UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 8, 2020

 

 

VENUS CONCEPT INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-38238   06-1681204

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

235 Yorkland Blvd, Suite 900

Toronto, Ontario M2J 4Y8

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code (877) 848-8430

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

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.0001 par value per share   VERO   The Nasdaq Global Market

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

Emerging growth company  ☒

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

 

 

 


EXPLANATORY NOTE

This Form 8-K/A is filed as an amendment (this “Amendment No. 1”) to the Current Report on Form 8-K filed by Venus Concept, Inc. (the “Company”) on December 10, 2020 (the “Original Form 8-K”). This Amendment No. 1 is filed to file herewith the material definitive agreements referenced in Item 1.01 of the Original Form 8-K.

Item 9.01 Financial Statements and Exhibits.

 

Exhibit No.

  

Description

10.1    Third Amended and Restated Loan Agreement dated as of December 9, 2020, by and among the Company, Venus Concept USA Inc., Venus Concept Canada Corp. and City National Bank of Florida.
10.2    Second Amended and Restated Security Agreement dated as of December 9, 2020 by and among the Company, Venus Concept USA Inc. and City National Bank.
10.3    Fourth Amended and Restated Revolving Promissory Note dated as of December 9, 2020 by Venus Concept USA Inc., Venus Concept Canada Corp. and the Company in favor of City National Bank of Florida.
10.4    Third Amended and Restated Guaranty of Payment and Performance dated as of December 9, 2020 by Venus Concept Ltd. in favor of City National Bank of Florida.
10.5    Amendment to General Security Agreement dated as of December 9, 2020 between Venus Concept Canada Corp. and City National Bank of Florida.
10.6    Loan and Security Agreement dated as of December 8, 2020, by and between Venus Concept USA Inc. and City National Bank.
10.7    Promissory Note dated December 8, 2020, by Venus Concept USA Inc. in favor of City National Bank.
10.8    Guaranty of Payment and Performance Agreement dated as of December 8, 2020 by and between the Company and City National Bank.
10.9    Securities Exchange and Registration Rights Agreement as of December  8, 2020 by and among the Company, Venus Concept USA Inc., Venus Concept Canada Corp., Venus Concept Ltd., Madryn Health Partners, LP and the Investors signatory thereto.
10.10    Secured Subordinated Convertible Note dated as of December 9, 2020 by the Company in favor of Madryn Health Partners, LP.
10.11    Secured Subordinated Convertible Note dated as of December 9, 2020 by the Company in favor of and Madryn Health Partners (Cayman Master), LP.
10.12    Guaranty and Security Agreement dated as of December 9, 2020 by and among the Company, Venus Concept USA, Venus Concept Canada Corp., Venus Concept Ltd. and Madryn Health Partners, LP.
10.13    Subordination of Debt Agreement dated as of December 9, 2020 by and among Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, City National Bank and Venus Concept Inc.
10.14    Subordination of Debt Agreement dated as of December 9, 2020 by and among Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, City National Bank and Venus Concept Canada Corp.
10.15    Subordination of Debt Agreement dated as of December 9, 2020 by and among Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, City National Bank and Venus Concept USA Inc.


SIGNATURES

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

 

VENUS CONCEPT INC.
By:  

/s/ Domenic Della Penna

  Domenic Della Penna
  Chief Financial Officer

Date: December 15, 2020

Exhibit 10.1

THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT AMENDS, RESTATES AND REPLACES IN ITS ENTIRETY THAT CERTAIN AMENDED AND RESTATED LOAN AGREEMENT DATED AS OF AUGUST 29, 2018, AS AMENDED BY THAT CERTAIN FIRST AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT DATED MARCH 15, 2019, THAT CERTAIN SECOND AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT DATED APRIL 25, 2019, THAT CERTAIN THIRD AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT DATED OCTOBER 28, 2019 AND THAT CERTAIN SECOND AMENDED AND RESTATED LOAN AGREEMENT DATED MARCH 20, 2020 ALL BETWEEN BORROWER AND LENDER

THIRD AMENDED AND RESTATED LOAN AGREEMENT

THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT (this “Agreement”), dated as of this 9th day of December, 2020, by and between VENUS CONCEPT USA INC., a Delaware corporation, whose address is 235 Yorkland Blvd., Suite 900, Toronto, ON M2J 4Y8 (“Venus USA”); VENUS CONCEPT CANADA CORP., a Canadian corporation whose address is 255 Consumers Road, Suite 110, Toronto, ON M2J 1R4 (“Venus Canada”), and VENUS CONCEPT INC., a Delaware corporation, whose address is 235 Yorkland Blvd., Suite 900, Toronto, ON M2J 4Y8 (“VCI”), jointly and severally (collectively, the “Borrower”), and CITY NATIONAL BANK OF FLORIDA, its successors and/or assigns (the “Lender”), whose address is 100 SE 2nd Street, 13th Floor, Miami, Florida 33131.

RECITALS

A. Borrower has requested and Lender has agreed to make a revolving credit facility to Borrower in the maximum principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) (the “Loan”) to be used by Borrower to finance working capital requirements, subject to the terms and conditions contained in this Agreement.

B. Borrower and Lender have negotiated the terms and conditions of, and wish to enter into, this Agreement in order to set forth the terms and conditions of the Loan.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, Borrower and Lender agree as follows:

1. DEFINITIONS. As used in this Agreement the terms listed below shall have the following meanings unless otherwise required by the context:

(a) Account: Has the meaning set forth in the Code.

(b) Account Debtor: Means a person who is obligated under any Account.

(c) Affiliate: An Affiliate of the Borrower shall mean any entity which, directly or indirectly, controls or is controlled by or is under common control with the Borrower. An entity shall be deemed to be “controlled by” another entity if such other entity possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such entity whether by contract, ownership of voting securities, membership interests or otherwise.

(d) Available Commitment: Means up to $10,000,000.00.

(e) Bona Fide Revenue Contract: Means any duly executed and effective bona fide contract of the Parent or any Subsidiary thereof entered into in the ordinary course of business with any


Person that is not an Affiliate of any Loan Party or any Subsidiary pursuant to which the Parent or any Subsidiary earns revenue.

(f) Borrowing Base: Shall have the meaning given to such term in Section 2 hereof.

(g) Borrowing Base Certificate or BBC: Means the certificate attached hereto as Exhibit “A”.

(h) Capital Expenditures: Means all expenditures which would be required to be capitalized and shown on the balance sheet of the Borrower, including expenditures in respect to Capital Leases, but excluding expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (b) with awards of compensation arising from the taking of eminent domain or condemnation of the assets being replaced.

(i) Capital Lease: Means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real and personal property by such Person that is accounted for as a capital lease on the balance sheet of such Person.

(j) Code: Means the Uniform Commercial Code (or any successor statute), as adopted and in force in Florida or, when the laws of any other state govern the method or manner of the perfection or enforcement of any security interest in any of the Collateral, the Uniform Commercial Code (or any successor statute) of such state. Any term used in this Agreement and in any financing statement filed in connection herewith which is defined in the Code and not otherwise defined in this Agreement or in any other Loan Document has the meaning given to the term in the Code.

(k) Collateral: Shall have the meaning set forth in the Amended and Restated Security Agreement.

(l) Collateral Access Agreement: Means an agreement pursuant to which a mortgagee or lessor of real property on which collateral is stored or otherwise located, or a warehouseman, processor or other bailee of inventory owned by the loan party, acknowledges the liens of the lender and waives any liens held by such Person on such property, and in the case of any such agreement with a mortgagee or lessor, permits the Lender reasonable access to and use of such real property following the occurrence and during the continuance of an Event of Default to assemble, complete and sell any Collateral stored or otherwise located thereon, and contains such other provisions as otherwise acceptable to Lender.

(m) Consolidated Contract Revenues: Means, for any period, for the Parent and its Subsidiaries on a consolidated basis, the sum (as calculated by the Parent in accordance with its practices prior to the date hereof), without duplication, of (a) gross revenues for such period from all Bona Fide Revenue Contracts originally entered into by the Parent or any Subsidiary of Parent in such period that are, or pursuant to the terms of such Bona Fide Revenue Contract will be, recognized as Consolidated Revenues under GAAP in such period or any future period plus (b) incremental gross revenues for such period arising pursuant to the terms of any bona fide amendment, extension, renewal or other modification of any Bona Fide Revenue Contract entered into by the Parent or any of its Subsidiaries in a prior period (or earlier in such period) that are, or pursuant to the terms of such amendment, extension, renewal or other modification will be, recognized as Consolidated Revenues under GAAP in such period or any future period plus (c) all revenues for such period that are (x) not in any way earned pursuant to,

 

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derived from or in any way related to any Contractual Obligation and (y) included in Consolidated Revenues for such period; provided, that, it is understood and agreed that in no event shall “Consolidated Contract Revenues” include any revenues from any contract or any amendment, extension, renewal or modification of any contract to the extent such contract, amendment, extension, renewal or modification represents a replacement of an existing Bona Fide Revenue Contract without a material modification of the economics thereof.

(n) Consolidated Revenues: Means, for any period, for the Parent and its Subsidiaries on a consolidated basis, the total of (a) gross revenues for such period as determined in accordance with GAAP minus (b) the sum (without duplication) of (i) trade, quantity and cash discounts allowed by the Parent and its Subsidiaries plus (ii) discounts, refunds, rebates, charge backs, retroactive price adjustments and any other allowances which effectively reduce net selling price plus (iii) product returns and allowances plus (iv) set-offs and counterclaims plus (v) any other similar and customary deductions used by the Parent and its Subsidiaries in determining net revenues, all for such period and as determined in accordance with GAAP; provided, that, “Consolidated Revenues” shall exclude the revenues generated by any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of the income resulting from such revenues is not at the time permitted by operation of the terms of its organizational documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary.

(o) Contractual Obligation: Means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

(p) CPLTD: Current Portion of Long-Term Debt.

(q) EBITDA: As applies to any Person, the sum of earnings before interest, taxes, depreciation and amortization.

(r) Eligible Accounts Receivable: Means all Accounts in U.S. dollars and Canadian dollars evidenced by a paper invoice or electronic equivalent (valued at the face amount of such invoice, less maximum discounts, credits and allowances which may be taken by Account Debtors on such Accounts, and net of any sales tax, finance charges or late payment charges included in the invoiced amount) created or acquired by Borrower arising from the sale of inventory and/or the provision of services in Borrower’s ordinary course of business (as approved by Lender) in which Lender has a first priority, perfected security interest, but excluding, without duplication:

(i) domestic (Account Debtor located in the U.S. and/or Canada) Accounts not related to equipment leased to an Account Debtor due more than ninety (90) days after the date of invoice or past due by more than sixty (60) days;

(ii) All Accounts owed by an Account Debtor if more than twenty-five percent (25%) of the Accounts owed by such Account Debtor to Borrower is deemed ineligible hereunder pursuant to clause (i);

(iii) Accounts owing from any Affiliate of Borrower;

 

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(iv) Accounts owed by a creditor of Borrower to the extent of the amount of the indebtedness of Borrower to such creditor;

(v) Accounts that are in dispute or subject to any counterclaim, contra-account, volume rebate, cooperative advertising accrual, deposit or offset, to the extent of such dispute, counterclaim, contra-account, rebate, accrual, deposit or offset;

(vi) Accounts owing by any Account Debtor that becomes the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships;

(vii) Accounts arising from a sale on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or similar basis or which is subject to repurchase, return, rejection, repossession, loss or damage;

(viii) Accounts owed by an Account Debtor that (1) is a sanctioned person or (2) other than an Account Debtor with respect to a foreign Eligible Accounts Receivable, is located outside of the United States of America;

(ix) Accounts owed by the United States of America or other governmental or quasi-governmental unit, agency or subdivision, provided, however, accounts owed by the United States Postal Service shall be Eligible Accounts Receivable;

(x) (I) Accounts as to which the goods giving rise to the Account have not been delivered to and accepted by the Account Debtor and (II) accounts as to which the service giving rise to the Account has not been completely performed or which do not represent a final sale;

(xi) Accounts evidenced by a note or other instrument or chattel paper or reduced to judgment;

(xii) Accounts for which the total of all Accounts from an Account Debtor (together with the Affiliates of such Account Debtor) exceeds fifteen percent (15%) of the total Accounts of Borrower subject to the Borrowing Base (but only to the extent of the excess) (each an “Over Concentration Account,” and collectively the “Over Concentration Accounts,”); provided, however, at Borrower’s request Lender shall review any Over Concentration Account on a case-by-case basis, and may include any such Over Concentration Account as Eligible Accounts Receivable as Lender shall determine in its sole and absolute discretion;

(xiii) Accounts which, by contract, subrogation, mechanics’ lien laws or otherwise, are subject to claims by Borrower’s creditors or other third parties or which are owed by Account Debtors as to whom any creditor of Borrower (including any bonding company) has Lien or retainage rights;

(xiv) Any and all other Accounts the validity, collectability, or amount of which is determined in good faith and after reasonable due diligence by Borrower or Lender to be doubtful;

(xv) Any and all Accounts owed in connection with any bonded contracts;

 

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(xvi) Any other Account which Lender in its sole and absolute discretion deems to be ineligible;

(xvii) Accounts owed by an Account Debtor which is located in a jurisdiction where Borrower is required to qualify to transact business or to file reports, unless Borrower so qualify or filed;

(xviii) Accounts owed by an Account Debtor who disputes the liability thereof; and

(xviv) Accounts in which Body Contour Ventures, LLC, American Aesthetic Equipment, LLC, BCA Acquisitions, LLC and/or any of their affiliates is the Account Debtor for so long as such Account Debtors are the subject of any bankruptcy or other similar proceeding and until Lender provides consent to include such Accounts as Eligible Accounts Receivable.

(s) Escrow Agreement: Means that certain Escrow Agreement dated of even date herewith, by and among Madryn Health Partners, LP and the Lender.

(t) Event of Default: Shall have the meaning given to such term in Section 7.

(u) Exchange Agreement: Means that certain Securities Exchange and Registration Rights Agreement dated of even date herewith, by and among VCI, the Guarantors party thereto, the Investors party thereto and Madryn Health Partners, LP.

(v) Financing Statements: The financing statements from Borrower to Lender to perfect Lender’s security interest in the personal property described in the Amended and Restated Security Agreement.

(w) Fiscal Year: Means the fiscal year of the Borrower, which period shall be a 12-month period ending on December 31 of each year. References to a Fiscal Year with a number corresponding to any calendar year (e.g. “Fiscal Year 2013”) refer to the Fiscal Year ending on December 31 of such calendar year.

(x) GAAP: Generally accepted accounting principles consistently applied, as adopted in the United States, and as amended from time to time.

(y) Governmental Authority: Any governmental or quasi-governmental authority, agency, authority, board, commission, or governing body authorized by federal, state or local laws or regulations as having jurisdiction over the Lender, the Borrower or, the Guarantor.

(z) Governmental Requirements: The standards for real property appraisals established under applicable regulations governing national or state chartered banks promulgated by the Board of Governors of the Federal Reserve System or the United States Comptroller of the Currency, and any other regulations promulgated by any Governmental Authority which apply to Lender.

(aa) Guarantor: VENUS CONCEPT LTD., an Israeli corporation.

(bb) Guaranty: Third Amended and Restated Guaranty of Payment and Performance of even date herewith from Guarantor in favor of Lender, as may be amended, restated, modified or replaced from time to time.

 

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(cc) Inventory: Has the meaning set forth in the Code.

(dd) Involuntary Disposition: any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any property of any Loan Party or any of its Subsidiaries.

(ee) IP Rights: all worldwide intellectual property rights, industrial property rights, proprietary rights and common-law rights, whether registered or unregistered, copyrights, domain names, patents, trademarks, proprietary databases, proprietary software, websites and trade secrets, including without limitation, all rights to and under all new and useful algorithms, concepts, data (including all clinical data relating to a product), databases, designs, discoveries, inventions, know-how, methods, processes, protocols, chemistries, compositions, show-how, software (other than commercially available, off-the-shelf or open source), specifications for products, techniques, technology, trade dress and all improvements thereof and thereto, which is owned by any Loan Party or any Subsidiary thereof or which any Loan Party or any Subsidiary thereof is licensed, authorized or otherwise granted rights under or to.

(ff) Lien: means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

(gg) Loan: That certain revolving credit facility in the amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) from time to time outstanding, as evidenced by the Note and secured by the Security Agreement and other Loan Documents as provided herein.

(hh) Loan Documents: Any and all agreements evidencing, securing, or executed by the Borrower and the Guarantors in connection with the Loan, including, without limitation, the Note, the Security Agreement, and the Guaranty and this Agreement.

(ii) Loan Party: the Parent, Guarantor and each Borrower.

(jj) LTD or Long-Term Debt: Means financial obligations that become due more than one year.

(kk) Material Adverse Effect: Means (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business, properties or prospects of the Parent and its Subsidiaries taken as a whole, (b) a material impairment of the ability of the Borrower to perform any of the obligations under any Loan Documents or (c) a material adverse effect upon any substantial portion of the Collateral under the Loan Documents or upon the legality, validity, binding effect or enforceability of any Loan Document against the Borrower of any Loan Document.

(ll) Note: That certain Fourth Amended and Restated Revolving Promissory Note dated as of even date herewith from Borrower in favor of Lender in the principal amount of $10,000,000.00, as the same may be amended, restated, modified or replaced from time to time.

(mm) Parent: Venus Concept Inc., a Delaware corporation.

(nn) Permitted Transfers: (a) the sale, lease, license, transfer or other disposition (including, for the avoidance of doubt, by way of subscription agreements) of inventory (excluding, for

 

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the avoidance of doubt, any intellectual property or any IP rights) in the ordinary course of business, (b) the sale, lease, license, transfer or other disposition in the ordinary course of business of surplus, obsolete or worn out property no longer used or useful in the conduct of business of any Loan Party or any of their Subsidiaries, (c) any sale, lease, license, transfer or other disposition of property to any Loan Party or any Subsidiary thereof; provided, that, if the transferor of such property is a Loan Party (i) the transferee thereof must be a Loan Party or (ii) to the extent such transaction constitutes an investment, such transaction is permitted under the terms of this Agreement, (d) granting licenses of intellectual property on a non-exclusive basis or on an exclusive basis so long as each such exclusive license is limited to geographic areas, particular distribution channels or fields of use, customized products for customers or limited time periods, and so long as after giving effect to such exclusive license, the Parent and its Subsidiaries retain sufficient rights to use or benefit from the subject intellectual property as to enable them to continue to conduct their business in the ordinary course, (e) any Involuntary Disposition, (f) investments permitted pursuant to this Agreement (including, for the avoidance of doubt, any issuance by a Subsidiary of Parent of its equity interests to a minority owner of such Subsidiary at initial creation or formation of such Subsidiary), (g) the sale, transfer, issuance or other disposition of a de minimis number of shares of the equity interests of a Subsidiary of Parent that is not organized under the laws of any state of the United States or the District of Columbia (excluding Venus Canada) in order to qualify members of the governing body of such Subsidiary if required by applicable law, (h) the abandonment or other disposition of IP Rights that are not material and are no longer used or useful in any material respect in the business of the Parent and its Subsidiaries, (i) licenses, sublicenses, leases or subleases (in each case, other than with respect to IP Rights or intellectual property) granted to third parties in the ordinary course of business and not interfering in any material respect with the business of the Parent and its Subsidiaries, (j) dispositions of cash and cash equivalents in the ordinary course of business and (k) any other disposition where (1) the consideration paid in connection therewith shall be cash or cash equivalents paid contemporaneous with consummation of the transaction and shall be in an amount not less than the fair market value of the property disposed of, (2) no Default or Event of Default shall have occurred and be continuing both immediately prior to and after giving effect to such disposition and (3) the aggregate net book value of all of the assets sold or otherwise disposed of in such disposition together with the aggregate net book value of all assets sold or otherwise disposed of by the Loan Parties and their Subsidiaries in all such transactions occurring during the term of this Agreement does not exceed $1,000,000.

(oo) Person: A natural person, a partnership, a joint venture, an unincorporated association, a limited liability company, a corporation, a trust, any other legal entity, or any Governmental Authority.

(pp) Permitted Liens: Means (i) Liens pursuant to any Loan Document; (ii) Liens in favor of the Junior Lender (as defined in the Subordination Agreement) on Junior Lender’s Collateral (as defined in the Subordination Agreement); (iii) Liens in favor of the Senior Lender (as defined in the Subordination Agreement) on Senior Lender’s Collateral (as defined in the Subordination Agreement); (iv) Liens granted under the Transaction Documents (as defined in the Exchange Agreement); (v) Liens existing on the Effective Date; (vi) Liens (other than Liens imposed under ERISA or in respect of a Canadian Pension Plan) for taxes, assessments or governmental charges or levies not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; (vii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business; provided, that, such Liens secure only amounts not yet due and payable or, if

 

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due and payable, are unfiled and no other action has been taken to enforce the same or are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established; (viii) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA or in respect of a Canadian Pension Plan; (ix) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (x) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; (xi) Liens securing judgments for the payment of money (or appeal or other surety bonds relating to such judgments) not constituting an Event of Default; (xii) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; (xiii) Liens of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection; (xiv) reservations, limitations, provisos and conditions expressed in any original grants from the crown or other grants of real or immovable property, or interest therein, which do not materially affect the use of the affected land for the purpose for which it was used by that Person; (xv) security given to a public utility or Governmental Authority when required by such utility or authority (excluding, for the avoidance of doubt, security in connection with Indebtedness for borrowed money) in connection with the operations of that Person in the ordinary course of its business provided that such security does not materially impair the use of the affected property for the purpose for which it was used by that Person; (xvi) Liens arising from precautionary Uniform Commercial Code financing statements or similar filings under applicable law regarding operating leases entered into by the Parent or any Subsidiary of Parent in the ordinary course of business; and (xvii) other Liens securing Indebtedness or other obligations permitted hereunder, in an aggregate amount at any time outstanding not to exceed $250,000.

(qq) Security Agreement: Collectively, that certain Second Amended and Restated Security Agreement of even date herewith from Venus USA and VCI in favor of Lender, and that certain Amended and Restated General Security Agreement dated August 24, 2018, as amended by that certain Amendment to General Security Agreement of even date herewith both from Venus Canada in favor of Lender as the same may be amended, restated, modified or replaced from time to time.

(rr) Subordination Agreement: Collectively, those certain Subordination of Debt Agreements dated of even date herewith by and among: (i) Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, Lender, and Venus USA; (ii) Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, Lender and VCI; and (iii) Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, Lender and Venus Canada.

(ss) Subsidiary: As defined in the Security Agreement.

(tt) Total Liabilities: Means the Borrower’s total stated liabilities, less subordinated debt.

(uu) Unmatured Event of Default: Any event that, if it continues uncured, will, with lapse of time or notice, or both, constitute an Event of Default hereunder and under the other Loan Documents.

 

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2. LOAN. Provided no Unmatured Event of Default or Event of Default then exists, the proceeds of the Loan shall be advanced from time to time to Borrower in amounts such that the aggregate principal amount of the Loan at any one time outstanding, will not exceed the lesser of: (i) $10,000,000.00; or (ii) the Domestic Eligible Non-Leased Accounts Receivable Formula Amount defined below, on such date (if applicable), less any reserves determined by Lender in its sole and absolute discretion (the “Borrowing Base”). If at any time (other than as described in the last paragraph of this Section 2) the aggregate principal balance of the Loan exceeds the Borrowing Base, Borrower shall be required to make a principal reduction within ten (10) business days in an amount sufficient to bring the outstanding principal balance of the Loan into compliance with the Borrowing Base. The failure to make such payment shall constitute an immediate Event of Default hereunder. In addition, upon such occurrence, Lender shall have the option, in its sole and absolute discretion, to permanently reduce availability under the Loan by an amount equal to the amount in excess of the Borrowing Base, irrespective of any subsequent payment made by Borrower. Notwithstanding the foregoing, Lender in its sole and absolute discretion may reduce the advance rates set forth above, or adjust or reduce one or more of the other elements used to compute the Borrowing Base and determine availability hereunder. As used herein, the following terms will have the meanings indicated:

“Domestic Eligible Non-Leased Accounts Receivable Formula Amount” means an amount up to 85% of the net amount of domestic (Account Debtor located in U.S. and/or Canada) Eligible Accounts Receivable not related to equipment leased to an Account Debtor, on any date of determination thereof.

3. EXPENSES: Borrower shall pay all fees and charges incurred in the procuring and making of the Loan and all other expenses incurred by Lender during the term of the Loan, including without limitation documentary stamp taxes, if applicable, intangible taxes, if applicable, recording expenses, and the fees of the attorneys for Lender. The Borrower shall also pay any and all insurance premiums, taxes, assessments, and other charges, Liens and encumbrances upon the Collateral. Such amounts, unless sooner paid, shall be paid from time to time as Lender shall request either to the Person to whom such payments are due or to Lender if Lender has paid the same.

4. WARRANTIES AND REPRESENTATIONS. Borrower and/or Guarantor, as applicable, represent and warrant (which representations and warranties shall be deemed continuing) as follows:

(a) Organization Status. (i) Venus Concept USA, Inc. is duly organized under the laws of the State of Delaware and is in good standing under the laws of the State of Delaware, (ii) Venus Concept Canada Corp. is duly organized under the laws of Ontario, Canada, and is in good standing under the laws Ontario, Canada, (iii) Venus Concept Inc. is duly organized under the laws of the State of Delaware and is in good standing under the laws of the State of Delaware, (iv) Venus Concept USA, Inc. is qualified to do business in the State of Florida and the State of California, and (v) the issued and outstanding capital stock of the Borrower and Guarantor has been duly and validly issued.

(b) Compliance with Laws. To the Borrower’s knowledge, Borrower is in material compliance with all laws, regulations, ordinances and orders of all Governmental Authorities applicable to it.

(c) Accurate Information. All information now and hereafter furnished by Borrower to Lender in connection with the Loan Documents is and will be true, correct and complete in all material respects.

 

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(d) Authority to Enter into Loan Documents. The Borrower has full power and authority to enter into the Loan Documents and consummate the transactions contemplated hereby, and the facts and matters expressed or implied in the opinions of its legal counsel are true and correct.

(e) Validity of Loan Documents. The Loan Documents have been approved by those Persons having proper authority, and are in all respects legal, valid and binding according to their terms.

(f) Priority of Lien on Personalty. No chattel mortgage, bill of sale, security agreement, financing statement or other title retention agreement (except those executed in favor of Lender and other Permitted Liens) has been or will be executed with respect to any of the Collateral, unless otherwise approved by Lender in accordance with the Security Agreement.

(g) Conflicting Transactions of Borrower. The consummation of the transaction hereby contemplated and the performance of the obligations of Borrower and Guarantor under and by virtue of the Loan Documents will not result in any breach of, or constitute a default under, any material lease, loan or credit agreement, or other material instrument to which Borrower or Guarantor is a party or by which they are bound.

(h) Pending Litigation. There are no actions, suits or proceedings pending against Borrower, Guarantor, or the Collateral, or to the Borrower’s knowledge, threatened in writing against Borrower, Guarantor, the Collateral before or by any Governmental Authority that (i) purports to affect or pertain to the validity or enforceability of any of the Loan Documents or (ii) could reasonably be expected to have a Material Adverse Effect, except, in each case, actions, suits and proceedings which have been disclosed to and approved by Lender in writing. As of the date hereof, a true and complete list of all actions, suits or proceedings pending before any Governmental Authority that could reasonably be expected to result in losses and/or expenses in excess of $250,000 has been provided to Lender. To the Borrower’s knowledge, Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Authority.

(i) Condition of Collateral. The Collateral is not now damaged or injured as a result of any fire, explosion, accident, flood or other casualty.

(j) Discharge of Liens and Taxes. Borrower and Guarantor have filed all Canadian, Israeli and U.S. federal and state income and all other material tax returns and reports required to be filed, and have paid and/or discharged all provincial, territorial, state and other material taxes, assessments, fees and other governmental charges levied or imposed by a taxing authority upon them or their properties, income or assets otherwise due and payable, except to the extent that such items are being appropriately contested in good faith and an adequate reserve under GAAP for the payment thereof is being maintained.

(k) Sufficiency of Capital. Neither Borrower nor any Guarantor is, and after consummation of this Agreement and after giving effect to all indebtedness incurred and Liens created by Borrower in connection with the Note and any other Loan Documents, will be, insolvent within the meaning of 11 U.S.C. § 101, as in effect from time to time.

(l) ERISA. Each employee pension benefit plan, as defined in Employee Retirement Income Security Act of 1974, as amended (“ERISA”), maintained by Borrower and/or any Guarantor meets, as of the date hereof, the minimum funding standards of ERISA and all applicable regulations thereto and requirements thereof, and of the Internal Revenue Code of 1986, as amended. No

 

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“Prohibited Transaction” or “Reportable Event” (as both terms are defined by ERISA) has occurred with respect to any such plan.

(m) No Default. There is no Event of Default or Unmatured Event of Default on the part of Borrower or Guarantor under this Agreement, the Note, the Guaranty or the Security Agreement. To Borrower’s knowledge, Guarantor and Borrower are not in default in any material respect under any agreement or instrument to which it is a party or by which it may be bound which would individually or in the aggregate have a material adverse effect on the financial condition or business of the Borrower or Guarantor.

(n) Brokerage. Any brokerage commission due in connection with the transaction contemplated hereby has been paid in full.

(o) Ownership of Properties/Liens. Borrower has marketable title or leasehold interests in and to all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Borrower’s real and personal properties, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), are free and clear of all Liens (other than Permitted Liens).

5. COVENANTS. Borrower and Guarantor, as applicable, covenants and agrees with Lender as follows:

(a) Taxes. Borrower certifies that it has filed or caused to be filed all federal, state income and other material tax returns which are required to be filed, and have paid or caused to be paid all such taxes as shown on said returns or in any manner due to be paid (including, but not limited to, ad valorem and personal property taxes) or on any assessment received by Borrower and not being contested in good faith, to the extent that such taxes have become due.

(b) Notice of Litigation. Borrower shall promptly give Lender written notice of (a) a judgment in excess of $500,000.00 entered against Borrower, or (b) the commencement of any action, suit, claim, counterclaim or proceeding against or investigation of Borrower which, if adversely determined, would materially adversely affect the business of Borrower, or which questions the validity of this Agreement, the Note or the Security Agreement.

(c) Notice of Default. Borrower shall promptly give Lender written notice of any Unmatured Event of Default under any agreement with Lender or under any other contract to which Borrower is a party resulting in the acceleration of Indebtedness which would reasonably be expected to have a materially adverse affect on the business of Borrower.

(d) Reports. Borrower shall promptly furnish Lender with copies of all material governmental agency reports pertaining to or affecting Borrower which would materially adversely affect the business of Borrower.

(e) Change in Ownership, Control or Management of Borrower. Borrower shall not change its ownership, control or management structure during the term of the Agreement without the prior written consent of Lender, including without limitation, if either Borrower becomes a standalone

 

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entity or subsidiary of another entity, which shall not be unreasonably withheld or delayed. It is hereby clarified that bona fide raising of capital or an initial public offering of the Guarantor or either Borrower shall not be deemed as change of control of the Borrower and shall not require the Lender’s prior written consent.

(f) Change in Fiscal Year. Borrower shall not change its fiscal year without the prior written consent of Lender. Borrower’s fiscal year ends on December 31.

(g) No Sale of Assets. Borrower and Guarantor shall not, during the term of the Loan, transfer any material portion of their respective assets (other than Permitted Transfers) unless either (i) such transfer is in the ordinary course of Borrower’s or Guarantor’s business, for fair market value or reasonable consideration, and such transfer will not have a material adverse effect on the financial condition of Borrower or Guarantor and/or its ability to perform the obligations hereunder, as determined by Lender in its reasonable discretion, or (ii) (x) the consideration paid in connection therewith shall be cash or cash equivalents paid contemporaneous with consummation of the transaction and shall be in an amount not less than the fair market value of the property disposed of, (y) no Unmatured Event of Default or Event of Default shall have occurred and be continuing both immediately prior to and after giving effect to such transfer, and (z) the aggregate net book value of all of the assets sold or otherwise disposed of in such disposition together with the aggregate net book value of all assets sold or otherwise disposed of by the Loan Parties and their Subsidiaries in all such transactions occurring during the term of this Agreement does not exceed $500,000.

(h) Title to Collateral. Borrower will deliver to Lender, after its reasonable request, any contracts, bills of sale, statements, receipted vouchers or agreements under which Borrower claims title to any of the Collateral.

(i) Payment of Taxes. Borrower shall pay and discharge when due, and before subject to penalty or further charge, and otherwise satisfy before maturity or delinquency, all provincial, territorial, state and other material taxes, assessments, fees and other governmental charges levied or imposed by a taxing authority upon them or their properties, income or assets otherwise due and payable, except to the extent that such items are being appropriately contested in good faith and an adequate reserve under GAAP for the payment thereof is being maintained, or with respect to which Borrowers have obtained a valid extension of time within which to pay any such debts, taxes and liabilities, or for which delay and payment shall not have a material adverse effect on Borrower’s financial condition . 

(j) Collection of Insurance Proceeds. Borrower will cooperate with Lender in obtaining for Lender the benefits of any insurance or other proceeds lawfully or equitably payable to it in connection with the transaction contemplated hereby and the collection of any indebtedness or obligation of Borrower to Lender incurred hereunder.

(k) Indebtedness. Borrower shall not incur, create, assume or permit to exist any indebtedness or liability for borrowed money, any indebtedness constituting the deferred purchase price of any property or assets, any indebtedness owed under any conditional sale or title retention agreement, contingent obligations pursuant to guaranties of Indebtedness, endorsements, letters of credit and other similar secondary liabilities, or any other indebtedness or liability evidenced by notes, bonds, debentures or similar obligations (collectively, “Indebtedness”) without the prior written approval of Lender, except for (i) the Loan, (ii) the endorsement of checks for collection in the ordinary course of business, (iii) debt payable to suppliers and other trade creditors in the ordinary course of business on ordinary and

 

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customary trade terms and which is not past due, (iv) intercompany Indebtedness; (v) other Indebtedness, in an aggregate principal amount not to exceed $1,000,000 at any time outstanding; (vi) purchase money Indebtedness (including obligations in respect of capital leases or synthetic leases) hereafter incurred by any Loan Party or any of their Subsidiaries to finance the purchase of fixed assets, and renewals, refinancings and extensions thereof; provided, that, (1) the total of all such Indebtedness for all such Persons taken together shall not exceed an aggregate principal amount of $500,000 at any one time outstanding, (2) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed and (3) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; (vii) unsecured Indebtedness in respect of netting services, overdraft protections, employee credit card programs, automatic clearinghouse arrangements and similar arrangements in each case in connection with deposit accounts and Indebtedness arising from the honoring of a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided, that, (x) any such Indebtedness is extinguished within thirty (30) days; and (y) the aggregate outstanding principal amount of such Indebtedness shall not at any time exceed $750,000; (viii) Indebtedness in favor of Madryn Health Partners, LP as set forth in any Subordination Agreement; and (ix) other Indebtedness owing to Lender.

(l) Guaranties. Except as may be in existence prior to the date hereof, as previously disclosed to the Lender, or as permitted under Section 5(k), Borrower shall not guarantee or otherwise in any way become or be responsible for any Indebtedness of any other Person, whether by agreement to purchase the indebtedness of any other Person, or agreement for the furnishing of funds to any other Person through the purchase of goods, supplies or services (or by way of stock purchase, capital contribution, advance or loan) for the purpose of paying or discharging Indebtedness of any other Person, or otherwise.

(m) Advances. Borrower shall not make any advances, dividends, loans, or distributions to Guarantor or any of its subsidiaries, affiliates, shareholders, officers or directors, without the prior written consent of Lender. Notwithstanding the foregoing, so long as no Event of Default exists, Borrower shall be permitted to make advances to Guarantor or any of its subsidiaries, affiliates, shareholders, officers or directors, in the ordinary course of Borrower’s business, without first obtaining Lender’s prior written consent. Furthermore, it is hereby clarified and agreed that the provisions made in this section shall not interfere with any ordinary course money transfers among the Borrower and any of its affiliates, and such money transfers shall not require the Lender’s prior written consent.

(n) Further Assurances and Preservation of Security. Borrower will do all acts and execute all documents for the better and more effective carrying out of the intent and purposes of this Agreement, as Lender shall reasonably require from time to time, and will do such other acts necessary or desirable to preserve and protect the Collateral at any time securing or intending to secure the Note, as Lender may reasonably require.

(o) No Assignment. Borrower shall not assign this Agreement or any interest therein and any such assignment is void and of no effect. Lender may assign this Agreement and any other Agreements contemplated hereby, and all of its rights hereunder and thereunder, and all provisions of this Agreement shall continue to apply to the Loan. Lender agrees to notify Borrower of any such assignment. Lender also shall have the right to participate the Loan with any other lending institution.

 

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(p) Access to Books and Records. Borrower shall allow Lender, or its agents, after reasonable prior notice and during reasonable normal business hours, to access Borrower’s books, records and such other documents, and allow Lender, at Borrower’s expense, to inspect, audit and examine the same and to make extracts therefrom and to make copies thereof. Lender shall be entitled to a field exam, audit and inventory appraisal on a semi-annual basis (or during the existence of an Event of Default, more frequently, if Lender deems it necessary in its sole and absolute discretion) at Borrower’s expense throughout the term of the Loan.

(q) Business Continuity. Borrower shall conduct its business in substantially the same manner and as such business is now and has previously been conducted during the term of the Loan.

(r) Insurance.

(1) Borrower shall obtain, maintain and keep in full force and effect during the term of the Loan adequate insurance coverage, with all premiums paid thereon and without notice or demand, with respect to its properties and business against loss or damage of the kinds and in the amounts customarily insured against by companies of established reputation engaged in the same or similar businesses and owning similar properties in localities where the applicable Borrower operates including, without limitation:

(i) For any and all Canadian locations, public liability insurance insuring against all claims for personal or bodily injury, death, or property damage in an amount of not less than $10,000,000.00 single limit coverage, and $10,000,000.00 in the aggregate. Such policy shall include an additional insured endorsement naming the Lender as loss payee;

(ii) For any and all United States locations, public liability insurance insuring against all claims for personal or bodily injury, death, or property damage in an amount of not less than $1,000,000.00 single limit coverage, and $2,000,000.00 in the aggregate. Such policy shall include an additional insured endorsement naming the Lender as loss payee;

(iii) A personal property insurance policy (insuring Inventory) in an amount not less than $2,000,000.00 combined for its North American locations; and

(iv) Insurance in such amounts and against such other casualties and contingencies as may from time to time be required by Lender.

(2) All policies of insurance required hereunder shall: (i) be written by carriers which are licensed or authorized to transact business in the State of Florida, and are rated “A” or higher, Class XII or higher, according to the latest published Best’s Key Rating Guide and which shall be otherwise acceptable to Lender in all other respects, (ii) provide that the Lender shall receive thirty (30) days’ prior written notice from the insurer before a cancellation, material change or non-renewal of the policy becomes effective and (iii) be otherwise satisfactory to Lender in its reasonable discretion.

(3) Borrower shall not, without the prior written consent of Lender, take out separate insurance concurrent in form or contributing with regard to any insurance coverage required by Lender.

 

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(4) At all times during the term of the Loan, at request of Lender, Borrower shall promptly deliver to Lender the original (or a certified copy) of all policies of insurance required hereby, together with receipts or other evidence that the premiums therefor have been paid.

(5) Not less than thirty (30) days prior to the expiration date of any property or liability insurance policy of Borrower, at request of Lender, Borrower shall deliver to Lender the original (or certified copy), or a certificate, as applicable, of each renewal policy, together with receipts or other evidence that the premiums therefor have been paid.

(6) The delivery of any insurance policy and any renewals thereof, shall constitute an assignment thereof to Lender and Borrower hereby grants to Lender a security interest in all such policies, in all proceeds thereof and in all unearned premiums therefor.

(s) Lockbox. After the occurrence and during the continuation of an Event of Default, Lender may require the Borrower to establish a lockbox under the control of Lender to which all of the Account Debtors shall forward payments on the Accounts. The Borrower shall pay all of Lender’s standard fees and charges in connection with such lockbox arrangement (if any) as such charges and fees may change from time to time. In the event Lender requires a lockbox arrangement, the Borrower shall notify Account Debtors on the Accounts to forward payments on the Accounts to the lockbox; provided, however, that Lender shall have the right to directly contact Account Debtors at any time after the occurrence and during the continuation of an Event of Default, to ensure that payments on the Accounts are directed to the lockbox. The Borrower hereby grants to Lender as additional security in and lien upon all items and balances held in any lockbox as additional collateral for the obligations of the Borrower. After the occurrence and during the continuation of an Event of Default, the Lender shall be irrevocably authorized to debit and “sweep” the lockbox daily and take all sums contained therein and apply such sums against monies owed to the Lender of any kind, including, without limitation, any principal and/or interest due under the Note.

(t) Subordination of Debt. Borrower will fully subordinate all of the Borrower’s material Indebtedness owed to third parties, including, without limitation, officers, employees, stockholders, and affiliates, upon terms and conditions acceptable to Lender. Notwithstanding the foregoing, (i) so long as the Borrower is in compliance with the financial covenants contained herein and there is no Event of Default, and no condition exists, which but for the giving of notice or the passage of time would constitute and Event of Default, the Borrower shall be permitted to make regular scheduled payments of principal and interest on such subordinated debt.

(u) Indemnification. Borrower and Guarantor hereby indemnify and hold Lender, its directors, officers, agents, employees and attorneys harmless from and against any liability, loss, expenses, damage of any nature, and claims, including, without limitation, brokers’ claims, arising in connection with: (i) any failure by the Borrower to make payment of any amount due under this Loan Agreement or the Security Agreement on the due date or, if so payable, on demand; (ii) the occurrence and/or continuance of an Event of Default or (iii) material inaccuracy or material breach of any of the representations contained in this Agreement or any other Loan Documents, in each case, except for any liabilities, losses, expenses, damages and claims arising out of Lender’s breach of contract, bad faith, gross negligence or willful misconduct.

(v) Estoppel Certificate. At any time during the term of the Loan, within ten (10) business days after written demand of such Borrower by the Lender therefor, the Borrower shall deliver to

 

15


the Lender a certificate, duly executed and in form satisfactory to the Lender, stating and acknowledging, to the best of such Borrower’s knowledge, the then unpaid principal balance of, and interest due and unpaid, under the Loan, the fact that there are no defenses, off sets, counterclaims or recoupments thereto (or, if such should not be the fact, then the facts and circumstances relating to such defenses, off sets, counterclaims or recoupments).

(w) Release of Information for Marketing Purposes. The Borrower consents to the Lender releasing details of the Loan to the media, radio, television, trade publications, magazines, web sites or other forms of media (collectively, the “Media”) and hereby releases and holds Lender harmless from any liability arising out of the use or publication of such information absent Lender’s gross negligence or willful misconduct.

6. FINANCIAL COVENANTS AND REPORTING REQUIREMENTS.

(a) Depository Relationship. At all times during the term of the Loan, each Borrower shall maintain all its depository account(s), merchant services and treasury management services with Lender with exception for foreign depository accounts. Notwithstanding the foregoing, Borrower shall be permitted to maintain: (i) account(s) with JP Morgan; and (ii) Borrower’s PayPal account(s) so long as such account(s) do not exceed $250,000.00 at any given time. The Loan shall be set up on an automatic debit from one of Borrower’s accounts with Lender.

(b) Guarantor’s Annual Financial Statements. Within 120 days after the end of each fiscal year, commencing with fiscal year end 2018, Guarantor shall supply Lender with (i) an annual audited consolidated financial statement for the prior fiscal year (including a comparison to the immediately preceding year) in form of presentation reasonably acceptable to Lender, and (ii) such supporting documentation as Lender reasonably requests.

(c) Borrower, Guarantor and its Subsidiaries Financial Statements. Within 45 days following the close of each quarter (but within 45 days after the last month in a fiscal year), Borrower shall supply Lender with (i) quarterly management prepared (and certified as true and correct by the CEO and/or CFO of Guarantor) consolidated and consolidating, financial statement of the Parent and its Subsidiaries for the prior semi-annual period in form of presentation reasonably acceptable to Lender, (ii) such supporting documentation as Lender reasonably requests, and (iii) a covenant compliance certificate confirming compliance with the financial covenants set forth herein, in form reasonably satisfactory to Lender.

(d) Borrower Tax Returns. Within 30 days of filing, Borrower shall supply Lender with a copy of its annual federal income tax returns, including, without limitation, K-1 statements for all Partnerships and Sub Chapter S Corporations, or, if an extension is filed for any tax return, within 30 days after any permitted extension date.

(e) Guarantor Tax Returns. Within 30 days of filing, each Guarantor shall supply Lender with a copy of its annual federal income tax returns, including, without limitation, K-1 statements for all Partnerships and Sub Chapter S Corporations, or, if an extension is filed for any tax return, within 30 days after any permitted extension date.

 

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(f) Monthly Reports. Within twenty (20) days of the end of each month, Borrower shall supply Lender with (i) an accounts receivable aging report, (ii) [reserved], (iii) an accounts payable aging report, (iv) [reserved].

Should Borrower not be required to provide the bank with Monthly Reports as established in Section 6 (f) and require an advance under the line thereafter, Borrower shall submit Monthly Reports for the three periods prior to the advance request, along with a BBC for the most current period. Borrower will give Bank two weeks’ notice of the borrowing requirement with the submission of the required reports.

(g) Form of Financial Statements. The form of presentation of each financial statement as required above shall be reasonably acceptable to Lender, shall be certified by Borrower to be correct and complete in all material respects, and to the extent required by GAAP, shall include a complete description of all contingent liabilities, including, without limitation, all Indebtedness guaranteed.

(h) Intentionally Omitted.

(i) Monthly Borrowing Base Certificates. Within twenty (20) days of the end of each month, Borrower shall supply Lender with a Borrowing Base Certificate with the Borrowing Base calculation for such month and resulting availability under the Note duly executed by an authorized officer of Borrower.

(j) Financial Covenants. At all times during the term of the Loan, the Borrower shall satisfy (or cause to be satisfied) either clause (i) below; or clauses (ii) and (iii) below:

(i) Average Compensating Balances. The Borrower shall maintain an average daily balance during each calendar quarter of deposits with the Lender as follows: (i) (which shall include amounts held pursuant to the Escrow Agreement) during the first twelve (12) months following the date of this Agreement, of at least Twenty Three Million and No/100 Dollars ($23,000,000.00) and (ii) thereafter of at least Three Million and No/100 Dollars ($3,000,000.00) (the “Minimum Deposit Relationship”), in each case, to be tested on a quarterly basis. Failure to maintain the Minimum Deposit Relationship will result in a fee payable to Lender equal to two percent (2%) per annum of the amount of the deficiency (the “Deficiency Fee”), which Deficiency Fee shall be charged automatically without any notice to Borrower. The Deficiency Fee shall not be deemed to be or constitute additional interest under the Loan, as it relates specifically and directly to the required deposit balances. In the event Borrower fails to maintain the required Minimum Deposit Relationship and the Deficiency Fee becomes due and payable by Borrower, Lender shall be entitled to either (i) set off against the Borrower’s accounts held with Lender (excluding the account established pursuant to the Escrow Agreement) in order to collect the Deficiency Fee without the requirement of notice, or (ii) send a written demand to Borrower that the Deficiency Fee be paid within ten (10) days of written notice thereof. At Lender’s sole discretion, the Minimum Deposit Relationship may be satisfied not only with Borrower accounts, but also with accounts maintained with

 

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Lender by Guarantor or any accounts owned or controlled by the Borrower or Guarantor (collectively, the “Related Accounts”). To the extent such Related Accounts are included in the calculation of the Minimum Deposit Relationship, Lender may exercise its right of setoff against any such Related Accounts along with any Borrower accounts.

(ii) Debt Service Coverage Ratio. [Parent shall maintain a minimum Debt Service Coverage Ratio of not less than 1.75 to 1.00 including Madryn Health Partners, LP debt service. For purposes hereof, “Debt Service Coverage Ratio” shall mean the ratio of (a) EBITDA, plus stock based compensation, plus capital contributions to Borrower or Parent less shareholder distributions, less unfinanced capex, divided by (b) CPLTD, plus cash interest expense on all debt. This covenant shall be measured semiannually on a trailing twelve month basis upon Lender’s receipt of the consolidated financial statements of Parent required herein for each fiscal quarter ending June 30 and December 31.]1

(iii) Total Liabilities to Tangible Net Worth Ratio. Parent shall maintain a maximum ratio of Total Liabilities to Tangible Net Worth of not more than 1.5 to 1.00. For purposes hereof, “Total Liabilities” shall be defined as total liabilities, less subordinated debt; and “Tangible Net Worth” shall be defined as net worth, less dues from or loans to affiliated/related parties, less intangible assets, plus subordinated debt. This covenant shall be measured quarterly upon Lender’s receipt of the financial statements of Parent required herein.

(k) Reserved.

(l) Landlord Lien Waivers. Borrower shall use best efforts to obtain a Landlord Lien Waiver in form and substance acceptable to Lender for Borrower’s Florida location(s). Lender may, from time to time, request reasonable evidence of such efforts.

(m) Loan Fee. Borrower shall pay Lender a loan fee in the total amount of $1,000,000 fully earned as of the date hereof and payable in three (3) equal installments on the following dates: (i) January 25, 2021; (ii) February 25, 2021; and (iii) March 25, 2021.

