LOAN AND SECURITY AGREEMENT
Exhibit 10.7
This Loan and Security Agreement (the “Agreement”) is made as of the 1st day of December, 2012 by and between Leveraged Developments LLC, a New Hampshire limited liability company, with its chief executive office at 000 Xxxxxxxxx Xxxx, X.X. Xxx 000, Xxxxxxxx, Xxx Xxxxxxxxx 00000-0000 (“Borrower”), and Xxxx Molding Company, a Vermont corporation, having a mailing address of Warm Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxx 00000 (“Lender”).
Preliminary Statement. Borrower is in the process of developing improvements to intravenous pumps and associated disposables for use with intravenous (IV) pumps, with potential for use in other IV applications, and requires working capital for further development of its technology.
Lender is willing to provide a loan of up to Six Hundred Thousand Dollars $600,000.00) (the “Loan”) subject to obtaining a security interest in all of Borrower’s assets of the Borrower and agreement on future revenue participation payments, as more particularly set forth below, and upon the other terms and conditions set forth herein.
Agreement. In consideration of the mutual agreements and undertakings of the parties set forth in this Agreement and the other Transaction Documents, Borrower hereby agrees with Lender as follows:
1. Loan; Term; Disbursement; Security:
a. Subject to the terms and conditions of this Agreement, Lender agrees to extend to Borrower a term loan in the original principal amount of up to Six Hundred Thousand Dollars ($600,000.00) for a term of twenty five years from the date hereof, which shall be evidenced by this Agreement and a promissory note of even date herewith (the “Note”). Proceeds of the Loan shall be used by Borrower to facilitate the development, production and licensing of the Device, as defined below.
b. Lender will disburse Two Hundred Thousand Dollars ($200,000.00) as of the date of this Agreement (the “Funding Date”).
c. Lender will disburse an additional Two Hundred Thousand Dollars ($200,000.00) on April 1, 2013 (the “Second Loan Installment”) and also on August l, 2013 (the “Third Loan Installment”), subject to Lender’s satisfaction, in its sole discretion, with progress made in development, intellectual property protection, production and licensing of the Device.
d. The Obligations, as defined in Section 4 below, shall be secured by this Loan Agreement and a pledge of all membership interests in the Borrower by its principal Xxxx Xxxxxxxx.
LEVERAGED DEVELOPMENT, LLC - LOAN AND SECURITY AGREEMENT
a Payment equal to Twenty Four Cents ($0.24) per Disposable Pump Set Manufactured and One Hundred Twenty Dollars ($120.00) per Pump Assembly Manufactured, provided, however, that if (i) the Third Loan Installment is not made, the per unit rates shall decrease to Sixteen Cents ($0.16) and Eighty Dollars ($80.00), respectively; and (iii) if the Second Loan Installment and Third Loan Installment are not made, the per unit rate shall be Eight Cents ($0.08) and Forty Dollars ($40.00), respectively.
b. Revenue Participation Payments shall be paid quarterly in arrears beginning on April 1, 2013.
i. Disposable Pump Set means any and all disposable pump sets, devices, kits or parts including ‘“IV kits” and “administration kits” that use, rely on, or otherwise incorporate any portions of the Technology.
ii. Pump Assembly means any and all pump assemblies, sub-assemblies or control systems that use, rely on, or otherwise incorporate any portions of the Technology.
111. Technology means (i) the inventions disclosed in one or more of the patents or patent applications referenced in Schedule I, attached hereto and made a part hereof; and (ii) the technology described in Schedule III, attached hereto and made a part hereof.
iv. Device means a Disposable Pump Set, a Pump Assembly, and/or a combination of a Disposable Pumps Set and Pump Assembly.
iv. Manufactured means the manufacture, assembly, distribution, shipment, or sale of the Device by either Borrower, Lender or by any other third party who has received or acquired, directly or indirectly, from Borrower, or any successor in interest to Borrower, a license, assignment, or any other transfer of any rights in any of the Technology. Borrower agrees that Borrower shall not license, assign or otherwise transfer any rights in the Technology without the prior written approval of Lender, and without limiting the foregoing, any such license, assignment or other transfer must provide assurance adequate to Lender that Borrower will, following such license, assignment or transfer, continue to collect and remit to Lender all applicable Revenue Participation Payments.
