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): April 17, 2015
Hooper Holmes, Inc.
(Exact Name of registrant as specified in its charter)
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New York | | 1-9972 | | 22-1659359 |
(State or other jurisdiction
of incorporation) | | (Commission File Number) | | (I.R.S. Employer
Identification No.) |
560 N. Rogers Road, Olathe, KS 66062
(Address, including zip code, of principal executive offices)
(913) 764-1045
(Registrant’s telephone number including area code)
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:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01 | Entry into a Material Definitive Agreement. |
Asset Purchase Agreement
On April 17, 2015, Hooper Holmes, Inc. (the “Company”) entered into and consummated an Asset Purchase Agreement (the “Purchase Agreement”) among the Company, Hooper Wellness, LLC, a wholly owned subsidiary of the Company, Jefferson Acquisition, LLC, a wholly owned subsidiary of Hooper Wellness, LLC (the “Buyer”), Accountable Health Solutions, Inc. (the “Seller”) and Accountable Health, Inc. (“Shareholder”). Pursuant to the Purchase Agreement, the Buyer has acquired the assets and certain liabilities representing the health and wellness business of the Seller (the “Acquisition”) for approximately $7 million, $4 million in cash and 6,500,000 million shares of the Company’s common stock, $0.04 par value (“Common Stock”), subject to a working capital adjustment as described in the Purchase Agreement. 5,576,087 shares of Common Stock were delivered to the Shareholder at closing and 326,087 shares of Common Stock were held back for the working capital adjustment, and 597,826 shares of Common Stock were held back for indemnification purposes. The Purchase Agreement contains customary representations, warranties, covenants and indemnities and provides that the indemnification obligations of the Seller and the Shareholder may be satisfied by delivering Common Stock delivered or deliverable pursuant to the Purchase Agreement. The Purchase Agreement provides that the Buyer will offer employment to the employees of the Seller’s business after a transition period of up to 75 days.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is attached as Exhibit 2.1 and is incorporated herein by reference.
Third Amendment to Loan Agreement
On April 17, 2015, the Company entered into and consummated a Consent and Third Amendment to Loan and Security Agreement (the “Third Amendment”) to the Loan and Security Agreement dated as of February 28, 2013 (as previously amended, the “Loan and Security Agreement”) with ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP (the “Senior Lender”). The Loan and Security Agreement provides a revolving credit facility which is secured and repaid as set forth therein. Pursuant to the Third Amendment, the Senior Lender consented to the Acquisition described above, the incurrence by the Company of the indebtedness evidenced by the Credit Agreement described below and the granting by the Company and its subsidiaries of the security interests to the Lenders as described below. The maximum Borrowing Capacity under the Loan and Security Agreement was reduced from $10 million to $7 million (subject to increase to up to $12 million in certain circumstances, subject to Senior Lender’s consent, as provided in the Loan and Security Agreement) and the expiration is extended through February 28, 2019. The Company paid a $105,000 amendment fee in connection with the Third Amendment.
In addition, Section 3.7 of the Loan and Security Agreement was amended to revise the early termination fees due by the Company if it prepays its entire outstanding obligations, the Senior Lender demands repayment of the outstanding obligations or the repayment of the outstanding obligations is accelerated. In such event, the Company will be required to pay a fee equal to three percent (3%) of the Revolving Credit Limit at the time of repayment if repayment occurs prior to the fourth anniversary of the Loan and Security Agreement, two percent (2%) of the Revolving Credit Limit at the time of repayment if repayment occurs on or after the fourth anniversary but prior to the fifth anniversary, and one percent (1%) of the Revolving Credit Limit at the time of repayment if repayment occurs on or after the fifth anniversary, but prior to the sixth anniversary.
The Third Amendment also revises the covenants with respect to the Company’s EBITDA and revises the specified amounts permitted for Unfunded Capital Expenditures for 2015, 2016, 2017 and each fiscal year thereafter. Upon an Event of Default, all obligations under Loan and Security Agreement may be accelerated and the Senior Lenders will have other customary remedies, including the right to charge a default rate of interest and increase fees, set forth in the Loan and Security Agreement.
The foregoing description of the Third Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Third Amendment, a copy of which is attached as Exhibit 10.1(a) hereto and is incorporated herein by reference.
Further, on April 17, 2015, each of the following of the Company’s subsidiaries entered into the General Security Agreement in favor of the Senior Lender, pursuant to which each granted to the Senior Lender a security interest in substantially all of the assets of such subsidiary and granted the Senior Lender the right to accelerate all obligations and to exercise rights and remedies upon an Event of Default: Jefferson Acquisition, LLC, Hooper Wellness, LLC, Hooper Distribution, LLC, Hooper Information Services, Inc., Hooper Kit Services, LLC, Mid-America Agency Services, Incorporated and TEG Enterprises, Inc.
On April 17, 2015, Jefferson Acquisition, LLC, Hooper Wellness, LLC and the Senior Lender also entered into the Joinder Agreement (the “Joinder Agreement”) to the Unconditional and Continuing Guaranty, dated as of February 28, 2013 in favor the Senior Lender (the “Guaranty”), pursuant to which each became a party to the Guaranty and each guaranteed the obligations under the Loan and Security Agreement.
On the same date, Hooper Wellness, LLC, the Company and the Senior Lender entered into the Joinder and First Amendment to Pledge Agreement, dated as of February 28, 2013 (the “Joinder to Pledge Agreement”), in favor of the Senior Lender, pursuant to which Hooper Wellness, LLC pledged all outstanding equity interests in Jefferson Acquisition, LLC, to the Senior Lender and became a party to the Pledge Agreement and the Company pledged all outstanding equity interests in Hooper Wellness, LLC to the Senior Lender, each as further security under the Loan and Security Agreement.
The foregoing descriptions of the General Security Agreement, the Joinder Agreement and the Joinder to Pledge Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the form of each agreement, copies of which are attached as Exhibits 10.1(b), 10.1(c) and 10.1(d) hereto and are incorporated herein by reference.
Credit Agreement
On April 17, 2015, the Company entered into and consummated a Credit Agreement (the “Credit Agreement”) with SWK Funding LLC as the agent (“Agent’), and the lenders (including SWK Funding LLC) party thereto from time to time (the “Lenders”). The Credit Agreement provides the Company with a $5 million term loan (the “Loan”). The proceeds of the Loan were used to pay certain fees and expenses related to the negotiation and consummation of the Purchase Agreement and the Acquisition and the Loan and Security Agreement described above and general corporate purposes. The Company paid SWK Funding LLC a $100,000 origination fee. The Loan is due and payable on April 17, 2018 (the “Term Loan Maturity Date”).
The outstanding principal balance under the Credit Agreement will bear interest at an adjustable rate per annum equal to the LIBOR Rate (subject to a minimum amount of one percent (1.0%)) plus fourteen percent (14.0%) and will be due and payable in arrears (i) the forty-fifth (45th) day following the last calendar day of each of the months of June, September, December and March, commencing with August 14, 2015, (ii) upon a prepayment of the Loan and (iii) at maturity in cash. Upon the earlier of (a) the Term Loan Maturity Date or (b) full repayment of the Loan, whether by acceleration or otherwise, the Company is required to pay the Agent an exit fee equal to eight percent (8%) of the aggregate principal amount of all term loans advanced under the Credit Agreement.
On or after April 17, 2016, the Company may prepay the Loan, in whole or in part subject to certain minimum amounts, upon five business days written notice. If the Company prepays the Loan voluntarily, the Company is required to pay Lenders an amount equal to four percent (4%) of the aggregate amount of the loan prepaid if such prepayment is made on or after April 17, 2016, but prior to April 17, 2017. The Company is required to prepay the Loan with any net cash proceeds received from certain types of dispositions of assets described in the Credit Agreement. The Company is also required to make certain quarterly revenue-based payments in an amount equal to eight and one-half percent (8.5%) of yearly aggregate revenue, up to and including $20 million; seven percent (7%) of yearly aggregate revenue greater than $20 million up to and including $30 million; and five percent (5%) of yearly aggregate revenue greater
than $30 million. The revenue-based payment will be applied to fees and interest, and any excess to the principal of the Loan. Revenue-based payments will be applied to the principal of the Loan beginning in February, 2016, and the maximum aggregate revenue-based payment is capped at $600,000 per quarter.
The Credit Agreement contains customary affirmative and negative covenants for credit facilities of its type, including limiting the Company’s ability to pay dividends or redeem outstanding equity interests, incur additional indebtedness, grant additional liens, engage in any other type of business, make investments, merge, consolidate or sell all or substantially all of its assets and enter into transactions with related parties. The Credit Agreement also contains certain financial covenants, including, certain minimum aggregate revenue and EBITDA requirements and requirements regarding consolidated unencumbered liquid assets.
The Credit Agreement includes customary Events of Default, including failure to pay principal, interest or fees when due, failure to comply with covenants, default under certain other indebtedness, certain insolvency or bankruptcy events, the occurrence of certain material judgments, the institution of any proceeding by certain government agencies or a change of control of the Company that it is not otherwise permitted under the Credit Agreement. Upon an Event of Default, all loans and obligations sunder the Credit Agreement may be accelerated and the Lenders will have other customary remedies, including the right to charge a default rate of interest, set forth in the Credit Agreement.
The Company’s obligations under the Credit Agreement are secured under the Guarantee and Collateral Agreement, dated April 17, 2015, among the Agent, the Company, and the Company’s subsidiaries (the “Collateral Agreement”), pursuant to which the Company granted to Agent a security interest in substantially all of the Company’s assets and the Company’s subsidiaries granted to Agent a security interest in substantially all their assets and guaranteed performance and payment of the Company’s obligations under the Credit Agreement.
The Credit Agreement is also subject to the Intercreditor Agreement, dated April 17, 2015, among the Agent, the Lenders and the Senior Lender (the “Intercreditor Agreement”) whereby Agent and the Lenders agreed, among other things, that their lien would be a second lien in the Company’s assets and to give the Senior Lender priority over payments and distributions from the Company. The Company and its subsidiaries are not a party to the Intercreditor Agreement, but have signed an acknowledgment agreeing to abide by the terms.
In addition on April 17, 2015, in connection with the execution of the Credit Agreement, the Company issued SWK Funding, LLC a warrant (the “Warrant”) to purchase 8,152,174 shares of the Company’s Common Stock. The Warrant is exercisable after October 17, 2015, and up to and including April 17, 2022 at an exercise price of $0.46 per share, subject to adjustment. The Warrant is exercisable on a cashless basis. In the event the Warrant is exercised on a cashless basis, the Company will not receive any proceeds. The exercise price of the Warrant is subject to customary adjustment provisions for stock splits, stock dividends, recapitalizations and the like. The Warrant grants the holder certain piggyback registration rights. Further, pursuant to the Credit Agreement, if the Loan and Security Agreement described above is not repaid in full and terminated, and all liens securing the Loan and Security Agreement are not released, on or prior to February 28, 2016, the Company has agreed to issue an additional warrant to Agent to purchase Common Stock valued at $1,250,000, with an exercise price just over the closing price on February 28, 2016. The additional warrant will become exercisable six months after issuance, remain exercisable for 7 years and have customary anti-dilution protection similar to the Warrant.
The foregoing description of the Credit Agreement, Collateral Agreement, Intercreditor Agreement and Warrant do not purport to be complete and are qualified in their entirety by reference to the full text of each, copies of which are attached hereto as Exhibits 10.2(a), 10.2(b), 10.2(c) and 10.2(d), respectively, and are incorporated herein by reference.
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Item 2.01 | Completion of Acquisition or Disposition of Assets. |
The information required by this Item is included in Item 1.01 and is incorporated by reference hereto.
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Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information provided in Item 1.01 of the Current Report on Form 8-K filed by the Company on March 6, 2013 and Exhibits 10.1, 10.2, 10.3 and 10.4 attached thereto are incorporated by reference into this Item 2.03.
The information provided in Item 1.01 of the Current Report on Form 8-K filed by the Company on March 29, 2013 and Exhibits 10.1 and 10.2 attached thereto are incorporated by reference into this Item 2.03.
The information provided in Item 1.01 of the Current Report on Form 8-K filed by the Company on July 10, 2014 and Exhibit 10.1 attached thereto are incorporated by reference into this Item 2.03.
The information required by this Item is included in Item 1.01 and is incorporated by reference hereto.
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Item 3.02 | Unregistered Sales of Equity Securities. |
As described in Item 1.01, which information is incorporated by reference in this Item, the Company issued shares of Common Stock described above to the Shareholder pursuant to the Purchase Agreement and it also granted the Agent the Warrant described above pursuant to the Credit Agreement.
The Company claims an exemption from registration for the issuances and grant described above pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), since the foregoing issuances and grant did not involve a public offering, the recipients were “accredited investors,” the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by the Company or its representatives. No underwriters or agents were involved in the foregoing issuances and grant and the Company paid no underwriting discounts or commissions. The certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
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Item 3.03 | Material Modification to Rights of Security Holders. |
The information required by this Item is included in Items 1.01 and 2.03 and is incorporated by reference hereto.
On April 20, 2015, the Company issued a press release announcing the Acquisition. The press release is being furnished as Exhibit 99.1 and shall not be deemed “filed” for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended.
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Item 9.01 | Financial Statements and Exhibits. |
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(a) | Financial Statements of Business Acquired. |
The financial statements required by this Item will be filed by an amendment to this Current Report on Form 8-K within 71 calendar days after April 23, 2015, the date this report was required to have been filed.
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(b) | Pro forma Financial Information. |
The financial statements required by this Item will be filed by an amendment to this Current Report on Form 8-K within 71 calendar days after April 23, 2015, the date this report was required to have been filed.
(d) Exhibits.
Exhibit No. Description
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2.1 | Asset Purchase Agreement, dated April 17, 2015, by and among Hooper Holmes, Inc., Jefferson Acquisition, LLC, Hooper Wellness, LLC, Accountable Health Solutions, Inc., and Accountable Health, Inc. (The exhibits and schedules to the Asset Purchase Agreement have been omitted. The Company will furnish such exhibits and schedules to the SEC upon request.) |
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4.1 | Warrant, dated April 17, 2015, issued by Hooper Holmes, Inc. to SWK Funding LLC (incorporated by reference to Exhibit 10.2(d) to this Form 8-K). |
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10.1(a) | Consent and Third Amendment to Loan and Security Agreement, dated April 17, 2015, between ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP, and Hooper Holmes, Inc. |
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10.1(b) | General Security Agreement executed by Jefferson Acquisition, LLC, Hooper Wellness, LLC, Hooper Distribution Services, LLC, Hooper Information Services, Inc., Hooper Kit Services LLC, Mid-America Agency Services, Inc., and TEG Enterprises, Inc., in favor of ACF FinCo I LP. |
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10.1(c) | Joinder Agreement by Jefferson Acquisition, LLC, Hooper Wellness, LLC and ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP. |
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10.1(d) | Joinder Agreement and First Amendment to Pledge Agreement by and between Hooper Holmes, Inc., Hooper Wellness, LLC. and ACF FinCo I LP., as assignee of Keltic Financial Partners II, LP |
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10.2(a) | Credit Agreement, dated April 17, 2015, by and between Hooper Holmes, Inc., SWK Funding LLC and the Lenders party thereto from time to time. |
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10.2(b) | Guarantee and Collateral Agreement, dated April 17, 2015, among SWK Funding LLC, Hooper Holmes, Inc. and its subsidiaries. |
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10.2(c) | Intercreditor Agreement, dated April 17, 2015 by SWK Funding, LLC and the Lenders party to the Credit Agreement in favor of ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP. |
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10.2(d) | Warrant, dated April 17, 2015, issued by Hooper Holmes, Inc. to SWK Funding LLC. |
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99.1 | Press Release dated April 20, 2015. |
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.
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Date: April 21, 2015 | | HOOPER HOLMES, INC. |
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| | By: | /s/ Tom Collins |
| | | Tom Collins |
| | | Senior Vice President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. Description
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2.1 | Asset Purchase Agreement, dated April 17, 2015, by and among Hooper Holmes, Inc., Jefferson Acquisition, LLC, Hooper Wellness, LLC, Accountable Health Solutions, Inc., and Accountable Health, Inc. (The exhibits and schedules to the Asset Purchase Agreement have been omitted. The Company will furnish such exhibits and schedules to the SEC upon request.) |
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4.1 | Warrant, dated April 17, 2015, issued by Hooper Holmes, Inc. to SWK Funding LLC (incorporated by reference to Exhibit 10.2(d) to this Form 8-K). |
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10.1(a) | Consent and Third Amendment to Loan and Security Agreement, dated April 17, 2015, between ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP, and Hooper Holmes, Inc. |
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10.1(b) | General Security Agreement executed by Jefferson Acquisition, LLC, Hooper Wellness, LLC, Hooper Distribution Services, LLC, Hooper Information Services, Inc., Hooper Kit Services LLC, Mid-America Agency Services, Inc., and TEG Enterprises, Inc., in favor of ACF FinCo I LP. |
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10.1(c) | Joinder Agreement by Jefferson Acquisition, LLC, Hooper Wellness, LLC and ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP. |
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10.1(d) | Joinder Agreement and First Amendment to Pledge Agreement by and between Hooper Holmes, Inc., Hooper Wellness, LLC. and ACF FinCo I LP., as assignee of Keltic Financial Partners II, LP |
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10.2(a) | Credit Agreement, dated April 17, 2015, by and between Hooper Holmes, Inc., SWK Funding LLC and the Lenders party thereto from time to time. |
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10.2(b) | Guarantee and Collateral Agreement, dated April 17, 2015, among SWK Funding LLC, Hooper Holmes, Inc. and its subsidiaries. |
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10.2(c) | Intercreditor Agreement, dated April 17, 2015 by SWK Funding, LLC and the Lenders party to the Credit Agreement in favor of ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP. |
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10.2(d) | Warrant, dated April 17, 2015, issued by Hooper Holmes, Inc. to SWK Funding LLC. |
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99.1 | Press Release dated April 20, 2015. |
___________________________________________________________________________
ASSET PURCHASE AGREEMENT
BY AND AMONG
JEFFERSON ACQUISITION, LLC, AS THE BUYER,
HOOPER WELLNESS, LLC, AS HOLDCO
HOOPER HOLMES, INC., AS THE BUYER PARENT
ACCOUNTABLE HEALTH SOLUTIONS, INC., AS THE SELLER, AND
ACCOUNTABLE HEALTH, INC., AS THE SHAREHOLDER
DATED AS OF APRIL 17, 2015
___________________________________________________________________________
1
11840517.1
KCP-4567096-11
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
ARTICLE II PURCHASE AND SALE OF ASSETS 10
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2.1 | Agreement to Purchase and Sell 11 |
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2.3 | Assumption of Liabilities 13 |
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2.5 | Working Capital Adjustments 15 |
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2.6 | Tax Treatment; Allocation of Purchase Price 17 |
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2.8 | Allocation of Certain Items 17 |
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2.9 | Employee Transition Period 18 |
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDER 18
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3.1 | Organization; Good Standing 18 |
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3.2 | Authorization; Binding Effect 19 |
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3.4 | Financial Statements 20 |
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3.6 | Intellectual Property 21 |
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3.7 | Title to Purchased Assets; Sufficiency and Condition of Purchased Assets 23 |
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3.8 | Licenses and Permits; Compliance with Laws 23 |
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3.14 | Material Contracts 28 |
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3.15 | Environmental and Healthcare Law Compliance 30 |
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3.17 | Operations Since Balance Sheet Date; Absence of Changes 31 |
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3.18 | Customers and Suppliers 32 |
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3.19 | Accounts Receivable 33 |
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3.20 | Affiliate Transactions 33 |
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3.21 | Accredited Investor 33 |
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER, HOOPER WELLNESS and BUYER PARENT 35
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4.1 | Organization; Good Standing 35 |
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4.2 | Authorization; Binding Effect 35 |
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4.6 | Valid Issuance of HH Common Stock; Capitalization of Buyer 36 |
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4.7 | Absence of Certain Changes 36 |
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4.8 | Financial Statements; SEC Filings 36 |
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4.9 | No Undisclosed Liabilities 37 |
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4.10 | Compliance with Laws; Permits 37 |
ARTICLE V COVENANTS 38
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5.4 | Maintenance of Insurance 40 |
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5.6 | Use of Business Name 41 |
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5.8 | Shareholder Audited Financial Statements 42 |
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5.9 | Sale of HH Common Stock 42 |
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5.10 | Non-Assignable Contracts 43 |
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5.11 | Contracts Not Transferred at Closing 43 |
ARTICLE VI CLOSING 43
ARTICLE VII 45
INDEMNIFICATION 45
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7.1 | Survival of Representations and Warranties 45 |
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7.5 | Limitations of Liability 49 |
ARTICLE VIII MISCELLANEOUS 50
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8.1 | Entire Agreement; Amendments 50 |
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8.3 | Specific Performance 50 |
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8.4 | Amendment; Extension; Waiver 51 |
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8.6 | Public Announcements 51 |
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8.8 | Successors and Assigns; No Third‑Party Beneficiaries 52 |
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8.9 | Compliance with Bulk Sales Laws 53 |
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8.12 | Jurisdiction; Waiver of Jury Trial 53 |
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8.13 | Execution in Counterparts; Facsimile 54 |
EXHIBITS AND SCHEDULES TO THE ASSET PURCHASE AGREEMENT
Exhibits:
Exhibit A ‑ Form of Bill of Sale
Exhibit B ‑ Form of Assignment and Assumption Agreement
Exhibit 2.5(a) ‑ Closing Statement
Exhibit C - Transition Services Agreement
Schedules:
Schedule 1.1 Permitted Liens
Schedule 1.2 Current Assets
Schedule 1.3 Current Liabilities
Schedule 2.1(d) Assumed Contracts
Schedule 2.2(c) Excluded Personal Property
Schedule 2.2(d) Excluded Contracts
Schedule 2.2(m) Certain Excluded Assets
Schedule 2.3(a)(iii) Transferring Employees
Schedule 2.6 Allocation of Purchase Price
Schedule 3.3(a) Non‑Contravention – Seller and Shareholder
Schedule 3.3(b) Non‑Contravention – Third‑Party Consents
Schedule 3.3(c) Third Party Approvals and Governmental Approvals
Schedule 3.4(a) Financial Statements
Schedule 3.4(b) Liabilities Not Reflected on Balance Sheet
Schedule 3.4(c) Distributions to Shareholder
Schedule 3.5(a) Leases; Leased Real Property
Schedule 3.6(a) Seller’s Intellectual Property
Schedule 3.6(b)(i) Intellectual Property – Infringement
Schedule 3.6(b)(ii) Intellectual Property – Infringement Actions
Schedule 3.6(d) IP Licenses
Schedule 3.6(e) Seller’s Software
Schedule 3.6(j) Open Source Software
Schedule 3.7(a) Exceptions to Title
Schedule 3.8(c) Permits
Schedule 3.9 Litigation
Schedule 3.10(a) Employee Contracts
Schedule 3.10(c) Employees
Schedule 3.10(d) Employee Bonuses
Schedule 3.10(e) Consultants
Schedule 3.11 Seller Benefit Plans
Schedule 3.12(a) Policies
Schedule 3.12(b) Expiring Policies
Schedule 3.13(g) Audit by Taxing Authority
Schedule 3.14(a) Material Contracts
Schedule 3.14(b) Exceptions to Material Contracts
Schedule 3.15(e) Orders
Schedule 3.15(f) HIPAA Compliance
Schedule 3.16 Brokers
Schedule 3.17 Absence of Changes
Schedule 3.18(a) Material Customers and Suppliers
Schedule 3.18(b) Exceptions to Material Customers and Suppliers
Schedule 3.19 Outstanding Accounts Receivable
Schedule 3.20 Affiliate Transactions
Schedule 8.9 Supplemental Disclosures
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of April 17, 2015 (the “Closing Date”), is made and entered into by and among (a) Jefferson Acquisition, LLC, a Kansas limited liability company and a wholly owned subsidiary of Hooper Wellness, LLC (the “Buyer”), (b) Hooper Holmes, Inc., a New York corporation (“Buyer Parent”), (c) Hooper Wellness, LLC, a Kansas limited liability company and a wholly owned subsidiary of Buyer Parent (“Hooper Wellness”) (d) Accountable Health Solutions, Inc., an Indiana corporation (the “Seller”), and (e) Accountable Health, Inc., a Delaware corporation (“Shareholder”).
RECITALS
WHEREAS, the Seller is engaged in the business of developing and administering health and wellness programs, solutions and related services for employers, employees, and wellness partners including biometric screenings, coaching and year-round portal based support programs (the “Business”); and
WHEREAS, subject to the terms and conditions set forth herein, the Seller and Shareholder have agreed to sell to the Buyer, and the Buyer has agreed to purchase from the Seller and/or Shareholder, the Purchased Assets, and the Buyer will assume the Assumed Liabilities, in each case as defined and set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound hereby, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the terms below shall have the following meanings:
“Accounting Firm” has the meaning set forth in Section 2.5(c).
“Action” means any action, administrative enforcement, appeal, petition, plea, charge, complaint, claim, suit, demand, litigation, arbitration, mediation, hearing, investigation, review or other proceeding commenced, brought or heard by or before any Governmental Authority.
“Affiliate” means any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with the Person specified; it being understood that, for purposes of this definition, “control” of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
“Agreed Stock Value” means $0.46 per share.
“Agreement” has the meaning set forth in the preamble.
“Ancillary Agreements” has the meaning set forth in Section 3.2.
“Assignment and Assumption Agreement” has the meaning set forth in Section 6.2(a)(iii).
“Assumed Contracts” has the meaning set forth in Section 2.1(d).
“Audited Financial Statements” has the meaning set forth in Section 5.8.
“Balance Sheet” has the meaning set forth in Section 3.4(a).
“Balance Sheet Date” has the meaning set forth in Section 3.4(a).
“Basket Amount” has the meaning set forth in Section 7.5(a).
“Benefit Plan” means each compensation or benefits plan, program or arrangement including, without limitation, plans within the meaning of Section 3(3) of ERISA, employment agreements, profit‑sharing, defined contribution, deferred compensation, insurance, pension, retirement, medical, hospital, disability, change of control, termination, welfare or fringe benefit plans, programs, agreements or arrangements, cash or equity‑based bonus or incentive arrangements, severance arrangements and vacation policies sponsored or maintained by the Seller or any of the Seller’s Affiliates or ERISA Affiliates for the benefit of the Seller’s employees, directors, partners, independent contractors or consultants.
“Business” has the meaning set forth in the recitals.
“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of Delaware are authorized or obligated to close.
“Buyer” has the meaning set forth in the preamble.
“Buyer Indemnified Parties” has the meaning set forth in Section 7.2(a).
“Buyer Material Adverse Effect” means any circumstance, change in, or effect on the Buyer Parent, on a consolidated basis, that individually or in the aggregate with any other circumstances, changes in, or effects on the Buyer Parent, on a consolidated basis, or its business, that is, or could be materially adverse to (a) the business or operations of the Buyer Parent, on a consolidated basis, or (b) the condition (financial or otherwise) of the business of the Buyer Parent, on a consolidated basis, or the HH Common Stock.
“Buyer Parent” has the meaning set forth in the preamble.
“Buyer Parent Reports” has the meaning set forth in Section 4.8(a).
“Buyer Permits” has the meaning set forth in Section 4.10(b).
“Cash” means all cash and all cash equivalents held by the Seller, as determined in accordance with GAAP. In the event that cash is less than zero, it will be treated as zero for purposes of the purchase price and Working Capital Adjustment, and Buyer does not assume any liabilities thereto.
“Cash Payment” has the meaning set forth in Section 2.4(a).
“Claim Notice” has the meaning set forth in Section 7.3(a).
“Closing” has the meaning set forth in Section 6.1(a).
“Closing Date” has the meaning set forth in the preamble.
“Closing Statement” has the meaning set forth in Section 2.5(a).
“Closing Working Capital” means Current Assets minus Current Liabilities as of the Closing Date.
“Code” means the Internal Revenue Code of 1986, as amended, and all rules and regulations promulgated thereunder.
“Competitive Business” has the meaning set forth in Section 5.3(a).
“Contract” means any contract, agreement, lease, sublease, mortgage, obligation, understanding, promise, arrangement, undertaking, restriction, license, sublicense or other instrument, in each case, whether written or oral.
“Current Assets” means the current assets of the Seller set forth on Schedule 1.1.
“Current Liabilities” means the current liabilities of the Seller set forth on Schedule 1.2; provided, however, for the avoidance of doubt the Current Liabilities shall not include any Indebtedness, any Excluded Liabilities or costs and expenses related to obtaining the Shareholder Financial Statements.
“Delivered Shares” has the meaning set forth in Section 2.4(a).
“Disclosure Schedules” has the meaning set forth in the introductory paragraph of ARTICLE III.
“Dispute Notice” has the meaning set forth in Section 7.3(b).
“Disputed Working Capital Items” has the meaning set forth in Section 2.5(c).
“Employee Transition Period” has the meaning set forth in Section 2.9.
“Enforceability Exceptions” has the meaning set forth in Section 3.2.
“Environmental Laws” means any Law in effect as of the Closing Date relating to the generation, production, use, treatment, storage, transportation or disposal of Hazardous Substances or the protection of the environment.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means each trade or business (whether or not incorporated) that together with the Seller is treated as a single employer pursuant to Sections 414(b), (c), (m) or (o) of the Code.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Excluded Assets” has the meaning set forth in Section 2.2.
“Excluded Contracts” has the meaning set forth in Section 2.2(d).
“Excluded Personal Property” has the meaning set forth in Section 2.2(c).
“Facilities” has the meaning set forth in Section 3.5(b).
“Final Closing Statement” has the meaning set forth in Section 2.5(d).
“Final Closing Working Capital” has the meaning set forth in Section 2.5(d).
“Fundamental Representations” means those representations and warranties identified in Section 7.1(a)(i).
“GAAP” means United States generally accepted accounting principles, as in effect from time to time, consistently applied.
“Governmental Approvals” means all consents, authorizations or approvals of or by, and all filings with, all Governmental Authorities that are necessary to consummate the transactions contemplated hereby.
“Governmental Authority” means any legislature, agency (including the IRS), bureau, branch, department, division, commission, court, tribunal, magistrate, justice, multi‑national organization, quasi‑governmental body or other similarly recognized organization (including the Centers for Medicare and Medicaid Services) or body of any federal, state, county, municipal, local or foreign government or other similarly recognized organization or body exercising similar powers or authority.
“Hazardous Substances” means (a) any and all substances, wastes, pollutants, contaminants and materials regulated, defined or designated as hazardous, dangerous or toxic under any Environmental or Healthcare Law, (b) gasoline, diesel fuel or other petroleum hydrocarbons, (c) PCBs, asbestos, mold or urea formaldehyde foam insulation and (d) natural gas, synthetic gas and any mixtures thereof.
“Healthcare Laws” means all applicable Laws of any Governmental Authority regulating health services or payment, including, but not limited to, the federal Anti‑Kickback Statute (42 U.S.C. § 1320a‑7b(b)), the Stark Law (42 U.S.C. § 1395nn), the Anti‑Inducement Law (42 U.S.C. § 1320a‑7a(a)(5)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the administrative False Claims Law (42 U.S.C. § 1320a‑7b(a)), the exclusion laws (42 U.S.C. § 1320a‑7), the civil monetary penalty laws (42 U.S.C. § 1320a‑7a), the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §§ 1320d‑1320d‑8), the Medicare Prescription Drug, Improvement and Modernization Act of 2003, Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), the Food, Drug and Cosmetic Act (21 C.F.R. §§ 301 et seq.), the Prescription Drug Marketing Act of 1987, the Deficit Reduction Act of 2005, the Health Insurance Portability and Accountability Act of 1996 (Public Law 104‑191), HITECH, the Patient Protection and Affordable Care Act of 2010, any amendments thereto, the regulations promulgated pursuant to such Laws, any state analogs to any of the foregoing Laws, and any other federal, state, or local Law, regulation, guidance document (including, but not limited to, OIG advisory opinions), manual provision, program memorandum, or other issuance of any Governmental Authority which regulates kickbacks, patient or program charges, recordkeeping, claims process, documentation requirements, medical necessity, referrals, the hiring of employees or acquisition of services or supplies from those who have been excluded from government healthcare programs, privacy, security, licensure, accreditation, or billing/coding.
“HH Common Stock” means the Common Stock, $0.04 par value per share, of Hooper Holmes, Inc.
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.
“HITECH” means the Health Information Technology for Economic and Clinical Health Act provisions of the American Recovery and Reinvestment Act of 2009 (Public Law 111‑005), as amended.
“Holdback Shares” has the meaning set forth in Section 2.4(a).
“Hooper Wellness” has the meaning set forth in the preamble.
“Improvements” has the meaning set forth in Section 3.5(b).
“Indebtedness” means, as of a particular date and without duplication, (a) all indebtedness (including the principal amount thereof, the amount of accrued and unpaid interest thereon, and all applicable prepayment penalties) of the Seller, whether or not represented by bonds, debentures, notes or other securities, for the repayment of money borrowed, (b) all obligations of the Seller to pay rent or other payments under a lease of real property or Personal Property that is required to be classified as a capital lease in accordance with GAAP, (c) any Liability for the deferred purchase price of any property or services (but expressly excluding trade payables), (d) all obligations under any interest rate, currency or other hedging agreement, (e) prepayment premiums of any change of control premiums, if any, “breakage” costs or similar payments associated with the repayments of
such Indebtedness and accrued interest, if any, and fees and expenses and all other amounts owed in respect of the foregoing, (f) any reimbursement obligation of the Seller that is then due and payable with respect to direct‑pay letters of credit, surety bonds, bankers’ acceptances or similar facilities issued for the account of the Seller, (g) any obligation of another Person in respect of any of the foregoing that is unconditionally guaranteed by the Seller and (h) any obligation of another Person in respect of any of the foregoing that is secured by a Lien on any asset of the Seller.
“Indemnified Party” has the meaning set forth in Section 7.3(a).
“Indemnitor” has the meaning set forth in Section 7.3(a).
“Indemnity Shares” has the meaning set forth in Section 2.4(b).
“Intellectual Property” means, collectively, all United States, foreign and international industrial and intellectual property and other proprietary rights, including patents, patent applications, rights to file for patent applications (including continuations, continuations‑in‑part, divisionals, reissues and reexaminations), trademarks, logos, service marks, trade names and service names (in each case whether or not registered) and applications for and the right to file applications for registration thereof, Internet domain names or applications for Internet domain names, Internet and World Wide Web URLs or addresses and web site content, copyrights (whether or not registered), applications for and the right to file applications for registration thereof, works of authorship, moral rights, mask work rights, mask work registrations, applications and rights to file applications therefor, franchises, licenses, inventions, trade secrets, trade dress, know‑how, confidential information, customer lists, supplier lists, proprietary processes and formulae, software, source code and object code, database, algorithms, net lists, architectures, structures, screen displays, layouts, development tools, designs, blueprints, specifications, technical drawings (or similar information in electronic format), publicity and privacy rights and any other intellectual property rights arising under the laws of the United States of America, any state thereof, or any country or province, and all documentation and media (in whatever form) constituting, describing or relating to the foregoing, including programmers’ notes, memoranda and records.
“Interim Financial Statements” has the meaning set forth in Section 3.4(a).
“Inventory” means any inventory, including finished goods, supplies, raw materials, work in progress, spare, replacement and components, or goods or products used, held for use or related to the conduct of the Business, whether located on the Seller’s owned or leased property or located at any third‑party locations.
“IP Assignments” has the meaning set forth in Section 6.2(a)(v).
“IP Licenses” has the meaning set forth in Section 3.6(d).
“IRS” means the United States Internal Revenue Service or any successor organization thereto.
“Knowledge,” means, (a) when applied to the Seller, the actual knowledge of (i) David Blair of the Shareholder and Arielle Band, Adam Bernard or Kailin Alberti of the Seller, and the knowledge that any such individual should have possessed after a reasonable investigation of the subject matter in question and (b) when applied to the Buyer, the actual knowledge of the executive officers of the Buyer, and the knowledge that any such individual should have possessed after a reasonable investigation of the subject matter in question.
“Law” means any law, statute, rule, regulation or ordinance enacted or promulgated by any Governmental Authority, including any Environmental or Healthcare Laws.
“Leased Real Property” has the meaning set forth in Section 3.5(a).
“Leases” has the meaning set forth in Section 3.5(a).
“Liability” means, with respect to any Person, any liability or obligation of such Person of any kind, whether known or unknown, absolute or contingent, matured or unmatured, conditional or unconditional, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, or due or to become due.
“Lien” means, with respect to any assets, any lien, encumbrance, claim, charge, security interest, mortgage, deed of trust, pledge, easement, conditional sale or other title retention agreement or other restriction of a similar kind, other than Permitted Liens.
“Loss” means any Action, investigation, Order, ruling, damage, penalty, fine, cost, reasonable amount paid in settlement, Liability, Tax, Lien, loss, injury, decline in value, lost opportunity, expense or fee, including court costs and reasonable attorneys’ and accountants’ fees, expenses and disbursements.
“Maintained Policies” has the meaning set forth in Section 5.4.
“Material Adverse Effect” means any circumstance, change in, or effect on, the Business or the Seller that, individually or in the aggregate with any other circumstances, changes in, or effects on, the Seller or the Business that (a) is, or could be, materially adverse to the business, operations, assets or liabilities (including, without limitation, contingent liabilities), employee relationships, customer or supplier relationships, results of operations or the condition (financial or otherwise) of the Business, or (b) could materially adversely affect the ability of the Buyer to operate or conduct the Business in the manner in which it is currently operated or conducted, or contemplated to be conducted, by the Seller.
“Material Contract” has the meaning set forth in Section 3.14(b).
“Non-Assignable Contract” has the meaning set forth in Section 5.10.
“Non‑Compete Period” has the meaning set forth in Section 5.3(a).
“Non-Disclosure Agreement” means collectively, (i) the Non‑Disclosure Agreement dated January 26, 2015 between Hooper Holmes, Inc. and Accountable Health Solutions, Inc. and (ii) the
Non‑Disclosure Agreement dated February 27, 2015 between Hooper Holmes, Inc. and Accountable Health Solutions, Inc.
“Non-Paying Party” has the meaning set forth in Section 2.8(a).
“Omitted Contract” has the meaning set forth on Section 5.11.
“Order” means any binding and enforceable judgment, order, writ, decision, injunction, verdict, ruling, award (including arbitration awards), decree or other similar determination or finding by, before or under the supervision of any Governmental Authority, arbitrator or mediator of competent jurisdiction.
“Ordinary Course of Business” means the ordinary course of business consistent with the past custom and practice (including with respect to quantity and frequency to the extent applicable under the circumstances) of the Seller in the operation of the Business.
“Party” means each of the Buyer, the Seller and the Shareholder, and referred to collectively as the “Parties.”
“Paying Party” has the meaning set forth in Section 2.8(a).
“Permits” means any and all licenses, permits, authorizations, bonds, approvals, franchises, registrations, accreditations, certificates of need, consents, supplier or provider numbers, qualifications, operating authority, or any other permit or permission which are material to or legally required for the operation of the Business as currently conducted or in connection with the Seller’s ability to own, lease, operate or manage any of its property (including, without limitation, any such licenses or permits required for each Facility and), or bill any governmental payer, in each case that are issued or enforced by a Governmental Authority with jurisdiction over any Law (including, without limitation, any Environmental or Healthcare Law).
“Permitted Liens” means (a) Liens for Taxes and other governmental charges and assessments that are not yet due and payable or delinquent, (b) Liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like liens arising in the Ordinary Course of Business for sums not yet due and payable or delinquent, (c) Liens relating to deposits made in the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance and other types of social security or to secure the performance of leases, trade contracts or other similar agreements, (d) purchase money Liens on Personal Property acquired in the Ordinary Course of Business, (e) Liens securing executory obligations under any lease that constitute a “capital lease” under GAAP, (f) any utility company rights, easements and franchises and (g) Liens disclosed on Schedule 1.3.
“Person” means an individual, partnership, limited liability company, corporation, association, business trust, joint stock company, trust, unincorporated organization, joint venture, Governmental Authority or other entity of whatever nature.
“Personal Information” shall mean an individual’s first name and last name or first initial and last name in combination with any one or more of the following data elements that relate to such
individual: (a) Social Security number; (b) driver's license number or state-issued identification card number; or (c) financial account number, or credit or debit card number, with or without any required security code, access code, personal identification number or password, that would permit access to an individual’s financial account; provided, however, that “Personal information” shall not include information that is lawfully obtained from publicly available information, or from federal, state or local government records lawfully made available to the general public. Notwithstanding the foregoing, if an applicable state privacy law includes a more expansive definition of “Personal Information” (or an analogous term) than that set forth herein, such state law definition shall be deemed to replace the foregoing definition of “Personal Information” for purposes of Sections 3.7(d) and 3.15(f).
“Personal Property” means all machinery, equipment, furniture, computer hardware, fixtures, motor vehicles, other miscellaneous supplies, tools, fixed assets and other tangible personal property owned or leased by the Seller or used in connection with the Business.
“Policies” has the meaning set forth in Section 3.12.
“PTO Carryover” has the meaning set forth in Section 2.3(a)(iii).
“Purchase Price” has the meaning set forth in Section 2.4(a).
“Purchased Assets” has the meaning set forth in Section 2.1.
“Rent Charges” has the meaning set forth in Section 2.8(b).
“Restricted Party” has the meaning set forth in Section 5.3(a).
“Securities Act” means the Securities Act of 1933, as amended.
“Seller” has the meaning set forth in the preamble.
“Seller Benefit Plan” has the meaning set forth in Section 3.11.
“Seller Corporate Records” means those documents, records and materials described in Section 2.2(b) and 2.2(i).
“Seller Indemnified Parties” has the meaning set forth in Section 7.2(b).
“Seller’s Intellectual Property” has the meaning set forth in Section 3.6(a).
“Seller’s Software” has the meaning set forth in Section 3.6(e).
“Shareholder” has the meaning set forth in the preamble.
“Shareholder Financial Statements” has the meaning set forth in Section 5.8.
“Shareholder Q1 Interim Financials” has the meaning set forth in Section 5.8.
“Shareholder Unaudited Financial Statements” has the meaning set forth in Section 3.4(a).
“Stock Payment” has the meaning set forth in Section 2.4(a).
“Straddle Period” has the meaning set forth in Section 2.8(a).
“Survival Date” has the meaning set forth in Section 7.1(a)(iii).
“Tax” or “Taxes” means any federal, state, local or non‑U.S. income, gross receipts, license, payroll, employment, escheat or unclaimed property, excise, severance, stamp, occupation, bulk sales, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs duties, governmental fee or other like assessment or charge of any kind whatsoever, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value‑added, alternative or add‑on minimum, estimated or other tax of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner, including any interest, penalty or addition thereto, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person.
“Tax Claim” means any written claim with respect to Taxes made by any Taxing Authority or other Person that, if pursued successfully, could serve as the basis for a claim for indemnification of the Buyer Indemnified Parties or the Seller Indemnified Parties.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule, attachment thereto or amendment thereof.
“Taxing Authority” means any federal, state, local, foreign governmental entity or other authority (including any Governmental Authority) having jurisdiction over the assessment, determination, collection or other imposition of any Tax.
“Third‑Party Approvals” means all approvals, consents, licenses and waivers from third parties that are required to effect the transactions contemplated by this Agreement, that are required for the transfer of the Purchased Assets (including each Assumed Contract) to the Buyer or that are required in order to prevent a breach of or a default under or a termination or modification of or any right of acceleration of any obligations under any Assumed Contract.
“Third‑Party Claim” has the meaning set forth in Section 7.4(a).
“Third‑Party Claim Notice” has the meaning set forth in Section 7.4(a).
“Transferring Employee Schedule” has the meaning set forth in Section 2.9.
“Transferring Employees” has the meaning set forth in Section 2.3(a)(iii).
“Transition Services Agreement” has the meaning set forth in Section 6.2(a)(iv).
“Unaudited Financial Statements” has the meaning set forth in Section 3.4(a).
“Working Capital Notice of Disagreement” has the meaning set forth in Section 2.5(b).
“Working Capital Range” means the range of negative Fifty Thousand Dollars to Fifty Thousand Dollars (-$50,000 to +$50,000).
“Working Capital Shares” has the meaning set forth in Section 2.4(b).
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Agreement to Purchase and Sell.
Subject to the terms and conditions hereof, at the Closing, the Seller and the Shareholder, to the extent applicable, shall sell, assign, transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from the Seller and the Shareholder, to the extent applicable, all right, title and interest of the Seller and the Shareholder, to the extent applicable, in and to those certain assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and whether now existing or hereafter acquired, to the extent used, held for use or related to the conduct of the Business (such assets, properties and rights, being referred to as the “Purchased Assets”), in each case free and clear of all Liens, other than Permitted Liens, including, without limitation, the following (except to the extent any of the same are made an Excluded Asset under Section 2.2):
(a) all Inventory;
(b) all of Seller’s Cash on hand, if any, as of the Closing Date;
(c) all Personal Property (other than Excluded Personal Property);
(d) those Contracts set forth on Schedule 2.1(d) (the “Assumed Contracts”);
(e) the Leased Real Property and, to the extent their transfer is permitted under applicable Laws, all Permits related primarily to the Leased Real Property, easements, improvements and other rights relating thereto;
(f) all Intellectual Property of Seller (collectively, the “Acquired Intellectual Property”), all goodwill associated therewith, and all claims, causes of action, and rights to sue at law or in equity for any past, present, or future infringement of the Acquired Intellectual Property;
(g) to the extent their transfer is permitted under applicable Laws, all Permits related to the operation of the Business and held in the name of the Seller or Shareholder, to the extent applicable;
(h) all accounts receivable of the Seller, the proceeds thereof, and any security therefor;
(i) all data and records related to the operations of the Business (other than those required by Law to be retained by the Seller, copies of which will be made available to the Buyer, and other than those relating to the Excluded Assets), including but not limited to client and
customer lists and records, supplier lists and records, customer samples and related records, invoices, referral sources, research and development reports and records, production reports and records, service and warranty records, equipment logs, operating guides and manuals, financial and accounting records, creative materials, advertising materials, promotional materials, studies, reports, telephone numbers, correspondence and other similar documents and records and, subject to applicable Laws, copies of all personnel records;
(j) all express or implied guarantees, warranties, representations, covenants, indemnities and similar rights relating to the Assumed Liabilities or the Purchased Assets, including third‑party warranties and guarantees and all related claims, credits, rights of recovery and set‑off as to third parties which are held by or in favor of the Seller or Shareholder, to the extent applicable, and relate to the Assumed Liabilities or the Purchased Assets; and
(k) all deposits, advances, pre‑paid expenses and credits relating to the operation of the Business other than those relating to the Excluded Assets.
2.2 Excluded Assets.
Notwithstanding anything to the contrary set forth herein, the Purchased Assets shall not include any of the following assets, properties and rights of the Seller (collectively, the “Excluded Assets”):
(a) ownership and other rights with respect to any Seller Benefit Plan;
(b) the articles of incorporation and bylaws of the Seller, minute books, stock ledgers and other records of capitalization, qualifications to conduct business, taxpayer and other identification numbers, Tax Returns, Tax information, Tax records related to the Seller or any of the Seller’s Affiliates, corporate seals and any other document relating to the organization, maintenance and existence of the Seller;
(c) all Personal Property set forth on Schedule 2.2(c) (the “Excluded Personal Property”);
(d) those Contracts set forth on Schedule 2.2(d) (the “Excluded Contracts”) and any other Contracts not listed on Schedule 2.1(d);
(e) causes of action, lawsuits, judgments, claims and demands relating to any of the Excluded Liabilities or the Excluded Assets, whether arising by way of counterclaim or otherwise;
(f) all express or implied guarantees, warranties, representations, covenants, indemnities and similar rights relating to the Excluded Liabilities or the Excluded Assets, including third‑party warranties and guarantees and all related claims, credits, rights of recovery and set‑off as to third parties which are held by or in favor of the Seller and relate to the Excluded Liabilities or the Excluded Assets;
(g) the rights that accrue to the Seller hereunder and under the Ancillary Agreements to which the Seller is a party;
(h) All Taxes and installments of Taxes paid by the Seller and all rights to Tax credits and refunds of Taxes paid by the Seller, whether paid directly by the Seller or indirectly by a third party on the Seller’s behalf, regardless of whether such rights have arisen or hereafter arise;
(i) All corporate records, including, but not limited to, the Seller’s minute book and stock record book (but not including records of the Business relating to operation of the Business described in Section 2.1(i));
(j) all records prepared in connection with the sale of the Purchased Assets, including bids received from third Persons and analyses relating to the Purchased Assets;
(k) all insurance policies of the Seller and rights with respect to claims thereunder;
(l) all deposits, advances, pre‑paid expenses and credits relating to the Excluded Assets;
(m) any equity interest in any Person and the assets, properties and rights identified on Schedule 2.2(m); and
2.3 Assumption of Liabilities.
(a) Subject to the terms and conditions hereof, effective as of the Closing, the Buyer shall assume and agree to be responsible for, pay, perform and discharge when due only the following Liabilities related to the Business (collectively, the “Assumed Liabilities”), in each case in accordance with their respective terms:
(i) all Current Liabilities that remain unpaid on the Closing Date;
(ii) the Liabilities of the Seller with respect to the Assumed Contracts arising on or after the Closing Date;
(iii) all amounts owed to the Seller’s employees listed on Schedule 2.3(a)(iii) (“Transferring Employees”) for (A) accrued but unpaid wages (including commissions and bonuses) as of the Closing Date attributable to services performed from January 1, 2015 through the Closing Date by the Transferring Employees; and (B) accrued but unused paid time off (“PTO Carryover”) as of March 20, 2015 for such Transferring Employees attributable to services performed through March 20, 2015 as set forth on Schedule 3.10(c); and
(iv) Liabilities of the Seller with respect to customer or supplier claims arising on or prior to the Closing Date, for amounts less than $10,000, individually, or $40,000 in the aggregate.
(b) Except for the Assumed Liabilities, the Buyer shall not assume any Liabilities of the Seller (collectively, the “Excluded Liabilities”), including the following:
(i) any Liability claims with respect to the conduct of the Business that occurred on or prior to the Closing Date;
(ii) any Liability under or with respect to any Seller Benefit Plan, including any Liability of the Seller under Code Section 4980B and any similar state law;
(iii) any Liability related to any actual or alleged violation or Liability arising under any Environmental Law or Healthcare Law occurring on or prior to the Closing Date, regardless of whether such Liability related to any act or omission of the Seller;
(iv) any Indebtedness of the Seller;
(v) any Liability of the Seller to the extent related to or arising in connection with the Excluded Assets;
(vi) any Liability of the Seller to any of the Seller’s Affiliates;
(vii) any Liability of the Seller or Shareholder under this Agreement or the Ancillary Agreements to which the Seller or Shareholder is party and any costs and expenses incurred by the Seller or Shareholder incident to the negotiation and preparation of this Agreement and the Seller’s and Shareholder’s performance and compliance with the agreement and conditions contained herein, including any sale or transaction bonuses payable to any employee, independent contractor, advisor or other Representative of the Seller or Shareholder;
(viii) any Liability of the Seller to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement;
(ix) any Liability for Taxes of the Seller, any Affiliate of the Seller or of any other Person (whether direct or as a result of successor liability, transferee liability, joint and several liability or contractual liability);
(x) any Liability of the Seller arising out of any occurrence set forth (or required to be set forth) on Schedule 3.15(f); and
(xi) Liabilities of the Seller with respect to customer or supplier claims arising on or prior to the Closing Date, for amounts exceeding $10,000, individually, or $40,000 in the aggregate.
(xii) any PTO Carryover Liabilities in excess of the sum of (i) the PTO Balances set forth in Schedule 3.10(c) attributable to services performed through March 20, 2015 and (ii) the net amount of PTO accrued or taken by Transferring Employees in the Ordinary Course of Business between March 21, 2015 and the Closing Date.
2.4 Purchase Price.
(a) In addition to the assumption of the Assumed Liabilities by the Buyer in accordance with the terms of this Agreement, as full consideration for the Purchased Assets, the Buyer shall pay, or cause to be paid, subject to adjustment following the Closing, if any, in accordance with Section 2.5, an amount equal to the consideration described in Subsections (A) and (B) below (the “Purchase Price”). The Purchase Price paid at Closing shall consist of (A) the issuance to Seller and/or Shareholder, as designated by Shareholder, on the Closing Date of that number of shares of HH Common Stock (the “Delivered Shares”) equal to the difference between (i) 6,500,000 shares of HH Common Stock (the “Stock Payment”) and (ii) 923,913 shares of HH Common Stock (the “Holdback Shares”) and (B) a cash payment equal to $4,000,000, (the “Cash Payment”). The Cash Payment shall be paid to the Seller and/or Shareholder, as designated by Shareholder, by wire transfer of immediately available funds to the account designated in writing by the Seller or Shareholder prior to the Closing.
(b) The Buyer shall retain Holdback Shares as security for the obligations and agreements of the Seller and Shareholder in this Agreement and the Ancillary Agreements. A number of Holdback Shares equal to 326,087 shares of HH Common Stock shall be available to satisfy any obligation of the Seller and Shareholder under Section 2.5(d) (the “Working Capital Shares”) and the remainder of the Holdback Shares (597,826 shares of HH Common Stock) shall be used, if available, to satisfy the obligations of Seller and Shareholder under Article VII hereof (the “Indemnity Shares”).
2.5 Working Capital Adjustments.
(a) As promptly as practicable, but in no event later than ninety (90) days following the Closing Date, the Buyer shall have prepared and delivered to the Seller an internally prepared statement (the “Closing Statement”) setting forth the Buyer’s calculation of the Closing Working Capital, as of the Closing Date, together with all worksheets, working papers, schedules and other data that supports the Closing Statement. The Closing Statement shall be prepared from the books and records of the Seller and in accordance with GAAP. The Closing Statement will be in the form attached hereto as Exhibit 2.5(a).
(b) In the event that the Seller does not agree with the Closing Statement or the calculation of the Closing Working Capital reflected therein, the Seller shall notify the Buyer in writing of its objections within thirty (30) days after receipt of the Closing Statement and shall set forth, in reasonable detail, the reasons for the Seller’s objections (a “Working Capital Notice of Disagreement”). If the Seller fails to deliver a Working Capital Notice of Disagreement within such thirty (30)‑day period, then the Seller shall be deemed to have irrevocably accepted as final the Closing Statement and the Buyer’s calculation of the Closing Working Capital set forth in the Closing Statement. If the Seller delivers to the Buyer a Working Capital Notice of Disagreement within such thirty (30)‑day period, the Seller and the Buyer shall endeavor in good faith to resolve any disputed items within thirty (30) days after the Buyer’s receipt of the Seller’s Working Capital Notice of Disagreement. If the Buyer and the Seller are able to resolve all disputed items within such thirty (30)‑day period, the Buyer and the Seller shall be deemed to have accepted, as final,
a revised Closing Statement that shall reflect the agreed resolution relating to the computations of the Closing Working Capital.
(c) If the Buyer and the Seller are unable to resolve all disputed items within such thirty (30)‑day period, the Buyer and the Seller shall promptly engage an independent certified public accounting firm as mutually agreed by the Buyer and the Seller (the “Accounting Firm”) to resolve the items remaining in dispute (the “Disputed Working Capital Items”). The Buyer and the Seller agree to execute such customary documents, agreements and arrangements as are reasonably requested by the Accounting Firm in connection with such engagement. Within ten (10) days following the engagement of the Accounting Firm, each of the Seller and the Buyer shall submit to the Accounting Firm its respective position with regard to the Disputed Working Capital Items. The Accounting Firm shall be instructed to use all reasonable efforts to resolve all the Disputed Working Capital Items within thirty (30) days following its receipt of the respective positions of the Seller and the Buyer. The determination by the Accounting Firm shall be conclusive and binding on the Seller and the Buyer, absent manifest error. In connection with the Accounting Firm’s determinations hereunder, (i) the scope of the Accounting Firm’s review shall be limited to only the Disputed Working Capital Items, (ii) the Accounting Firm shall not assign a value to any Disputed Working Capital Item greater than the greatest value for such Disputed Working Capital Item claimed by any Party or less than the lowest value for such Disputed Working Capital Item claimed by any Party, in each case as presented to the Accounting Firm and (iii) the Accounting Firm shall conduct its determination activities in a manner wherein all materials submitted to it are held in confidence and shall not be disclosed to third parties. After the Accounting Firm has resolved the Disputed Working Capital Items, the Buyer and the Seller shall be deemed to have accepted as final a revised Closing Working Capital Statement, which shall (A) be prepared by the Accounting Firm and (B) reflect the Disputed Working Capital Items resolved by the Accounting Firm, setting forth the basis for its resolution of each of the Disputed Working Capital Items. The Parties agree that judgment may be entered upon the determination of the Accounting Firm in any court having jurisdiction over the Party or Parties against which such determination is to be enforced.
(d) The calculations of the Closing Working Capital (whether determined by failure of the Seller to deliver a Working Capital Notice of Disagreement, by agreement of the Seller and the Buyer or by final determination of the Accounting Firm) shall be set forth in writing on a “Final Closing Statement,” in the form attached hereto as Exhibit 2.5(s), and the Closing Working Capital calculation set forth thereon shall be referred to herein as the “Final Closing Working Capital.” The Purchase Price shall be adjusted on a dollar‑for‑dollar basis as follows:
(i) If the Final Closing Working Capital is within the Working Capital Range or above the high end of the Working Capital Range, the Buyer shall release the Working Capital Shares to the Seller and/or Shareholder, as designated by Shareholder;
(ii) If the Final Closing Working Capital is less than the low end of the Working Capital Range, then Buyer shall deliver to Seller and/or Shareholder, as designated by Shareholder, a number of shares of HH Common Stock (rounded up to the nearest whole Share) equal to the positive difference between the number of Working Capital Shares less the number of
shares determined by (A) subtracting the Final Closing Working Capital from the low end of the Working Capital Range and dividing that number by (B) the Agreed Stock Value; provided, however, that if the difference between the low end of the Working Capital Range and the Final Closing Working Capital is an amount that exceeds the number of Working Capital Shares multiplied by the Agreed Stock Value, the Seller and/or Shareholder will promptly pay to Buyer, via wire transfer of immediately available funds to an account designated in writing by the Buyer, pay an amount equal to the amount of such excess; or
(iii) If the Final Closing Working Capital is greater than the high end of the Working Capital Range, then Buyer shall promptly pay to Seller and/or Shareholder, as designated by Shareholder, via wire transfer of immediately available funds to an account designated by the Seller, an amount equal to the amount of such excess.
(e) Each of the Parties shall bear its own fees and expenses (including the fees and expenses of its own lawyers, accountants, appraisers and other advisers) in connection with the determination of the Final Closing Working Capital. All fees and expenses of the Accounting Firm shall be allocated one‑half to the Buyer, on the one hand, and one‑half to the Seller, on the other hand.
(f) The Parties shall treat all payments made under this Section 2.5 as an adjustment to the Purchase Price for Tax purposes, unless a final determination (which includes the execution of a Form 870‑AD or successor form) with respect to such payment causes any such payment not to be treated as an adjustment to the Purchase Price for Tax purposes.
2.6 Tax Treatment; Allocation of Purchase Price.
Attached hereto as Schedule 2.6 is a schedule allocating the Purchase Price among the Purchased Assets (including the Assumed Liabilities), which allocation shall be (a) in accordance with Section 1060 of the Code and (b) binding among the Parties. To the extent the Purchase Price is adjusted pursuant to Section 2.5, the Buyer and the Seller shall amend such allocation in accordance with Section 1060 of the Code to reflect such adjustments. The Buyer, the Seller and the Shareholder shall file their Tax Returns (including IRS Form 8594 and any corresponding state or local Tax form) on the basis of such allocation, as it may be amended pursuant to the preceding sentence, and no Party shall thereafter take a position on any Tax Return, or in any audit that is inconsistent with such allocation except upon a final determination by a Taxing Authority.
2.7 Withholding Tax.
The Buyer will be entitled to deduct and withhold from the Purchase Price all Taxes that the Buyer may be required to deduct and withhold under any provision of Tax Law. All such withheld amounts will be treated as delivered to the Seller hereunder.
2.8 Allocation of Certain Items.
With respect to certain expenses incurred in the operation of the Business, the following allocations shall be made between the Seller and the Buyer:
(a) Taxes. Subject to Section 5.5(b), all ad valorem and similar Taxes with respect to the Purchased Assets for a Taxable period that includes but does not end on the Closing Date (a “Straddle Period”) shall be apportioned as follows: (i) the Seller shall be apportioned an amount equal to the total amount of such Tax for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the Straddle Period ending on and including the Closing Date and the denominator of which is the number of days in such Straddle Period; and (ii) the Buyer shall be apportioned an amount equal to the excess of the total amount of such Tax for the entire Straddle Period over the amount determined in clause (i) hereof. If any party (the “Paying Party”) pays or has paid a Tax for which the other party (the “Non-Paying Party”) is responsible pursuant to the apportionment set forth in this Section 2.8(a), the Paying Party shall be entitled to reimbursement from the Non-Paying Party.
(b) Rent. The Seller shall pay all base rent and additional rent, including common area maintenance charges (collectively, “Rent Charges”), for the periods on or prior to the Closing Date and the Buyer shall pay all Rent Charges for the period following the Closing Date. At the Closing, Rent Charges payable with respect to the Leased Real Property shall be prorated between the Seller and the Buyer as of the Closing Date based on the actual number of days the Seller and the Buyer occupied the Leased Real Property during the relevant period. There shall be no prorations with respect to any insurance relating to the Leased Real Property.
(c) Utilities. Water, gas, electric and other utility charges, sewer and waste water charges and other similar charges with respect to the Leased Real Property shall be adjusted as of the Closing Date. If there are meters measuring the consumption of any utility or other service to the Leased Real Property, then the Seller shall use commercially reasonable efforts to cause the meters to be read not more than three (3) Business Days before the Closing Date. For metered service, the Seller shall pay the utility bills for service rendered prior to the readings and the Buyer shall pay the utility bills for services rendered after the readings. If the Seller is unable to obtain any such meter readings at such time, the Parties shall prorate those utility charges based upon the actual number of days the Seller and the Buyer respectively occupied the Leased Real Property during the relevant period.
2.9 Employee Transition Period.
For a period of up to seventy-five (75) days following Closing (the “Employee Transition Period”), Seller shall continue to employ the Transferring Employees. During the Employee Transition Period, Seller shall, in accordance with the terms and conditions of the Transition Services Agreement, continue to direct and control the Transferring Employees in the performance of their duties associated with what was formerly the Seller’s Business. In addition, Transferring Employees shall continue to accrue PTO in accordance with Seller’s policy regarding the same during the Employee Transition Period. Any PTO accrued during the Employee Transition Period, net of any PTO used during the Employee Transition Period, shall be assumed by Buyer upon expiration of the Employee Transition Period. Effective as of the end of the Employee Transition Period, Buyer or an Affiliate of Buyer shall offer employment to each Transferring Employee. Seller will terminate the employment of the Transferring Employees at the end of the Employee Transition Period and shall, on or prior to the last day of the Employee Transition Period, provide Buyer with a schedule
that contains, with respect to each Transferring Employee, the information set forth on Schedule 3.10(c) updated through such date (the “Transferring Employee Schedule”). For the avoidance of doubt, the Parties acknowledge that Buyer is obligated to pay Seller an amount equal to the total cost of payroll (including, but not limited, to wages, taxes and other benefits) for Transferring Employees during the Employee Transition Period pursuant to the Transition Services Agreement, and only pursuant to such Transition Services Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDER
The Seller and the Shareholder, jointly and severally, hereby represent and warrant to the Buyer, Hooper Wellness, and Buyer Parent that the statements contained in this ARTICLE III are correct and complete as of the Closing Date:
3.1 Organization; Good Standing.
The Seller is a corporation, duly formed, validly existing and in good standing under the laws of the State of Indiana. The Seller has full power and authority to carry on its business as it is now being conducted, and to own, operate and lease its respective properties and assets. The Seller is duly qualified to transact business as a foreign corporation in each jurisdiction in which its operations or the ownership of the Seller’s properties and assets requires such qualification except where failure to so qualify would not result in a Material Adverse Effect. True, complete and correct copies of the organizational documents of the Seller have been made available to the Buyer.
3.2 Authorization; Binding Effect.
This Agreement, and each of the other agreements to be executed and delivered pursuant to this Agreement (the “Ancillary Agreements”) to which the Seller or the Shareholder is a party, has been duly authorized by all requisite action on the part of the Seller and the Shareholder and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Seller and the Shareholder, enforceable in accordance with their respective terms, except to the extent limited by applicable bankruptcy, insolvency, creditors’ rights and similar laws now or hereafter in effect, and except insofar as the availability of equitable remedies may be limited by applicable law (collectively, the “Enforceability Exceptions”).
3.3 Non‑Contravention‑.
(c) Except as set forth on Schedule 3.3(a), none of the execution and delivery by the Seller or the Shareholder of this Agreement or the Ancillary Agreements, the consummation of the transactions contemplated hereby or thereby, or compliance by the Seller or the Shareholder with any of the provisions hereof or thereof will result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of acceleration, termination or cancellation under, or result in the creation of any Lien (other than any Permitted Lien) upon any of the Purchased Assets under, any provision of (i) the organizational documents of the Seller,
(ii) any Contract to which the Seller or the Shareholder is a party and by which any Purchased Assets or Assumed Liabilities is adversely affected, (iii) any Order applicable to the Seller or the Shareholder or by which any Purchased Assets are bound or (iv) any applicable Law.
(d) Except as set forth on Schedule 3.3(b), no consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Authority is required on the part of the Seller or Shareholder in connection with the execution and delivery of this Agreement or the Ancillary Agreements or the compliance by the Seller and each Shareholder with any of the provisions hereof or thereof, or the consummation of the transactions contemplated hereby or thereby, to avoid a breach or violation of, or any right of termination, cancellation or acceleration of any right or obligation under, or loss of any benefit under, any (i) Contract to which the Seller or the Shareholder is a party and by which any Purchased Assets or Assumed Liabilities is adversely affected, (ii) Order applicable to the Seller or the Shareholder or by which any Purchased Assets are bound, (iii) applicable Law, (iv) any employment, severance, independent contractor, or similar agreement, or (v) Permit.
