LOAN AGREEMENT
This Agreement is entered into effective as of the 6th day of March,
2006, between MICROCOR, INC., a Utah corporation ("Borrower"), and WESCOR, INC.,
a Utah corporation ("Lender").
WHEREAS, Borrower has requested that Lender advance certain funds to or
on behalf of Borrower, specifically detailed as follows:
a. Borrower is the owner, by assignment from InMedica
Development Corporation, a Utah corporation ("InMedica") of a method
for measuring hematocrit non-invasively (without drawing blood) which
includes four (4) patents from the U.S. Patent and Trademark Office,
including a patent entitled "Method and Apparatus for Non-Invasively
Determining Hematocrit" issued by the U.S. Patent and Trademark Office,
on June 18, 1996, as Patent No. 5,526,808 with a term of 17 years; two
additional patents, 5,642,734 and 6,128,518 which claim priority from
October 4, 1990. Borrower has also received a first office action
notice of allowance on a fourth patent, "System and Method for Invivo
Hematocrit Measurement Using Impedance and Pressure Plethysmography"
which Borrower expects to be issued shortly. The methods and procedures
to measure hematocrit non-invasively, including without limitation, the
patents and technologies incorporated in the patents and patent
applications described above and the development work pursued by
InMedica and Xxx Xxx Technology Co. Ltd. ("Xxx Xxx") all of which has
been assigned and transferred by Xxx Xxx and InMedica to Borrower are
collectively referred to herein as the "Hematocrit Technology."
b. Pursuant to that certain Joint Development Agreement among
Lender, Borrower, InMedica and Xxx Xxx (the "Development Agreement")
Borrower, as the assignee of the Hematocrit Technology from InMedica,
is required to pay certain minimum royalties to InMedica (the "Minimum
Royalties").
c. Lender has agreed to loan to Borrower during the months of
March, 2006 through February, 2007 an amount of up to $ 6,667 per
month, up to a total amount of $80,004, in order to allow Borrower to
pay a portion of the Minimum Royalties (the "Minimum Royalty
Advances").
WHEREAS, Lender is willing to loan the Minimum Royalty Advances to
Borrower subject to the terms and conditions of this Loan Agreement. In exchange
therefore, Borrower is willing to execute and deliver to Lender a Note in the
form of Exhibit "A" attached hereto and incorporated herein by this reference
(the "Minimum Royalty Advance Note") and to grant to Lender certain security
interests and otherwise comply with the terms of this Loan Agreement.
NOW, THEREFORE, the parties hereto do hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings, unless the context otherwise requires:
"Business Day" shall mean a day other than a Saturday, Sunday, or legal
holiday for commercial banks under the laws of the State of Utah.
"Collateral" shall mean an assignment and security interest granted to
Lender by Borrower covering 20% of all proceeds received by Borrower in
the future from any commercial use of the Hematocrit Technology or
proceeds of any license or investment by any party other than the
participants in the Joint Development Agreement; provided however that
such proceeds shall in no event exceed the total amount owing to Lender
pursuant to the secured Note;.
"Conversion Events" shall have the meaning set forth in Section 6.1.
"Conversion Price" shall have the meaning set forth in Section 6.2.
"Effective Date" shall be the date hereof.
"Event of Default" shall mean any of the events specified in Section 7
hereof, provided that there has been satisfied any requirement in
connection with such event for the giving of notice or the lapse of
time, or the happening of any further condition, event or act.
"Interest Rate" shall mean the rate of interest to accrue on the Note,
which rate shall be equal to Two (2) points above the Prime Rate.
"Loan" shall mean the advance of funds to Borrower pursuant to the
terms of this Agreement and represented by the Notes.
"Loan Documentation" shall mean the following documents executed in
connection with this transaction: (a) this Agreement; (b) the Note; (c)
the Security Agreement; (d) other documentation delivered by Borrower
or Lender pursuant to this Agreement and signed by the party against
whom the document is intended to be enforced.
"Note" shall mean the Minimum Royalty Advance Note which shall be
convertible, upon the occurrence of certain events described herein, at
the option of Lender, into shares of Borrower's common stock based upon
the amount owing on the particular Note or Notes at the time of
conversion, including principal, accrued interest and penalties at a
conversion price set forth herein.
"Obligations" shall mean the principal and the interest on the Notes,
and all other liabilities of Borrower (including liabilities for fees,
expenses and charges) now or hereafter arising under or out of the Loan
Documentation.
