SECURITY AGREEMENT

SECURITY AGREEMENT
dated as of August 16, 2024
among
ARBOR HEALTH TECHNOLOGIES INC., a Delaware corporation,
ARBOR HEALTH HOLDINGS LLC, a Delaware limited liability company,
and
ARBOR HEALTH PLATFORM SERVICES INC., a Delaware corporation,
as Grantors,
in favor of
PINNACLE TRUST BANK, N.A., a national banking association,
as Secured Party
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SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement" or "Security Agreement"), dated as of August 16, 2024, is made by and among ARBOR HEALTH TECHNOLOGIES INC., a Delaware corporation (the "Borrower"), ARBOR HEALTH HOLDINGS LLC, a Delaware limited liability company, and ARBOR HEALTH PLATFORM SERVICES INC., a Delaware corporation (the Borrower and each of the foregoing entities, individually a "Grantor" and collectively the "Grantors"), in favor of PINNACLE TRUST BANK, N.A., a national banking association (together with its successors, transferees, and assigns, the "Secured Party").
RECITALS
A. The Borrower and the Secured Party are parties to that certain Bridge Loan Agreement, dated as of August 16, 2024 (as amended, restated, supplemented, or otherwise modified from time to time, the "Loan Agreement"), pursuant to which the Secured Party has agreed to make a twenty-five million dollar ($25,000,000) senior secured bridge loan (the "Bridge Loan") to the Borrower, subject to the terms and conditions set forth therein.
B. It is a condition precedent to the obligations of the Secured Party to make the Bridge Loan and to extend credit under the Loan Agreement that each Grantor shall have executed and delivered this Security Agreement, granting to the Secured Party a first-priority security interest in the Collateral (as defined herein) to secure the prompt and complete payment and performance of all Obligations (as defined herein).
C. Each Grantor acknowledges that it will derive substantial direct and indirect benefits from the extensions of credit made by the Secured Party under the Loan Agreement, and that the execution and delivery of this Security Agreement is in furtherance of such Grantor's corporate or limited liability company purposes and is in the best interests of such Grantor.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1 — DEFINITIONS AND INTERPRETATION
Section 1.01. Defined Terms
Capitalized terms used but not otherwise defined in this Security Agreement shall have the meanings ascribed to such terms in the Loan Agreement. In addition to terms defined elsewhere in this Security Agreement, the following terms shall have the meanings set forth below:
"Accounts" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include all rights to payment of a monetary obligation, whether or not earned by performance, for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, for services rendered or to be rendered, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel, for arising out of the use of a credit or charge card or information contained on or for use with the card, or as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state.
"Chattel Paper" shall have the meaning ascribed to such term in Article 9 of the UCC, including both tangible chattel paper and electronic chattel paper.
"Collateral" shall have the meaning ascribed to such term in Section 2.01 of this Security Agreement.
"Commercial Tort Claims" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include any claim arising in tort with respect to which the claimant is an organization, or the claimant is an individual and the claim arose in the course of the claimant's business or profession and does not include damages arising out of personal injury to or the death of an individual.
"Copyrights" shall mean all registered copyrights, applications for copyright registration, and common law copyrights, in each case whether now owned or hereafter acquired by any Grantor, together with all renewals, extensions, and restorations thereof, all income, royalties, damages, and payments now or hereafter due or payable with respect thereto, including damages and payments for past, present, or future infringement thereof, and the right to sue for past, present, and future infringement thereof.
"Deposit Accounts" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include a demand, time, savings, passbook, or similar account maintained at a bank.
"Documents" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include bills of lading, dock warrants, dock receipts, warehouse receipts, or orders for the delivery of goods, and any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession or control of it is entitled to receive, control, hold, and dispose of the document and the goods it covers.
"Equipment" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include all machinery, equipment, furnishings, fixtures (to the extent constituting personal property), vehicles (other than motor vehicles excluded under Section 2.02(b)), tools, parts, dies, jigs, molds, patterns, and all other tangible personal property of every kind and description that is not Inventory.
"Equity Interests" shall mean shares of capital stock, membership interests, partnership interests (whether general or limited), limited liability company interests, beneficial interests in a trust, or other ownership or profit interests in or equivalents of any Person, and any warrants, options, or other rights to purchase or acquire any of the foregoing.
"Excluded Collateral" shall have the meaning ascribed to such term in Section 2.02 of this Security Agreement.
"General Intangibles" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include all payment intangibles and software and all choses in action, causes of action, and all other intangible personal property of every kind and nature (other than Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, Goods, Instruments, Investment Property, Letter-of-Credit Rights, Letters of Credit, money, and oil, gas, and other minerals before extraction).
"Guaranteed Obligations" shall have the meaning ascribed to such term in that certain Guaranty Agreement, dated as of August 16, 2024, executed by each Grantor (other than the Borrower) in favor of the Secured Party.
"Immaterial Subsidiary" shall mean any Subsidiary of the Borrower that has total assets (as determined in accordance with GAAP) of less than one million dollars ($1,000,000) individually.
"Instruments" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include all promissory notes, drafts, bills of exchange, and other negotiable instruments and non-negotiable instruments that evidence a right to the payment of a monetary obligation, are not themselves a security agreement or lease, and are of a type that in ordinary course of business is transferred by delivery with any necessary indorsement or assignment.
"intellectual Property" shall mean, collectively, all Patents, Trademarks, Copyrights, Trade Secrets, and all licenses, sublicenses, agreements, and permissions relating to the foregoing, whether as licensor or licensee, in each case whether now owned or hereafter acquired by any Grantor, together with all goodwill, income, royalties, and other rights associated therewith.
"Inventory" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include all goods held for sale or lease or to be furnished under a contract of service, and all raw materials, work in process, finished goods, and materials used or consumed in a Grantor's business.