(e) Schedule 3.3(c) sets forth all Third-Party Approvals and Governmental Approvals necessary to transfer the Purchased Assets to the Buyer in accordance with the terms of this Agreement and consummate the transactions contemplated by this Agreement. The Seller has received all Third-Party Approvals and Governmental Approvals set forth on Schedule 3.3(c).
3.4 Financial Statements.
(g) On the Closing Date, the Seller shall have provided the Buyer with the unaudited consolidated balance sheet of the Shareholder (the “Balance Sheet”) as of February 28, 2015 (the “Balance Sheet Date”) and the related unaudited consolidated statements of income, owner’s equity and cash flows for the two‑month period then ended (together with the Balance Sheet, the “Interim Financial Statements”). On the Closing Date, the Seller shall have provided the Buyer with the unaudited consolidated balance sheet of the Shareholder as of December 31, 2014 and the related consolidated statements of income, owner’s equity, and cash flows for the period then ended (the “Shareholder Unaudited Financial Statements” and, together with the Interim Financial Statements, the “Unaudited Financial Statements”). The Unaudited Financial Statements have been or will be, as applicable, prepared from the books and records of the Shareholder and present fairly, in all material respects, the respective financial condition of the Shareholder and the respective results of operations, owners’ equity and cash flow at the dates or for the respective periods then ended, as applicable, and have been prepared in accordance with GAAP. The books and records of the Shareholder have been maintained in accordance with good business and bookkeeping practices and records of the Shareholder have been maintained in accordance with statutory requirements. The internal controls and procedures of the Shareholder are sufficient to ensure that the Unaudited Financial Statements are accurate in all material respects.
(h) Except as set forth on Schedule 3.4(b), the Seller has no Liabilities (whether or not of a nature required to be reflected or reserved against in the Interim Financial Statements in accordance with GAAP) other than: (i) Liabilities specifically set forth (and only to the extent set forth) in the Interim Financial Statements, (ii) Liabilities and obligations that have arisen after
the Balance Sheet Date consistently with past business practice, in or as a result of the operation of the Business, in the Ordinary Course of Business (none of which is a Liability resulting from breach of Contract, breach of warranty, tort, infringement or Action), or (iii) those items arising in the Ordinary Course of Business under any Contract specifically disclosed on any Schedule hereto (or not required to be disclosed because of the term or amount involved).
(i) Schedule 3.4(c) lists all distributions made to the Shareholder of Seller since January 1, 2014.
3.5 Real Property.
(a) The Seller does not own any real property. Schedule 3.5(a) contains a complete list of all leases and subleases of real property, including all amendments thereto (the “Leased Real Property”) pursuant to which the Seller or the Shareholder, solely with respect to the contracts listed in Schedule 2.1(d) to which it is a party, is the lessee or sublessee (the “Leases”). The Seller has made available to or delivered to the Buyer true, complete and correct copies of all Leases (including all amendments thereto). The Leases, together with applicable Law, permit the current use by the Seller or the Shareholder, to the extent applicable, of the Leased Real Property.
(b) The Seller or Shareholder, to the extent applicable, has a valid and existing leasehold interest in each parcel of Leased Real Property and the right to occupy and use the real property that is the subject of each such Lease, together with the buildings, structures, fixtures and improvements thereon (the “Improvements” and, together with the underlying real property, the “Facilities”). Each Lease is valid, binding and in full force and effect and, subject to any required notice, consent, or approval, will be valid, binding and in full force and effect following the transactions contemplated by this Agreement, and neither the Seller, nor the Shareholder, nor, to the Seller’s Knowledge, any of the other parties thereto are in breach or default thereunder and no event has occurred which, with notice or the lapse of time, or both, would constitute a breach or default or permit termination, modification or acceleration thereunder. The Facilities have received all required approvals of Governmental Authorities (including Permits and a certificate of occupancy or other similar certificate permitting lawful occupancy of the Facilities) required in connection with the operation thereof except those approvals the failure to receive would not be likely to have a Material Adverse Effect. The Improvements are in good operating condition and repair, subject to ordinary wear and tear, and scheduled maintenance and replacement in the Ordinary Course of Business. There are no disputes, oral agreements or forbearance programs in effect as to any of the Leases, and the Leases have not been assigned, subleased, transferred, mortgaged or encumbered. The Facilities are supplied with utilities and other services necessary or appropriate for the operation of the Facilities.
(c) Neither the Seller nor the Shareholder has received any notice that the Seller or the Shareholder is in violation of any material zoning, use, occupancy, building, Environmental Laws, ordinance or other Law or requirement relating to the Facilities.
3.6 Intellectual Property.
(a) Schedule 3.6(a) sets forth (i) all patented or registered Intellectual Property (or applications related thereto) owned by the Seller and related to the Business, (ii) all other Intellectual Property that is owned or licensed by the Seller, or that is used in the conduct of the Business, and that is material to the conduct of the Business and (iii) all software related to the Business (other than “off‑the‑shelf”, shrink‑wrap or click‑wrap software) owned or licensed by the Seller (collectively, the “Seller’s Intellectual Property”). The Seller owns or possesses all right, title and interest in and to each item of the Seller’s Intellectual Property, free and clear of any Liens other than Permitted Liens. The rights of the Seller in the Seller’s Intellectual Property are valid, effective and enforceable, and, together with the IP Licenses, constitute in all material respects all of the rights necessary to the conduct of the Business as currently conducted and proposed to be conducted.
(b) Except as set forth on Schedule 3.6(b)(i), neither the Seller nor Shareholder has (i) since July 1, 2013, received notice of any infringement by the Seller of the rights of any Person with respect to such Person’s Intellectual Property or (ii) infringed, misappropriated or otherwise violated any Intellectual Property rights of any Person. To the Seller’s Knowledge, no Person has infringed, misappropriated or otherwise violated any of Seller’s Intellectual Property. Except as set forth on Schedule 3.6(b)(ii), no Action by any Person contesting the validity, enforceability, use, registration or ownership of any of the Seller’s Intellectual Property is pending or, to the Seller’s Knowledge, threatened.
(c) All of Seller’s Intellectual Property was written, created, invented or developed solely by either (i) employees of the Seller acting within the scope of their employment and subject to an obligation, by agreement or Law, to assign all rights in the Seller Intellectual Property to the Seller or (ii) third parties who have assigned all of their rights therein to the Seller through the execution of written agreements, true, complete and correct copies of which have been supplied to the Buyer. No funding, facilities or personnel of any Governmental Authority were used, directly or indirectly, to develop or create, in whole or part, any of the Seller’s Intellectual Property.
(d) All agreements related to Intellectual Property licensed by the Seller and material to the operation of the Business as currently conducted (other than off‑the‑shelf Intellectual Property or Intellectual Property subject to shrink‑wrap, click‑through or similar licenses) are listed on Schedule 3.6(d) (each, an “IP License,” and collectively, the “IP Licenses”). The Seller has provided the Buyer with true, complete and correct copies of all IP Licenses. All IP Licenses are valid and enforceable against the Seller and, to the Seller’s Knowledge, each IP License is valid and enforceable against the other parties thereto, in each case as subject to the Enforceability Exceptions.
(e) Except as set forth on Schedule 3.6(e), the Seller has good title to and otherwise owns all rights, title and interest in and to (i) all software and applications developed by or on behalf of the Seller and intended for use in the Business, including all enhancements, versions, releases and updates of such products (the “Seller’s Software”) and (ii) all Intellectual Property and documentation associated with the Seller’s Software, free and clear of any and all Liens (other than Permitted Liens). To the Seller’s Knowledge, there are no viruses, worms,
Trojan horses, self‑help code or similar programs that would restrict in any material respect the proper use or access to any code in any Seller Software. The Seller maintains and follows a disaster recovery plan designed to maintain access to the Seller’s Software and to prevent the unintended destruction of the Seller’s Software.
(f) Each Person that has developed any (i) of Seller’s Intellectual Property or (ii) third‑party Intellectual Property in the possession of the Seller that the Seller is required to keep confidential, has signed an agreement or acknowledgement requiring that such Person keep such information confidential.
(g) To the Seller’s Knowledge, no employee of the Seller is in default of any assignment of invention, non‑compete or similar agreement between such employee and a third party.
(h) To the Seller’s Knowledge, the operation of the Seller as currently conducted does not result in any interference with, infringement upon or misappropriation of any Intellectual Property rights of any other Person.
(i) The Seller owns or has the valid right or license to use, possess, sell or license, all of Seller’s Intellectual Property necessary or required for the conduct of the Business as currently conducted and as currently proposed to be conducted, and such rights to use, possess, sell or license are sufficient for the conduct of the Business and are free and clear of any Liens (other than those imposed by the documents evidencing the licenses with respect to such Intellectual Property). The Seller has not authorized any other Person to use or otherwise exploit any Intellectual Property owned by or licensed to the Seller, except pursuant to a binding, written license.
(j) Seller has used open source software in the development of Seller’s Intellectual Property and all such open source software license agreements are disclosed on Schedule 3.6(j). Seller represents and warrants that it has complied with all license requirements of such disclosed open-source software.
(k) None of the contracts set forth in Schedule 2.1(d) to which the Shareholder is a party relate to the Seller’s Intellectual Property, Seller Software, or IP License or the Seller’s ownership rights thereof.
3.7 Title to Purchased Assets; Sufficiency and Condition of Purchased Assets.
(d) The Seller, or the Shareholder, to the extent applicable, has good and marketable title to, or a valid leasehold interest in, all of the Purchased Assets, free and clear of any Lien, other than the Liens set forth on Schedule 3.7(a) (which Liens shall be terminated and released in connection with the Closing) and Permitted Liens.
(e) The Purchased Assets are sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted by Seller prior to the Closing,
and constitute all of the rights, property and assets necessary to conduct the Business as currently conducted.
(f) The Inventory is good, usable, merchantable and saleable in the Ordinary Course of Business, and has been reflected on the balance sheets contained in the Unaudited Financial Statements at the lower of cost or market value (taking into account the usability or saleability thereof) in accordance with GAAP. All of the Personal Property is in good operating condition and repair, except for ordinary wear and tear, and scheduled maintenance and replacement in the Ordinary Course of Business.
(g) Since July 1, 2013, there have been (i) no losses, thefts, or security breaches suffered by the Seller in respect of Personal Information or other data used in the Business, (ii) to the Seller’s Knowledge, no unauthorized access or unauthorized use of any Personal Information or other data used in the Business, and (iii) to the Seller’s Knowledge, no unintended or improper use of any Personal Information in the possession, custody, or control of the Seller or a contractor or agent acting on behalf of the Seller.
3.8 Licenses and Permits; Compliance with Laws.
(a) The Seller, or the Shareholder, to the extent applicable, has been and currently is in compliance with regard to the Seller’s operations, practices, provision of goods and services, claims and billings, real property, structures, machinery, equipment and other property, and all other material aspects of the Business, with all applicable Laws, Healthcare Laws and Orders, including, but not limited to, all Laws or Orders relating to the safe conduct of business, quality and labeling, antitrust, Taxes, consumer protection, equal opportunity, discrimination, health, wage and hour, sanitation, fire, zoning, building and occupational safety. There are no Actions pending or, to the Seller’s Knowledge, threatened in writing, nor has the Seller nor the Shareholder received notice, regarding any violations of any Laws, Healthcare Laws and Orders enforced by any Governmental Authority claiming jurisdiction over the Seller or Shareholder, to the extent applicable, including any requirement of the Occupational Safety and Health Administration or any pollution and environmental control agency (including air and water).
(b) The Seller has been and currently is in compliance with any and all immigration Laws that are applicable to the Seller and the Seller’s operations, including, but not limited to, the Immigration Reform and Control Act of 1986, as amended from time to time.
(c) The Seller, or the Shareholder, to the extent applicable, holds, and is in compliance with all Permits required for the conduct of the Business, the provision of goods and services by the Seller or the Shareholder, to the extent applicable, the billing of goods and services by the Seller or the Shareholder, to the extent applicable, and the ownership of the Seller’s assets and properties other than those the failure to comply with is not reasonably likely to have a Material Adverse Effect. Schedule 3.8(c) sets forth a list of all such Permits. Each such Permit is valid and in full force and effect and, to the Seller’s Knowledge, no suspension or cancellation of such Permit is threatened and, to the Seller’s Knowledge, there is no reasonable basis for believing that such Permit will not be renewable upon expiration. No notice from a Governmental Agency has been received by the Seller or the Shareholder alleging the failure to hold any of the foregoing.
Except as set forth on Schedule 3.8(c), all of such Permits will be available for use by the Buyer immediately after the Closing. True, complete and correct copies of the Permits and any other material reports, statements of deficiencies, plans of correction, audits and other investigation notices with respect to any Law have been made available to Buyer.
3.9 Litigation.
Except as set forth on Schedule 3.9, there are no Actions pending or, to the Seller’s Knowledge, threatened against or involving the Seller (at law or in equity, or before or by any Governmental Authority), any of the properties or assets of the Seller (including the Purchased Assets), any of the properties or assets of the Shareholder relating to the contracts listed in Schedule 2.1(d) to which it is a party (including the Purchased Assets), Shareholder or any officer or employee of the Seller, nor, to the Seller’s Knowledge, is there any basis for any such Action. Neither the Shareholder, solely with respect to the contracts listed in Schedule 2.1(d) to which it is a party, nor the Seller is identified as a party to, or is in any way subject to any restrictions or limitations under any Order. Since the Balance Sheet Date, neither the Shareholder, solely with respect to the contracts listed in Schedule 2.1(d) to which it is a party, nor the Seller has commenced or settled any Action asserting Losses in excess of $20,000 individually, or $40,000, in the aggregate, against any other Person.
3.10 Employees.
(a) Except as set forth on Schedule 3.10(a), (i) the Seller is not a party or subject to or bound by any collective bargaining or other similar agreement, (ii) no current officers or employees of the Seller are a party to any employment agreement or union or collective bargaining agreement with the Seller, (iii) no union has been certified or recognized as the collective bargaining representative of any of such employees or has attempted to engage in negotiations with the Seller regarding terms and conditions of employment, (iv) no unfair labor practice charge, work stoppage, picketing or other such activity relating to labor matters has occurred or is pending, (v) to the Seller’s Knowledge, no executive of the Seller, Kailin Alberti, Arielle Band, Joanna Ficklin, Laura Hogle, Jeremy Knipper, Jeffrey Moore, or any consultant of the Seller has any plans to terminate employment or relationship with the Seller; (vi) neither the Seller nor the Shareholder currently has independent contractors or consultants who have provided services to the Seller, except as disclosed in any Contract set forth on Schedule 3.14(a); and (vii) to the Seller’s Knowledge, no employee of the Seller is subject to any noncompete, nondisclosure, confidentiality, employment, consulting or similar agreements relating to, affecting or in conflict with the present or proposed business activities of the Seller. There are no current or, to the Seller’s Knowledge, threatened attempts (and there have been no current or, to Seller’s Knowledge, threatened attempts since July 1, 2013) to organize or establish any labor union to represent any employees of the Seller.
(b) The Shareholder, solely with respect to the contracts set forth in Schedule 2.1(d) to which it is a party, and the Seller have been and currently are in compliance with all federal, state and local Laws or Orders governing employee relations applicable to the Seller, or the Shareholder, to the extent applicable, including without limitation anti‑discrimination laws, wage and hour laws, labor relations laws and occupational safety and health laws, and no Actions,
grievances or controversies relating to any such Law or Order are pending or, to the Seller’s Knowledge, have been threatened.
(c) The Seller has withheld or collected from its employees the amount of all Taxes required to be withheld or collected therefrom and has paid the same when due to the proper Governmental Authority. Schedule 3.10(c) sets forth a correct and complete list of each employee of the Seller as of the Closing Date, including the name, position, current annual base and bonus target, total accrued vacation and employment status (either full‑time or part‑time) for each such employee, and whether any such employee is absent from active employment, including but not limited to, leave of absence or disability. The Seller has not increased the annual base or bonus target paid or payable to any employee since March 13, 2015.
(d) Schedule 3.10(d) of the Disclosure Schedules sets forth the bonuses earned by the Transferring Employees of the Seller for the fiscal years ended December 31, 2013 and 2014.
(e) Schedule 3.10(e) of the Disclosure Schedules lists all independent contractors and consultants currently hired by the Seller (including health care professionals) to which the Seller has paid or expects to pay more than $25,000 in any fiscal year, their rates of pay, the dates they began their assignment with the Seller and the estimated completion date of their services. Except in the ordinary course of business, the Seller has not increased the rate of pay that is payable to any independent contractor, consultant, or health care professional since January 1, 2015.
(f) All obligations relating to the following have been paid: (i) all bonuses set forth in Schedule 3.10(d), and (ii) all employee commissions accrued as of the Balance Sheet Date arising out of the operation of the Business.
3.11 Employee Benefits.
(a) Schedule 3.11 sets forth a list of all Benefit Plans in effect as of the Closing Date (each, a “Seller Benefit Plan”). Each Seller Benefit Plan (and each related trust, insurance contract or fund) complies in form and, in administration, with the applicable requirements of ERISA, the Code and other Law.
(b) All contributions required in connection with each Seller Benefit Plan by Law, by the terms of such Seller Benefit Plan (including all employer contributions and employee salary reduction contributions, if any) or any agreement relating thereto have been made. There are no material unfunded Liabilities or benefits under any Seller Benefit Plan that have not been properly reserved, accrued for, or otherwise reflected in, the Unaudited Financial Statements.
(c) Each Seller Benefit Plan that is an employee pension benefit plan that is intended to be qualified under Section 401(a) of the Code is so qualified, and if so qualified, has received a favorable determination letter from the IRS, or may rely on a favorable opinion letter, as to its qualification under Section 401(a) of the Code.
(d) Neither the Seller nor any ERISA Affiliate has maintained or contributed to, or has been obligated to maintain or contribute to, any multiemployer plan, as defined in Section 3(37) of ERISA, and neither the Seller nor any ERISA Affiliate has, since January 1, 1974, maintained, contributed to or terminated an employee pension benefit plan, as defined in Section 3(2) of ERISA.
(e) The Seller does not maintain or have any obligation under a nonqualified deferred compensation plan within the meaning of Code Section 409A that fails to meet the requirements of paragraph (2), (3), or (4) of Code Section 409A(a) or that is not operated in accordance with a good faith interpretation of such requirements or with respect to which assets are subject to Code Section 409A(b).
(f) The Seller does not have any obligation to provide life or medical insurance benefits to former or retired employees or beneficiaries thereof, except to the extent required by COBRA.
3.12 Insurance.
The Seller currently has, and through the last day of the Employee Transition Period will have, insurance contracts or policies (collectively, the “Policies”) in full force and effect that provide for coverages that, in the Seller’s reasonable determination, are reasonably adequate as to amount and scope for the Seller and the Seller’s operations. Schedule 3.12(a) sets forth summary descriptions of all Policies, including the name of the insurer, the types, dates and amounts of coverages, and any material coverage exclusions. Except as set forth on Schedule 3.12(b), all of the Policies will remain in full force and effect through no less than eighteen (18) months after the Closing Date. The Seller has not breached or otherwise failed to perform in any material respect the Seller’s obligations under any of the Policies nor has the Seller nor Shareholder received any adverse notice or communication from any of the insurers party to the Policies with respect to any such alleged breach or failure in connection with any of the Policies. To the Seller’s Knowledge, all Policies are sufficient to protect the Seller from any material loss resulting from the risks and liabilities reasonably foreseeable at the date hereof. All Policies to which the Seller is subject are valid, outstanding, collectible and enforceable, and will not in any way be affected by, or terminate or lapse by reason of, the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. The Seller has not been refused any insurance with respect to its assets or operations, nor has coverage ever been limited by any insurance carrier to which the Seller has applied for any Policy or with which the Seller has carried a Policy.
3.13 Taxes.
(a) Since July 1, 2013, the Seller has filed all Tax Returns required to be filed, all such Tax Returns are accurate, true and complete, and the Seller has duly paid all Taxes due or payable (whether or not shown or required to be shown on any Tax Return).
(b) Since July 1, 2013, all Taxes that have been required to be withheld or collected by the Seller, including, but not limited to, in connection with any amounts paid or owing to any employee, independent contractor, creditor, partner or other third party, have been duly
withheld or collected and, to the extent required, have been paid to the proper Taxing Authority or properly segregated or deposited as required by applicable laws.
(c) There are no Liens for Taxes upon any property or assets of the Seller, except for Permitted Liens.
(d) For the period since July 1, 2013, the Seller does not have in force any waiver of the statute of limitations on the right of the Internal Revenue Service or any other Taxing Authority to assess additional Taxes or to contest the income or loss with respect to any Tax Return.
(e) No Taxing Authority is now asserting in writing or, to the Seller’s Knowledge, threatening to assert against the Seller any deficiency or claim for additional Taxes or any adjustment of any Tax Return for any period after July 1, 2013.
(f) To the Seller’s Knowledge, no claim has been made since July 1, 2013, by a Taxing Authority in a jurisdiction in which the Seller does not file a Tax Return that the Seller is or would reasonably likely be subject to taxation by that jurisdiction.
(g) No issues have been raised in writing that are currently pending by any Taxing Authority in connection with any Tax Returns filed by or with respect to the income, assets or activities of the Seller. Except as set forth on Schedule 3.13(g), the Seller has not been subject to an audit by a Taxing Authority.
(h) The Seller is not a party to any tax‑sharing agreement.
(i) Since July 1, 2013, no corporation, partnership, limited liability company or other entity has merged with or into the Seller.
(j) None of the assets of the Seller constitute tax‑exempt bond financed property or tax‑exempt use property within the meaning of Section 168 of the Code, and none of the assets of the Seller are subject to a lease, safe harbor lease or other arrangement as a result of which the Seller is not treated as the owner of such assets for federal income tax purposes.
(k) Since July 1, 2013, the Seller is not, and has not been, a party to any “reportable transaction,” as defined in Section 6707A(c)(1) of the Code and Treasury Regulation Section 1.6011‑4(b).
(l) [Reserved.]
(m) Since July 1, 2013, the Seller has not, and the Seller has not previously had, any permanent establishment in any foreign country, and the Seller has not previously engaged in a trade or business in any foreign country.
(n) None of the Purchased Assets constitute stock in a corporate subsidiary or a joint venture, partnership, limited liability company interest, or other arrangement or contract which is treated as a partnership for U.S. federal income Tax purposes.
(o) None of the Purchased Assets are subject to an arrangement that may cause a “tax‑exempt use loss” under Section 470 of the Code for any time period after July 1, 2013.
(p) Since July 1, 2013, none of the Purchased Assets are or have been subject to any “Section 467 rental agreement” within the meaning of Section 467(d) of the Code or Treasury Regulation Section 1.467‑1(c).
3.14 Material Contracts.
(a) Except as set forth on Schedule 3.14(a), neither the Shareholder (solely with respect to Contracts related to the Business) nor the Seller is a party to or otherwise bound by any of the following:
(i) any Contract or group of related Contracts with the same party, which, when aggregated with any Contract between such party and the Seller, creates a future payment obligation by the Seller in excess of $25,000 in any calendar year;
(ii) Assumed Contracts with customers of the Seller for amounts in excess of $100,000 (in terms of dollars billed by Seller for the calendar year 2014);
(iii) any employment, severance or consulting Contract with any director, officer or employee of the Seller;
(iv) any Contract with another Person limiting or restricting the ability of the Seller to enter into or engage in any market or line of business;
(v) any Contract for the sale of any of the assets of the Seller or the acquisition of the stock or the assets of another Person other than in the Ordinary Course of Business;
(vi) any Contract relating to the incurrence, assumption, surety or guarantee of any Indebtedness in excess of $25,000;
(vii) any Contract under which the Seller has made advances or loans to any other Person (which shall not include advances made to an employee of the Seller in the Ordinary Course of Business) in excess of $25,000;
(viii) any Contract under which the Seller uses or leases personal property that involves annual payments in excess of $25,000;
(ix) any Contract involving Intellectual Property licensed (A) by the Seller or (B) to the Seller;
(x) any consulting, independent contractor, sales, commissions, distributor, dealer, advertising or marketing Contract that involves annual payments in excess of $25,000;
(xi) any Contract for the purchase, acquisition or supply to the Seller of Inventory and other property and assets (other than purchase orders issued in the Ordinary Course of Business) in excess of $25,000;
(xii) any Contract with a Governmental Authority; or
(xiii) any Contract with physicians, hospitals, home health agencies, hospices or any other referral source, to the extent not otherwise set forth on Schedule 3.14(a).
(b) Each of the Assumed Contracts is the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms (subject to the Enforceability Exceptions). The Seller has made available to or delivered to the Buyer true, complete and correct copies of all of the written Assumed Contracts set forth (or required to be set forth) on Schedule 3.14(a) (collectively, the “Material Contracts”). Neither the Seller nor, to the Seller’s Knowledge, any other party thereto is in breach or default of any of the Assumed Contracts. Except as set forth on Schedule 3.14(b), neither the Seller nor the Shareholder has received any notice of or, to the Seller’s Knowledge, any threat to terminate any of the Material Contracts. No event has occurred (including the execution of this Agreement and the consummation of the transactions contemplated hereby), and that (i) constitutes a breach, default or event of default of any Assumed Contract by the Seller, (ii) would cause the acceleration of any obligation under any Assumed Contract, or (iii) gives rise to any right or termination or cancellation of any of the Assumed Contracts by any party other than the Seller. Except as set forth on Schedule 3.14(b), neither the Seller nor the Shareholder has received any notice of any breach or default by any other party to an Assumed Contract, and neither the Seller nor Shareholder has made such a claim with respect to any such breach or default. Except as set forth in Schedule 3.14(b), since the Balance Sheet Date, the Seller has not amended, modified, renewed, terminated or entered into a Material Contract.
3.15 Environmental and Healthcare Law Compliance.
(a) The Shareholder, solely with respect to the contracts set forth on Schedule 2.1(d) to which it is a party, and the Seller have since July 1, 2013 and currently are in material compliance with all Environmental Laws and Healthcare Laws. To the Seller’s Knowledge, no event has occurred that (with or without notice or lapse of time) (i) would constitute or result in a material violation by the Seller or the Shareholder, to the extent applicable, of, or a failure on the Seller or Shareholder’s part to comply with, any Environmental Law or Healthcare Law or (ii) would give rise to any obligation on the part of the Seller or the Shareholder, to the extent applicable, to undertake, or to bear all or any portion of the cost of, any remedial action.
(b) (i) The properties or operations of the Shareholder, solely with respect to the contracts set forth on Schedule 2.1(d) to which it is a party, and the Seller, that are currently owned, leased or operated, are not the subject of any Action, settlement or Contract relating to Environmental Laws, Healthcare Laws or Hazardous Substances, (ii) neither the Seller nor the Shareholder has received notice of any investigation that has been commenced or a written request for information concerning Hazardous Substances or compliance of the Seller or Shareholder, to the extent applicable, with Environmental Laws and Healthcare Laws, (iii) to the Seller’s
Knowledge, no Action is threatened against the Seller or Shareholder, to the extent applicable, alleging any violation or liability under any Environmental Law or Healthcare Law and (iv) no notice has been received by the Seller or Shareholder alleging any violation of or liability under any Environmental Law or Healthcare Law, or requiring or seeking to impose upon the Seller or Shareholder, to the extent applicable, any property currently owned, leased or operated by the Seller or Shareholder, to the extent applicable, any investigatory or remedial action or obligation under any Environmental Law or Healthcare Law.
(c) No current shareholder, member, officer, director, manager or employee of the Seller, has at any time (i) been convicted of a criminal offense related to any Healthcare Law, or (ii) been convicted of a criminal offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of a healthcare item or service, or in connection with a program operated by or financed in whole or in part by any Governmental Authority.
(d) Since July 1, 2013, Seller has duly filed with the proper authorities all reports and other information required by federal and state regulatory agencies, and, to the Seller’s Knowledge, all such reports or other information were accurate and complete when filed.
(e) Except as set forth on Schedule 3.15(e), there are no pending or, to the Seller’s Knowledge, threatened, Actions, investigations, audits, reviews or other examination of the Seller or its business, assets or properties, or billing records or claims, and the Seller is not subject to any Order, agreement, memorandum of understanding or other regulatory enforcement Action with or by any Governmental Authority or contractor having supervisory or regulatory authority with respect to the Seller or the Business, or the Purchased Assets.
(f) The Seller is in compliance with the applicable privacy, security, transaction standards, breach notification, and other provisions and requirements of HIPAA, HITECH and any applicable state Laws governing the privacy and security of heath information and Personal Information. The Seller has established and implemented such policies, programs, procedures, contracts and systems as are necessary to comply with HIPAA, HITECH and applicable state Laws. The Seller has not received any notice from any Governmental Authority alleging that the Seller is not in compliance with HIPAA, HITECH or applicable state Laws. With regard to Protected Health Information, (“PHI,” as defined by the HIPAA regulations or, to the extent more stringent, the applicable state privacy and security Law), except as disclosed in Schedule 3.15(f), since July 1, 2013, there has been no Breach of Unsecured PHI, or Security Incident resulting in the unauthorized “use” or “disclosure” of PHI (as those terms are defined by HIPAA and HITECH) and no reportable violation of state Laws regarding the privacy and security of health information and Personal Information by the Seller, any facility of the Seller, or any of the Seller’s agents, employees or contractors.
3.16 Brokers.
Except for the Persons set forth on Schedule 3.16, neither the Seller nor the Shareholder nor any Person acting on the Seller’s or the Shareholder’s behalf has become obligated to pay any fee
or commission to any broker, finder or intermediary for, or on account of, the transactions contemplated by this Agreement.
3.17 Operations Since Balance Sheet Date; Absence of Changes.
Since the Balance Sheet Date, the Seller has operated in the Ordinary Course of Business and there has not been any fact, event, occurrence or development that has had, or could reasonably be expected to have, a Material Adverse Effect. Since the Balance Sheet Date, the Shareholder, solely with respect to the contracts set forth on Schedule 2.1(d) to which it is a party, and the Seller have (i) used commercially reasonable efforts to retain the employees and sales and other agents of the Seller or otherwise rendering services to the Business, and preserve good business relationships with the such employees, customers and suppliers, and continued to compensate the such employees and sales and other agents in accordance with past custom and practice; and (ii) maintained the Seller’s books, accounts and records in accordance with past custom and practice. Since the Balance Sheet Date or other dates as indicated below, except as set forth on Schedule 3.17, the Seller, or the Shareholder (solely with respect to the Business), to the extent applicable, have not done, and are not in any way obligated to do any of the following:
(a) create, incur, assume or agree to create, incur, assume or guarantee, any Indebtedness;
(b) institute any increase in, amend, enter into, terminate or adopt any Seller Benefit Plan, other than as required by any such existing plan or by Law;
(c) make any changes in the compensation of the officers or employees of the Seller, since March 13, 2015;
(d) make any change in the accounting principles, methods, practices or policies applied in the preparation of the Unaudited Financial Statements;
(e) sell, lease, transfer, license, pledge or otherwise dispose of tangible or intangible assets having a fair market value in excess of $10,000, individually, or $25,000 in the aggregate; or create or suffer to exist any Lien on any of the Purchased Assets;
(f) enter into any employment, severance or similar Contract or agreement with any partner, officer, consultant, independent contractor or employee of the Seller or independent contractor otherwise rendering services to the Business, involving any payments for an amount in excess of $10,000, individually, or $25,000, in the aggregate;
(g) enter into any other transaction or Contract or agreement with any Affiliate of the Seller or of any Shareholder, or enter into any collective bargaining agreement;
(h) make any loan, advance or capital contribution to or cash investment in any Person, other than advances to employees in the Ordinary Course of Business for travel and similar business expenses;
(i) write down or write up the value of any asset by more than $10,000, individually, or $25,000 in the aggregate;
(j) delay or postpone the payment of accounts payable and other Liabilities or accelerate the collection of accounts receivable except in the Ordinary Course of Business;
(k) commence or settle any Action asserting Losses in excess of $20,000, individually, or $40,000, in the aggregate, against any other Person;
(l) amend, modify, terminate or enter into any Material Contract;
(m) make any distributions to its Shareholder; or
(n) enter into any Contract or agreement to do any of the actions described in clauses (a) through (m) above.
3.18 Customers and Suppliers.
(a) Schedule 3.18(a) sets forth the twenty (20) largest customers (in terms of dollars billed by the Seller) and the twenty (20) largest suppliers (in terms of dollars spent by the Seller), in each case, of the Seller during calendar years 2015 (year-to-date) and 2014, together with the dollar amount of goods purchased by the Seller from each such supplier and the dollar amount billed by the Seller to each customer during each such period.
(b) Except as set forth on Schedule 3.14(b), no customer or supplier has canceled, terminated or, to the Seller’s Knowledge, made any threat to the Seller or Shareholder to cancel or otherwise terminate its relationship with the Seller or to materially decrease its services or supplies to the Seller or its direct or indirect purchase or usage of the products or services of the Seller. Except as set forth on Schedule 3.14(b), to Seller’s Knowledge, Seller has not received or paid within the last 12 months, any substantiated customer claim for compensation for service level credits or damages in excess of $10,000, arising from a service level disruption or service claim.
3.19 Accounts Receivable.
The accounts receivable of the Seller reflected on the Balance Sheet and such additional accounts receivable as are reflected on the books of the Seller on the Closing Date (except to the extent so reserved against) (a) are valid, genuine and subsisting, arise out of bona fide sales and deliveries of goods, performance of services or other business transactions and are not subject to defenses, set‑offs or counterclaims and (b) have not been assigned or pledged to any Person. The reserve for bad debts reflected in the Balance Sheet represents an estimate, to Seller’s Knowledge, that is sufficient to provide protection against losses from inability to collect such accounts receivable. No Person has any Lien on such receivables or any part thereof, and except in the Ordinary Course of Business of the Seller, no agreement for deduction, free goods, discount or other deferred price or quantity adjustment has been made with respect to such receivables. Schedule 3.19
sets forth all accounts receivable of the Seller (including the account receivable debtor) that have been outstanding for more than one hundred twenty (120) days as of February 28, 2015.
3.20 Affiliate Transactions.
Schedule 3.20 sets forth a complete and accurate list, including the parties, of all Contracts to which the Seller, on the one hand, and any Affiliate of the Seller, on the other hand, is a party. Except as provided on Schedule 3.20, the Seller has not made any payments, made any distribution, loaned any funds or property or made any credit arrangement with the Shareholder, any Affiliate of the Seller or any employee of the Seller except for the payment of employee salaries in the Ordinary Course of Business.
3.21 Accredited Investor.
The HH Common Stock acquired by the Seller and/or Shareholder hereunder will be issued by Buyer Parent without registration under the Securities Act, in reliance upon exemptions from registration contained in the Securities Act, and reliance upon such exemptions is based in part upon the following representations, warranties, acknowledgements, and agreements of the Seller and Shareholder:
(a) Each of the Seller and Shareholder is an “accredited investor” within the meaning of such term under Rule 501 of the Securities Act, and each of the Seller and Shareholder has the knowledge and experience in financial and business matters, is capable of evaluating the merits and risks of an investment in the HH Common Stock and is able to bear the economic risks of such investment.
(b) The HH Common Stock may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and otherwise in compliance with state securities laws and regulations, as applicable.
(c) The HH Common Stock is being acquired, and will be acquired, by the Seller and/or Shareholder for investment for its own account and not with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act or any applicable state securities laws.
(d) Each of the Seller and Shareholder has had the opportunity to make inquiries of and obtain from representatives and employees of Buyer and Buyer Parent such other information about Hooper Holmes, Inc. as it deems necessary in connection with such investment.
(e) The acquisition of the HH Common Stock by the Seller and/or Shareholder is consistent with the general investment objectives of the Seller or Shareholder, as applicable. Each of the Seller and Shareholder understands that the acquisition of the HH Common Stock involves a high degree of risk.
(f) Each of the Seller and Shareholder is aware that there are substantial restrictions on the transferability of the HH Common Stock. Each of the Seller and Shareholder
also understands and agrees that stop transfer instructions relating to the HH Common Stock will be placed in the stock transfer ledger of Buyer Parent, and that the certificates evidencing the HH Common Stock will bear legends in substantially the following form:
The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are "restricted securities" as that term is defined in Rule 144 under the Securities Act. The securities may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Securities Act and applicable state securities laws or pursuant to an exemption from registration under such securities laws, the availability of which is to be established to the satisfaction of the Company, including, if requested by the Company, a satisfactory legal opinion.
3.22 No Indebtedness.
There is no Indebtedness with respect to the Seller, the Business, Purchased Assets or Assumed Liabilities, either direct or indirect, matured or unmatured, absolute, contingent or otherwise (and whether or not of a kind required by GAAP to be set forth in a financial statement).
3.23 Full Disclosure.
Neither this Agreement nor any of the Exhibits, certificates or Disclosure Schedules delivered hereunder by the Seller or the Shareholder contains any untrue statement of a material fact or omits a material fact necessary to make each statement contained herein or therein not misleading. There is no fact that the Seller or the Shareholder has not disclosed to the Buyer herein and of which the Seller or the Shareholder is aware that would reasonably be anticipated to have a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER, HOOPER WELLNESS AND BUYER PARENT
Except as set forth in the Buyer Disclosure Schedule, the Buyer, Hooper Wellness and Buyer Parent jointly and severally, hereby represent and warrant to the Seller and Shareholder that the statements contained in this Article IV are correct and complete as of the Closing Date:
4.1 Organization; Good Standing.
(c) The Buyer is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Kansas and is duly qualified to transact business as a foreign entity in each jurisdiction where its operations or the ownership of its properties and assets requires such qualification except where the failure to so qualify would not be reasonable expected to have a Buyer Material Adverse Effect.
(d) Hooper Wellness is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Kansas and is duly qualified to transact business as a foreign entity in each jurisdiction where its operations or the ownership of its properties and assets requires such qualification except where the failure to so qualify would not be reasonable expected to have a Buyer Material Adverse Effect.
(e) Buyer Parent is a corporation duly formed, validly existing and in good standing under the laws of the State of New York and is duly qualified to transact business as a foreign corporation in each jurisdiction where its operations or the ownership of its properties and assets requires such qualification except where the failure to so qualify would not be reasonable expected to have a Buyer Material Adverse Effect.
4.2 Authorization; Binding Effect.
This Agreement and the Ancillary Agreements to which the Buyer is a party have been duly authorized by all requisite action on the part of the Buyer, Hooper Wellness and Buyer Parent and, assuming due authorization, execution and delivery by the other parties thereto, constitute the legal, valid and binding obligation of the Buyer, Hooper Wellness and Buyer Parent enforceable in accordance with their respective terms, except to the extent limited by the Enforceability Exceptions.
4.3 Non‑Contravention‑.
The execution, delivery and performance of this Agreement and the Ancillary Agreements, when executed, and the consummation of the transactions contemplated hereby and thereby by the Buyer does not and will not: (a) result in a breach of any provision of the charter, bylaws or other organizational documents of the Buyer, Hooper Wellness or Buyer Parent; (b) violate any applicable Law or any Order to which the Buyer, Hooper Wellness or Buyer Parent is a party; (c) result in a breach of or default under, or give a third party the right to accelerate, terminate or suspend any obligations under, any material Contract to which the Buyer, Hooper Wellness or Buyer Parent is a party, except to the extent as would not adversely affect the Buyer, Hooper Wellness or Buyer Parent’s performance under this Agreement or the consummation of the transactions contemplated hereby; or (d) require any Governmental Approval or any Third‑Party Approval.
4.4 Litigation.
There are no Actions that are pending or, to the Buyer’s Knowledge, threatened against or involving the Buyer, Hooper Wellness or Buyer Parent, at law or in equity, or before or by any Governmental Authority, that would adversely affect the Buyer, Hooper Wellness or Buyer Parent’s performance under this Agreement or the consummation of the transactions contemplated hereby.
4.5 Brokers.
Except as set forth on Schedule 4.5, neither the Buyer, Hooper Wellness, Buyer Parent nor any Person acting on the Buyer’s behalf has become obligated to pay any fee or commission to any broker, finder or intermediary for, or on account of, the transactions contemplated by this Agreement.
4.6 Valid Issuance of HH Common Stock; Capitalization of Buyer.
(h) The HH Common Stock issuable pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued, fully paid and nonassessable and will be free and clear of restrictions on transfer, other than restrictions on transfer under this Agreement and under applicable securities Laws and are not subject to any preemptive or similar rights. Assuming the truth and accuracy of the Company’s representations and warranties set forth in Section 3.21, the issuance of the Buyer Common Stock as contemplated by this Agreement is exempt from the registration requirements of the Securities Act and the securities or “blue-sky” laws of any applicable jurisdiction.
(i) The authorized, issued and outstanding shares of capital stock of the Buyer Parent is as set forth in the Buyer Parent Reports, as of the dates indicated in the Buyer Parent Reports;
(j) There are no outstanding obligations of Buyer or Buyer Parent to repurchase, redeem or otherwise acquire any of the Buyer Securities.
4.7 Absence of Certain Changes.
Since December 31, 2014 through the date hereof, other than as described in the Buyer Parent Reports, Buyer, Hooper Wellness and Buyer Parent have conducted their businesses in all material respects only in the ordinary course consistent with past practice; and since December 31, 2014 through the date hereof, other than as described in the Buyer Parent Reports, there has not been any change, loss, event, development, damage or circumstance which has had, or would reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect.
4.8 Financial Statements; SEC Filings.
(a) Since January 1, 2015, Buyer Parent has timely filed all forms, reports, statements and documents required to be filed by it with the SEC (collectively, together with any amendments thereto and any such forms, reports, statements or documents Buyer Parent may file or be required under applicable Law to file subsequent to the date hereof until the Closing, the “Buyer Parent Reports”). As of its date or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing, each Buyer Parent Report (i) complied in all material respects with the requirements of the Exchange Act and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.
(b) Except as disclosed in a subsequent Buyer Parent Report: (i) the consolidated financial statements (including any related notes thereto and the unqualified report and certification of Buyer Parent’s independent auditors) contained in Buyer Parent’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2014 were prepared in accordance with GAAP (except as may be indicated in the notes thereto), were derived from the books and records of the Buyer Parent, are complete and correct in all material respects and present
fairly, in all material respects, the consolidated financial position of Buyer Parent at and as of the respective dates thereof, and their consolidated results of operations, shareholders’ equity and cash flows for the respective periods indicated therein; and (ii) the unaudited consolidated financial statements of Buyer Parent (including any related notes thereto, subject to normal recurring year-end audit adjustments and the absence of footnotes, if applicable) for all interim periods prepared by Buyer Parent, certified by Buyer Parent’s Chief Financial Officer and included in the Buyer Parent’s Quarterly Reports on Form 10-Q filed with the SEC since December 31, 2014 were prepared in accordance with GAAP (except as may be indicated in the notes thereto), were derived from the books and records of Buyer Parent, are complete and correct in all material respects and present fairly, in all material respects, the consolidated financial position of Buyer Parent at and as of the respective dates thereof, and their consolidated results of operations, shareholders’ equity and cash flows for the respective periods indicated therein (subject to changes resulting from normal and recurring period-end audit adjustments).
4.9 No Undisclosed Liabilities.
Except for Liabilities (A) reflected or reserved against in the most recent balance sheet (or described in the notes thereto) of Buyer Parent included in the Buyer Parent Reports, (B) incurred in connection with this Agreement or the transactions contemplated by this Agreement or (C) incurred since December 31, 2014, in the Ordinary Course of Business, neither Buyer Parent nor any of its subsidiaries has any Liabilities (whether accrued, absolute, contingent or otherwise) that, individually or in the aggregate, have had or are reasonably likely to have a Buyer Material Adverse Effect.
4.10 Compliance with Laws; Permits.
(b) Buyer, Hooper Wellness and Buyer Parent are in compliance with all Laws and Orders applicable to its business or operations except for violations that would not reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect. No written notice has been received by Buyer, Hooper Wellness or Buyer Parent from any Governmental Authority alleging any violation of any applicable Laws or Orders except for violations that would not reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect.
(c) Buyer, Hooper Wellness and Buyer Parent have in effect all Approvals of all Governmental Authorities necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted (collectively, “Buyer Permits”), except as would not reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect. Buyer, Hooper Wellness and Buyer Parent are in compliance, in all material respects, with the terms of all Buyer Permits.
ARTICLE V
COVENANTS
5.1 Access.
(f) Following the Closing, subject to the Parties’ compliance with all applicable privacy laws, including HIPAA, the Seller shall preserve and, upon reasonable advance notice, afford to Buyer’s officers, independent public accountants, counsel, lenders, consultants and other representatives, reasonable access during normal business hours to all records pertaining to the Purchased Assets, including the Seller Corporate Records as well as the right to review the preparation of the Unaudited Financial Statements and the working papers related thereto. Buyer, however, shall not be entitled to access to any materials containing privileged communications or information about employees, disclosure of which might violate an employee’s reasonable expectation of privacy.
(g) Solely with respect to customer or supplier claims made against Seller or Shareholder pursuant to Section 2.3(a)(iv), following the Closing, subject to the Parties’ compliance with all applicable privacy laws, including HIPAA, the Buyer shall preserve and, upon reasonable advance notice, afford to Seller or Shareholder’s officers and counsel, reasonable access during normal business hours to all records which may pertain to, or employees who may have knowledge of, the relevant Assumed Liabilities or Purchased Assets that are subject of the claim, provided, however, that such access shall be given under the supervision of the Buyer’s personnel and in such a manner as not to interfere with the conduct of the Business.
5.2 Confidentiality.
(j) Any information provided to or obtained by the Parties in connection with the transactions contemplated by this Agreement will be subject to the Non-Disclosure Agreement, and shall be held by the Parties in accordance with, and be subject to the terms of, the Non-Disclosure Agreement.
(k) The Parties agree to be bound by and comply with the provisions set forth in the Non-Disclosure Agreement as if such provisions were set forth herein, and such provisions are hereby incorporated herein by reference.
5.3 Non‑Compete‑.
(d) To assure that the Buyer will realize the benefits of the transactions contemplated hereby, and as part of the value to be received by the Buyer in connection with such transactions, for a period of three (3) years from and after the Closing Date (the “Non‑Compete Period”), none of the Seller, Shareholder nor any Affiliate thereof, other than Principal Financial Group and Principal Life Insurance Company, (collectively, the “Restricted Parties”) shall own, manage, operate or control, whether as an officer, director, manager, employee, investor, partner, shareholder, member, trustee, consultant, agent, representative, broker, promoter or otherwise, in the Business anywhere in the United States (the “Competitive Business”); provided, however, that (i) the foregoing is not intended to prohibit or restrict the ownership, directly or indirectly by any Restricted Party, of up to 5% of the equity interests in any Competitive Business, (ii) no owner of 5% or less of the outstanding equity interests of any entity shall be deemed to engage, solely by reason thereof, in its business, (iii) the foregoing shall not prohibit or restrict Seller, Shareholder or any Affiliate thereof, from providing comprehensive diabetes disease management services, including, without limitation operation of a patient portal and provision of health coaching, and
(iv) the foregoing shall not prohibit or restrict Shareholder, or any Affiliate of Shareholder, from providing pharmacy benefit management services.
(e) During the Non‑Compete Period, no Restricted Party shall (i) directly or indirectly, induce or attempt to induce any employee of the business of the Buyer or any of its Affiliates to leave the employ of such entity; or (ii) call on, service or solicit any client, customer, supplier, lessee or other business relation of the business of the Buyer or any of its Affiliates on behalf of a Competitive Business; provided, however, that nothing herein shall prohibit any Restricted Party or any company with which any of the foregoing is affiliated from (i) making general solicitations for employment not directly targeted at such employees and hiring any employee who responds to such solicitation, (ii) providing diabetes disease management services, including, without limitation operation of a patient portal and provision of health coaching, or (iii) providing pharmacy benefit management services.
(f) If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 5.3 is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.
(g) Each Restricted Party hereby acknowledges and agrees that in the event of a breach by such Restricted Party of any of the provisions of this Section 5.3, monetary damages may not constitute a sufficient remedy. Consequently, in the event of any such breach, the Buyer and its successors or assigns shall be entitled to, in addition to other rights and remedies existing in their favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, in each case without the requirement of posting a bond or proving actual damages.
5.4 Maintenance of Insurance.
The Seller will maintain the professional and general liability insurance it has in place as of the Closing Date for a period of eighteen (18) months following the Closing Date (the “Maintained Policies”). In the event that Seller receives any insurance proceeds pursuant to the Maintained Policies that relate to any occurrence for which the Buyer would be entitled to indemnification under Section 7.2(a), Seller agrees to pay to the Buyer such insurance proceeds up to the amount of the Buyer’s claim. In the event that Seller fails to pay any premium or amount due under any Maintained Policy, Buyer shall have the right to pay such premiums or amounts, and such payments shall be considered a Loss pursuant to Section 7.2(a)(ii).
5.5 Tax Matters.
(k) General. Prior to the Closing, without the prior written consent of the Buyer, which consent shall not be unreasonably withheld, the Seller shall not make or change any election,
change an annual accounting period, adopt or change any accounting method, file any amended Tax Return (unless such amendment is supported by substantial authority within the meaning of Section 6662(d)(2)(B)(i) of the Code, or with respect to non‑income or state and local Taxes, a substantially similar level of authority), enter into any closing agreement, settle any state or local Tax Claim or assessment relating to the state and local Taxes of the Seller, surrender any right to claim a refund of state or local Taxes, consent to any extension or waiver of the limitation period applicable to any state or local Tax Claim or assessment relating to the Seller, or take any other similar action, or omit to take any action relating to the filing of any state or local Tax Return or the payment of any state or local Tax.
(l) Bulk Transfer Taxes. The Buyer shall be liable for, and shall indemnify and hold the Seller harmless from, any bulk transfer Tax of any jurisdiction (under any Law) in connection with the transactions contemplated by this Agreement.
(m) Transfer Taxes. Subject to Section 5.5(b), the Buyer shall be liable for, and shall indemnify and hold the Seller harmless against, any sales, use, transfer, value added, stock transfer, stamp or similar Taxes (including real property transfer and gains taxes) and any transfer, recording, registration or other fees imposed or payable in connection with the transactions contemplated by this Agreement, and the Buyer shall file such applications and documents as shall permit any such Tax to be assessed and paid in accordance with this Agreement. The Seller shall execute and deliver all instruments and certificates reasonably necessary to enable the Buyer to comply with the foregoing.
(n) Assistance and Records. The Parties shall provide each other with such assistance as each may reasonably request in connection with (i) the preparation of Tax Returns required to be filed with respect to the Seller, (ii) any audit or other examination by any Taxing Authority, (iii) any judicial or administrative Action relating to liability for Taxes or (iv) any claim for refund in respect of such Taxes. Such assistance shall include making employees available to the other Parties and their counsel, providing additional information (including executed powers of attorney), explaining any material to be provided and furnishing to, or permitting the copying by, any Party or its counsel of any records, returns, schedules, documents, work papers or other relevant materials related to the transactions addressed in this Agreement, the Purchased Assets or the Assumed Liabilities that might reasonably be expected to be used in connection with any such Action.
(o) Notices. If any Taxing Authority or other Person asserts a Tax Claim, then the Party first receiving notice of such Tax Claim promptly shall provide written notice to the other Parties hereto.
5.6 Use of Business Name.
Following the Closing, the Seller will immediately cease to use or do business, and cease to allow any Affiliate of the Seller to use or do business, under the names “Accountable Health Solutions” or any other name that, in the reasonable judgment of the Buyer, is similar to any of the foregoing names. Notwithstanding the foregoing, the Buyer acknowledges that the Shareholder is permitted to continue to use the corporate name “Accountable Health, Inc.” following the Closing
Date; provided, however, that Shareholder may not use the name “Accountable Health, Inc.” for marketing or advertising purposes, or for the operation of a health and wellness business that competes with the Buyer. Each party agrees that it shall provide any consent required in order to permit the use of such business names pursuant to this Section 5.6. Notwithstanding any other provision of this Section 5.6, in the event that Buyer is precluded from using or doing business under the name “Accountable Health Solutions” in any jurisdiction due to Shareholder’s continued use under this Section 5.6, Shareholder shall promptly discontinue the conflicting use in such jurisdiction.
5.7 Received Payments.
If the Seller or the Shareholder receives any payment relating to any Purchased Asset, including any accounts receivable of the Seller with respect to the Business, outstanding on or after the Closing Date, such payment will be the property of, and the Seller or the Shareholder, as the case may be, will promptly forward and remit such payment to, the Buyer. The Seller or Shareholder, as the case may be, will promptly endorse and deliver to the Buyer any cash, checks or other documents received by the Seller or the Shareholder on account of any such Purchased Asset, including any such accounts receivable. The Seller and the Shareholder will advise the Buyer (promptly following the Seller or the Shareholder becoming aware thereof) of any counterclaims or set‑offs that may arise subsequent to the Closing Date with respect to any such Purchased Asset, including any accounts receivable. If the Buyer receives any payment relating to any Excluded Asset, such payment will be the property of, and the Buyer will promptly forward and remit such payment to the Seller. The Buyer will promptly endorse and deliver to the Seller any cash, checks or other documents received by the Buyer on account of any such Excluded Asset. The Buyer will advise the Seller (promptly following the Buyer becoming aware thereof) of any counterclaims or set‑offs that may arise subsequent to the Closing Date with respect to any such Excluded Asset.
5.8 Shareholder Audited Financial Statements.
On or before May 7, 2015, the Seller agrees to use reasonable best efforts to deliver to Buyer the audited consolidated balance sheets of Shareholder as of December 31, 2014 and December 31, 2013 and the related audited, consolidated statements of income, owner’s equity and cash flows for the respective periods then ended (the “Audited Financial Statements”). The parties agree that the Seller will pay all costs and expenses for obtaining and delivering the Audited Financial Statements. If the Seller fails to deliver the Audited Financial Statements by May 7, 2015, Seller agrees to furnish the Audited Financial Statements and unaudited consolidated balance sheets of Shareholder as of March 31, 2015 and March 31, 2014 and the related unaudited consolidated statements of income, owner’s equity and cash flows for the three-month period then ended for Shareholder (the “Shareholder Q1 Interim Financials” and together with the Audited Financial Statements, the “Shareholder Financial Statements”) no later than sixty (60) days after the Closing Date. The Shareholder Financial Statements (including the notes thereto) have been or will be, as applicable, prepared from the books and records of the Shareholder and present fairly, in all material respects, the respective financial condition of the Shareholder and the respective results of operations, owners’ equity and cash flow at the dates or for the respective periods then ended, as applicable, and have been prepared in accordance with GAAP, other than, in the case of the Shareholder Q1 Interim
Financials, which will be reviewed by Grant Thornton, the absence of normal year‑end adjustments and footnote disclosure (none of which would be material, either individually or in the aggregate). The books and records of the Shareholder have been maintained in accordance with good business and bookkeeping practices and records of the Shareholder have been maintained in accordance with statutory requirements. The internal controls and procedures of the Shareholder are sufficient to ensure that the Shareholder Financial Statements are accurate in all material respects.
5.9 Sale of HH Common Stock
(d) The Seller and Shareholder each understand that the shares of HH Common Stock it is acquiring pursuant to this Agreement are “restricted securities” under the Securities Act inasmuch as they are being acquired in a transaction not involving a public offering and that under such laws and applicable regulations such securities may not be resold without registration or an applicable exemption under the Securities Act and applicable state securities laws. In this connection, the Seller and each Shareholder represents that it is familiar with Rule 144 promulgated under the Securities Acts as presently in effect, and understands the resale limitations imposed by the Securities Act and such rules and regulations. Until such time as the HH Common Stock received by the Seller or Shareholder pursuant to this Agreement have been registered under the Securities Act, each of the Seller and Shareholder covenants and agrees that in no event will it make any sale, transfer or other disposition of any of the HH Common Stock except in full compliance with Rule 144 promulgated under the Securities Act. In addition, if requested by the Buyer or Buyer Parent, the Seller and Shareholder shall each furnish to the Buyer and Buyer Parent (at the expense of Seller and the Shareholder) an opinion of counsel or other evidence, reasonably satisfactory to the Buyer and Buyer Parent to the effect that any transfer is in full compliance with Rule 144 promulgated under the Securities Act.
(e) Except as otherwise provided in Section 5.9(a), following the Closing, in the event that the Seller or Shareholder wishes to transfer the HH Common Stock, and such transfer would be in compliance with all Laws, neither the Buyer nor Buyer Parent will interfere and will cooperate with the Seller or Shareholder to effectuate any such transfer.
5.10 Non-Assignable Contracts.
Nothing in this Agreement shall be deemed to be an assignment by Seller to Buyer of any Assumed Contract or Permit for which a necessary consent has not been obtained by the Seller prior to the Closing (a “Non-Assignable Contract”). The Parties shall, during the remaining term of each Non-Assignable Contract, use commercially reasonable efforts to (a) obtain the consent of the third parties required thereunder, (b) make the benefit of such Non-Assignable Contract available to Buyer and (c) enforce, at the request of the Buyer, any right of the Seller arising from such Non-Assignable Contract against the other party or parties thereto (including the right to elect or terminate any such Non-Assignable Contract in accordance with the terms thereof). With respect to any such Non-Assignable Contract as to which the necessary approval or consent of the assignment or transfer to the Buyer is obtained following the Closing, the Seller shall transfer, or cause to be transferred, such Non-Assignable Contract to the Buyer by execution and delivery of an instrument of conveyance reasonably satisfactory to the Buyer within five (5) Business Days following receipt
of such approval or consent. Nothing in this Section 5.10 shall require the Buyer to pay any amount to the Seller or any other Person in order to obtain any consent required under any Non-Assignable Contract not obtained by the Seller prior to the Closing.
5.11 Contracts Not Transferred at Closing
Following the Closing, the Parties agree that if the Buyer or Seller becomes aware of a Contract that was not set forth on Schedule 2.1(d) that relates to any of the Purchased Assets, Assumed Liabilities or the operation of the Business, to which either the Seller or the Shareholder was a party prior to the Closing Date (an “Omitted Contract”), and such Omitted Contract is necessary for the Buyer’s operation of the Business, the Buyer shall have the option to request assumption of such Omitted Contract from Seller, or Shareholder, to the extent applicable. Upon any such request, the Seller or Shareholder, as applicable, shall use commercially reasonable efforts to cause such Omitted Contract to be assigned to the Seller, including with respect to obtaining any consent to assignment necessary from any counterparty to such Omitted Contract.
ARTICLE VI
CLOSING
6.1 Closing.
The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place remotely via the exchange of electronic signatures. All documents and other instruments required to be delivered at the Closing shall be regarded as having been delivered simultaneously, and no document or other instrument shall be regarded as having been delivered until all have been delivered. The Closing shall be deemed to be effective as of 12:01 a.m. Central Standard Time on the Closing Date.
6.2 Closing Deliveries.
(h) At the Closing, the Seller shall deliver, or cause to be delivered, to the Buyer the following items, each in the form attached to this Agreement as an Exhibit or in form and substance reasonably acceptable to the Buyer, as applicable:
(i) a certificate of an officer of the Seller certifying to the Buyer the resolutions of the shareholder and the board of directors of the Seller approving this Agreement and the transactions contemplated hereby;
(ii) a bill of sale substantially in the form of Exhibit A, duly executed by the Seller;
(iii) an assignment and assumption agreement substantially in the form of Exhibit B (the “Assignment and Assumption Agreement”), duly executed by the Seller;
(iv) a transition services agreement, substantially in the form of Exhibit C (the “Transition Services Agreement”) duly executed by the Seller;
(v) intellectual property assignments, in forms acceptable to the Buyer, transferring to the Buyer all right, title and interest in, to and under all of the Intellectual Property held or used by the Seller, duly executed by the Seller (collectively, the “IP Assignments”);
(vi) [Reserved.]
(vii) all documents and instruments, executed and delivered in form and substance acceptable to the Buyer, amending the Seller’s articles of incorporation, any foreign qualification registrations and any assumed name or d/b/a filings to eliminate the Seller’s right to use the names “Accountable Health Solutions,” or any other name that, in the reasonable judgment of the Buyer, is similar to any of the foregoing names except otherwise provided herein;
(viii) the consents and acknowledgements set forth in Section 3.3(c), other than the following agreements, to which consents shall be sought following the Closing: (i) Real property lease for the facility located in Des Moines, Iowa, (ii) Real property lease for the facility located in Indianapolis, Indiana, and (iii) the contracts set forth on Schedule 2.1(d) for which notice or consent is required, as indicated thereon.
(i) At the Closing, the Buyer shall deliver to the Seller or Shareholder, as applicable, the following items, each in the form attached to this Agreement as an Exhibit or in form and substance reasonably acceptable to the Seller, as applicable:
(i) a certificate of an officer of the Buyer Parent certifying to the Seller the resolutions of the sole member of the Buyer, the sole member of Hooper Wellness, and the board of directors of Buyer Parent approving this Agreement and the transactions contemplated hereby;
(ii) a Transition Services Agreement, substantially in the form of Exhibit C duly executed by the Buyer;
(iii) the Cash Payment, and stock certificates for HH Common Stock constituting the Purchase Price less the Holdback Shares;
(iv) the Assignment and Assumption Agreement, duly executed by the Buyer; and
(v) the IP Assignments, duly executed by the Buyer.
ARTICLE VII
INDEMNIFICATION
7.1 Survival of Representations and Warranties.
(j) The representations and warranties in this Agreement shall survive the Closing as follows:
(xiv) The representations and warranties in Sections 3.1 (Organization; Good Standing), 3.2 (Authorization; Binding Effect), 3.6(a) (Intellectual Property – Ownership), 3.7(a) (Title to Purchased Assets), 3.10(f) (Payment of Bonuses and Commissions), 3.16 (Brokers), 3.22 (No Indebtedness), 4.1 (Organization; Good Standing), 4.2 (Authorization; Binding Effect), 4.5 (Brokers), and 4.6 (Valid Issuance of HH Common Stock), and the obligations in Section 8.10, shall survive the Closing indefinitely;
(xv) The representations and warranties in Sections 3.8 (Compliance with Laws), 3.11 (Employee Benefits), 3.13 (Taxes), and 3.15 (Environmental and Healthcare Law Compliance) shall terminate on the date that is sixty (60) days following the expiration of the applicable statute of limitations;
(xvi) All other representations and warranties in this Agreement shall terminate on the date that is eighteen (18) months after the Closing Date (the “Survival Date”);
(xvii) All covenants and agreements shall expire when so stated in accordance with their express terms.
(k) Notwithstanding the above, all claims on or prior to the Survival Dates set forth above and the indemnity with respect thereto, shall survive the time at which such claim would otherwise terminate pursuant to this Section 7.1 if notice of the inaccuracy or breach giving rise to such right of indemnity shall have been given to the Party against whom such indemnity may be sought prior to such time.
7.2 Indemnification.
(l) Indemnification by the Seller and Shareholder. Subject to the terms and conditions of this Article VII, from and after the Closing Date, the Seller and Shareholder jointly and severally, hereby agree to indemnify, defend and hold harmless the Buyer and its Affiliates and each of their respective officers, directors, employees, shareholders, members, partners and agents (the “Buyer Indemnified Parties”) from and against all Losses asserted against, resulting to, imposed upon or incurred by any of the Buyer Indemnified Parties, directly or indirectly, by reason of, arising out of or resulting from:
(i) any breach of any representation or warranty of the Seller or Shareholder contained in or made pursuant to this Agreement or any Ancillary Agreement;
(ii) any non‑fulfillment or breach of any covenant or agreement of the Seller or Shareholder or any covenant or agreement of the Seller or Shareholder contained in this Agreement or any Ancillary Agreement;
(iii) any Excluded Liabilities;
(iv) any Excluded Asset; and
(v) any Action relating to clauses (i) through (iv) above.
(m) Indemnification by the Buyer. Subject to the terms and conditions of this Article VII, from and after the Closing Date, the Buyer hereby agrees to indemnify, defend and hold harmless the Seller, the Shareholder and their respective Affiliates and each of their respective officers, directors, employees, shareholders, members, partners and agents (“Seller Indemnified Parties”) from and against all Losses asserted against, resulting to, imposed upon or incurred by any Seller Indemnified Party, directly or indirectly, by reason of, arising out of or resulting from:
(i) any breach of any representation or warranty of the Buyer or Buyer Parent, as applicable, contained in or made pursuant to this Agreement or any Ancillary Agreement;
(ii) any non‑fulfillment or breach of any covenant or agreement of the Buyer contained in this Agreement or any Ancillary Agreement;
(iii) any Assumed Liabilities; and
(iv) any Action relating to clauses (i) through (iii) above.
7.3 Notice of Claims.
(p) Any of the Buyer Indemnified Parties or the Seller Indemnified Parties seeking indemnification hereunder (in each case, the “Indemnified Party”) shall, within the period provided for in Section 7.1, give to the Party obligated to provide indemnification (the “Indemnitor”) a written notice (a “Claim Notice”) describing in reasonable detail the facts giving rise, or that would reasonably be expected to give rise, to the claim for indemnification hereunder that is the subject of the Claim Notice. The Claim Notice shall include (if and to the extent then known) the amount and the method of computation of the amount of such claim, a reference to the provision of this Agreement or any agreement, certificate or instrument executed pursuant hereto or in connection herewith upon which such claim is based and all material documentation relevant to the claim (to the extent not previously provided under this Section 7.3(a), or, with respect to the Buyer, if applicable, a statement that it intends in lieu thereof, not to deliver all or any part of the Indemnity Shares pursuant to Section 7.3. A Claim Notice shall be given promptly following the Indemnified Party’s determination that facts or events are reasonably expected to give rise to a claim for indemnification hereunder; provided that the failure to give such written notice shall not relieve any Indemnitor of its obligations hereunder, except to the extent it shall have been prejudiced by such failure.
