SECURITY AGREEMENT
This Security Agreement (this "Agreement") is made as of April
28, 1999, between HealthCore Medical Solutions, Inc. (the "Secured Party") and
Adatom, Inc. (the "Debtor").
W I T N E S S E T H :
WHEREAS, the Secured Party and the Debtor have entered into a
certain Letter of Intent (the "Letter"), dated as of the date hereof, which
contemplates the merger of the Debtor with and into the Secured Party (the
"Merger");
WHEREAS, in accordance with the terms of the Letter, the
Secured Party and the Debtor have entered into a negotiable promissory note of
even date herewith (the "Note"), in the aggregate principal amount of Two
Hundred Fifty Thousand ($250,000) Dollars; and
WHEREAS, the Debtor desires to grant the Secured Party a
security interest in its assets to secure payment of all amounts due or to
become due under the Note (such amounts being the "Indebtedness"), upon the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of these premises and other
good and valuable consideration, the parties hereto agree as follows:
I. Certain Definitions
1.1 "Collateral" means all of those present or future assets,
real or personal, tangible or intangible, of the Debtor in which a security
interest is granted under Section 2.1 hereof.
1.2 "Event of Default" shall mean any Event of Default as
defined in the Note.
1.3 "UCC" means the Uniform Commercial Code as adopted and in
effect from time to time under the laws of the State of California.
II. Collateral
2.1 Grant of Security Interest. In order to secure the payment
in full of all Indebtedness of the Debtor to the Secured Party, the Debtor
hereby grants to the Secured Party a security interest in the Collateral,
consisting of: (i) all of the Debtor's accounts, equipment, inventory,
intellectual property rights, general intangibles, chattel paper, instruments,
documents and other property and assets (real or personal), whether presently
owned by the Debtor or hereafter acquired and wherever located; (ii) all of the
products and proceeds of all of the foregoing Collateral (including all proceeds
of insurance policies covering the Collateral) as well as all accessions,
additions, substitutions, replacements and increments thereto; and (iii) all
books and records, including, without limitation, customer lists, credit files,
computer programs, print-outs, and other computer materials and records of the
Debtor pertaining to any of the foregoing items described in clauses (i) and
(ii).
2.2 UCC Terms. As used herein, the terms accounts, equipment,
inventory, general intangibles, chattel paper, instruments, documents and
account debtor, shall have the respective meanings ascribed to the terms in the
UCC.
2.3 Continuing Perfection. The Debtor will perform any and all
steps requested by the Secured Party to create and maintain in the Secured
Party's favor a valid and perfected, first-priority security interest in the
Collateral, including, without limitation, the execution, delivery, filing and
recording of financing statements and any other documents necessary or desirable
to protect the Secured Party's interest in the Collateral or to enable the
Secured Party to enforce its rights or remedies hereunder. The Secured Party is
hereby appointed the Debtor's attorney-in-fact to do all acts and things which
the Secured Party may deem necessary to perfect and to continue the perfected
security interests and liens provided for in this Agreement, including, but not
limited to, executing financing statements on behalf of the Debtor. The Secured
Party shall provide notice to the Debtor of any financing statements that it
executes on behalf of the Debtor.
III. Representations, Covenants And Warranties
To induce the Secured Party to enter into this Agreement and
to make the loan evidenced by the Note, the Debtor represents covenants and
warrants to the Secured Party as follows:
3.1 Good Standing. The Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
3.2 Intellectual Property. Schedule 3.2 sets forth all
trademarks, trade names, patents and copyrights (or applications thereof) used
by the Debtor in connection with its businesses.
3.3 Collateral. There is no item of Collateral located outside
of the State of California, and all item of Collateral are owned by the Debtor
free and clear of any mortgage, lien, security interest, encumbrance or charge
of any character (other than the security interest granted hereunder).
3.4 Sales and Encumbrances. Without the prior written consent
of the Secured Party the Debtor shall not: (i) other than in the ordinary course
of business, sell, loan, lease, assign, transfer, convey or alienate the
Collateral or any portion thereof, or any interest therein; and (ii) suffer or
permit any mortgage, lien, security interest, encumbrance or charge of any
character upon or against the Collateral (other than the security interest
granted herein).
3.5 No Violation. The execution of this Agreement and the
Note, and the performance by the Debtor of its obligations hereunder and
thereunder, do not, at the date of execution hereof, violate the charter or
by-laws of the Debtor or any agreement or undertaking to which it is a party or
by which it is bound.
