EXHIBIT 10.1
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QUOVADX, INC.
XXXXXXXXXX.XXX CORPORATION
LOAN AND SECURITY AGREEMENT
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This LOAN AND SECURITY AGREEMENT is entered into as of August 26, 2003
by and among COMERICA BANK ("Bank"), QUOVADX, INC. ("Quovadx") and
XXXXXXXXXX.XXX CORPORATION ("Xxxxxxxxxx.xxx") (each of Quovadx and
Xxxxxxxxxx.xxx are individually referred to herein as a "Borrower" and
collectively, the "Borrowers"),
RECITALS
Borrowers wish to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrowers. This Agreement sets forth the terms to
which Bank will advance credit to Borrowers, and Borrowers will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, payment intangibles and all other forms of obligations owing to
a Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by such Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by a Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means an advance of money deemed to be made to
Borrower to reimburse Bank for any payments made in connection with a draw under
a Letter of Credit.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
reasonable Collateral audit fees; and Bank's reasonable attorneys' fees and
expenses incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an
Insolvency Proceeding, whether or not suit is brought.
"Borrower's Books" means all of a Borrower's books and records
including: ledgers; records concerning a Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to eighty percent (80%) of
Eligible Accounts, as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrowers.
"Business Day" means any day that is not Saturday, Sunday, or other day
on which banks in the State of California are authorized or required to close.
"Change in Control" shall mean a transaction in which any "person" or
"group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of l934), directly or indirectly, of a
sufficient number of shares of all classes of stock then outstanding of a
Borrower ordinarily entitled to vote in the election of directors, empowering
such "person" or "group" to elect a majority of the Board of Directors of a
Borrower who did not have such power before such transaction.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached hereto.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit, corporate credit cards, or merchant services issued or provided for the
account of that Person; and (iii) all obligations arising under any interest
rate, currency or commodity swap agreement, interest rate cap agreement,
interest rate collar agreement, or other agreement or arrangement designed to
protect such Person against fluctuation in interest rates, currency exchange
rates or, commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
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"Credit Extension" means each Advance, Letter of Credit or any other
extension of credit by Bank for the benefit of a Borrower hereunder.
"Daily Balance" means the amount of the Obligations owed at the end of
a given day.
"Eligible Accounts" means those billed Accounts that arise in the
ordinary course of a Borrower's business that comply with all of such Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrowers in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice, date;
(b) Accounts with respect to an account debtor, twenty percent
(20%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of a Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of a Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which a Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to a
Borrower or for deposits or other property of the account debtor held by a
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to a Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrowers exceed twenty
percent (20%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
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(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably determines to
be doubtful.
(l) "Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States and that (i) are supported by one or more letters of credit in an
amount and of a tenor, and issued by a financial institution, acceptable to
Bank, or (ii) that Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which a Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles as in effect from
time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property" means all of a Borrower's right, title, and
interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to a Borrower
now or hereafter existing, created, acquired or held;
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(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to xxx for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"Inventory" means all present and future inventory in which a 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 at any time hereafter owned by or in the custody or
possession, actual or constrictive, of a Borrower, including such inventory as
is temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by a Borrower, and any other agreement entered into in connection with
this Agreement, all as amended or extended from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations, condition (financial or otherwise) or prospects of
Borrowers or (ii) the ability of Borrowers to repay the Obligations or otherwise
perform its obligations under the Loan Documents or (iii) the value or priority
of Bank's security interests in the Collateral.
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"Negotiable Collateral" means all of a Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by a Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding.
"Patents" means all patents (issued or provisional), patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that a Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between a Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of a Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Indebtedness secured by a lien described in clause (c) of the
defined term "Permitted Liens," provided (i) such Indebtedness does not exceed
the lesser of the cost or fair market value of the equipment financed with such
Indebtedness and (ii) such Indebtedness does not exceed $100,000 in the
aggregate at any given time;
(d) Subordinated Debt;
(e) Indebtedness to Borrowers' trade creditors incurred in the
ordinary course of Borrowers' business; and
(f) other Indebtedness not to exceed $1,000,000 in the aggregate
at any time during the term of this agreement or while Obligations are
outstanding.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule;
(b) (i) marketable direct obligations issued unconditionally
guaranteed by the United States of America or any agency or any State thereof
with an average aggregate maturity of one and one-half (1.5) years from the date
of acquisition thereof, (ii) commercial paper maturing no more than one (l) year
from the date of creation thereof and, currently having rating of at least A-
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2 or P-2 from either Standard & Poor's Corporation or Xxxxx'x Investors Service,
(iii) certificates of deposit maturing no more than one (1) year from the date
of investment therein issued by Bank and (iv) money market accounts;
(c) Investments in Borrowers' Subsidiaries in an aggregate amount
not to exceed Five Million Dollars ($5,000,000) in the aggregate in each fiscal
year provided that no such Investments are permitted upon the occurrence and
during the continuance of an Event or Default or if after giving effect to such
Investments an Event of Default will occur; and
(d) Investments in CareScience, Inc. in connection with its
acquisition by Borrower on or after September 19, 2003 provided, however, that
such Investments shall not exceed Nineteen Million Dollars ($19,000,000) in cash
and Two Million Five Hundred Thousand (2,500,000) shares of Borrower's common
stock.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;
(c) Liens (i) upon or in any equipment which was not financed by
Bank acquired or held by a Borrower or any of its Subsidiaries to secure the
purchase price of such equipment or indebtedness incurred solely for the purpose
of financing the acquisition of such equipment, or (ii) existing on such
equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds of
such equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.5 or Section
8.9;
(f) Deposits in the ordinary course of business to secure the
performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure indemnity, performance or other similar bonds for
the performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure statutory obligations (other than liens arising
under ERISA or environmental liens) or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds; and
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(g) Liens securing Subordinated Debt.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Responsible Officer" means each of the Chief Executive Officer, the
Chief Financial Officer and the Controller of a Borrower.
"Revolving Facility" means the facility under which the Bank issues
Advances, as specified in Sections 2.1.(a) and (b).
"Revolving Line" means a credit extension of up to Four Million Dollars
($4,000,000).
"Revolving Maturity Date" means the day before the second anniversary
of the Closing Date.
"Schedule" means the schedule of exceptions attached hereto and
approved by Bank, if any.
"Subordinated Debt" means any debt incurred by a Borrower that is
subordinated to the debt owing by such Borrower to Bank on terms acceptable to
Bank (and identified as being such by such Borrower and Bank).
"Subsidiary" means any corporation, company or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock or other
units of ownership which by the terms thereof has the ordinary voting power to
elect the Board of Directors, managers or trustees of the entity, at the time as
of which any determination is being made, is owned by a Borrower, either
directly or through an Affiliate.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of a Borrower
connected with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
Borrowers promise to pay to the order of Bank, in lawful money of
the United States of America, the aggregate unpaid principal amount of all
Credit Extensions made by Bank to
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each Borrower and/or Borrowers hereunder. Borrowers shall also pay interest on
the unpaid principal amount of such Credit Extensions at rates in accordance
with the terms hereof.