"Prime Rate" shall mean an annual rate of interest equal to the prime
rate published on a daily basis in the Wall Street Journal, which rate
is subject to change from time to time.
"Security Agreement" shall mean the Assignment and Security Agreement
attached hereto as Exhibit "B."
"Termination Date" shall be March 6, 2008, being the date under the
Loan Documentation when all unpaid principal and accrued interest shall
be due and payable.
1.2 Use of Defined Terms. All terms defined in this Agreement shall
have the defined meanings when used in any Note, certificate, report or other
document made or delivered pursuant to this Agreement, unless the context
otherwise requires.
SECTION 2. AMOUNT AND TERMS OF LOAN
2.1 Loan Commitment. Subject to the terms and conditions of this
Agreement, Lender has agreed to extend credit to Borrower for the Minimum
Royalty Advances, as provided in the Minimum Royalty Advance Note and subject to
the terms and conditions of this Agreement.
2.2 Promissory Notes. The Loan made pursuant to subsection 2.1 of this
Agreement shall be evidenced by the Note.
2.3 Minimum Payments. As provided in the Note, at such time and from
time to time as Borrower shall have generated revenues in excess of working
capital needs ("Excess Revenues"), as determined by Borrower's board of
directors, on which Lender shall have a representative, Borrower shall pay any
such Excess Revenues to Lender as payments toward the amounts owing on the Loan.
2.4 Voluntary Prepayment. Borrower may at its option at any time or
from time to time prepay the Notes in whole without penalty or premium.
2.5 Payments. All payments (including prepayments) by Borrower on
account of principal and interest shall be made to Wescor, Inc., 000 Xxxxx Xxxx,
Xxxxx, Xxxx 00000.
2.6 Computation of Interest. Interest shall be calculated on the basis
of actual days elapsed and a year of three hundred sixty five days (365) days.
Any change in the interest rate on the Notes resulting from a change in the
Prime Rate shall become effective as of the opening of the same Business Day
that such change in Prime Rate is announced. Lender is under no obligation to
notify Borrower of such change.
2.7 Use of Proceeds. The proceeds of the Loans shall be utilized by
Borrower to apply against the Minimum Royalties as described in the recitals
above.
SECTION 3. SECURITY
3.1 Collateral Security. As collateral for the payment and performance
by Borrower of all of the obligations of Borrower contained in this Agreement
and the Note, Borrower shall grant and convey to Lender a lien and security
interest in the Collateral. Borrower agrees to execute and deliver to Lender the
Security Agreement.
3.2 Other Documentation. Borrower agrees to execute any security
agreements, financing statements or equivalent security or lien instruments and
any continuation statements that Lender may reasonably require and further
agrees to cause the same to be duly recorded and filed whenever Lender may
reasonably direct.
3.3 Obligations Secured. The security interest herein granted to Lender
by Borrower shall secure all Obligations of Borrower hereunder to Lender,
including all covenants to be performed by Borrower under the Loan
Documentation, and the repayment of all funds advanced to Borrower from time to
time, including future advances, together with all accrued interest, costs and
other fees and expenses properly chargeable to Borrower hereunder. All such
advances shall be deemed to be a Loan or Loans to Borrower, whether or not
evidenced by instruments or documents other than this Agreement or by the
records of Lender.
SECTION 4. CONDITIONS OF LOAN
4.1 Conditions of Loan. Lender shall not be required to advance any
amounts of the Loan unless:
(a) Borrower shall have supplied to Lender the following:
(i) The executed Loan Documentation;
(ii) Original documents reasonably requested by
Lender.
(b) Borrower is in compliance with all the terms and
provisions set forth herein on its part to be observed or performed and
no Event of Default as specified herein nor any event which upon notice
or lapse of time or both or upon the further happening of any
condition, event or act would constitute such an Event of Default shall
have occurred and be continuing at the time of the Loan.
(c) No material, adverse change has occurred in the condition
of Borrower or in the condition of the Collateral.
Making of the Loan under subsection 2.1 shall constitute a representation by
Borrower that the foregoing conditions (a) through (c) have been satisfied.
4.2 Consents to Assignment. Borrower shall deliver to Lender
notifications and acknowledgments (if required) with respect to the assignments
and security interests granted unto Lender by the terms of the Security
Agreement.