(q) An Indemnitor (acting through the Buyer, in the case of indemnification sought by the Seller Indemnified Parties, and acting through the Seller, in the case of indemnification sought by any of the Buyer Indemnified Parties) shall have thirty (30) days after the giving of any proper Claim Notice pursuant hereto to (i) agree to the amount or method of determination set forth in the Claim Notice and to pay or cause to be paid such amount to such Indemnified Party in immediately available funds or, if applicable, acknowledge that the Buyer will not deliver all or part of the Indemnity Shares in accordance with Section 7.6 or (ii) provide such Indemnified Party with written notice that it disagrees with the amount or method of determination set forth in the Claim Notice (the “Dispute Notice”). For a period of thirty (30) days after the giving of any Dispute Notice, a representative of the Indemnitor and the Indemnified
Party shall negotiate in good faith to resolve the matter. In the event that the controversy is not resolved within thirty (30) days after the date the Dispute Notice is given, such dispute will be resolved by binding arbitration conducted by the American Arbitration Association in accordance with the American Arbitration Association’s Commercial Arbitration Rules. In the event of any conflict between this Agreement and such rules, the provisions of this Agreement shall govern. Either party may initiate arbitration. The decision of the arbitrator or arbitration panel, as the case may be, shall be final and incontestably binding upon the parties and not subject to any rights of appeal. Judgment, if applicable, upon any award may be entered in any court of competent jurisdiction. Each party shall share equally the fees and expenses of the American Arbitration Association, including, without limitation, the fees and expenses of the arbitrator(s). If the Indemnitor agrees to the Claim Notice pursuant to clause (i) above or fails to provide a timely Dispute Notice pursuant to clause (ii) above, then the Indemnitor shall make payment to the Indemnified Party in accordance with the provisions of Section 7.6.
(r) The provisions of this Section 7.3 shall not apply in the case of a Claim Notice provided in connection with a claim by a third Person made against an Indemnified Party, which claims shall be governed by Section 7.4.
7.4 Third‑Party Claims‑.
(d) If a claim by a third party is made against an Indemnified Party (a “Third‑Party Claim”), and if such Indemnified Party intends to seek indemnity with respect thereto under this Article VII, such Indemnified Party shall promptly notify the Indemnitor in writing of such Third‑Party Claim (a “Third‑Party Claim Notice”). The Third‑Party Claim Notice shall describe in reasonable detail the facts giving rise or that could reasonably be expected to give rise to the claim for indemnification hereunder that is the subject of the Third‑Party Claim Notice, the amount and the method of computation of the amount of such claim, a reference to the provision of this Agreement upon which such claim is based and all material documentation relevant to the claim described in the Third‑Party Claim Notice (to the extent not previously provided under this Section 7.4). A Third‑Party Claim Notice shall be given promptly following the Indemnified Party’s determination that facts or events are reasonably expected to give rise to a claim for indemnification hereunder; provided that the failure to give such written notice shall not relieve any Indemnitor of its obligations hereunder, except to the extent it shall have been prejudiced by such failure.
(e) An Indemnitor shall have forty‑five (45) days after receipt of such Third‑Party Claim Notice to notify in writing any Indemnified Party that it intends to undertake, conduct and control, through counsel of its own choosing and at its own expense, the settlement or defense thereof, and such Indemnified Party shall cooperate with it in connection therewith; provided, however, that an Indemnitor may not undertake, conduct or control such settlement or defense unless such Indemnitor accepts responsibility for all Losses relating to the claim identified in the Third‑Party Claim Notice; provided, further that the Indemnitor shall not have the right to assume the defense of such Third‑Party Claim, notwithstanding the acceptance of responsibility for such Losses, if (i) the Third‑Party Claim seeks only an injunction or other equitable relief, (ii) the Indemnified Party shall have been advised by independent outside counsel that there are
one or more legal or equitable defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnitor and, in the reasonable opinion of the Indemnified Party, counsel for the Indemnitor could not adequately represent the Indemnified Party’s interests because they conflict with those of the Indemnitor, (iii) such Third‑Party Claim involved, or could reasonably be expected to have a material effect on, any matter beyond the scope of the indemnification obligation of the Indemnitor, or (iv) the Indemnitor shall not have assumed the defense of such Third‑Party Claim in a timely fashion. In such event, each Indemnified Party shall be entitled to participate with its own counsel at its own expense, provided that, if in the reasonable opinion of counsel for such Indemnified Party, there is an actual conflict of interest between the Indemnitor and the Indemnified Parties, then the reasonable cost of counsel for the Indemnified Party shall be borne by the Indemnitor. The Indemnitor shall not, except with the consent of an Indemnified Party, enter into any settlement or compromise any claim by a third Person that (X) does not include as a term thereof the giving by the Person or Persons asserting such claim to all Indemnified Parties of an unconditional release from all liability (subject to the limitations of this Article VII) with respect to such claim or consent to entry of any judgment; or (Y) involves any non‑monetary relief or remedy, including any restrictions on the Indemnified Party’s ability to operate or compete. Any consent required by this Section 7.4(b) shall not be unreasonably delayed, withheld or conditioned.
(f) If the Indemnitor does not notify each Indemnified Party in writing within forty-five (45) days after receipt of a Third‑Party Claim Notice that it elects to undertake the defense thereof, the Indemnified Parties shall have the right to undertake the defense or prosecution of the claim through one counsel of their own choice; provided, however, in no event shall the Indemnified Parties settle or compromise any such Third‑Party Claim without the prior written consent of the Indemnitor, which consent shall not be unreasonably withheld.
(g) Each Party shall have full access to the employees, books and records of the other Parties for purposes of investigating the merits of any claim that is the subject of investigation. Each Party shall use its reasonable best efforts to preserve the confidentiality and/or privileged status of all confidential and/or privileged information provided pursuant to such request.
7.5 Limitations of Liability.
Notwithstanding anything in this Agreement to the contrary:
(c) The Buyer Indemnified Parties shall not be entitled to indemnification pursuant to Section 7.2(a)(i) (other than as set forth in Section 7.5(c), for which the following limitations set forth in Section 7.5(a) and 7.5(b) will not apply) until the sum of the aggregate amount of all claims under Section 7.2(a)(i) exceeds $75,000 (the “Basket Amount”), after which the Buyer Indemnified Parties shall be entitled to receive indemnification to the extent Losses exceed the Basket Amount.
(d) In no event shall the aggregate liability of the Seller and the Shareholder under Section 7.2(a)(i) (other than as set forth in Section 7.5(c), for which the following limitations set forth in Sections 7.5(a) and 7.5(b) will not apply) exceed the Purchase Price.
(e) The indemnification obligations of the Seller or Shareholder for any Losses resulting from any of the following shall not be subject to the limitations set forth in Sections 7.5(a) and 7.5(b): (i) fraud or intentional misrepresentation on the part of the Seller or Shareholder, (ii) the breach of any Fundamental Representation, (iii) any non‑fulfillment or breach of any covenant or agreement of the Seller or Shareholder in any case, contained in this Agreement or any Ancillary Agreement, (iv) any Excluded Liability, (v) any Excluded Asset, or (vi) failure to deliver the Audited Financial Statements pursuant to Section 5.8.
7.6 Manner of Payment.
(g) Any Loss for which Buyer is entitled to indemnification pursuant to Section 7.2(a) shall reduce the number of Indemnity Shares Buyer is obligated to deliver in accordance with the terms of this Agreement. Within ten (10) days after a final determination has been made pursuant to Section 7.3 or Section 7.4 that Buyer is entitled to indemnification for a Loss, Buyer will send a notice to Seller that it is reducing the number of Indemnity Shares issuable under Section 2.4(b) by a number of shares determined by dividing the amount of such Loss by the Agreed Stock Value, rounded up to the nearest whole share. Subject to the other terms and conditions of this Agreement, in the event that the Indemnity Shares are insufficient to cover the amount of any such Loss, the Seller and the Shareholder shall be jointly and severally liable for the amount of such Loss and shall, at the sole option of the Seller and the Shareholder, (i) turn over to the Buyer that number of Delivered Shares with a value equal to, based on the Agreed Stock Value, the amount of such Loss exceeding the value of the Indemnity Shares applied to such Loss, (ii) deliver such amount by wire transfer of immediately available funds to the account designated by the Buyer Indemnified Party or (iii) compensate the Buyer Indemnified Party for such excess Loss through a combination of subsections (i) and (ii) above.
(h) Any indemnification pursuant to Section 7.1(b) shall be made as a payment by the Buyer to the relevant Seller Indemnified Party by transfer of immediately available funds to the account designed by the Seller Indemnified Party within ten (10) days of the final determination thereof.
(i) Within nineteen (19) months after the Closing Date, the Buyer shall deliver to the Seller or Shareholder, as designated by Shareholder, the Indemnity Shares less any shares that have been deducted therefrom under this Section 7.6, and any shares necessary to cover amounts then under dispute, which such disputed amounts shall be released upon final settlement of all disputed claims.
7.7 Exclusive Remedy. Subject to Section 5.4, Section 7.5(c) and Section 8.3, the parties acknowledge and agree that, following the Closing, their sole and exclusive remedy with respect to any and all Losses arising from or relating to any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement or the transactions contemplated hereby or thereby, shall be pursuant to the indemnification provisions set forth in this Article VII. Nothing in this Section 7.7 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Section 8.3, or to seek any remedy on account of fraud by any Person. For purposes of calculating Losses in connection with a claim for indemnification under this Article VII, each
of the representations and warranties that contains any qualifications as to materiality, material adverse effect or other similar language shall be deemed to have been given as though there were no such qualifications, and any such qualifications shall be disregarded for purposes of this Article VII.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement; Amendments.
The Non-Disclosure Agreement, this Agreement, the Disclosure Schedules, the Exhibits referred to herein and the documents delivered pursuant hereto contain the entire understanding of the Parties with regard to the subject matter contained herein or therein, and supersede all other prior agreements, understandings, term sheets, heads of terms or letters of intent among the Parties. No amendment to or modification of this Agreement shall be effective unless it shall be in writing and signed by each of the Parties.
8.2 Invalidity.
If any provision of this Agreement or the application thereof to any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby and, to such end, the provisions of this Agreement are agreed to be severable.
8.3 Specific Performance.
Each of the Parties acknowledges and agrees that each of the other Parties would be damaged irreparably in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, in addition to any and all other remedies that may be available at law or in equity, the Parties agree that each of the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any Action instituted in any court in the United States or in any state having jurisdiction over the Parties and the matter, in addition to any other remedy to which such Party may be entitled pursuant hereto.
8.4 Amendment; Extension; Waiver.
At any time prior to the Closing Date, each Party may (a) extend the time for the performance of any of the obligations or other acts of the other Parties, (b) waive any inaccuracies in the representations and warranties of any other Party contained herein or in any document, certificate or writing delivered pursuant hereto or (c) waive compliance by any other Party with any of the agreements or conditions contained herein. Any agreement on the part of any Party to any such extension or waiver shall be valid only if set forth in an instrument, in writing, signed on behalf of such Party. The failure of any Party to assert any of its rights hereunder shall not constitute a waiver of such rights. This Agreement may not be amended, modified or supplemented except by written agreement of the Parties.
8.5 Expenses.
Except as otherwise provided herein, each Party will pay all costs and expenses incident to its negotiation and preparation of this Agreement and to its performance and compliance with all agreements and conditions contained herein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel, accountants, advisors and consultants.
8.6 Public Announcements.
All press releases or other public communications of any nature whatsoever relating to the transactions contemplated by this Agreement, and the method of the release for publication thereof, shall be subject to the prior mutual approval in writing of the Buyer and the Seller. Notwithstanding anything herein to the contrary, the Buyer has the right to publicly disclose this Agreement and the transactions contemplated hereby as required by applicable securities laws without the prior written approval of the Seller or the Shareholder.
8.7 Notices.
All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by electronic mail, by nationally recognized overnight courier or by registered or certified mail (postage prepaid, return receipt requested) to each other Party as follows:
If to the Seller or the Shareholder:
Accountable Health Solutions
1101 Wootton Parkway
10th Floor
Rockville, MD 20852
Attention: David T. Blair, Chief Executive Officer
Email Address: dblair@accountablehealth.com
with a copy (which copy shall not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
701 Pennsylvania Ave., N.W., Suite 900
Washington, D.C. 20004
Attention: Theresa Carnegie, Esq.
Email Address: TCCarnegie@mintz.com
If to the Buyer, to:
Hooper Holmes, Inc.
560 N. Rogers Rd
Olathe, KS 66062
Attention: Henry Dubois, President and Chief Executive Officer
Email Address: Henry.Dubois@hooperholmes.com
with a copy (which copy shall not constitute notice) to:
Husch Blackwell LLP
4801 Main Street, Suite 1000
Kansas City, MO 64112
Attention: Kirstin Salzman
Email Address: Kirstin.Salzman@huschblackwell.com
with a copy (which copy shall not constitute notice) to:
Outside General Counsel Services, Inc.
10975 SW Avocet Court
Beaverton, OR 97007
Attention: Jay Zollinger
Email Address: Legal@hooperholmes.com
Such notice shall be deemed to be received when delivered if delivered personally, or the next Business Day after the date sent if sent next Business Day service by a United States national overnight delivery service, or three (3) Business Days after the date mailed if mailed by certified or registered mail, or upon receipt of confirmation of delivery if sent by facsimile. Any notice of any change in such address shall also be given in the manner set forth above. Whenever the giving of notice is required under this Agreement, the giving of such notice may be waived in writing by the Party entitled to receive such notice.
8.8 Successors and Assigns; No Third‑Party Beneficiaries‑.
The rights of a Party under this Agreement shall not be assignable by such Party without the written consent of the other Parties. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person, except and as provided in Article VII, any right, remedy or claim under or by reason of this Agreement.
8.9 Compliance with Bulk Sales Laws.
The Parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to the Buyer; it being understood that any Liabilities arising out of
the failure of the Seller to comply with the requirements and provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction which would not otherwise constitute Assumed Liabilities shall be treated as Excluded Liabilities and Buyer shall be liable for and indemnify and hold the Seller harmless from any such Liabilities as provided in Section 5.5(b).
8.10 Interpretation.
(g) Titles and headings to articles, sections and subsections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
(h) For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms “hereof,” “herein” and “herewith” and words of similar import shall be construed to refer to this Agreement and the Disclosure Schedules in their entirety and not to any particular provision, unless otherwise stated, (iii) the term “including” shall mean “including, without limitation,” (iv) unless otherwise stated, the term “day” means a calendar day, and (v) references in this Agreement to dollar amount thresholds shall not, for purposes of this Agreement, be deemed to be evidence of materiality or a material adverse effect.
8.11 Governing Law.
This Agreement and any disputes hereunder shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.
8.12 Jurisdiction; Waiver of Jury Trial.
The Parties hereby agree that any dispute or controversy arising out of or related to this Agreement or the transactions contemplated hereby shall be conducted only in federal and state courts located in Delaware. Each Party hereby irrevocably consents and submits to the exclusive personal jurisdiction of and venue in the federal and state courts located in the State of Delaware. EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. Each Party agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 8.9. Nothing in this Section 8.13, shall affect the right of any Party to serve such summons, complaint or initial pleading in any other manner permitted by Law.
8.13 Execution in Counterparts; Facsimile.
This Agreement may be executed in multiple counterparts (including electronically‑transmitted counterparts), each of which shall be considered an original instrument,
but all of which shall be considered one (1) and the same agreement, and shall become binding when one (1) or more counterparts have been signed by each of the Parties and delivered to the other Parties.
[Signature Page Follows.]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered as of the day and year first above written.
BUYER:
Jefferson Acquisition, LLC
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
HOOPER WELLNESS:
Hooper Wellness, LLC
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
BUYER PARENT:
Hooper Holmes, Inc.
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
SELLER:
Accountable Health Solutions, Inc.
By: /s/ David T. Blair
Name: David T. Blair
Title: President
SHAREHOLDER:
Accountable Health, Inc.
By: /s/ David T. Blair
Name: David T. Blair
Title: President
EXHIBIT A
Form of Bill of Sale
(see attached)
EXHIBIT B
Form of Assignment and Assumption Agreement
(see attached)
EXHIBIT 2.5(a)
Form of Closing Statement
(to come)
EXHIBIT C
Transition Services Agreement
(see attached)
CONSENT AND THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
CONSENT AND THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of April 17, 2015 (this “Amendment”), to the Loan and Security Agreement, dated as of February 28, 2013, as amended by the First Amendment to Loan and Security Agreement dated as of March 28, 2013, and the Second Amendment to Loan and Security Agreement dated as of July 9, 2014 (as amended, the “Loan Agreement”), between ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP, a Delaware limited partnership (the “Lender”), and Hooper Holmes, Inc., a New York corporation (the “Borrower”). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender are parties to the Loan Agreement, under which the Lender has agreed to make, and has made, Loans and other financial accommodations to the Borrower on the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower has formed Hooper Wellness, LLC, a Kansas limited liability company (“Hooper Wellness”), as a wholly owned subsidiary of the Borrower, and Hooper Wellness has formed Jefferson Acquisition, LLC, a Kansas limited liability company (“Jefferson Acquisition”) as a wholly owned subsidiary of Hooper Wellness; and
WHEREAS, the Borrower has requested that the Lender (i) consent to, among other things, (A) the purchase by Jefferson Acquisition of substantially all of the assets of Accountable Health Solutions, Inc. and certain assets of Accountable Health, Inc. and the conduct of business by Jefferson Acquisition following such purchase (collectively, the “Acquisition”), (B) the incurrence of Indebtedness by the Borrower in the form of a junior term loan in the principal amount of $5,000,000 (the “SWK Indebtedness”) to SWK Funding LLC (“SWK”) to finance, in part, the Acquisition and (C) the granting of security interests by the Borrower, Jefferson Acquisition, Hooper Wellness, Hooper Distribution Services, LLC (“Hooper Distribution”), Hooper Information Services, Inc. (“Hooper Information”), Mid-America Agency Services, Incorporated (“Mid-America”), TEG Enterprises, Inc. (“TEG Enterprises”) and Hooper Kit Services, LLC (“Hooper Kit Services,” and together with Jefferson Acquisition, Hooper Wellness, Hooper Distribution, Hooper Information, Mid-America and TEG Enterprises, the “Hooper Subsidiaries”) to SWK to secure the SWK Indebtedness (the “Junior Security Interests”), which shall be junior to the security interests of the Lender in the assets of the Borrower, Jefferson Acquisition and Hooper Wellness and (ii) agree to amend certain provisions of the Loan Agreement, in each case on the terms and conditions set forth herein.
NOW, THEREFORE, the Lender and the Borrower agree as follows:
SECTION 1.Consent. Effective as of the date hereof, subject to the terms and conditions hereof, including, without limitation, the satisfaction of the conditions of effectiveness specified in Section 3 hereof, the Lender consents:
(a) to the Acquisition, to the extent it is prohibited by Section 8.2 of the Loan Agreement;
(b) to the incurrence by the Borrower of the SWK Indebtedness, to the extent it is prohibited by Section 8.1 of the Loan Agreement; and
(c) to the granting by the Borrower and the Hooper Subsidiaries of the Junior Security Interests, to the extent it is prohibited by the Loan Documents.
SECTION 2. Amendments to the Loan Agreement. Effective as of the date hereof, subject to the terms and conditions hereof, including, without limitation, the satisfaction of the conditions of effectiveness specified in Section 3 hereof, the Loan Agreement is amended as follows:
(a) Section 2.1(a) of the Loan Agreement is amended by deleting “TEN MILLION AND 00/100 DOLLARS ($10,000,000.00)” and substituting therefor “SEVEN MILLION AND 00/100 DOLLARS ($7,000,000.00)”.
(b) Clause (c) of Section 3.7 of the Loan Agreement is amended and restated as follows:
“(c) at the time of such prepayment, repayment, demand or acceleration Borrower shall pay liquidated damages to Lender in an amount equal to the Revolving Credit Limit multiplied by (i) three percent (3.00%) if such prepayment, repayment, demand or acceleration occurs prior to the fourth (4th) anniversary of the Effective Date, (ii) two percent (2.00%) if such prepayment, repayment, demand or acceleration occurs on or after the fourth (4th) anniversary of the Effective Date but prior to the fifth (5th) anniversary of the Effective Date, and (iii) one percent (1.00%) if such prepayment, repayment, demand or acceleration occurs on or after the fifth (5th) anniversary of the Effective Date but prior to the sixth (6th) anniversary of the Effective Date”.
(c) Article 6 is amended by adding at the end thereof the following new section:
“6.11. Reports to other Lenders. Substantially simultaneously with the delivery thereof to any other lender to the Borrower, copies of all reports, financial statements, certificates or other documents delivered to such other lender.”
(d) Section 8.19 of the Loan Agreement is amended and restated in its entirety as follows:
“8.19. Capital Expenditures. Unfunded Capital Expenditures to exceed, individually or in the aggregate, $1,500,000 in Fiscal Year 2015, $1,750,000 in Fiscal Year 2016, and $2,000,000 in Fiscal Year 2017 and each Fiscal Year thereafter.”
Section 8.20 of the Loan Agreement is amended and restated in its entirety as follows:
“8.20. EBITDA. Permit EBITDA as of and for:
The Twelve (12) consecutive calendar month period ending on September 30, 2015, to be less than Negative Three Million and 00/100 Dollars ($3,000,000.00);
The Fiscal Year ending on December 31, 2015, to be less than Eight Hundred Thousand and 00/100 Dollars -- $800,000.00; and
The Twelve (12) consecutive calendar month period ending on March 31, 2016, to be less than One Million Eight Hundred Fifty Thousand and 00/100 Dollars -- $1,850,000.00;
The Twelve (12) consecutive calendar month period ending on June 30, 2016, to be less than Two Million Seven Hundred Thousand and 00/100 Dollars -- $2,700,000.00;
The Twelve (12) consecutive calendar month period ending on September 30, 2016, to be less than Three Million Four Hundred Thousand and 00/100 Dollars -- $3,400,000.00;
The Fiscal Year ending on December 31, 2016, to be less than Four Million Four Hundred Thousand and 00/100 Dollars -- $4,400,000.00; and
▪For each twelve (12) consecutive calendar month period ending on the last day of each Fiscal Quarter thereafter, to be less than Four Million Four Hundred Thousand and 00/100 Dollars -- $4,400,000.00.”
(e) The definition of “Revolving Credit Termination Date” in the Definitions Schedule is amended by deleting “third (3rd)” and substituting therefor “sixth (6th)”.
(f) The Disclosure Schedule is amended and restated in the form of Annex I hereto.
SECTION 3. Conditions of Effectiveness. This Amendment shall become effective when, and only when, the Lender shall have received each of the following which, in the case of documents, shall be in form and substance satisfactory to the Lender and dated the date hereof or as of an earlier date acceptable to the Lender:
(i) a counterpart of this Amendment, Authenticated by the Borrower;
(ii) a security agreement, in substantially the form of Exhibit A hereto, Authenticated by the Hooper Subsidiaries;
(iii) a joinder to the Guaranty, in substantially the form of Exhibit B hereto, Authenticated by Jefferson Acquisition and Hooper Wellness;
(iv) a joinder and amendment to the pledge agreement, in substantially the form of Exhibit C hereto, Authenticated by the Borrower and Hooper Wellness;
(v) an amended and restated promissory note in the maximum principal amount of $7,000,000, in substantially the form of Exhibit D hereto, Authenticated by the Borrower;
(vi) an intercreditor agreement, in substantially the form of Exhibit E hereto, duly executed by SWK and acknowledged by the Borrower and the Hooper Subsidiaries;
(vii) copies of all agreements, instruments and other documents executed or delivered by the Borrower and the Hooper Subsidiaries in connection with the Acquisition, the incurrence of the SWK Indebtedness and the granting of the Junior Security Interests, certified by the Secretary or an Assistant Secretary of the Borrower;
(viii) a certificate of an officer or the managing member, as the case may be, of each of the Borrower and the Hooper Subsidiaries certifying (A) that attached thereto are true and complete copies of (I) the certificate of incorporation or formation, as the case may be, of the Borrower or such Hooper Subsidiary, (II) the bylaws or limited liability company agreement, as the case may be, of the Borrower or such Hooper Subsidiary and (III) the resolutions or a unanimous written consent of the board of directors or the managers of the Borrower or such Hooper Subsidiary, as the case may be, authorizing the execution, delivery and performance of this Amendment and the other agreements, instruments and documents delivered in connection herewith and with the Acquisition to which the Borrower or such Hooper Subsidiary is a party and (B) the incumbency, names and true signatures of the officers or managers, as the case may be, of the Borrower or such Hooper Subsidiary authorized to sign this Amendment and the other agreements, instruments and documents delivered in connection herewith to which the Borrower or such Hooper Subsidiary is a party;
(ix) payment of an amendment fee in the amount of $105,000, which shall be deemed fully earned when paid and shall be non-refundable under any circumstance; and
(x) payment of the costs and expenses (including, without limitation, attorneys’ fees) incurred by the Lender in connection with the preparation, execution and delivery of this Amendment and the agreements, instruments and documents delivered hereunder.
SECTION 4. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:
(a) No Default or Event of Default has occurred and is continuing, and all of the representations set forth in Article 5 of the Loan Agreement and in the other Loan Documents are true and complete as of the date of this Amendment (except any such representation which is as of a specified date, which is accurate and complete as of such date).
(b) The execution, delivery and performance by the Borrower of this Amendment and the agreements, instruments and other documents executed in connection herewith (i) are within the Borrower’s corporate power, (ii) have been duly authorized by all necessary or proper actions of or pertaining to the Borrower (including the consent of directors, officers, or shareholders, as applicable), (iii) are not in contravention of (A) any agreement or indenture to which the Borrower is a party or by which the Borrower is bound, (B) the Borrower’s Charter Documents, (C) any provision of law, or (D) any order, writ, judgment, injunction, or decree of any court of competent jurisdiction binding on the Borrower or its property and (iv) do not require the consent or approval of any Governmental Unit or any other Person that has not been obtained and furnished to the Lender.
(c) No authorization, approval or other action by, and no notice to or filing with, any Person is required for the due execution, delivery and performance by the Borrower of this Amendment or any of the agreements, instruments and other documents executed in connection herewith.
(d) This Amendment and the Loan Agreement as amended hereby constitute the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms except as enforceability may be limited by (i) bankruptcy, insolvency or similar laws affecting creditors’ rights generally and (ii) general principles of equity.
SECTION 5. Reference to and Effect on the Loan Agreement.
(a) On and after the date hereof, each reference in the Loan Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” and words of like import, and each reference in the other Loan Documents to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby.
(b) Except as specifically waived or amended above, (i) the Loan Agreement and each other Loan Document shall remain in full force and effect and are hereby ratified and confirmed by the parties hereto and (ii) the Lender shall not be deemed to have waived any rights or remedies it may have under the Loan Agreement, any other Loan Document or applicable law.
(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as an amendment to any right, power or remedy of the Lender under any of the Loan Documents, or constitute a waiver of or an amendment to any provision of any of the Loan Documents.
(d) This Amendment constitutes a Loan Document.
SECTION 6. Execution in Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED ENTIRELY IN SUCH STATE WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective general partner or officer thereunto duly authorized, as of the date first above written.
LENDER:
ACF FINCO I LP, as assignee of Keltic Financial Partners II, LP
By: /s/ Oleh Szczupak
Name: Oleh Szczupak
Title: Vice President
BORROWER:
HOOPER HOLMES, INC.
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
SECTION 8.
ANNEX I
DISCLOSURE STATEMENT
GENERAL SECURITY AGREEMENT
This GENERAL SECURITY AGREEMENT is made on and as of April 17, 2015, by and from
JEFFERSON ACQUISITION, LLC, a Kansas limited liability company and wholly owned subsidiary of Hooper Wellness, LLC (“Jefferson”),
HOOPER WELLNESS, LLC, a Kansas limited liability company and wholly owned subsidiary of Hooper Holmes, Inc. (“Hooper Wellness”),
HOOPER DISTRIBUTION SERVICES, LLC, a New Jersey limited liability company and wholly owned subsidiary of Hooper Holmes, Inc. (“Hooper Distribution”),
HOOPER INFORMATION SERVICES, INC., a New Jersey corporation and wholly owned subsidiary of Hooper Holmes, Inc. (“Hooper Information”),
HOOPER KIT SERVICES, LLC, a Kansas limited liability company (f/k/a Heritage Labs International, LLC) and wholly owned subsidiary of Hooper Holmes, Inc. (“Hooper Kit”),
MID-AMERICA AGENCY SERVICES, INCORPORATED, a Nebraska corporation and wholly owned subsidiary of Hooper Holmes, Inc. (“Mid-America”),
and
TEG ENTERPRISES, INC., a Nebraska corporation and wholly owned subsidiary of Mid-America Agency Services, Incorporated (“TEG Enterprises”, collectively with Jefferson, Hooper Wellness, Hooper Distribution, Hooper Information, Hooper Kit and Mid-America, “Debtor”),
to and in favor of
ACF FINCO I, LP, a Delaware limited partnership with a place of business at 580 White Plains Road, Suite 610, Tarrytown, New York 10591 (“Lender”).
1. DEFINITIONS.
All words and terms used in this Agreement shall have the meanings as set forth herein and where not otherwise defined herein shall be deemed to have the meanings as accorded to them in the Loan and Security Agreement (as defined below) or the Uniform Commercial Code as in effect from time to time ("UCC"). As used herein, the following terms shall have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa):
1.1 “Agreement” shall mean this General Security Agreement, together with all extensions, modifications, refinancings, renewals, substitutions, replacements and/or redatings hereof made with the consent of Lender from time to time hereafter.
1.2 "Borrower" means HOOPER HOLMES, INC., a New York corporation and having its principal place of business at 560 N. Rogers Road, Olathe, Kansas 66062.
1.3 “Collateral” means all of Debtor’s right, title and interest in and to the following, wherever located and whether owned or thereafter acquired, whether owned or held by Debtor or by any other Person in any manner for Debtor's account (and specifically includes all accessions to, substitutions for and all replacements, products and cash and non-cash proceeds of all of the following): all cash, Money (as defined in Section 1-201(24) of the UCC), Accessions, Accounts (including without limitation all Receivables and unearned premiums with respect to insurance policies insuring any of the Collateral and claims against any Person for loss of, damage to, or destruction of any or all of the Collateral), Certificates of title, Chattel Paper, Commercial Tort Claims (specifically including all Commercial Tort Claims arising from or in connection with the matters described in the Disclosure Schedule to the Loan Agreement), Deposit Accounts, Documents (including but not limited all to books and records, and all recorded data of any kind or nature, regardless of the medium of recording, including, without limitation, writings, plans, specifications, schematics customer lists, credit files, computer programs, printouts and other computer materials and records of Debtor pertaining to any of the items or subject matter described in this paragraph), Equipment, General Intangibles, Goods, Health-Care-Insurance Receivables, Instruments, Inventory, Investment Property, Letter-Of-Credit Rights, Proceeds, Records, Software and Supporting Obligations, all rights to payment for money or funds advanced or sold, and all monies or other Property of any kind now or at any time or times hereafter in the possession or under the control of Lender or any Affiliate of Lender or any representative, agent or correspondent of Lender pertaining to any of the items or subject matter described in this paragraph, and to the extent not otherwise included in the foregoing, all other property in which a security interest may be granted under the UCC or which may be delivered to and held by Lender pursuant to the terms hereof. Notwithstanding the foregoing, if on or prior to the date hereof, Debtor has not obtained the written consent of a Governmental Authority necessary to permit the assignment of any Document, Instrument, Chattel Paper, contract or agreement by and between Debtor and any Governmental Authority (a “Government Contract”) in connection with the granting by Debtor to Lender of the security interests described herein, the Collateral and Lender’s security interests described herein shall specifically exclude each such Government Contract, and all of Debtor’s rights, title and interests therein, however, in such case the Collateral and Lender’s security interests granted herein shall specifically include and shall be limited to all Accounts and Receivables in connection with such Government Contract and all of Debtor’s rights, title and interests in and to such
Accounts and Receivables, and all such Accounts and Receivables shall be considered as Collateral for purposes hereof. The Collateral shall not include the Excluded Property.
1.4 “Excluded Property” means, with respect to Debtor: (i) any item of General Intangibles or other property (including, without limitation, any Material Contract) that is now or hereafter held by Debtor but only to the extent that such item of General Intangibles or property, including, for the avoidance of doubt, Intellectual Property (or any agreement evidencing such item of General Intangibles or property) contains a term or is subject to a rule of law, statute or regulation that restricts, prohibits, or requires a consent (that has not been obtained) of a Person (other than Debtor) to, the creation, attachment or perfection of the security interest granted herein, and any such restriction, prohibition and/or requirement of consent is effective and enforceable under applicable law and is not rendered ineffective by applicable law (including, without limitation, pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC); provided, however, that (x) Excluded Property shall not include any Proceeds of any item of General Intangibles or other property described in this definition, and (y) any item of General Intangibles or such other property described in this definition that at any time ceases to satisfy the criteria for Excluded Property (whether as a result of obtaining any necessary consent, any change in any rule of law, statute or regulation, or otherwise) shall no longer be Excluded Property; (ii) trademark applications filed in the United States Patent and Trademark Office on the basis of Debtor’s “intent to use” such trademark, unless and until acceptable evidence of use of the Trademark has been filed with the United States Patent and Trademark Office pursuant to Section 1(c) or Section 1(d) of the Lanham Act (15 U.S.C. 1051, et seq.), to the extent that granting a Lien in such Trademark application prior to such filing would adversely affect the enforceability or validity of such Trademark application; (iii) any asset subject to a Permitted Lien (other than Liens in favor of Lender) securing obligations permitted under the Loan Agreement to the extent that the grant of other Liens on such asset (A) would result in a breach or violation of, or constitute a default under, the agreement or instrument governing such Permitted Lien, (B) would result in the loss of use of such asset or (C) would permit the holder of such Permitted Lien to terminate Debtor’s use of such asset and (iv) real property leases.
1.5 "Loan Agreement" shall mean the Loan and Security Agreement, dated as of February 28, 2013 between Borrower and Lender (together with all Exhibits and Schedules thereto, as amended by the First Amendment to Loan and Security Agreement dated as of March 28, 2013, the Second Amendment to Loan and Security Agreement dated as of July 9, 2014 and the Consent and Third Amendment to Loan and Security Agreement dated as of even date herewith and as the same may be subsequently amended, extended, restated or otherwise modified from time to time hereafter.
1.6 "Loan Documents" means this Agreement, the Loan Agreement, the Note, the Guaranty, the Pledge Agreements and each other agreement, document and instrument delivered by Borrower, the Guarantors, the Debtor or any other Person to Lender or by Lender to any other Person in connection with the Obligations, the Loans, the Note, or any other Indebtedness payable to Lender in connection with the transactions contemplated by this Agreement, as the same may be amended, modified, supplemented, extended or restated from time to time.
1.7 "Obligations" is a collective term which means and includes all the following:
(a)all loans, advances, debts, liabilities, obligations, covenants and duties owing by Debtor to Lender or any affiliate of Lender of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, whether arising under the Loan Agreement, the Note or any other Loan Documents or under any other agreement or by
operation of law, whether or not for the payment of money, whether arising by reason of an extension of credit, opening, guaranteeing or confirming of a letter of credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now due or hereafter arising and however acquired, including, without limitation, all interest, charges, expenses, commitment, facility, collateral management or other fees, attorneys' fees and expenses, and any other sum now or hereafter chargeable to Borrower whether under the Loan Agreement, any of the other Loan Documents or any other agreement by and between Borrower and Lender; and
(b)all loans, advances, debts, liabilities, obligations, covenants and duties owing by Debtor to Lender or any affiliate of Lender of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, whether arising under this Agreement, the other Loan Documents or under any other agreement or by operation of law, whether or not for the payment of money, whether arising by reason of an extension of credit, opening, guaranteeing or confirming of a letter of credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now due or hereafter arising and however acquired, including, without limitation, all interest, charges, expenses, commitment, facility, collateral management or other fees, attorneys' fees and expenses, and any other sum now or hereafter chargeable to Debtor whether under the Guaranty, any of the other Loan Documents or any other agreement between Debtor and Lender.
1.8 "Person" shall mean an individual, partnership, limited liability company, limited liability partnership, corporation, joint venture, joint stock company, land trust, business trust or unincorporated organization, or a government agency or political subdivision thereof.
1.9 "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.
1.10 UCC Definitions. When used in this Agreement, the following terms have the same definitions as provided in Article 9 of the UCC, but for convenience in this Agreement the first letter of all such terms shall be capitalized: “Accession”, “Account”, “Account Debtor”, “Authenticate” (and all derivations thereof), “Chattel Paper”, “Deposit Account”, “Document”, “Equipment”, “General Intangible”, “Goods”, “Health-Care-Insurance Receivable”, “Instrument”, “Inventory”, “Investment Property”, “Letter-Of-Credit Right”, “Obligor”, “Proceeds” (as specifically defined in Section 9-102(64) of the UCC), “Record”, “Secondary Obligor”, “Secured Party”, “Software” and “Supporting Obligation”.
2. SECURITY INTEREST.
2.1 Security Interest. As security for the final and indefeasible payment to Lender in cash and performance of the Obligations in full, Debtor hereby pledges to Lender, and grants to Lender a continuing general lien upon and security interest in and to the Collateral. Debtor acknowledges and agrees that Collateral securing any purchase money security interest in favor of Lender also secures all non-purchase money security interests in favor of Lender.
2.2 Perfection.
(a) Debtor will execute and deliver to Lender security agreements, assignments (including, without limitation, assignments of specific Accounts, Receivables, Certificates of title, Chattel Paper, Documents, Instruments, Goods, Inventory, Equipment and General Intangibles), and other documents and instruments as Lender may at any time reasonably request to establish, evidence, attach, perfect, or protect any security interest, pledge, lien, charge, mortgage or other encumbrance granted to Lender. Debtor authorizes Lender to file all financing statements, and all continuations or amendments thereof, to establish, evidence, attach, perfect or protect any security interest, pledge, lien, charge, mortgage or other encumbrance granted to Lender in the Collateral. Debtor agrees that subject to Debtor’s rights under Section 9-509(d)(2) of the UCC, Debtor is not and shall not be authorized to file any financing statement or amendment, termination or corrective statement with respect to any financing statement filed by Lender, or with respect to any continuation or amendment thereof, without the prior written consent of Lender.
(b) Debtor will perform any and all actions requested by Lender in Lender’s sole discretion to establish, attach, perfect or protect any security interest, pledge, lien, charge, mortgage or other encumbrance of Lender in Inventory, including without limitation, placing and maintaining signs, appointing custodians, maintaining stock Records and transferring Inventory to warehouses. Upon Lender’s request, Debtor shall record Lender’s security interest on any Certificate of Title for any Collateral that is a motor vehicle. Debtor hereby appoints Lender, and Lender’s designee(s), as Debtor’s attorney-in-fact (i) to execute and deliver notices of lien, financing statements, assignments, and any other documents, instruments, notices, and agreements necessary for the establishment, attachment, perfection or protection of any security interest, pledge, lien, charge, mortgage or other encumbrance of Lender in any Collateral, (ii) to endorse the name of Debtor on any checks, notes, drafts or other forms of payment or security consisting of Collateral that may come into the possession of Lender or any Affiliate of Lender, (iii) following the occurrence and during the continuation of an Event of Default, to sign Debtor’s name on invoices or bills of lading, drafts against customers, notices of assignment, verifications and schedules relating to Collateral, (iv) following the occurrence and during the continuation of an Event of Default (A) to notify the Post Office authorities to change the address of delivery of mail to an address designated by Lender, and (B) to open and dispose of mail addressed to Debtor, and (v) generally, to do all things necessary to carry out the purposes and intent of this Agreement. The powers granted herein, being coupled with an interest, are irrevocable, and Debtor approves and ratifies all acts of the attorney(s)-in-fact consistent with the foregoing. Neither Lender nor any attorney(s)-in-fact shall be liable for any act or omission, error in judgment or mistake of law so long as the same does not constitute gross negligence or willful misconduct.
(c) Debtor shall cooperate with Lender in obtaining waivers or subordinations in favor of Lender as Lender may require from third parties having any interest in any Collateral and Debtor shall cooperate with Lender in obtaining “control” of Collateral consisting of Deposit Accounts, electronic Chattel Paper, Investment Property, or Letter-Of-Credit Rights as provided in Sections 9-104 through 9-107, inclusive, of the UCC. If any Inventory is in the possession or control of any third party other than a purchaser in the ordinary course of business or a public warehouseman where the warehouse receipt is in the name of or held by Debtor, Debtor shall notify such person of each security interest, pledge, lien, charge, mortgage or other encumbrance of Lender therein and instruct such person or persons to hold such Inventory for the account and benefit of Lender and subject to Lender’s instructions. Debtor will deliver to Lender warehouse receipts covering any Inventory located in warehouses showing Lender as the beneficiary thereof and will
also cooperate with Lender in obtaining from warehousemen and bailees agreements relating to the release of warehouseman’s and bailee’s liens on Inventory as Lender may request.
(d) Debtor acknowledges and agrees that the security interest granted to Lender pursuant to this Agreement shall specifically include a security interest in all Commercial Tort Claims arising after the Effective Date, and in order to permit Lender to perfect its security interest in each such Commercial Tort Claim Debtor shall promptly deliver to Lender copies of all summonses, complaints, responses, motions and other pleadings filed by or against Debtor after the date hereof so that Lender may file a Uniform Commercial Code financing statement relating to each such Commercial Tort Claim.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Debtor represents, warrants and covenants to Lender, and shall be deemed to continually do so, as long as this Agreement shall remain in force, that:
3.1 Inventory.
(a) Warranties With Respect to Inventory. (i) All representations made by Debtor to Lender and all documents and schedules given by Debtor to Lender, relating to the description, quantity, quality, condition and valuation of Inventory are true and correct, and (ii) Debtor has not received any Inventory on consignment or approval unless Debtor has notified Lender thereof in a Record, has marked such Inventory on consignment or approval or has segregated it from all other Inventory, and has appropriately marked its records to reflect that such Inventory is held on consignment or approval.
(b) Lender’s Rights in Inventory. Lender's security interests in the Inventory shall continue through all steps of manufacture and sale and attach without further act to raw materials, work in process, finished goods, returned goods, documents of title, warehouse receipts, and to proceeds resulting from sale or disposition of Inventory. Until all Obligations of Debtor and Borrower to Lender have been satisfied, Lender’s security interest in Inventory and in all proceeds thereof shall continue in full force and effect. Upon the occurrence of a Default or an Event of Default (as defined below), Lender shall have, in its discretion and at any time, the right to take physical possession of the Inventory and to maintain it on Debtor's premises, in a public warehouse, or at such place as Lender may remove the Inventory or any part thereof. If Lender exercises its right to take possession of Inventory, Debtor will, upon demand, and at Debtor's own cost and expense assemble the Inventory and make it available to Lender at a place or places reasonably convenient to Lender.
(c) Debtor's Obligation with Respect to Inventory. All Inventory is and shall be maintained at the locations shown on Schedule 3.l(c) hereof. No Inventory shall be removed therefrom, except for the purpose of sale or in the ordinary course of Debtor's business, and except for such sales, Debtor will not sell, encumber, grant a security interest in, dispose of or permit the sale, encumbrance, return or disposal of any Inventory without Lender's prior consent contained in an Authenticated Record. If sales are made for cash, Debtor shall immediately deliver to Lender the identical checks or other forms of payment, which it receives. In the event that Inventory is stored with the manufacturer thereof, Debtor shall cause such manufacturer to enter into a no offset agreement with Lender which agreement is in form and substance satisfactory to Lender.
(d) Further Obligations of Debtor with Respect to Inventory. From time to time, and at least once every month in any event, Debtor shall execute and deliver to Lender, a confirmatory Record, in form and substance satisfactory to Lender, listing Debtor's Inventory, but any failure to execute or deliver the same shall not affect or limit Lender's security interest in and to the Inventory.
(e) Maintenance of Inventory Records. Debtor shall maintain full, accurate and complete records respecting Inventory, including a perpetual inventory, and all other Collateral at all times. Debtor will pay all costs to be paid on taxes, assessments, governmental charges or private encumbrances levied, assessed, imposed or payable upon or with respect to the Inventory, Equipment or other Collateral or any part thereof.
3.2 Receivables. Debtor represents warrants and covenants to Lender that it will comply with the following:
(a) Warranties With Respect to Receivables. Each Receivable (i) will cover a bona fide sale and delivery of merchandise usually dealt in by Debtor in the ordinary course of its business or will cover the rendition of services by Debtor to customers of a kind ordinarily rendered in the ordinary course of Debtor's business, (ii) will be for a liquidated amount from a customer competent to contract therefor, (iii) is not subject to renegotiation, (iv) is not subject to any prepayment or credit and will not be subject to any deduction, offset, counterclaim, lien or other condition, except in the ordinary course of business, and (v) is generally enforceable in accordance with its terms. Debtor further represents and warrants that all services to be performed by it in connection with each Receivable have been performed.
(b) [Reserved].
(c) Notice of Certain Events. Debtor will notify Lender of all returns and recoveries of merchandise and of all claims asserted with respect to merchandise which such returns, recoveries or claims exceed $25,000 per occurrence. Debtor shall promptly report each such return, repossession or recovery of merchandise to Lender, advising it of the location thereof and providing it with a description of such goods and its location. Debtor shall not settle or adjust any dispute or claim, or grant any discount (except ordinary trade discounts), credit or allowance or accept any return of merchandise (except in the ordinary course of Debtor's business, provided that, such credit, allowance or return does not exceed $25,000, without Lender's consent. Upon the occurrence of a Default or an Event of Default, Lender may settle or adjust disputes or claims directly with customers or Account Debtors of Debtor for amounts and upon terms which it considers advisable. Where a Debtor receives Collateral of any kind or nature by reason of transactions between itself and its customers or Account Debtors, it will hold the same on Lender's behalf, subject to Lender’s instructions, and as property forming part of the Receivables.
(d) Communication with Account Debtors. Debtor authorizes Lender, after the occurrence of an Event of Default, upon notice to Debtor but without the consent of Debtor, to communicate directly with customers or Account Debtors by whatever means Lender shall elect for
the purpose of verifying the information supplied by Debtor to Lender with respect to Receivables. Upon Lender's request, before or after the occurrence of an Event of Default, Debtor shall provide Lender with a list of the addresses of its Account Debtors.
3.3 Equipment. Debtor represents, warrants and covenants to Lender that it will comply with the following:
(a) Warranties With Respect to Equipment. All Equipment hereafter acquired will be kept at the location or locations shown on Schedule 3.3(a) unless Debtor shall have first advised Lender of its intention to maintain a plant, offices at some other location or place the equipment with a third party and have obtained Lender's prior consent contained in an Authenticated Record.
(b) Debtor's Obligations With Respect to Equipment. Debtor shall keep all of its Equipment in a good state of repair, and will make all repairs and replacements when and where necessary, will not waste or destroy Equipment or any part thereof, and will not be negligent in the care, or use, thereof. Debtor shall keep accurate lists and records reflecting its Equipment and shall retain copies of all warranties, manuals and manufacturers or vendors' requirements with respect thereto. All Equipment shall be used substantially in accordance with law and prudent business practice and the manufacturer's instructions and shall be kept separate from and shall not be annexed or affixed to or become part of the realty except where Lender first consents in an Authenticated Record.
3.4 Ownership and Maintenance of Collateral. To the extent that Debtor owns Collateral, Debtor will have good, marketable and indefeasible title thereto, free and clear of all liabilities, mortgages, security interests, leases, liens, pledges, encumbrances, restrictions, charges, claims or imperfections of title whatsoever other than Permitted Liens.
3.5 Maintenance of Collateral. To the extent that Debtor owns Collateral, Debtor shall continually take such steps as are necessary and prudent to protect the interest of Lender in the Collateral including, but not limited to, the following:
(a) maintain books and records relating to the Collateral satisfactory to Lender and shall allow Lender or its representatives access to such records and the Collateral at all reasonable times and upon reasonable notice for the purpose of examination, inspection, verification, copying, extracting and other reasonable purposes as Lender may require;
(b) maintain the Collateral and the books and records relating to the Collateral at Debtor's address indicated above, at any address listed on Schedule 3.5(b) or at such other address as Lender shall permit, in its sole discretion (exercised in good faith using reasonable commercial judgment), upon the request to Lender contained in an Authenticated Record from Debtor;
(c) execute and deliver to Lender such other and further documentation necessary to evidence, effectuate or perfect its security interest in the Collateral;
(d) defend the Collateral against all claims and demands of third parties at any time claiming the same or any interest therein;
(e) keep the Collateral free of all liens and encumbrances, except for the security interests of Lenders, security interests in favor of SWK Funding, LLC which have been subordinated to the security interests of Lender on terms satisfactory to Lender and any other Permitted Liens, and will not, without prior consent of Lender contained in an Authenticated Record, sell, transfer or otherwise dispose of the Collateral or any interest therein, in bulk or otherwise;
(f) notify Lender in the event of material loss or damage to the Collateral or of any material adverse change in Debtor's business, financial condition or the Collateral, or of any other occurrences which could materially and adversely affect the security of Lender;
(g) pay all expenses incurred in the manufacture, delivery, storage or other handling of the Collateral and all taxes which are or may become a lien on the Collateral, promptly when due, and in any event reimburse Lender, on demand, for any expenses which Lender might incur following the occurrence of a Default or an Event of Default, in satisfying such expenses or taxes, which Lender, in its sole discretion, deems necessary in order to protect the Collateral;
(h) [Reserved].
(i) if requested by Lender: (A) mark its records evidencing the Collateral in a manner satisfactory to Lender so as to indicate the security interest of Lender hereunder; (B) furnish to Lender any chattel paper, invoices, documents, schedules, purchase orders, delivery receipts, contracts or other documents representing or relating to any of the Collateral; (C) promptly reflect in its books, records, and reports to Lender the rejection of goods, delay in delivery or performance, or claims made, in regard to any Collateral and after a Default or an Event of Default inform Lender immediately of any of the same; (D) prior to an a Default or Event of Default, with respect to Account Debtors whose Receivables owed to Debtor exceed 10% of all Receivables owed to Debtor, and thereafter with respect to all Account Debtors, furnish to Lender all information received by Debtor indicating a material adverse change in the financial standing of any Account Debtor, debtor under any General Intangible, or obligor under any Receivables; (E) immediately notify Lender if any of the Collateral relates to Inventory which, prior to Debtor's rendering of all invoices therefor, has been delivered to or stored on real property for which the landlord or bailee has not executed waivers in form and substance acceptable to Lender; (F) immediately notify Lender if any of the Collateral arises out of contracts for the improvement of real property, deals with a public improvement or is with the United States, any state, or any department, agency or instrumentality thereof, and execute any instruments and take any steps required by Lender in order that all moneys due or to become due under any such contract shall be assigned to Lender and notice thereof be given as required by law; (G) furnish to Lender such financial statements, reports, certificates, lists of Account Debtors (showing names, addresses, telephone and facsimile numbers, and amounts owing) and other data concerning the Collateral and other matters as Lender may, from time to time, request; and (H) fully cooperate with Lender in the exercising of its rights and methods for verification of the Collateral.
3.6 Authority. Debtor is authorized to enter into and implement this Agreement and has taken all necessary actions, corporate or otherwise, in relation to such authorization.
3.7 Fixtures/Landlords. To the extent that Debtor owns Collateral, the Collateral will remain personality and will not be permanently affixed to real estate without the prior consent of
Lender contained in an Authenticated Record. If any of the Collateral is or will be a fixture, Debtor will provide legal descriptions and the names of record owners of the premises to which the Collateral will be affixed sufficient for perfection of the security interests of Lender. Debtor will provide disclaimers of interest and removal agreements, in form reasonably satisfactory to Lender with respect to any location where the value of the Collateral thereat exceeds $250,000.
4. EVENTS OF DEFAULT.
Any of the following events or occurrences shall constitute an "Event of Default" under this Agreement:
(a) the occurrence of any Event of Default under the Loan Agreement, or any of the Loan Documents after giving effect to any applicable grace period thereunder; or
(b) the failure of Debtor to perform or comply with any provision of this Agreement and the continuance of such failure beyond any applicable grace and/or notice period; or
(c) the occurrence of a material adverse change in the condition, marketability or value of the Collateral.
5. RIGHTS OF LENDER.
5.1 General Rights. The rights of Lender shall at all times be those of a secured party under the UCC. Without limiting the generality of the foregoing, Lender shall have the additional rights set forth in this Agreement.
5.2 Lender’s Right to Perform Debtor’s Obligations. In the event that Debtor shall fail to purchase or maintain insurance, or to pay any tax, assessment, government charge or levy, except as the same may be otherwise permitted hereunder, or in the event that any lien, encumbrance or security interest prohibited hereby shall not be paid in full or discharged, or in the event that Debtor shall fail to perform or comply with any other covenant, promise or Obligation to Lender hereunder or under any other Loan Document, Lender may, but shall not be required to, perform, pay, satisfy, discharge or bond the same for the account of Debtor, and all monies so paid by Lender, including actual attorneys' fees and expenses, shall be treated as part of the Obligations.
5.3 Collections; Modifications of Terms. Without limiting any rights Lender may have pursuant to this Agreement or otherwise, upon the occurrence and during the continuance of a Default or an Event of Default, Lender may demand, sue for, collect and give receipts for any money, Instruments or property payable or receivable on account of or in exchange for any of the Collateral, or make any compromises it deems necessary or proper, including without limitation, extending the time of payment, permitting payment in installments, or otherwise modifying the terms or rights relating to any of the Collateral, all of which may be effected without notice to or consent from Debtor and without otherwise discharging or affecting the Obligations, the Collateral or the security interest granted under this Agreement or any of the Loan Documents.
5.4 Notification of Account Debtors. Without limiting any rights Lender may have pursuant to this Agreement or under applicable law, after a Default or an Event of Default has occurred, (i) Debtor, at the request of Lender, shall notify its Account Debtors of Lender's security interest in Debtor's Receivables; and (ii) Lender may notify the Account Debtors of Lender's security interest in the Receivables and to make payment directly to Lender, and Lender may endorse all items of payment received by it that are payable to Debtor. Debtor authorizes such parties to make such payments directly to Lender and to rely on notice from Lender without further inquiry. Lender may demand and take all necessary or desirable steps to collect such Collateral in the name either of Lender or Debtor, with the right to enforce, compromise, settle, or discharge any of the foregoing.
5.5 Insurance. Without limiting any rights of Lender pursuant to this Agreement or under applicable law, after a Default or Event of Default has occurred, Lender may file proofs of loss and claim with respect to any of the Collateral with the appropriate insurer, and may endorse in Lender's own or Debtor's name any checks or drafts constituting insurance proceeds. Any insurance proceeds received by Lender may be applied by it against Debtor's Obligations under the Loan Documents.
5.6 Waiver of Rights by Debtor. Except as may be otherwise specifically provided herein, Debtor waives, to the extent permitted by law, any bonds, security or sureties required by any statute, rule or otherwise by law as an incident to any taking of possession by Lender of any Collateral. Debtor authorizes Lender, upon the occurrence of an a Default or Event of Default, upon prior notice to Debtor where practicable to enter upon any premises owned by or leased to Debtor where the Collateral is kept, without obligation to pay rent or for use and occupancy, through self help, without judicial process or obtained an order of any court, and peacefully retake possession thereof by securing at or removing same from such premises.
5.7 Lender's Rights. Debtor agrees that Lender shall not have any obligation to preserve rights to any Collateral against prior parties or to marshal any Collateral of any kind for the benefit of any other creditor of Debtor or any other Person. After the occurrence of a Default or an Event of Default, Lender is hereby granted a license or other right to use, without charge, Debtor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and Debtor's rights under all licenses and any franchise, sales or distribution agreements shall inure to Lender's benefit for such purpose.
5.8 Rights on Event of Default.
(a) After the occurrence and during the continuation of an Event of Default, in addition to and without limiting any rights Lender may have under any agreement, document or instrument evidencing or representing any obligation of Debtor to Lender or executed in connection with any such obligation, Lender is hereby authorized to declare any or all of the Obligations to be immediately due and payable, and the rights and remedies of Lender with respect to the Collateral shall be as set forth herein, in the UCC and as otherwise available under applicable law.
(b) After the occurrence and during the continuation of an Event of Default, Lender may, without demand, advertising or notice, all of which Debtor hereby waives (except as the same may be required by law), sell, lease, license, dispose of, deliver and grant options to a third party to purchase, lease or otherwise dispose of any and all Collateral held by it or for its account at any time or times in one or more public or private sales or other dispositions, for cash, on credit or otherwise, as such prices and upon such terms as Lender, in its sole discretion, deems advisable. All
requirements of reasonable notice under this section shall be met if such notice is mailed, postage prepaid, to Debtor at its address set forth herein or such other address as Debtor may have provided to Lender, in a Record, at least ten (10) days before the time of such sale or disposition. Lender may, if it deems it reasonable, postpone or adjourn any sale of any Collateral from time to time by an announcement at the time and place of the sale to be so postponed or adjourned without being required to give a new notice of sale, provided, however, that Lender shall provide Debtor with written notice of the time and place of such postponed or adjourned sale. Lender may be the purchaser at any such sale, and payment may be made, in whole or in part, in respect of such purchase price by the application of Obligations due from Debtor to Lender. Debtor shall be obligated for, and the proceeds of sale shall be applied first to, the costs of retaking, refurbishing, storing, guarding, insuring, preparing for sale, and selling the Collateral, including the fees and disbursements of attorneys, auctioneers, appraisers, consultants and accountants employed by Lender. Proceeds from the Sale or other disposition or Collateral shall be applied to the payment, in whatever order Lender may elect, of all Obligations of Debtor. Lender shall return any excess to Debtor and Debtor shall remain liable for any deficiency. Collateral securing purchase money security interests also secures non-purchase money security interests. To the extent Debtor uses an advance under the Loan Documents to purchase Collateral, Debtor's repayment of such advance shall apply on a "first-in-first-out" basis so that the portion of the advance used to purchase a particular item of Collateral shall be paid in the chronological order Debtor purchased the Collateral. Upon request of Lender, Debtor will assemble and make the Collateral available to Lender, at a reasonable place and time designated by Lender. Debtor's failure to take possession of any Collateral at any time and place reasonably specified by Lender in a Record to Debtor shall constitute an abandonment of such Property.
(c) Lender shall not be responsible to Debtor for loss or damage resulting from Lender's failure to enforce or collect any Collateral or any monies due or to become due under any liability of Debtor to Lender.
(d) After a Default or an Event of Default, Debtor (i) will make no change in any Receivable or General Intangible, and (ii) shall receive as the sole property of Lender and hold in trust for Lender all monies, checks, notes, drafts, and other property (collectively called "Items of Payment") representing the proceeds of any Collateral.
(e) After an Event of Default, Lender may but shall be under no obligation to: (i) notify all appropriate parties that the Collateral, or any part thereof, has been assigned to Lender; (ii) collect any Receivables or General Intangibles in Lender's own or Debtor's name, and apply any such collections against such obligations of Debtor to Lender as Lender may select; (iii) take control of any cash or non-cash proceeds of any item of the Collateral; (iv) compromise, extend or renew any Receivables, General Intangible, or document, or deal with the same as it may deem advisable; and (v) make exchanges, substitutions or surrender of items comprising the Collateral.
5.9 Lender's Right of Set-Off. Lender may, at any time upon the occurrence of a Default or an Event of Default hereunder and without any further notice to Debtor (such notice being expressly waived), set-off or apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, or any other Indebtedness at any time owing by Lender or any affiliate of Lender or any participant in Lender's loans, to Debtor to or for the credit or the account of Debtor against any Obligation irrespective of whether any demand has been made hereunder or whether such Obligation is mature.
5.10 Expense of Collection and Sale. Debtor agrees to pay all costs and expenses incurred by the Lender in connection with the negotiation and preparation of this Agreement or any other
document, or any other Loan Documents executed in connection herewith, in determining Lender's rights under, and in enforcing and collecting the indebtedness represented by the guaranty and in determining its rights under and enforcing the security interests created by this Agreement, including, without limitation, costs and expenses relating to taking, holding, insuring, preparing for sale, appraising, selling or otherwise realizing on the Collateral, and reasonable attorneys' fees and expenses in connection with any of the foregoing. All such reasonable costs and expenses shall be payable on demand, and shall bear interest at the highest rate charged on any Obligation, payable on demand, from the date of Lender's payment of such costs and expenses until payment of all Obligations is made in full, at the highest rate of interest permitted by law.
5.11 Compliance with Other Laws. Lender may comply with any applicable law requirements in connection with a disposition of the Collateral, and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
5.12 Warranties. Lender may sell the Collateral without giving any warranties. Lender may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
5.13 Sales on Credit. If Lender sells any of the Collateral on credit, Debtor will be credited only with payments actually made by the purchaser, received by Lender and applied to the Indebtedness. If the purchaser fails to pay for the Collateral, Lender may resell the Collateral, and Debtor shall be credited with the proceeds of the sale.
6. GENERAL PROVISIONS.
6.1 Waivers. Debtor expressly waives notice of nonpayment, demand, presentment, protest or notice of protest in relation to the Loan Documents or the Collateral. No delay or omission of Lender in exercising or enforcing any of its rights, powers, privileges, options or remedies under this Agreement shall constitute a waiver thereof, and no waiver by Lender of any default by Debtor shall operate as a waiver of any other default.
6.2 Remedies Not Exclusive. All rights and remedies of Lender under this Agreement shall be cumulative and not alternative or exclusive, irrespective of any other collateral guaranty, right or remedy and may be exercised by Lender at such time or times and in such order as Lender, in its sole discretion, may determine, and are for the sole benefit of Lender. The exercise or failure to exercise such rights and remedies shall not result in liability to Debtor or others except in the event of willful misconduct or bad faith by Lender, and in no event shall Lender be liable for more than it actually receives as a result of the exercise or failure to exercise such rights and remedies.
6.3 Successors and Assigns. This Agreement is entered into for the benefit of the parties hereto and their successors and assigns. It shall be binding upon and shall inure to the benefit of such parties, their successors and assigns. Lender shall have the right, without the necessity of any further consent or authorization by Debtor, to sell, assign, securitize or grant participation in all, or a portion of, Lender's interest in the Collateral, to other financial institutions of the Lender's choice and on such terms as are acceptable to Lender in its sole discretion.
6.4 Notices. Wherever this Agreement provides for notice to any party (except as expressly provided to the contrary), it shall be given by messenger, certified U.S. mail with return receipt requested, or nationally recognized overnight courier with receipt requested, effective when either received or receipt rejected by the party to whom addressed, and shall be addressed as follows:
If to Lender:
ACF FINCO I, LP
580 White Plains Road, Suite 610
Tarrytown, New York 10591
Attention: Oleh Szczupak
With a copy to:
LUSKIN, STERN & EISLER LLP
Eleven Times Square
New York, New York 10036
Attention: Nathan Eisler, Esq.
If to Debtor:
JEFFERSON ACQUISITION, LLC
560 N. Rogers Road
Olathe, Kansas 66062
HOOPER WELLNESS, LLC
560 N. Rogers Road
Olathe, Kansas 66062
HOOPER DISTRIBUTION SERVICES, LLC
560 N. Rogers Road
Olathe, Kansas 66062
HOOPER INFORMATION SERVICES, INC.
560 N. Rogers Road
Olathe, Kansas 66062
HOOPER KIT SERVICES, LLC,
(f/k/a Heritage Labs International, LLC)
560 N. Rogers Road
Olathe, Kansas 66062
MID-AMERICA AGENCY SERVICES, INCORPORATED
560 N. Rogers Road
Olathe, Kansas 66062
TEG ENTERPRISES, INC.
560 N. Rogers Road
Olathe, Kansas 66062
6.5 Strict Performance. The failure by Lender at any time to require Debtor’s strict compliance with or performance of any provision of this Agreement shall not waive, affect, impair or diminish any right of Lender thereafter to demand Debtor’s strict compliance with and performance of such provision. Any suspension or waiver by Lender of any Default or Event of Default shall not suspend, waive or affect any other Default or Event of Default, whether the same is prior or subsequent to such suspension or waiver and whether of the same or a different type.
6.6 Construction of Agreement. The parties hereto agree that the terms, provisions and language of this Agreement were the result of negotiations between the parties, and, as a result, there shall be no presumption that any ambiguities in this Agreement shall be resolved against either party. Any controversy over the construction of this Agreement shall be decided without regard to events of authorship or negotiation.
6.7 WAIVER OF RIGHT TO JURY TRIAL. Debtor and Lender recognize that in matters related to this Agreement, and as it may be subsequently modified and/or amended, either party may be entitled to a trial in which matters of fact are determined by a jury (as opposed to a trial in which such matters are determined by a judge, magistrate, referee or other elected or appointed decider of facts). By executing this Agreement, Lender and Debtor will give up their respective right to a trial by jury. Debtor and Lender each hereby expressly acknowledges that this waiver is entered into to avoid delays, minimize trial expenses, and streamline the legal proceedings in order to accomplish a quick resolution of claims arising under or in connection with this Agreement.
(a) WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, DEBTOR AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT DEBTOR OR LENDER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, ACTION, SUIT OR PROCEEDING, DIRECTLY OR INDIRECTLY, AT ANY TIME ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, OR ANY TRANSACTION CONTEMPLATED BY THIS AGREEMENT, BEFORE OR AFTER MATURITY.
(b) CERTIFICATIONS. DEBTOR HEREBY CERTIFIES THAT NEITHER ANY REPRESENTATIVE NOR AGENT OF LENDER NOR LENDER'S COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT LENDER WOULD NOT, IN THE EVENT OF ANY LITIGATION, ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER. DEBTOR ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATION HEREIN.
6.8 Entire Agreement; Amendments; Lender's Consent. This Agreement (including the Schedules and Exhibits) constitutes the entire agreement between Lender and Debtor with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements or conditions between Lender and Debtor, whether express or implied, oral or written, with respect to the subject matter hereof. No amendment or waiver of any provision of this Agreement, nor consent to any departure by Debtor therefrom, shall in any event be effective unless the same shall be Authenticated by Lender in a Record, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
6.9 Cross Default; Cross Collateral. Debtor hereby agrees that (a) a Default or an Event of Default under this Agreement is a default or an event of default under all the other Loan Documents and a default under any of such other Loan Documents is a Default or an Event of Default under this Agreement, and (b) the Collateral under this Agreement secures the Obligations now or hereafter outstanding under all other agreements between Debtor and Lender and the Collateral pledged under any other agreement with Lender secures the Obligations under this Agreement.
6.10 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.
6.11 Severability of Provisions. Any provision of this Agreement or any of the other Loan Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or the other Loan Documents or affecting the validity or enforceability of such provision in any other jurisdiction.
