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BRIDGE LOAN AGREEMENT

Dated as of August 16, 2024

between

ARBOR HEALTH TECHNOLOGIES INC., a Delaware corporation, as Borrower

and

PINNACLE TRUST BANK, N.A., a national banking association, as Lender

BRIDGE LOAN AGREEMENT

This BRIDGE LOAN AGREEMENT is entered into as of August 16, 2024, by and between ARBOR HEALTH TECHNOLOGIES INC., a Delaware corporation, as borrower, and PINNACLE TRUST BANK, N.A., a national banking association, as lender.

Borrower has requested that Lender make available to Borrower a single-draw senior secured bridge term loan facility in the principal amount of Twenty-Five Million Dollars ($25,000,000), to be used for the purposes set forth herein. Lender is willing to make such loan available on the terms and subject to the conditions contained in this Agreement and the other Loan Documents.

Accordingly, the parties agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.01. Definitions.

As used in this Agreement, the following terms have the meanings set forth below:

“Adjusted EBITDA” means, for any period, the net income of Borrower and its Subsidiaries on a consolidated basis for such period, determined in accordance with GAAP, plus, to the extent deducted in determining such net income and without duplication: (a) Interest Expense, (b) income tax expense, (c) depreciation and amortization expense, (d) stock-based compensation expense, (e) transaction, acquisition, integration, and related expenses, including expenses incurred in connection with the acquisitions of MedBridge Workflow Solutions LLC and Cortland Surgical Systems, Inc., and (f) other non-recurring, unusual, or extraordinary charges approved by Lender in writing. Adjusted EBITDA shall be reduced by non-cash income items included in net income for such period, in each case calculated on a consolidated basis for Borrower and its Subsidiaries.

“Adjusted Term SOFR” means, for any Interest Period, Term SOFR for such Interest Period plus the SOFR Adjustment; provided that Adjusted Term SOFR shall at all times be subject to the SOFR Floor.

“Affiliate” means, with respect to any specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such specified Person. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through ownership of voting securities, by contract, or otherwise.

“Agreement” means this Bridge Loan Agreement, as amended, restated, supplemented, waived, or otherwise modified from time to time.

“Applicable Margin” means 4.75% per annum, equal to four hundred seventy-five basis points.

“Applicable Rate” means, for any Interest Period, Adjusted Term SOFR for such Interest Period plus the Applicable Margin.

“Asset Sale” means any sale, transfer, lease, license, conveyance, assignment, or other disposition by Borrower or any Subsidiary of any asset or property, whether in one transaction or a series of related transactions, other than sales of inventory and dispositions of obsolete, worn-out, or surplus equipment in the ordinary course of business.

“Borrower” means Arbor Health Technologies Inc., a Delaware corporation.

“Bridge Loan” means the term loan made by Lender to Borrower pursuant to Article II in the original principal amount of Twenty-Five Million Dollars ($25,000,000).

“Business Day” means any day other than a Saturday, Sunday, or other day on which commercial banks in New York, New York are authorized or required by law to close.

“Capital Expenditures” means, for any period, expenditures made or liabilities incurred for the acquisition, construction, improvement, replacement, or repair of fixed or capital assets that would be capitalized on the consolidated balance sheet of Borrower and its Subsidiaries in accordance with GAAP.

“Change of Control” means the occurrence of any of the following: (a) any Person or group, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, acquires beneficial ownership of more than thirty-five percent (35%) of the voting power of Borrower’s outstanding equity interests; (b) during any twelve-month period, a majority of the members of Borrower’s board of directors cease to be Continuing Directors; or (c) Borrower ceases to own, directly or indirectly, one hundred percent (100%) of the equity interests in each Guarantor. Notwithstanding the foregoing, no Change of Control shall be deemed to occur solely as a result of ordinary-course public market trading in Borrower’s common stock, so long as no Person or group acquires beneficial ownership of more than thirty-five percent (35%) of the voting power of Borrower’s outstanding equity interests, or solely as a result of ordinary-course director elections by shareholders.

“Closing Date” means August 16, 2024.

“Collateral” has the meaning assigned to such term in the Security Agreement.

“Commitment” means Twenty-Five Million Dollars ($25,000,000).

“Compliance Certificate” means a certificate executed by the Chief Financial Officer of Borrower, substantially in the form attached as Exhibit B, delivered with each quarterly and annual financial statement required under this Agreement, certifying compliance with the financial covenants set forth in Article IX and setting forth reasonably detailed calculations thereof.

“Continuing Directors” means, as of any date, the directors of Borrower who were members of Borrower’s board of directors on the Closing Date and any director whose nomination or election was approved by a majority of the directors who were then Continuing Directors.

“Default” means any event or condition that, with the giving of notice, the lapse of time, or both, would constitute an Event of Default.

“Default Rate” means the Applicable Rate plus 2.00% per annum, equal to an additional two hundred basis points. As of the Closing Date, based on the Term SOFR rate in effect on such date, the Default Rate would equal Term SOFR plus an aggregate spread and adjustment of 6.75% per annum.

“Equity Issuance” means any issuance or sale by Borrower of any equity interests for cash consideration, other than equity interests issued pursuant to employee equity compensation plans.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“ERISA Event” means any reportable event, failure to satisfy minimum funding standards, termination of a plan, withdrawal from a multiemployer plan, or similar event under ERISA or the Internal Revenue Code that could result in liability to Borrower or any Subsidiary.

“Event of Default” has the meaning assigned to such term in Section 10.01.

“Excluded Collateral” has the meaning assigned to such term in the Security Agreement, and includes real property, motor vehicles, equity interests in Immaterial Subsidiaries with assets of less than $1,000,000 individually, and payroll and tax deposit accounts up to $2,500,000 in the aggregate.

“Fixed Charges” means, for any period, the sum of, without duplication: (a) scheduled principal payments of Funded Debt, (b) Interest Expense actually paid in cash, (c) income taxes actually paid in cash, and (d) Restricted Payments actually paid in cash.

“Fixed Charge Coverage Ratio” means, as of any date of determination, the ratio of (a) Adjusted EBITDA minus Unfinanced CapEx to (b) Fixed Charges, in each case calculated for the trailing twelve-month period ending on such date.

“Funded Debt” means, as of any date, all indebtedness for borrowed money of Borrower and its Subsidiaries on a consolidated basis that bears interest or has a stated maturity date, including capital lease obligations and purchase money indebtedness.

“Funding Account” means Borrower’s account at Pinnacle Trust Bank, N.A., Account No. 8726-4519-8417, ABA No. 021-209-118, or such other account as Borrower may designate in a written notice acceptable to Lender.

“GAAP” means generally accepted accounting principles in the United States, applied on a consistent basis.

“Governmental Authority” means any federal, state, local, municipal, foreign, or other government or political subdivision thereof, or any agency, authority, bureau, commission, department, instrumentality, regulatory body, court, tribunal, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of government, including the Securities and Exchange Commission, the Internal Revenue Service, and any Secretary of State.

“Guarantors” means Arbor Health Holdings LLC, a Delaware limited liability company, Arbor Health Platform Services Inc., a Delaware corporation, and each of their respective successors and permitted assigns.

“Guaranty Agreement” means the Guaranty Agreement dated as of August 16, 2024, executed by the Guarantors in favor of Lender.

“Immaterial Subsidiary” means any Subsidiary with total assets of less than $1,000,000 individually.

“Interest Expense” means, for any period, total interest expense of Borrower and its Subsidiaries on a consolidated basis for such period, determined in accordance with GAAP.

“Interest Period” means each period commencing on a Business Day and ending on the numerically corresponding day in the next succeeding calendar month or, if there is no numerically corresponding day in such next succeeding calendar month, the last Business Day of such month; provided that the initial Interest Period shall commence on the Closing Date.

“Investment” means any loan, advance, capital contribution, acquisition of equity interests, acquisition of all or substantially all assets of another Person or business line, or other similar investment transaction.

“Lender” means Pinnacle Trust Bank, N.A., a national banking association, together with its successors and permitted assigns.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien, charge, security interest, preference, priority, or other security agreement or preferential arrangement of any kind.

“Loan Documents” means this Agreement, the Guaranty Agreement, the Security Agreement, each promissory note, if any, issued pursuant to Section 2.04, each Perfection Certificate, each control agreement, each intellectual property security agreement, and all other documents, instruments, certificates, and agreements executed and delivered in connection with the foregoing.

“Loan Party” means Borrower and each Guarantor.

“Material Adverse Effect” means a material adverse change in or material adverse effect on: (a) the business, operations, properties, assets, or financial condition of Borrower and its Subsidiaries, taken as a whole; (b) the ability of any Loan Party to perform any of its material obligations under any Loan Document; or (c) the validity or enforceability of any Loan Document or the rights and remedies of Lender thereunder.

“Maturity Date” means February 16, 2026.

“Net Leverage Ratio” means, as of the last day of any fiscal quarter, the ratio of (a) Funded Debt as of such date minus unrestricted cash and cash equivalents of Borrower and its Subsidiaries as of such date, not to exceed $20,000,000, to (b) Adjusted EBITDA for the trailing twelve-month period ending on such date.

“Obligations” means all indebtedness, liabilities, and obligations of the Loan Parties under or in connection with the Loan Documents, whether now existing or hereafter arising, absolute or contingent, due or to become due, direct or indirect, secured or unsecured, including principal, interest, default interest, fees, costs, expenses, reimbursement obligations, indemnities, and all other amounts payable under any Loan Document.

“Permitted Liens” means: (i) Liens securing the Obligations; (ii) Liens for taxes, assessments, or governmental charges not yet delinquent or being contested in good faith with adequate reserves; (iii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s, and similar Liens arising in the ordinary course of business and not overdue for more than sixty (60) days or being contested in good faith; (iv) easements, zoning restrictions, rights-of-way, covenants, conditions, and similar encumbrances that do not materially interfere with the ordinary conduct of business; (v) purchase money Liens and capital lease Liens securing indebtedness permitted hereunder and not exceeding $5,000,000 in the aggregate; (vi) existing Liens disclosed in the Perfection Certificate, including Frontier Leasing Corp. UCC-1 Filing No. 2023-2811490; and (vii) other customary permitted Liens arising by operation of law in the ordinary course of business that do not secure Funded Debt and do not materially impair the value or use of the affected property.

