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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA

FORT LAUDERDALE DIVISION www.flsb.uscourts.gov

In re: TAMARAC 10200, LLC and Case No. 20-bk-23346-PDR UNIPHARMA, LLC, Case No. 20-bk-23348-PDR Debtors. Chapter 11 Cases (Jointly Administered) /

CREDITORS AND EQUITYHOLDERS’ OBJECTION TO DEBTORS’ MOTION FOR ENTRY OF AN ORDER (I) APPROVING STALKING

HORSE BID AGREEMENT AND AUTHORIZING THE SALE OF CERTAIN ASSETS OF THE DEBTORS OUTSIDE THE ORDINARY COURSE OF

BUSINESS, (II) AUTHORIZING THE SALE OF ASSETS FREE AND CLEAR OF ALL CLAIMS AND LIENS EXCEPT FOR PERMITTED LIENS,

ENCUMBRANCES AND ASSUMED LIABILITIES, (III) AUTHORIZING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY

CONTRACTS AND UNEXPIRED LEASES, AND (IV) GRANTING RELATED RELIEF (ECF NO. 19)

Creditors and Equity Holders, Raimundo Santamarta, Jr. (“Raimundo, Jr.”), Yohana

Santamarta (“Yohana”), and Reinaldo Santamarta (“Reinaldo” and together with Raimundo, Jr.

and Yohana, the “Creditors”) by and through undersigned counsel file this Objection (the

“Objection”) to the Debtors’ Motion for Entry of an Order: (I) Approving Stalking Horse Bid

Agreement and Authorizing the Sale of Certain Assets of the Debtors Outside the Ordinary Course

of Business, (II) Authorizing the Sale of Assets Free and Clear of All Claims and Liens Except for

Permitted Liens, Encumbrances and Assumed Liabilities, (III) Authorizing the Assumption and

Assignment of Certain Contracts and Unexpired Leases, and (IV) Granting Related Relief (ECF

No. 19) (the “Sale Motion”), and state as follows:

Case 20-23346-PDR Doc 236 Filed 01/18/21 of 27

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2023346210118000000000001

Docket #0236 Date Filed: 01/18/2021

Lead Case No. 20-23346-PDR

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I. PRELIMINARY STATEMENT

1. The Creditors are not opposed to a sale of the Debtors’ assets to maximize value

for their estates and creditors, but this proposed sale simply rewards the prepetition inequitable

conduct of the Debtors’ prepetition lender, NHTV. Seeking to protect its anticipated rate of return

on investment at all costs, NHTV wrongfully declared a non-monetary default based on conduct

that was permitted by the loan agreement and approved by NHTV’s board representative. That

default notice proved unavailing, but nonetheless the Debtors’ auditors provided a draft

unqualified audit report that disclosed the threat to the Debtors’ ability to continue as a “going

concern.” Unable to otherwise to assert a breach due to the lack of financial covenants, NHTV

seized upon this disclosure and determined that it constituted a failure to provide the required

financial reporting. Having falsely claimed events of default twice, NHTV compounded its

harmful conduct by seizing control of the business, firing highly experienced, key personnel in

favor of NHTV’s preferred team, and – on information and belief – causing a deterioration in

business relationships and opportunities.1

2. Perhaps cognizant of the claims against itself, NHTV engineered this current sale

via the personnel it installed and paid, by which it would obtain (i) a $90+ million enterprise in a

cashless transaction for less than fair value (as the Debtors have admitted by their Schedules and

Liquidation Analysis) and (ii) releases in derogation of any challenge period. This is a stunning

result – NHTV breaches its contractual and fiduciary duties to the Debtors so it can obtain their

assets for a fraction of their worth, while cleansing itself of liability. Aside from its wrongful

default notices and self-dealing, NHTV fraudulently induced the Santamarta Family to enter into

the loan in the first place and attributed funding to the loan rather than its equity investment,

1 The Creditors reserve the right to supplement or amend this Objection as discovery progresses.



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apparently in order to maximize its protections rather than accord with the reality of the investment.

NHTV cannot be permitted to credit bid its lien because its secured claims are subject to equitable

subordination under Section 510(c) of the Bankruptcy Code and recharacterization as equity.

3. However, the Creditors recognize the risk to creditors if the sale itself is disrupted.

Thus, the Creditors propose that any order approving the sale provide that:

a. If NHTV is the winning bidder and its secured claims are successfully

challenged, NHTV shall repay to the estates in cash the full amount of its “debt”

paid by credit bid or assumption, with such amounts to be distributed in

accordance with the Court’s adjudication of the challenge; and

b. If NHTV is not the winning bidder, the proceeds of the sale shall be held by the

Debtors pending the determination of the challenge to NHTV’s secured claims,

to be distributed in accordance with the results of that challenge.

II. BACKGROUND

4. A complete recitation of the facts relevant to and contained within the Objection is

available within the Creditors’ adversary proceeding complaint against NHTV ULM Holdings,

LLC (“NHTV”). The Creditors anticipate filing the Complaint later today (the “Complaint”). The

Objection adopts and incorporates the allegations of the Complaint as if fully set forth herein.

A. General Background of the Creditors, the Debtors, and NHTV

5. Before starting Unipharma in 2012, Raimundo Jose Santamarta, Sr. (“Raimundo,

Sr.” and together with the Creditors, the “Santamarta Family”) ran successful businesses which

engaged in manufacturing, packaging, and distribution operations for health, wellness, and

cosmetic products throughout Venezuela. As the political situation in Venezuela changed, his

business suffered political reprisals from the governing regime. Ultimately, Raimundo, Sr.



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determined that the best way to protect his assets and family would be to come to the United States

and start anew.

6. Given his business experience of over 40 years, Raimundo, Sr. founded Debtors

Unipharma, LLC and Tamarac 10200, LLC (“Tamarac”) to provide product development services,

a variety of manufacturing services, including private label and documentation, and regulatory

assistance services.