d. Revenue Participation Payments shall continue for a period of 25 years from the date of this Agreement, and this Agreement shall remain in effect until all Obligations hereunder have been fully paid and satisfied. Borrower acknowledges and agrees that the Revenue Participation Payments are a separate and distinct payment obligation from the Loan obligations, and that the term of the Revenue Participation Payments may continue beyond the term of the Note, and shall at all times be secured by the Collateral granted to Lender under this Agreement. Borrower further acknowledges and agrees that Lender would not be making the Loan to Borrower but for the parties’ agreement for Revenue Participation Payments as provided in this Agreement
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leveraged development, LLC - loan and security agreement
e. Upon reasonable prior written notice for an audit, Borrower shall permit auditors designated by Lender, together with such legal and technical support as Lender deems necessary, to examine and copy, during ordinary business hours, all records and materials of Borrower for the purpose of verifying compliance with this Agreement. Borrower shall cooperate with any audit. Lender shall be responsible for payment of the auditors; provided, however, however, in the event that the audit establishes underpayment greater than five percent (5%) of the Revenue Participation Payments due for any period under audit, Borrower shall reimburse Lender for the cost of the audit. Borrower shall pay any underpayment established by an audit, with interest at the rate of one and one half percent (11/2 %) per month commencing on the date such payment became due, within thirty (30) days after receipt of an invoice from Lender.
4. Grant of Security Interest. To secure prompt payment of all principal, interest, charges and expenses outstanding under the Note, the Revenue Participation Payments, and performance of all obligations arising under the Transaction Documents (which term shall mean the Note, this Loan and security Agreement, the manufacturing Agreement if the Option is exercised and all other documents executed in connection with the Loan), and all extensions, modifications, substitutions and renewals thereof, including without limitation any costs or expenses incurred by the Lender in connection with the same, together with any other indebtedness or obligations now or hereafter owed by the Borrower to the Lender from time to time (collectively, the “Obligations”), the Borrower hereby grants, sells, assigns, conveys, mortgages, pledges, hypothecates and transfers to the Lender a continuing security interest in and lien on all of the Borrower’s right, title and interest in and to all of the following, whether now existing or hereafter developed or acquired (the “collateral”):
Accounts; Chattel Paper, including Electronic Chattel Paper; Equipment, including computer programs embedded in goods, machinery, fixtures, furniture, tools, parts, vehicles, and materials relating to the use, operation or structure of any of the foregoing; Deposit Accounts; Documents; Fixtures; intellectual property and General Intangibles (including without limitation, Patents, Patent Applications and Patent Licenses, and Trademarks, Trademark Applications and Trademark Licenses), including business name(s), website(s), telephone numbers, customer lists, computers and Software and further including all rights under the Manufacturing Agreement; Instruments, including Promissory Notes; Inventory; Investment Property, including Securities Accounts; Letter-of-Credit Rights; Money; Supporting Obligations; and all Proceeds and Products of any of the foregoing to the extent not listed above as original collateral , including money and cash proceeds, deposit accounts, securities accounts, insurance proceeds, and proceeds in the form of any of the types of property included in this collateral description.
As used herein, the capitalized terms above shall have the meaning given to the term in the Uniform Commercial Code to be effective in the State of New Hampshire, as amended from time to time (“UCC’). The terms “include”, “includes” and “including” in this section and elsewhere in this Agreement are not limiting and shall be construed to mean ‘without limitation.”
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leveraged development, LLC - loan and security agreement
As used herein, the following terms shall have the following meanings:
“General Intangibles” means all of the Borrower’s present and future general intangibles as defined in the UCC and other personal property, including permits, licenses, choses in action, copyrights and renewal thereof, copyright applications, mask works, mask work applications, trade secrets, goodwill, patents, patent applications, trade names, trademarks, trademark applications, service marks, trade secrets, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, claims under insurance policies (whether or not proceeds), rights of set off, infringement claims, product lines, research and development, computer programs, computer software, computer discs, computer tapes, literature, reports, catalogs, deposit amounts, insurance premium rebates, tax refunds, tax refund claims and all leasehold interests of the Borrower to the extent considered personal property under applicable law.
