LOAN AND SECURITY AGREEMENT
Exhibit
10.1
This Loan
and Security Agreement (this “Agreement”) is executed by and
between Marquette Business Credit, Inc., d/b/a/ Marquette Healthcare Finance,
Standard Insurance Center, 000 XX Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx
00000, (“Lender”) and
Zynex, Inc. and Zynex Medical, Inc., f/d/b/a Stroke Recovery Systems, 0000
Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx
00000 (collectively, “Borrower”), as of September
22, 2008. Lender and Borrower hereby agree as follows:
Section
1. DEFINITIONS
1.1 Definitions. When
used in this Agreement, the capitalized terms set forth below shall have the
definitions assigned to such terms below:
“ACH” means automated
clearing house.
“Accounts” means all
accounts, including, without limitation, all health care receivables, all
governmental health care receivables, and health care insurance receivables, and
all other forms of obligations owing to Borrower, whether billed or unbilled,
arising out of the provision of services or the sale, lease, license, or
assignment of goods or other property, including all receivables, and all
proceeds of the foregoing.
“Account Debtor” means
a Person who is obligated on an account.
“Advance” means any
advance of funds by Lender to Borrower under this Agreement.
“Advance Rate” means
the percentages specified in Schedule A of Eligible
Accounts and unbilled Accounts.
“Advance Request”
means a written request by Borrower for an Advance signed by an Authorized
Representative in form and content specified by Lender.
“Affiliate” of a
Person means another Person which, directly or indirectly, controls, is
controlled by, or is under common control with, such former Person, including
without limitation any subsidiary of Borrower. For the purposes of
this definition, “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through ownership of voting securities or partnership or other interests, by
contract or otherwise.
“Authorized
Representative” means any officer or employee of Borrower designated by
Borrower for purposes of giving and receiving notices hereunder, requesting and
repaying Loans, agreeing to rates of interest and otherwise transacting business
with Lender hereunder.
Exhibit
10.1 - Page 1 of 43
“Base Rate” means the
rate per annum published from time to time by The Wall Street Journal as
the base rate for corporate loans at large commercial banks (or if more than one
such rate is published, the higher or highest of the rates so
published). If such rate is no longer published by The Wall Street Journal, then
Lender shall, in its sole and absolute discretion, substitute the base or prime
rate for corporate loans at a large commercial bank for the base rate published
in The Wall Street
Journal. Such rate may not necessarily be the lowest or best
rate actually charged to any customer of such commercial bank.
“Benefit Plan” means a
defined benefit plan as defined in Section 3(35) of ERISA (other than a
Multiemployer Plan) in respect of which a Person or any Related Company is, or
within the immediately preceding six (6) years was, an “employer” as defined in
Section 3(5) of ERISA, including such plans as may be established after the date
hereof.
“Borrowing Base”
means, as of any date, the amount determined by Lender equal to the lesser of:
(a) an
amount equal to Eligible Accounts multiplied by the applicable NCV by payor
class shown on Schedule
A, multiplied by the Advance Rate for Eligible Accounts, minus the Reserve,
or
(b) the
net sum of Borrower’s eight (8) weeks’ trailing collections from
Accounts.
“Borrowing Base
Certificate” means a certificate in the form of Exhibit A attached
hereto.
“Business Associate
Agreement” means a business associate agreement in form and content
acceptable to Lender executed by Borrower and Lender pursuant to the
requirements of HIPAA.
“Capital Expenditures”
means, with respect to any Person, all expenditures made and liabilities
incurred for the acquisition of assets which are required to be capitalized in
accordance with GAAP.
“Capitalized Lease”
means a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
“Capitalized Lease
Obligation” means Indebtedness represented by obligations under a
Capitalized Lease, and the amount of such Indebtedness shall be the capitalized
amount of such obligations determined in accordance with GAAP.
“Capitated Contracts”
means all of Borrower’s contracts whether presently existing or hereafter
executed between Borrower and various health maintenance organizations and all
proceeds therefrom.
“Capitated Contract
Rights” means all of Borrower’s rights to payment of any kind arising
from or out of Capitated Contracts or any other contracts or rights to payment
from health service contracts whether presently existing or hereafter executed
between Borrower and various health maintenance organizations.
“Change of Control”
means the time at which:
(a) Any Person (other than a
Person who is or becomes a Borrower or guarantor hereunder) who on the Closing
Date does not have voting control (meaning the control of more than 50% of the
outstanding shares of voting capital stock or other voting equity interests)
subsequently obtains voting control, either directly or through proxy, of
Borrower;
Exhibit
10.1 - Page 2 of 43
(b) There
shall be consummated any consolidation or merger of Borrower pursuant to which
Borrower’s common stock (or other capital stock) would be converted into cash,
securities, or other property, other than a merger or consolidation of Borrower
(i) with or into a Person who becomes a Borrower hereunder, or (ii) in which the
holders of such common stock (or other capital stock) immediately prior to the
merger have the same proportionate ownership, directly or indirectly, of common
stock of the surviving corporation immediately after the merger as they had of
the Borrower’s common stock (or other capital stock) immediately prior to such
merger;
(c) All
or substantially all of Borrower’s assets shall be sold, leased, conveyed, or
otherwise disposed of as an entirety or substantially as an entirety to any
Person (other than a Person who is or becomes a Borrower or guarantor hereunder)
in one or a series of transactions; or
(d) Any
Person on the Closing Date that was an executive officer of Borrower becomes
inactive whether by reason of death, disability, resignation, action by the
Board of Directors or shareholders of the Borrower, or otherwise, and such
inactivity causes Lender to reasonably believe that the prospect of payment or
performance by Borrower under any of the Loan Documents or any of the Collateral
is or may become impaired.
“Closing Date” means
the date on which each of the conditions set forth in Section 4.1 are
satisfied and Lender funds the initial Loan(s) hereunder.
“Code” means the
Internal Revenue Code of 1986, as amended from time to time.
“Collateral” means and
includes all of Borrower’s now owned or hereafter acquired assets, whether
tangible or intangible, including without limitation all of Borrower’s right,
title, and interest in and to each of the following, wherever located and
whether now existing or hereafter arising or acquired, including, without
limitation, all of the following:
(a) all
Accounts;
(b) all
contract rights, including all Capitated Contract Rights and all proceeds
therefrom;
(c) all
rights to payment for services rendered or work performed, but not yet
billed;
(d) all
Patient Lists;
(e) all
inventory;
(f) all
equipment and fixtures;
(g) all
federal, state, and local tax returns;
(h) all
general intangibles, including without limitation payment intangibles and
software;
(i) all
Intellectual Property, including without limitation all of Borrower’s
Intellectual Property rights now existing or hereafter arising in Borrower’s
NeuroMove products;
Exhibit
10.1 - Page 3 of 43
(j) all
Deposit Accounts, cash, drafts, certificates of deposit, and general and special
deposits;
(k) all
investment property and financial assets (other than margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System);
(l) all
instruments;
(m) all
chattel paper, including, without limitation, electronic chattel
paper;
(n) all
goods and all accessions thereto;
(o) all
documents;
(p) all
letter of credit rights;
(q) all
insurance and certificates of insurance pertaining to any and all items of
Collateral;
(r) all
books and records;
(s) all
files, correspondence, computer programs, tapes, disks, and related data
processing software and other media which contain information identifying or
pertaining to any of the Collateral or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof;
(t) all
cash deposited with any Affiliate of Lender;
(u) those
commercial tort claims, if any, described on Schedule 1.1
hereto;
(v) any
and all products and replacements of the foregoing; and
(w) all
cash and non-cash proceeds of the foregoing (including, but not limited to, any
claims to any items referred to in this definition and any claims against third
parties for loss of, damage to, or destruction of any or all of the Collateral
or for proceeds payable under or unearned premiums with respect to policies of
insurance) in whatever form.
“Collecting Bank”
means any banking institution with which a Lockbox Account has been established
pursuant to any Lockbox Agreement.
“Concentration Limit”
means the percent specified on Schedule A of total Accounts
of Borrower deemed Eligible Account other than with respect to clause (l) of the
definition of Eligible Accounts.
“Control Agreement”
means an agreement that satisfies the requirements of control in favor of Lender
within the meaning of the UCC over Borrower’s Deposit Accounts, investment
property, electronic chattel paper or letter of credit rights.
“Cross-Age Percentage”
shall mean the percent specified on Schedule A of the aggregate
delinquent balance of all Accounts owing by a particular insurance company that
is an Account Debtor, excepting Medicare and Anthem Blue Cross.
Exhibit
10.1 - Page 4 of 43
“Current Ratio” means
the ratio, measured at any time, of Borrower’s current assets to current
liabilities, determined in accordance with GAAP.
“Cut-Off Date” means
the number of days specified on Schedule A after the date of
invoice.
“Debt Service Coverage
Ratio” means the ratio determined as of the end of each fiscal quarter
for the twelve consecutive months then ending of Zynex, Inc. on a consolidated
basis: (a) EBITDA for such period to (b) the sum of total debt service on
Indebtedness during such period plus cash income taxes paid
during such period.
“Default” means any of
the events specified in Section 10.1 that,
with the passage of time or giving of notice or both, would constitute an Event
of Default.
“Default Rate” means
the annual rate of interest shown on Schedule A.
“Deposit Account”
means any demand, Lockbox, time, savings, passbook, or similar account now or
hereafter maintained by or for the benefit of Borrower, with an organization
that is engaged in the business of banking (including, without limitation,
banks, savings banks, savings and loan associations, credit unions, and
trust companies), and all funds and amounts therein, whether or not restricted
or designated for a particular purpose, including without limitation, all
“deposit accounts” as defined in the UCC.
“Dollar” and “$” means freely
transferable United States dollars.
“EBITDA” means, for
any period, the sum of (a) Net Income (or Net Loss) (including gains and losses
from the sales of assets in the ordinary course of business) for such period,
(b) the interest expense for such period, (c) the provision for income
taxes allocable to such period, and (d) any depreciation or amortization
expenses incurred in determining Net Income (or Net Loss) for such period (where
the items set forth in sections (a) – (d) above are determined without
duplication and on a consolidated basis and, where applicable, in accordance
with GAAP).
“Eligible Accounts”
shall mean all Accounts of Borrower which are deemed by Lender in the exercise
of its good faith credit judgment to be eligible for inclusion in the
calculation of the Borrowing Base, net of any and all interest, finance charges,
sales tax, fees, returns, discounts, claims, credits, charges, contra accounts,
exchange contracts or other allowances, offsets and rights of offset,
deductions, counterclaims, disputes, rejections, shortages, or other defenses,
and all credits owed or allowed by Borrower upon any of its Accounts and further
reduced by the aggregate amount of all reserves, limits, and deductions provided
for in this definition and elsewhere in this
Agreement. Notwithstanding the foregoing, Eligible Accounts shall be
determined without deduction for estimated insurance company reimbursement
deductions, which are sometimes referred to in the healthcare industry as
“contractual adjustments.” In no event shall Eligible Accounts
include the following:
(a) Accounts
which remain unpaid in whole or in part after the Cut-Off Date;
(b) Accounts
with respect to which the Account Debtor is an Affiliate of
Borrower;
(c) Accounts
due from Account Debtors that are insurance companies, other than Medicare and
Anthem Blue Cross, that exceed the Cross-Age Percentage;
Exhibit
10.1 - Page 5 of 43
(d) Accounts
with respect to which the obligation of payment by the Account Debtor is or may
be conditional for any reason whatsoever, including, without limitation,
accounts arising with respect to goods that were (i) not sold on an
absolute basis, (ii) sold on a xxxx-and-hold sale basis, (iii) sold on
a consignment sale basis, (iv) sold on a guaranteed sale basis,
(v) sold on a sale or return basis, or (vi) sold on the basis of any
other similar understanding;
(e) Accounts
with respect to which the Account Debtor is not a resident or citizen of, or
otherwise located in, the continental United States of America, or with respect
to which the Account Debtor is not subject to service of process in the
continental United States of America or a province of Canada, unless such
Accounts are backed in full by irrevocable letters of credit or credit insurance
in form and substance satisfactory to Lender issued or confirmed by a domestic
commercial bank acceptable to Lender and which, if a letter of credit, is in the
possession of Lender and which, if credit insurance, is payable to
Lender;
(f) Accounts
with respect to which the Account Debtor is the United States of America or any
other federal governmental body unless such Accounts are duly assigned to Lender
in compliance with all applicable governmental requirements (including, without
limitation, the Federal Assignment of Claims Act of 1940, as amended, if
applicable) or unless such Accounts are Medicare or Medicaid;
(g) Accounts
(i) with respect to which Borrower is or may be liable to the Account
Debtor for goods sold or services rendered by such Account Debtor, but only to
the extent of such liability to such Account Debtor or (ii) with respect to
which such Account Debtor disputes the amount owed but only that portion of such
Accounts which such Account Debtor disputes;
(h) Accounts
with respect to which the goods giving rise thereto have not been shipped and
delivered to and accepted as satisfactory by the applicable Account Debtor or
with respect to which the services performed giving rise thereto have not been
completed and accepted as satisfactory by the applicable Account
Debtor;
(i) Accounts
which are not invoiced within thirty (30) days after the date of service or the
date of shipment of the goods giving rise to the account;
(j) Accounts
which are not subject to a first priority perfected security interest in favor
of Lender;
(k) Accounts
where the account balance owed by an Account Debtor exceeds the Concentration
Limit;
(l) Accounts
which represent a progress billing; and
(m) Accounts
that Lender, in its good faith credit judgment, has determined to be
ineligible.
Exhibit
10.1 - Page 6 of 43
“Environmental Laws”
means all federal, state, local, and foreign laws now or hereafter in effect
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or wastes
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, removal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all regulations, notices, or demand letters issued, entered,
promulgated, or approved thereunder.
