SMFL Smart for Life Inc (CE)

 

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): February 2, 2024 (January 29, 2024)

 

SMART FOR LIFE, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		001-41290		81-5360128
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

990 Biscayne Blvd, Suite 505, Miami, FL		33132
(Address of principal executive offices)		(Zip Code)

 

(786) 749-1221

(Registrant’s telephone number, including area code)

 

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

 

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

 

☐

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

 

☐

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

 

☐

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

 

☐

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

 

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

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		SMFL		The Nasdaq Stock Market LLC

 

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

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.

 

Closing of Ceautamed Sale

 

On January 29, 2024, Smart for Life, Inc. (the “Company”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) with First Health FL LLC (the “Buyer”), the Company’s wholly owned subsidiary Ceautamed Worldwide, LLC (“Ceautamed”), along with its wholly owned subsidiaries, Wellness Watchers Global, LLC (“Wellness Watchers”) and Greens First Female LLC (“Greens First,” and together with Ceautamed and Wellness Watchers, the “Subsidiaries”), pursuant to which the Company agreed to sell all assets of the Subsidiaries to the Buyer (the “Disposition”), which upon consummation of the transaction is 51% owned by certain affiliates of the Buyer and 49% owned by the Company, subject to a purchase option which may be exercised by the Buyer as described in the following paragraph.

 

In connection with the Disposition, the Company also entered into a limited liability company agreement, pursuant to which the Buyer was organized (the “LLC Agreement”). Pursuant to the LLC Agreement, the voting members of the Buyer are Joseph X. Xiras, Stuart Benson, and Ryan Benson, each with a 17% voting interest in the Buyer. The Company will also maintain a 49% non-voting ownership interest in the Buyer (the “Minority Interest”). The voting members of the Buyer will have the option to purchase the remaining Minority Interest for nominal consideration at their discretion upon notice to the Company pursuant to the LLC Agreement.

 

Pursuant to the terms of the Asset Purchase Agreement, the Buyer acquired the Subsidiaries for an aggregate price of $3,486,233, allocated as described below. The purchase price consists of (i) $210,993.50 paid to the Company’s creditors for outstanding debt owed and (ii) $3,275,239 in the form of the assumption of certain Assumed Liabilities (as defined in the Asset Purchase Agreement), including the assumption of the Company’s (and its subsidiaries) debt under the Hayes Amortizing Note (defined below) and the release of the Subsidiaries from such liabilities.

 

Note Purchase Agreement Amendment

 

As previously disclosed on August 4, 2022, the Company entered into a note purchase agreement with an accredited investor (the “Note Holder”), pursuant to which the Company issued to such Note Holder an original issue discount.

 

The Note, as amended, was further amended by a promissory note modification agreement on January 26, 2024, to amend the new principal amount due and owing under the Note to $2,751,233.45 (the “OID Note Amendment”), with an interest rate of 13%. Further, the Company agreed to pay an administration fee of $6,000 per month to the Note Holder under the OID Note Amendment. In the event that any such payments are not made under the Note within three days, then the Company must pay a late fee equal to five percent (5%) of the late principal and interest payments. The principal and interest payments will be payable on the first day of the month beginning on April 1, 2024, and amortized on a 15-year amortization schedule. Further, on the first day of each June and October prior to the maturity date, the Company will pay an additional principal reduction payment of $50,000. The maturity date of the Note was also extended to January 26, 2026.

 

Pursuant to the OID Note Amendment, in the event that the Company (i) receives payment from the exercise its outstanding warrants in an amount up to $2,200,000, the Company shall pay the Note Holder 20% of the gross proceeds generated by such exercise, (ii) successfully completes a public offering with a specified investment bank, the Company shall pay to the Note Holder 25% of the gross proceeds of such public offering, (iii) successfully completes a private debenture offering, the Company shall pay the Note Holder 30% of the gross proceeds of such private placement, and (iv) successfully completes any other capital fund raising, the Company shall pay to the Note Holder 25% of such gross proceeds generated by such capital fund raising.

 

In connection with the Disposition, pursuant to a letter agreement, dated January 29, 2024, between the Company and the Note Holder (the “Note Letter Agreement”), the Note Holder released its security interests relating to the Subsidiaries, but not the Company, and the remaining amount of the Note that is due on behalf of the Company will remain outstanding.

 

Amendment and Assignment of Amortized Note

 

In connection with the closing of the Disposition, D&D Hayes, LLC (“D&D Hayes”), the Subsidiaries, First Group Acquisition Company, LLC (“First Group”) and the Buyer entered into an agreement (the “D&D Agreement”) wherein D&D Hayes: (i) released the Subsidiaries from their obligations as guarantors under that certain 5% Secured Subordinated Promissory Note, dated as of July 29, 2022, by and between the Company and D&D Hayes in the initial principal amount of $1,075,000 (as amended, the “Hayes Amortizing Note”) and (ii) released and terminated the guarantee by the Subsidiaries and the security interest in certain assets of the Subsidiaries pursuant to the Hayes Amortizing Note (the “Hayes Security Interest”).

 

Further, in connection with the closing of the Disposition, the Company, the Subsidiaries, First Group and the Buyer also entered into an agreement to amend the Hayes Amortizing Note (the “Hayes Note Amendment”). Pursuant to the Hayes Note Amendment, (i) the Company shall be entitled to discharge the Hayes Amortizing Note for a cash payment to First Group in the amount of $300,000, plus interest of 10% per annum, in lieu of the existing outstanding principal balance on the Hayes Amortizing Note, (ii) in the event of an equity or debt financing consummated by the Company or any of its subsidiaries after the closing of the Disposition occurs, and prior to the payments described in (i) have been satisfied, the Company must prepay to First Group an amount equal to $100,000 (or if less received, then the total proceeds from any such financing), (iii) until such time that the Company has completely repaid the amounts due and owing in (i), the encumbrances on the Company after the closing of the Disposition shall not be released. In the event of a default on the obligations, the Company shall be obligated to pay the full original balance of the Hayes Amortizing Note, plus interest of 10% per annum.

 

 

Forgiveness of Certain Outstanding Buyer Notes

 

As previously disclosed on August 4, 2022, the Company entered into secured subordinated convertible promissory notes (the “Buyer Notes I”) in connection with the acquisition of Ceautamed. In connection with the closing of the Disposition, certain Buyer Notes I, specifically those to RMB Industries, Inc. (“RMB”) in the initial principal amount of $967,500 (the “RMB Amortizing Note”) and to RTB Childrens Trust (“RTB”) in the principal amount of $107,500 (the “RTB Amortizing Note,” and together with the RMB Amortizing Note the “Amortizing Notes”), were forgiven and discharged in their entirety and cancelled, pursuant to a letter agreement, dated January 29, 2024, among the Company, RMB and RTB (the “Buyer Note Letter Agreement”).

 

The foregoing summary of the terms and conditions of the Asset Purchase Agreement, the LLC Agreement, the Note Letter Agreement, the OID Note Amendment, the D&D Agreement, the Hayes Note Amendment and the Buyer Note Letter Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of those documents attached as Exhibits hereto, which are incorporated herein by reference.

 

Item 2.01

Completion of Acquisition or Disposition of Assets.

 

The information set forth under Item 1.01 is incorporated by reference into this Item 2.01.

 

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information set forth under Item 1.01 is incorporated by reference into this Item 2.03.

 

 

Item 9.01

Financial Statements and Exhibits.

 

(b) Pro forma financial information

 

The unaudited pro forma combined financial information giving effect to the Disposition is filed as Exhibit 99.2 attached hereto and is incorporated herein by reference.

 

(d) Exhibits

 

Exhibit No.		Description of Exhibit
10.1		Asset Purchase Agreement, dated January 29, 2024, among Smart for Life, Inc., First Health FL LLC, Ceautamed Worldwide, LLC, Wellness Watchers Global, LLC and Greens First Female, LLC
10.2		Bill of Sale and Assignment and Assumption Agreement, dated January 29, 2024, among First Health FL LLC, Ceautamed Worldwide, LLC, Wellness Watchers Global, LLC and Greens First Female, LLC
10.3		Assignment of Intellectual Property, dated as of January 29, 2024, among First Health FL LLC, Ceautamed Worldwide LLC, Wellness Watchers, LLC and Greens First Female, LLC
10.4		Limited Liability Company Agreement, dated as of January 29, 2024, among Smart for Life, Inc., Joseph X. Xiras, Stuart Benson and Ryan Benson
10.5		Note Purchase Agreement, dated July 29, 2022, between Smart for Life, Inc. and Joseph X. Xiras (incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K filed on August 4, 2022)
10.6		Original Issue Discount Secured Subordinated Note issued by Smart for Life, Inc. to Joseph X. Xiras on July 29, 2022 (incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K filed on August 4, 2022)
10.7		Amendment No. 1 to Original Issue Discount Secured Subordinated Note issued by Smart for Life, Inc. to Joseph X. Xiras dated May 24, 2023
10.8		Amendment No. 2 to Original Issue Discount Secured Subordinated Note issued by Smart for Life, Inc. to Joseph X. Xiras dated January 26, 2024
10.9		Letter Agreement, dated January 29, 2024, between Smart for Life Inc. and Joseph X. Xiras
10.10		Secured Subordinated Convertible Promissory Note issued by Smart for Life, Inc. to D&D Hayes, LLC on July 29, 2022 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on August 4, 2022)
10.11		Agreement, dated January 29, 2024, among D&D Hayes, LLC, Ceautamed Worldwide, LLC, Wellness Watchers Global, LLC, Greens First Female, LLC, First Group Acquisition Company, LLC and First Health FL LLC
10.12		Agreement, dated January 29, 2024, among Smart for Life, Inc., D&D Hayes, LLC, Ceautamed Worldwide, LLC, Wellness Watchers Global, LLC, Greens First Female, LLC, First Group Acquisition Company, LLC and First Health FL LLC
10.13		Secured Subordinated Convertible Promissory Note issued by Smart for Life, Inc. to RMB Industries, Inc. on July 29, 2022 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on August 4, 2022)
10.14		Secured Subordinated Convertible Promissory Note issued by Smart for Life, Inc. to RTB Childrens Trust on July 29, 2022 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on August 4, 2022)
10.15		Letter Agreement, dated January 29, 2024, among Smart for Life, Inc., RTB Children’s Trust and RMB Industries, Inc.
99.1		Smart for Life, Inc. Unaudited Pro Forma Condensed Consolidated Financial Information
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

  

 

SIGNATURES

 

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

 

Date: February 2, 2024	SMART FOR LIFE, INC.
	/s/ Darren C. Minton
	Name:	Darren C. Minton
	Title:	Chief Executive Officer

 

 

4

 

Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT, dated as of January 29, 2024 (this “Agreement”), is by and among (i) First Health FL LLC, a Delaware limited liability company (the “Purchaser”), (ii) Ceautamed Worldwide, LLC, a Florida limited liability company (“Ceautamed”), Wellness Watchers Global, LLC, a Florida limited liability company (“WWG”), and Greens First Female, LLC, a Florida limited liability company (“GFF”; each of Ceautamed, WWG and GFF are referred to individually as a “Seller” and collectively as the “Sellers”), and (iii) Smart for Life, Inc., a Delaware corporation and the parent of Ceautamed and the indirect parent of WWG and GFF (the “Shareholder”).

 

RECITALS

 

WHEREAS, Sellers are engaged in the Business (as defined herein);

 

WHEREAS, the Shareholder owns all of the outstanding capital stock of Ceautamed and indirectly (via its ownership of all of the outstanding capital stock of Ceautamed) owns all of the outstanding capital stock of WWG and GFF and, as a result, the Shareholder will derive substantial benefit from the transactions contemplated by this Agreement; and

 

WHEREAS, Sellers desire to sell, transfer, convey and assign to Purchaser, and Purchaser desires to acquire, all of Sellers’ interests in substantially all of their assets, in accordance with the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and subject to and on the terms and conditions set forth herein, the parties hereto hereby agree as follows:

 

ARTICLE I

Certain Definitions

 

Section 1.1 Certain Definitions. As used in this Agreement, the following terms have the respective meanings set forth below.

 

“Accounts Receivable” has the meaning ascribed to such term in Section 2.1(f).

 

“Acquisition Proposal” means any offer, proposal, indication of interest letter of intent or other similar communication regarding (a) the acquisition (including by way of merger, consolidation, business combination or similar transactions involving the Sellers) of the equity of the Sellers or (b) the acquisition of all or substantially all of the assets of the Sellers.

 

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

 

 

“Agreement” has the meaning ascribed to such term in the introductory paragraph.

 

“Allocation Schedule” has the meaning ascribed to such term in Section 2.8.

 

“Assumed Contracts” means the Contracts pertaining to the Business that Purchaser has expressly elected to assume, in writing. A list of the Assumed Contracts are set forth on Schedule 2.1(l).

 

“Assumed Liabilities” means (i) those specific accounts payable of the Sellers in the amounts and due and owing to the Persons listed on Schedule 1.1(a) to this Agreement, (ii) the accrued payroll taxes of the Sellers in the amount set forth on Schedule 1.1(b), subject to a cap of Forty-Five Thousand Dollars ($45,000), (iii) the Senior Debt and (iv) those specific liabilities, commitments and obligations arising solely after the Closing Date under the Assumed Contracts, to the extent that any such liabilities, commitments and obligations relate to both the ownership of the Purchased Assets and the operation of the Business by Purchaser after the date hereof; provided, however, that in no event shall Purchaser assume any liability based on, arising out of or resulting from any actual or alleged breach or violation by any Seller (or any Affiliate thereof) of, or non-performance by any Seller (or any Affiliate thereof) under, any Assumed Contract on or prior to the Closing Date; provided, further, and for the avoidance of doubt, Purchaser is not assuming any Excluded Liability.

 

“Benefit Arrangement” has the meaning ascribed to such term in Section 4.17(a)(ii). “Benefit Plans” has the meaning ascribed to such term in Section 4.17(a)(i).

 

“Bill of Sale and Assignment and Assumption Agreement” has the meaning ascribed to such term in Section 3.2(a)(i).

 

“Business” means the combined business and operations conducted and operated by Sellers as of the date hereof, including the marketing, manufacturing and sale of nutritional foods and supplements.

 

“Business Day” means each day, other than a Saturday or Sunday, on which commercial banks in the State of New York are open for the general transaction of business.

 

“Business Employee” has the meaning ascribed to such term in Section 4.16(a).

 

“Capital Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person.

 

“Capital Lease Obligations” means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease.

 

“CARES Act” means the U.S. Coronavirus Aid, Relief and Economic Security Act and the regulations promulgated thereunder, including amendments thereto.

 

 

“Cash” means, as of a specified date or time, (a) all cash and cash equivalents of Sellers, including, all marketable securities and short-term investments, inbound checks that have been deposited but not yet cleared (but only to the extent such checks will clear), cash in bank accounts (including any deposit, demand, checking, savings, securities or other similar account maintained by Sellers with a bank or other financial institution), less (b) security deposits or other deposits required for the operation of the Business in the ordinary course consistent with past practice.

 

“Ceautamed” has the meaning ascribed to such term in the introductory paragraph.

 

“Closing” has the meaning ascribed to such term in Section 3.1.

 

 

“Closing Date” has the meaning ascribed to such term in Section 3.1.

 

“Code” has the meaning ascribed to such term in Section 4.17(b).

 

“Collateral” has the meaning ascribed to such term in Section 2.5(b).

 

“Contracts” means, with respect to any Person, any agreement, undertaking, franchise, permit, lease, loan, license, guarantee, understanding, commitment, contract, note, bond, indenture, mortgage, deed of trust or other obligation, instrument, document or other arrangement of any kind (written or oral) to which such Person is a party or by which such Person, or any material amount of such Person’s property, is bound.

 

“Covered Matters” has the meaning ascribed to such term in Section 10.3.

 

“Encumbrance” means, with respect to any asset, any lien, claim, charge, mortgage, pledge, security interest, equity restriction or other encumbrance relating to such asset.

 

“Environmental Law” means any foreign, federal, state or local law or ordinance or regulation pertaining to the protection of human health or the environment, including, without limitation, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Emergency Planning and Community Right-to-Know Act, the Federal Water Pollution Control Act, the Federal Clean Air Act, the Federal Solid Waste Disposal Act (including, without limitation, the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984), the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Federal Occupational Safety and Health Act of 1970.

 

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

 

“ERISA Affiliate” has the meaning ascribed to such term in Section 4.17(d).

 

“Excluded Assets” has the meaning ascribed to such time in Section 2.2.

 

“Excluded Liabilities” has the meaning ascribed to such term in Section 2.4.

 

 

“Expiration Date” means (i) with respect to the representations and warranties of the parties contained in this Agreement, except for the Special Representations, 11:59 pm, New York, New York time on the eighteen (18) month anniversary of the Closing Date and (ii) with respect to the Special Representations, the ninetieth (90) day following the expiration of the applicable statute of limitations (after taking into account any waivers or extensions thereof) under applicable Law for which claims can be asserted with respect to the matters covered thereby.

 

“Financial Statements” has the meaning ascribed to such term in Section 4.7(a).

 

“GAAP” means, with respect to any entity, generally accepted accounting principles as in effect in the United States on the date of this Agreement.

 

“GFF” has the meaning ascribed to such term in the introductory paragraph.

 

“Governmental Authority” means any national, federal, state, provincial, county, municipal or local government, foreign or domestic, or the government of any political subdivision of any of the foregoing, or any entity, authority, agency, ministry or other similar body exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government including, without limitation, any authority or other quasi-governmental entity established to perform any of such functions.

 

“Indebtedness”, as of a specified date and/or time, means, any of the following obligations or other liabilities of a Seller, whether or not contingent: (a) the principal of and accrued interest, including all fees and obligations thereunder (including any prepayment or termination penalties, premiums or fees which will arise out of the prepayment thereof prior to its maturity and termination) of any (i) indebtedness for borrowed money, (ii) liabilities evidenced by bonds, debentures, notes, or other similar instruments or debt securities (including assignment of receivables for financing purposes or factoring agreements), or (iii) liabilities under or in connection with drawn letters of credit or bankers’ acceptances or similar items (to the extent of the amount drawn thereunder); (b) liabilities to pay the deferred or installment purchase price of property or services, other than trade payables and other ordinary course payables, whether or not represented by a note, earn-out or contingent purchase payment or otherwise; (c) any deferred purchase price liabilities related to past acquisitions or divestitures, whether or not represented by a note, earn-out or contingent purchase payment or otherwise; (d) Capital Lease Obligations; (e) any other accrued but unpaid bonuses to any current or former employees of a Seller, (f) any accrued liabilities for paid time off of current or former employees of a Seller; (g) deferred compensation payable to or on behalf of any current or former employees of a Seller; (h) stay-put arrangements, severance plans, bonus plans, employment agreements, change of control agreements or any other plan, agreement or arrangement to which a Seller is a party, which obligation is payable or becomes payable solely as a result of the consummation of the transactions contemplated by this Agreement, and any withholding amounts payable as a result thereof; (i) the employer’s share of any payroll, social security, employment, unemployment or withholding or similar Taxes payable by or on behalf of a Seller with respect to the amounts described in clauses (e), (f), (g) and (h); (j) amounts, if any, guaranteed in any manner by a Seller (including guarantees in the form of an agreement to repurchase or reimburse) or other amounts, if any, for which a Seller is indirectly liable as guarantor, surety or otherwise (including guarantees in favor of the Shareholder); or (k) any repayment obligations in respect of government grants, loans, advances and similar payments.

 

 

 

“Indemnified Party” has the meaning ascribed to such term in Section 9.3(a).

 

“Indemnified Taxes” means any and all Taxes (i) with respect to the Purchased Assets, the Assumed Liabilities and the Business for any taxable period (or portion of a Straddle Period determined in accordance with Section 6.4(b)) ending on or before the Closing Date, (ii) relating to the Excluded Assets and Excluded Liabilities for any taxable period, (iii) of the Shareholder or any Seller for any taxable period, (iv) of the Shareholder or any Seller as a transferee, successor, pursuant to Law, by contract, or otherwise, and (v) any liability for Taxes that becomes a liability of Purchaser under any common law doctrine of de facto merger or transferee or successor liability or otherwise by operation of contract or Law) for any taxable period.

 

“Indemnifying Party” has the meaning ascribed to such term in Section 9.3(a).

 

“IP Agreement” has the meaning ascribed to such term in Section 3.2(a)(ii).

 

“Law” means any law, rule, regulation, ordinance, treaty, writ, judicial decision, judgment, injunction, decree, determination, award or other order of any court, government or Governmental Authority.

 

“Leased Premises” has the meaning ascribed to such term in Section 6.13.

 

“Loss” means any loss, damage, injury, liability, claim, decline or loss in value, demand, amount paid in settlement, judgment, award, fine, penalty, tax, fee (including reasonable attorneys’ fees and expenses), charge, costs (including costs of investigation and court costs), amounts due or expenses of any type, nature or description.

 

“Material Adverse Effect”, with respect to the Business, means any adverse event, change or effect that, when taken individually or together with all other adverse events, changes and effects, is or is reasonably likely to (i) be materially adverse to the condition (financial or otherwise), properties, assets, liabilities, business or results of operations of Sellers or the Business, taken as a whole, or (ii) result in a material loss or decrease in value of the Purchased Assets.

 

“Material Contracts” has the meaning ascribed to such term in Section 4.10(a).

 

“Permits” means all consents, waivers, requirements, authorizations, declarations, filings, registrations, notifications, licenses, permits, certificates, variances, exemptions and other approvals issued, granted, given, required or otherwise made available by any Governmental Authority.

 

“Permitted Encumbrances” means (a) statutory liens for current Taxes of Sellers not yet due and payable for which adequate reserves have been established or (b) mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of Sellers and which are not, individually or in the aggregate, material to the Business or the Purchased Assets.

 

 

“Person” means an individual, partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust or joint venture, or a Governmental Authority.

 

“Proprietary Rights” has the meaning ascribed to such term in Section 4.10.

 

“Purchase Price” has the meaning ascribed to such term in Section 2.5.

 

“Purchased Assets” has the meaning ascribed to such term in Section 2.1.

 

“Purchaser” has the meaning ascribed to such term in the introductory paragraph.

 

“Real Property Leases” has the meaning ascribed to such term in Section 4.9.

 

“Regulated Substances” means pollutants, contaminants, hazardous or toxic substances, compounds or related materials or chemicals, hazardous materials, hazardous waste, flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde, foam insulation, polychlorinated biphenyls, petroleum and petroleum products (including, without limitation, waste petroleum and petroleum products) as regulated under applicable Environmental Laws.

 

“Related Persons” has the meaning ascribed to such term in Section 4.20.

 

“Securities Purchase Agreement” means that certain Securities Purchase Agreement, dated March 14, 2022 and amended on July 29, 2022, by and among the Shareholder, Ceautamed and the sellers party thereto.

 

“Securities Purchase Agreement Closing Date” has the meaning ascribed thereto in Section 4.12.

 

“Seller(s)” has the meaning ascribed to such term in the introductory paragraph.

 

“Sellers’ Knowledge” means the actual knowledge of the Sellers or the Shareholder or any officer or director of the Sellers or the Shareholder, after reasonable and prudent investigation.

 

“Sellers’ Proprietary Rights” has the meaning ascribed to such term in Section 4.18(a).

 

“Sellers’ Tangible Assets” has the meaning ascribed to such term in Section 2.1(a).

 

“Senior Debt” means the Indebtedness due and owing by the Shareholder and its subsidiaries to the Senior Lender under the Senior Loan Agreement and the other Loan Documents (as defined in the Senior Loan Agreement).

 

“Senior Lender” means First Group Acquisition Company, LLC (via assignment from Diamond Creek Capital, LLC)

 

“Senior Loan Agreement” means the Loan Agreement, dated July 1, 2021 and amended on June 29, 2022, December 29, 2022, April 20, 2023 and May 22, 2023, by and among the Shareholder and its subsidiaries (including Ceautamed) and the Senior Lender.

