1
Exhibit 10.1
SECURED TERM NOTE
$10,000,000.00 SEPTEMBER 11, 2000
FOR VALUE RECEIVED, and intending to be legally bound, the undersigned,
THE TRIZETTO GROUP, INC., a Delaware corporation ("TriZetto"), CREATIVE BUSINESS
SOLUTIONS, INC., a Texas corporation ("CBS"), ELBEJAY ACQUISITION CORP., a
Delaware corporation ("LBJ"), FINSERV HEALTH CARE SYSTEMS, INC., a New York
corporation ("Finserv"); HEALTHCARE MEDIA ENTERPRISES, INC., a Delaware
corporation ("HME") HEALTHWEB, INC., a Delaware corporation ("HealthWeb");
MARGOLIS HEALTH ENTERPRISES, INC., a California corporation ("Margolis");
NOVALIS CORPORATION, a Delaware corporation ("Novalis"); TRIZETTO APPLICATION
SERVICES, INC., a Colorado corporation ("TriZetto Application"); HEALTHCARE
MEDIA PRIVATE LIMITED, an India company and subsidiary of HME ("HMP"); DIGITAL
INSURANCE SYSTEMS CORPORATION, an Ohio corporation ("Digital"); HEALTH NETWORKS
OF AMERICA, INC., a Maryland corporation ("Health Networks"); NOVALIS
DEVELOPMENT CORPORATION, a Delaware corporation ("Novalis Development"); NOVALIS
DEVELOPMENT & LICENSING CORPORATION, an Indiana corporation ("Novalis
Licensing"); NOVALIS SERVICES CORPORATION, a Delaware corporation ("Novalis
Services" and collectively with TriZetto, CBS, LBJ, Finserv, HME, HealthWeb,
Margolis, Novalis, TriZetto Application, HMP, Digital, Health Networks, Novalis
Development, and Novalis Licensing, the "Borrower"), jointly and severally,
promise to pay, in lawful money of the United States, to the order of HELLER
HEALTHCARE FINANCE, INC., a Delaware corporation, its successors and assigns
("Lender"), the principal sum of TEN MILLION AND 00/100 DOLLARS
($10,000,000.00), or so much of such sum as shall have been advanced by Lender
(the "Principal Sum") in accordance with the terms of this Secured Term Note
(the "Note"), together with interest and other fees as further set forth in this
Note, to be paid in accordance with the terms set forth below.
1. Principal and Interest.
a. If not sooner repaid, Borrower promises to pay to Lender the
entire Principal Sum on the earlier to occur of (i) November 30, 2000 and (ii)
the date on which the Acquisition is consummated (such payoff date referred to
as the "Maturity Date"). For purposes of this Note, the "Acquisition" shall mean
that certain merger of LBJ, which is a wholly-owned subsidiary of TriZetto, with
and into ERISCO Managed Care Technologies, Inc., a New York corporation
("ERISCO"), pursuant to that certain Agreement and Plan of Reorganization, dated
May 16, 2000 (the "Merger Agreement") among TriZetto, LBJ, IMS Health
Incorporated, and ERISCO.
b. In addition to the repayment of the Principal Sum, Borrower
promises to pay to Lender interest on the Principal Sum on a monthly basis from
the date of this Note until the Maturity Date. Interest shall be at a
fluctuating rate per annum compounded daily (on the basis of the actual number
of days elapsed over a year of 360 days) equal to LIBOR plus three
1
2
percent (LIBOR plus 3%) (the "Base Rate"), provided that after an Event of
Default (as defined below) such rate shall be equal to the Base Rate plus five
percent (5%) (the "Default Interest Rate"). For purposes of the foregoing, the
term "LIBOR" means that rate of interest (rounded to the nearest 1/8 of 1% or,
if there is no nearest 1/8 of 1%, the next higher 1/8 of 1%) at which deposits
of U.S. dollars are offered to Lender (or to a bank designated by Lender) by
prime banks in the London interbank foreign currency deposits market, as the
rate may from time to time fluctuate. Accrued interest shall be payable monthly
in arrears on the last Business Day (as defined below) of each month from
September 30, 2000 and continuing through and including the Maturity Date. After
maturity, and until the entire Principal Sum plus any other amount due and
unpaid shall be paid in full, without limiting any of Lender's other rights and
remedies, all outstanding amounts of the Principal Sum shall bear interest,
payable on demand, at the Default Interest Rate, but in no event shall the
interest payable exceed the maximum lawful rate.
c. Repayment of Borrower's obligations under this Note is secured
by, among other things, the Collateral defined and described in Section 7 of
this Note.
2. Fees.
a. In consideration for the extension of credit by Lender as
evidenced by this Note, Borrower shall pay to Lender a commitment fee (the
"Commitment Fee") in the amount of One Hundred Thousand and No/100 Dollars
($100,000.00), which Commitment Fee shall be payable as follows: (i) Fifty
Thousand and No/100 Dollars ($50,000) shall be paid to Lender by Borrower on the
date of this Note and (ii) Fifty Thousand and No/100 Dollars ($50,000) shall be
paid to Lender by Borrower on the earlier to occur of the (A) Maturity Date, or
(B) the date on which Borrower prepays all of the obligations under this Note
(whether the payment is voluntary or as a result of acceleration of the
obligations as provided for under this Note); provided, however, if and only if
the Merger Agreement is consummated on or prior to November 30, 2000 or the date
on which Borrower prepays all of the obligations under this Note and terminates
this Note (other than in the event of acceleration hereunder), the portion of
the Commitment Fee payable under (ii) above shall be paid by Borrower within
three (3) Business Days after the approval by Lender's credit committee of that
certain Loan and Security Agreement by and between Borrower and Lender of even
date with this Note, pursuant to which Borrower and Lender have entered into a
revolving credit arrangement in a principal amount not to exceed $15,000,000
(the "Revolving Loan Agreement") which approval will not occur until after
consummation of the Acquisition pursuant to the terms of the Revolving Loan
Agreement. Any payment of either (i) or (ii) above shall be made to Lender in
immediately available funds to an account designated by Lender. Lender hereby
reserves the right to charge the portion of the Commitment Fee described in (ii)
above so that it constitutes a portion of the Obligations under (and as defined
in) the Revolving Loan Agreement evidenced by the Note (as defined in the
Revolving Loan Agreement) and secured by the Revolving Loan Agreement and other
Loan Documents under ( and as defined in) the Revolving Loan Agreement. Borrower
hereby authorizes Lender to deduct the portion of the Commitment Fee described
in (ii) above from the proceeds of the first Revolving Credit Loan under (and as
defined in) the Revolving Loan Agreement.
2
3
b. Borrower acknowledges and agrees that the financing provided
by Lender pursuant to this Note is essential to Borrower in financing its
business operations. Accordingly, in consideration thereof and as a material
inducement to Lender to make the loan evidenced by this Note (the "Loan"),
Borrower shall pay to Lender an exit financing fee (the "Exit Financing Fee")
equal to, as applicable, (i) One Hundred Thousand and No/100 Dollars ($100,000)
if Borrower does not make any borrowings (i.e. draws) under this Note at any
time during the term of this Note, (ii) One Hundred and Fifty Thousand and
No/100 Dollars ($150,000) if at any time during the term of this Note, the
aggregate gross borrowings (i.e. draws) under this Note (including without
limitation principal and interest and irrespective of any payments made by
Borrower) are greater than zero ($0) and less than or equal to Five Million and
No/100 Dollars ($5,000,000.00), or (iii) Two Hundred and Fifty Thousand and
No/100 Dollars ($250,000) if at any time during the term of this Note, the
aggregate gross borrowings (i.e. draws) under this Note (including without
limitation principal and interest and irrespective of any payments made by
Borrower) are greater than Five Million and No/100 Dollars ($5,000,000.00). The
breakdown of the Exit Financing Fees are set forth on the following schedule:
Aggregate Draws Fee
--------------- --------
$0 $100,000
$1-$5,000,000 $150,000
>$5,000,000 $250,000
The Exit Financing Fee shall be due and payable on the earlier to occur of (i)
the Maturity Date and (ii) the date on which Borrower prepays all of the
obligations under this Note (whether the payment is voluntary or as a result of
acceleration of the obligations as provided for under this Note).
3. Additional Payments. Borrower further promises to pay to Lender,
immediately upon demand any and all other sums and charges that may at the time
become due and payable under this Note, and all reasonable costs and
disbursements in connection with the preparation of this Note (including without
limitation reasonable attorneys' fees (both in-house and outside counsel, as
applicable), audit fees and search fees), and in the collection of any payments
due under this Note and in any action, suit or proceeding to protect, sustain or
enforce the rights and remedies of Lender under this Note. The deposit of
$25,000 shall be credited towards the payment of such preparation fees. If
Lender uses in-house counsel for any of these purposes (i.e., for any task in
connection with the enforcement, protection or preservation of any right or
claim of Lender and the collection of any amounts due under its Loan Documents),
Borrower further agrees that its obligations under this Note and under the Loan
Documents include reasonable charges for such work commensurate with the fees
that would otherwise be charged by outside legal counsel selected by Lender for
the work performed. Borrower shall pay all taxes (other than taxes based upon or
measured by Lender's income or revenues or any personal property tax), if any,
in connection with the issuance of the Note and the recording of the security
documents therefor. The obligations of Borrower under this Section 3 shall
survive the payment of Borrower's indebtedness under this Note and the
termination of this Note.