7. To grow the business, Unipharma needed substantial capital. As such, Raimundo,

Sr. communicated with various investors, including NHTV. NHTV engaged in a roughly six-

month process of due diligence, including engaging third parties, before determining that the

investment made sense based upon its valuation of Unipharma at $180 million pre-investment and

$240 million post-investment.

8. To induce the Santamarta Family to select NHTV as its investor, NHTV falsely

represented to Unipharma’s CEO that NHTV would act as a strategic partner and use its

connections to assist Unipharma. NHTV also knew that Unipharma’s CEO was new to the United

States from Venezuela and needed introductions to key U.S. persons to facilitate Unipharma’s

business, particularly as he did not speak, read or understand English.

9. The investment from NHTV was structured as a combination loan and equity

investment documented as of September 28, 2018, with grants of equity being conditions precedent

to “loan” funding. For its funds, NHTV obtained voting stock and a special membership seat,

which had the unilateral power to veto various conduct, unlike other members.

10. Via its membership seat and control, NHTV obtained detailed financial and

operational information from Unipharma on a weekly basis. In January 2019, NHTV also directed

Unipharma to hire a Director of Finance, who provided information directly to NHTV and handled



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Unipharma’s financials and accounting. NHTV also obtained information from outside

consultants it required Unipharma to engage.

11. The parties understood that Unipharma would need substantial investments to

create full-scale, revenue producing operations. To that end, the “loan” did not contain any

financial, collateral availability, revenue, EBITDA, or solvency covenants, with the exceptions

that NHTV would not be obligated to fund if there existed a material adverse effect in Unipharma’s

business (and NHTV ultimately invested the full $60 million funding amount). Reflecting the

anticipated capital needs, Unipharma was only obliged to make a 3% interest payment once per

year, with the 7% in remaining PIK interest added to the loan balance. None of the principal would

come due until September 28, 2023. Given that the parties anticipated that Unipharma’s

investment needs could be larger than the “loan” amount, the agreement also contemplated an

additional $30 million in funding.

12. The maturity date and interest provisions coincided with NHTV’s investment

horizon and desired rate of return on its investment. The parties entered into an investment

agreement concurrently with the “loan,” which required the Santamarta Family to purchase – or

find a suitable purchaser for – NHTV’s affiliate’s equity within 6 years, by September 28, 2024.

13. At the time of the NHTV transactions, Raimundo, Sr. had already lent

$80,404,791.10 to Unipharma (both individually and via his entity Global Capital Invest Finance,

Ltd. (“Global Capital”). As such, NHTV required Raimundo, Sr. and Global Capital to

subordinate their loans to NHTV’s loans.

14. But that subordination would not protect the funds NHTV invested to purchase a

24.49% equity investment in Unipharma, so NHTV determined to allocate none of its investment



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to its equity, despite having determined the value was $180 million pre-investment and $240

million post-investment.

15. At this point, all but 24.49% of the equity of Unipharma is held by the Santamarta

Family. The 24.49% amount is held by NHTV’s affiliate, NHTV (AIV) ULM Holdings, LLC

(“AIV”).

B. NHTV’s Attempts to Locate Defaults

16. In early 2019, the FDA issued to Unipharma a warning letter, requiring a product

recall and an overhaul of the water system, with production of over the counter products restarting

in October 2019. Due to the cash flow issues presented by the work stoppage, starting around the

last quarter of 2019, NHTV sought to maximize near-term cash flow and force the Santamarta

Family to provide additional funding. But NHTV was unwilling to permit the Santamarta Family

to provide funding on a secured basis and unwilling to fund jointly with the Santamarta Family.

17. After months of back and forth, on April 15, 2020, Raimundo Sr. responded to

NHTV’s demand for $8 million in funding by inquiring about the $30 million in additional funding

contemplated by the Asserted NHTV Loan.

18. The following day, on April 16, 2020, NHTV sent a Notice of Default to Unipharma

listing the following defaults:

a. The placement of certain of Unipharma’s funds in an investment account with

NHTV’s affiliate Morgan Stanley (the “MS Account”); and

b. The occurrence of certain transactions with Bio Dose Pharma, LLC (“Bio

Dose”), an entity owned by Raimundo, Sr., “on terms that are less favorable to

[Unipharma] than would be obtained in an arms’ length transaction.”



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19. Both of the alleged defaults were bogus. For the first default, the MS Account was

opened and funded at the direction of NHTV’s affiliate, and NHTV knew of the account no later

than November 2018 but never mentioned it, much less complained. Unipharma’s board, which

included NHTV’s representative, approved the use of the account. Moreover, the MS Account

was invested in shares of cash and mutual funds as permitted by the Asserted NHTV Loan.

20. For the second default, the transactions were carried out at NHTV’s direction and

authorization. Because NHTV directed Unipharma in the last quarter of 2019 and the first quarter

of 2020 to refocus from pharmaceutical-grade products to dietary supplements to create cash flow,

Unipharma increased its production and sale of GlutaDose to Bio Dose. The transactions were

favorable to Unipharma. Bio Dose provided substantial services to Unipharma and purchased

GlutaDose on materially better terms than the market rate. NHTV was both aware of and

authorized these transactions with Bio Dose.

21. In connection with the notice of default, NHTV offered to forbear if it received (a)

$10 million in escrow within 15 days, (b) either repayment of its “loan” in full or satisfaction of

certain revenue metrics within 30 days, and (c) additional control over Unipharma. Plainly, the

notice of default was intended to enhance NHTV’s negotiating position against the Santamarta

Family.

22. Thereafter, on April 24, 2020, NHTV for the first time requested the 2019 audited

financial statements, which were due under the Asserted NHTV Loan by March 30, 2020. They

had not yet been provided due to the challenges presented by the COVID-19 pandemic, which had

led to a state of emergency being declared by the Florida Governor on March 9, 20202 and “stay

2 State of Florida, Office of the Governor, Executive Order Number 20-52, available at https://www.flgov.com/wp-content/uploads/orders/2020/EO_20-52.pdf.



