LOAN AND SECURITY AGREEMENT

 

TABLE OF CONTENTS

 

				Page
1.	Definitions			1
	1.1	Definitions		1
2.	Loan Description			4
	2.1	Amount of Loan		4
	2.2	Nature and Duration of Loan		4
	2.3	Promissory Note		4
	2.4	Disbursements of Promissory Note		4
	2.5	Administration Fee		5
	2.6	First Loan Advance Fee		5
	2.7	Early Termination Fee		5
	2.8	Loan Payments		5
	2.9	Excess Interest		6
3.	Security for Loan			6
	3.1	Grant of Security Interest		6
	3.2	Representations and Warranties Concerning Collateral		6
	3.3	Covenants Concerning Collateral		7
4.	Conditions to Loan Disbursements			9
	4.1	Conditions to Loan Disbursements		9
	4.2	No Default, Adverse Change, False or Misleading Statement		9
5.	Representations and Warranties			9
	5.1	Organization and Qualification		9
	5.2	Authorization		10
	5.3	Accuracy of Financial Statements		11
	5.4	Full and Accurate Disclosure		11
	5.5	Compliance with All Other Applicable Law		11
	5.6	Operation of Business		11
	5.7	Payment of Taxes		12
6.	Borrower’s Covenants			12
	6.1	Eligible Equipment		12
	6.2	Continued Compliance with Applicable Law		12

 

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TABLE OF CONTENTS

(continued)

 

				Page
	6.3	Payment of Taxes and Obligations		12
	6.4	Financial Statements and Reports		13
	6.5	Insurance		13
	6.6	Inspection		13
	6.7	Operation of Business		13
7.	Default			13
	7.1	Events of Default		13
	7.2	No Waiver of Event of Default		14
8.	Remedies			14
	8.1	Remedies upon Event of Default		14
	8.2	Rights and Remedies Cumulative		15
	8.3	No Waiver of Rights		15
9.	General Provisions			16
	9.1	Governing Agreement		16
	9.2	Borrower’s Obligations Cumulative		16
	9.3	Payment of Expenses and Attorney’s Fees		16
	9.4	Right to Perform for Borrower		16
	9.5	Assignability		17
	9.6	Third Party Beneficiaries		17
	9.7	Governing Law		17
	9.8	Severability of Invalid Provisions		17
	9.9	Interpretation of Loan and Security Agreement		17
	9.10	Survival and Binding Effect of Representations, Warranties, and Covenants		17
	9.11	Indemnification		18
	9.12	Interest on Expenses and Indemnification, Collateral, Order of Application		18
	9.13	Limitation of Consequential Damages		18
	9.14	Revival Clause		18
	9.15	Consent to Utah Jurisdiction, Exclusive Jurisdiction of Utah Courts, and Jury Waiver		19
	9.16	Nature of Borrower’s Obligations		19

 

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TABLE OF CONTENTS

(continued)

 

				Page
	9.17	Notices		23
	9.18	Duplicate Originals; Counterpart Execution		24
	9.19	Disclosure of Financial and Other Information		24
	9.20	Integrated Agreement and Subsequent Amendment		24

 

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LOAN AND SECURITY AGREEMENT

 

This Loan and Security Agreement is made and entered into by and between Summit Financial Resources, L.P., CORGENIX MEDICAL CORPORATION, and CORGENIX, INC.

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.              Definitions

 

1.1            Definitions

 

Terms defined in the singular shall have the same meaning when used in the plural and vice versa.  As used herein, the term:

 

“Accounts” shall have the meaning set forth in the definition of Collateral.

 

“Accounting Standards” means (i) in the case of financial statements and reports, conformity with generally accepted accounting principles and fully and fairly representing the financial condition as of the date thereof and the results of operations for the period or periods covered thereby, consistent with other financial statements of that company previously delivered to Lender, and (ii) in the case of calculations, definitions, and covenants, generally accepted accounting principles consistent with those used in the preparation of financial statements of Borrower previously delivered to Lender.