(a) Revolving Advances. Subject to and upon the terms and
conditions of this Agreement, any amounts treated as Advances under Section
2.1(b) hereof, which amounts shall not in the aggregate exceed the lesser of (i)
the Revolving Line or (ii) the Borrowing Base, minus, in each case, the
aggregate face amount of all outstanding Letters of Credit (including any drawn
but unreimbursed amounts), may be repaid at any time. Borrower may not request
cash advances under this Section 2.1(a). On the Revolving Maturity Date, any
outstanding Advances shall be immediately due and payable. Borrower may prepay
any Advances without penalty or premium. Interest shall accrue from the date of
each Advance at the rate specified in Section 2.2(a).
(b) Letters of Credit.
(i) Subject to the terms and conditions of this Agreement, at
any time prior to the Revolving Maturity Date, Bank agrees to issue or cause to
be issued letters of credit for the account of Borrower (each, a "Letter of
Credit" and collectively, the "Letters of Credit") in an aggregate outstanding
face amount (including any drawn but unreimbursed amounts) not to exceed the
lesser of the Revolving Line or the Borrowing Base minus, in each case, the
aggregate amount of all outstanding Advances. All Letters of Credit shall be, in
form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of standard application and
letter of credit agreement (the "Application"), which Borrower hereby agrees to
execute, including Bank's standard fee equal to one-half of one percent (0.5%)
per annum of the face amount of each Letter of Credit, payable in advance. On
any drawn but unreimbursed Letter of Credit, the unreimbursed amount shall be
deemed an Advance under Section 2.1(a). On the Revolving Maturity Date and only
if the Revolving Line is not renewed, Borrower shall secure in cash all
obligations under any outstanding Letters of Credit on terms acceptable to Bank.
(ii) The obligation of Borrower to reimburse Bank for drawings
made under Letters of Credit shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Agreement,
the Application, and such Letters of Credit, under all circumstances whatsoever,
provided, however, that the Letters of Credit were issued pursuant to the Bank's
standard policies and no damages were caused by Bank's gross negligence or
willful misconduct. Borrower shall indemnify, defend, protect, and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit, except for expenses caused by Bank's gross negligence or
willful misconduct.
2.2 Overadvances. If the aggregate amount of the outstanding Advances
exceeds the lesser of the Revolving Line or the Borrowing Base at any time,
Borrowers shall immediately pay to Bank, in cash, the amount of such excess.
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2.3 Interest Rates, Payments and Calculations.
(a) Interest Rate. Except as set forth in Section 23(b), the
Advances shall bear interest, on the outstanding Daily Balance thereof, at a
rate equal to the Prime Rate.
(b) Late Fee: Default Rate. If any payment is not made within ten
(10) days after the date such payment is due, Borrowers shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All Obligations shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the
first calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic payments
against any of a Borrower's deposit accounts or against the Revolving Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder. All payments shall be free and
clear of any taxes, withholdings, duties, impositions or other charges, to the
end that. Bank will receive the entire amount of any Obligations payable
hereunder, regardless of source of payment.
(d) Computation. In the event the Prime Rate is changed from time
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased, effective as of the day the Prime Rate is changed, by an amount
equal to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrowers specify. After the occurrence of
an Event of Default, the receipt by Bank of any wire transfer of funds, check,
or other item of payment shall be immediately applied to conditionally reduce
Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon Pacific time shall be deemed to have been received by
Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.
2.5 Fees. Borrowers shall pay to Bank the following:
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(a) Facility Fees. On the Closing Date, and on each anniversary of
the Closing Date, a Facility Fee equal to Three Thousand Dollars ($3,000), which
shall be nonrefundable;
(b) Unused Facility Fee. Borrowers shall pay to Bank a fee equal to
one quarter of one percent (0.25%) per annum of the difference between the
Revolving Line and the average daily balance of outstanding Revolving Advances
(including the aggregate face amount of outstanding drawn Letters of Credit),
which fee shall be payable quarterly, within fifteen (15) days of the last day
of each quarter; and
(c) Bank Expenses. On the Closing Date, all Bank Expenses incurred
through the Closing Date, including reasonable attorneys' fees and expenses in
an aggregate amount not to exceed $5,000, and, after the Closing Date, all Bank
Expenses, including reasonable attorneys' fees and expenses, as and when they
become due.
2.6 Additional Costs. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal
or interest or any other amounts payable hereunder by Borrowers or otherwise
with respect to the transactions contemplated hereby (except for taxes on the
overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
the Obligations, Bank shall promptly notify Borrowers thereof. Borrowers agree
to pay to Bank the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by Bank of a statement of the amount and setting
forth Bank's calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during
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the continuance of an Event of Default. Notwithstanding termination, Bank's Lien
and the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance,
satisfactory to Bank, the following;
(a) this Agreement, duly executed by Borrower
(b) a certificate of the Secretary of each Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) a UCC financing statement for Quovadx;
(d) a UCC financing statement for Xxxxxxxxxx.xxx;
(e) agreement to provide insurance;
(f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;
(g) current financial statements of Borrowers;
(h) securities account control agreements with respect to Quovadx's
accounts maintained with Comerica Securities, Inc. duty executed by Quovadx;
(i) securities account control agreement with respect to Quovadx'
accounts maintained with Monarch Funds, duly executed by Quovadx;
(j) an audit of the Collateral, the results of which shall be
satisfactory to Bank; and
(k) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Disbursement Instruction Form;
and
(b) the representations and warranties contained in Section 5 shall
be true and correct in all material respects on and as of the date of such
Advance request and on the effective date of each Credit Extension as though
made at and as of each such date, and no Event of
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Default shall have occurred and be continuing, or would exist after giving
effect to such Credit Extension (provided, however, that those representations
and warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date). The making of each Credit
Extensions shall be deemed to be a representation and warranty by each Borrower
on the date of such Credit Extension as to the accuracy of the facts referred to
in this Section 3.2.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
4.2 Cash Collateral Following Event of Default. Immediately
following the occurrence of an Event of Default, Borrower shall maintain a money
market account or certificate of deposit with Bank with a balance equal to or
greater than the Revolving Line (the "Required Balance") at all times. Borrower
shall grant to Bank, as additional security for the purpose of securing the
Obligations, a valid, first priority security interest in such money market
account or certificate of deposit maintained by Borrower with Bank, including,
without limitation, all amounts held therein, together with all proceeds
thereof, interest paid thereon, and substitutions therefor, and all accounts,
securities, instruments, securities entitlements and financial assets arising
out of any of the foregoing, which collectively constitute the "Cash
Collateral", Borrower shall grant and pledge to Bank a continuing security
interest in all presently existing and hereafter acquired or arising Cash
Collateral, in order to secure prompt repayment of any and all Obligations. Bank
shall retain control over the Cash Collateral up to the Required Balance to
secure the Obligations until such Obligations have been satisfied in full.