6.12 Schedules. All of the Schedules to this Agreement are hereby incorporated by reference herein and made a part hereof.
6.13 GOVERNING LAW; CONSENT TO JURISDICTION.
(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY LENDER AND ACCEPTED BY DEBTOR IN THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED ENTIRELY IN SUCH STATE WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS. TO THE FULLEST EXTENT PERMITTED BY LAW, LENDER AND DEBTOR HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT OR ANY LOAN DOCUMENT, AND THIS AGREEMENT AND EACH SUCH LOAN DOCUMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED ENTIRELY IN SUCH STATE WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR DEBTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN THE SOLE OPTION OF LENDER IN ANY FEDERAL OR STATE COURT LOCATED IN WESTCHESTER COUNTY, NEW YORK, OR NEW YORK COUNTY, NEW YORK PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW; HOWEVER, LENDER MAY, AT ITS OPTION, COMMENCE ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION TO OBTAIN POSSESSION OF OR FORECLOSE UPON ANY COLLATERAL, TO OBTAIN EQUITABLE RELIEF OR TO ENFORCE ANY JUDGMENT OR ORDER OBTAINED BY LENDER AGAINST DEBTOR OR WITH RESPECT TO ANY COLLATERAL, TO ENFORCE ANY RIGHT OR REMEDY UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR TO OBTAIN ANY OTHER RELIEF DEEMED APPROPRIATE BY LENDER, AND LENDER AND DEBTOR EACH WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND LENDER AND DEBTOR EACH HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. DEBTOR REPRESENTS AND ACKNOWLEDGES THAT IT HAS REVIEWED THIS CONSENT TO JURISDICTION PROVISION WITH ITS LEGAL COUNSEL, AND HAS MADE THIS WAIVER KNOWINGLY AND VOLUNTARILY, WITHOUT COERCION OR DURESS.
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[SIGNATURE PAGES IMMEDIATELY FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officer or managing member thereunto duly authorized, as of the date first above written.
LENDER:
ACF FINCO I LP
By: /s/ Oleh Szczupak
Name: Oleh Szczupak
Title: Vice President
DEBTOR:
JEFFERSON ACQUISITION, LLC
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
HOOPER WELLNESS, LLC
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
HOOPER DISTRIBUTION SERVICES, LLC
By: Hooper Holmes, Inc., its sole Manager
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President of Hooper Holmes, Inc.
HOOPER INFORMATION SERVICES, INC.
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
HOOPER KIT SERVICES, LLC,
formerly Heritage Labs International, LLC
By: Hooper Holmes, Inc., its sole Member
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President of Hooper Holmes, Inc.
MID-AMERICA AGENCY SERVICES, INCORPORATED
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
TEG ENTERPRISES, INC.
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
Schedule 3.1(c)
Inventory Locations
Debtor represents, warrants and covenants to Lender that all Inventory owned by Debtor is located at Borrower’s Olathe, Kansas, facility, which location is specified on the Disclosure Schedule to the Loan Agreement.
Schedule 3.3(a)
Equipment and Equipment
Locations
all machinery, equipment, office machinery, furniture, fixtures, conveyors, tools, materials storage and handling equipment, molds, dies, stamps and other equipment of every kind and nature and wherever situated now or hereafter owned by Debtor or in which Debtor may have any interest (to the extent of such interest), together with all additions and accessions thereto, all replacements and all accessories and parts therefor, all manuals, blueprints, know-how, warranties and records in connection therewith, all rights against suppliers, warrantors, manufacturers, sellers or others in connection therewith, and together with all substitutes for any of the foregoing whether now owned or existing or hereafter created, acquired or arising and wheresoever located
Debtor represents, warrants and covenants to Lender that all Equipment owned by Debtor is located at Borrower’s Olathe, Kansas, facility, which location is specified on the Disclosure Schedule to the Loan Agreement.
Schedule 3.5(b)
Collateral Locations
Debtor represents, warrants and covenants to Lender that all Collateral owned by Debtor is located at Borrower’s Olathe, Kansas, facility, which location is specified on the Disclosure Schedule to the Loan Agreement.
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (this “Agreement”), dated as of April 17, 2015 to the Unconditional and Continuing Guaranty, dated as of February 28, 2013 (the “Guaranty”) by Hooper Distribution Services, LLC, Hooper Information Services, Inc., Mid-America Agency Services, Inc. and TEG Enterprises, Inc. in favor of ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP, a Delaware limited partnership (the “Lender”), is by and between Jefferson Acquisition, LLC, a Kansas limited liability company (“Jefferson Acquisition”), Hooper Wellness, LLC, a Kansas limited liability company (“Hooper Wellness”, collectively with Jefferson Acquisition, the “New Guarantor”), and the Lender.
A. Reference is made to the Loan and Security Agreement, dated as of February 28, 2013 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), between the Lender and Hooper Holmes, Inc., a New York corporation.
B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.
C. The New Guarantor is executing this Agreement to become a Guarantor under the Guaranty.
D. The New Guarantor will derive substantial direct and indirect benefit from the transactions contemplated by the Loan Agreement and the other Loan Documents.
Accordingly, the Lender and the New Guarantor agree as follows:
SECTION 1. The New Guarantor by its signature below becomes a Guarantor under the Guaranty with the same force and effect as if originally named therein as a Guarantor, and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guaranty applicable to it as a Guarantor thereunder, including without limitation, the consent to jurisdiction and waiver of jury trial set forth in Article 7 of the Guaranty, and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct in all material respects on and as of the date hereof. Each reference to a “Guarantor” in the Guaranty shall be deemed to include the New Guarantor. The Guaranty is hereby incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Lender that this Agreement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).
SECTION 3. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. This Agreement shall become effective when the Lender
shall have received counterparts of this Agreement that, when taken together, bear the signatures of the New Guarantor and the Lender. Delivery of an executed signature page to this Agreement by messenger, facsimile, certified U.S. mail with return receipt request, or nationally recognized overnight courier with receipt requested shall be as effective as delivery of a manually executed counterpart of this Agreement.
SECTION 4. Except as expressly supplemented hereby, the Guaranty shall remain in full force and effect.
SECTION 5. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. If any provision of this Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby and (b) the parties hereto shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 7.3 of the Guaranty. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below.
SECTION 8. The New Guarantor agrees to reimburse the Lender for its costs and expenses in connection with this Agreement, including the fees, disbursements and other charges of counsel for the Lender.
SECTION 9. THIS AGREEMENT, THE GUARANTY, AND THE OTHER LOAN DOCUMENTS ARE THE FINAL EXPRESSION OF THE AGREEMENT BETWEEN THE PARTIES. THIS AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL AGREEMENT OR OF ANY CONTEMPORANEOUS ORAL AGREEMENT BETWEEN THE PARTIES. ANY AND ALL SUCH PRIOR OR CONTEMPORANEOUS ORAL AGREEMENTS ARE EXPRESSLY SUPERSEDED BY THIS AGREEMENT.
THE PARTIES TO THIS AGREEMENT HEREBY ACKNOWLEDGE AND AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES EXISTS.
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[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
IN WITNESS WHEREOF, the New Guarantor and the Lender have duly executed this Agreement as of the day and year first above written.
NEW GUARANTOR:
JEFFERSON ACQUISITION, LLC,
a Kansas limited liability company
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
HOOPER WELLNESS, LLC
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
LENDER:
ACF FINCO I LP, as assignee of Keltic Financial Partners II, LP
By: /s/ Oleh Szczupak _
Name: Oleh Szczupak
Title: Vice President
[Signature page to Joinder to Guaranty]
JOINDER AND FIRST AMENDMENT TO PLEDGE AGREEMENT
THIS JOINDER AND FIRST AMENDMENT, dated as of April 17, 2015 (this “Amendment”), to the Pledge Agreement, dated as of February 28, 2013 (the “Pledge Agreement”) by Hooper Holmes, Inc. (the “Original Pledgor”) in favor of ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP, a Delaware limited partnership (the “Pledgee”), is by and between the Original Pledgor and Hooper Wellness, LLC, a Kansas limited liability company (“Hooper Wellness,” and together with the Original Pledgor, the “Pledgors”) and the Pledgee.
PRELIMINARY STATEMENTS
1.Reference is made to the Loan and Security Agreement, dated as of February 28, 2013 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”), between the Pledgee and Original Pledgor.
2.The Pledgee has made advances to the Original Pledgor evidenced by the Note.
3.The Original Pledgor pledged to the Pledgee under the Pledge Agreement certain Pledged Collateral.
4.Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Pledge Agreement and the Loan Agreement.
5.Hooper Wellness is executing this Amendment to become a Pledgor under the Pledge Agreement.
6.Hooper Wellness will derive substantial direct and indirect benefit from the transactions contemplated by the Loan Agreement and the other Loan Documents.
Accordingly, the Pledgee and the Pledgors agree as follows:
Section 1.The Disclosure Schedule of the Pledge Agreement is amended and restated as set forth on Schedule A attached hereto.
Section 2. Hooper Wellness, by its signature below, becomes a Pledgor under the Pledge Agreement, in combination with the Old Pledgor, with the same force and effect as if originally named therein as a Pledgor, and Hooper Wellness hereby agrees to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder. In furtherance of the foregoing, Hooper Wellness does hereby create and grant to the Pledgee (and its successors and assigns), for the benefit of the Pledgee (and its successors and assigns), a security interest in and lien on all of its right, title and interest in and to the pledged membership interests in Jefferson Acquisition, LLC specified in Schedule A attached hereto. Each reference to a
“Pledgor” in the Pledge Agreement shall be deemed to mean Hooper Wellness and the Original Pledgor. The Pledge Agreement is hereby incorporated herein by reference.
Section 3. Each of the Pledgors represents and warrants to the Pledgee that (i) this Amendment has been duly authorized, executed and delivered by each Pledgor and constitutes each Pledgor’s legal, valid and binding obligation, enforceable against such Pledgor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and (ii) the representations and warranties made by the Original Pledgor under the Pledge Agreement are true and correct as they relate to Hooper Wellness on and as of the date hereof and are hereby deemed repeated by Hooper Wellness as if set forth in full herein.
Section 4. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. This Amendment shall become effective when the Pledgee shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Pledgors. Delivery of an executed signature page to this Amendment by messenger, facsimile, certified U.S. mail with return receipt request, or nationally recognized overnight courier with receipt requested shall be as effective as delivery of a manually executed counterpart of this Amendment.
Section 5. Except as expressly supplemented and amended hereby, the Pledge Agreement shall remain in full force and effect.
Section 6. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 7. If any provision of this Amendment is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Amendment shall not be affected or impaired thereby and (b) the parties hereto shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 8. All communications and notices hereunder shall be in writing and given as provided in Section 12(d) of the Pledge Agreement. All communications and notices hereunder to Hooper Wellness shall be given to it at the address set forth under its signature below.
Section 9. The Pledgors agrees to reimburse the Lender for its costs and expenses in connection with this Amendment, including the fees, disbursements and other charges of counsel for the Lender.
Section 10. THIS AMENDMENT, THE PLEDGE AGREEMENT, AND THE OTHER LOAN DOCUMENTS ARE THE FINAL EXPRESSION OF THE AGREEMENT BETWEEN THE PARTIES. THIS AMENDMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL AGREEMENT OR OF ANY CONTEMPORANEOUS ORAL AGREEMENT BETWEEN THE PARTIES. ANY AND ALL SUCH PRIOR OR CONTEMPORANEOUS ORAL AGREEMENTS ARE EXPRESSLY SUPERSEDED BY THIS AMENDMENT.
THE PARTIES TO THIS AMENDMENT HEREBY ACKNOWLEDGE AND AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES EXISTS.
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[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
Section 11.
IN WITNESS WHEREOF, Hooper Wellness, the Original Pledgor and the Pledgee have duly executed this Amendment as of the day and year first above written.
NEW PLEDGOR:
HOOPER WELLNESS, LLC
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
ORIGINAL PLEDGOR:
HOOPER HOLMES, INC.
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
PLEDGEE:
ACF FINCO I LP, as assignee of Keltic Financial Partners II, LP
By: /s/ Oleh Szczupak
Name: Oleh Szczupak
Title: Vice President
ACKNOWLEDGMENT AND CONSENT
Each of the undersigned hereby acknowledges receipt of a copy of the Joinder and First Amendment to the Pledge Agreement dated as of February 28, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time through the date hereof, the “Pledge Agreement”), among Hooper Holmes, Inc., a New York corporation, Hooper Wellness, LLC, a Kansas limited liability company and Keltic Financial Partners II, LP. Each of the undersigned shall be bound by and comply with the terms of the Pledge Agreement insofar as such terms are applicable to the undersigned.
HOOPER DISTRIBUTION SERVICES, LLC
By: Hooper Homes, Inc., its sole Manager
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President of Hooper Holmes, Inc.
HOOPER INFORMATION SERVICES, INC.
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
MID-AMERICA AGENCY SERVICES, INCORPORATED
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
HOOPER WELLNESS, LLC
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
JEFFERSON ACQUISITION, LLC
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
HOOPER KIT SERVICES, LLC,
formerly known as Heritage Labs International, LLC
By: Hooper Homes, Inc., its sole Member
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President of Hooper Holmes, Inc.
SCHEDULE A TO
JOINDER AND FIRST AMENDMENT TO PLEDGE AGREEMENT
DISCLOSURE SCHEDULE
Pledged Collateral
|
| | | | | |
Issuer | Pledgor | Type or Class of
Interest Pledged |
Certificate No. | No. of
Shares or Units | Percentage
of Total Outstanding Shares or Units |
Jefferson Acquisition, LLC
(a wholly-owned subsidiary of Hooper Wellness, LLC)
| Hooper Wellness, LLC | Common membership units | N/A | TBD | 100% |
Hooper Wellness, LLC (a wholly-owned subsidiary of Hooper Holmes, Inc.) | Hooper Holmes, Inc. | Common Membership units | N/A | TBD | 100% |
| | | | | |
Hooper Distribution Services, LLC
(a wholly-owned subsidiary of Hooper Holmes, Inc.)
| Hooper Holmes, Inc. | Common membership units | 1 | 100 | 100% |
Hooper Kit Services, LLC, f/k/a Heritage Labs International, LLC (a wholly-owned subsidiary of Hooper Holmes, Inc.) | Hooper Holmes, Inc. | Common membership units | N/A | 100 | 100% |
| | | | | |
Hooper Information Services, Inc.
(a wholly-owned subsidiary of Hooper Holmes, Inc.)
| Hooper Holmes, Inc. | Common Stock | 1 | 100 | 100% |
Mid-America Agency Services, Incorporated
(a wholly-owned subsidiary of Hooper Holmes, Inc.)
| Hooper Holmes, Inc. | Common Stock | 21 | 797 | 100% |
[Signature page to Joinder and First Amendment to Pledge Agreement]
____________________________________________________
____________________________________________________
CREDIT AGREEMENT
among
HOOPER HOLMES, INC.
as Borrower,
SWK FUNDING LLC,
as Agent, Sole Lead Arranger and Sole Bookrunner,
and
the financial institutions party hereto from time to time as Lenders
Dated as of April 17, 2015
____________________________________________________
____________________________________________________
[Hooper Holmes] Credit Agreement
#35074903_v10
Table of Contents
Page
| |
Section 1 | Definitions; Interpretation. 1 |
| |
Section 2 | Credit Facility. 15 |
| |
2.1 | Term Loan Commitments 15 |
| |
2.3 | Commitments Several 15 |
| |
2.4 | Indebtedness Absolute; No Offset; Waiver 15 |
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2.6 | Payment of Interest 16 |
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2.6.2 | Payments of Interest and Principal 17 |
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2.8.1 | Mandatory Prepayment 17 |
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2.8.2 | Voluntary Prepayment 18 |
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2.9 | Repayment of Term Loan 18 |
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2.9.1 | Revenue-Based Payment 18 |
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2.10.1 | Making of Payments 20 |
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2.10.2 | Application of Payments and Proceeds 20 |
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2.10.4 | Proration of Payments 21 |
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Section 3 | Yield Protection. 21 |
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3.4 | Manner of Funding; Alternate Funding Offices 25 |
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3.5 | Conclusiveness of Statements; Survival 25 |
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Section 4 | Conditions Precedent. 25 |
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4.2 | Delivery of Loan Documents 25 |
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4.5 | Representations, Warranties, Defaults 26 |
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4.8 | No Felonies or Indictable Offenses 27 |
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4.9 | No Material Adverse Effect 27 |
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4.10 | Project Jefferson Closing 27 |
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Section 5 | Representations and Warranties. 27 |
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5.2 | Authorization; No Conflict 28 |
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5.3 | Validity; Binding Nature 28 |
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5.4 | Financial Condition 28 |
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5.5 | No Material Adverse Change 28 |
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5.7 | Ownership of Properties; Liens 29 |
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5.10 | Investment Company Act 29 |
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5.15 | Environmental Matters 30 |
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5.18 | Intellectual Property; Products and Services 31 |
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5.19 | Restrictive Provisions 31 |
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5.21 | Material Contracts 32 |
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5.22 | Compliance with Laws; Health Care Laws 32 |
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5.23 | Existing Indebtedness; Investments, Guarantees and Certain Contracts 33 |
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5.24 | Affiliated Agreements 33 |
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5.25 | Names; Locations of Offices, Records and Collateral; Deposit Accounts 34 |
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5.27 | Broker’s or Finder’s Commissions 34 |
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5.28 | Anti-Terrorism; OFAC 34 |
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Section 6 | Affirmative Covenants. 35 |
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6.1.4 | Compliance Certificate; Revenue 36 |
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6.1.5 | Reports to Governmental Authorities and Shareholders 36 |
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6.1.6 | Notice of Default; Litigation 36 |
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6.1.7 | Management Report 37 |
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6.1.9 | Updated Schedules to Guarantee and Collateral Agreement 38 |
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6.1.10 | Other Information 38 |
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6.2 | Books; Records; Inspections 38 |
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6.3 | Conduct of Business; Maintenance of Property; Insurance 38 |
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6.4 | Compliance with Laws; Payment of Taxes and Liabilities 39 |
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6.6 | Employee Benefit Plans 40 |
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6.7 | Environmental Matters 40 |
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6.9 | Compliance with Health Care Laws 41 |
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6.10 | Cure of Violations 42 |
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6.11 | Corporate Compliance Program 42 |
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6.12 | Additional Warrant 42 |
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Section 7 | Negative Covenants. 43 |
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7.3 | Dividends; Redemption of Equity Interests 45 |
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7.4 | Mergers; Consolidations; Asset Sales 45 |
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7.5 | Modification of Organizational Documents 46 |
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7.7 | Transactions with Affiliates 46 |
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7.8 | Inconsistent Agreements 46 |
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7.9 | Business Activities 47 |
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7.11 | Restriction of Amendments to Certain Documents 48 |
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7.13 | Financial Covenants 49 |
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7.13.1 | Consolidated Unencumbered Liquid Assets 49 |
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7.13.2 | Minimum Aggregate Revenue 49 |
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7.16 | Regulatory Matters 50 |
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7.17 | Name; Permits; Dissolution; Insurance Policies; Disposition of Collateral; Taxes; Trade Names 50 |
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7.18 | Truth of Statements 51 |
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Section 8 | Events of Default; Remedies. 51 |
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8.1.1 | Non-Payment of Credit 51 |
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8.1.2 | Default Under Other Debt 51 |
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8.1.3 | Bankruptcy; Insolvency 51 |
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8.1.4 | Non-Compliance with Loan Documents 52 |
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8.1.5 | Representations; Warranties 52 |
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8.1.8 | Invalidity of Loan Documents or Liens 52 |
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8.1.9 | Invalidity of Subordination Provisions 53 |
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8.1.10 | Change of Control 53 |
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8.1.11 | Certificate Withdrawals, Adverse Test or Audit Results, and Other Matters 53 |
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9.1 | Appointment; Authorization 54 |
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9.2 | Delegation of Duties 55 |
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9.10 | Collateral and Guarantee Matters 57 |
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9.11 | ACF Indebtedness and Equivalent Credit Line Intercreditor Agreement 58 |
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9.12 | Actions in Concert 58 |
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Section 10 | Miscellaneous. 58 |
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10.1 | Waiver; Amendments 58 |
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10.5 | Indemnification by Borrower 60 |
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10.6 | Marshaling; Payments Set Aside 61 |
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10.7 | Nonliability of Lenders 61 |
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10.12 | Nature of Remedies 64 |
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10.16 | Successors; Assigns 64 |
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10.18 | Forum Selection; Consent to Jurisdiction 65 |
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10.19 | Waiver of Jury Trial 65 |
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Annexes
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Annex I | Commitments and Pro Rata Term Loan Shares |
Exhibits
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Exhibit A | Form of Assignment Agreement |
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Exhibit B | Form of Compliance Certificate |
Schedules
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Schedule 1.1 | Pending Acquisitions as of the Closing Date |
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Schedule 5.1 | Jurisdictions of Qualification |
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Schedule 5.7 | Ownership of Properties; Liens |
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Schedule 5.8 | Capitalization |
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Schedule 5.18(a) | Borrower’s Registered Intellectual Property |
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Schedule 5.18(b) | Products and Required Permits |
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Schedule 5.21 | Material Contracts |
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Schedule 5.27 | Broker’s Commissions |
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Schedule 7.1 | Existing Debt |
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Schedule 7.2 | Existing Liens |
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Schedule 7.7 | Transactions with Affiliates |
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Schedule 7.10 | Existing Investments |
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Schedule 7.11 | Restricted Material Contracts |
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Schedule 7.14 | Deposit Accounts |
CREDIT AGREEMENT
This CREDIT AGREEMENT (as may be amended, restated, supplemented, or otherwise modified from time to time, this “Agreement”) dated as of April 17, 2015 (the “Closing Date”), among HOOPER HOLMES, INC., a New York corporation (“Borrower”), the financial institutions party hereto from time to time as lenders (each a “Lender” and collectively, the “Lenders”) and SWK FUNDING LLC (in its individual capacity, “SWK”), as Agent for all Lenders.
In consideration of the mutual agreements herein contained, the parties hereto agree as follows:
Section 1Definitions; Interpretation.
1.1 Definitions.
When used herein the following terms shall have the following meanings:
Account Control Agreement means, individually and collectively, any account control or similar agreement(s) entered into from time to time at Agent’s request, among a Loan Party, Agent and any third party bank or financial institution at which such Loan Party maintains a Deposit Account.
ACF means ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP.
ACF Indebtedness means any Debt of Borrower in a principal amount not to exceed, in the aggregate, $7,000,000 owing to ACF as of any date of determination, and which loan facility shall provide for advance rates on Borrower’s receivables of no greater than eighty-five percent (85%) for receivables that have been invoiced by Borrower to the payor of such receivables and fifty percent (50%) for receivables that have not yet been invoiced by Borrower to the payor on such receivables; in all cases pursuant to the ACF Loan Documents and subject to the qualifications and exceptions therein.
ACF Loan Documents means that certain Loan and Security Agreement dated February 28, 2013, by and between ACF and Borrower, and the documents, instruments, and agreements executed in conjunction therewith, as each may be amended prior to the Closing Date.
Acquisition means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of fifty percent (50%) of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, (c) the acquisition of a product license or a product line (excluding, for purposes of Section 7.10 hereof, any pending Acquisitions as of the Closing Date as set forth on Schedule 1.1 hereto), or (d) a merger or consolidation or any other combination (other than a merger, consolidation or combination that effects a Disposition) with another Person (other than a Person that is already a Subsidiary).
Affiliate of any Person means (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person, (b) any employee, manager, officer or director of such Person and (c) with respect to any Lender, any entity administered or managed by such Lender or an Affiliate or investment advisor thereof which is engaged in making, purchasing, holding or otherwise investing in commercial loans. For purposes of the definition of the term “Affiliate”, a Person shall be deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly, power to vote ten percent (10%) or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Unless expressly stated otherwise herein, neither Agent nor any Lender shall be deemed an Affiliate of Borrower or of any Subsidiary.
Agent means SWK in its capacity as administrative agent for all Lenders hereunder and any successor thereto in such capacity.
Aggregate Revenue shall have the meaning set forth in Section 2.9.1(a).
Agreement has the meaning set forth in the Preamble.
Approved Fund means (a) any fund, trust or similar entity that invests in commercial loans in the ordinary course of business and is advised or managed by (i) a Lender, (ii) an Affiliate of a Lender, (iii) the same investment advisor that manages a Lender or (iv) an Affiliate of an investment advisor that manages a Lender or (b) any finance company, insurance company or other financial institution which temporarily warehouses loans for any Lender or any Person described in clause (a) above.
Assignment Agreement means an agreement substantially in the form of Exhibit A.
Authorization shall have the meaning set forth in Section 5.22(b).
Borrower shall have the meaning set forth in the Preamble.
Business Day means any day on which commercial banks are open for commercial banking business in Dallas, Texas, and, in the case of a Business Day which relates to the calculation of LIBOR, on which dealings are carried on in the London interbank Eurodollar market.
Capital Lease means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person.
Cash Equivalent Investment means, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof, (b) commercial paper, or corporate demand notes, in each case (unless issued by a Lender or its holding company) rated at least “A-l” by Standard & Poor’s Ratings Group or “P-l” by Moody’s Investors Service, Inc., (c) any certificate of deposit (or time deposit represented by a certificate of deposit) or banker’s acceptance maturing not more than one year after such time, or any overnight Federal Funds transaction that is issued or sold by any Lender (or by a commercial banking institution that is a member of the Federal Reserve System or is a U.S. branch of a foreign banking institution and has a combined capital and surplus and undivided profits of not less than $500,000,000), (d) any repurchase agreement entered into with any Lender (or commercial banking institution of the nature referred to in clause (c) above) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time such repurchase agreement is entered into of not less than one-hundred percent (100%) of the repurchase obligation of such Lender (or other commercial banking institution) thereunder, (e) money market accounts or mutual funds which invest exclusively or substantially in assets satisfying the foregoing requirements, (f) cash, and (g) other short term liquid investments approved in writing by Agent.
Change of Control means the occurrence of any of the following, unless such action has been consented to in advance in writing by Agent in its sole discretion:
(i) any Person acquires the direct or indirect ownership of more than fifty-one percent (51%) of the issued and outstanding voting Equity Interests of Borrower;
(ii) fifty percent (50%) or more of the members of the Board of Directors (or other applicable governing body) of Borrower on any date shall not have been (x) members of the Board of Directors (or other applicable governing body) of Borrower on the date twelve (12) months prior to such date or (y) approved (by recommendation, nomination, election or otherwise) by Persons who constitute at least a majority of the members of the Board of Directors (or other applicable governing body) of Borrower as constituted on the date twelve (12) months prior to such date; or
(iii) a Key Person Event.
CLIA means (a) the Clinical Laboratory Improvement Act of 1967, as the same may be amended, modified or supplemented from time to time, including without limitation the Clinical Laboratory Improvement Amendments, 42 U.S.C. § 263a et seq. (“CLIA 88”), and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder, or (b) any equivalent state statute (and any and all rules or regulations promulgated from time to time thereunder) recognized by the relevant Governmental Authority as (x) having an “Equivalency” (as defined by CLIA) to CLIA, and (y) offering a compliance and regulatory framework that is applicable to a Person in such state in lieu of CLIA.
Closing Date shall have the meaning set forth in the Preamble.
Closing Date Warrant means that certain warrant issued to SWK by Borrower on the Closing Date.
CMS means the Center for Medicare and Medicaid Services of the United States of America.
Collateral has the meaning set forth in the Guarantee and Collateral Agreement.
Collateral Access Agreement means an agreement in form and substance reasonably satisfactory to Agent pursuant to which a mortgagee or lessor of real property on which Collateral (or any books and records) is stored or otherwise located, or a warehouseman, processor or other bailee of Inventory or other property owned by any Loan Party, acknowledges the Liens of Agent and waives (or, if approved by Agent, subordinates) any Liens held by such Person on such property, and, in the case of any such agreement with a mortgagee or lessor, permits Agent reasonable access to any Collateral stored or otherwise located thereon.
Collateral Documents means, collectively, the Guarantee and Collateral Agreement, any Collateral Access Agreement, any Mortgage delivered in connection with the Loan from time to time, any Account Control Agreement and each other agreement or instrument pursuant to or in connection with which any Loan Party or any other Person grants a Lien in any Collateral to Agent for the benefit of Lenders, each as amended, restated or otherwise modified from time to time.
Commitment means, as to any Lender, such Lender’s Pro Rata Term Loan Share.
Compliance Certificate means a certificate substantially in the form of Exhibit B.
Consolidated Net Income means, with respect to any Person and its Subsidiaries, for any period, the consolidated net income (or loss) of such Person and its respective Subsidiaries for such period, as determined under GAAP.
Consolidated Unencumbered Liquid Assets means any Cash Equivalent Investment owned by Borrower and its Subsidiaries on a consolidated basis which are not the subject of any Lien or other arrangement with any creditor to have its claim satisfied out of the asset (or proceeds thereof) prior to the general creditors of Borrower and such Subsidiaries other than the Lien for the benefit of Agent and Lenders.
Contingent Obligation means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) any indebtedness, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person’s obligation in respect of any Contingent Obligation shall be deemed to be the amount for which the Person obligated thereon is reasonably expected to be liable or responsible.
Contract Rate means a rate per annum equal to (x) the LIBOR Rate, as adjusted from time to time pursuant to Section 2.6.1, plus (y) fourteen percent (14.0%).
Controlled Group means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with a Loan Party, are treated as a single employer under Section 414 of the IRC or Section 4001 of ERISA.
Controlled Substances Act means the Drug Abuse Prevention and Control Act; Title 21 of the United States Code, 13 U.S.C, as amended from time to time.
Copyrights shall mean all of each Loan Party’s (or if referring to another Person, such other Person’s) now existing or hereafter acquired right, title, and interest in and to: (i) copyrights, rights and interests in copyrights, works protectable by copyright, all applications, registrations and recordings relating to the foregoing as may at any time be filed in the United States Copyright Office or in any similar office or agency of the United States, any State thereof or any political subdivision thereof, or in any other country, and all research and development relating to the foregoing; and (ii) all renewals of any of the foregoing.
DEA means the Federal Drug Enforcement Administration of the United States of America.
Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all indebtedness evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (d) all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business), other than (i) payment obligations, earn-outs and similar obligations of such Person arising in connection with an Acquisition or (ii) royalty payments or milestone payments made or to be made by such Person from time to time in connection with an Acquisition, (e) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (with the amount thereof being measured as the lesser of (x) the aggregate unpaid amount of such indebtedness and (y) the fair market value of such property), (f) all reimbursement obligations, contingent or otherwise, with respect to letters of credit (whether or not drawn), banker’s acceptances and surety bonds issued for the account of such Person, other than obligations that relate to trade accounts payable in the ordinary course of business, (g) all Hedging Obligations of such Person, (h) all Contingent Obligations of such Person in respect of Debt of others, (i) all indebtedness of any partnership of which such Person is a general partner except to the extent such Person is not liable for such Debt, and (j) all obligations of such Person under any synthetic lease transaction, where such obligations are considered borrowed money indebtedness for tax purposes but the transaction is classified as an operating lease in accordance with GAAP.
Debtor Relief Law means, collectively: (a) Title 11 of the United States Code, 11 U.S.C. § 101 et. seq., as amended from time to time, and (b) all other United States or foreign applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally, in each case as amended from time to time.
Default means any event that, if it continues uncured, will, with the lapse of time or the giving of notice or both, constitute an Event of Default.
Default Rate means a rate per annum equal to the lesser of (i) three percent (3%) over the Contract Rate, or (ii) the maximum rate of interest permitted to be charged by applicable laws or regulation governing this Agreement until paid.
Deposit Account means, individually and collectively, any bank or other depository accounts of a Loan Party.
Disposition means, as to any asset or right of any Loan Party, (a) any sale, lease, assignment or other transfer (other than to any other Loan Party), but specifically excluding any license or sublicense, (b) any loss, destruction or damage thereof or (c) any condemnation, confiscation, requisition, seizure or taking thereof, in each case excluding (i) any Disposition (except as set forth in clauses (ii) and (iii) below) where the Net Cash Proceeds of any sale, lease, assignment, transfer, condemnation, confiscation, requisition, seizure or taking do not in the aggregate exceed $250,000 in any Fiscal Year, (ii) the sale of Inventory or Product in the ordinary course of business and (iii) any issuance of Equity Interests by Borrower.
Dollar and $ mean lawful money of the United States of America.
Drug Application means a new drug application, an abbreviated drug application, or a product license application for any Product, as appropriate, as those terms are defined in the FDA Law and Regulation.
EBITDA means, for any Person and its Subsidiaries for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income for such period (and without duplication), (i) Interest Expense, (ii) income tax expense (including tax accruals), (iii) depreciation and amortization, (iv) nonrecurring cash fees, costs and expenses incurred in connection with (a) the Acquisitions of product licenses and product lines from a third party, and milestone and royalty payments to any third party, in relation to any Material Contract or any other Acquisition made prior to the date of this Agreement, (b) the negotiation and closing of this Agreement and the Loan Documents and (c) Project Jefferson, (v) non-cash expenses relating to equity-based compensation or purchase accounting and (vi) other non-recurring and/or non-cash expenses or charges approved by the Agent.
Environmental Claims means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment or any Person or property.
Environmental Laws means all present or future foreign, federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to any matter arising out of or relating to the effect of the environment on health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, release, control or cleanup of any Hazardous Substance.
Equity Interests means, with respect to any Person, its equity ownership interests, its common stock and any other capital stock or other equity ownership units of such Person authorized from time to time, and any other shares, options, interests, participations or other equivalents (however designated) of or in such Person, whether voting or nonvoting, including, without limitation, common stock, options, warrants, preferred stock, phantom stock, membership units (common or preferred), stock appreciation rights, membership unit appreciation rights, convertible notes or debentures, stock purchase rights, membership unit purchase rights and all securities convertible, exercisable or exchangeable, in whole or in part, into any one or more of the foregoing.
Equivalent Credit Line has the meaning set forth in Section 6.13.
Event of Default means any of the events described in Section 8.1.
Excluded Taxes has the meaning set forth in Section 3.1(a).
Exempt Accounts means any Deposit Accounts, securities accounts or other similar accounts (i) into which there are deposited no funds other than those intended solely to cover compensation to employees of the Loan Parties (and related contributions to be made on behalf of such employees to health and benefit plans) plus balances for outstanding checks for compensation and such contributions from prior periods; or (ii) constituting employee withholding accounts and contain only funds deducted from pay otherwise due to employees for services rendered to be applied toward the tax obligations of such Person or its employees.
Exit Fee shall have the meaning set forth in Section 2.7(b).
Fair Valuation shall mean the determination of the value of the consolidated assets of a Person on the basis of the amount which may be realized by a willing seller within a reasonable time through collection or sale of such assets at market value on a going concern basis to an interested buyer who is willing to purchase under ordinary selling conditions in an arm’s length transaction.
FATCA means Sections 1471 through 1474 of the IRC and any current or future regulations thereunder or official interpretations thereof.
FD&C Act means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq., as amended.
FDA means the Food and Drug Administration of the United States of America.
FDA Law and Regulation means the provisions of the FD&C Act and all applicable regulations promulgated by the FDA.
FDA Products means any finished products sold by Borrower or any of the other Loan Parties for itself or for a third party that are subject to applicable Health Care Laws.
Fiscal Quarter means a calendar quarter of a Fiscal Year.
Fiscal Year means the fiscal year of Borrower and its Subsidiaries, which period shall be the 12-month period ending on December 31 of each year.
Foreign Lender means any Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the IRC.
FRB means the Board of Governors of the Federal Reserve System or any successor thereto.
GAAP means generally accepted accounting principles in effect in the United States of America set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.
Governmental Authority means any nation or government, any state or other political subdivision thereof, and any agency, branch of government, department or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation or other Person owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing, whether domestic or foreign. Governmental Authority shall include any agency, branch or other governmental body charged with the responsibility and/or vested with the authority to administer and/or enforce any Health Care Laws.
Guarantee and Collateral Agreement means the Guarantee and Collateral Agreement dated as of the Closing Date by each Loan Party signatory thereto in favor of Agent and Lenders.
Hazardous Substances means hazardous waste, pollutant, contaminant, toxic substance, oil, hazardous material, chemical or other substance regulated by any Environmental Law.
Health Care Laws mean all foreign, federal and state fraud and abuse laws relating to the regulation of healthcare products, pharmaceutical products, laboratory facilities and services, healthcare providers, healthcare professionals, healthcare facilities, clinical research facilities or healthcare payors, including but not limited to (i) the federal Anti-Kickback Statute (42 U.S.C. (§1320a-7b(b)), the Stark Law (42 U.S.C. §1395nn and §1395(q)), the civil False Claims Act (31 U.S.C. §3729 et seq.), TRICARE (10 U.S.C. Section 1071 et seq.), Section 1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations promulgated pursuant to such statues; (ii) the Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104-191), as amended by the Health Information, Technology for Economic and Clinical Health Act of 2009 (collectively, “HIPPA”), and the regulations promulgated thereunder, (iii) Medicare (Title XVIII of the Social Security Act) and the regulations promulgated thereunder; (iv) Medicaid (Title XIX of the Social Security Act) and the regulations promulgated thereunder; (v) the FD&C Act and all applicable requirements, regulations and guidances issued thereunder by the FDA (including FDA Law and Regulation); (vi) the Controlled Substances Act, as amended, and all applicable requirements, regulations and guidances issued thereunder by the DEA; (vii) CLIA, as amended, and all applicable requirements, regulations, and guidance issued thereunder by the applicable Governmental Authority; (viii) quality, safety and accreditation standards and requirements of all applicable foreign and domestic federal, provincial or state laws or regulatory bodies; (ix) all applicable licensure laws and regulations; (x) all applicable professional standards regulating healthcare providers, healthcare professionals, healthcare facilities, clinical research facilities or healthcare payors; and (xi) any and all other applicable health care laws (whether foreign or domestic), regulations, manual provisions, policies and administrative guidance, including those related to the corporate practice of medicine, fee-splitting, state anti-kickback or self-referral prohibitions, each of clauses (i) through (xi) as may be amended from time to time.
Hedging Obligation means, with respect to any Person, any liability of such Person under any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices. The amount of any Person’s obligation in respect of any Hedging Obligation shall be deemed to be the incremental obligation that would be reflected in the financial statements of such Person in accordance with GAAP.
Intellectual Property shall mean all present and future: trade secrets, know-how and other proprietary information; Trademarks and Trademark Licenses (as defined in the Guarantee and Collateral Agreement), internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; Copyrights (including Copyrights for computer programs, but excluding commercially available off-the-shelf software and any Intellectual Property rights relating thereto) and Copyright Licenses (as defined in the Guarantee and Collateral Agreement) and all tangible and intangible property embodying the Copyrights, unpatented inventions (whether or not patentable); Patents and Patent Licenses (as defined in the Guarantee and Collateral Agreement); industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom, books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; customer lists and customer information, the right to sue for all past, present and future infringements of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.
Indemnified Taxes has the meaning set forth in Section 3.1(a).
Intercreditor Agreement means that certain Intercreditor Agreement, dated as of the Closing Date, by and between Agent and ACF.
Interest Expense means for any Person and its Subsidiaries for any period the consolidated interest expense of such Person and its Subsidiaries for such period (including all imputed interest on Capital Leases).
Inventory has the meaning set forth in the Guarantee and Collateral Agreement.
Investment means, with respect to any Person, (a) the purchase of any debt or equity security of any other Person, (b) the making of any loan or advance to any other Person, (c) becoming obligated with respect to a Contingent Obligation in respect of obligations of any other Person (other than travel and similar advances to employees in the ordinary course of business) or (d) the making of an Acquisition.
IP Security Agreement means the Intellectual Property Security Agreement dated on or about the Closing Date by each Loan Party signatory thereto in favor of Agent and Lenders.
IRC means the Internal Revenue Code of 1986, as amended.
IRS means the United States Internal Revenue Service.
Key Person means, individually, each of (i) Henry Dubois and (ii) Thomas Collins.
Key Person Event means, unless such actions are consented to in advance in writing by Agent, each Key Person shall no longer serve in their respective, current executive capacity with Borrower, unless each such Key Person is replaced within sixty (60) days with (in each case) a person of like qualification and experience to assume the respective responsibilities of such departing Key Person and which has been approved in writing by Agent (such approval not to be unreasonably withheld or delayed) to assume such responsibility and capacity of the applicable departing Key Person.
Legal Costs means, with respect to any Person, all reasonable, duly documented, out-of-pocket fees and charges of any counsel, accountants, auditors, appraisers, consultants and other professionals to such Person, and all court costs and similar legal expenses.
Lenders has the meaning set forth in the Preamble.
LIBOR Rate means a fluctuating rate per annum equal to the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which U.S. Dollar deposits are offered by leading banks in the London interbank deposit market), as the offered rate for loans in Dollars for a three (3) month period, rounded upwards, if necessary, to the nearest 1/100 of 1%. The rate is set by the ICE Benchmark Administration as of 11:00 a.m. (London time) as determined two (2) Business Days prior to each Payment Date, and effective on the Payment Date immediately following such determination date. If Bloomberg Professional Service (or another nationally-recognized rate reporting source acceptable to Agent) no longer reports the LIBOR Rate or Agent determines in good faith that the rate so reported no longer accurately reflects the rate available to Agent in the London Interbank Market or if such index no longer exists or if page USD-LIBOR-BBA (ICE) no longer exists or accurately reflects the rate available to Agent in the London Interbank Market, Agent may select a replacement index that approximates as near as possible such prior index. Notwithstanding the foregoing, in no event shall the “LIBOR Rate” ever be less than one percent (1%) per annum at any time.
Lien means, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.
Loan or Loans means, individually and collectively the Term Loans and any other advances made by Agent and Lenders in accordance with the Loan Documents.
Loan Documents means this Agreement, the Notes, the Post-Closing Agreement, the Intercreditor Agreement, the Collateral Documents and all documents, instruments and agreements delivered in connection with the foregoing.
Loan Party means Borrower and each of its Subsidiaries.
Margin Stock means any “margin stock” as defined in Regulation T, U or X of the FRB.
Material Adverse Effect means (a) a material adverse change in, or a material and adverse effect upon, the financial condition, operations, assets, business or properties of the Loan Parties taken as a whole, (b) a material impairment of the ability of any Loan Party to perform any of its payment Obligations under any Loan Document or (c) a material and adverse effect upon any material portion of the Collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against any Loan Party of any material Loan Document. For the avoidance of doubt, the investigation, inspection, examination, audit or view of the operations of any Loan Party in the ordinary course of business by any Governmental Authority shall not, in itself, be deemed to be a Material Adverse Effect or be deemed to be an event that could or would reasonably be expected to result in or have a Material Adverse Effect.
Material Contract has the meaning assigned in Section 5.21 hereof.
Mortgage means a mortgage, deed of trust, leasehold mortgage or similar instrument granting Agent a Lien on a real property interest of any Loan Party, each as amended, restated or otherwise modified from time to time.
Multiemployer Pension Plan means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which Borrower or any member of the Controlled Group may have any liability.
Net Cash Proceeds means, with respect to any Disposition, the aggregate cash proceeds (including cash proceeds received pursuant to policies of insurance and by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by any Loan Party pursuant to such Disposition net of (i) the reasonable direct costs relating to such Disposition (including sales commissions and legal, accounting and investment banking fees, commissions and expenses), (ii) any portion of such proceeds deposited in an escrow account pursuant to the documentation relating to such Disposition (provided that such amounts shall be treated as Net Cash Proceeds upon their release from such escrow account to and receipt by the applicable Loan Party), (iii) taxes and other governmental costs and expenses paid or reasonably estimated by a Loan Party to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iv) amounts required to be applied to the repayment of any Debt (together with any interest thereon, premium or penalty and any other amount payable with respect thereto) secured by a Lien that has priority over the Lien, if any, of Agent on the asset subject to such Disposition, (v) reserves for purchase price adjustments and retained liabilities reasonably expected to be payable by the Loan Parties in connection therewith established in accordance with GAAP (provided that upon the final determination of the amount paid in respect of such purchase price adjustments and retained liabilities, the actual amount of purchase price adjustments and retained liabilities paid is less than such reserves, the difference shall, at such time, constitute Net Cash Proceeds) and (vi)(A) with respect to any Disposition described in clauses (a), (b) or (c) of the definition thereof, all money actually applied within one-hundred eighty (180) days to replace such assets to be used in the business of Borrower and the Subsidiaries, and (B) with respect to any Disposition, all money actually applied within one-hundred eighty (180) days to replace the assets in question or to repair or reconstruct damaged property or property affected by loss, destruction, damage, condemnation, confiscation, requisition, seizure or taking.
Net Sales means the gross amount billed or invoicedby Borrower and its Subsidiaries for Services and for the sale of Products and (including products and services ancillary thereto) to independent customers, less deductions for (a) quantity, trade, cash or other discounts, allowances, credits or rebates (including customer rebates) actually allowed or taken, (b) amounts deducted, repaid or credited by reason of rejections or returns of goods and government mandated rebates, or because of chargebacks or retroactive price reductions, (c) charges for freight, handling, postage, transportation, insurance and other shipping charges and (d) taxes, tariffs, duties or other governmental charges or assessments (including any sales, value added or similar taxes other than an income tax) levied, absorbed or otherwise imposed on or with respect to the production, sale, transportation, delivery or use of pharmaceutical products. To the extent applicable, components of Net Sales shall be determined in the ordinary course of business in accordance with historical practice and using the accrual method of accounting in accordance with GAAP. For the purposes of calculating Net Sales, Lenders and Agent understand and agree that (i) Affiliates of a Borrower shall not be regarded as independent customers and (ii) Net Sales shall not include Products distributed for product development purposes, including for use in pre-clinical trials.
Note means a promissory note substantially in the form of Exhibit C.
Obligations means all liabilities, indebtedness and obligations (monetary (including post-petition interest, allowed or not) or otherwise) of any Loan Party under this Agreement, any other Loan Document or any other document or instrument executed in connection herewith or therewith which are owed to any Lender or Affiliate of a Lender, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due.
OFAC shall mean the U.S. Department of Treasury’s Office of Foreign Asset Control.
Origination Fee shall have the meaning set forth in Section 2.7(a).
Paid in Full, Pay in Full or Payment in Full means, with respect to any Obligations, the payment in full in cash of all such Obligations (other than contingent indemnification obligations, yield protection and expense reimbursement to the extent no claim giving rise thereto has been asserted in respect of contingent indemnification obligations, and to the extent no amounts therefor have been asserted, in the case of yield protection and expense reimbursement obligations).
Patents shall mean all of each Loan Party’s (or if referring to another Person, such other Person’s) now existing or hereafter acquired right, title and interest in and to: (i) all patents, patent applications, inventions, invention disclosures and improvements, and all applications, registrations and recordings relating to the foregoing as may at any time be filed in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any political subdivision thereof, or in any other country, and all research and development relating to the foregoing; and (ii) the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the foregoing.
Payment Date means the forty-fifth (45th) day following the last calendar day of each Fiscal Quarter (or the next succeeding Business Day to the extent such 45th day is not a Business Day), commencing with August 14, 2015.
PBGC means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its material functions under ERISA.
Pension Plan means a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Pension Plan), and to which Borrower or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.
Permit means collectively all licenses, leases, powers, permits, franchises, certificates, authorizations and approvals.
Permitted Liens means Liens permitted by Section 7.2.
Person means any natural person, corporation, partnership, trust, limited liability company, association, Governmental Authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.
Post-Closing Agreement means that certain Post-Closing Agreement, dated as of the Closing Date, by and between Agent and Borrower, as the same may be modified, amended or restated from time to time.
Prior Debt means the Debt listed on Schedule 4.1; provided that for the avoidance of doubt, for purposes of this Agreement, the term “Prior Debt” does not include the ACF Indebtedness or money owed pursuant to any Capital Lease existing as of the Closing Date.
Pro Rata Term Loan Share means, with respect to any Lender, the applicable percentage (as adjusted from time to time in accordance with the terms hereof) specified opposite such Lender’s name on Annex I which percentage represents the aggregate percentage of the Term Loan Commitment held by such Lender, which percentage shall be with respect to the outstanding balance of the Term Loan as of any date of determination after the Term Loan Commitment has terminated.
Product means any products manufactured, sold, developed, tested or marketed by Borrower or any of its Subsidiaries, including without limitation, those products set forth on Schedule 5.18(b) (as updated from time to time in accordance with Section 6.1.2); provided, however, that if Borrower shall fail to comply with the obligations under Section 6.1.2 to give notice to Agent and update Schedule 5.18(b) prior to manufacturing, selling, developing, testing or marketing any new Product, any such improperly undisclosed Product shall be deemed to be included in this definition; and provided, further, that products manufactured by Borrower for unaffiliated third parties shall not be deemed “Products” hereunder.
Project Jefferson shall have the meaning set forth in Section 4.10.
Registered Intellectual Property means all applications, registrations and recordings for or of Patents, Trademarks or Copyrights filed by a Loan Party with any Governmental Authority, all internet domain name registrations owned by a Loan Party, and all proprietary software owned by a Loan Party.
Required Lenders means Lenders having an aggregate Pro Rata Term Loan Share in excess of fifty percent (50%), collectively; provided that if there are only two Lenders, then Required Lenders means both such Lenders (Lenders that are Affiliates of one another being considered as one Lender for purposes of this proviso).
Required Permit means a Permit (a) issued or required under applicable law to the business of Borrower or any of its Subsidiaries or necessary in the manufacturing, importing, exporting, possession, ownership, warehousing, marketing, promoting, sale, labeling, furnishing, distribution or delivery of goods or services under any laws applicable to the business of Borrower or any of its Subsidiaries (including, without limitation, any Health Care Laws) or any Drug Application (including without limitation, at any point in time, all licenses, approvals and permits issued by the FDA, CMS, or any other applicable Governmental Authority necessary for the testing, manufacture, marketing or sale of any Product by any Borrower or its Subsidiary as such activities are being conducted by Borrower or its Subsidiary with respect to such Product at such time), and (b) issued by any Person from which Borrower or any of its Subsidiaries have received an accreditation.
Responsible Officer shall mean the president, vice president or secretary of a Person, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants or delivery of financial information, the chief financial officer, the treasurer or the controller of a Person, or any other officer having substantially the same authority and responsibility, and in all cases such person shall be listed on an incumbency certificate delivered to Agent, in form and substance acceptable to Agent in its sole discretion.
Revenue-Based Payment has the meaning set forth in Section 2.9.1(a).
Royalties means the amount of any and all royalties, license fees and any other payments or income of any type recognized as revenue in accordance with GAAP by Borrower and its Subsidiaries with respect to the sale of Products or the provision of services by independent licensees of Borrower and/or its Subsidiaries, including any such payments characterized as a share of net profits, any up-front or lump sum payments, any milestone payments, commissions, fees or any other similar amounts, less deductions for amounts deducted, repaid or credited by reason of adjustments to the sales upon which royalty amounts are based, regardless of the reason for such adjustment to such sales. For the purposes of calculating Royalties, Lenders and Agent understand and agree that Affiliates of Borrower shall not be regarded as independent licensees.
Services means services provided by Borrower or any Affiliate of Borrower to un-Affiliated Persons, including without limitation any sales, laboratory analysis, testing, consulting, marketing, commercialization and any other healthcare-related services.
Solvent means, as to any Person at any time, that (a) the fair value of the property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent, unmatured and unliquidated liabilities); (b) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to pay its debts and other liabilities (including subordinated, disputed, contingent, unmatured and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital.
Subsidiary means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which such Person owns, directly or indirectly, such number of outstanding shares or other equity interests as to have more than fifty percent (50%) of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited liability company or other entity. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to direct and indirect Subsidiaries of Borrower.
SWK has the meaning set forth in the Preamble.
Taxes has the meaning set forth in Section 3.1(a).
Term Loan Commitment means $5,000,000.
Term Loan Maturity Date means April 17, 2018, or such earlier date on which the Commitments terminate pursuant to Section 8.
Term Loan has the meaning set forth in Section 2.1.
Trademarks shall mean all of each Loan Party’s (or if referring to another Person, such other Person’s) now existing or hereafter acquired right, title, and interest in and to: (i) all of such Loan Party’s (or if referring to another Person, such other Person’s) trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, all applications, registrations and recordings relating to the foregoing as may at any time be filed in the United States Patent and Trademark Office or in any similar office or agency of the United States, or in any other country, and all research and development relating to the foregoing; (ii) all renewals thereof; and (iii) all designs and general intangibles of a like nature.
Uniform Commercial Code means the Uniform Commercial Code as in effect in the State of New York; provided that if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.
U.S. Lender means any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the IRC.
Wholly-Owned Subsidiary means, as to any Person, another Person all of the equity interests of which (except directors’ qualifying shares) are at the time directly or indirectly owned by such Person and/or another Wholly-Owned Subsidiary of such Person.
1.2 Interpretation.
(a) In the case of this Agreement and each other Loan Document, (a) the meanings of defined terms are equally applicable to the singular and plural forms of the defined terms; (b) Annex, Exhibit, Schedule and Section references are to such Loan Document unless otherwise specified; (c) the term “including” is not limiting and means “including but not limited to”; (d) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”; (e) unless otherwise expressly provided in such Loan Document, (i) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments, restatements and other modifications thereto, but only to the extent such amendments, restatements and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation; (f) this Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, all of which are cumulative and each shall be performed in accordance with its terms and (g) this Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to Agent, Borrower, Lenders and the other parties hereto and thereto and are the products of all parties; accordingly, they shall not be construed against Borrower, Agent or Lenders merely because of Borrower’s, Agent’s or Lenders’ involvement in their preparation. Except where otherwise expressly provided in the Loan Documents, in any instance where the approval, consent or the exercise of Agent’s judgment is required, the granting or denial of such approval or consent and the exercise of such judgment shall be (x) within the sole and absolute discretion of Agent and/or Lenders; and (y) deemed to have been given only by a specific writing intended for such purpose executed by Agent.
(b) For purposes of converting any amount reported or otherwise denominated in any currency other than Dollars to Dollars under or in connection with the Loan Documents, Agent shall calculate such currency conversion via the applicable exchange rate identified and normally published by Bloomberg Professional Service as the applicable exchange rate as of the close of currency trading on each trading date during the applicable period of measurement, or, if such currency conversion deals exclusively with a particular date of determination, as of the close of currency trading on such date of determination (or the following trading date to the extent no currency trading took place on such date of determination). If Bloomberg Professional Service no longer reports such currency exchange rate, Agent shall select another nationally-recognized currency exchange rate reporting service selected by Agent in good faith.
Section 2 Credit Facility.
2.1 Term Loan Commitments. On and subject to the terms and conditions of this Agreement, each Lender, severally and for itself alone, agrees to make a term loan to Borrower (each such loan, individually and collectively, a “Term Loan”) in an amount equal to such Lender’s applicable Pro Rata Term Loan Share of the Term Loan Commitment. The Commitments of Lenders to make a Term Loan shall terminate concurrently with the making of such Term Loan on the Closing Date, except as otherwise specifically set forth in Section 2.2 below. The Loan is not a revolving credit facility, and therefore, any amount thereof that is repaid or prepaid by Borrower, in whole or in part, may not be re-borrowed.
2.2 Loan Procedures. On the Closing Date, Lenders shall advance to Borrower an amount equal to $4,118,472.52 upon Borrower satisfaction of the conditions to closing described in Section 4 of this Agreement (other than Section 4.2(c) as it relates to Hooper Information Services, Inc., Hooper Kit Services, LLC, Mid-America Agency Services, Inc., and TEG Enterprises, Inc.). Upon satisfaction of the conditions to closing described in Section 4.2(c) as it relates to Hooper Information Services, Inc., Hooper Kit Services, LLC, Mid-America Agency Services, Inc., and TEG Enterprises, Inc., so long as no Default or Event of Default has occurred and is continuing, Lenders shall advance to Borrower an amount equal to $881,527.48.
2.3 Commitments Several.
The failure of any Lender to fund its Pro Rata Term Loan Share on the Closing Date shall not relieve any other Lender of its obligation hereunder, but no Lender shall be responsible for the failure of any other Lender to fund such other Lender’s Pro Rata Term Loan Share on the Closing Date.
2.4 Indebtedness Absolute; No Offset; Waiver.
The payment obligations of Borrower hereunder are absolute and unconditional, without any right of rescission, setoff, counterclaim or defense for any reason against Agent and Lenders. As of the Closing Date, the Loan has not been compromised, adjusted, extended, satisfied, rescinded, set-off or modified, and the Loan Documents are not subject to any litigation, dispute, refund, claims of rescission, setoff, netting, counterclaim or defense whatsoever, including but not limited to, claims by or against any Loan Party or any other Person. Payment of the Obligations by Borrower, shall be made only by wire transfer, in Dollars, and in immediately available funds when due and payable pursuant to the terms of this Agreement and the other Loan Documents, is not subject to compromise, adjustment, extension, satisfaction, rescission, set-off, counterclaim, defense, abatement, suspension, deferment, deductible, reduction, termination or modification, whether arising out of transactions concerning the Loan, or otherwise. Without limitation to the forgoing, to the fullest extent permitted under applicable law and notwithstanding any other term or provision contained in this Agreement or any other Loan Document, Borrower hereby waives (and shall cause each Loan Party to waive) (a) presentment, protest and demand, notice of default (except as expressly required in the Loan Documents), notice of intent to accelerate, notice of acceleration, notice of protest, notice of demand and of dishonor and non-payment of the Obligations, (b) any requirement of diligence or promptness on Agent’s part in the enforcement of its rights under the provisions of this Agreement and any other Loan Document, (c) any rights, legal or equitable, to require any marshalling of assets or to require foreclosure sales in a particular order, (d) all notices of every kind and description which may be required to be given by any statute or rule of law except as specifically required hereunder, (e) the benefit of all laws now existing or that may hereafter be enacted providing for any appraisement before sale or any portion of the Collateral, (f) all rights of homestead, exemption, redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the Obligations in the event of foreclosure of the Liens created by the Loan Documents, (g) the pleading of any statute of limitations as a defense to any demand under any Loan Document and (h) any defense to the obligation to make any payments required under the Loan Documents, including the obligation to pay taxes based on any damage to, defects in or destruction of the Collateral or any other event, including obsolescence of any of the Collateral, it being agreed and acknowledged that such payment obligations are unconditional and irrevocable. Borrower further acknowledges and agrees (i) to any substitution, subordination, exchange or release of any security or the release of any party primarily or secondarily liable for the payment of the Loan; (ii) that Agent shall not be required to first institute suit or exhaust its remedies hereon against others liable for repayment of all or any part of the Loan, whether primarily or secondarily (collectively, the “Obligors”), or to perfect or enforce its rights against any Obligor or any security for the Loan; and (iii) that its liability for payment of the Loan shall not be affected or impaired by any determination that any security interest or lien taken by Agent for the benefit of Lenders to secure the Loan is invalid or unperfected. Borrower acknowledges, warrants and represents in connection with each waiver of any right or remedy of Borrower contained in any Loan Document, that it has been fully informed with respect to, and represented by counsel of its choice in connection with, such rights and remedies, and all such waivers, and after such advice and consultation, has presently and actually intended, with full knowledge of its rights and remedies otherwise available at law or in equity, to waive or relinquish such rights and remedies to the full extent specified in each such waiver.
2.5 Loan Accounting.
2.5.1 Recordkeeping.
Agent, on behalf of each Lender, shall record in its records the date and amount of the Loan made by each Lender, each prepayment and repayment thereof. The aggregate unpaid principal amount so recorded shall be final, binding and conclusive absent manifest error. The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the Obligations of Borrower hereunder or under any Note to repay the principal amount of the Loans hereunder, together with all interest accruing thereon.
2.5.2 Notes.
At the request of any Lender, the Loan of such Lender shall be evidenced by a Note, with appropriate insertions, payable to the order of such Lender in a face principal amount equal to such Lender’s Pro Rata Term Loan Share and payable in such amounts and on such dates as are set forth herein.
2.6 Payment of Interest.
2.6.1 Interest Rates.
(a) The outstanding principal balance under the Loan shall bear interest at a per annum rate of interest equal to the Contract Rate as may be adjusted from time to time in accordance with this Section 2.6.1. Whenever, subsequent to the date hereof, the LIBOR Rate is increased or decreased (as determined on the date that is two (2) Business Days prior to each Payment Date), the Contract Rate, as set forth herein, shall be similarly changed effective as of such subsequent Payment Date, without notice or demand of any kind. The interest due on the principal balance of the Loan outstanding as of any Payment Date shall be computed for the actual number of days elapsed during the period in question on the basis of a year consisting of three hundred sixty (360) days and shall be calculated by determining the average daily principal balance outstanding for each day of such period in question. The daily rate shall be equal to 1/360th times the Contract Rate. If any statement furnished by Agent for the amount of a payment due was less than the actual amount that should have been paid because the LIBOR Rate increased and such increase was not reflected in such statement, Borrower shall make the payment specified in such statement from Agent and Borrower shall be required to pay any resulting underpayment with the next subsequent payment due hereunder.
(b) Borrower recognizes and acknowledges that any default on any payment, or portion thereof, due hereunder or to be made under any of the other Loan Documents, may result in losses and additional expenses to Agent in servicing the Loan, and in losses due to Lenders’ loss of the use of funds not timely received. Borrower further acknowledges and agrees that in the event of any such Default, Lenders would be entitled to damages for the detriment proximately caused thereby, but that it would be extremely difficult and impracticable to ascertain the extent of or compute such damages. Therefore, upon the Term Loan Maturity Date and upon the occurrence and during the existence of an Event of Default (or upon any acceleration), interest shall automatically accrue hereunder, without notice to Borrower, at the Default Rate. The Default Rate shall be calculated and due from the date that the Event of Default occurred and shall be payable upon demand.
2.6.2 Payments of Interest and Principal.
Borrower shall pay to Lenders all accrued interest on the Loan in arrears on each Payment Date, upon a prepayment of such Loan in accordance with Section 2.8 and at maturity in cash. Any partial prepayment of the Loan shall be applied in inverse order of maturity and so shall not reduce the amount of any quarterly principal amortization payment required pursuant to Section 2.9.1 (but this shall not be construed as permitting any partial prepayment other than as may be expressly permitted elsewhere in this Agreement).
2.7 Fees.
(a) Origination Fee. Borrower shall pay to SWK, for its own account, a fee (the “Origination Fee”) in the amount of $100,000, which Origination Fee shall be deemed fully earned and non-refundable on the Closing Date.
(b) Exit Fee. Upon the earlier to occur of (i) the Term Loan Maturity Date, or (ii) full repayment of the Loan and all other Obligations whether as a result of the acceleration of the Loan, or otherwise, Borrower shall pay an exit fee to Agent, for the benefit of Lenders, in an amount equal to eight percent (8.0%) multiplied by the aggregate principal amount of all Term Loans advanced hereunder.
2.8 Prepayment.
2.8.1 Mandatory Prepayment. Borrower shall prepay the Term Loans until paid in full within two (2) Business Days after the receipt by a Loan Party of any Net Cash Proceeds from any Disposition, in an amount equal to such Net Cash Proceeds.
2.8.2 Voluntary Prepayment.
(a) Subject to clause (b) below, Borrower may, on or after the first anniversary of the Closing Date and from time to time thereafter, on at least five (5) Business Day’s written notice or telephonic notice (followed on the same Business Day by written confirmation thereof) to Agent (which shall promptly advise each Lender thereof) not later than 12:00 noon Dallas time on such day, prepay the Term Loan and all related Obligations in whole or in part. Such notice to Agent shall specify the amount and proposed date of such prepayment, and the application of such amounts to be prepaid shall be applied in accordance with Section 2.9.1(b) or 2.10.2 (as applicable). Any such partial prepayment shall be in an amount equal to $500,000 or a higher integral multiple of $100,000. For avoidance of doubt, permitted payments under this Section 2.8.2 are independent of and in addition to Revenue Based Payments that are credited toward the principal of the Loans under Section 2.9.1(b).
(b) If Borrower makes any prepayment of the Term Loan under clause (a), it shall pay to Agent, for the benefit of Lenders, the following amounts (in addition to any such prepayment of the Term Loan and related Obligations) on the date of such prepayment: (i) if such prepayment is made on or after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date, four percent (4%) of the aggregate amount of the Term Loan so prepaid and (ii) if such prepayment is made on or after the second anniversary of the Closing Date, zero percent (0%) of the aggregate amount of the Term Loan so prepaid.
(c) Notwithstanding anything set forth herein or in any other Loan Documents to the contrary, any prepayment of the Loans other than via the application of Revenue-Based Payments made pursuant to Section 2.9.1 or Section 2.10.2, as applicable, shall be limited and governed by this Section 2.8.2.
2.9 Repayment of Term Loan.
2.9.1 Revenue-Based Payment.
(d) During the period commencing on the date hereof until the Obligations are Paid in Full, Borrower promises to pay to Agent, for the account of each Lender according to its Pro Rata Term Loan Share, an amount based on a percentage of the aggregate of Net Sales, Royalties and any other income or revenue recognized by Borrower and/or its Subsidiary, on a consolidated basis, in accordance with GAAP (in each case, excluding the proceeds from Dispositions) (collectively, the “Aggregate Revenue”) in each Fiscal Quarter (the “Revenue-Based Payment”), which will be applied to the Obligations as provided in clause (b) below. The Revenue-Based Payment with respect to each Fiscal Quarter shall be payable on the Payment Date next following the end of such Fiscal Quarter. Commencing with the Fiscal Quarter beginning April 1, 2015, the Revenue-Based Payment with respect to each Fiscal Quarter shall be equal to the difference between (i) the aggregate Revenue-Based Payments payable from January 1 of the Fiscal Year of which such Fiscal Quarter is part through the end of such Fiscal Quarter, calculated as the sum of:
(A) Eight and one-half percent (8.5%) of Aggregate Revenue up to and including $20,000,000 in such Fiscal Year; plus
(B) seven percent (7.0%) of Aggregate Revenue greater than $20,000,000 up to and including $30,000,000 in such Fiscal Year; plus
(C) five percent (5.0%) of Aggregate Revenue greater than $30,000,000 in such Fiscal Year; and
(ii) the amount of Revenue-Based Payments, if any, made with respect to prior Fiscal Quarters in such Fiscal Year; provided that the Revenue-Based Payment is payable solely upon Aggregate Revenue in a given Fiscal Year, and will not be calculated on a cumulative, year-over-year basis.
