Loan and Security Agreement between Silicon Valley Bank and Zynex Medical, Inc. and Zynex Medical Holdings, Inc.

Summary

This agreement is between Silicon Valley Bank and Zynex Medical, Inc. and Zynex Medical Holdings, Inc. It outlines the terms under which the bank will provide a term loan to the borrowers, including repayment in 36 monthly installments, interest rates, and conditions for loan disbursement. The agreement also grants the bank a security interest in the borrowers' assets, sets out financial and operational covenants, and details remedies in case of default. The contract includes standard provisions on notices, waivers, and legal compliance.

EX-10.1 2 zynex8kex101_1062005.txt AGREEMENT Exhibit 10.1 LOAN AND SECURITY AGREEMENT ZYNEX MEDICAL, INC. AND ZYNEX MEDICAL HOLDINGS, INC. TABLE OF CONTENTS 1 ACCOUNTING AND OTHER TERMS......................................4 -------------------------- 2 LOAN AND TERMS OF PAYMENT.......................................4 ------------------------- 2.1 Promise to Pay.........................................4 2.2 Interest Rate, Payments. ..............................4 2.3 Fees...................................................5 2.4 Additional Costs.......................................5 3 CONDITIONS OF LOANS.............................................5 --------------------- 3.1 Conditions Precedent to Initial Credit Extension........5 4 CREATION OF SECURITY INTEREST...................................5 ----------------------------- 4.1 Grant of Security Interest.............................5 4.2 Authorization of File..................................5 5 REPRESENTATIONS AND WARRANTIES..................................5 ------------------------------ 5.1 Due Organization and Authorization.....................5 5.2 Collateral.............................................6 5.3 Litigation.............................................6 5.4 No Material Adverse Change in Financial Statements.....6 5.5 Solvency...............................................6 5.6 Regulatory Compliance..................................6 5.7 Investments in Subsidiaries............................7 5.8 Full Disclosure........................................7 6 AFFIRMATIVE COVENANTS...........................................7 --------------------- 6.1 Government Compliance..................................7 6.2 Financial Statements, Reports, Certificates............7 6.3 Inventory; Returns.....................................8 6.4 Taxes........ ............... .........................8 6.5 Insurance..............................................8 6.6 Primary Accounts.......................................8 6.7 Financial Covenants....................................9 6.8 Registration of Intellectual Property Rights...........9 6.9 Further Assurances.....................................9 7 NEGATIVE COVENANTS..............................................9 ------------------ 7.1 Dispositions...........................................9 7.2 Changes in Business, Ownership, Management or Locations of Collateral...............................10 7.3 Mergers or Acquisitions...............................10 7.4 Indebtedness..........................................10 7.5 Encumbrance...........................................10 7.6 Distributions; Investments............................10 7.7 Transactions with Affiliates..........................10 7.8 Subordinated Debt.....................................10 7.9 Compliance............................................11 EVENTS OF DEFAULT..............................................11 8 ----------------- 8.1 Payment Default.......................................11 8.2 Covenant Default......................................11 8.3 Material Adverse Change...............................11 2 Attachment.....................................................11 Insolvency.....................................................12 Other Agreements...............................................12 Judgments......................................................12 Misrepresentations. ...........................................12 Guaranty.......................................................12 9 BANK'S RIGHTS AND REMEDIES.....................................12 --------------------------. 9.1 Rights and Remedies...................................12 9.2 Power of Attorney.....................................13 9.3 Bank Expenses.........................................13 9.4 Bank's Liability for Collateral.......................13 9.5 Remedies Cumulative...................................14 9.6 Demand Waiver.........................................14 10 NOTICES AND WAIVERS............................................14 ------------------- 10.1 Notices...............................................14 10.2 Subrogation and Similar Rights........................14 10.3 Waivers of Notice. ...................................15 10.4 Subrogation Defenses..................................15 10.5 Right to Settle, Release..............................15 11 CHOICE OF LAW. VENUE AND JURY TRIAL WAIVER.....................15 ------------------------------------------ 12 GENERAL Provisions.............................................16 ------------------ 12.1 Successors and Assigns................................16 12.2 Indemnification.......................................16 12.3 Time of Essence.......................................16 12.4 Severability of Provision.............................16 12.5 Amendments in Writing, Integration....................16 12.6 Counterparts..........................................16 12.7 Survival..............................................17 12.8 Confidentiality.......................................17 12.9 Attorneys' Fees, Costs and Expenses...................17 13 DEFINITIONS....................................................17 ------------ 13.1 Definitions...........................................17 3 This LOAN AND SECURITY AGREEMENT (Agreement) dated as of the Effective Date, between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara, California 95054 with a loan production office located at 4410 Arapahoe Avenue, Suite 200, Boulder, Colorado 80303 and ZYNEX MEDICAL, INC. and ZYNEX MEDICAL HOLDINGS, INC. Jointly and severally, "Borrower") provides the terms on which Bank will lend to Borrower and Borrower will repay Bank. The parties agree as follows: 1. ACCOUNTING AND OTHER TERMS -------------------------- Accounting terms not defined in this Agreement will be construed following GAAP. Calculations and determinations must be made following GAAP. The term "financial statements" includes the notes and schedules. The terms "including" and "includes" always mean "including (or includes) without limitation," in this or any Loan Document. 