Borrower hereby authorizes Bank to place restrictions on Borrower's ability to
withdraw amounts from accounts holding the Cash Collateral in order to ensure
that such Required Balance is maintained. Borrower authorizes Bank to execute
and/or file such documents, and take such actions, as Bank determines reasonable
to perfect its security interest in the Cash Collateral. Such security interest
constitutes a valid, first priority security interest in the Cash Collateral,
and will constitute a valid, first priority security interest in Cash Collateral
acquired after the date hereof. Notwithstanding termination of this Agreement,
Bank's lien on the Cash Collateral shall remain in effect for so long as any
Obligations are outstanding.
4.3 Delivery of Additional Documents Required. Borrowers shall from
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form reasonably satisfactory to Bank, to perfect and
continue the perfection of Bank's security interests in the Collateral and in
order to fully consummate all of the transactions contemplated under the Loan
Documents. Borrowers from time to time may deposit with Bank specific time
deposit accounts to secure specific Obligations. Borrowers authorize Bank to
hold such balances in pledge and to decline to honor any
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drafts thereon or any request by a Borrower or any other Person to pay or
otherwise transfer any part of such balances for so long as the Obligations are
outstanding.
4.4 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during a Borrower's usual. business hours but no more than once a year (unless
an Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrowers' Financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing under the laws of its state of
incorporation and qualified and licensed to do business in any state in which
the failure to be so qualified could reasonably be expected to result in a
Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate or Articles of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which Borrower is bound. Borrower
is not in default under any material agreement to which it is a party or by
which it is bound.
5.3 No Prior Encumbrances. Borrower has good and marketable title
to its property, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. Except as disclosed in the
Schedule, the Eligible Accounts are bona fide existing obligations. The property
and services giving rise to such Eligible Accounts has been delivered or
rendered to the account debtor or to the account debtor's agent for immediate:
and unconditional acceptance by the account debtor. Borrower has not, received
notice of actual or imminent Insolvency Proceeding of any account debtor that is
included in any Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. Except as disclosed in the Schedule,
all Inventory is in all material respects of good and marketable quality, free
from all material defects, except for Inventory for which adequate reserves have
been made.
5.6 Intellectual Property. To the best of Borrower's knowledge,
Borrower is the sole owner of the Intellectual Property, except for
non-exclusive licenses granted by Borrower to its customers in the ordinary
course of business. To the best of Borrower's knowledge, each of Borrower's
Patents is valid and enforceable, and no part of its Intellectual Property has
been judged
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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.
5.7 Name; Location of Chief Executive Office. Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section l0 hereof. Except as disclosed in
the Schedule, all Borrower's Inventory and Equipment is located only at the
location set forth in Section 10 hereof and Borrower has paid for and owns all
Equipment financed by Bank hereunder.
5.8 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect, or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral.
5.9 No Material Adverse Change in Financial Statements. All
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that Bank has received from Borrower fairly present in all material
respects Borrower's financial condition as of the date thereof and Borrower's
consolidated and consolidating results of operations for the period then ended.
There has not been a material adverse change in the consolidated or the
consolidating financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank.
5.10 Solvency, Payment of Debts. Borrower is solvent and able to
pay its debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary have met
the minimum funding requirements of ERISA with respect to any employer, benefit
plans subject to ERISA, and no event has occurred resulting from Borrower's
failure to comply with ERISA that could result in. Borrower's incurring any
material liability. Borrower is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one of the
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T and L
of the Board of Governors of the Federal Reserve System). To the best of
Borrower's knowledge, Borrower has complied with all the provisions of the
Federal Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 Environmental Condition. Except as disclosed in the Schedule,
none of Borrower's or any Subsidiary's properties or assets has ever been used
by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance other
than in accordance with applicable law; to the best of Borrower's knowledge,
none of Borrower's properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a hazardous
waste or hazardous substance disposal site, or a
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candidate for closure pursuant to any environmental protection statute; no lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal. property owned by Borrower or any Subsidiary; and
neither Borrower nor any Subsidiary has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by Borrower or
any Subsidiary resulting in the releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.
5.13 Taxes. Borrower and each Subsidiary have filed or caused to be
filed all material tax returns required to be filed, and have paid, or have made
adequate provision for the payment of, all material taxes reflected therein.
5.14 Subsidiaries. Except as disclosed in the Schedule, Borrower
does not own any stock, partnership interest or other equity securities of any
Person, except for Permitted Investments.
5.15 Government Consents. Borrower and each Subsidiary have
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted; which the failure to obtain could have a Material Adverse Effect.
5.16 Accounts. Except as disclosed in the Schedule, none of
Borrower's nor any Subsidiary's property is maintained or invested with a Person
other than Bank.
5.17 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, each Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which failure
to be qualified could reasonably be expected to result in a Material Adverse
Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, in force all licenses, approvals and agreements, the loss of which
could have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect.
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6.3 Financial Statements, Reports, Certificates.
(a) Borrower shall deliver the following to Bank: (i) as soon
as available, but in any event within five (5) days after filing, all reports on
Forms 10-K filed with the Securities and Exchange Commission (including audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank); (ii) as soon as available, but in any event within five (5)
days after filing all reports on Forms 10-Q filed with the Securities and
Exchange Commission; (iii) as soon as available, but in any event within five
(5) days after mailing, copies of all statements, reports and notices sent or
made available generally by Borrower, to its security holders or to any holders
of Subordinated Debt and (iv) promptly upon, receipt of notice thereof, a report
of any legal actions pending or threatened against Borrower or any Subsidiary
that could result in damages or costs to Borrower or any Subsidiary of Five
Hundred Thousand Dollars ($500,000) or more; and (v) other financial information
generally prepared by Borrower in the ordinary course of business as Bank may
reasonably request from time to time.
(b) Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit B hereto, together with
aged listings of accounts receivable and accounts payable.
(c) Within thirty (30) days after the last day of each calendar
quarter, Borrower shall deliver to Bank a Compliance Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto.
(d) Bank shall have a right from time to time hereafter, during
Borrower's regular business hours and after reasonable notice, to audit
Borrower's Accounts and appraise Collateral at Borrower's expense, provided that
such audits will be conducted no more often than once each year unless an Event
of Default' has occurred and is continuing and Borrower will only be obligated
to reimburse Bank for Bank's reasonable out of pocket expenses.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects except for Inventory for
which adequate reserves have been. made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the execution and delivery of this Agreement. Borrower shall promptly
notify Bank of all returns and recoveries and of all disputes and claims; where
the return, recovery, dispute or claim involves more than Two Hundred Fifty
Thousand Dollars ($250,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand. appropriate certificates attesting to
the payment or deposit thereof and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes
-17-
required of it by applicable laws; including; but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability; and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.6 Insurance.
(a) Borrower, at its expense; shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's business, ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
6.7 Minimum Cash Covenants. Borrowers shall maintain (i) on the Closing
Date and at all times thereafter, an aggregate amount equal to at least Fourteen
Million Dollars ($14,000,000) of cash and cash equivalents in Borrowers'
operating, depository or investment accounts at Bank and/or Comerica Securities,
Inc., (ii) within forty five days after the Closing Date and at all times
thereafter, an aggregate amount equal to at least Fifteen Million Dollars
($15,000,000) of cash and cash equivalents in Borrowers' operating, depository
or investment accounts at Bank and/or Comerica Securities, Inc, and (iii) at all
times, a combined monthly average balance in an aggregate amount equal to at
least Eighteen Million Dollars ($18,000,000) of cash and cash equivalents in
Borrowers' operating, depository or investment accounts with Bank and/or
Comerica Securities, Inc. measured monthly.