 

 

“Shareholder” has the meaning ascribed to such term in the introductory paragraph.

 

“Significant Customer” has the meaning ascribed to such term in Section 4.10(b).

 

“Significant Supplier” has the meaning ascribed to such term in Section 4.10(b).

 

“Special Representations” means the representations and warranties contained in Section 4.1 (Organization of Seller), Section 4.2 (Authorization; Enforceability), Section 4.5 (Capitalization), Section 4.6 (Title to Assets; No Liens; Condition of Assets), Section 4.13 (Taxes), Section 4.15 (Environmental Matters), Section 4.17 (Employee Benefit Plans), Section 4.19 (Brokers), Section 5.1 (Organization of Purchaser), Section 5.2 (Authorization; Enforceability) and Section 5.6 (Brokers).

 

“Straddle Period” has the meaning ascribed to such term in Section 6.4(b).

 

“Tax” (and, with correlative meaning, “Taxes”) means any net income, alternative or add- on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, escheat, abandoned or unclaimed property, premium, property, environmental, windfall profit or other tax, custom, duty, fee, imposts or other charges of any kind whatsoever, together with any interest, penalty, fines, addition to tax or other additional amount with respect thereto, imposed by any Governmental Authority whether disputed or not and any successor or transferee liability or obligation to indemnify another Person in respect of any and all of the above.

 

“Tax Returns” means any returns, declarations, reports, claims for refund, information returns or statements relating to Taxes, including, without limitation, any schedules or attachments thereto, and any amendments thereof, to be filed (whether on a mandatory or elective basis) with any Government Authority responsible for the imposition or collection of Taxes.

 

“Third Party Claim” has the meaning ascribed to such term in Section 9.3(a).

 

“Transaction Documents” means this Agreement and all other agreements, instruments, documents and certificates executed and delivered by any Seller, the Shareholder and/or the Purchaser pursuant to or in connection with this Agreement, the Closing and/or the sale of the Purchased Assets to Purchaser; and the “Transaction Documents” in reference to a Seller, the Shareholder and Purchaser means those Transaction Documents to which such Person is a party.

 

“Transaction Expenses” means the out-of-pocket expenses and fees (including Taxes) incurred by, or on behalf of, Sellers or the Shareholder in connection with the preparation and negotiation of this Agreement and the consummation of the transactions contemplated hereby, including (a) fees payable to investment banks, accountants and counsel and (b) any amounts paid or payable to any Person in connection with, or conditioned in whole on, the consummation of the transactions contemplated by this Agreement.

 

“WARN Act” means the Worker Adjustment Retraining Notification Act of 1988, as amended from time to time.

 

“WWG” has the meaning ascribed to such term in the introductory paragraph.

 

 

“Xiras Debt” means the Indebtedness due and owing to Joseph X. Xiras by the Shareholder pursuant to (i) that certain Note Purchase Agreement, dated as of July 29, 2022 (as amended), by and between the Shareholder and Joseph X. Xiras and the Original Issue Discount Secured Subordinated Note, dated as of July 29, 2022 (as amended), issued by the Shareholder in favor of Joseph X. Xiras in the original principal amount of $2,272,727.27 (as the same may have been increased by virtue of subsequent advances made by Joseph X. Xiras) and (ii) any other loans or advances made by Joseph X. Xiras to or for the benefit of the Shareholder or any of its subsidiaries, which Xiras Debt is guaranteed by the direct subsidiaries of the Shareholder (including Ceautamed).

 

ARTICLE II

Purchase of Assets; Assumption of Liabilities

 

Section 2.1 Purchase of Assets by Purchaser. Subject to the terms and conditions hereinafter set forth, at the Closing, each Seller shall sell, grant, convey, assign, transfer and deliver to Purchaser, free and clear of all Encumbrances (other than Permitted Encumbrances) all of its right, title and interest in and to any and all assets of such Seller (whether or not used in the conduct of the Business), of every kind and description, wherever located, whether tangible or intangible (including, without limitation, goodwill), real, personal or mixed (collectively, the “Purchased Assets”), but excluding the Excluded Assets. The Purchased Assets shall include, without limitation, all of the right, title and interest of each Seller in and to the following assets used in the conduct of the Business:

 

(a) Tangible Assets. All tangible assets owned by each Seller, including, without limitation, all machinery, equipment, tools, tooling, vehicles, computers and computer related hardware, computer servers, printers, software, fixtures, leasehold improvements, telephone lines, telephone equipment, telephone systems, telecopy machines and other office equipment, furniture, warehouse supplies and any and all items in the warehouse or situated downstairs in the Leased Premises and other tangible property of all kinds (collectively, the “Sellers’ Tangible Assets”);

 

(b) Products. All inventory, stock in trade, merchandise, goods, supplies, raw materials, work in progress, finished products, wrapping, supply and packaging items, promotional materials and similar items used in the Business and other products used or held for sale in the ordinary course of the Business;

 

(c) Permits. All Permits, to the extent transferable;

 

(d) Claims. All claims of any nature of a Seller against third persons, including, without limitation, claims under express or implied product warranties and under indemnification and contribution agreements;

 

(e) Records and Other Materials. Copies of all financial, accounting, operating and other data, documents and records that relate to the operation or conduct of the Business, including, without limitation, copies of all books and records, notes, sales data, cost and pricing information, advertising materials, and lists of customers, suppliers and sources of materials;

 

(f) Accounts Receivable. All notes receivable, loans receivable, and accounts receivable (whether current or not current) of the Business (each of the foregoing, the “Accounts Receivable”);

 

 

(g) Advances. All prepaid deposits, advances and other prepaid expenses of the Business;

 

(h) Intellectual Property. All of Sellers’ Proprietary Rights including, without limitation, (i) those Proprietary Rights set forth on Schedule 2.1(h) attached hereto and (ii) any licenses granted to a Seller and used in connection with the operation or conduct of the Business;

 

(i) Trade Secrets. All trade secrets, confidential information, inventions, proprietary software, know-how, formulae, processes, recipes, procedures, research records, records of inventions, test information, market surveys and marketing know-how owned by a Seller or used in the operation or conduct of the Business;

 

(j) Customer Lists. All customers and suppliers lists and all written historic and current data, information and records relating thereto, in whatever form or medium, relating to the Business;

 

(k) Names. All right, title and interest of Sellers in and to the name “Ceautamed”, “Greens First” and “Wellness Watchers” and any derivations thereof, as well as any other names used by a Seller in the conduct of the Business;

 

(l) Contracts. All rights of Sellers under the Assumed Contracts set forth on Schedule 2.1(l), including, without limitation, any right to receive the benefit of all obligations thereunder, and the right to receive payment or goods and services thereunder, and to assert claims and take other rightful actions in respect of breaches, defaults and other violations thereunder;

 

(m) Security and Other Deposits. All security deposits or other deposits required for the operation of the Business in the ordinary course consistent with past practice; and

 

(n) Additional Assets. All other assets used in the conduct of the Business, whether or not reflected on the books and records of Sellers, including, without limitation, all restrictive covenants, intellectual property assignments and other obligations of present and former employees, agents, representatives, independent contractors, consultants and others.

 

Section 2.2 Excluded Assets. The Purchased Assets do not include the following assets of Sellers (the “Excluded Assets”):

 

(a) all Cash of Sellers as of the Closing Date;

 

(b) all Tax Returns of Sellers and related work papers and correspondence;

 

(c) all claims and rights of Sellers under this Agreement;

 

(d) all rights and interests of Sellers under all Contracts that are not Assumed Contracts;

 

(e) all minute and stock record books of Sellers, and all incorporation, organization, and corporate reporting documents of Sellers; and

 

(f) all insurance policies maintained by Sellers and all related claims, rights, deposits, refunds, reserve funds, and insured interests and any excess deposits and excess reserve funds under workers compensation and other insurance policies and risk retention programs.

 

 

Section 2.3 Assumption of Liabilities of Seller. Upon the terms and subject to the conditions of this Agreement and on the basis of the representations, warranties, covenants and agreements contained herein, on the Closing Date (and subject to and conditioned upon the Closing), Purchaser shall assume, and agree to pay, perform and discharge when due, the Assumed Liabilities. Other than the Assumed Liabilities, THE PURCHASER IS NOT ASSUMING, NOR SHALL IT IN ANY MANNER BECOME LIABLE FOR, ANY DEBTS, LIABILITIES, OBLIGATIONS, OR EXPENSES OF ANY KIND OR NATURE WHATSOEVER OF ANY SELLER OR ANY OF ITS AFFILIATES (INCLUDING THE SHAREHOLDER), INCLUDING, WITHOUT LIMITATION, (I) TAXES OF ANY KIND OR ANY DEBTS, LIABILITIES, OBLIGATIONS, OR EXPENSES OF ANY KIND OR NATURE WHATSOEVER RELATING TO SELLERS, THE SHAREHOLDER OR TO THE EXCLUDED ASSETS AND (II) THE EXCLUDED LIABILITIES.

 

Section 2.4 Excluded Liabilities. Except for the Assumed Liabilities, Purchaser shall not assume and shall not be responsible to pay, perform or discharge any of the following liabilities or obligations of Sellers or the Shareholder (collectively, the “Excluded Liabilities”): (i) any liabilities or obligations arising out of or relating to Sellers’ ownership or operation of the Business and the Purchased Assets prior to the Closing; (ii) all liabilities and trade accounts payable of Sellers to third parties in connection with the Business incurred prior to the Closing; (iii) all liabilities and obligations arising under or relating to the Assumed Contracts arising prior to the Closing or relating to pre-Closing periods or arising from breaches by the Sellers or the Shareholder occurring prior to Closing; (iv) any liabilities or obligations relating to or arising out of the Excluded Assets; (v) any liabilities or obligations for (i) Taxes relating to the Business, the Purchased Assets or the Assumed Liabilities for any taxable period ending on or before the Closing Date or any portion of any Straddle Period ending on and including the Closing Date, (ii) any other Taxes of Sellers or any stockholders or Affiliates of Sellers for any taxable period, or (iii) any liability for unpaid Taxes of a Seller or Shareholder as a transferee, successor, pursuant to Law, by contract or otherwise; (vi) any liabilities or obligations of Sellers or the Shareholder relating to or arising out of or under (1) any Benefit Plan or the employment, or termination of employment, of any employee, including employee benefits, compensation or other arrangements or (2) workers’ compensation claims of any employee relating to periods prior to the Closing; (vii) any Transaction Expenses; (viii) Indebtedness of the Sellers or the Shareholder; (ix) any liabilities or obligations of the Sellers to any Related Person (including the Shareholder); (x) any liabilities or obligations (including Indebtedness) of the Shareholder; (xi) any amounts due under any corporate credit cards of any of the Sellers in the name of Ryan Benson or Stuart Benson or for which Ryan Benson or Stuart Benson have guaranteed the obligations of the Sellers; and (xii) any liabilities arising out of any receivables of the Sellers that were assigned prior to the Closing (including any claims from (1) any manufacturer or supplier for the failure of Sellers to pay amounts due in respect of products supplied in respect of such assigned receivables or (2) any Person to whom such receivables were assigned). For the avoidance of doubt, Purchaser is not assuming and its Affiliates (including Stuart Benson, Ryan Benson and their family members) are not forgiving the following (which shall remain obligations of Shareholder): (i) any and all employment or consulting fees due and owing to Ryan Benson and Stuart Benson by Shareholder and its Affiliates; (ii) any and all insurance benefits and reimbursements due and owing to Ryan Benson, Stuart Benson and their respective family members by Shareholder and its Affiliates; and (iii) any commissions or fees that may become payable to Stuart Benson by Shareholder and its Affiliates (including Smart Acquisition Group, LLC) in respect of the potential acquisition of Purely Optimal. The Shareholder acknowledges that Stuart Benson is entitled to a commission (based on the Lehman formula) upon consummation of the acquisition of Purely Optimal by the Shareholder or any of its Affiliates.

 

 

Section 2.5 Purchase Price; Payment. In consideration of the sale, transfer and assignment of the Purchased Assets to Purchaser at the Closing, in addition to assuming the Assumed Liabilities, Purchaser shall, subject to and conditioned upon the Closing, pay on behalf of the Sellers on the Closing Date, in accordance with the next sentence, an aggregate amount of One Hundred Eighty Five Thousand Nine Hundred Ninety Three Dollars and Fifty Cents ($185,993.50)(the “Purchase Price”). Sellers and the Shareholder hereby direct Purchaser to pay from the Purchase Price the amounts set forth on Schedule 2.5 in order to cause such Persons set forth thereon to execute and deliver the deliverables set forth below in clauses (ix) and (x) of Section 3.2(a). At the Closing, the sum of Twenty Five Thousand Dollars ($25,000) shall be paid by Purchaser, at Shareholder’s request, directly to Bevilacqua PLLC, counsel to the Shareholder, as a transaction fee to cover expenses for services rendered by Bevilacqua PLLC to the Shareholder in connection with this transaction.

 

Section 2.6 Non-assignable Assumed Contracts. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any asset or any claim or right or any benefit arising under or resulting from such asset if an attempted assignment thereof, without the consent of a third party, would constitute a breach or other contravention of the rights of such third party, would be ineffective with respect to any party to an agreement concerning such asset, or would in any way adversely affect the rights of Sellers or, upon transfer, Purchaser under such asset. If any transfer or assignment by Sellers to, or any assumption by Purchaser of, any interest in, or liability, obligation or commitment under, any asset requires the consent of a third party, then such assignment or assumption shall be made subject to such consent being obtained. To the extent any Contract may not be assigned to Purchaser by reason of the absence of any such consent, Purchaser shall not be required to assume any liabilities arising under such Contract unless Purchaser has received all of the benefits that gave rise to such liability. If any such consent has not been obtained prior to the Closing Date, the parties shall cooperate in any lawful and reasonable arrangement designed to: (i) provide to Purchaser the benefits intended to be assigned to Purchaser with respect to the underlying asset, including, without limitation, in the case of any of the Assumed Contracts, enforcement of such Assumed Contract for the account of Purchaser of any and all rights of Sellers against any other party to such Assumed Contract arising out of the breach, non-fulfillment or cancellation thereof by such other party or otherwise and (ii) enable Sellers to continue to perform under the Assumed Contracts.

 

Section 2.7 Withholding. Purchaser and any other applicable withholding agent will be entitled to deduct and withhold, and pay over to the applicable Governmental Authority, from any amounts payable pursuant to this Agreement any Taxes or other amounts as are required under the Code or any applicable Law to be deducted and withheld. To the extent that any such amounts are so deducted or withheld and paid over to the applicable Governmental Authority, such amounts will be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

 

 

Section 2.8 Allocation of the Purchase Price. The parties agree that the Purchase Price (plus other relevant items) will be allocated among the Purchased Assets in accordance with their relative fair market values as of the Closing Date. Purchaser shall prepare and deliver to Sellers within sixty (60) days after the Closing Date a schedule (the “Allocation Schedule”) allocating the Purchase Price (plus other relevant items) among the Purchased Assets consistent with this Section 2.8. The Allocation Schedule shall be binding on the parties hereto, and the parties hereto agree not to take (or permit any of their Affiliates to take) any tax position (on IRS Form 8594 or otherwise) that is inconsistent with such Allocation Schedule. In any action, arbitration, audit, hearing, investigation, litigation, suit or other proceeding related to the determination of any Tax, neither Purchaser nor Sellers shall contend or represent that such allocation is not a correct allocation.

 

ARTICLE III

Closing

 

Section 3.1 Closing. The closing with respect to the transactions contemplated by this Agreement (the “Closing”) shall take place on the Business Day following the satisfaction or waiver of the conditions set forth in ARTICLE VII and ARTICLE VIII hereof. The date on which the Closing is to occur is herein referred to as the “Closing Date”. Notwithstanding the foregoing, for all purposes hereunder, the Closing shall be deemed to have occurred at 12:01 a.m. New York City time on the Closing Date.

 

Section 3.2 Closing Deliverables.

 

(a) At the Closing, Sellers shall deliver, or caused to be delivered, to Purchaser the following:

 

(i) a Bill of Sale and Assignment and Assumption Agreement (the “Bill of Sale and Assignment and Assumption Agreement”), in the form of Exhibit A, duly executed by Seller;

 

(ii) an Assignment of Intellectual Property Agreement (the “IP Agreement”), in the form of Exhibit B, duly executed by Seller;

 

(iii) originals, if available, or certified copies of the Assumed Contracts;

 

(iv) an officer’s certificate duly executed by an officer of Sellers attesting to the resolutions adopted by the board of directors and the stockholders of Sellers duly authorizing the execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement;

 

(v) a good standing certificate of each Seller from the Secretary of State of Florida dated not earlier than fifteen (15) days prior to the date hereof;

 

(vi) a copy of any third party consents set forth on Schedule 4.4, in form and substance satisfactory to Purchaser, necessary for Sellers to transfer and assign to Purchaser all of Sellers’ right, title and interest in and to the Purchased Assets;

 

(vii) all records, documents, lists and other materials specified in Sections 2.1(e) and (j) of this Agreement;

 

 

(viii) separate IRS Forms W-9 properly completed and executed certifying that each of the Sellers is not a foreign person;

 

(ix) evidence of the discharge of all Indebtedness of Sellers to, and the release and termination of all Encumbrances on the Purchased Assets in favor of, the following Persons (which evidence shall be based on the form attached hereto as Exhibit C and shall be satisfactory to Purchaser, in its sole discretion): Apex Payables; Pro Venture Capital; Grover Capital; Seamless Capital Group; and Vivian Capital Group, LLC;

 

(x) evidence, in form and substance satisfactory to Purchaser, of the (i) release by D&D Hayes, LLC of any Encumbrance related to the Purchased Assets securing the Indebtedness evidenced by the Buyer Notes II (as defined in the Securities Purchase Agreement) issued to D&D Hayes, LLC and (ii) assignment by D&D Hayes, LLC to the Senior Lender of the Buyer Notes II issued to D&D Hayes, LLC; and

 

(xi) such other documents as Purchaser may deem reasonably necessary to complete the transactions contemplated by this Agreement.

 

(b) At the Closing, Purchaser shall deliver or cause to be delivered to Sellers the following:

 

(i) the Bill of Sale and Assignment and Assumption Agreement, duly executed by Purchaser; and

 

(ii) the IP Agreement, duly executed by Purchaser; and

 

(iii) the forgiveness of (I) the Buyer Notes II (as defined in the Securities Purchase Agreement) issued by the Shareholder (and guaranteed by the Sellers) to (y) RMB Industries, Inc. in the initial principal amount of $967,500 and (z) RTB Childrens Trust in the initial principal amount of $107,500 and (II) any conversion price floor guarantees made by Shareholder to RMB Industries, Inc. and RTB Childrens Trust in respect of the Buyer Notes (as defined in the Securities Purchase Agreement); and

 

(iv) a written agreement acknowledging the release by Joseph X. Xiras of any Encumbrances on the Purchased Assets granted by Ceautamed, WWG and GFF to Joseph X. Xiras to secure repayment of the Xiras Debt (for the avoidance of doubt, the Xiras Debt is not being discharged and will remain an outstanding obligation of the Shareholder that is guaranteed by its subsidiaries and with a continuing Encumbrance on all of the assets of the Shareholder and its subsidiaries (other than the Purchased Assets)); and

 

(v) a written agreement acknowledging the assumption by the Purchaser of the Senior Debt and the release of the Shareholder and its subsidiaries as obligors under the Senior Debt.

 

 

ARTICLE IV

Representations and Warranties of Sellers and the Shareholder

 

Sellers and the Shareholder hereby represent and warrant to Purchaser that the statements contained in this ARTICLE IV are complete and accurate as of the date of this Agreement and as of the Closing Date.

 

Section 4.1 Organization of Sellers. Each Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Florida, with full power and authority to own or lease its property and assets and to carry on its business as presently conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified as a foreign corporation would not, individually or in the aggregate, have a Material Adverse Effect. The Business is conducted solely through the Sellers and not through any of its Affiliates or other Persons. Except as set forth on Schedule 4.1, no Seller owns, directly or indirectly, any equity interests in any other Person.

 

Section 4.2 Authorization; Enforceability.

 

(a) Each Seller has all requisite limited liability company power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform its obligations hereunder and thereunder, all of which have been duly authorized by all requisite limited liability company action (including approval of the managers and/or members of Sellers). Each of this Agreement and the other Transaction Documents has been duly authorized, executed and delivered by each Seller and constitutes a valid and binding agreement of each Seller, enforceable against each Seller in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

 

(b) The Shareholder has the corporate power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform its obligations hereunder and thereunder. Each of this Agreement and each of the other Transaction Documents has been duly authorized, executed and delivered by the Shareholder and constitutes a valid and binding agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

 

Section 4.3 Non-contravention. Neither the execution and delivery of this Agreement or any of the other Transaction Documents nor the performance by the Sellers or the Shareholder of its obligations hereunder or thereunder will (a) contravene any provision contained in the governing documents of the Sellers or the Shareholder, in each case, as amended and in full force and effect on the date of this Agreement, (b) violate or result in a breach (with or without the lapse of time, the giving of notice or both) of or constitute a default under (i) any Contract to which the Sellers or the Shareholder are a party or any Permit issued to the Sellers or (ii) any Law or other restriction of any Governmental Authority, to which the Sellers or the Shareholder is a party or by which the Sellers or the Shareholder is bound or to which any of their assets or properties are subject, (c) result in the creation or imposition of any Encumbrance on any of the Purchased Assets or (d) except as set forth on Schedule 4.3, result in the acceleration of, or permit any Person to accelerate or declare due and payable prior to its stated maturity, any obligation of the Sellers or the Shareholder.

 

 

Section 4.4 No Consents. No notice to, filing with, or authorization, registration, consent or approval of, any Governmental Authority or other Person is necessary for the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby by the Sellers (including the transfer of the Assumed Contracts and the other Purchased Assets) or the Shareholder, other than those set forth on Schedule 4.4.

 

Section 4.5 Capitalization. The issued and outstanding membership interests of the Sellers and the holders thereof are set forth on Schedule 4.5. There are no rights, options or warrants to purchase any membership interests of the Sellers, whether granted or issued by the Sellers or any of the holders set forth on Schedule 4.5.

 

Section 4.6 Title to Assets; No Liens; Condition of Assets. Except as set forth on Schedule 4.6, Sellers have good and marketable title to (or valid leasehold or contractual interests in) all of the Purchased Assets, free and clear of any Encumbrances (other than Permitted Encumbrances). Upon the assignment, transfer and conveyance of the Purchased Assets to Purchaser, there will be vested in Purchaser good and marketable title to (or valid leasehold or contractual interests in) all of the Purchased Assets, free and clear of all Encumbrances. All Purchased Assets are fit for operation in the ordinary course of business (subject to normal wear and tear) with no defects that could interfere with the conduct of normal operations of such Purchased Assets and are suitable for the purposes for which they are currently being used. The Purchased Assets are sufficient to conduct the Sellers’ Business as historically conducted by Sellers.

 

Section 4.7 Financial Statements.

 

(a) Attached as Schedule 4.7(a) is a true and complete copy of each Seller’s unaudited balance sheet as of December 31, 2023 and the related unaudited statements of income and cash flows of such Seller for the twelve (12) month period ending December 31, 2023 (collectively, the “Financial Statements”). The Financial Statements have been prepared from, are in accordance with, and accurately reflect, the books and records of each Seller, comply in all material respects with applicable accounting requirements and fairly present the financial position and the results of operations and cash flows (and changes in financial position, if any) of each Seller as of the times and for the periods referred to therein (subject, to normally recurring year end audit adjustments that are not material either individually or in the aggregate).

 

(b) All books, records and accounts of each Seller are accurate and complete in all material respects and are maintained in all material respects in accordance with good business practice and all applicable Laws.