7. DEFAULT. Upon the occurrence of any of the following events (each an “Event of Default” and collectively, the “Events of Default”), Lender may at its option exercise any of its remedies set forth herein:

(a) Borrower fails to pay any principal or interest under this Agreement or the Note, when due, whether on the scheduled due date or upon acceleration, maturity or otherwise, and such failure is not cured by the Borrower within 5 business days from the date of notice by Lender of such Event of Default; or

(b) Borrower fails to perform any other obligation under the Loan Documents and such failure is not cured by the Borrower within fourteen (14) business days after written notice thereof is

 

1 

NTD: Address the GW write down.

 

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given by Lender to Borrower; or

(c) Borrower or Guarantor (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), in respect of any Indebtedness or Guarantee of Indebtedness having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $250,000, or (ii) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee of more than $250,000 or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or

(d) If any warranty or representation made by Borrower in this Agreement or in any written document, instrument or agreement delivered pursuant to the terms hereof shall be false or misleading in any material respect, when made or deemed made; or

(e) The dissolution of, or termination of existence of, Borrower; or

(f) Borrower becomes the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships, and such proceeding has not been vacated, discharged, or stayed within 60 days from the commencement thereof; or

(g) Guarantor becomes the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationship; or

(h) The entry of a final judgment against Borrower or Guarantor for the payment of money in an aggregate amount exceeding $250,000 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) which is not paid, stayed or discharged within 60 days, except as would not have a material adverse effect on Borrower’s financial condition; or

(i) The seizure or forfeiture of, or the issuance of any writ of possession, garnishment or attachment, or any turnover order for any material property of Borrower, or Guarantor; and such proceeding has not been vacated, discharged, or stayed within 60 days from the commencement thereof; or

(j) There occurs any circumstance or circumstances that could reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect, and Lender has given Borrower written notice thereof; or

(k) The failure of Borrower or any Guarantor to timely provide any of the information as required in Section 6 above, and such failure is not cured by the Borrower within fourteen (14) business days; or

(l) The failure of Borrower to timely satisfy any of the covenants as required in

 

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Section 6 above, and such failure is not cured by the Borrower within fourteen (14) business days.

8. REMEDIES OF LENDER. Upon the happening of an Event of Default, subject to the expiration of the applicable cure period, then Lender may, at its option, upon written notice to Borrower:

(j) Cease making advances hereunder;

(k) Terminate its obligations to make advances under this Agreement;

(l) Commence an appropriate legal or equitable action to enforce performance of this Agreement;

(m) Accelerate the payment of the Note and the Loan and any other sums secured by the Security Agreement, and commence appropriate legal and equitable action to collect all such amounts due Lender;

(n) Exercise any other rights or remedies Lender may have under the Security Agreement or other Loan Documents referred to in this Agreement or executed in connection with the Loan or which may be available under applicable law.

9. INTENTIONALLY OMITTED.

10. GENERAL TERMS. The following shall be applicable throughout the period of this Agreement or thereafter as provided herein:

(o) Rights of Third Parties. All conditions of the Lender hereunder are imposed solely and exclusively for the benefit of Lender and Borrower and their respective successors and assigns. No Person other than Lender shall have standing to require satisfaction of such conditions or be entitled to assume that Lender will make advances in the absence of strict compliance with any or all thereof. No other Person shall, under any circumstances, be deemed to be a beneficiary of this Agreement or the Loan Documents, any provisions of which may be freely waived in whole or in part by the Lender at any time if, in its sole discretion, it deems it desirable to do so.

(p) Borrower is not Lender’s Agent. Nothing in this Agreement, the Note, the Security Agreement, or any other Loan Document shall be construed to make the Borrower the Lender’s agent for any purpose whatsoever, or the Borrower and Lender partners, or joint or co-venturers, and the relationship of the parties shall, at all times, be that of debtor and creditor.

(q) Loan Expense/Enforcement Expense. Borrower agrees to pay to Lender on demand all reasonable costs and expenses incurred by Lender in seeking to enforce Lender’s rights and remedies under this Agreement, including court costs, costs of alternative dispute resolution and reasonable attorneys’ fees and costs, whether or not suit is filed or other proceedings are initiated hereon.

(r) Evidence of Satisfaction of Conditions. Lender shall, at all times, be free independently to establish to its good faith and satisfaction, and in its absolute discretion, the existence or nonexistence of a fact or facts which are disclosed in documents or other evidence required by the terms of this Agreement.

 

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(s) Headings. The headings of the sections, paragraphs and subdivisions of this Agreement are for the convenience of reference only, and shall not limit or otherwise affect any of the terms hereof.

(t) Invalid Provisions to Affect No Others. If performance of any provision hereof or any transaction related hereto is limited by law, then the obligation to be performed shall be reduced accordingly; and if any clause or provision herein contained operates or would prospectively operate to invalidate this Agreement in part, then the invalid part of said clause or provision only shall be held for naught, as though not contained herein, and the remainder of this Agreement shall remain operative and in full force and effect.

(u) Application of Interest to Reduce Principal Sums Due. In the event that any charge, interest or late charge is above the maximum rate provided by law, then any excess amount over the lawful rate shall be applied by Lender to reduce the principal sum of the Loan or any other amounts due Lender hereunder.

(v) Governing Law. The laws of the State of Florida shall govern the interpretation and enforcement of this Agreement.

(w) Number and Gender. Whenever the singular or plural number, masculine or feminine or neuter gender is used herein, it shall equally include the others and shall apply jointly and severally.

(x) Waiver. If Lender shall waive any provisions of the Loan Documents, or shall fail to enforce any of the conditions or provisions of this Agreement, such waiver shall not be deemed to be a continuing waiver and shall never be construed as such; and Lender shall thereafter have the right to insist upon the enforcement of such conditions or provisions. Furthermore, no provision of this Agreement shall be amended, waived, modified, discharged or terminated, except by instrument in writing signed by the parties hereto.

(y) Notices. All notices from the Borrower to Lender and Lender to Borrower required or permitted by any provision of this Agreement shall be in writing and sent by registered or certified mail, by nationally recognized overnight delivery service, by facsimile or by electronic communication (e-mail) and addressed as follows:

 

TO LENDER:

   CITY NATIONAL BANK OF FLORIDA
   100 S.E. 2nd Street, 13th Floor
   Miami, Florida 33131
   Attention: Legal Department
   E-mail: Greg.Mangram@citynational.com

TO BORROWER:

   VENUS CONCEPT USA INC.
   235 Yorkland Blvd, Suite 900
   Toronto, Ontario, Canada M2J 4Y8
   Attention: Domenic Serafino, President
                    Michael Mandarello, General Counsel
   Facsimile: (855) 907-0115

 

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   E-mail:    dom@venusconcept.com
                   mmandarello@venusconcept.com
   With a copy to:
   (which shall not constitute service):
   Reed Smith LLP 599 Lexington Avenue
   New York, New York 10022
   Attention: Mark Pedretti
   Facsimile: (212) 521-5450
   E-mail: mpedretti@reedsmith.com

Such addresses may be changed by such notice to the other party. Notices sent by registered or certified mail or by overnight delivery service shall be deemed given on the date of its deposit in the United States Mail and, unless sooner actually received, shall be deemed received by the party to whom it is addressed on the third calendar day following the date on which said notice is deposited in the mail, or if a courier system is used, on the date of delivery of the notice; notices sent by facsimile or by electronic communications shall be deemed given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).

(z) Successors and Assigns. This Agreement shall inure to the benefit of and be binding on the parties hereto and their successors and assigns; but nothing herein shall authorize the assignment hereof by the Borrower.

(aa) USA Patriot Act Notice. Lender hereby notifies Borrower and Guarantor that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), Lender is required to obtain, verify and record information that identifies Borrower and Guarantor, which information includes the name and address of Borrower and Guarantor and other information that will allow Lender to identify Borrower and Guarantor in accordance with the Act.

(bb) Counterparts, Facsimiles. This Agreement may be executed in counterparts. Each executed counterpart of this Agreement will constitute an original document, and all executed counterparts, together, will constitute the same agreement. Any counterpart evidencing signature by one party that is delivered by facsimile by such party to the other party hereto shall be binding on the sending party when such facsimile is sent.

(cc) WAIVER OF JURY TRIAL. LENDER, BORROWER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT TO BE CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT.

 

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[CONTINUES ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Borrower and Lender have caused this Third Amended and Restated Loan Agreement to be executed on the date first above written.

 

BORROWER:
VENUS CONCEPT USA INC., a Delaware
corporation
By:  

        /s/ Domenic Serafino

  Domenic Serafino, as President
VENUS CONCEPT CANADA CORP., a Canadian corporation
By:  

        /s/ Domenic Serafino_

  Domenic Serafino, as CEO
VENUS CONCEPT INC., a Delaware
corporation
By:  

        /s/ Domenic Serafino

  Domenic Serafino, as CEO

 

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JOINDER OF GUARANTOR

Each of the undersigned as Guarantor hereby consents to the foregoing Second Amended and Restated Loan Agreement.

 

GUARANTOR:
VENUS CONCEPT LTD., an Israeli
corporation
By:  

        /s/ Domenic Serafino

  Domenic Serafino, as CEO

PROVINCE OF ONTARIO         )

                                              )SS:

CITY OF TORONTO                   )

The foregoing instrument was acknowledged before me this _____ day of _____________, 2020, by means of ☐ physical presence or ☐ online notarization, by Domenic Serafino, as President of VENUS CONCEPT USA INC., a Delaware corporation; as CEO of VENUS CONCEPT CANADA CORP., a Canadian corporation, as CEO of VENUS CONCEPT LTD., an Israeli corporation, and as CEO of VENUS CONCEPT INC., a Delaware corporation; on behalf of and as an act of the corporations respectively. He is personally known to me or has produced a ______________________ as identification, and took an oath.

 

NOTARY PUBLIC
Print Name:  

 

My Commission Expires: _________________


LENDER:
CITY NATIONAL BANK OF FLORIDA
By:  

        /s/ Greg Mangram

Name: Greg Mangram
Title: Senior Vice President

 

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Exhibit A

Borrowing Base Certificate

 

27

Exhibit 10.2

THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT AMENDS, RESTATES AND REPLACES IN THEIR ENTIRETY THAT CERTAIN AMENDED AND RESTATED SECURITY AGREEMENT DATED AS OF AUGUST 29, 2018, FROM VENUS USA IN FAVOR OF LENDER AND THAT CERTAIN SECURITY AGREEMENT DATED AS OF MARCH 20, 2020, FROM VENUS CONCEPT INC. IN FAVOR OF LENDER.

SECOND AMENDED AND RESTATED SECURITY AGREEMENT

This SECOND AMENDED AND RESTATED SECURITY AGREEMENT dated as of December 9, 2020 (the “Security Agreement”), is executed by VENUS CONCEPT INC., a Delaware corporation, and VENUS CONCEPT USA INC., a Delaware corporation both whose address is 235 Yorkland Blvd., Suite 900, Toronto, Ontario, Canada M2J 4Y8 (collectively, the “Debtor”), and CITY NATIONAL BANK OF FLORIDA, whose address is 100 S.E. 2nd Street, 13th Floor, Miami, FL 33131 (the “Bank”).

R E C I T A L S:

A. Debtor, requested and Bank agreed to make a revolving loan in the maximum principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) to the Debtor, and Venus Concept Canada Corp., a Canadian corporation (“Venus Canada”) which shall be used to finance working capital requirements for Borrower and for other corporate purposes.

B. As a condition to the Bank’s loaning funds or providing other financial accommodations to the Debtor, the Bank requires that the Debtor enter into this Security Agreement in order to secure the obligations and performance of the Debtor under such loans or financial accommodations.

NOW THEREFORE, in consideration of the premises, and the mutual covenants and agreements set forth herein, the Debtor and the Bank hereby agree as follows:

A G R E E M E N T S:

Section 1 DEFINITIONS.

1.1 Defined Terms. For the purposes of this Security Agreement, the following capitalized words and phrases shall have the meanings set forth below.

Affiliate” of the Bank shall mean any entity which, directly or indirectly, controls or is controlled by or is under common control with the Bank. An entity shall be deemed to be “controlled by” another entity if such other entity possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such entity whether by contract, ownership of voting securities, membership interests or otherwise.

Bank Product Agreements” shall mean those certain cash management service agreements entered into from time to time by an Obligor with the Bank or any Affiliate of the Bank concerning Bank Products.

Bank Product Obligations” shall mean all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by an Obligor to the Bank or any Affiliate of the

 

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Bank pursuant to or evidenced by the Bank Product Agreements and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.

Bank Products” shall mean any service or facility extended to an Obligor by the Bank or any Affiliate of the Bank, including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, (f) cash management, including controlled disbursement, accounts or services.

Bankruptcy Code” shall mean the United States Bankruptcy Code, as now existing or hereafter amended.

Borrower” shall mean collectively the Debtor and Venus Canada.

Business Day” shall mean any day other than a Saturday, Sunday or a legal holiday on which banks are authorized or required to be closed for the conduct of commercial banking business in Miami, Florida.

Capital Lease” shall mean, as to any Person, a lease of any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, by such Person, as lessee, that is, or should be, in accordance with Financial Accounting Standards Board Statement No. 13, as amended from time to time, or, if such statement is not then in effect, such statement of GAAP as may be applicable, recorded as a “capital lease” on the financial statements of such Person prepared in accordance with GAAP.

Capital Securities” shall mean, with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued or acquired after the date hereof, including common shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership or any other equivalent of such ownership interest.

Capitalized Lease Obligations” shall mean, as to any Person, all rental obligations of such Person, as lessee under a Capital Lease which are or will be required to be capitalized on the books of such Person.

Collateral” shall have the meaning set forth in Section 2.1 hereof.

Collateral Access Agreement” shall mean an agreement in form and substance reasonably satisfactory to the Bank pursuant to which a mortgagee or lessor of real property on which Collateral is stored or otherwise located, or a warehouseman, processor or other bailee of Inventory or other property owned by the Debtor of any Subsidiary, acknowledges the Liens of the Bank and waives any Liens held by such Person on such property, and, in the case of any such agreement with a mortgagee or lessor, permits the Bank reasonable access to and use of such real property following the occurrence and during the continuance of an Event of Default to assemble, complete and sell any collateral stored or otherwise located thereon.

Default Rate” shall mean a per annum rate of interest equal to the highest rate authorized by applicable law (the “Default Rate”).

 

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ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

Event of Default” shall have the meaning set forth in the Loan Agreement.

Exchange Agreement” shall have the meaning set forth in the Loan Agreement.

Excluded Property” shall mean, with respect to any Borrower: (a) any personal property (including, without limitation, motor vehicles) in respect of which perfection of a Lien is not governed by the Uniform Commercial Code, (b) any permit, lease, license, contract or other agreement if the grant of & security interest in such permit, lease, license, contract or other agreement in the manner contemplated by the Loan Documents, under the terms thereof or under applicable law or regulation, is prohibited and would result in the termination thereof or give the other parties thereto the right to terminate, accelerate or otherwise alter such Borrower’s rights, titles and interests thereunder (including upon the giving of notice or the lapse of time or both); provided, that, (i) any such limitation described in the foregoing clause (b) on the security interests granted under the Loan Documents shall only apply to the extent that any such prohibition is not rendered ineffective pursuant to the Uniform Commercial Code that has the effect of permitting the grant of a security interest and preventing any termination, acceleration or alteration of such Borrower’s rights, titles and interests thereunder as a result of such grant of a security interest and (ii) in the event of the termination or elimination of any such prohibition or the requirement for any consent contained in any applicable law, regulation, permit, lease, license, contract or other agreement, or upon the granting of any such consent, or waiving or terminating any requirement for such consent, a security interest in such permit, lease, license, contract or other agreement shall be automatically and simultaneously granted under the Loan Documents and such permit, lease, license, contract or other agreement shall be included as Collateral, (c) any equity interests in any Subsidiaries, and (d) any assets that are not collateral pledged and perfected under the Transaction Documents (as defined in the Exchange Agreement).1

GAAP” shall mean generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination, provided, however, that interim financial statements or reports shall be deemed in compliance with GAAP despite the absence of footnotes and fiscal year-end adjustments as required by GAAP.

Hedging Agreements” shall mean any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices.

Hedging Obligation” shall mean, with respect to any Person, any liability of such Person under any Hedging Agreement.

 

1 

NTD: This concept should remain. It is not tied to Madryn or the former Intercreditor Agreement.

 

3


Letter of Credit” and “Letters of Credit” shall mean, respectively, a letter of credit and all such letters of credit issued by the Bank, in its sole discretion, for the account of an Obligor.

Lien” shall have the meaning in the Loan Agreement.

Loan Agreement” shall mean that certain Third Amended and Restated Loan Agreement dated as of even date herewith as amended from time to time by and between Borrower and Bank.

Loan Documents” shall mean the Loan Agreement, the Fourth Amended and Restated Revolving Promissory Note and each of the agreements and instruments from time to time executed and delivered by an Obligor for the benefit of the Bank in connection with the Obligations, and all amendments, restatements, supplements and other modifications thereto.

Material Adverse Effect” shall have the meaning in the Loan Agreement.

Note” shall mean that certain Fourth Amended and Restated Revolving Promissory Note dated as of even date herewith as amended from time to time from Borrower to the order of Bank in the principal amount of $10,000,000.00.

Obligations” shall mean all loans or other obligations arising pursuant to (a) (i) the Note, and (ii) the Loan Agreement, all interest accrued thereon (including interest which would be payable as post-petition in connection with any bankruptcy or similar proceeding, whether or not permitted as a claim thereunder), any fees due the Bank under the Loan Documents, any expenses incurred by the Bank under the Loan Documents, (b) any and all other liabilities and obligations of an Obligor to the Bank under any reimbursement obligations of an Obligor to Bank in respect of Letters of Credit and surety bonds, which are owed by an Obligor to the Bank or any Affiliate of the Bank, and (c) all Bank Product Obligations of an Obligor, in each of (a), (b) and (c) howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, together with any and all renewals or extensions thereof.

Obligor” shall mean the Borrower and any guarantor with respect to the Obligations.

Organizational Identification Number” means, with respect to Debtor, the organizational identification number assigned to Debtor by the applicable governmental unit or agency of the jurisdiction of organization of the Debtor.

Permitted Liens” shall have the meaning in the Loan Agreement.

Person” shall have the meaning in the Loan Agreement.

Subsidiary” and “Subsidiaries” shall mean, respectively, with respect to any Person, each and all such corporations, partnerships, limited partnerships, limited liability companies, limited liability partnerships, joint ventures or other entities of which or in which such Person owns, directly or indirectly, such number of outstanding Capital Securities as have more than fifty percent (50.00%) of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited liability company or other entity. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Borrower.

UCC” shall mean the Uniform Commercial Code in effect in the state of Florida from time to time.

 

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1.2 Other Terms Defined in UCC or Loan Agreement. All other capitalized words and phrases used herein and not otherwise specifically defined herein shall have the respective meanings assigned to such terms in the UCC, to the extent the same are used or defined therein, and otherwise in the Loan Agreement.

1.3 Other Interpretive Provisions.

(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Whenever the context so requires, the neuter gender includes the masculine and feminine, the single number includes the plural, and vice versa, and in particular the word “Debtor” shall be so construed.

(b) Section and Schedule references are to this Security Agreement unless otherwise specified. The words “hereof”, “herein” and “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.

(c) The term “including” is not limiting, and means “including, without limitation”.

(d) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”.

(e) Unless otherwise expressly provided herein, (i) references to agreements (including this Security Agreement and the other Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, supplements and other modifications thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation.

(f) To the extent any of the provisions of the other Loan Documents are inconsistent with the terms of this Security Agreement, the provisions of this Security Agreement shall govern.

(g) This Security Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and each shall be performed in accordance with its terms.

Section 2 SECURITY FOR THE OBLIGATIONS.

2.1 Security for Obligations. As security for the payment and performance of the Obligations, the Debtor does hereby pledge, assign, transfer, deliver and grant to the Bank, for its own benefit and as agent for its Affiliates, a continuing and unconditional first priority security interest in and to any and all personal property of the Debtor, of any kind or description, tangible or intangible, wheresoever located and whether now existing or hereafter arising or acquired, including the following (all of which property, along with the products and proceeds therefrom, are individually and collectively

 

5


referred to as the “Collateral” provided however, that the Collateral shall not include any Excluded Property):

(a) all property of, or for the account of, the Debtor now or hereafter coming into the possession, control or custody of, or in transit to, the Bank or any agent or bailee for the Bank or any parent, affiliate or subsidiary of the Bank or any participant with the Bank in the Obligations (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise), including all earnings, dividends, interest, or other rights in connection therewith and the products and proceeds therefrom, including the proceeds of insurance thereon; and

(b) the additional property of the Debtor, whether now existing or hereafter arising or acquired, and wherever now or hereafter located, together with all additions and accessions thereto, substitutions, betterments and replacements therefor, products and Proceeds therefrom, and all of the Debtor’s books and records and recorded data relating thereto (regardless of the medium of recording or storage), together with all of the Debtor’s right, title and interest in and to all computer software required to utilize, create, maintain and process any such records or data on electronic media, identified and set forth as follows:

(i) All Accounts and all Goods whose sale, lease or other disposition by the Debtor has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, the Debtor, or rejected or refused by an Account Debtor;

(ii) All Inventory, including raw materials, work in process and finished goods;

(iii) All Goods (other than Inventory), including embedded software, Equipment, vehicles, furniture and Fixtures;

(iv) All Software and computer programs;

(v) All Securities, Investment Property, Financial Assets and Deposit Accounts;

(vi) All Chattel Paper, Electronic Chattel Paper, Instruments, Documents, Letter of Credit Rights, all proceeds of letters of credit, Health-Care-Insurance Receivables, Supporting Obligations, notes secured by real estate, Commercial Tort Claims and General Intangibles, including Payment Intangibles; and

(vii) All Proceeds (whether Cash Proceeds or Noncash Proceeds) of the foregoing property, including all insurance policies and proceeds of insurance payable by reason of loss or damage to the foregoing property, including unearned premiums, and of eminent domain or condemnation awards.

2.2 Possession and Transfer of Collateral. Until an Event of Default has occurred hereunder, the Debtor shall be entitled to possession or use of the Collateral (other than Instruments or Documents (including Tangible Chattel Paper and Investment Property consisting of certificated securities) and other Collateral required to be delivered to the Bank pursuant to this Section 2. The cancellation or surrender of any promissory note evidencing an Obligation, upon payment or otherwise, shall not affect the right of the Bank to retain the Collateral for any other of the Obligations.

 

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2.3 Financing Statements. The Debtor shall, at the Bank’s request, at any time and from time to time, execute and deliver to the Bank such financing statements, amendments and other documents and do such acts as the Bank deems necessary in order to establish and maintain valid, attached and perfected first priority security interests in the Collateral in favor of the Bank, for its own benefit and as agent for its Affiliates, free and clear of all Liens except Permitted Liens. The Debtor hereby irrevocably authorizes the Bank at any time, and from time to time, to file in any jurisdiction any initial financing statements and amendments thereto without the signature of the Debtor that (a) indicate the Collateral (i) is comprised of all assets of the Debtor or words of similar effect, regardless of whether any particular asset comprising a part of the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the jurisdiction wherein such financing statement or amendment is filed, or (ii) as being of an equal or lesser scope or within greater detail as the grant of the security interest set forth herein, and (b) contain any other information required by Section 5 of Article 9 of the Uniform Commercial Code of the jurisdiction wherein such financing statement or amendment is filed regarding the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether the Debtor is an organization, the type of organization and any Organizational Identification Number issued to the Debtor, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of the real property to which the Collateral relates. The Debtor hereby agrees that a photogenic or other reproduction of this Security Agreement is sufficient for filing as a financing statement and the Debtor authorizes the Bank to file this Security Agreement as a financing statement in any jurisdiction. The Debtor agrees to furnish any such information to the Bank promptly upon request. The Debtor further ratifies and affirms its authorization for any financing statements and/or amendments thereto, executed and filed by the Bank in any jurisdiction prior to the date of this Security Agreement. In addition, the Debtor shall make appropriate entries on its books and records disclosing the security interests of the Bank, for its own benefit and as agent for its Affiliates, in the Collateral.

2.4 Preservation of the Collateral. The Bank may, but is not required, to take such actions from time to time as the Bank deems appropriate to maintain or protect the Collateral. The Bank shall have exercised reasonable care in the custody and preservation of the Collateral if the Bank takes such action as the Debtor shall reasonably request in writing which is not inconsistent with the Bank’s status as a secured party, but the failure of the Bank to comply with any such request shall not be deemed a failure to exercise reasonable care; provided, however, the Bank’s responsibility for the safekeeping of the Collateral shall (i) be deemed reasonable if such Collateral is accorded treatment substantially equal to that which the Bank accords its own property, and (ii) not extend to matters beyond the control of the Bank, including acts of God, war, insurrection, riot or governmental actions. In addition, any failure of the Bank to preserve or protect any rights with respect to the Collateral against prior or third parties, or to do any act with respect to preservation of the Collateral, not so requested by the Debtor, shall not be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral, absent Bank’s gross negligence or willful misconduct. The Debtor shall have the sole responsibility for taking such action as may be necessary, from time to time, to preserve all rights of the Debtor and the Bank in the Collateral against prior or third parties. Without limiting the generality of the foregoing, where Collateral consists in whole or in part of securities, the Debtor represents to, and covenants with, the Bank that the Debtor has made arrangements for keeping informed of changes or potential changes affecting the securities (including rights to convert or subscribe, payment of dividends, reorganization or other exchanges, tender offers and voting rights), and the Debtor agrees that the Bank shall have no responsibility or liability for informing the Debtor of any such or other changes or potential changes or for taking any action or omitting to take any action with respect thereto.

2.5 Other Actions as to any and all Collateral. The Debtor further agrees to take any other action reasonably requested by the Bank to ensure the attachment and perfection and first priority of, and

 

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the ability of the Bank to enforce, the security interest of the Bank, for its own benefit and as agent for its Affiliates, in any and all of the Collateral, including (a) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Bank to enforce, the security interest of the Bank, for its own benefit and as agent for its Affiliates, in such Collateral, (b) to the extent required under the Loan Agreement, obtaining waivers from mortgagees and landlords in form and substance reasonably satisfactory to the Bank, and (c) taking all actions required by the UCC in effect from time to time or by other law, as applicable in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction. The Debtor further agrees to indemnify and hold the Bank harmless against claims of any Persons not a party to this Security Agreement concerning disputes arising over the Collateral, absent Bank’s gross negligence or willful misconduct.

2.6 Collateral in the Possession of a Warehouseman or Bailee. If any material portion of the Collateral at any time is in the possession of a warehouseman or bailee, the Debtor shall promptly notify the Bank thereof, and shall promptly use commercially reasonable efforts at Bank’s request to obtain a Collateral Access Agreement.

2.7 Letter-of-Credit Rights. If the Debtor at any time is a beneficiary under a letter of credit now or hereafter issued in favor of the Debtor, the Debtor shall promptly notify the Bank thereof and, at the request and option of the Bank, the Debtor shall, pursuant to an agreement in form and substance satisfactory to the Bank, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Bank, for its own benefit and as agent for its Affiliates, of the proceeds of any drawing under the letter of credit, or (ii) arrange for the Bank, for its own benefit and as agent for its Affiliates, to become the transferee beneficiary of the letter of credit, with the Bank agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided in this Security Agreement.

2.8 Commercial Tort Claims. If the Debtor shall at any time hold or acquire a Commercial Tort Claim, the Debtor shall promptly notify the Bank in writing signed by the Debtor of the details thereof and grant to the Bank for its own benefit and as agent for its Affiliates, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Security Agreement, in each case in form and substance satisfactory to the Bank, and shall execute any amendments thereto deemed reasonably necessary by the Bank to perfect the security interest of the Bank, for its own benefit and as agent for its Affiliates, in such Commercial Tort Claim.

2.9 Electronic Chattel Paper and Transferable Records. If the Debtor at any time holds or acquires an interest in any electronic chattel paper or any “transferable record”, as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, the Debtor shall promptly notify the Bank thereof and, at the request of the Bank, shall take such action as the Bank may reasonably request to vest in the Bank control under Section 9-105 of the UCC of such electronic chattel paper or control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, §16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Bank agrees with the Debtor that the Bank will arrange, pursuant to procedures satisfactory to the Bank and so long as such procedures will not result in the Bank’s loss of control, for the Debtor to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to make without loss of control.

 

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Section 3 REPRESENTATIONS AND WARRANTIES.

3.1 The Debtor makes the following representations and warranties to the Bank:

3.2 Debtor Organization and Name. Each Debtor is a Delaware corporation duly organized, existing and in good standing under the laws of the State of Delaware with full and adequate power to carry on and conduct its business as presently conducted. The exact legal name of Debtor is as set forth in the first paragraph of this Security Agreement.

3.3 Authorization. The Debtor has full right, power and authority to enter into this Security Agreement and to perform all of its duties and obligations under this Security Agreement. The execution and delivery of this Security Agreement and the other Loan Documents will not, nor will the observance or performance of any of the matters and things herein or therein set forth, violate or contravene any provision of law or of the articles/certificate of incorporation or bylaws of the Debtor. All necessary and appropriate action has been taken on the part of the Debtor to authorize the execution and delivery of this Security Agreement.

3.4 Validity and Binding Nature. This Security Agreement is the legal, valid and binding obligation of the Debtor, enforceable against the Debtor in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity.

3.5 Consent; Absence of Breach. The execution, delivery and performance of this Security Agreement and any other documents or instruments to be executed and delivered by the Debtor in connection herewith, do not and will not (a) require any consent, approval, authorization, or filings with, notice to or other act by or in respect of, any governmental authority or any other Person (other than any consent or approval which has been obtained and is in full force and effect and filings with respect to security interests); (b) conflict with (i) any provision of law or any applicable regulation, order, writ, injunction or decree of any court or governmental authority, (ii) the articles of incorporation or bylaws of the Debtor, or (iii) any material agreement, indenture, instrument or other document, or any judgment, order or decree, which is binding upon the Debtor or any of its respective properties or assets; or (c) require, or result in, the creation or imposition of any Lien on any asset of Debtor, other than Liens in favor of the Bank created pursuant to this Security Agreement and the other Loan Documents.

3.6 [Reserved]

3.7 [Reserved]

3.8 Security Interest. This Security Agreement creates a valid security interest in favor of the Bank in the Collateral and, when properly perfected by filing in the appropriate jurisdictions, or by possession or Control of such Collateral by the Bank or delivery of such Collateral to the Bank, shall, constitute a valid, perfected, first priority security interest in the Collateral to the extent a security interest in such Collateral may be perfected under Article 9 of the UCC.

3.9 Place of Business. The principal place of business and books and records of the Debtor as of the hereof is set forth in the preamble to this Security Agreement. The Debtor will not remove or permit the Collateral to be removed from such locations without the prior written consent of the Bank, except for Inventory sold in the usual and ordinary course of the Debtor’s business or as otherwise permitted under the Loan Agreement.

 

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3.10 [Reserved]

Section 4 AFFIRMATIVE COVENANTS.

4.1 Debtor Existence. The Debtor shall at all times preserve and maintain its (a) its existence and good standing in the jurisdiction of its organization, and (b) its qualification to do business and good standing in each jurisdiction where the nature of its business makes such qualification necessary (other than such jurisdictions in which the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect), and shall at all times continue as a going concern in the business which the Debtor is presently conducting. If the Debtor does not have an Organizational Identification Number and later obtains one, the Debtor shall promptly notify the Bank of such Organizational Identification Number.

4.2 Compliance with Laws. The Debtor shall comply in all respects, including the conduct of its business and operations and the use of the Collateral, with all applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits, except where failure to comply could not reasonably be expected to have a Material Adverse Effect.

4.3 [Reserved.]

4.4 Maintain Property. The Debtor shall at all times maintain, preserve and keep the Collateral, in good repair, working order and condition, normal wear and tear excepted. The Debtor shall permit the Bank to examine and inspect such Collateral, at all reasonable times to the extent provided under the Loan Agreement.

4.5 Maintain Insurance. The Debtor shall at all times maintain, and cause each Subsidiary to maintain, with insurance companies reasonably acceptable to the Bank, such insurance coverage as may be required by any law or governmental regulation or court decree or order applicable to it and such other insurance, to such extent and against such hazards and liabilities, including employers’, public and professional liability risks, as is customarily maintained by companies similarly situated, as provided in the Loan Agreement. The Debtor shall furnish to the Bank a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by the Debtor, which shall be reasonably acceptable in all respects to the Bank. The Debtor shall cause each issuer of an insurance policy to provide the Bank with an endorsement (i) showing the Bank as loss payee and as additional insured with respect to each policy of property or casualty insurance; and (ii) providing that thirty (30) days notice will be given to the Bank prior to any cancellation of, material reduction or change in coverage provided by or other material modification to such policy.

4.6 In the event the Debtor either fails to provide the Bank with evidence of the insurance coverage required by this Section or at any time hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay any premium in whole or in part relating thereto, then the Bank, without waiving or releasing any obligation or default by the Debtor hereunder, may at any time (but shall be under no obligation to so act), obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto, which the Bank deems advisable. This insurance coverage (a) may, but need not, protect the Debtor’s interests in such property, including the Collateral, and (b) may not pay any claim made by, or against, the Debtor in connection with such property, including the Collateral. The Debtor may later cancel any such insurance purchased by the Bank, but only after providing the Bank with evidence that the Debtor has obtained the insurance coverage required by this Section. If the Bank purchases insurance for the Collateral, the Debtor will be

 

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responsible for the costs of that insurance, including interest and any other charges that may be imposed with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to the principal amount of the Loans owing hereunder. The costs of the insurance may be more than the cost of the insurance the Debtor may be able to obtain on its own.

4.7 Field Audits. Upon reasonable advance written notice and during reasonable normal business hours, no more than twice annually (unless an Event of Default has occurred and is continuing), the Debtor shall permit the Bank to inspect the Inventory and other Collateral, to perform appraisals of the Inventory of the Debtor, and to inspect, audit, check and make copies of, and extracts from, the books, records, computer data, computer programs, journals, orders, receipts, correspondence and other data relating to Inventory, Accounts and any other Collateral. All such inspections or audits by the Bank shall be at the Debtor’s sole expense.

4.8 Collateral Records. The Debtor shall keep full and accurate books and records relating to the Collateral and shall mark such books and records to indicate the Bank’s Lien in the Collateral including placing a legend, in form and content acceptable to the Bank, on all Chattel Paper created by the Debtor indicating that the Bank has a Lien in such Chattel Paper.

Section 5 REMEDIES.

Upon the occurrence of an Event of Default (as defined in the Loan Agreement) beyond the expiration of any applicable grace or cure periods (if any), the Bank shall have all rights, powers and remedies set forth in this Security Agreement or the other Loan Documents or in any other written agreement or instrument relating to any of the Obligations or any security therefor, as a secured party under the UCC or as otherwise provided at law or in equity. Without limiting the generality of the foregoing, the Bank may, at its option upon the occurrence of an Event of Default, declare its commitments to the Borrower or the Debtor to be terminated and all Obligations to be immediately due and payable, or, if provided in the Loan Documents, all commitments of the Bank to the Borrower or the Debtor shall immediately terminate and all Obligations shall be automatically due and payable, all without demand, notice or further action of any kind required on the part of the Bank. The Debtor hereby waives any and all presentment, demand, notice of dishonor, protest, and all other notices and demands in connection with the enforcement of Bank’s rights under the Loan Documents, and hereby consents to, and waives notice of release, with or without consideration, of any Collateral, notwithstanding anything contained herein or in the Loan Documents to the contrary. In addition to the foregoing:

5.1 Possession and Assembly of Collateral. The Bank may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral of which the Bank already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may at any time enter into any of the Debtor’s premises where any of the Collateral may be or is supposed to be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of and the Bank shall have the right to store and conduct a sale of the same in any of the Debtor’s premises without cost to the Bank. At the Bank’s request, the Debtor will, at the Debtor’s sole expense, assemble the Collateral and make it available to the Bank at a place or places to be designated by the Bank which is reasonably convenient to the Bank and the Debtor.

5.2 Sale of Collateral. The Bank may sell any or all of the Collateral at public or private sale, upon such terms and conditions as the Bank may deem proper, and the Bank may purchase any or all of

 

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the Collateral at any such sale. The Debtor acknowledges that the Bank may be unable to effect a public sale of all or any portion of the Collateral because of certain legal and/or practical restrictions and provisions which may be applicable to the Collateral and, therefore, may be compelled to resort to one or more private sales to a restricted group of offerees and purchasers. The Debtor consents to any such private sale so made even though at places and upon terms less favorable than if the Collateral was sold at public sale. The Bank shall have no obligation to clean-up or otherwise prepare the Collateral for sale. The Bank may apply the net proceeds, after deducting all costs, expenses, reasonable attorneys’ and paralegals’ fees incurred or paid at any time in the collection, protection and sale of the Collateral and the Obligations, to the payment of the Obligations, returning the excess proceeds, if any, to the Debtor. The Debtor and/or the Borrower shall remain liable for any amount remaining unpaid after such application, with interest at the Default Rate. Any notification of intended disposition of the Collateral required by law shall be conclusively deemed reasonably and properly given if given by the Bank at least ten (10) calendar days before the date of such disposition. The Debtor hereby confirms, approves and ratifies all acts and deeds of the Bank relating to the foregoing, and each part thereof, and expressly waives any and all claims of any nature, kind or description which it has or may hereafter have against the Bank or its representatives, by reason of taking, selling or collecting any portion of the Collateral absent Bank’s bad faith, gross negligence, willful misconduct or material breach of contract. The Debtor consents, effective after the acceleration of the Obligations during the existence of an Event of Default, to release of the Collateral at any time and to commercially reasonable sales of the Collateral in groups, parcels or portions, or as an entirety, as the Bank shall deem appropriate. The Debtor expressly absolves the Bank from any loss or decline in market value of any Collateral by reason of delay in the enforcement or assertion or non-enforcement of any rights or remedies under this Security Agreement.

5.3 Standards for Exercising Remedies. To the extent that applicable law imposes duties on the Bank to exercise remedies in a commercially reasonable manner, the Debtor acknowledges and agrees that, subject to applicable law, it is not commercially unreasonable for the Bank (a) to fail to incur expenses reasonably deemed significant by the Bank to prepare Collateral for disposition or otherwise to complete raw material or work-in-process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against Account Debtors or other Persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against Account Debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same business as the Debtor, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (h) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, including any warranties of title, (k) to purchase insurance or credit enhancements to insure the Bank against risks of loss, collection or disposition of Collateral or to provide to the Bank a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by the Bank, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Bank in the collection or disposition of any of the Collateral. The Debtor acknowledges that the purpose of this section is to provide non-exhaustive indications of what actions or omissions by the Bank would not be commercially unreasonable in the Bank’s exercise of remedies against the Collateral and that other actions or omissions by the Bank shall not be deemed

 

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commercially unreasonable solely on account of not being indicated in this section. Without limitation upon the foregoing, nothing contained in this section shall be construed to grant any rights to the Debtor or to impose any duties on the Bank that would not have been granted or imposed by this Security Agreement or by applicable law in the absence of this section.

5.4 UCC and Offset Rights. The Bank may exercise, from time to time, any and all rights and remedies available to it under the UCC or under any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Security Agreement or in any other agreements between any Obligor and the Bank, and may, without demand or notice of any kind, appropriate and apply toward the payment of such of the Obligations then due and owing, whether matured or unmatured, including costs of collection and reasonable attorneys’ and paralegals’ fees, and in such order of application as the Bank may, from time to time elect, any indebtedness of the Bank to any Obligor, however created or arising, including balances, credits, deposits, accounts or moneys of such Obligor in the possession, control or custody of, or in transit to the Bank. The Debtor, on behalf of itself and each Obligor, hereby waives the benefit of any law that would otherwise restrict or limit the Bank in the exercise of its right, which is hereby acknowledged, to appropriate at any time hereafter any such indebtedness owing from the Bank to any Obligor.

5.5 Additional Remedies. The Bank shall have the right and power to:

(a) instruct the Debtor, at its own expense, to notify any parties obligated on any of the Collateral, including any Account Debtors, to make payment directly to the Bank of any amounts due or to become due thereunder, or, the Bank may directly notify such obligors of the security interest of the Bank, and/or of the assignment to the Bank of the Collateral and direct such obligors to make payment to the Bank of any amounts due or to become due with respect thereto, and thereafter, collect any such amounts due on the Collateral directly from such Persons obligated thereon;

(b) enforce collection of any of the Collateral, including any Accounts, by suit or otherwise, or make any compromise or settlement with respect to any of the Collateral, or surrender, release or exchange all or any part thereof, or compromise, extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder;

(c) take possession or control of any proceeds and products of any of the Collateral, including the proceeds of insurance thereon;

(d) extend, renew or modify for one or more periods (whether or not longer than the original period) the Obligations or any obligation of any nature of any other obligor with respect to the Obligations;

(e) grant releases, compromises or indulgences with respect to the Obligations, any extension or renewal of any of the Obligations, any security therefor, or to any other obligor with respect to the Obligations;

(f) transfer the whole or any part of securities which may constitute Collateral into the name of the Bank or the Bank’s nominee without disclosing, if the Bank so desires, that such securities so transferred are subject to the security interest of the Bank, and any corporation, association, or any of the managers or trustees of any trust issuing any of such securities, or any transfer agent, shall not be bound to inquire, in the event that the Bank or such nominee makes any further transfer of such securities, or any portion thereof, as to whether the Bank or such

 

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nominee has the right to make such further transfer, and shall not be liable for transferring the same;

(g) vote the Collateral;

(h) make an election with respect to the Collateral under Section 1111 of the Bankruptcy Code or take action under Section 364 or any other section of the Bankruptcy Code; provided, however, that any such action of the Bank as set forth herein shall not, in any manner whatsoever, impair or affect the liability of the Debtor hereunder, nor prejudice, waive, nor be construed to impair, affect, prejudice or waive the Bank’s rights and remedies at law, in equity or by statute, nor release, discharge, nor be construed to release or discharge, the Debtor, any guarantor or other Person liable to the Bank for the Obligations; and

(i) at any time, and from time to time, accept additions to, releases, reductions, exchanges or substitution of the Collateral, without in any way altering, impairing, diminishing or affecting the provisions of this Security Agreement, the Loan Documents, or any of the other Obligations, or the Bank’s rights hereunder, under the Obligations.

The Debtor hereby ratifies and confirms whatever the Bank may do with respect to the Collateral and agrees that the Bank shall not be liable for any error of judgment or mistakes of fact or law with respect to actions taken in connection with the Collateral.

5.6 Attorney-in-Fact. The Debtor hereby irrevocably makes, constitutes and appoints the Bank (and any officer of the Bank or any Person designated by the Bank for that purpose) as the Debtor’s true and lawful proxy and attorney-in-fact (and agent-in-fact) in the Debtor’s name, place and stead, with full power of substitution, to (i) take such actions as are permitted in this Security Agreement, (ii) execute such financing statements and other documents and to do such other acts as the Bank may require to perfect and preserve the Bank’s security interest in, and to enforce such interests in the Collateral, and (iii) during the occurrence of an Event of Default, carry out any remedy provided for in this Security Agreement, including endorsing the Debtor’s name to checks, drafts, instruments and other items of payment, and proceeds of the Collateral, executing change of address forms with the postmaster of the United States Post Office serving the address of the Debtor, changing the address of the Debtor to that of the Bank, opening all envelopes addressed to the Debtor and applying any payments contained therein to the Obligations. The Debtor hereby acknowledges that the constitution and appointment of such proxy and attorney-in-fact are coupled with an interest and are irrevocable. The Debtor hereby ratifies and confirms all that such attorney-in-fact may do or cause to be done by virtue of any provision of this Security Agreement.

5.7 No Marshaling. The Bank shall not be required to marshal any present or future collateral security (including this Security Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order. To the extent that it lawfully may, the Debtor hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Bank’s rights under this Security Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, the Debtor hereby irrevocably waives the benefits of all such laws.

5.8 Application of Proceeds. The Bank will within a commercially reasonable time after receipt of cash or solvent credits from collection of items of payment, proceeds of Collateral or any other

 

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source, apply the whole or any part thereof against the Obligations secured hereby. The Bank shall further have the exclusive right to determine how, when and what application of such payments and such credits shall be made on the Obligations, and such determination shall be conclusive upon the Obligors. Any proceeds of any disposition by the Bank of all or any part of the Collateral during the continuation of an Event of Default may be first applied by the Bank to the payment of expenses incurred by the Bank in connection with the Collateral, including reasonable attorneys’ fees and legal expenses as provided for in Section 6.13 hereof.

5.9 No Waiver. No Event of Default shall be waived by the Bank except in writing. No failure or delay on the part of the Bank in exercising any right, power or remedy hereunder shall operate as a waiver of the exercise of the same or any other right at any other time; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. There shall be no obligation on the part of the Bank to exercise any remedy available to the Bank in any order. The remedies provided for herein are cumulative and not exclusive of any remedies provided at law or in equity. The Debtor agrees that in the event that the Debtor fails to perform, observe or discharge any of its Obligations or liabilities under this Security Agreement or any other agreements with the Bank, no remedy of law will provide adequate relief to the Bank, and further agrees that the Bank shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

Section 6 MISCELLANEOUS.

6.1 Entire Agreement. This Security Agreement and the other Loan Documents (i) are valid, binding and enforceable against the Debtor and the Bank in accordance with their respective provisions and no conditions exist as to their legal effectiveness; (ii) constitute the entire agreement between the parties with respect to the subject matter hereof and thereof; and (iii) are the final expression of the intentions of the Debtor and the Bank. No promises, either expressed or implied, exist between the Debtor and the Bank, unless contained herein or therein. This Security Agreement, together with the other Loan Documents, supersedes all negotiations, representations, warranties, commitments, term sheets, discussions, negotiations, offers or contracts (of any kind or nature, whether oral or written) prior to or contemporaneous with the execution hereof with respect to any matter, directly or indirectly related to the terms of this Security Agreement and the other Loan Documents. This Security Agreement and the other Loan Documents are the result of negotiations among the Bank, the Debtor and the other parties thereto, and have been reviewed (or have had the opportunity to be reviewed) by counsel to all such parties, and are the products of all parties. Accordingly, this Security Agreement and the other Loan Documents shall not be construed more strictly against the Bank merely because of the Bank’s involvement in their preparation.

6.2 Amendments; Waivers. No delay on the part of the Bank in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by the Bank of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Security Agreement or the other Loan Documents shall in any event be effective unless the same shall be in writing and acknowledged by the Bank, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

6.3 WAIVER OF DEFENSES. SUBJECT TO APPLICABLE LAW, THE DEBTOR, ON BEHALF OF ITSELF AND ANY GUARANTOR OF ANY OF THE OBLIGATIONS, WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF

 

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WHICH THE DEBTOR MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS SECURITY AGREEMENT. PROVIDED THE BANK ACTS IN GOOD FAITH, AND WITHOUT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THE DEBTOR RATIFIES AND CONFIRMS WHATEVER THE BANK MAY DO PURSUANT TO THE TERMS OF THIS SECURITY AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE DEBTOR.

6.4 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF MIAMI-DADE COUNTY, THE STATE OF FLORIDA OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHHERN DISTRICT OF FLORIDA; PROVIDED THAT NOTHING IN THIS SECURITY AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE BANK FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. THE DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF MIAMI-DADE COUNTY, STATE OF FLORIDA AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE DEBTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF FLORIDA. THE DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

6.5 WAIVER OF JURY TRIAL. THE BANK AND THE DEBTOR, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE BANK AND THE DEBTOR ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO THE DEBTOR.

6.6 Assignability. The Bank may at any time assign the Bank’s rights in this Security Agreement, the other Loan Documents, the Obligations, or any part thereof and transfer the Bank’s rights in any or all of the Collateral, and the Bank thereafter shall be relieved from all liability with respect to such Collateral. This Security Agreement shall be binding upon the Bank and the Debtor and their respective legal representatives and successors. All references herein to the Debtor shall be deemed to include any successors, whether immediate or remote. In the case of a joint venture or partnership, the term “Debtor” shall be deemed to include all joint venturers or partners thereof, who shall be jointly and severally liable hereunder.

 

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6.7 Binding Effect. This Security Agreement shall become effective upon execution by the Debtor and the Bank. If this Security Agreement is not dated or contains any blanks when executed by the Debtor, the Bank is hereby authorized, without notice to the Debtor, to date this Security Agreement as of the date when it was executed by the Debtor, and to complete any such blanks according to the terms upon which this Security Agreement is executed.

6.8 Governing Law. This Security Agreement shall be delivered and accepted in and shall be deemed to be a contract made under and governed by the internal laws of the State of Florida (but giving effect to federal laws applicable to national banks) applicable to contracts made and to be performed entirely within such state, without regard to conflict of laws principles.

6.9 Enforceability. Wherever possible, each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Security Agreement shall be prohibited by, unenforceable or invalid under any jurisdiction, such provision shall as to such jurisdiction, be severable and be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Security Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

6.10 Time of Essence. Time is of the essence in making payments of all amounts due the Bank under this Security Agreement and in the performance and observance by the Debtor of each covenant, agreement, provision and term of this Security Agreement.

6.11 Counterparts; Facsimile Signatures. This Security Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Security Agreement. Receipt of an executed signature page to this Security Agreement by facsimile or other electronic transmission shall constitute effective delivery thereof. Electronic records of executed Loan Documents maintained by the Bank shall be deemed to be originals thereof.

