FTHM 8-K
Fathom Holdings Inc. (FTHM)
8-K
2026-03-23
For: 2026-03-18
View Original
Added on
April 06, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM 8-K
_______________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 18, 2026
_______________________________________________
(Exact name of registrant as specified in its charter)
_______________________________________________
(State or other jurisdiction of incorporation) | ||||||||
| (Commission File Number) | (IRS Employer Identification No.) | |||||||
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 888 -455-6040
_______________________________________________
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 | ||||||
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. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On March 18, 2026, Fathom Holdings Inc. (the “Company”) entered into a subordinated secured promissory note in the original principal amount of $2,000,000 (the “Bridge Note”) with Bed Bath & Beyond, Inc. (the “Investor”). In connection with the Bridge Note, on March 18, 2026, the Company, the Material Subsidiaries (as defined in the Bridge Note), and the Investor entered into (i) a security agreement (the “Security Agreement”) and (ii) a subsidiary guarantee (the “Subsidiary Guarantee”).
Bridge Note
General. The Company will pay the Investor the principal amount under the Bridge Note on April 1, 2027, or such earlier date as the Bridge Note is required or permitted to be repaid as provided by its terms. The Bridge Note bears interest at a rate equal to nine percent (9.0%) per annum, which is payable in kind and added to the principal amount at the end of each calendar month beginning in March 2026.
Security. The Bridge Note is secured by all assets of the Company and the Material Subsidiaries pursuant to the Security Agreement, as described in more detail below.
Guarantee. The Company’s obligations under the Bridge Note are guaranteed by the Material Subsidiaries pursuant to the Subsidiary Guarantee, as described in more detail below.
Subordination. The Bridge Note is expressly subordinated in right of payment to the prior payment in full of all of the Company’s obligations under that certain Securities Purchase Agreement, dated as of September 25, 2024, by and among the Company and the signatories thereto (the “Senior Debt”).
Events of Default. The Bridge Note provides for certain events of default that are typical for a transaction of this type, including, among other things, any breach of the covenants described below. During the occurrence and continuation of any Event of Default (as defined in the Bridge Note), at the election of the Investor, the interest on the Bridge Note will accrue at a rate equal to the lesser of 18.0% per annum or the maximum rate permitted under applicable law.
Covenants. The Company is subject to certain customary affirmative and negative covenants, including obligations to maintain its business and properties, preserve its corporate existence, timely pay taxes and liabilities, and maintain its intellectual property rights. The Bridge Note also restricts the Company from, among other things, making payments in respect of Indebtedness, other than Permitted Indebtedness (as such terms are defined in the Bridge Note), or to any officer, director, or five percent or greater beneficial holder of the Company’s voting stock or Common Stock, affiliate of the Company or affiliate of any of the foregoing, other than payments made pursuant to the Senior Debt; declaring dividends or redeeming more than a de minimis number of shares; incurring any Indebtedness (other than Permitted Indebtedness); creating liens (other than Permitted Liens (as defined in the Bridge Note)); making guarantees, loans, or advances; effecting any Change of Control Transaction (as defined in the Bridge Note), unless all obligations under the Bridge Note are paid in full prior to the closing of such Change of Control Transaction; changing the nature of the Company’s business or corporate structure; and entering into transactions with affiliates unless such transactions are made on arms’ length terms and are approved by a majority of disinterested directors.
Security Agreement
General. On March 18, 2026, and to secure the Bridge Note, the Company and the Material Subsidiaries (each, a “Debtor” and, collectively, the “Debtors”) entered into a Security Agreement with the Investor. Pursuant to the Security Agreement, each Debtor granted to the Investor a security interest in, and lien upon, and a right of setoff against all of its assets.
Representations and Warranties. The Debtors will be subject to customary representations and warranties for a transaction of this type, which include, among other things, location and ownership of the Collateral (as defined in the Security Agreement), use of the Collateral in the Debtors’ business, the absence of liens other than Permitted Liens, payment of taxes related to the Collateral, the condition of the Collateral, and maintenance and lawful use of the Collateral.
Event of Default. Upon an Event of Default under the Bridge Note, the Investor may declare all obligations immediately due and payable, take possession of the Collateral, and sell it at a public or private sale, applying the proceeds to the outstanding obligations, with the Debtors remaining liable for any deficiency.
Subordination. The Investor’s rights under the Security Agreement are subordinate to the Senior Debt, as provided in Section 9 of the Bridge Note, and the security interest and liens granted to the Investor under the Security Agreement are subordinate to the security interest and liens granted by the Company and the Material Subsidiaries in connection with the Senior Debt.
Subsidiary Guarantee
General. On March 18, 2026, and in connection with the Bridge Note, the Material Subsidiaries made the Subsidiary Guarantee in favor of the Investor, pursuant to which the Material Subsidiaries guaranteed the prompt and complete payment and performance of the Company’s obligations under the Bridge Note.
Covenants. Each Material Subsidiary is subject to customary covenants for a transaction of this type, which include limitations on incurring indebtedness (other than Permitted Indebtedness); creating liens (other than Permitted Liens); amending its certificate of incorporation, bylaws, or other charter documents; redeeming more than a de minimis number of shares; paying cash dividends on the Company’s equity securities; and entering into transactions with affiliates unless such transactions are made on arms’ length terms and are approved by a majority of disinterested directors.
Event of Default. Upon an Event of Default under the Bridge Note, the Investor is authorized to exercise a right of set off against any deposits, credits, indebtedness, or claims, held by or owing to any Material Subsidiary, and to apply such amounts against the Material Subsidiary’s obligations under the Subsidiary Guarantee.
Additional Guarantors. The Company is obligated to cause any future Material Subsidiary to become a guarantor under the Subsidiary Guarantee by executing the form of assumption agreement appended to the Subsidiary Guarantee and granting a lien on all of its assets pursuant to documentation satisfactory to the Investor.
Subordination. The Investor’s rights and obligations under the Subsidiary Guarantee are subordinate to the Senior Debt, as provided in Section 9 of the Bridge Note.
Additional Information
The Bridge Note, the Security Agreement, and the Subsidiary Guarantee are attached hereto as Exhibit 4.1, 10.1, and 10.2, respectively, and are incorporated herein by reference. The foregoing descriptions of the Bridge Note, the Security Agreement, and the Subsidiary Guarantee related thereto do not purport to be complete and are qualified in their entirety by reference to such exhibits.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information included in Item 1.01 of this Current Report is incorporated by reference into this Item 2.03 of this Current Report to the extent required.
Item 9.01 Financial Statements and Exhibits.
(d)Exhibits.
| Exhibit No. | Exhibit Description | |||||||
| 104 | The cover pages of this Current Report on Form 8-K, formatted in Inline XBRL. | |||||||
SIGNATURE
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.
| FATHOM HOLDINGS INC. | |||||
| Date: March 23, 2026 | /s/ Marco Fregenal | ||||
| Marco Fregenal | |||||
| President and Chief Executive Officer | |||||
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD 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 ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL IN A FORM ACCEPTABLE TO THE COMPANY.
Original Issue Date: March 18, 2026 | Principal Amount: $2,000,000 | ||||
SUBORDINATED SECURED PROMISSORY NOTE
DUE APRIL 1, 2027
THIS SUBORDINATED SECURED PROMISSORY NOTE is a duly authorized and validly issued promissory note of Fathom Holdings Inc., a North Carolina corporation (the “Company”), having its principal place of business at 2000 Regency Parkway Drive, Suite 300, Cary, NC 27518, and designated as its Subordinated Secured Promissory Note due April 1, 2027 (the “Note”).
FOR VALUE RECEIVED, the Company promises to pay to Bed Bath & Beyond, Inc., a Delaware corporation or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $2,000,000 on April 1, 2027 (the “Maturity Date”), or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, the following terms shall have the following meanings:
“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty (60) days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment, (e) the
|US-DOCS\169287088.5||
Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business Day” means any day other than a Saturday or Sunday or any other day on which the Federal Reserve Bank of New York is not open for business.
“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the aggregate votes of the then-issued and outstanding voting securities of the Company, (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the shareholders of the Company immediately prior to such transaction own less than fifty percent (50%) of the aggregate voting power of the Company or the successor entity of such transaction, or (c) the Company sells or transfers all or substantially all of its assets to another Person and the shareholders of the Company immediately prior to such transaction own less than fifty percent (50%) of the aggregate voting power of the acquiring entity immediately after the transaction.
“Closing” means the time of issuance and sale by the Company of the Note to the Holder.
“Closing Date” means the Original Issue Date.
“Common Stock” means (a) the Company’s common stock, no par value per share, and (b) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.
“Company Covered Person” shall have the meaning set forth in Section 4(aa)(i).
“Company Covered Persons” shall have the meaning set forth in Section 4(aa)(i).
“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.
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“Current Report” shall have the meaning set forth in Section 5(c).
“Disqualification Event” shall have the meaning set forth in Section 4(aa)(i).
“Documents” means, collectively, this Note, the Security Agreement, the Subsidiary Guarantee and/or any other document and/or instrument related thereto and the transactions hereunder and/or thereunder and/or any other agreements, documents or instruments required or contemplated hereunder or thereunder, whether now existing or at any time hereafter arising.
“Evaluation Date” shall have the meaning set forth in Section 4(q).
“Event of Default” shall have the meaning set forth in Section 7(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“GAAP” shall have the meaning set forth in Section 4(o).
“Indebtedness” means, with respect to any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables and accrued expenses incurred in the ordinary course of business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or the purchasers under such agreement in the event of default are limited to repossession or sale of such property), (e) the capitalized amount of all capital lease obligations of such Person that would appear on a balance sheet in accordance with GAAP (provided, however, capital lease obligations shall not include any obligations under operating leases that are required to be treated as capital leases on account of the adoption of FAS 842 where such leases would not have been required to be treated as capital leases under GAAP as in effect on December 31, 2015), (f) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any capital stock of such Person, (g) all obligations of such Person, contingent or otherwise, with respect to all unpaid drawings in respect of letters of credit, bankers’ acceptances and similar obligations, (h) all guarantee obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (g) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation; provided that, if such Person has not assumed or become liable for the payment of such obligation, the amount of such Indebtedness shall be limited to the lesser of (A) the principal amount of the obligation being secured and (B) the fair market value
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of the encumbered property; and (j) all Contingent Obligations in respect to indebtedness or obligations of any Person of the kind referred to in clauses (a)-(i) above. The Indebtedness of any Person shall include, without duplication, the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.