 

(c) Schedule 4.7(c)(i) sets forth a true and complete listing of all Accounts Receivable of each Seller as of December 31, 2023 and an aging schedule reflecting the aggregate amount of all such Accounts Receivable outstanding (i) thirty (30) days or less, (ii) more than thirty (30) days but not more than sixty (60) days, (iii) more than sixty (60) days but not more than ninety (90) days, and (iv) more than ninety (90) days. All of the Accounts Receivable have arisen in the ordinary and regular course of each Seller’s Business, represent bona fide transactions with third parties, are not subject to any counterclaims or offsets (except for those for which adequate reserves have been established), are not being contested or disputed by any third party (whether orally or in writing) and, to Sellers’ Knowledge, are collectible. All of the Accounts Receivable have been billed in the ordinary course of each Seller’s Business. Sellers have not assigned any Accounts Receivable except as expressly set forth on Schedule 4.7(c)(ii).

 

(d) Except as set forth on Schedule 4.7(d), no Seller has any Indebtedness.

 

 

Section 4.8 No Undisclosed Liabilities. Each Seller’s Business does not have any debt, Loss, liability or obligation (whether direct or indirect, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due, and whether in contract, tort, strict liability or otherwise) which are not accurately reflected or provided for in the balance sheet for the Financial Statements of such Seller, other than those incurred in the ordinary course of business from and after December 31, 2023 that would not, individually or in the aggregate, have a Material Adverse Effect on any Seller’s Business or the Purchased Assets. Except as expressly set forth on Schedule 4.8, since December 31, 2023, (i) each Seller has conducted its business only in the ordinary course of business consistent with past practice and (ii) there has not been any event, change, occurrence or circumstance that has had or could reasonably be expected to have a Material Adverse Effect on such Seller’s Business or the Purchased Assets.

 

Section 4.9 Real Property. Schedule 4.9 contains a true, correct and complete list of all real property leases including all amendments thereto to which a Seller is a party or by which a Seller is bound (the “Real Property Leases”). Except as disclosed on Schedule 4.9(a), there are no assignments or subleases of all or any portion of the premises covered under the Real Property Leases. Sellers have delivered to Purchaser a true, correct and complete copy of the Real Property Leases. No Seller owns any real property or any interest in any real property. To Sellers’ Knowledge, the real property subject to the Real Property Leases, including all of the buildings, offices and other structures located thereon, which is material to the conduct of the Business, is in reasonable operating condition, ordinary wear and tear excepted. To Sellers’ Knowledge, the real property leased by the Company and its continued use as currently used is in material compliance with building, zoning, subdivision or other land use and similar Law applicable to the leased real property.

 

Section 4.10 Contracts; Customers; Suppliers.

 

(a) Schedule 4.10(a) is a complete and correct list of all material Contracts (“Material Contracts”) pertaining to a Seller’s Business and/or a Seller’s ownership and/or use of the Purchased Assets to which such Seller is a party and which list shall include, without limitation: (i) any employment agreement or employment contract of such Seller (other than oral, at-will employment contracts with such Seller’s employees); (ii) any collective bargaining agreement or other Contract with any labor organization, union or association; (iii) any covenant not to compete that limits the conduct of such Seller’s Business as presently conducted or the use of the Purchased Assets; (iv) any Contract with (A) a shareholder or Affiliate of such Seller or any of their respective family members or (B) a current or former officer, director, member, manager, partner or employee of such Seller or any of their Affiliates or family members; (v) any lease, sublease or similar Contract with any Person under which such Seller is a lessor or sublessor of, or makes available for use to any Person, any of the Purchased Assets; (vi) any lease, sublease or similar Contract with any Person pertaining to such Seller’s Business under which such Seller is a lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any Person; (vii) any lease, sublease or similar Contract with any Person pertaining to such Seller’s Business under which such Seller is a lessee of any real property; (viii) any license, option or other Contract relating in whole or in part to the intellectual property rights of such Seller or any third party (“Proprietary Rights”) used in connection with the operation or conduct of such Seller’s Business (including, without limitation, any license or other Contract under which such Seller is licensee or licensor of any such Proprietary Rights but exclusive of confidentiality agreements entered into in the normal course of business); (ix) any Contract under which such Seller has borrowed any money from, or issued any note, bond, debenture or other evidence of indebtedness to, any Person; (x) any Contract under which such Seller has directly or indirectly guaranteed the Indebtedness of any other Person; (xi) any Contract under which such Seller has, directly or indirectly, made any material advance, loan, extension of credit or capital contribution to, or other investment in, any Person; (xii) any Contract granting an Encumbrance upon any of the Purchased Assets; (xiii) any pending Contract for the transfer or sale of any Purchased Asset; (xiv) any Contract with or license or Permit by or from any Governmental Authority; (xv) any Contract for any joint venture, partnership or similar arrangement; (xvi) any Contracts with any Significant Customers of, or Significant Suppliers to, such Seller’s Business; and (xvii) any other Contract to which such Seller (or any of its Affiliates) is a party or by which it or any of its assets is bound or subject, and that is material to the use or operation of the Purchased Assets. Sellers have made available to the Purchaser a copy of each of the Material Contracts listed on Schedule 4.10(a) as amended to date. Each of the Material Contracts is valid, binding and in full force and effect and is enforceable by such Seller in accordance with its terms. Each Seller has, and to the Sellers’ Knowledge, each counterparty thereto has, performed all material obligations required to be performed by them to date under the Material Contracts and Sellers are not, and to Sellers’ Knowledge, each counterparty thereto is not (with or without the lapse of time or the giving of notice, or both), in material breach or default thereof. As of the date hereof, Sellers have not received any written or, to Sellers’ Knowledge, oral notice that any counterparty to any Material Contract threatened to terminate, suspend or not renew any Material Contract. The agreements with Boxout, LLC listed on Schedule 4.10(a) have not been amended or modified.

 

 

(b) Schedule 4.10(b) sets forth a list identifying: (i) the top 10 largest customers of each Seller’s Business measured by dollar value of gross sales to such customer during such Seller’s current fiscal year (through December 31, 2023), showing the approximate total revenues generated from each such customer during such period (each, a “Significant Customer”); and (ii) the top 10 suppliers of each Seller’s Business measured by dollar amount of total purchases by such Seller during its current fiscal year (through December 31, 2023), showing the approximate total purchases by such Seller from each such supplier during such period (each, a “Significant Supplier”).

 

(c) Except as set forth on Schedule 4.10(c), since January 1, 2023, no Significant Customer or Significant Supplier has terminated its relationship with a Seller or materially changed any terms of its business with a Seller and no Significant Customer or Significant Supplier has notified a Seller that it intends to terminate or materially change any terms of its business with any of the Sellers.

 

Section 4.11 Tangible Assets. Schedule 4.11 sets forth a true and complete listing of all the Sellers’ Tangible Assets with an aggregate net worth equal to or in excess of $10,000.

 

Section 4.12 Governmental Authorizations; Permits; Etc. The Sellers’ Business has at all times since the closing of the transactions contemplated by the Securities Purchase Agreement (the “Securities Purchase Agreement Closing Date”) been operated in material compliance with all applicable Laws including, without limitation, Laws related to: fire, safety, labeling of products, pricing, sales or distribution of products, antitrust, trade regulation, trade practices, sanitation, land use, employment or employment practices, energy, insurance and similar Laws. Schedule 4.12 identifies each material Permit from or by a Governmental Authority, affecting, or relating to, the Sellers’ Business or any of the Purchased Assets, together with the name of the Governmental Authority issuing such scheduled Permit. There is no action, case or proceeding pending or, to the Sellers’ Knowledge, threatened by any Governmental Authority with respect to (i) any alleged violation by any Seller of any Law, or (ii) any alleged failure by any Seller to have a Permit necessary to operate or conduct the Sellers’ Business. No written notice of any violation of such Laws has been received by any Seller and Sellers have not received any written notice that the services rendered by the Sellers’ Business were not in compliance with, or did not meet the standards of, all applicable Laws.

 

 

Section 4.13 Taxes. Except as set forth on Schedule 4.13, since the Securities Purchase Agreement Closing Date: (i) each Seller has filed all Tax Returns required to be filed by it; (ii) all such Tax Returns are complete and accurate in all respects and have been prepared in compliance with applicable Law; (iii) all Taxes owed by Sellers or with respect to the Business (whether or not shown on any Tax Return) have been duly and timely paid; (iv) there are no outstanding agreements or waivers extending any statute of limitations in respect of Taxes; (v) there is no action, suit, investigation, audit, claim or assessment pending or proposed for which Sellers have received written notice thereof, or, to Sellers’ Knowledge, threatened, with respect to Taxes of Sellers; (vi) to Sellers’ Knowledge, no claim has been made by any Government Authority in a jurisdiction where Sellers do not file Tax Returns that Sellers are or may be subject to Taxes by such jurisdiction; (vii) all deficiencies asserted or assessments made as a result of any examination of any Tax Return of Sellers have been paid in full; (viii) there are no Encumbrances upon any of the Purchased Assets arising in connection with any failure (or alleged failure) to pay any Tax; (ix) each Seller (A) has complied with all Laws relating to the payment and withholding of Taxes from wages, salaries, or other payments to any employee or independent contractor of the Sellers’ Business; (B) has paid over to the proper Governmental Authority all amounts required to be so withheld; and (C) is not liable for any Taxes for failure to comply with such Laws; (x) no Seller is a party to any Tax allocation, sharing or indemnification agreement.; (xi) no Seller has any liability for the Taxes of any other Person as a member of a consolidated, combined, unified, affiliated, or controlled group, as a transferee or successor, as a withholding agent or collection agent, by contract, or otherwise; (xii) each Seller has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code; (xiii) no Seller has participated in any “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b); (xiv) no Seller is a “foreign person” within the meaning of Section 1445 of the Code; (xv) no Seller has taken out any loan, received any loan assistance or received any other financial assistance, or requested any of the foregoing, under the CARES Act, including pursuant to the Paycheck Protection Program or the Economic Injury Disaster Loan Program; (xvi) no Seller has, pursuant to the CARES Act, and amendments thereto or the Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, issued by President Donald Trump on August 8, 2020, deferred until after the Closing Date the payment of any payroll Taxes the due date for the original payment of which was on or before the date hereof; and (xvii) no Seller has claimed any “employee retention credit” pursuant to Section 2301 of the CARES Act (or any corresponding or similar provision of state, local or foreign Law).

 

 

Section 4.14 Litigation. Except as set forth on Schedule 4.14, there is no action, suit, or other legal or administrative proceeding or governmental investigation pending, or to Sellers’ Knowledge, threatened against or involving any Seller, the Sellers’ Business or the Purchased Assets or which question the validity or enforceability of this Agreement or the transactions contemplated hereby. There are no judgments, injunctions, orders or decrees binding upon any Seller, the Sellers’ Business or the Purchased Assets. There are no insolvency proceedings pending, or to Sellers’ Knowledge, threatened against a Seller.

 

Section 4.15 Environmental Matters. Except as set forth on Schedule 4.15, since the Securities Purchase Agreement Closing Date: (i) each Seller has at all times conducted such Seller’s Business in compliance in all respects with all Environmental Laws, (ii) each Seller’s Business at all times had all Permits required under applicable Environmental Laws for the operation of such Seller’s Business, (iii) no Seller has received any written notice from any Governmental Authority that such Seller may be a potentially responsible party in connection with any waste disposal site or facility used, directly or indirectly, by or otherwise related to such Seller or such Seller’s Business, (iv) no Seller has received any written notice and is not aware of any fact in connection with the operation of such Seller’s Business that could give rise to any violation or claim under any Environmental Laws and (v) no reports have been filed, or have been required to be filed, by any of the Sellers concerning the release of any Regulated Substance or the violation of any Environmental Law on or at the properties used in the operation of the Sellers’ Business.

 

Section 4.16 Employees.

 

(a) Schedule 4.16 contains a true and complete list of all employees of Sellers (each, a “Business Employee”), together with each such employee’s job title, current rate of base salary or hourly wage, full- or part-time status, most recent annual bonus or commission, date of hire, and current employment status (e.g., leave of absence and cause therefor, together with date that leave commenced and is expected to end). Except as set forth on Schedule 4.16, the employment of each Business Employee is at will.

 

(b) Except as set forth on Schedule 4.16, the Sellers are, and at all times since the Securities Purchase Agreement Closing Date have been, in compliance in all material respects with all applicable Laws relating to the employment of each Business Employee, including without limitation, all Laws relating to wages, hours, employment standards, discrimination, safety and health, worker’s compensation, the collection and payment of withholding and/or Social Security taxes, and the WARN Act, and any similar state, local or layoff statute. No claim by any past or present employee of the Seller’s Business that such employee was subject to a wrongful discharge or any employment discrimination arising out of or relating to such employee’s race, sex, age, religion, national origin, ethnicity, handicap or any other protected characteristic under applicable Laws is outstanding. Except as set forth on Schedule 4.16, no proceedings are pending before any Governmental Authority or arbitrator relating to labor matters of the Sellers’ Business, and there is no pending investigation by any Governmental Authority or, to Sellers’ Knowledge, threatened claim by any such Governmental Authority or other Person relating to labor or employment matters of the Sellers’ Business.

 

(c) There is no Contract with any union, labor organization or employee group which affects the employment of any Business Employee, including, without limitation, any collective bargaining agreements or labor contracts.

 

 

(d) There has not been any strike, slowdown, picketing, work stoppage, labor dispute or threat of a labor dispute or any attempt or threat of an attempt by a labor union to organize the Business Employees; nor has any application or complaint about Sellers been filed by any current or former employee of the Sellers’ Business or by any union representative of any current or former employee of the Sellers’ Business with the National Labor Relations Board or any comparable state or local agency, since the Securities Purchase Agreement Closing Date.

 

(e) Since the Securities Purchase Agreement Closing Date, Sellers have not directly employed any unauthorized aliens, as defined in 8 U.S.C. Section 1324a(h)(3). Since the Securities Purchase Agreement Closing Date, Sellers have has complied in all material respects with the employment verification and record-keeping requirements of 8 U.S.C. Section 1324a and 8 C.F.R. Section 274a, as amended. Since the Securities Purchase Agreement Closing Date, Sellers are in compliance in all material respects with the Immigration and Nationality Act and the Immigration Reform and Control Act.

 

(f) Except as set forth on Schedule 4.16, there are no pending, or to Sellers’ Knowledge, threatened claims or actions by any Business Employee under any worker’s compensation policy or long-term disability policy.

 

(g) Since the Securities Purchase Agreement Closing Date, Sellers have in all material respects withheld and reported all amounts required by Law or by agreement to be withheld and reported with respect to wages, salaries and other payments to Business Employees.

 

(h) No “mass layoff” (as defined in the WARN Act), “plant closing” (as defined in such Act) or similar event has occurred with respect to Sellers over the past twelve (12) months.

 

Section 4.17 Employee Benefit Plans.

 

(a) Schedule 4.17 hereto identifies:

 

(i) Each “employee benefit plan”, as such term is defined in Section 3(3) of ERISA, that is maintained or otherwise contributed to by Sellers for the benefit of Business Employees and that is covered by ERISA (collectively, the “Benefit Plans”), copies of which have been provided or made available to the Purchaser.

 

(ii) Each material Benefit Arrangement, copies of which have been provided or made available to the Purchaser. As used herein, “Benefit Arrangement” means any plan or arrangement not subject to ERISA maintained or otherwise contributed to by Sellers for the benefit of Business Employees and providing for deferred compensation, bonuses, equity compensation, employee insurance coverage or any similar compensation or welfare benefit arrangement, including, without limitation, any employment agreement, bonus arrangement, stock option, stock purchase, deferred compensation plan or arrangement, vacation pay, severance pay or other employee fringe benefit plans maintained, sponsored or contributed to by Sellers for the benefit of any Business Employee or dependent or beneficiary of any Business Employee.

 

 

(b) Subject to the exceptions set forth on Schedule 4.17, each Benefit Plan and Benefit Arrangement has been maintained and administered at all times in all material respects in compliance with its terms and all applicable Laws, including, without limitation, ERISA and the Internal Revenue Code of 1986, as amended (the “Code”), applicable to such Benefit Plan or Benefit Arrangement.

 

(c) No Benefit Plan or Benefit Arrangement has terms requiring assumption by Purchaser.

 

(d) Sellers do not currently have, and have never had, any obligation or liability with respect to any “defined benefit plan” as such term is defined in Section 3(35) of ERISA and no Seller nor any ERISA Affiliate currently has, or has ever had, any “multiemployer plan” (as defined in Section 3(37) of ERISA) which would give rise to any obligation or liability to any Seller. For purposes of this Agreement, the term “ERISA Affiliate” means each business, person or entity which would be treated as a “single employer” with a Seller under Sections 414(b), (c), (m) or (o) of the Code or under Section 4001(b) of ERISA.

 

(e) To Sellers’ Knowledge, there is no threatened or pending claim, suit or other proceeding (other than ordinary and usual claims for benefits by participants and beneficiaries, including, without limitation, routine claims pursuant to domestic relations orders) with respect to any Benefit Plan or Benefit Arrangement that could have an impact on this transaction or result in any liability to Purchaser or result in the imposition of an Encumbrance or other claim against any of the Purchased Assets. No Benefit Plan or Benefit Arrangement is under audit or investigation by the Internal Revenue Service, Department of Labor or other Governmental Authority, nor to Sellers’ Knowledge has any such audit or investigation been threatened.

 

(f) Except as set forth in Schedule 4.17, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, either alone or in combination with another event, result in the payment to any Business Employee of any money or other property or accelerate or provide any other rights or benefits to any Business Employee.

 

(g) Each Benefit Plan and Benefit Arrangement intended to be qualified under Section 401(a) of the Code is so qualified or is the subject of a currently effective favorable determination letter (or opinion letter) issued by the IRS with respect to the qualification of such Benefit Plan or Benefit Arrangement under the Code. No event has occurred, and no condition exists, which could adversely affect the tax-qualified status of any such Benefit Plan or Benefit Arrangement.

 

(h) Sellers have complied in all material respects and in good faith with the requirements of Section 409A of the Code with respect to each applicable Benefit Plan and Benefit Arrangement that covers Business Employees.

 

Section 4.18 Proprietary Rights.

 

(a) Schedule 4.18 hereto contains a complete list and brief description of all patents, patent rights, patent applications, invention disclosures, trademarks, trademark rights, trademark applications, copyright registrations and copyright applications and all applications for such which pertain to any Seller or the Sellers’ Business, whether owned by or registered in the name of any Seller or of which any Seller is a licensee or otherwise has a right to use. Each Seller owns or has the rights to use all patents, patent applications, trademarks, copyrights, technology, know-how and processes necessary to conduct such Seller’s Business as presently conducted by such Seller (collectively as to all Sellers, the “Sellers’ Proprietary Rights”). No other Person has any ownership or other rights in or to the Sellers’ Proprietary Rights. The Sellers’ Proprietary Rights set forth on Schedule 2.1(h) consist of all of the intellectual property rights owned by, or licensed to, the Sellers in connection with the operation and/or conduct of the Sellers’ Business and, following the consummation of the transactions contemplated by this Agreement, neither Sellers nor any of their Affiliates will retain any right, title or interest in any of the Sellers’ Proprietary Rights that are used in connection with the operation and/or conduct of the Sellers’ Business. The registrations of the Sellers’ Proprietary Rights listed (or required to be listed) on Schedule 4.18 are valid and subsisting, all necessary registration and renewal fees in connection with such registrations have been made and all necessary documents and certificates in connection with such registrations have been filed with the relevant intellectual property authorities in the United States or any other jurisdiction where the Business is conducted for the purposes of maintaining such registrations, and except as set forth on Schedule 4.18, no actions (including filing of documents or payments of fees) are due within ninety (90) days after the Closing.

 

 

(b) No claim by any third party contesting the validity, enforceability, use or ownership of the Sellers’ Proprietary Rights has been made, is currently pending or, to Sellers’ Knowledge, is threatened. Sellers have not received any written notice of any infringement or misappropriation by, or conflict with, any third party with respect to any of the Sellers’ Proprietary Rights. Sellers have not infringed, misappropriated or otherwise conflicted with, and the Sellers’ Proprietary Rights do not infringe, misappropriate or otherwise conflict with, any rights of any third parties, nor to Sellers’ Knowledge is there any infringement, misappropriation or conflict which will occur as a result of the continued operation of the Sellers’ Business.

 

(c) In each case in which any Seller has acquired ownership of any of the Sellers’ Proprietary Rights that are material to the Seller’s Business from any third party, Sellers have obtained written assignment sufficient to transfer ownership of all of such Sellers’ Proprietary Rights to the Purchaser.

 

(d) No Affiliate of the Sellers, nor any of the Sellers’ current or former partners, shareholders, officers, members, managers, employees, consultants or agents will, after giving effect to the transactions contemplated by this Agreement, own or retain any rights to use any of the Sellers’ Proprietary Rights.

 

Section 4.19 Brokers. Except as set forth on Schedule 4.19, no Person is or will be entitled to a broker’s, finder’s, investment banker’s, financial adviser’s or similar fee from Sellers or the Shareholder in connection with this Agreement or any of the transactions contemplated hereby.

 

Section 4.20 Affiliate Transactions. Except as set forth on Schedule 4.20, no employee, officer, manager or member of any of the Sellers, any member of his or her immediate family or any of their respective Affiliates (“Related Persons”) (i) owes any amount to the Sellers or the Sellers’ Business nor does any Seller or the Sellers’ Business owe any amount to, or has any Seller or the Sellers’ Business committed to make any loan or extend or guarantee credit to or for the benefit of, any Related Person (except for business expense reimbursements incurred in the ordinary course of business), (ii) is involved in any business arrangement or other relationship (other than customary employment relationships which are disclosed on the list of Material Contracts) with the Sellers (whether written or oral), (iii) owns any property or right, tangible or intangible, that is used by any of the Sellers in the operation or conduct of the Sellers’ Business or (iv) has any claim or cause of action against the Sellers or the Sellers’ Business.

 

 

Section 4.21 Full Disclosure. No representation or warranty made by Sellers or the Shareholder in this Agreement or any certificate delivered, or to be delivered, by or on behalf of Sellers pursuant hereto contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.

 

ARTICLE V

Representations and Warranties of Purchaser

 

Purchaser hereby represents and warrants to Sellers and the Shareholder that the statements contained in this ARTICLE V are complete and accurate as of the date of this Agreement and as of the Closing Date.

 

Section 5.1 Organization of the Purchaser. Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Florida, with full power and authority to own or lease its property and assets and to carry on its business as presently conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires it to be so qualified.

 

Section 5.2 Authorization; Enforceability. Purchaser has all requisite limited liability company power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform its obligations hereunder and thereunder, all of which have been duly authorized by all requisite limited liability company action. Each of this Agreement and each of the other Transaction Documents has been duly authorized, executed and delivered by Purchaser and constitutes a valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

 

Section 5.3 Non-contravention. Neither the execution and delivery of this Agreement or any of the other Transaction Documents nor the performance by Purchaser of its obligations hereunder or thereunder will (a) contravene any provision contained in Purchaser’s governing documents, as amended, (b) violate or result in a breach (with or without the lapse of time, the giving of notice or both) of or constitute a default under (i) any Contract or Permit or (ii) any Law or other restriction of any Governmental Authority, to which Purchaser is a party or by which it is bound or to which any of its respective assets or properties are subject, or (c) result in the acceleration of, or permit any Person to accelerate or declare due and payable prior to its stated maturity, any obligation of Purchaser.

 

Section 5.4 No Consents. No notice to, filing with, or authorization, registration, consent or approval of, any Governmental Authority is necessary for the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby by Purchaser.

 

 

Section 5.5 No Financing. Purchaser has cash reserves or availability under existing credit facilities to pay the Purchase Price in cash on the Closing Date without new debt or equity financing. Purchaser’s obligations hereunder are not contingent upon procuring financing for the transaction contemplated hereunder.