"Investment Property" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include all securities (whether certificated or uncertificated), securities entitlements, securities accounts, commodity contracts, and commodity accounts.
"Letter-of-Credit Rights" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include any right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance.
"Loan Agreement" shall mean the Bridge Loan Agreement, dated as of August 16, 2024, between the Borrower and the Secured Party, as amended, restated, supplemented, or otherwise modified from time to time.
"Loan Documents" shall have the meaning ascribed to such term in the Loan Agreement, and shall include, without limitation, this Security Agreement.
"Obligations" shall mean all obligations, indebtedness, and liabilities of any Grantor to the Secured Party under or in connection with the Loan Documents, whether now existing or hereafter arising, whether direct or indirect, absolute or contingent, joint or several, due or to become due, including all principal, interest (including interest accruing at the Default Rate and interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization, or like proceeding relating to any Grantor, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, costs, expenses, indemnities, reimbursement obligations, and other amounts payable by any Grantor under the Loan Documents, together with all Guaranteed Obligations.
"Patents" shall mean all letters patent of the United States or any other country, all registrations and recordings thereof, all applications for letters patent of the United States or any other country, and all patentable inventions, in each case whether now owned or hereafter acquired by any Grantor, together with all reissues, continuations, divisionals, continuations-in-part, renewals, and extensions thereof, all income, royalties, damages, and payments now or hereafter due or payable with respect thereto, including damages and payments for past, present, or future infringement thereof, and the right to sue for past, present, and future infringement thereof.
"Permitted Liens" shall have the meaning ascribed to such term in the Loan Agreement.
"Proceeds" shall have the meaning ascribed to such term in Article 9 of the UCC and, in any event, shall include (a) all property (including cash, negotiable instruments, and other money or property) received upon the sale, exchange, collection, or other disposition of Collateral or Proceeds, (b) any and all amounts from time to time paid or payable under or in connection with any of the Collateral, and (c) whatever is receivable or received when Collateral or Proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the Collateral.
"Trademarks" shall mean all trademark registrations, trademark applications (including intent-to-use applications, subject to the limitations set forth in Section 2.02(f)), service mark registrations, service mark applications, trade names, trade dress, brand names, corporate names, business names, domain names, logos, designs, and other indicia of origin or source identification, in each case whether now owned or hereafter acquired by any Grantor, together with all translations, adaptations, derivations, and combinations thereof, all goodwill associated therewith, all registrations and recordings thereof, and all applications in connection therewith, all income, royalties, damages, and payments now or hereafter due or payable with respect thereto, including damages and payments for past, present, or future infringement, dilution, or other violation thereof, and the right to sue for past, present, and future infringement, dilution, or other violation thereof.
"Trade Secrets" shall mean all trade secrets, know-how, proprietary information, confidential business information, customer and supplier lists, technical data, databases, processes, formulas, methods, techniques, algorithms, source code, and other confidential or proprietary information, in each case whether now owned or hereafter acquired by any Grantor, together with all income, royalties, damages, and payments now or hereafter due or payable with respect thereto, including damages and payments for past, present, or future misappropriation thereof, and the right to sue for past, present, and future misappropriation thereof.
"UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if, by reason of mandatory provisions of law, the perfection, the effect of perfection or non-perfection, or the priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, "UCC" shall mean the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection, or priority.
Section 1.02. UCC Terms
All terms used in this Security Agreement that are defined in the UCC (including "authenticate," "control," "debtor," "obligor," "proceeds," "purchase-money security interest," "secured party," "security interest," and "value") and that are not otherwise defined herein or in the Loan Agreement shall have the respective meanings given to such terms in the UCC.
Section 1.03. Interpretation
The following rules of construction and interpretation shall apply to this Security Agreement:
(a) The headings and captions in this Security Agreement are inserted for convenience of reference only and shall not define, limit, or otherwise affect the meaning or construction of any provision hereof.
(b) References to "Sections," "Articles," and "Schedules" are to Sections and Articles of, and Schedules to, this Security Agreement unless otherwise specified.
(c) The use of the singular shall include the plural, and the use of the plural shall include the singular, and the use of any gender shall include every other gender, in each case as the context may require.
(d) The word "including" (and with correlative meaning "include" and "includes") shall mean "including, without limitation."
(e) References to any agreement, instrument, or other document shall mean such agreement, instrument, or document as amended, restated, supplemented, or otherwise modified from time to time, except to the extent that any such amendment, restatement, supplement, or modification is prohibited by the terms of any Loan Document.
(f) References to any Person shall include such Person's successors and permitted assigns.
(g) References to any statute, rule, or regulation shall mean such statute, rule, or regulation as amended, modified, supplemented, or replaced from time to time (and, in the case of statutes, shall include any rules and regulations promulgated under such statute), and references to any section of any statute, rule, or regulation shall include any successor to such section.
(h) The words "hereof," "herein," "hereunder," and words of similar import when used in this Security Agreement shall refer to this Security Agreement as a whole and not to any particular provision of this Security Agreement.
(i) Unless otherwise stated, references to dollar amounts shall mean lawful money of the United States of America.