“Permanent Facility” means any revolving credit facility, term loan facility, or other credit facility entered into by Borrower after the Closing Date that is intended to serve as Borrower’s primary working capital and general corporate credit facility on a non-bridge basis.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, Governmental Authority, or other entity.

“Restricted Payment” means any dividend, distribution, payment, purchase, redemption, retirement, acquisition, cancellation, or other payment on account of any equity interest of Borrower or any Subsidiary, whether in cash, securities, or other property.

“Security Agreement” means the Security Agreement dated as of August 16, 2024, executed by Borrower and the Guarantors in favor of Lender.

“SOFR” means the Secured Overnight Financing Rate administered by the Federal Reserve Bank of New York, or any successor administrator.

“SOFR Adjustment” means 0.10% per annum, equal to ten basis points.

“SOFR Floor” means 1.00% per annum.

“Solvent” means, with respect to any Person as of any date, that: (a) the fair value of such Person’s total assets exceeds the fair value of its total liabilities, including contingent liabilities; (b) such Person is able to pay its debts as they become due in the ordinary course of business; and (c) such Person has adequate capital to carry on its business as then conducted and as proposed to be conducted.

“Subsidiary” means, with respect to Borrower, any corporation, limited liability company, partnership, association, or other entity of which Borrower directly or indirectly owns more than fifty percent (50%) of the voting equity interests.

“Term SOFR” means, for any Interest Period, the forward-looking term rate based on SOFR published by CME Group Benchmark Administration Limited, or any successor administrator, for a tenor comparable to such Interest Period, subject to the SOFR Floor; provided that in no event shall Term SOFR be less than the SOFR Floor.

“Unfinanced CapEx” means Capital Expenditures that are not financed with the proceeds of Funded Debt, other than revolving credit borrowings.

Section 1.02. Rules of Interpretation.

Unless the context otherwise requires:

(a) references to Articles, Sections, Exhibits, and Schedules are references to articles, sections, exhibits, and schedules of this Agreement;

(b) the words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation”;

(d) headings are included for convenience of reference only and shall not affect the interpretation of this Agreement;

(e) accounting terms not otherwise defined herein shall be construed in accordance with GAAP;

(f) references to statutes, rules, regulations, and governmental requirements include all amendments, supplements, replacements, and successor provisions;

(g) references to time of day mean New York City time; and

(h) references to “dollars” or “$” mean lawful money of the United States of America.

Section 1.03. SOFR Rate Provisions.

If Lender determines that Term SOFR is unavailable, no longer representative, no longer published, or cannot be determined for an applicable Interest Period, Lender may, after consultation with Borrower, establish a replacement benchmark rate giving due consideration to any evolving or then-prevailing market convention for U.S. dollar-denominated syndicated or bilateral credit facilities and any recommendations of the Alternative Reference Rates Committee or successor official body.

Any replacement benchmark shall include any applicable spread adjustment or methodology recommended by the Alternative Reference Rates Committee or, if no such recommendation is available, such spread adjustment as Lender reasonably determines to be consistent with market practice for similar credit facilities. Lender may make conforming changes to this Agreement and the other Loan Documents as Lender reasonably determines are necessary or appropriate to implement the replacement benchmark, including changes to definitions, timing and frequency of rate determinations, interest periods, payment dates, and administrative mechanics. Lender shall consult with Borrower regarding such conforming changes, but Lender’s reasonable determination shall be conclusive absent manifest error.

ARTICLE II

THE LOAN

Section 2.01. Bridge Loan Commitment.

Subject to the terms and conditions of this Agreement, Lender agrees to make a single term loan to Borrower on the Closing Date in the aggregate principal amount of $25,000,000. The facility established under this Agreement is a single-draw bridge term loan facility. Amounts repaid or prepaid may not be reborrowed.

The Commitment shall terminate automatically and without further action upon the funding of the Bridge Loan on the Closing Date.

Section 2.02. Funding.

On the Closing Date, upon satisfaction or waiver by Lender of the conditions precedent set forth in Article V, Lender shall disburse the proceeds of the Bridge Loan in immediately available funds to the Funding Account. Funding shall occur no later than 2:00 p.m. New York City time on the Closing Date, provided that all conditions precedent have been satisfied or waived prior to such time.

Section 2.03. Use of Proceeds.

Borrower shall use the proceeds of the Bridge Loan solely for the following purposes:

(a) working capital and general corporate purposes of Borrower and its Subsidiaries;

(b) integration costs related to the acquisitions of MedBridge Workflow Solutions LLC and Cortland Surgical Systems, Inc.;

(d) payment of fees and expenses incurred in connection with this Agreement and the other Loan Documents.

No proceeds of the Bridge Loan shall be used in violation of Regulation U of the Board of Governors of the Federal Reserve System or for any purpose prohibited by applicable law.

Section 2.04. Evidence of Debt.

Borrower’s obligation to repay the Bridge Loan shall be evidenced by this Agreement and by the records maintained by Lender in the ordinary course of business. No promissory note shall be required unless requested by Lender. If Lender requests a promissory note, Borrower shall execute and deliver to Lender, within five (5) Business Days after such request, a promissory note in form and substance reasonably satisfactory to Lender.

Lender’s records regarding the principal amount of the Bridge Loan, accrued interest, payments, and other Obligations shall be presumptive evidence of such amounts absent manifest error.

ARTICLE III

INTEREST AND FEES

Section 3.01. Interest Rate.

The outstanding principal balance of the Bridge Loan shall bear interest at a rate per annum equal to the Applicable Rate. The Applicable Rate is Adjusted Term SOFR plus the Applicable Margin of 4.75% per annum.

As of the Closing Date, one-month Term SOFR is 5.34% per annum. After giving effect to the SOFR Adjustment of 0.10% per annum, Adjusted Term SOFR is 5.44% per annum. Accordingly, the all-in Applicable Rate as of the Closing Date is 10.19% per annum. The parties acknowledge that the spread component attributable to Borrower’s credit is 4.75% per annum and that the SOFR Adjustment is a benchmark-related component.

Section 3.02. Default Interest.

Upon the occurrence and during the continuance of any Event of Default, the outstanding principal balance of the Bridge Loan and, to the extent permitted by law, overdue interest, fees, and other amounts shall bear interest at the Default Rate. The Default Rate equals the Applicable Rate plus 2.00% per annum.

Default interest shall accrue from the date of the applicable Event of Default until such Event of Default is waived in writing by Lender or the Obligations have been paid in full.

Section 3.03. Interest Payment Dates.

Interest on the Bridge Loan shall be payable quarterly in arrears on the last Business Day of each fiscal quarter, including September 30, December 31, March 31, and June 30 of each year, and on the Maturity Date. Interest shall also be payable on the date of any prepayment with respect to the principal amount prepaid.

The first interest payment date shall be September 30, 2024.

Section 3.04. Computation of Interest.

Interest shall be computed on the basis of a 360-day year and the actual number of days elapsed.

Section 3.05. Origination Fee.

Borrower shall pay to Lender on the Closing Date a non-refundable origination fee in the amount of $125,000, representing 0.50% of the Commitment. The origination fee shall be fully earned upon the Closing Date and shall not be refunded under any circumstances, including early repayment, prepayment, acceleration, or termination of this Agreement.

Section 3.06. Lender’s Counsel Fees.

Borrower shall reimburse Lender for the reasonable and documented fees and disbursements of Lender’s counsel, Whitfield Gage & Associates LLP, incurred in connection with the negotiation, preparation, execution, and closing of this Agreement and the other Loan Documents. Such reimbursement shall not exceed $125,000 in the aggregate for pre-closing and closing legal fees and disbursements. Amounts due under this Section shall be payable at closing or promptly upon Lender’s request.

Section 3.07. Other Fees and Expenses.

Borrower shall pay all reasonable and documented out-of-pocket costs and expenses incurred by Lender in connection with the administration, enforcement, and protection of Lender’s rights under the Loan Documents, including UCC filing fees, lien search fees, recording fees, collateral perfection costs, and similar expenses. After the occurrence and during the continuance of an Event of Default, Borrower shall also pay all reasonable attorneys’ fees and expenses incurred by Lender in enforcing or protecting its rights under the Loan Documents.

ARTICLE IV

PAYMENTS AND PREPAYMENTS

Section 4.01. Repayment at Maturity.

Borrower shall repay the entire outstanding principal balance of the Bridge Loan, together with all accrued and unpaid interest and all other Obligations then owing, on the Maturity Date. The Bridge Loan has a bullet maturity structure and is not subject to scheduled amortization prior to the Maturity Date.

Section 4.02. Voluntary Prepayment.

Borrower may prepay the Bridge Loan in whole or in part at any time without premium or penalty, subject to Borrower’s obligation to indemnify Lender for customary SOFR breakage costs and any loss or expense incurred by Lender arising from prepayment on a date other than the last day of an Interest Period.

Borrower shall provide Lender with not less than three (3) Business Days’ prior written notice of any voluntary prepayment. Each partial prepayment shall be in a minimum principal amount of $1,000,000 and in whole multiples of $500,000 in excess thereof, or, if less, the entire remaining outstanding principal balance. Any notice of prepayment shall be irrevocable once delivered.

Section 4.03. Mandatory Prepayment.

(a) Permanent Facility. On the closing date of any Permanent Facility, Borrower shall prepay the Bridge Loan in full using one hundred percent (100%) of the net cash proceeds of such Permanent Facility. The parties acknowledge that repayment from a Permanent Facility is the primary intended exit mechanism for the Bridge Loan.

(b) Asset Sales. Upon consummation of any Asset Sale resulting in net cash proceeds in excess of $5,000,000 individually or $10,000,000 in the aggregate during the term of this Agreement, Borrower shall apply one hundred percent (100%) of such net cash proceeds to prepay the Bridge Loan. Such prepayment shall be made within five (5) Business Days after receipt of such net cash proceeds. Ordinary-course sales of inventory and obsolete equipment shall be excluded from the thresholds in this Section.

(c) Equity Issuances. Upon receipt by Borrower of net cash proceeds from any Equity Issuance, Borrower shall apply seventy-five percent (75%) of such net cash proceeds to prepay the Bridge Loan. Proceeds from employee equity compensation plans in an aggregate amount not to exceed $3,000,000 per fiscal year shall be excluded from this mandatory prepayment requirement. Any mandatory prepayment under this paragraph shall be made within five (5) Business Days after receipt of such net cash proceeds.

