Arbor Health Technologies Inc. 400 Beacon Ridge Parkway, Suite 800 Waltham, MA 02451
August 16, 2024
Pinnacle Trust Bank, N.A. 600 Lexington Avenue, 22nd Floor New York, NY 10022
Attention: Derek Calloway, Vice President, Healthcare Finance Group
Re: Borrowing Request Under Bridge Loan Agreement dated August 16, 2024
Dear Mr. Calloway:
Reference is hereby made to that certain Bridge Loan Agreement dated as of August 16, 2024 (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "Loan Agreement"), by and between Arbor Health Technologies Inc., a corporation organized and existing under the laws of the State of Delaware (the "Borrower"), and Pinnacle Trust Bank, N.A., a national banking association (the "Lender"). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement.
This Borrowing Request is delivered to the Lender pursuant to Section 2.01 (Borrowing Procedures) and Section 5.01(h) (Conditions Precedent — Officer's Certificate and Borrowing Request) of the Loan Agreement. The Borrower hereby requests an advance under the Loan Agreement and, in connection therewith, sets forth the following information:
1. Borrowing Date: August 16, 2024.
2. Principal Amount Requested: Twenty-Five Million Dollars ($25,000,000.00).
3. Type of Borrowing: Adjusted Term SOFR Loan.
4. Interest Period: One (1) month.
5. Applicable Rate: Adjusted Term SOFR plus 475 basis points (4.75%) per annum. Based on the 1-month Term SOFR rate of 5.34% as published by the CME Group Benchmark Administration Limited (or a successor administrator) as of August 16, 2024, plus the SOFR Adjustment of 0.10% (ten basis points), the Adjusted Term SOFR rate equals 5.44%. When combined with the Applicable Margin of 4.75% (four hundred seventy-five basis points), the estimated all-in interest rate for the initial Interest Period is 10.19% per annum. For the avoidance of doubt, the SOFR Floor of 1.00% set forth in the Loan Agreement is not binding at current Term SOFR levels.
6. Disbursement Instructions: The Borrower requests that the proceeds of the Bridge Loan be disbursed by wire transfer of immediately available funds in accordance with the following instructions:
Account Name: Arbor Health Technologies Inc. Bank: Pinnacle Trust Bank, N.A. Account Number: XXXX-XXXX-8417 ABA Routing Number: 021-209-XXX Reference: Bridge Loan — August 2024 Funding
7. Use of Proceeds: The proceeds of the Bridge Loan shall be applied by the Borrower solely for the following purposes, each of which constitutes a permitted use of proceeds under Section 8.12 (Use of Proceeds) of the Loan Agreement:
(i) working capital and general corporate purposes of the Borrower and its Subsidiaries in the ordinary course of business;
(ii) payment of integration costs and transition expenses related to the Borrower's recently completed acquisitions of (A) MedBridge Workflow Solutions LLC, a Delaware limited liability company (acquisition closed on April 22, 2024; aggregate purchase price of $34,000,000), and (B) Cortland Surgical Systems, Inc., a Delaware corporation (acquisition closed on May 31, 2024; aggregate purchase price of $21,000,000);
(iii) anticipated earnout payments and deferred purchase price obligations arising in connection with certain of the Borrower's prior acquisitions, in each case as and when such payments become due and payable in accordance with their terms; and
(iv) payment of fees, costs, and expenses incurred in connection with the negotiation, execution, and delivery of the Loan Agreement and the other Loan Documents, including without limitation (A) the origination fee of $125,000 payable to the Lender pursuant to Section 3.05 of the Loan Agreement, (B) the legal fees and disbursements of Whitfield Gage & Associates LLP, counsel to the Lender, subject to the fee cap of $125,000 set forth in Section 12.03(b) of the Loan Agreement, (C) the advisory fee of $150,000 payable to Reedmore Capital Partners LLC in its capacity as financial advisor to the Borrower, and (D) the legal fees and disbursements of Calderwood & Harkness LLP, counsel to the Borrower.