 

“Banking Business Day” means any day not a Saturday, Sunday, legal holiday in the State of Utah, or day on which national banks in the State of Utah are closed.

 

“Borrower” means, individually and collectively, jointly and severally, CMC and CORGENIX, or either of them.

 

“CMC” means CORGENIX MEDICAL CORPORATION, a corporation organized and existing under the laws of the State of Nevada, its successors, and, if permitted, assigns.

 

“Collateral” means the following personal property of Borrower, wherever located, now owned or existing or hereafter acquired or created, all additions and accessions thereto, all replacements, insurance or condemnation proceeds, all documents covering any of the Collateral, all leases of any of the Collateral, all rents, revenues, issues, profits and proceeds arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of any of the Collateral or any interest therein, all amendments, modifications, renewals, extensions, and replacements thereof, and all products and proceeds thereof: (a) all inventory (the “Inventory”); (b) all accounts (the “Accounts”); (c) all equipment, goods and motor vehicles (collectively, the “Equipment”); (d) all general intangibles, including any and all patents, trademarks and copyrights (registered or unregistered), trade secrets, domain names and addresses, and intellectual property licenses; (e) any and all promissory notes and instruments payable to or owing to Borrower or held by Borrower; any and all leases under which Borrower is the lessor; any and all chattel paper in favor of, owing to, or held by Borrower, including,

 

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without limitation, any and all conditional sale contracts or other sale agreements, whether Borrower is the original party or the assignee; and any and all security agreements, collateral and titles to motor vehicles which secure any of the foregoing obligations; all deposit accounts, including without limitation, all interest, dividends or distributions accrued or to accrue thereon, whether or not due; all investment property, including all interest, dividends or distributions accrued or to accrue thereon, whether or not due, all documents; all letter-of-credit rights; and all supporting obligations (collectively, the “Financial Obligations”); and (f) all balances, deposits, debts or any other amounts or obligations of Lender owing to Borrower, whether or not due.

 

“CORGENIX” means CORGENIX, INC., a corporation organized and existing under the laws of the State of Delaware, its successors, and, if permitted, assigns.

 

“Default Rate” means the default interest rate provided in the Promissory Note.

 

“Effective Date” shall mean the date the parties intend this Loan and Security Agreement to become binding and enforceable, which is the date stated at the conclusion of this Loan and Security Agreement.

 

“Eligible Equipment” means Equipment which (i) is subject to no security interest, lien, or encumbrance of any nature whatsoever with priority over the security interest created by the Loan Documents and the Financing Agreement, except any liens for current taxes and assessments which are not delinquent; (ii) meets all applicable representations and warranties concerning the Collateral set forth in Section 3.2 Representations and Warranties Concerning Collateral and Section 3.3 Covenants Concerning Collateral ; and (iii) is located on the Borrower’s premises; but excluding any Equipment which, in the sole discretion of Lender, is damaged, out-dated, obsolete, or otherwise unacceptable to Lender.

 

“Event of Default” shall have the meaning set forth in Section 7.1 Events of Default .

 

“Equipment” shall have the meaning set forth in the definition of Collateral.

 

“Equipment Appraisal” means a third-party appraisal of the Equipment that is acceptable to Lender, in Lender’s reasonable discretion.

 

“Financing Agreement” means that certain Financing Agreement, and all amendments, modifications, and addenda thereto, by and between Lender and Borrower of approximate even date herewith.

 

“First Loan Advance” shall have the meaning set forth in Section 2.4 Disbursements of Promissory Note .

 

“Inventory” shall have the meaning set for in the definition of Collateral.

 

“Lender” means Summit Financial Resources, L.P., a Hawaii limited partnership, its successors, and assigns.