6.8 Intellectual Property Rights. Borrower shall use reasonable and
customary efforts to (i) protect, defend and maintain the validity and
enforceability of its Trademarks, Patents and Copyrights, (ii) detect
infringements of its trademarks, patents and copyrights and promptly advise Bank
in writing of material infringements detected (iii) not allow any of its
material Trademarks, Patents or Copyrights to be abandoned, forfeited or
dedicated to the public without the written consent of Bank, which shall not be
unreasonably withheld, and (iv) shall remain the sole owner, of and hold all
rights relating to the Intellectual Property (provided that Borrower may enter
into licenses in the ordinary course of its business, and further provided that
Borrower may enter into professional services agreements in the ordinary course
of its business which transfer title and all related Intellectual Property
rights in all work for hire to the customer).
6.9 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
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7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Credit
Extensions, no Borrower will not do any of the following without Bank's prior
written consent:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of licenses and
similar arrangements for the use of the property of Borrower or its Subsidiaries
in the ordinary course of business; (iii) Transfers of worn-out or obsolete
Equipment which was not financed by Bark, (iv) Transfers of assets between and
among Subsidiaries, or (v) Transfers of assets which constitute Permitted
Investments.
7.2 Change in Business Change in Control or Executive Office.
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and any
business substantially similar or related thereto (or incidental thereto); or
cease to conduct business in the manner conducted by Borrower as of the Closing
Date; or suffer or permit a Change in Control; or without thirty (30) days prior
;written notification to Bank; relocate its chief executive office or state of
incorporation or change its legal name; or without Bank's prior written consent,
change the date on which its fiscal year ends.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, except
mergers or consolidations of any Subsidiary into another Subsidiary or into a
Borrower. Notwithstanding the foregoing, this Section 7.3 shall not apply to (i)
transactions in which the sole consideration is Borrower's stock, Borrower is
the surviving entity, and, after giving effect to such transaction, there is no
Change in Control, provided that at the time of any such transaction an Event of
Default has not occurred which is continuing' and no Event of Default would
exist after giving effect to any such transaction, and (ii) reverse triangular
mergers in which the sole consideration is Borrower's stock, the surviving
entity is a wholly owned subsidiary of Borrower, and, after giving effect to
such transaction, there is no Change in Control, provided that at the time of
any such transaction an Event of Default has not occurred which is continuing
and no Event of Default would exist after giving effect to any such transaction.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income; including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except far Permitted Liens. Agree with any Person other
than Bank not to grant a security interest in, or otherwise encumber, any of its
property, or permit any Subsidiary to do so.
-19-
7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock, or permit any of its Subsidiaries t do so, except that Borrower may
repurchase the stock of former employees pursuant to stock repurchase
agreements, or pay dividends or make any other distribution or payment on
account of or in redemption, retirement or purchase of any capital stock and
except that any "deemed" dividend arising from a permitted Transfer under
Section 7.1 above shall not be included in the definition of "Dividend"
(collectively, the "Repurchases and Dividends") provided that (i) such
Repurchases and Dividends do not to exceed $2,000,000 during the term of this
Agreement, and (ii) an Event of Default does not exist prior to such Repurchases
and Dividends or would not exist alter giving effect to such Repurchases and
Dividends.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments; or maintain or invest any of its property with
a Person other than Bank or permit any of its Subsidiaries to do so unless such
Person has entered into an account control agreement with Bank in form and
substance satisfactory to Bank; or suffer or permit any Subsidiary to be a party
t, or be bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Borrower.
7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction, other than permitted Transfers
under Section 7.1, permitted distributions under Section 7.6 and other
transactions permitted hereunder, 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 non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt in
any manner which could directly or indirectly modify, terminate or impair the
subordination of the Subordinated Debt or the subordination of the security
interest or lien that the subordinated creditor may have in any property of
Borrower without Bank's prior written consent.
7.10 Inventory and Equipment. Store inventory or Equipment with a
book value exceeding One Hundred Thousand Dollars ($100,000) with a bailee,
warehouseman, or other third party unless the third party has been notified of
Bank's security interest and Bank (a) has received an acknowledgment from the
third party that it is holding or will hold the Inventory or Equipment for
Bank's benefit or (b) is in pledge possession of the warehouse receipt, where
negotiable, covering such Inventory or Equipment. Except as disclosed in the
Schedule, store or maintain any Equipment or Inventory at a location other than
the location set forth in Section 10 of this Agreement.
7.11 Compliance. Become an "investment company" or be controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one (if its important
activities, the business of- extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit
-20-
Extension for such 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 law or regulation, which violation could have a Material Adverse Effect, or
a material adverse effect on the Collateral or the priority of Bank's Lien on
the Collateral, or permit any of its Subsidiaries to do any of the foregoing
where doing so could reasonably be expected to result in a Material Adverse
Effect.
7.12 Subsidiary Cash. Maintain cash and cash equivalents with or at
Borrower's Subsidiaries (measured on a consolidated basis) in an aggregate
amount in excess of Five Million Dollars ($5,000,000) at any time.
7.13 Negative Pledge Agreements. Permit the inclusion in any
contract to which it or a Subsidiary becomes a party of any provisions that
could restrict or invalidate the creation of a security interest in any of
Borrower's or such Subsidiary's property.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrowers under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations and does not cure such payment default within five business days;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Article
6 or violates any of the covenants contained in Article 7 of this Agreement; or
(b) If Borrower fails or neglects to perform or observe any
other material term, provision, condition, covenant 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 or covenant that can be cured, has failed to cure such
default within ten business days after Borrower receives notice thereof or any
Responsible Officer of Borrower becomes aware thereof; provided, however, that
if the default cannot by its nature be cured within the ten business day period
or cannot after diligent attempts by Borrower be cured within such ten 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 30 days unless otherwise agreed in writing by Bank) 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 but no Credit
Extensions will be made.