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at home” orders being issued for Miami-Dade and Broward counties from March 19, 2020 and

March 22, 2020, respectively.3

23. On June 5, 2020, NHTV sent a Federal Rule of Evidence 408 settlement letter

noting that NHTV had received perfection documents from Unipharma and informing Unipharma

that the failure to provide the 2019 audited financials constituted an Event of Default, while stating

that NHTV wanted a response to its prior settlement offer and that its real desire was to find a way

to get the Santamarta Family to provide them with an “acceptable exit from this debt investment”

(but apparently not the equity portion).

24. On June 9, 2020, Unipharma provided NHTV with drafts of the 2019 financials,

which were substantially final and contained an unqualified certification of compliance with

GAAP. The financials noted the auditors’ concern about Unipharma’s ability to continue as a

going concern, with the notes explaining that the stated amounts were dependent on continued

operations, “which in turn is dependent upon [Unipharma’s] ability to meet its funding

requirements on a continuous basis, to maintain existing financing and to succeed in its future

operations.” The auditors informed the Santamarta Family that to eliminate the “going concern”

qualification, they would need to resolve NHTV’s asserted defaults.

25. At that point, Unipharma remained current on all its debts, including the Asserted

NHTV Loan. But, NHTV’s insistence on Santamarta Family funding on unsecured terms, NHTV’s

refusal to disburse the additional $30 million under the Asserted NHTV Loan, and NHTV’s desire

to prematurely exit its “loan” were all imperiling Unipharma’s operations, its revenues, and its

prospects of obtaining additional financing.

3 See Miami-Dade County Emergency Order 07-20, available at https://www.miamidade.gov/information/library/canceled-coronavirus-emergency-order-07-20-businesses.pdf; Broward County Administrator’s Emergency Order 20-01, available at https://www.broward.org/CoronaVirus/Documents/BerthaHenryExecutiveOrder20-01.pdf.



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26. Thereafter throughout June, July, and August 2020, NHTV and the Debtors

engaged in settlement negotiations to discuss terms by which NHTV could exit its investment.

27. In July 2020, NHTV required Unipharma to install its designee, Alan Petro, as

Chief Operating Officer. In August 2020, Petro unilaterally halted Unipharma’s operations,

causing losses of revenues, inventory stocks, and the ability to fill orders.

28. From about mid-August to October 2020, the communications about the potential

exit with NHTV ceased, causing the Santamarta Family to believe that NHTV had determined to

continue honoring its commitments under the Asserted NHTV Loan.

C. NHTV Improperly Exercises Remedies

29. On October 19, 2020, through letters dated the 18th, NHTV sent a notice to the

Debtors asserting that the purported failure to provide the 2019 audited financials identified in

NHTV’s June 5, 2020 letter constituted an Event of Default permitting NHTV to exercise its

various remedies under the NHTV Loan. The notice purported to take the Santamarta Family’s

voting rights for NHTV’s benefit and to remove the managers of the Debtors and replace them

with two individuals chosen by NHTV, Charles Sweet and Elizabeth Muscato (the “NHTV

Managers”).4

30. The same day, the NHTV Managers terminated the employment of Unipharma

officers Reinaldo and Raimundo, Sr. and other high level employees, without any analysis

whatsoever as to the effect on Unipharma. Indeed, the terminations would result in material

damage to Unipharma, its business operations and important business relationships.

4 Sweet and Muscato were appointed as the managers of Unipharma, while only Sweet was appointed as the manager of Tamarac.



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31. On or about October 27, 2020, NHTV caused the Debtors to elevate Alan Petro to

the CEO position and retain SOLIC and bankruptcy counsel in connection with a planned

restructuring. SOLIC’s role was later expanded in November 2020 to include providing entirely

new management for Unipharma. SOLIC reported both to Unipharma and NHTV.

32. Also on October 27, 2020, the Debtors – by their new CEO – falsely communicated

to their customers and vendors that “the former CEO, Raimundo Santamarta, along with Vice

President Reinaldo Santamarta, have stepped down from their roles to pursue other business

ventures, and as part of the long-term strategy to steer Unipharma through the next phase of

growth.” This communication was factually inaccurate and caused numerous customers and

vendors to question their reputations, business prospects, and equity interests in the Debtors.

33. NHTV’s wrongful takeover of Unipharma and troubling communications to the

public caused Unipharma to lose contractual opportunities for lucrative sales of Unipharma

products, including both contracts that were in the process of being negotiated and contracts that

were executed prior to the substantial uncertainty created by Defendants’ actions and

communications. NHTV also terminated invaluable members of Unipharma’s management

without any basis, causing Unipharma to lose key personnel, historical knowledge, and important

relationships.

D. NHTV Engineers the Sale to Obtain Both Unipharma and Releases

34. On December 7, 2020 (the “Petition Date”), the Debtors filed petitions for relief

under Chapter 11 of the Bankruptcy Code.

35. On the Petition Date, the Debtors also filed the Sale Motion, which seeks, among

other things, to approve the following transaction:



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a. The Debtors would sell substantially all of their assets to NHTV’s affiliate

NHTV (AIV) ULM BIDCO LLC (“NHTV BidCo”) pursuant to the Stalking

Horse Bid Agreement, including avoidance claims, but not including the DIP

proceeds being planned to fund a liquidating plan;

b. NHTV would use a $20 million credit bid against its Asserted NHTV Loan to

purchase those assets, while assuming the remainder of the Asserted NHTV

Loan;

c. NHTV’s DIP loan would remain with the Debtors rather than being assumed;

and

d. The Debtors would grant NHTV and NHTV BidCo releases from all known

and unknown existing claims of any nature relating to the Debtors, the DIP

Loan Facility, the Asserted NHTV Loan, the bankruptcy cases, the sale

transaction, and the Stalking Horse Bid Agreement.