(e) So long as no Event of Default has occurred and is continuing and until the Obligations have been Paid in Full, each Revenue-Based Payment on each Payment Date will be applied in the following priority:
(i) FIRST, to the payment of all fees, costs, expenses and indemnities due and owing to Agent pursuant to Sections 2.7, 3.1, 3.2, 6.3(d), 10.4 and/or 10.5 under this Agreement or otherwise pursuant to the Collateral Documents, and any other Obligations owing to Agent in respect of sums advanced by Agent to preserve or protect the Collateral or to preserve or protect its security interest in the Collateral;
(ii) SECOND, to the payment of all fees, costs, expenses and indemnities due and owing to Lenders in respect of the Loans and Commitments pursuant to Sections 2.7, 3.1, 3.2, 6.3(d), 10.4 and/or 10.5 under this Agreement or otherwise pursuant to the Collateral Documents, pro rata based on each Lender’s Pro Rata Term Loan Share, until Paid in Full;
(iii) THIRD, to the payment of all accrued but unpaid interest in respect of the Loans as of such Payment Date, pro rata based on each Lender’s Pro Rata Term Loan Share, until Paid in Full;
(iv) FOURTH, as it relates to each Payment Date on or after the Payment Date occurring in February 2016, to the payment of all principal of the Loans, pro rata based on each Lender’s Pro Rata Term Loan Share, up to an aggregate amount of $600,000 on any such Payment Date;
(v) FIFTH, all remaining amounts to the Borrower.
In the event that the amounts distributed under Section 2.9.1(b) on any Payment Date are insufficient for payment of the amounts set forth in Section 2.9.1(b)(i) through (iii) for such Payment Date, Borrower shall pay an amount equal to the extent of such deficiency within five (5) Business Days of request by Agent. For the avoidance of doubt, at all times prior to the Payment Date in February 2016, Borrower shall only be required to pay Revenue-Based Payments to the extent of amounts owing under clauses (i), (ii), and (iii) above on each such Payment Date prior to February 2016.
(f) In the event that Borrower makes any adjustment to Aggregate Revenue after it has been reported to Agent, and such adjustment results in an adjustment to the Revenue-Based Payment due to the Lenders pursuant to this Section 2.9.1, Borrower shall so notify Agent and such adjustment shall be captured, reported and reconciled with the next scheduled report and payment of Revenue-Based Payment hereunder. Notwithstanding the foregoing, Agent and Borrower shall discuss and agree on the amount of any such adjustment prior to it being given effect with respect to future Revenue-Based Payments.
2.9.2 Principal.
Notwithstanding the foregoing, the outstanding principal balance of the Term Loans and all other Obligations then due and owing shall be Paid in Full on the Term Loan Maturity Date.
2.10 Payment.
2.10.1 Making of Payments.
Except as set forth in the last sentence of this Section 2.10.1, all payments of principal, interest, fees and other amounts, shall be made in immediately-available funds, via wire transfer as directed by Agent and each Lender in writing, not later than 4:00 p.m. Dallas time on the date due, and funds received after that hour shall be deemed to have been received by Agent and/or such Lenders on the following Business Day. Not later than two (2) Business Days prior to each Payment Date, Agent shall provide to Borrower and each Lender a quarterly statement with the amounts payable by Borrower to Agent and each Lender on such Payment Date in accordance with Section 2.9.1(b) hereof, which shall include, for additional clarity, Agent’s calculation of the Revenue Based Payment for the prior Fiscal Quarter, which statement shall be binding on Borrower absent manifest error, and Borrower shall be entitled to rely on such quarterly statement in relation to its payment obligations on such Payment Date. Except as otherwise specified herein or as otherwise directed by Agent in writing, all payments under this Agreement shall be made by Borrower directly to each Lender entitled thereto.
2.10.2 Application of Payments and Proceeds Following an Event of Default.
Following the occurrence and during the continuance of an Event of Default, or if the Obligations have otherwise become or have been declared to become immediately due and payable in accordance with this Agreement, then notwithstanding anything herein or in any other Loan Document to the contrary, Agent shall apply all or any part of payments in respect of the Obligations and proceeds of Collateral, in each case as received by Agent, to the payment of the Obligations in the following order:
(i) FIRST, to the payment of all fees, costs, expenses and indemnities due and owing to Agent under this Agreement or any other Loan Document, and any other Obligations owing to Agent in respect of sums advanced by Agent to preserve or protect the Collateral or to preserve or protect its security interest in the Collateral;
(ii) SECOND, to the payment of all fees, costs, expenses and indemnities due and owing to Lenders in respect of the Loans, pro rata based on each Lender’s Pro Rata Term Loan Share, until Paid in Full;
(iii) THIRD, to the payment of all accrued and unpaid interest due and owing to Lenders in respect of the Loans, pro rata based on each Lender’s Pro Rata Term Loan Share, until Paid in Full;
(iv) FOURTH, to the payment of all principal of the Loans due and owing, pro rata based on each Lender’s Pro Rata Term Loan Share, until Paid in Full;
(v) FIFTH, to the payment of all other Obligations owing to each Lender, pro rata based on each Lender’s Pro Rata Term Loan Share, until Paid in Full; and
(vi) SIXTH, to Borrower or whomsoever may be entitled to such amount by applicable law.
2.10.3 Set-off.
Borrower agrees that Agent and each Lender and its Affiliates have all rights of set-off and bankers’ lien provided by applicable law, and in addition thereto, Borrower agrees that at any time an Event of Default exists, Agent and each Lender may, to the fullest extent permitted by applicable law, apply to the payment of any Obligations of Borrower hereunder then due, any and all balances, credits, deposits, accounts or moneys of Borrower then or thereafter with Agent or such Lender. Notwithstanding the foregoing, no Lender shall exercise any rights described in the preceding sentence without the prior written consent of Agent.
2.10.4 Proration of Payments.
If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of set-off or otherwise, on account of principal of or interest on any Loan, but excluding any payment pursuant to Section 3.1, 3.2, 10.5 or 10.8) in excess of its applicable Pro Rata Term Loan Share of payments and other recoveries obtained by all Lenders on account of principal of and interest on such Term Loan then held by them, then such Lender shall purchase from the other Lenders such participations in the Loans held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery.
Section 3 Yield Protection.
3.1 Taxes.
(a) All payments of principal and interest on the Loans and all other amounts payable hereunder by or on behalf of Borrower to or for the account of Agent or any Lender shall be made free and clear of and without deduction for any present or future income, excise, stamp, documentary, property or franchise taxes and other taxes, fees, duties, levies, withholdings or other similar charges imposed by any Governmental Authority that is a taxing authority (“Taxes”), excluding (i) taxes imposed on or measured by Agent’s or any Lender’s net income (however denominated) or gross profits, and franchise taxes, imposed by any jurisdiction (or subdivision thereof) under the laws of which Agent or such Lender is organized or in which Agent or such Lender conducts business or, in the case of any Lender, in which its applicable lending office is located, (ii) any branch profit taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Agent or a Lender is located or conducts business; (iii) in the case of any Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or designates a new lending office; (iv) in the case of any U.S. Lender, any United States federal backup withholding tax; and (v) taxes imposed under FATCA (items in clauses (i) through (v), “Excluded Taxes”, and all Taxes other than Excluded Taxes, “Indemnified Taxes”). If any withholding or deduction from any payment to be made by Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then Borrower shall: (w) make such withholding or deduction; (x) pay directly to the relevant Governmental Authority the full amount required to be so withheld or deducted; (y) as promptly as practicable forward to Agent the original or a certified copy of an official receipt or other documentation reasonably satisfactory to Agent evidencing such payment to such Governmental Authority; and (z) if the withholding or deduction is with respect to Indemnified Taxes, pay to Agent for the account of Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction of Indemnified Taxes been required. To the extent that any amounts shall ever be paid by Borrower in respect of Indemnified Taxes, such amounts shall, for greater certainty, be considered to have accrued and to have been paid by Borrower as interest on the Loans.
(b) Borrower shall indemnify Agent and each Lender for any Indemnified Taxes paid by Agent or such Lender, as applicable, on or with respect to any payment by or on account of any obligation of Borrower hereunder, and any additions to Tax, penalties and interest paid by Agent or such Lender with respect to such Indemnified Taxes; provided that Borrower shall not have any obligation to indemnify any party hereunder for any Indemnified Taxes or additions to Tax, penalties or interest with respect thereto that result from or are attributable to such party’s own gross negligence or willful misconduct. Payment under this Section 3.1(b) shall be made within thirty (30) days after the date Agent or the Lender, as applicable, makes written demand therefor; provided, however, that if such written demand is made more than one-hundred eighty (180) days after the earlier of (i) the date on which Agent or the Lender, as applicable, pays such Indemnified Taxes or additions to Tax, penalties or interest with respect thereto and (ii) the date on which the applicable Governmental Authority makes written demand on Agent or such Lender, as applicable, for payment of such Indemnified Taxes or additions to Tax, penalties or interest with respect thereto, then Borrower shall not be obligated to indemnify Agent or such Lender for such Indemnified Taxes or additions to Tax, penalties or interest with respect thereto.
(c) Each Foreign Lender that is a party hereto on the Closing Date or becomes an assignee of an interest under this Agreement under Section 10.8.1 after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) shall deliver to Borrower and Agent on or prior to the date on which such Foreign Lender becomes a party to this Agreement:
(i) Two duly completed and executed originals of IRS Form W-8BEN (or IRS Form W-8BENE) claiming exemption from withholding of Taxes under an income tax treaty to which the United States of America is a party;
(ii) two duly completed and executed originals of IRS Form W-8ECI;
(iii) a certificate in form and substance reasonably satisfactory to Agent and Borrower claiming entitlement to the portfolio interest exemption under Section 881(c) of the IRC and certifying that such Foreign Lender is not (x) a “bank” within the meaning of Section 881(c)(3)(A) of the IRC, (y) a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the IRC, or (z) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the IRC, together with two duly completed and executed originals of IRS Form W-8BEN (or IRS Form W-8BENE); or
(iv) if the Foreign Lender is not the beneficial owner of amounts paid to it hereunder, two duly completed and executed originals of IRS Form W-8IMY, each accompanied by a duly completed and executed IRS Form W-8ECI, IRS Form W-8BEN (or IRS Form W-8BENE), IRS Form W-9 or a portfolio interest certificate described in clause (iii) above from each beneficial owner of such amounts claiming entitlement to exemption from withholding or backup withholding of Taxes.
Each Foreign Lender shall (to the extent legally entitled to do so) provide updated forms to Borrower and Agent on or prior to the date any prior form previously provided under this clause (c) becomes obsolete or expires, after the occurrence of an event requiring a change in the most recent form or certification previously delivered by it pursuant to this clause (c) or from time to time if requested by Borrower or Agent. Each U.S. Lender shall deliver to Agent and Borrower on or prior to the date on which such Lender becomes a party to this Agreement (and from time to time thereafter upon the request of Borrower or Agent) properly completed and executed originals of IRS Form W‑9 certifying that such Lender is exempt from backup withholding. Notwithstanding anything to the contrary contained in this Agreement, Borrower shall not be required to pay additional amounts to or indemnify any Lender pursuant to this Section 3.1 with respect to any Taxes required to be deducted or withheld (or any additions to Tax, penalties or interest with respect thereto) (A) on the basis of the information, certificates or statements of exemption provided by a Lender pursuant to this clause (c), or (B) if such Lender shall fail to comply with the certification requirements of this clause (c).
(d) Without limiting the foregoing, each Lender shall timely comply with any certification, documentation, information or other reporting necessary to establish an exemption from withholding under FATCA and shall provide any documentation reasonably requested by Borrower or Agent sufficient for Borrower and Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such applicable reporting requirements.
(e) If Agent or a Lender determines that it is entitled to or has received a refund of any Taxes for which it has been indemnified by Borrower (or another Loan Party) or with respect to which Borrower (or another Loan Party) shall have paid additional amounts pursuant to this Section 3.1, it shall promptly notify Borrower of such refund, and promptly make an appropriate claim to the relevant Governmental Authority for such refund (if it has not previously done so). If Agent or a Lender receives a refund (whether or not pursuant to such claim) of such Taxes, it shall promptly pay over such refund to Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by Loan Parties under this Section 3.1 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses of the Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that Borrower, upon the request of Agent or such Lender, agrees to repay to Agent or such Lender the amount paid over to Borrower in the event Agent or such Lender is required to repay such refund to such Governmental Authority. This Section 3.1(e) shall not be construed to require Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to Borrower or any other Person or to alter its internal practices or procedures with respect to the administration of Taxes.
(f) Each Lender shall severally indemnify Borrower for any Excluded Taxes attributable to such Lender and any additions to Tax, penalties and interest with respect to such Excluded Taxes that are paid by Borrower with respect to a payment hereunder.
3.2 Increased Cost.
(a) If, after the Closing Date, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration of any applicable law, rule or regulation by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof (provided 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 shall be considered a change in applicable law, regardless of the date enacted, adopted or issued), or compliance by any Lender with any request or directive (whether or not having the force of law) issued after the Closing Date of any such authority, central bank or comparable agency: (i) shall impose, modify or deem applicable any reserve (including any reserve imposed by the FRB), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by any Lender; or (ii) shall impose on any Lender any other condition affecting its ability to make loans based on the LIBOR Rate or its obligation to make loans based on the LIBOR Rate; and the result of anything described in clauses (i) and (ii) above is to increase the cost to (or to impose a cost on) such Lender of making or maintaining any loan based on the LIBOR Rate, or to reduce the amount of any sum received or receivable by such Lender under this Agreement or under its Note with respect thereto, then upon demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), and without duplication of other payment obligations of Borrower hereunder (including pursuant to Section 3.1), Borrower shall pay directly to such Lender such additional amount as will compensate such Lender for such increased cost or such reduction, so long as such amounts have accrued on or after the day which is one-hundred eighty (180) days prior to the date on which such Lender first made demand therefor; provided that if the event giving rise to such costs or reductions has retroactive effect, such one-hundred eighty (180) day period shall be extended to include the period of retroactive effect. For the avoidance of doubt, this clause (a) will not apply to any such increased costs or reductions resulting from Taxes, as to which Section 3.1 shall govern.
(b) If any Lender shall reasonably determine that any change after the Closing Date in, or the adoption or phase-in after the Closing Date of, any applicable law, rule or regulation regarding capital adequacy, or any change after the Closing Date in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or the compliance by any Lender or any Person controlling such Lender with any request or directive issued after the Closing Date regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s or such controlling Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person could have achieved but for such change, adoption, phase-in or compliance (taking into consideration such Lender’s or such controlling Person’s policies with respect to capital adequacy) by an amount deemed by such Lender or such controlling Person to be material, then from time to time, within five (5) Business Days of demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), Borrower shall pay to such Lender such additional amount as will compensate such Lender or such controlling Person for such reduction, so long as such amounts have accrued on or after the day which is one-hundred eighty (180) days prior to the date on which such Lender first made demand therefor; provided that if the event giving rise to such costs or reductions has retroactive effect, such one-hundred eighty (180) day period shall be extended to include the period of retroactive effect.
(c) Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering its Loans, becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender to receive payments under this Section 3.2, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts to (i) make, issue, fund or maintain its Loans through another office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the additional amounts which would otherwise be required to be paid to such Lender pursuant to this Section 3.2 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Loans through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Loans or the interests of such Lender; provided that such Lender will not be obligated to utilize such other office pursuant to this clause (c) unless Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described above. A certificate as to the amount of any such expenses payable by Borrower pursuant to this clause (c) (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Borrower (with a copy to Agent) shall be conclusive absent manifest error.
3.3 [Reserved].
.
3.4 Manner of Funding; Alternate Funding Offices.
Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it may determine at its sole discretion. Each Lender may, if it so elects, fulfill its commitment to make any Term Loan by causing any branch or Affiliate of such Lender to make such Loan; provided that in such event for the purposes of this Agreement (other than Section 3.1) such Loan shall be deemed to have been made by such Lender and the obligation of Borrower to repay such Loan shall nevertheless be to such Lender and shall be deemed held by it, to the extent of such Loan, for the account of such branch or Affiliate.
3.5 Conclusiveness of Statements; Survival.
Determinations and statements of any Lender pursuant to Section 3.1, 3.2, or 3.4 shall be conclusive absent manifest error. Lenders may use reasonable averaging and attribution methods in determining compensation under Sections 3.1 or 3.2, and the provisions of such Sections shall survive repayment of the Loans, cancellation of the Notes and termination of this Agreement.
Section 4 Conditions Precedent.
The obligation of each Lender to make its Loan hereunder is subject to the following conditions precedent, each of which shall be reasonably satisfactory in all respects to Agent.
4.1 Prior Debt.
The Prior Debt has been (or concurrently with the initial borrowing will be) paid in full and all related Liens have been (or concurrently with the initial borrowing will be) released.
4.2 Delivery of Loan Documents.
Borrower shall have delivered the following documents (and, as applicable, duly executed and dated the Closing Date or an earlier date satisfactory to Agent):
(a) Loan Documents. The Loan Documents to which any Loan Party is a party, each duly executed by a Responsible Officer of each Loan Party and the other parties thereto (except Agent and the Lenders), and (ii) each other Person (except Agent and the Lenders) shall have delivered to Agent and Lenders the Loan Documents to which it is a party, each duly executed and delivered by such Person and the other parties thereto (except Agent and the Lenders).
(b) Financing Statements. Properly completed Uniform Commercial Code financing statements and other filings and documents required by law or the Loan Documents to provide Agent, for the benefit of Lenders, perfected first priority Liens in the Collateral.
(c) Lien Searches. Copies of Uniform Commercial Code, foreign, state and county search reports listing all effective financing statements filed and other Liens of record against any Loan Party, with copies of any financing statements and applicable searches of the records of the U.S. Patent and Trademark Office performed with respect to each Loan Party, all in each jurisdiction reasonably determined by Agent.
(d) Collateral Access Agreements. Fully executed (except by Agent and the Lenders) Collateral Access Agreements reasonably requested by Agent with respect to the Collateral.
(e) Payoff; Release. Payoff letters with respect to the repayment in full of all Prior Debt, termination of all agreements relating thereto and the release of all Liens granted in connection therewith, with Uniform Commercial Code or other appropriate termination statements and documents effective to evidence the foregoing or authorization to file the same.
(f) Authorization Documents. For each Loan Party, such Person’s (i) charter (or similar formation document), certified by the appropriate Governmental Authority, (ii) good standing certificates in its jurisdiction of incorporation (or formation) and in each other jurisdiction reasonably requested by Agent, (iii) bylaws (or similar governing document), (iv) resolutions of its board of directors (or similar governing body) approving and authorizing such Person’s execution, delivery and performance of the Loan Documents to which it is party and the transactions contemplated thereby, and (v) signature and incumbency certificates of its officers executing any of the Loan Documents, all certified by its secretary or an assistant secretary (or similar officer) as being in full force and effect without modification, in form and substance reasonably satisfactory to Agent.
(g) [Reserved].
(h) Opinions of Counsel. Opinions of counsel for each Loan Party regarding certain closing matters, and Borrower hereby requests such counsel to deliver such opinions and authorizes Agent and Lenders to rely thereon.
(i) Insurance. Certificates or other evidence of insurance in effect as required by Section 6.3(c) and (d), with endorsements naming Agent as lenders’ loss payee and/or additional insured, as applicable.
(j) [Reserved].
(k) Financials. The financial statements, projections and pro forma balance sheet described in Section 5.4.
(l) Account Control Agreements. The fully-executed Account Control Agreement in relation to each of the Deposit Accounts set forth on Schedule 7.14 hereto.
(m) Consents. Evidence that all necessary consents, permits and approvals (governmental or otherwise) required for the execution, delivery and performance by each Loan Party of the Loan Documents have been duly obtained and are in full force and effect.
(n) Other Documents. Such other certificates, documents and agreements as Agent or any Lender may reasonably request.
4.3 Fees. The Lenders and Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel), required to be paid under the Loan Documents on or before the Closing Date. All such amounts will be paid with proceeds of the initial advance of the Term Loan and any previous expense deposits made with Agent on or before the Closing Date and will be reflected in the funding instructions given by Borrower to Agent on or before the Closing Date.
4.4 Warrants. Agent shall have received the fully executed Closing Date Warrant.
4.5 Representations, Warranties, Defaults. As of the Closing Date, after giving effect to the making of the Loans, (a) all representations and warranties of Borrower set forth in any Loan Document shall be true and correct in all material respects as if made on and as of the Closing Date (except for representations and warranties that specifically refer to an earlier date, which shall be true and correct in all material respects as of such earlier date) and (b) no Default or Event of Default shall exist. The acceptance of the Term Loans by Borrower shall be deemed to be a certification by Borrower that the conditions set forth in this Section 4.5 have been satisfied.
4.6 Diligence. Agent and Lenders shall have completed their due diligence review of the Loan Parties, their assets, business, obligations and the transactions contemplated herein, the results of which shall be satisfactory in form and substance to Lenders, including, without limitation, (i) an examination of (A) Borrower projected Aggregate Revenue for such periods as required by Lenders, (B) such valuations of Borrower and its assets as Lenders shall require (C) the terms and conditions of all obligations owed by Borrower deemed material by Lenders, the results of which shall be satisfactory in form and substance to Lenders and (D) background checks with respect to the managers, officers and owners of Borrower; (ii) an examination of the Collateral, the financial statements and the books, records, business, obligations, financial condition and operational state of Borrower, and Borrower shall have demonstrated to Lender’s satisfaction, in its sole discretion, that (x) no operations of Borrower are the subject of any governmental investigation, evaluation or any remedial action which could result in any expenditure or liability deemed material by Lenders, in their sole discretion, and (y) Borrower has no liabilities or obligations (whether contingent or otherwise) that are deemed material by Lenders, in their reasonable discretion.
4.7 Corporate Matters. All corporate and other proceedings, documents, instruments and other legal matters in connection with the transactions contemplated by the Loan Documents (including, but not limited to, those relating to corporate and capital structures of Borrower) shall be satisfactory to Lenders in their sole discretion.
4.8 No Felonies or Indictable Offenses. No Loan Party nor, to Borrower’s actual knowledge, any of their respective Affiliates nor any of their officers or key management personnel shall have been charged with or be under active investigation for a felony crime.
4.9 No Material Adverse Effect. There shall not be any Debt or material obligations (other than those under the ACF Indebtedness or an Equivalent Credit Line permitted pursuant to Section 7.1(b) hereof or as otherwise set forth in the Schedules to this Agreement) of any nature with respect to any Loan Party which could reasonably be likely to have a Material Adverse Effect.
4.10 Project Jefferson Closing. Agent shall have received fully-executed copies of that certain Asset Purchase Agreement, including all annexes, exhibits and schedules thereto, together with all other material documents and agreements delivered in connection therewith, in each case, dated as of the date hereof, by and among Borrower, Jefferson Acquisition, LLC, Hooper Wellness, LLC, Accountable Health Solutions, Inc. and Accountable Health, Inc., and shall be satisfied, in its sole discretion, that the closing of the transactions contemplated therein (such transactions, herein referred to as “Project Jefferson”) shall occur immediately following the making of the Term Loan under this Agreement.
Section 5 Representations and Warranties.
To induce Agent and Lenders to enter into this Agreement and to induce Lenders to make Loans hereunder, Borrower represents and warrants to Agent and Lenders, as of the Closing Date that:
5.1 Organization.
Each Loan Party is validly existing and in good standing under the laws of its state or country of jurisdiction as set forth on Schedule 5.1, and is duly qualified to do business in each jurisdiction set forth on Schedule 5.1, which are all of the jurisdictions in which failure to so qualify could reasonably be likely to have or result in a Material Adverse Effect.
5.2 Authorization; No Conflict.
Each Loan Party is duly authorized to execute and deliver each Loan Document to which it is a party, to borrow or guaranty monies hereunder, as applicable, and to perform its Obligations under each Loan Document to which it is a party. The execution, delivery and performance by Loan Parties of this Agreement and the other Loan Document to which it is a party, as applicable, and the transactions contemplated therein, do not and will not (a) require any consent or approval of any Governmental Authority (other than any consent or approval which has been obtained and is in full force and effect), (b) conflict with (i) any provision of applicable law (including any Health Care Law), (ii) the charter, by-laws or other organizational documents of such Loan Party or (iii) (except as it relates to the documents governing the Prior Debt, each of which will be terminated and/or paid on the Closing Date) any Material Contract, or any judgment, order or decree, which is binding upon any Loan Party or any of its properties or (c) require, or result in, the creation or imposition of any Lien on any asset of any Loan Party (other than Liens in favor of Agent created pursuant to the Collateral Documents).
5.3 Validity; Binding Nature.
Each of this Agreement and each other Loan Document to which any Loan Party is a party, as applicable, is the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity and concepts of reasonableness.
5.4 Financial Condition.
(c) The audited consolidated financial statements of Borrower for the Fiscal Year 2014, copies of each of which have been delivered pursuant hereto, were prepared in accordance with GAAP and present fairly in all material respects the consolidated financial condition of Borrower as at such dates and the results of its operations for the periods then ended.
(d) The consolidated financial projections (including an operating budget and a cash flow budget) of Borrower delivered to Agent and Lenders on or prior to the Closing Date (i) were prepared by Borrower in good faith and (ii) were prepared in accordance with assumptions for which Borrower believes it has a reasonable basis, and the accompanying consolidated and consolidating pro forma, unaudited, balance sheet of Borrower as at March 31, 2015, adjusted to give effect to the financings contemplated hereby as if such transactions had occurred on such date, is consistent in all material respects with such projections (it being understood that the projections are not a guaranty of future performance and that actual results during the period covered by the projections may materially differ from the projected results therein).
5.5 No Material Adverse Change.
Since December 31, 2014, there has been no material adverse change in the financial condition, operations, assets, business or properties of Borrower taken as a whole.
5.6 Litigation.
No litigation (including derivative actions), arbitration proceeding or governmental investigation or proceeding is pending or, to Borrower’s knowledge, threatened against any Loan Party that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. As of the Closing Date, other than any liability incidental to such litigation or proceedings, no Loan Party has any material Contingent Obligations not listed on Schedule 7.1 or disclosed in the financial statements specified in Section 5.4(a).
5.7 Ownership of Properties; Liens.
Borrower and each other Loan Party owns all of its material properties and assets, tangible and intangible, of any nature whatsoever that it purports to own (including Intellectual Property), free and clear of all Liens and charges and claims (including infringement claims with respect to Intellectual Property), except Permitted Liens and as set forth on Schedule 5.7.
5.8 Capitalization.
All issued and outstanding Equity Interests of Loan Parties are duly authorized, validly issued, fully paid, non-assessable, and such securities were issued in compliance in all material respects with all applicable state and federal laws concerning the issuance of securities. Schedule 5.8 sets forth the authorized Equity Interests of each Loan Party as of the Closing Date as well as all Persons owning more than ten percent (10%) of the outstanding Equity Interests in each such Loan Party.
5.9 Pension Plans.
No Loan Party has, nor to Borrower’s knowledge has any Loan Party ever had, a Pension Plan.
5.10 Investment Company Act.
No Loan Party is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company”, within the meaning of the Investment Company Act of 1940.
5.11 No Default.
No Event of Default or Default exists or would result from the incurrence by Borrower of any Debt hereunder or under any other Loan Document or as a result of any Loan Party entering into the Loan Documents to which it is a party.
5.12 Margin Stock.
No Loan Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. As of the Closing Date, no portion of the Obligations is secured directly or indirectly by Margin Stock.
5.13 Taxes.
Each Loan Party has filed, or caused to be filed, all federal, state, foreign and other tax returns and reports required by law to have been filed by it and has paid all federal, state, foreign and other taxes and governmental charges thereby shown to be owing, except any such taxes or charges (a) that are not delinquent or (b) that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books.
5.14 Solvency.
On the Closing Date, and immediately prior to and after giving effect to the borrowing hereunder and the use of the proceeds thereof, Borrower is and will be Solvent.
5.15 Environmental Matters.
The on-going operations of Loan Parties comply in all respects with all applicable Environmental Laws, except for non-compliance which could not (if enforced in accordance with applicable law) reasonably be expected to result in a Material Adverse Effect. Each Loan Party has obtained, and maintained in good standing, all licenses, permits, authorizations and registrations required under any Environmental Law and necessary for its respective ordinary course operations, and each Loan Party is in compliance with all material terms and conditions thereof, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. Neither Borrower, any of its Subsidiaries nor any of their respective properties or operations is subject to any outstanding written order from or agreement with any federal, state, or local Governmental Authority, nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Substance. There are no Hazardous Substances or other conditions or circumstances existing with respect to any property, or arising from operations prior to the Closing Date, of any Loan Party that would reasonably be expected to result in a Material Adverse Effect. No Loan Party has underground storage tanks.
5.16 Insurance.
Loan Parties and their respective properties are insured with financially sound and reputable insurance companies which are not Affiliates of any Loan Party, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where such Loan Parties operate, as applicable. A true and complete listing of such insurance as of the Closing Date, including issuers, coverages and deductibles, is set forth on Schedule 5.16.
5.17 Information.
All written information heretofore or contemporaneously herewith furnished in writing by Borrower to Agent or any Lender for purposes of or in connection with this Agreement and the transactions contemplated hereby, taken as a whole, is, and all written information hereafter furnished by or on behalf of Borrower to Agent or any Lender pursuant hereto or in connection herewith, taken as a whole, will be true and accurate in every material respect on the date as of which such information, taken as a whole, is dated or certified, and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading in any material respect in light of the circumstances under which made (it being recognized by Agent and Lenders that any projections and forecasts provided by Borrower are based on good faith estimates and assumptions believed by Borrower to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ from projected or forecasted results).
5.18 Intellectual Property; Products and Services.
(a) Schedule 5.18(a) (as updated from time to time in accordance with Section 6.1.2 hereof) accurately and completely lists all of Loan Parties’ Registered Intellectual Property. Each Loan Party owns and possesses or has a license or other right to use all Intellectual Property as is necessary for the conduct of the business of such Loan Party, without any infringement upon the intellectual property rights of others, except as otherwise set forth on Schedule 5.18(a) hereto.
(b) Schedule 5.18(b) (as updated from time to time in accordance with Section 6.1.2 hereof) accurately and completely lists all Products, Services, and all Required Permits in relation thereto, and Borrower has delivered to Agent a copy of all Required Permits as of the date hereof.
(i) With respect to any Product or Service being tested, manufactured, marketed, sold, and/or delivered by Loan Parties, the applicable Loan Party has received (or the applicable, authorized third parties have received), and such Product or Service is the subject of, all Required Permits needed in connection with the testing, manufacture, marketing, sale, and/or delivery of such Product or Service by or on behalf of Loan Parties as currently conducted. No Loan Party has received any notice from any applicable Governmental Authority, specifically including the FDA and/or CMS, that such Governmental Authority is conducting an investigation or review (other than a normal routine scheduled inspection) of any Loan Party’s (x) manufacturing facilities, laboratory facilities, the processes for such Product, or any related sales or marketing activities and/or the Required Permits related to such Product, and (y) laboratory facilities, the processes for such Services, or any related sales or marketing activities and/or the Required Permits related to such Services. There are no material deficiencies or violations of applicable laws in relation to the manufacturing, processes, sales, marketing, or delivery of such Product or Services and/or the Required Permits related to such Product or Services, no Required Permit has been revoked or withdrawn, nor, to the best of Borrower’s knowledge, has any such Governmental Authority issued any order or recommendation stating that the development, testing, manufacturing, sales and/or marketing of such Product or Services by or on behalf of Loan Parties should cease or be withdrawn from the marketplace, as applicable.
(ii) Except as set forth on Schedule 5.18(b), (A) there have been no adverse clinical test results in respect of any Product since the date on which the applicable Loan Party acquired rights to such Product, and (B) there have been no product recalls or voluntary product withdrawals from any market in respect of any Product since the date on which the applicable Loan Party acquired rights to such Product.
(iii) No Loan Party has experienced any significant failures in its manufacturing of any Product which caused any reduction in Products sold.
5.19 Restrictive Provisions.
No Loan Party is a party to any agreement or contract or subject to any restriction contained in its operative documents which would reasonably be expected to have a Material Adverse Effect.
5.20 Labor Matters.
No Loan Party is subject to any labor or collective bargaining agreement. There are no existing or threatened strikes, lockouts or other labor disputes involving any Loan Party that singly or in the aggregate would reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of each Loan Party are not in violation in any material respect of the Fair Labor Standards Act or any other applicable law, rule or regulation dealing with such matters. Each Loan Party has fully and timely made any and all social benefits and pension contributions and payments required to be made by such Loan Party according to any applicable law or agreement.
5.21 Material Contracts.
Except for the agreements set forth on Schedule 5.21 (collectively, the “Material Contracts”), as of the Closing Date there are no (i) employment agreements covering the Chief Executive Officer and Chief Financial Officer of Borrower, (ii) collective bargaining agreements or other labor agreements covering any employees of any Loan Party, (iii) agreements for managerial, consulting or similar services to which any Loan Party is a party or by which it is bound, (iv) agreements regarding any Loan Party, its assets or operations or any investment therein to which such Loan Party and any of its equity holders are a party, (v) patent licenses, trademark licenses, copyright licenses or other comparable lease or license agreements to which any Loan Party is a party, either as lessor or lessee, or as licensor or licensee (other than widely-available software subject to “shrink-wrap” or “click-through” software licenses), (vi) distribution, marketing or supply agreements to which any Loan Party is a party, (vii) [reserved], (viii) partnership agreements pursuant to which any Loan Party is a partner, limited liability company agreements pursuant to which any Loan Party is a member or manager, or joint venture agreements to which any Loan Party is a party (in each case other than the applicable Loan Parties’ organizational documents), (ix) real estate leases, or (x) any other agreements or instruments to which any Loan Party is a party, in each case the breach, nonperformance or cancellation of which, would reasonably be expected to have a Material Adverse Effect. Schedule 5.21 sets forth, with respect to each real estate lease agreement to which any Loan Party is a party as of the Closing Date, the address of the subject property. The consummation of the transactions contemplated by the Loan Documents will not give rise to a right of termination in favor of any party to any Material Contract (other than a Loan Party) which would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
5.22 Compliance with Laws; Health Care Laws.
(a) Laws Generally. Each Loan Party is in compliance with, and is conducting and has conducted its business and operations in material compliance with the requirements of all applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits except where the failure to be in compliance would not reasonably be expected to have a Material Adverse Effect.
(b) Health Care Laws. Without limiting the generality of clause (a) above:
(i) No Loan Party is in violation of any of the Health Care Laws, except for any such violation which would not reasonably be expected (either individually and taken as a whole with any other violations) to have a Material Adverse Effect.
(ii) Each Loan Party(either directly or through one or more authorized third parties) has (i) all licenses, consents, certificates, permits, authorizations, approvals, franchises, registrations, qualifications and other rights from, and has made all declarations and filings with, all applicable Governmental Authorities and self-regulatory authorities (each, an “Authorization”) necessary to engage in the business conducted by it, except for such Authorizations with respect to which the failure to obtain would not reasonably be expected to have a Material Adverse Effect, and (ii) no knowledge that any Governmental Authority is considering limiting, suspending or revoking any such Authorization, except where the limitation, suspension or revocation of such Authorization would not reasonably be expected to have a Material Adverse Effect. All such Authorizations are valid and in full force and effect and such Loan Party is in material compliance with the terms and conditions of all such Authorizations and with the rules and regulations of the regulatory authorities having jurisdiction with respect to such Authorizations, except where failure to be in such compliance or for an Authorization to be valid and in full force and effect could not reasonably be expected to have a Material Adverse Effect.
(iii) Each Loan Party has received and maintains accreditation in good standing and without limitation or impairment by all applicable accrediting organizations, to the extent required by applicable law or regulation (including any foreign law or equivalent regulation), except where the failure to be so accredited and in good standing without limitation would not reasonably be expected to have a Material Adverse Effect.
(iv) Except where any of the following would not reasonably be expected to have a Material Adverse Effect, no Loan Party has been, and has been threatened to be, (i) excluded from U.S. health care programs pursuant to 42 U.S.C. §1320(a)7 or any related regulations, (ii) “suspended” or “debarred” from selling products to the U.S. government or its agencies pursuant to the Federal Acquisition Regulation, relating to debarment and suspension applicable to federal government agencies generally (48 C.F.R. Subpart 9.4), or other applicable laws or regulations, or (iii) made a party to any other action by any Governmental Authority that may prohibit it from selling products to any governmental or other purchaser pursuant to any federal, state or local laws or regulations.
(v) No Loan Party has received any written notice from the FDA, CMS, or any other Governmental Authority with respect to, nor to Borrower’s best knowledge is there, any actual or threatened investigation, inquiry, or administrative or judicial action, hearing, or enforcement proceeding by the FDA, CMS, or any other Governmental Authority against any Loan Party regarding any violation of applicable law, except for such investigations, inquiries, or administrative or judicial actions, hearings, or enforcement proceedings which, individually and in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
5.23 Existing Indebtedness; Investments, Guarantees and Certain Contracts.
Except as set forth on Schedule 7.1, Loan Parties does not (a) have any outstanding Debt, except Debt under the Loan Documents, or (b) own or hold any equity or long-term debt investments in, or have any outstanding advances to or any outstanding guarantees for the obligations of, or any outstanding borrowings from, any other Person.
5.24 Affiliated Agreements.
Except as set forth on Schedule 7.7 and employment agreements entered into with employees, managers, officers and directors from time to time in the ordinary course of business, (i) there are no existing or proposed agreements, arrangements, understandings or transactions between any Loan Party, on the one hand, and such Loan Party’s members, managers, managing members, investors, officers, directors, stockholders, other equity holders, employees, or Affiliates or any members of their respective families, on the other hand, and (ii) to Borrower’s knowledge, none of the foregoing Persons are directly or indirectly, indebted to or have any direct or indirect ownership or voting interest in, any Affiliate of any Loan Party or any Person with which any Loan Party has a business relationship or which competes with any Loan Party (except that any such Persons may own equity interests in (but not exceeding two percent (2%) of the outstanding equity interests of) any publicly traded company that may compete with Loan Parties).
5.25 Names; Locations of Offices, Records and Collateral; Deposit Accounts.
No Loan Party has conducted business under or used any name (whether corporate, partnership or assumed) within the five (5) years prior to the Closing Date other than such names set forth on Schedule 5.25A. Each Loan Party is the sole owner(s) of all of its respective names listed on Schedule 5.25A, and any and all business done and invoices issued in such names are such Loan Party’s sales, business and invoices. Each Loan Party maintains, and since its formation has maintained, respective places of business only at the locations set forth on Schedule 5.25B, and all books and records of Loan Parties relating to or evidencing the Collateral are located in and at such locations (other than (i) Deposit Accounts, and (ii) Collateral in the possession of Agent, for the benefit of Lenders). Schedule 7.14 lists all of Loan Parties’ Deposit Accounts as of the Closing Date. All of the tangible Collateral is located exclusively within the United States.
5.26 [Reserved].
5.27 Broker’s or Finder’s Commissions.
Except as set forth in Schedule 5.27, no broker’s, finder’s or placement fee or commission will be payable to any broker or agent engaged by any Loan Party or any of its officers, directors or agents with respect to the Loan or the transactions contemplated by this Agreement except for fees payable to Agent and Lenders. Borrower agrees to indemnify Agent and each Lender and hold each harmless from and against any claim, demand or liability for broker’s, finder’s or placement fees or similar commissions, whether or not payable by Borrower, alleged to have been incurred in connection with such transactions, other than any broker’s or finder’s fees payable to Persons engaged by Agent and/or Lenders.
5.28 Anti-Terrorism; OFAC.
(a) No Loan Party nor any Person controlling or controlled by a Loan Party, nor, to Borrower’s knowledge, any Person having a beneficial interest in a Loan Party, nor any Person for whom a Loan Party is acting as agent or nominee in connection with this transaction (1) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001, Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (2) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such Person in any manner violative of Section 2 of such executive order, or (3) is a Person on the list of Specially Designated Nationals and Blocked Persons or is in violation of the limitations or prohibitions under any other OFAC regulation or executive order.
(b) No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
5.29 Security Interest.
Each Loan Party has full right and power to grant to Agent, for the benefit of itself and the other Lenders, a perfected, second priority (subject to currently existing Permitted Liens) security interest and Lien on the Collateral pursuant to this Agreement and the other Loan Documents, as applicable, subject to the following sentence. Upon the execution and delivery of this Agreement and the other Loan Documents, and upon the filing of the necessary financing statements and/or appropriate filings and/or delivery of the necessary certificates evidencing an equity interest, control and/or possession, as applicable, without any further action, Agent will have a good, valid and first priority (subject to Permitted Liens) perfected Lien and security interest in the Collateral, for the benefit of Lenders. Borrower is not party to any agreement, document or instrument that conflicts with this Section 5.29.
5.30 Survival.
Borrower hereby makes the representations and warranties contained herein with the knowledge and intention that Agent and Lenders are relying and will rely thereon. All such representations and warranties will survive the execution and delivery of this Agreement, the Closing and the making of the Loan.
Section 6 Affirmative Covenants.
Until all Obligations have been Paid in Full, Borrower agrees that, unless at any time Required Lenders shall otherwise expressly consent in writing, it will:
6.1 Information.
Furnish to Agent (which shall furnish to each Lender):
6.1.3 Annual Report.
Promptly when available and in any event within ninety (90) days after the close of each Fiscal Year (unless Borrower files a Notice of Late Filing (12b-25 Notice) in which case such report shall be due within one hundred five (105) days of the end of the relevant Fiscal Year): (a) a copy of the annual audited report of Borrower and its Subsidiaries for such Fiscal Year, including therein a consolidated balance sheet and statement of earnings and cash flows of Borrower and its Subsidiaries as at the end of and for such Fiscal Year, certified without qualification (except for qualifications relating to changes in accounting principles or practices reflecting changes in GAAP and required or approved by Borrower’s independent certified public accountants) by independent auditors of recognized standing selected by Borrower and reasonably acceptable to Agent, and (ii) a comparison with the previous Fiscal Year; and (b) upon Agent’s reasonable request, a consolidated balance sheet of Borrower and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flows for Borrower and its Subsidiaries for such Fiscal Year, together with a comparison of actual results for such Fiscal Year with the budget for such Fiscal Year, each certified by the chief financial officer or another executive officer of Borrower.
6.1.4 Interim Reports.
(a) Promptly when available and in any event within forty-five (45) days after the end of each Fiscal Quarter (unless Borrower files a Notice of Late Filing (12b-25 Notice) in which case such report shall be due within fifty (50) days of the end of the relevant Fiscal Quarter), unaudited consolidated balance sheets of Borrower and its Subsidiaries as of the end of such Fiscal Quarter, together with consolidated statements of earnings and cash flows for such Fiscal Quarter and for the period beginning with the first day of such Fiscal Year and ending on the last day of such Fiscal Quarter, together with a comparison with the corresponding period of the previous Fiscal Year and a comparison with the budget for such period of the current Fiscal Year (which may be in preliminary form), certified by the chief financial officer or other executive officer of Borrower.
(b) Together with each such quarterly report to be delivered pursuant to Section 6.1.2(a) above, Borrower shall provide to Agent (i) a written statement of Borrower’s management in a mutually agreed format setting forth a summary discussion of Borrower’s financial condition, changes in financial condition and results of operations, and (ii) updated Schedules 5.18(a) and (b) setting forth any changes to the disclosures set forth in such schedules as most recently provided to Agent or, as applicable, a written statement of Borrower’s management stating that there have been no changes to such disclosures as most recently provided to Agent.
6.1.5 [Reserved].
6.1.6 Compliance Certificate; Revenue Based Payment Reconciliation.
Contemporaneously with the furnishing of a copy of each annual audit report pursuant to Section 6.1.1 and each set of quarterly statements pursuant to Section 6.1.2, (i) a duly completed Compliance Certificate, with appropriate insertions, dated the date of delivery and corresponding to such annual report or such quarterly statements, and signed by the chief financial officer (or other executive officer) of Borrower, containing a computation showing compliance with Section 7.13 and a statement to the effect that such officer has not become aware of any Event of Default or Default that exists or, if there is any such event, describing it and the steps, if any, being taken to cure it and (ii) a report, in form acceptable to Agent, reconciling the Royalties, Net Sales and all other revenue reported by Borrower to Agent during any reporting period to the Aggregate Revenue reported by Borrower hereunder for such period and the amount of Revenue-Based Payment(s) made by Borrower in connection with such period(s).
6.1.7 Reports to Governmental Authorities and Shareholders.
Promptly upon the filing or sending thereof, copies of (a) all regular, periodic or special reports of each Loan Party filed with any Governmental Authority, (b) all registration statements (or such equivalent documents) of each Loan Party filed with any Governmental Authority and (c) all proxy statements or other communications made to the holders of Borrower’s Equity Interests generally; provided that no loan Party is obligated to deliver to Agent or any Lender any state or local tax returns or any state or local licensing requests unless reasonably requested in writing by Agent.
6.1.8 Notice of Default; Litigation.
Promptly upon becoming aware of any of the following, written notice describing the same and the steps being taken by Borrower or the applicable Loan Party affected thereby with respect thereto:
(a) the occurrence of an Event of Default;
(b) any litigation, arbitration or governmental investigation or proceeding not previously disclosed by Borrower to Lenders which has been instituted or, to the knowledge of Borrower, is threatened in writing against Borrower or any other Loan Party or to which any of the properties of any thereof is subject, which in any case would reasonably be expected to have a Material Adverse Effect;
(c) the institution of any steps by any member of the Controlled Group or any other Person to terminate any Pension Plan, or the failure of any member of the Controlled Group to make a required contribution to any Pension Plan (if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA) or to any Multiemployer Pension Plan, or the taking of any action with respect to a Pension Plan which could result in the requirement that Borrower or any other Loan Party furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan or Multiemployer Pension Plan which could result in the incurrence by any member of the Controlled Group of any material liability, fine or penalty (including any claim or demand for withdrawal liability or partial withdrawal from any Multiemployer Pension Plan), or any material increase in the contingent liability of Borrower or any other Loan Party with respect to any post-retirement welfare plan benefit, or any notice that any Multiemployer Pension Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the IRC, that any such plan is or may be terminated, or that any such plan is or may become insolvent, in each;
(d) any material adverse change in any insurance maintained by Borrower or any other Loan Party;
(e) any other event (including (i) any violation of any law, including any Environmental Law, or the assertion of any Environmental Claim or (ii) the enactment or effectiveness of any law, rule or regulation) which could reasonably be expected to have a Material Adverse Effect; or
(f) to the extent that it would reasonably be expected to result in a Material Adverse Effect (i) any suspension, revocation, cancellation or withdrawal of an Authorization required for Borrower or any other Loan Party, is threatened or there is any basis for believing that such Authorization will not be renewable upon expiration or will be suspended, revoked, cancelled or withdrawn, (ii) Borrower or any other Loan Party enters into any consent decree or order pursuant to any Health Care Law and Regulation, or becomes a party to any judgment, decree or judicial or administrative order pursuant to any Health Care Law, (iii) receipt of any written notice or other written communication from the FDA, CMS, or any other applicable Governmental Authority alleging non-compliance with CLIA or any other applicable Health Care Law, (iv) the occurrence of any violation of any Health Care Law by Borrower or any of the other Loan Parties in the development or provision of Services, and record keeping and reporting to the FDA or CMS that could reasonably be expected to require or lead to an investigation, corrective action or enforcement, regulatory or administrative action, (v) the occurrence of any civil or criminal proceedings relating to Borrower or any of the other Loan Parties or any of their respective employees, which involve a matter within or related to the FDA’s or CMS’ jurisdiction, (vi) any officer, employee or agent of Borrower or any of the other Loan Parties is convicted of any crime or has engaged in any conduct for which debarment is mandated or permitted by 21 U.S.C. § 335a, or (vii) any officer, employee or agent of Borrower or any of the other Loan Parties has been convicted of any crime or engaged in any conduct for which such Person could be excluded from participating in any federal, provincial, state or local health care programs under Section 1128 of the Social Security Act or any similar law or regulation.
6.1.9 Management Report.
Promptly upon receipt thereof, copies of all detailed financial and management reports submitted to Borrower or any other Loan Party by independent auditors in connection with each annual or interim audit made by such auditors of the books of Borrower or any other Loan Party.
6.1.10 Projections.
As soon as practicable, and in any event not later than thirty (30) days after the commencement of each Fiscal Year, financial projections on a monthly basis of revenues and EBITDA for Borrower and the Subsidiaries for such Fiscal Year prepared in a manner consistent with the projections delivered by Borrower to Agent prior to the Closing Date or otherwise in a manner reasonably satisfactory to Agent, accompanied by a certificate of a chief financial officer (or other executive officer) of Borrower on behalf of Borrower to the effect that (a) such projections were prepared by them in good faith, (b) Borrower believes that it has a reasonable basis for the assumptions contained in such projections and (c) such projections have been prepared in accordance with such assumptions.
6.1.11 Updated Schedules to Guarantee and Collateral Agreement.
Contemporaneously with the furnishing of each annual audit report pursuant to Section 6.1.1, updated versions of the Schedules to the Guarantee and Collateral Agreement showing information as of the date of such audit report (it being agreed and understood that this requirement shall be in addition to the notice and delivery requirements set forth in the Guarantee and Collateral Agreement).
6.1.12 Other Information.
(a) Promptly from time to time, such other information concerning Borrower and any other Loan Party as Agent may reasonably request.
(b) Promptly, upon receipt by Borrower, copies of (x) any notices or other communications relating to any breach, default, or event of default with respect to the ACF Indebtedness, and (y) any other modifications or amendments entered into in relation to the ACF Indebtedness shall be delivered to Agent.
6.2 Books; Records; Inspections.
Keep, and cause each other Loan Party to keep, its books and records in accordance with sound business practices sufficient to allow the preparation of financial statements in accordance with GAAP; permit, and cause each other Loan Party to permit (at any reasonable time and with reasonable notice), Agent or any representative thereof to inspect the properties and operations of Borrower or any other Loan Party; and permit, and cause each other Loan Party to permit, at any reasonable time and with reasonable notice (or at any time without notice if an Event of Default exists), Agent (accompanied by any Lender) or any representative thereof to visit any or all of its offices, to discuss its financial matters with its officers and its independent auditors (and Borrower hereby authorizes such independent auditors to discuss such financial matters with any Lender or Agent or any representative thereof), and to examine (and, at the expense of Borrower or the applicable Loan Party, photocopy extracts from) any of its books or other records; and permit, and cause each other Loan Party to permit, (at any reasonable time and with reasonable notice) Agent and its representatives to inspect the Collateral and other tangible assets of Borrower or Loan Party, to perform appraisals of the equipment of Borrower or Loan Party, and to inspect, audit, check and make copies of and extracts from the books, records, computer data, computer programs, journals, orders, receipts, correspondence and other data relating to any Collateral.
6.3 Conduct of Business; Maintenance of Property; Insurance.
(e) Borrower shall, and shall cause each other Loan Party to, (i) conduct its business in accordance with its current business practices, (ii) engage principally in the same or similar lines of business substantially as heretofore conducted, (iii) collect the Royalties in the ordinary course of business, (iv) maintain all of its Collateral used or useful in its business in good repair, working order and condition (normal wear and tear excepted and except as may be disposed of in the ordinary course of business and in accordance with the terms of the Loan Documents), (v) from time to time to make all necessary repairs, renewals and replacements to the Collateral; (vi) maintain and keep in full force and effect all material Permits and qualifications to do business and good standing in its jurisdiction of formation and each other jurisdiction in which the ownership or lease of property or the nature of its business makes such Permits or qualification necessary and in which failure to maintain such Permits or qualification could reasonably be expected to be, have or result in a Material Adverse Effect; (vii) remain in good standing and maintain operations in all jurisdictions in which it is currently located, except where the failure to remain in good standing or maintain operations would not reasonably be expected to be, have or result in a Material Adverse Effect, and (viii) maintain, comply with and keep in full force and effect all Intellectual Property and Permits necessary to conduct its business, except in each case where the failure to maintain, comply with or keep in full force and effect could not reasonably be expected to be, have or result in a Material Adverse Effect.
(f) Borrower shall keep, and cause each other Loan Party to keep, all property necessary in the business of Borrower or each other Loan Party in good working order and condition, ordinary wear and tear excepted.
(g) Borrower shall maintain, and cause each other Loan Party to maintain, with responsible insurance companies, such insurance coverage as shall be required by all laws, governmental regulations and court decrees and orders applicable to it and such other insurance, to such extent and against such hazards and liabilities, as is (i) customarily maintained by Persons operating in the same geographical region as Borrower that are (A) subject to CLIA and other applicable Health Care Laws, or (B) otherwise delivering to customers products or services similar to the Services (in each case, as determined by Agent in its reasonable discretion), and (ii) otherwise in form, substance, and amounts acceptable to Agent in its reasonable discretion; provided that in any event, such insurance shall, unless the Agent otherwise agrees, insure against all risks and liabilities of the type insured against as of the Closing Date and shall have insured amounts no less than, and deductibles no higher than, those amounts provided for as of the Closing Date. Upon request of Agent or any Lender, Borrower shall furnish to Agent or such Lender a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by Borrower and each other Loan Party. Borrower shall cause each issuer of an insurance policy to provide Agent with an endorsement (x) showing Agent as a loss payee with respect to each policy of property or casualty insurance and naming Agent as an additional insured with respect to each policy of liability insurance promptly upon request by Agent, (y) providing that the insurance carrier will endeavor to give at least thirty (30) days’ prior written notice to Borrower and Agent (or ten (10) days’ prior written notice if the Agent consents to such shorter notice) before the termination or cancellation of the policy prior to the expiration thereof and (z) reasonably acceptable in all other respects to Agent.
(h) Unless Borrower provides Agent with evidence of the continuing insurance coverage required by this Agreement, Agent (upon reasonable advance notice to Borrower) may purchase insurance at Borrower’s expense to protect Agent’s and Lenders’ interests in the Collateral. This insurance shall protect Borrower’s and each other Loan Party’s interests. The coverage that Agent purchases shall pay any claim that is made against Borrower or any other Loan Party in connection with the Collateral. Borrower may later cancel any insurance purchased by Agent, but only after providing Agent with evidence that Borrower has obtained the insurance coverage required by this Agreement. If Agent purchases insurance for the Collateral, as set forth above, Borrower will be responsible for the reasonable costs of that insurance, including interest and any other charges that may be imposed with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance, and such costs of the insurance may be added to the principal amount of the Loans owing hereunder.
6.4 Compliance with Laws; Payment of Taxes and Liabilities.
(g) Comply, and cause each other Loan Party to comply, in all material respects with all applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits, except where failure to comply would not reasonably be expected to have a Material Adverse Effect; (b) without limiting clause (a) above, ensure, and cause each other Loan Party to ensure, that no person who Controls a Loan Party is (i) listed on the Specially Designated Nationals and Blocked Person List maintained by OFAC, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation or (ii) a Person designated under Section 1(b), (c) or (d) or Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders; (c) without limiting clause (a) above, comply and cause each other Loan Party to comply, with all applicable Bank Secrecy Act and anti-money laundering laws and regulations, (d) file, or cause to be filed, all federal, state, foreign and other tax returns and reports required by law to be filed by any Loan Party, and (e) pay, and cause each other Loan Party to pay, prior to delinquency, all foreign, federal, state and other taxes and other material governmental charges against it or any of its property, as well as material claims of any kind which, if unpaid, could become a Lien (other than a Permitted Lien) on any of its property; provided that the foregoing shall not require Borrower or any other Loan Party to pay any such tax, charge or claim so long as it shall contest the validity thereof in good faith by appropriate proceedings and shall set aside on its books adequate reserves with respect thereto in accordance with GAAP. For purposes of this Section 6.4, “Control” shall mean, when used with respect to any Person, (x) the direct or indirect beneficial ownership of fifty-one percent (51%) or more of the outstanding Equity Interests of such Person or (y) the power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
6.5 [Reserved].
6.6 Employee Benefit Plans.
Except to the extent that failure to do so would not be reasonably expected to result in (a) a Material Adverse Effect or (b) liability in excess of $100,000 of any Loan Party, maintain, and cause each other Loan Party to maintain, each Pension Plan (if any) in substantial compliance with all applicable requirements of law and regulations.
6.7 Environmental Matters.
Except to the extent the failure to do so would not be reasonably expected to result in a Material Adverse Effect, if any release or disposal of Hazardous Substances shall occur or shall have occurred on any real property or any other assets of Borrower or any other Loan Party, cause, or direct the applicable Loan Party to cause, the prompt containment and removal of such Hazardous Substances and the remediation of such real property or other assets as is necessary to comply in all material respects with all Environmental Laws and to preserve the value of such real property or other assets. Without limiting the generality of the foregoing, except to the extent the failure to do so would not be reasonably expected to result in a Material Adverse Effect, Borrower shall, and shall cause each other Loan Party to, comply with each valid Federal or state judicial or administrative order requiring the performance at any real property by Borrower or any other Loan Party of activities in response to the release or threatened release of a Hazardous Substance.
6.8 Further Assurances.
Take, and cause each other Loan Party to take, such actions as are necessary or as Agent or the Required Lenders may reasonably request from time to time to ensure that the Obligations of Borrower and each other Loan Party under the Loan Documents are secured by a perfected Lien in favor of Agent (subject only to the Permitted Liens) on substantially all of the assets of Borrower and each Subsidiary of Borrower (as well as all equity interests of each Subsidiary of Borrower) and guaranteed by all of the Subsidiaries of Borrower (including, promptly upon the acquisition or creation thereof, any Subsidiary of Borrower acquired or created after the Closing Date), in each case including (a) the execution and delivery of guaranties, security agreements, pledge agreements, mortgages, deeds of trust, financing statements and other documents, and the filing or recording of any of the foregoing and (b) the delivery of certificated securities (if any) and other Collateral with respect to which perfection is obtained by possession but excluding (a) the requirement for the Loan Parties to execute and deliver leasehold mortgages, and (b) any other Excluded Collateral as defined in the Guarantee and Collateral Agreement.
6.9 Compliance with Health Care Laws.
(a) Without limiting or qualifying Section 6.4 or any other provision of this Agreement, Borrower will comply, and will cause each other Loan Party and each Subsidiary of Borrower to comply, in all material respects with all applicable Health Care Laws relating to the operation of such Person’s business, except where failure to comply would not reasonably be expected to have a Material Adverse Effect.
(b) Borrower will, and will cause each other Loan Party and each Subsidiary to:
(i) Keep in full force and effect all Authorizations required to operate such Person’s business under applicable Health Care Laws and maintain any other qualifications necessary to conduct, arrange for, administer, provide services in connection with or receive payment for all applicable Services, except to the extent such failure to keep in full force and effect or maintain would not reasonably be expected to have a Material Adverse Effect.
(ii) Promptly furnish or cause to be furnished to the Agent, with respect to matters that could reasonably be expected to have a Material Adverse Effect, (i) copies of all material reports of investigational/inspectional observations issued to and received by the Loan Parties or any of their Subsidiaries, and issued by any Governmental Authority relating to such Person’s business, (ii) copies of all material establishment investigation/inspection reports (including, but not limited to, FDA Form 483’s) issued to and received by Loan Parties or any of their Subsidiaries and issued by any Governmental Authority, and (iii) copies of all material warnings and material untitled letters as well as other material documents received by Loan Parties or any of their Subsidiaries from the FDA, CMS, DEA, or any other Governmental Authority relating to or arising out of the conduct applicable to the business of the Loan Parties or any of their Subsidiaries that asserts past or ongoing lack of compliance with any Health Care Law or any other applicable foreign, federal, state or local law or regulation of similar import and (iv) notice of any material investigation or material audit or similar proceeding by the FDA, DEA, CMS, or any other Governmental Authority.
(iii) Promptly furnish or cause to be furnished to the Agent, with respect to matters that would reasonably be expected to have a Material Adverse Effect, (in such form as may be reasonably required by Agent) copies of all non-privileged, reports, correspondence, pleadings and other communications relating to any matter that could lead to the loss, revocation or suspension (or threatened loss, revocation or suspension) of any material Authorization or of any material qualification of any Loan Party or Subsidiary; provided that any internal reports to a Person’s compliance “hot line” which are promptly investigated and determined to be without merit need not be reported.
(iv) Promptly furnish or cause to be furnished to the Agent notice of all material fines or penalties imposed by any Governmental Authority under any Health Care Law against any Loan Party or any of its Subsidiaries.
(v) Promptly furnish or cause to be furnished to the Agent notice of all material allegations by any Governmental Authority (or any agent thereof) of fraudulent activities of any Loan Party or any of its Subsidiaries in relation to the provision of clinical research or related services.
Notwithstanding anything to the contrary in any Loan Document, no Loan Party or any of its Subsidiaries shall be required to furnish to Agent or any Lender patient-related or other information, the disclosure of which to Agent or such Lender is prohibited by any applicable law.
6.10 Cure of Violations.
If there shall occur any breach of Section 6.9, Borrower shall take such commercially reasonable action as is necessary to validly challenge or otherwise appropriately respond to such fact, event or circumstance within any timeframe required by applicable Health Care Laws, and shall thereafter diligently pursue the same.
6.11 Corporate Compliance Program.
Maintain, and will cause each other Loan Party to maintain on its behalf, a corporate compliance program reasonably acceptable to Agent. Until the Obligations have been Paid in Full, Borrower will modify such corporate compliance program from time to time (and cause the other Loan Parties and Subsidiaries to modify their respective corporate compliance programs) as may be reasonable to attempt to ensure continuing compliance in all material respects with all material applicable laws, ordinances, rules, regulations and requirements (including, in all applicable material respects, any material Health Care Laws). Borrower will permit Agent and/or any of its outside consultants to review such corporate compliance programs from time to time upon reasonable notice and during normal business hours of Borrower.
6.12 Additional Warrant.
If on or before February 28, 2016, the ACF Indebtedness has not been repaid in full, the liens securing such ACF Indebtedness have not been released, and the ACF Loan Documents have not been terminated, then Borrower shall issue to Agent an additional warrant for stock in Borrower valued, at the time of such issuance, at $1,250,000, the form and the terms of which shall be substantially similar to the form and terms of the Closing Date Warrant or as otherwise agreed to by Agent and Borrower.
6.13 Deposit Accounts.
As it relates to those certain Deposit Accounts described on Schedule 7.14 hereto as being subject to the control of ACF in connection with the ACF Indebtedness (individually and collectively, the “ACF Controlled Accounts”), in the event the ACF Indebtedness is repaid or otherwise terminated and not immediately replaced with a substantially equivalent line of credit as approved by Agent in accordance with Section 7.19 hereof and that is subject to the Intercreditor Agreement (or any replacement intercreditor or subordination agreement in form and substance acceptable to Agent in its sole discretion) (an “Equivalent Credit Line”), Borrower shall, promptly upon Agent’s request, cause each such ACF Controlled Account to be subject to an Account Control Agreement reasonably acceptable to Agent.
Section 7 Negative Covenants.
Until all Obligations have been Paid in Full, Borrower agrees that, unless at any time Agent shall otherwise expressly consent in writing, in its sole discretion, it will:
7.1 Debt.
Not, and not permit any other Loan Party to, create, incur, assume or suffer to exist any Debt, except:
(i) Obligations under this Agreement and the other Loan Documents;
(j) the ACF Indebtedness or any Equivalent Credit Line; provided that the aggregate principal amount of all such ACF Indebtedness or an Equivalent Credit Line at any time outstanding shall not exceed $7,000,000;
(k) Debt secured by Liens permitted by Section 7.2(b), Section 7.2(d), Section 7.2(e) or Section 7.2(o) and extensions, renewals and re-financings thereof; provided that the aggregate amount of all such Debt permitted under Section 7.2(d) at any time outstanding shall not exceed $100,000;
(l) Debt with respect to any Hedging Obligations incurred for bona fide hedging purposes and not for speculation;
(m) Debt (i) arising from customary agreements for indemnification related to sales of goods, licensing of intellectual property or adjustment of purchase price or similar obligations in any case incurred in connection with the acquisition or disposition of any business, assets or Subsidiary of Borrower otherwise permitted hereunder, (ii) representing deferred compensation to employees of any Loan Party incurred in the ordinary course of business, and (iii) representing customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business;
(n) Debt with respect to cash management obligations and other Debt in respect of automatic clearing house arrangements, netting services, overdraft protection and similar arrangements, in each case incurred in the ordinary course of business;
(o) Debt incurred in connection with surety bonds, performance bonds or letters of credit for worker’s compensation, unemployment compensation and other types of social security and otherwise in the ordinary course of business or referred to in Section 7.2(e);
(p) Debt described on Schedule 7.1 as of the Closing Date, and any extension or renewal thereof so long (i) as the principal amount thereof is not increased, (ii) as the terms and conditions of such extension, renewal or refinancing are substantially identical to the original Debt, (iii) as to such extension or renewal, no collateral or other form of security is granted by Borrower in connection therewith; and
(q) unsecured Debt (which for further clarity shall exclude accounts payable and other current liabilities incurred by Loan Parties in the ordinary course of business), in addition to the Debt listed above, in an aggregate outstanding amount not at any time exceeding $100,000.