SECTION 5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees as hereinafter set forth that, except
with the prior written consent of Lender, so long as the Loan is outstanding in
whole or in part:
5.1 Notices. Borrower covenants that it will promptly give written
notice to Lender of:
(a) The occurrence of any Default or Event of Default, and the
occurrence of any default under the provisions of any other loan
agreement, security agreement or instrument of indebtedness to which
Borrower is a defaulting party.
(b) Any litigation or proceedings affecting any of the
Collateral, which, if adversely determined, might have a materially
adverse effect upon the financial condition, business or operations of
Borrower or the Collateral.
(c) Any dispute between Borrower and any governmental
regulatory body, or other party which might materially affect the
Collateral or the transactions contemplated by this Agreement or
materially interferes with the normal business operation of Borrower.
(d) Any other event which might materially and adversely
affect the Collateral.
5.2 Compliance with Law; Maintenance of Existence and Properties.
Borrower covenants that Borrower will pay all of its respective obligations and
liabilities when due, including (without limitation) all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
upon any property belonging to it, and maintain appropriate reserves for the
accrual of the same in accordance with generally accepted accounting principles;
provided, however, that (unless and until an event of default under any of the
Loan Documentation) nothing in this subsection 5.2 shall require Borrower to
observe or conform to any requirement of a governmental authority, or to pay any
obligation or liability, so long as the validity thereof shall be contested in
good faith by appropriate proceedings diligently prosecuted.
5.3 Right to Inspect. Borrower will permit any person designated in
writing by Lender to inspect any of the books and records and operations of
Borrower and to discuss the affairs, finances and accounts of Borrower, all at
such reasonably times and as often as Lender may reasonably request, upon prior
notice to and subject to any reasonable conditions imposed by Borrower as to
confidentiality and trade secrets. As long as no Default shall have occurred and
be continuing, such visits, inspections and discussions shall be at Lender'
expense and risk.
SECTION 6. CONVERSION RIGHTS OF LENDER.
6.1 Conversion Events. Upon the occurrence of any of the following
events ("Conversion Events"), at the option of Lender, Lender shall have the
right to immediately demand payment in full of the Note, including interest and
fees as applicable, or to convert the amount then owing on the Note to newly
issued common stock of Borrower:
(a) Lender has exercised its option to purchase all
outstanding shares of Borrower from InMedica and Xxx Xxx pursuant to
the terms of the Development Agreement but shall not have closed on
such purchase.
(b) InMedica has exercised its right to purchase from Lender
all outstanding shares of Borrower owned by Lender pursuant to the
terms of the Development Agreement, which shares to be purchased by
InMedica shall include all shares acquired by Lender pursuant to
exercise of its conversion rights as set forth herein.
(c) A third party enters into an agreement to purchase all
outstanding shares of Borrower from Lender, InMedica and Xxx Xxx, which
shares to be purchased shall include all shares acquired by Lender
pursuant to exercise of its conversion rights as set forth herein.
(d) The occurrence of an uncured Event of Default as described
in Section 7.1 subsections (c) through (i) .
6.2 Conversion Price. In the event that any of the events described in
Section 6.1 occur and Lender elects to convert the outstanding Note balance to
shares of Borrower common stock as provided therein, the terms of conversion
(the "Conversion Price") shall be as follows:
(a) The first $40,000 owing under the Note shall be
convertible at a conversion price of $1.00 per share.
(b) All amounts owing under the Note above $40,000 up to
$80,000 shall be convertible at a conversion price of $1.50 per share.
(c) All amounts owing under the Note in excess of $80,000
shall be convertible at a conversion price of $ 2.00 per share.
SECTION 7. EVENTS OF DEFAULT
7.1 Events of Default Defined. If any of the following events (herein
called "Events of Default") shall occur and shall not have been remedied after
giving thirty (30) days written notice to Borrower (except that said thirty (30)
day written notice is not required for the Events of Default set out in
subparagraphs (a), (g) and (h)):
(a) Failure to pay any amounts due under the Note within ten
(10) days after written notice from Lender to Borrower that any such
sums have not been paid, including failure to pay the Note in full on
or before the Termination Date. Provided, that Lender, at its sole
option, may extend the Termination Date.
(b) Occurrence of a Conversion Event as described in Article
VI and failure by Borrower to perform its obligations provided therein
within ten (10) days after written notice from Lender to Borrower.