(d) Insurance and Condemnation Proceeds. If Borrower or any Subsidiary receives casualty insurance proceeds or condemnation proceeds in excess of $5,000,000 and does not reinvest such proceeds in replacement assets or repair or restoration of affected assets within one hundred eighty (180) days after receipt, Borrower shall apply such unreinvested net cash proceeds to prepay the Bridge Loan within five (5) Business Days after the end of such reinvestment period.

Section 4.04. Application of Prepayments.

All voluntary and mandatory prepayments shall be applied first to accrued and unpaid interest and fees, and thereafter to the outstanding principal balance of the Bridge Loan. No prepaid amount may be reborrowed.

Section 4.05. Payments Generally.

All payments under this Agreement shall be made in immediately available funds in U.S. dollars, without setoff, counterclaim, deduction, or withholding, except as required by applicable law. Payments received by Lender after 2:00 p.m. New York City time shall be deemed received on the next Business Day.

If any payment date falls on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day, and interest shall accrue for the period of such extension.

ARTICLE V

CONDITIONS PRECEDENT

Section 5.01. Conditions to Closing and Funding.

The obligation of Lender to make the Bridge Loan on the Closing Date is subject to the satisfaction or waiver by Lender of each of the following conditions:

(a) Loan Documents. Lender shall have received executed counterparts of this Agreement, the Guaranty Agreement, and the Security Agreement, each duly executed by all parties thereto.

(b) Legal Opinion. Lender shall have received a legal opinion of Borrower’s counsel, Calderwood & Harkness LLP, in form and substance satisfactory to Lender, covering customary matters, including organization, authority, due execution and delivery, enforceability, no conflict, and attachment of security interests.

(c) Secretary’s Certificate. Lender shall have received a Secretary’s Certificate of Borrower executed by Gerald Fong, General Counsel and Corporate Secretary, attaching: (i) certified copies of Borrower’s Certificate of Incorporation, as amended, and Bylaws; (ii) resolutions of Borrower’s board of directors adopted August 2, 2024 authorizing the transactions contemplated by the Loan Documents; and (iii) an incumbency certificate identifying authorized officers.

(d) Officer’s Closing Certificate. Lender shall have received an Officer’s Closing Certificate executed by Evan Strickland, Chief Financial Officer of Borrower, certifying that: (i) the representations and warranties in Article VI are true and correct as of the Closing Date; (ii) no Default or Event of Default exists or would result from the borrowing; and (iii) Borrower is in compliance with the financial covenants in Article IX.

(e) Perfection Certificate. Lender shall have received a Perfection Certificate duly executed by Borrower and the Guarantors, disclosing all information reasonably requested by Lender regarding perfection of Lender’s security interests.

(f) Search Results. Lender shall have received UCC, tax lien, judgment, and litigation search results in each relevant jurisdiction, including Delaware, satisfactory to Lender.

(g) Insurance. Lender shall have received evidence of insurance satisfactory to Lender, naming Lender as additional insured and/or loss payee, as applicable.

(h) Borrowing Request. Lender shall have received a Borrowing Request substantially in the form attached as Exhibit A, duly executed by an authorized officer of Borrower.

(i) Fees and Expenses. Lender shall have received payment of the Origination Fee and all other fees and expenses then due and payable, including estimated Lender’s counsel fees.

(j) No Material Adverse Effect. No Material Adverse Effect shall have occurred since December 31, 2023.

(k) Consents. All required governmental and third-party consents, approvals, notices, and authorizations shall have been obtained or made.

(l) Due Diligence. Lender shall have completed its due diligence review to its satisfaction. Lender acknowledges that such review was completed on August 9, 2024.

(m) Good Standing Certificates. Lender shall have received good standing certificates for each Loan Party from the Secretary of State of Delaware and, with respect to Borrower, the Secretary of the Commonwealth of Massachusetts.

(n) Financial Statements. Lender shall have received Borrower’s audited consolidated financial statements for the fiscal year ended December 31, 2023 and unaudited consolidated financial statements for the fiscal quarter ended June 30, 2024.

(o) Solvency. Borrower shall have delivered a solvency certificate confirming that Borrower and its Subsidiaries, on a consolidated basis, are Solvent after giving effect to the Bridge Loan and the payment of related fees and expenses.

(p) Know Your Customer; BSA. Lender shall have received all documentation and information required under applicable “know your customer,” anti-money laundering, Bank Secrecy Act, and USA PATRIOT Act rules and regulations.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

Section 6.01. Representations and Warranties.

Borrower represents and warrants to Lender as of the Closing Date and as of each date on which such representations and warranties are deemed repeated, including each date a Compliance Certificate is delivered and each interest payment date, as follows:

(a) Organization and Good Standing. Borrower is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, with Delaware File Number 7284619. Borrower is duly qualified to do business in each jurisdiction where the nature of its business requires such qualification, including the Commonwealth of Massachusetts. Each Guarantor is duly organized, validly existing, and in good standing under the laws of the State of Delaware.

(b) Authorization. The execution, delivery, and performance of the Loan Documents have been duly authorized by all necessary corporate or limited liability company action of each Loan Party, including, with respect to Borrower, resolutions of its board of directors adopted August 2, 2024.

(c) No Conflict. The execution, delivery, and performance of the Loan Documents do not: (i) conflict with or result in a breach of Borrower’s Certificate of Incorporation or Bylaws; (ii) violate any material agreement to which Borrower or any Subsidiary is a party or by which its property is bound; or (iii) violate any applicable law, rule, regulation, order, writ, judgment, injunction, or decree.

(d) Enforceability. Each Loan Document constitutes a legal, valid, and binding obligation of each Loan Party that is a party thereto, enforceable against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws affecting creditors’ rights generally and to general principles of equity.

(e) Financial Statements. The consolidated financial statements of Borrower delivered to Lender, including audited financial statements for the fiscal year ended December 31, 2023 audited by Greystone Audit Group LLP, engagement partner Danielle Chow, and unaudited financial statements for the fiscal quarter ended June 30, 2024, present fairly in all material respects the financial condition and results of operations of Borrower and its Subsidiaries in accordance with GAAP, subject, in the case of unaudited statements, to normal year-end adjustments and absence of footnotes. For the twelve months ended June 30, 2024, Borrower reported revenue of $162,300,000, Adjusted EBITDA of $28,400,000, representing a 17.5% margin, total assets of $411,700,000, and cash on hand of approximately $47,000,000.

(f) No Material Adverse Effect. Since December 31, 2023, there has been no Material Adverse Effect.

(g) Litigation. There is no action, suit, investigation, arbitration, or proceeding pending or, to Borrower’s knowledge, threatened against Borrower or any Subsidiary before any Governmental Authority or arbitrator that could reasonably be expected to result in a Material Adverse Effect.

(h) Compliance with Laws. Borrower and its Subsidiaries are in compliance in all material respects with all applicable laws, rules, and regulations, including healthcare regulatory requirements, HIPAA, the HITECH Act, state privacy laws, CMS conditions of participation, and applicable state healthcare licensing requirements. Borrower’s SaaS platform operates across 22 states.

(i) Taxes. Borrower, EIN 88-3164720, and its Subsidiaries have filed all required federal, state, and local tax returns and have paid all taxes due and payable, except taxes being contested in good faith with adequate reserves.

(j) ERISA. No ERISA Event has occurred or is reasonably expected to occur that would result in liability to Borrower or its Subsidiaries in excess of $5,000,000.

(k) Solvency. Borrower and its Subsidiaries, on a consolidated basis after giving effect to the Bridge Loan and payment of all fees and expenses in connection therewith, are Solvent.

(l) intellectual Property. Borrower and its Subsidiaries own or have the right to use all intellectual property material to the conduct of their business as currently conducted, free and clear of all Liens other than Permitted Liens.

(m) Securities Law Compliance. Borrower is a reporting company under the Securities Exchange Act of 1934 and has been assigned a CIK by the SEC. Shares of Borrower’s common stock are listed on the Nasdaq Global Select Market under ticker symbol AHTI. Borrower completed its initial public offering on March 14, 2024, raising approximately $180,000,000 in gross proceeds through the sale of 10,000,000 shares at $18.00 per share. Borrower’s post-IPO market capitalization is approximately $740,000,000. Borrower is current in all SEC reporting obligations.

(n) Subsidiaries. Borrower has accurately disclosed to Lender all Subsidiaries, including Arbor Health Holdings LLC, a direct wholly-owned Delaware limited liability company with EIN 88-4271835; Arbor Health Platform Services Inc., an indirect wholly-owned Delaware corporation with EIN 92-1058467; MedBridge Workflow Solutions LLC, an indirect wholly-owned Delaware limited liability company acquired April 22, 2024 for $34,000,000; and Cortland Surgical Systems, Inc., an indirect wholly-owned Delaware corporation acquired May 31, 2024 for $21,000,000. Total Q2 2024 acquisition spend was $55,000,000.

(o) Existing Indebtedness. As of the Closing Date, Borrower has no existing Funded Debt. Borrower’s prior term loan was retired with IPO proceeds. Upon funding, the Bridge Loan will be the sole Funded Debt of Borrower, except for equipment lease obligations disclosed on Schedule 8.01.

(p) Deposit Accounts. Borrower has disclosed all deposit accounts on the Perfection Certificate, including accounts maintained at Pinnacle Trust Bank, N.A. and Ridgefield National Bank.

(q) Insurance. Borrower and its Subsidiaries maintain insurance with financially sound carriers in amounts and covering risks customary for companies of similar size and in similar industries.

(r) Anti-Corruption; Sanctions. Neither Borrower nor any Subsidiary, nor any director, officer, or employee thereof, is a Sanctioned Person. Borrower and its Subsidiaries are in compliance with applicable anti-corruption laws, including the Foreign Corrupt Practices Act.

(s) Use of Proceeds. No part of the proceeds of the Bridge Loan will be used in violation of Regulation U or for any prohibited purpose.

(t) Margin Stock. Borrower does not own any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System.

ARTICLE VII

AFFIRMATIVE COVENANTS

Borrower covenants and agrees that, from the Closing Date until the Bridge Loan has been repaid in full and the Commitment has been terminated, Borrower shall comply with the covenants set forth in this Article VII.

Section 7.01. Financial Reporting and Deliverables.