2. LOAN AND TERMS OF PAYMENT ------------------------- 2.1 Promise to Pay. Borrower promises to pay Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the Credit Extensions. 2.1.1 Term Loan. (a) Bank will make a Tern Loan available to Borrower to be advanced on the Effective Date. (b) Borrower will pay 36 equal installments of principal and interest (the "Term Loan Payment"). Each Term Loan Payment is payable on the 1st of each month, beginning November 1, 2005, during the term of the loan. Borrower's final Term Loan Payment, due on October 1, 2008, includes all outstanding Term Loan principal and accrued interest. (c) Bank's obligation to lend the undisbursed portion of the Obligations will terminate if, in Bank's sole discretion, there has been a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations, or there has been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement. 2.2 Interest Rate, Payments. (a) Interest Rate. The Term Loan accrues interest at a per annum rate equal to the Basic Rate. After an Event of Default, Obligations accrue interest at 5 percent above the rate effective immediately before the Event of Default Interest is computed on a 360 day year for the actual number of days elapsed. (b) Payments. Bank may debit any of Borrower's deposit accounts including Account Number for principal and interest payments owing or any amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits Borrower's accounts. These debits are not a set-off. Payments received after 12:00 noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional interest shall accrue. 4 2.3 Fees. Borrower will pay: (a) Facility Fee. A fully earned, non-refundable Facility Fee of $2,500 due on the Effective Date; and (b) Bank Expenses. All Bank Expenses (including reasonable attorneys' fees and reasonable expenses) incurred through and after the date of this Agreement, are payable when due. 2.4 Additional Costs. If any law or regulation increases Bank's costs or reduces its income for any loan, Borrower will pay the increase in cost or reduction in income or additional expense. 3 CONDITIONS OF LOANS ------------------- 3.1 Conditions Precedent to Initial Credit Extension. Bank's obligation to make the initial Credit Extension is subject to the condition precedent that it receives the agreements, documents and fees it requires. 4 CREATION OF SECURITY INTEREST ----------------------------- 4.1 Grant of Security Interest. Borrower grants Bank a continuing security interest in all presently existing and later acquired Collateral to secure all Obligations and performance of each of Borrower's duties under the Loan Documents. Except for Permitted Liens, any security interest will be a first priority security interest in the Collateral. If this Agreement is terminated, Bank's lien and security interest in the Collateral will continue until Borrower fully satisfies its Obligations. If Borrower shall at any time, acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the brief details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to Bank. 4.2 Authorization of File. Borrower authorizes Bank to file financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to perfect or protect Bank's interest in the Collateral. 5 REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as follows: 5.1 Due Organization and Authorization. Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. Except as disclosed in Borrower's Form 10-K Report for the year ended December 31, 2004 which has been delivered to Bank on or prior to the Effective Date, Borrower has not changed its 5 state of formation or its organizational structure or type or any organizational number (if any) assigned by its jurisdiction of formation. The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower's formation documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change. 5.2 Collateral. Borrower has good title to the Collateral, free of Liens except Permitted Liens or Borrower has Rights to each asset that is Collateral. Borrower has no other deposit account, other than the deposit accounts described in the Schedule. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. The Collateral is not in the possession of any third party bailee (such as at a warehouse). In the event that Borrower, after the date hereof, intends to store or otherwise deliver the Collateral to such a bailee, then Borrower will receive the prior written consent of Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for the benefit of Bank. All Inventory is in all material respects of good and marketable quality, free from material defects. Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted to its customers in the ordinary course of business. Each Patent is valid and enforceable and no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property violates the rights of any third party, except to the extent such claim could not reasonably be expected to cause a Material Adverse Change. 5.3 Litigation. Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers, threatened by or against Borrower or any Subsidiary in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change. 5.4 No Material Adverse Change in Financial Statements. All consolidated financial statements for Borrower, and any Subsidiary, delivered to Bank fairly present in all material respects Borrower's consolidated financial condition and Borrower's consolidated results of operations. There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent financial statements submitted to Bank. 5.5 Solvency. The fair salable value of Borrower's assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; the Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. 