 

Section 5.6 Brokers. No Person is or will be entitled to a broker’s, finder’s, investment banker’s, financial adviser’s or similar fee from Purchaser in connection with this Agreement or any of the transactions contemplated hereby.

 

ARTICLE VI

Covenants and Agreements

 

Section 6.1 Affirmative Covenants of Sellers. Each Seller and the Shareholder hereby covenants and agrees that, from the date hereof through and including the Closing Date, unless otherwise expressly consented to in writing by Purchaser, Sellers shall take (and Shareholder shall causes Sellers to take) the following actions:

 

(a) operate the Sellers’ Business in the ordinary course of business consistent with past practice;

 

(b) use commercially reasonable efforts to preserve intact the business organizations and goodwill of each Seller, keep available the services of their respective officers and employees consistent with past practice and maintain their respective relationships with customers, suppliers, distributors and other Persons having business relationships with them on the date of this Agreement;

 

(c) maintain and keep its properties and assets in as good repair and condition as at present, ordinary wear and tear excepted;

 

(d) maintain all Permits that are used or necessary for the Sellers for the conduct of the Sellers’ Business as it is currently conducted in full force and effect;

 

(e) operate the Business in all material respects in compliance with all applicable Laws;

 

(f) pay invoices of the Business in a timely manner and when due and payable;and

 

(g) maintain in effect any currently effective insurance policies.

 

Section 6.2 Negative Covenants of the Sellers. Without limiting anything to the contrary in Section 6.1, except as consented to in writing by Purchaser, from the date hereof until the Closing Date, the Sellers shall not, and the Shareholder and the Sellers shall take all actions within their control to cause the Sellers not to, do any of the following:

 

(a) (i) grant or increase the amount of any severance or termination payments payable to (or amend any existing arrangement with) any manager, officer or employee of any Seller, other than payments to employees upon termination in accordance with the written employment and severance agreements listed on Section 6.2(a) of the Disclosure Schedule pursuant to the terms in effect on the date of this Agreement, (ii) increase benefits payable under any existing severance or termination pay policies or employment agreements, except such changes as may be required in order to comply with applicable Law, (iii) enter into any employment, deferred compensation or other similar agreement (or amend any such existing agreement) with any manager or officer of any Seller or with any employee of any Seller that is not terminable at-will, (iv) establish, adopt, amend or terminate (except as required by applicable Law) any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of any Seller, including any Benefit Plan or (v) materially increase compensation, bonus or other benefits payable to any manager, officer or employee of any Seller, except as required pursuant to the terms of any existing employment agreement to which such Seller is a party;

 

 

(b) (i) redeem, repurchase or otherwise reacquire any of its securities or obligations convertible into or exchangeable for any of its equity securities, or any options, warrants or conversion or other rights to acquire any of its securities or obligations, (ii) effect any reorganization, recapitalization, distribution payable in equity securities, equity split or like change in its capitalization or (iii) split, combine or reclassify any of its equity interests or issue or authorize or propose the issuance of any other securities in respect of, in lieu of, or in substitution for, its equity securities;

 

(c) issue, pledge, deliver, award, grant or sell, or agree to or authorize or propose the issuance, pledge, delivery, award, grant or sale (including the grant of any encumbrances) of, any of its equity or debt securities, any securities convertible into or exercisable or exchangeable for any such equity or debt securities, or any rights, warrants or options to acquire, any such equity or debt securities;

 

(d) (i) acquire, merge or consolidate with or agree to acquire, merge or consolidate with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets of any other Person or (ii) make or commit to make any investments;

 

(e) sell, lease, exchange, mortgage, pledge, transfer or otherwise encumber or dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or otherwise encumber or dispose of, any of its assets with a value exceeding $25,000 (other than the sale of inventory in the ordinary course of business);

 

(f) propose or adopt any amendments to the governing documents of any Seller or take any steps towards dissolution, or change the authorized capital stock or equity interests of any Seller;

 

(g) make any change in its accounting policies or in any of its methods or practices of accounting, or make any reclassification of assets or liabilities, except as may be required by Law or GAAP;

 

 

(h) create or incur any Encumbrances on any assets of the Sellers, except for Permitted Encumbrances;

 

(i) make any capital expenditures, capital additions or capital improvements other than expenditures in the ordinary course of business consistent with past practice in amounts not exceeding $25,000 in the aggregate;

 

(j) enter into any Material Contract (or any Contract that would have been a Material Contract if it had been entered into prior to the date hereof) or amend, renew or terminate any Material Contract or fail to perform in any material respect its obligations under any Material Contract;

 

(k) make or revoke any Tax election, adopt or change any Tax accounting method, settle or compromise any material Tax assessment or deficiency, surrender any right to a material Tax refund, file an amended Tax Return, or consent to an extension or waiver of any statute of limitations with respect to Taxes;

 

(l) make or revoke any election changing the entity classification for U.S. federal income Tax purposes of any Seller;

 

(m) incur, forgive, cancel or compromise any Indebtedness other than in the ordinary course of business consistent with past practice or guarantee any Indebtedness of another Person;

 

(n) enter into any non-competition or non-solicitation agreement that restricts any of the Sellers from competing in their industry;

 

(o) make any distribution or dividend to the Shareholder or any of its Affiliates, provide any loan or advance to the Shareholder or any of its Affiliates or enter into any Contract or arrangement with the Shareholder or any of its Affiliates;

 

(p) change any of the Seller’s practices, policies, procedures or timing of the collection of accounts receivable, payment of accounts payable, billing of its customers, pricing and payment terms, cash collections, cash payments, or terms with vendors;

 

(q) accelerate the collection of, or provide discounts to assist with the collection of, Accounts Receivable;

 

(r) delay the payment of vendor invoices related to the Sellers’ Business or fail to pay, when due, vendor invoices related to the Sellers’ Business; or

 

(s) agree or make a binding commitment to do any of the foregoing.

 

Section 6.3 Further Assurances.

 

(a) Prior to the Closing, each of the parties hereto shall cooperate with and assist the other parties, and shall use their reasonable best efforts, to promptly (i) take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement as soon as practicable, including preparing and filing as promptly as practicable all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, and (ii) obtain and maintain all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any other Person, including any Governmental Authority, that are necessary, proper or advisable to consummate the transactions contemplated by this Agreement.

 

 

(b) Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents. Seller and the Shareholders hereby covenant that, from time to time after the Closing, at the Purchaser’s request and without further consideration, they will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, conveyances, transfers, assignments, powers of attorney and assurances as reasonably may be required more effectively to convey, transfer to and vest in Purchaser, and to put Purchaser in possession of, any of the Purchased Assets transferred or assigned hereunder and otherwise to carry out the purposes of this Agreement. Without limiting the generality of the foregoing, Purchaser shall cooperate with Shareholder and promptly deliver such additional documents, instruments, and information, as may be reasonably requested by Shareholder, to allow Shareholder to fulfill its requirement(s) to file its Annual Report on Form 10-K and any other required interim or periodic reports with the Securities and Exchange Commission for the most recent fiscal year.

 

Section 6.4 Tax Matters.

 

(a) Sellers shall pay any transfer, sales, purchase, use or similar Taxes under the Laws of any Governmental Authority arising out of or resulting from the transfer of the Purchased Assets. Sellers shall prepare and timely file the required Tax Returns and other required documents with respect to the Taxes and fees required to be paid by Sellers pursuant to the preceding sentence and shall promptly provide Purchaser with evidence of the payment of such Taxes and fees.

 

(b) All Taxes with respect to the Purchased Assets or the Business for any period beginning before or on the Closing Date but ending after the Closing Date (“Straddle Period”), whether imposed or assessed before or after the Closing Date, shall be prorated between the Sellers and the Purchaser as of the end of the Closing Date. The amount of Tax that relates to the portion of such Straddle Period ending on the Closing Date shall: (a) in the case of Taxes based on sales, receipts, gross income or net income, be deemed equal to the amount which would be payable if the Straddle Period ended on the Closing Date and (b) in the case of all other Taxes, shall be deemed to be the amount of such Taxes for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period. If any Taxes subject to proration are paid to the Taxing authority by Purchaser, the proportionate amount of such Taxes paid shall be paid promptly by Sellers to the Purchaser.

 

 

(c) The parties hereto shall cooperate fully, as and to the extent reasonably requested by the other, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The parties hereto agree (i) to retain all books and records with respect to Tax matters pertinent to Business and the Purchased Assets relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Purchaser or Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any Governmental Authority, and (ii) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records.

 

Section 6.5 Release of Restrictive Covenants. Effective as of the Closing, the Shareholder and the Sellers irrevocably and forever release Stuart Benson, Ryan Benson and their respective Affiliates from any restrictive covenants made in favor of the Shareholder or the Sellers, including (i) the restrictive covenants set forth in Section 6.7 of the Securities Purchase Agreement, (ii) the restrictive covenants set forth in the employment agreement between Ryan Benson and Ceautamed and (iii) the restrictive covenants set forth in any other agreement between Stuart Benson, Ryan Benson or any of their respective Affiliates, on the one hand, and the Shareholder, the Sellers or any of their respective Affiliates, on the other hand.

 

Section 6.6 Employee Matters.

 

(a) The employment of Ryan Benson with Ceautamed shall terminate effective as of the Closing Date and Ryan Benson shall thereafter be employed by Purchaser on such terms and conditions as are agreed to by Ryan Benson and Purchaser. Ceautamed and its Affiliates shall, effective as of the Closing Date, release Ryan Benson from any employment, non- compete and/or confidentiality agreement previously entered into with Ceautamed and its Affiliates.

 

(b) Purchaser assumes no obligations under Benefit Plans of Seller or any of its Affiliates.

 

Section 6.7 Accounts Receivable. From and after the Closing Date, Purchaser shall have the right and authority to collect for its own account all Accounts Receivable and other related items that are included in the Purchased Assets and to endorse with the name of Sellers any checks or drafts received with respect to any Accounts Receivable or such other related items. From and after the Closing Date, neither Sellers, the Shareholder nor any Person acting on their behalf shall have the right to collect for the account of anyone (other than Purchaser) the Accounts Receivable without the prior written consent of Purchaser. Sellers and the Shareholder shall promptly deliver to Purchaser any cash or other property received directly or indirectly by it following the Closing Date with respect to the Accounts Receivable, and all such cash and property shall be deemed held in trust until so delivered to Purchaser. Sellers shall, at the request and sole expense of Purchaser, execute and deliver to Purchaser such additional instruments, documents and agreements as Purchaser may reasonably request to assist Purchaser in the collection of the Accounts Receivable of Sellers following the Closing Date. Sellers shall, at the request and sole expense of Purchaser, cooperate with Purchaser in all reasonable efforts to collect any and all such Accounts Receivable of Sellers following the Closing Date.

 

 

Section 6.8 Name Change. Within fifteen (15) days following the Closing Date, Sellers shall, and Shareholder shall cause Sellers to, file an amendment to its governing documents changing its name to one that does not include “Ceautamed”, “Greens First Female” or “Wellness Watchers” or any derivation thereof.

 

Section 6.9 Notice of Developments. The Sellers and the Shareholder will give prompt written notice to the Purchaser of any event that would reasonably be expected to give rise to, individually or in the aggregate, a Material Adverse Effect or would reasonably be expected to cause a breach of any of their respective representations, warranties, covenants or other agreements contained herein. Such notice shall not relieve the Sellers or the Shareholder from any liability arising from such disclosed breach.

 

Section 6.10 Bulk Sales Laws. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Purchaser. The parties hereto agree that any Losses arising out of the failure to comply with the requirements and provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction shall be treated as Excluded Liabilities for all purposes of this Agreement.

 

Section 6.11 Exclusive Dealing. During the period from the date of this Agreement through the Closing Date, neither Sellers nor the Shareholder shall take, nor will Sellers or the Shareholders permit any of their respective Affiliates or representatives to take any action to solicit, initiate, encourage or engage in discussions or negotiations with, or provide any information to, or enter into any agreement with any Person (other than Purchaser, its Affiliates and their respective representatives) concerning any Acquisition Proposal or that would frustrate the binding obligations of the parties set forth in this Agreement. Sellers and the Shareholder shall cease and cause to be terminated any prior discussions, communications or negotiations with any Person (other than Purchaser) conducted heretofore with respect to any Acquisition Proposal.

 

Section 6.12 Non-Solicitation. During the three (3) year period following the Closing, the Shareholder and the Sellers shall not, and shall cause their Affiliates not to, directly or indirectly, (i) attempt in any manner to solicit from any customer or supplier of the Sellers business of the type performed by or for the Sellers, (ii) seek to encourage or induce any customer or supplier of the Business to cease or adversely change its business relationship or dealings with the Business as operated by Purchaser following the Closing or (iii) in any way deliberately interfere with the relationship between Purchaser and any customer or supplier.

 

Section 6.13 Sublease of Certain Premises. Shareholder is the lessee of that certain premises located at 990 S. Rogers Circle, Unit #3, Boca Raton, Florida (the “Leased Premises”). Purchaser hereby agrees to sublease a portion of the Leased Premises consisting of the downstairs offices and the warehouse for a monthly payment of Nine Thousand Dollars ($9,000) until the earlier to occur of (x) the thirtieth (30^th) day following written notice from Purchaser to Shareholder of its termination of the sublease, (y) the expiration or termination of the lease for the Leased Premises or (z) the termination of the sublease for the Leased Premises by Purchaser in accordance with the next sentence. If the landlord for the Leased Premises shall notify Shareholder of its breach of the lease for the Leased Premises and Shareholder shall fail to cure such breach within five (5) days following written notice from the landlord, Purchaser shall have the right to terminate the sublease with no further obligations due and owing thereunder to Shareholder. Shareholder shall deliver to Purchaser any written notice or correspondence (including via email) from the landlord for the Leased Premises or its counsel (including any notice of any default thereunder) within twenty-four (24) hours of receipt.

 

 

Section 6.14 Corporate Credit Cards. Shareholder and Sellers shall cause to be paid off, in full, any corporate credit cards of the Sellers in the name of Ryan Benson or Stuart Benson or for which they have guaranteed the obligations under such corporate credit cards and shall cease to use such corporate credit cards. Shareholder and Sellers shall cause to be paid off, in full, (i) any corporate credit cards of the Sellers in the name of Ryan Benson or Stuart Benson or for which they have guaranteed the obligations under such corporate credit cards and shall cease to use such corporate credit cards and (ii) the Indebtedness in favor of On Deck that was guaranteed by Ryan Benson or Stuart Benson. Shareholder shall use 50% of the net proceeds from any equity or debt financing to satisfy the obligations and Indebtedness specified in clauses (i) and (ii) of the immediately preceding sentence.

 

Section 6.15 Share Price. As of the date hereof, Purchase is unaware of any facts or circumstances giving rise to a potential claim resulting from the decrease in the share price of Shareholder’s publicly traded securities. Purchaser hereby releases Shareholder and its directors, executive officers and affiliates from any and all losses, claims and liabilities that may be incurred by Purchaser resulting from the decrease in the share price of Shareholder’s publicly traded securities.

 

Section 6.16 Certain Matters. With respect to amounts due and payable to Delta Bridge (a/k/a Cloud Fund) and Unique Funding Solutions by Shareholder and/or any of the Sellers, the Shareholder and the Sellers shall seek to promptly resolve and settle the amounts due and payable to Delta Bridge (a/k/a Cloud Fund) and Unique Funding Solutions and to cause the release and termination of all Encumbrances (if any) on any of the Purchased Assets. Subject to receipt of the release and termination of any Encumbrances (if any) on any of the Purchased Assets by Delta Bridge (a/k/a Cloud Fund) and Unique Funding Solutions, Purchaser shall contribute

$8,303.70 to any settlement with Delta Bridge (a/k/a Cloud Fund) and $12,000 to any settlement with Unique Funding Solutions, and Shareholder and the Sellers shall be responsible for any additional amounts.

 

ARTICLE VII

Conditions to the Sellers’ Obligations

 

The obligations of Sellers and the Shareholder to consummate the Closing are subject to the satisfaction (or written waiver by the Shareholder, on behalf of themselves and Sellers) of each of the following conditions on or prior to the Closing Date:

 

Section 7.1 Representations and Warranties. The representations and warranties of Purchaser in ARTICLE V shall be true and correct in all respects (in the case of any such representation and warranty that contains any materiality or Material Adverse Effect qualification) or in all material respects (in the case of any such representation and warrant that does not contain any materiality or Material Adverse Effect qualification) as of the date hereof and as of the Closing Date (or if any such representation or warranty expressly relates to a specific date, such representation or warranty shall be true and correct in all respects as of such date).

 

 

Section 7.2 Compliance with Covenants. Purchaser shall have performed in all material respects with all of the covenants and agreements required to be performed by it under this Agreement at or prior to the Closing.

 

Section 7.3 Purchaser’s Deliverables. Purchaser shall have delivered to the Sellers all of the documents and agreements set forth in Section 3.2(b).

 

Section 7.4 Absence of Litigation. As of the Closing, no Law shall have been adopted, promulgated, entered, enforced or issued by any Governmental Authority, or other governmental order, action, claim, suit or proceeding instituted by a Governmental Authority seeking to enjoin, restrain, or prohibit the consummation of this Agreement, having the effect of making illegal or otherwise prohibiting the transactions contemplated hereby shall be pending before any court or any other Governmental Authority.

 

Section 7.5 Officer Certificate. Purchaser shall have delivered to Sellers a certificate signed by an officer of Purchaser, dated as of the Closing Date, certifying that the conditions specified in Section 7.1 and Section 7.2 have been fulfilled.

 

ARTICLE VIII

Conditions to the Purchaser’s Obligations

 

The obligations of Purchaser to consummate the Closing are subject to the satisfaction (or written waiver by the Purchaser) of each of the following conditions on or prior to the Closing Date:

 

Section 8.1 Representations and Warranties. The representations and warranties of Sellers and the Shareholder in ARTICLE IV shall be true and correct in all respects (in the case of any such representation and warranty that contains any materiality or Material Adverse Effect qualification) or in all material respects (in the case of any such representation and warrant that does not contain any materiality or Material Adverse Effect qualification) as of the date hereof and as of the Closing Date (or if any such representation or warranty expressly relates to a specific date, such representation or warranty shall be true and correct in all respects as of such date).

 

Section 8.2 Compliance with Covenants. Sellers and the Shareholder shall have performed in all material respects with all of the covenants and agreements required to be performed by any of them under this Agreement at or prior to the Closing.

 

Section 8.3 Sellers’ Deliverables. Sellers shall have delivered to Buyer all of the documents and agreements set forth in Section 3.2(a).

 

 

Section 8.4 No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any event, circumstance, occurrence or fact that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 8.5 Officer Certificate. Sellers shall have delivered to Purchaser a certificate signed by an officer of each Seller, dated as of the Closing Date, certifying that the conditions specified in Section 8.1, Section 8.2, Section 8.3 and Section 8.4 have been fulfilled.

 

Section 8.6 Absence of Litigation. As of the Closing, no Law shall have been adopted, promulgated, entered, enforced or issued by any Governmental Authority, or other governmental order, action, claim, suit or proceeding instituted by a Governmental Authority seeking to enjoin, restrain, or prohibit the consummation of this Agreement, having the effect of making illegal or otherwise prohibiting the transactions contemplated hereby shall be pending before any court or any other Governmental Authority.

 

ARTICLE IX

Indemnification

 

Section 9.1 Indemnification by Sellers and the Shareholders. Subject to Sections 9.3 and 9.4, from and after the Closing, Sellers and the Shareholders shall, jointly and severally, defend, indemnify and hold Purchaser and its Affiliates and the directors, officers, managers, members, shareholders and employees of Purchaser and its Affiliates harmless from and against all Losses that they may suffer, sustain or incur or become subject to arising out of, based upon or in connection with: (a) any breach of a representation or warranty contained in this Agreement made by Sellers or the Shareholder, other than the Special Representations; (b) any breach of a Special Representation contained in this Agreement made by Sellers or the Shareholder; (c) any violation or breach of a covenant or agreement contained in this Agreement by Sellers or the Shareholder; (d) the operation of the Sellers’ Business on or before the Closing Date and any Losses relating thereto or arising therefrom, other than any Losses which constitute an Assumed Liability; (e) any Indemnified Taxes; (f) any failure by Sellers to comply with statutory provisions relating to bulk sales and transfers, if applicable; (g) any Losses related to amounts owed or alleged to be owed by Sellers to any Related Person (including the Shareholder); (h) without limiting the foregoing, any claim against the Purchaser for successor liability made after the Closing Date with respect to any action, suit, or other legal or administrative proceeding or governmental investigation pending, threatened against or involving (1) the Purchased Assets relating to or arising from the Sellers’ operation of the Business before the Closing Date or (2) the Shareholder, Sellers or their assets (other than the Purchased Assets); (i) the Excluded Assets; or

(j) the Excluded Liabilities.

 

 

Section 9.2 Indemnification by Purchaser. Subject to Sections 9.3 and 9.4, from and after the Closing, Purchaser shall defend, indemnify and hold Sellers and the Shareholders harmless from and against all Losses that they may suffer, sustain or incur or become subject to arising out of, based upon or in connection with any of the following:

 

(a) any breach of a representation or warranty contained in this Agreement made by Purchaser;

 

(b) any violation or breach of a covenant or agreement contained in this Agreement by Purchaser; or

 

(c) any Assumed Liability.

 

Section 9.3 Claims Procedures.

 

(a) In the case of any claim for indemnification arising from a claim of a third party (a “Third Party Claim”), a Person entitled to indemnification under this ARTICLE IX (an “Indemnified Party”) shall give prompt written notice to the Person(s) obligated to provide indemnification under this ARTICLE IX with respect to such Third Party Claim (an “Indemnifying Party”) of any claim or demand of which such Indemnified Party has knowledge and as to which it may request indemnification hereunder; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually and materially prejudiced as a result of such failure. The Indemnifying Party shall have the right (and if they elect to exercise such right, to do so within twenty (20) days after receiving notice from the Indemnified Party) to defend and to direct the defense against any such Third Party Claim, in its/their, as the case may be, name or in the name of the Indemnified Party, as the case may be, at the expense of the Indemnifying Party, and with counsel selected by the Indemnifying Party, unless (i) the Indemnifying Party shall not have taken any action to defend such Third Party Claim within such twenty (20) day period, (ii) such Third Party Claim seeks an order, injunction or other equitable reflect against the Indemnified Party, or (iii) the Indemnified Party shall have reasonably concluded that (A) there is a conflict of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense of such Third Party Claim or (B) the Indemnified Party has one or more material defenses not available to the Indemnifying Party; provided, however, that the Indemnifying Party shall not be entitled to assume the defense of a Third Party Claim unless it has acknowledged and agreed in a separate writing, in form and substance satisfactory to the Indemnified Party, that it assumes the obligation to and shall satisfy, without reservation, set-off or other defense, any Loss incurred by such Indemnified Party from such Third Party Claim. Notwithstanding anything in this Agreement to the contrary, if the Indemnified Party is in control of the defense of such Third Party Claim, it shall, at the expense of the Indemnifying Party, cooperate with the Indemnifying Party, and keep the Indemnifying Party fully informed, in the defense of such Third Party Claim. The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel employed at its own expense; provided, however, that, in the case of any Third Party Claim described in clause (A) or (B) of the second preceding sentence or as to which the Indemnifying Party shall not in fact have employed counsel to assume the defense of such Third Party Claim within such twenty (20) day period, the reasonable fees and disbursements of such Indemnified Party’s counsel shall be at the expense of the Indemnifying Party. The Indemnifying Party shall have no indemnification obligations with respect to any Third Party Claim which shall be settled by the Indemnified Party without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, delayed or conditioned.