“Intellectual Property Rights” shall have the meaning set forth in Section 4(k).
“Liabilities” means all direct or indirect liabilities and obligations of any kind of Company to the Holder pursuant to the Note and/or any of the other Documents.
“Liens” or “liens” means a lien, mortgage, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction, or other clouds on title.
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, property, prospects, operations, or condition (financial or otherwise) of Company and all of its Subsidiaries, taken as a whole, (b) the validity or enforceability of this Note or any of the other Documents or (c) the rights or remedies of Holder hereunder.
“Material Subsidiaries” means, collectively, the following Subsidiaries of the Company: E4:9 Holdings LLC, a Delaware limited liability company, IntelliAgent, LLC, a Texas limited liability company, Fathom Realty Holdings LLC, a Texas limited liability company, and Verus Holdings Inc., a North Carolina corporation.
“New York Courts” shall have the meaning set forth in Section 8(d).
“Note Register” shall have the meaning set forth in Section 2(b).
“OFAC” means the United States Department of the Treasury’s Office of Foreign Assets Control.
“OFAC Regulations” means the regulations promulgated by OFAC, as amended from time to time.
“Original Issue Date” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence this Note.
“Other Covered Person” shall have the meaning set forth in Section 4(aa)(2).
“Permitted Indebtedness” means (a) Indebtedness of the Company evidenced by this Note and/or any other Document in favor of Holder including all Liabilities, (b) Indebtedness of the Company and its Subsidiaries set forth in the Company’s most
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recent SEC Reports, provided none of such Indebtedness, has been materially increased, extended and/or otherwise changed since the date of the most recent SEC Reports), (c) Indebtedness that is subordinated to and not equal to or senior to this Note, (d) trade Indebtedness incurred in the ordinary course of business, (e) Indebtedness secured by Permitted Liens described in clauses “(d)” and “(e)” of the definition of Permitted Liens, and (f) Indebtedness existing as of the date hereof, including, without limitation, the Senior Debt.
“Permitted Liens” means (a) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (b) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (c) any Lien created by operation of law, such as materialman’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (d) Liens (i) upon or in any equipment acquired or held by the Company to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, and (ii) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (e) Liens arising in connection with capital lease obligations (and attaching only to the property being leased) or (f) any Liens securing Permitted Indebtedness set forth in Sections (a) through (c) and (f) of the definition of Permitted Indebtedness.
“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, county, city, municipal or otherwise including, without limitation, any instrumentality, division, agency, body or department thereof).
“Plan” shall have the meaning set forth in Section 5(f).
“Trading Day” means any day on which the Common Stock is traded on the Trading Market, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on the Trading Market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on the Trading Market ( or if the Trading Market does not designate in advance the closing time of trading on the Trading Market, then during the hour ending at 4:00:00 p.m., New York City time) unless such day is otherwise designated as a Trading Day in writing by the Holder.
“Trading Market” means any of the following markets or exchanges on which the Common Stock (or any other common stock of any other Person that references the Trading Market for its common stock) is listed or quoted for trading on the date in question: the OTC Bulletin Board, The NASDAQ Global Market, The NASDAQ Global
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Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE MKT, or the OTCQX Marketplace, the OTCQB Marketplace, the OTCPink Marketplace or any other tier operated by OTC Markets Group Inc. (or any successor to any of the foregoing).
“SEC” or “Commission” means the United States Securities and Exchange Commission.
“SEC Reports” shall have the meaning set forth in Section 4(o).
“Securities” means this Note and any securities of the Company issued in replacement or substitution hereof.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” shall have the meaning set forth in Section 8(k).
“Senior Debt” shall have the meaning set forth in Section 9(a).
“Senior Debt Documents” shall have the meaning set forth in Section 9(a).
“Senior Lenders” shall have the meaning set forth in Section 9(a).
“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.
“Subsidiary Guarantee” means the Subsidiary Guarantee, dated as of the date hereof, as hereinafter amended and/or supplemented, together with all exhibits, schedules and annexes thereto.
Section 2. Interest; Prepayment.
(a)Payment of Interest. This Note will accrue interest on the unpaid principal amount commencing on the Original Issue Date until such principal amount is paid in full at a rate equal to (i) nine percent (9%) per annum or (ii) such lesser rate as shall be the maximum rate allowable under applicable law. At the end of each calendar month, all interest accrued hereunder shall be paid in kind, deemed capitalized and added to the principal amount hereof; provided, however, notwithstanding anything to the contrary provided herein or elsewhere, interest accrued but not yet paid will be due and payable
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upon any prepayment, and/or acceleration, whether as a result of an Event of Default or otherwise.
(b)Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30-calendar day periods, and shall accrue commencing on the date hereof until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).
(c)Prepayment. Subject to Section 9 hereof, the Company may prepay this Note, in full or in part, without premium or penalty. Any prepayment of this Note shall be credited first against accrued interest, then principal.
Section 3. Registration of Transfers and Exchanges.
(a)Different Denominations. This Note is exchangeable for an equal aggregate principal amount of notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
(b)Investment Representations. This Note is being issued subject to the investment representations of the original Holder set forth below and may be transferred or exchanged only in compliance therewith and applicable federal and state securities laws and regulations. The original Holder hereby represents and warrants as of the date hereof to the Company as follows:
(i)Own Account. The Holder understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting the Holder’s right to sell the Securities pursuant to an effective registration statement or otherwise in compliance with applicable federal and state securities laws).
(ii)Accredited Investor Status; Investment Experience. At the time the Holder was offered the Securities it was, and as of the date hereof it is, an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.
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(iii)Experience of Holder. The Holder, either alone or together with its representatives, 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. The Holder is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(iv)General Solicitation. The Holder is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.
(v)Reliance on Exemptions. The Holder understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Securities.
(vi)Information. The Holder has been afforded the opportunity to ask questions of the Company. The Holder understands that its investment in the Securities involves a high degree of risk. The Holder has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. The Holder is relying solely on its own accounting, legal and tax advisors, and not on any statements of the Company or any of its agents or representatives, for such accounting, legal and tax advice with respect to its acquisition of the Securities.
(vii)No Governmental Review. The Holder understands that no United States 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 an investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(viii)Brokers or Finders. No brokerage or finder’s fees or commissions are or will be payable by the Holder to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Note. The Company shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this section that may be due in connection with the transactions contemplated by this Note.
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(c)Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 4. Representation and Warranties of the Company. Except as set forth in the SEC Reports, the Company represents and warrants to Holder that as of the Closing Date (unless as of a specific date therein):
(a)Material Subsidiaries. All of the direct and indirect Material Subsidiaries of the Company are set forth in the SEC Reports. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Material Subsidiary free and clear of any Liens, other than Permitted Liens, and all of the issued and outstanding shares of capital stock or other equity ownership interest of each Material Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.
(b)Organization and Qualification. The Company and each of the Material Subsidiaries is an entity duly incorporated or otherwise organized and validly existing, and except as set forth on Schedule 4(b) attached hereto, the Company and each Material Subsidiary is in good standing, under the respective laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Material Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each Material Subsidiary is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to result in a Material Adverse Effect, and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(c)No Conflict. The execution, delivery and performance of the Documents and the transactions contemplated thereby by the Company, including, but not limited to, the issuance of this Note do not and shall not contravene or conflict with any provision of, or require any consents (except such consents as have already been received) under (i) any law, rule, regulation or ordinance, (ii) the Company’s organizational documents; and/or (iii) any agreement binding upon the Company or any of the Company’s properties, except in the case of (i) and (iii) as would not reasonably be expected to have a Material Adverse Effect, and do not result in, or require, the creation or imposition of any Lien and/or encumbrance on any of the Company’s properties or revenues pursuant to any law,
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rule, regulation or ordinance or otherwise, except as would not reasonably be expected to have a Material Adverse Effect.
(d)Authorization; Enforcement. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of the Documents and the performance of all obligations of the Company under the Documents and have been taken on or prior to the date hereof. Each of the Documents has been duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by general equitable principles regardless of whether such enforcement is considered in a proceeding in equity or at law, (iii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iv) insofar as indemnification and contribution provisions may be limited by applicable law.
(e)Title to Assets. The Company has good and marketable title to all assets owned by Company that are material to the business of the Company.
(f)No Violations of Laws. The Company is not in violation of any law, ordinance, rule, regulation, judgment, decree or order of any federal, state or local governmental body or court and/or regulatory or self-regulatory body, except as would not reasonably be expected to have a Material Adverse Effect.
(g)Taxes. All federal, and material state and local tax returns required to be filed by the Company have been filed with the appropriate governmental agencies and all taxes due and payable by the Company have been timely paid.
(h)Fiscal Year. The fiscal year of the Company ends on December 31 of each year.
(i)Accuracy of Information, etc. No statement or information contained in this Note, the SEC Reports, any other Document or any other document, certificate or statement furnished to Holder by or on behalf of the Company in writing for use in connection with the transactions contemplated by this Note and/or the other Documents contained, as of the date such statement, information, document or certificate was made or furnished, as the case may be, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein, taken as a whole, not materially misleading. There is no fact known to the Company that could have a Material Adverse Effect that has not been expressly disclosed herein, in the other Documents, or in any other documents, certificates and statements furnished to Holder for use in connection with the transactions contemplated hereby and by the other Documents.
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(j)Affiliate Transactions. None of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from providing for the borrowing of money from or lending of money to, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.
(k)Intellectual Property. The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or required for use in connection with its business and which the failure to so have would have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and the Company has not received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned. The Company has not received a written notice of a claim that, nor does the Company otherwise have any knowledge that, the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual property, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All Intellectual Property Rights of the Company are set forth in the SEC Reports.
(l)USA Patriot Act. The Company is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the USA Patriot Act (Title III of Pub. L. 107-56, signed into law on October 26, 2001). No part of the proceeds of this Note will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
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(m)Foreign Asset Control Laws. The Company is not a Person named on a list published by OFAC or a Person with whom dealings are prohibited under any OFAC Regulations.