6.12 Notices. All notices from the Debtor to Lender and Lender to Debtor required or permitted by any provision of this Security Agreement shall be in writing and sent by registered or certified mail, by nationally recognized overnight delivery service, by facsimile or by electronic communication (e-mail) and addressed as follows:

 

TO LENDER:

   CITY NATIONAL BANK OF FLORIDA
   100 S.E. 2nd Street, 13th Floor Miami, FL 33131
   Attention: Legal Department
   Email:  Greg.Mangram@citynational.com

TO BORROWER/DEBTOR:

   VENUS CONCEPT USA INC.
   235 Yorkland Blvd, Suite 900 Toronto, Ontario, Canada M2J 4Y8
   Attention: Domenic Serafino, President
  

  Michael Mandarello, General Counsel

Facsimile: (855) 907-0115

   E-mail:      dom@venusconcept.com
  

  mmandarello@venusconcept.com

 

17


   With a copy to:
  

(which shall not constitute service):

 

  

Reed Smith LLP

599 Lexington Avenue

  

New York, New York 10022

Attention: Mark Pedretti

Facsimile: (212) 521-5450

   E-mail: mpedretti@reedsmith.com

Such addresses may be changed by such notice to the other party. Notices sent by registered or certified mail or by overnight delivery service shall be deemed given on the date of its deposit in the United States Mail and, unless sooner actually received, shall be deemed received by the party to whom it is addressed on the third calendar day following the date on which said notice is deposited in the mail, or if a courier system is used, on the date of delivery of the notice; notices sent by facsimile or by electronic communications shall be deemed given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient).

6.13 Costs, Fees and Expenses. The Debtor shall pay or reimburse the Bank for all reasonable costs, fees and expenses incurred by the Bank or for which the Bank becomes obligated in connection with the enforcement of this Security Agreement, including reasonable attorneys’ fees and time charges of counsel to the Bank, plus costs and expenses of such attorneys or of the Bank; search fees, costs and expenses; and all taxes payable in connection with this Security Agreement. In furtherance of the foregoing, the Debtor shall pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and expenses in connection with the execution and delivery of this Security Agreement and the other Loan Documents to be delivered hereunder, and agrees to save and hold the Bank harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses. That portion of the Obligations consisting of costs, expenses or advances to be reimbursed by the Debtor to the Bank pursuant to this Security Agreement or the other Loan Documents which are not paid on or prior to the date hereof shall be payable by the Debtor to the Bank on demand. If at any time or times hereafter the Bank: (a) employs counsel for advice or other representation (i) with respect to this Security Agreement or the other Loan Documents, (ii) to represent the Bank in any litigation, contest, dispute, suit or proceeding or to commence, defend, or intervene or to take any other action in or with respect to any litigation, contest, dispute, suit, or proceeding (whether instituted by the Bank, the Debtor, or any other Person) in any way or respect relating to this Security Agreement, or (iii) to enforce any rights of the Bank against the Debtor or any other Person under of this Security Agreement; (b) takes any action to protect, collect, sell, liquidate, or otherwise dispose of any of the Collateral; and/or (c) attempts to or enforces any of the Bank’s rights or remedies under this Security Agreement, the costs and expenses incurred by the Bank in any manner or way with respect to the foregoing, shall be part of the Obligations, payable by the Debtor to the Bank on demand.

[EXECUTIONS ON FOLLOWING PAGE]

 

18


IN WITNESS WHEREOF, the Debtor and the Bank have executed this Second Amended and Restated Security Agreement as of the date first above written.

 

Debtor:
VENUS CONCEPT INC., a Delaware corporation
By:  

        /s/ Domenic Serafino

  Domenic Serafino, as CEO
VENUS CONCEPT USA INC., a Delaware corporation
By:  

        /s/ Domenic Serafino

  Domenic Serafino, as President

PROVINCE OF ONTARIO    )

)SS:

CITY OF TORONTO             )

The foregoing instrument was acknowledged before me this _____ day of ______________, 2020, by means of ☐ physical presence or ☐ online notarization, by Domenic Serafino, as CEO of VENUS CONCEPT INC., a Delaware corporation and as President of VENUS CONCEPT USA INC., a Delaware corporation, on behalf of and as an act of the corporations. He is personally known to me or has produced ______________________ as identification, and took an oath.

 

 

NOTARY PUBLIC
Print Name:                                                                  
My Commission Expires:                                            


Bank:
CITY NATIONAL BANK OF FLORIDA
By:  

        /s/ Greg Mangram

Name: Greg Mangram
Title: Senior Vice President

Exhibit 10.3

AS REQUIRED BY FLORIDA LAW, FLORIDA DOCUMENTARY STAMP TAXES IN THE AMOUNT OF $2,450.00 WERE PAID IN CONNECTION WITH THAT CERTAIN THIRD AMENDED AND RESTATED REVOLVING PROMISSORY NOTE DATED MARCH 20, 2020. NO ADDITIONAL DOCUMENTARY STAMP TAXES ARE DUE.

FOURTH AMENDED AND RESTATED REVOLVING PROMISSORY NOTE

 

Date of Note:    December 9, 2020
Amount of Note:    TEN MILLION AND NO/100 DOLLARS ($10,000,000.00)
Maturity Date:    April 25, 2021, unless otherwise extended and/or accelerated pursuant to and in accordance with the terms and conditions set forth in this Note or extended as provided herein.

FOR VALUE RECEIVED, VENUS CONCEPT USA INC., a Delaware corporation (“Venus USA”); VENUS CONCEPT CANADA CORP., an Ontario corporation (“Venus Canada”); and VENUS CONCEPT INC., a Delaware corporation (“VCI”), jointly and severally (collectively, the “Borrower”) hereby covenants and promises to pay to the order of CITY NATIONAL BANK OF FLORIDA, its successors and/or assigns (the “Lender”), at 100 S.E. 2nd Street, 13th Floor, Miami, Florida 33131, or at such other place as Lender may designate to Borrower in writing from time to time, in legal tender of the United States, TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), together with all accrued interest, which shall be due and payable upon the following terms and conditions contained in this Fourth Amended and Restated Revolving Promissory Note (this “Note”) and the Loan Agreement (as defined herein).

 

A.

Interest Rate:

 

  (i)

From the date hereof until and including the Maturity Date, Borrower may borrow, repay and re-borrow, and Lender shall advance and re-advance under this Note from time to time, so long as the total principal balance outstanding at any one time does not exceed the principal amount stated on the face of this Note. Lender’s obligation to make advances under this Note shall terminate upon the earlier to occur of: (i) an Event of Default under this Note, or (ii) the Maturity Date.

 

  (ii)

Interest shall accrue on the unpaid principal balance of this Note from the date hereof at a rate per annum equal to the LIBOR 30-Day Rate (as defined below), plus 3.25% (as the same may be modified below, the “Interest Rate Margin”) (as the same may be modified below, the “Interest Rate”).

 

  (iii)

As used herein, “LIBOR 30-Day Rate” means the rate of interest per annum equal to the London Interbank Offered Rate (“LIBOR”) for thirty (30) day U.S. dollar deposits as published in the “Money Rates” column of the local edition of The Wall Street Journal. If such LIBOR 30-Day Rate is no longer available from the Wall Street Journal, but otherwise continues to be readily available from another publisher in the marketplace, Lender, at its sole discretion, shall choose a new publisher of the LIBOR 30-Day Rate. The Interest Rate will be effective on and from the date hereof, based on the most recent rate information available, and will be effective until the last day of said month. The interest rate shall be thereafter be adjusted on the first (1st) day of each calendar month to


  the current LIBOR 30-Day Rate or, if applicable, the current LIBOR Successor Rate (as defined below), plus the Interest Rate Margin, or, if applicable, the Successor Interest Rate Margin (as defined below), based on the most recent rate information available on the date that the interest rate is adjusted and such rate shall be effective until the end of each such calendar month.

 

  (iv)

If The Wall Street Journal or its successor ceases to publish the LIBOR 30-Day Rate, or if LIBOR is permanently or indefinitely unavailable or unascertainable, or a Governmental Authority (as defined in the Loan Agreement, and including the Board of Governors of the Federal Reserve, the Office of the Comptroller of the Currency, or the Alternative Reference Rates Committee), has made a public statement identifying a specific date after which the LIBOR 30-Day Rate shall no longer be made available or used for determining the interest rate of loans (the “LIBOR Sunset Date”), then at any time within 90 days of the LIBOR Sunset Date, or reasonably promptly after such occurrence, Lender shall amend this Note (without the need for any action or consent by Borrower) to (i) replace the LIBOR 30-Day Rate with an alternate benchmark rate (including any mathematical or other adjustments to the benchmark (if any) incorporated therein), giving consideration to any similar loans for such alternative benchmarks (any such proposed rate, a “LIBOR Successor Rate”), (ii) adjust the Interest Rate Margin on a permanent basis (the “Adjusted Interest Rate Margin”) by a factor equal to the positive or negative difference which, on the date of the adjustment, will make the LIBOR 30-Day Rate plus the Interest Rate Margin substantially equal to the LIBOR Successor Rate plus the Adjusted Interest Rate Margin, and (iii) make any LIBOR Successor Rate Changes (as defined below), and Lender shall give Borrower prompt notice thereof (it being understood that such amendment may become effective prior to such notice). In the event that on the date selected by Lender to make the change from the LIBOR 30-Day Rate to the LIBOR Successor Rate, the LIBOR 30-Day Rate is either 50 basis points above or below the prior day’s rate, then in order to substitute a fair LIBOR Successor Rate, the Lender shall be required to use a mathematical average of the last 60 days of the LIBOR 30-Day Rate instead of the LIBOR 30-Day Rate on the date of the change. For clarification purposes, the intent of this language is that, at the time of the transition and substitution from the LIBOR 30-Day Rate to the LIBOR Successor Rate, the effective Interest Rate under the Note shall be mathematically as close as possible to what the effective Interest Rate was prior to the change. Thereafter, the Interest Rate will adjust monthly (subject to LIBOR Successor Rate Changes) based on the then current LIBOR Successor Rate plus the Adjusted Interest Rate Margin.

 

  (v)

For purposes hereof, “LIBOR Successor Rate Changes” means, with respect to any LIBOR Successor Rate and the Adjusted Interest Rate Margin, any changes to the timing and frequency of determining rates and other administrative matters as may be appropriate, in the discretion of Lender, to reflect the adoption of the LIBOR Successor Rate and the Adjusted Interest Rate Margin and to permit the administration thereof by Lender in a manner reasonably consistent with market practice.

 

  (vi)

Interest shall be calculated at the rate of 1/360 of the annual rate of interest for each day that principal is outstanding (i.e., interest will not accrue and be paid on the actual number of calendar days elapsed from the date hereof based on a 360 day year).


B.

Payment Terms:

Commencing on January 25, 2021, and continuing on the twenty-fifth (25th) day of each month thereafter, Borrower shall make consecutive monthly payments of accrued interest only. Unless this Note is otherwise accelerated in accordance with the terms and conditions hereof, the entire outstanding principal balance of this Note plus all accrued interest shall be due and payable in full on April 25, 2021 (the “Maturity Date”).

 

C.

Security:

This Note is secured pursuant to that certain Second Amended and Restated Security Agreement of even date herewith from Borrower and Guarantor (defined hereinafter below), all in favor of Lender    (as the same may be amended or modified from time to time, collectively, the “Security Agreement”), granting Lender a lien and security interest in and to certain personal property, as more particularly described in the Security Agreement and those certain applicable UCC-1 and PPSA.

 

D.

Loan Documents:

This Note, the Security Agreement, that certain Third Amended and Restated Loan Agreement dated of even date herewith by and between Borrower and Lender (as the same may be amended, restated, modified or replaced from time to time, the “Loan Agreement”), that certain Third Amended and Restated Guaranty of Payment and Performance of even date herewith from VENUS CONCEPT LTD., an Israeli corporation (the “Guarantor”) in favor of Lender (as the same may be amended, restated, modified or replaced from time to time, the “Guaranty”), and all other documents and instruments executed by the Borrower or the Parent in connection with this Note are hereinafter individually and/or collectively referred to as the “Loan Documents”.

 

E.

Default Interest Rate:

All principal and installments of interest shall bear interest from the date that said payments are due and unpaid or from the date of occurrence of any other Event of Default (as hereinafter defined) at a rate equal to the highest rate authorized by applicable law (the “Default Rate”).

 

F.

Prepayment/Prepayment Compensation:

The Borrower may prepay all or any portion of this Note at any time without fee, premium or penalty.

 

G.

Late Charges:

Lender may collect a late charge not to exceed an amount equal to five percent (5%) of any installment which is not paid within ten (10) days of the due date thereof, to cover the extra expense involved in handling delinquent payments, provided that collection of said late charge shall not be deemed a waiver by Lender of any of its rights under this Note. Notwithstanding the foregoing, there shall be no grace period or late charges for payments due on the outstanding principal balance due on the Maturity Date or upon acceleration, as set forth in Section H below, but such outstanding balance shall accrue interest at the Default Rate. The late charge is intended to compensate the Lender for administrative and processing costs incident to late payments. The late charge payments are not interest. The late charge payment shall not be subject to rebate or credit against any other amount due. Any late charge shall be in addition to any other interest due.


H.

Default and Acceleration:

If any of the “Events of Default” defined in the Loan Agreement occur, at the Lender’s option, exercisable in its sole discretion by written notice to the Borrower to such effect, all sums of principal and interest under this Note shall be accelerated and become immediately due and payable, and the Lender shall be immediately entitled to exercise all of its available remedies under the Loan Documents.

In any such event, all sums of principal and interest under this Note shall automatically become immediately due and payable The Borrower expressly consents to any extension or renewal, in whole or in part, and all delays in time of payment or other performance which Lender may grant at any time and from time to time without limitation and without any notice or further consent of the undersigned.

The remedies of Lender as provided herein, or in the Security Agreement, the Loan Agreement or the other Loan Documents shall be cumulative and concurrent and may be pursued singularly, successively or together, at the sole discretion of Lender, and may be exercised as often as the occasion therefor shall arise.

The Lender may, in the sole discretion of Lender, accept payments made by Borrower after any Event of Default has occurred, without waiving any of Lender’s rights herein.

 

I.

Costs:

In the event that this Note is collected by law or through attorneys at law, or under advice therefrom (whether such attorneys are employees of Lender or an affiliate of Lender or are outside counsel), Borrower and any guarantor for payment hereof hereby, severally and jointly agree to pay all reasonable costs of collection, including attorneys’ fees, including reasonable charges for paralegals, appraisers, experts and consultants working under the direction or supervision of Lender’s attorneys costs for evaluating preserving or disposing of any collateral granted as security for payment of this Note, including the costs of any audits, environmental inspections which Lender may reasonably deem necessary from time to time; any premiums for property insurance purchased on behalf of Borrower or on behalf of the owners of any collateral pursuant to any Security Agreement relating to any collateral, or any other charges permitted by applicable law whether or not suit is brought, and whether incurred in connection with collection, trial, appeal, bankruptcy or other creditors’ proceedings or otherwise.

 

J.

Loan Charges:

Nothing herein contained, nor any transaction related thereto, shall be construed or so operate as to require Borrower or any person liable for the repayment of same, to pay interest in an amount or at a rate greater than the maximum allowed by applicable law. Should any interest or other charges paid by Borrower, or any parties liable for the payment of the loan made pursuant to this Note, result in the computation or earning of interest in excess of the maximum legal rate of interest permitted under the law in effect while said interest is being earned, then any and all of such excess shall be and is waived by Lender, and all such excess shall be automatically credited against and in reduction of the principal balance, and any portion of the excess that exceeds the principal balance shall be paid by Lender to Borrower or any parties liable for the payment of the loan made pursuant to this Note so that under no circumstances shall the Borrower, or any parties liable for the payment of the loan hereunder, be required


to pay interest in excess of the maximum rate allowed by applicable law.

 

K.

Jurisdiction:

The laws of the State of Florida shall govern the interpretation and enforcement of this Note. In the event that legal action is instituted to collect any amounts due under, or to enforce any provision of, this instrument, Borrower and any endorser, guarantor or other person primarily or secondarily liable for payment hereof consent to, and by execution hereof submit themselves to, the jurisdiction of the courts of the State of Florida, and, notwithstanding the place of residence of any of them or the place of execution of this instrument, such litigation may be brought in or transferred to a court of competent jurisdiction in and for Miami-Dade County, Florida.

 

L.

Assignment:

Subject to prior written notice to Borrower, Lender shall have the unrestricted right at any time and from time to time and without Borrower’s or Guarantor’ s consent, to assign all or any portion of its rights and obligations hereunder to one or more lenders or Purchasers (each, an “Assignee”) under this Note and the Loan Documents and all information now or hereafter in its possession relating to the Borrower and all Guarantors (all rights of privacy hereby being waived, and to retain any compensation received by Lender in connection with any such transaction and Borrower and Guarantor agrees that it shall execute such documents, including without limitation, the delivery of an estoppels certificate and such other documents as Lender shall reasonably deem necessary to effect the foregoing. The Borrower hereby agrees to be bound by the terms of the Amended and Restated Note subsequent to any transfer and agrees that the terms of the Amended and Restated Note maybe fully enforced by any subsequent holder of this Note.

 

M.

Non-Waiver:

The failure at any time of Lender to exercise any of its options or any other rights hereunder shall not constitute a waiver thereof, nor shall it be a bar to the exercise of any of its options or rights at a later date. All rights and remedies of Lender shall be cumulative and may be pursued singly, successively or together, at the option of Lender.

 

N.

Right of Setoff:

In addition to all liens upon and rights of setoff against the Borrower’s money, securities or other property given to the Lender by law, the Lender shall have, with respect to the Borrower’s obligations to the Lender under this Note and to the extent permitted by law, a contractual possessory security interest in and a contractual right of setoff against, and the Borrower hereby grants the Lender a security interest in, and hereby assigns, conveys, delivers, pledges and transfers to the Lender, all of the Borrower’s right, title and interest in and to, all of the Borrower’s deposits, moneys, securities and other property now or hereafter in the possession of or on deposit with, or in transit to, the Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding, however, all IRA, Keogh, and trust accounts, resident prepayments, and such other funds as government agencies may require for resident care. Every such security interest and right of setoff may be exercised subject to prior notice to the Borrower. Every such right of setoff shall be deemed to have been exercised immediately upon the occurrence of an Event of Default hereunder without any action of the Lender, although the Lender may enter such set off on its books and records at a later time.


O.

Miscellaneous:

 

  1.

TIME IS OF THE ESSENCE OF THIS NOTE.

 

  2.

It is agreed that the granting to Borrower or any other party of an extension or extensions of time for the payment of any sum or sums due under this Note or under the Security Agreement or for the performance of any covenant or stipulation thereof or the taking of other or additional security shall not in any way release or affect the liability of Borrower under this Note or any of the Loan Documents.

 

  3.

This Note may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

 

  4.

[Reserved].

 

  5.

Notwithstanding anything herein to the contrary, the obligations of Borrower under this Note shall be subject to the limitation that payments of interest shall not be required to the extent that receipt of any such payment by Lender would be contrary to provisions of law applicable to Lender limiting the maximum rate of interest which may be charged or collected by Lender. In the event that any charge, interest or late charge is above the maximum rate provided by law, then any excess amount over the lawful rate shall be applied by Lender to reduce the principal sum of the Loan or any other amounts due Lender hereunder.

 

  6.

Borrower acknowledges that Lender shall have no obligation whatsoever to renew, modify or extend this Note or to refinance the indebtedness under this Note upon the maturity thereof, except as specifically provided herein.

 

  7.

Lender shall have the right to accept and apply to the outstanding balance of this Note and all payments or partial payments received from Borrower after the due date therefor, whether this Note has been accelerated or not, without waiver of any of Lender’s rights to continue to enforce the terms of this Note and to seek any and all remedies provided for herein or in any instrument securing the same, including, but not limited to, the right to foreclose on such security.

 

  8.

All amounts received by Lender shall be applied to expenses, late fees and interest before principal or in any other order as determined by Lender, in its sole discretion, as permitted by law.

 

  9.

Borrower shall not assign Borrower’s rights or obligations under this Note without Lender’s prior consent.

 

  10.

The term “Borrower” as used herein, in every instance shall include the makers of this Note, and its successors, and assigns, and shall denote the singular and/or plural, the masculine and/or feminine, and natural and/or artificial persons whenever and wherever the context so requires or admits.


  11.

If more than one party executes this Note, all such parties shall be jointly and severally liable for the payment of this Note.

 

  12.

If any clause or provision herein contained operates or would prospectively operate to invalidate this Note in part, then the invalid part of said clause or provision only shall be held for naught, as though not contained herein, and the remainder of this Note shall remain operative and in full force and effect.

 

P.

Waiver of Jury Trial:

BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO EXTEND TO BORROWER THE LOAN EVIDENCED BY THIS NOTE.

This Note amends, restates and replaces that certain Third Amended and Restated Revolving Promissory Note dated as of March 20, 2020, by Borrower and in favor of Lender in the original principal amount of $10,000,000, in its entirety.

[SIGNATURE ON PAGE TO FOLLOW]


Borrower has duly executed this Note effective as of the date set forth hereinabove.

 

BORROWER:
VENUS CONCEPT USA INC., a Delaware corporation
By:  

/s/ Domenic Serafino

Name: Domenic Serafino
Title: President
VENUS CONCEPT CANADA CORP., an Ontario corporation
By:  

/s/ Domenic Serafino

Name: Domenic Serafino
Title: Chief Executive Officer
VENUS CONCEPT INC., a Delaware corporation
By:  

/s/ Domenic Serafino

Name: Domenic Serafino
Title: Chief Executive Officer

Exhibit 10.4

THIS THIRD AMENDED AND RESTATED GUARANTY OF PAYMENT AND PERFORMANCE AMENDS, RESTATES AND REPLACES IN ITS ENTIRETY THAT CERTAIN SECOND AMENDED AND RESTATED GUARANTY OF PAYMENT AND PERFORMANCE DATED THE 20TH DAY OF MARCH, 2020 GIVEN BY GUARANTOR TO LENDER.

THIRD AMENDED AND RESTATED GUARANTY OF PAYMENT AND PERFORMANCE

This Third Amended and Restated Guaranty of Payment and Performance (this “Guaranty”) is made as of this 9th day of December, 2020, by VENUS CONCEPT LTD., an Israeli limited corporation (the “Guarantor”), in favor of CITY NATIONAL BANK OF FLORIDA (“Lender”).

RECITALS

VENUS CONCEPT USA INC., a Delaware corporation (“Venus USA”); VENUS CONCEPT CANADA CORP., a Canadian corporation (“Venus Canada”); and VENUS CONCEPT, INC., a Delaware corporation (“VCI”) (individually and collectively, the “Borrower”) have requested and Lender has agreed to make one or more loans to Borrower in the principal amount from time to time outstanding of TEN MILLION THOUSAND AND NO/100 DOLLARS ($10,000,000.00) (the “Loan”), as evidenced by that certain Fourth Amended and Restated Revolving Promissory Note dated as of even date herewith, from Borrower in favor of Lender in the original principal amount of the Loan (as the same may be amended, restated, modified or replaced from time to time, the “Note”). Certain terms and conditions of the Loan are set forth in that certain Third Amended and Restated Loan Agreement dated as of even date herewith between Borrower and Lender (as the same may be amended, restated, modified or replaced from time to time, the “Loan Agreement”). As a condition precedent to Lender making the Loan, Lender has required Guarantor to execute and deliver this Guaranty to Lender. Any capitalized term used and not defined in this Guaranty shall have the meaning given to such term in the Loan Agreement.

AGREEMENTS

Guarantor is a subsidiary of VCI and a sub-parent of Venus USA and Venus Canada and will receive a material benefit from Lender making the Loan to Borrower. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to induce Lender to make the Loan to Borrower, Guarantor hereby guarantees to Lender the prompt and full payment of the Indebtedness described below in this Guaranty (collectively called the “Guaranteed Obligations”), this Guaranty being upon the following terms and conditions:

Section 1. Guaranty of Payment.

Guarantor hereby unconditionally and irrevocably guarantees to Lender the punctual payment when due, whether by lapse of time, by acceleration of maturity, or otherwise, of all principal, interest (including interest accruing after maturity and after the commencement of any bankruptcy or insolvency proceeding by or against Borrower, whether or not allowed in such proceeding), prepayment premiums, fees, late charges, costs, expenses, indemnification indebtedness, and other sums of money now or hereafter due and owing, or which Borrower is obligated to pay, pursuant to the terms of the Note, the Loan Agreement, the Security Agreements by and between Borrower and Lender (the “Security Agreements”), any application, agreement, note or other document executed and delivered by Borrower in connection with any Loan, or any of the other Loan Documents, including, without limitation, any letter of credit issued by Lender in connection with the Loan, as the same may from time to time be amended, supplemented, restated or otherwise modified (collectively, the “Indebtedness”). The Indebtedness includes all reasonable costs and expenses incurred by Lender in seeking to enforce


Lender’s rights and remedies with respect to the Indebtedness, and to protect, defend, maintain or enforce Lender’s liens or security interests, including, without limitation, collection costs, default rates of interest, reasonable attorneys’ fees and costs at trial and appellate levels and related costs, and costs of alternative dispute resolution, whether or not suit is filed or other proceedings are initiated thereon. This Guaranty covers the Indebtedness presently outstanding and the Indebtedness arising subsequent to the date hereof, including all amounts advanced by Lender in stages or installments. The guaranty of Guarantor as set forth in this Section is a continuing guaranty of payment and not a guaranty of collection.

The foregoing obligations guaranteed under this Section are defined as the “Guaranteed Payment Obligations”. The Guaranteed Payment Obligations are included as part of the Guaranteed Obligations for all purposes of this Guaranty.

Section 2. Guaranty of Performance.

Guarantor hereby unconditionally and irrevocably guarantees to Lender the complete performance when due of all other Obligations of Borrower under all of the Loan Documents, including, without limiting the generality of the foregoing, all such Obligations of Borrower to duly and punctually perform and observe all other terms, covenants and conditions of the Note, the Loan Agreement, and all other Loan Documents.

The foregoing obligations guaranteed under this Section are defined as the “Guaranteed Performance Obligations.” The Guaranteed Performance Obligations are included as part of the Guaranteed Obligations for all purposes of this Guaranty.

The liability and obligations under this Section shall not be limited or restricted by the existence of, or any terms of, the guaranty of payment under Section 1.

Section 3. Primary Liability of Guarantor.

(a) This Guaranty is an absolute, irrevocable and unconditional guaranty of payment and performance, and Guarantor shall be liable for the payment and performance of the Guaranteed Obligations as a primary obligor. This Guaranty shall be effective as a waiver of, and Guarantor hereby expressly waives, any right to which Guarantor may otherwise have been entitled, whether existing under statute, at law or in equity, to require Lender to take prior recourse or proceedings against any collateral, security or person. It shall not be necessary for Lender, in order to enforce such payment or performance by Guarantor, first to institute suit or pursue or exhaust any rights or remedies against Borrower or other person liable on such indebtedness or performance, or to enforce any rights against any security given to secure such indebtedness or for such performance, or to join Borrower or any other person liable for the payment or performance of the Guaranteed Obligations or any part thereof in any action to enforce this Guaranty, or to resort to any other means of obtaining payment or performance of the Guaranteed Obligations provided, however, that nothing herein contained shall prevent Lender from suing on the Note or exercising any other right under the Loan Documents.

(b) Suit may be brought or demand may be made against Borrower or against any or all parties who have signed this Guaranty or any other guaranty covering all or any part of the Guaranteed Obligations, or against any one or more of them, separately or together, without impairing the rights of Lender against any party hereto. Any time that Lender is entitled to exercise its rights or remedies hereunder, it may in its discretion elect to demand payment and/or performance. If Lender elects to demand performance, it shall at all times thereafter have the right to demand payment until all of the Guaranteed Obligations have been paid and performed in full. If Lender elects to demand payment, it shall at all times thereafter have the right to demand performance until all of the Guaranteed Obligations

 

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have been paid and performed in full.

Section 4. Certain Agreements and Waivers by Guarantor.

(a) Guarantor agrees that neither Lender’s rights or remedies nor Guarantor’s obligations under the terms of this Guaranty shall be released, diminished, impaired, reduced or affected by any one or more of the following events, actions, facts, or circumstances, in each case, unless the Guaranteed Obligations themselves have been changed, reduced, discharged or terminated, and the liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of:

(i) any limitation on the liability of, or recourse against, any other person in any Loan Document or arising under any law;

(ii) any claim or defense that this Guaranty was made without consideration or is not supported by adequate consideration or that the obligations of Guarantor hereunder exceed or are more burdensome than those of Borrower under the other Loan Documents;

(iii) the taking or accepting of any other security or guaranty for, or right of recourse with respect to, any or all of the Guaranteed Obligations;

(iv) the operation of any laws (other than statutes of limitation) regarding the limitation of actions, all of which are hereby waived as a defense to any action or proceeding brought by Lender against Guarantor, to the fullest extent permitted by law;

(v) any homestead exemption or any other exemption under applicable law;

(vi) any release, surrender, abandonment, exchange, alteration, sale or other disposition, subordination, deterioration, waste, failure to protect or preserve, impairment, or loss of, or any failure to create or perfect any lien or security interest with respect to, or any other dealings with, any collateral or security at any time existing or purported, believed or expected to exist in connection with any or all of the Guaranteed Obligations, or any impairment of Guarantor’s recourse against any person or collateral;

(vii) whether express or by operation of law, any partial release of the liability of Guarantor hereunder (except to the extent paid, performed or expressly so released) or any complete or partial release of Borrower or any other person liable, directly or indirectly, for the payment or performance of any or all of the Guaranteed Obligations;

(viii) the insolvency, bankruptcy, dissolution, liquidation, termination, receivership, reorganization, merger, consolidation, change of form, structure or ownership, sale of all assets, or lack of corporate, partnership or other power of Borrower or any other person at any time liable for the payment of any or all of the Guaranteed Obligations;

(ix) any renewal, extension, modification, supplement, subordination or rearrangement of the terms of any or all of the Guaranteed Obligations and/or any of the Loan Documents, including material alterations of the terms of payment (including changes in maturity date(s) and interest rate(s) or performance or any other terms thereof, or any waiver, termination, or release of, or consent to departure from, any of the Loan Documents or any other guaranty of any or all of the Guaranteed Obligations, or any adjustment, indulgence, forbearance, or compromise that may be granted from time to time by Lender to Borrower or any other person at

 

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any time liable for the payment or performance of any or all of the Guaranteed Obligations (collectively “Change”), provided however, that the Lender has furnished the Guarantor with a prior written notice setting forth such a Change, and, provided further, that the Guarantor shall be liable to guarantee the Guaranteed Obligations, as so amended, supplemented, modified, extended, renewed waived of otherwise changed, as of the effective date of such Change;

(x) any neglect, lack of diligence, delay, omission, failure, or refusal of Lender to take or prosecute (or in taking or prosecuting) any action for the collection or enforcement of any of the Guaranteed Obligations, or to foreclose or take or prosecute any action to foreclose (or in foreclosing or taking or prosecuting any action to foreclose) upon any security therefor, or to exercise (or in exercising) any other right or power with respect to any security therefor, or to take or prosecute (or in taking or prosecuting) any action in connection with any Loan Document, or any failure to sell or otherwise dispose of in a commercially reasonable manner any collateral securing any or all of the Guaranteed Obligations;

(xi) the existence of any claim, counterclaim, set-off or other right that Guarantor may at any time have against Borrower, Lender, or any other person, whether or not arising in connection with this Guaranty, the Note, the Loan Agreement, the Security Agreement, any other Loan Document; provided, however, that the foregoing shall not be deemed a waiver of Guarantor’s right to assert any compulsory counterclaim maintained in a court of the United States or the State of Florida if such counterclaim is compelled under local law or procedure;

(xii) the unenforceability of all or any part of the Guaranteed Obligations against Borrower, whether because the Guaranteed Obligations exceed the amount permitted by law or violate any usury law, or because the persons creating the Guaranteed Obligations acted in excess of their authority, or because of a lack of validity or enforceability of or defect or deficiency in any of the Loan Documents, or because Borrower has any valid defense, claim or offset with respect thereto, or because Borrower’s obligation ceases to exist by operation of law, or because of any other reason or circumstance, it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other person be found not liable on the Guaranteed Obligations, or any part thereof, for any reason (and regardless of any joinder of Borrower or any other party in any action to obtain payment or performance of any or all of the Guaranteed Obligations);

(xiii) any order, ruling or plan of reorganization emanating from proceedings under Title 11 of the United States Code with respect to Borrower or any other person, including any extension, reduction, composition, or other alteration of the Guaranteed Obligations, whether or not consented to by Lender, or any action taken or omitted by Lender in any such proceedings, including any election to have Lender’s claim allowed as being secured, partially secured or unsecured, any extension of credit by Lender in any such proceedings or the taking and holding by Lender of any security for any such extension of credit;

(xiv) any other condition, event, omission, or action that would in the absence of this paragraph result in the release or discharge of the Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty or any other agreement;

(xv) Lender’s enforcement or forbearance from enforcement of the Guaranteed Obligations on a net or gross basis.

(b) In the event any payment by Borrower or any other person to Lender is held to constitute a preference, fraudulent transfer or other voidable payment under any bankruptcy, insolvency or similar

 

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law, or if for any other reason Lender is required to refund such payment or pay the amount thereof to any other party, such payment by Borrower or any other party to Lender shall not constitute a release of Guarantor from any liability hereunder, and this Guaranty shall continue to be effective or shall be reinstated (notwithstanding any prior release, surrender or discharge by Lender of this Guaranty or of Guarantor), as the case may be, with respect to, and this Guaranty shall apply to, any and all amounts so refunded by Lender or paid by Lender to another person (which amounts shall constitute part of the Guaranteed Obligations), and any interest paid by Lender and any reasonable attorneys’ fees, costs and expenses paid or incurred by Lender in connection with any such event.

(c) It is the intent of Guarantor and Lender that the obligations and liabilities of Guarantor hereunder are absolute, irrevocable and unconditional under any and all circumstances and that until the Guaranteed Obligations are fully and finally paid and performed, and not subject to refund or disgorgement, the obligations and liabilities of Guarantor hereunder shall not be discharged or released, in whole or in part, by any act or occurrence that might, but for the provisions of this Guaranty, be deemed a legal or equitable discharge or release of a guarantor.

(d) Guarantor’s obligations shall not be affected, impaired, lessened or released by loans, credits or other financial accommodations now existing or hereafter advanced by Lender to Borrower in excess of the Guaranteed Obligations. All payments, repayments and prepayments of the Loan, whether voluntary or involuntary, received by Lender from Borrower, any other person or any other source (other than from Guarantor pursuant to a demand by Lender hereunder), and any amounts realized from any collateral for the Loan, shall be deemed to be applied first to any portion of the Loan which is not covered by this Guaranty, and last to the Guaranteed Obligations, and this Guaranty shall bind Guarantor to the extent of any Guaranteed Obligations that may remain owing to Lender. Lender shall have the right to apply any sums paid by Guarantor to any portion of the Loan in Lender’s sole and absolute discretion.

(e) If acceleration of the time for payment of any amount payable by Borrower under the Note, the Loan Agreement, or any other Loan Document is stayed or delayed by any law or tribunal, then unless similarly stayed or delayed all such amounts shall nonetheless be payable by Guarantor within 10 Business Days following receipt of a written demand from the Lender.

(f) Guarantor hereby waives and agrees not to assert or take advantage of (i) any right or claim of right to cause a marshalling of any of Borrower’s assets or the assets of any other party now or hereafter held as security for the Indebtedness; (ii) the defense of laches in any action hereunder or for the payment of the Indebtedness and performance of any obligation hereby guaranteed; (iii) any defense that may arise by reason of lack of authority of Guarantor, any other guarantor of the Loan, or Borrower or any other person or entity, or the voluntary or involuntary dissolution of Borrower or Guarantor, or the failure of Lender to file or enforce a claim against the estate (either in administration, bankruptcy, or any other proceeding) of Borrower or any other person or entity; (iv) any defense based on the failure of Lender to give notice of the existence, creation, or incurring of any new or additional indebtedness or obligation, or of any action or nonaction on the part of any other person whomsoever, or any modification of the terms of the Loan Documents, or the Indebtedness, in connection with any obligation hereby guaranteed; (v) any defense based upon an election of remedies by Lender which destroys or otherwise impairs any subrogation rights of Guarantor or any other guarantor of the Loan or the right of Guarantor to proceed against Borrower or any other guarantor for reimbursement, or both; (vi) any defense based upon failure of Lender to commence an action against Borrower; (vii) any defense based upon acceptance of this Guaranty by Lender; (viii) any defense based upon the invalidity or unenforceability of any of the Loan Documents; (ix) any defense based upon any complete or partial release of liability contained in any of the Loan Documents; (x) any defense based upon any transfer by Borrower of all or any part of the collateral for the Loan; (xi) any defense based upon the failure of Lender to perfect any security or to extend or renew the perfection of any security; and (xii) any other legal or equitable defenses whatsoever

 

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to which Guarantor might otherwise be entitled.

Section 5. Subordination.

If, for any reason whatsoever, Borrower is now or hereafter becomes Indebted (as defined in the Loan Agreement) to Guarantor:

(a) such Indebtedness and all interest thereon and all liens, security interests and rights now or hereafter existing with respect to property of Borrower securing such indebtedness shall, at all times, be subordinate in all respects to the Guaranteed Obligations and to all liens, security interests and rights now or hereafter existing to secure the Guaranteed Obligations;

(b) at any time after the occurrence and during the continuation of an Event of Default, Guarantor shall not be entitled to enforce or receive payment, directly or indirectly, of any such indebtedness of Borrower to Guarantor until the Guaranteed Obligations have been fully and finally paid and performed;

(c) After the occurrence and during the continuation of an Event of Default, Guarantor shall assign and grant to Lender a security interest in all such indebtedness and security therefor, if any, of Borrower to Guarantor now existing or hereafter arising, including any dividends and payments pursuant to debtor relief or insolvency proceedings referred to below. In the event of receivership, bankruptcy, reorganization, arrangement or other debtor relief or insolvency proceedings involving Borrower as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and shall have the right to receive directly from the receiver, trustee or other custodian (whether or not an Event of Default shall have occurred or be continuing under any of the Loan Documents), dividends and payments that are payable upon any obligation of Borrower to Guarantor now existing or hereafter arising, and to have all benefits of any security therefor, until the Guaranteed Obligations have been fully and finally paid and performed. If, notwithstanding the foregoing provisions, Guarantor should receive any payment, claim or distribution that is prohibited as provided above in this Section, Guarantor shall pay the same to Lender immediately, Guarantor hereby agreeing that it shall receive the payment, claim or distribution in trust for Lender and shall have absolutely no dominion over the same except to pay it immediately to Lender; and

(d) Upon the occurrence of an Event of Default, Guarantor shall promptly upon request of Lender from time to time execute such documents and perform such acts as Lender may reasonably require to evidence and perfect its interest and to permit or facilitate exercise of its rights under this Section, including execution and delivery of proofs of claim, further assignments and security agreements, and delivery to Lender of any promissory notes or other instruments evidencing indebtedness of Borrower to Guarantor.

Section 6. Other Liability of Guarantor or Borrower.

If Guarantor is or becomes liable, by endorsement or otherwise, for any indebtedness owing by Borrower to Lender other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may have against Guarantor. If Borrower is or becomes indebted to Lender for any indebtedness other than or in excess of the Guaranteed Obligations, any payment received or recovery realized upon such other indebtedness of Borrower to Lender may be applied to such other indebtedness. This Guaranty is independent of (and shall not be limited by) any other guaranty now existing or hereafter given. Further, Guarantor’s liability under this Guaranty is in addition to any and all other liability Guarantor may have in any other capacity to Lender.

 

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Section 7. [Reserved].

Section 8. Lender Assigns; Disclosure of Information.

This Guaranty is for the benefit of Lender and Lender’s successors and assigns, and in the event of an assignment of the Guaranteed Obligations, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Obligations so assigned, may be transferred with such Guaranteed Obligations. Subject to prior written notice to the Guarantor, Lender may sell or offer to sell the Loan or interests therein to one or more assignees or participants. Guarantor shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith, and to the extent, if any, specified in any such assignment or participation, such assignee(s) or participant(s) shall have the same rights and benefits with respect to the Loan Documents as such person(s) would have if such person(s) were Lender hereunder. Lender may disclose to any such assignee or participant or prospective assignee or participant, to Lender’s affiliates (in each case, provided it or they are subject to the same confidentiality obligations towards Guarantor as applicable to Lender in the Loan Documents), to any regulatory body having jurisdiction over Lender and to any other parties as necessary or appropriate in Lender’s reasonable judgment, any information Lender now has or hereafter obtains pertaining to the Guaranteed Obligations, this Guaranty, or Guarantor, including information regarding any security for the Guaranteed Obligations or for this Guaranty, and/or credit or other information on Guarantor and/or any other person liable, directly or indirectly, for any part of the Guaranteed Obligations.

Section 9. Binding Effect; Joint and Several Liability.

This Guaranty is binding not only on Guarantor, but also on Guarantor’s successors and assigns. Section 10. Governing Law.

The validity, enforcement, and interpretation of this Guaranty, shall for all purposes be governed by and construed in accordance with the laws of the State of Florida and applicable United States federal law, and is intended to be performed in accordance with, and only to the extent permitted by, such laws. All obligations of Guarantor hereunder are payable and performable at the place or places where the Guaranteed Obligations are payable and performable. This Guaranty is an agreement executed under seal. If any Guarantor is a corporation, the designation “(SEAL)” on this Guaranty shall be effective as the affixing of such Guarantor’s corporate seal physically to this Guaranty.

Section 11. Invalidity of Certain Provisions.

If any provision of this Guaranty or the application thereof to any person or circumstance shall, for any reason and to any extent, be declared to be invalid or unenforceable, neither the remaining provisions of this Guaranty nor the application of such provision to any other person or circumstance shall be affected thereby, and the remaining provisions of this Guaranty, or the applicability of such provision to other persons or circumstances, as applicable, shall remain in effect and be enforceable to the maximum extent permitted by applicable law.

Section 12. Costs and Expenses of Enforcement.

Guarantor agrees to pay to Lender on demand all reasonable costs and expenses incurred by Lender in seeking to enforce Lender’s rights and remedies under this Guaranty, including court costs, costs of alternative dispute resolution and reasonable attorneys’ fees and costs, whether or not suit is filed

 

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or other proceedings are initiated hereon. All such reasonable costs and expenses incurred by Lender shall constitute a portion of the Guaranteed Obligations hereunder, shall be subject to the provisions hereof with respect to the Guaranteed Obligations and shall be payable by Guarantor within ten (10) business days of written demand by Lender.

Section 13. No Usury.

It is not the intention of Lender or Guarantor to obligate Guarantor to pay interest in excess of that lawfully permitted to be paid by Guarantor under applicable law. Should it be determined that any portion of the Guaranteed Obligations or any other amount payable by Guarantor under this Guaranty constitutes interest in excess of the maximum amount of interest that Guarantor, in Guarantor’s capacity as guarantor, may lawfully be required to pay under applicable law, the obligation of Guarantor to pay such interest shall automatically be limited to the payment thereof in the maximum amount so permitted under applicable law. The provisions of this Section shall override and control all other provisions of this Guaranty and of any other agreement between Guarantor and Lender.

Section 14. Representations, Warranties, and Covenants of Guarantor.

Until the Guaranteed Obligations are paid and performed in full and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor hereby represents, warrants, and covenants that: (a) Guarantor has a financial interest in Borrower and will derive a material and substantial benefit, directly or indirectly, from the making of the Loan to Borrower and from the making of this Guaranty by Guarantor; (b) this Guaranty is duly authorized and valid, and is binding upon and enforceable against Guarantor; (c) Guarantor is not, and the execution, delivery and performance by Guarantor of this Guaranty will not cause Guarantor to be, in violation of or in default with respect to any law or in default (or at risk of acceleration of indebtedness) under any agreement or restriction by which Guarantor is bound or affected; (d) unless Guarantor is a natural person, Guarantor is duly organized, validly existing, and in good standing under the laws of the state of its organization and has full power and authority to enter into and perform this Guaranty; (e) except as previously disclosed to Lender in writing, there is no litigation pending or, to the knowledge of Guarantor, threatened by or before any tribunal against or affecting Guarantor; (f) all financial statements and written information heretofore furnished to Lender by Guarantor do, and all financial statements and written information hereafter furnished to Lender by Guarantor will, fully and accurately, in all material aspects, present the condition (financial or otherwise) of Guarantor as of their dates and the results of Guarantor’s operations for the periods therein specified; (g) after giving effect to this Guaranty, Guarantor consolidated with its subsidiaries is solvent, is not engaged or about to engage in business or a transaction for which the property of Guarantor is an unreasonably small capital, and does not intend to incur or believe that it will incur debts that will be beyond its ability to pay as such debts mature; (h) Guarantor has read and fully understands the provisions contained in the Note, the Loan Agreement, the Security Agreement and the other Loan Documents. No Loan Documents or other document, certificate or written statement (including, without limitation, any financial statements provided to Lender by Guarantor) furnished to Lender by or on behalf of Guarantor in connection with the Loan Documents contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. Guarantor acknowledges that all such statements, representations and warranties shall be deemed to have been relied upon by Lender as an inducement to make the Loan to Borrower. Guarantor’s representations, warranties and covenants are a material inducement to Lender to enter into the other Loan Documents shall survive the execution hereof and any bankruptcy, foreclosure, transfer of security or other event affecting Borrower, Guarantor, any other party, or any security for all or any part of the Guaranteed Obligations.

 

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Section 15. Notices.

All notices from the Guarantor to Lender and Lender to Guarantor required or permitted by any provision of this Guaranty shall be in writing and sent by registered or certified mail, by nationally recognized overnight delivery service, by facsimile or by electronic communication (e-mail) and addressed as follows:

 

TO LENDER:

   CITY NATIONAL BANK OF FLORIDA
  

100 S.E. 2nd Street, 13th Floor

Miami, FL 33131

   Attention: Legal Department
   E-mail: Greg.Mangram@citynational.com

TO GUARANTOR:

   VENUS CONCEPT LTD.
  

235 Yorkland Blvd, Suite 900

Toronto, Ontario, Canada M2J 4Y8

Attention: Domenic Serafino, CEO

  

                  Michael Mandarello, General Counsel

Facsimile: (855) 907-0115

   E-mail:       dom@venusconcept.com
                      mmandarello@venusconcept.com
   With a copy to:
   (which shall not constitute service):
  

Reed Smith LLP

599 Lexington Avenue

  

New York, New York 10022

Attention: Mark Pedretti

Facsimile: (212) 521-5450

   E-mail: mpedretti@reedsmith.com

Such addresses may be changed by such notice to the other party. Notices sent by registered or certified mail or by overnight delivery service shall be deemed given on the date of its deposit in the United States Mail and, unless sooner actually received, shall be deemed received by the party to whom it is addressed on the third calendar day following the date on which said notice is deposited in the mail, or if a courier system is used, on the date of delivery of the notice; notices sent by facsimile or by electronic communications shall be deemed given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).

Section 16. Cumulative Rights.

All of the rights and remedies of Lender under this Guaranty and the other Loan Documents are cumulative of each other and of any and all other rights at law or in equity, and the exercise by Lender of any one or more of such rights and remedies shall not preclude the simultaneous or later exercise by Lender of any or all such other rights and remedies. No single or partial exercise of any right or remedy shall exhaust it or preclude any other or further exercise thereof, and every right and remedy may be exercised at any time and from time to time. No failure by Lender to exercise, nor delay in exercising, any

 

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right or remedy shall operate as a waiver of such right or remedy or as a waiver of any Event of Default. No notice to or demand on Guarantor in any case shall of itself entitle Guarantor to any other or further notice or demand in similar or other circumstances. No provision of this Guaranty or any right or remedy of Lender with respect hereto, or any default or breach, can be waived, nor can this Guaranty or Guarantor be released or discharged in any way or to any extent, except specifically in each case by a writing intended for that purpose (and which refers specifically to this Guaranty) executed and delivered by Lender to Guarantor.

Section 17. Term of Guaranty.

Without limitation of the provisions of Section 4(b) hereof, this Guaranty shall continue in effect until all the Guaranteed Obligations and all of the obligations of Guarantor to Lender under this Guaranty are fully and finally paid, performed and discharged.

Section 18. Subrogation.

Guarantor shall not have any right of subrogation under any of the Loan Documents or any right to participate in any security for the Guaranteed Obligations or any right to reimbursement, exoneration, contribution, indemnification or any similar rights, until the Guaranteed Obligations have been fully and finally paid, performed and discharged in accordance with Section 17 above, and Guarantor hereby waives all of such rights.

Section 19. [Reserved]

Section 20. [Reserved]

Section 21. Time of Essence.

Time shall be of the essence in this Guaranty with respect to all of Guarantor’s obligations hereunder.

Section 22. Entire Agreement; Counterparts; Construction.

This Guaranty embodies the entire agreement between Lender and Guarantor with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty supersedes all prior agreements and understandings, if any, with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty shall be effective upon execution by Guarantor and delivery to Lender. This Guaranty may not be modified, amended or superseded except in a writing signed by Lender and Guarantor referencing this Guaranty by its date. This Guaranty has been executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement. As used herein, the words “include” and “including” shall be interpreted as if followed by the words “without limitation.”