8.3 Material Adverse Effect. If there occurs any circumstance or
circumstances that could have a Material Adverse Effect;
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8.4 Attachment. If any material portion of a Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if a Borrower is
enjoined, restrained, or in anyway prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of a
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of a Borrower's material assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within ten (10) days after a Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by Borrowers (provided that no Credit Extensions will be required to be made
during such cure period);
8.5 Insolvency. If a Borrower becomes insolvent (i.e., Borrower is
unable to pay its obligations as they become due), or if an Insolvency
Proceeding is commenced by a Borrower, or if an Insolvency Proceeding is
commenced against a Borrower and is not dismissed or stayed within thirty (30)
days (provided that no Credit Extensions will be made prior to the dismissal of
such Insolvency Proceeding);
8.6 Other Agreements. If there is a default or other failure to perform
in any agreement to which a Borrower is a party or by which it is bound
resulting in a right by a third party or parties, whether or not exercised; to
accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand Dollars ($100,000); or which could have a Material Adverse
Effect;
8.7 Subordinate Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Five Hundred Thousand
Dollars ($500,000) shall be rendered against a Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
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9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may at its elections without notice of
its election and without demand do any one or more of the following, all of
which are authorized by each Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5, all Obligations shall become immediately due and payable without
any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower 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, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time
owing to or for the credit or the account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, 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 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Dispose of the Collateral by way of one or more contracts
or transactions, for cash or on terms; in such manner and at such places
(including Borrower's premises) as Bank determines is commercially reasonable,
and apply any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;
-23-
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, each Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as such
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
xxxx of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all
claims under and decisions with respect to Borrower's policies of insurance; (f)
settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; and (g) to file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral; provided Bank may exercise such power of attorney to sign the name
of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as each
Borrower's attorney in fact, and each and every one of Bank's rights and powers,
being coupled with an interest, is irrevocable until all of the Obligations have
been fully repaid and performed and Bank's obligation to provide Credit
Extensions hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to a
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Each Borrower shall collect all amounts owing to such Borrower for
Bank, receive in trust all payments as Bank's trustee, and immediately deliver
such payments to Bank in their original form as received from the account
debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If a Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following after reasonable notice to Borrowers: (a) make payment of the same or
any part thereof; (b) set up such reserves under a loan facility in Section 2.1
as Bank deems necessary to protect Bank from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type discussed in
Section 6.6 of this Agreement, and take any action with respect to such policies
as Bank deems prudent. Any amounts so paid or deposited by Bank shall constitute
Bank Expenses, shall be immediately due and payable, and shall bear interest at
the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or
-24-
fashion from any cause; (c) any diminution in the value thereof or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrowers except to the extent such loss, damage or
destruction was caused by Bank's gross negligence or misconduct.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on a Borrower's part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver, election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on behalf of
Bank and then shall be effective only in the specific instance and for the
specific purpose for which it was given.
9.7 Demand; Protest. Each Borrower waives demand, protest, notice
of protest, 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 at any time held by Bank on which a Borrower may in any way be
liable.
10. 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 Borrowers or to Bank, as the case may be, at its addresses
set forth below:
If to Borrowers: Quovadx, Inc. and
Xxxxxxxxxx.xxx Corporation
0000 Xxxxx Xxxxxxx'x Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxx, Chief Financial Officer
FAX: (000) 000-0000
with a copy to: Quovadx, Inc.
0000 Xxxxx Xxxxxxx'x Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn: General Counsel
FAX: (000) 000-0000
If to Bank: Comerica Bank
0000 X. Xx Xxxxxxx Xxxx., Xxxxx 0000
Xxxxxxxxx, XX 00000
-25-
Attn: Manager
FAX: (000) 000-0000
with a copy to: Comerica Bank
Technology & Life Sciences Division
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxx Xxxxxxxx,
Vice President & Regional Marketing Manager
FAX: (000) 000-0000
Notwithstanding the foregoing, notice sent to Borrowers in accordance
with this Section 10 shall be effective despite any failure to provide a copy of
such notice to Borrower's General Counsel. The parties hereto may change the
address at which they are to receive notices hereunder, by notice in writing in
the foregoing manner given to the other.
11. CHOICE OF LAW AND VENUE- JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. BORROWERS AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by a Borrower without Bank's prior written consent, which
consent may be granted or withheld in Bank's sole discretion. Bank shall have
the right without the consent of or notice to Borrowers to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.2 Indemnification. Each Borrower shall defend, indemnify and
hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and
-26-
liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Agreement; and (b) all losses or Bank Expenses
in any way suffered, incurred, or paid by Bank as a result of or in any way
arising out of, following, or consequential to transactions between Bank and a
Borrower whether under this Agreement, or otherwise (including without
limitation 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 set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for tire purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. Neither this Agreement nor
the Loan Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Agreement and the Loan
Documents, if any, are merged 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, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make Credit
Extensions to Borrowers. The obligations of each Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 12.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.
13. CO-BORROWER PROVISIONS.
13.1 Primary Obligation. This Agreement is a primary and original
obligation of each Borrower and shall remain in effect notwithstanding future
changes in conditions, including any change of law or any invalidity or
irregularity in the creation or acquisition of any Obligations or in the
execution or delivery of any agreement between Bank and any Borrower. Each
Borrower shall be liable for existing and future Obligations as fully as if all
of all Credit Extensions were advanced to such Borrower. Bank may rely on any
certificate or representation made by any Borrower as made on behalf of, and
binding on, all Borrowers, including without limitation Disbursement Request
Forms, Borrowing Base Certificates and Compliance Certificates.
-27-
13.2 Enforcement of Rights. Borrowers are jointly and severally
liable for the Obligations and Bank may proceed against one or more of the
Borrowers to enforce the Obligations without waiving its right to proceed
against any of the other Borrowers.
13.3 Borrowers as Agents. Each Borrower appoints the other Borrower
as its agent with all necessary power and authority to give and receive notices,
certificates or demands for and on behalf of both Borrowers, to act as
disbursing agent for receipt of any Credit Extensions on behalf of each Borrower
and to apply to Bank on behalf of each Borrower for Credit Extensions, any
waivers and any consents. This authorization cannot be revoked, and Bank need
not inquire as to each Borrower's authority to act for or on behalf of Borrower.
13.4 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 Obligations in connection with the Loan
Documents or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section 12.4 shall
be null and void. If any payment is made to a Borrower in contravention of this
Section 12.4, 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.
13.5 Waivers of Notice. Except as otherwise provided in this
Agreement, 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.
-28-
13.6 Subrogation Defenses. Each Borrower hereby waives any defense
based on impairment or destruction of its subrogation or other rights against
any other Borrower and waives all benefits which might otherwise be available to
it under California Civil Code Sections 2809, 2810, 2819, 2839, 2845, 2848,
2849, 2850, 2899, and 3433 and California Code of Civil Procedure Sections 580a,
580b, 580d and 726, as those statutory provisions are now in effect and
hereafter amended, and under any other similar statutes now and hereafter in
effect.
13.7 Right to Settle, Release.
(a) The liability of Borrowers 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, of
rights, if any, which Bank may now or hereafter have against any other Person,
including another Borrower, or property with respect to any of the Obligations.
(b) 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.
13.8 Subordination. All indebtedness of a Borrower now or hereafter
arising held by another Borrower is subordinated to the Obligations and the
Borrower holding the indebtedness shall take all actions reasonably requested by
Lender to effect, to enforce and to give notice of such subordination.
-29-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
QUOVADX, INC.