“Patents, Patent Applications and Patent Licenses” means all of the Borrower’s present and future patents, patent applications and patent licenses in which it possesses an ownership interest, including without limitation, .all those patents, patent applications, and patent licenses referred to on Schedule I hereto.
“Trademarks, Trademark Applications and Trademark Licenses” means all of the Borrower’s present and future trademarks, trademark applications and trademark licenses in which it possesses an ownership interest, including without limitation, all of those trademarks, trademark applications and trademark licenses referred to on Schedule II hereto.
5. Grant of Option. Borrower hereby grants and conveys to Lender the exclusive option (“Option”) and right to enter into a contract for the exclusive manufacture of the Devices, subject to and in accordance with the terms and conditions of this Agreement. The Option shall be , exercisable by Lender during the one (1) year period after the date of this Agreement (“Option Period”). The Option may not be revoked by Borrower during the Option Period. Lender may exercise the Option by giving Borrower written notice of such exercise (the “Option Notice”), which written notice may be given at any time after the date of this Agreement and on or before 11:59 p.m. (ET) on the last day of the Option Period. Immediately following delivery of the Option Notice, the parties shall execute the Manufacturing Agreement in the form attached as Schedule IV hereto and made a part hereof. After the Option Period expires, the Option will be of no further force and effect.
a. Patent Search; IP Ownership: Lender’s review of a patent search provided by Borrower. The cost of this search was estimated at Eight Thousand Dollars ($8,000.00), which Lender has previously advanced to Borrower; and which Lender shall deduct from the initial Loan disbursement. Borrower shall have provided Lender with evidence that Borrower’s principal Xxxxxxx Xxxxxxxx shall have transferred all intellectual property rights that he has or may claim in the Device to Borrower.
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leveraged development, LLC - loan and security agreement
b. Authority Documents: Evidence of Borrower’s authority to enter into the Loan transaction, including copies of all of Borrower’s organizational documents and resolutions or authorizations concerning the Loan, all as certified by the keeper of Borrower’s records, together with evidence of Borrower’s good standing as an entity, and an incumbency certificate as to those authorized to execute Transaction Documents on behalf of Borrower.
c. Legal Opinion: An opinion of Borrower’s counsel that the Transaction Documents have been duly authorized, executed and delivered by Borrower, and constitute legal; valid and binding obligations of Borrower, in accordance with their respective terms.
d. Insurance: Evidence of insurance as required below.
a. Organization. Etc. The Borrower is duly organized, validly existing and in good standing under the law of the State of New Hampshire, and its legal name is correctly stated in the first paragraph of this Agreement, and that this is not a trade name. Borrower does not conduct business through any other business entity or name except as set forth in this Agreement. Borrower possesses full power and authority to conduct business in its name and as now conducted. The execution, delivery and performance of the Transaction Documents has been duly authorized by Borrower. Each of the Transaction Documents has been executed by a duly authorized agent of Borrower. The execution, delivery and performance of the Transaction Documents by Borrower will not violate any provision of Borrower’s organizational documents.
e. Litigation: Violations: Defaults. There are no actions, litigation, suits, proceedings, inquiries or investigations, at law or in equity, or before or by any court, public board or body, pending, threatened against or affecting Borrower that could adversely affect Borrower’s business, profits or :financial condition or their ability to perform its obligations under the Transaction Documents. Borrower is not in breach of any contract, agreement, license, permit or approval that could materially adversely affect Borrower’s business, profits or financial condition or the Borrower’s ability to perform its obligations under the Transaction Documents.
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leveraged development, LLC - loan and security agreement
h. Intellectual Property. Borrower possesses all requisite patents, patent rights, licenses, trademarks, trademark rights, trade names and copyrights that are required to conduct. its business as now conducted without conflict with the rights of others.