(n)Valid Issuance of the Securities. The Securities have been duly authorized and, when issued and paid for in accordance with the applicable Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens and all restrictions on transfer other than those expressly imposed by the federal securities laws and vest in Holder full and sole title and power to the Securities.
(o)SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one (1) year preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, 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 Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“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, and fairly present in all material respects the 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, immaterial, year-end audit adjustments.
(p)Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect; (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission; (iii) the Company has not altered its method of accounting other than as required by GAAP; (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock; and (v) the Company has not issued any equity
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securities to any officer, director or affiliate, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Material Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made.
(q)Sarbanes-Oxley; Internal Accounting Controls. The Company and the Material Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Material Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Material Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Material Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Material Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Material Subsidiaries.
(r)Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company, the Common Stock or any of the Company’s officers or directors or 5% or greater stockholders in their capacities as such.
(s)No Integrated Offering. Assuming the accuracy of the representations and warranties set forth in Section 3(b), neither the Company, nor any of its affiliates, nor any
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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 the issuance and/or sale of the Securities to be integrated with prior offerings of securities by the Company for purposes of the Securities Act that would require the registration of any such Securities and/or any other securities of the Company under the Securities Act.
(t)No Consents. No direct or indirect consent, approval, authorization or similar item is required to be obtained by the Company to enter into this Note and/or the other Documents to which it is a party and to perform or undertake any of the transactions contemplated pursuant to this Note, and/or any of the other Documents to which it is a party, except for such consents as have already been received.
(u)No General Solicitation. Neither the Company, nor any of its affiliates, nor, to the knowledge of the Company, any Person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities.
(v)Acknowledgment Regarding Holder’s Purchase of Note. The Company acknowledges and agrees that Holder is acting solely in the capacity of an arm’s length purchaser with respect to this Note and the other Documents. The Company further acknowledges that Holder is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Documents and the transactions contemplated hereby and thereby, and any advice given by Holder or any of its representatives or agents in connection with the Documents and the transactions contemplated hereby and thereby is merely incidental to the Holder’s purchase of the Securities. The Company further represents to Holder that the Company’s decision to enter into the Documents has been based solely on the independent evaluation by the Company and its representatives.
(w)Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Documents. Holder shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Documents.
(x)Private Placement. Assuming the accuracy of Holder’s representations and warranties set forth in Section 3(b), no registration under the Securities Act is required for the offer and sale of the Securities by the Company to Holder as contemplated hereby.
(y)Investment Company. The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Securities, will not be or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not
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become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(z)Accountants. The Company’s accounting firm is Deloitte & Touche LLP. To the knowledge and belief of the Company, such accounting firm: (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2025.
(aa)Rule 506(d) Bad Actor Disqualification Representations and Covenants.
(i)No Disqualification Events. Neither the Company, nor any of its predecessors, affiliates, any manager, executive officer, other officer of the Company participating in the offering, 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, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity as of the date of this Note and on the Closing Date (each, a “Company Covered Person” and, together, “Company 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”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine (A) the identity of each person that is a Company Covered Person; and (B) whether any Company Covered Person is subject to a Disqualification Event. The Company will comply with its disclosure obligations under Rule 506(e).
(ii)Other Covered Persons. The Company is not aware of any person (other than any Company Covered Person) who has been or will be paid (directly or indirectly) remuneration in connection with the purchase and sale of this Note who is subject to a Disqualification Event (each, an “Other Covered Person”).
(iii)Reasonable Notification Procedures. With respect to each Company Covered Person, the Company has established procedures reasonably designed to ensure that the Company receives notice from each such Company Covered Person of (A) any Disqualification Event relating to that Company Covered Person, and (B) any event that would, with the passage of time, become a Disqualification Event relating to that Company Covered Person; in each case occurring up to and including the Closing Date.
(iv)Notice of Disqualification Events. The Company will notify Holder immediately in writing upon becoming aware of (A) any Disqualification Event relating to any Company Covered Person and (B) any event that would, with the passage of time, become a Disqualification Event relating to any Company Covered Person and/or Other Covered Person.
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(ab)Off-Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off-balance sheet entity.
(ac)Seniority. As of the Closing Date, no Indebtedness or other claim against the Company is senior to this Note in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, except for, other than (i) the Senior Debt, (ii) Indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and (iii) capital lease obligations (which is senior only as to the property covered thereby).
Section 5. Covenants.
(a)Transfer Restrictions.
(i)The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an affiliate of Holder, the Company may require, at the Company’s expense, the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Note and shall have the rights and obligations of Holder under this Note.
(ii)Holder agrees to the imprinting, so long as is required by this Section 5(a), of a legend on any of the Securities in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD 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 ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL IN A FORM ACCEPTABLE TO THE COMPANY.
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(b)Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide Holder or its agents or counsel with any information that constitutes, or that the Company reasonably believes constitutes, material non-public information, unless prior thereto Holder shall have consented to the receipt of such information and agreed with the Company to keep such information confidential and not trade Company securities while in possession of such information. The Company understands that Holder may be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company delivers any material, non-public information to Holder without Holder’s consent, the Company hereby covenants and agrees that Holder shall not have any duty of confidentiality to Company or any of its officers, directors, agents, employees or affiliates, or a duty to the Company or any of its officers, directors, agents, employees or affiliates not to trade on the basis of such material, non-public information, provided that Holder shall remain subject to applicable law. To the extent that any notice provided pursuant to any Document constitutes, or contains, material, non-public information regarding the Company, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. Holder shall not have any liability to the Company or any of its directors, officers, employees, stockholders or agents, for any such disclosure. The Company understands that Holder may be relying on the foregoing covenants and obligations in effecting transactions in securities of the Company.
(c)Securities Law Disclosure; Publicity. (i) No later than 9:30 am (EDT) on the second Trading Day after the date hereof, the Company shall issue a Current Report on Form 8-K (the “Current Report”) disclosing the material terms of the transactions contemplated hereby, and including the Documents required to be included in such Current Report as exhibits thereto. The Company represents to Holder that, as of the issuance of the first such Current Report, the Company shall have publicly disclosed all material, non-public information delivered to Holder, if any, as of such time by the Company, or any of its respective officers, directors, employees or agents in connection with the transactions contemplated by the Documents. The Company shall afford Holder and Holder’s counsel with a reasonable opportunity to review and comment upon, shall consult with them on the form and substance of, and shall give due consideration to all such comments from them on, any press release, SEC filing or any other public disclosure made by or on behalf of the Company relating to Holder, the Documents and/or the transactions contemplated by any Document, prior to the issuance, filing or public disclosure thereof, and the Company shall not issue, file or publicly disclose any such information to which Holder shall reasonably object, unless required by law. For the avoidance of doubt, the Company shall not be required to submit for review any such disclosure contained in periodic reports filed with the SEC under the Exchange Act if it shall have previously provided the same disclosure for review in connection with a previous filing. Notwithstanding the foregoing, the Company shall not publicly disclose the name of Holder, or include the name of Holder in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of Holder, except: (a) as required by federal securities law in connection with the filing of final
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Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide Holder with prior notice of such disclosure permitted under this clause (b).
(d)Taxes and Liabilities. The Company shall pay when due all of its material taxes, assessments and other liabilities, except as contested in good faith and by appropriate proceedings and for which adequate reserves in conformity with GAAP have been established.
(e)Maintenance of Business; Company Names. The Company shall (i) keep all property and systems useful and necessary in its business in good working order and condition, (ii) preserve its existence, rights and privileges in the jurisdiction of its organization or formation and become or remain, and cause each of its Material Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, (iii) not operate in any business other than a business substantially the same as the business as in effect on the date of this Note; provided, however, that it may change its jurisdiction of organization or formation establishment upon ten (10) days’ prior written notice to Holder. The Company shall give Holder ten (10) days’ prior written notice before the Company changes its name or does business under any other name.
(f)Employee Benefit Plans, Etc. The Company shall (i) maintain each plan and/or each employee benefit plan (each, a “Plan”) as to which it may have any liability in substantial compliance with all applicable requirements of law and regulations; (ii) make all payments and contributions required to be made pursuant to such Plans and/or plans in a timely manner; and (iii) neither establish any new Plan, agree or contribute to any Plan and/or multi-employer plan nor amend any existing Plan and/or employee pension benefit plan in a manner that would materially increase its obligation to contribute to such Plan and/or plan.
(g)Good Title. The Company shall at all times maintain good and marketable title to all of its assets necessary for the operation of its business.
(h)Maintenance of Intellectual Property Rights. The Company will take all reasonable action necessary or advisable to maintain all of the Intellectual Property Rights of the Company that are necessary or material to the conduct of its business in full force and effect.
(i)Locations. The Company shall give Holder ten (10) days’ prior written notice of a change in its jurisdiction of organization or the location of its chief executive office or sole place of business or principal residence.
(j)Negative Covenants. Until all the Liabilities are paid in full, Company covenants and agrees that:
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(i)Restricted Payments. Except as contemplated by the Documents, and except for payments to Holder, the Company shall not directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness, whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness, except for the Permitted Indebtedness; provided, however, that, notwithstanding anything to the contrary provided herein or elsewhere, except for Senior Debt, in no event shall the Company directly and/or indirectly make any payment to any officer, director, or 5% or greater beneficial holder of the Company’s voting stock or Common Stock or an affiliate of the Company and/or any affiliate of any such person representing the direct and/or indirect repayment of Indebtedness, premiums and/or interest on Indebtedness, and/or accrued but unpaid interest.
(ii)Restriction on Redemption and Dividends. Other than as permitted or required under the Documents, the Company shall not, directly or indirectly, redeem or repurchase more than a de minimis number of shares of or declare or pay any dividend or distribution on any of its capital stock whether in cash, stock rights and/or property.
(iii)Indebtedness. The Company shall not incur or permit to exist any Indebtedness, except for Permitted Indebtedness.
(iv)Liens. The Company shall not create or permit to exist any Liens or security interests with respect to any assets, whether now owned or hereafter acquired and owned, except for Permitted Liens.