 

 

(b) In the event that an Indemnified Party determines that it has a claim for Losses against the Indemnifying Party hereunder (other than as a result of a Third Party Claim), the Indemnified Party shall give prompt written notice thereof to the Indemnifying Party, specifying the amount of such claim and any relevant facts and circumstances relating thereto. The Indemnified Party shall provide the Indemnifying Party with reasonable access to its books and records for the purpose of allowing the Indemnifying Party a reasonable opportunity to verify any such claim for Losses. The Indemnified Party and the Indemnifying Party shall negotiate in good faith for a twenty (20) day period beginning on the date the Indemnified Party provides notice hereunder regarding the resolution of any disputed claims for Losses. If no resolution is reached with regard to such disputed claim between the Indemnifying Party and the Indemnified Party within such twenty (20) day period, the Indemnified Party shall be entitled to seek appropriate remedies in accordance with the terms hereof. Promptly following the final determination of the amount of any Losses claimed by the Indemnified Party, the Indemnifying Party shall pay such Losses to the Indemnified Party by wire transfer or check made payable to the order of the Indemnified Party. In the event that the Indemnified Party is required to institute legal proceedings in order to recover Losses hereunder, the cost of such proceedings (including, without limitation, costs of investigation and reasonable attorneys’ fees and disbursements) shall be added to the amount of Losses payable to the Indemnified Party if the Indemnified Party recovers Losses in such proceedings.

 

(c) To the extent that the undertaking to indemnify, pay and hold harmless set forth in this ARTICLE IX may be unenforceable with respect to any Losses because it violates any Law or public policy, the Indemnifying Party shall contribute the maximum portion which it is permitted to pay and satisfy under applicable Law, to the payment and satisfaction of all such Losses incurred by the Indemnified Party or any of them with respect to such Losses.

 

Section 9.4 Limitations. Notwithstanding anything to the contrary contained herein, the following provisions shall limit the liability of Seller and the Shareholders and Purchaser for purposes of this ARTICLE IX:

 

(a) Other than in the case of fraud, the aggregate obligations of Sellers and the Shareholder to provide indemnification for Losses pursuant to Section 9.1(a) (other than with respect to the Special Representations) applies only to the extent that the aggregate amount of all such Losses exceed $10,000 (the “Basket Amount”) in which event the Sellers and the Shareholder shall be liable for all such Losses. The obligation of Sellers and the Shareholder to provide indemnification for Losses pursuant to Sections 9.1(b) through 9.1(j) applies from the first dollar of Losses.

 

(b) Other than in the case of fraud, the aggregate obligations of Sellers and the Shareholder to provide indemnification for Losses pursuant to Section 9.1(a) shall not exceed twenty-five percent (25%) of the sum of (i) the Purchase Price and (ii) the Assumed Liabilities.

 

Section 9.5 No Punitive Damages. In no event shall any Indemnifying Party be liable to any Indemnified Party for any punitive damages, except to the extent awarded to a third party in connection with a Third Party Claim.

 

 

Section 9.6 Read Out of Qualifications. For purposes of determining whether any inaccuracy in, or breach of, any representation or warranty in this Agreement has occurred for purposes of Sections 9.1 and 9.2, and for the avoidance of doubt, also including for the purposes of determining Losses, any and all exceptions, limitations, restrictions, modifications, qualifications and exclusions contained in such representations and warranties that are based or conditioned on or refer to the terms “Material Adverse Effect”, “material” and/or “materially” (including when “material” and “materially” are used as adjectives and/or adverbs) shall be disregarded.

 

Section 9.7 Right to Increase Xiras Debt; Payment of Losses from Future Financings. In the event that the Purchaser or any of its Affiliates sustains or incurs Losses for which it is entitled to indemnification from the Sellers and/or the Shareholder under this Agreement (“Indemnification Losses”), Purchaser shall, at its option, be entitled to add the amount of such Indemnification Losses to the amount of the Xiras Debt then outstanding. In addition, if the Shareholder or any of the Sellers consummates an equity or debt financing at a time when any Indemnification Losses are due and owing under this Agreement to Purchaser or any of its Affiliates, the Shareholder and the Sellers shall use fifty (50%) of the net proceeds from such equity or debt financing to satisfy the then-outstanding Indemnification Losses.

 

ARTICLE X

Miscellaneous

 

Section 10.1 Survival of Representations and Warranties; Due Diligence by Purchaser.

 

(a) The representations and warranties made by the parties to this Agreement shall survive the Closing and shall expire on their applicable Expiration Dates and any claim for indemnification under ARTICLE IX that is made after the applicable Expiration Date shall be time barred; provided, however, that if, at any time prior to the applicable Expiration Date, a party delivers to the other party a written notice alleging a breach of any of the representations and warranties made by the receiving party and asserting a claim for indemnification under ARTICLE IX, then such claim shall survive the applicable Expiration Date until such time as such claim is fully and finally resolved and such party shall be entitled to Losses incurred in connection therewith, including Losses incurred following the applicable Expiration Date, subject to the applicable limitations set forth herein. All covenants and agreements contained in this Agreement shall survive and continue until fully performed and the period for bringing any indemnification claims for breaches of any post-closing covenants and agreements shall be the expiration of the statute of limitations for such claims under applicable Law. The survival period applicable to any indemnification claims attributable to fraud shall be governed by applicable Law.

 

(b) Notwithstanding anything to the contrary contained in this Agreement, no investigation by Purchaser and its representatives, and no knowledge Purchaser and its representatives may have as of the date of this Agreement or thereafter (regardless of whether such knowledge was obtained by Purchaser and its representatives in their due diligence investigation of the Purchased Assets or from any other source), shall affect or limit the rights of Purchaser under this Agreement (including without limitation under Section 9.1 hereof) in respect of any representation, warranty, covenant or obligation of Sellers or the Shareholder contained herein being untrue or inaccurate in any respect. Unless expressly waived by Purchaser in writing, Purchaser’s consummation of the transactions contemplated by this Agreement shall not in any way impair or be deemed a waiver of any matter as to which Purchaser has or may have had knowledge prior to such consummation.

 

 

Section 10.2 Notices. Except as expressly provided in this Agreement, all notices, consents, waivers, requests or other instruments or communications given pursuant to this Agreement shall be in writing, signed by the party giving the same, and shall be deemed given (i) upon personal delivery; (ii) three (3) days after being mailed by certified or registered mail, postage prepaid, return receipt requested; (iii) one (1) Business Day after being sent via a nationally recognized overnight courier service; or (iv) upon the successful completion of the email transmission followed by an accompanying telephone call (including leaving a voice mail) to the Person being noticed, in any such case, at the addresses of the parties set forth below. Any party may, by notice to the other parties hereto, specify any other address for the receipt of such notices, instruments or communications. Except as expressly provided in this Agreement, any notice, instrument or other communication shall be deemed properly given when sent in the manner prescribed in this Section 10.2

 

Copies of all notices to the Sellers or the Shareholder shall be sent to:

 

c/o Smart for Life, Inc.

990 Biscayne Blvd.

Suite 503

Miami, FL 33132

Email: darren.minton@smartforlifecorp.com

 

With a copy to (which shall not constitute notice):

 

Bevilacqua PLLC

Attention: Louis A. Bevilacqua

[          ]

Email: [                           ]

 

Copies of all notices to Purchaser shall be sent to:

 

First Health FL LLC

[                           ]

Email: [                  ]

 

and

 

Joseph X Xiras

[                  ]

 

With a copy to:

 

 

Greenberg Traurig, P.A.

Attention: Mathew Hoffman

[                  ]

Email:[                       ]

 

Section 10.3 Governing Law; Jurisdiction; Venue. This Agreement and all matters arising herefrom or with respect hereto, including, without limitation, tort claims (the “Covered Matters”), shall be governed by, and construed in accordance with, the internal laws of the State of Florida, without reference to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the co-exclusive jurisdiction of the federal and state courts located in Miami-Dade County Florida, for the purpose of any suit, action, proceeding or judgment relating to or arising out of the Covered Matters. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action, or proceeding brought in such courts and irrevocably waives any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH ANY COVERED MATTER.

 

Section 10.4 Severability. Each item and provision of this Agreement is intended to be severable. If any term or provision of this Agreement is determined by a court of competent jurisdiction to be unenforceable for any reason whatsoever that term or provision shall be ineffectual and void and the validity of the remainder of this Agreement shall not be adversely affected thereby.

 

Section 10.5 Assignment; Successors and Assigns; No Third-Party Rights. Except as otherwise expressly provided herein, this Agreement may not be assigned by operation of law or otherwise, and any attempted assignment shall be null and void. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, assigns (as permitted above) and legal representatives. Except as otherwise expressly provided herein, this Agreement shall be for the sole benefit of the parties to this Agreement and their respective heirs, successors, assigns (as permitted above) and legal representatives and is not intended, nor shall be construed, to give any Person, other than the parties hereto and their respective heirs, successors, assigns (as permitted above) and legal representatives, any legal or equitable right, remedy or claim hereunder; provided, however, that the parties hereto hereby acknowledge and agree that any Indemnified Party shall be an express and intended third-party beneficiary of ARTICLE IX.

 

Section 10.6 Counterparts. This Agreement may be executed in one or more counterparts for the convenience of the parties, each of which shall be deemed an original and all of which together will constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile, .pdf, or Docu-sign attachment to email shall be effective as delivery of a mutually executed original counterpart to this Agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party to this Agreement shall raise the use of a facsimile or electronic transmission by .pdf or Docu-sign to deliver a signature or the fact that this Agreement was transmitted or communicated through the use of a facsimile machine or electronic transmission in .pdf or Docu-sign as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

 

 

Section 10.7 Titles and Headings. The headings and table of contents in this Agreement are for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement.

 

Section 10.8 Entire Agreement. This Agreement, including the Schedules and Exhibits attached hereto and all documents being executed in connection herewith, constitute the entire agreement among the parties with respect to the matters covered hereby and supersede all previous written, oral or implied understandings among them with respect to such matters.

 

Section 10.9 Amendment and Modification.

 

(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by all parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective.

 

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 10.10 Specific Performance. Each party acknowledges that Purchaser shall be irreparably harmed and that there shall be no adequate remedy at Law for any violation by the Sellers or the Shareholder of any of the terms of any of the covenants or agreements contained in this Agreement. It is accordingly agreed, that in addition to, but not in lieu of, any other remedies which may be available upon the breach or threatened breach of any such covenant or agreement by the Sellers or the Shareholder, the Purchaser shall have the right to obtain injunctive relief to restrain a breach or threatened breach of, or otherwise to obtain specific performance of, such covenant.

 

Section 10.11 Prevailing Party. If any litigation or other court action or similar adjudicatory proceeding is commenced by any party to enforce its rights under this Agreement against any other party, all fees, costs and expenses, including reasonable attorneys’ fees and court costs, incurred by the prevailing party in such litigation, action or proceeding shall be reimbursed by the losing party; provided, that if a party to such litigation, action or proceeding prevails in part, and loses in part, the court or other adjudicator presiding over such litigation, action or proceeding shall award a reimbursement of the fees, costs and expenses incurred by such party on an equitable basis.

 

 

Section 10.12 Termination. Purchaser shall have the right to terminate this Agreement if the Closing has not occurred on or prior to January 31, 2024.

 

Section 10.13 No Strict Construction. Each of the parties hereto acknowledges that this Agreement has been prepared jointly by the parties hereto, and shall not be strictly construed against any party.

 

Section 10.14 Expenses. Each party hereto shall bear and be responsible for any and all fees, costs and expenses incurred by such party in connection with the negotiation and consummation of the transactions contemplated by this Agreement, including, without limitation, any and all agreements entered into before and contemporaneous with this Agreement.

 

Section 10.15 Publicity. Except for any public disclosure required by Law or any securities exchange or similar body (in which case, the disclosing party will give the other parties an opportunity to review and comment upon such disclosure before it is made), no press releases related to this Agreement or the other Transaction Documents or the transactions contemplated hereby or thereby or other public announcements generally in connection with this Agreement or the other Transaction Documents will be issued or made without the prior written approval of both the Shareholder and the Purchaser.

 

Section 10.16 Interpretations. As used herein, words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa, unless the context otherwise requires.

 

[Remainder of page intentionally left blank. Signature page follows.]

 

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date and year first above written by a duly authorized officer or representative of each party hereto, as the case may be.

 

	PURCHASER:
	FIRST HEALTH LLC
	By:	/s/ Joseph X. Xiras
	Name:	Joseph X. Xiras
	Title:	Authorized Signatory
	SELLERS:
	CEAUTAMED WORLDWIDE, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
	Name:	Alfonso J. Cervantes, Jr.
	Title:	Executive Chairman
	GREENS FIRST FEMALE, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
	Name:	Alfonso J. Cervantes, Jr.
	Title:	Executive Chairman
	WELLNESS WATCHERS GLOBAL, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
	Name:	Alfonso J. Cervantes, Jr.
	Title:	Executive Chairman

 

 

	SHAREHOLDER:
	SMART FOR LIFE, INC.
	By:	/s/ Darren Minton
	Name:	Darren Minton
	Title:	Chief Executive Officer

 

 

41

Exhibit 10.2

 

BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of January 29, 2024 (this “Bill of Sale and Assignment and Assumption Agreement”), is made and entered into by and among First Health FL LLC, a Delaware limited liability company (“Purchaser”), Ceautamed Worldwide, LLC, a Florida limited liability company (“Ceautamed”), Wellness Watchers Global, LLC, a Florida limited liability company (“WWG”), and Greens First Female, LLC, a Florida limited liability company (“GFF”; each of Ceautamed, WWG and GFF are referred to individually as a “Seller” and collectively as the “Sellers”), pursuant to and in accordance with that certain Asset Purchase Agreement, dated as of the date hereof (the “Agreement”), by and among the Purchaser, the Sellers and the other parties thereto, which Agreement provides, among other things, for the purchase of the Purchased Assets by Purchaser and the assumption of the Assumed Liabilities by Purchaser. All capitalized terms used herein and not defined have the meanings ascribed to them in the Agreement.

 

NOW, THEREFORE, in consideration of the premises set forth below, Purchaser and Sellers hereby agree as follows:

 

1. Sellers hereby sell, convey, transfer, assign, and deliver to Purchaser all of their right, title and interest in and to the Purchased Assets, free and clear of all Encumbrances. Sellers are not selling, conveying, transferring, assigning or delivering to Purchaser, and Purchaser is not purchasing or assuming, any of Sellers’ right, title and interest in and to any of the Excluded Assets.

 

2. Purchaser hereby agrees to assume, pay, discharge and perform when required and lawfully due, all of the Assumed Liabilities. Except for the Assumed Liabilities, the parties expressly agree that Purchaser shall not assume or otherwise become liable for the Excluded Liabilities or any other debts, liabilities, obligations or expenses of any kind or nature whatsoever of Sellers, the Shareholder or their respective Affiliates, whether existing on the date hereof or arising after the date hereof, including, without limitation, unpaid Taxes of any kind or any debts, liabilities, obligations, or expenses of any kind or nature whatsoever (including Indebtedness) of Sellers or their Affiliates (including the Shareholder) or pertaining to the Excluded Assets or the Excluded Liabilities.

 

3. Each party shall execute and deliver such additional instruments and other documents and shall use commercially reasonable efforts to take such further actions as may be reasonably necessary to effectuate, carry out and comply with all of the terms of this Bill of Sale and Assignment and Assumption Agreement.

 

4. No provision of this Bill of Sale and Assignment and Assumption Agreement shall in any way modify, replace, amend, change, rescind, waive or in any way affect the express provisions (including the warranties, covenants, agreements, conditions, representations or any of the obligations and indemnifications, and the limitations relating thereto of Purchaser, Sellers and the Shareholder) set forth in the Agreement, this Bill of Sale and Assignment and Assumption Agreement being intended solely to effect the transfer of certain assets, obligations and liabilities pursuant to the Agreement. In the event of any conflict or inconsistency between the terms of the Agreement and the terms hereof, the terms of the Agreement shall govern.

 

5. This Bill of Sale and Assignment and Assumption Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto.

 

6. THIS BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

 

7. To the extent any provision hereof conflicts with any provision in the Agreement, the terms of the Agreement shall prevail.

 

8. This Bill of Sale and Assignment and Assumption Agreement may be executed in two counterparts, each of which will be deemed an original, but both of which together will constitute one and the same instrument.

 

 

IN WITNESS WHEREOF, this Bill of Sale and Assignment and Assumption Agreement has been executed by the parties hereto as of the date first above written.

 

	SELLERS:
	CEAUTAMED WORLDWIDE, LLC
	By:	/s/ A. J. Cervantes, Jr.
		Name:	A. J. Cervantes, Jr.
		Title:	Executive Chairman
	GREENS FIRST FEMALE, LLC
	By:	/s/ A. J. Cervantes, Jr.
		Name:	A. J. Cervantes, Jr.
		Title:	Executive Chairman
	WELLNESS WATCHERS GLOBAL, LLC
	By:	/s/ A. J. Cervantes, Jr.
		Name:	A. J. Cervantes, Jr.
		Title:	Executive Chairman
	PURCHASER:
	FIRST HEALTH FL LLC
	By:	/s/ Joseph X. Xiras
		Name:	Joseph X. Xiras
		Title:	Holder

 

 

 

Exhibit 10.3

 

ASSIGNMENT OF INTELLECTUAL PROPERTY

 

This ASSIGNMENT OF INTELLECTUAL PROPERTY, dated as of January 29, 2024 (this “IP Assignment Agreement”), is made and entered into by and between FIRST HEALTH FL LLC, a Delaware limited liability company (“Assignee”), and CEAUTAMED WORLDWIDE, LLC, a Florida limited liability company (“Ceautamed”), WELLNESS WATCHERS GLOBAL, LLC, a Florida limited liability company (“WWG”), and GREENS FIRST FEMALE, LLC, a Florida limited liability company (“GFF”; each of Ceautamed, WWG and GFF are referred to individually as an “Assignor” and collectively as the “Assignors”), pursuant to and in accordance with that certain Asset Purchase Agreement dated as of January 29, 2024 (the “Agreement”) by and among the Assignee, the Assignors and Smart for Life, Inc., which Agreement provides, among other things, for the purchase and sale of the Purchased Assets by Assignee and the assumption of the Assumed Liabilities by Assignee. All capitalized terms used herein and not defined have the meanings ascribed to them in the Agreement.

 

NOW, THEREFORE, in consideration of the premises set forth below, Assignee and Assignors hereby agree as follows:

 

1. Upon the terms and subject to the conditions of the Agreement, Assignors hereby sell, assign, transfer and convey to Assignee, and Assignee hereby purchases and accepts from Assignors, all of their right, title and interest in and to all of Assignors’ Proprietary Rights (collectively, the “Purchased IP”), including all of Assignors’ right, title and interest in and to (1) those Proprietary Rights set forth on Exhibit A (including all internet domain names, including those identified in Exhibit A, and all other source or business identifiers and general intangibles of a like nature, and their respective content, together with any rights and obligations, and any and all goodwill associated therewith, and grants Assignee full ownership rights to and for such, including the ability to remove any Assignor as an owner and/or administrator of such domain names, all registrations and applications for any of the foregoing, renewals and extensions thereof, the ongoing and existing business of any Assignor to which the domain names pertain (the “Purchased Domain Names”); (2) the trademarks, service marks, certification marks, trade dress, logos, slogans, trade names, service names, brand names, including the trademarks, trademark registrations and trademark applications identified in Exhibit A, all registrations and applications for any of the foregoing, renewals and extensions thereof, the ongoing and existing business of any Assignor to which they pertain, all goodwill associated with any of the foregoing, and any other trademark, service mark or trade dress confusingly similar to any of the foregoing (the “Purchased Trademarks”) and (3) any licenses granted to any Assignor and used in connection with the operation of the Business identified in Exhibit A, and including all of the goodwill of the business associated with the use of and/or symbolized by such Purchased IP, along with all claims for damages by reason of past, present and future infringement of the rights assigned under this IP Assignment Agreement, with the right to sue for and collect the same for its own use and benefit, and for the use and benefit of its successors, assigns and other legal representatives, as fully and entirely as if the same would have been held and enjoyed by Assignors if this transfer to Assignee had not been made.

 

 

2. The Assignors authorize and request the Commissioner of Patents and Trademarks of the United States, and the corresponding entities or agencies in any applicable foreign jurisdictions, whose duty is to issue patents or other evidence or forms of industrial property protection on applications as aforesaid, to issue the same to the Assignee and to record the Assignee as owner of the Purchased Trademarks, as assignee of the entire right, title and interest in, to and under the same, for the sole use and enjoyment of the Assignee, its successors, assigns or other legal representatives.

 

3. At Assignee’s sole expense, Assignors shall promptly execute, acknowledge, and deliver any applications, assignments or other instruments that Assignee may reasonably request in order to (i) obtain trademark or copyright registration or patents in the United States or in any foreign country, or otherwise to protect the Assignee’s right, title and interest in and to the Purchased IP; or (ii) evidence, protect or perfect Assignee’s ownership of the Purchased IP. Without limiting the generality of the foregoing, Assignors covenant to cooperate with, and to transmit any electronic mail messages required by, the applicable registrar for the Purchased Domain Names to transfer the assignment of the Purchased Domain Names from Assignors to Assignee, in accordance with the applicable registrar’s procedures and policies. For clarity, each Assignor does hereby instruct, authorize, and direct any and all registrars thereof to transfer the Purchased Domain Names to an account as directed by Assignee and to record Assignee as the assignee and owner of the Purchased Domain Names. Each Assignor agrees to cooperate with Assignee and to follow Assignee’s reasonable instructions in order to effectuate the transfer of the Purchased Domain Name registrations and the other Purchased IP in a timely manner, and Assignors or Assignee are hereby expressly permitted and authorized to provide a copy of this IP Assignment Agreement to any such registrar or intellectual property filing or recordation office as necessary to accomplish such transfer. Each Assignor further agrees that within five (5) business days after the parties execute this IP Assignment Agreement, such Assignor shall commence transfer of ownership of the Purchased Domain Names to Assignee in accordance with the on-line procedures provided by the applicable registrar of the Purchased Domain Names.

 

4. To the extent any provision hereof conflicts with any provision in the Agreement, the terms of the Agreement shall prevail.

 

5. This IP Assignment Agreement may be executed in two counterparts, each of which will be deemed an original, but both of which together will constitute one and the same instrument.

 

6. This IP Assignment Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida applicable to agreements made and to be performed therein without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of laws of any jurisdiction other than the State of Florida.

 

 

IN WITNESS WHEREOF, this Assignment of Intellectual Property has been executed by the parties hereto as of the date first above written.

 

	ASSIGNORS:
	CEAUTAMED WORLDWIDE, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
		Name:	Alfonso J. Cervantes, Jr.
		Title:	Executive Chairman
	GREENS FIRST FEMALE, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
		Name:	Alfonso J. Cervantes, Jr.
		Title:	Executive Chairman
	WELLNESS WATCHERS GLOBAL, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
		Name:	Alfonso J. Cervantes, Jr.
		Title:	Executive Chairman
	ASSIGNEE:
	FIRST HEALTH, LLC
	By:	/s/ Joseph X. Xiras
		Name:	Joseph X. Xiras
		Title:	Member

 

 

Exhibit 10.4

 

LIMITED LIABILITY COMPANY AGREEMENT

 

This Limited Liability Company Agreement of First Health FL LLC, a limited liability company organized pursuant to the Delaware Limited Liability Company Act (the “Company”), is entered into by and among (i) Joseph X. Xiras, Stuart Benson and Ryan Benson (each, a “Voting Member” and collectively, the “Voting Members”) and (ii) Smart for Life, Inc. (the “Non-Voting Member”). Each Voting Member and Non-Voting Member is referred to herein as a “Member” and collectively as, the “Members”.

 

ARTICLE I

 

ORGANIZATION

 

1.01 Formation. The Company has been organized as a Delaware limited liability company by the filing of its Certificate of Formation on January 26, 2024 (“Date of Formation”).

 

1.02 Purpose. The purposes of the Company are to engage in any activity that limited liability companies may engage in under the Delaware Limited Liability Company Act (the “Act”).