ARTICLE 2 — GRANT OF SECURITY INTEREST
Section 2.01. Grant
As security for the prompt and complete payment and performance in full when due (whether at stated maturity, by required prepayment, by acceleration, by demand, or otherwise) of all Obligations, each Grantor hereby grants to the Secured Party a first-priority continuing security interest in and lien upon all of such Grantor's right, title, and interest in and to the following property, whether now owned or existing or hereafter acquired or arising and regardless of where located (all of the following, collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper, including all electronic chattel paper and all tangible chattel paper;
(c) all Deposit Accounts, subject to the exclusions set forth in Section 2.02;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles, including all Payment Intangibles and Software;
(g) all Instruments;
(h) all intellectual Property, including all Patents, Trademarks, Copyrights, Trade Secrets, and licenses thereof (whether such Grantor is the licensor or licensee thereunder);
(i) all Inventory;
(j) all Investment Property;
(k) all Letter-of-Credit Rights;
(l) all Equity Interests owned by such Grantor in any direct Subsidiary, provided that, with respect to any first-tier foreign Subsidiary (i.e., a Subsidiary organized under the laws of a jurisdiction outside of the United States and directly owned by a Grantor), the pledge shall be limited to sixty-five percent (65%) of the total outstanding voting Equity Interests of such first-tier foreign Subsidiary (and one hundred percent (100%) of any non-voting Equity Interests thereof);
(m) all Commercial Tort Claims described on Schedule 3 hereto, as such Schedule may be supplemented from time to time in accordance with Section 5.08;
(n) all books and records (including customer lists, credit files, computer programs, printouts, and other computer materials and records) of such Grantor pertaining to any of the foregoing; and
(o) all Proceeds and products of any and all of the foregoing, in whatever form, including insurance proceeds and all claims against third parties for loss of, damage to, or destruction of any or all of the foregoing.
Section 2.02. Excluded Collateral
Notwithstanding anything to the contrary in Section 2.01, the term "Collateral" shall not include any of the following (collectively, "Excluded Collateral"):
(a) any fee-owned or leased real property or any interest therein, including fixtures to the extent they constitute an interest in real property;
(b) any motor vehicles or other assets subject to certificates of title issued by any state or other governmental authority, to the extent that a security interest therein cannot be perfected by the filing of a UCC financing statement;
(c) any Equity Interests in any Immaterial Subsidiary (i.e., any Subsidiary of the Borrower having individual total assets of less than one million dollars ($1,000,000));
(d) any Deposit Accounts that are used exclusively for payroll, payroll tax, or employee benefit purposes, so long as the aggregate balance of all such Deposit Accounts across all Grantors does not exceed two million five hundred thousand dollars ($2,500,000) at any time (each, an "Excluded Collateral Deposit Account");
(e) any asset to the extent that the granting of a security interest therein would violate any applicable law, rule, or regulation (including any applicable governmental authorization or license) or the valid and enforceable terms of any agreement, contract, lease, license, or other instrument governing such asset that was not entered into in contemplation of this Security Agreement; provided, however, that this exclusion shall not apply to the extent that any such prohibition or restriction on the grant of a security interest is rendered ineffective or unenforceable pursuant to Section 9-406, Section 9-407, Section 9-408, or Section 9-409 of the UCC (or any successor provision thereto) or any other applicable law; and provided, further, that immediately upon the ineffectiveness, lapse, or termination of any such restriction or prohibition, the Collateral shall include, and each applicable Grantor shall be deemed to have granted a security interest in, all such assets as if such restriction or prohibition had never been in effect;
(f) any intent-to-use trademark application filed with the United States Patent and Trademark Office ("USPTO") to the extent that the granting of a security interest therein would impair the validity or enforceability of such trademark application under applicable federal trademark law (including the Lanham Act, 15 U.S.C. § 1051 et seq.), until such time as a verified statement of use (or amendment to allege use) has been filed with, and accepted by, the USPTO with respect thereto, at which time such trademark application (and any resulting registration) shall automatically be included in the Collateral without further action by any party; and
(g) any asset as to which the Secured Party and the Borrower have reasonably determined in writing that the cost of obtaining or perfecting a security interest therein is excessive in relation to the practical benefit and the value of the security afforded thereby.
For the avoidance of doubt, the Proceeds of any Excluded Collateral shall not constitute Excluded Collateral (and shall constitute Collateral) unless such Proceeds would independently constitute Excluded Collateral.
Section 2.03. Security Interest as Security Only
The security interest created hereby is granted as security only and shall not subject the Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to any of the Collateral or any transaction in connection therewith. Without limiting the generality of the foregoing, the Secured Party shall not be obligated to make any demand, or to give any notice to, or to take any action with respect to the collection of any Collateral, and the Secured Party shall not be responsible for any loss or depreciation in value of the Collateral.
ARTICLE 3 — PERFECTION
Section 3.01. UCC Financing Statement Filings
(a) Each Grantor hereby authorizes the Secured Party to file one or more UCC-1 financing statements (and any continuation statements, amendments, assignments, and other filings related thereto) in all jurisdictions and filing offices as the Secured Party may determine to be necessary or advisable to perfect the security interests granted herein. Each Grantor acknowledges and agrees that such financing statements may describe the Collateral as "all assets" of such Grantor or "all personal property" of such Grantor, or words of similar effect, and that such description shall be sufficient for purposes of Section 9-504 of the UCC regardless of whether such description is broader than the grant of the security interest herein.
(b) The parties acknowledge that UCC-1 financing statement Filing No. 2024-3847261 was filed with the Secretary of State of the State of Delaware on August 19, 2024, naming each Grantor as debtor and Pinnacle Trust Bank, N.A. as secured party, covering all assets of each Grantor. Such filing was made through Meridian Filing Services Inc., 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, as filing agent.
(c) Each Grantor agrees to cooperate fully with the Secured Party and to provide all information necessary or reasonably requested to prepare, file, and maintain any financing statements or other filings in any jurisdiction where Collateral is located, where any Grantor is organized, or where filing is required or advisable for perfection, continuation, or maintenance of the security interests granted under this Security Agreement. Each Grantor shall promptly notify the Secured Party of any change in circumstances that would require or make advisable additional filings or amendments to existing filings.