Section 23. No Third Party Beneficiary.

Except as specifically provided for herein, Guarantor and Lender do not intend the benefits of this Guaranty to inure to any third party (including Borrower) and no third party shall have any status, right or entitlement under this Guaranty.

Section 24. Forum.

 

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Guarantor hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the jurisdiction of any state court or any United States federal court sitting in Miami-Dade County, Florida. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection that Guarantor may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum. Guarantor hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court or any United States federal court sitting in the state specified in the governing law section of this Guaranty may be made by certified or registered mail, return receipt requested, directed to Guarantor at its address for notice set forth in this Guaranty, or at a subsequent address of which Lender received actual notice from Guarantor in accordance with the notice section of this Guaranty, and service so made shall be complete five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Lender to serve process in any manner permitted by law or limit the right of Lender to bring proceedings against Guarantor in any other court or jurisdiction.

Section 25. WAIVER OF JURY TRIAL.

GUARANTOR AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT.

THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[CONTINUES ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Guarantor has duly executed this Third Amended and Restated Guaranty under seal as of the date first written above.

 

GUARANTOR:
VENUS CONCEPT LTD., an Israeli corporation
By:  

/s/ Domenic Serafino

  Domenic Serafino, as CEO

 

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Exhibit 10.5

AMENDMENT TO GENERAL SECURITY AGREEMENT

This Amendment to General Security Agreement (this “Agreement”) is made as of the 9th day of December, 2020 between Venus Concept Canada Corp., as grantor (the “Corporation”) and City National Bank of Florida, as lender (the “Secured Party”).

RECITALS:

 

A.

The Corporation, the Secured Party and certain other parties have entered into a Third Amended and Restated Loan Agreement dated as of the date hereof (as may be amended, restated, modified, supplemented or replaced from time to time, the “Loan Agreement”), which establishes certain credit facilities in favour of the Corporation and certain of its affiliates.

 

B.

As general and continuing collateral security for the payment and satisfaction of its obligations, indebtedness and liability under the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement), the Corporation executed in favour of the Secured Party a general security agreement dated as of May 25, 2017 (amended, restated, modified or supplemented prior to the date hereof, the “Security Agreement”).

 

C.

The Corporation and the Secured Party have agreed to amend the Security Agreement on the terms and conditions hereinafter set forth.

NOW THEREFORE, in consideration of the covenants and agreements contained in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation and the Secured Party agree as follows:

 

1.

Capitalized Terms. All capitalized terms used in this Agreement that are not defined herein shall have the meanings ascribed thereto in the Loan Agreement.

 

2.

Amendments to General Security Agreement.

 

  (a)

Paragraph 1(c) of the Security Agreement is hereby amended by deleting the following phrase:

“(iv) any assets that are not collateral pledged and perfected under the Madryn Loan Documents,”;

and replacing it with the following phrase:

“(iv) any assets that are not collateral pledged and perfected under the Transaction Documents (as defined in the Exchange Agreement),”; and

 

  (b)

The final paragraph of Section 13 of the Security Agreement is hereby deleted in its entirety and replaced with the following:

“The parties hereby affirm and acknowledge that if there exists any inconsistency between the provisions of this Security Agreement and the provision of the Loan Agreement, then the provisions of the Loan Agreement shall prevail, to the extent of such inconsistency.”.

 

3.

Continuing Effect. Except as expressly set forth in this Agreement, all other terms and conditions of the Security Agreement shall remain unchanged and shall continue in full force and effect, as


  may be amended hereby. No amendment or waiver of any other term, condition, covenant, agreement or any other aspect of the Security Agreement is intended or implied. This Agreement is a Loan Document.

 

4.

Reaffirmation and Confirmation. The Corporation hereby ratifies, affirms, acknowledges and agrees that the Loan Agreement and the other Loan Documents to which it is a party represent its valid, enforceable and collectible obligations. The Corporation hereby agrees that this Agreement in no way acts as a release or relinquishment of the Secured Party’s rights securing payments of the Obligations, and the same are hereby ratified and confirmed by the Corporation in all respects.

 

5.

Registration. The Corporation hereby authorizes the Secured Party to file such financing statements and other documents, and to do such other acts, matters and things from time to time as the Secured Party may deem appropriate, in its sole discretion, to perfect, amend or continue any security interest granted under the Security Agreement. The Corporation hereby waives its right under the Personal Property Security Act (Ontario) (the “PPSA”) to receive a printed copy of any financing statement or financing change statement relating to this Agreement or any verification statement or other statement used by the Registrar (as defined in the PPSA) to confirm the registration of any such financing statement or financing change statement.

 

6.

Costs and Expenses. All reasonable costs, fees and expenses incurred by the Secured Party in preparing this Agreement (including all external legal fees incurred by the Secured Party) shall be on the account of the Corporation, and shall form part of the Obligations secured by the Security Agreement.

 

7.

Prior Agreements. This Agreement supersedes and replaces any prior agreements or understandings with respect to any of the matters provided for herein.

 

8.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, as the same may from time to time be in effect.

 

9.

Counterparts. This Agreement may be executed in any number of separate counterparts by any one or more of the parties thereto, and all of such counterparts taken together shall constitute one and the same instrument. Delivery by any party of an executed counterpart of this Agreement by telecopier, PDF or by other electronic means shall be as effective as delivery of a manually executed counterpart of such party.

[Signature page follows.]


IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.

 

VENUS CONCEPT CANADA CORP.
Per:  

/s/ Domenic Serafino

Name: Domenic Serafino
Title: Chief Executive Officer
CITY NATIONAL BANK OF FLORIDA
Per:  

/s/ Greg Mangram

Name: Greg Mangram
Title: Senior Vice President

Amendment to General Security Agreement

Exhibit 10.6

LOAN AND SECURITY AGREEMENT

[MAIN STREET PRIORITY LOAN FACILITY]

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of this 8th day of December, 2020, by and between VENUS CONCEPT USA INC., a Delaware corporation, whose address is 1880 N. Commerce Parkway, Suite 2, Weston, Florida 33326 (the “Borrower”), and CITY NATIONAL BANK OF FLORIDA, its successors and/or assigns (the “Lender”), whose address is 100 S.E. 2nd Street, 13th Floor, Miami, Florida 33131.

RECITALS

A. Borrower has requested and Lender has agreed to make a term loan to Borrower in the original principal amount of FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00) (the “Loan”), to provide additional credit assistance to the Borrower in order to maintain or reinstate ongoing operations and payroll as a result of the COVID-19 pandemic, pursuant to the Main Street Priority Loan Facility as established by the Board of Governors of the Federal Reserve System under Section 13(3) of the Federal Reserve Act, and subject to the terms and conditions contained in this Agreement.

B. Borrower and Lender have negotiated the terms and conditions of, and wish to enter into, this Agreement in order to set forth the terms and conditions of the Loan.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, Borrower and Lender agree as follows:

1. DEFINITIONS. As used in this Agreement the terms listed below shall have the following meanings unless otherwise required by the context:

(a) Bank Product Obligations: Shall mean all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by an Obligor or any subsidiary of an Obligor to the Lender or any affiliate of the Lender pursuant to or evidenced by certain cash management service agreements entered into from time to time by an Obligor or any subsidiary of an Obligor with the Lender or any affiliate of the Lender concerning Bank Products and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.

(b) Bank Products: Shall mean any service or facility extended to an Obligor or any subsidiary of an Obligor by the Lender or any affiliate of the Lender, including: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, or (f) cash management, including controlled disbursement, accounts or services.

(c) Borrower Certification: That certain Main Street Priority Loan Facility Borrower Certifications and Covenants dated as of even date herewith, from Borrower in favor of Lender, as the same may be amended or modified from time to time.

(d) Capital Lease(s): Means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real and personal property by such Person that is accounted for as a capital lease on the balance sheet of such Person.

(e) CARES Act: The Coronavirus Aid, Relief, and Economic Security Act.

(f) Change of Control: A change of ownership in excess of fifty-one percent (51%) of the ownership interests of Borrower or Guarantor.

 

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(g) Collateral: Shall have the meaning ascribed to such term in Section 4 hereof. Collateral shall not include Excluded Property.

(h) EBITDA: The sum of earnings before interest, taxes, depreciation, and amortization.

(i) Excluded Property: Means, with respect to Borrower: (a) any personal property (including, without limitation, motor vehicles) in respect of which perfection of a lien is not governed by the UCC and (b) any permit, lease, license, contract or other agreement if the grant of a security interest in such permit, lease, license, contract or other agreement in the manner contemplated by the Loan Documents, under the terms thereof or under applicable law or regulation, is prohibited and would result in the termination thereof or give the other parties thereto the right to terminate, accelerate or otherwise alter Borrower’s rights, titles and interests thereunder (including upon the giving of notice or the lapse of time or both); provided, that, (i) any such limitation described in the foregoing clause (b) on the security interests granted under the Loan Documents shall only apply to the extent that any such prohibition is not rendered ineffective pursuant to the UCC that has the effect of permitting the grant of a security interest and preventing any termination, acceleration or alteration of Borrower’s rights, titles and interests thereunder as a result of such grant of a security interest and (ii) in the event of the termination or elimination of any such prohibition or the requirement for any consent contained in any applicable law, regulation, permit, lease, license, contract or other agreement, or upon the granting of any such consent, or waiving or terminating any requirement for such consent, a security interest in such permit, lease, license, contract or other agreement shall be automatically and simultaneously granted under the Loan Documents and such permit, lease, license, contract or other agreement shall be included as Collateral.

(j) Facility: The Main Street Priority Loan Facility, which has been authorized under Section 13(3) of the Federal Reserve Act.

(k) FAQS: The Main Street Lending Program Frequently Asked Questions as published by the Board of Governors of the Federal Reserve System, as the same may be amended or modified from time to time.

(l) Financing Statement(s): The financing statement(s) from Borrower to Lender to perfect Lender’s security interest in the Collateral.

(m) GAAP: Generally accepted accounting principles consistently applied, as adopted in the United States, and as amended from time to time.

(n) Governmental Assignee: Shall have the meaning ascribed to such term in the instructions to the Borrower Certification.

(o) Governmental Authority: Any governmental or quasi-governmental authority, agency, authority, board, commission, or governing body authorized by federal, state or local laws or regulations as having jurisdiction over the Lender or the Borrower or the Guarantor.

(p) Guarantor: VENUS CONCEPT USA INC., a Delaware corporation, and any other individual or entity now or hereafter guaranteeing the Loan.

(q) Guaranty: That certain Guaranty of Payment and Performance dated as of even date herewith from Guarantor in favor of Lender, as the same may be amended or modified from time to time.

(r) Loan: That certain term loan in the amount of FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00), made pursuant to the Facility, as evidenced by the Note and other Loan Documents as provided herein.

 

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(s) Loan Documents: Any and all documents evidencing, securing, or executed in connection with the Loan, including, without limitation, the Note, this Agreement, the Borrower Certification, the Guaranty, and the Financing Statements.

(t) Madryn Debt: Means the indebtedness outstanding under those certain secured subordinated convertible notes issued by Borrower pursuant to that certain Securities Exchange and Registration Rights Agreement dated as of the date hereof by and among Borrower, the Guarantors (as defined therein), each Investor (as defined therein) party thereto and MADRYN HEALTH PARTNERS, LP, in the principal amount of $26,695,110.54, which indebtedness is guaranteed by Borrower pursuant to that certain Guaranty and Security Agreement to be dated as of the date of funding of the Loan.

(u) Mortgage Debt: Shall have the meaning given to such term in the FAQS.

(v) Note: That certain Promissory Note dated as of even date herewith from Borrower in favor of Lender in the principal amount of $50,000,000.00, as the same may be amended, restated, modified or replaced from time to time.

(w) Obligations: Shall mean all loans, advances and other financial accommodations made or extended by Lender to an Obligor, including, without limitation, those arising pursuant to the Note and the Loan Agreement, all interest accrued thereon (including interest which would be payable as post-petition in connection with any bankruptcy or similar proceeding, whether or not permitted as a claim thereunder), any fees due the Lender under the Loan Documents, any expenses incurred by the Lender under the Loan Documents and any and all other liabilities and obligations of an Obligor to the Lender, including any reimbursement obligations of an Obligor to Lender in respect of any letter of credit issued by the Lender for the account of an Obligor and surety bonds, and all Bank Product Obligations of an Obligor, all in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, together with any and all renewals or extensions thereof.

(x) Obligor: Shall mean the Borrower, any subsidiary of the Borrower, any guarantor, accommodation endorser, third party pledgor, or any other party liable with respect to the Obligations.

(y) Permitted Debt: Shall mean (i) the Loan, (ii) the endorsement of checks for collection in the ordinary course of business, (iii) debt payable to suppliers and other trade creditors in the ordinary course of business on ordinary and customary trade terms and which is not past due, (iv) unsecured intercompany debt, (v) Mortgage Debt, (vi) any existing debt owed by Borrower or to Lender, (vii) purchase money debt (including obligations in respect of Capital Leases) hereafter incurred by Borrower to finance the purchase of fixed assets, and renewals, refinancings and extensions thereof; provided, that, (x) the total of all such debt for Borrower taken together shall not exceed an aggregate principal amount of $500,000.00 at any one time outstanding, (y) such debt when incurred shall not exceed the purchase price of the asset(s) financed and (z) no such debt shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing, (viii) unsecured debt in respect of netting services, overdraft protections, employee credit cards programs, automatic clearinghouse arrangements and similar arrangements in each case in connection with deposit accounts and debt arising from the honoring of a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided, that, the aggregate outstanding principal amount of such debt shall not at any time exceed $750,000.00, (ix) unsecured debt subordinated upon terms reasonably satisfactory to Lender in all respects, and (x) the Madryn Debt.

(z) Permitted Liens: Shall mean (i) liens securing obligations under the Loan; (ii) liens on real property in connection with loans with respect to which substantially all of the proceeds were used for acquisition, construction, fit-out, and/or renovation of such property; (iii) liens securing Permitted Debt that are junior or pari-passu to any lien securing the Loan; (iv) liens on receivables assets and related assets incurred in connection with a receivables facility, provided that such debt is secured only by the newly acquired property; (v) liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith; (vi) statutory liens securing claims or demands of materialmen, suppliers, producers, mechanics, carriers,

 

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warehousemen, landlords and other Persons imposed without action of such parties; (vii) liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than liens imposed by ERISA); (viii) liens that are rights of set-off, bankers’ liens or similar non-consensual liens relating to deposit or securities accounts in favor of banks, other depositary institutions and securities intermediaries arising in the ordinary course of business of Borrower; (ix) liens on limited recourse equipment financings (including equipment capital or finance leasing and purchase money equipment loans) secured only by the acquired equipment; (x) deposits to secure the performance of bids, trade contracts and leases (other than indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (xi) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; (xii) liens securing judgments for the payment of money (or appeal or other surety bonds relating to such judgments) not constituting an Event of Default; (xiii) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; (xiv) liens of a collection bank arising under Section 4-210 of the UCC on items in the course of collection; (xv) reservations, limitations, provisos and conditions expressed in any original grants from the crown or other grants of real or immovable property, or interest therein, which do not materially affect the use of the affected land for the purpose for which it was used by that Person; (xvi) security given to a public utility or Governmental Authority when required by such utility or authority (excluding, for the avoidance of doubt, security in connection with Indebtedness for borrowed money) in connection with the operations of that Person in the ordinary course of its business provided that such security does not materially impair the use of the affected property for the purpose for which it was used by that Person; and (xvii) liens arising from precautionary UCC financing statements or similar filings under applicable law regarding operating leases entered into by the Borrower in the ordinary course of business.

(aa) Person: A natural person, a partnership, a joint venture, an unincorporated association, a limited liability company, a corporation, a trust, any other legal entity, or any Governmental Authority.

(bb) SPV: MS FACILITIES LLC, a Delaware limited liability company.

(cc) UCC: Shall mean the Uniform Commercial Code in effect in the State of Delaware from time to time. Any term used in this Agreement and in any Financing Statement filed in connection herewith which is defined in the UCC and not otherwise defined in this Agreement or in any other Loan Document has the meaning given to the term in the UCC.

(dd) Unmatured Event of Default: Any event that, if it continues uncured, will, with lapse of time or notice, or both, constitute an Event of Default hereunder and under the other Loan Documents.

2. LOAN. All Loan proceeds under the Note shall be funded within three (3) business days of the date of the Commitment Letter (as defined in Section 6(gg) below).

3. EXPENSES: Borrower shall pay all fees and charges incurred in the procuring and making of the Loan and all other expenses incurred by Lender during the term of the Loan, including without limitation, Florida Documentary Stamp Taxes, if applicable, and the fees of the attorneys for Lender. The Borrower shall also pay any and all insurance premiums, taxes, assessments, and other charges, liens and encumbrances upon the Collateral. Such amounts, unless sooner paid, shall be paid from time to time as Lender shall request either to the Person to whom such payments are due or to Lender if Lender has paid the same.

4. SECURITY AGREEMENT.

(a) Security for Obligations. As security for the payment and performance of the Obligations, the Borrower does hereby pledge, assign, transfer, deliver and grant to the Lender, for its own benefit and as agent for its affiliates, a continuing and unconditional security interest in and to any and all property of the Borrower, of

 

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any kind or description, tangible or intangible, wheresoever located and whether now existing or hereafter arising or acquired, including the following (all of which property, along with the products and proceeds therefrom, are individually and collectively referred to as the “Collateral”):

(i) all property of, or for the account of, the Borrower now or hereafter coming into the possession, control or custody of, or in transit to, the Lender or any agent or bailee for the Lender or any parent, affiliate or subsidiary of the Lender or any participant with the Lender in the Obligations (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise), including all earnings, dividends, interest, or other rights in connection therewith and the products and proceeds therefrom, including the proceeds of insurance thereon; and

(ii) the additional property of the Borrower, whether now existing or hereafter arising or acquired, and wherever now or hereafter located, together with all additions and accessions thereto, substitutions, betterments and replacements therefor, products and Proceeds therefrom, and all of the Borrower’s books and records and recorded data relating thereto (regardless of the medium of recording or storage), together with all of the Borrower’s right, title and interest in and to all computer software required to utilize, create, maintain and process any such records or data on electronic media, identified and set forth as follows:

1. All Accounts and all Goods whose sale, lease or other disposition by the Borrower has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, the Borrower, or rejected or refused by an Account Debtor;

2. All Inventory, including raw materials, work-in-process and finished goods;

3. All Goods (other than Inventory), including embedded software, Equipment, vehicles, furniture and Fixtures;

4. All Software and computer programs;

5. All Securities, Investment Property, Financial Assets and Deposit Accounts;

6. All Chattel Paper, Electronic Chattel Paper, Instruments, Documents, Letter of Credit Rights, all proceeds of letters of credit, Health-Care-Insurance Receivables, Supporting Obligations, notes secured by real estate, Commercial Tort Claims and General Intangibles, including Payment Intangibles; and

7. All Proceeds (whether Cash Proceeds or Noncash Proceeds) of the foregoing property, including all insurance policies and proceeds of insurance payable by reason of loss or damage to the foregoing property, including unearned premiums, and of eminent domain or condemnation awards.

Notwithstanding anything to the contrary set forth herein, Collateral shall not include any Excluded Property.

(b) Possession and Transfer of Collateral. Until an Event of Default has occurred hereunder, the Borrower shall be entitled to possession or use of the Collateral (other than Collateral required to be delivered to the Lender pursuant to this Section 4). The cancellation or surrender of any promissory note evidencing the Obligations, upon payment or otherwise, shall not affect the right of the Lender to retain the Collateral for any other of the Obligations. The Borrower shall not sell, assign (by operation of law or otherwise), license, lease or otherwise dispose of, or grant any option with respect to any of the Collateral, except that the Borrower may sell inventory in the ordinary course of Borrower’s business.

(c) Financing Statements. The Borrower shall, at the Lender’s request, at any time and from time to time, execute and deliver to the Lender such financing statements, amendments and other documents and do

 

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such acts as the Lender deems necessary in order to establish and maintain valid, attached and perfected security interests in the Collateral in favor of the Lender, for its own benefit and as agent for its affiliates. The Borrower hereby irrevocably authorizes the Lender at any time, and from time to time, to file in any jurisdiction any initial financing statements and amendments thereto without the signature of the Borrower that (a) indicate the Collateral (i) is comprised of all assets of the Borrower or words of similar effect, regardless of whether any particular asset comprising a part of the Collateral falls within the scope of Article 9 of the UCC, or (ii) as being of an equal or lesser scope or within greater detail as the grant of the security interest set forth herein, and (b) contain any other information required by Section 5 of Article 9 of the UCC. The Borrower further ratifies and affirms its authorization for any financing statements and/or amendments thereto, executed and filed by the Lender in any jurisdiction prior to the date of this Agreement. In addition, the Borrower shall make appropriate entries on its books and records disclosing the security interests of the Lender, for its own benefit and as agent for its affiliates, in the Collateral.

(d) Preservation of the Collateral. The Lender may, but is not required, to take such actions from time to time as the Lender deems appropriate to maintain or protect the Collateral. The Lender shall have exercised reasonable care in the custody and preservation of the Collateral if the Lender takes such action as the Borrower shall reasonably request in writing which is not inconsistent with the Lender’s status as a secured party, but the failure of the Lender to comply with any such request shall not be deemed a failure to exercise reasonable care; provided, however, the Lender’s responsibility for the safekeeping of the Collateral shall (i) be deemed reasonable if such Collateral is accorded treatment substantially equal to that which the Lender accords its own property, and (ii) not extend to matters beyond the control of the Lender, including acts of God, war, insurrection, riot or governmental actions. In addition, any failure of the Lender to preserve or protect any rights with respect to the Collateral against prior or third parties, or to do any act with respect to preservation of the Collateral, not so requested by the Borrower, shall not be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral. The Borrower shall have the sole responsibility for taking such action as may be necessary, from time to time, to preserve all rights of the Borrower and the Lender in the Collateral against prior or third parties. Without limiting the generality of the foregoing, where Collateral consists in whole or in part of securities, the Borrower represents to, and covenants with, the Lender that the Borrower has made arrangements for keeping informed of changes or potential changes affecting the securities (including rights to convert or subscribe, payment of dividends, reorganization or other exchanges, tender offers and voting rights), and the Borrower agrees that the Lender shall have no responsibility or liability for informing the Borrower of any such or other changes or potential changes or for taking any action or omitting to take any action with respect thereto.

(e) Other Actions as to any and all Collateral. The Borrower further agrees to take any other action reasonably requested by the Lender to ensure the attachment, perfection and priority of, and the ability of the Lender to enforce, the security interest of the Lender, for its own benefit and as agent for its affiliates, in any and all of the Collateral including (a) causing the Lender’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of the Lender to enforce, the security interest of the Lender, for its own benefit and as agent for its affiliates, in such Collateral, (b) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Lender to enforce, the security interest of the Lender, for its own benefit and as agent for its affiliates, in such Collateral, (c) obtaining governmental and other third party consents and approvals, including any consent of any licensor, lessor or other Person obligated on Collateral, (d) obtaining waivers from mortgagees and landlords in form and substance satisfactory to the Lender, and (e) taking all actions required by the UCC in effect from time to time or by other law, as applicable in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction. The Borrower further agrees to indemnify and hold the Lender harmless against claims of any Persons not a party to this Agreement concerning disputes arising over the Collateral.

(f) Collateral in the Possession of a Warehouseman or Bailee. If any material portion of the Collateral at any time is in the possession of a warehouseman or bailee, the Borrower shall promptly notify the Lender thereof, and shall use commercially reasonable efforts to obtain a collateral access agreement upon request of the Lender.

 

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(g) Letter-of-Credit Rights. If the Borrower at any time is a beneficiary under a letter of credit now or hereafter issued in favor of the Borrower, the Borrower shall promptly notify the Lender thereof and, at the request and option of the Lender, the Borrower shall, pursuant to an agreement in form and substance satisfactory to the Lender, either (i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Lender, for its own benefit and as agent for its affiliates, of the proceeds of any drawing under the letter of credit, or (ii) arrange for the Lender, for its own benefit and as agent for its affiliates, to become the transferee beneficiary of the letter of credit, with the Lender agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided in this Agreement.

(h) Commercial Tort Claims. If the Borrower shall at any time hold or acquire a Commercial Tort Claim, the Borrower shall promptly notify the Lender in writing signed by the Borrower of the details thereof and grant to the Lender, for its own benefit and as agent for its affiliates, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, in each case in form and substance satisfactory to the Lender, and shall execute any amendments hereto deemed reasonably necessary by the Lender to perfect the security interest of the Lender, for its own benefit and as agent for its affiliates, in such Commercial Tort Claim.

(i) Electronic Chattel Paper and Transferable Records. If the Borrower at any time holds or acquires an interest in any electronic chattel paper or any “transferable record”, as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, the Borrower shall promptly notify the Lender thereof and, at the request of the Lender, shall take such action as the Lender may reasonably request to vest in the Lender control under Section 9-105 of the UCC of such electronic chattel paper or control under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Lender agrees with the Borrower that the Lender will arrange, pursuant to procedures satisfactory to the Lender and so long as such procedures will not result in the Lender’s loss of control, for the Borrower to make alterations to the electronic chattel paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to make without loss of control.

All capitalized words and phrases used in this Section 4 and not otherwise specifically defined in this Agreement shall have the respective meanings assigned to such terms in the UCC, to the extent the same are used or defined therein.

5. WARRANTIES AND REPRESENTATIONS. Borrower and/or Guarantor, as applicable, represent and warrant (which representations and warranties shall be deemed continuing) as follows:

(a) Organization Status. Borrower (i) is duly organized under the laws of the State of Delaware, (ii) is in good standing under the laws of the State of Delaware and Florida (iii) is qualified to do business in the State of Delaware and Florida and (iv) has shares of stock which have been duly and validly issued. Guarantor (i) is duly organized under the laws of the State of Delaware, (ii) is in good standing under the laws of the State of Delaware, (iii) is qualified to do business in the State of Delaware, and (iv) has shares of stock which have been duly and validly issued.

(b) Place of Business. The principal place of business, and the location of all Collateral (other than Inventory) and books and records of the Borrower is set forth in the preamble to this Agreement. The Borrower shall promptly notify the Lender of any change in such location. The Borrower will not remove or permit the Collateral to be removed from such location without the prior written consent of the Lender, except for inventory sold in the usual and ordinary course of the Borrower’s business.

(c) Compliance with Laws. Borrower and Guarantor are in compliance with all laws, regulations, ordinances and orders of all Governmental Authorities. Borrower and Guarantor are not engaged in any activity that is illegal under federal, state or local law.

 

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(d) Accurate Information. All information now and hereafter furnished to Lender is and will be true, correct and complete in all material respects. Any such information relating to Borrower’s and Guarantor’s financial condition has and will accurately reflect such financial condition as of the date(s) thereof, (including all contingent liabilities of every type), and Borrower and Guarantor further represent that its financial condition has not changed materially or adversely since the date(s) of such documents, including Borrower’s calculation of EBITDA for fiscal year end 2019.

(e) Authority to Enter into Loan Documents. The Borrower and the Guarantor have full power and authority to enter into the Loan Documents and consummate the transactions contemplated hereby, and the facts and matters expressed or implied in the opinions of its legal counsel are true and correct.

(f) Validity of Loan Documents. The Loan Documents have been approved by those Persons having proper authority, and are in all respects legal, valid and binding according to their terms.

(g) Conflicting Transactions. The consummation of the transaction hereby contemplated and the performance of the obligations of Borrower and Guarantor under and by virtue of the Loan Documents will not result in any breach of, or constitute a default under, any lease, loan or credit agreement, or other instrument to which Borrower or Guarantor is a party or by which they may be bound or affected.

(h) Pending Litigation. There are no actions, suits or proceedings pending against Borrower, Guarantor or the Collateral, or circumstances which could lead to such action, suits or proceedings against or affecting Borrower, Guarantor or the Collateral, or involving the validity or enforceability of any of the Loan Documents, before or by any Governmental Authority, except actions, suits and proceedings which have been specifically disclosed to and approved by Lender in writing; and Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Authority.

(i) Condition of Collateral. The Collateral is not now damaged or injured as a result of any fire, explosion, accident, flood or other casualty.

(j) Discharge of Liens and Taxes. Borrower and Guarantor are current (or will be current with any Loan proceeds specified for eligible tax payments) on all federal, state, and local taxes, including but not limited to income taxes, payroll taxes, real estate taxes, and sales taxes. Borrower and Guarantor have duly filed, paid and/or discharged all other taxes or other claims that may become a lien on any of its property or assets, except to the extent that such items are being appropriately contested in good faith and an adequate reserve for the payment thereof is being maintained.

(k) Sufficiency of Capital. Borrower and Guarantor are not, and after consummation of this Agreement and after giving effect to all indebtedness incurred and liens created by Borrower in connection with the Note and any other Loan Documents, will not be, insolvent within the meaning of 11 U.S.C. § 101, as in effect from time to time.

(l) ERISA. Each employee pension benefit plan, as defined in Employee Retirement Income Security Act of 1974, as amended (“ERISA”), maintained by Borrower or Guarantor meets, as of the date hereof, the minimum funding standards of ERISA and all applicable regulations thereto and requirements thereof, and of the Internal Revenue Code of 1986, as amended. No “Prohibited Transaction” or “Reportable Event” (as both terms are defined by ERISA) has occurred with respect to any such plan.

(m) No Default. Borrower and Guarantor are not in default in any material respect under any agreement or instrument to which it is a party or by which it may be bound which would individually or in the aggregate have a material adverse effect on the financial condition or business of Borrower or Guarantor.

 

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(n) EBITDA Leverage Condition. Borrower meets the EBITDA leverage condition of the Facility.

(o) Eligible Borrower. Borrower represents and warrants to Lender that Borrower is an Eligible Borrower (as that term is defined under the Facility), and that the Borrower:

(i) is a Business (as defined in the Borrower Certification) that was established prior to March 13, 2020;

(ii) is not an Ineligible Business, as that term is described under 13 CFR 120.110(b)- (j) and (m)-(s), as modified by regulations implementing the Paycheck Protection Program (“PPP”) established by Section 1102 of the CARES Act on or before April 24, 2020;

(iii) when aggregated with its affiliates (in accordance with the Instructions to the Borrower Certification), either: (i) has 15,000 employees or fewer, or (ii) had 2019 annual revenues of $5,000,000,000.00 or less;

(iv) is created or organized in the United States or under the laws of the United States and has significant operations in and a majority of its employees based in the United States, consistent with Section 4003(c)(3)(C) of the CARES Act;

(v) does not and will not also participate in any other Main Street Lending Program loan or the Primary Market Corporate Credit Facility; and

(vi) has not received specific support pursuant to Subtitle A of Title IV of the CARES Act.

(p) Other Indebtedness. Borrower represents and warrants to Lender that, as of the date hereof, (i) the Borrower has other indebtedness, and (ii) the Borrower has obtained any required consents from the lenders of such other indebtedness to enter into this Loan, or such consents have otherwise been waived or no such consents are required.

6. COVENANTS. Borrower and the Guarantor, as applicable, covenant and agree with Lender as follows:

(a) Taxes. Borrower certifies that it has filed or caused to be filed all federal, state and other tax returns which are required to be filed, and have paid or caused to be paid all taxes as shown on said returns or in any manner due to be paid (including, but not limited to, ad valorem and personal property taxes) or on any assessment received by Borrower and not being contested in good faith, to the extent that such taxes have become due.

(b) Notice of Litigation. Borrower shall promptly give Lender written notice of (a) a judgment entered against Borrower, or (b) the commencement of any action, suit, claim, counterclaim or proceeding against or investigation of Borrower which, if adversely determined, would materially adversely affect the business of Borrower, or which questions the validity of this Agreement or the Note, or any other actions or agreements taken or to be made pursuant to any of the foregoing.

(c) Notice of Default. Borrower shall promptly give Lender written notice of any act of default under any agreement with Lender or under any other contract to which Borrower is a party and of any acceleration of indebtedness caused thereby which would have a materially adverse affect to the business of Borrower.

 

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(d) Reports. Borrower shall promptly furnish Lender with copies of all governmental agency, and other special reports pertaining to or affecting Borrower, which would materially adversely affect the business of Borrower.

(e) Change of Control. Borrower and/or the Guarantor shall not have a Change of Control without the prior written approval of the Lender, which approval shall not be unreasonably withheld. Borrower and Guarantor shall at all times comply with the Lender’s standard and customary “know your customer” reviews and clearance in connection with any approved Change of Control.

(f) Ownership of Borrower. Borrower and/or the direct and indirect owners of Borrower are not “Specially Designated Nationals” by the Office of Foreign Asset Control. No owner of twenty (20%) or more of Borrower is (i) incarcerated, on probation or parole; (ii) subject to an indictment, criminal arraignment or any other means of formal criminal charges brought in any jurisdiction; or (iii) convicted of a felony in the last five (5) years.

(g) Change in Fiscal Year. Borrower shall not change its fiscal year without the prior written consent of Lender. Borrower’s fiscal year ends on December 31.

(h) No Sale of Assets. Borrower and Guarantor shall not, during the term of the Loan, transfer any material portion of its respective assets unless such transfer is in the ordinary course of Borrower’s or Guarantor’s business, for fair market value and such fair market value is given to Borrower or Guarantor, in its sole name, and such transfer will not have a material adverse effect on the financial condition of Borrower or Guarantor and/or its ability to perform the obligations hereunder, as determined by Lender in its sole and absolute discretion.

(i) Title to Collateral. Borrower will deliver to Lender, on demand, any contracts, bills of sale, statements, receipted vouchers or agreements under which Borrower claims title to any of the Collateral.

(j) Payment of Debts. Borrower shall pay and discharge when due, and before subject to penalty or further charge, and otherwise satisfy before maturity or delinquency, all obligations, debts, taxes, and liabilities of whatever nature or amount, except those which Borrower in good faith disputes.

(k) Collection of Insurance Proceeds. Borrower will cooperate with Lender in obtaining for Lender the benefits of any insurance or other proceeds lawfully or equitably payable to it in connection with the transaction contemplated hereby and the collection of any indebtedness or obligation of Borrower to Lender incurred hereunder.

(l) Further Assurances and Preservation of Security. Borrower will do all acts and execute all documents for the better and more effective carrying out of the intent and purposes of this Agreement, as Lender shall reasonably require from time to time, and will do such other acts necessary or desirable to preserve and protect the Collateral at any time securing or intending to secure the Note, as Lender may require.

(m) No Assignment. Borrower shall not assign this Agreement or any interest therein and any such assignment is void and of no effect. Lender may assign this Agreement and any other Agreements contemplated hereby, and all of its rights hereunder and thereunder, and all provisions of this Agreement shall continue to apply to the Loan. Lender also shall have the right to participate the Loan with any other lending institution.

(n) Access to Books and Records. Borrower shall allow Lender, or its agents, after reasonable prior notice and during reasonable normal business hours, to access Borrower’s books, records and such other documents, and allow Lender, at Borrower’s expense, to inspect, audit and examine the same and to make extracts therefrom and to make copies thereof.

(o) Business Continuity. Borrower shall conduct its business in substantially the same manner and locations as such business is now and has previously been conducted during the term of the Loan.

 

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(p) Insurance.

(A) Borrower shall obtain, maintain and keep in full force and effect during the term of the Loan adequate insurance coverage, with all premiums paid thereon and without notice or demand, with respect to its properties and business against loss or damage of the kinds and in the amounts customarily insured against by companies of established reputation engaged in the same or similar businesses including, without limitation:

(i) Public liability insurance insuring against all claims for personal or bodily injury, death, or property damage in an amount of not less than $1,000,000.00 single limit coverage, and $2,000,000.00 in the aggregate. Such policy shall include an additional insured endorsement naming the Lender as loss payee; and

(ii) Insurance in such amounts and against such other casualties and contingencies as may from time to time be required by Lender.

(B) All policies of insurance required hereunder shall: (i) be written by carriers which are licensed or authorized to transact business in the State of Florida, and are rated “A” or higher, Class XII or higher, according to the latest published Best’s Key Rating Guide and which shall be otherwise acceptable to Lender in all other respects, (ii) provide that the Lender shall receive thirty (30) days’ prior written notice from the insurer before a cancellation, modification, material change or non-renewal of the policy becomes effective, and (iii) be otherwise satisfactory to Lender.

(C) Borrower shall not, without the prior written consent of Lender, take out separate insurance concurrent in form or contributing with regard to any insurance coverage required by Lender.

(D) At all times during the term of the Loan, Borrower shall have delivered to Lender the original (or a certified copy) of all policies of insurance required hereby, together with receipts or other evidence that the premiums therefor have been paid.

(E) Not less than thirty (30) days prior to the expiration date of any insurance policy, Borrower shall deliver to Lender the original (or certified copy), or the original certificate, as applicable, of each renewal policy, together with receipts or other evidence that the premiums therefor have been paid.

(F) The delivery of any insurance policy and any renewals thereof, shall constitute an assignment thereof to Lender, and Borrower hereby grants to Lender a security interest in all such policies, in all proceeds thereof and in all unearned premiums therefor.

(q) Subordination of Debt. Borrower will fully subordinate all of the Borrower’s debts owed to third parties, including, without limitation, officers, employees, stockholders, and affiliates, upon terms and conditions acceptable to Lender, other than Permitted Debt which is not expressly required to be subordinated.

(r) Indemnification. Borrower and Guarantor hereby indemnify and hold Lender, its directors, officers, agents, employees and attorneys harmless from and against any liability, loss, expenses, damage of any nature, and claims, including, without limitation, brokers’ claims, arising in connection with the Loan, except for any liabilities, losses, expenses, damages and claims arising out of Lender’s breach of contract, bad faith, gross negligence or willful misconduct.

(s) Indebtedness. During the term of the Loan, Borrower shall not incur, create, assume or permit to exist any indebtedness or liability on account of advances or deposits, any indebtedness or liability for borrowed money, any indebtedness constituting the deferred purchase price of any property or assets, any indebtedness owed under any conditional sale or title retention agreement, contingent obligations pursuant to guaranties, endorsements, letters of credit and other secondary liabilities, or any other indebtedness or liability

 

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evidenced by notes, bonds, debentures or similar obligations without the prior written approval of Lender, except for Permitted Debt.

(t) Liens. Borrower will not, nor will it permit any subsidiary to, create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, securing any debt for borrowed money or any obligations evidenced by a bond, debenture, note, loan agreement or other similar instrument, or any guarantee of the foregoing, other than Permitted Liens.

(u) Cancellation or Reduction of Lines of Credit. Borrower will not seek to cancel or reduce any of its committed lines of credit with the Lender or any other lender until (i) the Loan is repaid in full or (ii) neither the SPV nor a Governmental Assignee holds an interest in the Loan in any capacity.

(v) Solvency and Bankruptcy. The Borrower has a reasonable basis to believe that, as of the date of origination of the Loan, and after giving effect to such Loan, the Borrower has the ability to meet its financial obligations for at least the next ninety (90) days and does not expect to file for bankruptcy during that time period.

(w) Compensation, Stock Repurchase, and Capital Distribution Restrictions. The Borrower will follow compensation, stock repurchase, and capital distribution restrictions that apply to direct loan programs under Section 4003(c)(3)(A)(ii) of the CARES Act, including, without limitation:

(i) Until twelve (12) months after the Loan has been repaid, Borrower shall not buyback stock of equity securities listed on a national securities exchange of Borrower or a parent of Borrower (exceptions for contractual obligations entered in to prior to March 27, 2020);

(ii) Borrower shall not make dividend payments or capital distributions on common stock of Borrower (except that an S-corporation or other tax pass-through entity that is a Borrower may make distributions to the extent reasonably required to cover its owners’ tax obligations in respect of the entity’s earnings); and

(iii) From the date hereof until twelve (12) months after the Loan has been repaid, Borrower shall comply with the compensation limits set out in Section 4004 of the CARES Act.

(x) Eligible To Participate in the Facility. The Borrower is eligible to participate in the Facility, including in light of the conflicts of interest prohibition in Section 4019(b) of the CARES Act. In addition, Borrower certifies to Lender that it has not obtained, and will not obtain, (i) another loan under the Facility, (ii) any other Main Street Lending Program loan, or (iii) a Primary Market Corporate Credit Facility.

(y) Payroll Maintenance and Employee Retention. The Borrower will make commercially reasonable efforts to maintain its payroll and retain its employees during the time the Loan is outstanding.

(z) Priority of Loan. At the time of origination of the Loan and at all times during the term of the Loan, the Loan shall be senior to, or pari passu with, in terms of priority and security, the Borrower’s other loans or debt instruments, other than Mortgage Debt.

(aa) Repayment of Other Indebtedness. Borrower will not repay the principal balance of, or pay any interest on, any debt unless the principal or interest payment is mandatory and due, until (i) the Loan is repaid in full or (ii) neither the SPV nor a Governmental Assignee holds an interest in the Loan in any capacity, provided that Borrower may, at the time of origination of the Loan, refinance existing debt owed by the Borrower to a lender that is not the Lender.

With respect to debt that predates the Loan, principal and interest payments are “mandatory and due”: (i) on the future date upon which they were scheduled to be paid as of the date of origination of the Loan, or (ii) upon

 

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the occurrence of an event that automatically triggers mandatory prepayments under a contract for indebtedness that the Borrower executed prior to the date of origination of the Loan, except that any such prepayments triggered by the incurrence of new debt can only be paid (i) if such prepayments are de minimis, or (ii) under the Facility at the time of origination of the Loan.

For the avoidance of doubt, Borrower may continue to pay, and Lender may request that Borrowers pay, interest or principal payments on outstanding debt on (or after) the payment due date, provided that the payment due date was scheduled prior to the date of origination of the Loan. Borrower may not pay, and Lender may not request that Borrower pay, interest or principal payments on such debt ahead of schedule during the life of the Loan, unless required by a mandatory prepayment clause as specifically permitted above.

For future debt incurred by the Borrower in compliance with the terms and conditions of the Facility, principal and interest payments are “mandatory and due” on their scheduled dates or upon the occurrence of an event that automatically triggers mandatory prepayments.

As to repayment of a loan owed to an owner or to an affiliate of the Borrower, such repayment shall be allowed provided that the loan is a bona fide loan and repayment is made when mandatory and due. A loan owed to an owner or to an affiliate of the Borrower shall be considered “bona fide” if (i) it is a written instrument with a stated interest rate, a stated maturity date, and terms that are at least as favorable to the Borrower as market terms for similar loans at the time of origination; (ii) such owner or affiliate of the Borrower has a reasonable expectation of repayment, including that payments on the loan are not deferred; (iii) the debt is enforceable under state law; and (iv) such owner or affiliate of the Borrower has remedies upon default (e.g., a security interest or position with respect to other creditors).

Borrower hereby acknowledges and agrees that Lender may require, in its sole and absolute discretion, additional documentation from Borrower relating to any loan owed to an owner or to an affiliate of the Borrower, including, without limitation, promissory notes or other evidence of such debt, as well as affidavits or certifications from Borrower, in order to confirm that such loan is bona fide.

(bb) Refinancing of Existing Debt. Any existing debt owed by the Borrower to a lender that is not the Lender that is to be refinanced with Loan proceeds shall be repaid in accordance with the terms and conditions set forth in the Borrower Certification, the Facility and the CARES Act, and if such debt is owed to an owner or to an affiliate of the Borrower, then it may only be refinanced with Loan proceeds if it is deemed bona fide, as more particularly described in Section 6(aa) above.

(cc) Mandatory Prepayment. If, on any date (such date, a “Trigger Date”), the Board of Governors of the Federal Reserve System or a designee thereof has, after consultation with Lender, notified Lender in writing that the Borrower has materially breached, made a material misrepresentation with respect to or otherwise failed to comply with certifications in Section 2 (CARES Act Borrower Eligibility Certifications and Covenants) or Section 3 (FRA and Regulation A Borrower Eligibility Certifications) of the Borrower Certification in any material respect or that any such certification has failed to be true and correct in any material respect, then Lender shall promptly so notify the Borrower and the Borrower shall, no later than two (2) business days after such Trigger Date, prepay the Loan in full, along with any accrued and unpaid interest thereon.

(dd) Compliance with Borrower Certification, the Facility and the CARES Act. At all times during the term of the Loan, Borrower shall comply with all other covenants, terms and conditions set forth in the Borrower Certification, the Facility and/or the CARES Act.

(ee) Cooperation Agreement. In the event any of the documents evidencing and/or securing the Loan between Borrower and Lender are misstated or inaccurately reflect the agreed upon, true and correct terms and provisions of the Loan and said misstatements or inaccuracies are due to the unilateral mistake on the part of Lender, mutual mistake on the part of Lender and/or Borrower, or clerical error, then in such event Borrower shall, upon reasonable request by Lender, and in order to correct such misstatement or inaccuracy, or to comply with the

 

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Facility requirements or in Lender’s reasonable opinion, more accurately evidence the Loan, execute such new documents or initial such corrected original documents as Lender may deem reasonably necessary to remedy said inaccuracy or mistake or to comply with the Facility requirements or in Lender’s reasonable opinion, more accurately evidence the Loan.

(ff) Fees and Expenses. Upon (i) the funding of the Loan, Borrower shall pay to SPV a transaction fee in the amount of $500,000.00 in connection with the Loan, and (ii) the closing of the Loan, Borrower shall pay to Lender an origination fee in the amount of $500,000.00 in connection with the Loan. At Borrower’s option, the foregoing fees can be deducted from the Loan proceeds at closing. In addition to the foregoing fees, Borrower agrees to pay all other fees and expenses incurred by Lender in connection with the Loan, as more particularly described in Section 3 above, which shall include, but not be limited to, the legal fees and costs of Lender’s counsel.

(gg) Facility Commitment Letter. Borrower hereby acknowledges and agrees that Lender shall be under no obligation to close and fund the Loan until the Lender has received a commitment letter (the “Commitment Letter”) from SPV that it will purchase a participation interest in the amount of $47,500,000.00 of the aggregate principal amount of the Loan under the Facility in accordance with the terms and guidelines of the Facility.

7. FINANCIAL AND REPORTING REQUIREMENTS.

(a) Depository Relationship. At all times during the term of the Loan, the Borrower shall maintain with Lender (i) its primary depository account(s), including its primary Operating Account(s), and (ii) its primary Treasury Management Services. As used herein, “Operating Account(s)” shall mean bank accounts that facilitate the collection of sales, including accounts receivable, and the payment of expenses and payroll disbursements; and “Treasury Management Services” shall mean commercial banking platforms that facilitate the origination of wire transfers and ACH transactions, the transfer of funds between accounts, positive pay decisioning, remote capture of check deposits and/or other electronic banking services. The Operating Accounts must be opened and the Treasury Management Services established prior to closing or funding of the Loan. In addition, at all times during the term of the Loan, Borrower shall maintain a minimum deposit ledger balance with Lender in an amount equal to the lesser of (i) $3,000,000.00 or (ii) fifteen percent (15%) of the outstanding principal balance of the Loan (based on the principal balance in effect as of the end of each applicable quarter) (the “Minimum Deposit Relationship”), to be tested and applied on a quarterly basis. Failure to maintain the Minimum Deposit Relationship will result in a fee payable to Lender equal to two percent (2%) per annum of the amount of the deficiency (the “Deficiency Fee”), which Deficiency Fee shall be charged automatically without any notice to Borrower. The Deficiency Fee shall not be deemed to be or constitute additional interest under the Loan, as it relates specifically and directly to the required deposit balances. In the event Borrower fails to maintain the required Minimum Deposit Relationship and the Deficiency Fee becomes due and payable by Borrower, Lender shall be entitled to either (i) setoff against the Borrower’s accounts held with Lender in order to collect the Deficiency Fee without the requirement of notice, or (ii) send a written demand to Borrower that the Deficiency Fee be paid within ten (10) days of written notice thereof. At Lender’s sole discretion, the Minimum Deposit Relationship may be satisfied not only with Borrower accounts, but also with accounts maintained with Lender by Guarantor or any accounts owned or controlled by the Borrower or Guarantor (collectively, the “Related Accounts”). To the extent such Related Accounts are included in the calculation of the Minimum Deposit Relationship, Lender may exercise its right of setoff against any such Related Accounts along with any Borrower accounts.

(b) Borrower’s Annual Financial Statements. Within one hundred twenty (120) days after the end of each fiscal year, Borrower shall provide Lender with an annual financial statement prepared on a consolidated basis in accordance with GAAP, with comparable information for the year to date and the immediately preceding fiscal year, all certified (as to the consolidated financial statements) by a recognized firm of certified public accountants. In addition, as soon as available, but in any event within sixty (60) days after the end of each fiscal year of the Borrower, (i) the Borrower shall deliver to the Lender financial reporting applicable for the Facility, in a form and substance reasonably acceptable to the Lender, setting forth the financial information, and

 

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where applicable reasonably detailed calculations of the required data, set forth in Appendix C to the FAQs as at the end of such fiscal year of the Borrower, which financial reporting and calculations, in each case, shall be true and accurate in all material respects and, where applicable, present fairly in all material respects the financial condition of the Borrower for the period covered thereby in accordance with GAAP, consistently applied, and (ii) such supporting documentation as Lender reasonably requests.