(c) Default by Borrower in the observance or performance of
any of the covenants or agreements contained in Section 5 of this
Agreement, and the continuation of the same unremedied for a period of
thirty (30) days after notice thereof shall have been given to Borrower
by Lender, provided, however, that if any such event is something which
may not be cured within thirty (30) days, there shall be no event of
default if Borrower commence action to remedy such event within thirty
(30) days, and continues to proceed diligently and in good faith to
remedy such event;
(d) Default by Borrower in the observance or performance of
any other covenant or agreement contained in the Loan Documentation and
the continuance of the same unremedied for a period of thirty (30) days
after notice thereof shall have been given to Borrower by Lender;
(e) Any of the Loan Documentation under this Agreement shall,
except with the prior consent of Lender, for any reason cease to be in
full force and effect;
(f) Filing by Borrower of a voluntary petition in bankruptcy
or a voluntary petition or an answer seeking reorganization,
arrangement, readjustment of its debts or for any other relief under
the Bankruptcy Act, as amended, or under any other insolvency act or
law, state or federal, now or hereafter existing, or any action by
Borrower indicating their consent to, approval of, or acquiescence in,
any such petition or proceeding; the application by Borrower or the
appointment by consent or acquiescence of, a receiver or trustee of
Borrower for all or a substantial part of their property; the making by
Borrower or Xxxxxxxx of an assignment for the benefit of creditors; the
admission of Borrower in writing of its inability to pay their debts as
they mature;
(g) Filing of an involuntary petition against Borrower in
bankruptcy or seeking reorganization, arrangement, readjustment of its
debts or for any other relief under the Bankruptcy Act, as amended, or
under any other insolvency act or law, state or federal, now or
hereafter existing; or the involuntary appointment of a receiver or
trustee of Borrower or for all or a substantial part of their property;
or the issuance of a warrant of attachment, execution or similar
process against any substantial part of the property of Borrower; and
the continuance of any of such events for sixty (60) days undismissed,
unbonded or undischarged;
(h) All or any substantial part of the property of Borrower
shall be condemned, seized or otherwise appropriated, or custody or
control of such property shall be assumed by any governmental agency or
any court of competent jurisdiction at the instance of any governmental
agency without just compensation or payment of value therefor and shall
be retained for a period of thirty (30) days such that, in the
reasonable estimation of Lender, a substantial impairment of the
Collateral results;
(i) The issuance of a writ of attachment, or execution or
garnishment or warrant of distraint against all or any substantial part
of the Collateral which continues unstayed and unreleased for a period
of sixty (60) days;
Then, and in any such event, Lender may, by notice of default given to Borrower;
(1) terminate forthwith the Borrower's rights under the Loan Agreement; and/or
(2) declare the Notes outstanding hereunder to be forthwith due and payable,
whereupon the principal amount of the outstanding Notes together with accrued
interest thereon, shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the Note to the contrary
notwithstanding; and/or (3) proceed to enforce any of its remedies under the
Loan Documentation, including this Agreement, and the Security Agreement.
All parties hereto do agree that this Loan Agreement is entered into
along with the other Documents including the Notes and the Security Agreement,
and further, all parties hereto do acknowledge that a default under any one of
the above documents including the Documents constitutes an event of default
under all of the other Documents including those listed above and this
Agreement.
7.2 Remedies. Lender shall have the following remedies:
(a) Upon Default by Borrower in any of the covenants or
agreements contained in the Loan Documentation providing for the
payment of taxes, or other liens or encumbrances relating to the
Collateral, Lender may, in its sole discretion and for its account (1)
pay and discharge any taxes, liens or encumbrances on the Collateral,
and (2) take any other steps they may deem necessary to protect its
security interest in the Collateral. All sums advanced or paid by
Lender for such purposes shall be payable by Borrower to Lender on
demand, as borrowings from Lender under this Agreement, and shall be
part of the Obligations.
(b) If an Event of Default set forth in Subsections 7.1 (a)
above shall occur and be continuing, Lender's remedy shall be limited
to collection of amounts due under the Collateral. Borrower agrees that
in such event Lender shall have, to the extent permitted by applicable
law, the right to send notice to any and all parties who may be
obligated to pay Borrower any consideration for the commercial use of
the Hematocrit Technology, to advise such parties that Lender claims a
security interest in proceeds to be paid Borrower for any commercial
use of the Hematocrit Technology. The proceeds of the Collateral shall
be applied to the satisfaction of the Obligations then due and only
after such application of the proceeds and the payment of any other
amounts required by applicable law shall Lender pay any surplus
proceeds to Borrower. Borrower agrees that if any notification of
intended disposition of any of the Collateral is required by law, such
notification shall be deemed reasonably and properly given if deposited
in the mails, first class postage prepaid, addressed as provided in
Section 8.1 of this Agreement.