(v)Guaranties, Loans or Advances. The Company shall not become or be a guarantor or surety of, or otherwise become or be responsible in any manner with respect to any undertaking of any other Person, or make or permit to exist any loans or advances to or investments in any other Person, except for (i) guarantee obligations that are Permitted Indebtedness and (ii) the endorsement, in the ordinary course of collection, of instruments payable to it or to its order.
(vi)Change of Control. The Company shall not effect any Change of Control Transaction unless all Liabilities under this Note are paid in full prior to or contemporaneously with the closing of such Change of Control Transaction.
(vii)Change in Nature of Business. The Company shall not, directly or indirectly, engage in any business substantially different from the business conducted by the Company on the Closing Date or any business substantially related or incidental thereto. The Company shall not, directly or indirectly, modify its corporate structure for any purpose.
(viii)Violation of Law. The Company shall not violate any law, statute, ordinance, rule, regulation, judgment, decree, order, writ or injunction of any
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federal, state or local authority, court, agency, bureau, board, commission, department or governmental body if such violation could have a Material Adverse Effect.
(ix)Transactions with Affiliates. The Company shall not directly and/or indirectly enter into, renew, extend or be a party to, any transaction or series of related transactions which would be required to be disclosed in any public filing with the SEC (including, without limitation, lending funds to an affiliate and/or borrowing funds from any affiliate, the purchase, sale, lease, transfer or exchange of property, securities or assets of any kind or the rendering of services of any kind) with any officer, director, affiliate and/or any affiliate of such person, unless such transaction is made on an arms’ length basis and expressly approved by a majority of the disinterested directors (even if less than a quorum otherwise required for board approval)
(k)Further Assurances. The Company shall, from time to time execute and deliver, or cause to be executed and delivered, such additional instruments, certificates or documents, and take such actions, as Holder may reasonably request for the purposes of implementing or effectuating the provisions of this Note and the other Documents.
(l)Secured Obligation. For the avoidance of doubt, the obligations of the Company under the Documents are secured by the Security Agreement. Further, the term “Obligations” as defined in the Security Agreement shall include, without limitation, principal of, and interest on this Note and the loan extended pursuant hereto.
Section 6. Closing Conditions. Holder’s obligation to accept this Note and make the loan evidenced hereby at Closing is subject to the fulfillment of each and every one of the following conditions prior to or contemporaneously with such Closing (unless waived by Holder in writing in its sole and absolute discretion):
(a)Delivery of Documents. Holder shall have received from the Company each of the following (together with all exhibits, schedules, and annexes to each of the following), in form and substance reasonably satisfactory to Holder and its counsel and, where applicable, duly executed and recorded (to the extent required):
(i)this Note;
(ii)the Security Agreement; and
(iii)the Subsidiary Guarantee.
(b)Approvals. The receipt by Holder of all governmental and third-party approvals necessary in connection with the execution and performance of the Documents and the transactions contemplated thereby, all of which consents/approvals shall be in full force and effect.
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(c)Additional Conditions. The fulfillment of each and every one of the following conditions prior to or contemporaneously with the Closing:
(i)Representations and Warranties. Each of the representations and warranties made by Company in or pursuant to the Documents and all schedules and/or exhibits to this Note and/or any of the other Documents shall be true and correct in all material respects (without any duplication of any materiality qualifiers contained therein) on and as of the Closing Date as if made (or given) on and as of such date (except where such representation and warranty speaks of a specific date, in which case such representation and warranty shall be true and correct as of such date).
(ii)No Events of Default. No Event of Default or any other event that, with the passage of time or the giving of notice or both, would become an Event of Default shall have occurred or would result from the issuance of this Note to Holder or the performance of any other transaction set forth or contemplated by any of the Documents.
(iii)Compliance with Laws. The Company shall have complied with all applicable federal, state and local governmental laws, rules, regulations and ordinances in connection with the execution, delivery and performance of this Note and the other Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the Company shall have obtained all permits and qualifications required by any applicable state securities or “Blue Sky” laws for the offer and sale of the Securities by the Company to Holder.
(iv)No Injunction. No statute, regulation, order, decree, writ, ruling or injunction shall have been enacted, entered, promulgated, threatened in writing or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of or which would materially modify or delay the execution and performance of the Documents and/or any of the transactions contemplated by the Documents.
(v)No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any court or governmental authority shall have been commenced or threatened in writing, and no inquiry or investigation by any governmental authority shall have been commenced or threatened in writing, against the Company, or any of the officers, directors or affiliates of the Company, seeking to restrain, prevent or change the Documents and/or any of the transactions contemplated by the Documents, or seeking material damages in connection with such Documents and/or transactions.
(vi)No Material Adverse Effect. No condition, occurrence, state of facts or event constituting a Material Adverse Effect shall have occurred and be continuing.
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(vii)Completion of Due Diligence. Holder shall have completed its legal, business and financial due diligence of the Company to its full satisfaction and shall be fully satisfied with the results thereof.
Section 7. Events of Default.
(a)“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
(i)any default in the payment of (A) the principal amount of this Note or (B) interest, liquidated damages and any other amounts owing to the Holder on this Note, as and when the same shall become due and payable (whether on the Maturity Date, by acceleration or otherwise), which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three (3) Business Days;
(ii)the Company shall fail to observe or perform any other covenant or agreement contained in this Note, which failure is not cured, if possible to cure, within the earlier to occur of (A) five (5) Business Days after notice of such failure sent by the Holder to the Company and (B) ten (10) Business Days after the Company has become or should have become aware of such failure;
(iii)a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under any of the Documents;
(iv)any representation or warranty made in this Note, any other Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;
(v)the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
(vi)the Company fails to file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);
(vii)the occurrence and continuation beyond any applicable cure period of any event of default under the Senior Debt Documents, which results in a right of the Senior Lenders to accelerate the maturity of the Senior Debt;
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(viii)the occurrence of any Change of Control Transaction; or
(ix)one or more final judgments or decrees shall be entered against the Company, any Significant Subsidiary or the Holder with respect to this Note, any other Document or any of the obligations or provisions hereunder or thereunder.
(b)Remedies Upon Event of Default. Subject to Section 9 hereof, if any Event of Default occurs and is continuing, then at the Holder’s election, the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become immediately due and payable. After the occurrence of any Event of Default that results in the eventual acceleration of this Note and while it is continuing, the interest rate on this Note shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by the Holder at any time prior to payment hereunder, and the Holder shall have all rights as a holder of this Note until such time, if any, as the Holder receives full payment pursuant to this Section 7(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
Section 8. Miscellaneous.
(a)Notices. Any and all notices or other communications or deliveries to be provided by the Holder or the Company hereunder shall be in writing and delivered personally, by electronic mail or sent by a nationally recognized overnight courier service, addressed to the Company or the Holder, as applicable, at the address or electronic mail address set forth on the signature page of this Note or such other address as the Holder or the Company may specify for such purposes by notice to the Holder or the Company, as applicable, delivered in accordance with this Section 8(a). Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via electronic mail prior to 5:00 p.m. (New York City time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via electronic mail on a day that is not a Business Day or later than 5:00 p.m. (New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
(b)Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages, and accrued interest, as
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applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
(c)Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of this Note, and of the ownership hereof, reasonably satisfactory to the Company.
(d)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in New York, New York (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.
(e)Amendment; Waiver. Any provision of this Note may be amended by a written instrument executed by the Company and the Holder, which amendment shall be binding on all successors and assigns. Any provision of this Note may be waived by the party seeking enforcement thereof, which waiver shall be binding on all successors and assigns. Any waiver by the Company or the Holder must be in writing. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion.
(f)Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
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(g)Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such power as though no such law has been enacted.
(h)Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. Subject to Section 9 hereof, the remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Documents (including, without limitation, the Security Agreement), at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder may cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to seek an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
(i)Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
(j)Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
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(k)Secured Obligation. Subject to Section 9 hereof, the obligations of the Company under this Note are secured by all assets of the Company and the Material Subsidiaries pursuant to a Security Agreement, dated as of March 18, 2026, between the Company, the Material Subsidiaries and the Secured Party (as defined therein) (the “Security Agreement”).
(l)Disclosure. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall within one (1) Business Days after such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or its Subsidiaries, the Company shall so indicate to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.
(m)Surrender of Note. Upon the payment in full of the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and all other amounts owing in respect thereof, the Holder shall promptly surrender this Note to or as directed by the Company.
(n)Costs, Expenses and Taxes. Notwithstanding anything to the contrary provided herein or elsewhere, Company agrees to pay all reasonable, documented direct and indirect out-of-pocket costs and expenses of Holder related to the negotiation, due diligence, preparation, closing, and all other items regarding or related to this Note and the other Documents and all of the transactions contemplated herein and/or therein, including, but not limited to, the reasonable legal fees and expenses of the Holder’s legal counsel, Latham & Watkins LLP; provided, however, Company’s responsibility for such expenses in connection with the Closing shall not exceed, in the aggregate, $30,000 for Latham & Watkins LLP; as the Holder’s legal counsel. In addition, Company shall pay any and all stamp, transfer and other similar taxes payable or determined to be payable in connection with the execution and delivery of the Documents and the Company agrees to hold the Holder harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes. If any suit or proceeding arising from any of the foregoing is brought against the Holder, Company, to the extent and in the manner reasonably directed by the Holder, will resist and defend such suit or proceeding or cause the same to be resisted and defended by counsel reasonably approved by the Holder. If Company shall fail to do any act or thing which each has covenanted and/or agreed to do under this Note and/or any other Document or any representation or warranty on the part of Company contained in this Note and/or any other Document shall be breached, the Holder may, in its sole and absolute discretion, do the same or cause it to be done or remedy any such breach, and may expend its funds for such purpose; and any and all reasonable amounts so expended by the Holder shall be repayable to the Holder by Company immediately upon the Holder’s demand therefor,
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with interest at a rate equal to eighteen (18%) percent during the period from and including the date funds are so expended by the Holder to the date of repayment in full, and any such amounts due and owing to the Holder shall be deemed to be part of the Liabilities secured hereunder and under the other Documents. The obligations of Company under this Section 8(n) shall survive the termination of this Note and the discharge of the other obligations of Company under the Documents.
