Exhibit 10.1
LOAN AND SECURITY AGREEMENT
ZYNEX MEDICAL, INC. AND ZYNEX MEDICAL HOLDINGS, INC.
TABLE OF CONTENTS
1 ACCOUNTING AND OTHER TERMS......................................4
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2 LOAN AND TERMS OF PAYMENT.......................................4
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2.1 Promise to Pay.........................................4
2.2 Interest Rate, Payments. ..............................4
2.3 Fees...................................................5
2.4 Additional Costs.......................................5
3 CONDITIONS OF LOANS.............................................5
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3.1 Conditions Precedent to Initial Credit Extension........5
4 CREATION OF SECURITY INTEREST...................................5
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4.1 Grant of Security Interest.............................5
4.2 Authorization of File..................................5
5 REPRESENTATIONS AND WARRANTIES..................................5
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5.1 Due Organization and Authorization.....................5
5.2 Collateral.............................................6
5.3 Litigation.............................................6
5.4 No Material Adverse Change in Financial Statements.....6
5.5 Solvency...............................................6
5.6 Regulatory Compliance..................................6
5.7 Investments in Subsidiaries............................7
5.8 Full Disclosure........................................7
6 AFFIRMATIVE COVENANTS...........................................7
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6.1 Government Compliance..................................7
6.2 Financial Statements, Reports, Certificates............7
6.3 Inventory; Returns.....................................8
6.4 Taxes........ ............... .........................8
6.5 Insurance..............................................8
6.6 Primary Accounts.......................................8
6.7 Financial Covenants....................................9
6.8 Registration of Intellectual Property Rights...........9
6.9 Further Assurances.....................................9
7 NEGATIVE COVENANTS..............................................9
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7.1 Dispositions...........................................9
7.2 Changes in Business, Ownership, Management or
Locations of Collateral...............................10
7.3 Mergers or Acquisitions...............................10
7.4 Indebtedness..........................................10
7.5 Encumbrance...........................................10
7.6 Distributions; Investments............................10
7.7 Transactions with Affiliates..........................10
7.8 Subordinated Debt.....................................10
7.9 Compliance............................................11
EVENTS OF DEFAULT..............................................11
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8.1 Payment Default.......................................11
8.2 Covenant Default......................................11
8.3 Material Adverse Change...............................11
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Attachment.....................................................11
Insolvency.....................................................12
Other Agreements...............................................12
Judgments......................................................12
Misrepresentations. ...........................................12
Guaranty.......................................................12
9 BANK'S RIGHTS AND REMEDIES.....................................12
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9.1 Rights and Remedies...................................12
9.2 Power of Attorney.....................................13
9.3 Bank Expenses.........................................13
9.4 Bank's Liability for Collateral.......................13
9.5 Remedies Cumulative...................................14
9.6 Demand Waiver.........................................14
10 NOTICES AND WAIVERS............................................14
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10.1 Notices...............................................14
10.2 Subrogation and Similar Rights........................14
10.3 Waivers of Notice. ...................................15
10.4 Subrogation Defenses..................................15
10.5 Right to Settle, Release..............................15
11 CHOICE OF LAW. VENUE AND JURY TRIAL WAIVER.....................15
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12 GENERAL Provisions.............................................16
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12.1 Successors and Assigns................................16
12.2 Indemnification.......................................16
12.3 Time of Essence.......................................16
12.4 Severability of Provision.............................16
12.5 Amendments in Writing, Integration....................16
12.6 Counterparts..........................................16
12.7 Survival..............................................17
12.8 Confidentiality.......................................17
12.9 Attorneys' Fees, Costs and Expenses...................17
13 DEFINITIONS....................................................17
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13.1 Definitions...........................................17
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This LOAN AND SECURITY AGREEMENT (Agreement) dated as of the Effective
Date, between SILICON VALLEY BANK ("Bank"), whose address is 0000 Xxxxxx Xxxxx,
Xxxxx Xxxxx, Xxxxxxxxxx 00000 with a loan production office located at 0000
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 and ZYNEX MEDICAL, INC. and
ZYNEX MEDICAL HOLDINGS, INC. Jointly and severally, "Borrower") provides the
terms on which Bank will lend to Borrower and Borrower will repay Bank. The
parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
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Accounting terms not defined in this Agreement will be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation," in this
or any Loan Document.