(c) Borrower’s Quarterly Financial Reporting Requirements. As soon as available, but in any event within sixty (60) days after the end of each fiscal quarter of the Borrower, (i) the Borrower shall deliver to the Lender financial reporting applicable for the Facility, in a form and substance reasonably acceptable to the Lender, setting forth the financial information, and where applicable reasonably detailed calculations of the required data, set forth in Appendix C to the FAQs as at the end of such fiscal quarter of the Borrower, which financial reporting and calculations, in each case, shall be true and accurate in all material respects and, where applicable, present fairly in all material respects the financial condition of the Borrower for the period covered thereby in accordance with GAAP, consistently applied, and (ii) such supporting documentation as Lender reasonably requests.

(d) Guarantor’s Financial Statements. Within sixty (60) days after the end of each fiscal year, Guarantor shall supply Lender with (i) an annual management-prepared financial statement for the prior fiscal year in form acceptable to Lender in its sole and absolute discretion, and(ii) such supporting documentation as Lender reasonably requests.

(e) Tax Returns. Within thirty (30) days of filing, Borrower and Guarantor shall supply Lender with a copy of its respective annual federal income tax returns, including, without limitation, K-1 statements for all Partnerships and Sub Chapter S Corporations, or, if an extension is filed for any tax return, within thirty (30) days after any permitted extension date.

(f) Changes to Financial Reporting Requirements. Lender may, in its sole and absolute discretion, upon written notice to the Borrower and/or Guarantor, do the following: (i) change the financial reporting requirements applicable to the Borrower and/or Guarantor with respect to the Facility in accordance with any changes made to the financial reporting requirements of the Federal Reserve set forth on Appendix C to the FAQs attached hereto as Exhibit “A”, (ii) change the frequency of delivery of the financial statements and reports required to be provided to Lender by Borrower and/or Guarantor hereunder, (iii) change the method of preparation for the financial statements required to be provided to Lender by Borrower and/or Guarantor hereunder, or (iv) require Borrower and/or Guarantor to provide additional financial statements, reports, or information regarding the Collateral, or the operation, business affairs or financial condition of Borrower and Guarantor. In the event that Lender notifies the Borrower and/or Guarantor of a change to the financial reporting requirements hereunder, Borrower and Guarantor agree (i) to execute any and all documentation required by Lender to acknowledge such change, and (ii) to comply with Lender’s request for the revised and/or additional financial reporting requirements.

(g) Form of Financial Statements. The form and content of each financial statement as required above, shall be acceptable to Lender in its sole discretion, shall be certified by each party to be correct and complete, and shall include a complete description of all contingent liabilities, including, without limitation, all indebtedness guaranteed.

For ease of reference and for the convenience of the parties, Appendix C to the FAQs is attached to this Agreement as Exhibit “A” and is incorporated by reference as if fully set forth herein.

8. DEFAULT. Upon the occurrence of any of the following events (each an “Event of Default” and collectively, the “Events of Default”), Lender may at its option exercise any of its remedies set forth herein:

(a) Borrower fails to perform any obligation under the Note when due, whether on the scheduled due date or upon acceleration, maturity or otherwise; or

(b) Borrower fails to perform any other obligation under the Loan Documents beyond any

 

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applicable notice and cure periods; or

(c) Borrower fails to perform any obligations under this Agreement (other than the items set forth in subsection (d) through (q) below for which there will be no grace periods other than as specifically stated therein) and such failure continues for thirty (30) days after written notice thereof shall have been given to Borrower, provided that if such breach cannot reasonably be cured within such thirty (30) day period and Borrower shall commence to cure such breach with such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure same, the thirty (30) day period shall be extended for so long as it shall reasonably require Borrower in the exercise of its best efforts to cure such breach, it being agreed that no such extension shall be for a period in excess of sixty (60) days after written notice of such breach; or

(d) Borrower and/or Guarantor fails to pay or perform any other obligation, liability or indebtedness to any other party beyond the expiration of any applicable notice and cure period; or

(e) A “Default” or an “Event of Default” (as defined in each respective document) occurs (beyond any applicable notice and cure period) under any of the Loan Documents; or

(f) If any warranty or representation made by Borrower in this Agreement or pursuant to the terms hereof shall at any time be false or misleading in any material respect, or if Borrower shall fail to keep, observe or perform any of the terms, covenants, representations or warranties contained in this Agreement, the Note or any other document given in connection with the Loan, or is unwilling to meet its obligations thereunder; or

(g) The dissolution of, termination of existence of, loss of good standing status by Borrower, its subsidiaries or affiliates, if any, or any party to the Loan Documents; or

(h) Borrower becomes the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships, and, in the case of any involuntary proceeding, such proceeding is not discharged within ninety (90) days of the filing thereof; or

(i) Guarantor becomes the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships, and, in the case of any involuntary proceeding, such proceeding is not discharged within ninety (90) days of the filing thereof; or

(j) The entry of a judgment against Borrower or Guarantor which Lender deems to be of a material nature, in Lender’s sole discretion; or

(k) The seizure or forfeiture of, or the issuance of any writ of possession, garnishment or attachment, or any turnover order for any property of Borrower or Guarantor; or

(l) A material alteration in the kind or type of Borrower’s prospects or business, financial or otherwise, or in the financial condition of the Borrower or Guarantor, is made without the prior written consent of Lender; or

(m) (i) Borrower, Guarantor or any subsidiary of Borrower shall fail to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (other than the Loan) owing to the Lender or any commonly controlled affiliate of the Lender, in each case beyond the applicable grace period with respect thereto, if any; or (ii) Borrower, Guarantor or any subsidiary of Borrower shall fail to observe or perform any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which failure to make a payment, default or other event described in clause (i) or (ii) is to cause such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity; provided that clause (ii) shall not apply to secured Indebtedness that becomes due as a result of the

 

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voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness and such Indebtedness is repaid when required under the documents providing for such Indebtedness. As used in this Section 8(m), “Indebtedness” shall mean all debt for borrowed money and any obligations evidenced by a bond, debenture, note, loan agreement or other similar instrument, and any guarantee of any of the foregoing; or

(n) A Change of Control occurs; or

(o) The failure of Borrower or Guarantor to timely provide any of the information as required in Section 7 above; or

(p) The failure of the Borrower’s business to materially comply with any law or regulation controlling its operation; or

(q) The failure of Borrower to comply with the terms and conditions of Section 6(t) through Section 6(dd), or any other terms and conditions of the Borrower Certification, the Facility or the CARES Act.

9. REMEDIES OF LENDER. Upon the happening of an Event of Default, then Lender may, at its option, upon written notice to Borrower:

(a) Commence an appropriate legal or equitable action to enforce performance of this Agreement;

(b) Accelerate the payment of the Note and the Loan, apply all or any portion of any equity funds toward payment of the Loan, and commence appropriate legal and equitable action to collect all such amounts due Lender; or

(c) Exercise any other rights or remedies Lender may have under the Loan Documents referred to in this Agreement or executed in connection with the Loan or which may be available under applicable law.

10. GENERAL TERMS. The following shall be applicable throughout the period of this Agreement or thereafter as provided herein:

(a) Rights of Third Parties. All conditions of the Lender hereunder are imposed solely and exclusively for the benefit of Lender and its successors and assigns, and no other Person shall have standing to require satisfaction of such conditions or be entitled to assume that Lender will make advances in the absence of strict compliance with any or all thereof, and no other Person shall, under any circumstances, be deemed to be a beneficiary of this Agreement or the Loan Documents, any provisions of which may be freely waived in whole or in part by the Lender at any time if, in its sole discretion, it deems it desirable to do so.

(b) Borrower is not Lender’s Agent. Nothing in this Agreement, the Note or any other Loan Document shall be construed to make the Borrower the Lender’s agent for any purpose whatsoever, or the Borrower and Lender partners, or joint or co-venturers, and the relationship of the parties shall, at all times, be that of debtor and creditor.

(c) Loan Expense/Enforcement Expense. Borrower agrees to pay to Lender on demand all reasonable costs and expenses incurred by Lender in seeking to enforce Lender’s rights and remedies under this Agreement, including court costs, costs of alternative dispute resolution and reasonable attorneys’ fees and costs, whether or not suit is filed or other proceedings are initiated hereon.

 

17


(d) Evidence of Satisfaction of Conditions. Lender shall, at all times, be free independently to establish to its good faith and satisfaction, and in its absolute discretion, the existence or nonexistence of a fact or facts which are disclosed in documents or other evidence required by the terms of this Agreement.

(e) Headings. The headings of the sections, paragraphs and subdivisions of this Agreement are for the convenience of reference only, and shall not limit or otherwise affect any of the terms hereof.

(f) Invalid Provisions to Affect No Others. If performance of any provision hereof or any transaction related hereto is limited by law, then the obligation to be performed shall be reduced accordingly; and if any clause or provision herein contained operates or would prospectively operate to invalidate this Agreement in part, then the invalid part of said clause or provision only shall be held for naught, as though not contained herein, and the remainder of this Agreement shall remain operative and in full force and effect. In addition, if any clause or provision herein contained is deemed to violate the governmental restrictions affecting the Facility, then the portion of such clause that violates the terms of the Facility shall be deemed void ab initio, as though not contained herein, and the remainder of the terms and conditions of this Agreement shall remain operative and in full force and effect.

(g) Application of Interest to Reduce Principal Sums Due. In the event that any charge, interest or late charge is above the maximum rate provided by law, then any excess amount over the lawful rate shall be applied by Lender to reduce the principal sum of the Loan or any other amounts due Lender hereunder.

(h) Governing Law. The laws of the State of Florida shall govern the interpretation and enforcement of this Agreement.

(i) Number and Gender. Whenever the singular or plural number, masculine or feminine or neuter gender is used herein, it shall equally include the others and shall apply jointly and severally.

(j) Prior Agreement. To the extent necessary, this Agreement shall be deemed to be an amendment to any prior loan agreement between Borrower and Lender, and in the event of a conflict between the terms of this Agreement or any such prior agreement, the terms of this Agreement shall govern.

(k) Waiver. If Lender shall waive any provisions of the Loan Documents, or shall fail to enforce any of the conditions or provisions of this Agreement, such waiver shall not be deemed to be a continuing waiver and shall never be construed as such; and Lender shall thereafter have the right to insist upon the enforcement of such conditions or provisions. Furthermore, no provision of this Agreement shall be amended, waived, modified, discharged or terminated, except by instrument in writing signed by the parties hereto.

(l) Notices. All notices from the Borrower to Lender and Lender to Borrower required or permitted by any provision of this Agreement shall be in writing and sent by registered or certified mail or nationally recognized overnight delivery service and addressed as follows:

 

TO LENDER:

   CITY NATIONAL BANK OF FLORIDA
   100 S.E. 2nd Street, 13th Floor
   Miami, Florida 33131
   Attention: Legal Department

TO BORROWER:

   VENUS CONCEPT USA INC.
   1880 N. Commerce Parkway, Suite 2
   Weston, Florida 33326
   Attention: Domenic Della Penna

Such addresses may be changed by such notice to the other party. Notice given as hereinabove provided shall be deemed given on the date of its deposit in the United States Mail and, unless sooner actually received, shall be

 

18


deemed received by the party to whom it is addressed on the third calendar day following the date on which said notice is deposited in the mail, or if a courier system is used, on the date of delivery of the notice.

(m) Successors and Assigns. This Agreement shall inure to the benefit of and be binding on the parties hereto and their heirs, legal representatives, successors and assigns.

(n) USA Patriot Act Notice. Lender hereby notifies Borrower and Guarantor that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), Lender is required to obtain, verify and record information that identifies Borrower and Guarantor, which information includes the name and address of Borrower and Guarantor and other information that will allow Lender to identify Borrower and Guarantor in accordance with the Act.

(o) Counterparts, Facsimiles and Electronic Signatures. This Agreement may be executed in counterparts. Each executed counterpart of this Agreement will constitute an original document, and all executed counterparts, together, will constitute the same agreement. Any counterpart evidencing signature by one party that is delivered by facsimile by such party to the other party hereto shall be binding on the sending party when such facsimile is sent, and such sending party shall within ten (10) days thereafter deliver to the other parties a hard copy of such executed counterpart containing the original signature of such party or its authorized representative. This Agreement may be executed and delivered by electronic signature, and such electronic signature(s) shall be deemed an original signature for purposes of this Agreement and all matters related thereto, with such electronic signature(s) having the same legal effect as an original signature.

(p) No Marshaling. The Lender shall not be required to marshal any present or future collateral security (including this Agreement and the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order. To the extent that it lawfully may, the Borrower hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of the Lender’s rights under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, the Borrower hereby irrevocably waives the benefits of all such laws.

(q) WAIVER OF JURY TRIAL. LENDER, BORROWER AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT TO BE CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT.

(r) Consent to Jurisdiction; Forum. Borrower and Guarantor hereby irrevocably submit generally and unconditionally for themselves and in respect of their property to the jurisdiction of any state court or any United States federal court sitting in Miami-Dade County, Florida. Borrower and Guarantor hereby irrevocably waive, to the fullest extent permitted by law, any objection that Borrower and/or Guarantor may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum. Borrower and Guarantor hereby agree and consent that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court or any United States federal court sitting in the state specified in the governing law section of this Loan Agreement may be made by certified or registered mail, return receipt requested, directed to Borrower and/or Guarantor, as applicable, at its address for notice set forth in this Loan Agreement, or at a subsequent address of which Lender received actual notice from Borrower and/or Guarantor, as applicable, in accordance with the notice section of this Loan Agreement, and service so made shall be complete five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Lender to serve process in any manner permitted by law or limit the right of Lender to bring proceedings against Borrower and/or Guarantor in any other court or jurisdiction.

 

19


[CONTINUES ON THE FOLLOWING PAGE]

 

20


IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be executed on the date first above written.

 

BORROWER:
VENUS CONCEPT USA INC., a Delaware corporation
By:  

/s/ Domenic Serafino

  Domenic Serafino, President
LENDER:
CITY NATIONAL BANK OF FLORIDA
By:  

/s/ Gregory Mangram

  Gregory Mangram, Senior Vice President

 

21


JOINDER OF GUARANTOR

The undersigned, as Guarantor, hereby joins in and consents to the foregoing Loan and Security Agreement.

 

VENUS CONCEPT INC., a Delaware corporation
By:  

/s/ Domenic Serafino

  Domenic Serafino, Chief Executive Officer

 

22


Exhibit “A”

Appendix C to the FAQs: Required Financial Reporting

[see attached]

 

23

Exhibit 10.7

FLORIDA DOCUMENTARY STAMP TAXES IN THE AMOUNT OF $2,450.00 ARE BEING PAID IN CONNECTION WITH THIS NOTE, AS REQUIRED BY FLORIDA LAW.

PROMISSORY NOTE

[MAIN STREET PRIORITY LOAN FACILITY]

 

Date of Note:    December 8, 2020
Amount of Note:    FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00)

FOR VALUE RECEIVED, VENUS CONCEPT USA INC., a Delaware corporation (the “Borrower”) hereby covenants and promises to pay to the order of CITY NATIONAL BANK OF FLORIDA, its successors and/or assigns (the “Lender”), at 100 S.E. 2nd Street, 13th Floor, Miami, Florida 33131, or at such other place as Lender may designate to Borrower in writing from time to time, in legal tender of the United States, FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00), together with all accrued interest, which shall be due and payable upon the following terms and conditions contained in this Promissory Note (this “Note”) and the Loan Agreement (as defined herein). Any capitalized term not otherwise defined herein shall have the meaning given to such term in the Loan Agreement.

 

A.

Interest Rate:

(a) Interest shall accrue on the unpaid principal balance of this Note from the date hereof at a rate per annum equal to the LIBOR 30-Day Rate (as defined below), plus three percent (3%) (as the same may be modified below, the “Interest Rate Margin”) (as the same may be modified below, the “Interest Rate”).

(b) As used herein, “LIBOR 30-Day Rate” means the rate of interest per annum equal to the London Interbank Offered Rate (“LIBOR”) for thirty (30) day U.S. dollar deposits as published in the “Money Rates” column of the local edition of The Wall Street Journal. If such LIBOR 30-Day Rate is no longer available from the Wall Street Journal, but otherwise continues to be readily available from another publisher in the marketplace, Lender, at its sole discretion, shall choose a new publisher of the LIBOR 30-Day Rate. This rate will be effective on and from the date hereof, based on the most recent rate information available, and will be effective until January 7, 2021. On January 8, 2021, the interest rate shall be readjusted to the current LIBOR 30-Day Rate, or, if applicable, the current LIBOR Successor Rate (as defined below), plus the Interest Rate Margin, or, if applicable, the Successor Interest Rate Margin (as defined below), based on the most recent rate information available on the date that the interest rate is adjusted and such rate shall be effective until February 7, 2021. The rate shall thereafter be adjusted on the eight (8th) day of each calendar month thereafter at the then current LIBOR 30-Day Rate, or, if applicable, the current LIBOR Successor Rate, plus the Interest Rate Margin or, if applicable, the Successor Interest Rate Margin, based on the most recent rate information available on the date that the interest rate is adjusted.

(c) If The Wall Street Journal or its successor ceases to publish the LIBOR 30-Day Rate, or if LIBOR is permanently or indefinitely unavailable or unascertainable, or a Governmental Authority (as defined in the Loan Agreement, and including the Board of Governors of the Federal Reserve, the Office of the Comptroller of the Currency, or the Alternative Reference Rates Committee) has made a public statement identifying a specific date after which the LIBOR 30-Day Rate shall no longer be made available or used for determining the interest rate of loans (the “LIBOR Sunset Date”), then at any time within ninety (90) days of the LIBOR Sunset Date, or reasonably promptly after such occurrence, Lender shall amend this Note (without the need for any action or consent by Borrower) to (i) replace the LIBOR 30-Day Rate with an alternate benchmark rate (including any mathematical or other adjustments to the benchmark (if any) incorporated therein), giving consideration to any similar loans for such alternative benchmarks (any such proposed rate, a “LIBOR Successor Rate”), (ii) adjust the Interest Rate Margin on a permanent basis (the “Successor Interest Rate Margin”) by a factor equal to the positive or negative difference which, on the date of the adjustment, will make the LIBOR 30-Day Rate plus the Interest Rate Margin substantially equal to the LIBOR Successor Rate plus the Successor Interest Rate Margin, and (iii) make any LIBOR Successor Rate Changes (as defined herein), and Lender shall give Borrower prompt notice thereof (it being understood that such amendment may become effective prior to such notice). In the event that on the date selected by Lender to

 

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      /s/ DS
      Initial(s)


make the change from the LIBOR 30-Day Rate to the LIBOR Successor Rate, the LIBOR 30-Day Rate is either fifty (50) basis points above or below the prior day’s rate, then in order to substitute a fair LIBOR Successor Rate, the Lender shall be required to use a mathematical average of the last sixty (60) days of the LIBOR 30-Day Rate instead of the LIBOR 30-Day Rate on the date of the change. For clarification purposes, the intent of this language is that, at the time of the transition and substitution from the LIBOR 30-Day Rate to the LIBOR Successor Rate, the effective Interest Rate under this Note shall be mathematically as close as possible to what the effective Interest Rate was prior to the change. Thereafter, the Interest Rate will adjust monthly (subject to LIBOR Successor Rate Changes) based on the then current LIBOR Successor Rate plus the Successor Interest Rate Margin.

(d) For purposes hereof, “LIBOR Successor Rate Changes” means, with respect to any LIBOR Successor Rate and the Successor Interest Rate Margin, any changes to the timing and frequency of determining rates and other administrative matters as may be appropriate, in the discretion of Lender, to reflect the adoption of the LIBOR Successor Rate and the Successor Interest Rate Margin and to permit the administration thereof by Lender in a manner reasonably consistent with market practice.

(e) Interest shall be calculated at the rate of 1/360 of the annual rate of interest for each day that principal is outstanding (i.e., interest will accrue and be paid on the actual number of calendar days elapsed from the date hereof based on a 360 day year).

 

B.

Main Street Priority Loan Facility:

(a) Reference is made to the Main Street Priority Loan Facility (the “Facility”), which has been authorized under section 13(3) of the Federal Reserve Act. Under the Facility, the Federal Reserve Bank of Boston, acting under the direction of the Board of Governors of the Federal Reserve System, has committed to lend to the SPV (as defined in the Loan Agreement), on a recourse basis. The SPV will purchase a ninety-five percent (95%) participation in this Note, and Lender will retain a five percent (5%) participation of this Note. The Secretary of the Treasury has committed funds appropriated to the Exchange Stabilization Fund under section 4027 of the CARES Act (as defined in the Loan Agreement) to the SPV in connection with the Facility.

(b) To participate in the Facility, Borrower must provide the certifications and covenants set forth in the Borrower Certification (as defined below), and comply with all terms and conditions of the Facility, even if such terms and conditions are not specifically set forth in the Loan Documents (as defined below).

 

C.

Payment Terms:

Commencing on January 8, 2022, and continuing on the eighth (8th) day of each month thereafter, Borrower shall make consecutive monthly payments of accrued interest. In addition to the monthly payments of accrued interest, on December 8, 2023, and December 8, 2024 (each a “Principal Payment Date”), Borrower shall make an annual payment of principal, inclusive of Capitalized Interest (as defined below), in an amount equal to fifteen percent (15%) of the outstanding principal balance of this Note (inclusive of Capitalized Interest) as of the respective Principal Payment Date. Unless this Note is otherwise accelerated in accordance with the terms and conditions hereof, the entire outstanding principal balance of this Note (inclusive of Capitalized Interest) plus all accrued and unpaid interest shall be due and payable in full on December 8, 2025 (the “Maturity Date”). As used herein, “Capitalized Interest” shall mean all accrued and unpaid interest from the date hereof until and including December 8, 2021 (the “Interest Capitalization Date”), which (i) shall be capitalized and added to the outstanding principal balance of this Note on the Interest Capitalization Date and (ii) shall accrue interest at the Interest Rate commencing on the day immediately following the Interest Capitalization Date and continuing at all times thereafter. The payments due hereunder shall be debited from Borrower’s account no. 1954733792 with Lender.

 

D.

Loan Documents:

This Note, that certain Loan and Security Agreement dated as of even date herewith by and between Borrower and Lender (as the same may be amended, restated, modified or replaced from time to time, the “Loan Agreement”), that certain Main Street Priority Loan Facility Borrower Certifications and Covenants dated as of

 

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even date herewith, from Borrower in favor of Lender (as the same may be amended or modified from time to time, the “Borrower Certification”), the Guaranty (as defined in the Loan Agreement), the Financing Statement(s) (as defined in the Loan Agreement), and all other documents and instruments executed in connection with this Note are hereinafter individually and/or collectively referred to as the “Loan Documents”.

 

E.

Default Interest Rate:

All principal and installments of interest shall bear interest from the date that said payments are due and unpaid or from the date of occurrence of any other Event of Default (as hereinafter defined) under this Note or any other Loan Document, at a rate equal to the highest rate authorized by applicable law (the “Default Rate”).

 

F.

Prepayment:

The Borrower may prepay all or any portion of this Note at any time without fee, premium or penalty.

 

G.

Late Charges:

Lender may collect a late charge not to exceed an amount equal to five percent (5%) of any installment which is not paid within ten (10) days of the due date thereof, to cover the extra expense involved in handling delinquent payments, provided that collection of said late charge shall not be deemed a waiver by Lender of any of its rights under this Note. Notwithstanding the foregoing, there shall be no grace period or late charges for payments due on the outstanding principal balance due on the Maturity Date or upon acceleration, as set forth in Section H below, but such outstanding balance shall accrue interest at the Default Rate. The late charge is intended to compensate the Lender for administrative and processing costs incident to late payments. The late charge payments are not interest. The late charge payment shall not be subject to rebate or credit against any other amount due. Any late charge shall be in addition to any other interest due.

 

H.

Default and Acceleration:

If any of the following “Events of Default” occur, at the Lender’s option, exercisable in its sole discretion, all sums of principal and interest under this Note shall be accelerated and become immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, and the Lender shall be immediately entitled to exercise all of its available remedies under the Loan Documents:

a. Borrower fails to perform any obligation under this Note to pay principal or interest when due; or

b. Borrower fails to perform any other obligation, liability or indebtedness under the Loan Documents to pay money when due beyond any applicable notice and cure periods; or

c. A “Default” or an “Event of Default” (as defined in each respective document) beyond any applicable notice and cure period occurs under any of the Loan Agreement or any of the Loan Documents; or

d. Borrower fails to comply with the terms and conditions of the Borrower Certification, the Facility or the CARES Act.

In any such event, all sums of principal and interest under this Note shall automatically become immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character. All persons now or at any time liable for payment of this Note hereby waive presentment, protest, notice of protest and dishonor. The Borrower expressly consents to any extension or renewal, in whole or in part, and all delays in time of payment or other performance which Lender may grant at any time and from time to time without limitation and without any notice or further consent of the undersigned.

 

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      Initial(s)


The remedies of Lender as provided herein, or in the Loan Agreement or the other Loan Documents shall be cumulative and concurrent and may be pursued singularly, successively or together, at the sole discretion of Lender, and may be exercised as often as the occasion therefor shall arise.

The Lender may, in the sole discretion of Lender, accept payments made by Borrower after any default has occurred, without waiving any of Lender’s rights herein.

 

I.

Costs:

In the event that this Note is collected by law or through attorneys at law, or under advice therefrom (whether such attorneys are employees of Lender or an affiliate of Lender or are outside counsel), Borrower and any endorser, guarantor or other person primarily or secondarily liable for payment hereof hereby, severally and jointly agree to pay all costs of collection, including attorneys’ fees, including charges for paralegals, appraisers, experts and consultants working under the direction or supervision of Lender’s attorneys whether or not suit is brought, and whether incurred in connection with collection, trial, appeal, bankruptcy or other creditors’ proceedings or otherwise.

 

J.

Loan Charges:

Nothing herein contained, nor any transaction related thereto, shall be construed or so operate as to require Borrower or any person liable for the repayment of same, to pay interest in an amount or at a rate greater than the maximum allowed by applicable law. Should any interest or other charges paid by Borrower, or any parties liable for the payment of the loan made pursuant to this Note, result in the computation or earning of interest in excess of the maximum legal rate of interest permitted under the law in effect while said interest is being earned, then any and all of such excess shall be and is waived by Lender, and all such excess shall be automatically credited against and in reduction of the principal balance, and any portion of the excess that exceeds the principal balance shall be paid by Lender to Borrower or any parties liable for the payment of the loan made pursuant to this Note so that under no circumstances shall the Borrower, or any parties liable for the payment of the loan hereunder, be required to pay interest in excess of the maximum rate allowed by applicable law.

 

K.

Jurisdiction:

The laws of the State of Florida shall govern the interpretation and enforcement of this Note. In the event that legal action is instituted to collect any amounts due under, or to enforce any provision of, this instrument, Borrower and any endorser, guarantor or other person primarily or secondarily liable for payment hereof consent to, and by execution hereof submit themselves to, the jurisdiction of the courts of the State of Florida, and, notwithstanding the place of residence of any of them or the place of execution of this instrument, such litigation may be brought in or transferred to a court of competent jurisdiction in and for Miami-Dade County, Florida.

 

L.

Assignment:

Lender shall have the unrestricted right at any time and from time to time and without Borrower’s or Guarantor’s consent, to assign all or any portion of its rights and obligations hereunder to one or more lenders or purchasers (each, an “Assignee”) under this Note and the Loan Documents and all information now or hereafter in its possession relating to the Borrower and Guarantor (all rights of privacy hereby being waived), and to retain any compensation received by Lender in connection with any such transaction and Borrower and Guarantor agree that they shall execute such documents, including without limitation, the delivery of an estoppel certificate and such other documents as Lender shall deem necessary to effect the foregoing. The Borrower hereby waives any notice of the transfer of this Note by the Lender or by any other subsequent holder of this Note and agrees to be bound by the terms of this Note subsequent to any transfer and agrees that the terms of this Note maybe fully enforced by any subsequent holder of this Note.

 

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M.

Non-Waiver:

The failure at any time of Lender to exercise any of its options or any other rights hereunder shall not constitute a waiver thereof, nor shall it be a bar to the exercise of any of its options or rights at a later date. All rights and remedies of Lender shall be cumulative and may be pursued singly, successively or together, at the option of Lender.

 

N.

Right of Setoff:

In addition to all liens upon and rights of setoff against the Borrower’s money, securities or other property given to the Lender by law, the Lender shall have, with respect to the Borrower’s obligations to the Lender under this Note and to the extent permitted by law, a contractual possessory security interest in and a contractual right of setoff against, and the Borrower hereby grants the Lender a security interest in, and hereby assigns, conveys, delivers, pledges and transfers to the Lender, all of the Borrower’s right, title and interest in and to, all of the Borrower’s deposits, moneys, securities and other property now or hereafter in the possession of or on deposit with, or in transit to, the Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to the Borrower. Every such right of setoff shall be deemed to have been exercised immediately upon the occurrence of an Event of Default hereunder without any action of the Lender, although the Lender may enter such setoff on its books and records at a later time.

 

O.

Miscellaneous:

 

  1.

This is a secured promissory note.

 

  2.

TIME IS OF THE ESSENCE OF THIS NOTE.

 

  3.

It is agreed that the granting to Borrower or any other party of an extension or extensions of time for the payment of any sum or sums due under this Note or for the performance of any covenant or stipulation thereof or the taking of other or additional security shall not in any way release or affect the liability of Borrower under this Note or any of the Loan Documents.

 

  4.

This Note may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

 

  5.

All parties to this Note, whether Borrower, principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, notice, protest, notice of protest and notice of dishonor.

 

  6.

Borrower acknowledges that Lender shall have no obligation whatsoever to renew, modify or extend this Note or to refinance the indebtedness under this Note upon the maturity thereof, except as specifically provided herein.

 

  7.

Lender shall have the right to accept and apply to the outstanding balance of this Note and all payments or partial payments received from Borrower after the due date therefor, whether this Note has been accelerated or not, without waiver of any of Lender’s rights to continue to enforce the terms of this Note and to seek any and all remedies provided for herein or in any instrument securing the same, including, but not limited to, the right to foreclose on such security.

 

  8.

All amounts received by Lender shall be applied to expenses, late fees and interest before principal or in any other order as determined by Lender, in its sole discretion, as permitted by law.

 

  9.

Borrower shall not assign Borrower’s rights or obligations under this Note without Lender’s prior consent.

 

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  10.

The term “Borrower” as used herein, in every instance shall include the makers of this Note, and its heirs, executors, administrators, successors, legal representatives and assigns, and shall denote the singular and/or plural, the masculine and/or feminine, and natural and/or artificial persons whenever and wherever the context so requires or admits.

 

  11.

If more than one party executes this Note, all such parties shall be jointly and severally liable for the payment of this Note.

 

  12.

If any clause or provision herein contained operates or would prospectively operate to invalidate this Note in part, then the invalid part of said clause or provision only shall be held for naught, as though not contained herein, and the remainder of this Note shall remain operative and in full force and effect.

 

  13.

This Note may be executed in counterparts. Each executed counterpart of this Note will constitute an original document, and all executed counterparts, together, will constitute the same agreement. This Note may be executed and delivered by electronic signature, and such electronic signature(s) shall be deemed an original signature for purposes of this Note and all matters related thereto, with such electronic signature(s) having the same legal effect as an original signature.

 

P.

Waiver of Jury Trial:

BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO EXTEND TO BORROWER THE LOAN EVIDENCED BY THIS NOTE.

[CONTINUES ON FOLLOWING PAGE]

 

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Borrower has duly executed this Note effective as of the date set forth hereinabove.

 

BORROWER:
VENUS CONCEPT USA INC., a Delaware corporation
By:  

        /s/ Domenic Serafino

  Domenic Serafino, President

PROVINCE OF ONTARIO    )

)

CITY OF TORONTO             )

The foregoing instrument was acknowledged before me by means of ☐ physical presence or ☐ online notarization this day of December, 2020, by Domenic Serafino, as President of VENUS CONCEPT USA INC., a Delaware corporation, as an act of and on behalf of the corporation, who is personally known to me or produced                         as identification.

 

                                                                                      
Print or Stamp Name:                                                   
Notary Public, Province of Toronto
Commission Number:                                                 

 

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Exhibit 10.8

GUARANTY OF PAYMENT AND PERFORMANCE

[MAIN STREET PRIORITY LOAN FACILITY]

This Guaranty of Payment and Performance (this “Guaranty”) is made as of this 8th day of December, 2020, by VENUS CONCEPT INC., a Delaware corporation (the “Guarantor”), in favor of CITY NATIONAL BANK OF FLORIDA (the “Lender”).

RECITALS

VENUS CONCEPT USA INC., a Delaware corporation (the “Borrower”) has requested and Lender has agreed to make a term loan to Borrower in the amount of FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00) (the “Loan”), pursuant to the Main Street Priority Loan Facility as established by the Board of Governors of the Federal Reserve System under Section 13(3) of the Federal Reserve Act, and as evidenced by that certain Promissory Note dated as of even date herewith, from Borrower in favor of Lender in the original principal amount of FIFTY MILLION AND 00/100 DOLLARS ($50,000,000.00) (as the same may be amended, restated, modified or replaced from time to time, the “Note”). Certain terms and conditions of the Loan are set forth in that certain Loan and Security Agreement dated as of even date herewith between Borrower and Lender (as the same may be amended, restated, modified or replaced from time to time, the “Loan Agreement”). As a condition precedent to Lender making the Loan, Lender has required Guarantor to execute and deliver this Guaranty to Lender. Any capitalized term used and not defined in this Guaranty shall have the meaning given to such term in the Loan Agreement.

AGREEMENTS

Guarantor owns, directly or indirectly, one hundred percent (100%) of the issued and outstanding shares of stock of Borrower, and Guarantor will receive a material benefit from Lender making the Loan to Borrower. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to induce Lender to make the Loan to Borrower, Guarantor hereby guarantees to Lender the prompt and full payment of the indebtedness and obligations described below in this Guaranty (collectively called the “Guaranteed Obligations”), this Guaranty being upon the following terms and conditions:

Section 1. Guaranty of Payment.

Guarantor hereby unconditionally and irrevocably guarantees to Lender the punctual payment when due, whether by lapse of time, by acceleration of maturity, or otherwise, of all principal, interest (including interest accruing after maturity and after the commencement of any bankruptcy or insolvency proceeding by or against Borrower, whether or not allowed in such proceeding), prepayment premiums, fees, late charges, costs, expenses, indemnification indebtedness, and other sums of money now or hereafter due and owing, or which Borrower is obligated to pay, pursuant to the terms of the Note, the Loan Agreement (including the timely payment of insurance premiums), any amounts due and owing in connection with any interest rate derivative or swap agreements entered into by Borrower with Lender or any of Lender’s affiliates, any application, agreement, note or other document executed and delivered by Borrower in connection with the Loan, or any of the other Loan Documents, including, without limitation, any letter of credit issued by Lender in connection with the Loan, as the same may from time to time be amended, supplemented, restated or otherwise modified (collectively, the “Indebtedness”). The Indebtedness includes all reasonable costs and expenses incurred by Lender in seeking to enforce Lender’s rights and remedies with respect to the Indebtedness, and to protect, defend, maintain or enforce Lender’s liens or security interests, including, without limitation, collection costs, default rates of interest, reasonable attorneys’ fees and costs at trial and appellate levels and related costs, and costs of alternative dispute resolution, whether or not suit is filed or other proceedings are initiated thereon. This Guaranty covers the Indebtedness presently outstanding and the Indebtedness arising subsequent to the date hereof, including all amounts advanced by Lender in stages or installments. The guaranty of Guarantor as set forth in this Section is a continuing guaranty of payment and not a guaranty of collection.

The foregoing obligations guaranteed under this Section are defined as the “Guaranteed Payment Obligations”. The Guaranteed Payment Obligations are included as part of the Guaranteed Obligations for all purposes of this Guaranty.

 

 

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Section 2. Guaranty of Performance.

Guarantor hereby unconditionally and irrevocably guarantees to Lender the complete performance when due of all other obligations of Borrower under all of the Loan Documents, including, without limiting the generality of the foregoing, all such obligations of Borrower to duly and punctually perform and observe all other terms, covenants and conditions of the Note, the Loan Agreement and all other Loan Documents.

The foregoing obligations guaranteed under this Section are defined as the “Guaranteed Performance Obligations.” The Guaranteed Performance Obligations are included as part of the Guaranteed Obligations for all purposes of this Guaranty.

The liability and obligations under this Section shall not be limited or restricted by the existence of, or any terms of, the guaranty of payment under Section 1.

Section 3. Primary Liability of Guarantor.

(a) This Guaranty is an absolute, irrevocable and unconditional guaranty of payment and performance, and Guarantor shall be liable for the payment and performance of the Guaranteed Obligations as a primary obligor. This Guaranty shall be effective as a waiver of, and Guarantor hereby expressly waives, any right to which Guarantor may otherwise have been entitled, whether existing under statute, at law or in equity, to require Lender to take prior recourse or proceedings against any collateral, security or person. It shall not be necessary for Lender, in order to enforce such payment or performance by Guarantor, first to institute suit or pursue or exhaust any rights or remedies against Borrower or other person liable on such indebtedness or performance, or to enforce any rights against any security given to secure such indebtedness or for such performance, or to join Borrower or any other person liable for the payment or performance of the Guaranteed Obligations or any part thereof in any action to enforce this Guaranty, or to resort to any other means of obtaining payment or performance of the Guaranteed Obligations provided, however, that nothing herein contained shall prevent Lender from suing on the Note or exercising any other right under the Loan Documents.

(b) Suit may be brought or demand may be made against Borrower or against any or all parties who have signed this Guaranty or any other guaranty covering all or any part of the Guaranteed Obligations, or against any one or more of them, separately or together, without impairing the rights of Lender against any party hereto. Any time that Lender is entitled to exercise its rights or remedies hereunder, it may in its discretion elect to demand payment and/or performance. If Lender elects to demand performance, it shall at all times thereafter have the right to demand payment until all of the Guaranteed Obligations have been paid and performed in full. If Lender elects to demand payment, it shall at all times thereafter have the right to demand performance until all of the Guaranteed Obligations have been paid and performed in full.

Section 4. Certain Agreements and Waivers by Guarantor.

(a) Guarantor agrees that neither Lender’s rights or remedies nor Guarantor’s obligations under the terms of this Guaranty shall be released, diminished, impaired, reduced or affected by any one or more of the following events, actions, facts, or circumstances, and the liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of:

(i) any limitation on the liability of, or recourse against, any other person in any Loan Document or arising under any law;

(ii) any claim or defense that this Guaranty was made without consideration or is not supported by adequate consideration or that the obligations of Guarantor hereunder exceed or are more burdensome than those of Borrower under the other Loan Documents;

(iii) the taking or accepting of any other security or guaranty for, or right of recourse with respect to, any or all of the Guaranteed Obligations;

 

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(iv) the operation of any laws (other than statutes of limitation) regarding the limitation of actions, all of which are hereby waived as a defense to any action or proceeding brought by Lender against Guarantor, to the fullest extent permitted by law;

(v) any release, surrender, abandonment, exchange, alteration, sale or other disposition, subordination, deterioration, waste, failure to protect or preserve, impairment, or loss of, or any failure to create or perfect any lien or security interest with respect to, or any other dealings with, any collateral or security at any time existing or purported, believed or expected to exist in connection with any or all of the Guaranteed Obligations, or any impairment of Guarantor’s recourse against any person or collateral;

(vi) whether express or by operation of law, any partial release of the liability of Guarantor hereunder (except to the extent paid, performed or expressly so released) or any complete or partial release of Borrower or any other person liable, directly or indirectly, for the payment or performance of any or all of the Guaranteed Obligations;

(vii) the insolvency, bankruptcy, dissolution, liquidation, termination, receivership, reorganization, merger, consolidation, change of form, structure or ownership, sale of all assets, or lack of corporate, partnership or other power of Borrower or any other person at any time liable for the payment of any or all of the Guaranteed Obligations;

(viii) either with or without notice to or consent of Guarantor, any renewal, extension, modification, supplement, subordination or rearrangement of the terms of any or all of the Guaranteed Obligations and/or any of the Loan Documents, including material alterations of the terms of payment (including changes in maturity date(s) and interest rate(s) or performance) or any other terms thereof, or any waiver, termination, or release of, or consent to departure from, any of the Loan Documents or any other guaranty of any or all of the Guaranteed Obligations, or any adjustment, indulgence, forbearance, or compromise that may be granted from time to time by Lender to Borrower or any other person at any time liable for the payment or performance of any or all of the Guaranteed Obligations;

(ix) any neglect, lack of diligence, delay, omission, failure, or refusal of Lender to take or prosecute (or in taking or prosecuting) any action for the collection or enforcement of any of the Guaranteed Obligations, or to foreclose or take or prosecute any action to foreclose (or in foreclosing or taking or prosecuting any action to foreclose) upon any security therefor, or to exercise (or in exercising) any other right or power with respect to any security therefor, or to take or prosecute (or in taking or prosecuting) any action in connection with any Loan Document, or any failure to sell or otherwise dispose of in a commercially reasonable manner any collateral securing any or all of the Guaranteed Obligations;

(x) any failure of Lender to notify Guarantor of any creation, renewal, extension, rearrangement, modification, supplement, subordination, or assignment of the Guaranteed Obligations or any part thereof, or of any Loan Document, or of any release of or change in any security, or of the occurrence or existence of any Event of Default, or of any other action taken or refrained from being taken by Lender against Borrower or any security or other recourse, or of any new agreement between Lender and Borrower, it being understood that Lender shall not be required to give Guarantor any notice of any kind under any circumstances with respect to or in connection with the Guaranteed Obligations, any and all rights to notice Guarantor may have otherwise had being hereby waived by Guarantor, and Guarantor shall be responsible for obtaining for itself information regarding Borrower, including any changes in the business or financial condition of Borrower, and Guarantor acknowledges and agrees that Lender shall have no duty to notify Guarantor of any information which Lender may have concerning Borrower;

(xi) the existence of any claim, counterclaim, set-off or other right that Guarantor may at any time have against Borrower, Lender, or any other person, whether or not arising in connection with this Guaranty, the Note, the Loan Agreement or any other Loan Document; provided, however, that the foregoing shall not be deemed a waiver of Guarantor’s right to assert any compulsory counterclaim maintained in a court of the United States or the State of Florida if such counterclaim is compelled under local law or procedure;

 

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(xii) the unenforceability of all or any part of the Guaranteed Obligations against Borrower, whether because the Guaranteed Obligations exceed the amount permitted by law or violate any usury law, or because the persons creating the Guaranteed Obligations acted in excess of their authority, or because of a lack of validity or enforceability of or defect or deficiency in any of the Loan Documents, or because Borrower has any valid defense, claim or offset with respect thereto, or because Borrower’s obligation ceases to exist by operation of law, or because of any other reason or circumstance, it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other person be found not liable on the Guaranteed Obligations, or any part thereof, for any reason (and regardless of any joinder of Borrower or any other party in any action to obtain payment or performance of any or all of the Guaranteed Obligations);

(xiii) any order, ruling or plan of reorganization emanating from proceedings under Title 11 of the United States Code with respect to Borrower or any other person, including any extension, reduction, composition, or other alteration of the Guaranteed Obligations, whether or not consented to by Lender, or any action taken or omitted by Lender in any such proceedings, including any election to have Lender’s claim allowed as being secured, partially secured or unsecured, any extension of credit by Lender in any such proceedings or the taking and holding by Lender of any security for any such extension of credit;

(xiv) any other condition, event, omission, or action that would in the absence of this paragraph result in the release or discharge of the Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty or any other agreement;

(xv) any early termination of any of the Guaranteed Obligations; or

(xvi) Lender’s enforcement or forbearance from enforcement of the Guaranteed Obligations on a net or gross basis.

(b) In the event any payment by Borrower or any other person to Lender is held to constitute a preference, fraudulent transfer or other voidable payment under any bankruptcy, insolvency or similar law, or if for any other reason Lender is required to refund such payment or pay the amount thereof to any other party, such payment by Borrower or any other party to Lender shall not constitute a release of Guarantor from any liability hereunder, and this Guaranty shall continue to be effective or shall be reinstated (notwithstanding any prior release, surrender or discharge by Lender of this Guaranty or of Guarantor), as the case may be, with respect to, and this Guaranty shall apply to, any and all amounts so refunded by Lender or paid by Lender to another person (which amounts shall constitute part of the Guaranteed Obligations), and any interest paid by Lender and any reasonable attorneys’ fees, costs and expenses paid or incurred by Lender in connection with any such event.

(c) It is the intent of Guarantor and Lender that the obligations and liabilities of Guarantor hereunder are absolute, irrevocable and unconditional under any and all circumstances and that until the Guaranteed Obligations are fully and finally paid and performed, and not subject to refund or disgorgement, the obligations and liabilities of Guarantor hereunder shall not be discharged or released, in whole or in part, by any act or occurrence that might, but for the provisions of this Guaranty, be deemed a legal or equitable discharge or release of a guarantor.

(d) Guarantor’s obligations shall not be affected, impaired, lessened or released by loans, credits or other financial accommodations now existing or hereafter advanced by Lender to Borrower in excess of the Guaranteed Obligations. All payments, repayments and prepayments of the Loan, whether voluntary or involuntary, received by Lender from Borrower, any other person or any other source (other than from Guarantor pursuant to a demand by Lender hereunder), and any amounts realized from any collateral for the Loan, shall be deemed to be applied first to any portion of the Loan which is not covered by this Guaranty, and last to the Guaranteed Obligations, and this Guaranty shall bind Guarantor to the extent of any Guaranteed Obligations that may remain owing to Lender. Lender shall have the right to apply any sums paid by Guarantor to any portion of the Loan in Lender’s sole and absolute discretion.

(e) If acceleration of the time for payment of any amount payable by Borrower under the Note, the Loan Agreement, or any other Loan Document is stayed or delayed by any law or tribunal, all such amounts shall

 

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nonetheless be payable by Guarantor on demand by Lender.

(f) Guarantor hereby waives and agrees not to assert or take advantage of (i) any right or claim of right to cause a marshalling of any of Borrower’s assets or the assets of any other party now or hereafter held as security for the Indebtedness; (ii) the defense of laches in any action hereunder or for the payment of the Indebtedness and performance of any obligation hereby guaranteed; (iii) any defense that may arise by reason of the incapacity, lack of authority, death or disability of Guarantor, any other guarantor of the Loan, or Borrower or any other person or entity, or the voluntary or involuntary dissolution of Borrower, or the failure of Lender to file or enforce a claim against the estate (either in administration, bankruptcy, or any other proceeding) of Borrower or any other person or entity; (iv) any defense based on the failure of Lender to give notice of the existence, creation, or incurring of any new or additional indebtedness or obligation, or of any action or nonaction on the part of any other person whomsoever, or any modification of the terms of the Loan Documents, or the Indebtedness, in connection with any obligation hereby guaranteed; (v) any defense based upon an election of remedies by Lender which destroys or otherwise impairs any subrogation rights of Guarantor or any other guarantor of the Loan or the right of Guarantor to proceed against Borrower or any other guarantor for reimbursement, or both; (vi) any defense based upon failure of Lender to commence an action against Borrower; (vii) any defense based upon acceptance of this Guaranty by Lender; (viii) any defense based upon the invalidity or unenforceability of any of the Loan Documents; (ix) any defense based upon any complete or partial release of liability contained in any of the Loan Documents; (x) any defense based upon any transfer by Borrower of all or any part of the collateral for the Loan; (xi) any defense based upon the failure of Lender to perfect any security or to extend or renew the perfection of any security; and (xii) any other legal or equitable defenses whatsoever to which Guarantor might otherwise be entitled.

Section 5. Subordination.

If, for any reason whatsoever, Borrower is now or hereafter becomes indebted to Guarantor:

(a) such indebtedness and all interest thereon and all liens, security interests and rights now or hereafter existing with respect to property of Borrower securing such indebtedness shall, at all times, be subordinate in all respects to the Guaranteed Obligations and to all liens, security interests and rights now or hereafter existing to secure the Guaranteed Obligations;

(b) Guarantor shall not be entitled to enforce or receive payment, directly or indirectly, of any such indebtedness of Borrower to Guarantor until the Guaranteed Obligations have been fully and finally paid and performed;

(c) Guarantor hereby assigns and grants to Lender a security interest in all such indebtedness and security therefor, if any, of Borrower to Guarantor now existing or hereafter arising, including any dividends and payments pursuant to debtor relief or insolvency proceedings referred to below. In the event of receivership, bankruptcy, reorganization, arrangement or other debtor relief or insolvency proceedings involving Borrower as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and shall have the right to receive directly from the receiver, trustee or other custodian (whether or not an Event of Default shall have occurred or be continuing under any of the Loan Documents), dividends and payments that are payable upon any obligation of Borrower to Guarantor now existing or hereafter arising, and to have all benefits of any security therefor, until the Guaranteed Obligations have been fully and finally paid and performed. If, notwithstanding the foregoing provisions, Guarantor should receive any payment, claim or distribution that is prohibited as provided above in this Section, Guarantor shall pay the same to Lender immediately, Guarantor hereby agreeing that it shall receive the payment, claim or distribution in trust for Lender and shall have absolutely no dominion over the same except to pay it immediately to Lender; and

(d) Guarantor shall promptly upon request of Lender from time to time execute such documents and perform such acts as Lender may reasonably require to evidence and perfect its interest and to permit or facilitate exercise of its rights under this Section, including execution and delivery of proofs of claim, further assignments and security agreements, and delivery to Lender of any promissory notes or other instruments evidencing indebtedness of Borrower to Guarantor. All promissory notes, accounts receivable ledgers or other evidences, now or hereafter held by Guarantor, of obligations of Borrower to Guarantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under and is subject to the terms of this Guaranty.