5.6 Regulatory Compliance. Borrower is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. 6 Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower's or any Subsidiary's properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 5.7 Investments In Subsidiaries. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 5.8 Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank (taken together with all such written certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading. It being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results. 6 AFFIRMATIVE COVENANTS --------------------- Borrower will do all of the following for so long as Bank has an obligation to lend, or there are outstanding Obligations: 6.1 Government Compliance. Borrower will maintain its and all Subsidiaries' legal existence and good standing in its jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower's business or operations. Borrower will comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change. 6.2 Financial Statements, Reports, Certificates. (a) Borrower will deliver to Bank: (Q as soon as available, but no later than 30 days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as available, but no later than 180 days after the last day of Borrower's fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an opinion which is unqualified or otherwise consented to by Bank on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank; (Iii) within 5 days of filing, copies of all statements, reports and notices made available to Borrower's security holders or to any holders of Subordinated Debt and all reports on Form 1o.K, 10-0 and 8-K filed with the Securities and Exchange Commission; (iv) a prompt report of any legal actions pending or threatened against 7 Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $100,000 or more; (v) budgets, sales projections, operating plans or other financial information Bank reasonably requests: and (vi) prompt notice of any material change in the composition of the Intellectual Property, including any subsequent ownership right of Borrower in or to any Copyright, Patent or Trademark not shown in any intellectual property security agreement between Borrower and Bank or knowledge of an event that materially adversely affects the value of the Intellectual Property. (b) Within 30 days after the last day of each month, Borrower will deliver to Bank aged listings of accounts receivable and accounts payable. (c) Within 30 days after the last day of each month, Borrower will deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in the form of Exhibit C. (d) Allow Bank to audit Borrower's Collateral at Borrower's expense. Such audits will be conducted only at such times as an Event of Default has occurred and is continuing. 6.3 Inventory; Returns. Borrower will keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors will follow Borrower's customary practices as they exist at execution of this Agreement. Borrower must promptly notify Bank of all returns, recoveries. disputes and claims that involve more than $50,000. 6.4 Taxes. Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments, unless contested in good faith and for which Borrower maintains adequate reserves in accordance with GAAP and will deliver to Bank, on demand, appropriate certificates attesting to the payment. 6.5 Insurance. Borrower will keep its business and the Collateral insured for risks and in amounts, as Bank may reasonably request. Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank in Bank's reasonable discretion. All property policies will have a lender's loss payable endorsement showing Bank as an additional loss payee and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least 20 days notice before canceling its policy. At Bank's request, Borrower will deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy will, at Bank's option, be payable to Bank on account of the Obligations. 6.6 Primary Accounts. Borrower will maintain its primary banking relationship with Bank, which relationship shall include Borrower maintaining account balances in any accounts at or through Bank representing at least 85% of all account balances of Borrower at any financial institution. As to any deposit accounts and investment accounts maintained with another institution, within 60 days following the Effective Date, Borrower shall cause such institution to enter into a control agreement in form acceptable to Bank in its good faith business judgment in order to perfect Bank's first priority security interest in said deposit accounts and investment accounts. 8 6.7 Financial Covenants. Borrower will maintain as of the last day of each month: (i) Debt Service Coverage (measured on a roiling 3 month basis). A ratio of Borrower's consolidated earnings before interest expense, income taxes, depreciation, amortization of intangible assets and other non-cash charges made to Borrower's income, to principal and interest payments due on the outstanding Obligations, of at least 1.40 to 1.00, increasing to 1.75 to 1.00 beginning with the month ending June 30, 2006 and thereafter. (ii) liquidity Coverage (to be maintained at all times). A ratio of unrestricted cash held with Bank plus all Accounts (less Borrower's reserves for uncollectible Accounts), to outstanding Obligations, of at least 1.50 to 1.00. 