In connection with the foregoing Borrowing Request, the Borrower hereby certifies to the Lender that, as of the date hereof and after giving effect to the making of the Bridge Loan and the application of the proceeds thereof:
(a) Conditions Precedent. All conditions precedent to the making of the Bridge Loan set forth in Article V (Conditions Precedent to Funding) of the Loan Agreement have been satisfied in full or, to the extent permitted thereunder, waived in writing by the Lender, as of the date hereof.
(b) Representations and Warranties. Each of the representations and warranties of the Borrower contained in Article VI (Representations and Warranties) of the Loan Agreement and in each other Loan Document is true and correct in all material respects as of the date hereof (or, with respect to any representation or warranty that is qualified by reference to "materiality" or "Material Adverse Effect," true and correct in all respects as of the date hereof), with the same effect as though each such representation and warranty had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty was true and correct in all material respects (or, if so qualified, in all respects) as of such earlier date.
(c) No Default. No Default or Event of Default has occurred and is continuing as of the date hereof, and no Default or Event of Default would result from the making of the Bridge Loan or the application of the proceeds thereof on the date hereof.
(d) Financial Covenant Compliance. After giving pro forma effect to the Bridge Loan and the application of the proceeds thereof, the Borrower is in compliance with each of the financial covenants set forth in Article IX (Financial Covenants) of the Loan Agreement, including the following:
(i) Minimum Liquidity (Section 9.01). As of the date hereof, after giving effect to the Bridge Loan, the Borrower's unrestricted cash and cash equivalents are approximately $72,000,000, comprised of $47,000,000 of existing unrestricted cash on hand (as reflected on the Borrower's balance sheet as of June 30, 2024) plus the $25,000,000 of Bridge Loan proceeds. Such amount exceeds the minimum required Liquidity of $15,000,000 set forth in Section 9.01 of the Loan Agreement.
(ii) Maximum Net Leverage Ratio (Section 9.02). As of the date hereof, after giving effect to the Bridge Loan, the Borrower's Total Funded Debt is $25,000,000. After deducting unrestricted cash and cash equivalents (capped at $20,000,000 pursuant to the definition of "Net Funded Debt" in the Loan Agreement), Net Funded Debt equals $5,000,000. Based on trailing twelve-month Adjusted EBITDA of $28,400,000 for the measurement period ended June 30, 2024, the Net Leverage Ratio is $5,000,000 / $28,400,000 = 0.18x, which does not exceed the maximum permitted Net Leverage Ratio of 3.50:1.00 set forth in Section 9.02 of the Loan Agreement.
(iii) Minimum Fixed Charge Coverage Ratio (Section 9.03). Based on trailing twelve-month financial data for the measurement period ended June 30, 2024, and after giving pro forma effect to the Bridge Loan, the Borrower's Fixed Charge Coverage Ratio exceeds the minimum required ratio of 1.25:1.00 set forth in Section 9.03 of the Loan Agreement.
(e) No Material Adverse Effect. Since December 31, 2023 (the date of the Borrower's most recently audited annual financial statements delivered to the Lender), no event, change, circumstance, development, occurrence, or condition has occurred that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on (i) the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise), or results of operations of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the Borrower to perform any of its obligations under the Loan Agreement or any other Loan Document, or (iii) the rights and remedies of the Lender under the Loan Agreement or any other Loan Document.
(f) Solvency. After giving effect to the Bridge Loan and the application of the proceeds thereof, the Borrower on a consolidated basis (together with its Subsidiaries) is Solvent, as such term is defined in the Loan Agreement.
This Borrowing Request is being delivered simultaneously with the execution and delivery of the Loan Agreement on August 16, 2024, and the Borrower requests that funding occur on the Borrowing Date specified herein. The Borrower acknowledges that this Borrowing Request is irrevocable and, once delivered, may not be withdrawn or revoked without the prior written consent of the Lender.
[Signature Page Follows]
[Signature Page to Borrowing Request]
Very truly yours,
ARBOR HEALTH TECHNOLOGIES INC.
By: ________
Name: Evan Strickland
Title: Chief Financial Officer
Date: August 16, 2024