2. LOAN AND TERMS OF PAYMENT
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2.1 Promise to Pay.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 Term Loan.
(a) Bank will make a Tern Loan available to Borrower to be advanced on the
Effective Date.
(b) Borrower will pay 36 equal installments of principal and interest (the
"Term Loan Payment"). Each Term Loan Payment is payable on the 1st of each
month, beginning November 1, 2005, during the term of the loan. Borrower's final
Term Loan Payment, due on October 1, 2008, includes all outstanding Term Loan
principal and accrued interest.
(c) Bank's obligation to lend the undisbursed portion of the Obligations
will terminate if, in Bank's sole discretion, there has been a material adverse
change in the general affairs, management, results of operation, condition
(financial or otherwise) or the prospect of repayment of the Obligations, or
there has been any material adverse deviation by Borrower from the most recent
business plan of Borrower presented to and accepted by Bank prior to the
execution of this Agreement.
2.2 Interest Rate, Payments.
(a) Interest Rate. The Term Loan accrues interest at a per annum rate equal
to the Basic Rate. After an Event of Default, Obligations accrue interest at 5
percent above the rate effective immediately before the Event of Default
Interest is computed on a 360 day year for the actual number of days elapsed.
(b) Payments. Bank may debit any of Borrower's deposit accounts including
Account Number for principal and interest payments owing or any amounts Borrower
owes Bank. Bank will promptly notify Borrower when it debits Borrower's
accounts. These debits are not a set-off. Payments received after 12:00 noon
Pacific time are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business Day, the
payment is due the next Business Day and additional interest shall accrue.
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2.3 Fees.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of $2,500 due
on the Effective Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys' fees
and reasonable expenses) incurred through and after the date of this Agreement,
are payable when due.
2.4 Additional Costs.
If any law or regulation increases Bank's costs or reduces its income for
any loan, Borrower will pay the increase in cost or reduction in income or
additional expense.
3 CONDITIONS OF LOANS
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3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receives the agreements, documents and fees it
requires.
4 CREATION OF SECURITY INTEREST
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4.1 Grant of Security Interest.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
If Borrower shall at any time, acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the brief details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to Bank.
4.2 Authorization of File.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change. Except as
disclosed in Borrower's Form 10-K Report for the year ended December 31, 2004
which has been delivered to Bank on or prior to the Effective Date, Borrower has
not changed its
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state of formation or its organizational structure or type or any
organizational number (if any) assigned by its jurisdiction of formation.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower
is bound. Borrower is not in default under any agreement to which or by which
it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
5.2 Collateral.
Borrower has good title to the Collateral, free of Liens except Permitted
Liens or Borrower has Rights to each asset that is Collateral. Borrower has no
other deposit account, other than the deposit accounts described in the
Schedule. The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its agent for
immediate shipment to and unconditional acceptance by the account debtor. The
Collateral is not in the possession of any third party bailee (such as at a
warehouse). In the event that Borrower, after the date hereof, intends to store
or otherwise deliver the Collateral to such a bailee, then Borrower will receive
the prior written consent of Bank and such bailee must acknowledge in writing
that the bailee is holding such Collateral for the benefit of Bank. All
Inventory is in all material respects of good and marketable quality, free from
material defects. Borrower is the sole owner of the Intellectual Property,
except for non-exclusive licenses granted to its customers in the ordinary
course of business. Each Patent is valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Intellectual Property
violates the rights of any third party, except to the extent such claim could
not reasonably be expected to cause a Material Adverse Change.
5.3 Litigation.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.
5.4 No Material Adverse Change in Financial Statements.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 Solvency.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 Regulatory Compliance.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
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Borrower has not violated any laws, ordinances or rules, the
violation of which could reasonably be expected to cause a Material Adverse
Change. None of Borrower's or any Subsidiary's properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted, except where the failure to do so
could not reasonably be expected to cause a Material Adverse Change.