Borrower acknowledges that the representations and warranties set forth in this paragraph are material to Lender’s agreement to extend credit to Borrower and that Lender has relied on these representations and warranties, which shall remain in effect for so long as the Obligations remain outstanding. Borrower agrees to notify Lender promptly in writing of any change in the information referenced in this section.
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leveraged development, LLC - loan and security agreement
c. Insurance. To make its best efforts to secure commercially available insurance within thirty (30) days of closing of this Agreement and to maintain such insurance with insurers acceptable to Lender in such amounts as are acceptable to Lender, including hazard and extended coverage covering all Collateral; such liability and casualty policies shall name Lender under a standard loss payable clause, and shall provide for at least thirty (30) days prior written notification to Lender of any termination, cancellation, or material modification of such policies, and within :fifteen (15) days after written notice from Lender, Borrower shall obtain such additional insurance as Lender may reasonably request. Certificates of such insurance shall be deposited with Lender. Borrower shall give immediate written notice to Lender and to insurers of loss or damage to the Collateral and shall promptly file proofs of loss with insurers. Lender is authorized, but under no duty, at Borrower’s expense, to obtain such insurance or file proofs of loss upon failure of the Borrower to do so.
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leveraged development, LLC - loan and security agreement
9. Additional Covenants as to Collateral For so long as the Obligations remain outstanding, Borrower further covenants and warrants to Lender as follows:
a. Location. To keep the Collateral at the address set forth above; or, if the Borrower wishes to keep Collateral at another location, to notify the Lender in writing at least thirty (30) days prior to the movement or location of any of Collateral to a new location and to obtain the Lender’s written consent prior to moving any items of Collateral to the new location.
·without the written consent of Lender, except that Borrower may sell the Collateral in the ordinary course of its business.
g. Inventory Schedule. To furnish from time to time, at the Borrower’s expense, within fifteen (15) days after requested by the Lender, a schedule of inventory prepared by a party satisfactory to the Lender and such other information relating to the Borrower’s business as the Lender may reasonably request.
10. Power of Attorney. The Borrower hereby grants to the Lender a Power of Attorney, which shall be deemed coupled with an interest and shall be irrevocable, (a) to demand, xxx for, and give an effectual discharge of any sum payable to the Borrower for Collateral assigned to the Lender; (b) to endorse in the Lender’s favor any negotiable instrument drawn in the Borrower’s favor in payment of the Collateral assigned to the Lender; (c) to execute on behalf of the Borrower any notes, chattel paper, UCC financing statements, amendments thereto and continuations thereof (or similar statements of notice, registration, amendment or continuation under the laws of any jurisdiction), or other writing in connection with this Agreement or the Collateral as the Lender may require for the purpose of protecting, maintaining or enforcing the Collateral or the security interest granted to the Lender in the Collateral; (d) to adjust, make, pursue, settle and collect any insurance claim in connection with this Agreement; and (e) to discharge taxes and encumbrances at any time levied or placed on the Collateral, or otherwise protect the Collateral, and to make repairs thereof. The Borrower agrees to reimburse the Lender on demand for any and all expenditures made in connection with any of the foregoing powers exercised by the Lender hereunder.
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leveraged development, LLC • loan and security agreement
a. If Borrower defaults in the payment of any amount due under the Note, this Agreement or any of the Transaction Documents within five (5) days of when due.
b. If Borrower defaults in the performance of any term or provision of this Agreement or any of the Transaction Documents, other than a payment default or a default specified in another provision of this section.
c. If any custodian, liquidator, trustee or receiver is appointed for Borrower for a material portion of its assets; or Borrower becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors; or Borrower or any guarantor applies for or consents to the appointment of a custodian, liquidator, trustee or receiver for itself or any material portion of its assets; or bankruptcy, reorganization, or insolvency proceedings or other proceedings for relief under any bankruptcy or similar law or laws for relief of debtors, are instituted by or against Borrower.
d. . If any statement or representation contained in this Agreement, any Loan Document, or any financial statement or certificate delivered to Lender shall be determined to have been materially false when made; or if any representation or warranty contained in this Agreement shall be breached, and such breach is not ·cured within 10 days.
e. Receipt of any information indicating that Lender’s security interest is not prior to all other security interests, or if a security interest in or other encumbrance on any of the Collateral is granted by Borrower, or any tax lien is filed against Borrower.
f. Upon failure of Borrower to maintain its entity registration with the State of New Hampshire, business failure or cessation of business operations of, Borrower or any change for any reason whatsoever in the management, majority ownership or control of Borrower.