“ERISA” means the
Employee Retirement Income Security Act of 1974, as in effect from time to time,
and any successor statute, and any rule or regulation issued
thereunder.
“Event of Default”
means any of the events specified in Section
10.1.
“Expenses and Fees”
means all expenses and fees invoiced by Lender that arise out of or under with
this Agreement and the Loans shown on Schedule A and including,
without limitation, (i) the reasonable fees and expenses of counsel in
connection with the negotiation, preparation, execution, delivery, amendment,
enforcement, and termination of this Agreement and each of the other Loan
Documents, (ii) the out-of-pocket costs and expenses incurred in connection with
the administration and interpretation of this Agreement and the other Loan
Documents, (iii) the costs and expenses of appraisals of the Collateral, (iv)
the costs and expenses of lien searches, and of perfecting Lender’s security
interest in the Collateral, (v) all stamp, registration, recordation, and
similar taxes, fees, or charges related to the Collateral and charges of filing
financing statements and continuations and the costs and expenses of taking
other actions to perfect, protect, and continue the security interest of Lender,
(vi) costs and expenses related to the preparation, execution, and delivery of
any waiver, amendment, supplement, or consent by Lender relating to this
Agreement or any of the Loan Documents, (vii) sums paid or obligations incurred
in connection with the payment of any amount or taking any action required of
Borrower under the Loan Documents that Borrower fails to pay or take, (viii)
costs of inspections and verifications of the Collateral, including, without
limitation, the per diem per examiner amount listed on Schedule A, plus out-of-pocket
expenses for travel, lodging, and meals arising in connection with inspections
and verifications of the Collateral and Borrower’s operations and books and
records by Lender’s employees and agents, (ix) costs and expenses of forwarding
Loan proceeds, collecting checks and other items of payment, and establishing
and maintaining each account of Borrower maintained with Lender or owned by
Lender for the benefit of Borrower and each Lockbox, (x) costs and expenses of
preserving and protecting the Collateral, (xi) audit fees shown on Schedule A, (xii) costs and
expenses related to consulting with and obtaining opinions and appraisals from
one or more Persons, including personal property appraisers, accountants, and
lawyers, concerning the value of any Collateral for the Obligations or related
to the nature, scope, or value of any right or remedy of Lender hereunder or
under any of the Loan Documents, including any review of factual matters in
connection therewith, which expenses shall include the fees and disbursements of
such Persons, and (xiv) costs and expenses paid or incurred to obtain payment of
the Obligations, enforce the security interest of Lender, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of the Loan
Documents, or to prosecute or defend any claim in any way arising out of,
related to, or connected with, this Agreement or any of the Loan Documents,
which expenses shall include the reasonable fees and disbursements of counsel
and of experts and other consultants retained by Lender, subject to the
limitations on payment to the prevailing party in litigation as specified in
Section 11.3.
“Facility
Availability” means, as of any date, the difference between (i) the
Borrowing Base on such date and (ii) the outstanding principal amount of
the Loans, together with all accrued interest, fees, costs and any other amounts
then due from Borrower under this Agreement on such date.
Exhibit
10.1 - Page 7 of 43
“Facility Limit” means
the maximum amount of Advances, as determined from time to time by Lender, to be
made under this Agreement. The initial Facility Limit amount is
specified on Schedule
A.
“Fiscal Year-End”
means Borrower’s fiscal year-end specified on Schedule
5.1
“GAAP” means generally
accepted accounting principles and practices consistently applied.
“Health Care Law”
means any and all federal, state, and local laws and regulations governing
(i) the manufacture, testing, distribution, possession, assembly,
repackaging, sale, administration, or dispensing of health care or medical
devices, equipment or supplies, products, biologicals, drugs, or goods, or
(ii) the rendering, provision, delivery, or supply of health care services,
or (iii) the ownership or operation of a health care facility or business,
or assets used in connection therewith, or (iv) the billing or submission
of claims, collection of accounts receivable, the handling of Protected Health
Information, and underwriting the cost of, or provision of management or
administrative services in connection with any and all of the foregoing, by
Borrower and its subsidiaries, including, but not limited to, laws and
regulations under HIPAA and the Privacy Rule, and laws and regulations relating
to practice of medicine and other health care professions, professional fee
splitting, tax-exempt organization and charitable trust law applicable to health
care organizations, certificates of need, certificates of operations and
authority, fraud and abuse, kickbacks and rebates, false claims, physician
self-referral arrangements, fraudulent billing practices, payment under the
Medicare and Medicaid programs, and the federal Food, Drug & Cosmetic
Act.
“HIPAA” means the
Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191
and any revisions and amendments.
“Indebtedness” means,
without duplication, (a) all Liabilities, (b) all obligations for
Money Borrowed or for the deferred purchase price of property or services or in
respect of reimbursement obligations under letters of credit, (c) all
obligations represented by bonds, debentures, notes, and accepted drafts that
represent extensions of credit, (d) Capitalized Lease Obligations,
(e) all obligations (including, during the noncancellable term of any lease
in the nature of a title retention agreement, all future payment obligations
under such lease discounted to their present value in accordance with GAAP)
secured by any Lien to which any property or asset owned or held by a Person is
subject, whether or not the obligation secured thereby shall have been assumed
by such Person, (f) all obligations of other Persons which such Person has
guaranteed, including, but not limited to, all obligations of such Person
consisting of recourse liability with respect to Accounts sold or otherwise
disposed of by such Person, and (g) in the case of Borrower, the
Loans.
“Intellectual
Property” means, as to any Person, all of such Person’s then owned and
existing and future acquired or arising patents, patent rights, copyrights,
works which are the subject of copyrights, trademarks, service marks, trade
names, trade styles, patent, trademark and service xxxx applications, and all
licenses and rights related to any of the foregoing, and all rights to xxx for
past, present, and future infringements of any of the foregoing.
“Interest Rate” means
the Base Rate plus Margin.
“Investment” means any
investment, whether by means of share purchase, loan, advance, purchase of debt
instrument, extension of credit (other than (i) accounts receivable arising
from the sale of goods or services in the ordinary course of business, and
(ii) notes, accepted in the ordinary course of business, evidencing overdue
accounts receivable arising in the ordinary course of business), capital
contribution, or otherwise, in or to any Person, the guaranty of any
Indebtedness of any Person, or the subordination of any claim against any Person
to other indebtedness of such Person.
Exhibit
10.1 - Page 8 of 43
“Lender’s Office”
means the office of Lender designated as Lender’s address for notices in Section
11.1(b), or such
other office as Lender may designate from time to time.
“Liabilities” means
all liabilities of a Person determined in accordance with GAAP.
“Lien” means, with
respect to any Person, any security interest, chattel mortgage, charge,
mortgage, deed to secure debt, deed of trust, lien, pledge, Capitalized Lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind in respect of any property of such Person or upon the
income or profits therefrom.
“Loan” or “Loans”
means all Advances and loans made to Borrower by Lender under this
Agreement.
“Loan Documents”
means, collectively, this Agreement, each agreement or document now or hereafter
executed and delivered by any Person to evidence or secure the Obligations, and
each other instrument, agreement, and document now or hereafter executed and
delivered in connection with this Agreement or the Loans.
“Lockbox” or “Lockbox
Account” means one or more lockbox accounts maintained with a bank
specified by Lender into which collections from Accounts and other Collateral,
including governmental healthcare receivables, are to be deposited and which
Lender alone has the power of withdrawal.
“Lockbox Agreement”
means one or more agreements among Borrower, Lender, and a Collecting Bank
concerning the collection of payments which represent the proceeds of Accounts
or of any other Collateral.
“Margin” means the
percent per annum
specified on Schedule
A and which is added to the Base Rate.
“Maximum Rate” means
the maximum nonusurious interest rate, if any, that at any time, or from time to
time, may be contracted for, taken, reserved, charged, or received on the Loans
under the laws which are presently in effect of the United States and the State
of Oregon applicable to Lender and such indebtedness or, to the extent permitted
by law, under such applicable laws of the United States and the State of Oregon
(or if applicable, the laws any other state) which may hereafter be in effect
and which allow a higher maximum nonusurious interest rate than applicable laws
now allow. To the extent federal law (including, without limitation, 12 U.S.C.
Section 85, as now enacted or hereafter amended) permits Lender to contract for,
charge, or receive a higher rate of interest or permits Lender to contract for,
charge, or receive interest at a higher rate permitted by the laws of another
jurisdiction, such federal law (and, if appropriate, the law of such other
jurisdiction) will be applicable in determining the Maximum Rate, instead of the
laws of the State of Oregon.
“Material Adverse
Change” means any act, omission, event, or undertaking which would,
singly or in the aggregate, have a materially adverse effect upon (a) the
business, assets, properties, liabilities, condition (financial or otherwise),
results of operations, or business prospects of Borrower or any of its
subsidiaries, (b) the ability of Borrower or any of its subsidiaries to perform
any obligations under this Agreement or any other Loan Document to which it is a
party, or (c) the legality, validity, binding effect, enforceability, or
admissibility into evidence of any Loan Document or the ability of Lender to
enforce any rights or remedies under or in connection with any Loan
Document.
“Minimum Facilty
Availability” means the Facility Availability as of the Closing Date as
specified in Schedule
A.
Exhibit
10.1 - Page 9 of 43
“Money Borrowed” means
Indebtedness (i) that is represented by notes payable, drafts accepted,
bonds, debentures, or similar instruments that represent extensions of credit,
(ii) upon which interest charges are customarily paid (other than trade
Indebtedness), (iii) that was issued or assumed as full or partial payment
for property, (iv) that is evidenced by a guarantee (but only if the
obligations guaranteed would otherwise qualify as Money Borrowed), or
(v) that constitutes a Capitalized Lease Obligation.
“Multiemployer Plan”
means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which
Borrower or a Related Company is required to contribute or has contributed
within the immediately preceding six (6) years.
“Net Collectible
Value” or “NCV” means the
percentage by payor class, as determined by Lender from time to time to be
applied against Eligible Accounts. The initial NCV for each payor
class is shown on Schedule
A.
“Net Income” or “Net Loss” means, with
respect to any Person, the net income or net loss of such Person for the period
in question (after provision for income taxes) determined in accordance with
GAAP, provided that the
impact of any extraordinary gains, determined in accordance with GAAP, shall be
excluded from the determination of “Net Income” and “Net Loss.”
“Obligations” shall
mean (i) all Loans or Advances made by Lender to Borrower pursuant to this
Agreement or otherwise, and interest thereon, (ii) all future advances or
other value, of whatever class or for whatever purpose, at any time hereafter
made or given by Lender to Borrower, whether or not the advances or value are
given pursuant to a commitment and whether or not Borrower is indebted to Lender
at the time of such advance; (iii) any and all other debts, liabilities and
obligations of every kind and character of Borrower to Lender, whether now or
hereafter existing, and regardless of whether such present or future debts,
liabilities, or obligations are direct or indirect, primary or secondary, joint,
several, or joint and several, fixed, or contingent, and regardless of whether
such present or future debts, liabilities or obligations may, prior to their
acquisition by Lender, be or have been payable to, or be or have been in favor
of, some other Person or have been acquired by Lender in a transaction with one
other than Borrower (it being contemplated that Lender may make such
acquisitions from others), howsoever such debts, liabilities, or obligations
shall arise or be incurred or evidenced; (iv) any and all other debts,
liabilities, and obligations of every kind and character of Borrower to any
Affiliate of Lender, whether now or hereafter existing, and regardless of
whether such present or future debts, liabilities, or obligations are direct or
indirect, primary or secondary, joint, several, or joint and several, fixed, or
contingent, and regardless of whether such present or future debts, liabilities,
or obligations may, prior to their acquisition by such Affiliate, be or have
been payable to, or be or have been in favor of, some other Person or have been
acquired by such Affiliate in a transaction with one other than Borrower (it
being contemplated that Affiliates of Lender may make such acquisitions from
others), howsoever such debts, liabilities, or obligations shall arise or be
incurred or evidenced; (v) all costs, fees, and expenses payable by
Borrower to Lender or any Affiliate of Lender pursuant to any of the Loan
Documents; and (vi) any and all renewals, extensions, modifications, and
increases of the debts, liabilities, and obligations set forth above, or any
part thereof.
“Obligors” means
Borrower, each guarantor of the Obligations, and all other Persons obligated to
Lender in respect of the Obligations, and “Obligor” means any of
them.
“Occupancy” means the
number of Medicare/Medicaid certified beds at all of Borrower’s facilities as a
percentage of the total number of Medicare/Medicaid certified beds at all of
Borrower’s facilities.
“Operating Account”
means the Deposit Account designated by Borrower for the deposit of
Advances.
Exhibit
10.1 - Page 10 of 43
“Operating Lease”
means any lease (other than a lease constituting a Capitalized Lease) of real or
personal property determined in accordance with GAAP.
“PBGC” means the
Pension Benefit Guaranty Corporation or any successor agency.
“Patient Lists” means
all records, documents, lists, electronic media, or any other method of
recordation that shows in any way any Person to whom Borrower supplies medical
services, medical supplies, or medication, the name and mailing address of such
Person, a complete and accurate description of such medical services, supplies,
or medication that is supplied to such Person, the physician at whose direction
such medical services, supplies, or medication is delivered, and all other
information Borrower uses in the course of Borrower’s ordinary course of
business to supply such Person.