By: /s/ XXXX X. XXXXXXXXX
------------------------------------------------
Title: Executive Vice President, Finance and CFO
---------------------------------------------
XXXXXXXXXX.XXX CORPORATION
By: /s/ XXXX X. XXXXXXXXX
------------------------------------------------
Title: Vice President and Treasurer
---------------------------------------------
COMERICA BANK
By: /s/ XXXXXX XXX XXXXXXXX
------------------------------------------------
Title: Vice President
---------------------------------------------
DEBTOR QUOVADX, INC. & XXXXXXXXXX.XXX CORPORATION
SECURED PARTY: COMERICA BANK
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of each Borrower (herein referred to 'as
"Borrower" or "Debtor") whether presently existing or hereafter created or
acquired, and wherever located, including, but not limited to;
(a) all accounts (including health-care-insurance receivables), chattel
paper (including tangible and electronic chattel paper), deposit accounts,
payment intangibles, inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property, letter of credit rights, money, and all of
Debtor's books and records with respect to any of the foregoing, and the
computers and equipment containing said books and records; and
(b) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
Notwithstanding the foregoing, the Collateral shall not include (i) any
copyright rights, copyright applications, copyright registrations and like
protections in each work or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also constitutes a trade
secret, now or hereafter existing, created, acquired or held ("Copyrights"),
patents (issued or provisional), patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same ("Patents"),
trademarks, servicemarks and applications therefor, whether registered or not,
applications to register and, registrations of the same and like protections now
owned or hereafter acquired ("Trademarks"), any and all trade secrets, and any
and all intellectual property rights in computer software and computer software
products now or hereafter existing, created, acquired or held, any and all
design rights which may be available to a Debtor now or hereafter existing,
created, acquired or held, any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation, to xxx for and collect such damages for said use
or infringement of the intellectual property rights identified above, any claims
for damages by way of any past, present and future infringement of any of the
foregoing, all licenses or other rights to use any of the Copyrights, Patents or
Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights (collectively, the "Intellectual
Property"), or (ii) equity interests consisting of membership units in a limited
liability company or shares of restricted stock which are (a) subject to
restrictions on transfer or resale under the Securities Act of 1933, as amended,
and (b) not listed on a U.S. national securities exchange or quotation thereof
in an inter-dealer quotation system (collectively, the "Interests"); provided,
however, that the Collateral shall include all accounts and general intangibles
that consist of rights to payment and proceeds from the sale, licensing or
disposition of all or any part, or rights in, the Intellectual Property and the
Interests (the "Rights to Payment").
EXHIBIT B
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: QUOVADX, INC. & XXXXXXXXXX.XXX CORPORATION
Lender: Comerica Bank
Commitment Amount: $4,000,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ____________ $_________
2. Additions (please explain on reverse) $_________
3. TOTAL ACCOUNTS RECEIVABLE $_________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $__________
5. Balance of 20% over 90 day accounts $__________
6. Concentration Limits
7. Foreign Accounts $__________
8. Governmental Accounts $__________
9. Contra Accounts $__________
10. Demo Accounts $__________
11. Intercompany/Employee Accounts $__________
12. Other (please explain on reverse) $__________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_________
14. Eligible Accounts (#3 minus #13) $_________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $_________
BALANCES
16. Maximum Loan Amount $4,000,000
17. Total Funds Available [Lesser of #15 or #16] $_________
18. Present balance owing on Line of Credit (including Letters of Credit) $_________
19. RESERVE POSITION (#17 minus #18) $_________
20.
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the
Loan and
Security Agreement between the undersigned and Comerica Bank.
QUOVADX, INC. & XXXXXXXXXX.XXX CORPORATION
BY:
-----------------------------------------------
Authorized Signer
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: COMERICA BANK
FROM: QUOVADX, INC. & XXXXXXXXXX.XXX CORPORATION
The undersigned authorized officer(s) of each of QUOVADX, INC. &
XXXXXXXXXX.XXX CORPORATION hereby certify that in accordance with 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 of Borrower stated in the Agreement are true and correct as of the
date hereof Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
----------------------------------------------------- ---------------------------------- ---------------
10K (Audited) Within 5 days of filing with S.E.C. Yes
l0Q Within 5 days of filing with S.E.C. Yes No
Copies of all statements, reports and notices sent or Within 5 days of mailing Yes
made available generally by Borrower to its security
holders or to any holders of Subordinated Debt
A/R & A/P Agings, Borrowing Base Cert. Monthly within 30 days Yes No
A/R Audit Initial and Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
----------------------------------------------------- -------------------------- ----------- ---------------
At all times
Minimum Cash Maintained by Borrowers in accounts $15,000,000 ($14,000,000 $ Yes No
-------
with Comerica Bank and Comerica Securities, Inc. at Closing, $15,000,000
w/in 45 days of Closing)
Maximum combined cash and cash equivalents $5,000,000 $ Yes
-------
Measured on a Monthly Basis:
maintained at or with all of Borrowers'
Subsidiaries (measured on a consolidated basis)
Minimum Average Cash Maintained by Borrowers in $18,000,000 $ Yes No
-------
accounts with Comerica Bank and Comerica
Securities, Inc.
Comments Regarding Exceptions: See Attached. BANK USE ONLY
Sincerely, Received by:
-------------------------------------
AUTHORIZED SIGNER
-------------------------------------------
SIGNATURE
Date:
--------------------------------------------
-------------------------------------------
TITLE Verified:
----------------------------------------
AUTHORIZED SIGNER
Date:
------------------------------------------- --------------------------------------------
DATE
Compliance Status Yes No
SCHEDULE OF EXCEPTIONS
Permitted Indebtedness (Section 1.1)
Various Equipment leases aggregating less than One Hundred Thousand
Dollars ($100,000).
Three existing Xxxxx Fargo Letters of Credit totaling no more than
Seven Hundred Thousand Dollars ($700,000) in the aggregate; copies of which have
previously been provided to Bank.
Permitted Investments (Section 1.1)
Approximately $40 million in short term investments, interest and cash.
Permitted Liens (Section 1.1)
Liens arising out of purchase money security interests in the various
Equipment leases aggregating less than One Hundred Thousand Dollars ($100,000).
Inbound Licenses (Section 5.6)
Exclusive License Agreement, dated as of March 31, 2002, between
Madison Information Technologies, Inc. n/k/a Initiate Systems, Inc.
("Initiate")and Xxxxxxxxxx.xxx Corporation, pursuant to which Initiate obtained
an exclusive license to the Emerge(R) technology with all third-party
proprietary algorithms removed. This agreement was assigned to Quovadx, Inc.,
pursuant to the terms of an Assignment and Assumption Agreement, dated as of
November 1, 2002, between Xxxxxxxxx.xxx Corporation and Quovadx, Inc.
Prior Names: Location of Chief Executive Office (Section 5.7)
Quovadx has done business under the names XXxxx.xxx, Inc. and MPower
Corporation.