(a) Annual Financial Statements. Within ninety (90) days after the end of each fiscal year, Borrower shall deliver to Lender audited consolidated financial statements of Borrower and its Subsidiaries, prepared in accordance with GAAP, together with an unqualified audit report from Greystone Audit Group LLP or another independent registered public accounting firm of recognized national standing.

(b) Quarterly Financial Statements. Within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year, Borrower shall deliver unaudited consolidated financial statements of Borrower and its Subsidiaries, including a balance sheet, income statement, and statement of cash flows.

(c) Compliance Certificate. Together with each annual and quarterly financial statement, Borrower shall deliver a Compliance Certificate executed by its Chief Financial Officer, certifying compliance with the financial covenants set forth in Article IX and including detailed calculations of each ratio. The first Compliance Certificate shall be due within forty-five (45) days after September 30, 2024, and therefore no later than November 14, 2024.

(d) Monthly Liquidity Reports. Within fifteen (15) days after the end of each calendar month, Borrower shall deliver to Lender a report setting forth unrestricted cash and cash equivalents as of the last day of such month.

(e) Annual Budget. Within sixty (60) days after the beginning of each fiscal year, Borrower shall deliver to Lender an annual budget and operating plan for such fiscal year.

(f) SEC Filings. Promptly upon filing, Borrower shall deliver copies of all reports, proxy statements, and other documents filed with the SEC, or, at Borrower’s election, written notice that such filings are available on the SEC’s EDGAR system.

Section 7.02. Insurance.

Borrower shall maintain, and shall cause its Subsidiaries to maintain, insurance with financially sound and reputable carriers in amounts and covering risks customary for companies of similar size and in similar industries, including general liability, property, directors and officers liability, cyber and data breach, errors and omissions, and workers’ compensation coverage. Lender shall be named as additional insured and/or loss payee, as applicable.

Section 7.03. Maintenance of Properties.

Borrower shall maintain, and shall cause each Subsidiary to maintain, all material properties and equipment necessary to the conduct of its business in good working order and condition, ordinary wear and tear excepted.

Section 7.04. Compliance with Laws.

Borrower shall comply, and shall cause each Subsidiary to comply, in all material respects with all applicable laws, rules, regulations, and governmental requirements, including HIPAA, the HITECH Act, state healthcare privacy laws, and applicable healthcare licensing requirements.

Section 7.05. Notices of Material Events.

Borrower shall promptly, and in any event within five (5) Business Days, notify Lender in writing of:

(i) any Default or Event of Default;

(ii) any Material Adverse Effect;