“Permitted
Indebtedness” means the sum of (i) purchase money Indebtedness
incurred by Borrower to finance, or provide the funds for, the acquisition of
assets, which outstanding principal Indebtedness shall not exceed the amount
shown on Schedule A,
plus (ii) the
Indebtedness described on Schedule 5.1 attached
hereto and made a part hereof, and any extension, renewal or refinancing of such
Indebtedness provided that the principal amount of the Indebtedness does not
increase and the extension, renewal or refinancing has been approved by Lender
in writing, or is otherwise authorized under the Loan Documents; plus (iii) the
Obligations; plus (iv)
Subordinated Indebtedness and Indebtedness secured by Permitted Liens; plus (v) trade payables,
deferred tax liabilities, accrued expenses, and taxes (all in the ordinary
course of business and in accordance with GAAP).
“Permitted Liens”
means: (a) Liens securing taxes, assessments, and other governmental
charges or levies (excluding any Lien imposed pursuant to any of the provisions
of ERISA) or the claims of materialmen, mechanics, carriers, warehousemen, or
landlords for labor, materials, supplies, or rentals incurred in the ordinary
course of business, but (i) in all cases, only if payment shall not at the
time be past due, and (ii) in the case of warehousemen or landlords
controlling locations where inventory is located, only if such liens have been
waived or subordinated to the security interest of Lender in a manner
satisfactory to Lender; (b) the Liens described on Schedule 5.1 attached
hereto and made a part hereof; (c) purchase money security interests created in
connection with Permitted Indebtedness provided that Lender has a perfected
security interest in the underlying collateral; and (d) Liens in favor of
Lender.
“Person” means an
individual, corporation, limited liability company, partnership, joint venture,
association, trust, or unincorporated organization or a government or any agency
or political subdivision thereof.
“Pledge Agreement”
means a pledge agreement in form and content acceptable to Lender executed by
Zynex, Inc. in favor of Lender under which Zynex, Inc. pledges and grants a
security interest in 100% of Zynex, Inc.’s right, title and interest to all of
the issued and outstanding shares of Zynex Medical, Inc.
“Privacy Rule” means
45 CFR Part 160 and Part 164, Subparts A and E, which implement certain
provisions of HIPAA and any revision, amendments, or updates.
“Prohibited
Distribution” by any Person means (a) the retirement, redemption,
purchase, or other acquisition for value of any capital stock or other equity
securities or partnership interests issued by such Person, (b) the
declaration or payment of any dividend or distribution on or with respect to any
such securities (excluding distributions made solely in shares of stock of the
same class) or partnership interests, (c) any loan or advance by such
Person to, or other Investment by such Person in, any other Person, and
(d) any other payment by such Person in respect of such securities or
partnership interests.
Exhibit
10.1 - Page 11 of 43
“Prohibited Payment”
means (a) any redemption, repurchase, or prepayment or other retirement,
prior to the stated maturity thereof or prior to the due date of any regularly
scheduled installment or amortization payment with respect thereto, of any
Indebtedness of a Person (other than the Obligations and trade debt),
(b) the payment by any Person of the principal amount of or interest on any
Indebtedness (other than trade debt) owing to an Affiliate of such Person, and
(c) any payment with respect to any Subordinated Indebtedness that is made
in violation of the subordination agreement relating thereto.
“Protected Health
Information” means protected health information subject to the HIPAA
Privacy Rule.
“Related Company”
means, as to any Person, any (a) corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as such Person, (b) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with such Person, or (c) member of the same affiliated service
group (within the meaning of Section 414(m) of the Code) as such Person or any
corporation described in clause (a) above or
any partnership, trade, or business described in clause (b)
above.
“Requirements of Law”
means, any and all laws, regulations, codes, or ordinances applicable to any
Person, or any Person’s assets, including, without limitation, the Securities
Act, the Securities Exchange Act, Regulations T, U, and X of the Federal Reserve
Board, ERISA, the Fair Labor Standards Act, the Worker Adjustment and Retraining
Notification Act, Americans with Disabilities Act of 1990, the Social Security
Act, Environmental Laws, Health Care Law, and any certificate of occupancy,
zoning ordinance, building, environmental, or land use requirement or permit, or
any other environmental, labor, employment, occupational safety, or health law,
rule, or regulation.
“Reserve” at any time
shall mean an amount from time to time established by Lender in its sole and
absolute discretion as a reserve in reduction of the Borrowing Base in respect
of contingencies or other potential factors (such as, without limitation,
rebates, sales taxes, property taxes, installation and delivery expenses, and
warranties) which could adversely affect or otherwise reduce the anticipated
amount of timely collections in payment of Eligible Accounts or the value
(whether at cost, market, or orderly liquidation value) of Eligible
Inventory. The “Reserve,” if any from time to time, does not
represent cash funds. The initial amount of the Reserve is shown on
Schedule A.
“Schedule of Accounts”
means a detailed schedule of Accounts delivered by Borrower to Lender in a form
acceptable to Lender that shall contain account balance and aging information
listed by Account Debtor name, class and type, together with a reconciliation of
the Schedule of Accounts to the Borrowing Base Certificate for the most recent
month end, and any other information concerning Borrower’s Accounts as Lender
may request from time to time.
“Shareholder’s Loans”
means the loans made by Xxxxxx Xxxxxxxxx to Zynex, Inc. evidenced by four
promissory notes with principal balances immediately prior to the Closing Date
in the amounts shown on Schedule 5.1-A, and any
extension, renewal or refinancing of such loans provided that the principal
amount of such loans does not increase and such extension, renewal or
refinancing is approved by lender in writing.
“Solvent” means, when
used in connection with any Person, that such Person has assets of a fair value
which exceeds the amount required to pay its debts (including contingent,
subordinated, unmatured, and unliquidated liabilities) as they become absolute
and matured, and that such Person is able to, and anticipates that it will be
able to, meet its debts as they mature and has adequate capital to conduct the
business in which it is or proposes to be engaged.
Exhibit
10.1 - Page 12 of 43
“Subordinated
Indebtedness” means Indebtedness of Borrower to a third Person
(i) that has been approved in writing by Lender and (ii) that has been
subordinated to the payment of the Obligations pursuant to a written
subordination agreement executed by Lender and the holder of such Indebtedness
containing terms acceptable to Lender in its sole and absolute
discretion.
“Termination Date”
means the date on which the Loan shall terminate and the entire outstanding
balance of the Loan and all Obligations shall be due and payable. The
Termination Date is shown on Schedule A.
“Termination Event”
means (a) a “Reportable Event” as defined in Section 4043 of ERISA, but
excluding any such event as to which the PBGC has by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within thirty (30)
days of the occurrence of such event, provided however, that a failure to meet
the minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code, (b) the filing of a notice of intent to
terminate a Benefit Plan or the treatment of a Benefit Plan amendment as a
termination under Section 4041 of ERISA, or (c) the institution of
proceedings to terminate a Benefit Plan by the PBGC under Section 4042 of ERISA
or the appointment of a trustee to administer any Benefit Plan.
“UCC” means the
Uniform Commercial Code as in effect from time to time in the State of Oregon,
including, without limitation, any amendments thereto which are effective after
the date hereof.
“Unfunded Vested
Liabilities" shall mean the amount (if any) by which (i) the actuarial
present value of accumulated benefits under a Benefit Plan which are vested
exceeds (ii) such Benefit Plan’s net assets available for benefits (all as
determined in connection with the filing of the Borrower's most recent Annual
Report on Form 5500) but only to the extent such excess would, if such Benefit
Plan were to terminate as of such date, represent a liability of the Borrower or
any ERISA Affiliate to the PBGC under Title IV of ERISA. In each case
the foregoing determination shall be made as of the most recent date prior to
the filing of said Annual Report as of which such actuarial present value of
accumulated Plan benefits is determined.
“Validity Guaranty”
means the Validity Guaranty in form and content acceptable to Lender to be
executed by Xxxxxx Xxxxxxxxx in favor of Lender.
1.2 UCC
Terms. Terms defined in the UCC (such as, but not limited to,
accounts, chattel paper, commercial tort claims, contract rights, deposit
account, documents, equipment, financial assets, general intangibles, goods,
instruments, investment property, inventory, and proceeds), as and when used
(without being capitalized) in this Agreement or the Loan Documents, shall have
the meanings given to such terms in the UCC.
1.3 Accounting Terms and
Determinations. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all financial
statements and all other certificates and reports as to any financial matters
required to be furnished to the Lender hereunder shall be prepared in accordance
with GAAP applied on a consistent basis.
Exhibit
10.1 - Page 13 of 43
Section 2. REVOLVING CREDIT FACILITY
2.1 Loan. Subject
to the terms and conditions of this Agreement, prior to the Termination Date
Lender will make Advances to Borrower under the Loan in an amount not to exceed
outstanding at any time the lesser of (a) the Facility Limit and
(b) the Borrowing Base. Borrower may borrow, repay, and reborrow
the principal of the Loan in accordance with the terms of this
Agreement.
2.2 Advances under the
Loan. Borrower may request an Advance under the Loan by making
an Advance Request. Advances made available by Lender will be
deposited by wire transfer into Borrower’s Operating
Account. Advances will be made available by Lender no earlier than
the first business day following an Advance Request received by Lender prior to
12:00 p.m. Pacific Time and two (2) business days following an
Advance Request received after 12:00 p.m. Pacific Time. Any change in
Borrower’s wiring instructions shall be made in writing at least three (3)
business days prior to the date of an Advance. Any updates to the
Collateral affecting the amount of Borrower’s Advance Request must be completed
two (2) business days prior to submission of the Advance Request.
2.3 Repayment of the
Loan. The Loan shall be repaid as follows: (a) unless
accelerated in accordance with the terms hereof, the outstanding principal
amount of, and all accrued and unpaid interest on, the Loan is due and payable,
without demand, on the Termination Date; (b) if at any time the principal
of, and interest upon, the Loan exceeds the lesser of (i) the Facility
Limit or (ii) the Borrowing Base, Borrower shall immediately repay the Loan
in the amount of such excess; and (c) Borrower hereby instructs Lender to
repay the Loan on any day in an amount equal to the amount received by Lender on
such day pursuant to Section
6.2.
2.4 Disbursement of
Loans. Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of Loans requested, or deemed to be requested, pursuant to
this Section 2
as follows: (i) each Advance requested shall be disbursed by the
Lender in lawful money of the United States of America in immediately available
funds, (a) in the case of the initial Advance under the Loan, in accordance
with the written instructions from Borrower to Lender, and (b) in the case
of each subsequent Advance, to a Deposit Account designated in writing by
Borrower to Lender.
2.5 Authorized
Representatives. Borrower shall act hereunder through the
Authorized Representatives designated from time to time by Borrower, and all
notices and requests to be given and received by Borrower, including requests
for Loans, shall be given by and directed to such Authorized
Representatives. Lender may rely on the authority or apparent
authority of any officer or employee of Borrower whom Lender in good faith
believes to be an Authorized Representative.
Section 3. GENERAL LOAN PROVISIONS; FEES AND
EXPENSES
3.1 Interest.
(a) Loans. Borrower
shall pay interest on the unpaid principal amount of the Obligations at a rate
per annum equal to the sum of the Base Rate plus the Margin (or, if such
amount were ever to exceed the Maximum Rate, then the Maximum Rate) payable
monthly in arrears on the first day of each calendar month and on the
Termination Date. Any change in the rate of interest resulting from a
change in the Base Rate shall become effective on the day such change in the
Base Rate is published.
Exhibit
10.1 - Page 14 of 43
(b) Default Rate. From
and after the occurrence of an Event of Default, the unpaid principal amount of
all Obligations and all accrued interest thereon shall, at the option of Lender,
bear interest until paid in full (or, if earlier, until such Event of Default is
cured or waived in writing by Lender) at a rate per annum equal to the lesser of
(i) the Default Rate, or (ii) the Maximum Rate.
(c) Computation of
Interest. Interest shall be computed on the basis of a year of
360 days and the actual number of days elapsed.
3.2 Fees and
Expenses.
(a) Origination
Fee. In consideration for Lender’s agreement to make the Loan
in accordance with the terms of this Agreement and in order to compensate Lender
in part for the costs associated with the Loan, Borrower shall pay to Lender on
the Closing Date of an origination fee in the amount shown on Schedule A. Such
fee is in addition to the expenses that Borrower has agreed to pay elsewhere in
this Agreement.
(b) Unused Line
Fee. Borrower shall pay to Lender an unused line fee for the
period from the date hereof through the Termination Date calculated as shown on
Schedule
A. The parties hereto agree that such unused line fee
constitutes reasonable consideration for Lender’s taking of appropriate actions
to be able to make available to Borrower the amount of the Facility Limit for
such period.
(c) Collateral Monitoring
Fee. Lender shall be entitled to charge Borrower, and, if so
charged, Borrower agrees to pay, a monthly collateral monitoring fee in the
amount shown on Schedule
A. The collateral monitoring fee for each calendar month shall
be due and payable on the first day of the next calendar month, and shall be
prorated for any partial calendar month until the Termination Date.
(d) Annual Facility
Fee. Borrower shall pay to Lender on each annual anniversary
of the Closing Date a Facility Fee in the amount shown on Schedule A. No
Annual Facility Fee will be charged on the annual anniversary date if it is the
Termination Date. The final Annual Facility Fee will be prorated for
a partial year.
(e) Early Termination
Fee. See Section
3.4.
(f) Expenses and
Fees. Borrower shall pay or reimburse all Expenses and Fees
invoiced or incurred by Lender that arise out of or under with this Agreement
and the Loans. Borrower hereby authorizes Lender to debit
Borrower’s Loan by increasing the principal amount of the Loan, or deduct from
Borrower’s accounts maintained with any Affiliate of Lender, the amount of any
Expenses and Fees owed by Borrower when due. At Lender’s discretion,
Lender may invoice Borrower for such Expenses and Fees and Borrower shall pay
such invoice within five (5) days after the date of the invoice.
Exhibit
10.1 - Page 15 of 43
3.3 Manner of
Payment.