36. The Sale Motion was timed to benefit NHTV. The Debtors planned for the

approval of the bidding procedures to be heard over the holidays, with those procedures and the

sale itself to be heard on an expedited basis because NHTV delayed the bankruptcy filing and ran

up substantial professional costs, and thereby shortened Unipharma’s runway. The exigency was

created by NHTV, rather than any imminent threats to the business.

37. The Stalking Horse Bid, negotiated between NHTV’s designees and NHTV,

likewise was designed to benefit NHTV. NHTV fully understands how valuable Unipharma’s

business is, as evidenced by its willingness to “pay” the full amount of its “debt” for it, whether

by a credit bid or assumption, and the sale was structured to force alternative bidders to pay cash

and in amounts well in excess of the amounts that even NHTV would credit bid and assume. See



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Order Granting Debtors’ Expedited Motion for Entry of an Order (I) Authorizing and Approving

the Debtors’ Entry into the Stalking Horse Bid Agreement with the Stalking Horse Bidder, Subject

to the Bidding Procedures and the Sale Hearing, (II) Approving Bidding Procedures, (III)

Scheduling the Bid Deadlines and the Auction, (IV) Scheduling a Hearing to Consider the

Transaction, (V) Approving the Form and Manner of Notice Thereof, (VI) Approving Contract

Procedures, and (VII) Granting Related Relief (ECF No. 158) (the “Bidding Procedures Order”)

at ¶¶11, 13, 14, 30.

38. The marketing efforts to obtain an alternative to the Stalking Horse Bid were no

better. After the Debtors started marketing the business, they failed to approach the Santamarta

Family as potential buyers, though the owners of the company would be likely bidders, and sought

to exclude competitors from obtaining company data, again despite competitors being natural

bidders. See Bidding Procedures Order at pp. 25-26 of 50 (Bidding Procedures).

39. According to Debtors’ schedules (ECF Nos. 14, 108), their assets total to at least

$81.23 million. According to the Debtors’ liquidation analysis in support of their amended

disclosure statement (ECF No. 221), the Debtors’ assets are worth $85.3 million and, on a

liquidation basis, between $29.2 million and $36.6 million.

40. The Court’s Final Order (I) Authorizing Debtors to (A) Obtain Postpetition Senior

Secured Financing and (B) Use Cash Collateral, (II) Granting Adequate Protection to Senior

Secured Lender, (IIII) Granting Liens and Superpriority Claims, (IV) Modifying the Automatic

Stay, and (V) Granting Related Relief (ECF No. 155) (the “Final DIP Financing Order”) and the

Court’s Bidding Procedures Order for the sale recognize that NHTV’s secured claims and right to

credit bid are subject to the rights of creditors and other parties in interest to challenge by virtue

of the terms of the Final DIP Financing Order. While a proposed form of order approving the Sale



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Motion has not yet been filed, the Sale Motion seeks relief that could improperly cut off the parties’

challenge rights. The Sale Motion seeks approval of the Stalking Horse Bid Agreement (ECF No.

19 at Ex. A), which requires a “Sale Order” (at pp. 53-54 of 178)) that approves the credit bid,

finds NHTV is a “good faith” buyer under Bankruptcy Code section 363(m), and releases NHTV,

AIV, and their affiliates from claims held by the Debtors, even though the challenge period in the

DIP Financing Order ends on February 9, 2021 (ECF No. 69 at para. 13), after both the sale hearing

and the proposed outside closing date of February 5, 2021 (ECF No. 19 at p. 20). This conflicts

with the Bidding Procedures Order (ECF No. 158), which provides (at paragraph 30) that the right

to credit bid is “subject in all respects to the challenge period.”

III. OBJECTION

A. NHTV Should Not Be Permitted to Credit Bid.

41. These historical facts evidence textbook “cause” to deny NHTV’s right to credit

bid. Not only are its secured claims at least partially equity, those claims are also subject to

equitable subordination due to NHTV’s baseless default notices, damages to the Debtors, breaches

of its contractual and fiduciary duties, and misrepresentations to the Santamarta Family and the

Debtors. NHTV has the burden of proof on its right to credit bid once cause is shown. See 11

U.S.C. § 363(p)(2) (“entity asserting an interest in property has the burden of proof on the issue of

the validity, priority, or extent of such interest”); In re The Free Lance-Star Publishing Co. of

Fredericksburg, VA, 512 B.R. 798, 801 (Bankr. E.D. Va. 2014) (holding that secured creditor “has

the burden of proof on the issue of the validity, priority, or extent of its liens” in dispute over

secured creditor’s right to credit bid).

42. Given that NHTV was and is an insider, its claims are subject to special scrutiny.

See In re Global Ocean Carriers Ltd., 251 B.R. 31, 48 (Bankr. D. Del. 2000) (sales to insiders are



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subject to special scrutiny in bankruptcy cases); In re Rickel & Assocs., Inc.¸ 272 B.R. 74, 100

(Bankr. S.D.N.Y. 2002) (same); Bayer Corp. v. MascoTech, Inc. (In re Autostyle Plastics, Inc.),

269 F.3d 726, 745 (6th Cir. 2001) (“Insider transactions are more closely scrutinized, not because

the insider relationship makes them inherently wrong, but because insiders ‘usually have greater

opportunities for ... inequitable conduct.’”) (citing Fabricators, Inc. v. Technical Fabricators, Inc.

(In re Fabricators, Inc.), 926 F.2d 1458, 1465 (5th Cir. 1991)); In re Channel One

Communications, Inc., 117 B.R. 493, 496 (Bankr. E.D. Mo. 1990) (citing In re Industrial Valley

Refrigeration & Air Conditioning Supplies, Inc., 77 B.R. 15, 17 (Bankr. E.D. Pa. 1987); In re

Crown Village Farm LLC, 415 B.R. 86, 93 (Bankr. D. Del. 2009) (“The sale process will be under

the close scrutiny of the Court as required where the stalking horse is an insider.”); see also In re

N & D Props., Inc., 799 F.2d 726, 731 (11th Cir. 1986) (for insider equitable subordination claims,

trustee must show “material evidence of unfair conduct,” at which point claimant “must prove the

fairness of his transactions with the debtor or his claim will be subordinated”).