 

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Section 6. Other Liability of Guarantor or Borrower.

If Guarantor is or becomes liable, by endorsement or otherwise, for any indebtedness owing by Borrower to Lender other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may have against Guarantor. If Borrower is or becomes indebted to Lender for any indebtedness other than or in excess of the Guaranteed Obligations, any payment received or recovery realized upon such other indebtedness of Borrower to Lender may be applied to such other indebtedness. This Guaranty is independent of (and shall not be limited by) any other guaranty now existing or hereafter given. Further, Guarantor’s liability under this Guaranty is in addition to any and all other liability Guarantor may have in any other capacity to Lender.

Section 7. Lender Assigns; Disclosure of Information.

This Guaranty is for the benefit of Lender and Lender’s successors and assigns, and in the event of an assignment of the Guaranteed Obligations, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Obligations so assigned, may be transferred with such Guaranteed Obligations. Guarantor waives notice of any transfer or assignment of the Guaranteed Obligations or any part thereof. Lender may sell or offer to sell the Loan or interests therein to one or more assignees or participants. Guarantor shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith, and to the extent, if any, specified in any such assignment or participation, such assignee(s) or participant(s) shall have the same rights and benefits with respect to the Loan Documents as such person(s) would have if such person(s) were Lender hereunder. Lender may disclose to any such assignee or participant or prospective assignee or participant, to Lender’s affiliates, to any regulatory body having jurisdiction over Lender and to any other parties as necessary or appropriate in Lender’s reasonable judgment, any information Lender now has or hereafter obtains pertaining to the Guaranteed Obligations, this Guaranty, or Guarantor, including information regarding any security for the Guaranteed Obligations or for this Guaranty, and/or credit or other information on Guarantor and/or any other person liable, directly or indirectly, for any part of the Guaranteed Obligations.

Section 8. Binding Effect; Joint and Several Liability.

This Guaranty is binding not only on Guarantor, but also on Guarantor’s heirs, personal representatives, successors and assigns. If this Guaranty is signed by more than one person, then all of the obligations of Guarantor arising hereunder shall be jointly and severally binding on each of the undersigned, and their respective heirs, personal representatives, successors and assigns, and the term “Guarantor” shall mean all of such persons and each of them individually.

Section 9. Governing Law.

The validity, enforcement, and interpretation of this Guaranty, shall for all purposes be governed by and construed in accordance with the laws of the State of Florida and applicable United States federal law, and is intended to be performed in accordance with, and only to the extent permitted by, such laws. All obligations of Guarantor hereunder are payable and performable at the place or places where the Guaranteed Obligations are payable and performable. This Guaranty is an agreement executed under seal. If any Guarantor is a corporation, the designation “(SEAL)” on this Guaranty shall be effective as the affixing of such Guarantor’s corporate seal physically to this Guaranty.

Section 10. Invalidity of Certain Provisions.

If any provision of this Guaranty or the application thereof to any person or entity or circumstance shall, for any reason and to any extent, be declared to be invalid or unenforceable, neither the remaining provisions of this Guaranty nor the application of such provision to any other person or circumstance shall be affected thereby, and the remaining provisions of this Guaranty, or the applicability of such provision to other persons or circumstances, as applicable, shall remain in effect and be enforceable to the maximum extent permitted by applicable law.

 

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Section 11. Costs and Expenses of Enforcement.

Guarantor agrees to pay to Lender on demand all reasonable costs and expenses incurred by Lender in seeking to enforce Lender’s rights and remedies under this Guaranty, including court costs, costs of alternative dispute resolution and reasonable attorneys’ fees and costs, whether or not suit is filed or other proceedings are initiated hereon. All such reasonable costs and expenses incurred by Lender shall constitute a portion of the Guaranteed Obligations hereunder, shall be subject to the provisions hereof with respect to the Guaranteed Obligations and shall be payable by Guarantor within ten (10) days of written demand by Lender.

Section 12. No Usury.

It is not the intention of Lender or Guarantor to obligate Guarantor to pay interest in excess of that lawfully permitted to be paid by Guarantor under applicable law. Should it be determined that any portion of the Guaranteed Obligations or any other amount payable by Guarantor under this Guaranty constitutes interest in excess of the maximum amount of interest that Guarantor, in Guarantor’s capacity as guarantor, may lawfully be required to pay under applicable law, the obligation of Guarantor to pay such interest shall automatically be limited to the payment thereof in the maximum amount so permitted under applicable law. The provisions of this Section shall override and control all other provisions of this Guaranty and of any other agreement between Guarantor and Lender.

Section 13. Representations, Warranties, and Covenants of Guarantor.

Until the Guaranteed Obligations are paid and performed in full and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor hereby represents, warrants, and covenants that: (a) Guarantor has a financial interest in Borrower and will derive a material and substantial benefit, directly or indirectly, from the making of the Loan to Borrower and from the making of this Guaranty by Guarantor; (b) this Guaranty is duly authorized and valid, and is binding upon and enforceable against Guarantor; (c) Guarantor is not, and the execution, delivery and performance by Guarantor of this Guaranty will not cause Guarantor to be, in violation of or in default with respect to any law or in default (or at risk of acceleration of indebtedness) under any agreement or restriction by which Guarantor is bound or affected; (d) unless Guarantor is a natural person, Guarantor is duly organized, validly existing, and in good standing under the laws of the state of its organization and has full power and authority to enter into and perform this Guaranty; (e) except as previously disclosed to Lender in writing, there is no litigation pending or, to the knowledge of Guarantor, threatened by or before any tribunal against or affecting Guarantor; (f) all financial statements and information heretofore furnished to Lender by Guarantor do, and all financial statements and information hereafter furnished to Lender by Guarantor will, fully and accurately, in all material aspects, present the condition (financial or otherwise) of Guarantor as of their dates and the results of Guarantor’s operations for the periods therein specified, and, since the date of the most recent financial statements of Guarantor heretofore furnished to Lender, no material adverse change has occurred in the financial condition of Guarantor, nor, except as heretofore disclosed in writing to Lender, has Guarantor incurred any material liability, direct or indirect, fixed or contingent; (g) after giving effect to this Guaranty, Guarantor is solvent, is not engaged or about to engage in business or a transaction for which the property of Guarantor is an unreasonably small capital, and does not intend to incur or believe that it will incur debts that will be beyond its ability to pay as such debts mature; and (h) Guarantor has read and fully understands the provisions contained in the Note, the Loan Agreement and the other Loan Documents. No Loan Documents or other document, certificate or statement (including, without limitation, any financial statements provided to Lender by Guarantor) furnished to Lender by or on behalf of Guarantor contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. Guarantor acknowledges that all such statements, representations and warranties shall be deemed to have been relied upon by Lender as an inducement to make the Loan to Borrower. Guarantor’s representations, warranties and covenants are a material inducement to Lender to enter into the other Loan Documents shall survive the execution hereof and any bankruptcy, foreclosure, transfer of security or other event affecting Borrower, Guarantor, any other party, or any security for all or any part of the Guaranteed Obligations.

 

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Section 14. Notices.

All notices from the Guarantor to Lender and Lender to Guarantor required or permitted by any provision of this Guaranty shall be in writing and sent by registered or certified mail or nationally recognized overnight delivery service and addressed as follows:

 

TO LENDER:    CITY NATIONAL BANK OF FLORIDA
   100 S.E. 2nd Street, 13th Floor
   Miami, Florida 33131
   Attention: Legal Department
TO GUARANTOR:    VENUS CONCEPT INC.
   235 Yorkland Blvd., Suite 900
   Toronto, Ontario M2J 4Y8
   Attention: Domenic Serafino, CEO
  

 Michael Mandarello, General Counsel

   E-mail:     dom@venusconcept.com
  

 mmandarello@venusconcept.com

Such addresses may be changed by such notice to the other party. Notice given as hereinabove provided shall be deemed given on the date of its deposit in the United States Mail and, unless sooner actually received, shall be deemed received by the party to whom it is addressed on the third calendar day following the date on which said notice is deposited in the mail, or if a courier system is used, on the date of delivery of the notice.

Section 15. Cumulative Rights.

All of the rights and remedies of Lender under this Guaranty and the other Loan Documents are cumulative of each other and of any and all other rights at law or in equity, and the exercise by Lender of any one or more of such rights and remedies shall not preclude the simultaneous or later exercise by Lender of any or all such other rights and remedies. No single or partial exercise of any right or remedy shall exhaust it or preclude any other or further exercise thereof, and every right and remedy may be exercised at any time and from time to time. No failure by Lender to exercise, nor delay in exercising, any right or remedy shall operate as a waiver of such right or remedy or as a waiver of any Event of Default. No notice to or demand on Guarantor in any case shall of itself entitle Guarantor to any other or further notice or demand in similar or other circumstances. No provision of this Guaranty or any right or remedy of Lender with respect hereto, or any default or breach, can be waived, nor can this Guaranty or Guarantor be released or discharged in any way or to any extent, except specifically in each case by a writing intended for that purpose (and which refers specifically to this Guaranty) executed and delivered by Lender to Guarantor.

Section 16. Term of Guaranty.

This Guaranty shall continue in effect until all the Guaranteed Obligations and all of the obligations of Guarantor to Lender under this Guaranty are fully and finally paid, performed and discharged and are not subject to any bankruptcy preference period or any other disgorgement.

Section 17. Subrogation.

Guarantor shall not have any right of subrogation under any of the Loan Documents or any right to participate in any security for the Guaranteed Obligations or any right to reimbursement, exoneration, contribution, indemnification or any similar rights, until the Guaranteed Obligations have been fully and finally paid, performed and discharged in accordance with Section 16 above, and Guarantor hereby waives all of such rights.

Section 18. Financial Reporting Requirements.

At all times during the term of the Loan, Guarantor shall comply with the financial reporting requirements more particularly set forth in the Loan Agreement.

 

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Section 19. No Transfer of Assets.

Guarantor shall not, during the term of the Loan, transfer any material portion of its assets unless such transfer is in the ordinary course of Guarantor’s business, for fair market value and such fair market value is given to Guarantor, in its sole name, and such transfer will not have a material adverse effect on the financial condition of Guarantor and/or its ability to perform its obligations hereunder, as determined by Lender in its sole and absolute discretion.

Section 20. Debt to Shareholders.

Upon the occurrence of an Event of Default, or if a condition exists, which but for the giving of notice or the passage of time, would constitute an Event of Default, the Guarantor agrees not to make any distributions or payments on loans to its shareholders.

Section 21. Lender’s Rights with Respect to Guarantor’s Property in Lender’s Possession.

In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Lender by law, Lender shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lender, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Lender in writing.

Section 22. Time of Essence.

Time shall be of the essence in this Guaranty with respect to all of Guarantor’s obligations hereunder.

Section 23. Entire Agreement; Counterparts; Construction; Electronic Signatures.

This Guaranty embodies the entire agreement between Lender and Guarantor with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty supersedes all prior agreements and understandings, if any, with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty shall be effective upon execution by Guarantor and delivery to Lender. This Guaranty may not be modified, amended or superseded except in a writing signed by Lender and Guarantor referencing this Guaranty by its date and specifically identifying the portions hereof that are to be modified, amended or superseded. This Guaranty has been executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement. As used herein, the words “include” and “including” shall be interpreted as if followed by the words “without limitation.” This Guaranty may be executed and delivered by electronic signature, and such electronic signature(s) shall be deemed an original signature for purposes of this Guaranty and all matters related thereto, with such electronic signature(s) having the same legal effect as an original signature.

Section 24. Forum.

Guarantor hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the jurisdiction of any state court or any United States federal court sitting in Miami-Dade County, Florida. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection that Guarantor may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum. Guarantor hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court or any United States federal court sitting in the state specified in the governing law section of this Guaranty may be made by certified or registered mail, return receipt requested, directed to Guarantor at its address for notice set forth in this

 

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      /s/ DS
      Initial(s)


Guaranty, or at a subsequent address of which Lender received actual notice from Guarantor in accordance with the notice section of this Guaranty, and service so made shall be complete five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Lender to serve process in any manner permitted by law or limit the right of Lender to bring proceedings against Guarantor in any other court or jurisdiction.

Section 25. WAIVER OF JURY TRIAL.

GUARANTOR AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT.

THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Section 26. Savings Clause.

Notwithstanding any provision herein contained to the contrary, Guarantor’s liability under this Guaranty shall be limited to an amount not to exceed as of any date of determination the amount which could be claimed by Lender from Guarantor under this Guaranty without rendering such claim voidable or avoidable under Section 548 of the Bankruptcy Code (Title 11, U.S.C.) or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law (the “Avoidance Provisions”) after taking into account, among other things, Guarantor’s right of contribution and indemnification from each other guarantor, if any. To the end set forth above, but only to the extent that the obligations of Guarantor hereunder would otherwise be subject to avoidance under the Avoidance Provisions, if Guarantor is not deemed to have received valuable consideration, fair value, fair consideration or reasonably equivalent value for the obligations of Guarantor hereunder, or if the obligations of Guarantor hereunder would render Guarantor insolvent, or leave Guarantor with an unreasonably small capital to conduct its business, or cause Guarantor to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the obligations of Guarantor hereunder are deemed to have been incurred for the purposes of the Avoidance Provisions, the maximum obligation for which Guarantor shall be liable hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the obligations of Guarantor hereunder, as so reduced, to be subject to avoidance under the Avoidance Provisions.

Section 27. Waiver of Sovereign Immunity.

To the extent that Guarantor may be entitled in any state or jurisdiction to claim or benefit from any immunity (whether characterized as state immunity, sovereign immunity, act of state or otherwise) now or hereafter for itself or any of its property or assets (which it now has or may hereafter acquire) in respect of its obligations under this Guaranty from service of process or other documents relating to proceedings, jurisdiction, suit, judgement, execution, attachment (whether before awarded or judgement, in aid or execution or otherwise) or legal process or to the extent that in any such jurisdiction there may be attributed to it or any of its property or assets such immunity (whether or not claimed), the Guarantor expressly, unconditionally and irrevocably agrees not to claim, invoke or permit to be invoked on it or its property or assets’ behalf or for it or its property or assets’ benefit and hereby expressly, unconditionally and irrevocably waives such immunity to the fullest extent permitted by the laws of such jurisdiction.

Section 28. Service of Process.

Guarantor hereby irrevocably and unconditionally consents to service of process of a summons complaint or related documents in the manner provided in Section 14 above, and expressly and irrevocably agrees that service

 

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of process in the manner provided in Section 14 above is proper, effectual and complies with applicable law as well as the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents. All summons, complaints or related documents issued in connection with this paragraph shall be directed to Guarantor at its address for notice set forth in Section 14 above, or at a subsequent address in accordance with Section 14 above.

[CONTINUES ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty under seal as of the date first written above.

 

Witnesses:      GUARANTOR:
     VENUS CONCEPT INC., a Delaware corporation

/s/ Joanne Serafino

     By:   

        /s/ Domenic Serafino

Print Name: Joanne Serafino                                                          Domenic Serafino, Chief Executive Officer

/s/ Lucia Mandarello

       
Print Name: Lucia Mandarello                                                     

PROVINCE OF ONTARIO     )

                   )SS:

CITY OF TORONTO               )

The foregoing instrument was acknowledged before me by means of ☐ physical presence or ☐ online notarization this day of December, 2020, by Domenic Serafino, as Chief Executive Officer of VENUS CONCEPT INC., a Delaware corporation, as an act of and on behalf of the corporation, who is personally known to me or produced                      as identification.

 

                                                                                      
Print or Stamp Name:                                                  
Notary Public, Province of Ontario
Commission Number:                                                  

 

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Exhibit 10.9

Execution Version

THIS INSTRUMENT IS SUBORDINATED TO ALL INDEBTEDNESS NOW OR HEREAFTER OWING BY THE MAKER TO CITY NATIONAL BANK OF FLORIDA, AS PROVIDED IN THOSE CERTAIN SUBORDINATION OF DEBT AGREEMENTS DATED ON OR ABOUT THE CLOSING DATE.

SECURITIES EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

THIS SECURITIES EXCHANGE AND REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of December 8, 2020, by and among Venus Concept Inc., a Delaware corporation with principal executive offices located at 235 Yorkland Blvd, Suite 900, Toronto, Ontario M2J 4Y8 (the “Company”), the Guarantors (as defined below) and each investor identified on the signature pages hereto (each, an “Investor” and collectively, the “Investors”), and Madryn Health Partners, LP, as collateral agent (in such capacity, the “Collateral Agent”).

RECITALS

A. The Company, the Guarantors and each Investor are executing and delivering this Agreement in reliance upon the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act.

B. The Company and the Guarantors have previously entered into that certain Credit Agreement dated as of October 11, 2016 (as amended, modified, restated, supplemented or extended from time to time, the “Credit Agreement”), by and among Venus Concept USA Inc. (“Venus USA”) and Venus Concept Canada Corp. (“Venus Canada”), as borrowers, the Company and Venus Concept Ltd., as guarantors, the other guarantors from time to time party thereto, the lenders from time to time party thereto (the “Madryn Lenders”), and Madryn Health Partners, LP, as administrative agent (the “Administrative Agent”).

C. Concurrently with the Closing, the Company and Venus USA shall enter into that certain Loan and Security Agreement by and among Venus USA, as borrower, the Company, as a guarantor and City National Bank of Florida, pursuant to which Venus USA shall obtain a term loan in the amount of $50,000,000 (the “CNB Loan Proceeds”).

D. From the CNB Loan Proceeds, Venus USA shall repay $42,500,000 of the Madryn Debt, and the Administrative Agent and the Madryn Lenders have agreed that any applicable prepayment premium or fee required under the Credit Agreement in connection with such repayment shall be waived (the “Cash Repayment”).

E. After giving effect to the Cash Repayment, in exchange for the satisfaction and termination of all remaining Madryn Debt and the payment of $1,600,000 as a closing fee (the “Closing Fee”), each Investor, severally and not jointly, wishes to accept, and the Company wishes to issue to each Investor, upon the terms and conditions stated in this Agreement, one or more secured convertible notes of the Company in substantially the form attached hereto as Exhibit A (collectively, the “Notes” and each, individually, a “Note”) in the aggregate principal amount set forth across from such Investor’s name under the heading “Principal Amount of Note” on the Schedule of Investors, which Notes shall be convertible on the terms stated therein into shares of


the common stock, $0.0001 par value, of the Company (the “Common Stock,” and the shares of Common Stock issuable pursuant to the terms of the Notes, including, without limitation, upon conversion or otherwise, collectively, the “Note Shares”). The Notes, the Note Shares and the Guarantees are collectively referred to herein as the “Securities.”

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company, the Guarantors and the Investors, intending to be legally bound hereby, agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated:

Act” has the meaning set forth in Section 9.17.

Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

Agreement” has the meaning set forth in the Preamble.

Allowable Grace Period” has the meaning set forth in Section 5.1(c)(xiv).

Assignment Conditions” means collectively, (a) all interests (except as limited by this definition) of the Investors and all Notes must be assigned to one Person and, to the extent so requested, to such Person’s Affiliates except as otherwise consented to in writing by the Company, (b) the Company has provided prior written consent to assignment of the Notes (which consent may be withheld in the Company’s sole discretion), (c) the assignment of the Notes must be in accordance with an exemption from the registration requirements of the Securities Act and any applicable state securities laws and the Investors shall deliver to the Company a certification to such effect and shall execute and deliver all documents and agreements reasonably requested by the Company in connection therewith, including an opinion of counsel to the Investor if requested by the Transfer Agent, (d) immediately upon an assignment of the Notes, the Security Documents (other than the Guaranty and Security Agreement), the security interests granted therein and any liens against the Company, the Guarantors and the Collateral shall be terminated, released and discharged and the Investors will execute and deliver to the Company all documents and agreements requested by the Company in connection therewith and (e) any and all costs incurred by the Company or the Guarantors in connection with the assignment of the Notes shall be at the sole cost and expense of the Investors; provided, that, notwithstanding anything to the contrary set forth herein, if an Event of Default under Section 4.1(b) or (d) of the Notes has occurred and is continuing, the Company shall not have any consent right under (b) above with respect to any assignment, transfer, sale of the Note or this Agreement by any Investor.

 

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Business Day” means any day other than Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in The State of New York or Ontario, Canada are authorized or required by law or other governmental action to close.

Canadian AML Acts” means applicable Canadian law regarding anti-money laundering, anti-terrorist financing, government sanction and “know your client” matters, including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada).

Claims” has the meaning set forth in Section 7.1(a).

Closing” means the closing of the issuance of the Notes pursuant to Section 2.1.

Closing Date” means the date on which the MSPLP Facility (as defined in the Notes) shall have closed and loans thereunder shall have funded.

CNB Escrow Agreement” means that certain Escrow Agreement dated as of the date Closing Date, by and among Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, and City National Bank of Florida.

Collateral” means all property (whether real or personal and whether tangible or intangible) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including Collateral as defined in the Guaranty and Security Agreement.

Collateral Agent” has the meaning set forth in the Preamble.

Common Stock” has the meaning set forth in the Recitals.

Company” has the meaning set forth in the Preamble.

Credit Agreement” has the meaning set forth in the Recitals.

Designated Jurisdiction” means any country or territory to the extent that such country or territory is the subject of any Sanction.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

FATCA” means Sections 1471 through 1474 of the Internal Revenue Code as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations thereunder, official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code and any intergovernmental agreements entered into thereunder.

Fee Letter” means that certain Fee Letter dated as of the Closing Date by and among the Company, Madryn Health Partners, LP and Madryn Health Partners (Cayman Master), LP.

 

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Filing Deadline” means (a) with respect to the initial Registration Statement required to be filed pursuant to Section 5.1(a), the 60th calendar day after the Closing Date and (b) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the date on which the Company was required to file such additional Registration Statement pursuant to the terms of this Agreement.

FINRA” has the meaning set forth in Section 3.2(c).

Foreign Investor” has the meaning set forth in Section 4.6(c).

GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, consistently applied and as in effect from time to time.

Governmental Authority” means the government of the United States, Canada, Israel or any other nation, or of any political subdivision thereof, whether state, provincial, territorial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

Grace Period” has the meaning set forth in Section 5.1(c)(xiv).

Guarantees” means the guaranty provided by each Guarantor pursuant to the Guaranty and Security Agreement.

Guarantors” means, collectively, Venus USA, Venus Canada and Venus Concept Ltd.

Guaranty and Security Agreement” means that certain Guaranty and Security Agreement, dated as of the Closing Date, in substantially the form attached hereto as Exhibit B, by and among the Company, the Guarantors from time to time party thereto, and each holder of Notes.

HMT” has the meaning set forth in the definition of “Sanctions”.

Indemnified Damages” has the meaning set forth in Section 7.1(a).

Indemnified Party” has the meaning set forth in Section 7.1(b).

Indemnified Person” has the meaning set forth in Section 7.1(a).

Information” means all information received from an Obligor or any Subsidiary of an Obligor relating to the Obligors or any Subsidiary of an Obligor or any of their respective businesses, other than any such information that is available to the Investors on a nonconfidential basis prior to disclosure by such Obligor or any Subsidiary of such Obligor. Any Person required to maintain the confidentiality of Information as provided in Section 9.3 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to

 

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maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Investor” has the meaning set forth in the Preamble.

Israeli Guarantor” means each of (a) Venus Concept Ltd. and (b) each Person that joins as a Guarantor from time to time pursuant to the Guaranty and Security Agreement (or pursuant to such other agreement as the Investors may agree) that is organized under the laws of, or is registered or maintains a place of business (including an office for the transfer or registration of shares) in, Israel, together with their respective successors and permitted assigns, in each case, organized under the laws of, or registered or maintaining a place of business (including an office for the transfer or registration of shares) in, Israel.

Israeli Investment Services Law” means the Israeli Regularization of Investment Advice, Investment Marketing and Investment Portfolio Management Law 5755-1995.

Israeli Penal Law” means the Israeli Penal Law, 5737-1977.

Israeli PMLL” means the Israeli Prohibition on Money-Laundering Law, 5760-2000.

Israeli Joint Investments in Trust Law” means the Israeli Joint Investments in Trust Law, 5754-1994.

Israeli Trading with the Enemy Ordinance” means the Israeli Trading with the Enemy Ordinance, 1939.

Israeli VAT Law” means the Israeli Value Added Tax Law, 5735-1975.

Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

Madryn Debt” means the aggregate outstanding obligations under the Credit Agreement as of the Closing Date.

Material Adverse Effect” means a material adverse effect on (a) the legality, validity or enforceability of this Agreement of any of the Transaction Documents, (b) on the business, assets, properties, liabilities (actual or contingent) or financial condition of the Company and its subsidiaries, taken as a whole, or (c) on the Obligors’ (taken as whole) ability to perform their obligations hereunder or under any of the Transaction Documents in any material respect on a timely basis.

Material Contract” means any contract of the Company or any Subsidiary that has been filed as an exhibit to the SEC Reports pursuant to Item 601(b)(10) of Regulation S-K.

 

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Maximum Rate” has the meaning set forth in Section 9.18.

Note Shares” has the meaning set forth in the Recitals.

Notes” has the meaning set forth in the Recitals.

Obligors” means, collectively, the Company and each Guarantor.

OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.

Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof and any other legal entity.

PPSA” means the Personal Property Security Act (Ontario); provided, that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any collateral granted pursuant to the Transaction Documents is governed by the Personal Property Security Act as in effect in a Canadian jurisdiction other than the Province of Ontario, or the Civil Code of Quebec, “PPSA” means the Personal Property Security Act as in effect from time to time in such other jurisdiction, as applicable, for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

Press Release” has the meaning set forth in Section 4.3.

Recipient” means the Collateral Agent, any Investor, and any other recipient of any payment by or on account of any obligation of any Obligor under any Transaction Document.

Registrable Securities” means (a) the Note Shares, and (b) any shares of capital stock issued or issuable with respect to the Note Shares and the Notes, including, without limitation, (i) as a result of any stock split, dividend, distribution, recapitalization or similar transaction and (ii) shares of capital stock of a Successor Entity (as defined in the Notes) into which the shares of Common Stock are converted or exchanged, in each case, without regard to any limitations on conversion of the Notes.

Registration Statement” means a registration statement or registration statements of the Company filed under the Securities Act covering Registrable Securities, including, in each case, the prospectus, amendments and supplements to such registration statement or prospectus, including pre- and post-effective amendments, all exhibits thereto and all material incorporated by reference or deemed to be incorporated by reference, if any, in such registration statement.

Regulation D” has the meaning set forth in the Recitals.

Required Registration Amount” means 100% of the maximum number of Note Shares issuable upon conversion of the Notes (assuming for purposes hereof that any such conversion shall not take into account any limitations on the conversion of the Notes set forth in the Notes).

 

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Responsible Officer” means the chief executive officer, president, general counsel, associate general counsel, senior vice president of finance or chief financial officer, in each case, of an Obligor. Any document delivered hereunder that is signed by a Responsible Officer of an Obligor shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Obligor and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Obligor.

Rule 144” means Rule 144 promulgated by the SEC under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule.

Sanction(s)” means any sanction administered or enforced by the United States government (including, without limitation, OFAC), the Canadian government, the United Nations Security Council, the European Union, Her Majesty’s Treasury (“HMT”), the State of Israel or its government or other relevant sanctions authority.

Schedule of Investors” means the list of Investors attached hereto as Annex A.

SEC” has the meaning set forth in the Recitals.

SEC Reports” has the meaning set forth in Section 3.1(s).

Securities Act” has the meaning set forth in the Recitals.

Security Documents” means, collectively, the Guaranty and Security Agreement and any other security agreement, collateral access agreement, landlord waiver, account control agreement or other agreement or instrument pursuant to or in connection with which the Company or any of the Guarantors grants or perfects a security interest to the Collateral Agent for the benefit of the Investors.

Subordination Agreements” means, collectively, (a) those certain Subordination of Debt Agreements dated on or about the Closing Date by and among one or more of the Obligors, Madryn Health Partners, LP, Madryn Health Partners (Cayman Master), LP, and City National Bank of Florida and (b) each other subordination agreement, if any, entered into in connection with the transaction contemplated hereby in form and substance reasonably satisfactory to the Investors.

Subsidiary” means any Person (a) in which the Company, directly or indirectly, owns more than 50% of the outstanding voting capital stock or any voting equity or similar interest of such Person or (b) the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by the Company.

Taxes” has the meaning set forth in Section 4.6(a).

Trading Day” means (a) a day on which the Common Stock is traded on a Trading Market (other than the OTCBB), or (b) if the Common Stock is not listed or quoted on a Trading Market (other than the OTCBB), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTCBB, or (c) if the Common Stock is not listed or quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as

 

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reported by the OTC Markets Group Inc. (or any similar organization or agency succeeding to its functions of reporting prices); provided, that, in the event that the Common Stock is not listed or quoted as set forth in clauses (a), (b) and (c) hereof, then Trading Day shall mean a Business Day.

Trading Market” means whichever of the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTCBB on which the Common Stock is listed or quoted for trading on the date in question.

Transaction Documents” means this Agreement, including the Schedules, Annexes and Exhibits attached hereto, the Notes, the Security Documents, the Fee Letter, the Subordination Agreements, each of the other agreements or instruments entered into or executed by the parties hereto in connection with the transactions contemplated by the foregoing, and each other document that identifies itself as a “Transaction Document”.

Transfer Agent” means Computershare, or any successor transfer agent for the Company.

VAT” means (a) any tax imposed in compliance with the Israeli VAT Law; or (b) any other consumption or value-added tax (Israeli or other foreign) which may be imposed or levied from time to time.

Violations” has the meaning set forth in Section 7.1(a).

ARTICLE II

CLOSING

2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing, (a) Venus USA shall make the Cash Repayment from certain of the CNB Loan Proceeds and, notwithstanding anything to the contrary set forth in the Credit Agreement, the Investors (as the Madryn Lenders under the Credit Agreement) hereby waive all applicable premiums and fees under the Credit Agreement with respect thereto and (b) after giving effect to the Cash Repayment, in exchange for the satisfaction and termination of all remaining Madryn Debt and the payment of the Closing Fee, the Company shall issue the Notes to each Investor, and each Investor shall, severally and not jointly, accept the Notes in the principal amount set forth across from such Investor’s name under the heading “Principal Amount of Note” on the Schedule of Investors, at a price equal to the principal face amount thereof. The date and time of the Closing shall be the same time when the MSPLP Facility (as defined in the Notes) shall close and loans thereunder shall fund on the Closing Date. The Closing shall take place by delivery of the items to be delivered at Closing by facsimile or other electronic transmission.

2.2 Closing Deliverables.

(a) At the Closing, the Company shall deliver or cause to be delivered to each Investor a duly executed Note in the principal amount set forth across from such Investor’s name under the heading “Principal Amount of Note” on the Schedule of Investors.

(b) At the Closing, each Investor shall deliver or cause to be delivered to the Company (i) a completed and executed Investor Signature Page to this Agreement, (ii) a payoff letter and such lien releases as are reasonably requested by the Company and the

 

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other deliveries required under the payoff letter in order to evidence the satisfaction in full of the Credit Agreement and the termination of the security interests and guaranties provided in connection therewith, all in form and substance reasonably satisfactory to the Company and (iii) the CNB Escrow Agreement, in form and substance reasonably satisfactory to the Company.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Obligors. The Obligors hereby represent and warrant to the Investors, as of the date hereof and as of the Closing Date, as follows:

(a) Existence, Qualification, Power. Each Obligor (i) is duly organized or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (to the extent such concept is applicable in the jurisdiction of its incorporation) and where the jurisdiction of its incorporation, or a jurisdiction of its registration, is Israel, is not a designated as a “breaching company” by the Israeli Companies Registrar, (ii) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (A) own or lease its assets and carry on its business as described in the SEC Reports and (B) execute, deliver and perform its obligations under the Transaction Documents to which it is a party, including the issuance of the Securities in accordance with the terms of the Transaction Documents and (iii) is duly qualified and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clauses (ii)(A) or (iii), to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect.

(b) Authorization; No Contravention. The execution, delivery and performance by the Company and each Guarantor of each Transaction Document to which such Person is party have been duly authorized by all necessary corporate or other organizational action, and do not (i) contravene the terms of any of such Person’s organization documents, (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (A) any contractual obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its subsidiaries or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject or (iii) violate, in any material respect, any law (including, without limitation, Regulation U or Regulation X issued by the Federal Reserve Board), except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (ii)(A) to the extent that such conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect. The issuance of the Note Shares has been duly authorized by all necessary action on the part of the Company, and (other than the filing with the SEC of one or more Registration Statements in accordance with Article V, the filing with the SEC of a Form D and any other filings as may be required by state securities agencies, and the filing of any requisite notices and/or application(s) to any Trading Market for the issuance and sale of the Note Shares and the listing of the Note Shares for trading

 

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or quotation, as the case may be, thereon in the time and manner required thereby) no further consent, filing, authorization or action is required from or with any United States federal or state or foreign regulatory authority or governmental body or any Trading Market by the Company.

(c) Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company or any Guarantor of this Agreement or any other Transaction Document (including the issuance of the Securities) other than (i) those that have already been obtained and are in full force and effect, (ii) filings to perfect the Liens created by the Transaction Documents, (iii) filings required by applicable state securities laws, (iv) the filing of a Notice of Sale of Securities on Form D with the SEC under Regulation D of the Securities Act, (v) the filing of any requisite notices and/or application(s) to any Trading Market for the issuance and sale of the Note Shares and the listing of the Note Shares for trading or quotation, as the case may be, thereon in the time and manner required thereby, (vi) the filing of one or more Registration Statements in accordance with Article V and (vii) any required shareholder approval for an issuance of the Note Shares in excess of the Exchange Cap.

(d) Binding Effect. Each Transaction Document has been duly executed and delivered by the Company and each Guarantor that is party thereto. Each Transaction Document constitutes a legal, valid and binding obligation of the Company and each Guarantor that is party thereto, enforceable against each such Person in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity.

(e) Valid Issuance; Listing Requirements. The Notes and the Guarantees are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens (other than Liens in favor of the Investors or restrictions on transfer arising under applicable securities laws) and will not be subject to preemptive or similar rights of stockholders. Upon issuance or conversion in accordance with the Notes, the Note Shares, when issued, will be validly issued, fully paid and nonassessable, free and clear of all Liens (other than restrictions on transfer arising under applicable securities laws) and will not be subject to preemptive or similar rights of stockholders, with the holders being entitled to all rights accorded to a holder of Common Stock. The Company has not been notified by the Trading Market on which the Common Stock is currently listed that the Company is in violation of the listing requirements of the Trading Market and has no knowledge of any facts that would reasonably be expected to lead to delisting or suspension of the Common Stock in the foreseeable future. The issuance by the Obligors of the Securities shall not have the effect of delisting or suspending the Common Stock from the Trading Market after taking into account Section 3.3 of the Notes.

(f) No Material Adverse Effect. Since September 30, 2020, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect; provided that no effect to the

 

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business, assets, properties, liabilities (actual or contingent) or financial condition of the Company and its subsidiaries, taken as a whole, relating to COVID-19 and related measures by any Governmental Authority shall constitute a “Material Adverse Effect” for any purpose hereunder.

(g) [Reserved].

(h) [Reserved].

(i) [Reserved].

(j) [Reserved].

(k) [Reserved].

(l) [Reserved].

(m) Margin Regulations; Investment Company Act. The Company is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Federal Reserve Board), or extending credit for the purpose of purchasing or carrying margin stock. None of the Obligors is or is required to be registered as an “investment company” under the Investment Company Act of 1940. No Israeli Guarantor or Subsidiary thereof (i) is a “fund”, “trustee” or “fund manager,” each within the meaning of, or is otherwise subject to, the Israeli Joint Investments in Trust Law, (ii) engages in “investment advice,” “investment marketing” or “portfolio management,” each within the meaning of, or is otherwise subject to, the Israeli Investment Services Law; or (iii) engages in the “provision of credit” or provision of “financial services,” each within the meaning of, or is otherwise subject to, the Israeli Financial Services Law.

(n) [Reserved].

(o) [Reserved].

(p) [Reserved].

(q) Sanctions Concerns; Anti-Corruption Laws; PATRIOT Act.

(i) Sanctions Concerns. Neither the Company, nor any Subsidiary, nor, to the knowledge of the Company and the Guarantors, any director, officer, employee, agent, representative or Affiliate thereof, is an individual or entity that is, or is owned or controlled by, any individual or entity that is (A) the subject or target of any Sanctions, (B) included on OFAC’s List of Specially Designated Nationals, HMT’s Consolidated List of Financial Sanctions Targets and the Investment Ban List, or any similar list enforced by any other relevant sanctions authority or (C) located, organized or resident in a Designated Jurisdiction.

 

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(ii) Anti-Corruption Laws. The Company and its Subsidiaries have conducted their business in material compliance with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, the Corruption of Foreign Public Officials Act (Canada), the Israeli Penal Law, Chapter 9, Part 5 and other similar anti-corruption legislation in such or other jurisdictions, and have instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.

(iii) PATRIOT Act. To the extent applicable, the Company and each Subsidiary is in compliance, in all material respects, with (A) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, (B) the Act, (C) the Canadian AML Acts and (D) the Israeli Trading with the Enemy Ordinance and the Israeli PMLL and other similar legislation in such or other jurisdictions. Notwithstanding the foregoing, the representations in this Section 3.1(q)(iii) shall not be made by nor apply to any Person organized under the laws of Canada insofar as such representations would result in a violation of or conflict with the Foreign Extraterritorial Measures Act (Canada) or any similar law.

(r) [Reserved].

(s) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the Closing Date (the “SEC Reports”). As of their respective dates (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing), the SEC Reports filed by the Company complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing) by the Company, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing). Such financial statements have been prepared in accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP or may be condensed or summary statements, and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments. All Material Contracts to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are subject are included as part of or identified in the SEC Reports.

 

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(t) [Reserved].

(u) Private Placement. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 3.2 and their compliance with their agreements contained in the Transaction Documents, no registration under the Securities Act is required for the offer and sale of the Securities by the Obligors to the Investors pursuant to the terms of this Agreement. Subject to limitations contained in the Notes, the issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market, which, for the avoidance of doubt, as of the Closing Date, is the NASDAQ Global Market.

(v) Registration Rights. Other than as set forth in this Agreement and as disclosed in the SEC Reports, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiaries.

(w) No Integrated Offering. Assuming the accuracy of the Investors’ representations and warranties set forth in in Section 3.2 and their compliance with their agreements contained in the Transaction Documents, neither the Company, nor any of its affiliates (as defined in Rule 405 of the Securities Act), nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by any Obligor for purposes of the Securities Act which would require the registration of any such securities under the Securities Act.

(x) No General Solicitation. None of the Obligors or any person acting on behalf of any of the Obligors has offered or sold any of the Securities by any form of general solicitation or general advertising. Each Obligor has offered, and may offer, the Securities for sale only to the Investors and other “accredited investors” within the meaning of Rule 501 under the Securities Act.

(y) Accountants. MNP LLP, whose reports on the consolidated financial statements of the Company are filed with the SEC as part of the Company’s most recent Annual Report on Form 10-K filed with the SEC, are and, during the periods covered by their report, were independent registered public accounting firms within the meaning of the Securities Act and the Public Company Accounting Oversight Board (United States). Deloitte LLP, whose reports on the consolidated financial statements of the Company are filed with the SEC as part of the Company’s most recent Annual Report on Form 10-K filed with the SEC, during the periods covered by their report, were independent registered public accounting firms within the meaning of the Securities Act and the Public Company Accounting Oversight Board (United States).

(z) Disqualification Events. None of the Company or any Subsidiary, any of their respective predecessors, any director, executive officer, other officer of the Company or any Subsidiary participating in the offering contemplated hereby, any beneficial owner (as that term is defined in Rule 13d-3 under the Exchange Act) of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, any “promoter” (as that term is defined in Rule 405 under the Securities Act) connected

 

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with the Company or any of the Subsidiaries in any capacity at the time of the Closing, any placement agent or dealer participating in the offering of the Notes, any of such agents’ or dealer’s directors, executive officers, other officers participating in the offering of the Notes (each, a “Covered Person” and, together, “Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”). The Company has exercised reasonable care to determine (i) the identity of each person that is a Covered Person; and (ii) whether any Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e). None of the Obligors is for any other reason disqualified from reliance upon Rule 506 of Regulation D under the Securities Act for purposes of the offer and sale of the Securities.

(aa) Acknowledgment Regarding Investor’s Purchase of Securities. Each Obligor acknowledges and agrees that each Investor is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that no Investor is (i) an officer or director of the Company or any of its Subsidiaries, (ii) prior to the issuance and exchange of the Notes, an “affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries or (iii) prior to the issuance and exchange of the Notes, a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the Exchange Act). Each Obligor further acknowledges that no Investor is acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by an Investor or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Investor’s purchase of the Securities.

(bb) Acknowledgement Regarding Investors’ Trading Activity. It is understood and acknowledged by each Obligor that, except as otherwise specifically set forth in any written agreement between any Obligor and the applicable Investor, (i) following the public disclosure of the transactions contemplated by the Transaction Documents, in accordance with the terms thereof, none of the Investors has been asked by the Company or any of its Subsidiaries to agree, nor has any Investor agreed with the Company or any of its Subsidiaries, to refrain from effecting any transactions in or with respect to (including, without limitation, purchasing or selling, long and/or short) any securities of any Obligor, or “derivative” securities based on securities issued by any Obligor or to hold any of the Securities for any specified term; (ii) no Investor shall be deemed to have any affiliation with or control over any arm’s length counterparty in any “derivative” transaction; and (iv) each Investor may rely on the Company’s obligation to timely deliver Note Shares upon conversion, exercise or exchange, as applicable, of the Notes as and when required pursuant to the Transaction Documents for purposes of effecting trading in the Common Stock of the Company. The Company further understands and acknowledges that, except as otherwise specifically set forth in any written agreement between the Company and the applicable Investor, following the public disclosure of the transactions contemplated by the Transaction Documents pursuant to the Press Release (as defined below) one or more Investors may engage in hedging and/or trading activities (including, without limitation, the location and/or reservation of borrowable shares of Common Stock) at various times

 

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during the period that the Notes are outstanding, including, without limitation, during the periods that the value and/or number of the Note Shares deliverable with respect to the Notes are being determined and such hedging and/or trading activities (including, without limitation, the location and/or reservation of borrowable shares of Common Stock), if any, can reduce the value of the existing stockholders’ equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. Each Obligor acknowledges that, except as otherwise specifically set forth in any written agreement between such Obligor and the applicable Investor, such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement, the Notes or any other Transaction Document or any of the documents executed in connection herewith or therewith.

(cc) Manipulation of Price. Neither the Company nor any of its Subsidiaries has, and no Person acting on their behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries in connection with the transactions contemplated by the Transaction Documents, or (iv) paid or agreed to pay any Person for research services with respect to any securities of the Company or any of its Subsidiaries.

(dd) Security Interest in Collateral. Prior to any assignment by the Investors of the Notes, the provisions of this Agreement and the other Transaction Documents (after giving effect to post-closing obligations) create legal, valid and enforceable Liens on, and security interests in, all of the right, title and interest of the Company and the Guarantors which are organized in the United States in and to all the Collateral owned by the Company or any such Guarantor in favor of the Collateral Agent, for the benefit of the Collateral Agent and the Investors, and upon (i) the making of the filings, recordings and other similar actions specified in the Security Documents, and (ii) the taking of possession or control by the Collateral Agent of such Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent required by any Security Document), such Liens shall constitute perfected and continuing Liens on, and security interests in, the Collateral, securing the Secured Obligations (as defined in the Guaranty and Security Agreement), enforceable against the Company, the Subsidiary Guarantors and all third parties, and, except as set forth on Schedule 3.1(dd), having priority over all other Liens on the Collateral.

(ee) No Installment Arrangements. No Israeli Guarantor or other Obligor is party to an installment arrangement (“hesder prisa”) with the Israeli Tax Authority, the National Insurance Institute of Israel (“Bituach Leumi”) or any municipal authority in Israel, and no obligations of such Obligor to any of such entities will be rescheduled, deferred or otherwise paid in instalments or can or will be classified as “Preferred Debts” (“hovot be-din kadima”) under Section 234(a)(5) of the Israeli Insolvency and Economic Rehabilitation Law.

 

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3.2 Representations and Warranties of the Investors. Each Investor hereby, as to itself only and for no other Investor, represents and warrants to the Obligors, as of the date hereof and as of the Closing Date, as follows:

(a) Organization; Authority. Such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, limited liability company, partnership or other power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The purchase by such Investor of the Notes hereunder and the consummation of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership or other action on the part of such Investor. This Agreement and the Transaction Documents to which such Investor is a party or has or will execute have been duly executed and delivered by such Investor and constitute the valid and binding obligations of such Investor, enforceable against it in accordance with their terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b) No Public Sale or Distribution. Such Investor is acquiring the Securities for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under the Securities Act or under an exemption from such registration and in compliance with applicable federal, state and foreign securities laws, and such Investor does not have a present arrangement to effect any distribution of the Securities to or through any person or entity; provided, however, that, by making the representations herein, such Investor does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption from registration under the Securities Act.

(c) Investor Status. Such Investor is an “accredited investor” as defined in Rule 501(a) under the Securities Act. Such Investor is not a registered broker dealer registered under Section 15(a) of the Exchange Act, or a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) or an entity engaged in the business of being a broker dealer.

(d) Experience of Such Investor; Risk of Loss. Such Investor has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Investor understands that it must bear the economic risk of its investment in the Securities indefinitely, and is able to bear such risk and is able to afford a complete loss of such investment.

(e) Access to Information. Such Investor acknowledges that it has been furnished with all materials relating to the business, finances and operations of the Obligors

 

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and materials relating to the offer and sale of the Securities that have been requested by such Investor. Such Investor has been afforded the opportunity to ask questions to the Obligors and receive answers from representatives of the Obligors concerning the Obligors and the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities. Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors, if any, or its representatives shall modify, amend or affect such Investor’s right to rely on the Obligors’ representations and warranties contained herein or in any other Transaction Document.

(f) No Governmental Review. Such Investor understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

(g) Reliance on Exemptions. Such Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Obligors are relying upon the truth and accuracy of, and such Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein and in the other Transaction Documents in order to determine the availability of such exemptions and the eligibility of such Investor to acquire the Securities.

(h) Transfer or Resale. Such Investor acknowledges and understands that: (i) the Securities have not been and are not being registered under the Securities Act, any U.S. state securities laws or the laws of any foreign country or other jurisdiction, and may not be offered for sale, sold, assigned or transferred other than pursuant to Section 4.1; and (ii) except as set forth in Article V, neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

(i) Legends. Such Investor acknowledges and understands that each of the certificates representing the Securities, except as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend as set forth in Section 4.1(b), which shall only be removed as set forth in Section 4.1(d).

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) Each Investor covenants that the Notes shall not be transferred or assigned to any Person, other than an Affiliate of each original Investor, unless the Assignment Conditions and the terms of Section 9.8 are satisfied prior to any such transfer or assignment. Each holder covenants that the Securities will be disposed of only pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act or pursuant to an available exemption from, or in a transaction not subject

 

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to, the registration requirements of the Securities Act, and in compliance with applicable state securities laws. In connection with any transfer of Securities other than (i) pursuant to an effective registration statement, (ii) to the Company, or (iii) pursuant to Rule 144 (provided, that, the holder provides the Company with reasonable assurances (in the form of a seller representation letter) that the Securities may be sold pursuant to such rule) or Rule 144A (as promulgated under the Securities Act), the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. The Company hereby consents to and agrees to register on the books of the Company and with its Transfer Agent, without any such legal opinion, except to the extent that the Transfer Agent requests such legal opinion, any transfer of Securities by an Investor to an Affiliate of such Investor; provided, that, such transfer does not involve a “sale” within the meaning of Section 2(a)(3) of the Securities Act; and provided, further, that, such Affiliate does not request any removal of any existing legends on any certificate evidencing such Securities.

(b) The Investors agree to the imprinting, until no longer required by Section 4.1(d), of the following legend on any certificate evidencing any of the Securities:

THESE SECURITIES [for Notes, insert: AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF] HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.

Additionally, for the Notes, insert: THIS INSTRUMENT IS SUBORDINATED TO ALL INDEBTEDNESS NOW OR HEREAFTER OWING BY THE MAKER TO CITY NATIONAL BANK OF FLORIDA, AS PROVIDED IN THOSE CERTAIN SUBORDINATION OF DEBT AGREEMENTS DATED ON OR ABOUT DECEMBER 9, 2020.

Additionally, for the Notes, insert: THIS INSTRUMENT IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECURITIES EXCHANGE AND REGISTRATION RIGHTS AGREEMENT DATED AS OF DECEMBER 8, 2020, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

(c) [Reserved].