(a) Timing. Each
payment by Borrower on account of the principal of or interest on the Loans or
of any fee or other amount payable to Lender shall be made not later than 12:00
p.m. (Pacific Time) on the applicable due date (or if such day is not a business
day, the next succeeding business day, provided that interest shall
continue to accrue until such payment is made). All payments shall be
made to Lender at Lender’s Office or by wire transfer to an account designated
by Lender in Dollars in immediately available funds, and shall be made without
any setoff, counterclaim, or deduction whatsoever.
(b) Charging
Accounts. Borrower hereby irrevocably authorizes Lender and
each Affiliate of Lender to charge any account of Borrower maintained with
Lender or such Affiliate with such amounts as may be necessary from time to time
to pay any Obligations which are not paid when due.
(c) Termination
Reserve. The amount of the Termination Reserve, less any and
all fees, costs, interest, or other charges incurred by Lender in the
performance of this Agreement after Borrower’s payment of all amounts described
above, shall be returned to Borrower within thirty (30) days following such
payment.
3.4 Termination of
Agreement.
(a) Required
Payments. On the Termination Date and upon any early
termination of this Agreement, Borrower shall pay to Lender (i) the
principal of, and accrued and unpaid interest on, all Loans outstanding on such
date, (ii) all fees accrued and unpaid, (iii) any amounts payable to
Lender pursuant to the other provisions of this Agreement or any other Loan
Document, and (iv) the amount of the Termination Reserve provided in Schedule A, and (v) any and
all other Obligations then outstanding.
(b) Early
Termination. If Borrower terminates this Agreement prior to
the Termination Date, Borrower acknowledges that such termination would result
in the loss to Lender of the benefits of this Agreement and, as a result
thereof, Borrower shall pay to Lender the termination fee in the amount shown
on Schedule
A. Borrower shall give thirty (30) days’ written notice to
Lender of Borrower’s intention to terminate this Agreement prior to the
termination dates specified in Schedule A.
3.5 Evidence of
Indebtedness.
(a) At
the request of Lender, the Loans shall be evidenced by one or more promissory
notes.
(b) Lender
shall maintain accounts in which it will record (i) the amount of each Loan
extended hereunder, (ii) the amount of any principal or interest due and
payable or to become due and payable from Borrower to Lender hereunder, and
(iii) the amount of any sum received by Lender hereunder from
Borrower.
(c) The
entries in the accounts maintained pursuant to subsection (b) above shall
be prima facie evidence
of the existence and amounts of the Obligations therein recorded, provided, however, that the
failure of the Lender to maintain such accounts or any error therein shall not
in any manner affect the obligation of Borrower to repay the Obligations in
accordance with their terms.
Exhibit
10.1 - Page 16 of 43
3.6 Adjustments by
Lender. Lender may in its discretion based on changes in
Borrower’s xxxxxxxx and collections of Accounts change from time to time the
NCV, Advance Rate, Cross-Age Percentage, Concentration Limit, and Reserve, and
may revise Schedule A
accordingly.
3.7 Application of
Payments. Lender may, in its discretion, apply payments as
follows:
(a) First,
to all fees and costs incurred by Lender for which Borrower is responsible to
reimburse Lender under this Agreement or any of the Loan Documents;
(b) next,
to any accrued but unpaid interest on the Loan;
(c) next,
to the outstanding principal balance due on the Loan;
(d) next,
to any other amounts due Lender under this Agreement or any other agreement
between Lender and Borrower.
3.8Maximum
Interest. Borrower and Lender intend to strictly comply with
any applicable usury laws. Accordingly, in no event shall Borrower or
any Obligor be obligated to pay, or Lender have any right or privilege to
reserve, receive, or retain, any interest in excess of the Maximum
Rate. On each day, if any, that the interest rate charged under this
Agreement (the “Stated
Rate”) exceeds the Maximum Rate, the rate at which interest shall accrue
shall automatically be fixed by operation of this sentence at the Maximum Rate
for that day, and shall remain fixed at the Maximum Rate for each day thereafter
until the total amount of interest accrued equals the total amount of interest
which would have accrued if there were no such ceiling rate as is imposed by
this sentence. Thereafter, interest shall accrue at the Stated Rate
unless and until the Stated Rate again exceeds the Maximum Rate when the
provisions of the immediately preceding sentence shall again automatically
operate to limit the interest accrual rate.
Section 4. CONDITIONS
PRECEDENT
4.1 Conditions
Precedent. Lender shall not be obligated to make any Loan or
Advance hereunder (including the first) until all of the following have been
fully performed or satisfied to Lender’s satisfaction as determined in its sole
discretion:
(a) Borrower
has executed and delivered to Lender this Agreement and a promissory note
evidencing the Loan;
(b) Borrower
has executed and delivered to Lender the Business Associate
Agreement;
(c) Borrower
has submitted a certificate executed by the President and the Secretary of
Borrower certifying (i) the names and signatures of the officers of such
Person authorized to execute Loan Documents, (ii) the resolutions duly
adopted by the Board of Directors of such Person authorizing the execution of
this Agreement and the other Loan Documents, as appropriate, and
(iii) correctness and completeness of the copy of the bylaws of such Person
attached thereto;
Exhibit
10.1 - Page 17 of 43
(d) Borrower
has submitted a certificate regarding the due formation, valid existence, and
good standing of Borrower in the state of its organization issued by the
appropriate governmental authorities in such jurisdiction and copies of its
organizational documents certified by such authorities;
(e) Borrower
has executed in favor of Lender and submitted to Lender an authorization to file
financing statements;
(f) Borrower
has provided payoff information under Schedule 4.1;
(g) Borrower
has submitted to Lender a payoff letter executed by any Person to whom Borrower
owes money and designated by Lender;
(h) Borrower
has caused to be executed a landlord’s or mortgagee’s waiver in a form
acceptable to Lender with respect to each premises where Collateral is located
(except such Collateral consisting of medical devices on lease to a patient or
in possession of a sales person in the ordinary course of Borrower’s
business);
(i) Borrower
has submitted to Lender endorsements naming Lender as an additional insured and
loss payee on all liability insurance and all property insurance policies of
Borrower;
(j) Borrower
has submitted to lender an opinion of counsel for Borrower in form and content
acceptable to Lender covering such matters as Lender may request;
(k) Borrower
has established a Lockbox Account for receipts of proceeds of Collateral, and a
Lockbox Account for the receipt of any governmental healthcare
receivables;
(l) Borrower
has submitted to Lender Lockbox Agreements in form and content acceptable to
Lender;
(m) Borrower
has prepared written notice in form and content acceptable to Lender as shown on
Exhibit D directing each
Account Debtor to send to the Lockbox address specified by Lender all
remittances with respect to all amounts payable by the Account Debtors, and
copies of such notices have been submitted to Lender;
(n) Borrower
has executed and delivered to Lender a Deposit Account Control Agreement in form
and content acceptable to Lender;
(o) after
giving effect to the first Advance of the Loan and the Reserve established by
Lender, Borrower shall have the Minimum Facility Availability of at least the
amount shown on Schedule
A, plus an amount sufficient so that no trade payables are overdue
(except those that are being contested in good faith by Borrower), plus an
amount sufficient to pay all book overdrafts;
(p) no
Default or Event of Default shall have occurred;
(q) Xxxxxx
Xxxxxxxxx has executed and delivered to Lender a subordination agreement in form
and content acceptable to Lender;
(r) Borrower
has submitted to Lender in form and content acceptable to Lender all documents
evidencing or relating to Subordinated Indebtedness as Lender may
request;
Exhibit
10.1 - Page 18 of 43
(s) Lender
shall have received background checks on Xxxxxx Xxxxxxxxx and Xxxxx Xxxxxxx
without derogatory information;
(t) Borrower
shall have caused a termination of all security interests and Uniform Commercial
Code filings by Silicon Valley Bank and Ascendiant Capital Group, LLC in any of
Borrower’s assets;
(u) Borrower
shall have paid within five (5) days prior to the Closing Date any taxes then
past due owing to any governmental unit (except those that are being contested
in good faith by Borrower);
(v) the
proceeds from the initial Advance shall be applied by Borrower to cause have all
trade payables (except those that are being contested in good faith by Borrower)
to be within sixty (60) days of the invoice date on all invoices payable sixty
(60) days or less on their terms;
(w) Zynex,
Inc. has submitted to Lender the executed Pledge Agreement;
(x) Zynex,
Inc. has delivered to Lender the shares of Zynex Medical, Inc. pursuant to the
Pledge Agreement;
(y) Xxxxxx
Xxxxxxxxx shall have executed and delivered to Lender the Validity Guaranty;
and
(z) Borrower
has submitted or executed such other documents, certificates, opinions, and
information that Lender may require.
4.2 Conditions to Subsequent
Advances. The obligation of Lender to make any Advance
subsequent to the initial Advance on the Loan is subject to the following
conditions precedent:
(a) Conditions to First
Advance. All of the conditions precedent set forth in Section 4.1 have been
satisfied.
(b) Borrowing Base
Certificate. Lender shall have received from Borrower a
Borrowing Base Certificate acceptable to Lender executed by an Authorized
Representative prior to the date of the requested Advance.
(c) Representations and
Warranties. The representations and warranties contained in
each of the Loan Documents shall be true in all material respects with the same
force and effect as though made on and as of such date.
(d) Defaults and Events of
Default. No Default or Event of Default shall have occurred
and be continuing.
(e) Adverse
Change. No Material Adverse Change (or event or condition that
could reasonably be expected to cause or have a Material Adverse Change) has
occurred since the date of the Borrower’s most recently submitted financial
statements.
(f) Legal
Restriction. The Advance shall not be prohibited by any law or
regulation or any order of any court or governmental agency or
authority.
Exhibit
10.1 - Page 19 of 43
(g) No
Repudiation. Neither Borrower nor any Obligor shall have
repudiated or made any anticipatory breach of any of its obligations under any
Loan Document.
Section
5. REPRESENTATIONS
AND WARRANTIES OF BORROWER
5.1 Representations and
Warranties. Borrower represents and warrants to Lender as
follows:
(a) Organization; Power;
Qualification. Borrower is duly organized, validly existing,
and in good standing under the laws of its state of organization and is
authorized to do business in each state in which the nature of its properties or
its activities requires such authorization, except where a failure to qualify as
a foreign corporation would not reasonably be expected to cause a Material
Adverse Change.
(b) Authorization;
Enforceability. Borrower has the power and authority to, and
is duly authorized to, execute and deliver the Loan Documents to be executed by
Borrower. All of the Loan Documents to which Borrower is a party
constitute the legal, valid, and binding obligations of Borrower, enforceable in
accordance with their terms, except as limited by bankruptcy, insolvency, or
similar laws of general application relating to the enforcement of creditors’
rights generally.
(c) Subsidiaries;
Ownership. Except as shown on Schedule 5.1,
Borrower does not have any subsidiaries. The outstanding stock or
membership interests of Borrower have been duly and validly issued and are fully
paid and nonassessable, and the number and owners of such shares of capital
stock or membership interests are set forth on Schedule
5.1.
(d) Conflicts. Neither
the execution and delivery of the Loan Documents, nor consummation of any of the
transactions therein contemplated nor compliance with the terms and provisions
thereof, will contravene any provision of law or any judgment, decree, license,
order, or permit applicable to Borrower or will conflict with, or will result in
any breach of, any agreement to which Borrower is a party or by which Borrower
may be bound or subject, or violate any provision of the organizational
documents of Borrower.
(e) Consents, Governmental
Approvals, Etc. No governmental approval nor any consent or
approval of any third Person (other than those which have been obtained prior to
the date hereof) is required in connection with the execution, delivery, and
performance by Borrower of the Loan Documents. To the best of
Borrower’s knowledge, Borrower is in compliance with all applicable governmental
approvals and all applicable laws affecting Borrower’s business as conducted as
of the Closing Date.
(f) Borrower
Information. Borrower has delivered to Lender a completed form
of Schedule
5.1, and all of the information contained in Schedule 5.1 is
complete, correct, accurate, and does not fail to state a material fact
necessary for Lender to complete its due diligence with respect to Borrower, and
all such information shall be complete, correct, accurate and shall not fail to
state a material fact at the time of each Advance, including the initial
Advance.
(g) Title;
Liens. Except for items described in Schedule 5.1 and for
Permitted Liens, all of the properties and assets of Borrower are free and clear
of all Liens, and Borrower has good and marketable title to such properties and
assets. Each Lien granted, or intended to be granted, to Lender
pursuant to the Loan Documents is a valid, enforceable, perfected, first
priority Lien and security interest.
Exhibit
10.1 - Page 20 of 43
(h) Indebtedness and
Guaranties. Set forth on Schedule 5.1 is a
complete and correct listing of all of Borrower’s (i) Indebtedness for
Money Borrowed, and (ii) guaranties and other contingent
obligations.
(i) Litigation, Suits, Actions,
Etc. Except as disclosed on Schedule 5.1, no
litigation, arbitration, governmental investigation, proceeding, or inquiry is
pending or, to the knowledge of Borrower, threatened against Borrower or that
could affect any of the Collateral.
(j) Tax Returns and
Payments. All tax returns required to be filed by Borrower in
any jurisdiction have been filed and all taxes (including property taxes) have
been paid prior to the time that such taxes could give rise to any
lien.
(k) Financial
Condition. Borrower has delivered to Lender copies
of Borrower’s (i) audited consolidated and consolidating balance
sheet and Borrower’s subsidiaries as of the most recent Fiscal Year-End and the
related audited consolidated and consolidating statements of income,
shareholders’ equity and cash flow, and (ii) unaudited consolidated and
consolidating balance sheet and Borrower’s subsidiaries as of the most recently
completed month and the related audited consolidated and consolidating
statements of income, shareholders’ equity and cash flow . The
financial statements submitted shall fairly present the financial condition of
Borrower as of the respective dates and shall have been prepared in accordance
with GAAP (except, with respect to the unaudited statements, for the
presentation of footnotes and for applicable normal year-end audit
adjustments). There is no Indebtedness of Borrower which is not
reflected in the financial statements, and no event or circumstance has occurred
since the date of the most recent financial statements in Borrower’s quarterly
report on Form 10-Q for the quarter ended June 30, 2008 which has had or could
have or result in a Material Adverse Change.