 

“Liquidation Costs” means the reasonable costs and out of pocket expenses incurred by Lender in obtaining possession of any Collateral, in storage and preparation for sale, lease or

 

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other disposition of any Collateral, in the sale, lease, or other disposition of any or all of the Collateral, and/or otherwise incurred in foreclosing on any of the Collateral, including, without limitation, (a) reasonable attorneys fees and legal expenses, (b) transportation and storage costs, (c) advertising costs, (d) sale commissions, (e) sales tax and license fees, (f) costs for improving or repairing any of the Collateral, and (g) costs for preservation and protection of any of the Collateral.

 

“Loan” means the loan to be made pursuant to Section 2 Loan Description .

 

“Loan and Security Agreement” means this agreement, together with any exhibits, amendments, addendums, and modifications.

 

“Loan Documents” means the Loan and Security Agreement, Promissory Note, Security Documents, all other agreements and documents contemplated by any of the aforesaid documents, and all amendments, modifications, addendums, and replacements, whether presently existing or created in the future.

 

“Material Adverse Effect” means a material adverse effect on Borrower’s financial condition, conduct of its business, or ability to perform its obligations under the Loan Documents.

 

“Organizational Documents” means, in the case of a corporation, its Articles of Incorporation and By-Laws; in the case of a general partnership, its Articles of Partnership; in the case of a limited partnership, its Articles of Limited Partnership; in the case of a limited liability company, its Articles of Organization and Operating Agreement or Regulations, if any; in the case of a limited liability partnership, its Articles of Limited Liability Partnership; and all amendments, modifications, and changes to any of the foregoing which are currently in effect.

 

“Permitted Encumbrances” means (i) liens for taxes and assessments not yet due and payable or, if due and payable, those being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained, (ii) security interests and liens created by the Loan Documents, (iii) security interests and liens created by the Financing Agreement, (iv) security interests and liens granted in favor of Benefactor Funding Corp. that shall be terminated by Borrower prior to or immediately in connection with Lender making the First Loan Advance, and (v) security interests and liens authorized in writing by Lender.

 

“Promissory Note” means the promissory note to be executed by Borrower pursuant to Section 2.3 Promissory Note and any and all renewals, extensions, modifications, and replacements thereof.

 

“Qualified Bank Financing” means financing provided directly by a full service commercial bank whose deposits are insured by the Federal Deposit Insurance Corporation in the form of a revolving line of credit for which the primary collateral is Client’s Accounts.  Financing provided by a subsidiary, affiliate or division of such a bank does not qualify as Qualified Bank Financing.

 

“Second Loan Advance” shall have the meaning set forth in Section 2.4 Disbursements of Promissory Note .

 

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“Security Documents” means all security agreements, including this Loan and Security Agreement, assignments, pledges, financing statements, and other documents which create or evidence any security interest, assignment, lien or other encumbrance in favor of Lender to secure any or all of the obligations created or contemplated by any of the Loan Documents, and all amendments, modifications, addendums, and replacements, whether presently existing or created in the future.

 

“Uniform Commercial Code” means the Uniform Commercial Code as adopted now or in the future in the State of Utah.

 

2.              Loan Description

 

2.1            Amount of Loan

 

Upon fulfillment of all conditions precedent set forth in this Loan and Security Agreement, and so long as no Event of Default exists, and no other breach has occurred under the Loan Documents, Lender agrees to loan Borrower up to two hundred fifty thousand dollars ($250,000).

 

2.2            Nature and Duration of Loan

 

The Loan shall be a term loan payable in full upon the date and upon the terms and conditions provided in the Promissory Note.

 

2.3            Promissory Note

 

The Loan shall be evidenced by the Promissory Note.  The Promissory Note shall be executed and delivered to Lender upon execution and delivery of this Loan and Security Agreement.

 

2.4            Disbursements of Promissory Note

 

The proceeds of the Promissory Note shall be disbursed as follows:

 

a.              One disbursement to be made upon the execution and delivery of the Loan Documents (the “First Loan Advance”).  The First Loan Advance shall be in the amount of one hundred twenty-five thousand dollars ($125,000).