(c) If an Event of Default set forth in Subsections 7.1 (b)
through (i) above shall occur and be continuing, Lender may declare the
Obligations to be immediately due and payable, whereupon all the
Obligations (and any Notes evidencing the same) shall become
immediately due and payable, without presentment, demand, protest or
other notice of any kind and Lender may exercise all remedies available
at law. Without limiting the generality of the foregoing, Borrower
agrees that in such event Lender shall have, to the extent permitted by
applicable law, the right to send notice to any and all parties who may
be obligated to pay Borrower any consideration for the commercial use
of the Hematocrit Technology, to advise such parties that Lender claims
a security interest in proceeds to be paid Borrower for any commercial
use of the Hematocrit Technology. The proceeds of the Collateral shall
be applied to the satisfaction of the Obligations then due and only
after such application of the proceeds and the payment of any other
amounts required by applicable law shall Lender pay any surplus
proceeds to Borrower. Borrower agrees that if any notification of
intended disposition of any of the Collateral is required by law, such
notification shall be deemed reasonably and properly given if deposited
in the mails, first class postage prepaid, addressed as provided in
Section 8.1 of this Agreement.
(d) Borrower hereby waives presentment, demand, protest or any
notice of any kind in connection with the Note.
7.3 No Waiver; Cumulative Remedies. No failure or delay on the part of
Lender in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 8. MISCELLANEOUS
8.1 Notices. Any Notice will be deemed effective on the date such
Notice is placed, first class postage prepaid, in the U.S. Mail, addressed to
the party to which Notice is being given, as follows:
Borrower: Microcor, Inc.
000 Xxxxx 000 Xxxx, #000
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Lender: Wescor, Inc.
000 Xxxxx Xxxx
Xxxxx, Xxxx 00000
With a copy to: Xxxxxxx X. Xxxxx
Xxxxx Xxxx Sessions & Xxxxxxx
000 Xx. Xxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
8.2 Successors and Assigns. This agreement shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors and
assigns, except that neither party may assign or transfer its rights hereunder
without the prior written consent of the other.
8.3 Construction. This Agreement, the Notes and all documents and
instruments associated herewith shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Utah and Borrower does
hereby irrevocably consent to the jurisdiction of any Utah court of competent
jurisdiction for the purposes of enforcement of and the seeking of any remedy
pursuant to this Agreement and any of the Loan Documentation including, but not
limited to the Security Agreement.
8.4 Time is of Essence. Time is of the essence hereof.
8.5 Attorney's Fees. In the event any action or proceeding is
brought by any party against any other party under this Agreement, the
prevailing party shall be entitled to recover attorney's fees and costs in such
amount as the court may adjudge reasonable.
8.6 Provisions Hereof Separable. Any provision of this Agreement, the
Notes, or other documents associated herewith, which may be found to be invalid,
shall be deemed separable and shall not invalidate the remainder of the
provisions provided the essential purposes of said documents are not impaired..
8.7 Other Agreements. All agreements and other documents to be supplied
to Lender hereunder, shall be in such form and substance, and Borrower agrees to
execute and deliver such other and further agreements and documents, and to
provide such other information and documentation, as Lender may reasonably
require and in such form and substance as Lender may reasonably require.
8.8 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, and such counterparts
together shall constitute one and the same instrument.
8.9 Amendment. This Agreement shall be deemed to express, embody, and
supersede any previous understanding, agreements, or commitments, whether
written or oral, between the parties with respect to the general subject matter
hereof and fully and finally to set forth the entire agreement between them.
This Agreement may not be amended or modified except in a writing, signed by
Borrower and Lender.
8.10 Miscellaneous. Any requests made or consent given hereunder at any
time by the then holder of any Note shall be binding on any transferee of such
Note. The singular of any term used in this Agreement or in any of the Loan
Documents shall include the plural as appropriate.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first above written.
BORROWER:
Microcor, Inc.,
a Utah Corporation
By: __/s/__Wayne K Barlow_________________
Its: _President___________________________
LENDER:
Wescor, Inc., a Utah Corporation
By: __/s/_Janice Wallentine______________
Its: _CFO________________________________