7.2 Liens.
Not, and not permit any other Loan Party to, create or permit to exist any Lien on any of its real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter acquired), except:
(r) Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves in accordance with GAAP and with respect to which no execution or other enforcement has occurred;
(s) Liens arising in the ordinary course of business (including without limitation (i) Liens of carriers, warehousemen, mechanics, landlords and materialmen and other similar Liens imposed by law and (ii) Liens incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA that secure an amount in excess of $250,000) or in connection with surety bonds, bids, tenders, performance bonds, trade contracts not for borrowed money, licenses, statutory obligations and similar obligations) for sums not overdue or being diligently contested in good faith by appropriate proceedings and not involving any deposits or advances or borrowed money or the deferred purchase price of property or services and, in each case, for which it maintains adequate reserves in accordance with GAAP and with respect to which no execution or other enforcement of which is effectively stayed;
(t) Liens described on Schedule 7.2 as of the Closing Date (other than Liens being released at the closing under this Agreement) and the replacement, extension or renewal of any Lien permitted by this clause (c) upon or in the same property subject thereto arising out of the extension, renewal or replacement of the Debt secured thereby (without increase in the amount thereof);
(u) subject to the limitation set forth in Section 7.1(c), (i) Liens arising in connection with Capital Leases (and attaching only to the property being leased), (ii) Liens on any property securing debt incurred for the purpose of financing all or any part of the cost of acquiring or improving such property; provided that any such Lien attaches to such property within ninety (90) days of the acquisition or improvement thereof and attaches solely to the property so acquired or improved, and (iii) the replacement, extension or renewal of a Lien permitted by one of the foregoing clauses (i) or (ii) in the same property subject thereto arising out of the extension, renewal or replacement of the Debt secured thereby (without increase in the amount thereof);
(v) Liens relating to litigation bonds and attachments, appeal bonds, judgments and other similar Liens arising in connection with any judgment or award that is not an Event of Default hereunder;
(w) easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of Borrower or any Subsidiary;
(x) Liens arising under the Loan Documents;
(y) the replacement, extension or renewal of any Lien permitted by clause (c) above upon or in the same property subject thereto arising out of the extension, renewal or replacement of the Debt secured thereby (without increase in the amount thereof);
(z) any interest or title of a licensor, sublicensor, lessor or sublessor under any license, lease, sublicense or sublease agreement to the extent limited to the item licensed or leased;
(aa) (i) Liens of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection and (ii) customary set off rights of deposit banks with respect to deposit accounts maintained at such deposit banks or which are contained in standard agreements for the opening of an account with a bank;
(bb) Liens arising from precautionary filings of financing statements under the Uniform Commercial Code or similar legislation of any applicable jurisdiction in respect of operating leases permitted hereunder and entered into by a Loan Party in the ordinary course of business;
(cc) Liens attaching to cash earnest money deposits in connection with any letter of intent or purchase agreement permitted hereunder or indemnification other post-closing escrows or holdbacks;
(dd) Liens incurred with respect to Hedging Obligations incurred for bona fide hedging purposes and not for speculation;
(ee) Liens to secure obligations of a Loan Party to another Loan Party; and
(ff) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods in the ordinary course of business.
7.3 Dividends; Redemption of Equity Interests.
Not (a) declare, pay or make any dividend or distribution on any Equity Interests or other securities or ownership interests, (b) apply any of its funds, property or assets to the acquisition, redemption or other retirement of any Equity Interests or other securities or interests or of any options to purchase or acquire any of the foregoing, (c) otherwise make any payments, dividends or distributions to any member, manager, managing member, stockholder, director or other equity owner in such Person’s capacity as such other than in compliance with Section 7.7 hereof, or (d) make any payment of any management, service or related or similar fee to any Affiliate or holder of Equity Interests of Borrower other than in compliance with Section 7.7 hereof.
7.4 Mergers; Consolidations; Asset Sales.
(a) Not be a party to any amalgamation or any other form of merger or consolidation, unless agreed to by Agent in its sole discretion, nor permit any other Loan Party to be a party to any amalgamation or any other form of merger or consolidation, unless agreed to by Agent in its reasonable discretion.
(b) Not, and not permit any other Loan Party to, sell, transfer, dispose of, convey or lease any of its assets or Equity Interests, or sell or assign with or without recourse any receivables, except for (i) sales of inventory in the ordinary course of business for at least fair market value, (ii) transfers, destruction or other disposition of inventory or obsolete or worn-out assets in the ordinary course of business and any other sales and dispositions of assets (excluding sales of inventory described in clause (i) above) for at least fair market value (as determined by the Board of Directors of Borrower) so long as the net book value of all assets sold or otherwise disposed of in any Fiscal Year does not exceed $250,000 with respect to sales and dispositions made pursuant to this clause (ii), (iii) sales and dispositions to Loan Parties, (iv) leases, licenses, subleases and sublicenses entered into in the ordinary course of business, (v) sales and exchanges of Cash Equivalent Investments to the extent otherwise permitted hereunder, (vi) Liens expressly permitted under Section 7.2 and transactions expressly permitted by Section 7.4(a) or 7.10, (vii) sales or issuances of Equity Interests by Borrower, (viii) issuances of equity interests by any Loan Party to any other Loan Party, (ix) dispositions in the ordinary course of business consisting of the abandonment of intellectual property rights which, in the reasonable good faith determination of Borrower, are not material to the conduct of the business of the Loan Parties, (x) a cancellation of any intercompany Debt among the Loan Parties, (xi) a disposition which constitutes an insured event or pursuant to a condemnation, “eminent domain” or similar proceeding, (xii) sales and dispositions among Subsidiaries of Borrower, and (xiii) exchanges of existing equipment for new equipment that is substantially similar to the equipment being exchanged and that has a value equal to or greater than the equipment being exchanged.
(c) Notwithstanding any provision in this Agreement or any other Loan Documents to the contrary, the prior consent of Agent shall not be required in connection with the licensing or sublicensing of Intellectual Property pursuant to collaborations, licenses or other strategic transactions with third parties executed (i) in the normal course of a Loan Party’s business, (ii) on an arms-length basis and (iii) prior to an Event of Default.
7.5 Modification of Organizational Documents.
Not permit the charter, by-laws or other organizational documents of Borrower or any other Loan Party to be amended or modified in any way which could reasonably be expected to materially and adversely affect the interests of Agent or any Lender. An amendment to Borrower’s certificate of incorporation to increase Borrower’s authorized capital stock shall not be deemed to adversely affect the interests of Agent or any Lender.
7.6 Use of Proceeds.
Use the proceeds of the Loans, solely for paying off the Prior Debt, for payment of the consideration for the transactions described in Section 4.10 above, working capital, for fees and expenses related to the negotiation, execution, delivery and closing of this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby and for other general business purposes of Borrower and its Subsidiaries, and not use any proceeds of any Loan or permit any proceeds of any Loan to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of “purchasing or carrying” any Margin Stock.
7.7 Transactions with Affiliates.
Not, and not permit any other Loan Party to, enter into, or cause, suffer or permit to exist any transaction, arrangement or contract with any of its other Affiliates, which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates, other than (i) reasonable compensation and indemnities to, benefits for, reimbursement of expenses of, and employment arrangements with, officers, employees and directors in the ordinary course of business, (ii) transactions among Loan Parties and (iii) transactions pursuant to agreements in existence on the Closing Date and set forth on Schedule 7.7.
7.8 Inconsistent Agreements.
Not, and not permit any other Loan Party to, enter into any agreement containing any provision which would (a) be violated or breached by any borrowing by Borrower hereunder or by the performance by Borrower or any other Loan Party of any of its Obligations hereunder or under any other Loan Document, (b) prohibit Borrower or any other Loan Party from granting to Agent and Lenders a Lien on any of its assets or (c) create or permit to exist or become effective any encumbrance or restriction on the ability of any other Loan Party to (i) pay dividends or make other distributions to Borrower or any other Subsidiary, or pay any Debt owed to Borrower or any other Subsidiary, (ii) make loans or advances to Borrower or any other Loan Party or (iii) transfer any of its assets or properties to Borrower or any other Loan Party, other than, in the cases of clauses (b) and (c), (A) restrictions or conditions imposed by any agreement relating to purchase money Debt, Capital Leases and other secured Debt or to leases and licenses permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Debt or the property leased or licensed, (B) customary provisions in leases and other contracts restricting the assignment thereof, (C) restrictions and conditions imposed by law, (D) those arising under any Loan Document or the ACF Loan Documents or any loan documents governing an Equivalent Credit Line as approved by Agent and (E) customary provisions in contracts for the disposition of any assets; provided that the restrictions in any such contract shall apply only to the assets or Subsidiary that is to be disposed of and such disposition is permitted hereunder.
7.9 Business Activities.
Not, and not permit any other Loan Party to, engage in any line of business other than the businesses engaged in on the Closing Date and businesses reasonably related thereto. Not, and not permit any other Loan Party to, issue any Equity Interest other than (a) Equity Interests of Borrower that do not require any cash dividends or other cash distributions to be made prior to the Obligations being Paid in Full, (b) any issuance by a Subsidiary to Borrower or another Subsidiary in accordance with Section 7.4 or Section 7.10, or (c) any issuance of directors’ qualifying shares as required by applicable law.
7.10 Investments.
Not, and not permit any other Loan Party to, make or permit to exist any Investment in any other Person, except the following:
(a) The creation of any Wholly-Owned Subsidiary and contributions by Borrower to the capital of any Wholly-Owned Subsidiary of Borrower, so long as the recipient of any such contribution has guaranteed the Obligations and such guaranty is secured by a pledge of all of its equity interests and substantially all of its real and personal property, in each case in accordance with Section 6.8;
(b) Cash Equivalent Investments;
(c) bank deposits in the ordinary course of business;
(d) Investments listed on Schedule 7.10 as of the Closing Date, together with any roll-over or reinvestment of such Investment(s);
(e) any purchase or other acquisition by Borrower or any Wholly-Owned Subsidiary of Borrower of the assets or equity interests of any Subsidiary of Borrower;
(f) transactions among Loan Parties permitted by Section 7.4;
(g) Hedging Obligations permitted under Section 7.1(c);
(h) (i) advances given to employees and directors in the ordinary course of business and (ii) other emergency or special circumstance advances given to employees not to exceed in the case of clauses (i) and (ii) taken together $100,000 in the aggregate outstanding at any time;
(i) lease, utility and other similar deposits made in the ordinary course of business and trade credit extended in the ordinary course of business;
(j) Investments consisting of the non-cash portion of the consideration received in respect of Dispositions permitted hereunder;
(k) Investments resulting from or otherwise constituting Acquisitions not to exceed $100,000 in the aggregate during any calendar year of the term of this Loan; provided that for purposes of calculating such aggregate annual Investments during any calendar year, such calculation shall exclude (i) any payments made by or on behalf of Borrower based solely on actual sales, revenues or other income-related metrics, (ii) any payments to be made in relation to such Investment after the Term Loan Maturity Date and (iii) any payments made during such calendar year in relation to Products in existence as of the Closing Date and/or Investments made by Borrower prior to the Closing Date;
(l) Investments permitted by Borrower or any Loan Party as a result of the receipt of insurance and/or condemnation proceeds in accordance with the Loan Documents; and
(m) Investments (i) received as a result of the bankruptcy or reorganization of any Person or taken in settlement of or other resolution of claims or disputes or (ii) in securities of customers and suppliers received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and bona fide disputes with, customers and suppliers, and, in each case, extensions, modifications and renewals thereof.
7.11 Restriction of Amendments to Certain Documents.
Not, nor permit any Loan Party to, (i) enter into any material amendment, increase or modification (which shall include, without limitation, any extension of the current maturity date in effect as of the Closing Date) of the ACF Indebtedness or any Equivalent Credit Line, nor enter into any Equivalent Credit Line, in each case without the prior written consent of Agent, which consent will be conditioned upon, among such other items as Agent may reasonably request (except that the terms of the ACF Indebtedness or any such Equivalent Credit Line may be amended, modified or otherwise waived to the extent permitted under the Intercreditor Agreement or such replacement intercreditor agreement delivered pursuant to Section 7.19) or (ii) amend or otherwise modify in any material manner, or waive any rights under, any provisions of any of the Material Contracts (or any replacements thereof) set forth on Schedule 7.11 hereto (as such schedule may be updated by Agent from time to time to include any material contracts, licenses, agreements or similar arrangements to those described on such Schedule as of the Closing Date that are entered into by a Loan Party from time to time after the Closing Date) other than amendments, waivers, consents and other similar modifications entered into in the ordinary course of business.
7.12 Fiscal Year.
Not change its Fiscal Year.
7.13 Financial Covenants
7.13.1 Consolidated Unencumbered Liquid Assets.
Not permit the Consolidated Unencumbered Liquid Assets on the last day of any Fiscal Quarter to be less than $750,000.
7.13.2 Minimum Aggregate Revenue.
Not permit the Aggregate Revenue for the twelve (12) consecutive month period ending on the last Business Day of any Fiscal Quarter (designated by “Q” in the table below) to be less than the applicable amount set forth in the table below for such period.
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Minimum LTM Aggregate Revenue (in millions of Dollars) as of the end of: |
Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 and each Fiscal Quarter thereafter |
$27.5 | $34 | $38 | $40 | $42 | $44.5 |
7.13.3 Minimum EBITDA.
Not permit the EBITDA of Borrower and its Subsidiaries for the twelve (12) consecutive month period ending on the last Business Day of any Fiscal Quarter (designated by “Q” in the table below) to be less than the applicable amount set forth in the table below for such period.
|
| | | | |
Minimum LTM EBITDA as of the end of: |
Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | Q1 2017 and each Fiscal Quarter thereafter |
$1 | $1,000,000 | $2,000,000 | $4,000,000 | $5,000,000 |
7.14 Deposit Accounts.
Not, and not permit any other Loan Party, to maintain or establish any new Deposit Accounts other than (a) the Deposit Accounts set forth on Schedule 7.14 (which Deposit Accounts constitute all of the Deposit Accounts, securities accounts or other similar accounts maintained by the Loan Parties as of the Closing Date) without prior written notice to Agent and unless Agent, Borrower or such other applicable Loan Party and the bank or other financial institution at which the account is to be opened after the Closing Date enter into a tri-party deposit account control agreement, in form and substance reasonably satisfactory to Agent, regarding such Deposit Account pursuant to which each of such bank and the applicable Loan Party acknowledges the security interest and control of Agent in such account and agrees to limit its set-off rights with respect thereto, and (b) Exempt Accounts.
7.15 Subsidiaries.
Not, and not permit any other Loan Party to, in each case without the prior written consent of Agent in its sole discretion, establish or acquire any Subsidiary unless (i) no Default or Event of Default has occurred and is continuing or would result therefrom, (ii) such Subsidiary shall have assumed and joined each Loan Document as a Loan Party pursuant to documentation acceptable to Agent in its sole discretion and (iii) all other Loan Parties shall have reaffirmed all Obligations as well as all representations and warranties under the Loan Documents (except to the extent such representations and warranties specifically relate to a prior date only).
7.16 Regulatory Matters.
To the extent that any of the following would reasonably be expected to result in a Material Adverse Effect, not, and not permit any other Loan Party to, (i) make, and use commercially reasonable efforts to not permit any officer, employee or agent of any Loan Party to make, any untrue statement of material fact or fraudulent statement to any Governmental Authority; fail to disclose a material fact required to be disclosed to any Governmental Authority; or commit a material act, make a material statement, or fail to make a statement in breach of CLIA or that could otherwise reasonably be expected to provide the basis for CMS or any Governmental Authority to undertake action against such Loan Party, (ii) conduct any clinical studies in the United States or sponsor the conduct of any clinical research in the United States, (iii) introduce into commercial distribution any FDA Products which are, upon their shipment, adulterated or misbranded in violation of 21 U.S.C. § 331, (iv) make, and use commercially reasonable efforts to not permit any officer, employee or agent of any Loan Party to make, any untrue statement of material fact or fraudulent statement to the FDA or any other Governmental Authority; fail to disclose a material fact required to be disclosed to the FDA or any other Governmental Authority; or commit a material act, make a material statement, or fail to make a statement in breach of the FD&C Act or that could otherwise reasonably be expected to provide the basis for the FDA or any other Governmental Authority to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” as set forth in 56 Fed. Reg. 46191 (September 10, 1991), or (v) otherwise incur any material liability (whether actual or contingent) for failure to comply with Health Care Laws.
7.17 Name; Permits; Dissolution; Insurance Policies; Disposition of Collateral; Taxes; Trade Names.
Borrower shall not, nor shall it permit any Loan Party to, (a) change its jurisdiction of organization or change its corporate name without thirty (30) calendar days prior written notice to Agent, (b) amend, alter, suspend, terminate or make provisional in any material way, any Permit, the suspension, amendment, alteration or termination of which could reasonably be expected to be, have or result in a Material Adverse Effect without the prior written consent of Agent, which consent shall not be unreasonably withheld, (c) wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking or that would result in any of the foregoing, (d) amend, modify, restate or change any insurance policy in a manner adverse to Agent or Lenders, (e) engage, directly or indirectly, in any business other than as set forth herein, (f) change its federal tax employer identification number or similar tax identification number under the relevant jurisdiction or establish new or additional trade names without providing not less than thirty (30) days advance written notice to Agent, or (g) revoke, alter or amend any Tax Information Authorization (on IRS Form 8821 or otherwise) or other similar authorization mandated by the relevant Government Authority given to any Lender.
7.18 Truth of Statements.
Borrower shall not knowingly furnish to Agent or any Lender any certificate or other document that contains any untrue statement of a material fact or that omits to state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished.
Section 8 Events of Default; Remedies.
8.1 Events of Default.
Each of the following shall constitute an Event of Default under this Agreement:
8.1.2 Non-Payment of Credit.
(a) Default in the payment when due of the principal of any Loan; (b) default in the payment of any Revenue-Based Payment on or before the applicable Payment Date or, if there is any good faith dispute as to the amount of any Revenue-Based Payment required to be paid with respect to any Fiscal Quarter, failure by Borrower, upon final resolution of such dispute (by agreement or non-appealable judgment of a New York Court) to pay within fifteen (15) days after such final resolution the amount of any such Revenue-Based Payment determined to be payable by it and not previously paid or (c) without duplication of clause (b) hereof, default, and continuance thereof for five (5) Business Days, in the payment when due of any interest, fee, or other amount payable by any Loan Party hereunder or under any other Loan Document.
8.1.3 Default Under Other Debt.
Any default shall occur under the terms applicable to any Debt of any Loan Party (excluding the Obligations) in an aggregate principal amount (for all such Debt so affected and including undrawn committed or available amounts and amounts owing to all creditors under any combined or syndicated credit arrangement) exceeding $250,000 and such default shall (a) consist of the failure to pay such Debt when due (after giving effect to applicable grace periods), whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable (or require Borrower or any other Loan Party to purchase or redeem such Debt or post cash collateral in respect thereof) prior to its expressed maturity.
8.1.4 Bankruptcy; Insolvency.
(d) Any Loan Party shall (i) be unable to pay its debts generally as they become due, (ii) have filed against it a petition under any insolvency statute that is not removed within sixty (60) days, (iii) make a general assignment for the benefit of its creditors, (iv) commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property or shall otherwise be dissolved or liquidated, or (v) make an application or commence a proceeding seeking reorganization or liquidation or similar relief under any Debtor Relief Law or any other applicable law; or
(e) (i) a court of competent jurisdiction shall (A) enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of any Loan Party or the whole or any substantial part of any of Loan Party’s properties, which shall continue unstayed and in effect for a period of sixty (60) calendar days, (B) approve a petition or claim filed against any Loan Party seeking reorganization, liquidation, appointment of a receiver, interim receiver, liquidator, conservator, trustee or special manager or similar relief under the any Debtor Relief Law or any other applicable law, which is not dismissed within sixty (60) calendar days or, (C) under the provisions of any Debtor Relief Law or other applicable law or statute, assume custody or control of any Loan Party or of the whole or any substantial part of any of Loan Party’s properties, which is not irrevocably relinquished within sixty (60) calendar days, or (ii) there is commenced against any Loan Party any proceeding or petition seeking reorganization, liquidation or similar relief under any Debtor Relief Law or any other applicable law or statute, which (A) is not unconditionally dismissed within sixty (60) calendar days after the date of commencement, or (B) is with respect to which Borrower takes any action to indicate its approval of or consent.
8.1.5 Non-Compliance with Loan Documents.
(a) Failure by Borrower to comply with or to perform any covenant set forth in Section 7; or (b) failure by any Loan Party to comply with or to perform any other provision of this Agreement or any other Loan Document applicable to it (and not constituting an Event of Default under any other provision of this Section 8) and continuance of such failure described in this clause (b) for thirty (30) days after the earlier of any Loan Party becoming aware of such failure or notice thereof to Borrower from Agent or any Lender;.
8.1.6 Representations; Warranties.
Any representation or warranty made by any Loan Party herein or any other Loan Document is false or misleading in any material respect when made, or any schedule, certificate, financial statement, report, notice or other writing furnished by any Loan Party to Agent or any Lender in connection herewith is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified.
8.1.7 Pension Plans.
(a) Institution of any steps by any Person to terminate a Pension Plan if as a result of such termination any Loan Party or any member of the Controlled Group could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of $250,000; (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA securing obligations in excess of $250,000; or (c) there shall occur any withdrawal or partial withdrawal from a Multiemployer Pension Plan and the withdrawal liability (without un-accrued interest) to Multiemployer Pension Plans as a result of such withdrawal (including any outstanding withdrawal liability that Borrower or any other Loan Party or any member of the Controlled Group have incurred on the date of such withdrawal) exceeds $250,000..
8.1.8 Judgments.
Final judgments which exceed an aggregate of $250,000 (in excess of insurance as to which the insurance company has not disclaimed liability (provided that customary “reservation of rights” letters shall not be deemed to be disclaimers of liability)) shall be rendered against any Loan Party and shall not have been paid, discharged or vacated or had execution thereof stayed pending appeal within sixty (60) calendar days after entry or filing of such judgments.
8.1.9 Invalidity of Loan Documents or Liens.
(n) Any Loan Document shall cease to be in full force and effect otherwise in accordance with its express terms that results in a material diminution of the rights and remedies afforded to Agent and/or Lenders or any other secured parties thereunder; (b) any Loan Party (or any Person by, through or on behalf of any Loan Party) shall contest in any manner the validity, binding nature or enforceability of any Loan Document; or (c) any Lien created pursuant to any Loan Document ceases to constitute a valid first priority perfected Lien (subject to Permitted Liens) on any material portion of the Collateral in accordance with the terms thereof, or Agent ceases to have a valid perfected first priority security interest (subject to Permitted Liens) in any material portion of the Collateral pledged to Agent, for the benefit of Lenders, pursuant to the Collateral Documents.
8.1.10 Invalidity of Subordination Provisions.
Any subordination provision in any document or instrument governing the ACF Indebtedness or any Equivalent Credit Line or any subordination provision in the Intercreditor Agreement or replacement Intercreditor Agreement entered into in connection with an Equivalent Credit Line, or any subordination provision in any guaranty by any Loan Party of the ACF Indebtedness or any Equivalent Credit Line, shall cease to be in full force and effect other than as a result of any payment of the ACF Indebtedness or any Equivalent Credit Line permitted hereunder, or any Loan Party shall contest in any manner the validity, binding nature or enforceability of any such provision.
8.1.11 Change of Control.
A Change of Control not otherwise permitted pursuant to Section 7.4 above shall occur.
8.1.12 Certificate Withdrawals, Adverse Test or Audit Results, and Other Matters.
The institution of any proceeding by FDA, CMS, or similar Governmental Authority to order the withdrawal of any Product or Product category or Service or Service category from the market or to enjoin Borrower or its Subsidiary from manufacturing, marketing, selling, distributing, or otherwise providing any Product or Product category or Service or Service category that could reasonably be expected to have a Material Adverse Effect, (b) the institution of any action or proceeding by DEA, FDA, CMS, or any other Governmental Authority to revoke, suspend, reject, withdraw, limit, or restrict any Required Permit held by Borrower or its Subsidiary or any of their representatives, which, in each case, could reasonably be expected to have a Material Adverse Effect, (c) the commencement of any enforcement action against Borrower or its Subsidiary by DEA, FDA, CMS, or any other Governmental Authority that could reasonably be expected to have a Material Adverse Effect, (d) the recall of any Products or Service from the market, the voluntary withdrawal of any Products or Service from the market, or actions to discontinue the sale of any Products or Service that could reasonably be expected to have a Material Adverse Effect, (e) the occurrence of adverse test, audit, or inspection results in connection with a Product or Service which could reasonably be expected to have a Material Adverse Effect, or (f) the occurrence of any event described in clauses (a) through (e) above that would otherwise cause Borrower to be excluded from participating in any federal, provincial, state or local health care programs under Section 1128 of the Social Security Act or any similar law or regulation.
8.2 Remedies.
(h) If any Event of Default described in Section 8.1.3 shall occur, the Loans and all other Obligations shall become immediately due and payable without presentment, demand, protest or notice of any kind; and, if any other Event of Default shall occur and be continuing, Agent may, and upon the written request of Required Lenders shall, declare all or any part of the Loans and other Obligations to be due and payable, whereupon the Loans and other Obligations shall become immediately due and payable (in whole or in part, as applicable), all without presentment, demand, protest or notice of any kind. Agent shall use commercially reasonable efforts to promptly advise Borrower of any such declaration, but failure to do so shall not impair the effect of such declaration.
(i) In addition to the acceleration provisions set forth in Section 8.2(a) above, upon the occurrence and continuation of an Event of Default, Agent may (or shall at the request of Required Lenders) exercise any and all rights, options and remedies provided for in any Loan Document, under the Uniform Commercial Code, any other applicable foreign or domestic laws or otherwise at law or in equity, including, without limitation, the right to (i) apply any property of Borrower held by Agent to reduce the Obligations, (ii) foreclose the Liens created under the Loan Documents, (iii) realize upon, take possession of and/or sell any Collateral or securities pledged, with or without judicial process, (iv) exercise all rights and powers with respect to the Collateral as Borrower might exercise, (v) collect and send notices regarding the Collateral, with or without judicial process, (vi) by its own means or with judicial assistance, enter any premises at which Collateral and/or pledged securities are located, or render any of the foregoing unusable or dispose of the Collateral and/or pledged securities on such premises without any liability for rent, storage, utilities, or other sums, and Borrower shall not resist or interfere with such action, (vii) at Borrower’s expense, require that all or any part of the Collateral be assembled and made available to Agent, for the benefit of Lenders, or Required Lenders at any place reasonably designated by Required Lenders in their sole discretion and/or relinquish or abandon any Collateral or securities pledged or any Lien thereon.
(j) The enumeration of any rights and remedies in any Loan Document is not intended to be exhaustive, and all rights and remedies of Agent and Lenders described in any Loan Document are cumulative and are not alternative to or exclusive of any other rights or remedies which Agent and Lenders otherwise may have. The partial or complete exercise of any right or remedy shall not preclude any other further exercise of such or any other right or remedy.
(k) Notwithstanding any provision of any Loan Document, Agent, in its sole discretion shall have the right, but not any obligation, at any time that Loan Parties fail to do so, subject to any applicable cure periods permitted by or otherwise set forth in the Loan Documents, and from time to time, without prior notice, to: (i) discharge (at Borrower’s expense) taxes or Liens affecting any of the Collateral that have not been paid in violation of any Loan Document or that jeopardize Agent’s Lien priority in the Collateral; or (ii) make any other payment (at Borrower’s expense) for the administration, servicing, maintenance, preservation or protection of the Collateral (each such advance or payment set forth in clauses (i) and (ii) herein, a “Protective Advance”). Agent shall be reimbursed for all Protective Advances pursuant to Section 2.9.1(b) and/or Section 2.10, as applicable, and any Protective Advances shall bear interest at the Default Rate from the date such Protective Advance is paid by Agent until it is repaid. No Protective Advance by Agent shall be construed as a waiver by Agent, or any Lender of any Default, Event of Default or any of the rights or remedies of Agent or any Lender under any Loan Document.
Section 9 Agent.
9.1 Appointment; Authorization.
Each Lender hereby irrevocably appoints, designates and authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, Agent shall not have any duty or responsibility except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Agent.
9.2 Delegation of Duties.
Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.
9.3 Limited Liability.
None of Agent or any of its directors, officers, employees or agents shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except to the extent resulting from its own gross negligence or willful misconduct as determined by a court of competent jurisdiction), or (b) be responsible in any manner to any Lender for any recital, statement, representation or warranty made by any Loan Party or Affiliate of any Loan Party, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document (or the creation, perfection or priority of any Lien or security interest therein), or for any failure of any Loan Party or any other party to any Loan Document to perform its Obligations hereunder or thereunder. Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or Affiliate of any Loan Party.
9.4 Reliance.
Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of Required Lenders (or all Lenders if expressly required hereunder) as it deems appropriate and, if it so requests, confirmation from Lenders of their obligation to indemnify Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of Required Lenders (or all Lenders if expressly required hereunder) and such request and any action taken or failure to act pursuant thereto shall be binding upon each Lender.
9.5 Notice of Default.
Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Event of Default or Default and stating that such notice is a “notice of default”. Agent will notify Lenders of its receipt of any such notice or any such default in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders. Agent shall take such action with respect to such Event of Default or Default as may be requested by Required Lenders in accordance with Section 8.2; provided that unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default or Default as it shall deem advisable or in the best interest of Lenders.
9.6 Credit Decision.
Each Lender acknowledges that Agent has not made any representation or warranty to it, and that no act by Agent hereafter taken, including any review of the affairs of Borrower and the other Loan Parties, shall be deemed to constitute any representation or warranty by Agent to any Lender. Each Lender represents to Agent that it has, independently and without reliance upon Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties. Except for notices, reports and other documents expressly herein required to be furnished to Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of any Loan Party which may come into the possession of Agent.
9.7 Indemnification.
Whether or not the transactions contemplated hereby are consummated, each Lender shall indemnify upon demand Agent and its directors, officers, employees and agents (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so), based on such Lender’s Pro Rata Term Loan Share, from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including Legal Costs, except to the extent any thereof result from the applicable Person’s own gross negligence or willful misconduct, as determined by a court of competent jurisdiction. Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for its ratable share of any costs or out‑of‑pocket expenses (including Legal Costs) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrower. The undertaking in this Section 9.7 shall survive repayment of the Loans, cancellation of the Notes, any foreclosure under, or modification, release or discharge of, any or all of the Collateral Documents, termination of this Agreement and the resignation or replacement of Agent.
9.8 Agent Individually.
SWK and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with any Loan Party and any Affiliate of any Loan Party as though SWK were not Agent hereunder and without notice to or consent of any Lender. Each Lender acknowledges that, pursuant to such activities, SWK or its Affiliates may receive information regarding Loan Parties or their Affiliates (including information that may be subject to confidentiality obligations in favor of any such Loan Party or such Affiliate) and acknowledge that Agent shall be under no obligation to provide such information to them. With respect to their Loans (if any), SWK and its Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though SWK were not Agent, and the terms “Lender” and “Lenders” include SWK and its Affiliates, to the extent applicable, in their individual capacities.
9.9 Successor Agent.
Agent may resign as Agent at any time upon 30 days’ prior notice to Lenders and Borrower (unless during the existence of an Event of Default such notice is waived by Required Lenders). If Agent resigns under this Agreement, Required Lenders shall, with (so long as no Event of Default exists) the consent of Borrower (which shall not be unreasonably withheld or delayed), appoint from among Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, on behalf of, and after consulting with Lenders and (so long as no Event of Default exists) Borrower, a successor agent from among Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “Agent” shall mean such successor agent, and the retiring Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent becomes effective, the provisions of this Section 9 and Sections 10.4 and 10.5 shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as Required Lenders appoint a successor agent as provided for above; provided that in the case of any collateral security held by Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent shall continue so to hold such collateral security until such time as a successor Agent is appointed and the provisions of this Section 9 and Sections 10.4 and 10.5 shall continue to inure to its benefit so long as retiring Agent shall continue to so hold such collateral security. Upon the acceptance of a successor’s appointment as Agent hereunder, the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents in respect of the Collateral.
9.10 Collateral and Guarantee Matters.
Lenders irrevocably authorize Agent, at its option and in its discretion, (a) to release any Lien granted to or held by Agent under any Collateral Document (i) when all Obligations have been Paid in Full; (ii) constituting property sold or to be sold or disposed of as part of or in connection with any sale or other disposition permitted hereunder (including by consent, waiver or amendment and it being agreed and understood that Agent may conclusively rely without further inquiry on a certificate of an officer of Borrower as to the sale or other disposition of property being made in compliance with this Agreement); or (iii) subject to Section 10.1, if approved, authorized or ratified in writing by Required Lenders; (b) notwithstanding Section 10.1(a)(ii) hereof to release any party from its guaranty under the Guarantee and Collateral Agreement (i) when all Obligations have been Paid in Full or (ii) if such party was sold or is to be sold or disposed of as part of or in connection with any disposition permitted hereunder (including by consent, waiver or amendment and it being agreed and understood that Agent may conclusively rely without further inquiry on a certificate of an officer of Borrower as to the sale or other disposition being made in compliance with this Agreement); or (c) to subordinate its interest in any Collateral to any holder of a Lien on such Collateral which is permitted by Section 7.2(d) (it being understood that Agent may conclusively rely on a certificate from Borrower in determining whether the Debt secured by any such Lien is permitted by Section 7.1(b)). Upon request by Agent at any time, Lenders will confirm in writing Agent’s authority to release, or subordinate its interest in, particular types or items of Collateral pursuant to this Section 9.10.
Agent shall release any Lien granted to or held by Agent under any Collateral Document (i) when all Obligations have been Paid in Full, (ii) in respect of property sold or to be sold or disposed of as part of or in connection with any sale or other disposition permitted hereunder (it being agreed and understood that Agent may conclusively rely without further inquiry on a certificate of an officer of Borrower as to the sale or other disposition of property being made in compliance with this Agreement) or (iii) subject to Section 10.1, if directed to do so in writing by Required Lenders.
In furtherance of the foregoing, Agent agrees to execute and deliver to Borrower, at Borrower’s expense, such termination and release documentation as Borrower may reasonably request to evidence a Lien release that occurs pursuant to terms of this Section 9.10.
9.11 ACF Indebtedness and Equivalent Credit Line Intercreditor Agreement.
Each Lender hereby irrevocably appoints, designates and authorizes Agent to enter into the Intercreditor Agreement, on its behalf and to take such action on its behalf under the provisions of any such agreement (subject to the last sentence of this Section 9.11). Each Lender further agrees to be bound by the terms and conditions of the Intercreditor Agreement. Each Lender hereby authorizes Agent to issue blockages notices in connection with the ACF Indebtedness and/or any Equivalent Credit Lien and the Intercreditor Agreement, or any replacement intercreditor agreement, at the direction of Required Lenders (it being agreed and understood that Agent will not act unilaterally to issue such blockage notices).
9.12 Actions in Concert.
For the sake of clarity, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement, the Notes or any other Loan Document (including exercising any rights of setoff) without first obtaining the prior written consent of Agent and Required Lenders, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement, the Notes and the other Loan Documents shall be taken in concert and at the direction or with the consent of Agent or Required Lenders.
Section 10 Miscellaneous.
10.1 Waiver; Amendments.
(f) Except as otherwise expressly provided in this Agreement, no amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or any of the other Loan Documents (including without limitation, the Intercreditor Agreement) shall in any event be effective unless the same shall be in writing and signed by Borrower (with respect to Loan Documents to which Borrower is a party), by Lenders having aggregate Pro Rata Term Loan Shares of not less than the aggregate Pro Rata Term Loan Shares expressly designated herein with respect thereto or, in the absence of such express designation herein, by Required Lenders, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that:
(i) no such amendment, modification, waiver or consent shall, unless in writing and signed by all of the Lenders directly affected thereby, in addition to Required Lenders and Borrower, do any of the following: (A) increase any of the Commitments (provided that only the Lenders participating in any such increase of the Commitments shall be considered directly affected by such increase), (B) extend the date scheduled for payment of any principal of (except as otherwise expressly set forth below in clause (C)) or interest on the Loans or any fees or other amounts payable hereunder or under the other Loan Documents, or (C) reduce the principal amount of any Loan, the amount or rate of interest thereon (provided that Required Lenders may rescind an imposition of default interest pursuant to Section 2.6.1), or any fees or other amounts payable hereunder or under the other Loan Documents; and
(ii) no such amendment, modification, waiver or consent shall, unless in writing and signed by all of the Lenders in addition to Borrower (with respect to Loan Documents to which Borrower is a party), and each such other Loan Party, do any of the following: (A) release any material guaranty under the Guarantee and Collateral Agreement or release all or substantially all of the Collateral granted under the Collateral Documents, except as otherwise specifically provided in this Agreement or the other Loan Documents, (B) change the definition of Required Lenders, (C) change any provision of this Section 10.1, (D) amend the provisions of Section 2.10.2, or (E) reduce the aggregate Pro Rata Term Loan Shares required to effect any amendment, modification, waiver or consent under the Loan Documents.
(g) No amendment, modification, waiver or consent shall, unless in writing and signed by Agent, in addition to Borrower and Required Lenders (or all Lenders directly affected thereby or all of the Lenders, as the case may be, in accordance with the provisions above), affect the rights, privileges, duties or obligations of Agent (including without limitation under the provisions of Section 9), under this Agreement or any other Loan Document.
(h) No delay on the part of Agent or any Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy.
10.2 Notices.
All notices hereunder shall be in writing (including via electronic mail) and shall be sent to the applicable party at its address shown on Annex II or at such other address as such party may, by written notice received by the other parties, have designated as its address for such purpose. Notices sent by electronic mail transmission shall be deemed to have been given when sent if sent during regular business hours on a Business Day, otherwise, such deemed delivery will be effective as of the next Business Day; notices sent by mail shall be deemed to have been given five (5) Business Days after the date when sent by registered or certified mail, first class postage prepaid; and notices sent by hand delivery or overnight courier service shall be deemed to have been given when received. Borrower, Agent and Lenders each hereby acknowledge that, from time to time, Agent, Lenders and Borrower may deliver information and notices using electronic mail.
10.3 Computations.
Unless otherwise specifically provided herein, any accounting term used in this Agreement (including in Section 7.13 or any related definition) shall have the meaning customarily given such term in accordance with GAAP, and all financial computations (including pursuant to Section 7.13 and the related definitions, and with respect to the character or amount of any asset or liability or item of income or expense, or any consolidation or other accounting computation) hereunder shall be computed in accordance with GAAP consistently applied; provided that if Borrower notifies Agent that Borrower wishes to amend any covenant in Section 7.13 (or any related definition) to eliminate or to take into account the effect of any change in GAAP on the operation of such covenant (or if Agent notifies Borrower that Required Lenders wish to amend Section 7.13 (or any related definition) for such purpose), then Borrower’s compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant (or related definition) is amended in a manner satisfactory to Borrower and Required Lenders. The explicit qualification of terms or computations by the phrase “in accordance with GAAP” shall in no way be construed to limit the foregoing. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (Codification of Accounting Standards 825-10) to value any Debt or other liabilities of any Loan Party or any Subsidiary at “fair value”, as defined therein.
10.4 Costs; Expenses.
Borrower agrees to pay on demand the reasonable, out-of-pocket costs and expenses of (a) Agent (including Legal Costs) in connection with (i) the preparation, execution, syndication and delivery (including perfection and protection of Collateral) of this Agreement, the other Loan Documents and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith, (ii) the administration of the Loans and the Loan Documents, and (iii) any proposed or actual amendment, supplement or waiver to any Loan Document, and (b) Agent and Lenders (including Legal Costs) in connection with the collection of the Obligations and enforcement of this Agreement, the other Loan Documents or any such other documents. In addition, Borrower agrees to pay and to save Agent and Lenders harmless from all liability for, any fees of Borrower’s auditors in connection with any reasonable exercise by Agent and Lenders of their rights pursuant to and to the extent provided in Section 6.2. All Obligations provided for in this Section 10.4 shall survive repayment of the Loans, cancellation of the Notes, and termination of this Agreement.
10.5 Indemnification by Borrower.
In consideration of the execution and delivery of this Agreement by Agent and Lenders and the agreement to extend the Commitments provided hereunder, Borrower hereby agrees to indemnify, exonerate and hold Agent, each Lender and each of the officers, directors, employees, Affiliates and agents of Agent and each Lender (each a “Lender Party”) free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including Legal Costs (collectively, the “Indemnified Liabilities”), incurred by Lender Parties or any of them as a result of, or arising out of, or relating to any act or omission of any Loan Party or any of their respective officers, directors or agents, including, without limitation, (a) any tender offer, merger, purchase of equity interests, purchase of assets or other similar transaction financed or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any of the Loans, (b) the use, handling, release, emission, discharge, transportation, storage, treatment or disposal of any Hazardous Substance at any property owned or leased by Borrower or any other Loan Party, (c) any violation of any Environmental Laws with respect to conditions at any property owned or leased by any Loan Party or the operations conducted thereon, (d) the investigation, cleanup or remediation of offsite locations at which any Loan Party or their respective predecessors are alleged to have directly or indirectly disposed of Hazardous Substances or (e) the execution, delivery, performance or enforcement of this Agreement or any other Loan Document by any Lender Party, except in any event to the extent any such Indemnified Liabilities result from the applicable Lender Party’s own gross negligence or willful misconduct or breach of contract, each as finally determined by a court of competent jurisdiction in a non-appealable judgment. If and to the extent that the foregoing undertaking may be unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. All Obligations provided for in this Section 10.5 shall survive repayment of the Loans, cancellation of the Notes, any foreclosure under, or any modification, release or discharge of, any or all of the Collateral Documents and termination of this Agreement.
10.6 Marshaling; Payments Set Aside.
Neither Agent nor any Lender shall be under any obligation to marshal any assets in favor of Borrower or any other Person or against or in payment of any or all of the Obligations. To the extent that Borrower makes a payment or payments to Agent or any Lender, or Agent or any Lender enforces its Liens or exercises its rights of set-off, and such payment or payments or the proceeds of such enforcement or set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Agent or any Lender in its discretion) to be repaid to a trustee, receiver or any other party in connection with any bankruptcy, insolvency or similar proceeding, or otherwise, then (a) to the fullest extent permitted by applicable law, to the extent of such recovery, the obligation hereunder or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred and (b) each Lender severally agrees to pay to Agent upon demand its ratable share of the total amount so recovered from or repaid by Agent to the extent paid to such Lender.
10.7 Nonliability of Lenders.
The relationship between Borrower on the one hand and Lenders and Agent on the other hand shall be solely that of borrower and lender. Neither Agent nor any Lender shall have any fiduciary responsibility to Borrower. Neither Agent nor any Lender undertakes any responsibility to Borrower to review or inform Borrower of any matter in connection with any phase of Borrower’s business or operations. To the fullest extent permitted under applicable law, execution of this Agreement by Borrower constitutes a full, complete and irrevocable release of any and all claims which Borrower may have at law or in equity in respect of all prior discussions and understandings, oral or written, relating to the subject matter of this Agreement and the other Loan Documents. Neither Agent nor any Lender shall have any liability with respect to, and Borrower hereby, to the fullest extent permitted under applicable law, waives, releases and agrees not to sue for, any special, indirect, punitive or consequential damages or liabilities.
10.8 Assignments.
10.8.1 Assignments.
(c) Any Lender may at any time assign to one or more Persons (other than a Loan Party and their respective Affiliates) (any such Person, an “Assignee”) all or any portion of such Lender’s Loans and Commitments, with the prior written consent of Agent, and, so long as no Default or Event of Default has occurred and is continuing, Borrower (which consents shall not be unreasonably withheld or delayed and shall not be required (i) from Borrower for an assignment by a Lender to another Lender or an Affiliate of a Lender or an Approved Fund of a Lender, (ii) from Borrower or Agent for an assignment by SWK Funding LLC, as a Lender, to any Person for which SWK Advisors LLC acts as an investment advisor (or any similar type of representation or agency) pursuant to a written agreement or (iii) from Agent for an assignment by a Lender to an Affiliate of a Lender or an Approved Fund of a Lender). Except as Agent may otherwise agree, any such assignment (other than any assignment by a Lender to a Lender or an Affiliate or Approved Fund of a Lender) shall be in a minimum aggregate amount equal to $1,000,000 or, if less, the Commitment or the principal amount of the Loan being assigned. Borrower and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned to an Assignee until Agent shall have received and accepted an effective Assignment Agreement executed, delivered and fully completed by the applicable parties thereto and a processing fee of $3,500 to be paid by the Lender to whom such interest is assigned; provided that no such fee shall be payable in connection with any assignment by a Lender to a Lender or an Affiliate or Approved Fund of a Lender.
(d) From and after the date on which the conditions described above have been met, (i) such Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned to such Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (ii) the assigning Lender, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, shall be released from its rights (other than its indemnification rights) and obligations hereunder. Upon the request of the Assignee (and, as applicable, the assigning Lender) pursuant to an effective Assignment Agreement, Borrower shall execute and deliver to Agent for delivery to the Assignee (and, as applicable, the assigning Lender) a Note in the principal amount of the Assignee’s Pro Rata Term Loan Share (and, as applicable, a Note in the principal amount of the Pro Rata Term Loan Share retained by the assigning Lender). Each such Note shall be dated the effective date of such assignment. Upon receipt by the assigning Lender of such Note, the assigning Lender shall return to Borrower any prior Note held by it.
(e) Agent, acting solely for this purpose as an agent of Borrower, shall maintain at one of its offices in the United States a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of each Lender, and the Commitments of, and principal amount of the Loans owing to, such Lender pursuant to the terms hereof. The entries in such register shall be, in the absence of manifest error, conclusive, and Borrower, Agent and Lenders may treat each Person whose name is recorded therein pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Such register shall be available for inspection by Borrower and any Lender, at any reasonable time upon reasonable prior notice to Agent.
(f) Notwithstanding the foregoing provisions of this Section 10.8.1 or any other provision of this Agreement, any Lender may at any time assign all or any portion of its Loans and its Note (i) as collateral security to a Federal Reserve Bank or, as applicable, to such Lender’s trustee for the benefit of its investors (but no such assignment shall release any Lender from any of its obligations hereunder) and (ii) to (w) an Affiliate of such Lender which is at least fifty percent (50%) owned (directly or indirectly) by such Lender or by its direct or indirect parent company, (x) its direct or indirect parent company, (y) to one or more other Lenders or (z) to an Approved Fund.
10.9 Participations.
Any Lender may at any time sell to one or more Persons participating interests in its Loans, Commitments or other interests hereunder (any such Person, a “Participant”). In the event of a sale by a Lender of a participating interest to a Participant, (a) such Lender’s obligations hereunder shall remain unchanged for all purposes, (b) Borrower and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations hereunder and (c) all amounts payable by Borrower shall be determined as if such Lender had not sold such participation and shall be paid directly to such Lender. No Participant shall have any direct or indirect voting rights hereunder except with respect to any event described in Section 10.1 expressly requiring the unanimous vote of all Lenders or, as applicable, all affected Lenders. Each Lender agrees to incorporate the requirements of the preceding sentence into each participation agreement which such Lender enters into with any Participant. Borrower agrees, to the fullest extent permitted by applicable law, that if amounts outstanding under this Agreement are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that such right of set-off shall be subject to the obligation of each Participant to share with Lenders, and Lenders agree to share with each Participant, as provided in Section 2.10.4. Borrower also agrees that each Participant shall be entitled to the benefits of Section 3 as if it were a Lender (provided that a Participant shall not be entitled to such benefits unless such Participant agrees, for the benefit of Borrower, to comply with the documentation requirements of Section 3.1(c) as if it were a Lender and complies with such requirements, and provided, further, that no Participant shall receive any greater compensation pursuant to Section 3 than would have been paid to the participating Lender if no participation had been sold). Any such Lender transferring a participation shall, as an agent for Borrower, maintain in the United States a register to record the names, address, and interest, principal and other amounts owing to, each Participant. The entries in such register shall be, in the absence of manifest error, conclusive, and Borrower, Agent and the Lenders may treat each Person whose name is recorded therein pursuant to the terms hereof as a Participant hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Such Participation register shall be available for inspection by the Agent or Borrower, at any reasonable time upon reasonable prior written notice from Agent or Borrower.
10.10 Confidentiality.
Borrower, Agent and each Lender agree to use commercially reasonable efforts (equivalent to the efforts Borrower, Agent or such Lender applies to maintain the confidentiality of its own confidential information) to maintain as confidential all information (including, without limitation, any information provided by Borrower pursuant to Sections 6.1, 6.2 and 6.9) provided to them by any other party hereto and/or any other Loan Party, as applicable, except that Agent and each Lender may disclose such information (a) to Persons employed or engaged by Agent or such Lender or any of their Affiliates (including collateral managers of Lenders) in evaluating, approving, structuring or administering the Loans and the Commitments (provided that such Persons have been informed of the covenant contained in this Section 10.10); (b) to any assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 10.10 (and any such assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any federal or state regulatory authority or examiner, or any insurance industry association, or as reasonably believed by Agent or such Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required by law; (e) in connection with the exercise of any right or remedy under the Loan Documents or in connection with any litigation to which Agent or such Lender is a party; (f) to any nationally recognized rating agency or investor of a Lender that requires access to information about a Lender’s investment portfolio in connection with ratings issued or investment decisions with respect to such Lender; (g) that ceases to be confidential through no fault of Agent or any Lender; (h) to a Person that is an investor or prospective investor in a Securitization that agrees that its access to information regarding Borrower and the Loans and Commitments is solely for purposes of evaluating an investment in such Securitization and who agrees to treat such information as confidential; or (i) to a Person that is a trustee, collateral manager, servicer, noteholder or secured party in a Securitization in connection with the administration, servicing and reporting on the assets serving as collateral for such Securitization. For purposes of this Section, “Securitization” means a public or private offering by a Lender or any of its Affiliates or their respective successors and assigns, of securities which represent an interest in, or which are collateralized, in whole or in part, by the Loans or the Commitments. In each case described in clauses (c), (d) and (e) (as such disclosure in clause (e) pertains to litigation only), where the Agent or Lender, as applicable, is compelled to disclose a Loan Party’s confidential information, promptly after such disclosure the Agent or such Lender, as applicable, shall notify Borrower of such disclosure provided, however, that neither the Agent nor any Lender shall be required to notify Borrower of any such disclosure (i) to any federal or state banking regulatory authority conducting an examination of the Agent or such Lender, or (ii) to the extent that it is legally prohibited from so notifying Borrower. Notwithstanding the foregoing, Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.
10.11 Captions.
Captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.
10.12 Nature of Remedies.
All Obligations of Borrower and rights of Agent and Lenders expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by applicable law. No failure to exercise and no delay in exercising, on the part of Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
10.13 Counterparts.
This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Receipt by facsimile machine or in “.pdf” format through electronic mail of any executed signature page to this Agreement or any other Loan Document shall constitute effective delivery of such signature page. This Agreement and the other Loan Documents to the extent signed and delivered by means of a facsimile machine or other electronic transmission (including “.pdf”), shall be treated in all manner and respects and for all purposes as an original agreement or amendment and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto or to any such other Loan Document shall raise the use of a facsimile machine or other electronic transmission to deliver a signature or the fact that any signature or agreement or amendment was transmitted or communicated through the use of a facsimile machine or other electronic transmission as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.
10.14 Severability.
The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.
10.15 Entire Agreement.
This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the parties hereto and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof.
10.16 Successors; Assigns.
This Agreement shall be binding upon Borrower, Lenders and Agent and their respective successors and assigns, and shall inure to the benefit of Borrower, Lenders and Agent and the successors and assigns of Lenders and Agent. No other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. Borrower may not assign or transfer any of its rights or Obligations under this Agreement without the prior written consent of Agent and each Lender.
10.17 Governing Law.
THIS AGREEMENT AND EACH NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS CODE).
10.18 Forum Selection; Consent to Jurisdiction.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, U.S. FIRST CLASS POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
10.19 Waiver of Jury Trial.
EACH OF BORROWER, AGENT AND EACH LENDER, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
10.20 Patriot Act.
Each Lender that is subject to the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), and Agent (for itself and not on behalf of any Lender), hereby notifies each Loan Party that, pursuant to the requirements of the Patriot Act, such Lender and Agent are required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or Agent, as applicable, to identify each Loan Party in accordance with the Patriot Act.
[Remainder of page intentionally blank; signature pages follow.]
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[Hooper Holmes] Credit Agreement
#35074903_v10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first set forth above.
BORROWER:
HOOPER HOLMES, INC.,
a New York corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
[SIGNATURE PAGE TO CREDIT AGREEMENT]
#35074903
AGENT AND LENDERS:
SWK FUNDING LLC, as Agent and a Lender
By: SWK Holdings Corporation,
its sole Manager
By: /s/ Brett Pope
Name: Brett Pope
Title: Chief Executive Officer
[SIGNATURE PAGE TO CREDIT AGREEMENT]
#35074903
____________________________________________________
____________________________________________________
GUARANTEE AND COLLATERAL AGREEMENT
dated as of April 17, 2015
between
HOOPER HOLMES, INC.,
as Grantor,
and
SWK FUNDING LLC,
as Agent
____________________________________________________
____________________________________________________
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of April 17, 2015 (as may be amended, restated, supplemented, or otherwise modified from time to time, this “Agreement”), made by each signatory hereto (together with any other Person that becomes a party hereto as provided herein, “Grantors”), in favor of SWK FUNDING LLC, as Agent (“Agent”) for the benefit of all Lenders party to the Credit Agreement (as hereafter defined).
Agent and Lenders have severally agreed to extend credit to Hooper Holmes, Inc., a New York corporation (the “Borrower”), pursuant to the Credit Agreement. The Borrower is affiliated with each other Grantor. The Borrower and the other Grantors are engaged in interrelated businesses, and each Grantor will derive substantial direct and indirect benefit from extensions of credit under the Credit Agreement. It is a condition precedent to each Lender’s obligation to extend credit under the Credit Agreement that Grantors shall have executed and delivered this Agreement to Agent for the ratable benefit of all Lenders.
In consideration of the premises and to induce Agent and Lenders to enter into the Credit Agreement and to induce Agent and Lenders to extend credit thereunder, each Grantor hereby agrees with Agent, for the ratable benefit of Lenders, as follows:
1.1. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms are used herein as defined in the Code: Accounts, Money, Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products, Goods, Health-Care-Insurance Receivables, Instruments, Inventory, Letter-of-Credit Rights, Software and Supporting Obligations.
1.2. When used herein the following terms shall have the following meanings:
Agreement has the meaning set forth in the preamble hereto.
Borrower Obligations means all Obligations of Borrower.
Code means the Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Code as in effect in a jurisdiction other than the State of New York, “Code” means the Uniform Commercial Code, as applicable if the context requires, as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.
Collateral has the meaning set forth in Section 3 hereof. Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part thereof.
Copyright Licenses means all written agreements naming any Grantor as licensor or licensee, including those listed on Schedule 4, granting any right under any Copyright, including the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright (other than agreements relating to widely-available software subject to “shrink-wrap” or “click-through” software licenses).
Credit Agreement means the Credit Agreement, of even date herewith, among Borrower, Lenders and Agent, as amended, supplemented, restated or otherwise modified from time to time.
Excluded Property means, with respect to a Grantor: (i) any item of General Intangibles or other property (including, without limitation, any Material Contract) that is now or hereafter held by such Grantor but only to the extent that such item of General Intangibles or property, including, for the avoidance of doubt, Intellectual Property (or any agreement evidencing such item of General Intangibles or property) contains a term or is subject to a rule of law, statute or regulation that restricts, prohibits, or requires a consent (that has not been obtained) of a Person (other than such Grantor) to, the creation, attachment or perfection of the security interest granted herein, and any such restriction, prohibition and/or requirement of consent is effective and enforceable under applicable law and is not rendered ineffective by applicable law (including, without limitation, pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Code); provided, however, that (x) Excluded Property shall not include any Proceeds of any item of General Intangibles or other property described in this definition, and (y) any item of General Intangibles or such other property described in this definition that at any time ceases to satisfy the criteria for Excluded Property (whether as a result of obtaining any necessary consent, any change in any rule of law, statute or regulation, or otherwise) shall no longer be Excluded Property; (ii) trademark applications filed in the United States Patent and Trademark Office on the basis of such Grantor’s “intent to use” such trademark, unless and until acceptable evidence of use of the Trademark has been filed with the United States Patent and Trademark Office pursuant to Section 1(c) or Section 1(d) of the Lanham Act (15 U.S.C. 1051, et seq.), to the extent that granting a Lien in such Trademark application prior to such filing would adversely affect the enforceability or validity of such Trademark application; (iii) any asset subject to a Permitted Lien (other than Liens in favor of Agent) securing obligations permitted under the Credit Agreement to the extent that the grant of other Liens on such asset (A) would result in a breach or violation of, or constitute a default under, the agreement or instrument governing such Permitted Lien, (B) would result in the loss of use of such asset or (C) would permit the holder of such Permitted Lien to terminate the Grantor’s use of such asset and (iv) real property leases.
Fixtures means all of the following, whether now owned or hereafter acquired by a Grantor: plant fixtures; business fixtures; other fixtures and storage facilities, wherever located; and all additions and accessories thereto and replacements therefor.
General Intangibles means all “general intangibles” as such term is defined in Section 9‑102(a)(42) of the Code and, in any event, including with respect to any Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same from time to time may be amended, supplemented or otherwise modified, including, without limitation, (a) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (b) all rights of such Grantor to damages arising thereunder and (c) all rights of such Grantor to perform and to exercise all remedies thereunder.
Guarantor Obligations means, collectively, with respect to each Guarantor, all payment and performance obligations of such Guarantor hereunder or under any other Loan Document to which such Guarantor is party.
Guarantors means the collective reference to each Grantor other than Borrower.
Identified Claims means the Commercial Tort Claims described on Schedule 6 as such schedule may be supplemented from time to time.
Intellectual Property shall mean all present and future: trade secrets, know-how and other proprietary information; Trademarks and Trademark Licenses, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; Copyrights (including Copyrights for computer programs, but excluding commercially available off-the-shelf software and any Intellectual Property rights relating thereto) and Copyright Licenses, and all tangible and intangible property embodying the Copyrights, unpatented inventions (whether or not patentable); Patents and Patent Licenses; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom, books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; customer lists and customer information, the right to sue for all past, present and future infringements of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.
Intercompany Note means any promissory note evidencing loans made by any Grantor to any other Grantor or its Affiliate.
Investment Property means the collective reference to (a) all “investment property” as such term is defined in Section 9‑102(a)(49) of the Code (other than the equity interest of any Subsidiary excluded from the definition of Pledged Equity), (b) all “financial assets” as such term is defined in Section 8‑102(a)(9) of the Code, and (c) whether or not constituting “investment property” as so defined, all Pledged Notes and all Pledged Equity.
Issuers means the collective reference to each issuer of any Investment Property.
Patent Licenses means all agreements, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including any of the foregoing referred to in Schedule 4.
Permitted Liens has the meaning ascribed such term in the Credit Agreement.
Pledged Equity means the equity interests listed on Schedule 1, as amended from time to time, together with any other equity interests, certificates, options or rights of any nature whatsoever in respect of the equity interests of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect.
Pledged Notes means all promissory notes listed on Schedule 1, all Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business).
Proceeds means all “proceeds” as such term is defined in Section 9‑102(a)(64) of the Code and, in any event, shall include all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.
Receivable means any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including any Accounts).
Secured Obligations means, collectively, all Borrower Obligations and Guarantor Obligations.
Securities Act means the Securities Act of 1933, as amended.
Trademark Licenses means, collectively, each agreement, whether written or oral, providing for the grant by or to any Grantor of any right to use any Trademark, including any of the foregoing referred to in Schedule 4.
2.1. Guarantee.
(a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to Agent, for the ratable benefit of Lenders and their respective successors, indorsees, transfers and assigns to the extent permitted by and in accordance with the Credit Agreement, the prompt and complete payment and performance by Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations.
(b) The guarantee contained in this Section 2 shall remain in full force and effect and shall serve as a continuing security, until all of the Secured Obligations have been Paid in Full.
(c) No payment made by Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by Agent or any Lender from Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Secured Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Secured Obligations or any payment received or collected from such Guarantor in respect of the Secured Obligations), remain liable for the Secured Obligations up to the maximum liability of such Guarantor hereunder until the Secured Obligations are Paid in Full.
2.2. Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to Agent and Lenders, and each Guarantor shall remain liable to Agent and Lenders for the full amount guaranteed by such Guarantor hereunder.
2.3. No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of Agent or any Lender against Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by Agent or any Lender for the payment of the Secured Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all of the Secured Obligations are Paid in Full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Secured Obligations shall not have been Paid in Full, such amount shall be held by such Guarantor in trust for Agent and Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be promptly turned over to Agent in the exact form received by such Guarantor (duly indorsed (but without any representation or warranty) by such Guarantor to Agent, if required), to be applied against the Secured Obligations, whether matured or unmatured, in a manner that is consistent with the provisions of Section 2.10.2 of the Credit Agreement.
2.4. Amendments, etc. with Respect to the Secured Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Secured Obligations made by Agent or any Lender may be rescinded by Agent or such Lender and any of the Secured Obligations continued, and the Secured Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by Agent or any Lender, and the Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as Agent (or the Required Lenders or all Lenders, as the case may be) may deem advisable from time to time (provided that any such amendment, modification, supplement or termination complies with the relevant provisions of the Credit Agreement, this Agreement and/or such Loan Document), and any collateral security, guarantee or right of offset at any time held by Agent or any Lender for the payment of the Secured Obligations may be sold, exchanged, waived, surrendered or released to the extent permitted by the Credit Agreement, this Agreement and the other Loan Documents. Neither Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Secured Obligations or for the guarantee contained in this Section 2 or any property subject thereto.
2.5. Guarantee Absolute and Unconditional; Waivers.
(a) Each Guarantor agrees that this Guaranty is a guaranty of payment and performance when due and not of collectability. The liability of Guarantor under this Guaranty shall be absolute, irrevocable and unconditional irrespective of:
(i) any lack of validity, regularity or enforceability of any Loan Document;
(ii) any lack of validity, regularity or enforceability of this Agreement;
(iii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to departure from any Loan Document;
(iv) any exchange, release or non-perfection of any security interest in any Collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Secured Obligations;
(v) any failure on the part of Agent or any other Person to exercise, or any delay in exercising, any right under any Loan Document; and
(vi) any other circumstance which might otherwise constitute a defense available to, or a discharge of, Borrower, any Guarantor or any other guarantor with respect to the Secured Obligations (including, without limitation, all defenses based on suretyship or impairment of collateral, and all defenses that Borrower may assert to the repayment of the Secured Obligations, including, without limitation, failure of consideration, breach of warranty, payment, statute of frauds, bankruptcy, lack of legal capacity, lender liability, accord and satisfaction, and usury), this Agreement and the obligations of Guarantor under this Agreement, other than payment in full of the Guarantor Obligations.
(b) Each Guarantor hereby agrees that if Borrower or any other guarantor of all or a portion of the Secured Obligations is the subject of a bankruptcy or insolvency case under applicable law, it will not assert the pendency of such case or any order entered therein as a defense to the timely payment of the Secured Obligations. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Secured Obligations and notice of or proof of reliance by Agent or any Lender upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Secured Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2, and all dealings between Borrower and any of the Guarantors, on the one hand, and Agent and Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives (i) diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Borrower or any of the Guarantors with respect to the Secured Obligations; (ii) notice of the existence or creation or renewal or non-payment of all or any of the Secured Obligations; (iii) all diligence in collection or protection of or realization upon any Secured Obligations or any security for or guaranty of any Secured Obligations; (iv) any right to require Agent or any Lender, as a condition of payment or performance by Guarantor, to (A) proceed against Borrower, any other guarantor of the Guarantor Obligations or any other Person, (B) proceed against or exhaust any security held from Borrower, any such other guarantor or any other Person, (C) proceed against or have resort to any balance of any deposit account or credit on the books of Agent or any Lender in favor of Borrower or any other Person or (D) pursue any other remedy in the power of Agent or any Lender whatsoever; (v) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Borrower or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guarantor Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Borrower or any other Guarantor from any cause other than payment in full of the Guarantor Obligations; (vi) any defense based upon Agent or any Lender’s errors or omissions in the administration of the Guarantor Obligations, except errors and omissions resulting from Agent or any Lender’s gross negligence, bad faith, or willful misconduct and (vii)(A) any legal or equitable discharge of Guarantor’s obligations hereunder and (B) any rights to set‑offs, recoupments and counterclaims.
(c) When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Secured Obligations or any right of offset with respect thereto, and any failure by Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from Borrower, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of Agent or any Lender against any Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings. Each Guarantor agrees that it is not a surety for purposes of any state statutes providing defenses for sureties, and each Guarantor waives any right that it may have under such statutes to assert the applicability thereof to the provisions of this Agreement to require that Agent commence action against Borrower or any other Person or against any of the Collateral.
(d) Agent or any Lender may, from time to time, at its sole discretion and without notice to any Grantor, take any or all of the following actions: (i) retain or obtain a security interest in any property to secure any of the Secured Obligations or any obligation hereunder, (ii) retain or obtain the primary or secondary obligation of any obligor or obligors with respect to any of the Secured Obligations, (iii) extend or renew any of the Secured Obligations for one or more periods (whether or not longer than the original period), alter or exchange any of the Secured Obligations, or release or compromise any obligation of any Guarantor or any obligation of any nature of any other obligor with respect to any of the Secured Obligations, (iv) release any guaranty or right of offset or its security interest in, or surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Secured Obligations or any obligation hereunder, or extend or renew for one or more periods (whether or not longer than the original period) or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property, and (v) resort to any Guarantor for payment of any of the Secured Obligations when due, whether or not Agent or such Lender shall have resorted to any property securing any of the Secured Obligations or any obligation hereunder or shall have proceeded against any other Guarantor or any other obligor primarily or secondarily obligated with respect to any of the Secured Obligations.
2.6. Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to Agent without set-off or counterclaim in Dollars at the office of Agent specified in the Credit Agreement.
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3. | Grant of Security Interest. |
(a) Each Grantor hereby assigns and transfers to Agent, and hereby grants to Agent, for the ratable benefit of Lenders and (to the extent provided herein) their Affiliates, a security interest in all of the following (if applicable):
(i)all of each Grantor’s right, title and interest in and to all of such Grantor’s assets, including any and all personal property, Accounts, Chattel Paper (including Electronic Chattel Paper), Deposit Accounts, Documents, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Health-Care-Insurance Receivables, Instruments, Intellectual Property, Inventory, Investment Property, Letter-of-Credit Rights, Software, Money, Supporting Obligations, and Identified Claims, in each case whether now owned or at any time hereafter acquired or arising,
(ii)all books and records pertaining to any of the foregoing,
(iii)all Proceeds and products of any of the foregoing, and
(iv)all collateral security and guarantees given by any Person with respect to any of the foregoing,
(all of the foregoing, collectively, the “Collateral”), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations; provided, that the Collateral shall not include the Excluded Property.