(l) ERISA. Neither
Borrower nor any Related Company maintains or contributes to any Benefit Plan
other than those listed on Schedule
5.1. Further, (i) no Reportable Event (as defined in
ERISA) has occurred and is continuing with respect to any Benefit Plan, and
(ii) the PBGC has not instituted proceedings to terminate any Benefit Plan.
The Borrower and each Related Company has satisfied the minimum funding
standards under ERISA with respect to its Benefit Plans and is in compliance in
all material respects with the presently applicable provisions of ERISA and the
Code, and has not incurred any liability to the PBGC or a Benefit Plan under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA.
(m) Capitalization. Borrower’s
capital stock issued (or membership information) is correctly listed on Schedule
5.1.
(n) Defaults. No
Default or Event of Default has occurred and is continuing.
(o) Borrowing Base
Reports. All Accounts included in any Borrowing Base
Certificate constitute Eligible Accounts, except as disclosed in such Borrowing
Base Certificate.
(p) Payroll
Taxes. Borrower has made all payroll tax deposits for all of
its employees on or before the date when due.
(q) Solvency. Borrower
is Solvent. No transfer of property is being made by Borrower and no
obligation is being incurred by Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of
Borrower.
Exhibit
10.1 - Page 21 of 43
5.2 Survival of
Representations. All representations and warranties by
Borrower herein shall be deemed to have been made on the date hereof and the
date of each Advance of a Loan.
Section 6. SECURITY INTEREST
AND COLLATERAL COVENANTS
6.1Security
Interest. To secure the payment and performance of the
Obligations, Borrower hereby mortgages, pledges, and assigns to Lender for
itself, and as agent for its Affiliates, all of the Collateral and grants to
Lender for itself, and as agent for its Affiliates, a security interest and Lien
in and upon all of the Collateral.
6.2 Collection of
Accounts.
(a) If
Borrower receives any monies, checks, notes, drafts, and other payments relating
to or constituting proceeds of Accounts or of any other Collateral, Borrower
shall immediately deposit such items in kind in the appropriate Lockbox Account,
fully endorsed. Borrower shall advise each Account Debtor that remits
amounts payable on the Accounts or any other Person that remits amounts to
Borrower in respect of any of the Collateral by wire transfer or ACH to make
such remittances directly to the Lockbox Account.
(b) Borrower
shall enter into Lockbox Agreements and shall cause all moneys, checks, notes,
drafts, and other payments relating to or constituting proceeds of Accounts,
including all governmental healthcare receivables, or of any other Collateral,
to be forwarded to a Lockbox Account for deposit.
(c) Deposits
in the Lockbox Accounts shall be credited, subject to final payment, to the
payment of the Obligations after receipt and deposit into the Lockbox Accounts
plus the collection clearance days shown on Schedule A. The
delay in applying funds held in the Lockbox Accounts to the Obligations shall in
all respects be limited so that interest on the Obligations is at all times less
than interest calculated at the Maximum Rate.
(d) Any
payments which are received by Borrower (including any payment evidenced by a
promissory note or other instrument) shall be held in trust for Lender and shall
be (i) deposited in the Lockbox Accounts, or (ii) delivered to Lender, as
promptly as possible in the exact form received, together with any necessary
endorsements.
6.3 Disputes, Returns and
Adjustments.
(a) Borrower
shall provide Lender with prompt written notice of amounts in excess
of the amount shown on Schedule A that are in
dispute between any Account Debtor and Borrower after completion of the account
dispute appeal process, exclusive of the amounts of ordinary course
reimbursement deductions made by insurance companies.
(b) Borrower
shall notify Lender promptly of all returns and credits in respect of any
Account, which notice shall specify the Accounts affected and be included in the
Borrowing Base Certificate delivered to Lender. Borrower shall notify
Lender promptly of any pending return or credit in excess of the amount
shown on Schedule A, and shall specify
the Account affected, the related Account Debtor, and the goods to be
returned.
Exhibit
10.1 - Page 22 of 43
(c) Borrower
may, in the ordinary course of business and prior to a Default or an Event of
Default, grant any extension of time for payment of any Account or compromise,
compound, or settle the same for less than the full amount thereof or release
wholly or partly any Person liable for the payment thereof or allow any credit
or discount whatsoever thereon, provided that (i) Borrower
shall not have taken any such action that results in the reduction of more than
the amount shown on Schedule
A with respect to any Account or more than the amount shown on Schedule A (exclusive of the
amounts of ordinary course reimbursement deductions made by insurance companies)
with respect to all Accounts of Borrower in any fiscal year and (ii) Borrower
shall promptly notify Lender (but not less often than ten (10) days after the
end of each month) of the amount of such adjustments and the Account(s) affected
thereby.
6.4 Verification and
Notice. Lender shall have the right at any time at Borrower’s
expense and in Lender’s own name, Borrower’s name, or an assumed name
(a) to verify the validity, amount, or any other matter relating to any
Accounts, and (b) upon the occurrence of an Event of Default, to notify
Account Debtors to make payment of all amounts directly to Lender and enforce
collection of any such Accounts and to adjust, settle, or compromise the amount
or payment thereof, in the same manner as Borrower.
6.5 Ownership; Defense of
Title.
(a) Borrower
shall defend its title in and to the Collateral and shall defend the security
interest of Lender in the Collateral against the claims and demands of all
Persons.
(b) Borrower
shall (i) protect and preserve all properties material to its business,
including Intellectual Property, and maintain all tangible property in good and
workable condition in all material respects, with reasonable allowance for wear
and tear, and (ii) from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements, and additions to such properties
necessary for the conduct of its business.
6.6 Location of Offices and
Collateral; Organizational Information. Borrower shall not
change the location of its place of business (or, if it has more than one place
of business, its chief executive office) or the place where it keeps its books
and records relating to the Collateral or change its name, identity, corporate
structure, or jurisdiction of organization without giving Lender at least thirty
(30) days’ prior written notice thereof. All inventory, other than
inventory in transit to any such location or in the possession of salespersons
in the ordinary course of business, shall at all times be kept by Borrower at
one or more of the locations set forth in Schedule
5.1.
6.7 Records Relating to
Collateral. Borrower shall at all times keep and maintain (i)
complete and accurate records of Accounts on a basis consistent with past
practices of Borrower, (ii) complete and accurate records of all other
Collateral, (iii) Patient Lists containing the names, addresses, and phone
numbers of Borrower’s patients or other Persons that owe Borrower money for any
goods or medical services rendered by Borrower, (iv) a list of all other Persons
that owe Borrower money, and (v) a current list of all salesmen and employees of
Borrower. Data bases containing the foregoing shall at all times be
accessible and available to Lender.
Exhibit
10.1 - Page 23 of 43
6.8 Inspection. Lender
(by any of its officers, employees, or agents) shall have the right at any time
or times to (a) visit the properties of Borrower, inspect the Collateral and the
other assets of Borrower, and inspect and make extracts from the books and
records of Borrower, all during customary business hours, (b) discuss Borrower’s
business, financial condition, results of operations, and business prospects
with Borrower’s (i) principal officers, (ii) independent accountants and other
professionals providing services to Borrower, and (iii) any other Person (except
that any such discussion with any third parties shall be conducted only in
accordance with Lender’s standard operating procedures relating to the
maintenance of confidentiality of confidential information of Borrower), (c)
verify the amount, quantity, value, and condition of, or any other matter
relating to, any of the Collateral and, in this connection, review, audit, and
make extracts from all records and files related to any of the Collateral, and
(d) access and copy the records, lists, reports, and data bases referred to in
Section
6.8. Borrower will deliver to the Lender upon request any
instrument necessary to authorize an independent accountant or other
professional to have discussions of the type outlined above with the Lender or
for the Lender to obtain records from any service bureau maintaining records on
behalf of Borrower.
6.9 Maintenance. Borrower
shall maintain all equipment of Borrower in good and working order and
condition, reasonable wear and tear excepted.
6.10 Power of
Attorney. Borrower hereby appoints Lender as its attorney,
with power (a) to endorse the name of Borrower on any checks, notes,
acceptances, money orders, drafts, or other forms of payment or security that
may come into Lender’s possession, and (b) to sign the name of Borrower on any
invoice or xxxx of lading relating to any Accounts, inventory, or other
Collateral. Borrower also authorizes Lender to file financing
statements, without Borrower’s signature, covering part or all of the Collateral
in such jurisdictions as Lender shall determine to be advisable.
Section 7. AFFIRMATIVE
COVENANTS
So long as this Agreement shall be in
effect or any of the Obligations shall be outstanding, Borrower covenants and
agrees as follows:
7.1 Preservation of Corporate
Existence and Similar Matters. Borrower shall preserve and
maintain its existence as a corporation or limited liability company, as the
case may be, and qualify and remain qualified as a foreign entity authorized to
do business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or
authorization.
7.2 Compliance with Requirements
of Law. Borrower shall continuously comply with all
Requirements of Law, including without limitation all occupational health and
safety laws and Environmental Laws, except where (a) any failure to do so is not
knowing or willful, and (b) Borrower promptly remedies, cures or otherwise
brings it or its affairs into compliance after notice of
non-compliance.
7.3 Conduct of
Business. Borrower shall engage only in substantially the same
businesses conducted by Borrower on the date hereof.
Exhibit
10.1 - Page 24 of 43
7.4 Payment of Taxes and
Claims. Borrower shall pay or discharge when due (a) all
taxes, assessments, and governmental charges imposed upon it or its properties
and (b) all lawful claims which, if unpaid, might become a Lien on any
properties of Borrower, except that this Section 7.4 shall not require the
payment or discharge of any such tax, assessment, charge, levy, or claim which
is being contested in good faith by appropriate proceedings and for which
adequate reserves have been established on the appropriate books of
Borrower.
7.5 Accounting Methods and
Financial Records. Borrower shall maintain a system of
accounting, and keep such books, records and accounts (which shall be true and
complete), as may be required or as may be necessary to permit the preparation
of financial statements in accordance with GAAP consistently
applied.
7.6 Use of
Proceeds. Borrower shall (a) use the proceeds of the Loan for
the repayment of its outstanding bank debt and for working capital and general
business purposes, and (b) not use any part of such proceeds to purchase or
carry, or to reduce or retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) or for any other purpose which would
violate Regulation U or Regulation T or X of such Board of Governors or for any
other purpose prohibited by law or by the terms and conditions of this
Agreement.
7.7 Accuracy of
Information. All written information, reports, statements, and
other papers and data furnished to Lender shall be, at the time the same is so
furnished, complete and correct in all material respects.
7.8 Revisions or Updates to
Schedules. Should any of the information or disclosures
provided on any of the Schedules attached hereto become outdated or incorrect in
any material respect, Borrower shall provide promptly to Lender such revisions
or updates to such Schedule(s) as may be necessary or appropriate to update, or
correct and update, such Schedule(s). Notwithstanding the foregoing, the
delivery to Lender of a revised or updated schedule shall not constitute a
waiver of, or consent to, any Default or Event of Default arising as a result of
any erroneous or incorrect information provided in any Schedule previously
delivered to Lender.
7.9 RISA. Borrower
shall provide to Lender, as soon as possible and in any event within thirty (30)
days after the date that (a) any Termination Event with respect to a Benefit
Plan has occurred or will occur, (b) the aggregate present value of the Unfunded
Vested Liabilities under all Benefit Plans has increased to an amount in excess
of $0, or (c) Borrower is in “default” (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan required by reason of
its complete or partial withdrawal (as described in Section 4203 or 4205 of
ERISA) from such Multiemployer Plan, a certificate of the president or the chief
financial officer of Borrower setting forth the details of such of the events
described in clauses
(a) through (c) as applicable and
the action which is proposed to be taken with respect thereto and,
simultaneously with the filing thereof, copies of any notice or filing which may
be required by the PBGC or other agency of the United States government with
respect to such of the events described in clauses (a) through
(c) as
applicable.
Exhibit
10.1 - Page 25 of 43
7.10 Insurance. Borrower
shall keep or cause to be kept adequately insured by financially sound and
reputable insurers all of its property usually insured by Persons engaged in the
same or similar businesses. Without limiting the foregoing, Borrower
shall insure the Collateral of Borrower against loss or damage by fire, theft,
burglary, pilferage, loss in transit, business interruption, and such other
hazards as usual and customary in Borrower’s industry or as Lender may specify
in amounts and under policies by insurers acceptable to Lender, and all premiums
thereon shall be paid by Borrower and copies of the policies delivered to
Lender. If Borrower fails to do so, Lender may procure such insurance
and charge the cost to Borrower’s account. Each policy of insurance
covering the Collateral shall provide that at least ten (10) days’ prior written
notice of cancellation or notice of lapse must be given to Lender by the
insurer. All insurance policies required under this Section 7.10 shall
name Lender as an additional named insured and as a loss payee. Any
proceeds of insurance referred to in this Section 7.10 which
are paid to Lender shall be, at the option of Lender in its sole and absolute
discretion, either (i) applied to rebuild, restore, or replace the damaged or
destroyed property, or (ii) applied to the payment or prepayment of the
Obligations.
7.11 Payroll
Taxes. Borrower shall at all times make all payroll tax
deposits for all of its employees on or before the date when due.