BRIDGE LOAN AGREEMENT
Dated as of August 16, 2024
between
ARBOR HEALTH TECHNOLOGIES INC., a Delaware corporation, as Borrower
and
PINNACLE TRUST BANK, N.A., a national banking association, as Lender
BRIDGE LOAN AGREEMENT
This BRIDGE LOAN AGREEMENT is entered into as of August 16, 2024, by and between ARBOR HEALTH TECHNOLOGIES INC., a Delaware corporation, as borrower, and PINNACLE TRUST BANK, N.A., a national banking association, as lender.
Borrower has requested that Lender make available to Borrower a single-draw senior secured bridge term loan facility in the principal amount of Twenty-Five Million Dollars ($25,000,000), to be used for the purposes set forth herein. Lender is willing to make such loan available on the terms and subject to the conditions contained in this Agreement and the other Loan Documents.
Accordingly, the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions.
As used in this Agreement, the following terms have the meanings set forth below:
“Adjusted EBITDA” means, for any period, the net income of Borrower and its Subsidiaries on a consolidated basis for such period, determined in accordance with GAAP, plus, to the extent deducted in determining such net income and without duplication: (a) Interest Expense, (b) income tax expense, (c) depreciation and amortization expense, (d) stock-based compensation expense, (e) transaction, acquisition, integration, and related expenses, including expenses incurred in connection with the acquisitions of MedBridge Workflow Solutions LLC and Cortland Surgical Systems, Inc., and (f) other non-recurring, unusual, or extraordinary charges approved by Lender in writing. Adjusted EBITDA shall be reduced by non-cash income items included in net income for such period, in each case calculated on a consolidated basis for Borrower and its Subsidiaries.
“Adjusted Term SOFR” means, for any Interest Period, Term SOFR for such Interest Period plus the SOFR Adjustment; provided that Adjusted Term SOFR shall at all times be subject to the SOFR Floor.
“Affiliate” means, with respect to any specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such specified Person. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through ownership of voting securities, by contract, or otherwise.
“Agreement” means this Bridge Loan Agreement, as amended, restated, supplemented, waived, or otherwise modified from time to time.
“Applicable Margin” means 4.75% per annum, equal to four hundred seventy-five basis points.
“Applicable Rate” means, for any Interest Period, Adjusted Term SOFR for such Interest Period plus the Applicable Margin.
“Asset Sale” means any sale, transfer, lease, license, conveyance, assignment, or other disposition by Borrower or any Subsidiary of any asset or property, whether in one transaction or a series of related transactions, other than sales of inventory and dispositions of obsolete, worn-out, or surplus equipment in the ordinary course of business.
“Borrower” means Arbor Health Technologies Inc., a Delaware corporation.
“Bridge Loan” means the term loan made by Lender to Borrower pursuant to Article II in the original principal amount of Twenty-Five Million Dollars ($25,000,000).
“Business Day” means any day other than a Saturday, Sunday, or other day on which commercial banks in New York, New York are authorized or required by law to close.
“Capital Expenditures” means, for any period, expenditures made or liabilities incurred for the acquisition, construction, improvement, replacement, or repair of fixed or capital assets that would be capitalized on the consolidated balance sheet of Borrower and its Subsidiaries in accordance with GAAP.
“Change of Control” means the occurrence of any of the following: (a) any Person or group, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, acquires beneficial ownership of more than thirty-five percent (35%) of the voting power of Borrower’s outstanding equity interests; (b) during any twelve-month period, a majority of the members of Borrower’s board of directors cease to be Continuing Directors; or (c) Borrower ceases to own, directly or indirectly, one hundred percent (100%) of the equity interests in each Guarantor. Notwithstanding the foregoing, no Change of Control shall be deemed to occur solely as a result of ordinary-course public market trading in Borrower’s common stock, so long as no Person or group acquires beneficial ownership of more than thirty-five percent (35%) of the voting power of Borrower’s outstanding equity interests, or solely as a result of ordinary-course director elections by shareholders.
“Closing Date” means August 16, 2024.
“Collateral” has the meaning assigned to such term in the Security Agreement.
“Commitment” means Twenty-Five Million Dollars ($25,000,000).
“Compliance Certificate” means a certificate executed by the Chief Financial Officer of Borrower, substantially in the form attached as Exhibit B, delivered with each quarterly and annual financial statement required under this Agreement, certifying compliance with the financial covenants set forth in Article IX and setting forth reasonably detailed calculations thereof.
“Continuing Directors” means, as of any date, the directors of Borrower who were members of Borrower’s board of directors on the Closing Date and any director whose nomination or election was approved by a majority of the directors who were then Continuing Directors.
“Default” means any event or condition that, with the giving of notice, the lapse of time, or both, would constitute an Event of Default.
“Default Rate” means the Applicable Rate plus 2.00% per annum, equal to an additional two hundred basis points. As of the Closing Date, based on the Term SOFR rate in effect on such date, the Default Rate would equal Term SOFR plus an aggregate spread and adjustment of 6.75% per annum.
“Equity Issuance” means any issuance or sale by Borrower of any equity interests for cash consideration, other than equity interests issued pursuant to employee equity compensation plans.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.
“ERISA Event” means any reportable event, failure to satisfy minimum funding standards, termination of a plan, withdrawal from a multiemployer plan, or similar event under ERISA or the Internal Revenue Code that could result in liability to Borrower or any Subsidiary.
“Event of Default” has the meaning assigned to such term in Section 10.01.
“Excluded Collateral” has the meaning assigned to such term in the Security Agreement, and includes real property, motor vehicles, equity interests in Immaterial Subsidiaries with assets of less than $1,000,000 individually, and payroll and tax deposit accounts up to $2,500,000 in the aggregate.
“Fixed Charges” means, for any period, the sum of, without duplication: (a) scheduled principal payments of Funded Debt, (b) Interest Expense actually paid in cash, (c) income taxes actually paid in cash, and (d) Restricted Payments actually paid in cash.
“Fixed Charge Coverage Ratio” means, as of any date of determination, the ratio of (a) Adjusted EBITDA minus Unfinanced CapEx to (b) Fixed Charges, in each case calculated for the trailing twelve-month period ending on such date.
“Funded Debt” means, as of any date, all indebtedness for borrowed money of Borrower and its Subsidiaries on a consolidated basis that bears interest or has a stated maturity date, including capital lease obligations and purchase money indebtedness.
“Funding Account” means Borrower’s account at Pinnacle Trust Bank, N.A., Account No. 8726-4519-8417, ABA No. 021-209-118, or such other account as Borrower may designate in a written notice acceptable to Lender.
“GAAP” means generally accepted accounting principles in the United States, applied on a consistent basis.
“Governmental Authority” means any federal, state, local, municipal, foreign, or other government or political subdivision thereof, or any agency, authority, bureau, commission, department, instrumentality, regulatory body, court, tribunal, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of government, including the Securities and Exchange Commission, the Internal Revenue Service, and any Secretary of State.
“Guarantors” means Arbor Health Holdings LLC, a Delaware limited liability company, Arbor Health Platform Services Inc., a Delaware corporation, and each of their respective successors and permitted assigns.
“Guaranty Agreement” means the Guaranty Agreement dated as of August 16, 2024, executed by the Guarantors in favor of Lender.
“Immaterial Subsidiary” means any Subsidiary with total assets of less than $1,000,000 individually.
“Interest Expense” means, for any period, total interest expense of Borrower and its Subsidiaries on a consolidated basis for such period, determined in accordance with GAAP.
“Interest Period” means each period commencing on a Business Day and ending on the numerically corresponding day in the next succeeding calendar month or, if there is no numerically corresponding day in such next succeeding calendar month, the last Business Day of such month; provided that the initial Interest Period shall commence on the Closing Date.
“Investment” means any loan, advance, capital contribution, acquisition of equity interests, acquisition of all or substantially all assets of another Person or business line, or other similar investment transaction.
“Lender” means Pinnacle Trust Bank, N.A., a national banking association, together with its successors and permitted assigns.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien, charge, security interest, preference, priority, or other security agreement or preferential arrangement of any kind.
“Loan Documents” means this Agreement, the Guaranty Agreement, the Security Agreement, each promissory note, if any, issued pursuant to Section 2.04, each Perfection Certificate, each control agreement, each intellectual property security agreement, and all other documents, instruments, certificates, and agreements executed and delivered in connection with the foregoing.
“Loan Party” means Borrower and each Guarantor.
“Material Adverse Effect” means a material adverse change in or material adverse effect on: (a) the business, operations, properties, assets, or financial condition of Borrower and its Subsidiaries, taken as a whole; (b) the ability of any Loan Party to perform any of its material obligations under any Loan Document; or (c) the validity or enforceability of any Loan Document or the rights and remedies of Lender thereunder.
“Maturity Date” means February 16, 2026.
“Net Leverage Ratio” means, as of the last day of any fiscal quarter, the ratio of (a) Funded Debt as of such date minus unrestricted cash and cash equivalents of Borrower and its Subsidiaries as of such date, not to exceed $20,000,000, to (b) Adjusted EBITDA for the trailing twelve-month period ending on such date.
“Obligations” means all indebtedness, liabilities, and obligations of the Loan Parties under or in connection with the Loan Documents, whether now existing or hereafter arising, absolute or contingent, due or to become due, direct or indirect, secured or unsecured, including principal, interest, default interest, fees, costs, expenses, reimbursement obligations, indemnities, and all other amounts payable under any Loan Document.
“Permitted Liens” means: (i) Liens securing the Obligations; (ii) Liens for taxes, assessments, or governmental charges not yet delinquent or being contested in good faith with adequate reserves; (iii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s, and similar Liens arising in the ordinary course of business and not overdue for more than sixty (60) days or being contested in good faith; (iv) easements, zoning restrictions, rights-of-way, covenants, conditions, and similar encumbrances that do not materially interfere with the ordinary conduct of business; (v) purchase money Liens and capital lease Liens securing indebtedness permitted hereunder and not exceeding $5,000,000 in the aggregate; (vi) existing Liens disclosed in the Perfection Certificate, including Frontier Leasing Corp. UCC-1 Filing No. 2023-2811490; and (vii) other customary permitted Liens arising by operation of law in the ordinary course of business that do not secure Funded Debt and do not materially impair the value or use of the affected property.
“Permanent Facility” means any revolving credit facility, term loan facility, or other credit facility entered into by Borrower after the Closing Date that is intended to serve as Borrower’s primary working capital and general corporate credit facility on a non-bridge basis.
“Person” means any individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, Governmental Authority, or other entity.
“Restricted Payment” means any dividend, distribution, payment, purchase, redemption, retirement, acquisition, cancellation, or other payment on account of any equity interest of Borrower or any Subsidiary, whether in cash, securities, or other property.
“Security Agreement” means the Security Agreement dated as of August 16, 2024, executed by Borrower and the Guarantors in favor of Lender.
“SOFR” means the Secured Overnight Financing Rate administered by the Federal Reserve Bank of New York, or any successor administrator.
“SOFR Adjustment” means 0.10% per annum, equal to ten basis points.
“SOFR Floor” means 1.00% per annum.
“Solvent” means, with respect to any Person as of any date, that: (a) the fair value of such Person’s total assets exceeds the fair value of its total liabilities, including contingent liabilities; (b) such Person is able to pay its debts as they become due in the ordinary course of business; and (c) such Person has adequate capital to carry on its business as then conducted and as proposed to be conducted.
“Subsidiary” means, with respect to Borrower, any corporation, limited liability company, partnership, association, or other entity of which Borrower directly or indirectly owns more than fifty percent (50%) of the voting equity interests.
“Term SOFR” means, for any Interest Period, the forward-looking term rate based on SOFR published by CME Group Benchmark Administration Limited, or any successor administrator, for a tenor comparable to such Interest Period, subject to the SOFR Floor; provided that in no event shall Term SOFR be less than the SOFR Floor.
“Unfinanced CapEx” means Capital Expenditures that are not financed with the proceeds of Funded Debt, other than revolving credit borrowings.