5.7 Investments In Subsidiaries.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 Full Disclosure.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6 AFFIRMATIVE COVENANTS
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Borrower will do all of the following for so long as Bank has an obligation
to lend, or there are outstanding Obligations:
6.1 Government Compliance.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower's business or operations. Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or would reasonably
be expected to cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower will deliver to Bank: (Q as soon as available, but no later
than 30 days after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during the period certified by a Responsible Officer and in a form acceptable to
Bank; (ii) as soon as available, but no later than 180 days after the last day
of Borrower's fiscal year, audited consolidated financial statements prepared
under GAAP, consistently applied, together with an opinion which is unqualified
or otherwise consented to by Bank on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank;
(Iii) within 5 days of filing, copies of all statements, reports and notices
made available to Borrower's security holders or to any holders of Subordinated
Debt and all reports on Form 1o.K, 10-0 and 8-K filed with the Securities and
Exchange Commission; (iv) a prompt report of any legal actions pending or
threatened against
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Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of $100,000 or more; (v) budgets, sales projections, operating
plans or other financial information Bank reasonably requests: and (vi) prompt
notice of any material change in the composition of the Intellectual Property,
including any subsequent ownership right of Borrower in or to any Copyright,
Patent or Trademark not shown in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that materially adversely
affects the value of the Intellectual Property.
(b) Within 30 days after the last day of each month, Borrower will deliver
to Bank aged listings of accounts receivable and accounts payable.
(c) Within 30 days after the last day of each month, Borrower will deliver
to Bank with the monthly financial statements a Compliance Certificate signed by
a Responsible Officer in the form of Exhibit C.
(d) Allow Bank to audit Borrower's Collateral at Borrower's expense. Such
audits will be conducted only at such times as an Event of Default has occurred
and is continuing.
6.3 Inventory; Returns.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries.
disputes and claims that involve more than $50,000.
6.4 Taxes.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments, unless contested in
good faith and for which Borrower maintains adequate reserves in accordance with
GAAP and will deliver to Bank, on demand, appropriate certificates attesting to
the payment.
6.5 Insurance.
Borrower will keep its business and the Collateral insured for risks and in
amounts, as Bank may reasonably request. Insurance policies will be in a form,
with companies, and in amounts that are satisfactory to Bank in Bank's
reasonable discretion. All property policies will have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank's
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy will, at Bank's option, be
payable to Bank on account of the Obligations.
6.6 Primary Accounts.
Borrower will maintain its primary banking relationship with Bank, which
relationship shall include Borrower maintaining account balances in any accounts
at or through Bank representing at least 85% of all account balances of Borrower
at any financial institution. As to any deposit accounts and investment accounts
maintained with another institution, within 60 days following the Effective
Date, Borrower shall cause such institution to enter into a control agreement in
form acceptable to Bank in its good faith business judgment in order to perfect
Bank's first priority security interest in said deposit accounts and investment
accounts.
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6.7 Financial Covenants.
Borrower will maintain as of the last day of each month:
(i) Debt Service Coverage (measured on a roiling 3 month basis). A ratio of
Borrower's consolidated earnings before interest expense, income taxes,
depreciation, amortization of intangible assets and other non-cash charges made
to Borrower's income, to principal and interest payments due on the outstanding
Obligations, of at least 1.40 to 1.00, increasing to 1.75 to 1.00 beginning with
the month ending June 30, 2006 and thereafter.
(ii) liquidity Coverage (to be maintained at all times). A ratio of
unrestricted cash held with Bank plus all Accounts (less Borrower's reserves for
uncollectible Accounts), to outstanding Obligations, of at least 1.50 to 1.00.
6.8 Registration of Intellectual Property Rights.
Borrower shall not register any Copyrights or Mask Works with the United
States Copyright Office unless it: (i) has given at least fifteen (15) days'
prior notice to Bank of its intent to register such Copyrights or Mask Works and
has provided Bank with a copy of the application it intends to file with the
United States Copyright Office (excluding exhibits thereto); (ii) executes a
security agreement or such other documents as Bank may reasonably request in
order to maintain the perfection and priority of Bank's security interest in the
Copyrights proposed to be registered with the United States Copyright Office;
and (iii) records such security documents with the United States Copyright
Office contemporaneously with filing the Copyright application(s) with the
United States Copyright Office. Borrower shall promptly provide to Bank a copy
of the Copyright application(s) filed with the United States Copyright Office,
together with evidence of the recording of the security documents necessary for
Bank to maintain the perfection and priority of its security interest in such
Copyrights or Mask Works. Borrower shall provide written notice to Bank of any
application filed by Borrower in the United States Patent Trademark Office for a
patent or to register a trademark or service xxxx within 30 days of any such
filing.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public without Bank's written consent.