 

1.03 Term. The Company commenced its existence on the Date of Formation. The Company shall have perpetual existence unless sooner terminated in accordance with the provisions of this Agreement.

 

1.04 Name. The name of the Company is “First Health FL LLC” and all Company business shall be conducted under that name or such other names that comply with applicable law as the Voting Members may select from time to time.

 

1.05 Registered Agent. The name and address of the initial registered agent of the Company in the State of Delaware is set forth in the Certificate of Formation of the Company. The Voting Members may change the registered agent of the Company through the filing of an amendment to its Certificate of Formation.

 

1.06 Principal Office; Other Offices. The principal office of the Company shall be at such place as the Voting Members may designate from time to time, which need not be in the State of Delaware. The Company may change its principal office or have such other offices as the Voting Members may designate from time to time.

 

1.07 No State Law Partnership. The Members intend that the Company shall not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member shall be a partner or joint venturer of any other Member, for any purposes other than federal, state and local tax purposes, and the provisions of this Agreement shall not be construed otherwise.

 

1.08 Liability to Third Parties. No Member shall be liable for the debts, obligations or liabilities of the Company, except to the extent required under the Act with respect to amounts distributed to the Member at a time when the Company was insolvent or rendered insolvent by virtue of the distribution.

 

 

ARTICLE II

 

MEMBERSHIP INTERESTS; TRANSFERS

 

2.01 Members and Initial Ownership. The Members of the Company are listed on Exhibit A hereto; such Members have been admitted to the Company as Members effective as of the Date of Formation and have been credited with the percentage membership interests in the Company as set forth on Exhibit A. The membership interests in the Company held by the Non-Voting Member are non-voting (the “Non-Voting Membership Interests”) and shall have no right to vote on any matter; provided, however, to the extent the Non-Voting Membership Interests have the right to vote on any matter under applicable law, the Non-Voting Member hereby grants an irrevocable proxy to each Voting Member to vote the Non-Voting Membership Interests in the same manner as the membership interests in the Company are voted by the Voting Members.

 

2.02 Additional Contributions. No Member shall be obligated to make any additional contributions to the Company. If, however, a new or existing Member shall hereafter make any additional contribution to the Company (other than a contribution in cash which is pro rata among all existing Members), then the percentage membership interest allocated among the Members of the Company shall be adjusted to reflect the fair market value of the new contribution relative to the fair market value of the Company, as determined prior to the new contribution by the Voting Members.

 

2.03 Transfers. No Member shall transfer, sell, assign, gift, devise, pledge or hypothecate (collectively, “Transfer”) his or its membership interests in the Company without the express written consent of the Voting Members and subject to compliance with Section 2.04; provided, that, no consent shall be required for a Transfer by a Voting Member of all or a portion of his membership interests in the Company to a member of such Member’s Family Group (as defined below)(a “Permitted Transfer”); provided that such transferee agrees in writing to be bound by this Agreement by executing a joinder to this Agreement. Notwithstanding the foregoing, the Non-Voting Member may not Transfer the Non- Voting Membership Interests except pursuant to Section 2.05. Any violation by the Non-Voting Member of the immediately preceding sentence shall result in the automatic forfeiture of the Non-Voting Membership Interests. For purposes of this Agreement, the term “Family Group” means, with respect to a Voting Member that is an individual, (i) the spouse and issue of such individual (whether natural or adopted), (ii) the parents of such individual (whether natural or adopted), (iii) the siblings of such individual (whether natural or adopted), (iv) the descendants of such individual (whether natural or adopted), (v) the nieces and nephews of such individual and (vi) trusts or custodianships for the primary benefit of such Voting Member or members of such Voting Member’s Family Group.

 

2.04 Right of First Refusal. Prior to making any Transfer of membership interests in the Company (other than a Permitted Transfer or a Transfer pursuant to Section 2.05) and subject to receipt o the requisite approvals required under Section 2.03, a Transferring Member (a “Selling Member”) shall deliver written notice (a “Sale Notice”) to the Voting Members and the Company. The Sale Notice shall disclose in reasonable detail the following information: the identity of the prospective transferee(s) (the “New Purchaser”); the membership interests to be Transferred (the “Offered Membership Interests”) by the Selling Member; and the terms and conditions of the proposed Transfer. The Sale Notice shall constitute an irrevocable offer by the Selling Member (i) first, to the Company to purchase all or any portion of the membership interests on the terms set forth in the Sale Notice and (ii) second, to the Voting Members (together, the “Non-Selling Voting Members”) to purchase all or any portion of the membership interests that the Company has elected not to purchase. The Company shall be entitled to accept such offer (on behalf of itself or its designee) by giving notice of acceptance to the Selling Member within fifteen (15) days of the receipt of such notice. If the Company notifies the Selling Member prior to the expiration of such fifteen (15) day period of its (or its designee’s) desire to purchase all or any portion of the membership interests, the Company shall be deemed to have accepted the offer with respect to the Offered Membership Interests that it has elected to purchase. If the Company has not elected to purchase all of the Offered Membership Interests specified in the Sale Notice by the expiration of such fifteen (15) day period, the Selling Member shall notify the Non-Selling Voting Members, in writing (the “Non-Selling Voting Members Notice”), of the Offered Membership Interests that remain available for purchase (the “Available Membership Interests”) on the terms set forth in the Sale Notice. Each Non-Selling Voting Member shall be entitled to accept the offer to purchase all or any portion of the Available Membership Interests multiplied by such Non-Selling Voting Member’s percentage interest of the outstanding membership interests of the Company (excluding the membership interests held by the Selling Member and the Non-Voting Member) by giving notice of acceptance to the Selling Member within fifteen (15) days of his receipt of the Non-Selling Voting Members Notice. During such fifteen (15) day period, each Non-Selling Voting Member may, by giving notice to the Selling Member, elect to purchase, in addition to the number of Available Membership Interests specified in the preceding sentence, all or a portion of such Non-Selling Voting Member’s percentage interest of the Available Membership Interests not subscribed for by the other Non-Selling Voting Members. This process shall continue until all of the unpurchased Available Membership Interests have been subscribed for by the Non-Selling Voting Members or no Non-Selling Voting Member elects to purchase any additional Available Membership Interests. If the Non-Selling Voting Members have not so elected to purchase all of the Available Membership Interests specified in the Non-Selling Voting Members Notice by the expiration of such fifteen (15) day period, the Selling Member may Transfer the Available Membership Interests not purchased by the Non-Selling Voting Members at a price and on terms no more favorable to the New Purchaser than those terms specified in the Sale Notice during the ninety (90) day period immediately following the expiration of such fifteen (15) day period (such ninety (90) day period, the “Sale Period”) so long as the New Purchaser agrees, in writing, to be bound by all of the provisions of this Agreement by executing a joinder to this Agreement acceptable to the Company. Any such Available Membership Interests not Transferred within the Sale Period shall be subject to the provisions of this Section 2.04 upon any subsequent Transfer by the Selling Member.

 

 

2.05 Option to Purchase Non-Voting Membership Interests.

 

(a) The Non-Voting Member hereby grants to each of the Voting Members an irrevocable option (the “Option”) to purchase the Non-Voting Membership Interests held by the Non-Voting Member on the terms and conditions set forth in this Section 2.05. The Non-Voting Member represents, warrants and covenants that the grant of the Option is a material inducement for the Voting Members to enter into this Agreement and to consummate (and to cause certain of its affiliated entities to take the actions necessary to consummate and satisfy conditions to the closing of) the transactions contemplated by that certain Asset Purchase Agreement, dated as of the date hereof, by and among the Company, the Non- Voting Member, Ceautamed Worldwide, LLC, Wellness Watchers Global, LLC and Greens First Female, LLC.

 

(b) At any time on or after April 1, 2024, the Voting Members (or any one Voting Member on behalf of all Voting Members) may exercise the Option to purchase all of the Non-Voting Membership Interests held by the Non-Voting Member for the Option Price (as defined below) by giving written notice (which may include email)(the “Exercise Notice”) to the Non-Voting Member. The “Option Price” shall mean One United States Dollar ($1.00). Any exercise of the Option shall be done on a pro rata basis among the Voting Members based on their pro rata portion of the membership interests held by the Voting Members.

 

(c) The Exercise Notice delivered by the Voting Members (or any one Voting Member on behalf of all Voting Members) to the Non-Voting Member shall specify the closing date (the “Option Closing Date”) on which the Non-Voting Member shall be obligated to sell, transfer and assign to the Voting Members the Non-Voting Membership Interests in exchange for payment of the Option Price. On the Option Closing Date, the Non-Voting Member shall deliver to the Voting Members the Non-Voting Membership Interests free and clear of all liens, claims and encumbrances and shall execute and deliver to the Voting Members such instruments of conveyance and other documents as the Voting Members may request against delivery to the Non-Voting Member of the Option Price. The Non-Voting Member hereby irrevocably instructs each officer of the Company to reflect the transfer of the Non-Voting Membership Interests to the Voting Members as of the Option Closing Date. Effective as of the Option Closing Date, subject to payment of the Option Price, the Non-Voting Member shall no longer have any right, title or interest in or to the Non-Voting Membership Interests (or to the Company). For the avoidance of doubt, the Non-Voting Member shall not be entitled to any share of the profits of the Company for the period prior to the Option Closing Date.

 

(d) The Non-Voting Member covenants and agrees not to take any actions, or refrain from taking any actions, which would frustrate the ability of the Voting Members to exercise, or consummate, the Option.

 

(e) Upon consummation of the closing of the Option, the membership interests of the Company shall be held entirely by the Voting Members, with each Voting Member holding 33.33% of the outstanding membership interests of the Company.

 

 

ARTICLE III

 

MANAGEMENT OF THE COMPANY

 

3.01 Management.

 

(a) Management and control of the Company shall be vested exclusively in the Voting Members, and the business and affairs of the Company shall be managed under the direction of the Voting Members. All actions or approvals by the Members (whether under this Agreement, applicable law or otherwise) shall be taken in accordance with Section 3.01(b) below. The Voting Members shall retain always the authority to make management decisions notwithstanding any delegation of duties by the Voting Members to officers, employees or agents. The Voting Members may, but shall not be required to, designate one or more officers or other agents who shall have such duties and shall perform such functions as may be delegated to them by the Voting Members from time to time, and who shall serve at the sole discretion of the Members. Any officers or other agents who are appointed by the Voting Members may be removed, at any time and from time to time, by the Voting Members, with or without cause. The Voting Members have the power to take such action as the Voting Members may deem to be necessary, appropriate, or convenient in connection with the management and conduct of the business and affairs of the Company. The Non-Voting Member shall have no authority to take any action on behalf of the Company and shall have no voting rights.

 

(b) Except as otherwise expressly required under the Act, whenever any action, including any approval, consent, determination, resolution or decision, is to be taken or given by the Voting Members or by the Company under this Agreement or under the Act, it shall be authorized by Voting Members holding at least a majority of the outstanding percentage membership interests of the Company held by the Voting Members (excluding, for the avoidance of doubt, the percentage membership interests of the Company held by the Non-Voting Member), which authorization may be evidenced by a vote taken at a meeting of Voting Members or by a written consent of the Voting Members in the manner set forth in Section 3.01(c).

 

(c) Any action permitted or required by the Act or this Agreement to be taken by the Voting Members may be taken without a meeting if a consent in writing, setting forth the action taken, is signed by Voting Members holding at least a majority of the outstanding percentage membership interests of the Company held by the Voting Members (excluding, for the avoidance of doubt, the percentage membership interests of the Company held by the Non-Voting Member).

 

3.02 Admission of New Members. The Members may from time to time (i) admit additional Members to the Company or (ii) cause the Company to issue additional membership interests in the Company (whether to a new or an additional Member), in each case, on such terms and conditions as the Voting Members shall determine. Any such additional Members shall join in and agree to be bound by the terms of this Agreement.

 

3.03 Liability of Parties. No Voting Member shall be liable to the Company or to any other Member for (i) the performance of, or the omission to perform, any act or duty on behalf of the Company if, in good faith, the Member determined that such conduct was in the best interests of the Company and such conduct did not constitute fraud, gross negligence or reckless or intentional misconduct, (ii) the termination of the Company and this Agreement pursuant to the terms hereof, and (iii) the performance of, or the omission to perform, any act on behalf of the Company in good faith reliance on advice of legal counsel, accountants or other professional advisors to the Company.

 

 

3.04 Indemnification of the Members. The Company, its receiver or its trustee shall indemnify, defend and hold the Voting Members (and their heirs or personal representatives) harmless from and against any expense, loss, damage or liability incurred or connected with, or any claim, suit, demand, loss, judgment, liability, cost or expense (including the reasonable fees of attorneys and experts, and court costs) arising from or related to, the Company or any act or omission of any of the Voting Members on behalf of the Company, and amounts paid in settlement of any of the foregoing, provided that the same were not the result of fraud, gross negligence, or reckless or intentional misconduct on the part of the Voting Member against whom a claim is asserted. The Company shall advance to any Voting Member (and his heirs or personal representatives) the costs of defending any claim, suit or action against any such third party so long as the Voting Member (or his heirs or personal representatives) undertakes to repay the funds advanced, with interest, if it is ultimately determined that the Voting Member is not entitled to indemnification under this Section 3.04.

 

ARTICLE IV

 

ALLOCATIONS AND DISTRIBUTIONS

 

4.01 Allocations. All profits and losses of the Company shall be allocated among the Members in accordance with their respective percentage membership interests in the Company.

 

4.02 Distributions. Distributions of cash or property shall be made from the Company to the Members at such times as the Voting Members may determine. All distributions to the Members shall be made in proportion to the Members’ percentage membership interests at the time such distribution is made.

 

ARTICLE V

 

DISSOLUTION AND LIQUIDATION

 

5.01 Dissolution. The Company shall be automatically dissolved and its affairs shall be wound up upon the earlier of (i) the written consent of Voting Members holding at least a majority of the outstanding percentage membership interests of the Company held by the Voting Members (excluding, for the avoidance of doubt, the percentage membership interests of the Company held by the Non-Voting Member) or (ii) the entry of a decree of judicial dissolution under the Act.

 

5.02 Liquidation.

 

(a) Upon a dissolution of the Company requiring the winding-up of its affairs, the Voting Members shall wind up its affairs. The assets of the Company shall be sold within a reasonable period of time to the extent necessary to pay or provide for the payment of all debts and liabilities of the Company, and may be sold to the extent deemed practicable and prudent by the Voting Members.

 

(b) The net assets of the Company remaining after satisfaction of all such debts and liabilities shall be distributed to the Members in accordance with their respective percentage membership interests in the Company as of the date of such distribution.

 

 

ARTICLE VI

 

GENERAL PROVISIONS

 

6.01 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE, CONSTRUCTION OR INTERPRETATION OF THIS AGREEMENT TO THE LAWS OF ANOTHER STATE.

 

6.02 Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the Members and each of their respective heirs, executors, administrators, personal representatives and successors.

 

6.03 Entire Agreement. This Agreement (including the exhibits hereto) supersedes any and all other understandings and agreements (including any prior limited liability company agreement), either oral or in writing, between the Members with respect to their membership interests in the Company and constitutes the sole and only agreement between the Members with respect to their membership interests in the Company.

 

6.04 Amendment or Modification. This Agreement (including the exhibits hereto) may be amended or modified from time to time only by the written consent of Voting Members holding at least a majority of the outstanding percentage membership interests of the Company held by the Voting Members (excluding, for the avoidance of doubt, the percentage membership interests of the Company held by the Non-Voting Member).

 

6.05 Counterparts. This Agreement may be executed in original or by facsimile in several counterparts, and as so executed shall constitute one agreement, binding on all of the parties hereto, notwithstanding that all of the parties are not signatory to the original or to the same counterpart.

 

6.06 Proxy. From the date hereof through the closing of the exercise of the Option, the Non- Voting Member hereby appoints each of the Voting Members as the Non-Selling Member’s proxy and attorney-in-fact to the extent necessary to carry out any and all of the terms and provisions of this Agreement including, without limitation, the obligations of the Non-Voting Member pursuant to Section 2.05 hereof. The proxy granted in this section is a proxy coupled with an interest and shall be irrevocable until the closing of the exercise of the Option.

 

[signature page follows]

 

 

IN WITNESS WHEREOF, the Members have executed and adopted this Limited Liability Company Agreement effective as of January 29, 2024.

 

	MEMBERS:
	/s/ Stuart Benson
	Stuart Benson
	/s/ Ryan Benson
	Ryan Benson
	/s/ Joseph X. Xiras
	Joseph X. Xiras
	SMART FOR LIFE, INC.
	By:	/s/ Darren Minton
	Name:	Darren Minton
	Title:	Chief Executive Officer

 

 

EXHIBIT A

 

Member		% Membership Interest
Stuart Benson			17	%
Ryan Benson			17	%
Joseph X. Xiras			17	%
Smart for Life, Inc.			49	%*

 

*

Non-Voting Membership Interests.

 

 

8

Exhibit 10.7

 

Smart for Life, Inc.

990 Biscayne Blvd., Suite 503

Miami, FL 33132

 

May 24, 2023

 

Joseph X. Xiras

[  ]

[  ]

 

Mr. Xiras:

 

Reference is made to that certain Original Issue Discount Secured Subordinated Note in the principal amount of $2,272,727.27 issued by Smart for Life, Inc., a Nevada corporation (the “Company”) to Joseph X. Xiras (the “Holder”) on July 29, 2022 (the “Note”). The Note was issued pursuant to that certain Note Purchase Agreement, dated July 29, 2022, by and among the Company and the Holder (the “Note Purchase Agreement”). Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Note.

 

The Company and the Holder desire to amend the repayment terms of the Note as set forth herein. The Company and the Holder acknowledge that to date, the scheduled totaling an aggregate of $315,897, have not been made (the “Past Due Payments”).

 

A. The Company and the Holder desire and agree that Section 2 of the Note is hereby amended such that:

 

(i)

The Maturity Date of the Note shall mean August 1, 2029 and the principal and interest shall be amortized on a 84-month straight-line basis and payable in accordance with the amortization schedule set forth on Exhibit A hereto (the “Amortization Schedule”).

 

(ii)

Each monthly Scheduled Payment of $45,141.05 (the “Original Monthly Payment Amount”) as set forth on the Amortization Schedule shall be increased to $67,711.58, representing 150% of the Original Monthly Payment Amount (the “Increased Monthly Payment Amount”), and shall be payable monthly, beginning on the first business day of the first full month following the completion of the Company’s proposed public offering of securities pursuant to a Registration Statement on Form S-1 (the “S-1 Offering”), but in no event shall the first Increased Monthly Payment Amount be made later than June 30, 2023.

 

	(iii)	Thereafter, the Company shall continue to pay the Increased Monthly Payment Amount on the monthly Payment Dates listed on the Amortization Schedule, with the difference between the Original Monthly Payment Amount and the Increased Monthly Payment Amount that is paid each month pursuant to paragraph (i) above being applied toward the Past Due Payments, and shall continue until such time that the Past Due Payments are paid in full.

(iv)

Following the payment in full of the Past Due Payments pursuant to paragraph (ii) and (iii) above, no further Increased Monthly Payment Amounts will be owing, and the Company will make all subsequent monthly payments under the Note in the Original Monthly Payment Amount.

 

 

B. The Company and the Holder desire and agree that Section 8 of the Note is hereby amended such that, in addition to the Guarantors under the Note, Alfonso J. Cervantes, Jr., the Company’s Executive Chairman, is an additional Guarantor under the Note, his agreement to which is evidenced by his signature hereto.

 

C. As further consideration for the terms described herein:

 

(i)

Within three (3) business days of the date hereof, the Company shall issue to Holder 5,000 shares of its common stock, par value $0.0001 per share (the “Shares”), on customary instruments and/or other documents in form and substance reasonably satisfactory to Holder. Holder hereby acknowledges and agrees that the Shares are not and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) and cannot be sold, transferred, pledged or otherwise disposed of without registration under the Securities Act or pursuant to an exemption therefrom.

 

(ii)

Upon the completion of the Company’s S-1 Offering but in no event later than June 30, 2023, the Company will (A) make an additional payment to Holder in the amount of $45,141.05, and (B) pay to Holder an amount in cash equal to the accrued but unpaid interest on the Note as of the date of the closing of the S-1 Offering which is currently estimated to be $209,332.97.

 

Except as amended as set forth above, the Note shall continue in full force and effect.

 

[Signature page follows]

 

 

By signing below, the parties hereto hereby consent and agree to amend the terms of the Note as set forth above.

 

	Very truly yours,
	COMPANY
	Smart for Life, Inc.
	By:	/s/ Alfonso J. Cervantes, Jr.
	Name:	Alfonso J. Cervantes, Jr.
	Title:	Executive Chairman
	GUARANTOR
	By:	/s/ Alfonso J. Cervantes, Jr.
	Name:	Alfonso J. Cervantes, Jr.

 

AGREED AND ACKNOWLEDGED:
HOLDER
By:	/s/ Joseph X. Xiras
Name:	Joseph X. Xiras

 

 

3

Exhibit 10.8

 

PROMISSORY NOTE MODIFICATION AGREEMENT

 

This Promissory Note Modification Agreement (this “Agreement”) is dated this 26^th day of January, 2024 and is entered into between SMART FOR LIFE, INC., a Nevada corporation (hereinafter referred to as “Borrower”), ALFONSO J. CERVANTES, JR. (hereinafter referred to as “Guarantor”) and JOSEPH X. XIRAS, (hereinafter referred to as “lender” or “Holder”). Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Note (as defined below).

 

RECITALS:

 

WHEREAS, Borrower issued to Holder, and Guarantor guaranteed, that certain Original Issue Discount Secured Subordinated Note dated July 22, 2022 in the original principal amount of $2,272,727.27, as amended on May 24, 2023 (hereinafter referred to as the “Note”); and

 

WHEREAS, the Note was issued pursuant to that certain Note Purchase Agreement, dated July 29, 2022, by and between the Borrower and the Holder; and

 

WHEREAS, Borrower, Holder and Guarantor wish to extend and modify the terms of the Note to provide for an extension of the Loan that is currently in default;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

A. (i) As of January 26, 2024, the new Principal Amount due and owing under the Note, including accrued and unpaid Interest thereon, is $2,751,233.45.

 

(ii) The Interest rate due under the Note is hereby amended to Thirteen Percent (13.00%) per annum.

 

(iii) Borrower shall pay to Holder, in addition to each monthly Principal and Interest payment, an Administration Fee of $6,000.00 per month (“Administrative Fee”).

 

(iv) In the event any payment due hereunder is not made within three (3) business days from its due date, Borrower shall pay Lender a late fee equal to Five Percent (5.00%) of the late Principal and Interest payments.

 

(iv) The Principal and Interest payments, which shall be due and payable on or before the 1^st day of each month beginning April 1, 2024, shall be amortized on a fifteen (15) year amortization schedule, payable in accordance with the amortization schedule as set forth in Exhibit A attached hereto and made a part hereof.

 

(v) On the 1^st day of each July and October prior to the Maturity Date, Borrower shall make, in addition to the regular monthly Principal and Interest payment and Administrative Fee then due, an additional Principal reduction payment of $50,000.00.

 

(vi) The Maturity Date shall be twenty-four (24) months from the date of this Agreement, at which time the entire Principal balance and accrued but unpaid Interest, shall be due and payable in full.