7.12 Notice of Litigation, Claims
Against the Collateral, and Other Matters. Borrower shall
promptly provide to Lender written notice of any of the following:
(a) the
commencement, to the extent Borrower is aware of the same, of all actions and
proceedings in any court against Borrower or any of the Collateral;
(b) any
Lien (other than Permitted Liens), material claim, attachment, or material legal
process asserted or levied against Borrower or any Collateral;
(c) the
commencement against any Obligor of any audit, investigation, judicial or
administrative proceeding, or any criminal or civil investigation initiated,
claim filed, or disclosure required of any Obligor by the Office of Inspector
General, the Department of Justice, Center for Medicare and Medicaid Services
(CMS) (formerly HCFA), or any other governmental authority, or any claim filed
under the False Claims Act or any other Requirement of Law;
(d) any
amendment of any of the organizational documents of Borrower, including, but not
limited to, articles of incorporation or bylaws;
(e) any
change in the business, financial condition, results of operations, or business
prospects of Borrower that would reasonably be expected to cause a Material
Adverse Change;
(f) any
change in the executive officers of Borrower;
(g) copies
of all reports and statements that Borrower sends to or receives from any
governmental authority;
(h) any
Default or Event of Default, or event that would constitute a default or event
of default by Borrower under any material agreement (other than this Agreement)
to which Borrower is a party; and
Exhibit
10.1 - Page 26 of 43
(i) the
occurrence of any other event which could reasonably be expected to have a
Material Adverse Change.
7.13 Notice of Healthcare
Matters. Borrower shall promptly provide to Lender
written notice of any of the following:
(a) any
investigation or pending or threatened proceedings relating to any violation by
Borrower, any Affiliate of Borrower, or any health care facility to which
Borrower or Affiliate provides services, of any Health Care Laws (including,
without limitation, any investigation or proceeding involving violation of any
of the Medicare and/or Medicaid fraud and abuse provisions);
(b) copies
of any written recommendation from any governmental authority or other
regulatory body that Borrower, any Affiliate of Borrower, or any Obligor to
which Borrower or any Affiliate of Borrower provides services should have its
licensure or accreditation revoked, or have its eligibility to participate in
TRICARE, Medicare or Medicaid or to accept assignments or rights to
reimbursement under TRICARE, Medicaid or Medicare regulations
revoked;
(c) notice
of any claim to recover any alleged material overpayments with respect to any
receivables including, without limitation, payments received from Medicare,
Medicaid or any other government reimbursement program, or from any private
insurance carrier;
(d) notice
of termination of eligibility of Borrower or any Affiliate of Borrower to
participate in any reimbursement program of any private insurance carrier or
other Obligor applicable to it;
(e) Borrower’s
knowledge of termination of eligibility of any health care facility to which
Borrower provides services to participate in any reimbursement program of any
private insurance carrier or other Obligor applicable to it;
(f) notice
of any material reduction in the level of reimbursement expected to be received
with respect to any receivables;
(g) notice
of any reimbursement payment contract or process that results or may result in
any material claim against Borrower or Affiliate of Borrower (including on
account of overpayments, settlement payments, appeals, repayment plan requests);
and
(h) copies
of any report or communication from any governmental authority in connection
with any inspection of any facility of Borrower or any Affiliate of
Borrower.
7.14 Post-Closing
Obligations.
(a) Borrower
shall cooperate with Lender to cause Lender to perfect its security interest
with the U.S. Patent and Trademark Office promptly upon any patent being issued
to Borrower in or on its NeuroMove products.
(b) On
or before September 30, 2008, Borrower shall send to each Account Debtor written
notice, in form and content acceptable to Lender as shown on Exhibit D, directing each
Account Debtor to send to the Lockbox address specified by Lender all
remittances with respect to all amounts payable by Account Debtors, and submit
copies of such notices to Lender.
Exhibit
10.1 - Page 27 of 43
Section 8. FINANCIAL AND
COLLATERAL REPORTING
So long
as this Agreement shall be in effect or any of the Obligations shall be
outstanding, Borrower covenants and agrees as follows:
8.1 Financial
Statements.
(a) Audited Year-End Financial
Statements. As soon as available, but in any event within one
hundred twenty (120) days after Borrower’s
Fiscal Year-End, Borrower shall furnish to Lender copies of Borrower’s Fiscal
Year-End audited consolidated and consolidating balance sheet of Borrower and
its subsidiaries as of the Fiscal Year-End and the related audited consolidated
and consolidating statements of income, shareholders’ equity and cash flow for
such fiscal year, in each case setting forth in comparative form the figures for
the previous year of Borrower and its subsidiaries, together with an unqualified
audit report certified by independent certified public accountants selected by
Borrower and acceptable to Lender. In addition, on or before such
date, Borrower shall provide Lender with copies of all management reports
received from its certified public accountants.
(b) Monthly Financial
Statements. As soon as available, but in any event within
twenty (20) days after the end of each month, Borrower shall furnish to Lender
copies of the unaudited consolidated and consolidating balance sheet of Borrower
and its subsidiaries as of the end of such month and the related unaudited
consolidated and consolidating income statement and statement of cash flow of
Borrower and its subsidiaries for such month and for the portion of the fiscal
year of Borrower through such month, certified by the chief financial officer of
Borrower as presenting fairly the financial condition and results of operations
of Borrower and its subsidiaries as of the date thereof and for the periods
ended on such date, subject to normal year-end adjustments.
(c) Projected Financial
Statements. At least thirty (30) but not more than sixty (60)
days prior to the Fiscal Year-End of Borrower, Borrower shall furnish to Lender
forecasted financial statements, prepared by Borrower, consisting of
consolidated and consolidating balance sheets, cash flow statements and income
statements of Borrower and its subsidiaries, reflecting projected borrowing
hereunder and setting forth the assumptions on which such forecasted financial
statements were prepared, covering the one-year period until the next fiscal
year end.
All such
financial statements shall be complete and correct in all material respects and
all such financial statements referred to in clauses (a) and (b) shall be prepared
in accordance with GAAP (except, with respect to interim financial statements,
for the omission of footnotes) applied consistently throughout the periods
reflected therein. Further, all such financial statements shall be in
a form acceptable to Lender.
8.2 Compliance
Certificate. Together with each delivery of financial
statements required by Sections 8.1(a) and
(b), Borrower
shall furnish to Lender a certificate of Borrower’s president or chief financial
officer in the form of Exhibit
B.
8.3 Collateral Information and
Reports.
(a) Schedules of
Accounts. Within ten (10) days after the end of each month,
Borrower shall furnish to Lender a Schedule of Accounts. Lender must
receive the Schedule of Accounts no later than 5:00 p.m. Pacific Time at least
two (2) business days prior to the receipt of the Borrowing Base Certificate for
purposes of determining the amount of any Advance.
Exhibit
10.1 - Page 28 of 43
(b) Schedules of Accounts
Payable. Within ten (10) days after the end of each month,
Borrower shall furnish to Lender a schedule of accounts payable of Borrower and
aging information as of the last business day of such month setting forth
(i) a detailed aged trial balance of all of Borrower’s then existing
accounts payable, specifying the name of and the balance due to each creditor,
and (ii) a reconciliation to the schedule of accounts payable to Borrower’s
general ledger as of such month end.
(c) Borrowing Base
Certificate. Not less often than monthly or such other period
of time as specified by Lender, Borrower shall furnish to Lender a Borrowing
Base Certificate, along with supporting documentation, in form and substance
satisfactory to Lender (including but not limited to information on sales,
credits, collections, adjustments, and Accounts).
(d) Reconciliation. Not
less than monthly Borrower shall prepare and submit to Lender a reconciliation
of the most recently submitted Borrowing Base Certificate to the Borrower’s most
recently submitted month-end unaudited consolidated and consolidating balance
sheet of Borrower and its subsidiaries.
(e) Tax
Returns. Borrower shall within fifteen (15) days after
filing, provide Lender a copy of all federal, state and local income tax
returns, all payroll tax returns, all sales tax returns or any other tax return
or filing filed by Borrower or any Affiliate of Borrower.
(f) NeuroMove. Borrower
shall report at the end of each quarter on the status of Borrower’s patent
application on Borrowers’ NeuroMove products.
(g) Other
Information. Lender may, in its sole and absolute discretion,
from time to time require Borrower to deliver the schedules and certificates
described in Section
8.3 more or less often and on different schedules than specified in such
Section. Borrower shall also furnish to Lender such other additional
information as Lender may from time to time request.
(h) Certification. Each
of the schedules and certificates delivered to Lender by Borrower pursuant to
this Section
8.3 shall be in a form acceptable to Lender and shall be signed and
certified by the president, chief financial officer, or treasurer of Borrower to
be true, correct, and complete as of the date indicated thereon. In
the event any of such schedules or certificates are delivered electronically or
without signature, such schedules and/or certificates shall, by virtue of their
delivery, be deemed to have been signed and certified by the president of
Borrower to be true, correct, and complete as of the date indicated
thereon.
Section 9. NEGATIVE
COVENANTS
So long
as this Agreement shall be in effect or any of the Obligations shall be
outstanding, Borrower covenants and agrees as follows:
9.1 Financial
Covenants.
(a) Minimum
EBITDA. Borrower shall at all times continuously maintain the
Minimum EBITDA amount shown on Schedule A.
(b) Minimum Debt Service
Coverage Ratio. Borrower shall at all times continuously
maintain the Minimum Debt Service Coverage Ratio shown on Schedule A.
Exhibit
10.1 - Page 29 of 43
(c) Minimum Current
Ratio. Borrower shall at all times continuously maintain the
Minimum Current Ratio amount shown on Schedule A.
(d) Capital
Expenditures. Borrower shall not, directly or indirectly, make
or incur Capital Expenditures which exceed in the aggregate in any fiscal year
the amount shown on Schedule
A. The amounts listed in Schedule A for Capital
Expenditures shall not include amounts Borrower expends for rental units that
are rented to patients by Borrower.
(e) Operating Leases.
Borrower shall
not, directly or indirectly, suffer to exist or enter into any lease other than
a Capitalized Lease which would cause the annual payment obligations of Borrower
under all leases (other than Capitalized Leases) to exceed the amount
shown on Schedule
A.
(f) Permitted
Indebtedness. Borrower shall not incur purchase money
Indebtedness to finance, or provide the funds for, the acquisition of assets,
which outstanding principal Indebtedness exceeds the amount shown on Schedule A, plus (ii) the
Indebtedness described on Schedule 5.1 attached
hereto and made a part hereof, plus (iii) the
Obligations.
9.2 Prohibited Distributions and
Payments, Etc. Borrower shall not, directly or indirectly,
declare or make any Prohibited Distribution or Prohibited Payment, except as
follows: on the express condition that no Default or Event of Default has
occurred or would result therefrom,
(a) Zynex,
Inc. may make regularly scheduled payments of principal and interest on the
Shareholder’s Loans, including demand payments on the Shareholder’s Loan
evidenced by a demand promissory note; and
(b) Borrower
may pre-pay purchase money Capitalized Lease Obligations.
9.3 Indebtedness. Except
as disclosed on Schedule 5.1,
Borrower shall not, directly or indirectly, create, assume, or otherwise become
or remain obligated in respect of, or permit or suffer to exist or to be
created, assumed, or incurred or to be outstanding, any Indebtedness, except for
Permitted Indebtedness.
9.4 Liens. Borrower
shall not, directly or indirectly, create, assume, or permit or suffer to exist
or to be created or assumed any Lien on any of the property or assets of
Borrower, real, personal or mixed, tangible or intangible, except for Permitted
Liens or the liens identified on Schedule
5.1.
9.5 Loans. Borrower
shall not make any loans or advances to or for the benefit of any officer,
director, manager, shareholder, member, or partner of Borrower except advances
for routine expense allowances in the ordinary course of
business. Borrower shall not make or suffer to exist any loans or
advances to or for the benefit of any Affiliate of Borrower, except for loans or
advances from one Borrower to another. Borrower shall not make any
payment on any obligation owing to any officer, director, manager, shareholder,
member, partner, or Affiliate of Borrower, except payments of any reasonable
compensation (whether salary, bonus, stock awards or other compensation amounts
as reported as executive compensation on Borrower’s annual report or proxy
statement filed with the Securities and Exchange Commission) and payments to the
holder of any Subordinated Indebtedness, if any, in accordance with the terms of
the subordination agreement among such subordinated creditor, Borrower, and
Lender.
Exhibit
10.1 - Page 30 of 43
9.6 Merger, Consolidation, Sale
of Assets, Acquisitions. Borrower shall not, directly or
indirectly, merge or consolidate with any other Person or sell, lease, or
transfer or otherwise dispose of any assets to any Person, other than sales of
inventory or licensing of assets in the ordinary course of business, or the
disposition of worn out, obsolete property or property no longer used by
Borrower. Borrower shall not directly or indirectly acquire all or
substantially all of the assets of any Person or the assets constituting the
business or a division or operating unit of any Person.
9.7 Transactions with
Affiliates. Borrower shall not, directly or indirectly, effect
any transaction with any Affiliate on a basis less favorable to Borrower than
would be the case if such transaction had been effected with a Person not an
Affiliate, provided
that Borrower shall not enter into any lease with any Affiliate.
9.8 Deposit
Accounts. Borrower shall not establish any Deposit Account
other than those described on Schedule
5.1.
9.9 Guaranties. Borrower
shall not, directly or indirectly, become or remain liable with respect to any
guaranty of any obligation of any other Person.
9.10 Benefit
Plans. Borrower shall not, directly or indirectly, permit, or
take any action which would cause, the Unfunded Vested Liabilities under all
Benefit Plans of Borrower to exceed $0.
9.11 Sales and
Leasebacks. Borrower shall not, directly or indirectly, enter
into any arrangement with any Person providing for the leasing from such Person
of real or personal property which has been or is to be sold or transferred,
directly or indirectly, by Borrower to such Person.