6.9 Further Assurances.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
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For so long as Bank has an obligation to lend or there are any outstanding
Obligations, Borrower shall not, without Bank's prior written consent (which
shall be a matter of its good faith business judgment), do any of the following:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; (iii) of worn-out or obsolete Equipment; or (iv) other Equipment no
longer used by Borrower, which value does not exceed $25,000 in any calendar
year.
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7.2 Changes In Business, Ownership, Management or Locations of Collateral.
Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership or management of greater than
25% (other than by the sale of Borrower's equity securities in a public offering
or to venture capital investors so long as Borrower identifies the venture
capital investors prior to the closing of the investment). Borrower will not,
without at least 30 days prior written notice, relocate its chief executive
office, change its state of formation (including reincorporation), change its
organizational number or name or add any new offices or business locations (such
as warehouses) in which Borrower maintains or stores over $5,000 in Collateral.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (Ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate Into another
Subsidiary or into Borrower.
7.4 Indebtedness.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
7.6 Distributions; Investments.
Directly or indirectly acquire or own any Person, or make any Investment in
any Person, other than Permitted Investments, or permit any of its Subsidiaries
to do so. Pay any dividends or make any distribution or payment or redeem,
retire or purchase any capital stock.
7.7 Transactions with Affiliates.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.
7.8 Subordinated Debt
Make or permit any payment on any Subordinated Debt, except under the terms
of the Subordinated Debt, or amend any provision in any document relating to the
Subordinated Debt without Bank's prior written consent.
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7.9 Compliance.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
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8.1 Anyone of the following is an Event of Default: Payment Default.
If Borrower fails to pay any of the Obligations within 5 days after their
due date, however, during such period no Credit Extensions will be made;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections 6.2 or 6.7
or violates any of the covenants contained in Section 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe any other
material term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) Business Days after the occurrence thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) Business Day period or cannot after diligent attempts by Borrower be
cured within such ten (10) Business Day period, and such default is likely to be
cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) Business Days)
to attempt to cure such default, and within such reasonable time period the
failure to have cured such default shall not be deemed an Event of Default
(provided that no Credit Extensions will be made during such cure period);
8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the business, operations,
or financial condition of the Borrower, or (ii) is a material impairment of the
prospect of repayment of any portion of the Obligations; or (iii) is a material
impairment of the value or priority of Bank's security interests in the
Collateral (the foregoing being defined as a "Material Adverse Change").
8.4 Attachment.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not
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Events of Default if stayed or if a bond is posted pending contest by Borrower
(but no Credit Extensions will be made during the cure period);
8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$100,000 or that could reasonably be expected to cause a Material Adverse
Change;
8.7 Judgments.
If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied);
8.8 Misrepresentations.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document; or
8.9 Guaranty.
Any guaranty of any Obligations ceases for any reason to be in full force
or any Guarantor does not perform any obligation under any guaranty of the
Obligations, or any material misrepresentation or material misstatement exists
now or later in any warranty or representation in any guaranty of the
Obligations or in any certificate delivered to Bank in connection with the
guaranty, or any circumstance described in Sections 8.4,8.5 or 8.7 occurs to any
Guarantor.
9 BANK'S RIGHTS AND REMEDIES
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9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable; notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit;
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(d) Make any payments and do any acts it considers necessary or reasonable
to protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located. take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;
(e) Bank may place a "hold" on any account maintained with Bank and deliver
a notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any control agreement or similar agreements providing
control of any Collateral;
(f) Apply to the Obligations any 0) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;
(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and
(h) Dispose of the Collateral according to the Code.
9.2 Power of Attorney.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or xxxx of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 Bank Expenses.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.4 Bank's Liability for Collateral.
If Bank complies with reasonable banking practices and Section 9-207 of the
Code, it is not liable for; (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other person.
Except as provided above, Borrower bears all risk of loss, damage or destruction
of the Collateral.
13
9.5 Remedies Cumulative.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
9.6 Demand Waiver.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments. chattel paper. and guarantees held by Bank on which Borrower is
liable.
10 NOTICES AND WAIVERS
-------------------
10.1 Notices.
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service. certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower
Zynex Medical, Inc.