3
4
4. Conditions to Borrowing; Prepayment; Loan Administration.
a. Subject to the terms and conditions of this Note, Lender shall
make available to Borrower the initial advance of the portion of the Principal
Sum requested by Borrower in accordance with Section 4(a)(v) below in
immediately available funds not later than 12:00 Noon (Maryland time) on the
Business Day on which the following conditions precedent are satisfied:
(i) Borrower shall have executed and delivered to Lender the
following documents (collectively, the "Loan Documents"):
(A) Note. This Note;
(B) Lockbox Agreement. The Lockbox Agreement (as
defined in Section 4(j));
(C) Resolutions; Company Documents. A certificate of
the secretary of each entity comprising Borrower ("Secretary's Certificate") of
the borrowing certifying: (i) Resolutions of Borrower or other evidence
reasonably satisfactory to Lender that the borrowing of the Loan and the
execution, delivery and performance of the Loan Documents have been duly and
properly authorized by all necessary action (the "Resolutions"); (ii) the names
and signatures of the officers of such parties authorized to execute documents
on its behalf in connection herewith; (iii) the certificate of incorporation (or
articles of incorporation, as applicable) and bylaws of Borrower, with any
amendments to any of the foregoing, (iv) good standing certificates showing each
entity comprising Borrower in good standing in its state of incorporation and in
each other state in which it is doing business and currently intends to do
business for which qualification is required except for such locations where
failure to qualify could not have a Material Adverse Effect (provided, Lender
agrees to accept qualifications from other states after the Closing if and only
if Borrower provides such qualifications after closing and Borrower continues to
diligently pursue such qualifications), and (v) all other documents necessary
for performance of the obligations of Borrower under the Loan Documents;
(notwithstanding the foregoing in this subparagraph (C), with respect to any
entity comprising Borrower which has aggregate assets worth less than $100,000,
the documents required to be provided under this subparagraph (C) may be
delivered within twenty-five (25) calendar days after the date hereof unless
otherwise waived by Lender);
(D) Opinion. A written opinion of counsel for Borrower
as to the due execution, validity and enforceability of the Loan Documents and
otherwise in a form reasonably satisfactory to Lender;
(E) CFO Certificate. A certificate of the chief
financial officer of each entity comprising Borrower, dated the Closing Date,
certifying that all of the conditions specified in this Section 4 have been
fulfilled;
(F) Revolver. The Revolving Loan Agreement and all
schedules and exhibits thereto;
4
5
(G) Other Items. All financing statements and other
documents, certificates and agreements deemed reasonably necessary or
appropriate by Lender to effectuate the transaction;
(ii) All representations, warranties and covenants contained
in this Note or otherwise made in writing in connection with this Note or the
other Loan Documents by or on behalf of Borrower shall be true and correct in
all material respects.
(iii) No Event of Default or any event that, with the giving
of notice or the passage of time or both, could be a default or an Event of
Default, shall have occurred or be continuing under this Note or any other Loan
Documents.
(iv) Lender shall have received Uniform Commercial Code
("UCC"), judgment and tax lien searches with the Secretary of State and local
filing offices of each jurisdiction where Borrower maintains a place of
business, which searches yield results consistent with the representations and
warranties contained in this Note.
(v) Lender shall have confirmed that the initial advance
shall not exceed a borrowing base (the "Borrowing Base") equal to eighty five
percent (85%) of Qualified Accounts (as defined in the Revolving Loan Agreement)
due and owing from any Account Debtor (as defined herein); provided, however,
subsection (b) of the definition of Qualified Accounts in the Revolving Loan
Agreement, for purposes of defining Qualified Accounts under this Note only
shall be replaced with the following: "(b) the Account remains unpaid more than
one hundred and twenty (120) calendar days past the claim or invoice date (but
in no event more than one hundred and thirty five (135) calendar days after the
applicable Healthcare Services have been rendered) other than twenty five
percent (25%) of the aggregate of such Accounts which remain unpaid more than
one hundred and twenty (120) calendar days past the claim or invoice date which
shall be deemed as Qualified Accounts hereunder (provided that such Accounts are
otherwise (and meet all of the conditions of) Qualified Accounts as defined and
set forth herein)". After the initial advance, Lender shall have the right to
monitor the collateral (as set forth herein) to ensure that the Loan hereunder
does not exceed the Borrowing Base.
b. Subject to the terms and conditions of this Note, Lender shall
make available to Borrower subsequent advances of the portion of the Principal
Sum requested by Borrower in accordance with Section 4(b)(iii) below in
immediately available funds not later than 12:00 Noon (Maryland time) on the
Business Day on which the following conditions precedent are satisfied:
(i) All representations, warranties and covenants contained
in this Note or otherwise made in writing in connection with this Note or the
other Loan Documents by or on behalf of Borrower shall be true and correct in
all material respects (except to the extent that any such representations and
warranties speak solely to a specified date or are affected by transactions
occurring after the date hereof and specifically permitted hereunder).
5
6
(ii) No Event of Default or any event that, with the giving
of notice or the passage of time or both, could be a default or an Event of
Default, shall have occurred or be continuing under this Note or any other Loan
Documents.
(iii) Borrower may request such additional advances by
delivering a request for a Loan hereunder (subject to availability under the
Borrowing Base as set forth in Borrowing Base certificates) in the following
manner: (A) Borrower may give Lender notice of its intention to borrow, in which
notice Borrower shall specify the amount of the proposed borrowing and the
proposed borrowing date, not later than 2:00 p.m. Eastern time two (2) Business
Days advance notice before the proposed borrowing date; and (B) the becoming due
of any amount required to be paid under this Note, whether as interest or for
any other obligation under this Note, shall be deemed irrevocably to be a
request for an additional advance under this Note on the day following the due
date in the amount required to pay such interest or other obligation hereunder
if such was not paid by Borrower on the due date.
c. Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each additional advance requested under this Note, or deemed to be
requested under this Note, as follows: (x) the proceeds of each such advance
requested under subpart (A) of Section 4(b)(iii) shall be disbursed by Lender by
wire transfer to such bank account as may be agreed upon by Borrower and Lender
from time to time or elsewhere if pursuant to written direction from Borrower;
and (y) the proceeds of each such advance deemed to be requested under subpart
(B) or Section 4(b)(iii) shall be disbursed by Lender by way of direct payment
of the relevant interest or other obligation. If any advance made by Lender in
excess of the Borrowing Base shall exist at any time, Borrower shall, as soon as
possible upon demand (not to exceed two (2) Business Days), repay such
overadvance. As set forth above in Section 4(a), Lender may further adjust the
Borrowing Base by applying liquidity factors (as described in the Revolving Loan
Agreement).
d. Lender shall enter all advances of the Principal Sum as debits
to a loan account in the name of Borrower and shall also record as credits in
the loan account all payments made by Borrower and all proceeds of Collateral
that are indefeasibly paid to Lender, and may record in the loan account, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to Borrower,
with respect to the extension of credit contemplated by this Note. Such
accounting rendered by Lender shall be deemed final, binding and conclusive upon
Borrower, absent manifest error, unless Lender is notified by Borrower in
writing to the contrary within thirty (30) calendar days of the date each
accounting is mailed to Borrower. Such notice shall be deemed an objection to
those items specifically objected to in the notice. All advances (including
without limitation the initial advance and all subsequent advances) and other
extensions of credit to or for the benefit of Borrower shall constitute one
general obligation of Borrower, and shall be secured by Lender's lien upon all
of the Collateral.
e. Lender will account to Borrower monthly with a statement of
advances, charges and payments made pursuant to this Note, and the account
rendered by Lender shall be deemed final, binding and conclusive upon Borrower
absent manifest error.
6
7
f. All outstanding principal, interest, fees and other amounts
due under this Note must be indefeasibly satisfied in full prior to any advances
under the Revolving Loan Agreement.
g. Borrower may prepay all or any part of the Principal Sum
outstanding (inclusive of the Commitment Fee and the Exit Financing Fee if the
Principal Sum is repaid in full) without penalty, together with all interest
accrued on the Principal Sum and all other sums that are payable pursuant to
this Note.
h. By completing the closing under this Note, or by making
advances under this Note, Lender does not waive a breach of any representation,
warranty or covenant of Borrower under this Note or under any other Loan
Documents, and all of Lender's claims and rights resulting from any breach or
misrepresentation by Borrower are specifically reserved by Lender.
i. Within five (5) Business Days after the end of each calendar
month, Borrower shall prepare and submit to Lender a Borrowing Base as of the
end of the preceding month. Lender shall calculate Qualified Accounts as of such
date and determine whether any shortfall exists as of such date. If a shortfall
is found to exist, the amount of such shortfall shall be considered as an
overadvance, and Borrower shall be required to repay such overadvance within two
(2) Business Days after Lender notifies Borrower, in writing, of such
overadvance.
j. (A) Borrower shall maintain Lockbox Accounts (collectively,
the "Lockbox Account") with Bank One Colorado (the "Lockbox Bank"), subject to
the provisions of this Note, and shall execute with the Lockbox Bank a Lockbox
Agreement in the form attached as Exhibit A, and such other agreements related
thereto as Lender may require (collectively, the "Lockbox Agreement"). Borrower
shall ensure that all collections of Accounts are paid directly from Account
Debtors into the Lockbox (as defined in the Lockbox Agreement) for transfer into
the Lockbox Account and that all funds paid into the Lockbox and Lockbox Account
are immediately transferred into a depository account maintained by Lender at
Bank One, N.A., or such other financial institution as determined by Lender in
its sole discretion, by written notice to Borrower and the Lockbox Bank (the
"Concentration Account"). Until such time as a Springing Lockbox Event (as
defined herein) has occurred under this Note, Lender shall transfer all funds
from the Concentration Account to an account designated in writing by Borrower
(the "Borrower Operating Account"). As of the date of this Agreement, the
Borrower Operating Account shall be the following account: Bank One, Colorado,
N.A., Account Number 283237533. Upon the occurrence of a Springing Lockbox
Event, Lender shall notify Borrower in writing that a Springing Lockbox Event
has occurred under this Note (such notice referred to as the "Default Notice")
and Lender shall simultaneously cease transferring funds Lender receives from
the Lockbox to the Borrower Operating Account, and after such Springing Lockbox
Event, all collections of Accounts and other funds paid into the Lockbox Account
(as provided in the Lockbox Agreement) shall be retained by Lender (and utilized
as set forth below) until such time as the Springing Lockbox Event is cured to
the satisfaction of Lender. Upon the occurrence and the continuation of a
Springing Lockbox Event, Lender shall apply, on a daily basis, all funds
transferred into the Concentration Account pursuant to this Section 4(j) to
reduce the outstanding indebtedness under this Note (in accordance with Section
4(d)) with future
7
8
advances and other extensions of credit to be made by Lender under the
conditions set forth in this Section 4. To the extent that any collections of
Accounts or proceeds of other Collateral are not sent directly to the Lockbox
but are received by Borrower (whether or not a Springing Lockbox Event has
occurred), such collections shall be held in trust for the benefit of Lender and
immediately remitted, in the form received, to the Lockbox Bank. For purposes of
this Agreement, a "Springing Lockbox Event" shall be an Event of Default or an
event that, with the giving of notice or the passage of time or both, could be
an Event of Default under the following sections of this Note (irrespective of
any cure periods): 12(a), 12(c) (but only with respect to a breach of the
covenant set forth in Section 10(r)), 12(e), 12(f) or 12(n)
(B) Borrower acknowledges and agrees that its compliance
with the terms of this Section 4(j) is essential, and that if Lender reasonably
determines that Borrower has failed to comply with any such terms, Lender shall
give written notice of such noncompliance. If the noncompliance is not cured
within such five (5) calendar days, Lender shall be entitled to assess a
non-compliance fee which shall operate to increase the Base Rate by two percent
(2%) per annum during any period of non-compliance. Lender shall be entitled to
assess such fee whether or not an Event of Default is declared or otherwise
occurs. All funds transferred from the Concentration Account for application to
Borrower's indebtedness to Lender shall be applied to reduce the Loan balance,
but for purposes of calculating interest at all times on and after the
occurrence and continuance of a Springing Lockbox Event shall be subject to a
three (3) Business Day clearance period. If as the result of collections of
Accounts pursuant to the terms and conditions of this Section 4(j) a credit
balance exists with respect to the Concentration Account, such credit balance
shall not accrue interest in favor of Borrower, but shall be available to
Borrower at any time or times for so long as no Springing Lockbox Event exists
and is continuing.
5. Payment Office. The Principal Sum, the interest on the Principal
Sum, and any other amounts payable under this Note are payable in lawful money
of the United States of America at the office of Lender, at 2 Wisconsin Circle,
Fourth Floor, Chevy Chase, Maryland 20815, Attention: Steven M. Curwin,
Executive Vice President, or at such other place as Lender may specify in
writing to Borrower. Any payment by other than immediately available funds shall
be subject to collection. Interest shall continue to accrue until the funds by
which payment is made are available to Lender for its use. Any payment stated to
be due on a day on which banks in Maryland are required or permitted to be
closed for business shall be due and payable on the next business day (each such
day, a "Business Day") and such extension of time shall be included in the
computation of interest in connection with such payment.
6. No Presentment; Acceleration. On the Maturity Date or upon the
occurrence of an Event of Default, the outstanding Principal Sum, accrued and
unpaid interest on the Principal Sum, and all other sums owed by Borrower to
Lender in connection with this Note (including without limitation the Commitment
Fee and the Exit Financing Fee) or the other Loan Documents shall immediately
become due and payable. Borrower hereby expressly waives any presentment for
payment, demand for payment, notice of nonpayment or dishonor, protest and
notice of protest of any kind.
8
9
7. Security Agreement.
a. This Note shall constitute a security agreement as that term
is used in the UCC and Borrower hereby grants to Lender, to secure Borrower's
obligations under this Note and the other Loan Documents, a security interest in
the following (collectively, the "Collateral"):
(i) All of Borrower's now-owned and hereafter acquired or
arising accounts, contract rights, general intangibles, chattel paper, documents
and instruments, as such terms are defined in the UCC, including, without
limitation, all obligations for the payment of money arising out of Borrower's
sale of goods or rendition of services ("Accounts"), accounts receivable and
rights to payment of every kind and description, and all of Borrower's contract
rights, chattel paper, documents and instruments with respect thereto, and all
of Borrower's rights, remedies, security and liens, in, to and in respect of the
Accounts, including, without limitation, rights of stoppage in transit,
replevin, repossession and reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, guaranties or other contracts of
suretyship with respect to the Accounts, deposits or other security for the
obligation of any Account Debtor, and credit and other insurance ("Account
Debtor" means any person obligated on any Account of Borrower);
(ii) All moneys, securities and other property and the
proceeds thereof, now or hereafter held or received by, in transit to, in
possession of, or under the control of Lender or a bailee or Affiliate of
Lender, from or for Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of Borrower's deposits (general
or special), balances, sums and credits with Lender at any time existing
("Affiliate" means with respect to a specified person, any person directly or
indirectly controlling, controlled by, or under common control with the
specified person, including without limitation its stockholders and any
affiliates. A person shall be deemed to control a corporation if the person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and business of the corporation whether through the ownership of
voting securities, by contract, or otherwise);
(iii) All of Borrower's right, title and interest in, to and
in respect of all goods relating to, or which by sale have resulted in,
Accounts, including, without limitation, all goods described in invoices or
other documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
(iv) All of Borrower's now or hereafter acquired deposit
accounts into which Accounts are deposited, including the Lockbox Account;
(v) All of Borrower's now owned and hereafter acquired or
arising general intangibles and other property of every kind and description
with respect to, evidencing or relating to its Accounts, accounts receivable and
other rights to payment, including, but not limited to, all existing and future
customer lists, choses in action, claims, books, records, ledger cards,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer programs, information, software, records, and data, as the same relates
to the Accounts;
9
10
(vi) All of Borrower's other general intangibles (including,
without limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights, goodwill, literary rights, rights to performance, rights under licenses,
choses-in-action, claims, information contained in computer media (such as data
bases, source and object codes, and information therein), things in action,
trademarks and trademarks applied for (together with the goodwill associated
therewith) and derivatives thereof, trade names, including the right to make,
use, and vend goods utilizing any of the foregoing, and permits, licenses,
certifications, authorizations and approvals, and the rights of Borrower
thereunder, issued by any governmental, regulatory, or private authority,
agency, or entity whether now owned or hereafter acquired, together with all
cash and non-cash proceeds and products thereof;
(vii) All of Borrower's now owned or hereafter acquired
inventory of every description which is held by Borrower for sale or lease or is
furnished by Borrower under any contract of service or is held by Borrower as
raw materials, work in process or materials used or consumed in a business,
wherever located, and as the same may now and hereafter from time to time be
constituted, together with all cash and non-cash proceeds and products thereof;
(viii) All of Borrower's now owned or hereafter acquired
machinery, equipment, computer equipment, tools, tooling, furniture, fixtures,
goods, supplies, materials, work in process, whether now owned or hereafter
acquired, together with all additions, parts, fittings, accessories, special
tools, attachments, and accessions now and hereafter affixed thereto and/or used
in connection therewith, all replacements thereof and substitutions therefor,
and all cash and non-cash proceeds and products thereof; and
(ix) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
; provided, however, Lender will have a continuing lien on and security
interest in (rather than a first priority lien and security interest in) the
leases set forth on Schedule 7.
b. Upon the occurrence of an Event of Default under this Note or
the other Loan Documents, Lender, in addition to all other rights, options, and
remedies granted to Lender under this Note or at law or in equity, may take any
of the following steps:
(i) Declare the Loan to be immediately due and payable;
(ii) Exercise all other rights granted to it under this Note
and all rights under the UCC in effect in the applicable jurisdiction(s) and
under any other applicable law; and
(iii) Exercise all rights and remedies under all Loan
Documents now or hereafter in effect, including but not limited to:
(A) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without judicial
process;
10
11
(B) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such premises
in compliance with subsection (c) below, without any liability for rent,
storage, utilities, or other sums, and Borrower shall not resist or interfere
with such action; and
(C) The right to require Borrower at Borrower's
expense to assemble all or any part of the Collateral and make it available to
Lender at any place reasonably designated by Lender.
c. Borrower agrees that a notice received by it at least ten (10)
calendar days before the time of any intended public sale, or the time after
which any private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable Collateral that threatens to decline
rapidly in value or that is sold on a recognized market may be sold immediately
by Lender without prior notice to Borrower. At any sale or disposition of
Collateral, Lender may (to the extent permitted by applicable law) purchase all
or any part of the Collateral, free from any right of redemption by Borrower,
which right is hereby waived and released. Borrower covenants and agrees not to
interfere with or impose any obstacle to Lender's exercise of its rights and
remedies with respect to the Collateral following an Event of Default.
d. Lender shall have the right to proceed against all or any
portion of the Collateral to satisfy in any order the liabilities and
obligations of Borrower to Lender under this Note and the other Loan Documents.
All rights and remedies granted Lender under this Note or under any of the other
Loan Documents, or otherwise available at law or in equity, shall be deemed
concurrent and cumulative, and not alternative remedies, and Lender may proceed
with any number of remedies at the same time until the Principal Sum, all
interest, costs, expenses and other charges due under, and all other existing
and future liabilities and obligations of Borrower to Lender under, this Note
are satisfied in full. The exercise of any one right or remedy shall not be
deemed a waiver or release of any other right or remedy, and Lender, upon the
occurrence of an Event of Default, may proceed against Borrower, and/or the
Collateral, at any time, under any agreement, with any available remedy and in
any order.
8. Use of Funds; Power of Attorney. Borrower covenants and agrees
that the Loan shall be used for working capital or other commercial purposes of
Borrower; provided, however, the Loan hereunder may not be used by Borrower to
pay off any indebtedness for borrowed money, including without limitation any
indebtedness from Banc One Leasing Corporation or any of its affiliates,
successors or assigns (excluding the specific amount to be paid pursuant to the
payoff letter from Banc One Leasing Corporation and Bank One Colorado, N.A.
dated as of September 7, 2000). Upon the occurrence and during the continuance
of an Event of Default, each of the officers of Lender is hereby irrevocably
made, constituted and appointed the true and lawful attorney for Borrower
(without requiring any of them to act as such) with full power of substitution
to do the following: (i) endorse the name of Borrower upon any and all checks,
drafts, money orders, and other instruments for the payment of money that are
payable to Borrower and constitute collections on Borrower's Accounts; (ii)
execute in the name of
11
12
Borrower any financing statements, schedules, assignments, instruments,
documents, and statements that Borrower is obligated to give Lender under this
Note; and (iii) do such other and further acts and deeds in the name of Borrower
that Lender may deem reasonably necessary or desirable to enforce any Account or
other Collateral or perfect Lender's security interest or lien in any
Collateral. In addition, if Borrower breaches its obligation to direct payments
of the proceeds of the Collateral to the Lockbox Account upon the occurrence and
during the continuance of a Springing Lockbox Event (or an event that, with the
giving of notice could reasonably be considered to be a Springing Lockbox
Event), Lender, as the irrevocably made, constituted and appointed true and
lawful attorney for Borrower pursuant to this paragraph, may, by the signature
or other act of any of Lender's officers (without requiring any of them to do
so), direct any private payor to pay proceeds of the Collateral to Borrower by
directing payment to the Lockbox Account.
9. Representations. Each entity constituting Borrower hereby warrants
and represents to Lender that:
a. Borrower is a corporation (i) duly organized, validly
existing, and in good standing under the laws of its state of incorporation,
(ii) is in good standing as a foreign corporation in each jurisdiction in which
the character of the properties owned or leased by it or the nature of its
business makes such qualification necessary except where the failure to so
qualify could not have a Material Adverse Effect (as defined below), (iii) has
the corporate power and authority to own its assets and transact the business in
which it is engaged, and (iv) has obtained all certificates, licenses and
qualifications required under all laws, regulations, ordinances, or orders of
public authorities necessary for the ownership and operation of all of its
properties and transaction of all of its business, except where the failure to
obtain such certificates, licenses and qualifications could not have a Material
Adverse Effect. For the purposes of this Note, "Material Adverse Effect" shall
mean any event or condition which, alone or when taken with other events or
conditions occurring or existing concurrently with such event or condition (i)
has or is reasonably expected to have a material adverse effect on the business,
operations, condition (financial or otherwise), assets, liabilities, or
properties of Borrower; (ii) has or is reasonably expected to have any material
adverse effect on the validity or enforceability of this Note or any Loan
Document; (iii) materially impairs or is reasonably expected to materially
impair the ability of Borrower to pay and perform the obligations under this
Note; (iv) materially impairs or is reasonably expected to materially impair the
ability of Lender to enforce its rights and remedies under this Note or any of
the Loan Documents; or (v) has or is reasonably expected to have any material
adverse effect on the Collateral, the liens of Lender in the Collateral or the
priority of such liens.
b. Borrower has full corporate power and authority to borrow the
Loan and to enter into, execute, and deliver this Note, and to incur and perform
its obligations under this Note and the other Loan Documents, all of which have
been duly authorized by all necessary corporate action. Except as set forth on
Schedule 9(b), no consent or approval of stockholders of, or lenders to,
Borrower, and no consent, approval, filing or registration with any governmental
authority is required as a condition to the validity of this Note or the other
Loan Documents or the performance by Borrower of its obligations under this Note
or the other Loan Documents.
12
13
c. This Note, when issued and delivered for value received, and
all other Loan Documents constitute the valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.
d. The execution and delivery by Borrower of this Note and the
other Loan Documents do not, and the performance of Borrower's obligations under
this Note and the other Loan Documents will not, violate, conflict with,
constitute a default under, or result in the creation of a lien or encumbrance
(other than a lien, security interest, charge or other encumbrance in favor of
Lender) upon the property of Borrower under (i) any provision of Borrower's
certificate of incorporation or bylaws, (ii) any provision of any law, rule or
regulation applicable to Borrower, or (iii) any of the following (A) any
indenture or other agreement or instrument to which Borrower is a party or by
which Borrower or its property is bound (other than indentures, agreements and
instruments, the violation, conflicts, or defaults of which, individually or in
the aggregate, do not have a Material Adverse Effect), or (B) any judgment,
order or decree of any court, arbitration tribunal, or governmental entity which
is applicable to Borrower or Borrower's properties or assets, other than such
judgments, orders or decrees from such governmental entities, the violation of
which, individually or in the aggregate, do not have a Material Adverse Effect.
e. There are no actions, suits, proceedings or investigations
pending, including, without limitation, any condemnation proceeding, or, to the
knowledge of Borrower, threatened, against or adversely affecting Borrower's
properties or assets or the validity or enforceability of this Note or the other
Loan Documents or the ability of Borrower to perform any obligations under this
Note or the other Loan Documents. Borrower is not in default with respect to any
order, writ, injunction, decree or demand of any court, arbitration tribunal or
governmental authority having jurisdiction over Borrower.
f. The audited financial statements of Borrower as of and for the
period ending December 31, 1999 and the unaudited financial statements of
Borrower as of and for the period ending June 30, 2000, all certified by the
chief financial officer of Borrower, which were previously delivered to Lender,
are true, correct and complete and fairly present the financial condition of
Borrower and the results of Borrower's operations and changes in financial
condition as of the dates and for the periods referred to, and have been
prepared in accordance with generally accepted accounting principles. There are
no material unrealized or anticipated liabilities, direct or indirect, fixed or
contingent, of Borrower as of the dates of such financial statements that are
not reflected in the financial statements or the notes thereto. There has been
no material adverse change in the business, properties, condition (financial or
otherwise) of Borrower since December 31, 1999. Borrower's fiscal year ends on
December 31.
g. Borrower is not in default under or with respect to any
obligation in any respect that could have a Material Adverse Effect on its
business, operations, property or financial condition, or that could have a
Material Adverse Effect on the ability of Borrower to perform its obligations
under this Note or the other Loan Documents. No Event of Default or event that,
with the giving of notice or lapse of time, or both, could become an Event of
Default, has occurred and is continuing.
13
14
h. Borrower has good and marketable title to its properties and
assets, including the Collateral and the properties and assets reflected in the
financial statements in described in paragraph (f) above, subject to no lien,
mortgage, pledge, encumbrance or charge of any kind, other than Permitted Liens.
Borrower has not agreed or consented to cause any of its properties or assets,
whether owned now or hereafter acquired, to be subject in the future (upon the
happening of a contingency or otherwise) to any lien, mortgage, pledge,
encumbrance or charge of any kind, other than Permitted Liens. For purposes of
this Agreement "Permitted Liens" shall mean: (i) deposits or pledges to secure
obligations under workmen's compensation, social security or similar laws, or
under unemployment insurance; (ii) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money),operating and capital
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business; (iii) mechanic's,
workmen's, materialmen's or other like liens arising in the ordinary course of
business with respect to obligations which are not due, or which are being
contested in good faith by appropriate proceedings which suspend the collection
thereof and in respect of which adequate reserves have been made (provided that
such proceedings do not, in Lender's sole discretion, involve any substantial
risk of the sale, loss or forfeiture of such property or assets or any interest
therein); (iv) liens and encumbrances in favor of Lender; (v) liens on equipment
of Borrower to secure borrowed money incurred for the sole purpose of financing
all or a portion of the purchase price of the equipment subject to such lien
(i.e. purchase money security interests) in the ordinary course of business; and
(vi) liens set forth on Schedule 9(h).
i. Borrower has filed, or has obtained extensions for the filing
of, all federal, state and other tax returns which are required to be filed, and
has paid all taxes shown as due on those returns and all assessments, fees and
other amounts due as of the date hereof. All tax liabilities of Borrower were,
as of December 31, 1999 and are now, adequately provided for on Borrower's
books. No tax liability has been asserted by the Internal Revenue Service or
other taxing authority against Borrower for taxes in excess of those already
paid. Immaterial exceptions to this section 9(i) are set forth on Schedule 9(i)
j. The use of the proceeds of the Loan and Borrower's issuance of
this Note will not, directly or indirectly, violate or result in a violation of
the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended,
or any regulations issued pursuant thereto, including without limitation
Regulations U, T, or X of the Board of Governors of the Federal Reserve System.
Borrower is not engaged in the business of extending credit for the purpose of
the purchasing or carrying "margin stock" within the meaning of those
regulations. No part of the proceeds of the Loan will be used to purchase or
carry any margin stock or to extend credit to others for such purpose.
k. Borrower is not an investment company within the meaning of
the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of that Act.
l. Borrower is not in violation of any statute, rule or
regulation of any governmental authority (including, without limitation, any
statute, rule or regulation relating to employment practices or to
environmental, occupational and health standards and controls), the
14
15
violation of which could, individually or in the aggregate, have a Material
Adverse Effect. Borrower has obtained all licenses, permits, franchises, and
other governmental authorizations necessary for the ownership of its properties
and the conduct of its business, unless the failure to obtain such licenses,
individually or in the aggregate, could not have a Material Adverse Effect.
Borrower is current with all reports and documents required to be filed with any
state or federal securities commission or similar governmental authority and is
in full compliance with all applicable rules and regulations of such
commissions, unless the failure to comply, individually or in the aggregate,
could not have a Material Adverse Effect.
m. To Borrower's best knowledge, no use, exposure, release,
generation, manufacture, storage, treatment, transportation or disposal of
hazardous material has occurred or is occurring on or from any real property on
which the Collateral is located (the "Premises") or which is owned, leased or
otherwise occupied by Borrower, or has occurred off the Premises as a result of
any action of Borrower. To Borrower's best knowledge, all hazardous material
used, treated, stored, transported to or from, generated or handled on the
Premises, or off the Premises by Borrower, has been disposed of on or off the
Premises by or on behalf of Borrower in a lawful manner. To Borrower's best
knowledge, there are no underground storage tanks present on or under the
Premises owned or leased by Borrower. To Borrower's best knowledge, no other
environmental, public health or safety hazards exist with respect to the
Premises.
n. The only places of business of Borrower, and the places where
it keeps and intends to keep the Collateral and records concerning the
Collateral, are at the addresses set forth in Schedule 9(n), which also lists
the owner of record of each such property. Immaterial exceptions to this Section
9(n)are set forth on Schedule 9(n).
o. Borrower exclusively owns or possesses all the patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, franchises, licenses, and rights with respect to the foregoing
necessary for the current and planned future conduct of its business, without
any conflict with the rights of others, except to the extent that failure to own
or possess such property could not have a Material Adverse Effect. A list of all
such patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, franchises, licenses, and rights with respect to
the foregoing (indicating the nature of Borrower's interest), as well as all
outstanding franchises and licenses given by or held by Borrower, is attached as
Schedule 9(o), except for such patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, franchises,
licenses, and rights with respect to the foregoing (indicating the nature of
Borrower's interest) which in the aggregate could not have a Material Adverse
Effect. Borrower is not in default of any obligation or undertaking with respect
to such intellectual property or rights. Borrower is not infringing on any
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, franchises, licenses, any rights with respect to the
foregoing, or any other intellectual property rights of others except for
infringement which individually or in the aggregate could not have a Material
Adverse Effect, and the Borrower is not aware of any infringement by others of
any such rights owned by Borrower.
p. The identity of the greater than 5% stockholders of record of
all classes of the outstanding stock of Borrower, together with the respective
ownership percentages held by
15
16
such stockholders as of August 31, 2000, are as set forth in the proxy statement
of Borrower dated as of September 7, 2000.
q. Neither this Note nor any other Loan Document nor any other
agreement, document, certificate, or statement furnished to Lender by or on
behalf of Borrower in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained in this Note or in the other Loan
Documents or such other documents not misleading. Except as disclosed in the
"risk factors" section of the Borrower's Annual Report on Form 10-K and
subsequent filings with the Securities and Exchange Commission, there is no fact
known to Borrower that would have a Material Adverse Effect or in the future
could have a Material Adverse Effect on the business, operations, affairs or
financial condition of Borrower, or any of its properties or assets.
r. Borrower does not own or hold any equity or long-term debt
investments in, have any outstanding advances to, have any outstanding
guarantees for the obligations of, or have any outstanding borrowings from, any
Person except as otherwise disclosed in the financial statements and except to
the extent such items, individually or in the aggregate, could not have a
Material Adverse Effect on Borrower. Except as otherwise disclosed in the
financial statements of the Borrower, Borrower is not a party to any contract or
agreement, or subject to any corporate restriction, which could have a Material
Adverse Effect.
s. Within five (5) years before the date of this Note, neither
the business, property or assets, or operations of Borrower has been adversely
affected in any way by any strike, lockout, combination of workers, or order of
the United States of America or other governmental authority, directed against
Borrower. There are no pending or, to Borrower's best knowledge, threatened
labor disputes, strikes, lockouts, or similar occurrences or grievances against
Borrower or its business, which individually or in the aggregate could have a
Material Adverse Effect on Borrower.
t. Except as otherwise set forth on Schedule 9(t), with respect
to each Account, Borrower represents that:
(i) The Account is genuine and in all respects what it
purports to be, and is not evidenced by a judgment;
(ii) The Account arises out of a completed, bona fide sale
and delivery of goods or rendition of services by Borrower in the ordinary
course of its business and in accordance with the terms and conditions of all
purchase orders, contracts, certification, participation, certificate of need,
or other documents relating thereto and forming a part of the contract between
Borrower and the Account Debtor;
(iii) The Account is for a liquidated amount maturing as
stated in a duplicate claim or invoice covering such sale or rendition of
services, a copy of which has been furnished or is available to Lender;
16
17
(iv) The Account, and Lender's security interest in such
Account, is not, and will not (by voluntary act or omission by Borrower), be in
the future, subject to any offset, lien, deduction, defense, dispute,
counterclaim or any other adverse condition, and each such Account is absolutely
owing to Borrower and is not contingent in any respect or for any reason;
(v) There are no facts, events or occurrences which in any
way impair the validity or enforceability of any Accounts or tend to reduce the
amount payable thereunder from the face amount of the claim or invoice and
statements delivered to Lender with respect thereto;
(vi) To the best of Borrower's knowledge, (i) the Account
Debtor under the Account had the capacity to contract at the time any contract
or other document giving rise to the Account was executed and (ii) such Account
Debtor is solvent;
(vii) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor under the Account which might result in any material adverse change in
such Account Debtor's financial condition or the collectibility of such Account;
(viii) The Account has been billed and forwarded to the
Account Debtor for payment in accordance with applicable laws and compliance and
conformance with any and requisite procedures, requirements and regulations
governing payment by such Account Debtor with respect to such Account, and such
Account is properly payable directly to Borrower; and
(ix) Borrower has obtained and currently has all licenses,
permits and authorizations that are necessary in the generation of such
Accounts, other than such licenses, permits and authorizations, the absence of
which could not have a Material Adverse Effect.
u. Within five (5) years before the date of this Note, Borrower
has not conducted business under or used any other name (whether corporate,
partnership or assumed) except as listed on Schedule 9(u). Borrower is the sole
owner of all names listed on that Schedule and any and all business done and
invoices issued in such names are Borrower's sales, business, and invoices. Each
trade name of Borrower represents a division of Borrower and not a separate
Person or independent Affiliate.
v. Except for Borrower entities which are subsidiaries of other
Borrower entities and except as set forth on Schedule 9(v), Borrower has no
subsidiaries. None of the subsidiaries set forth on Schedule 9(v) has any assets
or operations.
10. Affirmative Covenants.
Each entity constituting Borrower covenants and agrees that until
this Note shall be repaid in full:
17
18
a. Financial Statements and Collateral Reports. Borrower will
furnish to Lender (i) a sales and collections report and accounts receivable
aging schedule on a form acceptable to Lender within fifteen (15) Business Days
after the end of each calendar month, which shall include, but not be limited
to, a report of sales, credits issued, and collections received; (ii) payable
aging schedules within fifteen (15) Business Days after the end of each calendar
month; (iii) all internally prepared unaudited monthly financial statements for
Borrower, certified by the chief financial officer of Borrower, within twenty
(20) Business Days of the end of each calendar month; (iv) all unaudited
quarterly financial statements for Borrower, certified by the chief financial
officer of Borrower, within forty five (45) calendar days of the end of each
calendar month; (v) all unaudited annual financial statements for Borrower,
certified by the chief financial officer of Borrower, within forty five (45)
calendar days of the end of each fiscal year; and (vi) such additional
information, reports or statements as Lender may from time to time request. All
financial statements provided hereunder shall include a balance sheet and
statement of earnings and shall be prepared in accordance with GAAP.
b. Payments Hereunder. Borrower will make all payments of
principal, interest, fees, and all other payments required hereunder, under this
Note, and under any other agreements with Lender to which Borrower is a party,
as and when due.
c. Existence, Good Standing, and Compliance with Laws. Borrower
will do or cause to be done all things necessary (except where the failure to do
so could not have a Material Adverse Effect, (i) to obtain and keep in full
force and effect all corporate existence, rights, licenses, privileges, and
franchises of Borrower necessary to the ownership of its property or the conduct
of its business, and comply with all applicable present and future laws,
ordinances, rules, regulations, orders and decrees of any Governmental Authority
having or claiming jurisdiction over Borrower; and (ii) to maintain and protect
the properties used or useful in the conduct of the operations of Borrower, in a
prudent manner, including without limitation the maintenance at all times of
such insurance upon its insurable property and operations as required by law or
by subsection (e) below.
d. Taxes and Charges. Borrower will timely file all tax reports
and pay and discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower, or its income or profits or upon its properties or any
part thereof, before the same shall be in default and prior to the date on which
penalties attach thereto, as well as all lawful claims for labor, material,
supplies or otherwise which, if unpaid, might become a lien or charge upon the
properties or any part thereof of Borrower; provided, however, that Borrower
shall not be required to pay and discharge or cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith and by appropriate proceedings
by Borrower, as determined in the reasonable judgement of Lender, and Borrower
shall have set aside on their books adequate reserve therefor; and provided
further, that such deferment of payment is permissible only so long as
Borrower's title to, and its right to use, the Collateral is not adversely
affected thereby and Lender's lien and priority on the Collateral are not
adversely affected, altered or impaired thereby.
e. Insurance. Borrower will carry adequate public liability and
professional liability insurance with responsible companies reasonably
satisfactory to Lender in such amounts
18
19
and against such risks as is customarily maintained by similar businesses and by
owners of similar property in the same general area.
f. General Information. Borrower will furnish to Lender such
information as Lender may, from time to time, reasonably request with respect to
the business or financial affairs of Borrower, and permit any officer, employee
or agent of Lender to visit and inspect (upon reasonable notice of not less than
two (2) Business Days) any of the properties during regular business hours, to
examine the minute books, books of account and other records, including
management letters prepared by Borrower's auditors, of Borrower, and make copies
thereof or extracts therefrom, and to discuss its and their business affairs,
finances and accounts with, and be advised as to the same by, the accountants
and officers of Borrower, all at such times and as often as Lender may require.
g. Maintenance of Property. Borrower will maintain, keep and
preserve the Collateral in good repair, working order and condition, normal wear
and tear excepted, and from time to time make all reasonably needful and proper
repairs, renewals, replacements, betterments and improvements to the Collateral.
h. Notification of Events of Default and Adverse Developments.
Borrower promptly will notify Lender upon the occurrence of: (i) any Event of
Default; (ii) any event which, with the giving of notice or lapse of time, or
both, is reasonably likely to constitute an Event of Default; (iii) any event,
development or circumstance whereby the financial statements previously
furnished to Lender hereunder fail in any material respect to present fairly, in
accordance with GAAP, the financial condition and operational results of
Borrower as of the dates of such financial statements; (iv) any judicial,
administrative or arbitration proceeding pending against Borrower, and any
judicial or administrative proceeding known by Borrower to be threatened against
it which, if adversely decided, could have a Material Adverse Effect on the
condition (financial or otherwise) or operations (present or prospective) of
Borrower or which may expose Borrower to uninsured liability of $500,000.00 or
more; (v) any default claimed by any other creditor for borrowed money of
Borrower other than Lender in excess of $200,000; and (vi) any other development
in the business or affairs of Borrower which may have a Material Adverse Effect;
in each case describing the nature thereof and (in the case of notification
under clauses (i) and (ii)) the action Borrower proposes to take with respect
thereto.
i. Employee Benefit Plans. No employee benefit plan (a "Plan")
subject to the Employee Retirement Income Security Act of 1974 ("ERISA") and
regulations issued pursuant to ERISA that is maintained by Borrower or under
which Borrower could have any material liability under ERISA (i) has failed to
meet minimum funding standards established in Section 302 of ERISA, (ii) has
failed to substantially comply with all applicable requirements of ERISA and of
the Internal Revenue Code, including all applicable rulings and regulations
thereunder, or (iii) has engaged in or been involved in a prohibited transaction
(as defined in ERISA) under ERISA or under the Internal Revenue Code. Neither
Borrower nor any member of a Controlled Group that includes Borrower has not
assumed, or received notice of a claim asserted against Borrower or another
member of the Controlled Group for, withdrawal liability (as defined in the
Multi-Employer Pension Plan Amendments Act of 1980, as amended) with respect to
any multi-employer pension plan. Borrower has timely made when due all
19
20
contributions with respect to any multi-employer pension plan in which it
participates and no event has occurred triggering a material claim against
Borrower for withdrawal liability with respect to any multi-employer pension
plan in which Borrower participates.
j. Financial Records. Borrower shall keep current and accurate
books of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial statements
provided hereunder adequate accruals and appropriations to reserves, all in
accordance with GAAP.
k. Places of Business. Borrower shall give fifteen (15) calendar
days' prior written notice to Lender of any change in the location of any of its
places of business, of the places where its records concerning its Accounts are
kept, of the places where the Collateral is kept, or of the establishment of any
new, or the discontinuance of any existing, places of business.
l. Business Conducted. Borrower shall continue in the business
presently conducted by it using its commercially reasonable best efforts to
maintain its customers and goodwill. Borrower shall not engage, directly or
indirectly, in any line of business substantially different from the business
conducted by it immediately prior to the Closing Date, or engage in business or
lines of business which are not reasonably related thereto.
m. Litigation and Other Proceedings. Borrower shall give prompt
notice to Lender of any litigation, arbitration, or other proceeding before any
Governmental Authority against or affecting Borrower if the amount claimed is
more than $500,000.00.
n. Licensure. Borrower will maintain all licenses necessary to
conduct its business as currently conducted, and take any steps required to
comply with any such new or additional requirements that may be imposed on
Borrower.
o. Bank Accounts. Upon the occurrence of an Event of Default,
Borrower shall assign to Lender all of its depository and disbursement accounts
into which collections of Accounts are deposited.
p. Submission of Collateral Documents. Borrower will, on
reasonable demand of Lender, make available to Lender copies of shipping and
delivery receipts evidencing the shipment of goods that gave rise to an Account,
assignment of benefits, in-take forms or other proof of the satisfactory
performance of services that gave rise to an Account, a copy of the claim or
invoice for each Account and copies of any written contract or order from which
the Account arose. Borrower shall promptly notify Lender if an Account becomes
evidenced or secured by an instrument or chattel paper and upon request of
Lender, will promptly deliver any such instrument or chattel paper to Lender.
q. Visits and Inspections. Borrower agrees to permit
representatives of Lender, from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit and inspect the
properties of Borrower, and to inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its
20
21
independent accountants, Borrower's business, assets, liabilities, financial
condition, business prospects and results of operations.
r. Net Worth. Borrower will not at any time allow its aggregate
net worth, as computed in accordance with GAAP, to fall below $25,000,000.
s. Further Assurances. Borrower will defend its title to the
Collateral against all persons and will, upon request of the Lender, (i) furnish
such further assurances of title as may be reasonably required by the Lender,
(ii) deliver and execute or cause to be delivered and executed, in form and
content reasonably satisfactory to the Lender, any financing statements,
notices, certificates of title, and other documents and pay the cost of filing
or recording the same in all public offices deemed necessary by the Lender, as
well as any recordation, documentary, or transfer tax required by law to be paid
in connection with such filing or recording, and (iii) do such other acts as the
Lender may reasonably request in order to perfect, preserve, maintain, or
continue the perfection of the Lender's security interest in the Collateral
and/or its priority.
t. Enforcement of Rights. TriZetto, LBJ and all other applicable
Borrower entities hereby agree to (a) satisfy all of their respective
obligations under the Merger Agreement and the documents executed in connection
therewith (collectively with the Merger Agreement, the "Merger Documents") and
(b) diligently pursue, defend and otherwise enforce all of their respective
rights in all cases under the Merger Agreement and other Merger Documents.
11. Negative Covenants.
Each entity constituting Borrower covenants and agrees that until
this Note shall be repaid in full:
a. Borrowing. Borrower will not create, incur, assume or suffer
to exist any liability for borrowed money except: (i) indebtedness to Lender;
(ii) indebtedness of Borrower secured by mortgages, encumbrances or liens
expressly permitted by Lender; (iii) accounts payable to trade creditors and
current operating expenses (other than for borrowed money) which are not aged
more than one hundred twenty (120) calendar days from the billing date or more
than thirty (30) calendar days from the due date, in each case incurred in the
ordinary course of business and paid within such time period, unless the same
are being contested in good faith and by appropriate and lawful proceedings, and
Borrower shall have set aside such reserves, if any, with respect thereto as are
required by GAAP and deemed adequate by Borrower and its independent
accountants; and (iv) borrowings incurred in the ordinary course of its business
and not exceeding $100,000.00 in the aggregate outstanding at any one time.
Borrower will not make prepayments on any existing or future indebtedness for
borrowed money to any third person or entity (other than Lender, to the extent
permitted by this Note or any subsequent agreement between Borrower and Lender).
b. Liens and Encumbrances. Borrower will not create, incur,
assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any
kind (including the charge upon property purchased under a conditional sale or
other title retention agreement) upon, or any
21
22
security interest in, any of the Collateral, whether now owned or hereafter
acquired, except for Permitted Liens.
c. Merger, Acquisition, or Sale of Assets. Borrower will not: (i)
enter into any transaction of merger or consolidation except as set forth on
Schedule 11(c); (ii) liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution); (iii) convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, any of its assets,
or the capital stock of any subsidiary of Borrower, whether now owned or
hereafter acquired, other than in the ordinary course of business; or (iv)
acquire by purchase or otherwise all or any substantial part of the business or
assets of, or stock or other evidence of beneficial ownership of, any Person,
other than the Acquisition and such acquisitions approved in writing by Lender,
which approval shall not be unreasonably withheld (provided that upon the
occurrence and continuation of an Event of Default or an event that, with the
giving of notice or the passage of time or both, could be a default or an Event
of Default, such approval may be withheld in Lender's sole discretion).
d. Sale and Leaseback. Borrower will not, directly or indirectly,
enter into any arrangement whereby Borrower sells or transfers all or any part
of its assets and thereupon and within one year thereafter rents or leases the
assets so sold or transferred without the prior written notice to, and the prior
express written consent of, Lender, which consent shall not be unreasonably
withheld.
e. Dividends, Distributions, and Management Fees. Borrower will
not make, declare or pay any dividends or distributions with respect to,
purchase, redeem or otherwise acquire for value any of its outstanding stock now
or hereafter outstanding, or return any capital of its stockholders, except
pursuant to the Borrower's existing Restricted Stock Agreements or future
Restricted Stock Grants under the terms of The TriZetto Group, Inc. 1998 Stock
Option Plan (as amended and restated on June 29, 2000) or as otherwise approved
by the Board of Directors of the applicable Borrower (provided, that such
issuances, in the aggregate shall not exceed 10% of any such Borrower), nor
shall Borrower pay management fees or fees of a similar nature to any person
other than to other entities which constitute the Borrower (in accordance with
the terms hereof).
f. Loans. Borrower will not make loans or advances to any Person,
other than (i) trade credit extended in the ordinary course of its business, and
(ii) advances for business travel and similar temporary advances made in the
ordinary course of business to officers, stockholders, directors or employees.
g. Contingent Liabilities. Borrower will not assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligations of any Person, except by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business.
h. Subsidiaries. Except for subsidiaries which are also certain
of the entities which constitute Borrower and those subsidiaries set forth on
Schedule 9(v), Borrower does not have, and will not form, any subsidiary, or
make any equity investment in or any loan in the
22
23
nature of an equity investment to, any other person, without the prior written
consent of Lender, which consent shall not be unreasonably withheld. In the
event that any subsidiary listed on Schedule 9(v) or any other subsidiary of a
Borrower entity which is not a Borrower hereunder at any time acquires or
otherwise obtains any assets or commences operations of any kind, Borrower shall
immediately add such entity as a "Borrower" entity under this Note and shall
ensure that such subsidiary as well as the other Borrower entities execute all
documents required to include the collateral of such subsidiary in the
Collateral hereunder.
i. Transactions with Affiliates and Subsidiaries. Without the
prior written consent of Lender, which consent shall not be unreasonably
withheld, Borrower will not enter into any transaction, including without
limitation the purchase, sale, or exchange of property, or the lending or giving
of funds to any Affiliate or subsidiary, except as set forth on Schedule 11(i)
and except in the ordinary course of business and pursuant to the reasonable
requirements of Borrower's business and upon terms substantially the same and no
less favorable to Borrower as it would obtain in a comparable arm's length
transaction with any Person not an Affiliate or subsidiary, and so long as the
transaction is not otherwise prohibited under this Note. The term "Person" means
an individual, partnership, corporation, trust, joint venture, joint stock
company, limited liability company, association, unincorporated organization,
governmental authority, or any other entity. Notwithstanding the foregoing, no
Borrower will transfer any assets to any subsidiary listed on Schedule 9(v) or
any other subsidiary of a Borrower entity which is not a Borrower hereunder nor
cause or allow any such subsidiary to commence operations without the prior
written consent of Lender until such subsidiary is added as a "Borrower" entity
hereunder as set forth in paragraph 11(h) above for purposes of including the
assets of such subsidiary in the Collateral (provided, however, that Lender
shall not be required to lend against the assets of such subsidiary added as a
Borrower entity).
j. Change in Capital Structure. Except as set forth on Schedule
11(j)-1 and except as contemplated by the Acquisition, there shall occur no
change in Borrower's capital structure as set forth in Schedule 11(j)-2 without
the prior written consent of Lender, which consent shall not be unreasonably
withheld.
k. Contracts and Agreements. Borrower will not become or be a
party to any contract or agreement which would breach this Note, or breach any
other instrument, agreement, or document to which Borrower is a party or by
which it is or may be bound, including without limitation the Merger Agreement.
l. Compliance with ERISA. Borrower will not permit with respect
to any Plan covered by Title IV of ERISA any Prohibited Transaction or any
Reportable Event.
m. Qualifications. Borrower will not amend, alter or suspend or
terminate or make provisional in any material way, any qualification required to
operate its business without the prior written consent of Lender, except in the
event where such action could not have a Material Adverse Effect.
n. Use of Lender's Name. Borrower will not use Lender's name (or
the name of any of Lender's affiliates) in connection with any of its business
operations, except as
23
24
required by law (provided, Lender is given prior notice of such usage). Borrower
may disclose to third parties that Borrower has a borrowing relationship with
Lender. Nothing contained in this Note is intended to permit or authorize
Borrower to make any contract on behalf of Lender.
o. Margin Stock. Borrower will not carry or purchase any "margin
security" within the meaning of Regulations U, T or X of the Board of Governors
of the Federal Reserve System.
p. Truth of Statements and Certificates. Borrower will not
furnish to Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary to
make it not misleading in light of the circumstances under which it was
furnished.
12. Events of Default. The following events are each an "Event of
Default" under this Note:
a. Borrower fails to make any payment of principal when due or
fails to make any payment of interest, fees or other amounts owed to or for the
account of Lender under this Note and such payment remains unpaid for ten (10)
calendar days after the date that such payment is due; or
b. Borrower has made any representations or warranties in this
Note, the other Loan Documents, any financial statement delivered to Lender or
otherwise in connection with this Note or the related transaction that contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained in this Note or in such document or financial
statement not misleading; or
c. Borrower shall fail to perform or observe, or cause to be
performed or observed, any other term, obligation, covenant, condition or
agreement contained in this Note or the other Loan Documents and any such
failure shall have continued for a period of fifteen (15) Business Days after
written notice of such failure; or
d. Any obligation of Borrower (other than its obligations under
this Note) for the payment of borrowed money (excluding trade accounts payable)
in an amount greater than $200,000 is not paid when due or within any applicable
grace period, or such obligation becomes or is declared to be due and payable
before the expressed maturity of the obligation, or there shall have occurred an
event which, with the giving of notice or lapse of time, or both, would cause
any such obligation to become, or allow any such obligation to be declared to
be, due and payable; or
e. Borrower shall (i) apply for, or consent in writing to, the
appointment of a receiver, trustee or liquidator; or (ii) file a voluntary
petition seeking relief under the Bankruptcy Code, or be unable, or admit in
writing Borrower's inability, to pay their debts as they become due; or (iii)
make a general assignment for the benefit of creditors; or (iv) file a petition
or an answer seeking reorganization or an arrangement or a readjustment of debt
with creditors, apply for, take advantage, permit or suffer to exist the
commencement of any insolvency, bankruptcy,
24
25
suspension of payments, reorganization, debt arrangement, liquidation,
dissolution or similar event, under the law of the United States or of any state
in which Borrower is a resident; or (v) file an answer admitting the material
allegations of a petition filed against Borrower in any such bankruptcy,
reorganization or insolvency case or proceeding or (vi) take any action
authorizing, or in furtherance of, any of the foregoing; or
f. Either (i) an involuntary case is commenced against Borrower
and the petition is not contested within ten (10) calendar days or is not
dismissed within sixty (60) calendar days after the commencement of the case or
(ii) an order, judgment or decree shall be entered by any court of competent
jurisdiction on the application of a creditor adjudicating Borrower bankrupt or
insolvent, or appointing a receiver, trustee or liquidator of Borrower or of all
or substantially all of the assets of Borrower and the order, judgment or decree
shall continue unstayed and in effect for a period of sixty (60) calendar days
or shall not be discharged within ten (10) calendar days after the expiration of
any stay of such order, judgment, or decree; or
g. One or more final judgments against Borrower or attachments
against its property not fully and unconditionally covered by insurance shall be
rendered by a court of record and shall remain unpaid, unstayed on appeal,
undischarged, unbonded and undismissed for a period of twenty (20) calendar
days; or
h. There shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral that exceeds $500,000 in the
aggregate; or
i. Borrower ceases any material portion of its business
operations as presently conducted; or
j. Subject to applicable cure periods, Borrower breaches or
violates the terms of, or a default or an event which, whether with notice or
the passage of time, or both, is reasonably likely to constitute a default,
occurs under any other existing or future agreement (related or unrelated)
between Borrower and Lender; or
k. Any indication or evidence is received by Lender that Borrower
may have directly or indirectly been engaged in any type of activity which, in
Lender's discretion, may result in the forfeiture of any property of Borrower to
any governmental authority, which default shall have continued unremedied for a
period of fifteen (15) calendar days after written notice from Lender;
l. Borrower or any Affiliate of Borrower, shall challenge or
contest, in any action, suit or proceeding, the validity or enforceability of
this Note, or any of the other Loan Documents, the legality or the
enforceability of any of the obligations under this Note or under any of the
Loan Documents or the perfection or priority of any lien granted to Lender;
m. Borrower shall be criminally indicted or convicted under any
law that could have a Material Adverse Effect; or
25
26
n. There shall occur an adverse change in the financial condition
or business prospects of Borrower (which change meets the standard of Material
Adverse Effect hereunder), or Lender in good faith shall deem itself insecure as
a result of acts or events bearing upon the financial condition of Borrower or
the repayment of this Note, which default shall have continued unremedied for a
period of twenty (20) calendar days after written notice from Lender.
13. Lender's Rights.
a. Upon the occurrence of an Event of Default, Lender may, in
addition to its rights and remedies set forth in Sections 6 and 7 above,
proceed, to the extent permitted by law, to protect and enforce its rights
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, condition or agreement contained in this Note or in
aid of the exercise of any power granted in this Note, or proceed to enforce the
payment of this Note or to enforce any other legal or equitable right of Lender.
No right or remedy in this Note, the other Loan Documents or in other agreement
or instrument to the benefit of Lender is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given under this Note or
now or hereafter existing at law or in equity or by statute or otherwise.
Without limiting the generality of the foregoing, if the outstanding Principal
Sum, or any of the other obligations of Borrower to Lender shall not be paid
when due, Lender shall not be required to resort to any particular security,
right or remedy or to proceed in any particular order of priority, and Lender
shall have the right at any time and from time to time, in any commercially
reasonable manner and in any order, to enforce its security interests with
respect to the Collateral, liens, rights and remedies, or any of them, as it
deems appropriate in the circumstances, and apply the proceeds of any Collateral
to such obligations of Borrower as it determines in its sole discretion.
b. If an Event of Default has occurred as provided above and
Borrower has not paid the all amounts outstanding, including all principal,
together with interest accrued on such amounts, upon demand by Lender, then
Borrower shall pay to Lender interest on such outstanding amounts at a rate per
annum equal to the Default Interest Rate from the date such outstanding amounts
are due until the date this Note is paid in full. Borrower promises to pay all
costs of collection, including reasonable attorneys' fees, if this Note is
referred to an attorney for collection after the Event of Default.
14. No Defenses. Borrower's obligations under this Note shall not be
subject to any set-off, counterclaim or defense to payment that Borrower now has
or may have in the future.
15. No Waiver; Cumulative Rights. No failure or delay on the part of
Lender in exercising any right, power or privilege under this Note or the other
Loan Documents, nor any course of dealing between Borrower and Lender, shall
operate as a waiver of the right, power or privilege, nor shall a single or
partial exercise of any right, power or privilege preclude any other or further
exercise of, or the exercise of any other, right, power or privilege. The
remedies provided for in this Note are cumulative and are not exclusive of any
remedies that may be available to any party to this Note at law, in equity or
otherwise.
26
27
16. Writing Required. No modification or waiver of any provisions of
this Note or any other Loan Documents, and no consent to any departure by
Borrower, shall in any event be effective, without respect to any course of
dealing between the parties, unless the modification or waiver shall be in a
writing executed by Lender (and Borrower with respect to a modification) and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on Borrower in any case
shall thereby entitle Borrower to any other or further notice or demand in the
same, similar or other circumstances.
17. Usury Limitation. Notwithstanding anything contained to the contrary
in this Note, Lender shall never be entitled to receive, collect or apply as
interest any amount in excess of the maximum rate of interest permitted to be
charged by applicable law. If Lender receives, collects or applies as interest
any such excess, the amount that would be excessive interest shall be applied to
the reduction of the Principal Sum; and if the Principal Sum is paid in full,
any remaining excess shall be paid to Borrower. In determining whether or not
the interest paid or payable in any specific case exceeds the highest lawful
rate, Lender and Borrower shall to the maximum extent permitted under applicable
law: (i) characterize any non-principal payment as an expense, fee or premium
rather than as interest; and (ii) "spread" the total amount of interest
throughout the entire term of the obligation so that the interest rate is deemed
to have been uniform throughout the entire term.
18. Notices. Any notice or demand given under this Note shall be given
by delivering it, sending by telecopier (with a confirming copy by regular
mail), or by mailing it by certified or registered mail, postage prepaid, return
receipt requested, or sent by prepaid overnight courier service addressed to
Borrower at: The TriZetto Group, Inc., 567 San Nicolas Drive, Suite 360, Newport
Beach, California 92660, Attention: Mr. Michael Sunderland, CFO, Telephone (949)
719-2200, Telecopier: (949) 219-2199. Any notice to be given to Lender under
this Note shall be given by personally delivering it, sending by telecopier
(with a confirming copy by regular mail), or mailing it by certified or
registered mail, return receipt requested, or sent by prepaid overnight courier
service, addressed to Lender at: 2 Wisconsin Circle, Fourth Floor, Chevy Chase,
Maryland 20815 Attention: Steven M. Curwin, Executive Vice President--Telephone:
(301) 961-1640, Telecopier: (301) 664-9866, or at such other place as Lender may
specify in writing to Borrower. Each party may designate a change of address by
notice to the other given in accordance with this Section 18 at least fifteen
(15) calendar days before such change of address is to become effective. A
notice given under this Note shall be deemed received upon receipt if it is
personally delivered or sent by telecopier or overnight courier service and five
(5) calendar days after it is deposited in the U.S. mail if it is sent by
regular mail.
19. Section Headings. The headings of the several paragraphs of this
Note are inserted solely for convenience of reference and are not a part of and
are not intended to govern, limit or aid in the construction of any term or
provision.
20. Severability. If any term, provision, covenant or condition of this
Note or the application of such term, provision, covenant or condition to any
party or circumstance shall be found by a court of competent jurisdiction to be,
to any extent, invalid or unenforceable, the remainder of this Note and the
application of such term, provision, covenant, or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not
27
28
be affected thereby, and each term, provision, covenant or condition shall be
valid and enforced to the fullest extent permitted by law. Upon determination
that any such term, provision, covenant or condition is invalid, illegal or
unenforceable, Lender may, but is not obligated to, advance funds to Borrower
under this Note until Borrower and Lender amend this Note so as to effect the
original intent of the parties as closely as possible in a valid and enforceable
manner.
21. Survival of Terms. All covenants, agreements, representations and
warranties made in this Note or in any financial statements delivered pursuant
to this Note shall survive Borrower's execution and delivery of this Note to
Lender and shall continue in full force and effect so long as this Note or any
other obligation under this Note shall be outstanding and unpaid or any other
obligation of Borrower to Lender or its affiliates under this Note shall remain
unperformed.
22. Indemnity. Borrower hereby agrees to indemnify and hold harmless
Lender, its partners, officers, agents and employees (collectively,
"Indemnitee") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties under this Note or from the breach of any of the
representations or warranties contained in this Note. In addition, Borrower
shall defend Indemnitee against and save it harmless from all claims of any
Person with respect to the Collateral. Notwithstanding any contrary provision in
this Note, the obligations of Borrower under this Section 22 shall survive the
payment in full of the all obligations under this Note and the termination of
this Note.
23. Joint and Several Liability. Each entity constituting Borrower shall
be jointly and severally liable for all of the obligations of Borrower under
this Note.
24. Commissions. The transaction contemplated by this Note was brought
about by Lender and Borrower acting as principals and without any brokers,
agents, or finders being the effective procuring cause. Borrower represents that
it has not committed Lender to the payment of any brokerage fee, commission, or
charge in connection with this transaction. If any such claim is made on Lender
by any broker, finder, or agent or other person, Borrower will indemnify,
defend, and hold Lender harmless from and against the claim and will defend any
action to recover on that claim, at Borrower's cost and expense, including
Lender's counsel fees. Borrower further agrees that until any such claim or
demand is adjudicated in Lender's favor, the amount demanded will be deemed a
liability of Borrower under this Note, secured by the Collateral.
25. Third Parties. No rights are intended to be created under this Note
or under any other Loan Document for the benefit of any third party donee,
creditor, or incidental beneficiary of Borrower. Nothing contained in this Note
shall be construed as a delegation to Lender of Borrower's duty of performance,
including without limitation Borrower's duties under any account or contract in
which Lender has a security interest.
26. Discharge of Borrower's Obligations. Lender, in its sole discretion,
shall have the right at any time, and from time to time, without prior notice to
Borrower if Borrower fails to do
28
29
so, to: (i) obtain insurance covering any of the Collateral as required under
this Note; (ii) pay for the performance of any of Borrower's obligations under
this Note; (iii) discharge taxes, liens, security interests, or other
encumbrances at any time levied or placed on any of the Collateral in violation
of this Note unless Borrower is in good faith with due diligence by appropriate
proceedings contesting those items; and (iv) pay for the maintenance and
preservation of any of the Collateral. Reasonable expenses and advances
hereunder shall be added to the Loan, until reimbursed to Lender and shall be
secured by the Collateral. Any such payments and advances by Lender shall not be
construed as a waiver by Lender of an Event of Default.
27. Lender Approvals. Unless expressly provided herein to the contrary,
any approval, consent, waiver or satisfaction of Lender with respect to any
matter that is the subject of this Note, the other Loan Documents may be granted
or withheld by Lender in its sole and absolute discretion.
28. GOVERNING LAW; CONSENT TO JURISDICTION. THIS NOTE IS TO BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT
RESPECT TO ANY OTHERWISE APPLICABLE CONFLICTS-OF-LAWS PRINCIPLES, BOTH AS TO
INTERPRETATION AND PERFORMANCE, AND THE PARTIES EXPRESSLY CONSENT AND AGREE TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF MARYLAND AND THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND AND TO THE LAYING OF
VENUE IN MARYLAND, WAIVING ALL CLAIMS OR DEFENSES BASED ON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE, INCONVENIENT FORUM OR THE LIKE. BORROWER HEREBY
CONSENTS TO SERVICE OF PROCESS BY MAILING A COPY OF THE SUMMONS TO BORROWER, BY
CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER'S ADDRESS SET FORTH
IN SECTION 18 ABOVE. BORROWER FURTHER WAIVES ANY CLAIM FOR CONSEQUENTIAL DAMAGES
IN RESPECT OF ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY LENDER IN GOOD FAITH.
29. COOPERATION IN DISCOVERY AND LITIGATION. IN ANY LITIGATION, TRIAL,
ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING TO THIS NOTE OR ANY
OF THE OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS OF
BORROWER OR OF ITS AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR MANAGING AGENTS
OF BORROWER FOR PURPOSES OF ALL APPLICABLE LAW OR COURT RULES REGARDING THE
PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN A DEPOSITION, AT
TRIAL OR OTHERWISE). BORROWER AGREES THAT LENDER'S COUNSEL IN ANY SUCH DISPUTE
RESOLUTION PROCEEDING MAY EXAMINE ANY OF THESE INDIVIDUALS AS IF UNDER
CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY BE USED
IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION. BORROWER IN ANY EVENT
WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH DISPUTE
RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY LENDER, ALL
PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM) OR OTHER
THINGS UNDER ITS CONTROL AND RELATING TO THE DISPUTE IN ANY JURISDICTION THAT
RECOGNIZES THAT (OR ANY SIMILAR) DISTINCTION.
29
30
30. WAIVER OF TRIAL BY JURY. EACH OF BORROWER AND LENDER HEREBY (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUES TRIABLE OF RIGHT
BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY
IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH OF BORROWER AND LENDER,
AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. EACH PARTY
IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS NOTE TO ANY COURT HAVING
JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES TO THIS NOTE, SO AS TO
SERVE AS CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO JURY TRIAL.
FURTHER, EACH OF BORROWER AND LENDER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR
AGENT OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.
31. CONFESSION OF JUDGMENT. BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS
ANY ATTORNEY OF RECORD, OR THE PROTHONOTARY, CLERK OR SIMILAR OFFICER OF ANY
COURT IN ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND, AS ATTORNEY
FOR BORROWER, AS WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR THROUGH BORROWER,
TO APPEAR FOR BORROWER IN ANY SUCH COURT IN ANY SUCH ACTION BROUGHT AGAINST
BORROWER AT THE SUIT OF LENDER TO CONFESS JUDGMENT AGAINST BORROWER IN FAVOR OF
LENDER IN THE FULL AMOUNT DUE ON THIS NOTE (INCLUDING PRINCIPAL, ACCRUED
INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS ATTORNEYS FEES FOR
FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT COSTS, ALL WITHOUT PRIOR
NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING. NOTWITHSTANDING ANY OTHER
PROVISIONS OF THIS SECTION, THE LENDER ACKNOWLEDGES THAT ATTORNEYS' FEES ARE
STATED TO BE FIFTEEN PERCENT (15%) SOLELY FOR PURPOSES OF FIXING A SUM CERTAIN
FOR WHICH JUDGEMENT CAN BE ENTERED BY CONFESSION; AND THE LENDER AGREES THAT IN
ENFORCING ANY JUDGEMENT BY CONFESSION, LENDER SHALL NOT DEMAND, SOLELY WITH
RESPECT TO ATTORNEYS' FEES INCURRED BY THE LENDER IN CONNECTION WITH SUCH
INDEBTEDNESS AFTER SUCH JUDGEMENT IS RENDERED, ANY AMOUNTS IN EXCESS OF THE
ACTUAL AMOUNT OF ATTORNEYS' FEES CHARGED OR BILLED TO THE LENDER (WHICH
ATTORNEYS' FEES SHALL BE CHARGED OR BILLED TO THE LENDER AT THE STANDARD HOURLY
RATES). BORROWER WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE
OF COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON BORROWER ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR
30
31
OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A JUDGMENT OR
RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR FOR AND
ENTER JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE EXTINGUISHED BY
ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER MAY BE EXERCISED
ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR DIFFERENT
JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT AND PROPER.
[THIS SPACE INTENTIONALLY BLANK]
31
32
IN WITNESS WHEREOF, the undersigned have executed this Secured Term
Note as of the day and year first above written.
BORROWER:
THE TRIZETTO GROUP, INC.
a Delaware corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
CREATIVE BUSINESS SOLUTIONS, INC.
a Texas corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
ELBEJAY ACQUISITION CORP.
a Delaware corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
FINSERV HEALTH CARE SYSTEMS, INC.
a New York corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
32
33
HEALTHCARE MEDIA ENTERPRISES, INC.
a Delaware corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
HEALTHWEB, INC.
a Delaware corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
MARGOLIS HEALTH ENTERPRISES, INC.
a California corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
NOVALIS CORPORATION
a Delaware corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
TRIZETTO APPLICATION SERVICES, INC.
a Colorado corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
33
34
HEALTHCARE MEDIA PRIVATE LIMITED
an India company and subsidiary of HME
By:
---------------------------------------
Name:
Title:
DIGITAL INSURANCE SYSTEMS CORPORATION
an Ohio corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
HEALTH NETWORKS OF AMERICA, INC.
a Maryland corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
NOVALIS DEVELOPMENT CORPORATION
a Delaware corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
NOVALIS DEVELOPMENT & LICENSING CORPORATION
an Indiana corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
34
35
NOVALIS SERVICES CORPORATION
a Delaware corporation
By: /s/ Michael J. Sunderland
---------------------------------------
Name: Michael J. Sunderland
Title: Chief Financial Officer
and Secretary
35