 

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(d) Certificates evidencing the Securities shall not be required to contain such legend or any other legend (i) with respect to Notes Shares, following any sale of such Note Shares pursuant to an effective registration statement under the Securities Act, (ii) at the time of any sale pursuant to Rule 144 if the holder provides the Company with a legal opinion (and the documents upon which the legal opinion is based) reasonably acceptable to the Company and the Transfer Agent to the effect that the Securities can be sold under Rule 144 or (iii) if the holder provides the Company with a legal opinion (and the documents upon which the legal opinion is based) reasonably acceptable to the Company and the Transfer Agent to the effect that the legend is not required under applicable requirements of the Securities Act (including controlling judicial interpretations and pronouncements issued by the staff of the SEC (the “Staff”)); provided, however, that, the Company shall not be required to remove the restrictive legend on any Note Shares registered on a Registration Statement until the earlier of one year after the issuance of the Notes and such time that the holder intends to sell such Note Shares. The Company will no later than three (3) Trading Days following the delivery by an Investor to the Company or the Transfer Agent (if delivery is made to the Transfer Agent a copy shall be contemporaneously delivered to the Company) of (A) a legended certificate representing the applicable Securities and any necessary instruments of transfer and (B) evidence reasonably satisfactory to the Company and its counsel and the Transfer Agent of the occurrence of any of clauses (i) through (iii) above (including any applicable investor and broker representation letters and the delivery of any legal opinion referred to therein, as applicable), deliver or cause to be delivered to such Investor (or a transferee of such Investor, as applicable) a certificate or book-entry (including shares transferred via DWAC or similar methodology by DTC) representing such Securities that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that expand the restrictions on transfer set forth in this Section 4.1(d).

4.2 Use of Proceeds. The Company and its Subsidiaries shall use the net proceeds from the sale of the Notes and the Guarantees to (a) repay a portion of the outstanding amount of the term loans and certain other amounts owing under the Credit Agreement, and (b) pay the Closing Fee to the Investors as set forth in the Fee Letter. None of the Company or any of its Subsidiaries shall use such proceeds in violation of FCPA or OFAC regulations.

4.3 Securities Laws Disclosure; Publicity. The Company shall, on or before 9:30 a.m., New York time, on the first (1st) Business Day after the date the Notes are issued, issue a press release (the “Press Release”), the contents of which shall be subject to prior review of, and reasonable and timely comments by, the Investors, disclosing all the material terms of the transactions contemplated by the Transaction Documents. On or before 9:30 a.m., New York time, no later than the fourth (4th) Business Day after the date the Notes are issued, the Company shall file a Current Report on Form 8-K describing all the material terms of this Agreement and the Notes.

4.4 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Investor is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter

 

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adopted by the Company, or that any Investor could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents.

4.5 Form D and Blue Sky. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D. The Company, on or before the Closing Date, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Investors at the Closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification). The Company shall make all filings and reports, or shall rely on an available exemption, relating to the offer and sale of the Securities required under applicable securities or “blue sky” laws of the states of the United States following the Closing Date and shall provide copies to any Investor who so requests.

4.6 Taxes.

(a) Except as required by applicable law, all payments of principal and interest on the Notes and all other amounts payable under the Transaction Documents shall be made free and clear of and without deduction for any present or future income, excise, stamp, documentary, property or franchise taxes, VAT and other taxes, fees, duties, levies, assessments, withholdings or other charges of any nature whatsoever (including interest and penalties thereon) imposed by any taxing authority, excluding (i) taxes imposed on or measured by net income (however denominated), franchise Taxes and branch profits Taxes, in each case, (A) imposed by the jurisdiction under which a Recipient is organized or a jurisdiction in which the Recipient conducts business (other than solely as the result of entering into any of the Transaction Documents or taking any action thereunder), or (B) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Investor, its applicable lending office located in, the jurisdiction imposing such Taxes (or any political subdivision thereof) or (ii) U.S. federal or foreign withholding taxes imposed on amounts payable to or for the account of a Recipient with respect to an applicable interest on the Notes pursuant to a law in effect on the date on which such Recipient acquires such interest on the Notes except in each case to the extent that, pursuant to this Section 4.6, amounts with respect to such taxes were payable either to such Recipient’s assignor immediately before such Recipient became a party hereto, (iii) Canadian withholding taxes imposed or assessed solely as a result of (A) such Recipient not dealing at arm’s length with an Obligor within the meaning of the Income Tax Act (Canada) at the time of payment or (B) such Recipient being or not dealing at arm’s length (within the meaning of the Income Tax Act (Canada)) with a “specified shareholder” of an Obligor (within the meaning of subsection 18(5) of the Income Tax Act (Canada)) at the time of payment and (iv) U.S. federal withholding tax imposed under FATCA (all non-excluded items being called “Taxes”). If any withholding or deduction of any Taxes from any payment by or on account of any obligation of any Obligor hereunder is required in respect of any Taxes pursuant to any applicable law, then the sum payable by the applicable Obligor shall be increased by such additional amount or amounts as is necessary to ensure that the net amount actually received by the applicable Recipient will equal the full amount such Recipient would have received had no such withholding or deduction been required.

 

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(b) The Company or the Guarantors, as applicable, shall indemnify each Recipient, within ten (10) days after written demand therefor, for the full amount of any Taxes (including Taxes imposed on or attributable to amounts payable under this Section 4.6) payable or paid by such Recipient or required to be withheld or deducted from a payment by such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.

(c) Any Investor that is entitled to an exemption from or reduction of withholding Taxes with respect to payments made under any Transaction Document shall deliver to the Company, at the time or times reasonably requested by the Company, such properly completed and executed documentation reasonably requested by the Company as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Investor, at the time or times reasonably requested by the Company, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Company as will enable the Company to determine whether or not such Investor is subject to backup withholding, information reporting requirements, or withholding under FATCA. Each Investor that is not a “United States person” as defined in Section 7701(a)(30) of the Internal Revenue Code (each such Investor a “Foreign Investor”) shall execute and deliver to the Company on or prior to the date that such Investor becomes a party hereto (and from time to time thereafter upon the reasonable request of the Company), one or more (as the Company may reasonably request) duly completed and executed copies of United States Internal Revenue Service Forms W-8ECI, W-8BEN, W-8BEN-E, W-8IMY (as applicable) and other applicable forms, certificates or documents prescribed by the United States Internal Revenue Service or reasonably requested by the Company certifying as to such Investor’s entitlement to any available exemption from or reduction of withholding or deduction of taxes. Each Investor that is a “United States person” as defined in Section 7701(a)(30) of the Internal Revenue Code shall execute and deliver to the Company on or prior to the date such Investor becomes a party hereto (and from time to time thereafter upon the reasonable request of the Company), one or more (as the Company may reasonably request) duly completed and executed copies of United States Internal Revenue Service Form W-9 certifying that such Investor is not subject to United States backup withholding. The Company shall not be required to pay additional amounts to any Investor pursuant to this Section 4.6 with respect to taxes attributable to the failure of such Foreign Investor to comply with this paragraph or Section 4.6(d).

(d) Each Investor agrees that if any form or certification it previously delivered pursuant to this Section 4.6 expires or becomes obsolete or inaccurate in any respect, it shall promptly update such form or certification or promptly notify the Company of its inability to do so.

(e) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 4.6 (including by the payment of additional amounts pursuant to this Section 4.6), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, under this Section 4.6 with

 

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respect to the Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses (including taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 4.6(e) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority in the event that such indemnified party is required to repay such refund to such Governmental Authority). Notwithstanding anything to the contrary in this Section 4.6(e), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 4.6(e) the payment of which would place the indemnified party in a less favorable net after-tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had never been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts had never been paid. This paragraph shall not be construed to require any indemnified party to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the indemnifying party or any other Person.

(f) VAT.

(i) All amounts expressed in any Transaction Document to be payable by an Israeli Guarantor or other Obligor are deemed to be exclusive of any VAT which is chargeable on the payment of such amount, which VAT shall be the responsibility of the payor.

(ii) Where any Transaction Document requires an Israeli Guarantor or other Obligor to reimburse or indemnify another Person for any cost or expense, such Israeli Guarantor or other Obligor shall reimburse or indemnify (as the case may be) the Person for the full amount of such cost or expense, including such part thereof as represents VAT.

(iii) An Israeli Guarantor or any other Obligor shall promptly, upon request, provide the Collateral Agent or Investor, as the case may be, details of the Israeli Guarantor’s or other Obligor’s VAT registration and such other information as is reasonably requested in connection with any applicable VAT reporting requirements or demands made upon the Collateral Agent or Investor.

4.7 Israeli Security Matters. Within 120 calendar days following the Closing Date, the Company and the Israeli Guarantor shall (i) create and timely perfect the Investors’ security interest on their Israeli assets and/or equity interests granted as collateral pursuant to the Transaction Documents, and (ii) duly apply (A) to the Israeli Companies Registrar, within 21 days of the date of creation of those security interests, to ensure registration of such security interests by the Companies Registrar with effect as of creation of the security interests, (B) to the Israeli Patents Authority to ensure registration of such security interests in patents or patent applications within 21 days of the date of creation of those security interests, and (C) to the Israeli Pledges Registrar to ensure registration of security interests created by any other Obligor in any shares or other equity interests issued by any Israeli Guarantor.

 

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4.8 Canadian Security Matters. Within 120 calendar days following the Closing Date, the Company and the Venus Canada shall create and perfect the Investors’ security interest on their Canadian assets and/or equity interests granted as collateral pursuant to the Transaction Documents.

ARTICLE V

REGISTRATION RIGHTS

5.1 Resale Registration.

(a) Mandatory Registration. The Company shall prepare and, as soon as reasonably practicable, but in no event later than the Filing Deadline, file with the SEC, an initial Registration Statement on Form S-3 or such other form under the Securities Act as is then available to the Company, providing for the resale from time to time by the Investors of at least the number of Registrable Securities equal to the Required Registration Amount as of the date such Registration Statement is initially filed with the SEC. Notwithstanding anything to the contrary contained herein, the Filing Deadline with respect to any Registration Statement shall be automatically extended by a number of days necessary to address any comments to such Registration Statement by any Investor’s counsel, which comments have required that the Company not file such Registration Statement as set forth in clause (B) of Section 5.1(c)(iii). Such initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, shall contain (except as otherwise directed by the Investors) the “Selling Stockholders” and “Plan of Distribution” sections in substantially the form attached hereto as Annex B. The Company agrees to use reasonable efforts to cause the initial Registration Statement, and each other Registration Statement required to be filed pursuant to the terms of this Agreement, to be declared effective by the SEC as soon as practicable following such filing. The Company shall promptly, and in any event within three (3) Trading Days, notify the Investors of the effectiveness of a Registration Statement.

(b) [Reserved].

(c) Related Obligations. The Company shall use reasonable efforts to effect the registration of all the Registrable Securities in accordance with the intended method of disposition thereof, and, pursuant thereto, the Company shall have the following obligations:

(i) The Company shall promptly prepare and file with the SEC a Registration Statement with respect to all the Registrable Securities (but in no event later than the applicable Filing Deadline) and use reasonable efforts to cause such Registration Statement to become effective as soon as practicable after such filing. Subject to Allowable Grace Periods, the Company shall keep each Registration Statement effective (and the prospectus contained therein available for use) pursuant to Rule 415 for resales by the Investors on a delayed or continuous basis at then-prevailing market prices (and not fixed prices) at all times until the earlier of (A) the date as of which all of the Investors may sell all of the Registrable Securities required to be covered by such Registration Statement (disregarding any

 

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reduction pursuant to Section 5.1(g)) without restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as determined by legal counsel for the Company, or (B) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “Registration Period”). Notwithstanding anything to the contrary contained in this Agreement, the Company shall ensure that, when filed and at all times while effective, each Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading. The Company shall submit to the SEC, within five (5) days after the Staff advises the Company (orally or in writing, whichever is earlier) that the Staff either will not review a particular Registration Statement or has no further comments on such Registration Statement (as the case may be), a request for acceleration of effectiveness of such Registration Statement to a time and date not later than forty-eight (48) hours after the submission of such request.

(ii) Subject to Section 5.1(c)(xiv), the Company shall prepare and file with the SEC such amendments (including, without limitation, post-effective amendments) and supplements to each Registration Statement and the prospectus used in connection with each such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep each such Registration Statement effective at all times during the Registration Period for such Registration Statement, and, during such period, comply with the provisions of the Securities Act with respect to the registration of all Registrable Securities of the Company required to be covered by such Registration Statement until the completion of the applicable Registration Period; provided, however, that, by 5:30 p.m. (New York time) on or prior to the fifth (5th) Business Day immediately following the effective date of each Registration Statement, the Company shall file with the SEC in accordance with Rule 424(b) under the Securities Act the final prospectus to be used in connection with sales pursuant to such Registration Statement (whether or not such a prospectus is technically required by such rule). In the case of amendments and supplements to any Registration Statement which are required to be filed pursuant to this Agreement (including, without limitation, pursuant to this Section 5.1(c)(ii)) by reason of the Company filing a report on Form 10-Q or Form 10-K or any analogous report under the Exchange Act, the Company shall, if permitted under the applicable rules and regulations of the SEC, have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on or prior to the third (3rd) Trading Day following the date on which the Exchange Act report is filed with the SEC which created the requirement for the Company to amend or supplement such Registration Statement.

(iii) The Company shall (A) permit one legal counsel in the aggregate for the Investors to review and comment upon (1) each Registration Statement that

 

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includes the name, or otherwise identifies, any Investor as a “Selling Stockholder” with respect to securities registered for sale pursuant to such Registration Statement at least five (5) days prior to its filing with the SEC and (2) all amendments and supplements to each Registration Statement that includes the name, or otherwise identifies, any Investor as a “Selling Stockholder” with respect to securities registered for sale pursuant to such Registration Statement (including, without limitation, the prospectus contained therein) (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8K, and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto, in each case, referred to in clause (A) above, in a form to which legal counsel for the Investors reasonably objects in a timely manner; provided however, that, in the event of such objection, the Company shall have no liability to any Investor for the resulting failure to timely file the Registration Statement. The Company shall reasonably cooperate with legal counsel for the Investors in performing the Company’s obligations pursuant to this Section 5.1(c)(iii).

(iv) The Company shall promptly furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (A) copies of any correspondence from the SEC or the Staff to the Company or its representatives relating to such Registration Statement, to the extent that such comments relate to the “Selling Stockholders” or the “Plan of Distribution”, (B) upon request, after the same is prepared and filed with the SEC, a reasonable number of copies of such Registration Statement and any amendment(s) and supplement(s) thereto, including, if so requested, the financial statements and schedules filed therewith, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (C) upon request, upon the effectiveness of such Registration Statement, two (2) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request from time to time), and (D) such other documents, including, without limitation, copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.

(v) The Company shall use reasonable efforts to (A) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by any Registration Statement under such other securities or “blue sky” laws of jurisdictions in the United States as shall be reasonably appropriate for the distribution of the Registrable Securities covered by such Registration Statement, (B) prepare and file in those jurisdictions, such amendments (including, without limitation, post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the applicable Registration Period, (C) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the applicable Registration Period, and (D) take all other actions reasonably necessary or advisable to qualify the

 

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Registrable Securities for sale in such jurisdictions; provided, however, that, the Company shall not be required in connection therewith or as a condition thereto to (1) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 5.1(c)(v), (2) subject itself to general taxation in any such jurisdiction, or (3) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

(vi) The Company shall promptly notify each Investor in writing when a prospectus or any prospectus supplement or post-effective amendment relating to a Registration Statement has been filed, when a Registration Statement or any post-effective amendment thereto has become effective (notification of such effectiveness shall be delivered to each Investor by facsimile or e-mail no later than one (1) Business Day following the date of such effectiveness or by overnight mail), and when the Company receives written notice from the SEC that a Registration Statement or any post-effective amendment thereto will be reviewed by the SEC. The Company shall respond as promptly as practicable to any comments received from the SEC with respect to each Registration Statement or any amendment thereto. If the Company receives SEC comments which challenge the right of an Investor to have its Registrable Securities included in a Registration Statement without being deemed an underwriter thereunder, the Company shall, in discussions with and responses to the SEC, use reasonable efforts and time to cause as many Registrable Securities as possible to be included in such Registration Statement without characterizing any Investor as an underwriter and in such regard use reasonable efforts to cause the SEC to permit the affected Investors or their respective counsel to reasonably participate in SEC conversations on such issue together with Company Counsel, and timely convey relevant information concerning such issue with the affected Investors or their respective counsel. In no event may the Company name any Investor as an underwriter without such Investor’s prior written consent.

(vii) The Company shall (A) use reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of each Registration Statement or the use of any prospectus contained therein, or the suspension of the qualification, or the loss of an exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension as soon as reasonably practicable and (B) notify each Investor who holds Registrable Securities of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

(viii) The Company shall hold in confidence and not make, without the consent of such Investor, any disclosure of confidential information concerning an

 

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Investor provided to the Company unless (A) disclosure of such information is necessary to comply with federal or state securities laws, (B) the disclosure of such information is necessary to avoid or correct a misstatement or omission in a Registration Statement or is otherwise required to be disclosed in a Registration Statement pursuant to the Securities Act, (C) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (D) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor to undertake, at its expense, appropriate action to prevent disclosure of, or to obtain a protective order for, such information. For the avoidance of doubt, nothing contained in this Section 5.1(c)(viii) shall obligate the Company to withhold disclosure in contravention of any deadline imposed by any court or governmental body of competent jurisdiction.

(ix) Without limiting any obligation of the Company under this Agreement, the Company shall use reasonable efforts to cause all of the Registrable Securities covered by each Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange. In addition, the Company shall cooperate with each Investor and any broker or dealer through which any such Investor proposes to sell its Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110 as requested by such Investor. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5.1(c)(ix).

(x) [Reserved].

(xi) [Reserved].

(xii) [Reserved].

(xiii) Within two (2) Business Days after the date on which a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, or shall cause legal counsel for the Company to deliver, to the Transfer Agent (with copies to the Investors whose Registrable Securities are included in such Registration Statement upon request by any such Investor) written confirmation that such Registration Statement has been declared effective by the SEC.

(xiv) Notwithstanding anything to the contrary herein, at any time after the date on which a particular Registration Statement is declared effective by the SEC, the Company may suspend the use of any prospectus for sales of Registrable Securities under such Registration Statement or delay the disclosure of any material

 

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non-public information or pending development concerning the Company or any of its Subsidiaries for a specified period if the disclosure of such information or development during such period would be materially detrimental, in the good faith opinion of the Company’s board of directors or any named executive officer of the Company, to the Company (a “Grace Period”), provided, that, the Company shall promptly notify the Investors in writing of the (A) existence of material non-public information or pending development (without disclosing the nature of such information or development) giving rise to a Grace Period and the date on which such Grace Period will begin and (B) date on which such Grace Period ends, provided, further, that, (1) such Grace Period shall not exceed sixty (60) consecutive days, (2) during any three hundred sixty five (365) day period, all Grace Periods occurring during such period shall not exceed an aggregate of one hundred twenty (120) days, (3) the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period, and (4) no Grace Period may exist during the forty-five (45) day period immediately following the effective date of such Registration Statement (provided, that, such forty-five (45) day period shall be extended by the number of days during such period and any extension thereof contemplated by this proviso during which such Registration Statement is not effective or the prospectus contained therein is not available for use) (each Grace Period satisfying each of the conditions in the foregoing clauses (1), (2), (3) and (4), an “Allowable Grace Period”). For purposes of determining the length of a Grace Period above, such Grace Period shall begin on and include the date the Company delivers to the Investors the notice referred to in clause (A) above and shall end on and include the earlier of (x) the date stated in the notice referred to in clause (B) above as the end of such Grace Period or (y) to the extent considered appropriate by the Company in its sole discretion, such earlier date as to which the Company may advise the Investors in writing after the Company’s provision of the notices described above. The provisions of Section 5.1(c)(vi) hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of each Grace Period, the Company shall again be bound by the first sentence of Section 5.1(c)(vi) with respect to the information giving rise thereto unless such material non-public information is no longer applicable.

(d) Obligations of the Investors. Each Investor shall furnish to the Company such information regarding itself and the Persons who control such Investor, the Registrable Securities held by it, and the intended method of disposition of such securities as the Company shall reasonably request and as shall be required in connection with the registration of the Registrable Securities, and shall execute such documents in connection with such registration as the Company may reasonably request. Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement. Each Investor agrees to provide the Company with such information within three (3) Business Days of any such request by the Company.

 

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(e) Expenses of Registration. All expenses incurred in connection with any Registration Statement, excluding underwriters’ discounts and commissions, but including without limitation all registration, filing and qualification fees, word processing, duplicating, printers’ and accounting fees, stock exchange fees, messenger and delivery expenses incurred by the Company, all fees and expenses of complying with state securities or blue sky laws and the fees and disbursements of counsel for the Company shall be paid by the Company; provided, however, that, in the event the Company is required to file an amendment or supplement to any Registration Statement to identify an assignee of Registrable Securities as a “Selling Stockholder” in such Registration Statement, then, except with respect to the first transfer by the Investor of Registrable Securities to an assignee that is (or the first series of substantially concurrent transfers of Registrable Securities by the Investors to assignees that are) either (i) an “affiliate” (as defined in Rule 144) of an Investor or (ii) a limited partner of an Investor or an “affiliate” (as defined in Rule 144) of any such limited partner, such assignee shall pay any such expenses incurred in connection therewith.

(f) Sufficient Number of Shares Registered. Subject to Section 5.1(g), in the event the number of shares available under any Registration Statement during the applicable Registration Period is insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section 5.1(h), the Company shall amend such Registration Statement (if permissible), or file with the SEC a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than thirty (30) days after the necessity therefor arises (but taking account of any Staff position with respect to the date on which the Staff will permit such amendment to such Registration Statement and/or such new Registration Statement (as the case may be) to be filed with the SEC). The Company shall use reasonable efforts to cause such amendment to such Registration Statement and/or such new Registration Statement (as the case may be) to become effective as soon as practicable following the filing thereof with the SEC. Subject to Section 5.1(g), for purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under the applicable Registration Statement is less than the Required Registration Amount as of such time. The calculation set forth in the foregoing sentence shall be made without regard to any limitations on conversion, amortization and/or redemption of the Notes (and such calculation shall assume that (A) the Notes are then convertible in full into shares of Common Stock at the then prevailing Conversion Rate (as defined in the Notes) and (B) the initial outstanding principal amount of the Notes remains outstanding through the scheduled Maturity Date (as defined in the Notes) and no redemptions of the Notes occur prior to the scheduled Maturity Date (except to the extent redemptions of the Notes have actually occurred on or prior to such date).

(g) Offering. Notwithstanding anything to the contrary contained in this Agreement, in the event the Staff or the SEC seeks to characterize any offering pursuant to

 

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a Registration Statement filed pursuant to this Agreement as constituting an offering of securities by, or on behalf of, the Company, or in any other manner, such that the Staff or the SEC do not permit such Registration Statement to become effective and used for resales in a manner that does not constitute such an offering and that permits the continuous resale at the market by the Investors participating therein (or as otherwise may be acceptable to each Investor) without being named therein as an “underwriter,” then the Company shall reduce the number of shares to be included in such Registration Statement by all Investors until such time as the Staff and the SEC shall so permit such Registration Statement to become effective as aforesaid. In making such reduction, the Company shall reduce the number of shares to be included by all Investors on a pro rata basis (based upon the number of Registrable Securities otherwise required to be included for each Investor) unless the inclusion of shares by a particular Investor or a particular set of Investors are resulting in the Staff or the SEC’s “by or on behalf of the Company” offering position, in which event the shares held by such Investor or set of Investors shall be the only shares subject to reduction (and if by a set of Investors on a pro rata basis by such Investors or on such other basis as would result in the exclusion of the least number of shares by all such Investors); provided, that, with respect to such pro rata portion allocated to any Investor, such Investor may elect the allocation of such pro rata portion among the Registrable Securities of such Investor. In addition, in the event that the Staff or the SEC requires any Investor seeking to sell securities under a Registration Statement filed pursuant to this Agreement to be specifically identified as an “underwriter” in order to permit such Registration Statement to become effective, and such Investor does not consent to being so named as an underwriter in such Registration Statement, then, in each such case, the Company shall reduce the total number of Registrable Securities to be registered on behalf of such Investor, until such time as the Staff or the SEC does not require such identification or until such Investor accepts such identification and the manner thereof.

(h) Allocation of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and any increase in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time such Registration Statement covering such initial number of Registrable Securities or increase thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each transferee or assignee (as the case may be) that becomes an Investor shall be allocated a pro rata portion of the then-remaining number of Registrable Securities included in such Registration Statement for such transferor or assignee (as the case may be.

(i) No Inclusion of Other Securities. The Company shall in no event include any securities other than Registrable Securities on any Registration Statement filed in accordance herewith without the prior written consent of the Investors.

5.2 Rules 144 and 144A and Regulation S. The Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of any Investor, make publicly available such necessary information for so long as necessary to permit sales that would otherwise be permitted by this Agreement pursuant

 

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to Rule 144, Rule 144A or Regulation S under the Securities Act, as such rules may be amended from time to time or any similar rule or regulation hereafter adopted by the SEC), and it will take such further action as any Investor may reasonably request, all to the extent required from time to time to enable the Investors to sell Registrable Securities without Registration under the Securities Act in transactions that would otherwise be permitted by this Agreement and within the limitation of the exemptions provided by (i) Rule 144, Rule 144A or Regulation S under the Securities Act, as such rules may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Investor, the Company will deliver to the Investors a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

5.3 Notification. As promptly as practicable, each Investor of Registrable Securities shall notify the Company when all of such Investor’s Registrable Securities have been sold.

ARTICLE VI

CONDITIONS

6.1 Conditions Precedent to the Obligations of the Investors. The obligation of each Investor to purchase the Notes at the Closing is subject to the satisfaction, unless waived in writing by such Investor, at or before the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the Obligors contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of the Closing Date (except for those representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specified date).

(b) Performance. Each Obligor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.

(c) Approvals. Each Obligor shall have obtained all governmental, regulatory or third-party consents and approvals, if any, necessary for the sale of the Securities, all of which shall be and remain so long as necessary in full force and effect (other than the filing with the SEC of one or more Registration Statements in accordance with Article V, the filing with the SEC of a Form D and any other filings as may be required by state securities agencies, and the filing of any requisite notices and/or application(s) to any Trading Market for the issuance and sale of the Note Shares and the listing of the Note Shares for trading or quotation, as the case may be, thereon in the time and manner required thereby).

(d) MSPLP Facility. The MSPLP Facility (as defined in the Notes) shall have closed and loans thereunder shall have funded.

(e) Absence of Litigation. Other than as disclosed in the SEC Reports, there shall not exist (i) any action, suit or proceeding pending in any court or before an arbitrator or Governmental Authority that could reasonably be expected, either individually or in the

 

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aggregate, to have a Material Adverse Effect or (ii) to the knowledge of any Responsible Officer of the Company or any Subsidiary, any governmental investigation pending or threatened or any action, suit or proceeding threatened in any court or before an arbitrator or Governmental Authority, in each case, that could reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.

(f) Transaction Documents. Receipt by the Investors of executed counterparts of the Transaction Documents, each properly executed by a Responsible Officer of the signing Obligor and each other party to such documents, in each case in form and substance reasonably satisfactory to the Investors.

(g) Material Adverse Effect. There shall not have occurred a material adverse change since September 30, 2020 in the operations, business, assets, properties, liabilities (actual or contingent) or financial condition of the Company and its Subsidiaries, taken as a whole; provided that no effect to the operations, business, assets, properties, liabilities (actual or contingent) or financial condition of the Company and its Subsidiaries, taken as a whole, relating to COVID-19 and related measures by any Governmental Authority shall constitute a “material adverse effect” for any purpose hereunder.

(h) Credit Agreement. Delivery by the Company of evidence satisfactory to the Investors that all of the existing obligations under the Credit Agreement (other than contingent indemnification obligations and other obligations which, by their express terms, survive the termination of the Credit Agreement), have been (or contemporaneously with the Closing Date, shall be) repaid in full or cancelled and all security interests related thereto shall be released on the Closing Date.

(i) Funds Flow; Prepayment and Closing Fee. The Investors shall have received a funds flow demonstrating in reasonable detail the transactions to occur on the Closing Date. The Investors shall have received (i) in cash (A) a prepayment of the outstanding principal amount of the term loans under the Credit Agreement of $42,500,000, and (B) any accrued and unpaid interest under such term loans through the Closing Date and (ii) the Closing Fee, which will be paid in Notes and included in the aggregate principal amount of Notes to be issued at Closing, as set forth in the Fee Letter.

(j) Officer’s Closing Certificate. The Company shall have delivered to the Investors a certificate executed by a Responsible Officer of the Company (i) certifying the fulfillment of the conditions specified in Sections 6.1(a) through (e) and Section 6.1(g) and (ii) attaching certified true and correct copies of all principal transaction documents executed in connection with the MSPLP Facility and the ABL Facility (in each case, as defined in the Notes).

(k) Officer’s Certificate. Each Obligor shall have delivered to the Investors a certificate executed by a Responsible Officer of such Obligor, dated as of the Closing Date, as to (i) the resolutions adopted by the Board of Directors of such Obligor approving the transactions contemplated hereby, (ii) the articles of incorporation (or a similar constituent document) of such Obligor, as in effect on the Closing Date, (iii) the bylaws (or a similar constituent document) of such Obligor, as in effect on the Closing Date, (iv) the good

 

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standing (or its equivalent) of such Obligor not more than thirty (30) days prior to the Closing Date, and (v) the authority and incumbency of the officers of such Obligor executing the Transaction Documents.

(l) Perfection and Priority of Liens. Other than as set forth in Sections 4.7 and 4.8, receipt by the Investors of the following:

(i) searches of Uniform Commercial Code or PPSA filings (or the equivalent) in the jurisdiction of formation of each Obligor or where a filing would need to be made in order to perfect the Investors’ security interest in the collateral granted pursuant to the Transaction Documents, and copies of the financing statements (or the equivalent) on file in such jurisdictions;

(ii) Uniform Commercial Code financing statements for each appropriate jurisdiction as is necessary, in the Investors’ sole discretion, to perfect the Investors’ security interest in the collateral granted pursuant to the Transaction Documents;

(iii) PPSA financing statements filed under the PPSA for each appropriate jurisdiction as is necessary, in the Investors’ sole discretion, to perfect the Investors’ security interest in the collateral granted pursuant to the Transaction Documents; provided, however, that the creation and perfection of any security interests on foreign assets and/or equity interests shall not be a condition to Closing, and may instead be completed within 120 days following Closing;

(iv) all certificates evidencing any certificated equity interests pledged to the Investors pursuant to any Transaction Document, together with duly executed in blank and undated stock powers attached thereto; provided, however, that the creation and perfection of any security interests on foreign assets and/or equity interests shall not be a condition to Closing, and may instead be completed within 120 days following Closing;

(v) searches of ownership of, and Liens on, the intellectual property rights of each Obligor in the appropriate governmental offices in Israel, Canada and the United States;

(vi) duly executed notices of grant of security interest in the form required by the applicable Transaction Document(s) as are necessary, in the Investors’ sole discretion, to perfect the Investors’ security interest in the intellectual property rights of the Obligors; provided, however, that the creation and perfection of any security interests on foreign assets and/or equity interests shall not be a condition to Closing, and may instead be completed within 120 days following Closing; and

(vii) to the extent required to be delivered pursuant to the terms of the Transaction Documents, all stock certificates possession of any of the Obligors, together with allonges or assignments as may be necessary or appropriate to perfect

 

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the Investors’ security interest in such stock certificates granted pursuant to the Transaction Documents

6.2 Conditions Precedent to the Obligations of the Obligors. The obligation of the Obligors to sell the Securities at the Closing is subject to the satisfaction or waiver by the Obligors, at or before the Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of the Investors contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of the Closing Date (except for those representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such specified date).

(b) Deliverables. The Investors shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Company. The Investors shall have delivered to the Company those items required by Section 2.2(b).

ARTICLE VII

INDEMNIFICATION

7.1 Indemnification.

(a) To the fullest extent permitted by law, Obligors will, and hereby do, indemnify, hold harmless and defend each Investor and each of its directors, officers, shareholders, members, partners, employees, agents, and representatives and each Person, if any, who controls such Investor within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs (including, without limitation, court costs, reasonable attorneys’ fees and costs of defense and investigation), amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened in writing (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any breach of the representations, warranties, covenants or agreements made by any of the Obligors in this Agreement or in the other Transaction Documents, (ii) any untrue statement or alleged untrue statement of a material fact in any Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered, or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) any untrue statement or alleged untrue statement of a material fact contained in any final prospectus relating to any Registration Statement (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which

 

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the statements therein were made, not misleading, or (iv) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to any Registration Statement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). Subject to Section 7.1(c), the Obligors shall reimburse the Indemnified Persons for any reasonable and documented legal fees of one counsel or other reasonable and documented out-of-pocket expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 7.1(a): (A) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of, or inclusion in, any Registration Statement or any such amendment thereof or supplement thereto, (B) shall not be available to a particular Investor to the extent such Claim is based on a failure of such Investor to deliver or to cause to be delivered the prospectus made available by the Company (to the extent applicable), including, without limitation, a corrected prospectus, if such prospectus or corrected prospectus was made available by the Company. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of any of the Registrable Securities by any of the Investors and (C) shall not be available to the extent that such Claims are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnified Person. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of any of the Registrable Securities by any of the Investors.

(b) To the fullest extent permitted by law, each Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 7.1(a), each Obligor, each of its directors, officers, shareholders, members, partners, employees, agents, and representatives and each Person, if any, who controls any Obligor within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with the preparation of, or inclusion in, (i) a Registration Statement or any such amendment thereof or supplement thereto or (ii) any final prospectus relating to any Registration Statement (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC); and, subject to Section 7.1(c) and the below provisos in this Section 7.1(b), such Investor will reimburse an Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such Claim; provided, however, that, the indemnity agreement contained in this Section 7.1(b) and the agreement with respect to contribution contained in Section 7.2 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor,

 

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which consent shall not be unreasonably withheld or delayed, provided, further, that, such Investor shall be liable under this Section 7.1(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the applicable sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of any of the Registrable Securities by any of the Investors.

(c) Promptly after receipt by an Indemnified Person or Indemnified Party (as the case may be) under this Section 7.1 of notice of the commencement of any action or proceeding (including, without limitation, any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 7.1, deliver to the applicable indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, with the written consent of the Company if the Company is not the indemnifying party, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party (as the case may be); provided, however, that, an Indemnified Person or Indemnified Party (as the case may be) shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and to employ counsel reasonably satisfactory to such Indemnified Person or Indemnified Party (as the case may be) in any such Claim; or (iii) the named parties to any such Claim (including, without limitation, any impleaded parties) include both such Indemnified Person or Indemnified Party (as the case may be) and the indemnifying party, and such Indemnified Person or such Indemnified Party (as the case may be) shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Person or such Indemnified Party and the indemnifying party (in which case, if such Indemnified Person or such Indemnified Party (as the case may be) notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, then the indemnifying party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the indemnifying party), provided, further, that, in the case of clause (iii) above the indemnifying party shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for all Indemnified Persons or Indemnified Parties (as the case may be). The Indemnified Party or Indemnified Person (as the case may be) shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person (as the case may be) which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person (as the case may be) reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, that, the indemnifying party shall not unreasonably withhold, delay or

 

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condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person (as the case may be), consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person (as the case may be) of a release from all liability in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnified Party or Indemnified Person (as the case may be). Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person (as the case may be) with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party (as the case may be) under this Section 7.1, except to the extent that the indemnifying party is materially and adversely prejudiced in its ability to defend such action.

(d) No Person involved in the sale of Registrable Securities who is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such sale shall be entitled to indemnification from any Person involved in such sale of Registrable Securities who is not guilty of fraudulent misrepresentation.

(e) The indemnity and contribution agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities to which the indemnifying party may be subject pursuant to the law.

7.2 Contribution. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 7.1 to the fullest extent permitted by law; provided, however, that: (a) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 7.1; (b) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (c) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the applicable sale of such Registrable Securities pursuant to a Registration Statement. Notwithstanding the provisions of this Section 7.2, no Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the applicable sale of the Registrable Securities subject to the Claim exceeds the amount of any damages that such Investor has otherwise been required to pay, or would otherwise be required to pay under Section 7.1(b), by reason of such untrue or alleged untrue statement or omission or alleged omission.

ARTICLE VIII

COLLATERAL AGENT

 

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8.1 Appointment. Each of the Investors hereby irrevocably appoints the Collateral Agent as its agent, and for purposes of acquiring, holding and enforcing any and all Liens which are governed by Israeli law, as its trustee, and authorizes the Collateral Agent to take such actions on its behalf, including execution of the other Transaction Documents, and to exercise such powers as are delegated to the Collateral Agent by the terms of the Transaction Documents, together with such actions and powers as are reasonably incidental thereto.

8.2 Duties. The Collateral Agent shall not have any duties or obligations except those expressly set forth in the Transaction Documents. Without limiting the generality of the foregoing, (a) the Collateral Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default (as defined in the Notes) has occurred and is continuing, (b) the Collateral Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Transaction Documents that the Collateral Agent is required to exercise in writing as directed by the Required Holders (as defined in the Notes), and (c) except as expressly set forth in the Transaction Documents, the Collateral Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company or any of its Subsidiaries that is communicated to or obtained by the entity serving as Collateral Agent or any of its Affiliates in any capacity. The Collateral Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Holders or in the absence of its own gross negligence or willful misconduct. The Collateral Agent shall be deemed not to have knowledge of any Event of Default unless and until written notice thereof is given to the Collateral Agent by the Company or an Investor, and the Collateral Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Transaction Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Transaction Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Transaction Document, (iv) the validity, enforceability, effectiveness or genuineness of any Transaction Document or any other agreement, instrument or document, (v) the creation, perfection or priority of Liens on the Collateral or the existence of the Collateral, or (vi) the satisfaction of any condition set forth in any Transaction Document. The entity serving as the Collateral Agent may generally engage in any kind of business with the Company or any Subsidiary of the Company or other Affiliate thereof as if it were not the Collateral Agent hereunder. The Collateral Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Collateral Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Collateral Agent may consult with legal counsel (who may be counsel for the Company), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

8.3 Sub-Agents. The Collateral Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Collateral Agent. The Collateral Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Affiliates. The exculpatory provisions of

 

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this Article VIII shall apply to any such sub-agent and to the Affiliates of the Collateral Agent and any such sub-agent, and shall apply to their activities as Collateral Agent.

8.4 Successor Collateral Agent. Subject to the appointment and acceptance of a successor Collateral Agent as provided in this paragraph, the Collateral Agent may resign at any time by notifying the Investors and the Company. Upon any such resignation, the Required Holders shall have the right to appoint a successor. If no successor shall have been so appointed by the Required Holders and shall have accepted such appointment within 30 days after the retiring Collateral Agent gives notice of its resignation, then the retiring Collateral Agent may, on behalf of the Investors, appoint a successor Collateral Agent which shall be a commercial bank or an Affiliate of any such commercial bank. Upon the acceptance of its appointment as Collateral Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After the Collateral Agent’s resignation hereunder, the provisions of this Article VIII shall continue in effect for the benefit of such retiring Collateral Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while it was acting as Collateral Agent.

ARTICLE IX

MISCELLANEOUS

9.1 Termination. This Agreement, subject to Section 9.11, shall terminate and have no further force or effect (a) upon any repayment, conversion or redemption of the Notes in full in accordance with the terms thereof or (b) if Closing does not occur on or prior to December 31, 2020.

9.2 Fees and Expenses. The Obligors shall pay (a) all reasonable and documented out-of-pocket expenses incurred by the Investors and the Collateral Agent (including the fees, charges and disbursements of one counsel in the aggregate for all Investors and the Collateral Agent), in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Transaction Documents and (ii) any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) or the administration of this Agreement and the other Transaction Documents and (b) all reasonable and documented out-of-pocket expenses incurred by the Investors and the Collateral Agent (including the fees, charges and disbursements of one counsel in the aggregate for all Investors and the Collateral Agent), in connection with the enforcement or protection of their rights (i) in connection with this Agreement and the other Transaction Documents, including their rights under this Section 9.2 or (ii) in connection with the Notes, including all such out-of-pocket expenses incurred during any arbitration, dispute resolution, workout, restructuring or negotiations in respect of such Notes.

9.3 Confidentiality. Each of the Investors agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) to its Affiliates or to its and such Affiliates’ respective partners, directors, officers, employees, agents, trustees, administrators, managers, advisors, sub-advisors or representatives in connection with the transactions contemplated hereby (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and will be instructed to keep such

 

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Information confidential), (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or such Person’s Affiliates or the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors, sub-advisors or representatives of such Person or of such Person’s Affiliates (including any self-regulatory authority), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other original Investor signatory hereto, (e) as may be reasonably necessary in connection with the exercise of any remedies hereunder or under any other Transaction Document or any action or proceeding relating to this Agreement or any other Transaction Document or the enforcement of rights hereunder or thereunder, (f) upon the prior written consent of the Company, to any prospective assignee of any of an Investor’s rights and obligations under this Agreement which agrees to be bound by the confidentiality provisions set forth in this Section 9.3, (g) on a confidential basis to (i) any rating agency in connection with rating any Obligor or its Subsidiaries or any of the Securities or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers or other market identifiers with respect to any of the Securities, (h) with the consent of the Company, (i) to the members of its investment committee and its limited partners in connection with the transactions contemplated hereby (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential) or (j) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section 9.3 or (y) becomes available to the Investors or any of their respective Affiliates on a nonconfidential basis from a source other than the Obligors. Each of the Investors, any permitted assignee and any Affiliate of such Investor agrees not to transact in the securities of the Company on the basis of any Information provided by the Company to the extent and for so long as such Information remains material non-public information.

9.4 Entire Agreement; Further Assurances. The Transaction Documents, together with the Exhibits, Annexes and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

9.5 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and provided by email and by deposit with a nationally recognized courier service and shall be deemed given and effective on the earliest of (a) the Trading Day such notice or communication is delivered by such nationally recognized courier service to the party to whom such notice is required to be given, if such notice or communication is delivered at the address specified in this Section 9.5 prior to 6:30 p.m. (New York City time) on a Trading Day, or (b) the next Trading Day after the date of delivery, if such notice or communication is delivered by such nationally recognized courier service to the party to whom such notice is required to be given at the address specified in this Section 9.5 on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day. The addresses and email addresses for such notices and communications are those set forth on the signature pages hereof, or such other address as may be designated in writing hereafter, in the same manner, by any such Person.

9.6 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Obligors, the

 

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Collateral Agent and the Investors holding more than 50% of the outstanding principal amount of the Notes or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

9.7 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. A reference to a provision of law is a reference to that provision as amended or reenacted and any reference to any law shall include all rules and regulations promulgated pursuant to such law. Any reference to a law, unless the context requires otherwise, shall refer also to any applicable treaty, rule, official directive, request or guideline of any governmental, fiscal, monetary or regulatory body, agency, department or regulatory, self-regulatory or other authority or organization, whether or not having the force of law.

9.8 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. No Obligor may assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors holding more than 50% of the outstanding principal amount of the Notes; provided, however, that, this Agreement shall be assigned to any corporation or association into which such Obligor may be merged or converted or with which it may be consolidated, and any corporation, association or other similar entity resulting from any such merger, conversion or consolidation shall be a party hereto without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties to this Agreement, anything herein to the contrary notwithstanding. Any Investor may assign its rights under this Agreement to any Person to whom such investor assigns or transfers any Registrable Securities, but unless the Assignment Conditions have been satisfied, no Investor may assign its rights under this Agreement in connection with any transfer or assignment of the Notes, other than to an Affiliate of such Investor. In addition to the Assignment Conditions, prior to any assignment of this Agreement, (a) such transferor shall have agreed in writing with the transferee or assignee to assign such rights, and a copy of such agreement shall be furnished to the Company after such assignment, (b) the Company shall have been furnished with written notice of the name and address of such transferee or assignee, (c) following such transfer or assignment, the further disposition of such securities by the transferee or assignee shall be restricted, as applicable, under the Securities Act and applicable state securities laws, (d) such transferee shall agree in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the “Investors” and (e) such transfer shall have been made in accordance with the applicable requirements of this Agreement and with all laws applicable thereto.

9.9 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

41


9.10 Governing Law; Venue; Waiver of Jury Trial. This agreement shall be governed by and construed in accordance with the laws of the State of New York. The Obligors and the Investors hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute brought by any Obligor or any Investor hereunder, in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waive, and agree not to assert in any suit, action or proceeding brought by any Obligor or any Investor, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The Obligors and the Investors hereby waive all rights to a trial by jury.

9.11 Survival. Notwithstanding Section 9.1(a) above, Sections 4.1, 4.4, 4.6, 7.1, 7.2, 9.2, 9.3 9.10, 9.15 and 9.16 and Article V shall survive the termination of this Agreement upon repayment, conversion or redemption of the Notes in full.

9.12 Execution. This Agreement may be executed in counterparts, all of which when taken together shall be considered one and the same agreement. In the event that any signature is delivered by facsimile transmission or email attachment, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or email-attached signature page were an original thereof.

9.13 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

9.14 Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Documents. The decision of each Investor to purchase Securities pursuant to this Agreement has been made by such Investor independently of any other Investor and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries which may have been made or given by any other Investor or by any agent or employee of any other Investor, and no Investor or any of its agents or employees shall have any liability to any other Investor (or any other person) relating to or arising from any such information, materials, statements or opinions. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting

 

42


in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no other Investor will be acting as agent of such Investor in connection with monitoring its investment hereunder. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined for such purpose as an additional party in any action, claim, suit, investigation or proceeding (including, without limitation, a partial proceeding, such as a deposition).

9.15 CNB Escrow Agreement. The Collateral Agent and the Investors agree not to (a) take any affirmative action to cause the CNB Escrow Agreement to cease to be in full force and effect prior to the first anniversary of the issuance of the Notes and (b) amend, restate, supplement or otherwise modify the CNB Escrow Agreement in any respect without the prior written consent of the Obligors (such prior written consent not to be unreasonably withheld, conditioned or delayed). This Section 9.15 shall no longer apply if City National Bank of Florida has agreed in writing to release the Collateral Agent and the Investors from the CNB Escrow Agreement prior to the first anniversary of the issuance of the Notes.

9.16 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, then the relevant Obligor shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to such Obligor of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities, but without any requirement to post a bond (unless required by the Transfer Agent, in which case the cost of such bond shall be paid by the relevant Obligor).

9.17 USA PATRIOT Act and Canadian AML Act Notice. Each Investor that is subject to the Act (as hereinafter defined), the Canadian AML Acts or the Israeli PMLL hereby notifies the Obligors that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), the Canadian AML Acts and the Israeli PMLL, it is required to obtain, verify and record information that identifies the Obligors, which information includes the name and address of the Obligors, information concerning its direct and indirect holders of equity interests and other Persons exercising control over it, and its and their respective directors and officers, and other information that will allow such Investor to identify the Obligors in accordance with the Act, the Canadian AML Acts and the Israeli PMLL. The Obligors shall, promptly following a request by any Investor, provide all documentation and other information that such Investor reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act, the Canadian AML Acts and the Israeli PMLL.

9.18 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Transaction Document, the interest (actual or deemed) paid or agreed to be paid under the Transaction Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (including without limitation, the Criminal Code (Canada)) (the “Maximum Rate”).

 

43


If the Collateral Agent or any Investor shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Notes or, if it exceeds such unpaid principal, refunded to the Company. In determining whether the interest contracted for, charged, or received by the Collateral Agent or an Investor exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the obligations under the Transaction Documents.

[SIGNATURE PAGES FOLLOW]

 

44


IN WITNESS WHEREOF, the parties hereto have executed or caused this Securities Exchange and Registration Rights Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

VENUS CONCEPT INC., as Company
By:  

        /s/ Domenic Serafino

Name: Domenic Serafino
Title: Chief Executive Officer
Address for Notice:
Venus Concept Inc.
235 Yorkland Blvd, Suite 900
Toronto, Ontario M2J 4Y8
Email: dom@venusconcept.com; mmandarello@venusconcept.com
VENUS CONCEPT CANADA CORP., as Guarantor
By:  

        /s/ Domenic Serafino

Name: Domenic Serafino
Title: Chief Executive Officer
Address for Notice:
Venus Concept Canada
c/o Venus Concept Inc.
235 Yorkland Blvd, Suite 900
Toronto, Ontario M2J 4Y8
Email: dom@venusconcept.com; mmandarello@venusconcept.com

[OBLIGORS SIGNATURE PAGE]


VENUS CONCEPT LTD., as Guarantor
By:  

        /s/ Domenic Serafino

Name: Domenic Serafino
Title: Chief Executive Officer
Address for Notice:
Venus Concept Ltd.
c/o Venus Concept Inc.
235 Yorkland Blvd, Suite 900
Toronto, Ontario M2J 4Y8
Email: dom@venusconcept.com; mmandarello@venusconcept.com
VENUS CONCEPT USA INC., as Guarantor
By:  

        /s/ Domenic Serafino

Name: Domenic Serafino
Title: President
Address for Notice:
Venus Concept USA Inc.
c/o Venus Concept Inc.
235 Yorkland Blvd, Suite 900
Toronto, Ontario M2J 4Y8
Email: dom@venusconcept.com; mmandarello@venusconcept.com

[OBLIGORS SIGNATURE PAGE]


MADRYN HEALTH PARTNERS, LP, as Collateral Agent
By: MADYN HEALTH ADVISORS, LP,
Its: General Partner
By: MADRYN HEALTH ADVISORS GP, LLC,
Its: General Partner
By:  

        /s/ Avinash Amin

Name: Avinash Amin
Title: Managing Partner
Address: 140 East 45th Street, 15th Floor
New York, NY 10017
Email Address: aamin@madrynlp.com

[COLLATERAL AGENT SIGNATURE PAGE]


Investor Signature Page

IN WITNESS WHEREOF, by its execution and delivery of this signature page, the undersigned Investor hereby joins in and agrees to be bound by the terms and conditions of that certain Securities Exchange and Registration Rights Agreement dated as of December 8, 2020 (the “Exchange Agreement”), by and among Venus Concept Inc., a Delaware corporation, the Guarantors (as defined therein), the Collateral Agent (as defined therein) and the Investors (as defined therein), as to the principal amount of Notes set forth across from such Investor’s name on the Schedule of Investors, and authorizes this signature page to be attached to the Exchange Agreement or counterparts thereof.