3.6 No Litigation. There are no judgments against the Debtor
as of the date of this Agreement and no material litigation or administrative
proceeding before any governmental body is presently pending now, or to the
knowledge of the Debtor threatened, against the Debtor or any of its property.
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3.7 Good Title. On the date of this Agreement, the Debtor has
good and valid title to all of its properties and assets, real, personal and
mixed, and none of said properties or assets is subject to any mortgage, pledge,
lien, security interest, encumbrance, charge or title retention or other
security agreement or arrangement of any character whatsoever.
3.8 Inspection. The Secured Party or its designated
representatives shall have the right, at any time or times during the Debtor's
usual business hours, to inspect the Collateral, all records related thereto
(and to make extracts from such records at the Debtor's expense) and the
premises upon which any of the Collateral is located, to discuss the Debtor's
affairs and finances with any officer or employee and to verify in any manner
the Secured Party deem reasonably advisable, the amount, quality, quantity,
value and condition of, or any other matter relating to, the Collateral.
3.9 Duty to Update. In the event that any of the
representations or warranties of the Debtor contained herein ceases to be true
in any respect, the Debtor shall immediately inform the Secured Party of such
situation and provide all details relating thereto.
IV. Remedies Upon Event of Default
Upon the occurrence of any Event of Default and during the
continuation thereof, or at any time thereafter, the Secured Party shall have
all rights and remedies of a secured party under the UCC or other applicable
statute or rule, and may, at its sole option, and without limitation to any
other permissible actions, take any one or more of the following actions:
4.1 Control of Accounts. (i) the Secured Party shall have the
right at any time and from time to time, without notice, to notify account
debtors of the Debtor to make payments to the Secured Party; to endorse all
items of payment which may come into its hands payable to the Debtor; to take
control of any cash or non-cash proceeds of accounts and of any returned or
repossessed goods; to compromise, extend or renew any account or deal with it as
it may deem advisable; to make exchanges, substitutions or surrenders of
Collateral and to notify the postal authorities to deliver all mail,
correspondence or parcels addressed to the Debtor to the Secured Party at such
address as the Secured Party may designate; and (ii) the Debtor hereby appoints
each of the Secured Party or its designee as attorney-in-fact to endorse the
Debtor's name on any checks, notes, acceptances, drafts or any other instrument
or document requiring said endorsement and to sign the Debtor's name on any
invoice or bills of lading relating to any account, or drafts against its
customers, or schedules or confirmatory assignment on accounts, or notices of
assignment, financing statements under the UCC, and other public records, and in
verification of accounts and in notices to account debtors.
4.2 Possession of Collateral. Proceed with or without judicial
process to take possession of all or any part of the Collateral, and the Debtor
agrees that upon receipt of notice of the Secured Party's intention to take
possession of all or any part of said Collateral, the Debtor will do everything
reasonably necessary to assemble the Collateral and make the same available to
the Secured Party at a place to be designated by the Secured Party. The Debtor
hereby waives any and all rights it may have, by statute, constitution or
otherwise to notice or a hearing to determine the probable cause of the Secured
Party to obtain possession, by court proceedings or otherwise, of the
Collateral.
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4.3 Methods Of Sale. So long as the Secured Party acts in a
commercially reasonable manner, the Secured Party may assign, transfer and
deliver at any time or from time to time the whole or any portion of the
Collateral or any rights or interest therein in accordance with the UCC, and
without limiting the scope of the Secured Party's rights thereunder, the Secured
Party may sell the Collateral at public or private sale, or in any other manner,
at such price or prices as the Secured Party may deem best, and either for cash
or credit, or for future delivery, at the option of the Secured Party, in bulk
or in parcels and with or without having the Collateral at the sale or other
disposition. The Secured Party shall have the right to conduct such sales for
the Debtor's account on the Debtor's premises or elsewhere and shall have the
right to use the Debtor's premises without charge for such sales for such time
or times as the Secured Party may see fit. In connection with the exercise of
the Secured Party's rights and remedies under this Section 5, the Secured Party
is hereby granted a license or other right to use, without charge, the Debtor's
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in advertising for sale and selling any Collateral
and the Debtor's rights under all licenses shall inure to the Secured Party's
benefit. The Debtor agrees that a reasonable means of disposition of accounts
shall be for the Secured Party to hold and liquidate any and all accounts. In
the event of a sale of the Collateral, or any other disposition thereof, the
Secured Party shall apply all proceeds first to all costs and expenses of
disposition, including attorneys' fees, and then to the Indebtedness of the
Debtor to the Secured Party.