 

 

(vii) Upon the occurrence of any of the following) events, Borrower will pay to Holder, within three (3) business days of the event occurrence, the following amounts as a Principal reduction payment; provided, however, that in no event shall the total amount of payments that Borrower is required to make pursuant to this clause (vii) exceed the then outstanding amount of Principal and Interest owed to Holder pursuant to the terms of the Note:

 

(a)

Upon the exercise by any party of Borrower’s stock warrants in an amount up to $2,200,000.00, Borrower shall pay to Lender Twenty Percent (20.00%) of the gross proceeds generated by such exercise,

 

(b)

Upon the successful completion of a public offering under a Registration Statement on Form S-1 filing with HC Wainwright, Borrower shall pay to Lender Twenty-Five Percent (25.00%) of the gross proceeds generated by such public offering,

 

(c)

Upon the successful completion of a private placement debenture offering under Rule 506(c), Borrower shall pay to Lender Thirty Percent (30.00%) of the gross proceeds generated by such private placement, or

 

(d)

Upon the successful completion by Borrower of any other capital fund raising. Borrower shall pay to Lender Twenty-Five Percent (25.00%) of the gross proceeds generated by such capital fund raising.

 

(viii) Notwithstanding the provisions of Section 8 of the Note, Holder hereby agrees to the sale by Borrower of its operating subsidiary, Bonne Sante Natural Manufacturing, Inc. (“BSNM”), and hereby releases BNSM and all of its collateral from the security interest and lien granted pursuant to the Note and hereby authorizes Borrower and its designees to file UCC-3 termination statements with respect to the BSNM collateral and agrees to execute and deliver any additional written releases, terminations and such other documents as may be reasonably requested by Borrower to evidence such release and the termination of Holder’s interests in the collateral of BNSM.

 

B. In no event shall this Agreement be deemed to limit, modify, amend, waive or otherwise affect any of Holder’s rights and remedies that exist under the Note and this Agreement for any Events of Default, all of which rights and remedies are hereby expressly reserved and which may be enforced by Holder in accordance with the terms of the said Agreement and the Note.

 

C. Nothing in this Agreement shall be construed as a waiver of or acquiescence to the any defaults that exist now or may exist in the future. Except as expressly provided herein, the execution and delivery of this Agreement shall not: (a) constitute an extension, modification, or waiver of any aspect of the Note; (b) extend the terms of the Note or the due date of any of Borrower=s obligations; (c) give rise to any obligation on the part of Holder to extend, modify or waive any term or condition of the Note; (d) give rise to any defenses or counterclaims to the right of Holder to compel payment of Borrower=s obligations or to otherwise enforce their rights and remedies under the Note; or (e) establish a custom or course of dealing between or among the Borrower and the Holder. Except as expressly limited herein, Holder hereby expressly reserves all of their rights and remedies under the Note and under applicable law with respect to the existing defaults. Except as modified herein, Holder shall be entitled to enforce the Note according to the original terms thereof and all original terms of the Note remain in full force and effect except to the extent they are modified herein.

 

 

D. Borrower acknowledges that no oral representations, statements or inducements have been made by Holder with respect to the Note or this Agreement. Further, this Agreement and the Note, constitute valid and legally binding obligations of the Borrower, enforceable against the Borrower in accordance with the terms thereof subject to the effects of bankruptcy, insolvency, fraudulent conveyance and other laws affecting creditors’ rights generally and to general equitable principals.

 

E. It is agreed to and understood by the parties that this Agreement and all terms hereof are being entered into voluntarily and with the opportunity to seek advice of counsel and because it is believed by Borrower and Holder that it will result in the most expeditious, cost-effective and beneficial resolution to the issues constituting the subject matter of the extension of the balloon payment due and owing under the Note.

 

F. The parties hereto consent to and agree that any proceedings to enforce the terms hereof or of the original mortgage as herein modified, shall be brought in Palm Beach County, Florida.

 

G. All the remaining provisions of the Note not specifically changed or modified herein, are to remain in full force and effect.

 

[Signature page follows]

 

 

In Witness Whereof, the parties have set their hands and seals the day and year first aforesaid.

 

		Smart For Life, Inc., a Nevada corporation
		BORROWER
	By:	/s/ Alfonso J. Cervantes, Jr.
		Alfonso J. Cervantes, Jr.
		Executive Chairman
		/s/ Alfonso J. Cervantes, Jr.
		Alfonso J. Cervantes, Jr.
		GUARANTOR
		/s/ Joseph X. Xiras
		Joseph X. Xiras
		HOLDER

 

 

{Signature Page to Amendment No. 2 to OID Note}

 

 

4

Exhibit 10.9

 

January 29, 2024

 

Smart for Life, Inc.

990 Biscayne Blvd., Suite 503

Miami, FL 33132

Attn: Darren Minton

 

Dear Darren:

 

Reference is made to that certain Original Issue Discount Secured Subordinated Note, dated as of July 29, 2022 (as amended) (the “Xiras Note”), issued by Smart for Life, Inc. (the “Company”) to Joseph X. Xiras (“J. Xiras”) in the original principal amount of $2,272,727.27. The indebtedness evidenced by the Xiras Note is guaranteed by the subsidiaries of the Company (including Ceautamed Worldwide, LLC (“Ceautamed”).

 

Concurrently herewith, the Company is entering into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Ceautamed, Wellness Watchers Global, LLC (“WWG”), Greens First Female, LLC (“GFF” and together with Ceautamed and WWG, the “Sellers”) and First Health FL LLC (“Purchaser”) pursuant to which, at the closing of the transactions contemplated by the Asset Purchase Agreement (the “APA Closing”), the Purchaser will purchase the Purchased Assets (as defined in the Purchase Agreement) from the Sellers and assume the Assumed Liabilities (as defined in the Purchase Agreement).

 

Effective as of, and subject to and conditioned upon, the APA Closing, J. Xiras hereby releases any Encumbrances (as defined in the Purchase Agreement) on the Purchased Assets previously granted by the Sellers to J. Xiras (the “Released Collateral”) to secure repayment of the indebtedness evidenced by the Xiras Note. For the avoidance of doubt, the indebtedness evidenced by the Xiras Note is not being discharged, will remain an outstanding obligation of the Company that is guaranteed by the subsidiaries of the Company and will have a continuing Encumbrance on all of the assets of the Company and its subsidiaries (other than the Released Collateral).

 

The Company hereby represents, warrants and covenants that, upon consummation of the APA Closing, the indebtedness evidenced by the Xiras Note will represent the senior Indebtedness of the Company and its subsidiaries and a first priority Encumbrance on all of the assets of the Company and its subsidiaries.

 

This letter shall be effective solely upon, and subject to and conditioned upon, consummation of the APA Closing. This letter shall automatically terminate and be of no force and effect if the APA Closing has not occurred by February 15, 2024.

 

This letter shall be governed by and construed and enforced in accordance with the laws of the State of Florida, without regard to its conflict of laws principles. This letter may be executed in one or more counterparts, each of which shall constitute an original, and together they shall be one and the same instrument. Receipt by telecopy or electronic mail of any executed signature page to this letter shall constitute effective delivery of such signature page.

 

 

	Very truly yours,
	/s/ Joseph X. Xiras
	Joseph X. Xiras

 

Acknowledged and Agreed to by:
SMART FOR LIFE, INC.
By:	/s/ Darren Minton
Name:	Darren Minton
Title:	Chief Executive Officer

 

 

 

 

Exhibit 10.11

 

AGREEMENT

 

This AGREEMENT (this “Agreement”), dated as of January 29, 2024, is entered into by and among (i) D&D Hayes, LLC (“D&D Hayes”), (ii) Ceautamed Worldwide, LLC, a Florida limited liability company (“Ceautamed”), Wellness Watchers Global, LLC, a Florida limited liability company (“WWG”), and Greens First Female, LLC, a Florida limited liability company (“GFF”; each of Ceautamed, WWG and GFF are referred to individually as a “Seller” and collectively as the “Sellers”), (iii) First Group Acquisition Company, LLC, a Delaware limited liability company (“First Group” or “Senior Lender”), and (iv) First Health FL LLC, a Delaware limited liability company (“Purchaser”). Each of D&D Hayes, the Sellers, the Senior Lender and the Purchaser are collectively referred to herein as, the “Parties” and each individually as a “Party”.

 

RECITALS:

 

A. D&D Hayes is the holder of that certain 5% Secured Subordinated Promissory Note, dated as of July 29, 2022 (as amended, the “Hayes Amortizing Note”), issued by Smart for Life, Inc. (“Smart for Life”) to D&D Hayes in the initial principal amount of One Million Seventy-Five Thousand Dollars ($1,075,000), which Hayes Amortizing Note is guaranteed by the Sellers and secured by certain assets of the Sellers (the “Hayes Security Interest”).

 

B. Concurrently herewith, the Sellers, the Purchaser and Smart for Life are entering into that certain Asset Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which, at the closing of the transactions contemplated by the Purchase Agreement (the “APA Closing”), the Purchaser will purchase the Purchased Assets (as defined in the Purchase Agreement) from the Sellers and assume the Assumed Liabilities (as defined in the Purchase Agreement); and

 

C. Effective as of, and subject to and conditioned upon, the APA Closing, (i) D&D Hayes will release the Sellers from their obligations as guarantors of the Hayes Amortizing Note and will release and terminate the Hayes Security Interest (collectively, the “Hayes Releases”) in exchange for the Purchaser agreeing to provide to D&D Hayes the consideration set forth herein and (ii) and after giving effect to the Hayes Releases, D&D Hayes will sell, transfer and assign the Hayes Amortizing Note to the Senior Lender for a cash payment of Twenty-Five Thousand Dollars ($25,000).

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:

 

ARTICLE I.

EFFECTIVENESS; SPECIFIC TRANSACTIONS

 

Section 1.01. Effectiveness. This Agreement shall be effective upon consummation of the APA Closing and shall not be effective unless and until the APA Closing occurs.

 

 

Section 1.02. Hayes Releases; Consideration for Hayes Releases.

 

(a) Effective upon, and subject to and conditioned upon, the APA Closing, D&D Hayes shall, and hereby does, release the Sellers from their obligations as guarantors of the Hayes Amortizing Note and release and terminate the Hayes Security Interest. D&D Hayes hereby authorizes the Purchaser or its counsel to file UCC-3 financing statement terminations with respect to the Hayes Security Interest. D&D Hayes further agrees, at the sole expense of the Purchaser, to execute such other agreements, documents or instruments reasonably requested by Purchaser or its counsel to further evidence the release by D&D Hayes of the Hayes Security Interest. Following the filing of the UCC-3 financing statement terminations with respect to the UCC financing statements evidencing the Hayes Security Interest, D&D Hayes shall have no lien or security interest in or on any of the Purchased Assets.

 

(b) Effective upon, and subject to and conditioned upon, the APA Closing, in consideration for the Hayes Releases, the Purchaser shall make the following payments to D&D Hayes (collectively, the “Release Payments”):

 

(i) One Hundred Thousand Dollars ($100,000) on the date of consummation of the APA Closing;

 

(ii) Twelve (12) consecutive monthly payments of Six Thousand Two Hundred Fifty Dollars ($6,250), with the first monthly payment commencing on March 1, 2024 and continuing on the first business day of each subsequent month;

 

(iii) One Hundred Thousand Dollars ($100,000) on the one (1) year anniversary of the APA Closing; and

 

(iv) Thirty six (36) consecutive monthly payments of Five Thousand Five Hundred Fifty Five Dollars ($5,555), with the first monthly payment commencing on the first business day of the month immediately following the one (1) year anniversary of the APA Closing.

 

Notwithstanding the foregoing, the Purchaser may, at any time, prepay any of the Release Payments without premium or penalty.

 

(c) To secure the prompt payment of the Release Payments by the Purchaser to D&D Hayes, the Purchaser hereby pledges, grants, assigns and transfers to D&D Hayes, a continuing lien on and security interest in and to all of the following property of the Purchaser, whether now owned or later acquired (collectively the “Collateral”):

 

(i) All accounts, accounts receivable, contract rights, general intangibles related to or arising from any account, debit balances, notes, documents, chattel paper, instruments, acceptances, drafts or other forms of obligations and receivables of Purchaser arising from the sale or lease of inventory or rendition of services by Purchaser, in the ordinary course of its business or otherwise (all of the foregoing being herein collectively called “Accounts”), whether such Accounts are now existing or are created at any time hereafter, and all proceeds therefrom including without limitation, proceeds of insurance thereon and all guaranties, securities, and liens which the Purchaser may hold for the payment of any Accounts, including without limitation, all rights of stoppage in transit, replevin and reclamation and all other rights and remedies of unpaid vendor or lienor, and any liens held by the Purchaser as a mechanic, contractor, subcontractor, processor, materialman, machinist, manufacturer, artisan, or otherwise.

 

 

(ii) All documents, instruments, documents of title, policies and certificates of insurance, guaranties, securities, chattel paper (both tangible and electronic), deposits, proceeds of insurance, cash, liens or other property relating to Accounts owned by the Purchaser or in which the Purchaser has an interest, which are now or may hereafter be in the possession of the Purchaser or as to which the Purchaser may now or hereafter control possession by documents of title or otherwise.

 

(iii) All books, records, customer lists, supplier lists, ledgers, evidences of shipping invoices, purchase orders, sales orders, computer records, lists, software, programs, and all other such evidences of the Purchaser’s business records related to the Accounts, all whether now existing or hereafter arising or acquired.

 

(iv) All of the Purchaser’s tangible property of whatever nature or description, whether real or personal, now or hereafter used, owned, held or leased, including without limitation all goods, furniture, fixtures, vehicles, equipment, inventory and supplies.

 

(v) All of the Purchaser’s payment intangibles, instruments, letters of credit, letter-of-credit rights, money, deposit accounts, investment property, commodity contracts, and commodity accounts.

 

(vi) All of the Purchaser’s intangible property of whatever nature or description, including without limitation, all intellectual property, general intangibles, software, trade names, trademarks, service marks, computer programs (including source code and object code), patents and copyrights now owned or hereafter acquired.

 

(vii) All renewals, substitutions, replacements, additions, accessions, proceeds, and products of any and all the foregoing.

 

The security interest granted to D&D Hayes hereunder shall be subordinate, and subject to, the security interests in the Collateral granted by Purchaser to the Senior Lender. Terms used in the preceding collateral description shall have the respective meanings accorded such terms in the Uniform Commercial Code as enacted in the state of Florida as of the date of this Agreement.

 

(d) The Purchaser hereby agrees that D&D Hayes shall have all the rights and remedies of a secured party under the Uniform Commercial Code as in effect from time to time in the State of Florida. The Purchaser agrees that at any time, and from time to time, at the request of D&D Hayes, the Purchaser shall execute and deliver (or cause to be executed and delivered) any and all such further instruments and/or documents (including without limitation, UCC-1 financing statements) as D&D Hayes may consider reasonably necessary or desirable in order to effectuate, complete, perfect or preserve and maintain the lien created hereby.

 

 

(e) The security interest created hereunder shall terminate upon the payment in full by the Purchaser to D&D Hayes of all remaining unpaid Release Payments.

 

Section 1.03. Subordination.

 

(a) The Purchaser and D&D Hayes agree that payment of the Release Payments owing by the Purchaser to D&D Hayes are hereby absolutely and unconditionally subordinated to the payment in full of all amounts payable by the Purchaser to the Senior Lender under the Senior Debt (as defined below) at any time there is a default or event of default under the Senior Debt (a “Default Event”), and no payments or other distributions whatsoever in respect of the Release Payments shall be made by Purchaser or received by D&D Hayes, directly or indirectly, nor shall any property of the Purchaser be applied to the purchase or other acquisition, redemption, retirement or defeasance of the Release Payments at any time there is a Default Event, until the irrevocable payment in full of the Senior Debt and all obligations related thereto (collectively, the “Senior Debt Obligations”). “Senior Debt” means all indebtedness (including principal, interest, fees and obligations) due and owing by the Purchaser (by way of assumption of the indebtedness due and owing by Smart for Life and its subsidiaries to the Senior Lender under the Senior Loan Agreement (as defined below) and the other Loan Documents (as defined in the Senior Loan Agreement)) to the Senior Lender. “Senior Loan Agreement” means the Loan Agreement, dated July 1, 2021 and amended on June 29, 2022, December 29, 2022, April 20, 2023 and May 22, 2023, by and among Smart for Life and its subsidiaries (including Ceautamed) and the Senior Lender (by way of assignment from Diamond Creek Capital, LLC).

 

(b) In the event of any dissolution, winding up, liquidation, readjustment, reorganization or other similar proceedings relating to the Purchaser or to its property (whether voluntary or involuntary, partial or complete, and whether in bankruptcy, insolvency, or receivership, or upon an assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of the Purchaser (collectively, “Proceedings”), or any sale of all or substantially all of the assets of the Purchaser, or otherwise), the Senior Debt and all Senior Debt Obligations shall first be fully paid, before D&D Hayes shall be entitled to receive and retain any payment in respect of the Release Payments.

 

(c) In the event that D&D Hayes receives any payment of any kind or character from the Purchaser in respect of any of the Release Payments or from any other source whatsoever in respect of the Release Payments during a Default Event or during the pendency of any Proceedings, such payment shall be received in trust for the Senior Lender and promptly turned over by D&D Hayes to the Senior Lender, together with all necessary and appropriate endorsements thereto.

 

(d) D&D Hayes hereby waives (a) notice of acceptance by the Senior Lender of this Agreement, (b) notice of the existence or creation of all or any of the Senior Debt Obligations, and (c) all diligence in collection or protection of or realization upon any of the Senior Debt Obligations.

 

 

(e) The Senior Lender is the intended beneficiary of the agreements of D&D Hayes and the Purchaser under this Section 1.03 and the last paragraph of Section 1.02(c) and is entitled to enforce the provisions hereof against D&D Hayes and the Purchaser.

 

Section 1.04. Purchase of Hayes Amortizing Note. Effective upon, and subject to and conditioned upon, the APA Closing and after giving effect to the Hayes Releases (the “Note Purchase Effective Date”), (i) D&D Hayes agrees to, and does hereby, sell, convey and assign to the Senior Lender the Hayes Amortizing Note in consideration for a cash payment to D&D Hayes of Twenty-Five Thousand Dollars ($25,000) on the date of consummation of the APA Closing, and (ii) Senior Lender hereby agrees to, and does hereby, purchase the Hayes Amortizing Note from D&D Hayes in consideration for a cash payment to D&D Hayes of Twenty-Five Thousand Dollars ($25,000) on the date of consummation of the APA Closing. On the Note Purchase Effective Date, all of D&D Hayes’ right, title, and interest in and to the Hayes Amortizing Note will be transferred to and vested in the Senior Lender. D&D Hayes represents, warrants and covenants to the Senior Lender that (i) D&D Hayes is the sole legal and beneficial owner and holder of the Hayes Amortizing Note, free and clear of any and all adverse claims, liens or encumbrances and (ii) D&D Hayes has not pledged or transferred any interest (as security or otherwise) in the Hayes Amortizing Note nor has any third party acquired any interest therein, including any participation interest.

 

Section 1.05. Releases. D&D Hayes does hereby, now and forever, fully and completely release, acquit and forever discharge the Senior Lender and the Purchaser and their respective directors, officers, members, managers, agents and affiliates (collectively, the “Released Parties”), of and from any and all actions, causes of actions, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, whether matured, unmatured, liquidated or unliquidated, vested or contingent, known or unknow, that D&D Hayes has against the Released Parties or any of them (whether directly or indirectly) as of the date hereof, except for any rights of D&D Hayes arising under this Agreement. D&D Hayes acknowledges that the foregoing release is a material inducement to the Senor Lender and the Purchaser’s decision to enter into this Agreement and for the Purchaser to consummate the transactions contemplated by the APA Closing.

 

ARTICLE II.

REPRESENTATIONS AND WARRANTIES

 

Section 2.01. Representations and Warranties of the Parties. Each Party, on its own behalf and not on behalf of any other Party, hereby represents and warrants to the other Parties as follows:

 

(a) Incorporation and Authority. Such Party is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization. Such Party has all requisite corporate or limited liability company power to enter into, consummate the transactions contemplated by, and carry out its obligations under this Agreement. The execution and delivery by such Party of this Agreement and the consummation by such Party of the transactions contemplated by this Agreement have been duly authorized by all requisite corporate or limited liability company action on the part of such Party. This Agreement has been duly executed and delivered by such Party. Assuming due authorization, execution and delivery by the other Parties hereto, this Agreement constitutes the legal, valid and binding obligation of such Party, enforceable against it in accordance with its terms, subject in each case to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws now or hereafter in effect relating to or affecting creditors’ rights and remedies generally and subject, as to enforceability, to the effect of general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

 

(b) Non-Contravention. Neither the execution, delivery and performance by such Party of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance by such Party with any of the provisions hereof or thereof, will (A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of any Lien upon any of the properties or assets of such Party under any of the terms, conditions or provisions of (i) its governing instruments or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which such Party is a party or by which it may be bound, or to which such Party or any of the properties or assets of such Party may be subject, or (B) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any Law, statute, ordinance, rule or regulation, permit, concession, grant, franchise or any judgment, ruling, order, writ, injunction or decree applicable to such Party or any of its properties or assets.

 

ARTICLE III.

MISCELLANEOUS

 

Section 3.01. Entire Agreement. This Agreement, together with the Purchase Agreement, the Senior Debt and Senior Loan Agreement, the Hayes Amortizing Note and the other documents referenced herein, constitute the entire agreement, and supersede all other prior and contemporaneous agreements and understandings, both oral and written, among the Parties with respect to the subject matter hereof.

 

Section 3.02. Amendments and Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed by each of the Parties. No waiver of any breach or default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent breach or default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

 

Section 3.03. Successors and Assigns. All of the covenants and provisions of this Agreement by or for the benefit of a Party shall bind and inure to the benefit of their respective successors and permitted assigns. No Party hereunder may assign its rights or obligations hereunder without the prior written consent of the other Parties hereto.

 

 

Section 3.04. Counterparts; Effectiveness. This Agreement and any amendment hereto may be executed and delivered in any number of counterparts, and by the different Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. In the event that any signature to this Agreement or any amendment hereto is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof. No Party hereto shall raise the use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature to this Agreement or any amendment hereto or the fact that such signature was transmitted or communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file as a defense to the formation or enforceability of a contract, and each Party hereto forever waives any such defense.

 

Section 3.05. Effect of Headings. The section and subsection headings herein are for convenience only and not part of this Agreement and shall not affect the interpretation thereof.

 

Section 3.06. Further Assurances. The Parties hereby agree, from time to time, as and when reasonably requested by any other Party hereto, to execute and deliver or cause to be executed and delivered, all such documents, instruments and agreements, and to take or cause to be taken such further or other action, as may be reasonably necessary or desirable in order to carry out the intent and purposes of this Agreement.

 

Section 3.07. Governing Law. This Agreement will be governed by and construed in accordance with the Laws of the State of Florida. The Parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the state and federal courts located in Miami-Dade County Florida for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby. The Parties hereby irrevocably and unconditionally consent to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such action, suit or proceeding and irrevocably waive, to the fullest extent permitted by Law, any objection that they may now or hereafter have to the laying of the venue of any such action, suit or proceeding in any such court or that any such action, suit or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such action, suit or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.

 

Section 3.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 3.09. Captions. The article, section, paragraph and clause captions herein are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof.

 

 

Section 3.10. Severability. If any provision of this Agreement or the application thereof to any person (including the officers and directors of the parties hereto) or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the Parties.

 

Section 3.11. No Third Party Beneficiaries. Nothing contained in this Agreement, expressed or implied, is intended to confer upon any Person other than the Parties hereto (and their permitted assigns), any benefit, right or remedies.

 

Section 3.12. Termination. This Agreement shall terminate and be of no further force and effect if the APA Closing has not occurred by February 15, 2024.

 

[The remainder of this page is intentionally left blank—signature pages follow]

 

 

IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be duly executed as of the date first written above.