(b) Each Grantor shall promptly notify Agent of any Commercial Tort Claims related to the Loans in which such Grantor has an interest arising after the Closing Date and shall provide all necessary information concerning each such Commercial Tort Claim and make all necessary filings with respect thereto to perfect Agent’s first-priority security interest (subject to Permitted Liens) therein.
(c) Each Grantor has full right and power to grant to Agent, for the benefit of Agent and Lenders, a perfected, first-priority security interest (subject to Permitted Liens) and Lien on the Collateral pursuant to this Agreement, subject to no transfer or other restrictions or Liens of any kind in favor of any other Person (subject to any Permitted Liens). Except with respect to any financing statement (i) securing debt to be paid off as of the Closing Date, (ii) securing Permitted Liens, or (iii) filed on behalf of Agent, no financing statement relating to any of the Collateral is on file in any public office. No Grantor is party to any agreement, document or instruction that conflicts with this Section 3.
(d) Each Grantor hereby authorizes Agent to prepare and file financing statements provided for by the Code, or any similar law in any other jurisdiction, and to take such other action as may be required, in Agent's sole discretion, to perfect and to continue the perfection of Agent’s security interest in the Collateral.
(e) Irrespective of any provision in this Agreement, the prior consent of Agent shall not be required in connection with the licensing or sublicensing of Intellectual Property pursuant to collaborations, licenses or other strategic transactions with third parties (“Permitted Licenses”) executed in the normal course of Borrower’s business and excluding, for the avoidance of doubt, any exclusive license or sublicense.
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4. | Representations and Warranties. |
To induce Agent and Lenders to enter into the Credit Agreement and to induce Lenders to make their respective extensions of credit to Borrower thereunder, each Grantor jointly and severally hereby represents and warrants to Agent and each Lender that, after giving effect to the Project Jefferson closing:
4.1. Title; No Other Liens. Except for Permitted Liens, the Grantors own each item of the Collateral, tangible and intangible, of any nature whatsoever that they purport to own free and clear of any and all Liens or claims of others (including infringement claims with respect to Intellectual Property). As of the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor), no financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except filings evidencing Permitted Liens and filings for which termination statements have been delivered to Agent.
4.2. Perfected First Priority Liens. Each Grantor has full right and power to grant to Agent the security interests contemplated herein, and the security interests granted pursuant to this Agreement are prior and senior to all other Liens on the Collateral in existence on the date hereof except for Permitted Liens expressly permitted by the Credit Agreement.
4.3. Grantor Information. Schedule 2 sets forth, as of the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor), (a) each Grantor’s jurisdiction of organization, (b) the location of each Grantor’s chief executive office, (c) each Grantor’s exact legal name as it appears on its organizational documents, and (d) each Grantor’s federal business or tax identification number.
4.4. Collateral Locations. Schedule 3 sets forth, as of the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor), (a) each place of business of each Grantor (including its chief executive office), (b) all locations where all Inventory and the Equipment owned by each Grantor is kept, and (c) whether each such Collateral location and place of business (including each Grantor’s chief executive office) is owned or leased (and if leased, specifies the complete name and notice address of each lessor as set forth in the relevant lease). No Collateral is located outside the United States or in the possession of any lessor, bailee, warehouseman or consignee, except as indicated on Schedule 3.
4.5. Certain Property. Except as set forth on Schedule 8, none of the Collateral constitutes, or is the Proceeds of, (a) Farm Products, (b) Health-Care-Insurance Receivables or (c) vessels, aircraft or any other property subject to any certificate of title or other registration statute of the United States, any state or other jurisdiction, except for personal vehicles owned by the Grantors and used by employees of the Grantors in the ordinary course of business.
4.6. Investment Property.
(a) The shares of Pledged Equity pledged by each Grantor hereunder constitute all the issued and outstanding equity interests of each Issuer owned by such Grantor.
(b) All of the Pledged Equity issued by a Subsidiary of the Grantor has been duly and validly issued and is fully paid and nonassessable.
(c) Each of the Intercompany Notes (if any) constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing).
(d) Schedule 1 lists all Investment Property owned by each Grantor as of the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor). Each Grantor is the record and beneficial owner of the Investment Property pledged by it hereunder that it purports to own, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement and for Permitted Liens.
4.7. Receivables.
(a)No amount payable to such Grantor under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to Agent.
(b)The amounts represented by such Grantor to Lenders from time to time as owing to such Grantor in respect of the Receivables (to the extent such representations are required by any of the Loan Documents) will at all such times be accurate in all material respects, subject to the inability to collect Receivables in the ordinary course of business.
4.8. Intellectual Property.
(a) Schedule 4 lists all Intellectual Property owned by each Grantor in its own name (or a former name) on the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor).
(b) On the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor), all Intellectual Property owned by any Grantor is valid, subsisting, unexpired and enforceable, has not been abandoned and, to such Grantor’s knowledge, does not infringe on the intellectual property rights of any other Person.
(c) Except as set forth in Schedule 4, as of the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor), none of the Intellectual Property owned by a Grantor is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor.
(d) Except as set forth in Schedule 4, no holding, decision or judgment has been rendered by any Governmental Authority which would limit, cancel or question the validity of, or any Grantor’s rights in, any Intellectual Property owned by any Grantor.
(e) Except as set forth in Schedule 4, no action or proceeding is pending, or, to the knowledge of such Grantor, is threatened, as of the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor) (i) seeking to limit, cancel or question the validity of any Intellectual Property or any Grantor’s interest therein, or (ii) which, if adversely determined, would materially and adversely affect the value of any Intellectual Property.
(f) Each Grantor owns and possesses or has a license or other right to use all Intellectual Property as is necessary for the conduct of the businesses of such Grantor as currently conducted, without any infringement, to such Grantor's knowledge, upon rights of others.
4.9. Deposit Accounts and Other Accounts. All Deposit Accounts and all other bank accounts, securities accounts and other accounts maintained by each Grantor as of the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor), are described on Schedule 5 hereto, which description includes for each such account the name of the Grantor maintaining such account, the name, address, telephone and fax numbers of the financial institution at which such account is maintained, and the account number and the account officer, if any, of such account.
4.10. Excluded Property. Except as set forth in Schedule 7, each Grantor represents, warrants and covenants that it does not, as of the Closing Date (or the date such Grantor joins this Agreement as it relates to such Grantor), own any Excluded Property, which by itself is, and/or when aggregated, are material to the business of such Grantor.
Each Grantor covenants and agrees with Agent and Lenders that, from and after the date of this Agreement until the Secured Obligations shall have been Paid in Full:
5.1. Delivery of Instruments, Certificated Securities and Chattel Paper. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument (other than, for greater certainty, a license agreement), Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be promptly delivered to Agent, duly indorsed in a manner reasonably satisfactory to Agent, to be held as Collateral pursuant to this Agreement and in the case of Electronic Chattel Paper, the applicable Grantor shall cause Agent to have control thereof within the meaning set forth in Section 9‑105 of the Code. In the event that a Default or an Event of Default shall have occurred and be continuing, upon the request of Agent, any Instrument, Certificated Security or Chattel Paper not theretofore delivered to Agent and at such time being held by any Grantor shall be immediately delivered to Agent, duly indorsed in a manner satisfactory to Agent, to be held as Collateral pursuant to this Agreement and in the case of Electronic Chattel Paper, the applicable Grantor shall cause Agent to have control thereof within the meaning set forth in Section 9‑105 of the Code.
5.2. Maintenance of Perfected Security Interest; Further Documentation.
(e) Except as expressly permitted by this Agreement or the Credit Agreement, such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4.2 and shall defend such security interest against the claims and demands of all Persons whomsoever, provided that, unless otherwise required by Agent in writing at any time following the occurrence and continuance of an Event of Default, such security interest need not be perfected in property of the Grantor in which a security interest may not be perfected by filing a financing statement under the Code, having a value less than $100,000 individually or $350,000 in the aggregate.
(f) Such Grantor will furnish to Agent and Lenders from time to time statements and schedules further identifying and describing the assets and property of such Grantor and such other reports in connection therewith as Agent may reasonably request, all in reasonable detail.
(g) At any time and from time to time, upon the reasonable written request of Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including (i) filing any financing or continuation statements under the Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby, (ii) in the case of Investment Property, Deposit Accounts, Electronic Chattel Paper and Letter of Credit Rights and any other relevant Collateral, taking any actions necessary to enable Agent to obtain “control” (within the meaning of Code) with respect thereto, in each case pursuant to documents in form and substance reasonably satisfactory to Agent, provided that so long as no Event of Default has occurred and is continuing, no Grantor shall be required to cause the Agent to have control over such Investment Property, Electronic Chattel Paper, Letter of Credit Rights or other relevant Collateral (other than any Deposit Account) having a value less than $100,000 individually or $350,000 in the aggregate; provided further that only during the continuance of an Event of Default and if requested by Agent, shall any Grantor be obligated to deliver, to the extent permitted by law, any original motor vehicle certificates of title received by such Grantor from the applicable secretary of state or other Governmental Authority with information reflecting Agent’s security interest recorded therein.
(h) Such Grantor authorizes Agent to, at any time and from time to time, at such Grantor’s expense, file financing statements, continuation statements, and amendments thereto that describe the Collateral (including describing the Collateral as “all assets” of each Grantor, or words of similar effect), and which contain any other information required pursuant to the Code for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, and each Grantor agrees to furnish any such information to Agent promptly upon request. Any such financing statement, continuation statement, or amendment may be signed (to the extent signature of a Grantor is required under applicable law) by Agent on behalf of any Grantor and may be filed at any time in any jurisdiction.
(i) Such Grantor shall, at any time and from time to time, take such steps as Agent may reasonably request (i) to obtain an acknowledgement, in form and substance reasonably satisfactory to Agent, of any bailee having possession of any of the Collateral (provided that such Grantor shall not be required to obtain any such acknowledgement as it relates to Collateral having a value less than $100,000 individually or $350,000 in the aggregate unless otherwise required by Agent in writing at any time following the occurrence and continuance of an Event of Default), stating that the bailee holds such Collateral for Agent, (ii) to obtain “control” of any Letter-of-Credit Rights, or Electronic Chattel Paper (within the meaning of the Code) with any agreements establishing control to be in form and substance reasonably satisfactory to Agent (provided that such Grantor shall not be required to ensure Agent has “control” over any such Collateral described in this clause (ii) having a value less than $100,000 individually or $350,000 in the aggregate unless otherwise required by Agent in writing at any time following the occurrence and continuance of an Event of Default) and (iii) otherwise to ensure the continued perfection and priority of Agent’s security interest in any of the Collateral and of the preservation of its rights therein to the extent required in this Agreement and the Credit Agreement (subject to the conditions and exceptions in this Agreement).
(j) Without limiting the generality of the foregoing, if such Grantor at any time holds or acquires an interest in any Electronic Chattel Paper or any “transferable record”, as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in §16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Grantor shall promptly notify Agent thereof and, at the request of Agent, shall take such action as Agent may reasonably request to vest in Agent “control” under Section 9-105 of the Code of such electronic chattel paper or control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, §16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. Agent agrees with the Grantors that Agent will arrange, pursuant to procedures reasonably satisfactory to Agent and so long as such procedures will not result in Agent’s loss of control, for the Grantors to make alterations to such electronic chattel paper or transferable record permitted under Section 9-105 of the Code or, as the case may be, Section 201 of the federal Electronic Signatures in Global and National Commerce Act or §16 of the Uniform Electronic Transactions Act for a party in control to make without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by any Grantor with respect to such electronic chattel paper or transferable record.
5.3. Changes in Locations, Name, etc. Except as permitted by the Credit Agreement, each Grantor shall not, except upon 30 days’ prior written notice to Agent and delivery to Agent of (a) all additional financing statements and other documents reasonably requested by Agent as to the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 3 showing any additional location at which Inventory or Equipment having a fair market value greater than $100,000 at any single location shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location other than those listed on Schedule 3; provided, that up to $100,000 in fair market value of any such Inventory and Equipment may be kept at other single locations;
(ii) change the location of its chief executive office from that specified on Schedule 2 or in any subsequent notice delivered pursuant to this Section 5.3; or
(iii) change its name or corporate structure (including without limitation, the merger into or with any other Person).
Such Grantor shall not change its jurisdiction of organization without the prior written consent of Required Lenders, which consent will not be unreasonably withheld or delayed.
5.4. Notices. Such Grantor will advise Agent promptly, in reasonable detail, of:
(a) any Lien (other than Permitted Liens) on any of the Collateral; and
(b) the occurrence of any other event which could reasonably be expected to have a material and adverse effect on the aggregate value of the Collateral or on the Liens created hereby.
5.5. Investment Property.
(e) If such Grantor shall become entitled to receive or shall receive any certificate, option or rights in respect of the equity interests of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any of the Pledged Equity, or otherwise in respect thereof, such Grantor shall accept the same as the agent of Agent and Lenders, hold the same in trust for the benefit of the Agent and Lenders and deliver the same forthwith to Agent in the exact form received, duly indorsed (but without any representation or warranty) by such Grantor to Agent, if required, together with an undated instrument of transfer covering such certificate duly executed in blank by such Grantor and with, if Agent so reasonably request, signature guranateed, to be held by Agent, subject to the terms hereof, as additional Collateral for the Secured Obligations. Upon the occurrence and during the continuance of an Event of Default, (i) any sums paid upon or in respect of the Investment Property upon the liquidation or dissolution of any Issuer shall be paid over to Agent to be held, at Agent’s option, either by it hereunder as additional Collateral for the Secured Obligations or applied to the Secured Obligations as provided in Section 6.5, and (ii) in case any distribution of capital shall be made on or in respect of the Investment Property or any property shall be distributed upon or with respect to the Investment Property pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected Lien in favor of Agent, be delivered to Agent to be held, at Agent’s option, either by it hereunder as additional Collateral for the Secured Obligations or applied to the Secured Obligations as provided in Section 6.5. Upon the occurrence and during the continuance of an Event of Default, if any sums of money or property so paid or distributed in respect of the Investment Property shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to Agent, hold such money or property in trust for Lenders, segregated from other funds of such Grantor, as additional Collateral for the Secured Obligations.
(f) Without the prior written consent of Agent, such Grantor will not, so long as an Event of Default has occurred and is continuing and to the extent permitted by the Credit Agreement, (i) vote to enable, or take any other action to permit, any Issuer to issue any equity interests of any nature or to issue any other securities or interests convertible into or granting the right to purchase or exchange for any equity interests of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Investment Property or Proceeds thereof (except pursuant to a transaction expressly permitted by the Credit Agreement) other than, with respect to Investment Property not constituting Pledged Equity or Pledged Notes, and such action which is not prohibited by the Credit Agreement, (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for Permitted Liens, or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or Agent to sell, assign or transfer any of the Investment Property or Proceeds thereof, except, with respect to such Investment Property, shareholders’ agreements entered into by such Grantor with respect to Persons in which such Grantor maintains an ownership interest of 50% or less.
(g) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Investment Property issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify Agent promptly in writing of the occurrence of any of the events described in Section 5.5(a) with respect to the Investment Property issued by it and (iii) the terms of Sections 6.3(c) shall apply to such Grantor with respect to all actions that may be required of it pursuant to Section 6.3(c) regarding the Investment Property issued by it.
5.6. Receivables.
(a) Other than in the ordinary course of business, without the prior written consent of Agent, such Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could materially adversely affect the value thereof, to the extent that any action in clauses (i) - (iv) above could reasonably be expected to have a Material Adverse Effect.
(b) Such Grantor will deliver to Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables for all Grantors.
5.7. Intellectual Property.
(g) Such Grantor (either itself or through licensees) will (i) continue to use each Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (ii) maintain as in the past the quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless Agent, for the ratable benefit of Lenders, shall obtain a perfected security interest in such mark pursuant to this Agreement and the IP Security Agreement, and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way, to the extent that any action in clauses (i) - (v) could reasonably be expected to have a Material Adverse Effect.
(h) Such Grantor (either itself or through licensees) will not do any act, or omit to do any act, whereby any Patent may become forfeited, abandoned or dedicated to the public, to the extent such act or omission could reasonably be expected to have a Material Adverse Effect.
(i) Such Grantor (either itself or through licensees) (i) will employ each Copyright and (ii) will not (and will not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material portion of the Copyrights may become invalidated or otherwise impaired and which could reasonably be expected to have a Material Adverse Effect. Such Grantor will not (either itself or through licensees) do any act whereby any material portion of the Copyrights may fall into the public domain and which could reasonably be expected to have a Material Adverse Effect.
(j) Such Grantor (either itself or through licensees) will not do any act that knowingly uses any Intellectual Property to infringe the intellectual property rights of any other Person.
(k) Such Grantor will notify Agent promptly if it knows, or has reason to know, that any application or registration relating to any Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office, or any court or tribunal in any country) regarding, such Grantor’s ownership of, or the validity of, any Intellectual Property or such Grantor’s right to register the same or to own and maintain the same, except to the extent that such forfeiture, abandonment or dedication, or adverse determination or development would not reasonably be expected to have a Material Adverse Effect.
(l) Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office, or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to Agent concurrently with the next delivery of financial statements of Borrower pursuant to Section 6.1.1 or 6.1.2 of the Credit Agreement, as applicable. Upon the request of Agent, such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents, and papers as Agent may reasonably request to evidence Agent’s and Lenders’ security interest in any Copyright, Patent or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby.
(m) Such Grantor will take all reasonable and necessary steps to maintain and pursue each application referred to in Section 5.7(f), (and to obtain the relevant registration), except to the extent the failure to maintain and pursue such application would not reasonably be expected to have a Material Adverse Effect, and to maintain each registration of all Intellectual Property owned by it, except to the extent that the failure to maintain registration of all Intellectual Property owned by it would not reasonably be expected to have a Material Adverse Effect.
(n) In the event that any Intellectual Property is infringed upon or misappropriated or diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property is of material economic value, promptly notify Agent after it learns thereof and, to the extent, in its reasonable judgment, such Grantor determines it appropriate under the circumstances, sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution.
5.8. Deposit Accounts and Other Accounts. Such Grantor hereby authorizes the financial institutions at which such Grantor maintains a Deposit Account, other bank account, securities account or other account to provide Agent with such information with respect to such account as Agent may from time to time reasonably request, and each Grantor hereby consents to such information being provided to Agent. Such Grantor will cause each financial institution at which such Grantor maintains a Deposit Account or other account to enter into a control agreement or other similar agreement with Agent and such Grantor, in form and substance reasonably satisfactory to Agent, in order to give Agent “control” (within the meaning set forth in Section 9‑104 of the Code) of such account, except for Exempt Accounts.
5.9. Other Matters. Such Grantor shall, within the time period required pursuant to the Post-Closing Agreement, cause to be delivered to Agent, at Agent’s request, a Collateral Access Agreement with respect to (a) each bailee with which such Grantor keeps Inventory or other assets as of the Closing Date having a value in excess of $125,000 and (b) each landlord which leases real property (and the accompanying facilities) to such Grantor as of the Closing Date at which it maintains its chief executive office or a substantial amount of its books or records. If such Grantor shall (x) cause to be delivered Inventory or other property having a value in excess of $250,000 to any bailee after the Closing Date, such Grantor shall on or prior to such delivery cause such bailee to sign a Collateral Access Agreement or (y) enter into any lease for real property after the Closing Date at which it maintains its chief executive office or a substantial amount of its books and records, such Grantor shall on or prior to the first day of the term of such lease cause the landlord to sign a Collateral Access Agreement.
5.10. Commercial Tort Claims. If such Grantor shall at any time acquire any Commercial Tort Claim, such Grantor shall promptly notify Agent thereof in writing, therein providing a reasonable description and summary thereof, and upon delivery thereof to Agent, such Grantor shall be deemed to thereby grant to Agent (and such Grantor hereby grants to Agent) a security interest in such Commercial Tort Claim and all proceeds thereof, and such Grantor shall execute such documentation as Agent shall require in order to document and effectuate such grant of a security interest.
6.1. Certain Matters Relating to Receivables.
(k) At any time and from time to time after the occurrence and during the continuance of an Event of Default, Agent shall have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information Agent may reasonably require in connection with such test verifications. At any time and from time to time after the occurrence and during the continuance of an Event of Default, upon Agent’s reasonable request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others reasonably satisfactory to Agent to furnish to Agent reports showing reconciliations, agings and test verifications of, and trial balances for, the Receivables.
(l) If required by Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected or received by or on behalf of any Grantor, (i) shall be forthwith (and, in any event, within 2 Business Days) deposited by such Grantor in the exact form received, duly indorsed (but without any representation or warranty) by such Grantor to Agent if required, in a collateral account maintained under the sole dominion and control of Agent, for application to the Secured Obligations in accordance with Section 6.5, and (ii) until so turned over, shall be held by such Grantor in trust for Agent and Lenders, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.
(m) At any time and from time to time after the occurrence and during the continuance of an Event of Default, at Agent’s request, each Grantor shall deliver to Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including all original orders, invoices and shipping receipts.
6.2. Communications with Obligors; Grantors Remain Liable.
(b) Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables to verify with them to Agent’s reasonable satisfaction the existence, amount and terms of any Receivables.
(c) Upon the request of Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that the Receivables have been assigned to Agent for the ratable benefit of Lenders and that payments in respect thereof shall be made directly to Agent.
(d) Anything herein to the contrary notwithstanding, each Grantor shall remain liable in respect of each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither Agent nor any Lender shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by Agent or any Lender of any payment relating thereto, nor shall Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.
(e) For the purpose of enabling Agent to exercise rights and remedies under this Agreement, each Grantor hereby grants to Agent, for the benefit of Agent and Lenders, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Grantor) to use, license or sublicense any Intellectual Property that constitutes part of the Collateral now owned or hereafter acquired by such Grantor, to the extent such Intellectual Property may be so licensed or sublicensed, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.
6.3. Investment Property.
(c) Unless an Event of Default shall have occurred and be continuing and Agent shall have given notice to the relevant Grantor of Agent’s intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash dividends and distributions, payments and Proceeds paid in respect of the Pledged Equity, the Pledged Notes and all other Investment Property that constitutes Collateral, to the extent permitted in the Credit Agreement, and to exercise all voting and other rights and any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Pledged Equity, Pledged Notes and Investment Property (including the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate or other structure of any Issuer, or upon the exercise by such Grantor of any right, privilege or option pertaining to such Pledged Equity, Pledged Notes or Investment Property, and in connection therewith, the right to deposit and deliver any and all of such Pledged Equity, Pledged Notes and Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as such Grantor may determine); provided, that no vote shall be cast or other right exercised or action taken which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document.
(d) If an Event of Default shall occur and be continuing, upon notice to the relevant Grantor, Agent shall have the right to (i) receive any and all cash dividends and distributions, payments or other Proceeds paid in respect of the Pledged Equity, the Pledged Notes and all other Investment Property and make application thereof to the Secured Obligations in accordance with Section 6.5, (ii) register any or all of the Investment Property in the name of Agent or its nominee, (iii) exercise, or permit its nominee to exercise, all voting and other rights pertaining to such Investment Property, and (iv) exercise, or permit its nominee to exercise, any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate or other structure of any Issuer, or upon the exercise by any Grantor or Agent of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as Agent may determine), all without liability except to account for property actually received by it, but Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.
(e) Each Grantor hereby authorizes and instructs each Issuer of any Investment Property pledged by such Grantor hereunder to (i) comply with any instruction received by it from Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement and the Credit Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends, distributions or other payments with respect to the Investment Property directly to Agent.
6.4. Proceeds to be Turned Over To Agent. In addition to the rights of Agent specified in Section 6.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all such Proceeds of Collateral received by or on behalf of any Grantor consisting of cash, checks and other cash equivalent items shall be held by such Grantor in trust for Agent and Lenders, segregated from other funds of such Grantor, and shall, at the written request of Agent, forthwith upon receipt by such Grantor, be turned over to Agent in the exact form received by such Grantor (duly indorsed (but without any representation or warranty) by such Grantor to Agent, if required). All Proceeds received by Agent hereunder shall be applied to the Secured Obligations as provided in Section 6.5.
6.5. Application of Proceeds. If an Event of Default shall have occurred and be continuing, Agent shall apply all or any part of Proceeds held in any collateral account established pursuant hereto or otherwise received by Agent to the payment of the Secured Obligations in a manner that is consistent with the provisions of Section 2.10.2 of the Credit Agreement.
6.6. Code and Other Remedies. If an Event of Default shall occur and be continuing, Agent, on behalf of Lenders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the Code, or any other applicable foreign or domestic law. Without limiting the generality of the foregoing, if an Event of Default shall occur or be continuing, Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery with assumption of any credit risk. Agent may disclaim any warranties that might arise in connection with any such lease, assignment, grant of option or other disposition of Collateral and have no obligation to provide any warranties at such time. Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Such sales may be adjourned and continued from time to time with or without notice. Agent shall have the right to conduct such sales on any Grantor’s premises or elsewhere and shall have the right to use any Grantor’s premises without charge for such time or times as Agent deems necessary or advisable. Each Grantor further agrees after an Event of Default has occurred and is continuing, at Agent’s request, to assemble the Collateral and make it available to Agent at places which Agent shall reasonably select, whether at such Grantor’s premises or elsewhere. Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of Agent and Lenders hereunder, including reasonable attorneys’ fees and disbursements, to the payment of the Secured Obligations in a manner that is consistent with the provisions of Section 2.10.2 of the Credit Agreement. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against Agent or any Lender arising out of the exercise by them of any rights hereunder, except to the extent such claims, damages or demands arise from the gross negligence, willful misconduct or bad faith of the Agent or Lenders. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper so long as (a) it is given at least 15 days before such sale or other disposition, and (b) contains such information as may be prescribed by applicable law.
6.7. Pledged Equity. Each Grantor recognizes that Agent may be unable to effect a public sale of any or all the Pledged Equity, by reason of certain prohibitions contained in the Securities Act and other applicable securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. Agent shall be under no obligation to delay a sale of any of the Pledged Equity for the period of time necessary to permit the Issuer thereof to register such securities or other interests for public sale under the Securities Act, or other applicable state securities laws, even if such Issuer would agree to do so.
6.8. Deficiency. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient for the Secured Obligations to be Paid in Full and the fees and disbursements of any attorneys employed by Agent or any Lender to collect such deficiency.
6.9. Permitted Licenses. Agent hereby covenants and agrees that in connection with any foreclosure or other exercise of Agent’s rights with respect to Permitted Licenses, Agent shall not terminate, limit, or otherwise adversely affect the rights of the licensees or sublicensees under such Permitted Licenses, so long as such licensee or sublicensee is not then otherwise in default under the applicable Permitted License in a way that would permit the applicable licensor to terminate such Permitted License.
6.10. Protective Advances. Notwithstanding any provision of any Loan Document, Agent, in its sole discretion shall have the right, but not any obligation, at any time that Grantors fail to do so, subject to any applicable cure periods permitted by or otherwise set forth in the Loan Documents, and from time to time, without prior notice, to: (i) discharge (at Borrower’s expense) taxes or Liens affecting any of the Collateral that have not been paid in violation of any Loan Document or that jeopardize Agent’s Lien priority in the Collateral; or (ii) make any other payment (at Borrower’s expense) for the administration, servicing, maintenance, preservation or protection of the Collateral (each such advance or payment set forth in clauses (i) and (ii) herein, a “Protective Advance”). Agent shall be reimbursed for all Protective Advances pursuant to Section 2.9.1(b) and/or Section 2.10 of the Credit Agreement, as applicable, and any Protective Advances shall bear interest at the Default Rate from the date such Protective Advance is paid by Agent until it is repaid. No Protective Advance by Agent shall be construed as a waiver by Agent, or any Lender of any Default, Event of Default or any of the rights or remedies of Agent or any Lender under any Loan Document.
6.11. Actions in Concert. Section 9.12 of the Credit Agreement shall be incorporated herein by reference.
7.1. Agent’s Appointment as Attorney-in-Fact, etc.
(f) Each Grantor hereby irrevocably constitutes and appoints Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact and proxy with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of strictly carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the terms of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives Agent the power and right, on behalf of and at the expense of such Grantor, without notice to or assent by such Grantor, to do any or all of the following to the extent otherwise expressly permitted by the terms of this Agreement and the Credit Agreement (including the satisfaction of any requirement to give notice to such Grantor prior to doing any of the following):
(i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse (but without any representation or warranty) and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise reasonably deemed appropriate by Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as Agent may reasonably request to evidence Agent’s security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby;
(iii) discharge Liens (other than Permitted Liens) levied or placed on or threatened against the Collateral, and effect any repairs or insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 6.6 or 6.7, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and
(v) (A) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to Agent or as Agent shall direct; (B) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) sign and indorse (but without any representation or warranty) any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (D) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (E) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral; (F) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as Agent may deem appropriate; (G) assign any Copyright, Patent or Trademark, throughout the world for such term or terms, on such conditions, and in such manner, as Agent shall in its sole discretion determine; (H) vote any right or interest with respect to any Investment Property; (I) order good standing certificates and conduct lien searches in respect of such jurisdictions or offices as Agent may deem appropriate; and (J) generally sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Agent were the absolute owner thereof for all purposes, and do, at Agent’s option and such Grantor’s expense, at any time, or from time to time, all acts and things which Agent deems necessary to protect, preserve or realize upon the Collateral and Agent’s security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.
(g) THE POWER-OF-ATTORNEY AND PROXY GRANTED HEREBY IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW. SUCH PROXY SHALL BE EFFECTIVE AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY INVESTMENT PROPERTY ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF THE INVESTMENT PROPERTY OR ANY OFFICER OR AGENT THEREOF). Each Grantor acknowledges and agrees that in any event such power-of-attorney and proxy is intended to and shall, to the fullest extent permitted by applicable law, be valid and irrevocable until (x) the Secured Obligations have been Paid in Full and (y) Lenders and Agent have no further obligations under the Loan Documents. Such power-of-attorney and proxy shall be valid and irrevocable as provided herein notwithstanding any limitations to the contrary set forth in the charter, bylaws or other organizational documents of the relevant entities.
(h) Upon exercise of the proxy set forth herein, all prior proxies given by any Grantor with respect to any of the Investment Property (other than to Agent or otherwise pursuant to the Loan Documents) are hereby revoked, and until the Secured Obligations are Paid in Full no subsequent proxies (other than to Agent or otherwise under the Loan Documents) will be given with respect to any of the Investment Property. To the extent permitted by this Agreement, Agent, as proxy, will be empowered and may exercise the irrevocable proxy to vote the Investment Property at any and all times, including but not limited to, at any meeting of shareholders, partners or members, as the case may be, however called, and at any adjournment thereof, or in any action by written consent, and may waive any notice otherwise required in connection therewith. To the fullest extent permitted by applicable law, Agent shall have no agency, fiduciary or other implied duties to any Grantor or any other party when acting in its capacity as such attorney-in-fact or proxy. Each Grantor hereby waives and releases any claims that it may otherwise have against Agent with respect to any breach or alleged breach of any such agency, fiduciary or other duty, other than claims resulting from the gross negligence, bad faith or willful misconduct of Agent. Notwithstanding the foregoing grant of a power of attorney and proxy, Agent shall have no duty to exercise any such right or to preserve the same and shall not be liable for any failure to do so or for any delay in doing so.
(i) Anything in Section 7.1(a) to the contrary notwithstanding, Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1 unless an Event of Default shall have occurred and be continuing.
(j) If any Grantor fails to perform or comply with any of its agreements contained herein, Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement at such Grantor’s sole cost and expense.
(k) Each Grantor hereby ratifies all that such attorneys shall be authorized hereunder to lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.
7.2. Duty of Agent. Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession shall be to deal with it in the same manner as Agent deals with similar property for its own account. Neither Agent or any Lender nor any of their respective officers, directors, employees or agents shall be liable for any failure to demand, collect or realize upon any of the Collateral or for any delay in doing so (except to the extent Agent, such Lender or such officers, directors, employees or agents acted with gross negligence, bad faith or in willful misconduct as determined by a court of competent jurisdiction) or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on Agent and Lenders hereunder are solely to protect Agent’s and Lenders’ interests in the Collateral and shall not impose any duty upon Agent or any Lender to exercise any such powers. Agent and Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except to the extent Agent or a Lender (or such officer, director, employee or agent) acted with gross negligence, bad faith or in willful misconduct as determined by a court of competent jurisdiction.
7.3. Photocopy of this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction.
7.4. Authority of Agent. Each Grantor acknowledges that the rights and responsibilities of Agent under this Agreement with respect to any action taken by Agent or the exercise or non-exercise by Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between Agent and Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between Agent and the Grantors, Agent shall be conclusively presumed to be acting as agent for Lenders with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.
8.1. Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 10.1 of the Credit Agreement.
8.2. Notices. All notices, requests and demands to or upon Agent or any Grantor hereunder shall be effected in the manner provided for in Section 10.2 of the Credit Agreement and each such notice, request or demand to or upon any Grantor shall be addressed to such Grantor in care of Borrower at Borrower’s notice address set forth on Schedule 1.
8.3. Indemnification by Grantors. Each Grantor hereby agrees, on a joint and several basis, to indemnify, exonerate and hold Agent, each Lender and each of the officers, directors, employees, Affiliates and agents of Agent and each Lender (each a “Lender Party” and collectively, the “Lender Parties”) free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including Legal Costs, but expressly excluding any consequential, special or lost profits damages (collectively, the “Indemnified Liabilities”), incurred by Lender Parties or any of them as a result of, or arising out of, or relating to any act or omission by Borrower or any of its officer, directors, agents, including without limitation (a) any tender offer, merger, purchase of equity interests, purchase of assets or other similar transaction financed or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any of the Loans, (b) the use, handling, release, emission, discharge, transportation, storage, treatment or disposal of any hazardous substance at any property owned or leased by any Grantor or any Subsidiary, (c) any violation of any Environmental Laws with respect to conditions at any property owned or leased by any Grantor or any Subsidiary or the operations conducted thereon, (d) the investigation, cleanup or remediation of offsite locations at which any Grantor or any Subsidiary or their respective predecessors are alleged to have directly or indirectly disposed of hazardous substances, or (e) the execution, delivery, performance or enforcement of this Agreement or any other Loan Document by any Lender Party, except to the extent any such Indemnified Liabilities result from the applicable Lender Party’s own gross negligence, bad faith, willful misconduct or breach of contract as determined by a court of competent jurisdiction. If and to the extent that the foregoing undertaking may be unenforceable for any reason, each Grantor hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The agreements in this Section 8.3 shall survive repayment of the Secured Obligations, any foreclosure under, or any modification, release or discharge of, any or all of the Collateral Documents and termination of this Agreement.
8.4. Enforcement Expenses.
(o) Each Grantor agrees, on a joint and several basis, to pay or reimburse on demand each Lender and Agent for all duly documented, reasonable out-of-pocket costs and expenses (including Legal Costs) incurred in collecting against any Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents.
(p) Each Grantor agrees to pay, and to save Agent and Lenders harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.
(q) The agreements in this Section 8.4 shall survive repayment of the Secured Obligations, any foreclosure under, or any modification, release or discharge of, any or all of the Collateral Documents and termination of this Agreement.
8.5. Captions. Captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.
8.6. Nature of Remedies. All Secured Obligations of each Grantor and rights of Agent and Lenders expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by applicable law. No failure to exercise and no delay in exercising, on the part of Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
8.7. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Receipt by facsimile machine or in “.pdf” format through electronic mail of any executed signature page to this Agreement or any other Loan Document shall constitute effective delivery of such signature page, unless stated otherwise in such correspondence. This Agreement and the other Loan Documents to the extent signed and delivered by means of a facsimile machine or other electronic transmission (including “.pdf”), shall be treated in all manner and respects and for all purposes as an original agreement or amendment and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto or to any such other Loan Document shall raise the use of a facsimile machine or other electronic transmission to deliver a signature or the fact that any signature or agreement or amendment was transmitted or communicated through the use of a facsimile machine or other electronic transmission as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.
8.8. Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.
8.9. Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the parties hereto and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof and any prior arrangements made with respect to the payment by any Grantor of (or any indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of Agent or Lenders.
8.10. Successors; Assigns. This Agreement shall be binding upon Grantors, Lenders and Agent and their respective successors and assigns, and shall inure to the benefit of Grantors, Lenders and Agent and the successors and assigns of Lenders and Agent. No other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. No Grantor may assign or transfer any of its rights or Obligations under this Agreement without the prior written consent of Agent.
8.11. Governing Law. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS CODE).
8.12. Forum Selection; Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, U.S. FIRST CLASS POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
8.13. Waiver of Jury Trial. EACH GRANTOR, AGENT AND EACH LENDER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
8.14. Set-off. Each Grantor agrees that Agent and each Lender have all rights of set-off and bankers’ lien provided by applicable law, and in addition thereto, each Grantor agrees that at any time any Event of Default has occurred and is continuing, Agent and each Lender may apply to the payment of any Secured Obligations, whether or not then due, any and all balances, credits, deposits, accounts or moneys of such Grantor then or thereafter with Agent or such Lender.
8.15. Acknowledgements. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;
(b) it has received a fully executed copy of this Agreement;
(c) neither Agent nor any Lender has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and Agent and Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(d) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among Lenders or among the Grantors and Lenders.
8.16. Additional Grantors. Each Loan Party that is required to become a party to this Agreement pursuant to Section 6.8 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Loan Party of a joinder agreement in the form of Annex I hereto.
8.17. Releases.
(a) At such time as the Secured Obligations have been Paid in Full, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, Agent shall deliver to the Grantors any Collateral held by Agent hereunder, and execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold or otherwise disposed of by any Grantor in a transaction permitted by the Credit Agreement, then Agent, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral, so long as Borrower delivers to Agent a certificate of an officer of Borrower as to such sale or disposition being made in compliance with the Loan Documents. At the request and sole expense of Borrower, a Subsidiary Guarantor shall be released from its obligations hereunder in the event that all the equity interests of such Subsidiary Guarantor shall be sold, transferred, liquidated, dissolved or otherwise disposed of in a transaction permitted by the Credit Agreement; provided that Borrower shall have delivered to Agent, with reasonable notice prior to the date of the proposed release, a written request for release identifying the relevant Subsidiary Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents.
8.18. Obligations and Liens Absolute and Unconditional. Each Grantor understands and agrees that the obligations of each Grantor under this Agreement shall be construed as continuing, absolute and unconditional without regard to (a) the validity or enforceability of any Loan Document, any of the Secured Obligations or any other collateral security therefor or guaranty or right of offset with respect thereto at any time or from time to time held by Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Grantor or any other Person against Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of any Grantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of any Grantor for the Secured Obligations, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Grantor, Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against any other Grantor or any other Person or against any collateral security or guaranty for the Secured Obligations or any right of offset with respect thereto, and any failure by Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from any other Grantor or any other Person or to realize upon any such collateral security or guaranty or to exercise any such right of offset, or any release of any other Grantor or any other Person or any such collateral security, guaranty or right of offset, shall not relieve any Grantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of Agent or any Lender against any Grantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
8.19. Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Grantor or any Issuer for liquidation or reorganization, should any Grantor or any Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of any Grantor’s or any Issuer’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
8.20. Conflicting Terms. In the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Credit Agreement, the terms of the Credit Agreement shall control.
8.21. Subordination. The security interest granted herein is subject to an Intercreditor Agreement between Agent and ACF. In the event of any conflict or inconsistency between the terms of such Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall control.
[Signature page follows]
Each of the undersigned has caused this Guarantee and Collateral Agreement to be duly executed and delivered as of the date first above written.
GRANTOR:
HOOPER HOLMES, INC.,
a New York corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
HOOPER WELLNESS, LLC
a Kansas limited liability company
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
JEFFERSON ACQUISITION, LLC,
a Kansas limited liability company
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
HOOPER INFORMATION SERVICES, INC.,
a New Jersey corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
MID-AMERICA AGENCY SERVICES, INCORPORATED,
a Nebraska corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
TEG ENTERPRISES, INC.,
a Nebraska corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
HOOPER DISTRIBUTION SERVICES, LLC,
a New Jersey limited liability company
By: Hooper Homes, Inc.,
its Manager
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
HOOPER KIT SERVICES, LLC,
a Kansas limited liability company
By: Hooper Homes, Inc.,
its sole Member
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
AGENT:
SWK FUNDING LLC,
as Agent
By: SWK Holdings Corporation,
its sole Manager
By: /s/ Brett Pope
Name: Brett Pope
Title: Chief Executive Officer
SCHEDULE 1
INVESTMENT PROPERTY
A. PLEDGED EQUITY
None.
B. PLEDGED NOTES
None.
C. OTHER INVESTMENT PROPERTY
None.
D. NOTICE ADDRESS
Hooper Holmes, Inc.
560 N. Rogers Road
Olathe, KS 66062
SCHEDULE 2
GRANTOR INFORMATION
|
| | | | |
Grantor
(exact legal name) | Jurisdiction of Organization | Federal Employer Identification Number | Chief Executive Office | Organizational Identification Number |
Hooper Wellness, LLC | Kansas | 47-3646005 | 560 N. Rogers Road Olathe, KS 66062 | 7921356 |
Jefferson Acquisitions, LLC | Kansas | None | 560 N. Rogers Road Olathe, KS 66062 | 4904777 |
Hooper Holmes, Inc. | New York | 22-1659359 | 560 N. Rogers Road Olathe, KS 66062 | 27454 |
Hooper Distribution Services, LLC | New Jersey | 55-0796838 | 560 N. Rogers Road Olathe, KS 66062 | 600149871 |
Hooper Information Services, Inc. | New Jersey | 22-2934927 | 560 N. Rogers Road Olathe, KS 66062 | 100393789 |
Hooper Kit Services, LLC | Kansas | 48-1208378 | 560 N. Rogers Road Olathe, KS 66062 | 2672012 |
Mid-America Agency Services, Inc. | Nebraska | 47-0720501 | 560 N. Rogers Road Olathe, KS 66062 | 971644 |
TEG Enterprises, Inc. | Nebraska | 47-0786199 | 560 N. Rogers Road Olathe, KS 66062 | 1337331 |
SCHEDULE 3
A. COLLATERAL LOCATIONS
|
| | |
Grantor | Collateral Location or Place of Business (including chief executive office) | Owner/Lessor (if leased) |
Hooper Wellness, LLC | 560 N. Rogers Road Olathe, KS 66062 | 96-OP Prop, L.L.C. |
Jefferson Acquisitions, LLC | 560 N. Rogers Road Olathe, KS 66062 | 96-OP Prop, L.L.C. |
Hooper Holmes, Inc. | 560 N. Rogers Road Olathe, KS 66062 | 96-OP Prop, L.L.C. |
Hooper Distribution Services, LLC | 560 N. Rogers Road Olathe, KS 66062 | 96-OP Prop, L.L.C. |
Hooper Information Services, Inc. | 560 N. Rogers Road Olathe, KS 66062 | 96-OP Prop, L.L.C. |
Hooper Kit Services, LLC | 560 N. Rogers Road Olathe, KS 66062 | 96-OP Prop, L.L.C. |
Mid-America Agency Services, Inc. | 560 N. Rogers Road Olathe, KS 66062 | 96-OP Prop, L.L.C. |
TEG Enterprises, Inc. | 560 N. Rogers Road Olathe, KS 66062 | 96-OP Prop, L.L.C. |
B. COLLATERAL IN POSSESSION OF LESSOR,
BAILEE, CONSIGNEE OR WAREHOUSEMAN
|
| | |
Grantor | Collateral | Lessor/Bailee/Consignee/Warehouseman |
None. | All Collateral (other than Excluded Collateral) located at the leased premises.
| |
| | |
| | |
SCHEDULE 4
INTELLECTUAL PROPERTY
Patents
None.
See Exhibit Schedule 4.1 – Inventory of URL and domain name registration (Part 1)
See Exhibit Schedule 4.2 – Inventory of URL and domain name registration (Part 2)
Copyrights
None.
Trademarks
|
| | | |
Trademark | Application Number/Date | Registration Number/Date | Status |
HOOPER HOLMES
| 75/789,749 September 1, 1999 | 2,438,158 March 27, 2001 | Registered |
HOOPER HOLMES & LOGO | 77/288,338 September 25, 2007 | 3,559,666 January 13, 2009 | Registered |
Mask Works
None.
The following Intellectual Property acquired by Jefferson Acquisition, LLC in the Project Jefferson:
|
| | |
Registered IP | Trade names: Accountable Health Solutions Trademarks: None Service marks: iConnect (unregistered service mark) Domain names:
|
| fbtwellness.com | nhwellness365.com |
| fhlbwellness.com | nipponlifewellness.com |
| fortinetwellness.com | opecwellness.com |
| gafwellness.com | owenwellness.com |
| gmchealthquest.com | pathtowellness.info |
| gmchealthquestion.org | pfgwellness.com |
| gpwellnesship.com | phillipsmedisizestayingpositive.com |
| greenhillsrcwellness.com | pioneerwellnesscenter.com |
| hayneedlewellness.com | pmcwellnessworks.com |
| healthmatterstx.com | principalwellnesscompany.com |
| hillviewfitforlife.com | proliancewellness.com |
| hwy2hlth.com | psplwell.com |
| hyveewellness.com | pvmchealthwise.com |
| jdsucanadahealthyconnections.com | pwc123.com |
| jdsuhealthyconnections.com | pwc1234.com |
| jmwhighqualityliving.com | pwc1234.xyz |
| jslwellness.com | pwcemployees.com |
| konamipath.com | regalbeloitwellness.com |
| kpsfit.com | regalwellnesscanada.com |
| ksmwellness.com | regalwellnessmexico.com |
| lendmarkhealthfit.com | rsiwellness.com |
| livewellchildrens.com | schurzwellness.com |
| livewellmbi.com | sgiwellness.com |
| livewellmoritz.com | sncwellnessforus.com |
| lnajourneytowellness.com | srabrightrewards.com |
| mccainwellnessforlife.com | suncokewellness.com |
| measwellness.com | swsinvestinwellness.com |
| mehcwellness.com | takeaction.co |
| meriterwellness.com | thisisnoblewellness.com |
| meritresourcesbenefits.com | thompsoncoburnwellness.com |
| meritwellness.com | ticcraftwellness.com |
| metalsaleswellness.com | totalfitteam.com |
| mgcommittobefit.com | totallyfitteam.com |
| mhawellnessforlife.com | trbridgetohealth.com |
| mhpbbt.com | trihydrowellness.com |
| muscowellness.com | twmcwellness.com |
| myaccountablehealthwellness.com | walkingwarriors.com |
| myexpresswellness.com | wellmarkwellness.com |
| myhealthymac.com | wellnessatreliance.com |
| myjmwellness.com | wellnessbartwest.com |
| mykiewitwellness.com | wellnessfourme.com |
| myliihealthmatters.com | wellnessvitalsigns.com |
| myprincipalwellness.com | window2wellness.com |
| myrestorewellness.com | winegardwellness.com |
| myunitywellness.com | diabetesconnected.com |
| ncrwellness.com | wellnessconnectasthma.com |
| newwestwellness.com | wellnessconnectdiabetes.com |
| nfpwellness.com | wellnessconnectsleep.com
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IP owned | • Accountable Health Solutions Wellness Portal: A key aspect of the Accountable Health Solutions business is its internally developed internet-based wellness portal. The portal is customizable and flexible. The portal contains and displays key client and member-facing information, including a wellness assessment and educational materials • iConnect.
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IP licensed | AppDynamaics AssureBridge Atlassian Kenai Design Studio (WMS) Navigate Wellness, LLC, d/b/a Live Health America (LHA) Orbeon, Inc. Qlik Tech Inc. Rackspace Xtivia Inc / Liferay Iron. Io MailGun MySql Clustering Nprinting Barracuda
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Software related to the business (other than off-the-shelf, shrink-wrapped or click-wrapped) | AppDynmaics Orbeon, Inc. Qlik Tech Inc Rackspace Xtivia Inc / Liferay |
SCHEDULE 5
DEPOSIT ACCOUNTS AND OTHER ACCOUNTS
|
| | | | |
Bank | Account # | Name on Account | Type | Status |
Central Bank of the Midwest | *****8928 | Hooper Holmes Inc | Checking | Open |
Central Bank of the Midwest | *****4502 | Hooper Kit Services, LLC | Checking | Open |
Central Bank of the Midwest | *****5233 | Hooper Kit Services, LLC | Lockbox | Open |
Central Bank of the Midwest | *****8944 | Hooper Information Services Inc | Checking | Open |
Central Bank of the Midwest | *****8936 | APS - Hooper Holmes Inc | Checking | Open |
American National Bank | ******4939 | Mid-America Agency Services | Checking | Open |
American National Bank | ******9328 | Mid-America Agency Services | Checking | Closed |
TD AmeriTrade | ******2525 | Hooper Holmes Inc | Checking | Open |
TD AmeriTrade | ******3119 | Hooper Holmes Inc | Money Market | Open |
SCHEDULE 6
COMMERCIAL TORT CLAIMS
1. Potential claim against examiners arising out of their fraudulent billing practices. This claim and the prospects for recovering are still being investigated by Borrower. No claim has been filed in court.
SCHEDULE 7
EXCLUDED PROPERTY
None.
SCHEDULE 8
HEALTH CARE INSURANCE RECEIVABLES
None.
ANNEX I
FORM OF JOINDER TO GUARANTEE AND COLLATERAL AGREEMENT
This JOINDER AGREEMENT (this “Agreement”) dated as of [____________], 20[__] is executed by the undersigned for the benefit of SWK Funding LLC, as Agent (the “Agent”) in connection with that certain Guarantee and Collateral Agreement dated as of April 17, 2015 among the Grantors party thereto and Agent (as amended, supplemented or modified from time to time, the “Guarantee and Collateral Agreement”). Capitalized terms not otherwise defined herein are being used herein as defined in the Guarantee and Collateral Agreement.
Each Person signatory hereto is required to execute this Agreement pursuant to Section 8.16 of the Guarantee and Collateral Agreement.
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each signatory hereby agrees as follows:
1. Each such Person assumes all the obligations of a Grantor and a Guarantor under the Guarantee and Collateral Agreement and agrees that such Person is a Grantor and a Guarantor and bound as a Grantor and a Guarantor under the terms of the Guarantee and Collateral Agreement, as if it had been an original signatory to the Guarantee and Collateral Agreement. In furtherance of the foregoing, such Person hereby (i) assigns, pledges and grants to Agent a security interest in all of its right, title and interest in and to the Collateral owned thereby to secure the Secured Obligations and (ii) guarantees the prompt and complete payment and performance by Borrower when due (whether at the stated maturity, by acceleration or otherwise) of Borrower Obligations.
2. Schedules 1, 2, 3, 4, 5, 6, 7, and 8 of the Guarantee and Collateral Agreement are hereby amended to add the information relating to each such Grantor set forth in Schedules 1, 2, 3, 4, 5, 6, 7, and 8, respectively, hereof. Each such Person hereby makes to Agent the representations and warranties set forth in the Guarantee and Collateral Agreement applicable to such Person and the applicable Collateral and confirms that such representations and warranties are true and correct after giving effect to such amendment to such Schedules.
3. In furtherance of its obligations under Section 5.2 of the Guarantee and Collateral Agreement, each such Person authorizes Agent to file appropriately complete Code financing statements naming such person or entity as debtor and Agent as secured party, and describing the Collateral, and agrees to execute and deliver such other documentation as Agent (or its successors or assigns) may require to evidence, protect and perfect the Liens created by the Guarantee and Collateral Agreement, as modified hereby.
4. Each such Person’s address and fax number for notices under the Guarantee and Collateral Agreement shall be that of the Borrower as set forth in the Guarantee and Collateral Agreement.
5. This Agreement shall be deemed to be part of, and a modification to, the Guarantee and Collateral Agreement and shall be governed by all the terms and provisions of the Guarantee and Collateral Agreement, with respect to the modifications intended to be made to such agreement, which terms are incorporated herein by reference, are ratified and confirmed and shall continue in full force and effect as valid and binding agreements of each such person or entity enforceable against such person or entity. Each such person or entity hereby waives notice of Agent’s acceptance of this Agreement. Each such person or entity will deliver an executed original of this Agreement to Agent.
[add signature block for each new Grantor and an acknowledgement by each existing Grantor]
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT dated as of April 17, 2015 (this "Agreement") by SWK Funding LLC (in its individual capacity, “SWK”), as Agent for the lenders party to the Credit Agreement of even date herewith among Hooper Holmes, Inc., a New York corporation (the “Borrower”), the lenders party thereto (the “Junior Lenders”), and SWK, as agent (the “Agent”) for the Junior Lenders (the Agent and the Junior Lenders being hereinafter referred to collectively as the "Junior Lender"), in favor of ACF FinCo I LP, as assignee of Keltic Financial Partners II, LP, a Delaware limited partnership (the “Senior Lender”).
W I T N E S S E T H:
WHEREAS, the Junior Lender desires to make a second lien term loan to the Borrower in the original principal amount of $5,000,000 (such loan, including any amendment, restatement, extension or other modification of such loan and any promissory note or documentation related thereto, the “Junior Loan”);
WHEREAS, the Borrower and its wholly owned subsidiaries, Hooper Wellness, LLC (“Hooper Wellness”), Hooper Distribution Services, LLC, Hooper Information Services, Inc., Hooper Kit Services, LLC, Mid-America Agency Services, Incorporated and TEG Enterprises, Inc., and Jefferson Acquisition, LLC, a wholly owned subsidiary of Hooper Wellness (collectively, the “Hooper Subsidiaries,” and together with the Borrower, the “Obligors”), are granting security interests in all of their assets as security for the Junior Obligations (as defined below), and the Hooper Subsidiaries are guarantying the Obligations (as defined in the Junior Loan Agreement referred to below);
WHEREAS, the Borrower and the Senior Lender are parties to the Loan and Security Agreement, dated as of February 28, 2013, as amended through the date hereof (the “Senior Loan Agreement”), between the Senior Lender and the Borrower;
WHEREAS, the Senior Loan Agreement prohibits the incurrence by the Borrower of the secured indebtedness under the Junior Loan Agreement and the granting of a lien by the Borrower to secure such indebtedness and the Borrower has requested that the Senior Lender consent to the incurrence by the Borrower of such indebtedness and the granting of such lien; and
WHEREAS, the Senior Lender has agreed to consent to the incurrence by the Borrower of the indebtedness under the Junior Loan Agreement and the granting of a lien by the Borrower to secure such indebtedness subject to the Junior Lender having executed and delivered this Agreement subordinating the Liens and certain rights of the Junior Lender with respect to the Junior Obligations to the Liens and certain rights of the Senior Lender with respect to the Senior Obligations (as defined below);
NOW, THEREFORE, in consideration of the promises contained herein, the Senior Lender and the Junior Lender agrees as follows:
Section 1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Senior Loan Agreement.
"Bankruptcy Code" means the provisions of Title 11 of the United States Code, 11 U.S.C. §§101 et seq.
"Business Day" means any day of the year that is not a Saturday, a Sunday or a day on which banks are required or authorized to close in New York City.
“Collateral” means all assets and properties of any kind whatsoever, real or personal, tangible or intangible and wherever located, of the Obligors, whether now owned or hereafter acquired, upon which a Lien (including, without limitation, any Liens granted in any Insolvency Proceeding) is now or hereafter granted or purported to be granted by an Obligor in favor of a Secured Creditor, as security for all or any part of the Obligations.
"Debt Action" means (a) the filing of a lawsuit by any Secured Creditor solely to collect the Obligations owed to such Secured Creditor and not to exercise their secured creditor remedies in respect of the Collateral, (b) the demand by any Secured Creditor for accelerated payment of any and all of the Obligations owed to such Secured Creditor, (c) the filing of any notice of claim or statement of interest and the voting of any such claim or interest in any Insolvency Proceeding involving an Obligor, (d) the filing of any motion in any Insolvency Proceeding permitted under Section 4 or (e) the filing of any defensive pleading in any Insolvency Proceeding consistent with the terms of this Agreement; provided, however, that any Lien obtained by a Secured Creditor in respect of a Debt Action shall be subject to and governed by the terms of this Agreement.
“DIP Cap” shall have the meaning set forth in Section 4(b).
“DIP Financing” shall have the meaning set forth in Section 4(b).
“DIP Liens” shall have the meaning set forth in Section 4(b).
"Disposition" means any sale, lease, exchange, transfer or other disposition, and "Dispose" and shall have the correlative meaning.
"Enforcement Action" means (a) any action by any Secured Creditor to foreclose on the Lien of any Person in any Collateral, (b) any action by any Secured Creditor to take possession of (other than taking "possession" (as such term is defined in the UCC) for the sole purpose of perfecting such Secured Creditor's Lien on such Collateral), or sell or otherwise realize upon, or to exercise any other rights or remedies with respect to, any Collateral, including any Disposition after the occurrence of an Event of Default of any Collateral by an Obligor with the consent of, or at the direction of, a Secured Creditor so long as such Disposition is (i) on commercially reasonable terms, (ii) on an arm's length basis and (iii) to a buyer not an affiliate of an Obligor, (c) the taking of any other actions by a Secured Creditor against any Collateral, including the taking of control or possession of (other than taking "control" or "possession" (as such terms are defined in the UCC)), or the exercise of any right of setoff with respect to, any Collateral and/or (d) the commencement by any Secured Creditor of any legal proceedings or actions against or with respect to an Obligor or an Obligor's property or assets or any Collateral to facilitate any of the actions described in clauses (a), (b) and (c) above, provided that this definition shall not include any Debt Action or the commencement of any Insolvency Proceeding.
“Excess Senior Obligations" means the Senior Obligations that are in excess of the Maximum Senior Principal Amount.
"Final Order" means an order of the applicable bankruptcy court or any other court of competent jurisdiction as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending, or, in the event that an appeal, writ of certiorari, or reargument or rehearing thereof has been filed or sought, such order of such bankruptcy court or other court of competent jurisdiction shall have been affirmed by the highest court to which such order was appealed, or from which certiorari, reargument or rehearing was sought, and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired, provided that the possibility that a motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure or any analogous rule under the Federal Rules of Bankruptcy Procedure or applicable state court rules of civil procedure may be filed with respect to such order shall not cause such order not to be a Final Order.
“Insolvency Proceeding” shall mean, with respect to an Obligor any other any Person, the occurrence of any of the following: (i) such Person shall be adjudicated insolvent or bankrupt or institutes proceedings to be adjudicated insolvent or bankrupt, or shall generally fail to pay or admit in writing its inability to pay its debts as they become due, (ii) such Person shall seek dissolution or reorganization or the appointment of a receiver, trustee, custodian or liquidator for it or a substantial portion of its property, assets or business or to effect a plan or other arrangement with its creditors, (iii) such Person shall make a general assignment for the benefit of its creditors, or consent to or acquiesce in the appointment of a receiver, trustee, custodian or liquidator for a substantial portion of its property, assets or business, (iv) such Person shall file a voluntary petition under any bankruptcy, insolvency or similar law, (v) such Person shall take any corporate or similar act in furtherance of any of the foregoing, or (vi) such Person, or a substantial portion of its property, assets or business, shall become the subject of an involuntary proceeding or petition for (A) its dissolution or reorganization or (B) the appointment of a receiver, trustee, custodian or liquidator, and (I) such proceeding shall not be dismissed or stayed within sixty days or (II) such receiver, trustee, custodian or liquidator shall be appointed.
“Junior Adequate Protection Lien” shall have the meaning set forth in Section 4(d).
"Junior Default" means any "Event of Default" under the Junior Loan Agreement.
"Junior Default Notice" means with respect to the Junior Loan Agreement, a written notice from the Junior Lender to the Senior Lender, with a copy to the Borrower, indicating that a Junior Default has occurred and describing such Junior Default in reasonable detail.
“Junior Guarantee and Collateral Agreement” shall mean that certain Guarantee and Collateral Agreement of even date herewith by the Obligors in favor of SWK, as Agent for the Junior Lenders, as amended, supplemented or otherwise modified from time to time.
“Junior Loan Agreement” shall mean that certain Credit Agreement of even date herewith among the Borrower, the Junior Lenders and SWK, as Agent for the Junior Lenders, as amended, supplemented or otherwise modified from time to time.
"Junior Obligations" shall mean all Obligations (as defined in the Junior Loan Agreement)and all Guaranteed Obligations (as defined in the Junior Guarantee and Collateral Agreement), whether now existing or hereafter created or incurred, and whether they are or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several, all interest thereon, and all fees, costs and other charges related thereto (including all interest, fees, costs and other charges accruing after the commencement of any Insolvency Proceeding including the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of an Obligor, whether or not allowed in such case, proceeding or other action), all renewals, extensions and modifications thereof and any notes issued in whole or partial substitution therefor.
“Lien” shall mean any lien, claim, charge, pledge, security interest, assignment, hypothecation, deed of trust, mortgage, lease, conditional sale, retention of title or other preferential arrangement having substantially the same economic effect as any of the foregoing, whether voluntary or imposed by law.
"Maximum Senior Principal Amount" means, as of any date of determination, (a) $7,000,000 plus (b) any additional principal amounts advanced by the Senior Lender under the Senior Loan Agreement not to exceed $700,000 plus (c) interest, fees, costs, expenses, indemnities and other amounts payable pursuant to the terms of the Senior Loan Agreement, to the extent the same are added to the principal amount of the Senior Obligations, and all permanent reductions of revolving loan commitments under the Senior Loan Agreement after the date hereof, other than as a result of a refinancing of the Senior Obligations.
"Obligations" means the Senior Obligations and the Junior Obligations, or any of them, as the context may require.
“Payment in Full” or “Paid in Full” shall mean the full, final and indefeasible payment of the Senior Obligations in cash or immediately available funds
"Purchase Notice" shall have the meaning set forth in Section 6(a).
"Post-Petition Interest" shall mean interest on the Senior Obligations at the rate stated in the Senior Loan Agreement from the date of the filing by or against an Obligor of a petition under any bankruptcy, insolvency or similar law to the date of the indefeasible payment in full of the Senior Obligations.
“Release Documents” means, with respect to the Collateral, terminations of financing statements, partial lien releases, mortgage satisfactions and discharges, endorsements, assignments or other instruments of transfer, termination or release.
"Release Event" means the taking of any Enforcement Action to Dispose of Collateral by the Senior Lender or, after the occurrence and during the continuance of an Insolvency Proceeding, the entry of an order of the Bankruptcy Court pursuant to Section 363 of the Bankruptcy Code authorizing the sale of all or any portion of the Collateral conducted in accordance with Section 4(f).
“Recovery” shall have the meaning set forth in Section 4(e).
“Reorganization Security” shall have the meaning set forth in Section 4(i).
"Secured Creditors" means the Senior Lender and the Junior Lender, or any of them.
“Senior Adequate Protection Lien” shall have the meaning set forth in Section 4(b).
“Senior Default” shall mean a Default or Event of Default as defined in the Senior Loan Agreement.
"Senior Default Notice" means with respect to the Senior Loan Agreement, a written notice from the Senior Lender to the Junior Lender, with a copy to the Borrower, indicating that a Senior Default has occurred and describing such Senior Default in reasonable detail.
"Senior Obligations" shall mean all Obligations (as defined in the Senior Loan Agreement), whether now existing or hereafter created or incurred, and whether they are or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several, all interest thereon, and all fees, costs and other charges related thereto (including all interest, fees, costs and other charges accruing after the commencement of any Insolvency Proceeding including the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of an Obligor, whether or not allowed in such case, proceeding or other action), all renewals, extensions and modifications thereof and any notes issued in whole or partial substitution therefor.
“Senior Termination” has the meaning specified in Section 8.
"Standstill Period" means the period commencing on the date of (a) a Junior Default and ending upon the date which is the earlier of (i) 180 days after the Senior Lender has received a Junior Default Notice with respect to such Junior Default and (ii) the date on which the Senior Obligations (other than the Excess Senior Obligations) have been Paid in Full or (b) a Senior Default and ending upon the date which is the earlier of (i) 180 days after the Junior Lender has received a Senior Default Notice with respect to such Senior Default and (ii) the date on which the Senior Obligations have been Paid in Full.
"UCC" means the Uniform Commercial Code of any applicable jurisdiction and, if the applicable jurisdiction shall not have any Uniform Commercial Code, the Uniform Commercial Code as in effect in the State of New York.
"UCC Notice" shall have the meaning set forth in Section 2(g).
Section 2. Suspension of Payment; Subordination in Insolvency Proceeding; Lien Priority; Collateral Management.
(a) Payments to Junior Lender. Prior to Senior Termination, commencing on the date that the Junior Lender receives a Senior Default Notice, the Junior Lender shall not be entitled to receive or retain any payment in respect of the Junior Obligations through the end of the earlier of (i) the Standstill Period commencing on such date of receipt of the Senior Default Notice, or (ii) the date upon which the Senior Default referenced in the Senior Default Notice is either cured by the Borrower or another Obligor or waived by the Senior Lender. If the Junior Lender receives any payment in respect of the Junior Obligations during such Standstill Period, the Junior Lender will hold the amount so received in trust for the Senior Lender and will forthwith turn over such payment to the Senior Lender in the form received (except for the endorsement of the Junior Lender where necessary) for application to then‑existing Senior Obligations (whether or not due), in such manner of application as the Senior Lender may deem appropriate. If the Junior Lender fails to make any endorsement required under this Agreement, the Senior Lender, or any of its officers or employees or agents on behalf of the Senior Lender, is hereby irrevocably appointed as the attorney‑in‑fact (which appointment is coupled with an interest) for the Junior Lender to make such endorsement in the Junior Lender's name.
(a) Distributions. Upon any distribution to creditors of an Obligor in a liquidation or dissolution of such Obligor or upon the commencement of any Insolvency Proceeding: (i) the holders of the Senior Obligations shall be entitled to receive payment in full in cash, or to have such payment duly provided for, of all amounts payable under or in respect of the Senior Obligations (including Post-Petition Interest accrued after the commencement of such Insolvency Proceeding at the rate provided in the Senior Loan Agreement) before the Junior Lender shall be entitled to receive from such Obligor or its assets any payment under or in respect of the Junior Obligations and (ii) until the holders of the Senior Obligations have received such payment in full in cash, or such payment is duly provided for, any distribution from such Obligor or its assets to which the Junior Lender would otherwise be entitled shall be made to the holders of the Senior Obligations. Subject to Senior Termination, the Junior Lender shall be subrogated to the rights of the holders of the Senior Obligations to receive payments or distributions in cash or property applicable to the Senior Obligations, and no payment or distribution made to the Senior Lender by virtue of this Agreement that otherwise would have been made to the Junior Lender shall be deemed to be a payment by such Obligor on account of the Junior Obligations, it being understood that the provisions of this Section 2(b) are intended solely for the purpose of defining the relative rights of the Junior Lender, on the one hand, and the Senior Lender, on the other hand.