6.8 Registration of Intellectual Property Rights. Borrower shall not register any Copyrights or Mask Works with the United States Copyright Office unless it: (i) has given at least fifteen (15) days' prior notice to Bank of its intent to register such Copyrights or Mask Works and has provided Bank with a copy of the application it intends to file with the United States Copyright Office (excluding exhibits thereto); (ii) executes a security agreement or such other documents as Bank may reasonably request in order to maintain the perfection and priority of Bank's security interest in the Copyrights proposed to be registered with the United States Copyright Office; and (iii) records such security documents with the United States Copyright Office contemporaneously with filing the Copyright application(s) with the United States Copyright Office. Borrower shall promptly provide to Bank a copy of the Copyright application(s) filed with the United States Copyright Office, together with evidence of the recording of the security documents necessary for Bank to maintain the perfection and priority of its security interest in such Copyrights or Mask Works. Borrower shall provide written notice to Bank of any application filed by Borrower in the United States Patent Trademark Office for a patent or to register a trademark or service mark within 30 days of any such filing. Borrower will (i) protect, defend and maintain the validity and enforceability of the Intellectual Property and promptly advise Bank in writing of material infringements and (ii) not allow any Intellectual Property to be abandoned, forfeited or dedicated to the public without Bank's written consent. 6.9 Further Assurances. Borrower will execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank's security interest in the Collateral or to effect the purposes of this Agreement. 7 NEGATIVE COVENANTS ------------------ For so long as Bank has an obligation to lend or there are any outstanding Obligations, Borrower shall not, without Bank's prior written consent (which shall be a matter of its good faith business judgment), do any of the following: 7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (i) of Inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; (iii) of worn-out or obsolete Equipment; or (iv) other Equipment no longer used by Borrower, which value does not exceed $25,000 in any calendar year. 9 7.2 Changes In Business, Ownership, Management or Locations of Collateral. Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto or have a material change in its ownership or management of greater than 25% (other than by the sale of Borrower's equity securities in a public offering or to venture capital investors so long as Borrower identifies the venture capital investors prior to the closing of the investment). Borrower will not, without at least 30 days prior written notice, relocate its chief executive office, change its state of formation (including reincorporation), change its organizational number or name or add any new offices or business locations (such as warehouses) in which Borrower maintains or stores over $5,000 in Collateral. 7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, except where (i) no Event of Default has occurred and is continuing or would result from such action during the term of this Agreement and (Ii) such transaction would not result in a decrease of more than 25% of Tangible Net Worth. A Subsidiary may merge or consolidate Into another Subsidiary or into Borrower. 7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 7.5 Encumbrance. Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted here, subject to Permitted Liens. 7.6 Distributions; Investments. Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries to do so. Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock. 7.7 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a nonaffiliated Person. 7.8 Subordinated Debt Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any document relating to the Subordinated Debt without Bank's prior written consent. 10 7.9 Compliance. Become an "investment company" or a company controlled by an "investment company," under the Investment Company Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 8 EVENTS OF DEFAULT ------------------ 8.1 Anyone of the following is an Event of Default: Payment Default. If Borrower fails to pay any of the Obligations within 5 days after their due date, however, during such period no Credit Extensions will be made; 8.2 Covenant Default. (a) If Borrower fails to perform any obligation under Sections 6.2 or 6.7 or violates any of the covenants contained in Section 7 of this Agreement, or (b) If Borrower fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant, or agreement contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure such default within ten (10) Business Days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) Business Day period or cannot after diligent attempts by Borrower be cured within such ten (10) Business Day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed thirty (30) Business Days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default (provided that no Credit Extensions will be made during such cure period); 8.3 Material Adverse Change. If there (i) occurs a material adverse change in the business, operations, or financial condition of the Borrower, or (ii) is a material impairment of the prospect of repayment of any portion of the Obligations; or (iii) is a material impairment of the value or priority of Bank's security interests in the Collateral (the foregoing being defined as a "Material Adverse Change"). 8.4 Attachment. If any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in 10 days, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a material portion of Borrower's assets, or if a notice of lien, levy, or assessment is filed against any of Borrower's assets by any government agency and not paid within 10 days after Borrower receives notice. These are not 11 Events of Default if stayed or if a bond is posted pending contest by Borrower (but no Credit Extensions will be made during the cure period); 8.5 Insolvency. If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within 30 days (but no Credit Extensions will be made before any Insolvency Proceeding is dismissed); 8.6 Other Agreements. If there is a default in any agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness exceeding $100,000 or that could reasonably be expected to cause a Material Adverse Change; 8.7 Judgments. If a money judgment(s) in the aggregate of at least $50,000 is rendered against Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions will be made before the judgment is stayed or satisfied); 8.8 Misrepresentations. If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document; or 8.9 Guaranty. Any guaranty of any Obligations ceases for any reason to be in full force or any Guarantor does not perform any obligation under any guaranty of the Obligations, or any material misrepresentation or material misstatement exists now or later in any warranty or representation in any guaranty of the Obligations or in any certificate delivered to Bank in connection with the guaranty, or any circumstance described in Sections 8.4,8.5 or 8.7 occurs to any Guarantor. 