(o)Indemnity, Etc. In addition to the payment of expenses pursuant to Section 8(n), Company agrees to indemnify, pay and hold the Holder, and the Holder’s affiliates and their respective officers, directors, employees, agents, consultants, auditors, and attorneys of any of them (collectively called the “Indemnitees”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, reasonable documented out-of-pocket costs, reasonable documented out-of-pocket expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to (i) any breach of any of the representations or warranties, or any failure to perform or comply with any covenants or agreements, made by the Company in this Note or in any other Documents or (ii) any proceeding instituted against any Indemnitee, in any capacity, by any stockholder of the Company who is not an affiliate of such Indemnitee, with respect to any of the transactions contemplated by the Documents (unless such proceeding is based upon a breach of an Indemnitee’s representations or warranties, or any failure of an Indemnitee to perform or comply with any of its covenants or agreements, in this Note or in any other Documents, or any violations by an Indemnitee of state or federal securities or other laws, or any conduct by such Indemnitee which constitutes bad faith, fraud, gross negligence or willful misconduct) (the “Indemnified Liabilities”); provided that Company shall have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities directly resulting from the violation of law or this Note, bad faith, fraud, gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction by a final and nonappealable judgment. In no event shall the Holder and/or any of its employees, agents, partners, affiliates, members, equity and/or debt holders, managers, officers, directors and/or other related or similar type of Person, have any liability to the Company and/or any of its officers, directors, employees, agent, attorneys, affiliates, consultants, equity and/or debt holders, except for any actions or lack of actions of such persons that are found by a court of competent jurisdiction after the time for all appeals has passed to have resulted directly from such Person’s violation of law or this Note, bad faith, fraud, willful misconduct or gross negligence.
(p)Counterparts. This Note may be executed in any number of counterparts, each of which counterparts, once they are executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Note.
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(q)Binding Effects; Assignment. This Note shall be binding upon, and inure to the benefit of, the Holder, Company and their respective successors, assigns, representatives and heirs. Neither the Company nor the Holder shall assign any of its rights nor delegate any of its obligations under the Documents without the prior written consent of the other party.
(r)Entire Agreement. This Note, together with the other Documents, contains the entire agreement between the parties hereto with respect to the transactions contemplated herein and therein and supersedes all prior representations, agreements, covenants and understandings, whether oral or written, related to the subject matter of this Note and the other Documents.
(s)Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Documents or any amendments thereto.
(t)Survival. The representations, and warranties of the Company and the Holder herein and/or in the other Documents shall survive the execution and delivery hereof and the effectiveness of this Note; the obligations, liabilities, agreements and covenants of the Company and the Holder set forth herein and/or in the other Documents shall survive the execution and delivery hereof and effectiveness of this Note, as shall all rights and remedies of the Company and the Holder set forth in this Note and/or in any of the other Documents.
(u)No Integration. Neither the Company, nor any of its affiliates, nor any person acting on behalf of the Company or such affiliate, will sell, offer for sale, or solicit offers to buy or otherwise negotiate with respect to any security (as defined in the Securities Act) which will be integrated with the sale and/or issuance of any of the Securities in a manner which would require the registration of the Securities under the Securities Act, or require stockholder approval, under the rules and regulations of the Trading Market for the Common Stock. The Company will take all action that is appropriate or necessary to assure that its offerings of other securities will not be integrated for purposes of the Securities Act or the rules and regulations of the Trading Market, with the issuance of Securities contemplated herein.
Section 9. Subordination.
(a)The indebtedness evidenced by this Note is hereby expressly subordinated in right of payment to the prior payment in full of all of the Company’s obligations (collectively, the “Senior Debt”) under a Securities Purchase Agreement, dated as of September 25, 2024, and certain Senior Secured Convertible Promissory Notes (collectively, the “Senior Debt Documents”) with (a) Pinnacle Family Office Investments L.P. and (b) Scott Flanders (collectively, the “Senior Lenders”). Upon request by the Company, the Holder and each subsequent holder of this Note agrees to
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confirm this subordination relationship to the Senior Lenders in a form reasonably acceptable to the Senior Lenders and such Holder or subsequent holder, as applicable. Nothing will impair, as between the Company and the Holder, the obligation of the Company, which is absolute and unconditional, to pay to the Holder hereof the principal hereof and interest hereon as and when the same will become due and payable, or will prevent the Holder hereof, upon an Event of Default hereunder, from exercising all rights, powers and remedies otherwise provided herein or by applicable law, all subject to the rights, if any, of the Senior Lenders under the Senior Debt Documents.
(b)The Holder subordinates to the Senior Lenders any security interest or lien that the Holder may have in any property or assets of the Company and the Material Subsidiaries, including the security interests and liens granted by the Company and the Material Subsidiaries to the Holder pursuant to the Security Agreement. Notwithstanding the respective dates, order or time of attachment or perfection of the security interest of the Holder and the security interest of the Senior Lenders, the security interest of the Senior Lenders in the Collateral (as defined in that certain Security Agreement by and between the Company, the Material Subsidiaries and the Senior Lenders, dated as of September 25, 2024) shall at all times be prior to the security interest of the Holder. The lien priorities set forth in the immediately preceding sentence shall not be altered or otherwise affected by any failure to perfect the Senior Lenders’ security interest in the Collateral, by the avoidance or invalidation of the Senior Lenders’ security interest, or by any other action or inaction which the Senior Lenders may take or fail to take with respect to the Collateral.
Section 10. Post-Closing Covenant. The Company shall, not later than ten (10) Business Days (or such longer period as the Holder may agree to in its discretion) after the date hereof, deliver to the Holder (A) (i) certificates of Franchise Tax Account Status dated as of a recent date evidencing that each of IntelliAgent, LLC and Fathom Realty Holdings LLC is in “Active” status with the Texas State Comptroller and (ii) a Certificate of Good Standing dated as of a recent date from the Secretary of State of the State of Texas evidencing that each of IntelliAgent, LLC and Fathom Realty Holdings LLC is in good standing and (B) the certificate of formation (or equivalent document) of IntelliAgent, LLC and Fathom Realty Holdings LLC, in each case certified as of a recent date by the Secretary of State of the State of Texas.
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(Signature Pages Follow)
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[Signature Page to Subordinated Secured Promissory Note]
IN WITNESS WHEREOF, the Company has caused this Subordinated Secured Promissory Note to be duly executed by a duly authorized officer as of the Original Issue Date.
FATHOM HOLDINGS INC. | ||
By: /s/ Marco Fregenal | ||
Name: Marco Fregenal | ||
Title: Chief Executive Officer | ||
Address for delivery of Notices: | ||
2000 Regency Parkway Drive, Suite 300 | ||
Cary, NC 27518 | ||
Attention: Marco Fregenal | ||
Email: | ||
[Signature Page to Subordinated Secured Promissory Note]
Acknowledged and agreed by the Holder as of the Original Issue Date:
BED BATH & BEYOND, INC. | ||
By: /s/ Leah R. Putnam | ||
Name: Leah Putnam | ||
Title: Chief Accounting Officer | ||
Address for delivery of Notices: | ||
433 W Ascension Way, Suite 300, | ||
Murray, UT 84123 | ||
Attention: Adrianne Lee; Legal Department | ||
Email: [email protected] | ||
[Signature Page to Subordinated Secured Promissory Note]
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (“Security Agreement”), dated March 18, 2026, by and among Fathom Holdings Inc., a North Carolina corporation, with headquarters located at 2000 Regency Parkway Drive, Suite 300, Cary, NC 27518 (the “Company”), E4:9 Holdings LLC, a Delaware limited liability company (“E4:9”), IntelliAgent, LLC, a Texas limited liability company (“IntelliAgent”), Fathom Realty Holdings LLC, a Texas limited liability company (“FRH”), and Verus Holdings Inc., a North Carolina corporation (“Verus” and together with E4:9, IntelliAgent and FRH, each a “Subsidiary Debtor” and, collectively, the “Subsidiary Debtors”; the Subsidiary Debtors and the Company, each a “Debtor” and, collectively, the “Debtors”), and Bed Bath & Beyond, Inc., a Delaware corporation (“Secured Party”). Capitalized terms used herein and not otherwise defined have the meanings given to them in the Note (as defined below).
Each Debtor hereby agrees in favor of Secured Party as follows:
1. In consideration for loans made or to be made to the Company evidenced by the Subordinated Secured Promissory Note of Company in the initial principal amount of $2,000,000, payable to the order of Secured Party (such Subordinated Secured Promissory Note, as amended, modified, supplemented, replaced or substituted from time to time, being herein referred to as the “Note”), each Debtor hereby grants to Secured Party a continuing security interest in, lien upon and a right of setoff against, and each Debtor hereby assigns to Secured Party, all of such Debtor’s right, title and interest in and to the Collateral described in Section 2, to secure the full and prompt payment, performance and observance of all present and future indebtedness, obligations, liabilities and agreements of any kind of the Debtors to Secured Party arising under or in connection with the Note, the Subsidiary Guarantee and the other Documents, which are existing now or hereafter (all of the foregoing being herein referred to as the “Obligations”).
2. The Collateral is described on Schedule A annexed hereto as part hereof and on any separate schedule(s) identified as Collateral at any time or from time to time furnished by the Debtors to Secured Party (all of which are hereby deemed part of this Security Agreement) and includes claims of the Debtors against third parties for loss or damage to or destruction of any Collateral.