9.12 Amendments. Borrower
shall not amend or modify, or permit any amendment or modification to, whether
orally, in writing, or otherwise, any agreement evidencing or relating to
Subordinated Indebtedness.
9.13 USA Patriot
Act. Borrower shall not (a) be or become subject at any
time to any law, regulation, or list of any government agency (including,
without limitation, the U.S. Office of Foreign Asset Control list) that
prohibits or limits Lender from making any advance or extension of credit to
Borrower or from otherwise conducting business with Borrower, or (b) fail
to provide documentary and other evidence of Borrower’s or its corporate
officers’ identities as may be requested by Lender at any time to enable Lender
to verify Borrower’s identity or to comply with any applicable law or
regulation, including, without limitation, Section 326 of the USA Patriot Act of
2001, 31 X.X.X. §0000.
Section 10. DEFAULT
10.1 Events of
Default. Each of the following events shall constitute an
Event of Default:
(a) Borrower
fails to pay any of the Obligations when due and payable;
(b) Borrower
fails to continuously observe, meet, or perform any term, covenant obligation,
or duty contained in this Agreement or any of the Loan Documents;
(c) Any
Obligor fails to timely perform properly any covenant in this Agreement or in
any of the other Loan Documents;
Exhibit
10.1 - Page 31 of 43
(d) Any
Lockbox Agreement is breached or terminated;
(e) There
is an occurrence of any default or event of default under any of the other Loan
Documents;
(f) Borrower
defaults under any other agreement with Lender;
(g) Any
representation or warranty contained herein or in any of the other Loan
Documents is false or misleading in any material respect when made or deemed
made;
(h) Borrower
shall (i) apply for or consent to the appointment of a receiver, trustee,
custodian, intervenor, or liquidator of Borrower or of all or a substantial part
of Borrower’s assets, (ii) file a voluntary petition in bankruptcy, (iii) admit
in writing that Borrower is unable to pay its debts as they become due, (iv)
make a general assignment for the benefit of creditors, (v) file a petition or
answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy or insolvency proceeding, or (vii) take corporate,
company, or partnership action for the purpose of effecting any of the
foregoing;
(i) Either
(i) an involuntary petition or complaint shall be filed against Borrower
seeking bankruptcy or reorganization of Borrower or the appointment of a
receiver, custodian, trustee, intervenor, or liquidator of Borrower, or of all
or substantially all of Borrower’s assets or (ii) an order, order for
relief, judgment, or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of Borrower or appointing an intervenor or liquidator of
Borrower, or of all or substantially all of Borrower’s assets;
(j) Any
Obligor other than Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian, intervenor, or liquidator of such Obligor or of
all or a substantial part of such Obligor’s assets, (ii) file a voluntary
petition in bankruptcy, (iii) admit in writing that such Obligor is unable to
pay its debts as they become due, (iv) make a general assignment for the benefit
of creditors, (v) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
proceeding, or (vii) take corporate, company, or partnership action for the
purpose of effecting any of the foregoing;
(k) An
involuntary petition or complaint shall be filed against any Obligor other than
Borrower seeking bankruptcy or reorganization of such Obligor or the appointment
of a receiver, custodian, trustee, intervenor, or liquidator of such Obligor, or
of all or substantially all of such Obligor’s assets; or an order, order for
relief, judgment, or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of such Obligor or appointing an intervenor or liquidator
of such Obligor, or of all or substantially all of such Obligor’s
assets;
(l) Any
money judgment is rendered against Borrower that is not paid within thirty (30)
days, or the failure, within a period of ten (10) days after the commencement
thereof, to have discharged any attachment, sequestration, or similar
proceedings against Borrower’s assets;
(m) Lender
shall cease to have a valid, perfected, and first priority Lien on any of the
Collateral, except as otherwise expressly permitted herein or consented to in
writing by Lender;
Exhibit
10.1 - Page 32 of 43
(n) Lender
reasonably believes that the prospect of payment or performance by Borrower
under any of the Loan Documents is or may be impaired or any of the Collateral
is or may be in jeopardy, becomes unsafe or insecure, or its value is or may
become otherwise impaired;
(o) Xxxxxx
Xxxxxxxxx shall cease to own, beneficially and of record, at least 51% of the
outstanding voting capital stock of Zynex, Inc.;
(p) Zynex,
Inc. shall cease to own 100% of the capital stock of Zynex Medical,
Inc.;
(q) There
shall be any Change of Control;
(r) Any
guarantor of the Obligations, or such guarantor’s successors, heirs, or personal
representatives, shall (i) default under the terms of its guaranty to
Lender, (ii) repudiate its or his/her obligations under, or commit an
anticipatory breach of, its or his/her guaranty executed for the benefit of
Lender or (iii) attempt to terminate such guaranty, or (iv) commence
any legal proceeding to terminate or hold invalid in any respect such guaranty;
or
(s) There
is any default under the Validity Guaranty.
For any
Event of Default other than a default arising for failure to pay any of the
Loans when due, Lender shall provide Borrower with fifteen (15) days written
notice of Event of Default and opportunity to cure such noticed Event of
Default.
10.2 Remedies.
(a) Acceleration and Termination
of Facilities. Upon the occurrence of an Event of Default,
(i) the principal of and the accrued interest on the Loans at the time
outstanding, and all other amounts owed to Lender under this Agreement or any of
the Loan Documents and all other Obligations, shall thereupon become due and
payable upon Lender’s notice of acceleration, but without other presentment,
demand, protest, notice of protest and non-payment, notice of default, or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or any of the Loan Documents to the contrary notwithstanding, and
(ii) the commitment of Lender to make Loans hereunder shall immediately
terminate.
(b) Other
Remedies. Without limiting the terms of Section 10.2(a)
above, if any Event of Default shall have occurred and be continuing, Lender, in
its sole and absolute discretion, may:
(i) declare
the principal of and accrued interest on the Loans at the time outstanding, and
all other amounts owed to Lender under this Agreement or any of the Loan
Documents and all other Obligations, to be forthwith due and payable, whereupon
the same shall immediately become due and payable without presentment, demand,
protest, notice of protest and non-payment, notice of default, notice of
acceleration or intention to accelerate, or other notice of any kind, all of
which are expressly waived, anything in this Agreement or the Loan Documents to
the contrary notwithstanding;
(ii) terminate
any commitment of Lender to make Loans hereunder;
(iii) enter
upon any premises where Collateral is located and take possession of the
Collateral;
Exhibit
10.1 - Page 33 of 43
(iv) collect
any Accounts from any Account Debtor;
(v) require
Borrower to assemble the Collateral and make it immediately available to
Lender. Without limiting the generality of the foregoing with respect
to that portion of the Collateral that is comprised of Patient Lists, Borrower
shall make immediately available all Patient Lists to Lender;
(vi) sell
all or any part of the Collateral at either a public or private sale or both, by
way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower’s premises) as Lender determines
is commercially reasonable;
(vii) collect,
foreclose, receive, appropriate, set off, and realize upon any and all
Collateral;
(viii) without
notice to Borrower (such notice being expressly waived), and without
constituting an acceptance of any Collateral in satisfaction of an obligation
(within the meaning of the UCC or any successor statute or law of similar
effect), set off and apply to the Obligations any and all balances and deposits
of Borrower held by Lender (including any amounts received in the Lockboxes), or
indebtedness at any time owing to or for the credit or the account of Borrower
held by Lender;
(ix) obtain
the appointment of a receiver, trustee, or similar official over Borrower to
manage all of Borrower’s affairs and to effect all transactions contemplated by
this Agreement, realize upon the Collateral, or as is otherwise necessary to
perform or enforce this Agreement;
(x) declare
a default on any other contract or agreement between Borrower and Lender;
and
(xi) exercise
any or all rights and remedies available under the Loan Documents, at law and/or
in equity including, without limitation, the rights and remedies of a secured
party under the UCC (whether or not the UCC is applicable). Borrower
agrees that, to the extent notice of sale shall be required by law, at least
ten (10) days’
notice to Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable notice,
but notice given in any other reasonable manner or at any other reasonable time
shall also constitute reasonable notification.
10.3 Application of
Proceeds. All proceeds from each sale of, or other realization
upon, all or any part of the Collateral following an Event of Default shall be
applied to the payment of the Obligations (with Borrower remaining liable for
any deficiency) in any order which Lender may elect with the balance (if any)
paid to Borrower or to whomsoever is entitled thereto.
10.4 Power of
Attorney. Borrower hereby irrevocably designates, makes,
constitutes, and appoints Lender (and all Persons designated by Lender from time
to time) as Borrower’s true and lawful attorney and agent in fact to act in name
of Borrower to effectuate any term in this Agreement after the occurrence and
during the continuation of any Event of Default. Without limiting the
generality of the foregoing, Borrower’s power of attorney to Lender authorizes
Lender to:
Exhibit
10.1 - Page 34 of 43
(a) demand
payment of the Accounts, enforce payment thereof by legal proceedings or
otherwise, settle, adjust, compromise, extend, or renew any or all of the
Accounts or any legal proceedings brought to collect the Accounts, discharge and
release the Accounts or any of them, and exercise all of Borrower’s rights and
remedies with respect to the collection of Accounts;
(b) prepare,
file, and sign the name of Borrower on any proof of claim in bankruptcy or any
similar document against any Account Debtor or any notice of Lien, assignment,
or satisfaction of Lien or similar document in connection with any of the
Collateral;
(c) use
the stationery of Borrower, open Borrower’s mail, notify the post office
authorities to change the address for delivery of Borrower’s mail to an address
designated by Lender, and sign the name of Borrower to verifications of the
Accounts and on any notice to the Account Debtors; and
(d) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, inventory, or other
Collateral.
10.5 Joint and Several
Liability. Zynex, Inc., and Zynex Medical, Inc. are
jointly and severally liable under this Agreement.
10.6 Additional Provisions
Concerning Rights and Remedies.
(a) Time
Essence. Time is of the essence of all of Borrower’s
Obligations under this Agreement.
(b) Rights
Cumulative. The rights and remedies of Lender under the Loan
Documents shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. In exercising such rights and remedies,
Lender may be selective and no failure or delay by Lender in exercising any
right shall operate as a waiver of such right nor shall any single or partial
exercise of any power or right preclude its other or further exercise or the
exercise of any other power or right
(c) Extensions of
Time. Lender may extend or postpone the due dates of
Borrower’s Obligations, amend any agreement evidencing, guaranteeing, or
securing any of Borrower’s Obligations, take or not take any action respecting
any of the Collateral, or extend or postpone the due dates of Borrower’s
Obligations without affecting Borrower’s liability under this
Agreement.
(d) Waiver of
Marshaling. Borrower hereby waives any right to require any
marshaling of assets and any similar right.
10.7 Trademark
License. All trademarks, patents, copyrights, service marks
and licenses owned by Borrower, and all trademarks, patents, copyrights, service
marks, and software licensed by Borrower, are listed on Schedule
5.1. Borrower hereby grants to Lender the nonexclusive right
and license to use all of Borrower’s trademarks, patents, copyrights, service
marks, and licenses and any other trademarks, patents, copyrights, service
marks, and licenses now or hereafter used by Borrower to realize on the
Collateral and to permit any purchaser of any portion of the Collateral through
a foreclosure sale or any other exercise of Lender’s rights and remedies under
the Loan Documents to use, sell, or otherwise dispose of the Collateral bearing
any such trademarks, patents, copyrights, service marks, and
licenses. Such right and license is granted free of charge, without
the requirement that any monetary payment whatsoever be made to Borrower or any
other Person by Lender.
Exhibit
10.1 - Page 35 of 43
Section
11. MISCELLANEOUS
11.1 Notices.
(a) Method of
Communication. All notices and the communications hereunder
and thereunder shall be in writing. Notices in writing shall be
delivered personally or sent by overnight courier service, by certified or
registered mail, postage pre-paid, or by facsimile transmission, and shall be
deemed received, in the case of personal delivery, when delivered, in the case
of overnight courier service, on the next business day after delivery to such
service, in the case of mailing, on the third day after mailing (or, if such day
is a day on which deliveries of mail are not made, on the next succeeding day on
which deliveries of mail are made) and, in the case of facsimile transmission,
upon transmittal.
(b) Addresses for
Notices. Notices to any party shall be sent to it at the
following addresses, or any other address of which all the other parties are
notified in writing.
If
to Borrower:
|
See
Schedule 5.1 for Borrower’s address
and contact information.
|
||
If
to Lender:
|
Marquette
Healthcare Finance
|
||
000
XX Xxxxx Xxxxxx, Xxxxx 0000
|
|||
Xxxxxxxx,
Xxxxxx 00000
|
|||
Attention: Xxxxxxxx
Xxxxxxxxxx
|
|||
Facsimile
No.: (000) 000-0000
|
11.2 Press
Releases. Borrower and Lender may make press releases or other
public disclosure concerning this Agreement, including without limitation the
execution of this Agreement, and a description of the amount of credit
facilities made available to Borrower with the prior written consent of the
other party, such consent not to be unreasonably withheld or
delayed. Borrower authorizes Lender to use any of Borrower’s
trademarks, trade names or logos in such press releases or other public
disclosure. Notwithstanding the forgoing, Borrower may report any
information about this Agreement as required by the Securities Exchange Act of
1934 and the regulations promulgated thereunder without the prior written
consent of Lender.