43. Bankruptcy courts have discretion to deny a secured creditor the ability to credit

bid for “cause”. See 11 U.S.C. § 363(k). While the Bankruptcy Code entitles a secured creditor

to credit bid its allowed secured claim, “[t]he law is equally clear, as Section 363(k) provides, that

the Court may ‘for cause order[] otherwise.’” ln re Fisker Automotive Holdings. Inc., 510 B.R.

55, 59 (Bankr. D. Del. 2014); see also In re Free Lance-Star Publ’g Co., 512 B.R. 798, 805 (Bankr.

E.D. Va.) (noting that credit bidding is “not an absolute right”). The term “cause” is undefined,

but it is a “flexible concept enabling a court to fashion an appropriate remedy on a case-by-case

basis.” In re NJ Affordable Homes Corp., Case No. 05-60442-DHS, 2006 WL 2128624 at *16

(Bankr. D.N.J. June 29, 2006). Cause can even be found “in the interest of any policy advanced

by the Code, such as to ensure the success of the reorganization or to foster a competitive bidding



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environment.” Fisker, 510 B.R. at 59 (quoting In re Philadelphia Newspapers, LLC, 599 F.3d

298, fn.14 (3d Cir. 2010)).

44. Moreover, section 363(k) of the Bankruptcy Code permits credit bidding of allowed

claims only. See 11 U.S.C. § 363(k). NHTV’s claims have not been allowed and cannot be

allowed until the Creditors’ pending adversary proceeding and any other challenges are resolved.

“[C]ourts have found ‘cause’ to deny the opportunity to credit bid when a sufficient dispute exists

regarding the validity of the lien forming the basis for the credit bid.” In re L.L. Murphrey Co.,

No. 12-03837-8-JRL, 2013 WL 2451368, at *5 (Bankr. E.D.N.C. June 6, 2013) (quotation and

citation omitted) (denying right to credit bid due to challenge to lien). See In re Daufuskie Island

Props., LLC, 441 B.R. 60, 61 (Bankr. D.S.C. 2010) (holding that a secured creditor, whose lien

and $34 million claim were disputed and the subject of adversary proceedings seeking avoidance

and equitable subordination, was not entitled to credit bid its claim at the sale of the debtor's

assets); Nat'l Bank of Commerce v. McMullan (In re McMullan), 196 B.R. 818, 835 (Bankr. W.D.

Ark. 1996) (holding that “at any such sale, [the secured creditor] shall not be entitled to offset any

of its claimed liens or security interests under 11 U.S.C. § 363(k) because the validity of its liens

and security interests are unresolved.”), aff'd, 162 F.3d 1164 (8th Cir. 1998); Securities and

Exchange Commission v. Capital Cove Bancorp LLC, Case No. SACV 15-980-JLS, 2015 WL

9701154, *5-*10 (C.D. Cal. Oct. 13, 2015) (denying creditor’s right to credit bid where receiver

provided an objective basis for a dispute over whether secured creditor’s lien was subject to

avoidance, which created a “bona fide dispute” under 363(f)(4)). See also 11 U.S.C. § 363(f)(4)

(permitting sale free and clear of lien where “such interest is in bona fide dispute”).



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45. As the parties understood from the outset that Unipharma would need a meaningful

runway and capital investments to grow into the pharmaceutical company that was anticipated, the

Asserted NHTV Loan in material aspects was akin to an equity investment:

a. The “loan” was made to obtain a 24.49% equity interest in Unipharma and

NHTV paid no separate consideration for the equity stake;

b. There were no financial covenants;

c. No payments of principal were due for 5 years until September 2023, which

roughly coincided with NHTV’s desired date to exit the investment;

d. 70% of in the interest could be paid in kind by being added to the “loan” balance

to be paid in September 2023, protecting NHTV’s desired rate of return while

minimizing current expenses;

e. NHTV’s obtained control and oversight of Unipharma as part of the “loan”

transaction, including a board seat with special veto rights;

f. The purpose of the “loan” was to fund capital expenditures; and

g. Unipharma’s substantial needs for additional capitalization.

See Stinnett's Pontiac Serv., Inc. v. Comm'r of Internal Revenue, 730 F.2d 634, 638 (11th Cir.

1984) (listing non-controlling recharacterization factors as (1) the names given to the certificates

evidencing the indebtedness; (2) the presence or absence of a fixed maturity date; (3) the source

of payments; (4) the right to enforce payment of principal and interest; (5) participation in

management flowing as a result; (6) the status of the contribution in relation to regular corporate

creditors; (7) the intent of the parties; (8) “thin” or adequate capitalization; (9) identity of interest

between creditor and stockholder; (10) source of interest payments; (11) the ability of the

corporation to obtain loans from outside lending institutions; (12) the extent to which the advance



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was used to acquire capital assets; and (13) the failure of the debtor to repay on the due date or to

seek a postponement).

46. The lack of financial covenants was key – at the start of the “loan,” Unipharma was

not profitable, though it had a path to success. As such, the “loan” did not contain continuing

covenants relating to revenues, profits, or collateral, such as collateral coverage, cash flow,

EBIT/EBITDA, debt-to-equity, or interest coverage requirements. See Fin Hay Realty Co. v. U.S.,

398 F.2d 694, 698 (3d Cir. 1968) (“The economic reality was that the corporation used the

proceeds of the notes to purchase its original assets, and the advances represented a long term

commitment dependent on the future value of the real estate and the ability of the company to sell

or refinance it.”); In re Lexington Oil and Gas Ltd., 423 B.R. 353, 357-58, 365, 369-70 (Bankr.