3. Each Debtor hereby warrants, represents, covenants and agrees (as of the date hereof and so long as any Obligation remains outstanding) that: (a) the chief executive office of each Debtor, the books and records relating to the Collateral (except for such records as are in the possession or control of Secured Party) and the Collateral are located at 2000 Regency Parkway Drive, Suite 300, Cary, NC 27518, and no Debtor will change any of the same, change its name or conduct its business under any trade, assumed or fictitious name without providing at least ten (10) days’ prior written notice of same to Secured Party (and in the case of the location of Collateral, will from time to time notify Secured Party of the locations thereof), or merge or consolidate with any person without prior written notice to and consent of Secured Party; (b) the Collateral is and will be used in the business of the Debtors; (c) the Collateral is now, and at all times will be, owned by the applicable Debtor free and clear of all Liens, except for Permitted
Liens; (d) no Debtor will abandon or assign, sell, lease, transfer or otherwise dispose of, other than in the ordinary course of such Debtor’s business, nor will any Debtor suffer or permit any of the same to occur with respect to, any Collateral, without prior written notice to and consent of a designated representative of the Secured Party; (e) each Debtor will make payment or will provide for the payment, when due, of all taxes, assessments or contributions or other public or private charges which have been or may be levied or assessed against such Debtor, with respect to the Collateral or with respect to any wages or salaries paid by such Debtor (except for any taxes, assessments, contributions or charges being contested in good faith and as to which adequate reserves have been made), and will deliver to Secured Party, on demand, certificates or other evidence satisfactory to Secured Party attesting thereto; (f) each Debtor will use the Collateral for lawful purposes only, with all reasonable care and caution and in conformity in all material respects with all applicable laws, ordinances and regulations; (g) each Debtor will, at such Debtor’s sole cost and expense, keep the Collateral in good order, repair, running condition and in substantially the same condition as on the date hereof, reasonable wear and tear excepted, and such Debtor will not, without the prior written consent of Secured Party, alter or remove any identifying symbol or number upon any of the Collateral; (h) Secured Party shall at all times have reasonable access to and right of inspection of any Collateral, upon reasonable prior notice and during regular business hours) and any papers, instruments and records pertaining thereto (and the right to make extracts from and to receive from each Debtor originals or true copies of such records, papers and instruments upon request therefor), and each Debtor hereby grants to Secured Party a security interest in all such records, papers and instruments to secure the payment, performance and observance of the Obligations; (i) the Collateral is now and shall remain personal or intangible property, and no Debtor will permit any other types of Collateral to become a fixture without prior written notice to and consent of Secured Party (which consent will not be unreasonably withheld, conditioned or delayed) and without first making all arrangements, and delivering, or causing to be delivered, to Secured Party all instruments and documents, including, without limitation, waivers and subordination agreements by any landlords or mortgagees, requested by and reasonably satisfactory to Secured Party to preserve and protect the primary security interest granted herein against all persons; (j) each Debtor will, at its sole cost and expense, perform all acts and execute all documents reasonably requested by Secured Party from time to time to evidence, perfect, maintain or enforce Secured Party’s security interest granted herein or otherwise in furtherance of the provisions of this Security Agreement; (k) at any time and from time to time, each Debtor shall, at its sole cost and expense, execute and deliver, or cause to be executed and delivered, to Secured Party such financing statements pursuant to the Uniform Commercial Code (“UCC”) as in effect in the State of New York, applications for certificate of title and other papers, documents or instruments as may reasonably be requested by Secured Party in connection with this Security Agreement, and to the extent permitted by applicable law, each Debtor hereby authorizes Secured Party to execute and file at any time and from time to time one or more financing statements or copies thereof or of this Security Agreement with respect to the Collateral signed only by Secured Party, and each Debtor agrees to pay (or cause to be paid) any recording tax or similar tax arising in connection with the filing of any such financing statement and further agrees to pay any additional recording or similar tax which is incurred in connection therewith; (l) each Debtor assumes all responsibility and liability arising from the Collateral; (m) subject to Section 16 of this Security Agreement, in its discretion, Secured Party may, at any time and from time to time, upon the occurrence and during the continuance of a Default (as hereinafter defined), demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in
exchange for, or make any compromise or settlement deemed desirable by Secured Party with respect to, any Collateral, and/or extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, or release, any of the Obligations and/or the Collateral, or any obligor, maker, endorser, acceptor, surety or guarantor of, or any party to, any of the Obligations or the Collateral, all without notice to or consent by any Debtor and without otherwise discharging or affecting the Obligations or the Collateral; (n) subject to Section 16 of this Security Agreement, in its discretion, Secured Party may, at any time and from time to time, for the account of any Debtor, pay any amount or do any act required of such Debtor hereunder that such Debtor fails to do or pay, and any such payment shall be deemed an advance by Secured Party to the Debtors payable on demand together with interest at the highest rate then payable on any of the Obligations; (o) each Debtor will promptly pay Secured Party for any and all reasonable and documented out-of-pocket sums, costs, and expenses which Secured Party may pay or incur pursuant to the provisions of this Security Agreement or in perfecting, defending, protecting or enforcing this Security Agreement or the security interest granted herein or in enforcing payment of the Obligations or otherwise in connection with the provisions hereof, including, but not limited to, all search, filing and recording fees, taxes, fees and expenses for the service and filing of papers, premium on bonds and undertakings, fees of marshals, sheriffs, custodians, auctioneers, court costs, collection charges, travel expenses, and reasonable attorneys’ fees, all of which together with interest at the highest rate then payable on any of the Obligations, shall be part of the Obligations and be payable on demand; and (p) subject to Section 16 of this Security Agreement, upon the occurrence and during the continuance of a Default, at Secured Party’s option and following written notice to the Company, any proceeds of the Collateral received by any Debtor shall not be commingled with other property of the Debtors, but shall be segregated, held by such Debtor in trust for Secured Party, and promptly delivered to Secured Party in the form received, duly endorsed in blank where appropriate to effectuate the provisions hereof, the same to be held by Secured Party as additional Collateral hereunder or, at Secured Party’ option, to be applied to payment of the Obligations, whether or not due and in any order.
4. The term “Default” as used in this Security Agreement shall mean any Event of Default, as such term is defined in the Note.
5. Subject to Section 16 of this Security Agreement, upon the occurrence and during the continuance of any Default, Secured Party may, without notice to (except as herein set forth) or demand upon any Debtor, declare any Obligations immediately due and payable, and Secured Party shall have the following rights and remedies (to the extent permitted by applicable law) in addition to all rights and remedies of a Secured Party under the UCC or of Secured Party under the Obligations, all such rights and remedies being cumulative, not exclusive and enforceable alternatively, successively or concurrently:
(a) Secured Party may, at any time and from time to time, with or without judicial process or the aid and assistance of others, (i) enter upon any premises in which any Collateral may be located and, without resistance or interference by any Debtor, take possession of the Collateral, (ii) dispose of any part or all of the Collateral on any such premises, (iii) require any Debtor to assemble and make available to Secured Party at the expense of the Debtors any part or all of the Collateral at any place and time designated by Secured Party which is reasonably convenient to both parties, (iv) remove any part or all of the Collateral from any
such premises for the purpose of effecting sale or other disposition thereof (and if any of the Collateral consists of motor vehicles, Secured Party may use any Debtor’s license plates), and (v) sell, resell, lease, assign and deliver, grant options for or otherwise dispose of any part or all of the Collateral in its then condition or following any commercially reasonable preparation or processing, at public or private sale or proceedings or otherwise, by one or more contracts, in one or more parcels, at the same or different times, with or without having the Collateral at the place of sale or other disposition, for cash and/or credit, and upon any terms, at such place(s) and time(s) and to such person(s) as Secured Party deems best, all without demand, notice or advertisement whatsoever, except that where an applicable statute requires reasonable notice of sale or other disposition, each Debtor hereby agrees that the sending of ten days’ notice by overnight mail, postage prepaid, to the Debtors in accordance with Section 14 of this Security Agreement shall be deemed reasonable notice thereof. If any Collateral is sold by Secured Party upon credit or for future delivery, Secured Party shall not be liable for the failure of the purchaser to pay for same, and in such event Secured Party may resell or otherwise dispose of such Collateral. Secured Party may buy any part or all of the Collateral at any public sale and, if any part or all of the Collateral is of a type customarily sold in a recognized market or is of the type which is the subject of widely distributed standard price quotations, Secured Party may buy such Collateral at private sale and in each case may make payment therefor by any means, whether by credit against the Obligations or otherwise. Secured Party may apply the cash proceeds actually received from any sale or other disposition to the reasonable and documented expenses of retaking, holding, preparing for sale, selling, leasing and the like, to reasonable and documented external attorneys’ fees and all legal, travel and other expenses which may be incurred by Secured Party in attempting to collect the Obligations, proceed against the Collateral or enforce this Security Agreement or in the prosecution or defense of any action or proceeding related to the Obligations, the Collateral or this Security Agreement; and then to the Obligations in such order and as to principal or interest as Secured Party may desire; and each Debtor shall remain liable and will pay Secured Party on demand for any deficiency remaining, together with interest thereon at the highest rate then payable on the Obligations and the balance of any expenses unpaid, with any surplus to be paid to the Debtors, subject to any duty of Secured Party imposed by law to the holder of any subordinate security interest in the Collateral known to Secured Party.
(b) Subject to Section 16 of this Security Agreement, Secured Party may, at any time and from time to time, as appropriate, after the occurrence and during the continuance of a Default set off and apply to the payment of the Obligations, any Collateral in or coming into the possession of Secured Party or its agents, without notice to any Debtor and in such manner as Secured Party may in its discretion determine.
6. Debtors hereby constitute and appoint Secured Party the true and lawful attorney of Debtors with full power of substitution to take any and all appropriate action and to execute any and all documents, instruments or applications that may be necessary or desirable to accomplish the purpose and carry out the terms of this Security Agreement, including the authority to: endorse the name of any Debtor on any notes, acceptances, checks, drafts, money orders, instruments or other evidences of Collateral that may come into Secured Party’s possession; sign the name of any Debtor on any invoices, documents, assignments; execute proofs of claim and loss; execute endorsements, assignments or other instruments of conveyance or transfer; adjust and compromise any claims under insurance policies or otherwise; execute
releases; and do all other acts and things necessary or advisable in the sole discretion of Secured Party to carry out and enforce this Security Agreement or the Obligations. Neither Secured Party nor any designee or agent thereof shall be liable for any acts of commission or omission done in good faith, for any error of judgment or for any mistake of fact or law. This power of attorney being coupled with an interest is irrevocable while any Obligations shall remain unpaid.
7. With respect to the enforcement of Secured Party’s rights under this Security Agreement, each Debtor hereby releases Secured Party from any claims, causes of action and demands at any time arising out of or with respect to this Security Agreement, the Obligations, the Collateral and its use and/or any actions taken or omitted to be taken by Secured Party in good faith with respect thereto, and each Debtor hereby agrees to hold Secured Party harmless from and with respect to any and all such claims, causes of action and demands; provided that no Debtor shall have any obligation to Secured Party with respect to any claims, causes of action or demands directly resulting from any violation of law or this Security Agreement, bad faith, fraud, gross negligence or willful misconduct of Secured Party, as determined by a court of competent jurisdiction by a final and nonappealable judgment.
