-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FFsv5bxD0TqIqfcrtZCpvfRX5W5H3MCEmLTXGMguceVlQ9d2cInsIpM5pnHtCRjM 7Zgt3Doc37gDERts+i1Awg== 0001079974-05-000363.txt : 20051007 0001079974-05-000363.hdr.sgml : 20051007 20051007123732 ACCESSION NUMBER: 0001079974-05-000363 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20051005 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant FILED AS OF DATE: 20051007 DATE AS OF CHANGE: 20051007 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZYNEX MEDICAL HOLDINGS INC CENTRAL INDEX KEY: 0000846475 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 870403828 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-26787-D FILM NUMBER: 051128934 BUSINESS ADDRESS: STREET 1: 8100 SOUTH PARK WAY STREET 2: SUITE A-9 CITY: LITTLETON STATE: CO ZIP: 80120 BUSINESS PHONE: (303) 703-4906 MAIL ADDRESS: STREET 1: 8100 SOUTH PARK WAY STREET 2: SUITE A-9 CITY: LITTLETON STATE: CO ZIP: 80120 FORMER COMPANY: FORMER CONFORMED NAME: ZYNEX MEDICAL HOLDINGS INC DATE OF NAME CHANGE: 20040120 FORMER COMPANY: FORMER CONFORMED NAME: FOX RIVER HOLDINGS INC DATE OF NAME CHANGE: 20031126 FORMER COMPANY: FORMER CONFORMED NAME: ARIZONA VENTURES INC DATE OF NAME CHANGE: 20030115 8-K 1 zynex8k_1062005.txt REPORT 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 5, 2005 --------------- Zynex Medical Holdings, Inc. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Nevada 33-26787-D 90-0214497 ------------------ -------------- --------------------- (State or other (Commission (I.R.S. Employer jurisdiction File Number) Identification No.) of incorporation) 8100 South Park Way, Suite A-9, Littleton, CO 80120 --------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number: (303) 703-4906 -------------- Total pages: 2 --- Exhibit index at: 2 --- Item 1.01 Entry into a Material Definitive Agreement Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant On October 5, 2005 Zynex Medical Holdings, Inc. and Zynex Medical, Inc (collectively "Zynex") received $400,000 under a three year term loan agreement with Silicon Valley Bank, Santa Clara, California and Boulder. Colorado (the "Lender"). The loan bears interest at a per annum fixed rate of 7.84%. The loan is guaranteed by Zynex Chairman, President and Chief Executive Officer Thomas Sandgaard and is collateralized by a first perfected security interest in accounts, inventory, chattel paper, equipment, fixtures, general intangibles, including intellectual property and other assets. Registrant will repay the loan in 36 equal monthly payments of principal and interest. The loan includes financial covenants for minimum liquidity and minimum debt service coverage. In connection with the loan, the Lender was granted a seven-year warrant to purchase 50,000 shares of Zynex Common Stock at an exercise price of $0.71 per share. The following exhibits are filed with this Report: Exhibit No. Document ----------- --------------------------------------------- 10.1 Loan and Security Agreement among Zynex Medical Holdings, Inc, Zynex Medical, Inc and Silicon Valley Bank, dated September 29, 2005. 10.2 Warrant to Purchase Stock from Zynex Medical Holdings, Inc. to Silicon Valley Bank. 10.3 Unconditional Guaranty by Thomas Sandgaard for Silicon Valley Bank, dated September 29, 2005. 99.1 Press Release dated October 5, 2005. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Zynex Medical Holdings, Inc. (Registrant) Date: October 7, 2005 By: /s/ Thomas Sandgaard ------------------------------------- Thomas Sandgaard President and Chief Executive Officer EXHIBIT INDEX Exhibit No. Document ----------- ------------------------------------------------------ 10.1 Loan and Security Agreement among Zynex Medical Holdings, Inc, Zynex Medical, Inc and Silicon Valley Bank, dated September 29, 2005. 10.2 Warrant to Purchase Stock from Zynex Medical Holdings, Inc. to Silicon Valley Bank. 10.3 Unconditional Guaranty by Thomas Sandgaard for Silicon Valley Bank, dated September 29, 2005. 99.1 Press Release dated October 6. Page 2 of 2 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: 303-347-9153 and to Zynex Medical Holdings, Inc. 8100 South Park Way, Suite A-9 Littleton, CO 80120 Attn: Thomas Sandgaard and Chief Financial Officer FAX:303-347-9153 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 EX-10.2 3 zynex8kex102_1062005.txt WARRANT Exhibit 10.2 THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE (Y)ACT"), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION. WARRANT TO PURCHASE STOCK Company: Zynex Medical Holdings, Inc., a Nevada corporation Number of Shares: 50,000 Class of Stock: Series Common Warrant Price: $0.71 per share Issue Date: Is the Warrant Effective Date, which is the date in which the Holder executes this Warrant Expiration Date: The 7th anniversary after the Issue Date THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.OO and for other good and valuable consideration, SILICON VALLEY BANK ("Holder") is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the "Shares") of Zynex Medical, Inc., a Colorado corporation (the "Company") at the Warrant Price, all as set forth above and as adjusted pursuant 10 Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. ARTICLE 1. EXERCISE. --------- 1.1 Method of Exercise. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Article 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for 'the Shares being purchased. 1.2 Conversion Right. In lieu of exercising this Warrant as specified in Article 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant. to Article 1.3. 1.3 Fair Market Value. If the Company's common stock is traded in a public market and the Shares are common stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company's initial public offering, the "price to public" per share price specified in the final prospectus relating to such offering). If the Company's common stock is traded in a public market and the Shares are preferred stock, the fair market value of a Share shall be the closing price of a share of the Company's common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or, in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company's initial public offering, the initial "price to public" per share price specified in the final prospectus relating to such offering), in both cases, multiplied by the number of shares of the Company's common stock into which a Share is convertible. If the Company's common stock is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment. 1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has 'not expired, a new Warrant representing the Shares not so acquired. 1.5 Replacement of Warrants. On receipt Of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor. 1.6 Treatment of Warrant Upon Acquisition of Company. 1.6.1 "Acquisition". For the purpose of this Warrant, "Acquisition" means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holder of the Company's securities before the transaction, beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction., . 1.6.2 Treatment of Warrant at Acquisition. A) Upon the written request of the Company, Holder agrees-that, in the event of an Acquisition that is not an asset sale and in which the sole consideration is cash, either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide the Holder with written notice of its request relating to the foregoing (together with such reasonable information as the Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder, not less than ten (10) days prior to the closing of the proposed Acquisition. B) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is an "arms length" sale of all or substantially all of the Company's assets (and only its assets) to a third party that is not an Affiliate (as defined below) of the Company (a "True Asset Sale), either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will continue until the Expiration Date if the Company continues as a going concern following the closing of any such, True Asset Sale. The Company shall provide the Holder with written notice of its request relating to the .foregoing (together with such reasonable information as the Holder may request 'in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition. C) ,Upon the closing .of any Acquisition other than those particularly described in subsections (A) and (B) above, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion. of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly. As used herein "Affiliate" shall mean any person or entity that owns or controls directly or indirectly ten (10) percent or more of the stock of Company, any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person's or entity's officers, directors, joint ventures or partners, as applicable. ARTICLE 2. ADJUSTMENTS TO THE SHARES. -------------------------- 2.1 Stock Dividends. Splits. Etc. If the Company declares or pays a dividend' on the Shares payable in common stock, or other securities, then' upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification or otherwise into a greater number of shares or takes any other action which increase the amount of stock into which the Shares are convertible, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares are combined or consolidated, .,by reclassification or otherwise', into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased' 2.2 Reclassification. Exchange. Combinations or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for, the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company's Articles or Certificate (as applicable) of Incorporation upon the closing of a registered public offering of the Company's common stock. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation; adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events. 2.3 Intentionally Omitted. 2.4 No Impairment. The Company shall not, by amendment of its Articles or Certificate (as applicable) of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue,' or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder's rights under this Article against impairment. ' . 2.5 Fractional Shares. No fractional Shares shall be issuable upon exercise en conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share. ' 2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company shall promptly notify Holder in writing, and, at the Company's expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price. ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY. --------------------------------------------- 3.1 Representations and Warranties. The Company represents and warrants to the Holder as follows: ' (a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the average fair market value of the Shares as of the five trading days immediately prior to the date of this Warrant. (b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. 3.2 Notice of Certain Events. If the Company proposes at any time (a) to declare any dividend or distribution upon any of its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for sale any shares of the Company's capital stock (or other securities convertible into such capital stock), other than (i) pursuant to the Company's stock option or other compensatory plans, (ii) in connection with commercial credit arrangements or equipment financings, or (Hi) in connection with strategic transactions for purposes other than capital raising; (c) to effect any reclassification or recapitalization of any of its stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the Company's securities for cash, then, in connection with each such event, the Company shall give Holder: (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights. 3.3 Intentionally Omitted. 3.4 No Shareholder Rights. Except as provided in this Warrant, the Holder will not have .any rights as a shareholder of the Company until the exercise of this Warrant. ARTICLE 4. REPRESENTATIONS. WARRANTIES OF THE HOLDER. ------------------------------------------ The Holder represents and warrants to the Company as follows: 4.1 Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by the Holder will be acquired for investment for the Holder's account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that the Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares. 4.2 Disclosure of Information. The Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. The Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Holder or to which the Holder has access. 4.3 Investment Experience. The Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. The Holder has experience as an investor in securities of companies in the development stage and acknowledges that the Holder can bear the economic risk of such Holder's investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that the Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables the Holder to be aware of the character, business acumen and financial circumstances of such persons. 4.4 Accredited Investor Status. The Holder is an "accredited investor" within the meaning of Regulation D promulgated under the Act. 4.5 The Act. The Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption there from, which exemption depends upon, among other things, the bona fide nature of the Holder's investment intent as expressed herein. The Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. ARTICLE 5. MISCELLANEOUS. -------------- 5.1 Term: This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date. 5.2 Legends. This Warrant and the Shares (and the securities Issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form: THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE 5T A TE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION 5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to Holder's parent company, SVB Financial Group (formerly Silicon Valley Bancshares), or any other affiliate of Holder. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rile 144(f), and the Company is provided with a copy of-Holder's notice of proposed sale. 5.4 Transfer Procedure. Upon receipt by Holder of the executed Warrant, Holder will transfer all of this Warrant to Holder's parent company, SVB Financial Group, by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing Company with written notice, SVB Financial Group and any, subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded. 5.5 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such Holder from time to time. Effective upon receipt of the fully executed Warrant and the initial transfer described in Article 5.4 above, all notices to the Holder shall be addressed as follows until the Company receives notice of a change of address in connection. with a transfer or otherwise: SVB Financial Group Attn: Treasury Department 3003 Tasman Drive, HA 200 Santa Clara, CA 95054 Telephone: 408-654-7400 Facsimile: 408-496-2405 Notice to the Company shall be addressed as follows until the Holder receives notice of a change in address: Zynex Medical, Inc. 8100 South Park Way, Suite A-9 Littleton, CO 80120 Attn:____________________________________ (ADDRESS):_______________________________ Telephone:_______________________________ Facsimile:_______________________________ 5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. 5.7 Attorneys' Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney's fees. 5.8 Automatic Conversion Upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be converted pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such conversion to the Holder. 5.9 Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. 