E.D. Okla. 2010) (recharacterizing secured loan made at the inception of the company, when the

company was thinly capitalized, for the purchase of a drilling rig and associated equipment, where

there appeared to be no source of repayment other than the success of the company or the ultimate

sale of the drilling rig when the company failed). The sole exception was that a “material adverse

effect” would preclude additional borrowings, but NHTV still funded two additional tranches after

its first investment.

47. A further element showing that the “debt” was akin to equity – and one of the bases

for equitable subordination – are the circumstances of its creation. NHTV obtained the right to

fund Unipharma by representing that it was willing to act as a strategic partner, rather than a lender.

NHTV knew that Unipharma valued and needed access to key contacts in the United States to

grow the business, as Raimundo Sr. was a new entrant to the country, which NHTV promised to

provide. In other words, NHTV – in line with its role as a private equity fund obtaining a material



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ownership stake in Unipharma – told the company that it would act as an equity partner, and

Unipharma accordingly turned down traditional lenders to move forward with NHTV.

48. Further, in connection with the “loan,” NHTV obtained substantial control over

Unipharma’s management, and directed much of its conduct. Under Section 4.15 of the Operating

Agreement, NHTV’s representative even had the unilateral ability to veto (a) the hiring or firing

of the President, Chief Executive Officer, and Vice President of Unipharma, (b) the hiring and

firing of Unipharma’s auditors, (b) the issuance of dividends and distributions, (c) the exit from or

entry into lines of business, (d) the making of acquisitions exceeding $5 million, dispositions

exceeding $1 million (excluding inventory and certain surplus/obsolete property), and capital

expenditures above $5 million. See In re AtlanticRancher, Inc., 279 B.R. 411, 416-19, 421

(Bankr. D. Mass. 2002) (finding “loan” to be equity contribution where lender was pervasively

involved in management and was “in many respects … an equal partner” in company decision-

making); Matrix IV, Inc. v. Am. Nat’l Bank and Tr. Co. of Chicago (In re S.M. Acquisition Co.),

No. 05 C 7076, 2006 WL 2290990, at *10 (N.D. Ill. Aug. 7, 2006) (reversing dismissal of

recharacterization claim where “[b]ank obtained an equity interest in, and some degree of

managerial control over,” borrower at a time when the borrower “was undercapitalized and unable

to secure third party financing, yet used its revolving line of credit to make capital investments

rather than fund daily operations”); In re Commonwealth Biotechnologies, Inc. v. Fornova

Pharmworld, Inc. (In re Commonwealth Biotechnologies, Inc.), Bankr. No. 11-30381, Adv. Pro.

No. 12-03038, 2012 WL 5385632, at *6-*7 (Bankr. E.D. Va. 2012) (finding recharacterization

appropriate where cash infusion under convertible promissory note “was conditioned upon

[debtor] relinquishing control to [lender] in ways that are usually associated with equity

transactions,” including providing board seats and the right to monitor the borrower’s finances).



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49. In addition to NHTV’s conduct at the outset, NHTV’s improper efforts to default

Unipharma in order to prematurely exit the investment provide further grounds for equitable

subordination. See In re Lemco Gypsum, Inc., 911 F.2d 1553, 1556 (11th Cir. 1990) (equitable

subordination requires (i) inequitable conduct by the creditor, (ii) injury to the other creditors or

an unfair advantage to the creditor, and (iii) such subordination not to be inconsistent with the

Bankruptcy Code). While NHTV promised to give Unipharma at least five years of runway (to

roughly 2.5 years from now), it sought an earlier exit from the investment once it realized that its

rate of return would be lower than anticipated.

50. NHTV was determined to push more of the risk onto the Santamarta Family,

demanding that they provide additional capital and an early exit for NHTV. When those demands

failed, NHTV sought to increase its leverage by issuing frivolous default notices in connection

with its demands for the Santamarta Family to ensure its rate of return.

51. The first – for the MS Account and the Bio Dose transactions – was based on

transactions which were both permitted under the loan agreement5 and authorized by NHTV. In

fact, rather than relying on the information available from Unipharma about the Bio Dose

5 For the MS Account, the loan agreement (at Sections 5.02(d) and 1.01) permits the funds to be placed in investments in negotiable instruments deposited or to be deposited in the ordinary course of business as well as Cash Equivalents, which is defined to include “Investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (g) above.” Clauses (a) through (g) include commercial paper rated at least A-1 by S&P or P-1 by Moody’s, certificates of deposit maturing within a year from banks with capital and surplus of $1+ billion, deposit accounts with such banks, and debt securities maturing within six months with letters of credit from such banks. The Creditors submit that cash invested in an advisory account maintained by the lender’s affiliate is at least as creditworthy, if not more so, than these permitted investments as well as of the same type of such listed investments.

For the Bio Dose transactions, the loan agreement (at Section 5.02(h)) expressly permits transactions with affiliates (i.e., Bio Dose) that are in the ordinary course on terms that are no less favorable than would be obtained in an arms’ length transaction.