In addition to various computers used by our sales force, the following
are all of the locations where all Quovadx's Inventory and Equipment are
located:
1. 00000 Xxxxxx Xx., Xxxxx 0000, Xxxxxxxx Xxxxx, XX 00000
(Quovadx office)
2. 0000 Xxxxxxxxxx Xx., Xxx Xxxxxx, XX 00000 (Quovadx office)
3. 00 Xxxxxxxx Xx., Xxxxx 000, Xxxxxxxxxx, XX 00000 (Quovadx
office)
4. 0000 Xxxxxxx Xxx., Xxxxx 000, Xxxxxxx, XX 00000 (Quovadx
office)
5. 0000 X. Xxxxxxx'x Xxxxx Xx., Xxxxx 000X, 540 and 1000,
Xxxxxxxxx, XX 00000 (Quovadx office)
6. Regus Business Center, 0000 Xxxxx'x Xxxx., Xxxxx 000 xxx 000,
XxXxxx, XX 00000 (Quovadx office)
7. One Xxxxxxx Park; 0000 Xxxxxxxxxx Xxxx., Xxxxx 000, Xxxxxxx,
XX 00000 (Quovadx office)
8. 0000 Xxxxxxx Xxxxxx Xxxx. X.X., Xxxxx 000, Xxxxxxxxxxx, XX
00000 (Quovadx office)
9. 000 Xxxxxx Xx., Xxxxx 000, Xxx Xxxx, XX 00000 (Quovadx office)
10. 000 Xxxx Xxxxxx Xxxx Xxxx., Xxxxx 000, Xxxxxxxx, XX 00000
(Quovadx office)
11. 00000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, XX 00000 (Quovadx
office)
12. 0000 Xxxxx Xxxxxx, Xxxxx Xxxxx, XX 00000 (Cable & Wireless
facility)
Litigation (Section 5.8)
On November 14, 2001, a shareholder class action complaint was filed in
the United States District Court, Southern District of New York. On April 19,
2002, plaintiffs filed an amended complaint. The amended complaint asserts that
the prospectus from the Company's February 10, 2000 initial public offering
("IPO") failed to disclose certain alleged improper actions by various
underwriters for the offering in the allocation of the IPO shares. The amended
complaint alleges claims against certain underwriters, the Company and certain
officers and directors under the Securities Act of 1933 and the Securities
Exchange Act of 1934 (Bartula v. XXxxx.xxx, Inc., et al., Case No. 01-CV-10075).
Similar complaints have been filed concerning more than 300 other IPO's; all of
these cases have been coordinated as In re Initial Public Offering Securities
Litigation, 21 MC 92, In a negotiated agreement, individual defendants,
including all of the individuals named in the complaint filed against the
Company, were dismissed without prejudice, subject to a tolling agreement.
Issuer and underwriter defendants in these cases filed motions to dismiss and,
on February 19, 2003, the Court issued an opinion and order on those motions
that dismissed selected claims against certain defendants, including the Rule
l0b-5 fraud claims against the Company, leaving only the Section 11 strict
liability claims under the Securities Act of 1933 against the Company. A
committee of our Board of Directors has approved a settlement proposal made by
the plaintiffs, but the settlement is subject to a number of conditions. If the
settlement is not achieved, the Company will continue to aggressively defend the
claims. The Company believes it has meritorious defenses. We do not believe that
the outcome of this action will have a material adverse effect on our financial
position, results of operations or liquidity; however, litigation is inherently
uncertain and we can make no assurance as to the ultimate outcome or effect.
Subsidiaries (Section 5.14)
Subsidiaries of Quovadx, Inc.:
1. Outlaw Technologies, Inc., a Colorado corporation.
2. Quovadx Limited, a company formed under the laws of England
and Wales.
3. Xxxxxxxxxx.xxx Corporation, a Georgia corporation.
4. Confer Software, Inc., a
California corporation.
5. Integrated Media, Inc., a New York corporation.
6. Advica Health Resources, Inc., a Delaware corporation.
Accounts (Section 5.16)
Xxxxx Xxxxxx Short-term Money Market Portfolio - Account # EI-42234-XX
Xxxxx Fargo Capital Portfolio - Account # 00000000
Xxxxx Fargo Operating Account - Account # 2268018659
Xxxxx Fargo Collateral Account - Account # 00000000
Inventory and Equipment (Section 7.10)
Please see Schedule 5.7 above.
-2-
CORPORATE RESOLUTIONS TO BORROW
--------------------------------------------------------------------------------
BORROWER: QUOVADX, INC.
--------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of QUOVADX, INC.
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation, as amended, and the
Restated Bylaws of die Corporation, each of which is in full force and effect on
the date hereof.
I FURTHER CERTIFY that at a meeting of the Director of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITION ACTUAL SIGNATURES
Xxxx X. Xxxxxxxxx EVP, Finance and CFO /s/ XXXX X. XXXXXXXXX
-------------------------- ----------------------------- ----------------------------
Xxxxxx X. Xxxxxxx President and CEO /s/ XXXXXX XXXXXXX
-------------------------- ----------------------------- ----------------------------
-------------------------- ----------------------------- ----------------------------
-------------------------- ----------------------------- ----------------------------
-------------------------- ----------------------------- ----------------------------
acting for and on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered;
BORROW MONEY. To borrow from time to time from Comerica Bank ("Bank"),
on such terms as may be agreed upon between the officers, employees, or agents
of the Corporation and Bank, such sum or sums of money as in their judgment
should be borrowed, without limitation.
EXECUTE LOAN DOCUMENTS. To execute and deliver to Bank that certain
Loan and Security Agreement dated as of August 26, 2003 (the "Loan Agreement")
and any other agreement entered into between Corporation and Bank in connection
with the Loan Agreement, including any amendments, all as amended or extended
from time to time (collectively, with the Loan Agreement, the "Loan Documents"),
and also to execute and deliver to Bank one or, more renewals, extensions,
modifications, refinancings, consolidations, or substitutions for the Loan
Documents, or any portion thereof.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Documents, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Documents.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT. To execute letter of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and all
fees and costs, and to execute and deliver such other documents and agreements
as they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been, delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on August 26, 2003, and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED AND ATTESTED BY:
/s/ XXXX X. XXXXXXXXX
---------------------------------------------
-2-
CORPORATE RESOLUTIONS TO BORROW
--------------------------------------------------------------------------------
BORROWER: XXXXXXXXXX.XXX CORPORATION
--------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of XXXXXXXXXX.XXX
CORPORATION (the "Corporation"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of Georgia.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation, as amended, and the
Restated Bylaws of the Corporation, each of which is in full force and effect on
the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held, at which a quorum was present and voting (or
by other duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITION ACTUAL SIGNATURES
Xxxx X. Xxxxxxxxx VP and Treasurer /s/ XXXX X. XXXXXXXXX
-------------------------- ----------------------------- ----------------------------
Xxxxxx X. Xxxxxxx President /s/ XXXXXX XXXXXXX
-------------------------- ----------------------------- ----------------------------
-------------------------- ----------------------------- ----------------------------
-------------------------- ----------------------------- ----------------------------
-------------------------- ----------------------------- ----------------------------
acting for and on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Comerica Bank ("Bank"),
on such terms as may be agreed upon between the officers, employees, or agents
of the Corporation and Bank, such sum or sums of money as in their judgment
should be borrowed, without limitation.