Section 3.02. Deposit Account Control Agreements
(a) Within fourteen (14) days after the Closing Date (as defined in the Loan Agreement) (i.e., by no later than August 30, 2024), each Grantor shall deliver to the Secured Party fully executed deposit account control agreements ("DACAs") in form and substance reasonably satisfactory to the Secured Party with respect to each Deposit Account maintained by such Grantor at any depository institution other than Pinnacle Trust Bank, N.A., other than any Deposit Account that constitutes Excluded Collateral pursuant to Section 2.02(d).
(b) As of the Closing Date, DACAs are specifically required for the following accounts maintained at Ridgefield National Bank:
(i) Account **5694 — Money Market / Reserves; and
(ii) Account **7782 — Concentration Account.
(c) No DACA shall be required with respect to any Deposit Account maintained at Pinnacle Trust Bank, N.A., as the Secured Party is the depository bank with respect to such accounts and has automatic control over such Deposit Accounts pursuant to Section 9-104(a)(1) of the UCC.
(d) No DACA shall be required with respect to any Excluded Collateral Deposit Account, including Account **3201 at Pinnacle Trust Bank, N.A. (payroll account excluded under Section 2.02(d)).
Section 3.03. Intellectual Property Filings
To the extent required or advisable for perfection of or to provide constructive notice of the security interests granted herein, each Grantor shall, as a post-closing obligation to be completed by no later than August 30, 2024, execute and deliver to the Secured Party such short-form intellectual property security agreements, assignments, or other instruments as the Secured Party may reasonably request, in form suitable for recording with the following offices:
(a) United States Patent and Trademark Office — Each applicable Grantor shall execute and deliver to the Secured Party a short-form security agreement suitable for recordation with the USPTO covering all registered Trademarks and Patents owned by such Grantor, including the following:
(i) Trademark: ARBOR HEALTH (word mark), U.S. Registration No. 6,481,723 (Owner: Arbor Health Technologies Inc.);
(ii) Trademark: ARBOR HEALTH & Design, U.S. Registration No. 6,481,724 (Owner: Arbor Health Technologies Inc.);
(iii) Trademark: ARBORFLOW, U.S. Registration No. 6,592,108 (Owner: Arbor Health Platform Services Inc.);
(iv) Patent: Clinical Workflow Orchestration System, U.S. Patent No. 11,284,671 (Owner: Arbor Health Platform Services Inc.); and
(v) Patent Application: Automated Surgical Scheduling Engine, U.S. Patent Application No. 17/893,214 (pending) (Owner: Cortland Surgical Systems, Inc.).
(b) United States Copyright Office — Each applicable Grantor shall execute and deliver to the Secured Party a short-form security agreement suitable for recordation with the United States Copyright Office ("USCO") covering all registered Copyrights owned by such Grantor, including:
(i) Copyright: ARBORFLOW Platform — Software Code, U.S. Copyright Registration No. TXu 2-341-877 (Owner: Arbor Health Platform Services Inc.).
All costs and expenses of preparing, executing, and recording such intellectual property security agreements shall be borne by the Grantors.
Section 3.04. Equity Interest Pledges
(a) Each Grantor shall, as a post-closing obligation to be completed by no later than August 30, 2024, deliver to the Secured Party:
(i) the original stock certificates (or equivalent membership interest certificates, if any) evidencing all pledged Equity Interests, together with duly executed, undated stock powers or transfer instruments endorsed in blank, with respect to the following:
(A) 100% of the membership interests in Arbor Health Holdings LLC (held by Arbor Health Technologies Inc.);
(B) 100% of the issued and outstanding shares of common stock of Arbor Health Platform Services Inc. (held by Arbor Health Holdings LLC);
(C) 100% of the membership interests in MedBridge Workflow Solutions LLC (held by Arbor Health Holdings LLC); and
(D) 100% of the issued and outstanding shares of common stock of Cortland Surgical Systems, Inc. (held by Arbor Health Holdings LLC);
(ii) to the extent any Equity Interests are uncertificated securities, such documentation as may be required to perfect a security interest therein under Article 8 or Article 9 of the UCC, which may include (as applicable) control agreements with the issuer of such uncertificated securities, instructions to the issuer to register the Secured Party as the registered pledgee, or such other instruments or agreements as the Secured Party may reasonably require.
(b) With respect to any first-tier foreign Subsidiary, the pledge shall be limited to sixty-five percent (65%) of the total outstanding voting Equity Interests thereof (and one hundred percent (100%) of the non-voting Equity Interests thereof). As of the Closing Date, the Borrower has confirmed that no Grantor owns any Equity Interests in any first-tier foreign Subsidiary.
(c) Each Grantor agrees that, pending delivery of the certificated securities described above, such Grantor shall not transfer, sell, hypothecate, or otherwise dispose of any such certificated securities or permit any action that would impair the Secured Party's rights therein.
Section 3.05. Other Perfection Actions
Each Grantor shall take all actions necessary or reasonably requested by the Secured Party from time to time to create, preserve, maintain, protect, and perfect the first-priority security interest in the Collateral granted herein, including:
(a) marking its books and records to reflect the security interest of the Secured Party in the Collateral, including by noting the interest of the Secured Party on any schedules of assets, ledgers, or accounting records maintained by such Grantor;
(b) executing and delivering any instruments, documents, agreements, or other writings necessary or reasonably requested by the Secured Party to give effect to this Security Agreement or to enable the Secured Party to exercise and enforce its rights and remedies hereunder;
(c) delivering to the Secured Party possession of any Collateral that is perfected by possession (including certificated securities, promissory notes, negotiable instruments, and tangible chattel paper), in each case together with appropriate duly executed endorsements or instruments of transfer; and
(d) cooperating with the Secured Party in obtaining any necessary governmental, regulatory, or third-party consents, approvals, or waivers required in connection with the perfection or enforcement of the security interests granted herein, including landlord waivers, bailee letters, or similar acknowledgments.