0000 Xxxxx Xxxx Xxx, Xxxxx X-0
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx and Chief Financial Officer
FAX: 000-000-0000
and to
Zynex Medical Holdings, Inc.
0000 Xxxxx Xxxx Xxx, Xxxxx X-0
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx and Chief Financial Officer
FAX:000-000-0000
If to Bank
Silicon Valley Bank
0000 Xxxxxxxx Xxxxxx, Xxxxx 000 Xxxxxxx. XX 00000
Attn: Xxxxx Xxxxxxxx
FAX: (000) 000-0000
10.2 Subrogation and Similar Rights.
Notwithstanding any other provision of this Agreement or any other Loan
Document, each Borrower Irrevocably waives all rights that it may have at law or
in equity (including, without limitation, any law subrogating the Borrower to
the rights of Bank under the Loan Documents) to seek contribution,
indemnification. or any other form of reimbursement from any other Borrower, or
any other Person now or hereafter primarily or secondarily liable for any of the
Obligations, for any payment made by the Borrower with respect to the
Obligations in connection with the Loan Documents or otherwise and all rights
that it might have to benefit from, or to participate in, any security for the
Obligations as a result of any payment made by the Borrower with respect to the
14
Obligations in connection with the Loan Documents or otherwise. Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited
under this Section 10.2 shall be null and void. If any payment is made to a
Borrower in contravention of this Section 10.2, such Borrower shall hold such
payment in trust for Bank and such payment shall be promptly delivered to Bank
for application to the Obligations, whether matured or unmatured.
10.3 Waivers of Notice.
Each Borrower waives notice of acceptance hereof; notice of the existence,
creation or acquisition of any of the Obligations; notice of an Event of
Default; notice of the amount of the Obligations outstanding at any time; notice
of intent to accelerate; notice of acceleration; notice of any adverse change in
the financial condition of any other Borrower or of any other fact that might
increase the Borrower's risk; presentment for payment; demand; protest and
notice thereof as to any instrument; default; and all other notices and demands
to which the Borrower would otherwise be entitled. Each Borrower waives any
defense arising from any defense of any other Borrower, or by reason of the
cessation from any cause whatsoever of the liability of any other Borrower.
Bank's failure at any time to require strict performance by any Borrower of any
provision of the Loan Documents shall not waive, alter or diminish any right of
Bank thereafter to demand strict compliance and performance therewith. Nothing
contained herein shall prevent Bank from foreclosing on the lien of any deed of
trust, mortgage or other security instrument, or exercising any rights available
thereunder, and the exercise of any such rights shall not constitute a legal or
equitable discharge of any Borrower. Each Borrower also waives any defense
arising from any act or omission of Bank that changes the scope of the
Borrower's risks hereunder. Each Borrower hereby waives any right to assert
against Bank any defense (legal or equitable), setoff, counterclaim, or claims
that such Borrower individually may now or hereafter have against another
Borrower or any other Person liable to Borrower with respect to the Obligations
in any manner whatsoever.
10.4 Subrogation Defenses.
Each Borrower waives the benefits, if any, of any statutory or common law
rule that may permit a borrower to assert any defenses of a surety or guarantor,
or that may give a borrower the right to require a senior creditor to marshal
assets, and Borrower agrees that it shall not assert any such defenses or
rights.
10.5 Right to Settle, Release.
(a) The liability of each Borrower hereunder shall not be diminished by (i)
any agreement, understanding or representation that any of the Obligations is or
was to be guaranteed by another Person or secured by other property, or (Ii) any
release or unenforceability. whether partial or total, or rights, if any, which
Borrower may now or hereafter have against any other Person, including another
Borrower, or property with respect to any of the Obligations.
(b) Without notice to any Borrower and without affecting the liability of
any Borrower hereunder, Bank may (i) compromise, settle, renew, extend the time
for payment, change the manner or terms of payment, discharge the performance
of, decline to enforce, or release all or any of the Obligations with respect to
a Borrower, (ii) grant other indulgences to a Borrower in respect of the
Obligations, (iii) modify in any manner any documents, relating to the
Obligations with respect to a Borrower, (iv) release, surrender or exchange any
deposits or other property securing the Obligations, whether pledged by a
Borrower or any other Person, or (v) compromise, settle renew, or extend the
time for payment, discharge the performance of, decline to enforce, or release
all or any obligations of any guarantor, endorser or other Person who is now or
may hereafter be liable with respect to any of the Obligations.