11.3 Setoff. In
addition to any rights now or hereafter granted under applicable law, and not by
way of limitation of any such rights, upon and after the occurrence of any Event
of Default, Lender and any participant with Lender in the Loans are hereby
authorized by Borrower at any time or from time to time, without notice to
Borrower or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and to apply any and all deposits (general or
special, time or demand, including, but not limited to, indebtedness evidenced
by certificates of deposit, whether matured or unmatured) and any other
indebtedness at any time held or owing by Lender or any participant to or for
the credit or the account of Borrower against and on account of the Obligations
irrespective or whether or not (a) Lender shall have made any demand under this
Agreement or any of the Loan Documents, or (b) Lender shall have declared any or
all of the Obligations to be due and payable as permitted by Section 10.2 and
although such Obligations shall be contingent or unmatured.
Exhibit
10.1 - Page 36 of 43
11.4 Venue; Service of
Process. BORROWER HEREBY
IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN MULTNOMAH COUNTY, OREGON, and agrees and consents that service
of process may be made upon it in any legal proceeding relating to this
Agreement, any borrowing hereunder, or any other relationship between Lender and
Borrower by any means allowed under state or federal law. Any legal
proceeding arising out of or in any way related to this Agreement, any borrowing
hereunder, or any other relationship between Lender and Borrower may be brought
and litigated in any one of the state or federal courts located in Multnomah
County, Oregon. Borrower and Lender waive and agree not to assert, by
way of motion, as a defense or otherwise, that any such proceeding is brought in
an inconvenient forum or that the venue thereof is improper. Nothing
herein shall limit the right of the Lender to bring proceedings against Borrower
in the courts of any other jurisdiction. Any judicial proceeding by
Borrower against the Lender involving, directly or indirectly, any matter in any
way arising out of, related to, or in connection with this Agreement shall be
brought only in a court in Portland, Oregon. Borrower expressly waives
personal service of the summons and complaint or other process or papers issued
therein and agrees that service of such summons and complaint or other process
or papers may be made by registered or certified mail addressed to Borrower at
the address referenced in Section 11.1, which
service shall be deemed to have been made on the date that receipt is deemed to
have occurred for registered or certified mail as provided in Section
11.1.
11.5 Assignment;
Participation. All the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement. Lender may assign to one or more
Persons, or sell participations to one or more Persons in, all or a portion of
its rights and obligations hereunder and under this Agreement and any promissory
notes issued pursuant hereto and, in connection with any such assignment or sale
of a participation, may assign its rights and obligations under the Loan
Documents. Borrower agrees that Lender may provide any information
that Lender may have about Borrower or about any matter relating to this
Agreement to any of its Affiliates or their successors, or to any one or more
purchasers or potential purchasers of any of its rights under this Agreement or
any one or more participants or potential participants.
11.6 Amendments. Any
term, covenant, agreement, or condition of this Agreement or any of the other
Loan Documents may be amended or waived, and any departure therefrom may be
consented to if, but only if, such amendment, waiver, or consent is in writing
signed by Lender and, in the case of an amendment, by
Borrower. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
11.7 Performance of Borrower’s
Duties. If Borrower shall fail to do any act or thing which it
has covenanted to do under this Agreement or any of the Loan Documents, Lender
may (but shall not be obligated to) do the same or cause it to be done either in
the name of Lender or in the name and on behalf of Borrower, and Borrower hereby
irrevocably authorizes Lender so to act.
Exhibit
10.1 - Page 37 of 43
11.8 Indemnification. Borrower
shall reimburse Lender and its Affiliates and their officers, employees,
directors, shareholders, agents, and legal counsel (collectively, the “Indemnified Parties”
and individually, an “Indemnified Party”)
for all reasonable costs and expenses, including legal fees and expenses,
incurred and shall indemnify and hold the Indemnified Parties harmless from and
against all losses suffered by any Indemnified Party, other than losses
resulting from an Indemnified Party’s gross negligence or willful misconduct, in
connection with (a) the exercise by Lender or any of its Affiliates of any
right or remedy granted to it under this Agreement or any of the Loan Documents
or at law, (b) any claim, and the prosecution or defense thereof, arising
out of or in any way connected with this Agreement or any of the Loan Documents,
except in the case of a dispute between Borrower and Lender in which Borrower
prevails in a final unappealed or unappealable judgment, and (c) the
collection or enforcement of the Obligations or any of them. BORROWER AND LENDER EXPRESSLY INTEND
THAT THE FOREGOING INDEMNITY SHALL COVER, AND THAT BORROWER SHALL INDEMNIFY AND
HOLD THE INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST, COSTS, EXPENSES, AND
LOSSES SUFFERED AS A RESULT OF THE NEGLIGENCE OF ANY INDEMNIFIED
PARTY.
11.9 All Powers Coupled with
Interest. All powers of attorney and other authorizations
granted to Lender and any Persons designated by Lender pursuant to any
provisions of this Agreement or any of the Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied or Lender has any obligations to make
Advances hereunder.
11.10 Severability of
Provisions. Any provision of this Agreement or any other Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.11 Governing
Law. This Agreement and the promissory notes issued pursuant
hereto shall be construed in accordance with and governed by the laws of the
State of Oregon other than its conflict of laws principles.
11.12 Jury
Waiver. BORROWER AND LENDER HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT,
OR OTHERWISE) BETWEEN OR AMONG BORROWER AND LENDER AND LENDER’S AFFILIATES
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT,
OR ANY RELATIONSHIP BETWEEN LENDER AND BORROWER OR BETWEEN BORROWER AND ANY
AFFILIATE OF LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT TO
LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN
DOCUMENTS.
11.13 Attorney Fees and
Costs.The prevailing party in any litigation arising under or related to
this Agreement shall be entitled to recover from the non-prevailing party all of
the prevailing party’s reasonable attorney fees incurred in connection with such
litigation, together with all costs, deposition costs, court fees and other
costs and expenses of such litigation.
Exhibit
10.1 - Page 38 of 43
11.14 Counterparts. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and shall be binding upon all parties, their successors and
assigns, and all of which taken together shall constitute one and the same
agreement. A facsimile or digital copy of any signed Loan Document,
including this Agreement, shall be deemed to be an original
thereof.
11.15 Patriot Act
Notice. IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A
NEW ACCOUNT. To help the government fight the funding of terrorism
and money- laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies each
person or entity that opens an account, including any deposit account, treasury
management account, loan, other extension of credit, or other financial services
product. What this means for Borrower: When Borrower opens
an account, if Borrower is an individual, Lender will ask for Borrower’s name,
residential address, date of birth, and other information that will allow Lender
to identify Borrower, and if Borrower is not an individual, Lender will ask for
Borrower’s name, employer identification number, business address, and other
information that will allow Lender to identify Borrower. Lender may
also ask, if Borrower is an individual, to see Borrower’s driver’s license or
other identifying documents, and if Borrower is not an individual, to see
Borrower’s legal organizational documents or other identifying
documents.
11.16 Confidentiality. In
handling any confidential information of Borrower, Lender will exercise
reasonable care, but disclosure of information may be made (i) to Lender’s
subsidiaries, Affiliates and representatives in connection with their business
with Borrower, (ii) to prospective transferees or purchasers of any interest in
the Loans, (iii) as required by law, regulation, subpoena, or other order, (iv)
as required in connection with Lender’s examination or audit and (v) as Lender
considers appropriate exercising any of its rights, responsibilities or remedies
under this Agreement. Confidential information does not include
information that either: (a) is in the public domain or in Lender’s
possession when disclosed to Lender, or becomes part of the public domain after
disclosure to Lender; or (b) is disclosed to Lender by a third party, if Lender
does not know that the third party is prohibited from disclosing the
information. Lender will not use any of Borrower’s confidential
information in violation of any applicable securities laws.
11.17 Statutory
Disclaimer. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES, AND
COMMITMENTS MADE BY A LENDER AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER
CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER’S RESIDENCE, MUST BE IN WRITING, EXPRESS
CONSIDERATION, AND BE SIGNED BY THE LENDER TO BE ENFORCEABLE.
[Signature
Page to Follow]
Exhibit
10.1 - Page 39 of 43
THIS WRITTEN LOAN AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
ZYNEX,
INC.
|
|
By:
/s/ Xxxxxx Xxxxxxxxx
|
|
Name: Xxxxxx
Xxxxxxxxx
|
|
Title: Chief
Executive Officer and President
|
|
ZYNEX,
MEDICAL INC., f/d/b/a Stroke Recovery Systems
|
|
By:
/s/ Xxxxxx Xxxxxxxxx
|
|
Name: Xxxxxx
Xxxxxxxxx
|
|
Title: President
|
|
MARQUETTE
BUSINESS CREDIT, INC., d/b/a MARQUETTE HEALTHCARE FINANCE
|
|
By:
/s/ Xxxxxxxx
Xxxxxxxxxx
|
|
Name: Xxxxxxxx
Xxxxxxxxxx
|
|
Title: Senior
Vice President
|
Exhibit
10.1 - Page 40 of 43
Schedule
A
Supplemental
Terms and Conditions
Facility
Limit:
|
$3,000,000
|
||
Margin:
|
2.5%
|
||
Default
Rate:
|
3.0%
above the Interest Rate (i.e., Base Rate plus Margin).
|
||
Concentration
Limit*:
|
N/A
|
||
Advance
Rate on Eligible Accounts*:
|
85%
of Eligible Accounts less than 120 days from the invoice
date;
Account
debtors with 50% or more of their total Account balance aged beyond 120
days are ineligible, except for Medicare and Anthem Blue
Cross.
|
||
NCV
(by Account Debtor type)*
|
|||
Medicare
|
26%
|
||
Commercial
|
36%
|
||
Unlitigated
Workers Compensation
|
36%
|
||
Self-pay
|
0%
|
||
Reserve
(initial amount)*:
|
$0.00
|
||
Origination
Fee:
|
1.5%
of the Facility Limit ($45,000) due upon execution of this
Agreement.
|
||
Termination
Date:
|
3
years from the Closing Date
|
||
Minimum
Facility Availability as of the Closing Date after giving effect to the
first Advance of the Loan and the Reserve established by
Lender:
|
$150,000.
|
||
Minimum
EBITDA
|
Borrower’s
Minimum EBITDA (on a trailing twelve-month basis) as of each quarterly
reporting period shall be as set forth below:
9/30/08: $7,800,000
12/31/08: $9,600,000
3/31/09: $11,100,000
6/30/09: $12,500,000
9/30/09: $13,800,000
12/31/09
and thereafter: $15,100,000
|
||
Minimum
Debt Service Coverage Ratio
|
From
9/30/08 and thereafter, Borrower’s Minimum Current Ratio shall be at least
3.0 to 1.0, measured on a quarterly basis.
|
Exhibit
10.1 - Page 41 of 43
Minimum
Current Ratio
|
From
9/30/08 and thereafter, Borrower’s Minimum Current Ratio shall be at least
1.5 to 1.0, measured on a quarterly basis.
|
||
Capital
Expenditures:
|
Borrower
shall not, directly or indirectly, make or incur (i) unfinanced Capital
Expenditures which exceed, in the aggregate, $600,000 in any fiscal year,
or (ii) financed Capital Expenditures which exceed, in the aggregate,
$800,000 in any fiscal year, exclusive of amounts Borrower expends for
rental units that are rented to patients by Borrower.
|
||
Maximum
outstanding principal purchase money Indebtedness to finance, or provide
the funds for, the acquisition of assets (used for the calculation of
Permitted Indebtedness):
|
Total
purchase money Indebtedness is limited in all respects in accordance with
the provisions of the Agreement related to Capital
Expenditures. Purchase money Indebtedness other than Capital
Expenditures without the prior consent of Lender is
prohibited.
|
||
Threshold
for notice for amounts in dispute as set forth in Section 6.3(a).
|
$5,000
|
||
Threshold
for notice with respect to returns and credits as set forth in Section 6.3(b).
|
$25,000
|
||
Account
reduction limit as set forth in Section
6.3(c).
|
$5,000
with respect to a single account
$25,000
in the aggregate in any fiscal year
|
||
Cut-Off
Date:
|
120
days after the date of invoice.
|
||
Cross-Age
Percentage*:
|
50%
of total balance due from any insurance company that is aged beyond 120
days with the exception of Medicare and Anthem Blue Cross.
|
||
Annual
Facility Fee:
|
None
|
Exhibit
10.1 - Page 42 of 43
Schedule
A (continued)
Supplemental
Terms and Conditions
Early
Termination Fee:
|
3%
of the Facility Limit prior to the first annual anniversary of the Closing
Date; 2% of the Facility Limit at anytime from the first anniversary to
the second annual anniversary of the Closing Date: and 1% at anytime from
the second anniversary to the day prior to the Termination Date of the
Loan.
|
||
Unused
Line Fee:
|
0.5%
per annum payable monthly in arrears on the first day of each month,
calculated on the difference between the average daily balance and the
total Facility Limit
|
||
Collateral
Monitoring Fee:
|
$1,500
per month, payable monthly in arrears on the first day of each
month.
|
||
Collection
Clearance Days:
|
3
business days clearance on all items deposited into all Lockbox
Accounts.
|
||
Over
Advance Fee:
|
$TBD
|
||
Irregular
Advance Request Fee:
|
1%
of the amount of Borrower’s Advance Request not submitted in conformance
with the requirements of this Agreement.
|
||
Closing
and legal fees:
|
All
closing and legal fees incurred by Lender in connection with the Loan and
the Agreement.
|
||
Audit
Fee:
|
In
the event third-party auditors conduct the audit: actual audit fees
incurred plus all out of pocket expenses.
In
the event Lender’s auditors conduct the audit: $1,000 per day, per
auditor, plus all out of pocket expenses.
|
||
Mailing
Charges:
|
All
costs and expenses of Lender.
|
||
Wire
Transfer Fees:
|
$20.00
per wire
|
||
Waiver
Fee:
|
$TBD
|
||
Termination
Reserve
|
$10,000
|
* Subject
to change from time to time in Lender’s sole discretion.
Exhibit 10.1 - Page 43 of 43