5.10 Governing Law. This Warrant shall be governed. by and construed in accordance with the laws of the State of California, 'without giving effect to its principles regarding conflicts of Jaw. "COMPANY" ZYNEX MEDICAL, INC. By: By: ----------------------------------- ------------------------------------- Name: Name: --------------------------------- ----------------------------------- (Print) (Print) Title: Chief Financial Title: Chairman of the Board, Officer, Secretary, Assistant President or Vice President Treasurer or Assistant Secretary "HOLDER" SILICON VALLEY BANK By: ----------------------------------- Name: --------------------------------- (Print) Title: -------------------------------- Warrant Effective Date: -------------- APPENDIX 1 NOTICE OF EXERCISE 1. Holder elects to purchase _________ shares of the Common/Series______ Preferred [strike one] Stock of Zynex Medical, Inc. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full. [or] 1. Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for _________ of the Shares covered by the Warrant. [Strike paragraph that does not apply.] 2. Please issue a certificate or certificates representing the shares in the name specified below: ---------------------------------------------- Holders Name ---------------------------------------------- ---------------------------------------------- (Address) 3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof. HOLDER: -------------------------------- By: -------------------------------- Name: -------------------------------- Title: -------------------------------- (Date): -------------------------------- APPENDIX 2 ASSIGNMENT ---------- For value received, Silicon Valley Bank hereby sells, assigns and transfers unto Name: SVB Financial Group Address: 3003 Tasman Drive (HA-200) Santa Clara, CA 95054 Tax lD: 91-1962278 that certain Warrant to Purchase Stock issued by _______________________ (the "Company"), on _________,200__ (the "Warrant") together with all rights, title and interest therein. SILICON VALLEY BANK By: -------------------------------- Name: -------------------------------- Title: -------------------------------- (Date): ------------------------- By its execution below. and for the benefit of the Company, SVB Financial Group makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof. SVB FINANCIAL GROUP By: -------------------------------- Name: -------------------------------- Title: -------------------------------- EX-10.3 4 zynex8kex103_1062005.txt GUARANTY UNCONDITIONAL GUARANTY ---------------------- This continuing Unconditional Guaranty ("Guaranty") is entered into as of September 29, 2005, by Thomas Sandgaard ("Guarantor"), in favor of Silicon Valley Bank ("Bank"). Recitals -------- A. Concurrently herewith, Bank and Zynex Medical, Inc., a Colorado corporation and Zynex Medical Holdings, Inc., a Nevada corporation (jointly and severally, 'Borrower"), are entering into that certain Loan and Security Agreement dated as of the Effective Date (as defined therein) (as amended, restated, or otherwise modified from time to time, the 'Loan Agreement") pursuant to which Bank has agreed to make certain advances of money and to extend certain financial accommodations to Borrower (collectively, the "Loans"), subject to the terms and conditions set forth therein. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement. B. In consideration of the agreement of Bank to make the loans to Borrower under the Loan Agreement, Guarantor is willing to guaranty the full payment and performance by Borrower of all of its obligations thereunder and under the other Loan Documents, all as further set forth herein. C. Guarantor is the chairman. president and CEO of Borrower and will obtain substantial direct and indirect benefit from the Loans made by Bank to Borrower under the Loan Agreement. Now, THEREFORE, to induce Bank to enter into the Loan Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound, Guarantor hereby represents, warrants, covenants and agrees as follows: Section 1. Guaranty. 1.1 Unconditional Guaranty of Payment In consideration of the foregoing, Guarantor hereby irrevocably, absolutely and unconditionally guarantees to Bank the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of all Obligations. Guarantor agrees that it shall execute such other documents or agreements and take such action as Bank shall reasonably request to effect the purposes of this Guaranty. 1.2 Separate Obligations. These obligations are independent of Borrower's obligations and separate actions may be brought against Guarantor (whether action is brought against Borrower or whether Borrower is joined in the action). Section 2. Representations and Warranties. Guarantor hereby represents and warrants that (a) Intentionally Omitted (b) The execution, delivery and performance by Guarantor of this Guaranty (i) do not contravene any law or any contractual restriction binding on or affecting Guarantor or by which Guarantor's property may be affected; (ii) do not require any authorization or approval or other action by, or any notice to or filing with, any governmental authority or any other Person under any indenture, mortgage, deed of trust, lease, agreement or other instrument to which Guarantor is a party or by which Guarantor or any of its property is bound, except such as have been obtained or made; and (iii) do not result in the imposition or creation of any Lien upon any property of Guarantor. (c) Guarantor is legally competent to execute, deliver and perform this Guaranty. 