 

	D&D HAYES:
	D&D HAYES, LLC
	By:	/s/ Dr. Donald Hayes
		Name:	Dr. Donald Hayes
		Title:	President
	SELLERS:
	CEAUTAMED WORLDWIDE, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
		Name:	Alfonso J. Cervantes, Jr.
		Title:	Executive Chairman
	GREENS FIRST FEMALE, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
		Name:	Alfonso J. Cervantes, Jr.
		Title:	Executive Chairman
	WELLNESS WATCHERS GLOBAL, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
		Name:	Alfonso J. Cervantes, Jr.
		Title:	Executive Chairman
	PURCHASER:
	FIRST HEALTH LLC
	By:	/s/ Joseph X. Xiras
		Name:	Joseph X. Xiras
		Title:	Holder

 

	SENIOR LENDER:
	FIRST GROUP ACQUISITION COMPANY, LLC
	By:	/s/ Joseph X. Xiras
		Name:	Joseph X. Xiras
		Title:	Authorized Signatory

 

 

9

Exhibit 10.12

 

AGREEMENT

 

This AGREEMENT (this “Agreement”), dated as of January 29, 2024, is entered into by and among (i) Smart for Life, Inc., a Delaware corporation (the “Company”), (ii) Ceautamed Worldwide, LLC, a Florida limited liability company (“Ceautamed”), Wellness Watchers Global, LLC, a Florida limited liability company (“WWG”), and Greens First Female, LLC, a Florida limited liability company (“GFF”; each of Ceautamed, WWG and GFF are referred to individually as a “Seller” and collectively as the “Sellers”), (iii) First Group Acquisition Company, LLC, a Delaware limited liability company (“First Group” or “Senior Lender”), and (iv) First Health FL LLC, a Delaware limited liability company (“Purchaser”). Each of the Company, the Sellers, the Senior Lender and the Purchaser are collectively referred to herein as, the “Parties” and each individually as a “Party”.

 

RECITALS:

 

A. The Company, the Sellers and the Purchaser are entering into that certain Asset Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”; capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Purchase Agreement), pursuant to which, at the closing of the transactions contemplated by the Purchase Agreement (the “APA Closing”), the Purchaser will purchase the Purchased Assets from the Sellers and assume the Assumed Liabilities; and

 

B. Effective as of, and subject to and conditioned upon, the APA Closing, (i) Purchaser will agree to assume the Senior Debt, and the Senior Lender will agree to the assumption by Purchaser of the Senior Debt and (ii) Senior Lender shall release the Company and its subsidiaries of their respective obligations in respect of the Senior Debt and shall release any Encumbrances of the assets of the Company and its subsidiaries securing the Senior Debt (it being acknowledged and agreed that the Senior Lender is not releasing any Encumbrance on the Purchased Assets and, following the APA Closing, the Senior Lender will have an Encumbrance on the Purchased Assets and all other assets (now or hereafter arising) of the Purchaser); and

 

C. Effective as of, and subject to and conditioned upon, the APA Closing, (i) D&D Hayes, LLC will be assigning and transferring to the Senior Lender that certain 5% Secured Subordinated Promissory Note, dated as of July 29, 2022 (the “Hayes Amortizing Note”), issued by the Company to D&D Hayes, LLC in the initial principal amount of One Million Seventy-Five Thousand Dollars ($1,075,000)(the “Hayes Amortizing Note Assignment”), and (ii) the Company, the Sellers and Senior Lender desire to amend the Hayes Amortizing Note following the Hayes Amortizing Note Assignment, on the terms and conditions set forth herein.

 

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows:

 

ARTICLE I.
EFFECTIVENESS; SPECIFIC TRANSACTIONS

 

Section 1.01. Effectiveness. This Agreement shall be effective upon consummation of the APA Closing and shall not be effective unless and until the APA Closing occurs.

 

Section 1.02. Senior Debt. Effective upon, and subject to and conditioned upon, the APA Closing, (i) Purchaser shall, and hereby does, assume the Senior Debt (including, without limitation, all obligations under the Senior Loan Agreement and the other Loan Documents), (ii) Purchaser hereby acknowledges that, by virtue of the assumption of the Senior Debt, the Senior Lender will automatically have a first Encumbrance on the Purchased Assets and all other assets of the Purchaser (whether now existing or hereafter acquired) and, in any event, in order to secure the Purchaser’s obligations under the Senior Debt, the Purchaser hereby pledges, grants, assigns and transfers to the Senior Lender an Encumbrance on all of the assets of the Purchaser (whether now existing or hereafter acquired), including the Purchased Assets and (iii) the Senior Lender shall, and hereby does, release the Company and its subsidiaries as obligors of the Senior Debt and shall authorize the termination of any Encumbrances on the post-APA Closing assets of the Company and its subsidiaries securing the Senior Debt. For the avoidance of doubt, following the assumption of the Senior Debt by the Purchaser, the Senior Debt shall be secured by an Encumbrance on the Purchased Assets and all other assets of the Purchaser (whether now existing or hereafter acquired).

 

Section 1.03. Hayes Amortizing Note. The Company hereby consents to the Hayes Amortizing Note Assignment. Effective upon, and subject to and conditioned upon, the APA Closing and the Hayes Amortizing Note Assignment, the Company, the Sellers and the Senior Lender hereby agree to amend the Hayes Amortizing Note to provide as follows: (i) the Company shall be entitled to discharge the Hayes Amortizing Note for a cash payment to the Senior Lender in the amount of (y) Three Hundred Thousand Dollars ($300,000)(the “Reduced Principal Balance”) in lieu of the existing principal balance of the Hayes Amortizing Note in the amount of One Million Seventy-Five Thousand Dollars (the “Existing Principal Balance”), plus (z) interest on the Reduced Principal Balance at the rate of ten percent (10%) per annum; (ii) for each equity or debt financing (each, a “Financing”) consummated by the Company or any of its subsidiaries following the APA Closing until such time as all amounts due and owing pursuant to clause (i) above have been satisfied, the Company shall be obligated to pay to the Senior Lender an amount equal to One Hundred Thousand Dollars ($100,000) (or, if the proceeds received in a particular Financing are less than One Hundred Thousand Dollars ($100,000), the total amount of proceeds received in such Financing); (iii) the Encumbrance on the post-APA Closing assets of the Company and its subsidiaries evidenced by the Hayes Amortizing Note shall not be released until such time as the amounts set forth in clause (i) above are satisfied, in full; and (iv) if the Company or any of its subsidiaries defaults in the performance of its obligations pursuant to clause (ii) above, the Company shall be obligated to pay to the Senior Lender the Existing Principal Balance plus interest thereon at the rate set forth in clause (i)(z) above. For avoidance of doubt, effective upon the APA Closing, the difference between the Existing Principal Balance (plus any interest, default interest, costs or expenses due thereon) and the Reduced Principal Balance shall be forgiven and no longer due and payable by the Company, subject to clause (iv) above.

 

 

Section 1.04. Releases. The Company and the Sellers (collectively and individually, the “Releasing Parties”) do hereby, now and forever, fully and completely release, acquit and forever discharge the Senior Lender and the Purchaser and their respective directors, officers and agents (collectively, the “Released Parties”), of and from any and all actions, causes of actions, suits, debts, disputes, damages, claims, obligations, liabilities, costs, expenses and demands of any kind whatsoever, at law or in equity, whether matured, unmatured, liquidated or unliquidated, vested or contingent, known or unknow, that the Releasing Parties (or any of them) have against the Released Parties or any of them (whether directly or indirectly) as of the date hereof, except for any rights of the Company or the Sellers arising under this Agreement, the Purchase Agreement or any other agreement being entered into with any of the Released Parties in connection with the APA Closing. The Company and the Sellers each acknowledge that the foregoing release is a material inducement to each of the Senior Lender’s and the Purchaser’s decision to enter into this Agreement and for the Purchaser to consummate the transactions contemplated by the APA Closing.

 

ARTICLE II.
REPRESENTATIONS AND WARRANTIES

 

Section 2.01. Representations and Warranties of the Parties. Each Party, on its own behalf and not on behalf of any other Party, hereby represents and warrants to the other Parties as follows:

 

(a) Incorporation and Authority. Such Party is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization. Such Party has all requisite corporate or limited liability company power to enter into, consummate the transactions contemplated by, and carry out its obligations under this Agreement. The execution and delivery by such Party of this Agreement and the consummation by such Party of the transactions contemplated by this Agreement have been duly authorized by all requisite corporate or limited liability company action on the part of such Party. This Agreement has been duly executed and delivered by such Party. Assuming due authorization, execution and delivery by the other Parties hereto, this Agreement constitutes the legal, valid and binding obligation of such Party, enforceable against it in accordance with its terms, subject in each case to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws now or hereafter in effect relating to or affecting creditors’ rights and remedies generally and subject, as to enforceability, to the effect of general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

(b) Non-Contravention. Neither the execution, delivery and performance by such Party of this Agreement, nor the consummation of the transactions contemplated hereby, nor compliance by such Party with any of the provisions hereof or thereof, will (A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of any Lien upon any of the properties or assets of such Party under any of the terms, conditions or provisions of (i) its governing instruments or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which such Party is a party or by which it may be bound, or to which such Party or any of the properties or assets of such Party may be subject, or (B) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any Law, statute, ordinance, rule or regulation, permit, concession, grant, franchise or any judgment, ruling, order, writ, injunction or decree applicable to such Party or any of its properties or assets.

 

 

ARTICLE III.
MISCELLANEOUS

 

Section 3.01. Entire Agreement. This Agreement, together with the Purchase Agreement, the Senior Debt, the Hayes Amortizing Note and the other documents referenced herein, constitute the entire agreement, and supersede all other prior and contemporaneous agreements and understandings, both oral and written, among the Parties with respect to the subject matter hereof.

 

Section 3.02. Amendments and Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed by each of the Parties. No waiver of any breach or default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent breach or default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

 

Section 3.03. Successors and Assigns. All of the covenants and provisions of this Agreement by or for the benefit of a Party shall bind and inure to the benefit of their respective successors and permitted assigns. No Party hereunder may assign its rights or obligations hereunder without the prior written consent of the other Parties hereto.

 

Section 3.04. Counterparts; Effectiveness. This Agreement and any amendment hereto may be executed and delivered in any number of counterparts, and by the different Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. In the event that any signature to this Agreement or any amendment hereto is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof. No Party hereto shall raise the use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature to this Agreement or any amendment hereto or the fact that such signature was transmitted or communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file as a defense to the formation or enforceability of a contract, and each Party hereto forever waives any such defense.

 

Section 3.05. Effect of Headings. The section and subsection headings herein are for convenience only and not part of this Agreement and shall not affect the interpretation thereof.

 

Section 3.06. Further Assurances. The Parties hereby agree, from time to time, as and when reasonably requested by any other Party hereto, to execute and deliver or cause to be executed and delivered, all such documents, instruments and agreements, and to take or cause to be taken such further or other action, as may be reasonably necessary or desirable in order to carry out the intent and purposes of this Agreement.

 

 

Section 3.07. Governing Law. This Agreement will be governed by and construed in accordance with the Laws of the State of Florida. The Parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the state and federal courts located in Miami-Dade County Florida for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby. The Parties hereby irrevocably and unconditionally consent to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such action, suit or proceeding and irrevocably waive, to the fullest extent permitted by Law, any objection that they may now or hereafter have to the laying of the venue of any such action, suit or proceeding in any such court or that any such action, suit or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such action, suit or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.

 

Section 3.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 3.09. Captions. The article, section, paragraph and clause captions herein are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof.

 

Section 3.10. Severability. If any provision of this Agreement or the application thereof to any person (including the officers and directors of the parties hereto) or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the Parties.

 

Section 3.11. No Third Party Beneficiaries. Nothing contained in this Agreement, expressed or implied, is intended to confer upon any Person other than the Parties hereto (and their permitted assigns), any benefit, right or remedies.

 

Section 3.12. Termination. This Agreement shall terminate and be of no further force and effect if the APA Closing has not occurred by February 15, 2024.

 

[The remainder of this page is intentionally left blank—signature pages follow]

 

 

IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be duly executed as of the date first written above.

 

	THE COMPANY:
	SMART FOR LIFE, INC.
	By:	/s/ Darren Minton
	Name:	Darren Minton
	Title:	Chief Executive Officer
	SELLERS:
	CEAUTAMED WORLDWIDE, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
	Name:	Alfonso J. Cervantes, Jr.
	Title:	Executive Chairman
	GREENS FIRST FEMALE, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
	Name:	Alfonso J. Cervantes, Jr.
	Title:	Executive Chairman
	WELLNESS WATCHERS GLOBAL, LLC
	By:	/s/ Alfonso J. Cervantes, Jr.
	Name:	Alfonso J. Cervantes, Jr.
	Title:	Executive Chairman
	PURCHASER:
	FIRST HEALTH FL LLC
	By:	/s/ Joseph X. Xiras
	Name:	Joseph X. Xiras
	Title:	Member
	SENIOR LENDER:
	FIRST GROUP ACQUISITION COMPANY, LLC
	By:	/s/ Joseph X. Xiras
	Name:	Joseph X. Xiras
	Title:	Authorized Signatory

 

 

 

Exhibit 10.15

 

January 29, 2024

 

Smart for Life, Inc.

990 Biscayne Blvd., Suite 503

Miami, FL 33132

Attn: Darren Minton

 

Dear Darren:

 

Reference is made to that certain (i) 5% Secured Subordinated Promissory Note, dated as of July 29, 2022, issued by Smart for Life, Inc. (the “Company”) to RMB Industries, Inc. (“RMB”) in the initial principal amount of $967,500 (the “RMB Amortizing Note”) and (ii) 5% Secured Subordinated Promissory Note, dated as of July 29, 2022, issued the Company to RTB Childrens Trust (“RTB”) in the initial principal amount of $107,500 (the “RTB Amortizing Note” and together with the RMB Amortizing Note, the “Amortizing Notes”). The Amortizing Notes were issued pursuant to that certain Securities Purchase Agreement, dated March 14, 2022 and amended on July 29, 2022 (the “Securities Purchase Agreement”), by and among the Company, Ceautamed Worldwide, LLC (“Ceautamed”) and the sellers party thereto.

 

Concurrently herewith, the Company is entering into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Ceautamed, Wellness Watchers Global, LLC (“WWG”), Greens First Female, LLC (“GFF” and together with Ceautamed and WWG, the “Sellers”) and First Health FL LLC (“Purchaser”) pursuant to which, at the closing of the transactions contemplated by the Asset Purchase Agreement (the “APA Closing”), the Purchaser will purchase the Purchased Assets (as defined in the Asset Purchase Agreement) from the Sellers and assume the Assumed Liabilities (as defined in the Asset Purchase Agreement).

 

Effective as of, and subject to and conditioned upon, the APA Closing, RMB and RTB hereby (i) forgive and discharge the indebtedness evidenced by the Amortizing Notes, which Amortizing Notes shall be marked cancelled and (ii) forgive any conversion price floor guarantees made by the Company to RMB and RTB in respect of the Buyer Notes (as defined in the Securities Purchase Agreement).

 

This letter shall be effective solely upon, and subject to and conditioned upon, consummation of the APA Closing. This letter shall automatically terminate and be of no force and effect if the APA Closing has not occurred by February 15, 2024.

 

[signature page follows]

 

 

	Very truly yours,
	RTB Childrens Trust
	By:	/s/ Ryan Benson
	Name:	Ryan Benson
	Title:	Authorized Signatory
	RMB Industries, Inc.
	By:	/s/ Ryan Benson
	Name:	Ryan Benson
	Title:	Authorized Signatory

 

 

 

Exhibit 99.1

 

SMART FOR LIFE, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The following unaudited pro forma condensed consolidated financial statements are based on the Company's historical consolidated results of operations and financial position, adjusted to give effect to the Disposition, as defined in Item 2.01 of this Form 8-K, as if it had been completed on September 30, 2023 with respect to the pro forma condensed consolidated balance sheet and for the nine months ended September 30, 2023 and for the year ended December 31, 2022 with respect to the pro forma condensed consolidated statements of operations.

 

These unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and do not include all of the information and note disclosures required by generally accepted accounting principles of the United States.

 

The unaudited pro forma condensed consolidated financial information is subject to the assumptions and adjustments described in the accompanying notes. These assumptions and adjustments are based on information presently available. Actual adjustments may differ materially from the information presented. The unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of the Company for each period presented and in the opinion of the Company’s management, all adjustments and disclosures necessary for a fair presentation of the pro forma data have been made. These unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial condition that would have been achieved had events reflected been completed as of the dates indicated, and may not be useful in predicting the impact of the Disposition on the future financial condition and results of operations of the Company due to a variety of factors.

 

 

SMART FOR LIFE, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2023

 

						Pro Forma
		Historical				Adjustments						Pro Forma
ASSETS
Current assets:
Cash and cash equivalents		$	8,890			$	(1,635	)		(a)		$	7,255
Accounts receivable, net			412,547				(48,984	)		(a)			363,563
Inventory			1,987,730				(119,645	)		(a)			1,868,085
Prepaid expenses and other current assets			139,928				(139,928	)		(a)			-
Total current assets			2,549,095				(310,192	)					2,238,903
Property and equipment, net			311,472				(2,473	)		(a)			308,999
Intangible assets, net			14,341,745				(3,307,455	)		(a)			11,034,290
Goodwill			5,816,100				(173,451	)		(a)			5,642,649
Deposits and other assets			98,947				-						98,947
Investments			-				-						-
Right of use asset			2,421,550				(368,501	)		(a)			2,053,049
Total assets		$	25,538,909			$	(4,162,072	)				$	21,376,837
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable		$	4,241,956			$	(835,962	)		(b)		$	3,405,994
Accrued expenses			3,420,964				(107,719	)		(b)			3,313,245
Accrued expenses, related parties			157,938				-						157,938
Due to related parties, net			-				-						-
Deferred revenue			750,739				(85,458	)		(a)			665,281
Preferred stock dividend payable			600,750				-						600,750
Lease liability, current			347,852				(35,199	)		(a)			312,653
Debt, current, net of debt discounts			4,404,462				(28,157	)		(a)			4,376,305
Total current liabilities			13,924,661				(1,092,495	)					12,832,166
Lease liability, noncurrent			2,157,344				(339,753	)		(a)			1,817,591
Debt, noncurrent			8,505,068				(2,703,042	)		(b)			5,802,026
Total liabilities			24,587,073				(4,135,290	)					20,451,783
Commitments and contingencies
Equity:
Stockholders’ equity:
Series A Preferred			-				-						-
Series B Preferred			4				-						4
Common Stock			63				-						63
Additional paid in capital			58,792,603				-						58,792,603
Accumulated deficit			(57,840,834	)			(26,782	)		(c)			(57,867,616	)
Total stockholders’ equity			951,836				(26,782	)					925,054
Total liabilities and equity		$	25,538,909			$	(4,162,072	)				$	21,376,837

 

 

SMART FOR LIFE, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS FOR THE YEAR ENDED

DECEMBER 31, 2022

 

						Pro Forma					Pro
		Historical				Adjustments					Forma
Revenue – manufacturing		$	14,331,482				(1,481,064	)	(d)		$	12,850,418
Revenue - advertising			3,434,879				-					3,434,879
Total revenues		$	17,766,361			$	(1,481,064	)			$	16,285,297
Cost of goods sold			10,327,956				(986,309	)				9,341,647
Cost of sales - advertising			2,561,276				-					2,561,276
Total cost of revenue			12,889,232				(986,309	)	(d)			11,902,923
Gross Profit		$	4,877,129			$	(494,755	)			$	4,382,374
Operating expenses:
General and Administrative			6,321,672				(639,594	)	(d)			5,682,078
Compensation			6,690,889				(245,976	)	(d)			6,444,913
Professional services			1,925,713				171,352		(d)			2,097,065
Depreciation and amortization			2,145,441				(421,195	)	(d)			1,724,246
Total operating expenses			17,083,715				(1,135,413	)				15,948,302
Operating loss		$	(12,206,586	)		$	640,658				$	(11,565,928	)
Loss from discontinued operations			-				(647,014	)	(e)			(647,014	)
Other non-operating income (expense), net			(8,900	)			-					(8,900	)
Consulting fee – related parties			(1,471,199	)			-					(1,471,199	)
IPO expenses			(702,394	)			-					(702,394	)
Gain on debt extinguishment			329,052				-					329,052
Interest (expense)			(15,917,788	)			6,356		(d)			(15,911,432	)
Total other (expenses)			(17,771,229	)			(640,658	)				(18,411,887	)
Net loss from continuing operations			(29,977,815	)								(29,330,801	)
Net loss from discontinued operations			-									(647,014	)
Net loss		$	(29,977,815	)							$	(29,977,815	)
Preferred Dividends		$	-								$	-
Net loss attributable to common stockholders		$	(29,977,815	)							$	(29,977,815	)
Weighted average shares outstanding			304,950									304,950
Earnings per share for common stockholders:
Continuing operations		$	(98.30	)							$	(96.18	)
Discontinued operations		$	-								$	(2.12	)

 

 

SMART FOR LIFE, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2023

 

						Pro Forma					Pro
		Historical				Adjustments					Forma
Revenue – manufacturing		$	7,077,105				(2,486,412	)	(d)		$	4,590,693
Revenue - advertising			361,470				-					361,470
Total revenues		$	7,438,575			$	(2,486,412	)			$	4,952,163
Cost of goods sold			4,528,103				(1,372,528	)				3,155,575
Cost of sales - advertising			279,037				-					279,037
Total cost of revenue			4,807,140				(1,372,528	)	(d)			3,434,612
Gross Profit		$	2,631,435			$	(1,113,884	)			$	1,517,551
Operating expenses:
General and Administrative			3,838,333				(258,236	)	(d)			3,580,097
Compensation			4,929,327				(401,995	)	(d)			4,527,332
Professional services			1,565,396				3,500		(d)			1,568,896
Consulting Fee Related Party			46,686				-					46,686
Impairment of intangible assets			466,737				-					466,737
Depreciation and amortization			1,814,613				(1,113,890	)	(d)			700,723
Total operating expenses			12,661,092				(1,770,621	)				10,890,471
Operating loss		$	(10,029,657	)		$	656,737				$	(9,372,920	)
Loss from discontinued operations			-				(976,983	)	(e)			(976,983	)
Loss on disposal of subsidiary			-				(26,782	)	(c)			(26,782	)
Other non-operating income (expense), net			333,498				(8,826	)	(d)			324,672
Gain on debt extinguishment			273,058				(67,331	)	(d)			205,727
Interest (expense)			(3,425,318	)			396,403		(d)			(3,028,915	)
Total other (expenses)			(2,818,762	)			(683,519	)				(3,502,281	)
Net loss from continuing operations			(12,848,419	)								(11,871,436	)
Net loss from discontinued operations			-									(976,983	)
Net loss		$	(12,848,419	)							$	(12,875,201	)
Preferred Dividends		$	-								$	-
Net loss attributable to common stockholders		$	(12,848,419	)							$	(12,875,201	)
Weighted average shares outstanding			304,950									304,950
Earnings per share for common stockholders:
Continuing operations		$	(42.13	)							$	(38.93	)
Discontinued operations		$	-								$	(3.20	)

 

 

SMART FOR LIFE, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE
SHEET AND STATEMENTS OF OPERATIONS

 

(a)	Adjustment to eliminate the assets and liabilities attributable to the Divested Assets.

 

(b)	Adjustment reflects the elimination of debts forgiven and paid as consideration in the Disposition.

 

(c)	Amount represents the loss on sale of the divested assets resulting from the Disposition.

 

(d)	Adjustment to eliminate the historical revenue and expenses (operating and other) of the Divested Assets for the respective periods of the nine months ended September 30, 2023 and December 31, 2022.

 

(e)	Adjustment represents the reclassification of the eliminated historical revenues and expenses into a single component for disclosure purposes.

 

 

5

 

v3.24.0.1

Cover	Jan. 29, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jan. 29, 2024
Entity File Number	001-41290
Entity Registrant Name	SMART FOR LIFE, INC.
Entity Central Index Key	0001851860
Entity Tax Identification Number	81-5360128
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	990 Biscayne Blvd
Entity Address, Address Line Two	Suite 505
Entity Address, City or Town	Miami
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33132
City Area Code	786
Local Phone Number	749-1221
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	SMFL
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false

---