ARTICLE 4 — REPRESENTATIONS AND WARRANTIES
Each Grantor, jointly and severally, represents and warrants to the Secured Party as of the date hereof and as of each date on which a representation or warranty is deemed to be repeated under the Loan Agreement, as follows:
Section 4.01. Organization and Authority
Each Grantor is duly organized or formed, validly existing, and in good standing under the laws of its jurisdiction of organization, with full corporate or limited liability company power and authority to own or lease its properties and to conduct its business as currently conducted. Specifically:
(a) Arbor Health Technologies Inc. is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware, Delaware Secretary of State File No. 7284619, Federal Employer Identification Number 88-3164720, and is duly qualified to do business as a foreign corporation in the Commonwealth of Massachusetts;
(b) Arbor Health Holdings LLC is a limited liability company duly formed, validly existing, and in good standing under the laws of the State of Delaware, Delaware Secretary of State File No. 7301482, Federal Employer Identification Number 88-4271835; and
(c) Arbor Health Platform Services Inc. is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware, Delaware Secretary of State File No. 7318905, Federal Employer Identification Number 92-1058467.
Each Grantor has full power and authority to execute, deliver, and perform this Security Agreement and to grant the security interests contemplated hereby.
Section 4.02. Authorization
The execution, delivery, and performance of this Security Agreement by each Grantor have been duly authorized by all necessary corporate or limited liability company action on the part of such Grantor. Without limiting the foregoing:
(a) the Board of Directors of Arbor Health Technologies Inc. adopted resolutions on August 2, 2024 authorizing the execution, delivery, and performance of this Security Agreement and the other Loan Documents to which it is a party;
(b) the sole member of Arbor Health Holdings LLC adopted resolutions on August 2, 2024 authorizing the execution, delivery, and performance of this Security Agreement and the other Loan Documents to which it is a party; and
(c) the Board of Directors of Arbor Health Platform Services Inc. adopted resolutions on August 2, 2024 authorizing the execution, delivery, and performance of this Security Agreement and the other Loan Documents to which it is a party.
No other corporate, limited liability company, or other organizational action on the part of any Grantor, and no consent or approval of any holder of Equity Interests of any Grantor, is required in connection with the execution, delivery, and performance of this Security Agreement or the grant of the security interests contemplated hereby.
Section 4.03. Legal Name; Location; Identification
(a) The exact legal name (as set forth in its certificate of incorporation, certificate of formation, or other constitutive document filed with the applicable governmental authority), entity type, jurisdiction of organization, state organizational identification number, and federal employer identification number of each Grantor are as set forth in Section 4.01 above and in the Perfection Certificate delivered to the Secured Party concurrently herewith, and such information is true, correct, and complete in all respects.
(b) No Grantor has changed its legal name, jurisdiction of organization, or organizational structure (including by way of merger, conversion, or reorganization) at any time during the five (5) years preceding the date hereof.
(c) The chief executive office and principal place of business of each Grantor is located at: 400 Beacon Ridge Parkway, Suite 800, Waltham, Massachusetts 02451.
(d) In addition to the chief executive office, material Collateral is located at the following addresses:
(i) 1100 Commerce Boulevard, Suite 200, King of Prussia, Pennsylvania 19406; and
(ii) 250 Healthway Drive, Suite 1400, Nashville, Tennessee 37203.
A complete list of the chief executive offices and locations of material Collateral is set forth on Schedule 1 hereto.
Section 4.04. Title to Collateral; No Prior Liens
(a) Each Grantor has good and marketable title to, or valid and subsisting leasehold interests or other rights in, all of its Collateral, free and clear of all security interests, liens, encumbrances, charges, claims, options, and restrictions of every kind and nature whatsoever (collectively, "Liens"), other than Permitted Liens (as defined in the Loan Agreement).
(b) No effective UCC-1 financing statement or other filing or recording covering any Collateral is on file in any filing or recording office, except for the following:
(i) UCC-1 Financing Statement Filing No. 2023-2811490, filed by Frontier Leasing Corp. as secured party against Arbor Health Technologies Inc. as debtor with the Secretary of State of the State of Delaware on September 15, 2023, covering specific leased office equipment with an approximate aggregate value of $380,000, which constitutes a Permitted Lien under Section 8.02(e) of the Loan Agreement; and
(ii) UCC-1 Financing Statement Filing No. 2024-3847261, filed by the Secured Party against each Grantor as debtor with the Secretary of State of the State of Delaware on August 19, 2024, pursuant to and in connection with this Security Agreement.
(c) Comprehensive UCC, federal and state tax lien, judgment, and litigation search reports were conducted by Meridian Filing Services Inc. as of August 12, 2024, covering each Grantor in its jurisdiction of organization and in each jurisdiction where Collateral is located. Such search reports confirmed no filings, liens, judgments, or pending litigation against any Grantor other than the filing described in clause (b)(i) above.
Section 4.05. Intellectual Property
(a) Schedule 2 hereto sets forth a true, correct, and complete list of all registered Patents (including pending patent applications), Trademarks (including pending trademark applications), and Copyrights owned by each Grantor as of the Closing Date.
(b) Each Grantor owns or has valid and enforceable licenses to use all intellectual Property that is necessary for the conduct of its business as currently conducted, and no such license has been terminated or is subject to any pending or, to the knowledge of such Grantor, threatened termination.
(c) No intellectual Property owned by any Grantor is the subject of any pending or, to the knowledge of such Grantor, threatened claim of infringement, invalidity, unenforceability, misappropriation, or dilution by or against any third party. No Grantor has received any written notice from any third party asserting that the use by such Grantor of any intellectual Property infringes or misappropriates the intellectual property rights of any third party.