11 CHOICE OF LAW. VENUE AND JURY TRIAL WAIVER
------------------------------------------
15
Colorado law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Denver County, Colorado.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. initial here
12 GENERAL PROVISIONS
------------------
12.1 Successors and Assigns.
This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights
under it without Bank's prior written consent which may be granted or withheld
in Bank's discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under this
Agreement.
12.2 Indemnification.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 Severability of Provision.
Each provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.
12.5 Amendments In Writing, Integration.
All amendments to this Agreement must be in writing and signed by Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.
12.6 Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
16
12.7 Survival
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 Confidentiality .
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9 Attorneys' Fees, Costs and Expenses.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13 DEFINITIONS
-----------
13.1 Definitions.
In this Agreement:
"Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, and partners and, for any Person that is a limited
liability company, that Person's managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Basic Rate. is, as of the Effective Date, the per annum rate of
interest equal to the sum of (a) the U.S. Treasury note yield to maturity for a
term of 36 months as quoted in The Wall Street Journal on the Effective Date,
plus (b) 375 basis points.
"Borrower's Books" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Co/lateral,
business operations or financial condition and all computer programs or discs
or any equipment containing the information.
17
"Business Day" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"Code" is the Colorado Uniform Commercial Code, as applicable.
"Collateral" is the property described on Exhibit A.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"Copyrights" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"Credit Extension" is each Term Loan or any other extension of credit by
Bank for Borrower's benefit.
"Effective Date. is the date Bank executes this Agreement.
"Equipment' is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations. "GAAP" is generally accepted accounting principles. "Guarantor" is
any present or future guarantor of the Obligations, including Xxxxxx Xxxxxxxxx.
"Indebtedness. is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Insolvency Proceeding" are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property" is all of Borrower's:
(a) Copyrights, Trademarks, Patents, and Mask Works including amendments,
renewals, extensions, and all licenses or other rights to use and all license
fees and royalties from the use;
18
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement of
any of the rights above, with the right, but not the obligation, to xxx and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title. .
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"Mask Works" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"Material Adverse Change" is defined in Section 8.3.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"Patents" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other Loan
Document; (b) Indebtedness existing on the Effective Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
19
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the Effective Date;
and
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor's Corporation
or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of deposit
issued maturing no more than 1 year after issue.
"Permitted Liens" are:
(a) Liens existing on the Effective Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, !f they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower or
its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, !f the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of Borrower's
business and any interest or title of a licensor or under any license or
sublicense, !f the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"Responsible Officer" is each of the Chief Executive Officer, the
President. the Chief Financial Officer and the Controller of Borrower.
"Rights", as applied to the Collateral, means the Borrower's rights and
interests in, and powers with respect to, that Collateral, whatever the nature
of those rights, interests and powers and, in any event, including Borrower's
power to transfer rights in such Collateral to Bank. "Schedule" is any attached
schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form acceptable to Bank and approved by Bank in writing.
20
"Subsidiary" is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities. "Term Loan" a loan of
$400,000.
"Term Loan Maturity Date" is October 1, 2008.
"Total Liabilities" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"Trademarks" are trademark and service xxxx rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
BORROWER:
ZYNEX MEDICAL, INC.
By: /s/ Xxxxxx Xxxxxxxxx
----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
ZYNEX MEDICAL HOLDINGS, INC.
By: /s/ Xxxxxx Xxxxxxxxx
----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
BANK:
SILICON VALLEY BANK
By: /s/ Xxxxx Xxxxx
----------------------------------------
Title: Relationship Manager
----------------------------------------
Effective
Date: September 29, 2005
----------------------------------------
21
EXHIBIT A
---------
The Collateral consists of all of Borrower's right, title and interest in and to
the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles, commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), securities, and all
other investment property, supporting obligations, and financial assets, whether
now owned or hereafter acquired, wherever located; and
all Borrower's Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
A-1
EXHIBIT B
----------
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
Fax To: Date:
------------------------------------------------- -------------------
o LOAN PAYMENT:
Zynex Medical. Inc. and Zynex Medical Holdings. Inc. (Borrower)
---------------------------------------------------------------
From Account # To Account #
------------------- -----------------------
(Deposit Account #) (Loan Account #)
Principal $ and/or Interest $
--------------------------- --------------------
All Borrower's representation and warranties in the Loan and Security Agreement
are true. correct and complete in all material respects up to and Including the
date of the transfer request for a loan payment. but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of that date:
Authorized Signature: Phone Number:
-------------------------- -------------------
________________________________________________________________________________
o LOAN ADVANCE:
Complete Outgoing Wire Request section below If all or a portion of the funds
from this loan advance are for an outgoing wire.