 

b.              One disbursement to be made upon the completion of the Equipment Appraisal (the “Second Loan Advance”).  The Second Loan Advance shall be in an amount that when combined with the First Loan Advance shall equal the lesser of (i) two hundred fifty thousand dollars ($250,000), or (ii) sixty percent (60%) of the net orderly liquidation value of Eligible Equipment as set forth in the Equipment Appraisal.  In the event the net orderly liquidation value of Eligible Equipment as set forth in the Equipment Appraisal is not greater than two hundred eight thousand three hundred thirty-three and 34/100 dollars ($208,333.34), Borrower shall not be entitled to any Second Loan Advance or any additional advances or disbursements under the Promissory Note.

 

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2.5            Administration Fee

 

Borrower shall pay Lender a monthly administration fee in an amount equal to one and forty-five hundredths percent (1.45%) of the average outstanding monthly principal balance on the Promissory Note each month.  The administration fee shall be payable monthly in arrears.  Lender is irrevocably authorized to disburse a sufficient amount of funds pursuant to the Financing Agreement each month to pay the administration fee.

 

The administration fee is not intended to be and shall not be construed to be interest.

 

2.6            First Loan Advance Fee

 

As consideration for making the First Loan Advance prior to the completion of the Equipment Appraisal, Borrower shall pay to Lender a fee equal to two thousand two hundred fifty dollars ($2,250) for each month, or portion thereof, until the Equipment Appraisal has been completed; provided, however, the First Loan Advance fee shall not exceed three thousand three hundred seventy-five dollars ($3,375).  Lender is irrevocably authorized to disburse a sufficient amount of funds pursuant to the Financing Agreement each month to pay the First Loan Advance fee.

 

The First Loan Advance fee is not intended to be and shall not be construed to be interest.

 

2.7            Early Termination Fee

 

If Borrower elects to terminate the Loan at any time prior to the maturity of the Promissory Note, Borrower shall provide at least sixty (60) days written notice of intent to terminate.  Upon such termination, or if an Event of Default accelerates payment of the Loan, Borrower shall pay Lender an early termination fee equal to one percent (1%) of the face amount of the Promissory Note; provided, however, that in the event Borrower obtains Qualified Bank Financing to replace the Loan and the financing provided under the Financing Agreement, Lender shall waive the foregoing early termination fee so long as Borrower provides at least sixty (60) days written notice of its intent to replace the Loan and the financing provided under the Financing Agreement with Qualified Bank Financing, which notice shall itemize the material financial terms of the Qualified Bank Financing.  In the event Borrower provides Lender written notice of its intent to replace the Loan and the financing provided under the Financing Agreement with Qualified Bank Financing, Lender may, within thirty (30) days of receipt of such notice, provide written notice to Borrower that Lender will match the material terms of the proposed Qualified Bank Financing whereupon Lender and Borrower shall amend the Loan Documents and the Financing Agreement, as necessary, to match the material financial terms of the proposed Qualified Bank Financing and the Loan Documents and the Financing Agreement shall remain in force.

 

2.8            Loan Payments

 

As to all amounts owing to Lender by Borrower under the Loan Documents, Lender (i) may, and is irrevocably authorized to, disburse a sufficient amount of funds pursuant to the Financing Agreement to pay any such amounts in full, (ii) may, if there are insufficient Reserves, as defined in the Financing Agreement, demand payment from Borrower whereupon Borrower

 

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shall promptly pay all such amounts to Lender, or (iii) may exercise any combination of the foregoing alternatives set forth in this Section or available under the Loan Documents, at law, or in equity.