(d) Each Grantor has taken all commercially reasonable steps to protect and maintain the confidentiality of its Trade Secrets and other confidential proprietary information, including by requiring employees, contractors, and other persons having access to such information to execute appropriate non-disclosure and confidentiality agreements.
Section 4.06. Deposit Accounts
Schedule 4 hereto sets forth a true, correct, and complete list of all Deposit Accounts maintained by each Grantor as of the Closing Date, including the name of the depository institution, the last four digits of the account number, the type of account, and the status of any applicable deposit account control agreement. The Deposit Accounts of each Grantor as of the Closing Date are as follows:
No Grantor maintains any Deposit Account at any depository institution other than those set forth on Schedule 4 hereto.
Section 4.07. Equity Interests
(a) Schedule 5 hereto sets forth a true, correct, and complete list of all Equity Interests owned by each Grantor as of the Closing Date, including the issuer, class or type of interest, certificate number (if applicable), and percentage of outstanding interests held. The Equity Interests owned by each Grantor as of the Closing Date are as follows:
(i) Arbor Health Technologies Inc. holds 100% of the outstanding membership interests in Arbor Health Holdings LLC;
(ii) Arbor Health Holdings LLC holds 100% of the issued and outstanding shares of common stock of Arbor Health Platform Services Inc.;
(iii) Arbor Health Holdings LLC holds 100% of the outstanding membership interests in MedBridge Workflow Solutions LLC; and
(iv) Arbor Health Holdings LLC holds 100% of the issued and outstanding shares of common stock of Cortland Surgical Systems, Inc.
(b) No Grantor owns any Equity Interests in any first-tier foreign Subsidiary as of the Closing Date.
(c) All outstanding Equity Interests identified above have been duly authorized and validly issued and, to the extent applicable, are fully paid and non-assessable.
Section 4.08. Commercial Tort Claims
As of the Closing Date, no Grantor has any pending Commercial Tort Claims, except as set forth on Schedule 3 hereto. Schedule 3 hereto discloses: None.
Section 4.09. Letter-of-Credit Rights
As of the Closing Date, no Grantor is the beneficiary of any letter of credit. None disclosed.
Section 4.10. Enforceability
This Security Agreement has been duly executed and delivered by each Grantor and constitutes a legal, valid, and binding obligation of each Grantor, enforceable against such Grantor in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance, and other similar laws affecting creditors' rights generally, (b) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law), and (c) concepts of good faith, fair dealing, and reasonableness.
ARTICLE 5 — COVENANTS
Each Grantor covenants and agrees that, so long as any Obligation remains outstanding or any commitment of the Secured Party under the Loan Agreement remains in effect:
Section 5.01. Maintenance of Collateral
Each Grantor shall maintain all tangible Collateral in good working order and condition (ordinary wear and tear excepted) and shall make all repairs, renewals, replacements, and improvements thereto as may be necessary or appropriate to maintain such Collateral in such condition. No Grantor shall use or permit any Collateral to be used unlawfully or in violation of any provision of this Security Agreement, any other Loan Document, or any applicable law, rule, or regulation, or any policy of insurance covering the Collateral.
Section 5.02. Changes in Name, Jurisdiction, or Structure
No Grantor shall (a) change its legal name, (b) change its jurisdiction of organization, (c) change its entity type or organizational structure (including by way of merger, conversion, consolidation, or reorganization), or (d) change its organizational identification number, in each case without providing at least thirty (30) days' prior written notice to the Secured Party and taking all actions necessary or reasonably requested by the Secured Party to maintain the perfection and priority of the security interests granted herein, including the filing of amended UCC financing statements, new UCC financing statements, or other filings or recordings in any relevant jurisdiction.
Section 5.03. Disposition of Collateral
No Grantor shall sell, assign, transfer, exchange, lease, license, or otherwise dispose of any material Collateral or any interest therein outside the ordinary course of business without the prior written consent of the Secured Party, except as expressly permitted under the Loan Agreement, including (a) sales of Inventory in the ordinary course of business, (b) dispositions of obsolete, worn-out, or surplus Equipment in the ordinary course of business, and (c) other dispositions expressly permitted under Section 8.05 of the Loan Agreement. Any Proceeds of any permitted disposition shall remain subject to the security interest granted herein.
Section 5.04. Insurance
Each Grantor shall maintain insurance on the Collateral in accordance with the requirements of Section 7.01(b) of the Loan Agreement, with financially sound and reputable insurance companies having an A.M. Best rating of not less than "A-" and a financial size category of not less than "VII" (or such other carriers as may be reasonably acceptable to the Secured Party), in amounts and covering risks that are customary for companies of similar size engaged in similar industries and lines of business. Without limiting the foregoing, all insurance policies covering tangible Collateral shall (i) name the Secured Party as loss payee (or mortgagee, as applicable) with respect to casualty and property damage coverage, (ii) name the Secured Party as additional insured with respect to liability coverage, and (iii) provide that such policies may not be canceled or materially modified without at least thirty (30) days' prior written notice to the Secured Party.
Section 5.05. Liens
No Grantor shall create, incur, assume, or suffer to exist any Lien on any Collateral, other than Permitted Liens as defined in the Loan Agreement. Each Grantor shall defend the title to the Collateral and the security interests of the Secured Party therein against the claims and demands of all Persons.