EXECUTE LOAN DOCUMENTS. To execute and deliver to Bank that certain
Loan and Security Agreement dated as of August 26, 2003 (the "Loan Agreement")
and any other agreement entered into between Corporation and Bank in connection
with the Loan Agreement, including any amendments, all as amended or extended
from time to time (collectively, with the Loan Agreement, the "Loan Documents"),
and also to execute and deliver to Bank one or more renewals, extensions,
modifications; refinancings, consolidations, or substitutions for the Loan
Documents, or any portion thereof.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Documents, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Documents.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT. To execute letter of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and all
fees and costs, and to execute and deliver such other documents and agreements
as they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on August 26, 2003, and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED AND ATTESTED BY:
/s/ XXXX X. XXXXXXXXX
------------------------------------------
COMERICA BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
Name(s): QUOVADX, INC. & XXXXXXXXXX.XXX CORPORATION
Date: August 26, 2003
Amounts paid to others on your behalf:
$3,000 to Comerica Bank for Loan Fee *
* Payable annually on each anniversary of the Closing Date
$ to Comerica Bank for accounts receivable and collateral audit (estimate)
$ to Bank counsel fees and expenses
$ to ____________
S to ____________
$4,000,000 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as
the authorization for Comerica Bank to disburse the loan proceeds as stated
above.
/s/ XXXX X. XXXXXXXXX /s/ XXXXXX XXXXXXX
------------------------------------- -----------------------------------
Signature Signature
AGREEMENT TO PROVIDE INSURANCE
TO: COMERICA BANK Date: August 26, 2003
attn: Collateral Operations, M/C 4604
0000 Xxxxx Xx Xxxxxxx Xxxx, 00xx Xxxxx
Xxxxxxxxx, XX 00000
Borrowers: QUOVADX, INC. &
XXXXXXXXXX.XXX CORPORATION
In consideration of a loan in the amount of $4,000,000, secured by all
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force
during the term of the loan.
I/We also agree to advise the below named agent to add Comerica Bank as
lender's loss payable on the new or existing insurance policy, and to furnish
Bank at above address with a copy of said policy/endorsements and any subsequent
renewal policies. We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
(a) The amount of the loan, OR
(b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements on the
real property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of
Comerica Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent Xxxxx, Inc. Telephone No.: 000-000-0000
Agent's Address: 0000 00xx Xx. Xxxxx 0000, Xxxxxx, XX 00000
Signature of Obligor: /s/ XXXX X. XXXXXXXXX
--------------------------------
Signature of Obligor: /s/ XXXXXX XXXXXXX
-------------------------------
FOR BANK USE ONLY
INSURANCE VERIFICATION: Date:
------------------------------
Person Spoken to:
------------------------------------------
Policy Number:
---------------------------------------------
Effective From: To:
---------------- -------------------
Verified by:
----------------------------------------------
COMERICA BANK
MEMBER FDIC AUTOMATIC DEBIT AUTHORIZATION
REVOLVING FACILITY
To: COMERICA BANK
Re: Loan #
---------------------------------
You are hereby authorized and instructed to charge account No. ____________ in
the name of QUOVADX, INC. & XXXXXXXXXX.XXX CORPORATION
for principal and interest payments due on above referenced loan as set forth
below and credit the loan referenced above.
X Debit each interest payment as it becomes due according to
----- the terms of the note and any renewals or amendments thereof.
X Debit each principal payment as it becomes due according to
----- the terms of the note and any renewals or amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date
--------------------------------- ---------------------------------
/s/ XXXX X. XXXXXXXXX August 26, 2003
--------------------------------- ---------------------------------
--------------------------------- ---------------------------------
DEBTOR: QUOVADX, INC.
SECURED PARTY: COMERICA BANK
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO UCC-1 FINANCING STATEMENT
All personal property of each Borrower (herein referred to as
"Borrower" or "Debtor") whether presently existing or hereafter created or
acquired, and wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables), chattel
paper (including tangible and electronic chattel paper), deposit accounts,
payment intangibles, inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records; and
(b) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the
California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
Notwithstanding the foregoing, the Collateral shall not include any
copyright rights, copyright applications, copyright registrations and like
protections in each work or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also constitutes a trade
secret, now or hereafter existing, created, acquired or held ("Copyrights"),
patents (issued or provisional), patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same ("Patents"),
trademarks, servicemarks and applications therefor, whether registered or not,
applications to register and registrations of the same and like protections now
owned or hereafter acquired ("Trademarks"), any and all trade secrets, and any
and all intellectual property rights in computer software and computer software
products now or hereafter existing, created, acquired or held, any and all
design rights which may be available to a Debtor now or hereafter existing,
created, acquired or held, any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation, to xxx for and collect such damages for said use
or infringement of the intellectual property rights identified above, any claims
for damages by way of any past, present and future infringement of any of the
foregoing, all licenses or other rights to use any of the Copyrights, Patents
or Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights (collectively, the "'Intellectual
Property"); provided, however, that the Collateral shall include all accounts
and general intangibles that consist of rights to payment and proceeds from the
sale, licensing or disposition of all or any part, or rights in, the foregoing
(the "Rights to Payment").
DEBTOR: XXXXXXXXXX.XXX CORPORATION
SECURED PARTY: COMERICA BANK
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO UCC-1 FINANCING STATEMENT
All personal property of each Borrower (herein referred to as
"Borrower" or "Debtor") whether presently existing or hereafter created or
acquired, and wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables), chattel
paper (including tangible and electronic chattel paper), deposit accounts,
payment intangibles, inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property, letter of credit rights, money, and all of
Debtor's books and records with respect to any of the foregoing, and the
computers and equipment containing said books and records; and
(b) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the
California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
Notwithstanding the foregoing, the Collateral shall not include (i) any
copyright rights, copyright applications, copyright registrations and like
protections in each work or authorship and derivative work thereof, whether
published or unpublished and whether or not the same also constitutes a trade
secret, now or hereafter existing, created, acquired or held ("Copyrights"),
patents (issued or provisional), patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same ("Patents"),
trademarks; servicemarks and applications therefor, whether registered or not,
applications to register and registrations of the same and like protections now
owned or hereafter acquired ("Trademarks"), any and all trade secrets, and any
and all intellectual property rights in computer software and computer software
products now or hereafter existing, created, acquired or held, any and all
design rights which may be available to a Debtor now or hereafter existing,
created, acquired or held, any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation; to xxx for and collect such damages for said use
or infringement of the intellectual property rights identified above, any claims
for damages by way of any past, present and future infringement of any of the
foregoing, all licenses or other rights to use any of the Copyrights, Patents or
Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights (collectively, the "Intellectual
Property"), or (ii) equity interests consisting of membership units in a limited
liability company or shares of restricted stock which are (a) subject to
restrictions on transfer or resale under the Securities Act of 1933, as amended,
and (b) not listed on a U.S. national securities exchange or quotation thereof
in an inter-dealer quotation system (collectively, the "Interests"); provided,
however, that the Collateral shall include all accounts and general intangibles
that consist of rights to payment and proceeds from the sale, licensing or
disposition of all or any part, or rights in, the Intellectual Property and the
Interests (the "Rights to Payment").