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transactions, NHTV obtained outside, third party data in an attempt to justify the claim that the

transactions were unfair. Then, once the wrongful default notice caused “going concern” issues

in the audit, NHTV used that to declare another default, even though there was no issue with the

certification of Unipharma’s financial statements.6

52. Notably, NHTV declined to identify the MS Account or Bio Dose transactions as

grounds for its seizure of the company in October 2020. Rather, NHTV relied solely on the

purported failure to provide unqualified financials.7 Yet, even that “default” was defective. In

addition to being caused by NHTV, it was only contained in a settlement communication rather

than an appropriate notice of default.8 NHTV failed to recognize that the loan agreement required

certification of GAAP-compliance rather than financials with no disclosures. As a result, there

was no actual default by Unipharma. Nevertheless, NHTV seized control of the company in the

middle of the night (by email sent at 5:33 a.m. on a Monday). In doing so, NHTV compounded

the harms to Unipharma by terminating key personnel (not just the Santamarta Family), halting

operations, and incurring debts seemingly without an intent to repay them (as compared to the

6 The loan agreement (at Section 5.01(a)(i)) requires Unipharma to provide annual financial statements that are “certified, without any qualifications or exceptions, by such accountants to have been prepared in accordance with GAAP.” Hence, the plain language of this requirement is that the auditor’s certification, rather than the audit report itself, needed to be provided without qualifications or exceptions, which the auditors were willing to do. See Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., 651 F.3d 329, 335 (2d Cir. 2011) (“Under the ‘rule of the last antecedent, ... a limiting clause or phrase ... should ordinarily be read as modifying only the noun or phrase that it immediately follows.’” (alterations in original) (quoting Barnhart v. Thomas, 540 U.S. 20, 26, (2003)). 7 NHTV’s notice in connection with the seizure also included demands for certain collateral certificates but those were promptly provided by Unipharma upon request. 8 This may explain why the Debtors’ Declaration of Neil F. Luria in Support of Chapter 11 Petitions and First Day Pleadings (ECF No. 10) (“Luria Decl.”) identifies the defaults as being those listed in the earlier April 16, 2020 notice. See Luria Decl. at ¶33.



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additional debt NHTV imposed on Unipharma in late 2020, forcing the company to pay the costs

of restructuring professionals for both the Debtors and NHTV).

53. NHTV breached the loan agreement by wrongfully declaring the defaults. As such,

NHTV could not rely upon the bogus breaches by Unipharma to justify its October 2020 takeover.

See Barbagallo v. Marcum LLP, No. 11-CV-1358, 2013 WL 132711 at *10 (E.D.N.Y. Jan. 10,

2013) (“[A] party's performance under a contract is excused where the other party has substantially

failed to perform its side of the bargain or, synonymously, where that party has committed a

material breach.”) (quoting Merrill Lynch & Co., Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 186

(2d Cir.2007)); Bear Sterns Funding, Inc. v. Interface Group–Nevada, Inc., 361 F. Supp. 2d 283,

291 (S.D.N.Y.2005) (“fundamental principle of contract law that ... the material breach of a

contract by one party discharges the contractual obligations of the non-breaching party”); Medinol

Ltd. v. Boston Scientific Corp., 346 F.Supp.2d 575, 618 (S.D.N.Y.2004) (collecting cases).9

54. The bankruptcy planning also shows NHTV’s inequitable conduct. The timing of

the sale was delayed such that there would be insufficient runway to properly market and sell the

assets. The failures of the marketing process are also evidenced by the absence of outreach to the

Santamarta Family and the Debtors’ request for authority to deny informational access to key

strategic buyers – namely, competitors. Plus, NHTV determined that competing bids would have

to exceed the full amount of its prepetition and postpetition debts, making it more difficult for

other potential bidders to purchase the Debtors’ assets.10

9 The Asserted NHTV Loan (at section 8.14) has a governing law provision providing for the application of New York law. 10 Even post-bankruptcy, NHTV has continued with its inequitable conduct. Raimundo Sr.’s company Global Capital Investments Fund, Ltd. (“Global Capital”) maintains more than $10 million in accounts at Morgan Stanley. Since early November 2020, Raimundo Sr., Global Capital, and representatives from Raimundo Sr.’s current bank have been asking Morgan Stanley to transfer these funds to his current bank. Morgan Stanley has simply stonewalled without basis



00648051.DOCX 9 22

55. As such, NHTV cannot be permitted to credit bid its asserted secured claims, and

even if they are actually debts, those claims must be subordinated on account of its wrongful

conduct that has damaged Unipharma and its creditors.

B. The Court Cannot Issue a Good Faith Finding Under Section 363(m).

56. Due to NHTV’s inequitable conduct and knowledge of the pending claims against

it, NHTV cannot meet its burden to establish itself as a good faith purchaser.

57. Section 363(m) of the Bankruptcy Code protects a good faith purchaser’s interest

in property purchased from the debtor notwithstanding that the sale conducted under section 363(b)

was later reversed or modified on appeal. Specifically, Section 363(m) states:

The reversal or modification on appeal of an authorization under [section 363(b)] ... does not affect the validity of a sale ... to an entity that purchased ... such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale ... were stayed pending appeal.

11 U. S.C. § 363(m).

58. The burden of establishing good faith lies with the proponent seeking a good faith

finding. In re TMT Procurement Corp., 764 F.3d 512, 520 (5th Cir. 2014); In re M Capital Corp.,

290 B.R. 743, 747 (B.A.P. 9th Cir. 2003).

59. While the Code “does not define the meaning of ‘good faith purchaser,’ most courts

have adopted a traditional equitable definition: ‘one who purchase the assets for value, in good

faith and without notice of adverse claims.’” In re TFLO, LLC, 572 B.R. 391, 433 (S.D. Fla. 2016)

(emphasis added) (citing 23 Jefferson St. LLC v. 636 Assets, Inc., No. 14-CV-7150CBA, 2015 WL

and in contractual breach, perhaps to protect their anticipated collection on potential claims against Raimundo Sr. and Global Capital, who are not even guarantors of the asserted loan. More importantly for the Sale Motion, this conduct by NHTV’s affiliate hindered Raimundo Sr.’s ability to provide a competing bid to the detriment of Unipharma’s creditors. In other words, the fairness of the bidding process has been, and remains, fundamentally compromised.



00648051.DOCX 9 23

5037343, at *4 (E.D.N.Y. Aug. 25 2015); TMT Procurement, 764 F.3d at 520; Jeremiah v.

Richardson, 148 F.3d 17, 23 (1st Cir. 1998).