4.4 Attorneys' Fees And Expenses. The Secured Party may
include to the Indebtedness of the Debtor the Secured Party's expenses to obtain
or enforce payment of any Indebtedness and to exercise any of its other rights
under the Note, including, without limitation, reasonable fees and expenses of
counsel.
V. Miscellaneous
5.1 Entire Agreement. This Agreement represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all prior agreements and understandings between the
parties with respect thereto.
5.2 No Waiver. The Debtor agrees that no delay on the part of
the Secured Party in exercising any power or right hereunder or under the Letter
or the Note shall operate as a waiver of any such power or right, preclude any
other or further exercise thereof, or the exercise of any other power or right.
No waiver of any provision of any this Agreement shall be valid unless in a
writing signed by the party entitled to the benefit of such provision.
5.3 Certain Actions; Exculpation; Amendment. The Secured Party
shall not have any liability to the Debtor for any action taken in its capacity
as Secured Party in the exercise of its remedies hereunder, except, where
applicable, to the extent the Secured Party fails to act in a commercially
reasonable manner (i.e., in accordance with the applicable provisions of the
UCC). Any amendment to this Agreement must be set forth in a writing executed by
each of the parties hereto.
5.4 Waiver of Notice. The Debtor waives presentment, dishonor
and notice of dishonor, protest and notice of protest by the Secured Party.
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5.5 Governing Law. This Agreement and the rights of the
parties hereto shall be governed by and construed solely in accordance with the
internal laws of the State of New York, except to the extent the UCC is
applicable.
5.6 Jurisdiction. The Debtor hereby irrevocably consents to
the nonexclusive jurisdiction of the Courts of the State of New York or any
Federal Court in such State in connection with any action or proceeding arising
out of or related to this Agreement or the Note. In any such litigation, the
Debtor waives personal service of any summons, complaint or other process and
agrees that service of any summons, complaint or other process may be made by
certified or registered mail to it, at the address provided herein. THE DEBTOR
WAIVES TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE NOTE.
5.7 Successors or Assigns. This Agreement and the Note shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, successors and assigns. This Agreement may not
be assigned by the parties hereto, provided, however, that the Secured Party may
assign this Agreement to any person or entity (or person or entity affiliated
therewith) to whom the Secured Party concurrently assigns the Note.
5.8 Rights Cumulative. The rights and remedies expressed
herein or in the Note to be vested in or conferred upon the Secured Party shall
be cumulative and shall be in addition to and not in substitution for or in
derogation of the rights and remedies conferred upon secured creditors by the
UCC or any other applicable law.
5.9 Notification of Disposition of Collateral. Any
notification of a sale or other disposition of the Collateral or of any other
action by the Secured Party required to be given by the Secured Party to the
Debtor will be sufficient if given personally or mailed to the Debtor, by
registered or certified mail (return receipt requested), to the address set
forth for the Debtor in Section 5.10 hereof, not less than five (5) days prior
to the day on which such sales or other disposition will be made and such
notification shall be deemed reasonable notice.
5.10 Address For Notice. All notices and other communications
hereunder shall be of no force or effect unless in writing and shall be deemed
given when delivered personally (including by express courier) or, if mailed by
registered or certified mail (return receipt requested), five (5) days after
having been so mailed, to the parties at their respective addresses set forth
below (or at such other address for a party as shall be specified by like
notice):
If to the Secured Party:
HealthCore Medical Solutions, Inc.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, President
with a copy to:
Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
0
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx, Esq.
If to the Debtor:
Adatom, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, President
with a copy to:
McCutchen, Doyle, Xxxxx & Enersen, LLP
Three Embarcadero Center
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Xx., Esq.
5.11 Titles. The titles and headings indicated herein are
inserted for convenience only and shall not be considered a part of this
Agreement or in any way limit the construction or interpretation of this
Agreement.
5.12 Counterparts. This Agreement may be signed in one or more
counterparts which, taken together, shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
HEALTHCORE MEDICAL SOLUTIONS, INC.
By: /s/ Xxxx Xxxxx
------------------------------------
Xxxx Xxxxx, President & CEO
ADATOM, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx, President
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