12. Remedies Upon Default. Upon the occurrence of an Event of Default under the this Agreement or the other Transaction Documents, which continues beyond any applicable cure period, the Lender may exercise any one or more of the following remedies: (a) declare the Obligations secured by this Agreement to be due and payable in full without notice or demand; (b) demand that the Borrower assemble the Collateral and make it available to the Lender at the place and at the time designated in the demand; (c) to the extent permitted by law, enter, without process of law, all locations where the Collateral is kept, take possession of the Collateral; (d) operate the Borrower’s business (directly or indirectly, including through appointment of a receiver) using the Collateral; (e) conduct a public or private sale of the Collateral at its discretion and in accordance with the UCC; (f) contact account debtors and direct that future payments be made directly to the Lender; and (g) exercise any other right, remedy or privilege provided under the UCC or otherwise at law.
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leveraged development, LLC - loan and security agreement
In addition to all rights and remedies provided in this Agreement or by law. if an Event of Default occurs, the Lender may dispose of any of the Collateral at public auction or private sale in its then present condition or following such preparation and processing as Lender deems commercially reasonable. Lender has no duty to the Borrower to prepare or process the Collateral prior to sale. Lender may disclaim warranties of title, possession, quiet enjoyment and the like. Such actions by the Lender shall not affect the commercial reasonableness of the sale. Further, the Lender may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.
Lender may purchase all or any part of the Collateral at public or private sale, and in lieu of actual payment of such purchase price, may set-off the amount of such price against the Obligations.
The Borrower hereby waives any and all rights that it may have to judicial hearing in advance of the enforcement of any of the Lender’s rights hereunder, including without limitation Lender’s right following an Event of Default to take immediate possession of the Collateral and exercise its rights with respect thereto. All payments received by the Borrower under or in connection with any of the Collateral after the occurrence of an Event of Default shall be held by the Borrower in trust for the benefit of the Lender, shall be segregated from other funds of the Borrower and shall forthwith upon receipt by the Borrower be turned over to the Lender, inthe same form as received by the Borrower (duly endorsed by the Borrower to the Lender, if required).
The Lender may perform any defaulted obligations for the Borrower’s account and any expense incurred in so doing shall be chargeable with interest at the Note rate to the Borrower and added, to the Obligations.
The Borrower shall remain liable for any deficiency resulting from a sale of the Collateral and shall pay any such deficiency forthwith on demand.
13. Limitation on the Lender’s Duty in Respect to Collateral and Indemnification. It is expressly agreed by the Borrower that, notwithstanding anything to the contrary contained in this Agreement, the Borrower shall remain liable with respect to all Accounts, Negotiable Collateral, General Intangibles and other Collateral to observe and perform all the conditions and obligations to be observed and performed by it, the Lender shall not have any obligation or liability under any Accounts, Negotiable Collateral, General Intangibles and other Collateral (which terms shall have the meaning given them in the UCC unless otherwise defined in this Agreement) by reason of, or arising out of, this Agreement or the assignment by the Borrower to the Lender of, or the receipt by the Lender of any payment relating to any Accounts, Negotiable Collateral, General Intangibles and other Collateral pursuant hereto, nor shall the Lender be required or obligated in any manner to perform or fulfill any of the obligations of the Borrower under or pursuant thereto to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any person thereunder or by any account debtor, to present or file any claim or to take any action to collect or enforce any performance or the payment of any amounts that may have been assigned to the Borrower or to which the Borrower may be entitled at any time or times.