 

2.9            Excess Interest

 

It is the intent of the parties to comply with any usury law applicable to the Loan and to all amounts owing pursuant to the Loan Documents and it is understood and agreed that in no event and upon no contingency shall Borrower be required to pay interest in excess of the rate allowed by any laws of any state which are determined to be applicable and governing.  The intention of the parties being to conform strictly to any applicable usury laws, the Loan Documents shall be held to be subject to reduction to the amount allowed under any applicable and governing usury laws as now or hereafter construed by the courts having jurisdiction.  In the event Lender receives any interest under the Loan Documents in excess of any highest permissible rate under any applicable and governing law, such excess interest (including simple interest thereon at the interest rate at the highest permissible rate which is applicable and governing) shall be promptly applied to any unpaid principal balance owed by Borrower.  To the extent such excess interest is greater than the unpaid principal balance, Lender shall promptly remit such overage to Borrower.

 

3.              Security for Loan

 

3.1            Grant of Security Interest

 

Borrower hereby grants Lender a security interest in the Collateral.  Borrower and Lender acknowledge their mutual intent that all security interests contemplated herein are given as a contemporaneous exchange for new value to Borrower, regardless of when advances to Borrower are actually made or when the Collateral is created or acquired.

 

The Collateral shall secure all of Borrower’s present and future debts, obligations, and liabilities of whatever nature, and without any limitation whatsoever, to Lender, including, without limitation, (a) the Loan, (b) the Promissory Note, (c) all obligations of Borrower under the Loan Documents, (d) all advances of the same kind and quality relating to this transaction, (e) all obligations of Borrower under the Financing Agreement, and (f) transactions in which the documents evidencing the indebtedness refer to this grant of security interest as providing security thereof.

 

Borrower’s obligations under this Loan and Security Agreement may also be secured by other collateral as may be evidenced by other documentation apart from this Loan and Security Agreement.

 

3.2            Representations and Warranties Concerning Collateral

 

Borrower represents and warrants that:

 

a.              Borrower is the sole owner of the Collateral.

 

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b.                                       The Inventory and Accounts are not subject to any security interest, lien, prior assignment, or other encumbrance of any nature whatsoever except Permitted Encumbrances.

 

c.                                        The Accounts and Financial Obligations, if any, are each a bona fide obligation of the obligor identified therein for the amount identified in the records of Borrower, except for normal and customary disputes which arise in the ordinary course of business and which do not affect a material portion of the Accounts and Financial Obligations.

 

d.                                       There are no defenses or setoffs to payment of the Accounts and Financial Obligations, if any, which can be asserted by way of defense or counterclaim against Borrower or Lender, except for normal and customary disputes which arise in the ordinary course of business and which do not affect a material portion of the Accounts and Financial Obligations.

 

e.                                        There is presently no default or delinquency in any payment of the Accounts and Financial Obligations, if any, except for any default or delinquency which has been reserved against by Borrower in accordance with Accounting Standards and the Accounts and Financial Obligations will be timely paid in full by the obligors, except for normal and customary disputes which arise in the ordinary course of business and which do not affect a material portion of the Accounts and Financial Obligations.

 

f.                                          Borrower has no knowledge of any fact or circumstance which would materially impair the ability of any obligor on the Accounts and Financial Obligations, if any, to timely perform its obligations thereunder, except those which arise in the ordinary course of business and which do not affect a material portion of the Accounts and Financial Obligations.

 

g.                                       Any services performed or goods sold giving rise to the Accounts and Financial Obligations, if any, have been rendered or sold in compliance with applicable laws, ordinances, rules, and regulations and in the ordinary course of Borrower’s business.

 

h.                                       There have been no extensions, modifications, or other agreements relating to payment of the Accounts and Financial Obligations, if any, except those granted in the ordinary course of business and which do not affect a material portion of the Accounts and Financial Obligations and except those agreements with Benefactor Funding Corp. that shall be terminated by Borrower prior to or immediately in connection with Lender making the First Loan Advance.