Section 5.06. Intellectual Property Protection
Each Grantor shall:
(a) diligently maintain, protect, and enforce all material intellectual Property, including by timely filing all renewal applications, affidavits of use, and maintenance fees, timely paying all annuities and other required payments, and diligently prosecuting all pending applications, in each case as necessary to maintain the validity and enforceability of such intellectual Property;
(b) promptly notify the Secured Party in writing of any infringement, dilution, misappropriation, or unauthorized use of any material intellectual Property by any third party of which such Grantor becomes aware, and take commercially reasonable steps to enforce its rights with respect thereto;
(c) not abandon, disclaim, dedicate to the public, or allow to lapse any material intellectual Property without the prior written consent of the Secured Party; provided, however, that no such consent shall be required with respect to any intellectual Property that such Grantor reasonably determines in good faith is no longer material to the conduct of its business and the abandonment or lapse of which would not reasonably be expected to have a Material Adverse Effect (as defined in the Loan Agreement);
(d) promptly notify the Secured Party in writing and update Schedule 2 hereto upon acquiring or registering (or filing an application for registration of) any new Patents, Trademarks, or Copyrights, including any intellectual Property acquired or developed through the integration of the MedBridge Workflow Solutions and Cortland Surgical Systems businesses, and shall execute and deliver such supplemental intellectual property security agreements as the Secured Party may reasonably request in connection therewith; and
(e) not enter into any agreement or take any action that would impair or be inconsistent with the security interest of the Secured Party in any material intellectual Property.
Section 5.07. Deposit Account Notifications
Each Grantor shall promptly (and in any event within five (5) Business Days) notify the Secured Party in writing of the opening of any new Deposit Account, specifying the depository institution, account number, and type of account. Within thirty (30) days of opening any such new Deposit Account (unless such account qualifies as an Excluded Collateral Deposit Account under Section 2.02(d)), such Grantor shall deliver to the Secured Party a duly executed deposit account control agreement with respect thereto, in form and substance reasonably satisfactory to the Secured Party.
Section 5.08. Commercial Tort Claims
Each Grantor shall promptly (and in any event within ten (10) Business Days) notify the Secured Party in writing upon becoming aware of any Commercial Tort Claim in which the amount in controversy exceeds five hundred thousand dollars ($500,000), setting forth in reasonable detail the facts giving rise to such claim. Promptly upon request by the Secured Party, such Grantor shall execute and deliver to the Secured Party such amendments or supplements to this Security Agreement (including supplements to Schedule 3 hereto) as may be necessary or advisable to grant a first-priority security interest in such Commercial Tort Claim to the Secured Party.
Section 5.09. Further Assurances
Each Grantor shall, at its own cost and expense, execute and deliver all documents, instruments, agreements, and certificates and take all further actions that the Secured Party may reasonably request from time to time to create, preserve, protect, perfect, validate, and maintain the first-priority security interest in the Collateral granted herein, including:
(a) filing additional UCC financing statements, amendments, or continuation statements in any applicable jurisdiction;
(b) executing additional intellectual property security agreements for recordation with the USPTO, the USCO, or any other applicable intellectual property registry;
(c) delivering additional stock certificates, membership interest certificates, and duly executed undated stock powers or transfer instruments endorsed in blank;
(d) executing and delivering deposit account control agreements, securities account control agreements, or other control agreements;
(e) obtaining and delivering landlord waivers, bailee letters, or other third-party acknowledgments or waivers as the Secured Party may reasonably request with respect to Collateral located at leased premises or in the custody of third parties; and
(f) taking any other actions necessary or advisable under the UCC or other applicable law to perfect or maintain the perfection and priority of the security interests granted herein.
Section 5.10. Books and Records; Inspection
Each Grantor shall maintain accurate and complete books and records with respect to the Collateral in accordance with sound business practices and in a manner consistent with past practice, and shall permit the Secured Party and its representatives (including independent accountants, consultants, and counsel) to inspect, audit, and copy such books and records during normal business hours upon reasonable prior notice (which shall not be less than two (2) Business Days, except during the continuance of an Event of Default, in which case no prior notice shall be required), subject to the provisions and limitations set forth in Section 7.01(f) of the Loan Agreement. Such inspections shall be at the Secured Party's expense, except that during the continuance of an Event of Default, such inspections shall be at the expense of the Grantors.
ARTICLE 6 — RIGHTS OF SECURED PARTY
Section 6.01. Attorney-in-Fact
Each Grantor hereby irrevocably constitutes and appoints the Secured Party and any officer, employee, or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact, effective upon the occurrence and during the continuance of an Event of Default, with full power and authority in the name, place, and stead of such Grantor or in the Secured Party's own name, from time to time in the Secured Party's reasonable discretion, to take any and all appropriate action and to execute and deliver any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Security Agreement, and, without limiting the generality of the foregoing, each Grantor hereby grants to the Secured Party the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following upon the occurrence and during the continuance of an Event of Default:
(a) endorse any Grantor's name on any checks, notes, acceptances, money orders, drafts, or other instruments of payment constituting Collateral or Proceeds thereof that come into the possession of the Secured Party;
(b) sign any Grantor's name on any UCC financing statements, amendments, or continuation statements, any intellectual property assignment or security agreement filings, or any other documents or instruments necessary or advisable to perfect, continue, or maintain the perfection or priority of any security interest granted herein;
(c) notify account debtors, obligors, and other Persons obligated on Accounts, Chattel Paper, Instruments, General Intangibles, or other Collateral to make payment directly to the Secured Party;
(d) demand, collect, receive, receipt for, compound, compromise, settle, and give acquittance and discharge for any and all Accounts and other amounts due or to become due with respect to the Collateral;
(e) commence and prosecute any action, suit, or proceeding at law or in equity in any court of competent jurisdiction to enforce any rights in any intellectual Property, including the right to collect damages for infringement, dilution, or misappropriation thereof;
(f) sell, transfer, assign, pledge, make any agreement with respect to, or otherwise deal with any of the Collateral as fully and completely as though the Secured Party were the absolute owner thereof for all purposes; and
(g) take any other actions that the Secured Party may reasonably determine to be necessary or advisable to protect, preserve, collect, or realize upon the Collateral or to exercise or enforce the rights of the Secured Party with respect to any of the Collateral.