Section 1.02. Rules of Interpretation.
Unless the context otherwise requires:
(a) references to Articles, Sections, Exhibits, and Schedules are references to articles, sections, exhibits, and schedules of this Agreement;
(b) the words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation”;
(c) words in the singular include the plural, and words in the plural include the singular;
(d) headings are included for convenience of reference only and shall not affect the interpretation of this Agreement;
(e) accounting terms not otherwise defined herein shall be construed in accordance with GAAP;
(f) references to statutes, rules, regulations, and governmental requirements include all amendments, supplements, replacements, and successor provisions;
(g) references to time of day mean New York City time; and
(h) references to “dollars” or “$” mean lawful money of the United States of America.
Section 1.03. SOFR Rate Provisions.
If Lender determines that Term SOFR is unavailable, no longer representative, no longer published, or cannot be determined for an applicable Interest Period, Lender may, after consultation with Borrower, establish a replacement benchmark rate giving due consideration to any evolving or then-prevailing market convention for U.S. dollar-denominated syndicated or bilateral credit facilities and any recommendations of the Alternative Reference Rates Committee or successor official body.
Any replacement benchmark shall include any applicable spread adjustment or methodology recommended by the Alternative Reference Rates Committee or, if no such recommendation is available, such spread adjustment as Lender reasonably determines to be consistent with market practice for similar credit facilities. Lender may make conforming changes to this Agreement and the other Loan Documents as Lender reasonably determines are necessary or appropriate to implement the replacement benchmark, including changes to definitions, timing and frequency of rate determinations, interest periods, payment dates, and administrative mechanics. Lender shall consult with Borrower regarding such conforming changes, but Lender’s reasonable determination shall be conclusive absent manifest error.
ARTICLE II
THE LOAN
Section 2.01. Bridge Loan Commitment.
Subject to the terms and conditions of this Agreement, Lender agrees to make a single term loan to Borrower on the Closing Date in the aggregate principal amount of $25,000,000. The facility established under this Agreement is a single-draw bridge term loan facility. Amounts repaid or prepaid may not be reborrowed.
The Commitment shall terminate automatically and without further action upon the funding of the Bridge Loan on the Closing Date.
Section 2.02. Funding.
On the Closing Date, upon satisfaction or waiver by Lender of the conditions precedent set forth in Article V, Lender shall disburse the proceeds of the Bridge Loan in immediately available funds to the Funding Account. Funding shall occur no later than 2:00 p.m. New York City time on the Closing Date, provided that all conditions precedent have been satisfied or waived prior to such time.
Section 2.03. Use of Proceeds.
Borrower shall use the proceeds of the Bridge Loan solely for the following purposes:
(a) working capital and general corporate purposes of Borrower and its Subsidiaries;
(b) integration costs related to the acquisitions of MedBridge Workflow Solutions LLC and Cortland Surgical Systems, Inc.;
(c) earnout payments in connection with prior acquisitions; and
(d) payment of fees and expenses incurred in connection with this Agreement and the other Loan Documents.
No proceeds of the Bridge Loan shall be used in violation of Regulation U of the Board of Governors of the Federal Reserve System or for any purpose prohibited by applicable law.
Section 2.04. Evidence of Debt.
Borrower’s obligation to repay the Bridge Loan shall be evidenced by this Agreement and by the records maintained by Lender in the ordinary course of business. No promissory note shall be required unless requested by Lender. If Lender requests a promissory note, Borrower shall execute and deliver to Lender, within five (5) Business Days after such request, a promissory note in form and substance reasonably satisfactory to Lender.
Lender’s records regarding the principal amount of the Bridge Loan, accrued interest, payments, and other Obligations shall be presumptive evidence of such amounts absent manifest error.
ARTICLE III
INTEREST AND FEES
Section 3.01. Interest Rate.
The outstanding principal balance of the Bridge Loan shall bear interest at a rate per annum equal to the Applicable Rate. The Applicable Rate is Adjusted Term SOFR plus the Applicable Margin of 4.75% per annum.
As of the Closing Date, one-month Term SOFR is 5.34% per annum. After giving effect to the SOFR Adjustment of 0.10% per annum, Adjusted Term SOFR is 5.44% per annum. Accordingly, the all-in Applicable Rate as of the Closing Date is 10.19% per annum. The parties acknowledge that the spread component attributable to Borrower’s credit is 4.75% per annum and that the SOFR Adjustment is a benchmark-related component.
Section 3.02. Default Interest.
Upon the occurrence and during the continuance of any Event of Default, the outstanding principal balance of the Bridge Loan and, to the extent permitted by law, overdue interest, fees, and other amounts shall bear interest at the Default Rate. The Default Rate equals the Applicable Rate plus 2.00% per annum.
Default interest shall accrue from the date of the applicable Event of Default until such Event of Default is waived in writing by Lender or the Obligations have been paid in full.
Section 3.03. Interest Payment Dates.
Interest on the Bridge Loan shall be payable quarterly in arrears on the last Business Day of each fiscal quarter, including September 30, December 31, March 31, and June 30 of each year, and on the Maturity Date. Interest shall also be payable on the date of any prepayment with respect to the principal amount prepaid.
The first interest payment date shall be September 30, 2024.
Section 3.04. Computation of Interest.
Interest shall be computed on the basis of a 360-day year and the actual number of days elapsed.
Section 3.05. Origination Fee.
Borrower shall pay to Lender on the Closing Date a non-refundable origination fee in the amount of $125,000, representing 0.50% of the Commitment. The origination fee shall be fully earned upon the Closing Date and shall not be refunded under any circumstances, including early repayment, prepayment, acceleration, or termination of this Agreement.
Section 3.06. Lender’s Counsel Fees.
Borrower shall reimburse Lender for the reasonable and documented fees and disbursements of Lender’s counsel, Whitfield Gage & Associates LLP, incurred in connection with the negotiation, preparation, execution, and closing of this Agreement and the other Loan Documents. Such reimbursement shall not exceed $125,000 in the aggregate for pre-closing and closing legal fees and disbursements. Amounts due under this Section shall be payable at closing or promptly upon Lender’s request.
Section 3.07. Other Fees and Expenses.
Borrower shall pay all reasonable and documented out-of-pocket costs and expenses incurred by Lender in connection with the administration, enforcement, and protection of Lender’s rights under the Loan Documents, including UCC filing fees, lien search fees, recording fees, collateral perfection costs, and similar expenses. After the occurrence and during the continuance of an Event of Default, Borrower shall also pay all reasonable attorneys’ fees and expenses incurred by Lender in enforcing or protecting its rights under the Loan Documents.
ARTICLE IV
PAYMENTS AND PREPAYMENTS
Section 4.01. Repayment at Maturity.
Borrower shall repay the entire outstanding principal balance of the Bridge Loan, together with all accrued and unpaid interest and all other Obligations then owing, on the Maturity Date. The Bridge Loan has a bullet maturity structure and is not subject to scheduled amortization prior to the Maturity Date.
Section 4.02. Voluntary Prepayment.
Borrower may prepay the Bridge Loan in whole or in part at any time without premium or penalty, subject to Borrower’s obligation to indemnify Lender for customary SOFR breakage costs and any loss or expense incurred by Lender arising from prepayment on a date other than the last day of an Interest Period.
Borrower shall provide Lender with not less than three (3) Business Days’ prior written notice of any voluntary prepayment. Each partial prepayment shall be in a minimum principal amount of $1,000,000 and in whole multiples of $500,000 in excess thereof, or, if less, the entire remaining outstanding principal balance. Any notice of prepayment shall be irrevocable once delivered.
Section 4.03. Mandatory Prepayment.
(a) Permanent Facility. On the closing date of any Permanent Facility, Borrower shall prepay the Bridge Loan in full using one hundred percent (100%) of the net cash proceeds of such Permanent Facility. The parties acknowledge that repayment from a Permanent Facility is the primary intended exit mechanism for the Bridge Loan.
(b) Asset Sales. Upon consummation of any Asset Sale resulting in net cash proceeds in excess of $5,000,000 individually or $10,000,000 in the aggregate during the term of this Agreement, Borrower shall apply one hundred percent (100%) of such net cash proceeds to prepay the Bridge Loan. Such prepayment shall be made within five (5) Business Days after receipt of such net cash proceeds. Ordinary-course sales of inventory and obsolete equipment shall be excluded from the thresholds in this Section.
(c) Equity Issuances. Upon receipt by Borrower of net cash proceeds from any Equity Issuance, Borrower shall apply seventy-five percent (75%) of such net cash proceeds to prepay the Bridge Loan. Proceeds from employee equity compensation plans in an aggregate amount not to exceed $3,000,000 per fiscal year shall be excluded from this mandatory prepayment requirement. Any mandatory prepayment under this paragraph shall be made within five (5) Business Days after receipt of such net cash proceeds.
(d) Insurance and Condemnation Proceeds. If Borrower or any Subsidiary receives casualty insurance proceeds or condemnation proceeds in excess of $5,000,000 and does not reinvest such proceeds in replacement assets or repair or restoration of affected assets within one hundred eighty (180) days after receipt, Borrower shall apply such unreinvested net cash proceeds to prepay the Bridge Loan within five (5) Business Days after the end of such reinvestment period.
Section 4.04. Application of Prepayments.
All voluntary and mandatory prepayments shall be applied first to accrued and unpaid interest and fees, and thereafter to the outstanding principal balance of the Bridge Loan. No prepaid amount may be reborrowed.
Section 4.05. Payments Generally.
All payments under this Agreement shall be made in immediately available funds in U.S. dollars, without setoff, counterclaim, deduction, or withholding, except as required by applicable law. Payments received by Lender after 2:00 p.m. New York City time shall be deemed received on the next Business Day.
If any payment date falls on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day, and interest shall accrue for the period of such extension.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions to Closing and Funding.
The obligation of Lender to make the Bridge Loan on the Closing Date is subject to the satisfaction or waiver by Lender of each of the following conditions:
(a) Loan Documents. Lender shall have received executed counterparts of this Agreement, the Guaranty Agreement, and the Security Agreement, each duly executed by all parties thereto.
(b) Legal Opinion. Lender shall have received a legal opinion of Borrower’s counsel, Calderwood & Harkness LLP, in form and substance satisfactory to Lender, covering customary matters, including organization, authority, due execution and delivery, enforceability, no conflict, and attachment of security interests.
(c) Secretary’s Certificate. Lender shall have received a Secretary’s Certificate of Borrower executed by Gerald Fong, General Counsel and Corporate Secretary, attaching: (i) certified copies of Borrower’s Certificate of Incorporation, as amended, and Bylaws; (ii) resolutions of Borrower’s board of directors adopted August 2, 2024 authorizing the transactions contemplated by the Loan Documents; and (iii) an incumbency certificate identifying authorized officers.
(d) Officer’s Closing Certificate. Lender shall have received an Officer’s Closing Certificate executed by Evan Strickland, Chief Financial Officer of Borrower, certifying that: (i) the representations and warranties in Article VI are true and correct as of the Closing Date; (ii) no Default or Event of Default exists or would result from the borrowing; and (iii) Borrower is in compliance with the financial covenants in Article IX.
(e) Perfection Certificate. Lender shall have received a Perfection Certificate duly executed by Borrower and the Guarantors, disclosing all information reasonably requested by Lender regarding perfection of Lender’s security interests.
(f) Search Results. Lender shall have received UCC, tax lien, judgment, and litigation search results in each relevant jurisdiction, including Delaware, satisfactory to Lender.
(g) Insurance. Lender shall have received evidence of insurance satisfactory to Lender, naming Lender as additional insured and/or loss payee, as applicable.
(h) Borrowing Request. Lender shall have received a Borrowing Request substantially in the form attached as Exhibit A, duly executed by an authorized officer of Borrower.
(i) Fees and Expenses. Lender shall have received payment of the Origination Fee and all other fees and expenses then due and payable, including estimated Lender’s counsel fees.
(j) No Material Adverse Effect. No Material Adverse Effect shall have occurred since December 31, 2023.
(k) Consents. All required governmental and third-party consents, approvals, notices, and authorizations shall have been obtained or made.
(l) Due Diligence. Lender shall have completed its due diligence review to its satisfaction. Lender acknowledges that such review was completed on August 9, 2024.