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leveraged development, LLC - loan and security agreement
Beyond the safe custody thereof, the Lender shall have no duty as to any Collateral in its possession or in its nominee’s possession or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. In any suit, proceeding or action brought by the Lender under any Accounts, Negotiable Collateral, General Intangibles and other Collateral for any sum owing thereunder or to enforce any provision thereof, the Borrower will defend, indemnify and hold harmless the Lender from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction or liability whatsoever of the obligee thereunder arising out of a breach by the Borrower of any agreement, indebtedness or liability at any time owing to or in favor of such obligee or its successors from the Borrower, and all such obligations of the Borrower shall be and remain enforceable against the Borrower and shall not be enforceable against the Lender.
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leveraged development, LLC - loan and security agreement
Documents, any waiver of any conditions of the Transaction Documents requested by Borrower, or enforcing any of Lender’s rights hereunder or under any of the other Transaction Documents.
17. Consent to Jurisdiction; Waiver of Jury Trial. In the event that Lender brings any action or proceeding in connection herewith in any court of record of New Hampshire, Borrower hereby irrevocably consents to and confers personal jurisdiction of such court over Borrower by such court. In any such action or proceeding, Borrower hereby waives personal service of any summons, complaint, or other process and agrees that service thereof may be made upon Borrower by mailing a copy of such summons, complaint or other process by certified mail to Borrower at its address designated pursuant to the notice provisions of this Agreement. Borrower hereby waives trial by jury in any litigation in any court with respect to, in connection with, or arising out of this Agreement or any instrument or document delivered in connection herewith, or the validity, protection, interpretation, collection or enforcement thereof, or any other claim or dispute howsoever arising between Borrower and Lender.
18. General. The terms, warranties and agreements herein contained shall bind and inure to the benefit of the respective parties hereto, and their respective legal representatives, successors and assigns. Waiver of or acquiescence in any default by the Borrower, or failure of the Lender to insist upon strict performance by the Borrower of any provision of this Agreement, shall not constitute a waiver of any subsequent or other default or failure. Notices to any party shall be in \\rr.iting and shall be delivered personally or by mail addressed to the party at the address herein set forth or otherwise designated in writing. This Agreement may only be modified by a writing signed by the Borrower and the Lender. The laws of the State of New Hampshire, including the UCC, shall govern the rights, duties and remedies of the parties. In the event of any provision or clause of this Agreement conflicts with applicable law, such conflict shall not affect other provisions which can be given effect without the conflicting provision, and to this end the provisions of this Agreement are declared to be severable. All rights and remedies hereunder shall be governed by the laws of the State of New Hampshire without resort to principles of conflicts of laws.
[Signature pages follow.]
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Xxxx Molding Company | Leveraged Developments LLC | |
Signature: __________________________________ | Signature: | /s/ Xxxxxxx Xxxxxxxx |
Name: _____________________________________ | Name: Xxxxxxx Xxxxxxxx | |
Title: ______________________________________ | Title: Member | |
Date: ______________________________________ | Date: 06. December 2012 |
leveraged development, LLC • loan and security agreement
SCHEDULE I
PATENTS, PATENT APPLICATIONS
AND PATENT LICENSES
Code | Heading | Number | ||
No patents have been filed as of 1st December 2012.
This
schedule will be updated as intellectual property protections are filed, as described
in INTELLECTUAL PROPERTY AGREEMENT of 5 December 2012.
leveraged development, LLC • loan and security agreement
SCHEDULE II
TRADEMARKS. TRADEMARK APPLICATIONS
AND TRADEMARK LICENSES
Title | Registration No. | Reg. Date |
No TRADEMARKS have been filed as of 1st December, 2012
This schedule will be updated as intellectual property protections are filed, as described in INTELLECTUAL PROPERTY AGREEMENT of 5 December 2012.
leveraged development, LLC - loan and security agreement
SCHEDULE III
DESCRIPTION OF TECHNOLOGY
Refer to the description of the Technology in
INTELLECTUAL PROPERTY AGREEMENT of 5 December 2012.
leveraged development, LLC – loan and security agreement
SCHEDULE IV
MANUFACTURING AGREEMENT