8. Secured Party’s prior recourse to any Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of the Obligations nor shall any demand, suit or proceeding for payment or collection of the Obligations constitute a condition of any recourse by Secured Party to the Collateral. Any suit or proceeding by Secured Party to recover any of the Obligations shall not be deemed a waiver of, or bar against, subsequent proceedings by Secured Party with respect to any other Obligations and/or with respect to the Collateral. No act, omission or delay by Secured Party shall constitute a waiver of its rights and remedies hereunder or otherwise. No single or partial waiver by Secured Party of any covenant, warranty, representation, Default or right or remedy which it may have shall operate as a waiver of any other covenant, warranty, representation, Default, right or remedy or of the same covenant, warranty, representation, Default, right or remedy on a future occasion. Each Debtor hereby waives presentment, notice of dishonor and protest of all instruments included in or evidencing any Obligations or Collateral, and all other notices and demands whatsoever (except as expressly provided herein).
9. Each Debtor hereby agrees to pay, on demand, all reasonable and documented out-of-pocket expenses incurred by Secured Party in connection with the enforcement of the Note, this Security Agreement, and the Obligations and in connection with any amendment, including, without limitation, the reasonable fees and disbursements of counsel to Secured Party.
10. In the event of any litigation with respect to any matter connected with this Security Agreement, the Obligations, the Collateral or the Note, each Debtor hereby waives the right to a trial by jury and all rights of setoff. Each Debtor hereby waives personal service of any process in connection with any such action or proceeding and agrees that the service thereof may be made by certified or registered mail directed to the Company in accordance with Section 14 of this Security Agreement. In the alternative, Secured Party may in its discretion effect service upon the Debtors in any other form or manner permitted by law.
11. Upon the payment in full of the Note and satisfaction of all Obligations in accordance with the Note, the security interest granted hereby in the Collateral shall terminate and all rights to the Collateral under this Security Agreement shall revert to the applicable Debtor. Upon any such termination, each Debtor shall have the right to file UCC–3 financing statement releases or other documents of release reasonably required to reflect the termination of the security interest contemplated hereby.
12. Secured Party may assign its rights and obligations to any affiliate of Secured Party, provided that such affiliate assumes all of the liabilities or obligations of Secured Party hereunder.
13. All terms herein shall have the meanings as defined in the UCC, unless the context otherwise requires. No provision hereof shall be modified, altered, waived, released, terminated or limited except by a written instrument expressly referring to this Security Agreement and to such provision, and executed by the party to be charged. The execution and delivery of this Security Agreement have been authorized by any necessary vote or consent of each Debtor. This Security Agreement and all Obligations shall be binding upon the successors and assigns of each Debtor and shall, together with the rights and remedies of Secured Party hereunder, inure to the benefit of Secured Party and its successors and permitted assigns. This Security Agreement and the Obligations shall be governed in all respects by the laws of the State of New York applicable to contracts executed and to be performed in such state. If any term of this Security Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall in no way be affected thereby. Secured Party is authorized to annex hereto any schedules referred to herein. Each Debtor acknowledges receipt of a copy of this Security Agreement.
14. All notices and other communications under this Security Agreement shall be in writing and shall be deemed given when delivered personally, sent by electronic mail or sent by a nationally recognized overnight courier service, if to the Debtors, as set forth in the Note for the Company, and if to the Secured Party, as set forth in the Note for the Holder (as defined in the Note).
15. The obligations of the Debtors hereunder shall be joint and several.
16. Secured Party hereby agrees that Section 9 of the Note (Subordination) shall apply to it and its rights and obligations under this Security Agreement, and such section is incorporated fully herein by reference, mutatis mutandis.
*********************
(Signature Pages Follow)
IN WITNESS WHEREOF, the undersigned have executed or caused this Security Agreement to be executed on the date first above set forth.
| DEBTORS: | ||||||||
FATHOM HOLDINGS INC. | ||||||||
By: /s/ Marco Fregenal | ||||||||
Name: Marco Fregenal Title: Chief Executive Officer | ||||||||
E4:9 HOLDINGS LLC | ||||||||
By: /s/ Marco Fregenal | ||||||||
Name: Marco Fregenal Title: President | ||||||||
INTELLIAGENT, LLC | ||||||||
By: /s/ Marco Fregenal | ||||||||
Name: Marco Fregenal Title: Manager | ||||||||
FATHOM REALTY HOLDINGS LLC | ||||||||
By: /s/ Marco Fregenal | ||||||||
Name: Marco Fregenal Title: Manager | ||||||||
VERUS HOLDINGS INC. | ||||||||
By: /s/ Marco Fregenal | ||||||||
Name: Marco Fregenal Title: President | ||||||||
Secured Party:
BED BATH & BEYOND, INC.
By: /s/ Leah R. Putnam
Name: Leah Putnam
Title: Chief Accounting Officer
SUBSIDIARY GUARANTEE
This SUBSIDIARY GUARANTEE, dated as of March 18, 2026 (this “Guarantee”), is made by each signatory hereto (together with any other entity that may become a party hereto as provided herein, “Guarantors”) in favor of Holder (as defined below).
W I T N E S S E T H:
WHEREAS, Bed Bath & Beyond, Inc., a Delaware corporation (“Holder”), has made a loan in the original principal amount of $2,000,000 (the “Loan”) to Fathom Holdings Inc., a North Carolina corporation (the “Company”), in exchange for the issuance by the Company to Holder of a Subordinated Secured Promissory Note, dated as of the date hereof, in the amount of the Loan (as amended, supplemented or otherwise modified from time to time, the “Note”); and
WHEREAS, each Guarantor will directly benefit from the extension of credit to the Company represented by the issuance of the Note;
NOW, THEREFORE, in consideration of the premises and to induce Holder to make the Loan to the Company and accept the Note, each Guarantor hereby agrees with Holder as follows:
1.Definitions. Unless otherwise defined herein, terms defined in the Note and used herein shall have the meanings given to them in the Note. The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and Section and Schedule references are to this Guarantee unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. The following terms shall have the following meanings:
“Guarantee” means this Subsidiary Guarantee, as the same may be amended, supplemented or otherwise modified from time to time.
“Obligations” means, in addition to all other costs and expenses of collection incurred by Holder in enforcing any of such Obligations and/or this Guarantee, all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of the Company or any Guarantor to Holder, pursuant to this Guarantee, the Note, the Security Agreement and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from Holder as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and interest on the Note and the Loan extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Company or any Guarantor from time to time under or in connection with this Guarantee, the Note and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith; and (iii) all
amounts (including, but not limited to, post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company or any Guarantor.
2.Guarantee.
(a)Guarantee.
(i)Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantee to Holder and its successors, endorsees, transferees and assigns, the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.
(ii)Anything herein or in any other Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws, including laws relating to the insolvency of debtors, subsidiary guarantors, fraudulent conveyance or transfer or laws affecting the rights of creditors generally (after giving effect to the right of contribution established in Section 2(b)).
(iii)Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of Holder hereunder.
(iv)The guarantee contained in this Section 2 shall remain in full force and effect until all the Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by indefeasible payment in full (or converted into Common Stock of the Company as contemplated by the Note) (other than contingent indemnification obligations for which no claim has been asserted).
(v)No payment made by the Company, any Guarantor, any other guarantor or any other Person or received or collected by Holder from the Company, any Guarantor, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Obligations or any payment received or collected from such Guarantor in respect of the Obligations), remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations (other than contingent indemnification obligations for which no claim has been asserted) are indefeasibly paid in full, or converted into Common Stock of the Company as contemplated in the Note.
(vi)Notwithstanding anything to the contrary in this Guarantee, with respect to any defaulted non-monetary Obligations, the specific performance of which by Guarantors is not reasonably possible (e.g., the issuance of the Company’s Common
Stock), Guarantors shall only be liable for making Holder whole on a monetary basis for the Company’s failure to perform such Obligations in accordance with the Documents.
(b)Right of Contribution. Subject to Section 2(c), each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 2(c). The provisions of this Section 2(b) shall in no respect limit the obligations and liabilities of any Guarantor to Holder, and each Guarantor shall remain liable to Holder for the full amount guaranteed by such Guarantor hereunder.
(c)No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by Holder, no Guarantor shall be entitled to be subrogated to any of the rights of Holder against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by Holder for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to Holder by the Company on account of the Obligations are indefeasibly paid in full (or otherwise converted in accordance with the terms of the Note). If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full (or otherwise converted in accordance with the terms of the Note), such amount shall be held by such Guarantor in trust for Holder, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to Holder in the exact form received by such Guarantor (duly indorsed by such Guarantor to Holder, if required), to be applied against the Obligations, whether matured or unmatured, in such order as Holder may determine.
(d)Amendments, Etc. With Respect to the Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by Holder may be rescinded by Holder and any of the Obligations continued, and the Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by Holder, and the Note and the other Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as Holder may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by Holder for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Holder shall have no obligation to protect, secure, perfect or insure any Lien at any time held by Holder as security for the Obligations or for the guarantee contained in this Section 2 or any property subject thereto.
(e)Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by Holder upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived,
in reliance upon the guarantee contained in this Section 2; and all dealings between the Company and any of Guarantors, on the one hand, and Holder, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives to the extent permitted by law diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or any of Guarantors with respect to the Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment and performance without regard to (i) the validity or enforceability of the Note or any other Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by Holder, (ii) any defense, set-off or counterclaim (other than a defense of payment or performance or fraud by Holder) which may at any time be available to or be asserted by the Company or any other Person against Holder, or (iii) any other circumstance whatsoever (with or without notice to or knowledge of the Company or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, Holder may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Company, any other Guarantor or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by Holder to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of Holder against any Guarantor. For the purposes hereof, “demand” shall include the commencement and continuance of any legal proceedings.
(f)Reinstatement. The guarantee contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.
(g)Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to Holder without set-off or counterclaim in U.S. dollars at the address set forth or referred to in the signature pages to the Note.