9 BANK'S RIGHTS AND REMEDIES -------------------------- 9.1 Rights and Remedies. When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following: (a) Declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank); (b) Stop advancing money or extending credit for Borrower's benefit under this Agreement or under any other agreement between Borrower and Bank; (c) Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable; notify any Person owing Borrower money of Bank's security interest in the funds and verify the amount of the Account. Borrower must collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the account debtor, with proper endorsements for deposit; 12 (d) Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank requires and make it available as Bank designates. Bank may enter premises where the Collateral is located. take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank's rights or remedies; (e) Bank may place a "hold" on any account maintained with Bank and deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any control agreement or similar agreements providing control of any Collateral; (f) Apply to the Obligations any 0) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower; (g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name, trade secrets, trade names, Trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this Section, Borrower's rights under all licenses and all franchise agreements inure to Bank's benefit; and (h) Dispose of the Collateral according to the Code. 9.2 Power of Attorney. Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name on any checks or other forms of payment or security; (ii) sign Borrower's name on any invoice or bill of lading for any Account or drafts against account debtors, (iii) make, settle, and adjust all claims under Borrower's insurance policies; (iv) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and (v) transfer the Collateral into the name of Bank or a third party as the Code permits. Bank may exercise the power of attorney to sign Borrower's name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred. Bank's appointment as Borrower's attorney in fact, and all of Bank's rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank's obligation to provide Credit Extensions terminates. 9.3 Bank Expenses. If Borrower fails to pay any amount or furnish any required proof of payment to third persons, Bank may make all or part of the payment or obtain insurance policies required in Section 6.5, and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then applicable rate and secured by the Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank's waiver of any Event of Default. 9.4 Bank's Liability for Collateral. If Bank complies with reasonable banking practices and Section 9-207 of the Code, it is not liable for; (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. Except as provided above, Borrower bears all risk of loss, damage or destruction of the Collateral. 13 9.5 Remedies Cumulative. Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank's exercise of one right or remedy is not an election, and Bank's waiver of any Event of Default is not a continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given. 9.6 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments. chattel paper. and guarantees held by Bank on which Borrower is liable. 10 NOTICES AND WAIVERS ------------------- 10.1 Notices. Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service. certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses set forth below: If to Borrower Zynex Medical, Inc. 8100 South Park Way, Suite A-9 Littleton, CO 80120 Attn: Thomas Sandgaard and Chief Financial Officer FAX: 303 ###-###-#### and to Zynex Medical Holdings, Inc. 8100 South Park Way, Suite A-9 Littleton, CO 80120 Attn: Thomas Sandgaard and Chief Financial Officer FAX ###-###-#### If to Bank Silicon Valley Bank 4410 Arapahoe Avenue, Suite 200 Boulder. CO 80303 Attn: Kevin Grossman FAX: (303) 938-5900 10.2 Subrogation and Similar Rights. Notwithstanding any other provision of this Agreement or any other Loan Document, each Borrower Irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating the Borrower to the rights of Bank under the Loan Documents) to seek contribution, indemnification. or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by the Borrower with respect to the Obligations in connection with the Loan Documents or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by the Borrower with respect to the 14 Obligations in connection with the Loan Documents or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 10.2 shall be null and void. If any payment is made to a Borrower in contravention of this Section 10.2, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured. 10.3 Waivers of Notice. Each Borrower waives notice of acceptance hereof; notice of the existence, creation or acquisition of any of the Obligations; notice of an Event of Default; notice of the amount of the Obligations outstanding at any time; notice of intent to accelerate; notice of acceleration; notice of any adverse change in the financial condition of any other Borrower or of any other fact that might increase the Borrower's risk; presentment for payment; demand; protest and notice thereof as to any instrument; default; and all other notices and demands to which the Borrower would otherwise be entitled. Each Borrower waives any defense arising from any defense of any other Borrower, or by reason of the cessation from any