(m) Good Standing Certificates. Lender shall have received good standing certificates for each Loan Party from the Secretary of State of Delaware and, with respect to Borrower, the Secretary of the Commonwealth of Massachusetts.
(n) Financial Statements. Lender shall have received Borrower’s audited consolidated financial statements for the fiscal year ended December 31, 2023 and unaudited consolidated financial statements for the fiscal quarter ended June 30, 2024.
(o) Solvency. Borrower shall have delivered a solvency certificate confirming that Borrower and its Subsidiaries, on a consolidated basis, are Solvent after giving effect to the Bridge Loan and the payment of related fees and expenses.
(p) Know Your Customer; BSA. Lender shall have received all documentation and information required under applicable “know your customer,” anti-money laundering, Bank Secrecy Act, and USA PATRIOT Act rules and regulations.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. Representations and Warranties.
Borrower represents and warrants to Lender as of the Closing Date and as of each date on which such representations and warranties are deemed repeated, including each date a Compliance Certificate is delivered and each interest payment date, as follows:
(a) Organization and Good Standing. Borrower is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, with Delaware File Number 7284619. Borrower is duly qualified to do business in each jurisdiction where the nature of its business requires such qualification, including the Commonwealth of Massachusetts. Each Guarantor is duly organized, validly existing, and in good standing under the laws of the State of Delaware.
(b) Authorization. The execution, delivery, and performance of the Loan Documents have been duly authorized by all necessary corporate or limited liability company action of each Loan Party, including, with respect to Borrower, resolutions of its board of directors adopted August 2, 2024.
(c) No Conflict. The execution, delivery, and performance of the Loan Documents do not: (i) conflict with or result in a breach of Borrower’s Certificate of Incorporation or Bylaws; (ii) violate any material agreement to which Borrower or any Subsidiary is a party or by which its property is bound; or (iii) violate any applicable law, rule, regulation, order, writ, judgment, injunction, or decree.
(d) Enforceability. Each Loan Document constitutes a legal, valid, and binding obligation of each Loan Party that is a party thereto, enforceable against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and similar laws affecting creditors’ rights generally and to general principles of equity.
(e) Financial Statements. The consolidated financial statements of Borrower delivered to Lender, including audited financial statements for the fiscal year ended December 31, 2023 audited by Greystone Audit Group LLP, engagement partner Danielle Chow, and unaudited financial statements for the fiscal quarter ended June 30, 2024, present fairly in all material respects the financial condition and results of operations of Borrower and its Subsidiaries in accordance with GAAP, subject, in the case of unaudited statements, to normal year-end adjustments and absence of footnotes. For the twelve months ended June 30, 2024, Borrower reported revenue of $162,300,000, Adjusted EBITDA of $28,400,000, representing a 17.5% margin, total assets of $411,700,000, and cash on hand of approximately $47,000,000.
(f) No Material Adverse Effect. Since December 31, 2023, there has been no Material Adverse Effect.
(g) Litigation. There is no action, suit, investigation, arbitration, or proceeding pending or, to Borrower’s knowledge, threatened against Borrower or any Subsidiary before any Governmental Authority or arbitrator that could reasonably be expected to result in a Material Adverse Effect.
(h) Compliance with Laws. Borrower and its Subsidiaries are in compliance in all material respects with all applicable laws, rules, and regulations, including healthcare regulatory requirements, HIPAA, the HITECH Act, state privacy laws, CMS conditions of participation, and applicable state healthcare licensing requirements. Borrower’s SaaS platform operates across 22 states.
(i) Taxes. Borrower, EIN 88-3164720, and its Subsidiaries have filed all required federal, state, and local tax returns and have paid all taxes due and payable, except taxes being contested in good faith with adequate reserves.
(j) ERISA. No ERISA Event has occurred or is reasonably expected to occur that would result in liability to Borrower or its Subsidiaries in excess of $5,000,000.
(k) Solvency. Borrower and its Subsidiaries, on a consolidated basis after giving effect to the Bridge Loan and payment of all fees and expenses in connection therewith, are Solvent.
(l) intellectual Property. Borrower and its Subsidiaries own or have the right to use all intellectual property material to the conduct of their business as currently conducted, free and clear of all Liens other than Permitted Liens.
(m) Securities Law Compliance. Borrower is a reporting company under the Securities Exchange Act of 1934 and has been assigned a CIK by the SEC. Shares of Borrower’s common stock are listed on the Nasdaq Global Select Market under ticker symbol AHTI. Borrower completed its initial public offering on March 14, 2024, raising approximately $180,000,000 in gross proceeds through the sale of 10,000,000 shares at $18.00 per share. Borrower’s post-IPO market capitalization is approximately $740,000,000. Borrower is current in all SEC reporting obligations.
(n) Subsidiaries. Borrower has accurately disclosed to Lender all Subsidiaries, including Arbor Health Holdings LLC, a direct wholly-owned Delaware limited liability company with EIN 88-4271835; Arbor Health Platform Services Inc., an indirect wholly-owned Delaware corporation with EIN 92-1058467; MedBridge Workflow Solutions LLC, an indirect wholly-owned Delaware limited liability company acquired April 22, 2024 for $34,000,000; and Cortland Surgical Systems, Inc., an indirect wholly-owned Delaware corporation acquired May 31, 2024 for $21,000,000. Total Q2 2024 acquisition spend was $55,000,000.
(o) Existing Indebtedness. As of the Closing Date, Borrower has no existing Funded Debt. Borrower’s prior term loan was retired with IPO proceeds. Upon funding, the Bridge Loan will be the sole Funded Debt of Borrower, except for equipment lease obligations disclosed on Schedule 8.01.
(p) Deposit Accounts. Borrower has disclosed all deposit accounts on the Perfection Certificate, including accounts maintained at Pinnacle Trust Bank, N.A. and Ridgefield National Bank.
(q) Insurance. Borrower and its Subsidiaries maintain insurance with financially sound carriers in amounts and covering risks customary for companies of similar size and in similar industries.
(r) Anti-Corruption; Sanctions. Neither Borrower nor any Subsidiary, nor any director, officer, or employee thereof, is a Sanctioned Person. Borrower and its Subsidiaries are in compliance with applicable anti-corruption laws, including the Foreign Corrupt Practices Act.
(s) Use of Proceeds. No part of the proceeds of the Bridge Loan will be used in violation of Regulation U or for any prohibited purpose.
(t) Margin Stock. Borrower does not own any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, from the Closing Date until the Bridge Loan has been repaid in full and the Commitment has been terminated, Borrower shall comply with the covenants set forth in this Article VII.
Section 7.01. Financial Reporting and Deliverables.
(a) Annual Financial Statements. Within ninety (90) days after the end of each fiscal year, Borrower shall deliver to Lender audited consolidated financial statements of Borrower and its Subsidiaries, prepared in accordance with GAAP, together with an unqualified audit report from Greystone Audit Group LLP or another independent registered public accounting firm of recognized national standing.
(b) Quarterly Financial Statements. Within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year, Borrower shall deliver unaudited consolidated financial statements of Borrower and its Subsidiaries, including a balance sheet, income statement, and statement of cash flows.
(c) Compliance Certificate. Together with each annual and quarterly financial statement, Borrower shall deliver a Compliance Certificate executed by its Chief Financial Officer, certifying compliance with the financial covenants set forth in Article IX and including detailed calculations of each ratio. The first Compliance Certificate shall be due within forty-five (45) days after September 30, 2024, and therefore no later than November 14, 2024.
(d) Monthly Liquidity Reports. Within fifteen (15) days after the end of each calendar month, Borrower shall deliver to Lender a report setting forth unrestricted cash and cash equivalents as of the last day of such month.
(e) Annual Budget. Within sixty (60) days after the beginning of each fiscal year, Borrower shall deliver to Lender an annual budget and operating plan for such fiscal year.
(f) SEC Filings. Promptly upon filing, Borrower shall deliver copies of all reports, proxy statements, and other documents filed with the SEC, or, at Borrower’s election, written notice that such filings are available on the SEC’s EDGAR system.
Section 7.02. Insurance.
Borrower shall maintain, and shall cause its Subsidiaries to maintain, insurance with financially sound and reputable carriers in amounts and covering risks customary for companies of similar size and in similar industries, including general liability, property, directors and officers liability, cyber and data breach, errors and omissions, and workers’ compensation coverage. Lender shall be named as additional insured and/or loss payee, as applicable.
Section 7.03. Maintenance of Properties.
Borrower shall maintain, and shall cause each Subsidiary to maintain, all material properties and equipment necessary to the conduct of its business in good working order and condition, ordinary wear and tear excepted.
Section 7.04. Compliance with Laws.
Borrower shall comply, and shall cause each Subsidiary to comply, in all material respects with all applicable laws, rules, regulations, and governmental requirements, including HIPAA, the HITECH Act, state healthcare privacy laws, and applicable healthcare licensing requirements.
Section 7.05. Notices of Material Events.
Borrower shall promptly, and in any event within five (5) Business Days, notify Lender in writing of:
(i) any Default or Event of Default;
(ii) any Material Adverse Effect;
(iii) any material litigation, investigation, or proceeding commenced or threatened against Borrower or any Subsidiary;
(iv) any ERISA Event;
(v) any Change of Control; and
(vi) any material change in accounting policies.
Section 7.06. Books and Records; Inspection.
Borrower shall maintain, and shall cause each Subsidiary to maintain, accurate books and records in accordance with GAAP. Borrower shall permit Lender and its representatives, upon reasonable prior notice, to examine Borrower’s books, records, and properties during normal business hours. Unless an Event of Default exists, such inspections shall not occur more than twice per year.
Section 7.07. Maintenance of Existence and Rights.
Borrower shall maintain, and shall cause each Subsidiary to maintain, its legal existence and good standing in its jurisdiction of organization and its qualification to do business in each jurisdiction where failure to be so qualified could reasonably be expected to have a Material Adverse Effect.
Section 7.08. Further Assurances.
Borrower shall execute and deliver, and shall cause each Loan Party to execute and deliver, all documents, instruments, and agreements and take all actions reasonably requested by Lender to perfect and maintain Lender’s first-priority security interest in the Collateral, subject only to Permitted Liens. Such actions may include additional UCC filings, intellectual property security agreement recordations, deposit account control agreements, and delivery of certificates or instruments evidencing pledged equity interests.
Section 7.09. Post-Closing Obligations.
Within fourteen (14) days after the Closing Date, and therefore no later than August 30, 2024, Borrower shall deliver to Lender:
(i) deposit account control agreements with respect to all deposit accounts, other than excluded payroll and tax accounts, maintained at institutions other than Pinnacle Trust Bank, N.A., including accounts maintained at Ridgefield National Bank;
(ii) landlord waivers and consents for locations where material Collateral is located, including Waltham, Massachusetts; King of Prussia, Pennsylvania; and Nashville, Tennessee;
(iii) evidence of filing of UCC-1 financing statements in all necessary jurisdictions, including UCC-1 Filing No. 2024-3847261 filed August 19, 2024 with the Delaware Secretary of State through Meridian Filing Services Inc.;
(iv) short-form intellectual property security agreements recorded with the United States Patent and Trademark Office and the United States Copyright Office; and
(v) original stock certificates or other certificated equity instruments, together with undated stock powers or equivalent transfer powers, for pledged equity interests in Arbor Health Holdings LLC, Arbor Health Platform Services Inc., MedBridge Workflow Solutions LLC, and Cortland Surgical Systems, Inc.
Failure to complete the post-closing deliverables required by this Section by August 30, 2024 shall constitute an Event of Default unless Lender agrees in writing to extend such deadline.
Section 7.10. Payment of Taxes and Claims.
Borrower shall pay and discharge, and shall cause each Subsidiary to pay and discharge, all taxes, assessments, governmental charges, and material claims before the same become delinquent, except to the extent contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.
Section 7.11. Environmental Compliance.
Borrower shall comply, and shall cause each Subsidiary to comply, in all material respects with applicable environmental laws.
Section 7.12. Use of Proceeds.
Borrower shall use the proceeds of the Bridge Loan solely for the purposes set forth in Section 2.03.
ARTICLE VIII
NEGATIVE COVENANTS
Borrower covenants and agrees that, from the Closing Date until the Bridge Loan has been repaid in full, Borrower shall comply with the covenants set forth in this Article VIII.