1 (d) This Guaranty is a valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as the enforceability thereof may be subject to or limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws relating to or affecting the rights of creditors generally. (e) There is no action, suit or proceeding affecting Guarantor pending or threatened before any court, arbitrator, or governmental authority, domestic or foreign, which may have a material adverse effect on the ability of Guarantor to perform its obligations under this Guaranty. (f) Guarantor's obligations hereunder are not subject to any offset or defense against Bank or Borrower of any kind. (g) Intentional1y Omitted. (h) The personal financial statements as of August 31,2005 for Guarantor and the U.S. federal and Colorado state 2004 tax returns of Guarantor, copies of which have been furnished to Bank, fairly present the financial position of Guarantor for the dates and periods purported to be covered thereby based upon actual and estimated fair market value, and there has been no material adverse change in the financial position of Guarantor since the date of such personal financial statements and tax returns. (i) Intentionally Omitted. (j) Intentionally Omitted. (k) The incurrence of Guarantor's obligations under this Guaranty will not cause Guarantor to (i) become insolvent; (ii) be left with unreasonably small capital for any business or transaction in which Guarantor is presently engaged or plans to be engaged; or (iii) be unable to pay its debts as such debts mature. (l) Guarantor covenants, warrants, and represents to Bank that all representations and warranties contained in this Guaranty shall be true at the time of Guarantor's execution of this Guaranty, and shall continue to be true so long as this Guaranty remains in effect. Guarantor expressly agrees that any misrepresentation or breach of any warranty whatsoever contained in this Guaranty shall be deemed material. Section 3. General Waivers. Guarantor waives: (a) Any right to require Bank to (i) proceed against Borrower or any other person; (ii) proceed against or exhaust any security or (ii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against Borrower or any security it holds (including the right to foreclose by judicial or nonjudicial sale) without affecting Guarantor's liability hereunder. (b) Any defenses from disability or other defense of Borrower or from the cessation of Borrowers liabilities. (c) Any setoff, defense or counterclaim against Bank. (d) Any defense from the absence, impairment or loss of any right of reimbursement or subrogation or any other rights against Borrower. Until Borrower's obligations to Bank have been paid, Guarantor has no right of subrogation or reimbursement or other rights against Borrower. (e) Any right to enforce any remedy that Bank has against Borrower. (f) Any rights to participate in any security held by Bank. 2 (g) Any demands for performance, notices of nonperformance or of new or additional indebtedness incurred by Borrower to Bank. Guarantor is responsible for being and keeping itself informed of Borrower's financial condition. (h) The benefit of any act or omission by Bank which directly or indirectly results in or aids the discharge of Borrower from any of the obligations by operation of law or otherwise. Section 4. Real Property Security Waiver. Guarantor acknowledges that, to the extent Guarantor has or may have rights of subrogation or reimbursement against Borrower for claims arising out of this Guaranty, those rights may be impaired or destroyed if Bank elects to proceed against any real property security of Borrower by non-judicial foreclosure. That impairment or destruction could, under certain judicial cases and based on equitable principles of estoppel give rise to a defense by Guarantor against its obligations under this Guaranty. Guarantor waives that defense and any others arising from Bank's election to pursue non-judicial foreclosure. Guarantor waives the benefits, if any, of any statutory or common law rule that may permit a subordinating creditor to assert any defenses of a surety or guarantor, or that may give the subordinating creditor the right to require a senior creditor to marshal assets, and Guarantor agrees that it shall not assert any such defenses or rights. Section 5. Reinstatement Notwithstanding any provision of the Loan Agreement to the contrary, the liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent that for any reason any payment by or on behalf of Guarantor or Borrower is rescinded or must be otherwise restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any such payment must be rescinded or restored shall be made by Bank in its sale discretion; provided, however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold harmless Bank from all costs and expenses (including, without limitation, reasonable attorneys' fees) of such litigation. To the extent any payment is rescinded or restored, Guarantor's obligations hereunder shall be revived in full force and effect without reduction or discharge for that payment Section 6. No Waiver; Amendments. No failure on the part of Bank to exercise, no