cause whatsoever of the liability of any other Borrower. Bank's failure at any time to require strict performance by any Borrower of any provision of the Loan Documents shall not waive, alter or diminish any right of Bank thereafter to demand strict compliance and performance therewith. Nothing contained herein shall prevent Bank from foreclosing on the lien of any deed of trust, mortgage or other security instrument, or exercising any rights available thereunder, and the exercise of any such rights shall not constitute a legal or equitable discharge of any Borrower. Each Borrower also waives any defense arising from any act or omission of Bank that changes the scope of the Borrower's risks hereunder. Each Borrower hereby waives any right to assert against Bank any defense (legal or equitable), setoff, counterclaim, or claims that such Borrower individually may now or hereafter have against another Borrower or any other Person liable to Borrower with respect to the Obligations in any manner whatsoever. 10.4 Subrogation Defenses. Each Borrower waives the benefits, if any, of any statutory or common law rule that may permit a borrower to assert any defenses of a surety or guarantor, or that may give a borrower the right to require a senior creditor to marshal assets, and Borrower agrees that it shall not assert any such defenses or rights. 10.5 Right to Settle, Release. (a) The liability of each Borrower hereunder shall not be diminished by (i) any agreement, understanding or representation that any of the Obligations is or was to be guaranteed by another Person or secured by other property, or (Ii) any release or unenforceability. whether partial or total, or rights, if any, which Borrower may now or hereafter have against any other Person, including another Borrower, or property with respect to any of the Obligations. (b) Without notice to any Borrower and without affecting the liability of any Borrower hereunder, Bank may (i) compromise, settle, renew, extend the time for payment, change the manner or terms of payment, discharge the performance of, decline to enforce, or release all or any of the Obligations with respect to a Borrower, (ii) grant other indulgences to a Borrower in respect of the Obligations, (iii) modify in any manner any documents, relating to the Obligations with respect to a Borrower, (iv) release, surrender or exchange any deposits or other property securing the Obligations, whether pledged by a Borrower or any other Person, or (v) compromise, settle renew, or extend the time for payment, discharge the performance of, decline to enforce, or release all or any obligations of any guarantor, endorser or other Person who is now or may hereafter be liable with respect to any of the Obligations. 11 CHOICE OF LAW. VENUE AND JURY TRIAL WAIVER ------------------------------------------ 15 Colorado law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Denver County, Colorado. BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. initial here 12 GENERAL PROVISIONS ------------------ 12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights under it without Bank's prior written consent which may be granted or withheld in Bank's discretion. Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank's obligations, rights and benefits under this Agreement. 12.2 Indemnification. Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct. 12.3 Time of Essence. Time is of the essence for the performance of all obligations in this Agreement. 12.4 Severability of Provision. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 12.5 Amendments In Writing, Integration. All amendments to this Agreement must be in writing and signed by Borrower and Bank. This Agreement represents the entire agreement about this subject matter, and supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge into this Agreement and the Loan Documents. 12.6 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement. 16 12.7 Survival All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run. 12.8 Confidentiality . In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made (i) to Bank's subsidiaries or affiliates in connection with their business with Borrower, (ii) to prospective transferees or purchasers of any interest in the loans (provided, however, Bank shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this provision), (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank's examination or audit and (v) as Bank considers appropriate exercising remedies under this Agreement. Confidential information does not include information that either: (a) is in the public domain or in Bank's possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. 12.9 Attorneys' Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the prevailing party will be entitled to recover its reasonable attorneys' fees and other reasonable costs and expenses incurred, in addition to any other relief to which it may be entitled. 13 DEFINITIONS ----------- 13.1 Definitions. In this Agreement: "Accounts" are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and Borrower's Books relating to any of the foregoing, as such definition may be amended from time to time according to the Code. "Affiliate" of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person's senior executive officers, directors, and partners and, for any Person that is a limited liability company, that Person's managers and members. "Bank Expenses" are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys' fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings). "Basic Rate. is, as of the Effective Date, the per annum rate of interest equal to the sum of (a) the U.S. Treasury note yield to maturity for a term of 36 months as quoted in The Wall Street Journal on the Effective Date, plus (b) 375 basis points. "Borrower's Books" are all Borrower's books and records including ledgers, records regarding Borrower's assets or liabilities, the Co/lateral, business operations or financial condition and all computer programs or discs or any equipment containing the information. 