From Account # To Account #
------------------------ ------------------------
(Loan Account #) (Deposit Account #)
Amount of Advance $
-------------------
All Borrower's representation and warranties in the Loan and Security
Agreement are true, correct and complete in all material respects up to and
including the date of the transfer request for an advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of that date:
Authorized Signature: Phone Number:
-------------------------- -------------------
________________________________________________________________________________
OUTGOING WIRE REQUEST
Complete only if all or a portion of funds from the loan advance above are to
be wired. Deadline for same day processing is 12:00pm, P.S.T.
Beneficiary Name: Amount of Wire: $
--------------------- --------------------
Beneficiary Bank: Account Number:
--------------------- --------------------
City and State:
---------------------------
Beneficiary Bank Transit (ABA) #: Beneficiary Bank Code
- - - - - (Swift, Sort, Chip, etc.):
-----------
(For International Wire Only)
Intermediary Bank: Transit (ABA) #:
--------------------- --------------------
For Further Credit to:
---------------------------------------------------------
Special Instruction:
---------------------------------------------------------
By signing below. I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
Authorized Signature: 2nd Signature (If Required):
--------------- -------------
Print Name/Title: Print Name/Title:
--------------- -------------
Telephone # Telephone #
----------------- -----------------
________________________________________________________________________________
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: ZYNEX MEDICAL, INC. AND ZYNEX MEDICAL HOLDINGS, INC.
The undersigned Responsible officers of Zynex Medical, Inc. and Zynex
Medical Holdings, Inc. Jointly and severally, "Borrower") certify that under the
terms and conditions of the Loan and Security Agreement between Borrower and
Bank (the "Agreement"), (i) Borrower is in complete compliance for the period
ending ____________ with all required covenants except as noted below and (ii)
all representations and warranties in the Agreement are true and correct in all
material respects on this date. In addition, the undersigned certifies that
Borrower, and each Subsidiary, has timely filed all required tax returns and
paid, or made adequate provision to pay, all material taxes, except those being
contested in good faith with adequate reserves under GAAP. Attached are the
required documents supporting the certification. The Officer certifies that
these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) consistently applied from one period to the next except as explained in
an accompanying letter or footnotes. The Responsible Officer acknowledges that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial
statements + CC Monthly within 30 days Yes No
Annual (Audited) FYE within 180 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing
with SEC Yes No
AR & AP Monthly within 30 days Yes No
Aging
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Debt Service * ___ 1.00 Yes No
Minimum Liquidity Coverage ** Yes No
* (measured on a rolling 3 month basis). A ratio of EBITDA to principal and
interest payments due on the outstanding Obligations, of at least 1.40 to
1.00, increasing to 1.75 to 1.00 beginning with the month ending June 30,
2006 and thereafter.
** (to be maintained at all times) A ratio of unrestricted cash held with Bank
plus all Accounts (less Borrower's reserves for uncollectible Accounts), to
outstanding Obligations, of at least 1.50 to 1.00.
Have there been updates to Borrower's intellectual property? Borrower only has
deposit accounts located at the following institutions: Yes / No
------------------------
Comments Regarding Exceptions: See Attached.
________________________________________
BANK USE ONLY
Received by:
Sincerely, ----------------------------
AUTHORIZED SIGNER
Date:
-----------------------------------
ZYNEX MEDICAL, INC.
------------------------------------ Verified:
SIGNATURE -------------------------------
AUTHORIZED SIGNER
------------------------------------ Date:
TITLE ------------------------------------
Compliance Status: Yes No
------------------------------------ ________________________________________
DATE
ZYNEX MEDICAL HOLDINGS, INC.
------------------------------------
SIGNATURE
------------------------------------
TITLE
------------------------------------
DATE
2