60. In particular, a purchaser with knowledge of an adversary proceeding instituted

against them cannot be a good faith purchaser under section 363(m). TMT Procurement, 764 F.3d

at 522; Jeremiah, 148 F.3d 23; In re Cooper, 592 B.R. 469, 483 (S.D.N.Y. 2018) (purchasers could

“not be considered good faith purchasers on account of their detailed, long-standing knowledge of

. . . adverse claims of which they themselves [were] subject.”).

61. As described above and in the Complaint, NHTV has a detailed, long-standing

understanding of the adverse claims against it. Prior to this bankruptcy, NHTV, Unipharma, and

the Santamarta Family had been engaged in substantial disputes over NHTV’s conduct. Post-

petition, the Creditors have challenged NHTV’s efforts in this case. Furthermore, Raimundo Sr.

and Global Capital have been challenging NHTV’s affiliates baseless refusal to release Global

Capital’s funds for months. And shortly, NHTV will be the subject of the adversary proceeding

reflected by the Complaint to be filed.

62. Under these circumstances, NHTV cannot meet its burden of showing that it is a

good faith purchaser. Moreover, this Court may separately decline to find NHTV to be a good

faith purchaser due to its conduct during and leading up to the bankruptcy proceedings, as

described above, which is plainly intended to control the advantage for itself in the sale process.

63. In addition, “[a] purchaser’s good faith is lost by ‘fraud, collusion between the

purchaser and other bidders or the trustee, or an attempt to take grossly unfair advantage of other

bidders.” Licensing By Paolo, Inc. v. Sinatra (In re Gucci), 126 F.3d at 390 (quoting In re Rock

Industries Machinery Corp., 572 F.2d 1195, 1198 (7th Cir. 1978)). Here, as described above,



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NHTV’s affiliate has effectively frozen Global Capital’s eight-figure accounts with the effect of

impeding a competing bid.

64. Thus, NHTV not only has extensive awareness of adverse claims against it, but also

has sought to fundamentally impair the fairness of the sale process. Under these circumstances,

NHTV cannot show an entitlement to a good faith purchaser finding.

C. The Proposed Sale Must Be Subject to the Challenge Period.

65. As described above, the Court’s Final DIP Financing Order and the Bidding

Procedures Order both provide parties until February 9, 2021 to challenge NHTV’s prepetition

claims. This date falls after the contemplated February 5, 2021 outside date to close the sale. As

such, there is a substantial risk that NHTV will be able to obtain the Debtors’ assets via a credit

bid that it was never entitled to make.

66. In order to preserve the parties’ rights under the challenge period and to protect the

estates and their creditors, the Court should exercise its discretion and equitable powers under

Bankruptcy Code sections 363 and 105(a) to condition the sale of the Debtors’ assets upon the

proceeds of sale being distributed only in accordance with further orders from this court after

adjudication of any challenges brought within the challenge period. While NHTV should not be

permitted to credit bid at all, the Creditors submit that if NHTV is permitted to do so and is the

winning bidder, the sale order should require that any amounts of the NHTV Secured Loan for

which NHTV was permitted to bid or assume without cash should be subject to recovery in cash

to the estates to the extent of a successful challenge to NHTV’s prepetition claims. Alternatively,

if NHTV is not the winning bidder, the Creditors submit that the proceeds of the sale should be

held by the estates pending resolution of any challenges, including those made in the Complaint.



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IV. RESERVATION OF RIGHTS

67. The Creditors expressly reserve any and all of their rights to supplement this

Objection and to further object to the Sale Motion, including as discovery progresses. Further, the

Creditors reserve the right to join in any argument or objection made by any person relating to the

Sale Motion.

WHEREFORE, the Creditors respectfully request the Court enter an order: (i) requiring

that if NHTV is the winning bidder and NHTV’s secured claims are successfully challenged,

NHTV may be required to compensate the estate for the amounts of challenged debts NHTV was

permitted to assume or credit bid as part of its Stalking Horse Bid; (ii) alternatively, if NHTV is

not the winning bidder, requiring the proceeds of the sale to be held by the Debtors, with all liens,

claims and encumbrances to attach to the proceeds in the order as they existed prior to the sale,

pending the determination of any challenges to NHTV’s secured claims, with the proceeds

ultimately to be distributed in accordance with the Court’s adjudication of such challenge(s); and

(iii) granting any further relief the Court deems appropriate.



00648051.DOCX 9 26

Dated: January 18, 2021

Respectfully submitted, BAST AMRON LLP Attorneys for Creditors and Equity Holders Raimundo Santamarta, Jr., Yohana Santamarta, and Reinaldo Santamarta SunTrust International Center One Southeast Third Avenue, Suite 1400 Miami, Florida 33131 Telephone: 305.379.7904 Facsimile: 305.379.7905 Email: [email protected] Email: [email protected] Email: [email protected] By: /s/ Jaime B. Leggett Brett M. Amron (FBN 0148342) Jeffrey Bast (FBN 996343) Jaime B. Leggett (FBN 1016485)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing has been served

electronically via the Court’s CM/ECF system upon the parties listed below this 18th day of

January, 2021.

By: /s/ Jaime B. Leggett

Jaime B. Leggett, Esq. VIA CM/ECF

Scott Andron [email protected], [email protected] Eric N Assouline [email protected], [email protected] Paul A Avron [email protected],

[email protected];[email protected];[email protected] Chase A Berger [email protected],

[email protected];[email protected] Adisley M Cortez Rodriguez [email protected] Melbalynn Fisher [email protected] Gavin Gaukroger [email protected] Alan C Hochheiser [email protected],

[email protected]



00648051.DOCX 9 27

Phillip M. Hudson III [email protected], [email protected];[email protected];[email protected];[email protected]

Christopher A Jarvinen [email protected], [email protected];[email protected];[email protected]

Office of the US Trustee [email protected] Heather L. Ries [email protected], [email protected] Paul Steven Singerman [email protected],

[email protected];[email protected];[email protected] Edward Soto [email protected], [email protected];edward-soto-

[email protected] Andrew D. Zaron [email protected], [email protected]


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