 

Name of Investor:
MADRYN HEALTH PARTNERS, LP
By: MADYN HEALTH ADVISORS, LP,
Its: General Partner
By: MADRYN HEALTH ADVISORS GP, LLC,
Its: General Partner
By:  

        /s/ Avinash Amin

Name: Avinash Amin
Title: Managing Partner
Address: 140 East 45th Street, 15th Floor
New York, NY 10017
Email Address: aamin@madrynlp.com

Delivery Instructions (if different from above):

c/o:                                                                        

Address:                                                                

                                                                               

Telephone No.:                                                      

Facsimile No.:                                                       

Other Special

Instructions:                                                          


Investor Signature Page

IN WITNESS WHEREOF, by its execution and delivery of this signature page, the undersigned Investor hereby joins in and agrees to be bound by the terms and conditions of that certain Securities Exchange and Registration Rights Agreement dated as of December 8, 2020 (the “Exchange Agreement”), by and among Venus Concept Inc., a Delaware corporation, the Guarantors (as defined therein), the Collateral Agent (as defined therein) and the Investors (as defined therein), as to the principal amount of Notes set forth across from such Investor’s name on the Schedule of Investors, and authorizes this signature page to be attached to the Exchange Agreement or counterparts thereof.

 

Name of Investor:
MADRYN HEALTH PARTNERS (CAYMAN MASTER), LP
By: MADYN HEALTH ADVISORS, LP,
Its: General Partner
By: MADRYN HEALTH ADVISORS GP, LLC,
Its: General Partner
By:  

        /s/ Avinash Amin

Name: Avinash Amin
Title: Managing Partner
Address: 140 East 45th Street, 15th Floor
New York, NY 10017
Email Address: aamin@madrynlp.com

Delivery Instructions (if different from above):

c/o:                                                                      

Address:                                                              

                                                                             

Telephone No.:                                                   

Facsimile No.:                                                    

Other Special

Instructions:                                                        


ANNEX A

SCHEDULE OF INVESTORS

 

Name and Address of

Investor

  

Principal

Amount of Note

(A+B)

    

Aggregate Exchange

Amount (A)

     Closing Fee (B)  

MADRYN HEALTH PARTNERS (CAYMAN MASTER), LP

   $ 16,817,919.64      $ 15,809,919.64      $ 1,008,000.00  

140 East 45th Street, 15th Floor New York, NY 10017 MADRYN HEALTH PARTNERS, LP

   $ 9,877,190.90      $ 9,285,190.90      $ 592,000.00  

140 East 45th Street, 15th Floor New York, NY 10017

        
  

 

 

    

 

 

    

 

 

 

TOTAL:

   $ 26,695,110.54      $ 25,095,110.54      $ 1,600,000.00  
  

 

 

    

 

 

    

 

 

 


ANNEX B

“SELLING STOCKHOLDERS” / “PLAN OF DISTRIBUTION”

SCHEDULE 3.1(dd)

 

1.

UCC Financing Statements

 

2.

Liens granted pursuant to the MSPLP Facility and the Loan Documents (as defined in the MSPLP Facility).

 

3.

Liens granted pursuant to the ABL Facility, and the Loan Documents (as defined in the ABL Facility).


EXHIBIT A

FORM OF THE NOTE


EXHIBIT B

FORM OF THE GUARANTY AND SECURITY AGREEMENT

Exhibit 10.10

Execution Version

THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.

THIS INSTRUMENT IS SUBORDINATED TO ALL INDEBTEDNESS NOW OR HEREAFTER OWING BY THE MAKER TO CITY NATIONAL BANK OF FLORIDA, AS PROVIDED IN THOSE CERTAIN SUBORDINATION OF DEBT AGREEMENTS DATED ON OR ABOUT DECEMBER 9, 2020.

THIS INSTRUMENT IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SECURITIES EXCHANGE AND REGISTRATION RIGHTS AGREEMENT DATED AS OF DECEMBER 8, 2020, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

VENUS CONCEPT INC.

SECURED SUBORDINATED CONVERTIBLE NOTE

 

Certificate No.: 1   
Issuance Date: December 9, 2020    Original Principal Amount: U.S.$9,877,190.90

FOR VALUE RECEIVED, Venus Concept Inc., a Delaware corporation (the “Company”), hereby promises to pay to Madryn Health Partners, LP or registered permitted assigns (the “Holder”) in cash the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date, acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date, the Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Secured Subordinated Convertible Note (including all Secured Subordinated Convertible Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of a series of Secured Subordinated Convertible Notes issued pursuant to the Securities Exchange Agreement (as defined herein) on the Issuance Date (collectively, the “Notes” and such other Secured Subordinated Convertible Notes, the “Other Notes”). Certain capitalized terms used herein are defined in Section 28.

1. Payments of Principal. On the Maturity Date, the Company shall pay to the Holder an amount in cash equal to (a) all outstanding Principal as of such date, plus (b) all accrued and unpaid Interest thereon as of such date. Other than as specifically permitted by this Note, the


Company may not prepay any portion of the outstanding Principal or accrued and unpaid Interest. Notwithstanding anything herein to the contrary, with respect to any repayment, conversion or redemption hereunder, as applicable, the Company shall repay, convert or redeem, as applicable, (i) first, all accrued and unpaid Interest hereunder and under any other Notes held by such Holder, (ii) second, all other amounts (other than Principal, but including any Redemption Premium Amount) outstanding hereunder and under any other Notes held by such Holder, and (iii) third, all Principal outstanding hereunder and under any other Notes held by such Holder, in each case, allocated pro rata among this Note and such other Notes held by such Holder.

2. Interest. Interest on this Note shall commence accruing on the Issuance Date at the Interest Rate and shall be computed on the basis of a 360-day year and the actual number of days elapsed per month and shall be payable in arrears for each Calendar Quarter on the last Business Day of each Calendar Quarter after the Issuance Date (each, an “Interest Date”). Interest shall be payable on each Interest Date, to the record holder of this Note on the applicable Interest Date, by wire transfer of immediately available funds pursuant to wire instructions provided by the Holder in writing to the Company. If any portion of this Note is repaid or redeemed pursuant to Sections 4.2, 4.3, 5.2 and 7 or converted pursuant to Section 3 prior to the Maturity Date and prior to the payment of Interest on an Interest Date, Interest on such portion of this Note shall accrue at the Interest Rate and be payable in cash on each Redemption Date, on each Conversion Date and/or in connection with any required payment upon any Event of Default, as applicable; provided, that, in connection with a conversion, such Interest accrued and unpaid interest may, at the option of the Company, be converted into shares of Common Stock on the same terms as the Principal being converted on such Conversion Date, in lieu of payment in cash. Interest shall continue to accrue on any portion of this Note to the extent not so repaid, redeemed or converted.

3. Conversion of Notes. At any time after the Issuance Date, this Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock, on the terms and conditions set forth in this Section 3.

3.1 Conversion Right. Subject to the provisions of Section 3.3, at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Principal into fully paid and nonassessable shares of Common Stock in accordance with Section 3.2, at the Conversion Rate. The Company shall not issue any fraction of a share of Common Stock upon any such conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp and similar taxes, costs and expenses (including, without limitation, fees and expenses of the transfer agent of the Company (the “Transfer Agent”)) that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any portion of the outstanding and unpaid Principal.

3.2 Mechanics of Conversion.

(a) Optional Conversion.

(i) To convert any portion of the outstanding Principal into shares of Common Stock on any date (a “Conversion Date”), the Holder

 

2


shall deliver (whether via facsimile, electronic mail or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company. If required by Section 3.2(c), within two (2) Trading Days following a conversion of this Note as aforesaid, the Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by Section 16.2).

(ii) On or before the second (2nd) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile, electronic mail or otherwise the Transfer Agent instructions and representation as to whether such shares of Common Stock may then be resold pursuant to (A) an effective and available registration statement, either, (1) prior to, (2) contemporaneously with, or (3) within thirty (30) days after, as applicable, the date of the applicable Conversion Notice by the Holder, (B) Rule 144, unless the Holder affirmatively indicates on the applicable Conversion Notice that the shares of Common Stock issuable in connection with such Conversion Notice are not being resold either (1) prior to, (2) contemporaneously with, or (3) within thirty (30) days after, as applicable, the date of the applicable Conversion Notice by the Holder, provided that the Holder shall provide the Company with customary representations with respect to compliance by the Holder with Rule 144, or (C) Rule 144 without having to comply with the information requirements under Rule 144(c)(1) (each, a “Permitted Securities Transaction”), substantially in the form attached hereto as Exhibit II, to the Holder and the Transfer Agent which shall instruct the Transfer Agent to process such Conversion Notice in accordance with the terms herein.

(iii) On or before the third (3rd) Trading Day following the date on which the Company has received a Conversion Notice (the “Share Delivery Deadline”), the Company shall (A) provided, that, the Transfer Agent is participating in The Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program, with respect to the shares of Common Stock included in the Conversion Notice that may then be resold by the Holder pursuant to a Permitted Securities Transaction, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or with respect to the shares of Common Stock included in the Conversion Notice that may not then be resold by the Holder pursuant to a Permitted Securities Transaction, deliver a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion.

 

3


(iv) If this Note is physically surrendered for conversion pursuant to Section 3.2(c) and the outstanding Principal of this Note is greater than the portion of the Principal being converted, then the Company shall as soon as practicable and in no event later than five (5) Business Days after receipt of this Note and at its own expense, issue and deliver to the Holder (or its designee) a new Note (in accordance with Section 16.4) representing the outstanding Principal not so converted.

(v) The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

(b) [Reserved].

(c) Registration; Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered Notes”). The entries in the Register shall be presumed correct absent reasonable evidence to the contrary provided by the holders of the Notes. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes (including, without limitation, the right to receive payments of Principal and Interest hereunder) notwithstanding notice to the contrary. Unless the Assignment Conditions (as defined in the Securities Exchange Agreement) and the other terms of Section 9.8 of the Securities Exchange Agreement have been satisfied, the Registered Note may not be assigned, transferred or sold in whole or in part other than to an Affiliate of Holder and may be assigned, transferred or sold only by registration of such assignment or sale on the Register. Upon satisfaction of the Assignment Conditions and the other terms of Section 9.8 of the Securities Exchange Agreement, the Company shall record the information relating to such assignment in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 16, provided, that, if the Company does not so record an assignment, transfer or sale (as the case may be) of all or part of any Registered Note within two (2) Business Days of such a request, then the Register shall be automatically deemed updated to reflect such assignment, transfer or sale (as the case may be). Notwithstanding anything to the contrary set forth in this Section 3, following conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (i) the full outstanding Principal represented by this Note is being converted (in which event this Note shall be delivered to the Company following conversion thereof as contemplated by Section 3.2(a)) or (ii) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and/or paid (as the case may be) and the dates of

 

4


such conversions and/or payments (as the case may be) or shall use such other methods as are reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion. If the Company does not update the Register to record such Principal and Interest converted and/or paid (as the case may be) and the dates of such conversions, and/or payments (as the case may be) within two (2) Business Days of such occurrence, then the Register shall be automatically deemed updated to reflect such occurrence.

(d) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to Section 3.3, shall convert from each holder of Notes electing to have Notes converted on such Conversion Date a pro rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such Conversion Date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such Conversion Date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 21.

3.3 Exchange Cap. So long as the rules of the Principal Market (or another Eligible Market, if Common Stock is re-listed, re-traded or re-quoted on another Eligible Market) so require, the sum of the number of shares of Common Stock that may be issued under this Note and all outstanding Other Notes shall be limited to the Exchange Cap, unless stockholder approval is obtained prior to the issuance to issue more than the Exchange Cap. The Exchange Cap shall be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction in accordance with the rules of the Principal Market or another Eligible Market. If the Exchange Cap is reached upon conversion of this Note and all outstanding Other Notes, the Company shall use its commercially reasonable efforts to file a proxy statement with the SEC seeking stockholder approval, within seventy-five (75) calendar days after the date on which the Exchange Cap is reached, from at least a majority of the Company’s stockholders, for the Company’s issuance of all of the remaining shares of Common Stock underlying this Note and all outstanding Other Notes. Should the stockholders of the Company vote to reject such additional issuance, the Company shall not be required to seek another stockholder approval under this Section 3.3.

3.4 Net Share Settlement.

(a) Notwithstanding Section 3.2 above, in the case of conversion of this Note on the Maturity Date, any Redemption Date or any date of any required payment upon any Event of Default, as applicable, on which the entire outstanding Principal of this Note is to be repaid, redeemed or prepaid in full, the Company shall, at the option of the Holder, satisfy its obligation to issue and deliver shares of Common Stock by paying and delivering to the Holder, a combination of cash

 

5


and shares of Common Stock (the “Net Share Settlement”), as set forth in this Section 3.4.

(b) If the Holder elects the Net Share Settlement in a Conversion Notice, the Company shall pay and deliver the Net Share Settlement Amount in accordance with Sections 1, 2 and 3, as applicable.

The “Net Share Settlement Amount” will consist of (i) cash equal to the Principal of this Note outstanding immediately prior to the Maturity Date, the applicable Redemption Date or the applicable date of any required payment upon any Event of Default, plus all accrued but unpaid Interest and, if any, Redemption Premium Amount thereon and (ii) the number of shares of Common Stock equal to the Net Share Amount.

The “Net Share Amount” means the number of shares of Common Stock calculated by the following formula:

 

Net Share Amount    =   

    P    

     

    P    

   CP    MP

Where:

 

P    =    the Principal of this Note to be redeemed on the Maturity Date, the applicable Redemption Date or the applicable date of any required payment upon any Event of Default, as the case may be.
CP    =    the Conversion Price in effect as of the date of the Conversion Notice.
MP    =    the Closing Sale Price per share of the Common Stock on the date of the Conversion Notice or, if such Closing Sale Price is not yet available as of the date of the Conversion Notice, the Closing Sale Price per share of the Common Stock on the Trading Day immediately preceding the date of the Conversion Notice.

4. Events of Default; Rights Upon an Event of Default.

4.1 Event of Default. Each of the following events shall constitute an “Event of Default” and each of the events in clauses (d) and (e) below shall constitute a “Bankruptcy Event of Default”:

(a) the Company’s failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within ten (10) Trading Days after the applicable Conversion Date;

(b) the Company’s or any Guarantor’s failure to pay to the Holder (i) any amount of Principal when due under this Note, or (ii) any amount of Interest or other amounts due under this Note (including, without limitation, the Company’s

 

6


or any Guarantor’s failure to pay any redemption payments or amounts hereunder) or any other Transaction Document or any other agreement, document, certificate or other instrument delivered to Holder in connection with the transactions contemplated hereby and thereby, within three (3) Trading Days after such amounts were due;

(c) The occurrence of any default, event of default, or similar term under the MSPLP Facility or the ABL Facility, in each case, after the expiration of all applicable notice, grace and cure periods (each, a “CNB Event of Default”); provided, that no CNB Event of Default shall have occurred if the underlying default or event of default is a result of a breach of the CNB Escrow Agreement (as defined in the Securities Exchange Agreement) by Madryn Health Partners, LP or any of its Affiliates; provided, further, that, to the extent that the Holder has not accelerated the Notes or foreclosed upon the Collateral in reliance on the Event of Default in this clause (c) on or prior to the date upon which CNB, its affiliates or successors enter into a consent, amendment, waiver or similar agreement with respect to the underlying CNB Event of Default giving rise to the Event of Default under this clause (c), the Event of Default pursuant to this clause (c) shall be deemed to be automatically cured upon effectiveness of such waiver or similar agreement among CNB, its affiliates or successors and the Company and its affiliates with respect to the CNB Event of Default. For the avoidance of doubt, the proviso set forth in this clause (c) shall not apply to, or be deemed to have any impact on, any Event of Default arising independently of this clause (c);

(d) any Obligor or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law (as defined in the Guaranty and Security Agreement), or makes an assignment for the benefit of creditors; or makes a proposal to its creditors or files notice of its intention to do so, institutes any other proceeding under applicable law seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, dissolution, winding-up, reorganization, compromise, arrangement, adjustment, protection, moratorium, relief, stay of proceedings of creditors, composition of it or its debts or any other similar relief; or applies for or consents to the appointment (including any provisional appointment) of any receiver, receiver-manager, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, administrative receiver, administrator, compulsory manager, receiver-manager, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or with regard to an Israeli Guarantor (as defined in the Securities and Exchange Agreement), the occurrence at any time with respect to it of a winding-up, bankruptcy, dissolution or administration;

 

7


(e) the entry against the Company or any Guarantor of one or more final judgments or orders for the payment of money in an aggregate amount exceeding $500,000 (to the extent not covered by independent third-party insurance and/or third party indemnity rights as to which the applicable insurer or indemnitor does not dispute coverage in writing) and such judgment or order remains unpaid for a period of thirty (30) consecutive days;

(f) any default by the Company in the due performance and observance of any of the covenants or agreements contained in Section 12;

(g) any representation, warranty or other written statement of the Company set forth in any Transaction Document or any certification provided by the Company pursuant to any Transaction Document is incorrect or misleading in any material respect when given;

(h) other than as specifically set forth in another clause of this Section 4.1, any default by any Obligor in the due performance and observance of any of the covenants or agreements of any Transaction Document, except, in the case of a breach of a covenant that is curable, only if such breach remains uncured for a period of thirty (30) days following the earlier of the date on which (i) a Responsible Officer (as defined in the Securities Exchange Agreement) of any Obligor becomes aware of such failure and (ii) notice thereof shall have been given to the Obligors by the Holder;

(i) any material provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the Obligors party thereto in any material respect, or the validity or enforceability thereof shall be contested by any Obligor party thereto (other than with respect to indemnification or contribution provisions which may be unenforceable), or a proceeding shall be commenced by the Company or any Guarantor or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Guarantor shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document;

(j) shares of Common Stock shall cease to be quoted on the Principal Market for any reason and are not thereafter re-listed, re-traded or re-quoted on another Eligible Market within fifteen (15) Trading Days;

(k) the Company shall fail to comply in any material respect with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in its filings beyond any available extension); or

(l) any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.

4.2 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Holder may (a) declare the outstanding Principal of this Note, all Interest

 

8


accrued and unpaid on the outstanding Principal of this Note and all other amounts owing or payable hereunder or under any other Transaction Document, to be immediately due and payable (and upon any such declaration the same shall become and shall be immediately due and payable), without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company and (b) exercise all rights and remedies available to it under the Transaction Documents. Notwithstanding anything to the contrary in this Section 4.2, but subject to Section 3.3, the Holder may, in its sole discretion, determine to accept payment on the Principal part in shares of the Common Stock, converted at the Conversion Price, and part in cash. Accrued but unpaid Interest on the Principal shall be paid to the Holder in cash. For the avoidance of doubt, it is understood and agreed that no Redemption Premium Amount shall be due or payable upon acceleration of this Note.

4.3 Mandatory Redemption upon Bankruptcy Event of Default. Notwithstanding anything to the contrary herein, and notwithstanding any conversion that is then required or in process, upon any Bankruptcy Event of Default, whether occurring prior to or following the Maturity Date, the Company shall immediately pay to the Holder an amount in cash representing all outstanding Principal, in addition to all accrued and unpaid Interest and any and all other amounts due hereunder, without the requirement for any notice or demand or other action by the Holder or any other person or entity; provided, that, the Holder may, in its sole discretion, waive such right to receive payment upon a Bankruptcy Event of Default, in whole or in part, and any such waiver shall not affect any other rights of the Holder hereunder, including any other rights in respect of such Bankruptcy Event of Default, any right to conversion, and any right to payment under Section 4.2 or of any Redemption Price, as applicable.

5. Fundamental Transactions; Change of Control.

5.1 Fundamental Transactions.

(a) If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one or more related transactions, effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any Person other than one of the Company’s subsidiaries in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of fifty percent (50%) or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions, effects any reclassification, reorganization or recapitalization of the Common Stock (other than changes resulting from a subdivision or combination thereof) or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more

 

9


related transactions, consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than fifty percent (50%) of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination);; (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each share of Common Stock that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 3.3 on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 3.3 on the conversion of this Note). For purposes of any such conversion, the determination of the Conversion Rate shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Rate among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. The Company shall cause the Successor Entity to assume in writing all of the obligations of the Company under this Note, the other Transaction Documents, and any document ancillary hereto or thereto, pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders and approved by such Holders (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its Parent Entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion rate which applies the Conversion Rate hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion rate being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the

 

10


Holder. At and after the effective time of such Fundamental Transaction, (A) the Holder shall continue to have the right to determine the form of consideration to be paid or delivered in accordance with Section 3.4, (B)(1) any amount payable in cash upon conversion of this Note in accordance with Section 3 shall continue to be payable in cash, (2) any shares of Common Stock that the Company would have been required to deliver upon conversion of this Note in accordance with Section 3 shall instead be deliverable in the corresponding amount of Alternate Consideration that a holder of that number of shares of Common Stock would have received in such Fundamental Transaction and (3) the Closing Sale Price for the purposes Section 3.4 shall be calculated based on the value of such Alternate Consideration; provided that, if shares of capital stock of the relevant Successor Entity (or its Parent Entity) are not then traded on any securities exchange or trading market, the Closing Sale Price for the purposes Section 3.4 shall be deemed to be the greater of the per share price of the capital stock of such Successor Entity (or its Parent Entity) (I) as determined at the time of such Fundamental Transaction and (II) as determined by the latest transaction or series of related transactions pursuant to which such Successor Entity (or its Parent Entity) issues and sells shares of its capital stock (including securities convertible or exchangeable into shares of such capital stock) with the principal purpose of raising capital. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

(b) Waiver. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 5.1 to permit the Fundamental Transaction without the assumption of this Note and the other Transaction Documents.

(c) Applicability. The provisions of this Section 5.1 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.

5.2 Notice of a Change of Control; Redemption Right. Subject to prior public disclosure by the Company, not later than fifteen (15) calendar days, prior to the consummation of a Change of Control, the Company shall deliver written notice thereof via facsimile or electronic mail and overnight courier to the Holder (a “Change of Control Notice”). At any time during the period beginning after the Company’s delivery of a Change of Control Notice, or the Holder becoming aware of a Change of Control if a Change of Control Notice is not delivered to the Holder in accordance with the immediately preceding sentence (as applicable), and ending on the later of fifteen (15) calendar days after (a) the date on which the Company delivers such Change of Control Notice or (b) only if a Change of Control Notice is not delivered to the Holder in accordance with the immediately preceding sentence, the Holder becoming aware of the consummation of such

 

11


Change of Control, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the portion of the Principal the Holder is electing to redeem. The portion of the Principal of this Note subject to redemption pursuant to this Section 5.2 shall be redeemed by the Company at par (the “Change of Control Redemption Price”), plus all accrued but unpaid Interest on such portion of the Principal being redeemed. Redemptions required by this Section 5.2 shall be made in accordance with the provisions of Section 10 and shall have priority to payments to stockholders in connection with such Change of Control. To the extent redemptions required by this Section 5.2 are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments, but will not, in any event, be subject to the payment of any Redemption Premium Amount. Notwithstanding anything to the contrary in this Section 5.2, but subject to Section 3.3, until the Change of Control Redemption Price (together with all accrued but unpaid Interest on the Principal to be redeemed) is repaid in full, the portion of the Principal submitted for redemption under this Section 5.2 may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3 (in which case such accrued but unpaid Interest on such Principal shall be paid to the Holder in cash). In no event will any Redemption Premium Amount be required to be paid in connection with payment of the Change of Control Redemption Price or any accrued Interest therewith.

6. Adjustments to the Conversion Rate.

6.1 Adjustment of Conversion Rate upon Subdivision or Combination of Common Stock or Stock Dividend. If the Company issues solely shares of Common Stock as a dividend or distribution on all or substantially all shares of the Common Stock, or if the Company effects a stock split or a stock combination of the Common Stock (in each case excluding an issuance solely pursuant to a Fundamental Transaction, as to which the provisions set forth in Section 5.1 will apply), then the Conversion Rate will be adjusted based on the following formula:

 

CR1    =    CR0    x   

    OS1    

   OS0

Where:

 

CR0    =    the Conversion Rate in effect immediately before the open of business on the ex-dividend date for such dividend or distribution, or immediately before the open of business on the effective date of such stock split or stock combination, as applicable.
CR1    =    the Conversion Rate in effect immediately after the open of business on such ex-dividend date or the open of business on such effective date, as applicable.

 

12


OS0       the number of shares of Common Stock outstanding immediately before the open of business on such ex-dividend date or effective date, as applicable.
OS1       the number of shares of Common Stock outstanding immediately after giving effect to such dividend, distribution, stock split or stock combination.

For the avoidance of doubt, pursuant to the definition of CR1 above in this Section 6.1, any adjustment to the Conversion Rate made pursuant to this Section 6.1 will become effective immediately after the open of business on such ex-dividend date or the open of business on such effective date, as applicable. If any dividend, distribution, stock split or stock combination of the type described in this Section 6.1 is declared or announced, but not so paid or made, then the Conversion Rate, if previously adjusted, will be readjusted, effective as of the date the Board of Directors of the Company determines not to pay such dividend or distribution or to effect such stock split or stock combination, to the Conversion Rate that would then be in effect had such dividend, distribution, stock split or stock combination not been declared or announced.

6.2 Rights, Options and Warrants. If the Company distributes, to all or substantially all holders of Common Stock, rights, options or warrants entitling such holders, for a period of not more than sixty (60) calendar days after the record date of such distribution, to subscribe for or purchase shares of Common Stock at a price per share that is less than the average of the Closing Sale Prices per share of Common Stock for the ten (10) consecutive Trading Days ending on, and including, the Trading Day immediately before the date such distribution is publicly announced, then the Conversion Rate will be decreased based on the following formula:

 

CR1    =    CR0    x   

  OS + X  

   OS + Y

 

CR0    =    the Conversion Rate in effect immediately before the open of business on the ex-dividend date for such distribution.
CR1    =    the Conversion Rate in effect immediately after the open of business on such ex-dividend date.
OS       the number of shares of Common Stock outstanding immediately before the open of business on such ex-dividend date.
X       the total number of shares of Common Stock issuable pursuant to such rights, options or warrants.
Y    =    a number of shares of Common Stock obtained by dividing (i) the aggregate price amount to exercise all such rights, options or warrants distributed by the Company by (ii) the average of the Closing Sale Prices per share of Common Stock for the ten (10) consecutive Trading

 

13


     

Days ending on, and including, the Trading Day immediately before the date such distribution is announced.

For the avoidance of doubt, any adjustment to the Conversion Rate made pursuant to this Section 6.2 will be made successively whenever any such rights, options or warrants are issued and, pursuant to the definition of CR1 above in this Section 6.2, will become effective immediately after the open of business on the ex-dividend date for the applicable distribution. To the extent that shares of Common Stock are not delivered after the expiration of such rights, options or warrants (including as a result of such rights, options or warrants not being exercised), the Conversion Rate, if previously adjusted, will be readjusted effective as of such expiration date to the Conversion Rate that would then be in effect had the decrease to the Conversion Rate for such distribution been made on the basis of delivery of only the number of shares of Common Stock actually delivered upon exercise of such rights, option or warrants. To the extent such rights, options or warrants are not so distributed, the Conversion Rate will be readjusted effective as of the date the Board of Directors of the Company determines not to distribute such rights, options or warrants, to the Conversion Rate that would then be in effect had the ex-dividend date for the distribution of such rights, options or warrants not occurred. For purposes of this Section 6.2, in determining whether any rights, options or warrants entitle holders of Common Stock to subscribe for or purchase shares of Common Stock at a price per share that is less than the average of the Closing Sale Prices per share of Common Stock for the ten (10) consecutive Trading Days ending on, and including, the Trading Day immediately before the date of the distribution of such rights, options or warrants is announced, and in determining the aggregate price payable to exercise such rights, options or warrants, there will be taken into account any consideration the Company receives for such rights, options or warrants and any amount payable on exercise thereof, with the value of such consideration, if not cash, to be determined by the Board of Directors of the Company.

6.3 Other In-Kind Distributions. If the Company distributes shares of its capital stock, evidences of its indebtedness, other assets or property of the Company or rights, options or warrants to acquire its capital stock or other securities, to all or substantially all holders of the Common Stock, excluding:

(a) dividends, distributions or issuances as to which an adjustment was effected pursuant to Section 6.1 or Section 6.2;

(b) rights issued under a stockholder rights plan (except as set forth in this Section 6.3);

(c) dividends or distributions paid exclusively in cash as to which an adjustment was effected pursuant to Section 6.4;

(d) any dividends and distributions in connection with a Fundamental Transaction described in Section 5.1; and

(e) Spin-Offs as to which the provisions set forth in this Section 6.3 shall apply,

 

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(any of such shares of capital stock, evidences of indebtedness, assets, property, rights, options or warrants to acquire capital stock or other securities of the Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:

 

CR1    =    CR0    x   

SP0

   (SP0 – FMV)

 

CR0    =    the Conversion Rate in effect immediately before the open of business on the ex-dividend date for such distribution.
CR1    =    the Conversion Rate in effect immediately after the open of business on such ex-dividend date.
SP0    =    the average of the Closing Sale Prices per share of the Common Stock over the ten (10) consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the ex-dividend date for such distribution.
FMV    =    the fair market value (as determined by the Board of Directors of the Company) of the Distributed Property so distributed with respect to each outstanding share of the Common Stock on the ex-dividend date for such distribution.

Any increase made under the portion of this Section 6.3 above shall become effective immediately after the open of business on the ex-dividend date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall be decreased, effective as of the date the Company’s Board of Directors determines not to pay or make such distribution, to be the Conversion Rate that would then be in effect if such distribution had not been declared. Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, the Holder shall receive, in respect of each $1,000 principal amount thereof, at the same time and upon the same terms as holders of the Common Stock receive the Distributed Property, the amount and kind of Distributed Property that such Holder would have received if such Holder owned a number of shares of Common Stock equal to the Conversion Rate in effect on the ex-dividend date for the distribution.

With respect to an adjustment pursuant to this Section 6.3 where there has been a payment of a dividend or other distribution on the Common Stock of shares of capital stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued, will be, listed or admitted for trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the following formula:

 

CR1    =    CR0    x   

(FMV0+MP0)

   MP0

 

15


CR0    =    the Conversion Rate in effect immediately before the open of business on the ex-dividend date for such dividend or distribution.
CR1    =    the Conversion Rate in effect immediately after the open of business on such ex-dividend date.
FMV0    =    the average of the Closing Sale Prices per share of the capital stock or similar equity interest distributed to holders of the Common Stock applicable to one share of the Common Stock over the first ten (10) consecutive Trading Day period after, and including, the ex-dividend date of the Spin-Off (the “Valuation Period”).
MP0    =    the average of the Closing Sale Prices per share of the Common Stock over the Valuation Period.

The increase to the Conversion Rate under the preceding paragraph shall occur at the close of business on the last Trading Day of the Valuation Period; provided, that, if the relevant Conversion Date occurs during the Valuation Period, the references to “10” in the preceding paragraph shall be deemed to be replaced with such lesser number of Trading Days as have elapsed between the ex-dividend date of such Spin-Off and the Conversion Date in determining the Conversion Rate. If such Spin-Off does not occur, the Conversion Rate shall be decreased, effective as of the date the Company’s Board of Directors determines not to consummate such Spin-Off, to be the Conversion Rate that would then be in effect if such distribution had not been declared, effective as of the date on which the Company’s Board of Directors (or its designee) determines not to consummate such Spin-Off.

For purposes of this Section 6.3, rights, options or warrants distributed by the Company to all holders of the Common Stock entitling them to subscribe for or purchase shares of the Company’s capital stock, including Common Stock (either initially or under certain circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”):

(i) are deemed to be transferred with such shares of the Common Stock;

(ii) are not exercisable; and

(iii) are also issued in respect of future issuances of the Common Stock,

shall be deemed not to have been distributed for purposes of this Section 6.3 (and no adjustment to the Conversion Rate under this Section 6.3 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights, options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section 6.3. If any such right, option or warrant, including any such existing rights, options or warrants distributed prior to the date of this Note, are subject to events, upon the occurrence of which such rights, options or warrants become exercisable to purchase different securities, evidences of indebtedness or

 

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other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and ex-dividend date with respect to new rights, options or warrants with such rights (in which case the existing rights, options or warrants shall be deemed to terminate and expire on such date without exercise by any of the holders thereof).

In addition, in the event of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the type described in the immediately preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 6.3 was made:

(A) in the case of any such rights, options or warrants that shall all have been redeemed or purchased without exercise by any holders thereof, upon such final redemption or purchase, (1) the Conversion Rate shall be readjusted as if such rights, options or warrants had not been issued and (2) the Conversion Rate shall then again be readjusted to give effect to such distribution, deemed distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or purchase price received by a holder or holders of Common Stock with respect to such rights, options or warrants (assuming such holder had retained such rights, options or warrants), made to all holders of Common Stock as of the date of such redemption or purchase, and

(B) in the case of such rights, options or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options and warrants had not been issued.

For purposes of Section 6.1, Section 6.2 and this Section 6.3, any dividend or distribution to which this Section 6.3 is applicable that also includes one or both of:

(I) a dividend or distribution of shares of Common Stock to which Section 6.1 is applicable (the “Section 6.1 Distribution”); or

(II) a dividend or distribution of rights, options or warrants to which Section 6.2 is applicable (the “Section 6.2 Distribution”),

then:

(x) such dividend or distribution, other than the Section 6.1 Distribution and the Section 6.2 Distribution, shall be deemed to be a dividend or distribution to which this Section 6.3 is applicable (the “Section 6.3 Distribution”) and any Conversion Rate adjustment required by this Section 6.3 with respect to such Section 6.3 Distribution shall then be made; and

(y) the Section 6.1 Distribution and Section 6.2 Distribution shall be deemed to immediately follow the Section 6.3 Distribution and any Conversion Rate adjustment required by Section 6.1 and Section 6.2 with respect thereto shall then be made, except that, if determined by the Company (a) the “ex-dividend date ” of

 

17


the Section 6.1 Distribution and the Section 6.2 Distribution shall be deemed to be the ex-dividend date of the Section 6.3 Distribution and (b) any shares of Common Stock included in the Section 6.1 Distribution or Section 6.2 Distribution shall be deemed not to be “outstanding immediately before the open of business on such ex-dividend date or effective date” within the meaning of Section 6.1 or “outstanding immediately before the open of business on such ex-dividend date” within the meaning of Section 6.2.

6.4 Cash Dividends and Distributions. If any cash dividend or distribution is made to all or substantially all holders of the Common Stock, the Conversion Rate shall be adjusted based on the following formula:

 

CR1    =    CR0    x   

    SP0    

   SP0 – C

 

CR0    =    the Conversion Rate in effect immediately before the open of business on the ex-dividend date for such dividend or distribution.
CR1    =    the Conversion Rate in effect immediately after the open of business on such ex-dividend date.
SP0    =    the Closing Sale Price per share of the Common Stock on the Trading Day immediately preceding the ex-dividend date for such dividend or distribution.
C    =    the amount in cash per share the Company distributes to all or substantially all holders of the Common Stock.

Any increase made pursuant to this Section 6.4 shall become effective immediately after the open of business on the ex-dividend date for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall be decreased, effective as of the date the Board of Directors of the Company determines not to make or pay such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, the Holder shall receive, at the same time and upon the same terms as holders of shares of the Common Stock, the amount of cash that the Holder would have received if such Holder owned a number of shares of Common Stock equal to the Conversion Rate in effect immediately prior to the open of business on the ex-dividend date for such cash dividend or distribution.

6.5 Tender or Exchange Offers. If the Company or any of its Subsidiaries makes a payment in respect of a tender or exchange offer for the Common Stock (in each case excluding a tender or exchange offer that constitutes a Fundamental Transaction, as to which the provisions set forth in Section 5.1 will apply), to the extent that the cash and value of any other consideration included in the payment per share of the Common Stock

 

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exceeds the average of the Closing Sale Prices per share of the Common Stock over the ten (10) consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (such date, the “Expiration Date”), the Conversion Rate shall be increased based on the following formula:

 

CR1    =    CR0    x   

(AC + (SP1 x OS1))

   (OS0 x SP1)

 

CR0    =    the Conversion Rate in effect immediately prior to the close of business on the tenth (10th) Trading Day immediately following, and including, the Trading Day next succeeding the Expiration Date.
CR1    =    the Conversion Rate in effect immediately after the close of business on the tenth (10th) Trading Day immediately following, and including, the Trading Day next succeeding the Expiration Date.
AC    =    the aggregate value of all cash and any other consideration (as determined by the Board of Directors of the Company) paid or payable for shares of Common Stock purchased in such tender or exchange offer.
OS0    =    the number of shares of Common Stock outstanding immediately prior to the time (the “Expiration Time”) such tender or exchange offer expires (prior to giving effect to the purchase of all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer).
OS1    =    the number of shares of Common Stock outstanding immediately after the Expiration Time (after giving effect to the purchase of all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer).
SP1    =    the average of the Closing Sale Prices per share of the Common Stock over the ten (10) consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the Expiration Date.

The increase to the Conversion Rate under this Section 6.5 shall occur at the close of business on the tenth (10th) Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided, that, if the relevant Conversion Date occurs during the ten (10) Trading Days immediately following, and including, the Trading Day next succeeding the Expiration Date of any tender or exchange offer, references to “10” or “10th” in the preceding paragraph shall be deemed to be replaced with such lesser number of Trading Days as have elapsed between such Expiration Date of such tender or exchange offer and the Conversion Date in determining the Conversion Rate.

 

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In the event that the Company or one of its Subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Company or such Subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made or had been made only in respect of the purchases that have been effected.

6.6 Voluntary Adjustment by Company. The Company may at any time during the term of this Note, with the prior written consent of the Required Holders, increase the then current Conversion Rate to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

6.7 No Adjustments. Notwithstanding anything to the contrary in this Section 6, the Conversion Rate shall not be adjusted:

(a) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in shares of Common Stock under any plan;

(b) upon the issuance of any shares of Common Stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of the Company’s Subsidiaries;

(c) upon the issuance of any shares of the Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security not described in Section 6.7(b) and outstanding as of the date the Notes were first issued;

(d) for ordinary course of business stock repurchases that are not tender offers referred to in Section 6.5, including structured or derivative transactions or pursuant to a stock repurchase program approved by the Board of Directors of the Company;

(e) solely for a change in the par value of the Common Stock; or

(f) for accrued and unpaid interest, if any.

6.8 Calculations. All calculations and other determinations under this Section 6 shall be made by the Company and shall be made to the nearest one-ten thousandth (1/10,000th) of a share. If an adjustment to the Conversion Rate otherwise required pursuant to Sections 6.1 through 6.5 would result in a change of less than 1.0% to the Conversion Rate, then, notwithstanding the foregoing, the Company may, at its election, defer and carry forward such adjustment, except that all such deferred adjustments must be given effect immediately upon the earliest to occur of the following: (i) when all such deferred adjustments would result in an aggregate change of at least 1.0% to the Conversion

 

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Rate; (ii) on the Conversion Date for this Note, and (iii) on the effective date of any Fundamental Transaction, in each case, unless the adjustment has already been made.

7. Redemptions at the Company’s Option.

7.1 Company Optional Redemption.

(a) The Company shall have the right at any time to redeem all, but not less than all, of the Principal then outstanding under this Note (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (a “Company Optional Redemption”). The portion of this Note subject to redemption pursuant to this Section 7.1 shall be redeemed by the Company in cash at (i) a price equal to the sum of the Redemption Premium Amount as of the Company Optional Redemption Date and the outstanding Principal being redeemed as of the Company Optional Redemption Date (the “Company Optional Redemption Price”), plus (ii) all accrued but unpaid Interest on such Principal to be redeemed.

(b) The Company may exercise its right to require redemption under this Section 7.1 by delivering a written notice thereof by facsimile or electronic mail and overnight courier to all, but not less than all, of the holders of Notes (the “Company Optional Redemption Notice” and the date all of the holders of Notes received such notice is referred to as the “Company Optional Redemption Notice Date”). The Company may deliver only one Company Optional Redemption Notice hereunder and such Company Optional Redemption Notice shall be irrevocable; provided, that the Company Optional Redemption Notice may be conditioned upon the effectiveness of any credit facility or capital raising, the consummation of a particular disposition or the occurrence of a change of control, as specified in the Company Optional Redemption Notice, in which case such Company Optional Redemption Notice may be revoked by the Company (by notice to all the holders of Notes on or prior to the Company Optional Redemption Date) if such condition is not satisfied. The Company Optional Redemption Notice shall (i) state the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”) which date shall (A) not be less than fifteen (15) calendar days nor more than twenty-five (25) calendar days following the Company Optional Redemption Notice Date, or (B) if such Company Optional Redemption is conditioned upon the effectiveness of any credit facility or capital raising, the consummation of a particular disposition or the occurrence of a change of control, as specified in the Company Optional Redemption Notice, not be less than fifteen (15) calendar days following the Company Optional Redemption Notice Date nor be a date that is later than the applicable closing date of the relevant transaction specified in the Company Optional Redemption Notice and (ii) certify that there has been no Equity Conditions Failure.

(c) Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Company Optional Redemption Notice Date but an Equity Conditions Failure occurs at any time prior to the Company Optional Redemption Date, (A) the Company shall provide the Holder a subsequent

 

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notice to that effect, and (B) unless the Holder waives the Equity Conditions Failure, the Company Optional Redemption shall be cancelled and the applicable Company Optional Redemption Notice shall be null and void, and (ii) at any time prior to the date that is fifteen (15) calendar days following the Company Optional Redemption Notice Date, the Company Optional Redemption Amount may be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to Section 3 (in which case all accrued but unpaid Interest and any Redemption Premium Amount payable on such Principal shall be paid to the Holder in cash).

(d) Any portion of the Principal of the Note converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Note required to be redeemed on the Company Optional Redemption Date. Redemptions made pursuant to this Section 7.1 shall be made in accordance with Section 10. For the avoidance of doubt, the Redemption Premium shall be disregarded for purposes of calculation of the number of shares of Common Stock issuable upon conversion of this Note.

(e) In the event of the Company’s redemption of this Note under this Section 7.1, the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium amount due under this Section 7.1 is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty. For the avoidance of doubt, the Company shall have the right to effect a Company Optional Redemption if any Event of Default has occurred and continuing.

7.2 Pro Rata Redemption Requirement. If the Company elects to cause a Company Optional Redemption of this Note pursuant to Section 7.1, then it must simultaneously take the same action with respect to all of the Other Notes.

8. Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate or articles of incorporation, bylaws or other governing document or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note. Without limiting the generality of the foregoing or any other provision of this Note or the other Transaction Documents, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the Conversion Price then in effect, (b) shall not modify the voting rights attached to Common Stock and (c) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the conversion of this Note.

9. Reservation of Authorized Shares.

 

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9.1 Reservation. The Company shall initially reserve out of its authorized and unissued shares of Common Stock a number of shares of Common Stock for each of this Note and the Other Notes equal to 100% of the Conversion Rate with respect to the principal amount of each such Note as of the Issuance Date. So long as any of this Note and the Other Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of this Note and the Other Notes, the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding; provided, that, at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be reserved pursuant hereto (in each case, without regard to any limitations on conversions) (the “Required Reserve Amount”). The initial number of shares of Common Stock reserved for conversions of this Note and the Other Notes and each increase in the number of shares so reserved shall be allocated pro rata among the Holder and the holders of the Other Notes based on the Principal amount of this Note and the Other Notes held by each holder at the Closing (as defined in the Securities Exchange Agreement) or at the time of the increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a holder shall sell or otherwise transfer this Note, or a portion thereof, or any of such holder’s Other Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation.

9.2 Insufficient Authorized Shares. If at any time while any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to have reserved for issuance upon conversion of the outstanding Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall promptly take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall either (i) obtain the written consent of its stockholders for the approval of an increase in the number of authorized shares of Common Stock or (ii) file with the SEC a proxy statement for a meeting of its stockholders at which meeting the Company will seek the approval of its stockholders for an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use commercially reasonable efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its Board of Directors to recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if during any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of the shares of its issued and outstanding Common Stock to approve the increase in the number of authorized shares of Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C.

10. Redemptions.

 

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10.1 Mechanics.

(a) If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5.2, the Company shall deliver the applicable Change of Control Redemption Price (together with all accrued but unpaid Interest on the Principal to be redeemed) to the Holder in cash concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five (5) Business Days after the Company’s receipt of such notice otherwise (each, a “Change of Control Redemption Date”).

(b) In the event of a Company Optional Redemption, the Company shall deliver the applicable Company Optional Redemption Price (together with all accrued but unpaid Interest) to the Holder in cash or shares of Common Stock as determined in Section 3.4 hereof on the applicable Company Optional Redemption Date.

(c) Notwithstanding anything herein to the contrary, in connection with any redemption under this Section 10 at a time the Holder is entitled to receive a cash payment under any of the other Transaction Documents, at the option of the Holder delivered in writing to the Company, the applicable Redemption Price hereunder shall be increased by the amount of such cash payment owed to the Holder under such other Transaction Document and, upon payment in full in accordance herewith, shall satisfy the Company’s payment obligation under such other Transaction Document.

(d) In the event of a redemption of less than all of the Principal of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 16.4) representing the outstanding Principal which has not been redeemed.

(e) In the event that the Company does not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Principal that was submitted for redemption and for which the applicable Redemption Price (together with any Interest thereon) has not been paid. Upon the Company’s receipt of such notice, (i) the applicable Redemption Notice shall be null and void with respect to such Principal, and (ii) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 16.4), to the Holder; provided, that, notwithstanding the applicable Redemption Notice being deemed null and void and such return or issuance of this Note or a new Note in accordance with the foregoing, a continual Event of Default shall thereafter be deemed to have occurred and be continuing until the subsequent repayment or conversion of this Note in full.

 

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10.2 Redemption by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Other Notes (other than any such holder which is an Affiliate of the Holder) for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described Section 5.2 (each, an “Other Redemption Notice”), the Company shall immediately, but no later than two (2) Business Days after its receipt thereof, forward to the Holder by facsimile or electronic mail a copy of such notice. If the Company receives a Change of Control Redemption Notice and one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is two (2) Business Days prior to the Company’s receipt of the Holder’s Change of Control Redemption Notice and ending on and including the date which is five (5) Business Days after the Company’s receipt of the Holder’s Change of Control Redemption Notice and the Company is unable to redeem all principal, interest and any other amount designated in such Change of Control Redemption Notice and such Other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such Change of Control Redemption Notice and such Other Redemption Notices received by the Company during such seven (7) Business Day period.

11. Voting Rights. The Holder shall have no voting rights with respect to the shares of the capital stock of the Company in its capacity as the holder of this Note, except as required by law and as expressly provided in this Note.

12. Covenants. Until all of the Notes have been converted, redeemed or otherwise satisfied, in full, in accordance with their terms (excluding contingent and indemnification or contribution obligations), the Company hereby covenants and agrees that:

12.1 Rank. All payments due under this Note shall rank pari passu with all Other Notes.

12.2 Maintenance of Existence. The Company shall preserve and maintain its legal existence.

12.3 Maintenance of Listing. The Company shall maintain its Common Stock listing on the Principal Market or another Eligible Market (subject to all cure periods permitted by the Principal Market or such other Eligible Market). The Company shall list any Common Stock issuable upon conversion of this Note on the Principal Market or any other Eligible Market on which the Common Stock is then listed prior to issuance of such Common Stock.

13. Amendments and Waivers. No amendment or waiver of any provision of this Note or any other Transaction Document, and no consent to any departure by the Company therefrom, shall be effective unless in writing signed by the Required Holders and the Company. Each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. Notwithstanding the foregoing, any such amendment, waiver, consent or other departure that complies with the foregoing but that disproportionately, materially and adversely affects the rights and obligations of any holder of this Note or any Other Note relative to the

 

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comparable rights and obligations of the other holders of this Note or any Other Note shall require the prior written consent of such adversely affected Person(s). Any change, amendment, waiver, consent or departure by the Company and the Holder required by this Section 13 shall be binding on the Company, the Holder of this Note and all holders of the Other Notes.

14. Collateral. Solely in the event that this Note is held by Madryn Health Partners, LP or Madryn Health Partners (Cayman Master), LP or any of its Affiliates, this Note and the Other Notes are secured to the extent and in the manner set forth in the Transaction Documents (including, without limitation, the Guaranty and Security Agreement).

15. Transfer. Unless the Assignment Conditions and the other terms of Section 9.8 of the Securities Exchange Agreement have been satisfied, this Note may not be offered, sold, assigned or transferred by the Holder other than to an Affiliate of the Holder upon notice to the Company, subject only to the provisions of Section 4.1 of the Securities Exchange Agreement. Any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 4.1 of the Securities Exchange Agreement.

16. Reissuances; New Notes.

16.1 Transfer. If this Note is to be transferred in accordance with the terms of this Note, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 16.4 and subject to Section 3.2(c)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Note (in accordance with Section 16.4) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3.2(c) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

16.2 Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 16.4) representing the outstanding Principal.

16.3 Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 16.4) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstandi