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EXHIBIT 2.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("SECURITY AGREEMENT") is made as of September
5, 2001 by MED-XS ASSET SERVICES, INC., an Ohio corporation ("DEBTOR") and Med
XS Solutions, Inc., an Ohio corporation ("GUARANTOR"), in favor of ▇▇▇▇▇▇▇▇.▇▇▇,
INC., a Delaware Corporation, ("SECURED PARTY"). All capitalized terms not
otherwise defined herein shall be accorded their meanings set forth in that
certain Purchase Agreement, dated as of the date hereof, by and between Debtor,
Secured Party, Neoforma Gar, Inc. and Guarantor (the "Purchase Agreement").
WHEREAS, this Security Agreement is entered into with respect to a
Promissory Note in the principal amount of $2,350,000 made by Debtor in favor of
the Secured Party of even date herewith (the "Promissory Note"); and
WHEREAS, to secure Debtor's obligation to pay Secured Party pursuant to
the Promissory Note, Debtor has agreed to grant a security interest in certain
of its collateral, and Guarantor has agreed to guaranty payment under the
Promissory Note of 50% of the outstanding amount due under the Promissory Note;
NOW, THEREFORE, in consideration of the covenants and promises
hereinafter set forth and other valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
1.1 "COLLATERAL." All of the assets, tangible or intangible of
Debtor, including all products and proceeds thereof as defined in the UCC, and
as more fully set forth on Exhibit A attached hereto.
1.2 "OBLIGATIONS." This Security Agreement secures the following:
(i) Debtor's obligation under the Purchase Agreement, the
Promissory Note and this Security Agreement;
(ii) the repayment of (a) any amounts that Secured Party may
advance or spend for the maintenance or preservation of the Collateral and (b)
any other expenditures that Secured Party may make under the provisions of this
Security Agreement or for the benefit of Debtor;
(iii) all amounts owed under any modifications, renewals or
extensions of any of the foregoing obligations; and
(iv) any of the foregoing that arises after the filing of a
petition by or against Debtor under the Bankruptcy Code, even if the obligations
do not accrue because of the automatic stay under Bankruptcy Code Section 362 or
otherwise.
This Security Agreement does not secure any obligation described
above which is secured by consensual lien on real property.
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1.3 "UCC." Any term used in the Uniform Commercial Code ("UCC")
and not defined in this Security Agreement has the meaning given to the term in
the UCC as in effect in the State of California.
2. GRANT OF SECURITY INTEREST. Debtor grants and pledges to Secured
Party a continuing security interest in all presently existing or arising
Collateral in order to secure prompt payment of any and all Obligations. Such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, to the extent that a security interest in such
Collateral can be perfected by the filing of a financing statement. Debtor shall
from time to time execute and deliver to Secured Party, at the request of
Secured Party, all financing statements and other documents that Secured Party
may reasonably request, inform satisfactory to Secured Party, to perfect and
continue Secured Party's security interests in the Collateral.
3. WARRANTIES, REPRESENTATIONS AND COVENANTS OF DEBTORS. Debtor
warrants, represents and covenants as follows:
3.1 TITLE TO AND TRANSFER OF COLLATERAL. Except for the security
interest granted hereby, Debtor has rights in or power to transfer the
Collateral, and title to the Collateral is free from any lien, security
interest, encumbrance or adverse claim thereon of any kind whatsoever. Debtor
shall notify Secured Party of, and shall indemnify and defend Secured Party and
the Collateral against, all claims and demand of all persons at any time
claiming the Collateral or any part thereof or any interest therein.
3.2 LOCATION OF COLLATERAL. All Collateral consisting of goods is
located as stated so in Exhibit A.
3.3 LOCATION, STATE OF INCORPORATION, AND NAME OF DEBTOR AND
GUARANTOR.
Debtor: (i) chief executive office is located in Mentor, Ohio;
(ii) state of incorporation is Ohio; and (iii) exact legal name is as set forth
in the first paragraph of this Security Agreement.
Guarantor: (i) chief executive office is located in Mentor, Ohio;
(ii) state of incorporation is Ohio; and (iii) exact legal name is as set forth
in the first paragraph of this Security Agreement.
3.4 NO TRANSFER OF COLLATERAL. Debtor shall not lease, sell,
convey, assign or in any manner transfer the Collateral without the prior
written consent of Secured Party.
3.5 LIMITATION ON USE OF COLLATERAL. The Collateral is not, and
shall not be, used or bought for personal, family or household purposes.
3.6 DEBTOR'S COVENANTS. Until the Obligations are satisfied in
full, Debtor shall: (i) preserve its corporate existence and not, in one
transaction or a series of related transactions, merge into or consolidate with
any other entity, or sell all or substantially all of its assets; (ii) not
change the state of its incorporation; and (iii) not change its corporate name
without providing Secured Party with 30 days' prior written notice.
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3.7 MAINTAIN LIENS. Debtor shall at all times maintain the liens
and security interests provided for hereunder as valid and perfected liens and
security interests in the Collateral hereby granted to Secured Party.
4. PERFECTION OF THE SECURITY INTEREST.
4.1 FILING OF FINANCING STATEMENT. Debtor authorizes Secured Party
to file a financing statement (the "FINANCING STATEMENT") describing the
Collateral as follows: "All of Debtor's assets now owned or hereafter acquired"
or as such lesser amount of assets as Secured Party may determine, and to file
any necessary or required continuations thereof. Debtor shall be liable for and
shall pay the cost of all filings or recordings of this Security Agreement or
any other document or instrument in all public offices whenever it is deemed by
Secured Party to be necessary or desirable.
4.2 PRESERVATION OF PRIORITY. Secured Party shall receive prior to
the Closing an official report from the Secretary of State of each state in
which Collateral is located (as set forth in Exhibit A), of the state in which
Debtor's chief executive officer is located, and of the state in which Debtor is
incorporated (the "SOS REPORTS") indicating that Secured Party's security
interest is prior to all other security interests or other interests reflected
in the report.
4.3 POSSESSION.
(i) Debtor shall have possession of the Collateral, except
where expressly otherwise provided in this Security Agreement or where Secured
Party chooses to perfect its security interest by possession in addition to the
filing of a financing statement.
(ii) Where Collateral is in the possession of a third party,
Debtor will join with Secured Party in notifying the third party of Secured
Party's security interest and will, prior to Closing, obtain an acknowledgment
from the third party that it is holding the Collateral for the benefit of
Secured Party.
4.4 MARKING OF CHATTEL PAPER. Debtor will not create any Chattel
Paper without placing a legend on the Chattel Paper acceptable to Secured Party
indicating that Secured Party has a security interest in the Chattel Paper.
5. POST-CLOSING COVENANTS AND RIGHTS CONCERNING THE COLLATERAL.
5.1 INSPECTION. The parties to this Security Agreement may inspect
any Collateral in the other party's possession, at any time upon reasonable
notice.
5.2 PERSONAL PROPERTY. The Collateral shall remain personal
property at all times. Debtor shall not affix any of the Collateral to any real
property in any manner which would change its nature from that of personal
property to real property or to a fixture.
5.3 SECURED PARTY'S COLLECTION RIGHTS. Secured Party shall have
the right at any time to enforce Debtor's rights against the account debtors and
obligors.
5.4 LIMITATIONS ON OBLIGATIONS CONCERNING MAINTENANCE OF
COLLATERAL.
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(i) Debtor has the risk of loss of the Collateral.
(ii) Secured Party has no duty to collect any income accruing
on the Collateral or to preserve any rights relating to the Collateral.
6. EVENTS OF DEFAULT. The occurrence of any of the following shall, at
the option of Secured Party, be an Event of Default:
6.1 If Debtor fails to pay, when due, any of the Obligations;
6.2 Debtor's failure to comply with any of the provisions or
covenants of, or the incorrectness of any representation or warranty contained
in, this Security Agreement, the Note, or in any of the other Obligations;
6.3 Transfer or disposition of any of the Collateral, except as
expressly permitted by this Security Agreement;
6.4 Attachment, execution or levy on any of the Collateral;
6.5 Debtor voluntarily or involuntarily become subject to any
proceeding under (i) the Bankruptcy Code or (ii) any similar remedy under state
statutory or common law;
6.6 Debtor shall fail to comply with, or become subject to any
administrative or judicial proceeding under any federal, state or local (i)
hazardous waste or environmental law, (ii) asset forfeiture or similar law which
can result in the forfeiture of property, or (iii) other law, where
noncompliance may have any significant effect on the Collateral; or
6.7 Secured Party shall receive at any time following the Closing
an SOS Report indicating that Secured Party's security interest is not prior to
all other security interests or other interests reflected in the report.
Upon the occurrence of any Event of Default, all obligations under the
Promissory Note will become immediately due and payable.
7. GUARANTY.
7.1 Guarantor acknowledges that neoforma would not otherwise enter
into the Purchase Agreement, and so hereby unconditionally and absolutely
guarantees the punctual and full payment when due, whether by acceleration or
otherwise, of fifty percent (50%) of outstanding balance of the Promissory Note.
7.2 Guarantor hereby waives notice of any default, demand, protest
and notice demand, protest of nonpayment and consents to any and all delays,
extensions of time, renewals, releases of any part of said Note which may be
granted or consented to by any holder of said Note with regard to the time of
payment or with respect to any other provision of said Promissory Note and
agrees that no action or the failure to act on the part of any holder hereof
shall in any way affect or impair the obligations of the undersigned or be
construed as a waiver by such
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holder of, or otherwise affect, his right to avail himself of any remedy
hereunder with the same force and effect as if the undersigned had expressly
consented to such action upon the part of such holder.
8. REMEDIES.
8.1 GENERAL. Upon any Event of Default, Secured Party may pursue
any remedy available at law (including those available under the provisions of
the UCC), or in equity to collect, enforce or satisfy any Obligations then
owing, whether by acceleration or otherwise.
8.2 CONCURRENT REMEDIES. Upon any Event of Default, Secured Party
shall have the right, in addition to any other legal or equitable right it may
have, and without prior notice or demand to Debtor, to pursue any of the
following remedies separately, successively or concurrently:
(i) File suit and obtain judgment and, in conjunction with any
action, Secured Party may seek any ancillary remedies provided by law, including
levy of attachment and garnishment.
(ii) Take possession of any Collateral if not already in its
possession without demand and without legal process. Upon Secured Party's
demand, Debtor will assemble and make the Collateral available to Secured Party
as it may direct. Debtor grants to Secured Party the right, for this purpose, to
enter into or on any premises where Collateral may be located.
(iii) Without taking possession, sell, lease or otherwise
dispose of the Collateral at public or private sale in accordance with the UCC.
(iv) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Debtor.
8.3 ASSUMPTION OF EXPENSES AND PAYMENTS. In connection with any
default by Debtor hereunder, Secured Party may incur expenses, including
reasonable attorneys' fees, legal expenses and costs, appropriate to the
exercise of any right or power under this Security Agreement, and make any
payment agreed to be made by Debtor hereunder and perform any obligation of
Debtor hereunder, without, however, any obligation to do so. Any costs, fees or
expenses incurred pursuant to this paragraph shall become a part of the
Obligations.
8.4 REMEDIES CUMULATIVE. The remedies of Secured Party under this
Security Agreement, the Note, and the other Obligations are cumulative, and the
exercise of any one or more of the remedies under the Note or any of the other
Obligations or the UCC shall not be construed as a waiver of any of the other
remedies of Secured Party, so long as any part of the Obligations remains
unsatisfied. The acceptance by Secured Party of this Security Agreement shall
not waive or impair any other security Secured Party may have or hereafter
acquire for the payment of the Obligations, nor shall the taking of any such
additional security waive or impair this Security Agreement, or any term,
covenant or condition herein contained, but Secured Party
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may resort to any security it may have in the order it may deem proper at its
sole discretion. Release of the Security Interest in the Collateral, or any part
thereof, shall not affect the liability of Debtor under the Obligations.
8.5 FORECLOSURE PROCEDURES.
(i) Secured Party shall give Debtor such notice of any private
or public sale as may be required by the UCC.
(ii) Secured Party has no obligation to clean-up or otherwise
prepare the Collateral for sale.
(iii) Secured Party has no obligation to attempt to satisfy
the Obligations by collecting it from any other person liable for them and
Secured Party may release, modify or waive any collateral provided by any other
person to secure any of the Obligations, all without affecting Secured Party's
rights against Debtor. Debtor waives any rights it may have to require Secured
Party to pursue any third person for any of the Obligations.
(iv) Secured Party may comply with any applicable state or
federal law requirements in connection with a disposition of the Collateral and
compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral.
(v) Secured Party may sell the Collateral without giving any
warranties as to the Collateral. Secured Party may specifically disclaim any
warranties of title or the like. This procedure will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral.
(vi) If Secured Party sells any of the Collateral upon credit,
Debtor will be credited only with payments actually made by the purchaser,
received by Secured Party and applied to the indebtedness of the Debtor. In the
event the purchaser fails to pay for the Collateral, Secured Party may resell
the Collateral and Debtor shall be credited with the proceeds of the sale.
(vii) In the event Secured Party purchases any of the
Collateral being sold, Secured Party may pay for the Collateral by crediting
some or all of the Obligations of the Debtor.
(viii) Secured Party has no obligation to marshal any assets
in favor of Debtor, or against or in payment of:
(a) the Note,
(b) any of the other Obligations, or
(c) any other obligation owed to Secured Party by Debtor or
any other person.
8.6 POWER OF ATTORNEY. Debtor authorizes Secured Party, and does
hereby make, constitute and appoint Secured Party, and any of its officers,
agents, successors or assigns with full power of substitution, as Debtor's true
and lawful attorney-in-fact, with power, in its own name or in the name of each
of, to, after the occurrence and during the continuance of
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an Event of Default, endorse any notes, checks, drafts, money orders, or other
instruments of payment (including payments payable under or in respect of any
policy of insurance) in respect of the Collateral that may come into possession
of Secured Party; to sign and endorse any UCC financing statement or any
invoice, freight or express ▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to the Collateral; to pay or
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; to demand, collect,
receipt for, compromise, settle and ▇▇▇ for monies due in respect of the
Collateral; and, generally, to do, at the option of Secured Party, and at
Debtor's expense, at any time, or from time to time, all acts and things which
Secured Party deems necessary to protect, preserve and realize upon the
Collateral and Secured Party's security interests therein in order to effect the
intent of this Agreement and of the Note all as fully and effectually as Debtor
might or could do; and Debtor each hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be outstanding.
9. SUBORDINATION.
9.1 Secured Party hereby agrees to subordinate the security
interest created by this Security Agreement to any security interest to be
granted to any third party nonaffiliated lender providing funds to NEWCO on
arm's length terms for the operations and business of Debtor upon the written
request of Debtor. Such subordination shall be in such form as any such lender
may require and in the event Secured Party does not execute such subordination
within Five (5) days of such request, Guarantor is hereby appointed as Secured
Party's attorney-in-fact to execute such subordination.
10. MISCELLANEOUS.
10.1 CONTINUATION OF SECURED PARTY'S RIGHTS. The Security
Interest, this Security Agreement, and Secured Party's rights hereunder shall
continue in full force and effect until the Obligations secured hereby are paid
in full, even if Debtor's obligation to pay the Obligations secured hereby, or
any portion thereof, is legally unenforceable. To the fullest extent permitted
by law, Debtor expressly waives any right that it may have to plead any statute
of limitation or repose as a defense to any demand or action with respect to the
Obligations.
10.2 FORM AND EFFECT OF WAIVERS. Waiver by Secured Party of any
term, covenant or condition under this Security Agreement, of any default by
Debtor hereunder, or any failure by Secured Party to insist upon strict
performance by Debtor of any term, covenant or condition contained in this
Security Agreement, shall be effective or binding on Secured Party only if made
in writing by Secured Party; no such waiver shall be implied from any omission
by Secured Party to take action with respect to any such term, covenant or
condition or default. No express written waiver of any term, covenant or
condition of this Security Agreement or default by Debtor shall affect any other
term, covenant or condition or any other default or cover any other time period
other than the application of any such term, covenant or condition to the matter
as to which a waiver has been given or the default or time period specified in
such express waiver.
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10.3 NOTICES. Any notices required by this Security Agreement
shall be deemed to be delivered when a record has been (a) deposited in any
United States postal box if postage is prepaid and the notice properly addressed
to the intended recipient; (b) received by facsimile; (c) received by email; or
(d) personally delivered, to the following addresses:
Debtor: ▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Guarantor: ▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Secured Party: ▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Either party hereto may change its mailing address at any time by
giving written notice of such change to the other party at least ten (10) days
prior to the date such change is to be effected in the manner provided herein
and, where required by law, by recording or filing a notice thereof with the
appropriate public official.
10.4 SEVERABILITY OF TERMS. If any term of this Security
Agreement, or the application thereof to any person or circumstance, shall, to
any extent, be declared invalid or unenforceable, the remainder of this Security
Agreement, or the application of such term to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each term of this Security Agreement shall be valid and enforceable
to the fullest extent permitted by law.
10.5 NO INTENT TO BENEFIT THIRD PARTIES. Neither the Debtor nor
the Secured Party intends by any provision of this Security Agreement to confer
any right, remedy or benefit upon any third party, and no third party shall have
any right to demand or receive any payment or information from Secured Party.
Debtor agree to indemnify Secured Party against, and to hold Secured Party
harmless from, all claims, demands, liabilities, losses, obligations, causes of
action, judgments, damages, costs and expenses of any nature (including without
limitation costs of suit and reasonable attorneys' fees) that Secured Party may
suffer or incur in connection with any threatened or actual claim, demand,
action or proceeding made, brought or pursued by any third party to the extent
the same is related in any way to this Security Agreement, the Note, or the
Collateral.
10.6 CONSTRUCTION OF AGREEMENT. The terms and provisions contained
herein shall, unless the context otherwise requires, have the meaning and be
construed as provided in the California UCC. Headings and captions in this
Security Agreement are included solely for ease of reference and are not be
referred to in construing this Security Agreement. Except as otherwise expressly
indicated, each reference in this Security Agreement to any particular paragraph
is to a paragraph in this Security Agreement.
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10.7 TIME OF ESSENCE. Time is strictly of the essence as to each
and every provision of this Security Agreement.
10.8 SUCCESSORS AND ASSIGNS. This Security Agreement shall bind
and shall inure to the benefit of the heirs, legatees, executors,
administrators, successors and assigns of Secured Party and shall bind all
persons who become bound as a debtor to this Security Agreement. Secured Party
does not consent to any assignment by Debtor except as expressly provided in
this Security Agreement. Secured Party may assign its rights and interests under
this Security Agreement. If an assignment is made by Secured Party, Debtor shall
render performance under this Security Agreement to the assignee. Debtor waive
and will not assert against any assignee any claims, defenses or set-offs which
Debtor could assert against Secured Party except defenses which cannot be
waived.
10.9 AMENDMENTS IN WRITING. This Security Agreement may not be
amended, modified or changed, nor shall any waiver of any provision hereof be
effective, except only by a written instrument signed by the party against whom
enforcement of any waiver, amendment, change, modification or discharge is
sought.
10.10 FURTHER ASSURANCES. Debtor agrees to execute any further
documents, and to take any further actions, reasonably requested by Secured
Party to evidence or perfect the security interest granted herein or to
effectuate the rights granted to Secured Party herein.
10.11 WAIVER OF NOTICE: GOVERNING LAW. DEBTOR HAS BEEN ADVISED BY
COUNSEL IN CONNECTION WITH THE EXECUTION AND DELIVERY OF THIS SECURITY
AGREEMENT, THE INCURRENCE OF THE OBLIGATIONS AND THE EXECUTION AND DELIVERY OF
ALL DOCUMENTS AND INSTRUMENTS EVIDENCING AND SECURING THE SAME. WITH SUCH
ADVICE, DEBTOR AND GUARANTOR EACH EXPRESSLY WAIVE ANY CLAIM IT MIGHT HAVE UNDER
THE CONSTITUTION AND LAWS OF THE UNITED STATES OR OF ANY STATE TO NOTICE AND AN
OPPORTUNITY TO BE HEARD PRIOR TO THE EXERCISE OF SECURED PARTY'S RIGHTS
HEREUNDER, AS SAID RIGHTS ARE SANCTIONED BY THE CALIFORNIA COMMERCIAL CODE. THIS
SECURITY AGREEMENT IS BEING EXECUTED AND DELIVERED AND IS INTENDED TO BE
PERFORMED IN THE STATE OF CALIFORNIA AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCEPT TO THE EXTENT THAT
THE UCC PROVIDES FOR THE APPLICATION OF THE LAW OF THE STATE OF DEBTORS'
INCORPORATION.
IN WITNESS WHEREOF, Debtor and Guarantor have executed and
delivered this Security Agreement to Secured Party as of the date first written
above.
MED-XS ASSET SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
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Its: President
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MED XS SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Its: President
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▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Its: President
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EXHIBIT A
DESCRIPTION OF COLLATERAL
AND
STATES WHERE COLLATERAL IS LOCATED
All assets wherever located and whether now owned or existing or hereafter
existing or acquired, including:
(i) all equipment;
(ii) all accounts receivable;
(iii) all inventory;
(iv) any and all monies, reserves, deposits, deposit accounts, securities,
cash, cash equivalents, balances, credits and interest and dividends on
any of the above;
(v) all chattel paper, contracts, contract rights and instruments;
(vi) all general intangibles and goodwill;
(vii) all furniture and fixtures and leasehold improvements;
(viii) all books, records and computer records in any way relating to the
above property;
(ix) any and all substitutes, renewals, improvements, replacements,
additions and proceeds of the above, including without limitation
proceeds of insurance policies.