This power of attorney is irrevocable and coupled with an interest. Each Grantor ratifies and confirms all that any attorney-in-fact appointed pursuant to this Section 6.01 shall lawfully do or cause to be done by virtue hereof.
Section 6.02. Right to Perform
If any Grantor shall fail to perform any obligation under this Security Agreement or any other Loan Document (including any obligation to maintain insurance, file financing statements, or deliver documents), the Secured Party may (but shall have no obligation to) perform or cause the performance of such obligation, and any reasonable costs, expenses, fees, and charges incurred by the Secured Party in connection therewith (including reasonable attorneys' fees and disbursements) shall be payable by the Grantors on demand and shall constitute Obligations secured by this Security Agreement. The Secured Party shall not be responsible for any act or omission of any Grantor or for the identity, authority, or rights of any party from whom it may receive any payment or item of Collateral.
ARTICLE 7 — REMEDIES
Section 7.01. General Remedies Upon Event of Default
(a) Upon the occurrence and during the continuance of any Event of Default (as defined in Article IX of the Loan Agreement), the Secured Party shall have, in addition to all other rights and remedies granted to it in this Security Agreement, the Loan Agreement, and the other Loan Documents, all rights and remedies of a secured party under the Uniform Commercial Code as in effect in the State of New York and under all other applicable law, including the right to:
(i) take possession of all or any portion of the Collateral, and for that purpose, enter (to the extent permitted by applicable law) any premises where Collateral is located and remove the Collateral therefrom, with or without judicial process, to the extent permitted by law;
(ii) require any Grantor to assemble the Collateral and make it available to the Secured Party at a place designated by the Secured Party that is reasonably convenient to the Secured Party and such Grantor;
(iii) sell, lease, license, or otherwise dispose of any or all of the Collateral, in its then condition or following any commercially reasonable preparation or processing, at one or more public or private sales or dispositions, in one or more parcels, at such time or times, at such place or places, and on such terms and conditions as the Secured Party may determine, all in accordance with applicable law;
(iv) apply the Default Rate (as defined in the Loan Agreement, being the Applicable Rate plus two hundred (200) basis points, i.e., Term SOFR plus 675 basis points per annum) to all outstanding Obligations from and after the date of such Event of Default;
(v) collect any and all Accounts, Instruments, Chattel Paper, or other payment obligations directly from the account debtors or other obligors thereof, and for such purpose may notify any such account debtor or obligor, or any agent or bailee of any Grantor, to make payment directly to the Secured Party;
(vi) exercise any and all rights of a transferee with respect to any and all pledged Equity Interests, including the right to vote such Equity Interests and to receive and retain all dividends, distributions, and other payments thereon; and
(vii) exercise any other rights and remedies available to the Secured Party under the Loan Documents, at law, or in equity.
(b) The Secured Party shall give each applicable Grantor at least ten (10) days' prior written notice of the time and place of any public sale of the Collateral or of the time after which any private sale or other intended disposition thereof is to be made. Each Grantor acknowledges and agrees that ten (10) days' notice of such sale or disposition shall constitute commercially reasonable notice under the UCC. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.
(c) In any such sale, the Secured Party may, to the extent permitted by applicable law, purchase the whole or any part of the Collateral so sold, free of any right of redemption, which right each Grantor hereby waives and releases to the fullest extent permitted by law.
Section 7.02. Application of Proceeds
Any cash Proceeds of Collateral received by the Secured Party in connection with the collection, enforcement, or exercise of any right, remedy, or power under this Security Agreement or any other Loan Document (including any Proceeds received from the sale or other disposition of the Collateral) shall be applied in the following order of priority:
(a) first, to the payment of all costs and expenses of enforcement, collection, sale, and disposition (including all court costs, reasonable attorneys' fees and expenses incurred by the Secured Party and its counsel, Whitfield Gage & Associates LLP, and all fees and expenses of any agents, advisors, appraisers, or auctioneers retained by the Secured Party in connection therewith);
(b) second, to the payment of all accrued and unpaid interest, fees, and other periodic charges under the Loan Agreement and the other Loan Documents, in such order as the Secured Party shall determine;
(c) third, to the payment of the outstanding principal balance of the Bridge Loan (being $25,000,000 or such lesser amount as may then be outstanding);
(d) fourth, to the payment of all other Obligations that remain unpaid, in such order and priority as the Secured Party shall determine in its sole discretion; and
(e) fifth, any surplus remaining after the indefeasible payment in full in cash of all Obligations shall be paid to the Grantors (in proportion to their respective interests), or as a court of competent jurisdiction may otherwise direct or as otherwise required by applicable law.
Section 7.03. Deficiency
If the Proceeds of the Collateral are insufficient to satisfy all Obligations in full, each Grantor shall remain jointly and severally liable for any such deficiency, and the Secured Party shall be entitled to pursue all available remedies against the Grantors for the recovery of any such deficiency.
Section 7.04. Rights Cumulative
The rights and remedies of the Secured Party under this Security Agreement, the Loan Agreement, and the other Loan Documents are cumulative and not exclusive of any other rights or remedies that may be available to the Secured Party under applicable law or in equity. No delay or failure by the Secured Party in exercising any right, remedy, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege. Without limiting the foregoing, the making of a loan or the issuance of a letter of credit under the Loan Agreement shall not be construed as a waiver of any Event of Default.
ARTICLE 8 — MISCELLANEOUS
Section 8.01. Governing Law
This Security Agreement and any claims, controversies, disputes, or causes of action (whether in contract, tort, or otherwise) arising out of or relating to this Securi