delay in exercising and no course of dealing with respect to, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right The remedies herein provided are cumulative and not exclusive of any remedies provided by law. This Guaranty may not be amended or modified except by written agreement between Guarantor and Bank, and no consent or waiver hereunder shall be valid unless in writing and signed by Bank. Section 7. Compromise and Settlement. No compromise, Settlement, release, renewal, extension, indulgence, change in, waiver or modification of any of the Obligations or the release or discharge of Borrower from the performance of any of the Obligations shall release or discharge Guarantor from this Guaranty or the performance of the obligations hereunder. Section 8. Notice. Any notice or other communication herein required or permitted to be given shall be in writing and may be delivered in person or sent by facsimile transmission, overnight courier, or by United States mail, registered or certified. return receipt requested, postage prepaid and addressed as follows: If to Guarantor: Thomas Sandgaard 8100 South Park Way, Suite A-9 Littleton, CO 80120 Telephone No.: Facsimile No.: 303-347-9153 If to Bank: Silicon Valley Bank 3 4410 Arapahoe Avenue, Suite 200 Boulder, CO 80303 Attention: Chris Ennis Telephone No.:(303) 938-5900 Facsimile No.: (303) 938-0486 or at such other address as may be substituted by notice given as herein provided. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered or sent by facsimile transmission or three (3) Business Days after the same shall have been deposited in the United States mail. If sent by overnight courier service, the date of delivery shall be deemed to be the next Business Day after deposited with such service. Section 9. Entire Agreement This Guaranty constitutes and contains the entire agreement of the parties and supersedes any and all prior and contemporaneous agreements, negotiations, correspondence, understandings and communications between Guarantor and Bank, whether written or oral, respecting the subject matter hereof. Section 10. Severability. If any provision of this Guaranty is held to be unenforceable under applicable law for any reason, it shall be adjusted, if possible, rather than voided in order to achieve the intent of Guarantor and Bank to the extent possible. In any event, all other provisions of this Guaranty shall be deemed valid and enforceable to the fun extent possible under applicable law. Section 11. Subordination of Indebtedness. Any illdebtedness or other obligation of Borrower now or hereafter held by or owing to Guarantor is hereby suboordinated in time and right of payment to all obligations of Borrower to Bank, except as such indebtedness or other obligation is expressly permitted to be paid under the Credit Agreement; and such indebtedness of Borrower to Guarantor is assigned to Bank as security for this Guaranty, and if Bank SO requests shall be collected, enforced and received by Guarantor in trust for Bank and to be paid over to Bank on account of the Obligations of Borrower to Bank, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. Any notes now or hereafter evidencing such indebtedness of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Bank. Section 12. Business Debt Guarantor hereby represents and agrees that none of the Obligations and none of Guarantor's obligations hereunder are consumer debt, or were or shall be incurred by Borrower or Guarantor, respectively, primarily for personal, family or household purposes. Guarantor further agrees and represents that the Obligations are and shall be incurred by Borrower, and the obligations of Guarantor hereunder are and shall be incurred by Guarantor, for business and commercial purposes only. Section 13. Separate Property. Notwithstanding anything to the contrary contained herein, Guarantor hereby expressly agrees that recourse may be had against Guarantor's separate property for the payment and performance of Guarantor's obligations hereunder. Section 14. Payment of Expenses. Guarantor shall pay, promptly on demand, all Expenses incurred by Bank in defending and/or enforcing this Guaranty. For purposes hereof, "Expenses. shall mean costs and expenses (including reasonable fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel) for defending and/or enforcing this Guaranty (including those incurred in connection with appeals or proceedings by or against any Guarantor 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). Section 15. Assignment; Governing Law. This Guaranty shall be binding upon and inure to the benefit of Guarantor and Bank and their respective successors and assigns, except that Guarantor shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of 4 dank, which may be granted or withheld in Bank sole discretion. Any such purported assignment by Guarantor without Bank's written consent shall be void. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Colorado without regard to principles thereof regarding conflict of laws. Section 16. PERSONAL JURISDICTION. GUARANTOR HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OF THE AGREEMENTS, DOCUMENTS OR INSTRUMENTS DELIVERED IN CONNECTION HEREWITH MAY BE BROUGHT IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF COLORADO AS BANK MAY ELECT (PROVIDED THAT GUARANTOR ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE STATE OF COLORADO), AND, BY EXECUTION AND DELIVERY HEREOF, GUARANTOR ACCEPTS AND CONSENTS TO, Generally AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY BANK IN WRITING, WITH RESPECT TO ANY ACTION OR PROCEEDING BROUGHT BY GUARANTOR AGAINST BANK NOTHING HEREIN SHALL LIMIT THE RIGHT OF BANK TO BRING PROCEEDINGS AGAINST GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION. GUARANTOR HEREBY WAIVES, TO THE Full EXTENT PERMITTED BY LAW, ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS. Section 17. WAIVER OF JURY TRIAL EACH OF BANK AND GUARANTOR HEREBY WAIVES, TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, Expressly OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTY AND ANY RELATED INSTRUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE Mutual WAIVERS AND CERTIFICATIONS IN THIS SECTION 17. GUARANTOR /s/ Thomas Sandgaard ------------------------------------------------ Thomas Sandgaard 5 EX-99.1 5 zynex8kex991_1062005.txt PRESS RELEASE Exhibit 99.1 [[ZYNEX LOGO]] FOR IMMEDIATE RELEASE: ZYNEX MEDICAL ESTABLISHES $400,000 CREDIT FACILITY -------------------------------------------------- LITTLETON, Colo., Oct. 5, 2005 - Zynex Medical Holdings, Inc. (OTCBB: ZYNX), a provider of pain management systems and electrotherapy products for medical patients with functional disability, today announced that it has secured a $400,000 credit facility with Silicon Valley Bank, the primary operating subsidiary of Silicon Valley Bancshares (NASDAQ: SIVB). The new credit line will payoff existing obligations and provide additional capital to expand the Company's sales, marketing and support efforts related to its standard electrotherapy products and proprietary NeuroMove(TM) Stroke Recovery System. "We are pleased to establish this new credit facility and partnership with Silicon Valley Bank," stated Zynex President and Chief Executive Officer Thomas Sandgaard. "This facility will enable Zynex to substantially accelerate its sales and marketing initiatives and the roll-out of our flagship NeuroMove(TM) stroke recovery product." "Zynex is a rapidly growing Denver-area company addressing a large market opportunity. We are pleased to play a role in helping the company meet its objectives and growth plans," said Kevin Grossman, Senior Relationship Manager of Silicon Valley Bank's Boulder Colorado office. The NeuroMove(TM) system increases the functionality of many stroke victims by teaching the healthy parts of the brain to compensate for damaged areas. The NeuroMove(TM), which is significantly more sensitive than most diagnostic equipment, monitors muscle activity and selects signals from the brain indicating that the patient is attempting to move a certain muscle. It then introduces the actual movement through electrical stimulation. Eventually the connection between the brain and muscle can often be reestablished. The NeuroMove(TM) (www.neuromove.com) also can be used to treat spinal cord injuries. About Zynex Zynex Medical Holdings, Inc., (www.zynexmed.com), a leading provider of therapeutic devices for patients with functional disability through the creation, distribution, and marketing of electrotherapy devices since 1996, strives to uphold its mission to improve the quality of life of patients suffering from debilitating pain or illness by providing innovative technology. Utilizing a unique combination of electromyographic (EMG) technology combined with a system of instruction and reinforcement, including electrical muscle stimulation (EMS), Zynex offers new treatment options to post-stroke and spinal injury patients. About Silicon Valley Bank Silicon Valley Bank provides diversified financial services to emerging growth and mature companies in the technology, life science and private equity markets, as well as the premium wine industry. Through its focus on specialized markets and extensive knowledge of the people and business issues driving them, Silicon Valley Bank provides a level of service and partnership that measurably impacts its clients' success. Founded in 1983 and headquartered in Santa Clara, Calif., the company serves more than 10,000 clients around the world through 27 domestic offices and two international subsidiaries in the U.K. and India, and an extensive network of relationships with venture capitalists in Asia, Australia, Europe, India, and Israel. More information on the company can be found at www.svb.com. Safe Harbor Provision Certain statements in this release are "forward-looking" and as such are subject to numerous risks and uncertainties. Actual results may vary significantly from the results expressed or implied in such statements. Factors that could cause actual results to materially differ from forward-looking statements include, but are not limited to, the Company's ability to meet terms and conditions required to obtain project financing, risks and delays associated with product development, risk of market acceptance of new products, technology or product obsolescence, competitive risks, reliance on development partners and additional capital needs. # # # -----END PRIVACY-ENHANCED MESSAGE-----