Section 8.01. Indebtedness.
Borrower shall not, and shall not permit any Subsidiary to, incur, create, assume, or permit to exist Funded Debt in excess of $2,000,000 in the aggregate, except:
(i) the Bridge Loan;
(ii) a Permanent Facility;
(iii) purchase money indebtedness and capital lease obligations not exceeding $5,000,000 in the aggregate;
(iv) intercompany indebtedness among Borrower and the Guarantors, provided such indebtedness is subordinated to the Obligations on terms reasonably satisfactory to Lender; and
(v) existing indebtedness set forth on Schedule 8.01, consisting of Frontier Leasing Corp. equipment lease obligations.
Section 8.02. Liens.
Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume, or permit to exist any Lien on any property or asset, other than Permitted Liens.
Section 8.03. Investments and Acquisitions.
Borrower shall not, and shall not permit any Subsidiary to, make or permit any Investment or acquisition in excess of $7,500,000 individually or $15,000,000 in the aggregate without Lender’s prior written consent.
Permitted Investments include cash equivalents and short-term marketable securities, intercompany loans to Guarantors, Investments existing on the Closing Date, and other Investments not exceeding $7,500,000 individually or $15,000,000 in the aggregate.
Section 8.04. Restricted Payments.
Borrower shall not declare or pay any dividend or distribution on its equity interests, or purchase, redeem, retire, or otherwise acquire any equity interests, except:
(i) dividends and distributions by Subsidiaries to Borrower or another Subsidiary;
(ii) share repurchases pursuant to employee equity compensation plans not to exceed $3,000,000 per fiscal year; and
(iii) so long as no Default exists and no Default would result therefrom, repurchases of Borrower’s common stock in an aggregate amount not to exceed $5,000,000 per fiscal year, consistent with Borrower’s board-approved post-IPO repurchase program.
Section 8.05. Asset Sales.
Borrower shall not, and shall not permit any Subsidiary to, sell, transfer, lease, or dispose of assets with a fair market value in excess of $5,000,000 individually or $10,000,000 in the aggregate, other than sales of inventory and obsolete equipment in the ordinary course of business. Net cash proceeds from permitted Asset Sales exceeding the applicable thresholds shall be subject to mandatory prepayment under Section 4.03(b).
Section 8.06. Fundamental Changes.
Borrower shall not, and shall not permit any Subsidiary to, merge with or into, consolidate with, dissolve, liquidate, or wind up with or into any other Person, except:
(i) mergers of wholly-owned Subsidiaries into Borrower or another Guarantor, provided Borrower or such Guarantor is the surviving entity; and
(ii) liquidations or dissolutions of Subsidiaries into Borrower or a Guarantor.
Section 8.07. Transactions with Affiliates.
Borrower shall not, and shall not permit any Subsidiary to, enter into any transaction with any Affiliate on terms less favorable to Borrower or such Subsidiary than those obtainable in an arm’s-length transaction with a non-Affiliate. This Section shall not prohibit customary intercompany transactions, compensation arrangements approved by Borrower’s board of directors or an authorized committee thereof, or transactions with Subsidiaries in the ordinary course of business.
Section 8.08. Amendments to Organizational Documents.
Borrower shall not amend its Certificate of Incorporation or Bylaws in any manner materially adverse to Lender without Lender’s prior written consent.
Section 8.09. Changes in Business.
Borrower shall not, and shall not permit any Subsidiary to, engage in any line of business materially different from the healthcare services and SaaS platform businesses conducted as of the Closing Date.
Section 8.10. Accounting Changes.
Borrower shall not change its fiscal year or method of accounting, other than as required by GAAP, without prior written notice to Lender.
Section 8.11. Restrictive Agreements.
Borrower shall not, and shall not permit any Subsidiary to, enter into any agreement that restricts the ability of any Subsidiary to make dividends or distributions to Borrower or to transfer assets to Borrower, other than customary restrictions contained in the Loan Documents, leases, and permitted indebtedness documents.
ARTICLE IX
FINANCIAL COVENANTS
Section 9.01. Minimum Liquidity.
Borrower shall maintain at all times unrestricted cash and cash equivalents of not less than $15,000,000. Compliance with this covenant shall be tested monthly based on Borrower’s internal financial records and reported to Lender within fifteen (15) days after each month-end.
As of the Closing Date, after giving effect to the Bridge Loan, Borrower expects to have approximately $72,000,000 of unrestricted cash and cash equivalents, consisting of approximately $47,000,000 existing cash plus $25,000,000 of Bridge Loan proceeds.
Section 9.02. Maximum Net Leverage Ratio.
As of the last day of each fiscal quarter, commencing with the fiscal quarter ending September 30, 2024, Borrower shall not permit the Net Leverage Ratio to exceed 3.50 to 1.00.
For illustrative purposes, as of the Closing Date: Funded Debt equals $25,000,000; unrestricted cash and cash equivalents, capped at $20,000,000, equals $20,000,000; Net Funded Debt equals $5,000,000; trailing twelve-month Adjusted EBITDA equals $28,400,000; and the Net Leverage Ratio equals 0.18 to 1.00.
Section 9.03. Minimum Fixed Charge Coverage Ratio.
As of the last day of each fiscal quarter, commencing with the fiscal quarter ending September 30, 2024, Borrower shall not permit the Fixed Charge Coverage Ratio to be less than 1.25 to 1.00.
For illustrative purposes, as of the Closing Date, using trailing twelve-month Adjusted EBITDA of $28,400,000, Unfinanced CapEx of $12,600,000, and Fixed Charges of $4,200,000, the Fixed Charge Coverage Ratio equals 3.76 to 1.00.
Section 9.04. Equity Cure Right.
Borrower shall have no equity cure right with respect to any breach of the financial covenants set forth in this Article IX. Any breach of a financial covenant shall constitute an immediate Event of Default under Section 10.01(d), without any grace or cure period.
ARTICLE X
EVENTS OF DEFAULT
Section 10.01. Events of Default.
Each of the following shall constitute an Event of Default:
(a) Payment of Principal. Borrower fails to pay any principal amount when due, whether at stated maturity, upon acceleration, as a mandatory prepayment, or otherwise.
(b) Payment of Interest and Fees. Borrower fails to pay any interest, fee, or other amount within three (3) Business Days after the date when due.
(c) Misrepresentation. Any representation or warranty made or deemed made by any Loan Party in any Loan Document or in any certificate or document delivered pursuant thereto proves to have been materially incorrect when made or deemed made.
(d) Breach of Financial Covenants. Borrower fails to comply with any financial covenant in Article IX, with no cure period.
(e) Breach of Negative Covenants. Borrower fails to comply with any negative covenant in Article VIII, with no cure period.
(f) Breach of Affirmative Covenants. Borrower fails to comply with any affirmative covenant in Article VII and such failure continues for thirty (30) days after the earlier of notice from Lender and knowledge by any Loan Party; provided that no cure period shall apply to the post-closing obligations set forth in Section 7.09 beyond the specified deadline.
(g) Cross-Default. Borrower or any Subsidiary defaults under any other indebtedness in an aggregate principal amount exceeding $2,000,000, and such default results in acceleration of such indebtedness or permits the holder thereof to accelerate such indebtedness.
(h) Bankruptcy; Insolvency. Any Loan Party: (i) commences a voluntary case under the Bankruptcy Code or any other insolvency law; (ii) has an involuntary petition filed against it that is not dismissed within sixty (60) days; (iii) makes a general assignment for the benefit of creditors; or (iv) admits in writing its inability to pay its debts as they become due.
(i) Judgment. One or more final, non-appealable judgments are entered against Borrower or any Subsidiary in an aggregate amount exceeding $5,000,000 and remain unsatisfied, unvacated, unbonded, or unstayed for sixty (60) consecutive days.
(j) Change of Control. A Change of Control occurs.
(k) Invalidity of Loan Documents. Any Loan Document ceases to be in full force and effect, any Loan Party denies or contests the validity or enforceability of any Loan Document, or Lender’s security interest in any material portion of the Collateral ceases to be a valid, perfected, first-priority Lien, subject only to Permitted Liens.
(l) ERISA Event. An ERISA Event occurs that results in, or could reasonably be expected to result in, aggregate liability to Borrower and its Subsidiaries in excess of $5,000,000.
(m) Post-Closing Failure. Borrower fails to complete the post-closing deliverables required by Section 7.09 by August 30, 2024, or such later date as Lender may agree in writing.
Section 10.02. Remedies Upon Event of Default.
Upon the occurrence and during the continuance of any Event of Default other than an Event of Default under Section 10.01(h), Lender may, by written notice to Borrower: (a) declare the outstanding principal amount of the Bridge Loan, all accrued and unpaid interest, and all other Obligations immediately due and payable; (b) exercise any and all rights and remedies under the Loan Documents, the Security Agreement, the Uniform Commercial Code, and applicable law; and (c) apply the Default Rate to all outstanding Obligations.
Upon the occurrence of an Event of Default under Section 10.01(h), all Obligations shall automatically and immediately become due and payable without notice, demand, presentment, protest, or any other action by Lender.
All rights and remedies of Lender are cumulative and not exclusive and may be exercised concurrently or separately.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Notices.
All notices and other communications under this Agreement shall be in writing and delivered by hand, overnight courier, or email, with confirmation of transmission, to the following addresses:
If to Borrower:
Arbor Health Technologies Inc. 400 Beacon Ridge Parkway, Suite 800 Waltham, MA 02451
Attention: Gerald Fong, General Counsel
Email: gfong@arborhealth.com
With a copy to:
Calderwood & Harkness LLP One Liberty Plaza, 44th Floor New York, NY 10006
Attention: Claudia Merritt
Email: cmerritt@calderwoodharkness.com
If to Lender:
Pinnacle Trust Bank, N.A. 600 Lexington Avenue, 22nd Floor New York, NY 10022
Attention: Derek Calloway, Vice President, Healthcare Finance Group
Email: dcalloway@pinnacletrust.com
With a copy to:
Whitfield Gage & Associates LLP 787 Seventh Avenue, 30th Floor New York, NY 10019
Attention: Catherine Whitfield
Email: cwhitfield@whitfieldgage.com
Either party may change its notice information by written notice to the other party.
Section 11.02. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION, EXCEPT THAT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY.
Section 11.03. Jurisdiction; Venue.
EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Each party waives any objection to venue in such courts and any defense of inconvenient forum.
Section 11.04. Waiver of Jury Trial.
EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 11.05. Amendments; Waivers.
No amendment, modification, termination, or waiver of any provision of this Agreement shall be effective unless in writing and signed by Borrower and Lender. No waiver shall constitute a continuing waiver unless expressly stated in writing. Any waiver shall be limited to the specific instance and purpose for which given.
Section 11.06. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.
Borrower may not assign any of its rights or obligations under this Agreement without the prior written consent of Lender. Lender may assign its rights and obligations under this Agreement to any Person with the consent of Borrower, such consent not to be unreasonably withheld, conditioned, or delayed; provided that no Borrower consent shall be required for assignments: (i) during the continuance of an Event of Default; or (ii) to an Affiliate of Lender or to another commercial bank or financial institution.
Lender may grant participations in the Bridge Loan without Borrower’s consent, subject to customary limitations preserving Borrower’s rights under the Loan Documents.
Section 11.07. Severability.
If any provision of this Agreement is held invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and the remaining provisions shall be construed to give effect to the parties’ intent to the maximum extent permitted by law.
Section 11.08. Entire Agreement.
This Agreement, together with the other Loan Documents, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, commitments, offers, term sheets, and agreements, whether written or oral. The term sheet dated July 19, 2024 is superseded in its entirety.
Section 11.09. Counterparts; Electronic Execution.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart by facsimile or electronic transmission, including PDF, shall be effective as delivery of a manually executed counterpart.
Section 11.10. Confidentiality.
Lender agrees to maintain the confidentiality of all non-public information received from or on behalf of Borrower in connection with this Agreement, except that Lender may disclose such information: (a) as required by law, regulation, subpoena, or legal process; (b) to Lender’s Affiliates, directors, officers, employees, agents, auditors, and advisors who are informed of the confidential nature of such information or are bound by similar confidentiality obligations; (c) to prospective assignees and participants who agree to maintain confidentiality; (d) with Borrower’s prior written consent; and (e) to the extent such information becomes publicly available other than through Lender’s breach of this Section.
Section 11.11. Indemnification.
Borrower shall indemnify and hold harmless Lender and its directors, officers, employees, agents, and advisors, each an “Indemnified Party,” from and against any and all losses, claims, damages, liabilities, and expenses, including reasonable