17 "Business Day" is any day that is not a Saturday, Sunday or a day on which the Bank is closed. "Code" is the Colorado Uniform Commercial Code, as applicable. "Collateral" is the property described on Exhibit A. "Contingent Obligation" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement. "Copyrights" are all copyright rights, applications or registrations and like protections in each work or authorship or derivative work, whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held. "Credit Extension" is each Term Loan or any other extension of credit by Bank for Borrower's benefit. "Effective Date. is the date Bank executes this Agreement. "Equipment' is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest. "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations. "GAAP" is generally accepted accounting principles. "Guarantor" is any present or future guarantor of the Obligations, including Thomas Sandgaard. "Indebtedness. is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations. "Insolvency Proceeding" are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. "Intellectual Property" is all of Borrower's: (a) Copyrights, Trademarks, Patents, and Mask Works including amendments, renewals, extensions, and all licenses or other rights to use and all license fees and royalties from the use; 18 (b) Any trade secrets and any intellectual property rights in computer software and computer software products now or later existing, created, acquired or held; (c) All design rights which may be available to Borrower now or later created, acquired or held; (d) Any claims for damages (past, present or future) for infringement of any of the rights above, with the right, but not the obligation, to sue and collect damages for use or infringement of the intellectual property rights above; All proceeds and products of the foregoing, including all insurance, indemnity or warranty payments. "Inventory" is present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of Borrower, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or disposition of any of the foregoing and any documents of title. . "Investment" is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person. "Lien" is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. "Loan Documents" are, collectively, this Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated. "Mask Works" are all mask works or similar rights available for the protection of semiconductor chips, now owned or later acquired. "Material Adverse Change" is defined in Section 8.3. "Obligations" are debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, including cash management services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank. "Patents" are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. "Permitted Indebtedness" is: (a) Borrower's indebtedness to Bank under this Agreement or any other Loan Document; (b) Indebtedness existing on the Effective Date and shown on the Schedule; (c) Subordinated Debt; (d) Indebtedness to trade creditors incurred in the ordinary course of business; and (e) Indebtedness secured by Permitted Liens. 19 "Permitted Investments" are: (a) Investments shown on the Schedule and existing on the Effective Date; and (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii) Bank's certificates of deposit issued maturing no more than 1 year after issue. "Permitted Liens" are: (a) Liens existing on the Effective Date and shown on the Schedule or arising under this Agreement or other Loan Documents; (b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, !f they have no priority over any of Bank's security interests; (c) Purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing the acquisition of the Equipment, or (ii) existing on equipment when acquired, !f the Lien is confined to the property and improvements and the proceeds of the equipment; (d) Licenses or sublicenses granted in the ordinary course of Borrower's business and any interest or title of a licensor or under any license or sublicense, !f the licenses and sublicenses permit granting Bank a security interest; (e) Leases or subleases granted in the ordinary course of Borrower's business, including in connection with Borrower's leased premises or leased property; (f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase. "Person" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. "Responsible Officer" is each of the Chief Executive Officer, the President. the Chief Financial Officer and the Controller of Borrower. "Rights", as applied to the Collateral, means the Borrower's rights and interests in, and powers with respect to, that Collateral, whatever the nature of those rights, interests and powers and, in any event, including Borrower's power to transfer rights in such Collateral to Bank. "Schedule" is any attached schedule of exceptions. "Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's indebtedness owed to Bank and which is reflected in a written agreement in a manner and form acceptable to Bank and approved by Bank in writing. 20 "Subsidiary" is for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person. "Tangible Net Worth" is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b) intangible items such as unamortized debt discount and expense, patents, trade and service marks and names, copyrights and research and development expenses except prepaid expenses, and (c) reserves not already deducted from assets, and (ii) Total Liabilities. "Term Loan" a loan of $400,000. "Term Loan Maturity Date" is October 1, 2008. "Total Liabilities" is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower's consolidated balance sheet, including all Indebtedness, and current portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt. "Trademarks" are trademark and service mark rights, registered or not, applications to register and registrations and like protections, and the entire goodwill of the business of Assignor connected with the trademarks. BORROWER: ZYNEX MEDICAL, INC. By: /s/ Thomas Sandgaard ---------------------------------------- Title: President and Chief Executive Officer ---------------------------------------- ZYNEX MEDICAL HOLDINGS, INC. By: /s/ Thomas Sandgaard ---------------------------------------- Title: President and Chief Executive Officer ---------------------------------------- BANK: SILICON VALLEY BANK By: /s/ Chris Ennis ---------------------------------------- Title: Relationship Manager ---------------------------------------- Effective Date: September 29, 2005 ---------------------------------------- 21 EXHIBIT A --------- The Collateral consists of all of Borrower's right, title and interest in and to the following personal property: All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and all Borrower's Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing. A-1 EXHIBIT B ---------- LOAN PAYMENT/ADVANCE REQUEST FORM DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T. Fax To: Date: ------------------------------------------------- ------------------- o LOAN PAYMENT: Zynex Medical. Inc. and Zynex Medical Holdings. Inc. (Borrower) --------------------------------------------------------------- From Account # To Account # ------------------- ----------------------- (Deposit Account #) (Loan Account #) Principal $ and/or Interest $ --------------------------- -------------------- All Borrower's representation and warranties in the Loan and Security Agreement are true. correct and complete in all material respects up to and Including the date of the transfer request for a loan payment. but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that date: Authorized Signature: Phone Number: -------------------------- ------------------- ________________________________________________________________________________ o LOAN ADVANCE: Complete Outgoing Wire Request section below If all or a portion of the funds from this loan advance are for an outgoing wire. From Account # To Account # ------------------------ ------------------------ (Loan Account #) (Deposit Account #) Amount of Advance $ ------------------- All Borrower's representation and warranties in the Loan and Security Agreement are true, correct and complete in all material respects up to and including the date of the transfer request for an advance, but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that date: Authorized Signature: Phone Number: -------------------------- ------------------- ________________________________________________________________________________ OUTGOING WIRE REQUEST Complete only if all or a portion of funds from the loan advance above are to be wired. Deadline for same day processing is 12:00pm, P.S.T. Beneficiary Name: Amount of Wire: $ --------------------- -------------------- Beneficiary Bank: Account Number: --------------------- -------------------- City and State: --------------------------- Beneficiary Bank Transit (ABA) #: Beneficiary Bank Code - - - - - (Swift, Sort, Chip, etc.): ----------- (For International Wire Only) Intermediary Bank: Transit (ABA) #: --------------------- -------------------- For Further Credit to: --------------------------------------------------------- Special Instruction: --------------------------------------------------------- By signing below. I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us). Authorized Signature: 2nd Signature (If Required): --------------- ------------- Print Name/Title: Print Name/Title: --------------- ------------- Telephone # Telephone # ----------------- ----------------- ________________________________________________________________________________ EXHIBIT C COMPLIANCE CERTIFICATE TO: SILICON VALLEY BANK FROM: ZYNEX MEDICAL, INC. AND ZYNEX MEDICAL HOLDINGS, INC. The undersigned Responsible officers of Zynex Medical, Inc. and Zynex Medical Holdings, Inc. Jointly and severally, "Borrower") certify that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for the period ending ____________ with all required covenants except as noted below and (ii) all representations and warranties in the Agreement are true and correct in all material respects on this date. In addition, the undersigned certifies that Borrower, and each Subsidiary, has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Attached are the required documents supporting the certification. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Responsible Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Please indicate compliance status by circling Yes/No under "Complies" column. Reporting Covenant Required Complies ------------------ -------- -------- Monthly financial statements + CC Monthly within 30 days Yes No Annual (Audited) FYE within 180 days Yes No 10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No AR & AP Monthly within 30 days Yes No Aging Financial Covenant Required Actual Complies ------------------ -------- ------ -------- Maintain on a Monthly Basis: Minimum Debt Service * ___ 1.00 Yes No Minimum Liquidity Coverage ** Yes No * (measured on a rolling 3 month basis). A ratio of EBITDA to principal and interest payments due on the outstanding Obligations, of at least 1.40 to 1.00, increasing to 1.75 to 1.00 beginning with the month ending June 30, 2006 and thereafter. ** (to be maintained at all times) A ratio of unrestricted cash held with Bank plus all Accounts (less Borrower's reserves for uncollectible Accounts), to outstanding Obligations, of at least 1.50 to 1.00. Have there been updates to Borrower's intellectual property? Borrower only has deposit accounts located at the following institutions: Yes / No ------------------------ Comments Regarding Exceptions: See Attached. ________________________________________ BANK USE ONLY Received by: Sincerely, ---------------------------- AUTHORIZED SIGNER Date: ----------------------------------- ZYNEX MEDICAL, INC. - ------------------------------------ Verified: SIGNATURE ------------------------------- AUTHORIZED SIGNER - ------------------------------------ Date: TITLE ------------------------------------ Compliance Status: Yes No - ------------------------------------ ________________________________________ DATE ZYNEX MEDICAL HOLDINGS, INC. - ------------------------------------ SIGNATURE - ------------------------------------ TITLE - ------------------------------------ DATE 2