3. Representations and Warranties. Each Guarantor hereby makes the following representations and warranties to Holder as of the date hereof:
(a)Organization and Qualification. Guarantor is a corporation or a limited liability company, duly incorporated or formed, validly existing and, except as set forth on Schedule 1, in good standing under the laws of the applicable jurisdiction set forth on Schedule 1, with the requisite corporate or limited liability company power and authority to own and use its properties
and assets and to carry on its business as currently conducted. Guarantor has no Material Subsidiaries other than those identified in the Note. Guarantor is duly qualified to do business and is in good standing as a foreign corporation or limited liability company in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of any of this Guarantee in any material respect, (ii) have a material adverse effect on the results of operations, assets, prospects, or financial condition of Guarantor or (iii) adversely impair in any material respect Guarantor’s ability to perform fully on a timely basis its obligations under this Guarantee (a “Material Adverse Effect”).
(b)Authorization; Enforcement. Guarantor has the requisite corporate or limited liability company power and authority to enter into and to consummate the transactions contemplated by this Guarantee, and otherwise to carry out its obligations hereunder. The execution and delivery of this Guarantee by Guarantor and the consummation by it of the transactions contemplated hereby have been duly authorized by all requisite corporate or limited liability company action on the part of Guarantor. This Guarantee has been duly executed and delivered by Guarantor and constitutes the valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
(c)No Conflicts. The execution, delivery and performance of this Guarantee by Guarantor and the consummation by Guarantor of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of its Certificate of Incorporation or other organizational document or By-laws or operating agreement, or (ii) conflict with, constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Guarantor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which Guarantor is subject (including Federal and State securities laws and regulations), or by which any material property or asset of Guarantor is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have or result in a Material Adverse Effect. The business of Guarantor is not being conducted in violation of any law, ordinance or regulation of any governmental authority, except for violations which, individually or in the aggregate, do not have a Material Adverse Effect.
(d)Consents and Approvals. Guarantor is not required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local, foreign or other governmental authority or other person in connection with the execution, delivery and performance by Guarantor of this Guarantee.
(e)Note. The representations and warranties of the Company set forth in the Note as they relate to such Guarantor, each of which is hereby incorporated herein by reference, are true and correct as of each time such representations are deemed to be made pursuant to the Note, and the Holder shall be entitled to rely on each of them as if they were fully set forth herein, provided
that each reference in each such representation and warranty to the Company’s knowledge shall, for the purposes of this Section 3, be deemed to be a reference to such Guarantor’s knowledge.
4. Covenants.
(a)Each Guarantor covenants and agrees with Holder that, from and after the date of this Guarantee until the termination of such Guarantee, such Guarantor shall take, and/or shall refrain from taking, as the case may be, each commercially reasonable action that is necessary to be taken or not taken, as the case may be, so that no Event of Default (as defined in the Note) is caused by the failure to take such action or to refrain from taking such action by such Guarantor.
(b)So long as any of the Obligations are outstanding (other than contingent indemnification claims which have not been asserted), unless Holder otherwise consents in writing, each Guarantor will not directly or indirectly on or after the date of this Guarantee:
(i)enter into, create, incur, assume or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, other than Permitted Indebtedness;
(ii)enter into, create, incur, assume or suffer to exist any liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, other than Permitted Liens;
(iii)amend its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of Holder;
(iv)repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its securities or debt obligations, except as otherwise required by the express terms of any Permitted Indebtedness;
(v)pay cash dividends on any equity securities of the Company;
(vi)enter into any transaction with any affiliate of Guarantor which would be required to be disclosed in any public filing of the Company with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or
(vii)into any agreement with respect to any of the foregoing.
5. Miscellaneous.
(a)Amendments in Writing. None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except in writing by Holder.
(b)Notices. All notices, requests and demands to or upon Holder or any Guarantor hereunder shall be effected in the manner provided for in the Note, provided that any such notice,
request or demand to or upon any Guarantor shall be addressed to such Guarantor at the address for the Company as set forth in the Note.
(c)No Waiver by Course of Conduct; Cumulative Remedies. Holder shall not by any act (except by a written instrument pursuant to Section 5(a)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default under the Documents or Event of Default. No failure to exercise, nor any delay in exercising, on the part of Holder, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Holder would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
(d)Enforcement Expenses; Indemnification.
(i)Each Guarantor agrees to pay, or reimburse Holder for, all its reasonable and documented out-of-pocket costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Guarantee and the other Documents to which such Guarantor is a party, including, without limitation, the reasonable and documented fees and disbursements of external counsel to Holder.
(ii)Each Guarantor agrees to pay, and to save Holder harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable in connection with any of the transactions contemplated by this Guarantee.
(iii)Each Guarantor agrees to pay, and to save Holder harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Guarantee to the extent the Company would be required to do so pursuant to the Note.
(iv)The agreements in this section shall survive repayment of the Obligations and all other amounts payable under the Note and the other Documents.
(e)Successor and Assigns. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of Holder and its respective successors and assigns; provided that no Guarantor may assign, transfer or delegate any of its rights or obligations under this Guarantee without the prior written consent of Holder.
(f)Set-Off. Each Guarantor hereby irrevocably authorizes Holder at any time and from time to time while an Event of Default under any of the Documents shall have occurred and be continuing, without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits, credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Holder to or for the credit or
the account of such Guarantor, or any part thereof in such amounts as Holder may elect, against and on account of the obligations and liabilities of such Guarantor to Holder hereunder and claims of every nature and description of Holder against such Guarantor, in any currency, whether arising hereunder, under the Note, any other Document or otherwise, as Holder may elect, whether or not Holder has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. Holder shall notify such Guarantor promptly of any such set-off and the application made by Holder of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Holder under this section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which Holder may have.
(g)Counterparts. This Guarantee may be executed by one or more of the parties to this Guarantee on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
(h)Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
(i)Section Headings. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
(j)Integration. This Guarantee and the other Documents represent the agreement of Guarantors and Holder with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by Holder relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Documents.
(k)Governing Laws. All questions concerning the construction, validity, enforcement and interpretation of this Guarantee shall be governed by and construed and enforced in accordance with the internal laws of the State of New York. Each of the Company and Guarantors agree that all proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Guarantee (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Each of the Company and Guarantors hereby irrevocably submits 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 hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such 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 Guarantee 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. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Guarantee or the transactions contemplated hereby.
(l)Acknowledgements. Each Guarantor hereby acknowledges that:
(i)it has been advised by counsel in the negotiation, execution and delivery of this Guarantee and the other Documents to which it is a party;
(ii)Holder does not have any fiduciary relationship with or duty to any Guarantor arising out of or in connection with this Guarantee or any of the other Documents, and the relationship between Guarantors, on the one hand, and Holder, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(iii)no joint venture is created hereby or by the other Documents or otherwise exists by virtue of the transactions contemplated hereby among Guarantors and Holder.
(m)Additional Guarantors. The Company shall cause each of its Subsidiaries formed or acquired on or subsequent to the date hereof, which are designated as Material Subsidiaries upon the mutual agreement of the Company and Holder, to become a Guarantor for all purposes of this Guarantee by executing and delivering an Assumption Agreement in the form of Annex 1 hereto and to grant a lien in substantially all of their assets pursuant to documentation satisfactory to Holder.
(n)Release of Guarantors. Each Guarantor will be automatically released from all liability hereunder concurrently with the indefeasible repayment in full (or conversion into common stock of the Company) of all amounts (other than contingent indemnification obligations for which no claim has been asserted) owed under the Note and the other Documents.
(o)Subordination. Holder hereby agrees that Section 9 of the Note (Subordination) shall apply to it and its rights and obligations under this Guarantee, and such section is incorporated fully herein by reference, mutatis mutandis.
(p)WAIVER OF JURY TRIAL. EACH GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, HOLDER, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN.
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(Signature Page Follows)
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered as of the date first above written.
E4:9 Holdings LLC | ||||||||
By: | /s/ Marco Fregenal | |||||||
Name: | Marco Fregenal | |||||||
Title: | President | |||||||
IntelliAgent, LLC | ||||||||
By: | /s/ Marco Fregenal | |||||||
Name: | Marco Fregenal | |||||||
Title: | Manager | |||||||
Fathom Realty Holdings LLC | ||||||||
By: | /s/ Marco Fregenal | |||||||
Name: | Marco Fregenal | |||||||
Title: | Manager | |||||||
Verus Holdings Inc. | ||||||||
By: | /s/ Marco Fregenal | |||||||
Name: | Marco Fregenal | |||||||
Title: | President | |||||||
Annex 1 to
SUBSIDIARY GUARANTEE
This ASSUMPTION AGREEMENT, dated as of [ ], is made by [ ], a [ ] [corporation][limited liability company] (the “Additional Guarantor”), in favor of Holder pursuant to the Note referred to below. All capitalized terms not defined herein shall have the meaning ascribed to them in such Note.
W I T N E S S E T H:
WHEREAS, Fathom Holdings Inc., a North Carolina corporation (the “Company”), has issued to Holder a Subordinated Secured Promissory Note, dated as of March 18, 2026, in the original principal amount of $2,000,000 (as amended, supplemented or otherwise modified from time to time, the “Note”);
WHEREAS, in connection with the Note, certain Subsidiaries of the Company (other than the Additional Guarantor) have entered into the Subsidiary Guarantee, dated as of March 18, 2026 (as amended, supplemented or otherwise modified from time to time, the “Guarantee”) in favor of Holder;
WHEREAS, the Guarantee requires the Additional Guarantor to become a party to the Guarantee; and
WHEREAS, the Additional Guarantor has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee. By executing and delivering this Assumption Agreement, the Additional Guarantor, as provided in Section 5(m) of the Guarantee, hereby becomes a party to the Guarantee as a Guarantor thereunder with the same force and effect as if originally named therein as a Guarantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Guarantor thereunder. The information set forth in Annex 1 hereto is hereby added to the information set forth in Schedule 1 to the Guarantee. The Additional Guarantor hereby represents and warrants that each of the representations and warranties contained in Section 3 of the Guarantee is true and correct on and as the date hereof as to such Additional Guarantor (after giving effect to this Assumption Agreement) as if made on and as of such date.
2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GUARANTOR] | ||||||||
By: | ||||||||
Name: | ||||||||
Title: | ||||||||