 

3.3                                  Covenants Concerning Collateral

 

Borrower covenants that:

 

a.                                        Borrower hereby authorizes Lender to file UCC Financing Statements concerning the Collateral.  Borrower will execute and deliver any documents (properly endorsed, if necessary) reasonably requested by Lender for perfection or enforcement of

 

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any security interest or lien, give good faith, diligent cooperation to Lender, and perform such other acts reasonably requested by Lender for perfection and enforcement of any security interest or lien, including, without limitation, obtaining control for purposes of perfection with respect to Collateral consisting of deposit accounts, investment property, letter-of-credit rights, and electronic chattel paper.  Lender is authorized to file, record, or otherwise utilize such documents as it deems necessary to perfect and/or enforce any security interest or lien granted hereunder.

 

b.                                       Borrower shall keep the Equipment in good repair, ordinary wear and tear and obsolescence excepted, and be responsible for any loss or damage to the Equipment.  Borrower shall pay when due all taxes, license fees and other charges on the Equipment.  Borrower shall not sell, misuse, conceal, or in any way dispose of the Equipment or permit it to be used unlawfully or for hire or contrary to the provisions of any insurance coverage.  Risk of loss of the Equipment shall be on Borrower at all times unless Lender takes possession of the Equipment.  Loss of or damage to the Equipment or any part thereof shall not release Borrower from any of the obligations secured by the Equipment.  Lender or its representatives may, at any time and from time to time, enter any premises where the Equipment is located and inspect, audit and check the Equipment; provided, however, that so long as no Event of Default has occurred, Lender will only enter any premises where the Equipment is located upon twenty-four (24) hours notice to Borrower.

 

c.                                        Borrower agrees to insure the Equipment, at Borrower’s expense, against loss, damage, theft, and such other risks as Lender may request to the full insurable value thereof with insurance companies and policies satisfactory to Lender.  Proceeds from such insurance shall be payable to Lender as its interest may appear, shall name Lender as an additional insured and as a loss payee, and such policies shall provide for a minimum ten (10) days written cancellation notice to Lender.  Upon request, policies or certificates attesting to such coverage shall be delivered to Lender.  Insurance proceeds may be applied by Lender toward payment of any obligation secured by this Loan and Security Agreement, whether or not due, in such order of application as Lender may elect.

 

d.                                       Borrower will at all times keep accurate and complete records of the Collateral.  Lender or its representatives may, at any time and from time to time, enter any premises where the Collateral and/or the records pertaining to the Collateral are located and inspect, inventory, audit, check, copy, and otherwise review the Collateral and the records concerning the Collateral; provided, however, that so long as no Event of Default has occurred, Lender will enter any premise where the Collateral and/or records pertaining to the Collateral are located upon twenty-four (24) hours notice to Borrower.

 

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4.                                        Conditions to Loan Disbursements

 

4.1                                  Conditions to Loan Disbursements

 

Lender’s obligation to disburse any of the Loan is expressly subject to, and shall not arise until all of the conditions set forth below have been satisfied.  All of the documents referred to below must be in a form and substance acceptable to Lender.

 

a.                                        All of the Loan Documents and all other documents contemplated to be delivered to Lender prior to funding have been fully executed and delivered to Lender.

 

b.                                       All of the documents contemplated by the Loan Documents which require filing or recording have been properly filed and recorded so that all of the liens and security interests granted to Lender in connection with the Loan will be properly created and perfected and will have a priority acceptable to Lender.

 

c.                                        All other conditions precedent provided in or contemplated by the Loan Documents or any other agreement or document have been performed.

 

d.                                       As of the date of disbursement of all or any portion of the Loan, the following shall be true and correct:  (i) all representations and warranties made by Borrower in the Loan Documents are true and correct as of the date of such disbursement; and (ii) no Event of Default has occurred and no conditions exist and no event has occurred, which, with the passage of time or the giving of notice, or both, would constitute an Event of Default.

 

e.                                        All conditions precedent to advances under the Financing Agreement have been fully satisfied in Lender’s sole discretion.

 

All conditions precedent set forth in this Loan and Security Agreement and any of the Loan Documents are for the sole benefit of Lender and may be waived unilaterally by Lender.

 

4.2                                  No Default, Adverse Change, False or Misleading Statement

 

Lender’s obligation to adv