(b) Priorities. Each of the Senior Lender and the Junior Lender hereby acknowledges that the Secured Creditors have been granted Liens upon the Collateral to secure their respective Obligations. Until the Senior Termination has occurred, the Liens of the Senior Lender on the Collateral securing the Senior Obligations (other than the Excess Senior Obligations) are and shall be senior and prior in right to the Liens of the Junior Lender on the Collateral securing the Junior Obligations, and such Liens of the Junior Lender on the Collateral securing the Junior Obligations are and shall be junior and subordinate to the Liens of the Senior Lender on the Collateral securing the Senior Obligations. Any Liens of the Senior Lender on the Collateral securing the Excess Senior Obligations are and shall be junior and subordinate in all respects to the Liens of the Junior Lender on the Collateral securing the Junior Obligations. The priorities of the Liens provided in this Section 2(c) shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement, replacement or refinancing of any of the Obligations, nor by any action or inaction which any of the Secured Creditors may take or fail to take in respect of the Collateral. The subordination of the Liens provided for in this Section 2(c) affects only the relative priority of those Liens, and does not subordinate any Obligations in right of payment to any other Obligations. Nothing in this Agreement will affect the entitlement of the Junior Lender to receive and retain payments of interest, principal and other amounts in respect of the Junior Obligations unless the receipt is expressly prohibited by this Agreement.
(c) No Alteration of Priority. The priorities set forth in this Agreement are applicable irrespective of the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a Lien in favor of each Secured Creditor in any Collateral, and notwithstanding any conflicting terms or conditions which may be contained in any documents.
(d) Challenge to Liens. Each of the Senior Lender and the Junior Lender agrees that it will not (and hereby waives any right to) directly or indirectly contest or support any other Person (including a committee in any Insolvency Proceeding) in contesting, in any proceeding (including any Insolvency Proceeding), the perfection, priority, validity, extent or enforceability of a Lien held, or purported to be held, by or on behalf of the Senior Lender or the Junior Lender in Collateral or the provisions of this Agreement, provided that nothing in this Agreement shall be construed to prevent or impair the rights of the Senior Lender or the Junior Lender to enforce this Agreement, including the provisions of this Agreement relating to the priority of the Liens.
(e) Proceeds of Collateral. Unless the Senior Obligations (other than Excess Senior Obligations) have been Paid in Full, any Collateral or proceeds thereof received by the Junior Lender, or any payment or distribution, that may be received by the Junior Lender (other than Reorganization Securities) (i) in connection with the exercise of any right or remedy (including any right of setoff) with respect to the Collateral, (ii) in connection with any insurance policy claim or any condemnation award (or deed in lieu of condemnation) in respect of the Collateral, (iii) from the collection or other Disposition of, or realization on, the Collateral by the Junior Lender whether or not pursuant to an Insolvency Proceeding or (iv) in violation of this Agreement, shall be segregated and held in trust and promptly paid over to the Senior Lender.
(f) Management of Collateral. Until Payment in Full of the Senior Obligations (other than Excess Senior Obligations), subject to the other terms and conditions of this Agreement, the Senior Lender shall have the exclusive right to manage, perform and enforce the terms of the Senior Loan Agreement with respect to the Collateral, including, without limitation, prosecuting Enforcement Actions, to exercise and enforce all privileges and rights thereunder according to their sole discretion and the exercise of their sole business judgment, including the exclusive right to take or retake control or possession of the Collateral and to hold, prepare for sale, process, Dispose of, or liquidate the Collateral and to incur expenses in connection with such Disposition and to exercise all the rights and remedies of a secured lender under the UCC of any applicable jurisdiction. In conducting any public or private sale under the UCC, the Senior Lender shall give the Junior Lender such notice (a "UCC Notice") of such sale as may be required by the applicable UCC; provided, however, that 10 days' notice shall be deemed to be commercially reasonable notice. Except as specifically provided in this Section 2(g) or Section 2(h) below, notwithstanding any rights or remedies available to a Junior Lender under any of the Junior Loan Agreement, applicable law or otherwise, until Payment in Full of the Senior Obligations (other than Excess Senior Obligations), no Junior Lender shall, directly or indirectly, take any Enforcement Action, provided that upon the expiration of the applicable Standstill Period, the Junior Lender may take any Enforcement Action (provided that it gives the Senior Lender at least 10 days written notice prior to taking such Enforcement Action, which notice may be given during the pendency of the applicable Standstill Period); provided further, however, that, notwithstanding the expiration of a Standstill Period or anything herein to the contrary, in no event shall the Junior Lender exercise or continue to exercise any such rights or remedies, or commence or petition for any such action or proceeding (including any foreclosure action or proceeding or any Insolvency Proceeding) if the Senior Lender shall have commenced the enforcement or exercise of any rights or remedies with respect to any of the Collateral or any such action or proceeding (including, without limitation, any of the following) has occurred and is continuing: (i) the diligent pursuit of solicitation of bids from third parties to conduct the liquidation of all or any material portion of the Collateral, the engagement or retention of sales brokers, marketing agents, investment bankers, accountants, auctioneers or other third parties for the purpose of valuing, marketing, promoting or selling all or any material portion of the Collateral and such sales brokers, marketing agents, investment bankers, accountants, auctioneers or other third parties are diligently pursuing such process, (ii) the initiation of any action to take possession of all or any material portion of the Collateral or the commencement of any legal proceedings or actions against or with respect to the foreclosure and sale of all or any material portion of the Collateral, (iii) diligently attempting in good faith to vacate any stay prohibiting an Enforcement Action with respect to all or any material portion of the Collateral or any other Enforcement Action or (iv) an Insolvency Proceeding.
(g) Permitted Actions. Section 2(g) shall not be construed to limit or impair in any way the right of: (i) any Secured Creditor to bid for or purchase Collateral at any public, private or judicial foreclosure upon such Collateral initiated by any Secured Creditor provided that the Junior Lender shall not be permitted to credit bid on any Collateral at any public, private or judicial foreclosure sale unless such credit bid shall include cash in an amount sufficient to cause the Senior Obligations (other than Excess Senior Obligations) to be immediately Paid in Full, (ii) any Secured Creditor to join (but not control) any foreclosure or other judicial lien enforcement proceeding with respect to the Collateral initiated by another Secured Creditor for the sole purpose of protecting such Secured Creditor's Lien on the Collateral, so long as it does not materially delay or interfere with the exercise by such other Secured Creditor of its rights under this Agreement, the respective loan documents or applicable law, (iii) any Secured Creditor to take any Debt Action, (iv) any Secured Creditor to take action to create, perfect, preserve or protect its Lien on the Collateral, so long as such actions are not adverse to the priority status of the Liens on the Collateral set forth in this Agreement, (v) any Secured Creditor to exercise rights as an unsecured creditor in accordance with Section 4(i) hereof, provided that the Junior Lender shall not directly or indirectly participate or join in the commencement of any Insolvency Proceeding, (vi) the Junior Lender to make any filings and make any arguments and motions with respect to the Junior Obligations and the Collateral that are, in each case, in accordance with the terms of this Agreement, or (vii) the Junior Lender to receive any remaining proceeds of Collateral for application to the Junior Obligations after Payment in Full of the Senior Obligations.
(h) No Implied Waiver or Amendment. The Senior Lender shall not be prejudiced in its right to enforce subordination the Junior Lender’s Liens on the Collateral by any act or failure to act on the part of any Obligor or any other Person whether or not such act or failure shall give rise to any right of rescission or other claim or cause of action on the part of the Junior Lender.
(i) Enforceability. The provisions of this Section 2 shall be enforceable against the Obligors, the Junior Lender or the Senior Lender by the Senior Lender or any other holder of Senior Obligations, or the Junior Lender or any other holder of Junior Obligations, as the case may be.
Section 3. Covenants.
(a) Amendments to Senior Loan Agreement and Related Documents. The Senior Lender, at any time and from time to time, may, without consent of or notice to the Junior Lender, without incurring any liability to the Junior Lender and without impairing or releasing any rights or obligations hereunder or otherwise, enter into such agreements, amendments and modifications with any Obligor as the Senior Lender may deem proper, extending the time of payment of or renewing or otherwise altering the terms and conditions of the Senior Obligations; provided, however, that, without the consent of the Junior Lender, the Senior Lender shall not amend, restate, supplement, modify, substitute, renew or replace any or all of the Senior Loan Agreement or related documents, or waive any term thereof if the effect thereof would be to (i) violate or directly conflict with any provision of this Agreement, (ii) increase the Revolving Credit Rate or the Default Rate, (iii) change the final maturity date of the Senior Loan Agreement to a date later than February 28, 2019, (iv) shorten the maturity of the Senior Loan Agreement, (v) increase the principal amount of the Senior Obligations in excess of the Maximum Senior Principal Amount, or (vi) modify or add any covenant or event of default under the Senior Loan Agreement or related documents which directly restricts any Obligor from making payments under the Junior Loan Agreement which would otherwise be permitted under the Senior Loan Agreement and this Agreement as in effect on the date hereof.
(a) Amendments to Junior Loan Agreement and Related Documents. The Junior Lender may at any time and from time to time and without consent of or notice to the Senior Lender, without incurring any liability to the Senior Lender and without impairing or releasing any rights or obligations hereunder or otherwise, amend, restate, supplement, modify, substitute, renew or replace any or all of the Junior Loan Agreement; provided, however, that, until the Senior Termination has occurred, without the consent of the Senior Lender, the Junior Lender shall not amend, restate, supplement, modify substitute, renew or replace any or all of the Junior Loan Agreement or waive any term thereof if the effect thereof would be to (i) violate or directly conflict with any provision of this Agreement, (ii) directly or indirectly result in an increase in the total yield on the Junior Obligations to an amount greater than 3% per annum above such total yield that is in effect on the date hereof, (iii) shorten the maturity of the Junior Obligations or require that any payment on the Junior Obligations be made earlier than the date originally scheduled for such payment or that any commitment expire any earlier than the date originally scheduled therefor, (iv) add or modify in a manner adverse to any Obligor or the Senior Lender any covenant, agreement or event of default under the Junior Loan Agreement and related documents unless corresponding provisions of the Senior Loan Agreement have been amended or modified, with appropriate differences in the covenant and default levels and thresholds consistent with the covenants and defaults in the Senior Loan Agreement, (v) increase the principal amount of the Junior Obligations, or (vi) alter any of the subordination provisions with respect to the Junior Obligations.
(b) Turnover by Junior Lender. Prior to Payment in Full of the Senior Obligations (other than the Excess Senior Obligations), the Junior Lender shall remit to the Senior Lender, as soon as available and in any event not later than five (5) days after the receipt by the Junior Lender thereof, all cash or other property held by or on behalf of the Junior Lender constituting proceeds of the Collateral.
(c) Turnover by Senior Lender. Upon Payment in Full of the Senior Obligations (other than the Excess Senior Obligations), the Senior Lender shall remit to the Junior Lender, as soon as available and in any event not later than five (5) days after the receipt by the Senior Lender thereof, all cash or other property held by or on behalf of the Senior Lender constituting proceeds of the Collateral.
(d) Release of Collateral Upon Release Event. The Junior Lender shall, at any time in connection with a Release Event with respect to any Collateral: (i) upon the request of the Senior Lender with respect to the Collateral subject to such Release Event (which request will specify the principal proposed terms of the sale and the type and amount of consideration expected to be received in connection therewith), release or otherwise terminate its Liens on such Collateral, to the extent the Disposition of such Collateral is either by the Senior Lender or its agents or representatives or any Obligor at the direction of the Senior Lender in accordance with the definition of Enforcement Action and (ii) deliver such Release Documents and take such further actions as Senior Lender may reasonably require in connection therewith, provided that, (A) such release by the Junior Lender shall not extend to or otherwise affect any of the rights of the Junior Lender to the proceeds from any such Disposition of Collateral, (B) the Senior Lender shall promptly apply such proceeds to pay the Senior Obligations until the same have been Paid in Full (together with a concurrent reduction of the Maximum Senior Principal Amount by the amount of such payment), (C) such release or termination shall occur concurrently with the release or termination of the Senior Lender's security interest in the Collateral subject to such Release Event and (D) no such release and/or authorization documents shall be delivered (x) to the Borrower or any other Obligor or (y) more than 2 Business Days prior to the date of the closing of the Disposition of such Collateral, provided further that, if the closing of the Disposition of the Collateral subject to such Release Event is not consummated within 30 days of the proposed date of closing or any agreement governing such Disposition is terminated, the Senior Lender shall promptly, upon the Junior Lender's request, return all Release Documents to the Junior Lender.
Section 4. Insolvency Proceedings.
(a) Bankruptcy. This Agreement shall be applicable both before and after the filing of any petition by or against the Borrower under the Bankruptcy Code or any other Insolvency Proceeding and all converted or succeeding cases in respect thereof, and all references herein to an Obligor shall be deemed to apply to the trustee for such Obligor and such Obligor as a debtor-in-possession. The relative rights of the Senior Lender and the Junior Lender in respect of any Collateral or proceeds thereof shall continue after the filing of such petition on the same basis as prior to the date of such filing, subject to any court order approving the financing of, or use of cash collateral by, the applicable Obligor. This Agreement shall constitute a "subordination agreement" for the purposes of Section 510(a) of the Bankruptcy Code and shall be enforceable in any Insolvency Proceeding in accordance with its terms.
(b) Financing Matters. If an Obligor becomes subject to any Insolvency Proceeding, and if the Senior Lender desires to consent (or not object) to the sale, use or lease of cash or other collateral under the Bankruptcy Code or otherwise to provide financing to such Obligor under the Bankruptcy Code or otherwise or to consent (or not object) to the provision of such financing to such Obligor by any third party (a “DIP Financing”), then the Junior Lender agrees that (i) to the extent the aggregate principal amount of loans outstanding under any such DIP Financing together with the aggregate outstanding principal amount of the pre-petition Senior Obligations does not exceed 110% of the aggregate outstanding principal amount of the Senior Obligations immediately prior to the commencement of the Insolvency Proceedings (the "DIP Cap"), such DIP Financing (and any Senior Obligations not in excess of the Maximum Senior Principal Amount which arose prior to the Insolvency Proceeding) may be secured by Liens on all or a part of the assets of such Obligor which shall be superior in priority to the Liens on the assets of such Obligor held by any other Person, (ii) notice received three (3) Business Days prior to the entry of an interim order approving such DIP Financing and notice received fourteen (14) calendar days prior to entry of a Final Order approving such DIP Financing, shall be adequate notice, (iii) so long as the aggregate principal amount of such DIP Financing does not exceed the DIP Cap, the Junior Lender will not request or accept adequate protection or any other relief in connection with such DIP Financing except as set forth in Section 4(d) below, (iv) to the extent the aggregate principal amount such DIP Financing does not exceed the DIP Cap, the Junior Lender will subordinate (and will be deemed hereunder to have subordinated) the Liens securing the Junior Obligations (A) to the Liens securing such DIP Financing (the "DIP Liens") on the same terms (but on a basis junior to the Liens of the Senior Lender) as the Liens of the Senior Lender are subordinated thereto (and such subordination will not alter in any manner the terms of this Agreement), and (B) to any "replacement Lien" granted to the Senior Lender as adequate protection of its interests in the Collateral (the "Senior Adequate Protection Lien"), provided that, to the extent the aggregate principal amount such DIP Financing is in excess of the DIP Cap, such excess amount shall be subordinated to the Junior Obligations and (v) subject to Section 4(d) below, the Junior Lender shall not contest or oppose in any manner any adequate protection provided to the Senior Lender as adequate protection of its interests in the Collateral, or any DIP Financing, and shall be deemed to have waived any objections to such adequate protection, or DIP Financing, including, without limitation, any objection alleging such Obligor’s failure to provide "adequate protection" of the interests of the Junior Lender in the Collateral, provided, for purposes of the consents and limitations set forth in clauses (i) through (v) of this Section, that the DIP Financing does not by its express terms require such Obligor to (x) propose a specific plan of reorganization, or (y) sell substantially all of such Obligor’s assets, other than as a result of and after the occurrence of an event of default under such DIP Financing. It is understood and agreed that the foregoing provisions of this Section 4(b) shall not limit the right of the Junior Lender to object to any motion regarding DIP Financing but only (x) to the extent that the DIP Financing contravenes the requirements of this Section 4(b), or (y) such objection is based upon the Junior Lender’s rights under Section 4(j).
(c) Relief From the Automatic Stay. The Junior Lender agrees that it will not seek relief from the automatic stay or from any other stay in any Insolvency Proceeding unless the Senior Lender requests relief from such stay.
(d) Adequate Protection. Notwithstanding the foregoing provisions in this Section 4, in any Insolvency Proceeding, if the Senior Lender is granted adequate protection in the form of Senior Adequate Protection Liens, the Junior Lender may seek (and the Senior Lender may not oppose) adequate protection of its interests in the Collateral in the form of (i) a "replacement Lien" on the additional collateral subject to the Senior Adequate Protection Liens (the "Junior Adequate Protection Lien"), which Junior Adequate Protection Lien, if granted, will be subordinate to all Liens securing the Senior Obligations (including, without limitation, the Senior Adequate Protection Liens) and any Liens securing debtor-in-possession financing (whether or not constituting DIP Financing) on the same basis as the other Liens securing the Junior Obligations are so subordinated under this Agreement (provided that any failure of the Junior Lender to obtain such Junior Adequate Protection Liens shall not impair or otherwise affect the agreements, undertakings and consents of the Junior Lender pursuant to Section 4(b) and (ii) superpriority claims under Section 507(b) of the Bankruptcy Code junior in all respects to the superpriority claims granted under Section 507(b) of the Bankruptcy Code to the Senior Lender on account of any of the Senior Obligations or granted under Section 364(c)(1) of the Bankruptcy Code with respect to any debtor-in-possession financing (whether or not constituting DIP Financing), provided that the inability of the Junior Lender to receive any such Liens under Chapter 5 of the Bankruptcy Code or proceeds thereof shall not affect the agreements and waivers set forth in this Section 4; and provided, further, that the Junior Lender shall have irrevocably agreed, pursuant to Section 1129(a)(9) of the Bankruptcy Code, in any stipulation and/or order granting such adequate protection, that any such junior superpriority claims may be paid under any plan of reorganization in any combination of cash, debt, equity or other property having a value on the effective date of such plan equal to the allowed amount of such junior superpriority claims, and only after the Payment in Full of the Senior Obligations.
(e) Avoidance Issues. If the Senior Lender is required in any Insolvency Proceeding or otherwise to disgorge, turn over or otherwise pay to the estate of an Obligor, because such amount was avoided or ordered to be paid or disgorged for any reason including, without limitation, because it was found to be a fraudulent or preferential transfer, any amount (a “Recovery”), whether received as proceeds of security, enforcement of any right of setoff or otherwise, then the Senior Obligations shall be reinstated to the extent of such Recovery and deemed to be outstanding as if such payment had not occurred and the Senior Termination shall be deemed not to have occurred. The Junior Lender agrees it shall not be entitled to benefit from any avoidance action affecting or otherwise relating to any distribution or allocation made in accordance with this Agreement, whether by preference or otherwise, it being understood and agreed that the benefit of such avoidance action otherwise allocable to the Junior Lender shall instead be allocated and turned over for application in accordance with the priorities set forth in this Agreement.
(f) Asset Dispositions in an Insolvency Proceeding. The Junior Lender agrees that it will not object to or oppose a Disposition of any Collateral securing the Senior Obligations (or any portion thereof) free and clear of Liens or other claims under Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code, if the Senior Lender has consented to such or Disposition of such assets, as long as (a) the Maximum Senior Principal Amount is reduced by an amount equal to the proceeds of such Disposition received and retained by the Senior Lender on account of the Senior Obligations which are used to pay the principal or face amount, as applicable, of the Senior Obligations, and (b) pursuant to a court order the Liens of the Junior Lender attach to the net proceeds of such Disposition with the same priority and validity as the Liens held by the Junior Lender in such Collateral, provided that the Junior Lender is not deemed to have waived any rights to credit bid on the Collateral in any such Disposition in accordance with Section 363(k) to the extent such credit bid includes cash in an amount sufficient to cause the Senior Obligations to be immediately Paid in Full. The Junior Lender waives any claim it may now or hereafter have arising out of the Senior Lender's election in any proceeding instituted under Chapter 11 of the Bankruptcy Code of the application of Section 1111(b)(2) of the Bankruptcy Code.
(g) No Waivers of Rights. Nothing contained herein shall prohibit or in any way limit the Senior Lender from objecting in any Insolvency Proceeding or otherwise to any action taken by the Junior Lender, including the seeking by the Junior Lender of adequate protection (other than as provided for in Section 4(d)); provided, however, the Senior Lender agrees not to initiate or prosecute or join with any Person to initiate or prosecute any claim, action or other proceeding challenging the enforceability, validity, priority or perfected status of any Liens on assets securing the Junior Obligations.
(h) Plans of Reorganization. The Junior Lender shall not support or vote in favor of any plan of reorganization (and shall vote and shall be deemed to have voted to reject any plan of reorganization) unless such plan (i) pays off, in cash in full, all Senior Obligations (other than Excess Senior Obligations) or (ii) is accepted by the Senior Lender. To the extent that the Junior Lender attempts to vote or votes in favor of any plan or reorganization in a manner inconsistent with this Section 4(h), the Junior Lender irrevocably agrees that (A) the Senior Lender may be, and may be deemed, an “authorized agent” of such party under Bankruptcy Rules 3018(c) and 9010, (B) the Senior Lender is irrevocably appointed the Junior Lender’s attorney in fact, coupled with an interest, to vote on the Junior Lender’s behalf in such proceedings with respect to the Junior Obligations, and (C) the Senior Lender shall be authorized and entitled to submit a superseding ballot or vote, as the case may be, on behalf of the Junior Lender that is consistent herewith.
(i) Other Matters. In the event of any Insolvency Proceeding involving an Obligor, all proceeds of Collateral (including, without limitation, any Distribution which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Junior Obligations) shall be paid or delivered directly to the Senior Lender (to be held and/or applied by the Senior Lender in accordance with the Senior Loan Agreement) until all Senior Obligations are Paid In Full before any of the same shall be made to one or more of the Junior Lenders on account of any Junior Obligations, and the Junior Lender irrevocably authorizes, empowers and directs any debtor, debtor in possession, receiver, trustee, liquidator, custodian, conservator or other Person having authority to pay or otherwise deliver all such Distributions in respect of any Junior Obligations to the Senior Lender, provided that the foregoing provision shall not apply to Distributions made in respect of the Junior Obligations pursuant to a plan of reorganization under the Bankruptcy Code with respect to such Obligor which has received the affirmative vote of the Senior Lender and which has been confirmed pursuant to a Final Order or to any Reorganization Securities received by the Junior Lender in accordance with this Section 4(i). Nothing in this Agreement prohibits or limits the right of a Junior Lender to receive and retain any debt or equity securities that are issued by a reorganized debtor pursuant to a plan of reorganization or similar dispositive restructuring plan in connection with an Insolvency Proceeding (such debt or equity securities, "Reorganization Securities").
(j) Rights as Unsecured Lenders. In any Insolvency Proceeding, to the extent not prohibited by and in all respects consistent with this Agreement, the Junior Lender may take any action, file any pleading, appear in any proceeding and exercise rights and remedies whether as an unsecured lender or otherwise. In any Insolvency Proceeding, to the extent not prohibited by and in all respects consistent with this Agreement, the Senior Lender may take any action, file any pleading, appear in any proceeding and exercise rights and remedies whether as an unsecured lender or otherwise.
Section 5. Representation and Warranties. Each of the Secured Creditors represents and warrants as follows:
(a) Enforceability. This Agreement is the legal, valid and binding obligation of the respective Secured Creditors enforceable in accordance with its terms.
(b) No Conflict. The execution, delivery and performance by either of the Secured Creditors of this Agreement do not and will not contravene (i) any law, treaty, rule, regulation, order or determination of an arbitrator, court or other governmental authority or regulatory body or any franchise, license, lease, permit, certificate, authorization, qualification, easement, right of way, or other right or approval binding on either of the Secured Creditors or any of their property or (ii) any material contract to which it is a party or by which its property is bound.
(c) Consents and Filings. No consent, authorization or approval of, or filing with or other act by, either of the Secured Creditors or any governmental authority or regulatory body or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement, except those that have been obtained.
(d) No Judgments or Litigation. No judgments, orders, writs or decrees are outstanding against either of the Secured Creditors, nor is there now pending or, to the knowledge of either of the Secured Creditors after due inquiry, any threatened litigation, contested claim, investigation, arbitration, or governmental proceeding by or against either of the Secured Creditors that purports to affect the legality, validity or enforceability of this Agreement or the consummation of the transactions contemplated hereby.
(e) Acceptance. Both the Senior Lender and the Junior Lender, by their execution and delivery of this Agreement, have accepted this Agreement.
Section 6. Junior Lender Purchase Option.
(a) Purchase Notice. Upon (i) an acceleration of the Senior Obligations or the taking of any Enforcement Action by the Senior Lender, (ii) a payment default under the Senior Loan Agreement that is not cured by the Borrower or waived by the Senior Lender within 60 days of its occurrence, or (iii) the commencement of an Insolvency Proceeding, the Junior Lender shall have the option, but not the obligation, to purchase all, but not less than all, of the Senior Obligations owing to the Senior Lender from the Senior Lender, and assume all, but not less than all, of the then existing funding commitments under the Senior Loan Agreement by giving a written notice (the "Purchase Notice") to the Senior Lender no later than 15 Business Days after the Junior Lender has knowledge of any event set forth in clause (i), (ii), or (iii) above. A Purchase Notice once delivered shall be irrevocable.
(b) Purchase Option Closing. On the date specified by the Junior Lender in the Purchase Notice (which shall not be more than 30 days after the receipt by the Senior Lender of the Purchase Notice), the Senior Lender shall sell to the Junior Lender, and the Junior Lender shall purchase from the Senior Lender, all, but not less than all, of the Senior Obligations (other than Excess Senior Obligations), and the Senior Lender shall assign to the Junior Lender, and the Junior Lender shall assume from the Senior Lender all, but not less than all, of the then existing funding commitments under the Senior Loan Agreement.
(c) Purchase Price. Such purchase and sale shall be made by execution and delivery by the Secured Creditors of an Assignment Agreement in form and substance satisfactory to the Secured Creditors. Upon the date of such purchase and sale, the Junior Lender shall (a) pay to the Senior Lender as the purchase price therefor the full amount of all the Senior Obligations (other than Excess Senior Obligations) then outstanding and unpaid (including principal, interest, fees, prepayment premiums, indemnities and expenses, including, without limitation, reasonable attorneys' fees and legal expenses). Such purchase price shall be remitted by wire transfer of immediately available funds to such bank account of the Senior Lender in New York, New York, as the Senior Lender may designate in writing to the Junior Lender for such purpose. Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by the Junior Lender to the bank account designated by the Senior Lender are received in such bank account prior to 1:00 p.m., New York City time, and interest shall be calculated to and including such Business Day if the amounts so paid by the Junior Lender to the bank account designated by the Senior Lender are received in such bank account later than 1:00 p.m., New York City time.
(d) Nature of Sale. Such purchase and sale shall be expressly made without representation or warranty of any kind by the Senior Lender as to the Senior Obligations or otherwise and without recourse to the Senior Lender, except for representations and warranties as to the following: (i) the amount of the Senior Obligations being purchased (including as to the principal of and accrued and unpaid interest on such Senior Obligations, fees and expenses thereof), (ii) that the Senior Lender owns the Senior Obligations free and clear of any Liens and (iii) that the Senior Lender has the full right and power to assign the Senior Obligations and such assignment has been duly authorized by all necessary partnership action by the Senior Lender.
(e) Notice of Election to Purchase. The Senior Lender shall not complete any Disposition in connection with any Enforcement Action, as long as the Senior Lender shall have received a Purchase Notice, the purchase and sale of the Senior Obligations provided for in this Section 6 shall have closed within 30 days of the Senior Lender's receipt of such Purchase Notice and the Senior Lender shall have received payment in full of the Senior Obligations (other than Excess Senior Obligations) as provided for in Section 6(c) within such 30 day period.
Section 7. Certain Matters of Construction. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement and section references are to this Agreement unless otherwise specified. For purposes of this Agreement, the following additional rules of construction shall apply: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter, (b) the term "including" shall not be limiting or exclusive, unless specifically indicated to the contrary, (c) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations and (d) unless otherwise specified, all references to any instruments or agreements, including references to any of this Agreement and any other documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof, in each case, made in accordance with the terms hereof.
Section 8. Termination. This Agreement shall terminate and cease to be of any further force or effect upon the Payment in Full of the Senior Obligations (the occurrence of the foregoing being referred to herein as “Senior Termination”).
Section 9. Benefit of Agreement. Nothing in this Agreement, express or implied, shall give or be construed to give to any Person any legal or equitable right, remedy or claim under this Agreement or any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto.
Section 10. Notices. Except as otherwise provided herein, all notices and other communications provided for hereunder shall be made in the manner and to the address set forth for the Senior Lender in the Senior Loan Agreement and the address set forth for the Junior Lender in the Junior Loan Agreement) or to such other address as the Senior Lender or the Junior Lender may specify to the other party in the manner required hereunder.
Section 11. Amendments and Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and signed by the party to be charged thereby, and then any such amendment or waiver shall be effective only to the extent set forth therein.
Section 12. Delays; Partial Exercise of Remedies. No delay or omission of the Senior Creditors to exercise any right or remedy hereunder shall impair any such right or operate as a waiver thereof. No single or partial exercise by the Senior Creditors of any right or remedy shall preclude any other or further exercise thereof, or preclude the exercise of any other right or remedy.
Section 13. Counterparts; Telecopied Signatures. This Agreement and any waiver or amendment hereof may be executed in counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. This Agreement may be executed and delivered by telecopier or other electronic transmission all with the same force and effect as if the same were a fully executed and delivered original manual counterpart.
Section 14. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
Section 15. Entire Agreement; Successors and Assigns; Interpretation. This Agreement constitutes the entire agreement among the parties, supersedes any prior written and verbal agreements among them with respect to the subject matter hereof, and shall bind and benefit the parties and their respective successors and permitted assigns. This Agreement shall be deemed to have been jointly drafted, and no provision of it shall be interpreted or construed for or against a party because such party purportedly prepared or requested such provision, any other provision, or this Agreement as a whole.
Section 16. SPECIFIC PERFORMANCE. EITHER SECURED CREDITOR IS HEREBY AUTHORIZED TO DEMAND SPECIFIC PERFORMANCE OF THIS AGREEMENT AT ANY TIME WHEN THE OTHER SECURED CREDITOR SHALL HAVE FAILED TO COMPLY WITH ANY OF THE PROVISIONS OF THIS AGREEMENT APPLICABLE TO IT.
Section 17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section 18. SUBMISSION TO JURISDICTION.
(a) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OFTHE JUNIOR LENDER AND THE SENIOR LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE JUNIOR LENDER AND THE SENIOR LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT, ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. EACH OF THE JUNIOR LENDER AND THE SENIOR LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
(b) Nothing in this Section 18 shall affect the right of either the Senior Lender or the Junior Lender to serve legal process in any other manner permitted by law or affect the right of the Senior Lender or Junior Lender to bring any action or proceeding against the other party in the courts of any other jurisdiction.
Section 19. JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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IN WITNESS WHEREOF, each of the Junior Lender and the Senior Lender has executed this Agreement as of the date first set forth above.
JUNIOR LENDER:
SWK FUNDING LLC, in its capacity as Agent and sole initial Junior Lender
By: SWK Holdings Corporation, its sole Manager
By: /s/ Brett Pope
Name: Brett Pope
Title: Chief Executive Officer
SENIOR LENDER:
ACF FINCO I LP
By: /s/ Oleh Szczupak
Name: Oleh Szczupak
Title: Vice President
ACKNOWLEDGMENT
Each of the undersigned hereby acknowledges the provisions of the foregoing Intercreditor Agreement and agrees to abide by the terms thereof.
Each of the undersigned will, at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all further action, that the Senior Lender or the Junior Lender may reasonably request to protect any right or interest granted or purported to be granted hereby or by the foregoing Intercreditor Agreement to the Senior Lender or the Junior Lender or to enable the Senior Lender or the Junior Lender to exercise and enforce its rights and remedies hereunder or thereunder.
HOOPER HOLMES, INC.,
a New York corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
HOOPER WELLNESS, LLC,
a Kansas limited liability company
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
JEFFERSON ACQUISITION, LLC,
a Kansas limited liability company
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
HOOPER DISTRIBUTION SERVICES, LLC,
a New Jersey limited liability company
By: Hooper Homes, Inc.,
its sole Manager
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President of Hooper Homes, Inc.
HOOPER INFORMATION SERVICES, INC.,
a New Jersey corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
MID-AMERICA AGENCY SERVICES, INCORPORATED,
a Nebraska corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
TEG ENTERPRISES, INC.,
a Nebraska Corporation
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President
HOOPER KIT SERVICES, LLC,
a Kansas limited liability company,
formerly known as Heritage Labs International, LLC
By: Hooper Homes, Inc.,
its sole Member
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: President of Hooper Homes, Inc.
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAWS OR (II) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAWS, AND IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.
WARRANT
Original Issuance Date: April 17, 2015 Warrant No. [SWK-1]
FOR VALUE RECEIVED, Hooper Holmes, Inc., a New York corporation (the “Company”), hereby grants to SWK Funding LLC, a Delaware limited liability company (“SWK”), or its registered assigns (the “Registered Holder”), the right to purchase up to EIGHT MILLION ONE HUNDRED FIFTY TWO THOUSAND ONE HUNDRED SEVENTY FOUR (8,152,174) duly authorized, validly issued, fully paid and nonassessable shares of the Company’s Common Stock (as further adjusted from time to time, the “Exercise Shares”) at a price of $0.46 per share (as adjusted from time to time hereunder, the “Exercise Price”). This Warrant is one of one or more Warrants issued by the Company (collectively, the “Warrants”) pursuant to Section 4.4 of the Credit Agreement. Certain capitalized terms used herein are defined in Section 14 hereof. The amount and kind of securities purchasable pursuant to the rights granted hereunder and the Exercise Price for such securities are subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1.Exercise of Warrant.
A Exercise Period and Amount. The Registered Holder may exercise, in whole or in part, the purchase rights represented by this Warrant for the Exercise Shares at any time and from time to time after October 17, 2015 and up to and including the Expiration Date (the “Exercise Period”).
(i) Exercise Procedure. This Warrant will be deemed to have been exercised when the Company has received all of the following items or such later time as may be specified by the Registered Holder in the Exercise Agreement but in no event after the Expiration Date (the “Exercise Time”):
(a) a completed Exercise Agreement, as described in Section 1B hereof, executed by the Person exercising all or part of the purchase rights represented by this Warrant (the “Purchaser”);
(b) this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction);
(c) if this Warrant is not registered in the name of the Purchaser, an Assignment or Assignments in the form set forth in Exhibit II hereto (an “Assignment”) properly executed evidencing the assignment of this Warrant to the Purchaser, in compliance with the provisions set forth in Section 5 hereof; and
(d) a payment to the Company in an amount equal to the product of the Exercise Price multiplied by the number of Exercise Shares being purchased upon such exercise (the “Aggregate Exercise Price”) in the form of, at the Registered Holder’s option, (1) a certified or official bank check payable to the Company or (2) a wire transfer of immediately available funds to an account designated by the Company; provided, however, the Registered Holder may exercise this Warrant in whole or in part by the surrender of this Warrant to the Company, with a duly executed Exercise Agreement marked to reflect “Net Issue Exercise” and specifying the number of Exercise Shares to be purchased, and upon such Net Issue Exercise, the Registered Holder shall be entitled to receive that number of Exercise Shares determined in accordance with the following equation:
X = (A - B) x C
A
where
| |
X | = the number of shares of Exercise Shares purchasable upon a Net Issue Exercise of the Warrant pursuant to the provisions of this Section 1A; |
| |
A | = the Fair Market Value of one Exercise Share on the date of the Net Issue Exercise; |
| |
B | = the Exercise Price for one Exercise Share under this Warrant; and |
| |
C | = the number of Exercise Shares as to which this Warrant is being exercised pursuant to the provisions of this Section 1A. |
If the foregoing calculation results in a negative number, then no Exercise Shares shall be issued upon a Net Issue Exercise pursuant to this Section 1A. In the event of any withholding of Exercise Shares or surrender of other equity securities where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of
a share being so withheld or surrendered multiplied by (y) the Fair Market Value per Exercise Share as of the Exercise Date.
(i) Delivery of Stock Certificates and New Warrants. Duly executed certificates for Exercise Shares purchased upon exercise of this Warrant will be delivered by the Company to the Purchaser within five (5) Business Days after the date of the Exercise Time. The issuance of certificates for Exercise Shares will be made without charge to the Registered Holder or the Purchaser for any issuance tax in respect thereof or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Common Stock. Unless this Warrant has expired or all of the purchase rights represented hereby have been exercised, the Company will prepare a new Warrant, substantially identical hereto, representing the rights formerly represented by this Warrant which have not expired or been exercised and will, within such five (5) Business Day period, deliver such new Warrant to the Person designated for delivery in the Exercise Agreement.
(ii) Deemed Timing of Certain Events. The Exercise Shares will be deemed to have been issued to the Purchaser at the Exercise Time, and the Purchaser will be deemed for all purposes to have become the record holder of such Exercise Shares at the Exercise Time.
(iii) Valid Issuance of Exercise Shares. Each Exercise Share issuable upon exercise of this Warrant will, upon exercise of this Warrant in accordance with the terms hereof and payment of the Aggregate Exercise Price therefor in accordance with Section 1A(i)(d), be fully paid and nonassessable and free from all liens and charges with respect to the issuance thereof, other than those arising by virtue of any action taken by the Registered Holder or the failure of the Registered Holder to take any action required to be taken by it.
(iv) Compliance with the Securities Act.
(a) Agreement to Comply with the Securities Act; Legend. The Registered Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 1A(v) and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Registered Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”); provided, however, that notwithstanding anything to the contrary contained herein or in any legend placed on the Warrant or any certificates representing the Exercise Shares, in no event shall the Registered Holder be required to provide an opinion of counsel in connection with a Permitted Transfer.
(b) This Warrant and Exercise Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:
“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”
(c) Representations of the Registered Holder. In connection with the issuance of this Warrant, the Registered Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:
(i)The Registered Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Registered Holder is acquiring this Warrant and the Exercise Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Exercise Shares, except pursuant to sales registered or exempted under the Securities Act.
(i) The Registered Holder understands and acknowledges that this Warrant and the Exercise Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Registered Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
(ii) The Registered Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Exercise Shares. The Registered Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the
offering of the Warrant and the business, properties, prospects and financial condition of the Company.
(i) Books; Par Value. The Company will maintain at its principal office, books for the registration of the Warrants and any transfer or assignment thereof. Except as otherwise provided herein, the Company will not close its books against the transfer of this Warrant or of any Exercise Share in any manner which interferes with the timely exercise of this Warrant. The Company will from time to time take all such action as may be necessary to assure that the par value per share, if any, of the unissued Exercise Shares is at all times equal to or less than the Exercise Price then in effect.
(i) Company Cooperation and Government Filings. If the Registered Holder is required to make any governmental filings or obtain any governmental approvals prior to or in connection with any exercise of this Warrant (including, without limitation, making any filings reasonably required to be made by the Company), then the Company shall, at the Registered Holder’s expense, provide reasonable assistance, as reasonably requested by the Registered Holder, in connection with such filings or approvals; provided, however, that nothing in this Section 1(b)(vii) shall require the Company to register the Exercise Shares, except as expressly provided in this Warrant.
(ii) Effective Time of Exercise in Connection with Public Offering or Sale. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a Public Offering or Sale of the Company Transaction, the exercise of any portion of this Warrant may, at the election of the Registered Holder, be conditioned upon the consummation of the Public Offering or Sale of the Company Transaction in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.
(iii) Sufficient Shares; No Violation; Listing in Certain Instances. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Common Stock issuable upon the exercise of all outstanding Warrants. All shares of Common Stock that are issuable shall, when issued in accordance with the terms of this Warrant, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges, other than those arising by virtue of any action taken by the Registered Holder or the failure of the Registered Holder to take any action required to be taken by it. The Company shall take all such actions as may be reasonably necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance). The Company will use its commercially reasonable efforts to cause the Exercise Shares, immediately upon any exercise of this Warrant, to be listed on any domestic securities exchange
upon which shares of Common Stock, or other securities constituting Exercise Shares, are listed at the time of such exercise, if any.
1B. Exercise Agreement. Upon any exercise of this Warrant, the Exercise Agreement will be substantially in the form set forth in Exhibit I hereto (the “Exercise Agreement”), except that if the Exercise Shares are not to be issued in the name of the Person in whose name this Warrant is registered, the Exercise Agreement will also state the name of the Person to whom the certificates for the Exercise Shares are to be issued and will be accompanied by a properly executed Assignment (as required by Section 5 hereof), and if the number of Exercise Shares to be issued does not include all the shares of Common Stock purchasable hereunder, it will also state the name of the Person to whom a new Warrant for the unexercised portion of the rights hereunder is to be delivered (and if such Person is other than the Person in whose name this Warrant is then registered, will be accompanied by a properly executed Assignment (as required by Section 5 hereof)). Such Exercise Agreement will be dated the actual date of execution thereof.
1C. Payment of Expenses and Taxes. The Company shall pay all expenses and taxes imposed by law or any governmental agency, including any documentary stamp taxes, attributable to the issuance of Exercise Shares upon the exercise of the Warrant; provided, that nothing in this Section 1C shall make the Company liable for any income taxes payable by the Registered Holder and associated with the issuance of the Warrant or the exercise thereof; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Exercise Shares to any Person other than the Registered Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.
Section 2. Adjustment of Number of Exercise Shares. The number of Exercise Shares in effect shall be subject to adjustment from time to time as provided in this Section 2.
2A. Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the number of Exercise Shares in effect immediately prior to such subdivision will be proportionately increased and the Exercise Price proportionately decreased (but not to less than the par value, if any, of such shares). If the Company at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the number of Exercise Shares in effect immediately prior to such combination will be proportionately decreased and the Exercise Price proportionately increased.
2B. Reorganization, Reclassification, Consolidation, Merger or Sale. Any (i) recapitalization or reorganization of the Company, (ii) reclassification of the stock of the Company, (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other transaction, which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities, assets or other property with respect to or in exchange for Common Stock is referred to herein as an “Organic Change”. Prior to the consummation of any
Organic Change, the Company will make appropriate provision to ensure that each Registered Holder of a Warrant will thereafter have the right to acquire and receive in lieu of or addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the exercise of such holder’s Warrant, such shares of stock, securities, assets or other property (“Exchangeable Property”) as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of such holder’s Warrant had such Organic Change not taken place. In any such case, the Company will make appropriate provision (in form and substance reasonably satisfactory to Registered Holders of Warrants representing a majority of the Exercise Shares obtainable upon exercise of all Warrants then outstanding) with respect to such Registered Holders’ rights and interests to ensure that the provisions of this Warrant will thereafter be applicable to the Warrants (including, in the case of any such consolidation, merger or sale in which the successor entity or purchasing entity is other than the Company, an immediate adjustment of the Exercise Price in proportion to the Exchangeable Property receivable for each share of Common Stock reflected by the terms of such consolidation, merger or sale, and a corresponding immediate adjustment in the number of Exercise Shares). Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 2B, each Registered Holder shall have the right to elect, prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 1 hereof instead of giving effect to the provisions contained in this Section 2B with respect to this Warrant.
2C. Legal Impediments to Exercise Price Adjustments. If any adjustment to the Exercise Price required hereunder is not permitted by applicable law (including without limitation, by reducing the Exercise Price below the par value, if any, of the shares of Common Stock), then, unless the adjustment necessary shall be agreed upon by the Company and the Registered Holder, the Board shall appoint a firm of independent certified public accountants of recognized standing, acceptable to the Registered Holder, which, at the Company’s expense, shall render its written opinion on the necessary adjustment in the number of Exercise Shares purchasable upon exercise of this Warrant, so as to preserve, without dilution, the exercise rights of the Registered Holder consistent with the standards in this Section 2. Upon receipt of such opinion, the Board shall forthwith make the adjustments described therein.
2D. Certain Other Actions Prohibited. The Company shall not by amendment of the Charter or its bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the provisions of this Warrant, but shall at all times in good faith assist in the carrying out of all of the provisions of this Warrant and shall take all such action as the Registered Holder may reasonably request to protect the exercise privilege of the Registered Holder against dilution. Without limiting the generality of the foregoing, the Company (i) shall take all such actions as may be necessary or appropriate under state law in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of all of the Warrants from time to time outstanding and (ii) shall not take any action which results in (1) any adjustment of the total number of shares of Common Stock or other securities issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then authorized by the Charter and available for the purpose of issuance
upon such exercise or (2) any adjustment of the Exercise Price to be less than the par value of the Common Stock.
2E. Notices.
(i) Adjustment Notice and Certificate. As soon as practicable following any adjustment of the number of Exercise Shares, but in any event not later than ten (10) Business Days thereafter, the Company will give written notice thereof to the Registered Holder, setting forth in reasonable detail, and certifying the calculation of, such adjustment. Each such certification shall be signed by the chief executive officer or chief financial officer of the Company and by the secretary or any assistant secretary of the Company.
(ii) Exercise Shares Notice and Certificate. As soon as practicable following the receipt by the Company of a written request by the Registered Holder, but in any event not later than ten (10) Business Days thereafter, the Company will provide to the Registered Holder written notice certifying the number of Exercise Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant. Each such certification shall be signed by the chief executive officer or chief financial officer of the Company and by the secretary or any assistant secretary of the Company.
(iii) Notices Regarding Books Closure, Dividends, Subscription Offers and Certain Voting Rights. The Company will give written notice to the Registered Holder at least ten (10) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock (including, without limitation with respect to any regular dividends or liquidating distributions), (B) with respect to any issuance of Common Stock, preferred stock or Stock Equivalents covered by Section 5, or (C) for determining rights to vote with respect to any Organic Change, dissolution or liquidation.
(iv) Notice of Organic Change. The Company will give written notice to the Registered Holder at least ten (10) days prior to the date on which any Organic Change, dissolution or liquidation will take place. Such written notice shall include a reasonable description of such Organic Change, the expected date of the consummation of such Organic Change, and the Fair Market Value payable, as well as the number of Exercise Shares issuable upon exercise of the Warrant if issued upon a Net Issue Exercise pursuant to Section 1A in connection with such Organic Change.
(v) Notice of Certain Corporate Action. Without prejudice to the foregoing, the Registered Holder shall be entitled to the same rights to receive notice of all other corporate action as any holder of Common Stock.
2F. Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, preferred stock or Stock Equivalents or (B) to subscribe for or purchase Common Stock, preferred stock or Stock Equivalents, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
Section 3. Dividends.
3A. Dilution Fee. Subject to the provisions of this Section 3A, if the Company shall, at any time or from time to time after the Date of Issuance, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend in cash, then provision shall be made so that the Exercise Price of the Warrant shall be reduced by the amount of cash which the Registered Holder would have been entitled to receive per share had the Warrant been exercised in full into Exercise Shares on the date of such event; provided, that in the event such adjustment would have the effect of reducing the Exercise Price below zero, the Exercise Price shall be reduced to zero and any additional amount shall be distributed to the Registered Holder; provided further, that no such provision shall be made if the Registered Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend of cash in an amount equal to the amount of such cash as the Registered Holder would have received if the Warrant had been exercised in full into Exercise Shares on the date of such event.
Section 4. No Voting Rights; Limitations of Liability. This Warrant shall not entitle the holder thereof to any voting rights or other rights of a stockholder of the Company, except as otherwise set forth herein. No provision hereof, in the absence of affirmative action by the Registered Holder to purchase Common Stock, and no enumeration herein of the rights or privileges of the Registered Holder shall give rise to any liability of such Registered Holder for the Exercise Price of the Exercise Shares acquirable by exercise hereof or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
Section 5. Purchase Rights. If at any time after the Date of Issuance the Company grants, issues or sells any shares of Common Stock or other Stock Equivalents pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Registered Holder shall be entitled to acquire, upon the same terms applicable to such Purchase Rights, the aggregate pro-rata Purchase Rights which such Holder could have acquired if such Holder had held the number of Exercise Shares acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the Common Stock or Stock Equivalents are granted, issued or sold. In the event of any such offering, the Company shall give notice (the “Offer Notice”) to each Registered Holder, stating (i) its bona fide intention to offer such Common Stock or other Stock Equivalents, (ii) the number of such securities to be offered, and (iii) the price and terms upon which it proposes to offer such securities. By notification to the Company within fifteen (15) days after the Offer Notice is given, each Registered Holder may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to the aggregate pro-rata Purchase Rights as described above.
Section 6. Warrant Transferable. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder (including the Exercise Shares) are transferable, in whole or in part, without charge to the Registered Holder, upon surrender of this Warrant (or certificate for Exercise Shares) with a properly completed and duly executed Assignment
at the principal office of the Company together with funds sufficient to pay any transfer taxes as described in Section 1C. Upon such compliance, surrender and delivery, the Company shall execute and deliver a new Warrant or Warrants (or shares) in the name of the assignee or assignees and in denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant (or shares) to evidence the portion of this Warrant (or shares), if any, not so assigned, and this Warrant (or shares) shall promptly be cancelled. Without limiting the generality of the foregoing, upon a Sale of the Company Transaction structured as a sale of the capital stock of the Company (whether by direct sale, merger or otherwise), in lieu of any exercise hereof and sale of the underlying Exercise Shares, the Registered Holder shall have the right to transfer and sell this Warrant to one or more third party purchasers for the purchase price otherwise payable by such Persons for Common Stock in such transaction less the Aggregate Exercise Price. The Registered Holder agrees that until such time as any transfer pursuant to this Section 6 is recorded on the books of the Company, the Company may treat the Registered Holder on the books of the Company as the absolute owner; provided, that nothing in this Warrant affects any requirement that transfer of any Warrant or share of Common Stock is issued or issuable upon the exercise of such Warrant be subject to compliance with the Securities Act and all applicable state and foreign securities laws.
Section 7. Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the principal office of the Company, for new Warrants of like tenor representing in the aggregate the purchase rights hereunder, and each of such new Warrants will represent such portion of such rights as is designated by the Registered Holder at the time of such surrender. The date the Company initially issues this Warrant will be deemed to be the “Date of Issuance” hereof regardless of the number of times new certificates representing the unexpired and unexercised rights formerly represented by this Warrant shall be issued. All Warrants representing portions of the rights hereunder are referred to herein as the “Warrants.”
Section 8. Replacement. Upon receipt of evidence reasonably satisfactory to the Company (including at the request of the Company an affidavit of the Registered Holder) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing this Warrant and upon delivery of an indemnity reasonably satisfactory to the Company or, in the case of any such mutilation upon surrender of such certificate to the Company, the Company will (at the Registered Holder’s expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the same rights represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.
Section 9. Registration Rights. In the event the Company, at any time prior to the Expiration Date, proposes to file on behalf of any shareholder a registration statement under the Securities Act on any form (other than a registration statement on Form S-4 or S-8) for shares held by any such shareholder, the Company shall offer to include in such registration statement the Exercise Shares of each Registered Holder (whether issued or issuable under the Warrants) at the Company’s expense. Such Exercise Shares shall be registered, along with such other shares, on a pro rata basis on terms customary for a transaction of this type and nature. The registration rights
granted under this Section 9 shall not be effective at any time when Rule 144 under the Securities Act is available for resale of all the Exercise Shares issuable pursuant to the Net Issue Exercise provision of Section 1A without limitation during a three month period and without registration.
Section 10. Notices. Except as otherwise expressly provided herein, all notices, demands or other communications to be given or delivered under or by reason of the provisions of this Warrant shall be in writing and shall be deemed to have been received: (a) when delivered personally to the recipient, (b) one (1) day after sent to the recipient by reputable overnight courier service (charges prepaid), (c) three (3) days after mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid, or (d) upon confirmation of transmittal by facsimile. Such notices, demands and other communications shall be addressed (x) in the case of the Registered Holder, to its address as set forth in the books and records of the Company or, if different, as is designated in writing from time to time by such Registered Holder, (y) in the case of the Company, to its principal office, and (z) in the case of any registered assignee of this Warrant or its registered assignee, to such assignee at its address as designated in writing by such assignee to the Company from time to time.
Section 11. Amendment and Waiver. Except as otherwise provided herein, the provisions of this Warrant may not be amended or waived and the Company may not take any action herein prohibited, or omit to perform any act herein required to be performed by it, unless the Company has obtained the written consent of the Registered Holders of Warrants representing a majority of the Exercise Shares issuable upon exercise of the Warrants; provided that (except as otherwise provided herein) no such action may change the Exercise Price of any Warrants or the number of shares or class of stock obtainable upon exercise of any Warrant without the written consent of the Registered Holder of such Warrant. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, and no failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
Section 12. Survival of Warrant Terms. The provisions contained in Section 9 through Section 14, inclusive, shall all survive the exercise of the Warrant for so long as any of the Warrants or the Exercise Shares are outstanding; provided, however, that in no event shall such terms survive longer than the last to occur of (i) the expiration of the Exercise Period, and (ii) the two year anniversary of the last exercise of the Warrant.
Section 13. Descriptive Headings; Governing Law. The descriptive headings of the several Sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The construction, validity and interpretation of this Warrant will be governed by the internal law, and not the conflicts law, of the State of New York.
Section 14. Definitions. The following terms have meanings set forth below:
“Affiliates” shall have the meaning ascribed to such term in the Credit Agreement.
“Aggregate Exercise Price” shall have the meaning set forth in Section 1A(i)(d) hereof.
“Appraised Value” means, with respect to a share of Common Stock and any other property, the fair value of such other property, as determined by an appraisal performed at the expense of the Company by an Approved Appraiser, and whose determination will be final and binding on the Company and the Registered Holder; provided, that such Approved Appraiser shall be directed to determine the value of such securities or other property as soon as practicable, but in no event later than thirty (30) days from the date of its selection, and for such purposes, such valuation shall be without discount for limitations on voting rights, minority interests, illiquidity or restrictions on transfer and all rights, options and warrants to subscribe for or purchase, and other securities convertible into or exchangeable for, Common Stock shall be deemed to be exercised, exchanged.
“Approved Appraiser” shall mean a mutually acceptable investment banking or valuation firm, as determined by the Company and the Registered Holders holding Warrants exercisable for at least a majority of the Exercise Shares issuable upon the exercise of all then outstanding Warrants.
“Assignment” shall have the meaning set forth in Section 1A(i)(c) hereof.
“Board” shall mean the Company’s Board of Directors.
“Business Day” shall have the meaning ascribed to such term in the Credit Agreement.
“Charter” shall mean the Company’s Certificate of Incorporation as filed with the Secretary of State of the State of New York, as the same may be from time to time amended.
“Closing Date” shall have the meaning ascribed to such term in the Credit Agreement.
“Common Stock” shall mean the common voting stock described in Article Fourth of the Charter, together with any capital stock into which such common voting stock shall have been converted, exchanged or reclassified following the date hereof.
“Company” shall have the meaning set forth in the preamble to this Warrant.
“Credit Agreement” shall mean the Credit Agreement dated as of April 17, 2015, among the Company, as Borrower, SWK, as Agent, Sole Lead Arranger and Sole Bookrunner, and the financial institutions party hereto from time to time, as Lenders.
“Date of Issuance” shall have the meaning set forth in Section 7 hereof.
“Dilution Fee” shall have the meaning set forth in Section 3A hereof.
“Exchangeable Property” shall have the meaning set forth in Section 2B hereof.
“Exercise Agreement” shall have the meaning set forth in Section 1B hereof.
“Exercise Period” shall have the meaning set forth in Section 1A hereof.
“Exercise Price” shall have the meaning set forth in the preamble to this Warrant.
“Exercise Shares” shall have the meaning set forth in the preamble to this Warrant.
“Exercise Time” shall have the meaning set forth in Section 1A(i) hereof.
“Expiration Date” means April 17, 2022.
“Fair Market Value” means, (a) with respect to a share of Common Stock, (i) if determined in connection with a Sale of the Company Transaction, the amount payable in respect of one share of Common Stock upon consummation thereof, (ii) otherwise, if available, the Market Price thereof, and (iii) otherwise, if Market Price is not available, the Appraised Value thereof and (b) with respect to any other property, (i) the fair value thereof determined jointly by the Company and the Registered Holder, and (ii) if such parties are unable to reach agreement within ten (10) days, the Appraised Value thereof.
“Market Price” means (A) if at any time the Common Stock is listed on any securities exchange or quoted in the NYSE MKT or the over-the-counter market, the average of the closing prices of such security’s sales on all securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of each day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NYSE MKT as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NYSE MKT, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of thirty (30) days consisting of the day as of which “Market Price” is being determined and the twenty-nine (29) consecutive Business Days prior to such day, or (B) if at any time such security is not listed on any securities exchange or quoted in the NYSE MKT or the over-the-counter market, the fair value thereof determined jointly by the Company and the Registered Holder (and if such parties are unable to reach agreement within ten (10) days, then the Market Price shall be deemed not to be available).
“Net Issue Exercise” shall have the meaning set forth in Section 1A(i)(d) hereof.
“Offer Notice” shall have the meaning set forth in Section 5 hereof.
“Organic Change” shall have the meaning set forth in Section 2B hereof.
“Permitted Transfer” shall mean a transfer (i) to an Affiliate of such Registered Holder, or (ii) in connection with the transfer of any portion of the Obligations (as defined in the Credit Agreement) or any participation therein, in either case in compliance with the Credit Agreement; provided, however, that such transfer does not result in a violation of the Securities Act.
“Person” shall have the meaning ascribed to such term in the Credit Agreement.
“Public Offering” shall mean a registered “public offering” of the Company’s Common Stock or other equity under the Securities Act.
“Purchaser” shall have the meaning set forth in Section 1A(i)(a) hereof.
“Purchase Rights” shall have the meaning set forth in Section 5 hereof.
“Registered Holder” shall have the meaning set forth in the preamble to this Warrant.
“Sale of the Company Transaction” shall mean any transaction in which the Company’s shareholders immediately prior to such transaction (or series of related transactions) no longer hold at least a majority of the Company’s Common Stock after the consummation of such transaction.
“Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations promulgated thereunder as in effect at the relevant time.
“Stock Equivalent” means any security, option, warrant, right or claim exercisable into, exchangeable for, convertible to or redeemable for shares of Common Stock or the economic equivalent value of shares of Common Stock (including, by way of illustration, preferred stock and stock appreciation rights).
“SWK” shall have the meaning set forth in the preamble to this Warrant.
“Warrants” shall mean this Warrant and all warrants issued upon replacement or transfer of this Warrant in accordance with the terms of this Warrant and all warrants issued upon exchange for different denominations hereof in accordance with the terms of this Warrant.
* * * * *
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and attested by its duly authorized officer under its corporate seal and to be dated the Date of Issuance hereof.
HOOPER HOLMES, INC.
By: /s/ Henry E. Dubois
Name: Henry E. Dubois
Title: Chief Executive Officer and President
Acknowledged, accepted and agreed,
SWK FUNDING LLC
By: SWK Holdings Corporation,
its sole Manager
By: /s/ Brett Pope
Name: Brett Pope
Title: Chief Executive Officer
Date: April 17, 2015
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No. ____), hereby agrees to subscribe for the purchase of shares of the Common Stock covered by such Warrant and makes payment herewith in full therefor at the price per share provided by such Warrant. This subscription shall be effective on the date the Company has received this Exercise Agreement and the other items required under Section 1A(i) of the Warrant.
Check Box for Net Issue Exercise
Signature
Address
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, ____________________ hereby sells, assigns, and transfers all of the rights of the undersigned under the attached Warrant (Certificate No. ____) with respect to the number of shares of the Common Stock covered thereby set forth below, unto:
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Signature
Name:
Title:
News Release
For further information:
Hooper Holmes
Henry E. Dubois
President and CEO
(913) 764-1045
Investors: Andrew Berger
S.M. Berger & Company
(216) 464-6400
Hooper Holmes Acquires Accountable Health Solutions
Acquisition Adds New Wellness Services, Diversifies Revenue
OLATHE, Kan., April 20, 2015 — Hooper Holmes (NYSE MKT: HH) has acquired the assets representing the health and wellness business of Accountable Health Solutions, Inc (AHS). Accountable Health Solutions’ unaudited financial statements reflect approximately $15 million in net sales during calendar year 2014. The purchase price was $7.0 million comprising $4 million cash and approximately $3 million in unregistered common stock, subject to a working capital adjustment. The acquisition is expected to be accretive to Hooper Holmes’ earnings in 2015. The Company will host a conference call on Wednesday, April 22, 2015, at 7:30 a.m. CT / 8:30 a.m. ET to discuss the acquisition of Accountable Health Solutions. The details of the call are outlined in this press release and are also available on the Investors section of Hooper Holmes’ webpage.
Accountable Health Solutions is a leading provider of health and wellness solutions, serving more than 125 clients. Accountable Health’s wellness portal services reach 385,000 members nationwide. Combining Hooper’s biometric screening services and health professional network with Accountable Health’s expert staff and programs, including telephonic health coaching, wellness portals and data analytics, is expected to have broad market appeal.
Henry Dubois, President and CEO of Hooper Holmes, commented: “Accountable Health Solutions and Hooper Holmes are two complementary companies focused on growth and market innovation. Hooper’s national network of health professionals is a perfect match for Accountable Health's scalable health coaching and portal platforms and advanced analytical capabilities. Their focus on employers with populations of 1,000 to 3,000 complements the larger populations served by Hooper’s traditional wellness channel partners, who may also become customers for certain AHS products. This acquisition further advances our strategy to diversify our revenue base, add scale, increase screening volumes, and more efficiently utilize our health professional network. We also look forward to leveraging Accountable Health’s technology and 20 years of health and wellness experience to offer value-added solutions.”
David Blair, CEO of Accountable Health, commented: “Accountable Health Solutions and Hooper Holmes share a common DNA — a focus on measurable results and a passion to improve the health and well-being of those we serve. Integrating with Hooper’s national health professional network, biometric screening capabilities and strategic alliance with Clinical Reference Laboratory creates a powerful end-to-end solution for improving health and well-being, increasing productivity, and reducing costs for clients.”
Financing for the transaction is being provided by SWK Holdings Corporation, a specialized finance company with a focus on the global healthcare sector, through a $5 million, three-year, secured term loan. The financing carries an annual interest rate of Libor (1% floor) plus 14% (currently, approximately 15% in total) and a warrant to purchase up to $3.75 million of common stock.
Brett Pope, CEO of SWK Holdings Corporation said, "We are excited to partner with Hooper Holmes. The combined Company will be well positioned with scale, vertical integration, and technology to continue to bring innovative health and wellness solutions to market."
Accountable Health Solutions will continue to be based in Des Moines, IA and Indianapolis, IN. Hooper Holmes will continue to conduct the AHS business using the Accountable Health Solutions brand.
Cantor Fitzgerald & Co. is acting as the financial advisor to Hooper Holmes.
Conference Call
The Company will host a conference call on Wednesday, April 22, 2015, at 7:30 a.m. CT / 8:30 a.m. ET to discuss the acquisition of Accountable Health Solutions. A slide presentation accompanying management’s discussion will be available on the Company’s website.
To participate in the conference call, please dial 877-440-5807, or internationally 719-325-4770, conference ID: 2260166 five to ten minutes before the call is scheduled to begin. A live webcast will be hosted on the Company’s website located at www.hooperholmes.com. A replay of the conference call will be available from 11:30 a.m. ET on April 22, 2015 until midnight ET on April 29, 2015, by dialing 877-870-5176, or internationally 858-384-5517. The access code for the replay is 2260166.
About Accountable Health Solutions
Accountable Health Solutions was founded in 1992 as Molloy Wellness Company and acquired by the Principal Financial Group in 2004, with ownership transferred to Accountable Health, Inc., and whose name changed to Accountable Health Solutions in 2013.
Accountable Health Solutions offers comprehensive health and wellness programs to employers and health plan clients. Accountable Health combines smart technology, healthcare and behavior change expertise to deliver solutions that improve health, increase efficiencies and reduce costs in the delivery of healthcare. The company’s product suite ranges from traditional wellness products to health improvement programs. Accountable Health Solutions is an industry leader with more than 20 years in the health and wellness industry and a 97% client retention rate. More at accountablehealthsolutions.com.
About Hooper Holmes
Hooper Holmes, Inc. mobilizes a national network of health professionals to provide on-site health screenings, laboratory testing, risk assessment and sample collection services to wellness and disease management companies, insurance companies, employers, government organizations and academic institutions. More information is available at hooperholmes.com.
About SWK Holdings Corporation
SWK Holdings Corporation is a specialized finance company with a focus on the global healthcare sector. SWK partners with ethical product marketers and royalty holders to provide flexible financing solutions at an attractive cost of capital to create long-term value for both SWK’s business partners and its investors. SWK believes its financing structures achieve an optimal partnership for companies, institutions and inventors seeking capital for expansion or capital and estate planning by allowing its partners to monetize future cash flow with minimal dilution to their equity stakes. Additional information on the life science finance market is available on the Company’s website at www.swkhold.com.
This press release contains “forward-looking” statements; as such term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company’s current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions. Among the important factors that could cause actual results to differ materially from those expressed in, or implied by, these forward-looking statements are our ability to realize the expected benefits from this acquisition and our strategic alliance with Clinical Reference Laboratory; our ability to successfully implement our business strategy and integrate Accountable Health Solutions’ business with ours; our ability to retain and grow our customer base; our ability to recognize operational efficiencies and reduce costs; uncertainty as to our working capital requirements over the next 12 to 24 months; our ability to maintain compliance with the financial covenant in our credit facility and the financing for this acquisition; and the rate of growth in the Health and Wellness market. Additional information about these and other factors that could affect the Company’s business is set forth in the Company’s annual report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 31, 2015. The Company undertakes no obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release to reflect the occurrence of unanticipated events, except as required by law.
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