-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WzenhkD7aUoxzWOY2eBAtVkPYHEkIsJ1kpvtIxmu7n1q3hYiDqUhTJ5N94BoZOYb 8ffCtHNPmvaBmE9hCGKODA== 0001161697-04-000531.txt : 20040708 0001161697-04-000531.hdr.sgml : 20040708 20040708162941 ACCESSION NUMBER: 0001161697-04-000531 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20040708 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STANFORD VENTURE CAPITAL HOLDINGS INC CENTRAL INDEX KEY: 0001160414 IRS NUMBER: 760619955 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 201 S BISCAYNE BLVD SUITE 1200 CITY: MIAMI STATE: FL ZIP: 33131 BUSINESS PHONE: 3053479102 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH SYSTEMS SOLUTIONS INC CENTRAL INDEX KEY: 0001093913 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 821513245 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-78530 FILM NUMBER: 04906368 BUSINESS ADDRESS: STREET 1: 200 SOUTH HOOVER BLVD. STREET 2: BLDG. 205 CITY: TAMPA STATE: FL ZIP: 33609 BUSINESS PHONE: 813-282-3303 MAIL ADDRESS: STREET 1: 200 SOUTH HOOVER BLVD. STREET 2: BLDG. 205 CITY: TAMPA STATE: FL ZIP: 33609 FORMER COMPANY: FORMER CONFORMED NAME: SILVER KEY MINING CO INC DATE OF NAME CHANGE: 19990826 SC 13D/A 1 sched13d.txt AMENDED SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Amendment No. 2)* Under the Securities Exchange Act of 1934 Health Systems Solutions, Inc. (Name of Issuer) Common Stock (Title of Class of Securities) 82773R 20 2 (CUSIP Number) Stanford Venture Capital Holdings, Inc. 5050 Westheimer Road Houston, Texas 77056 Attention: P. Mauricio Alvarado, Esq. Telephone No.: (713) 964-5100 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 6, 2004 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. Note: Schedules filed in paper formal shall included a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ----------------------------------------------- ----------------------------- CUSIP No. 82773R 20 2 Page 2 of 8 Pages - ----------------------------------------------- ----------------------------- - -------- ----------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON Stanford Venture Capital Holdings, Inc. - -------- ----------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------- ----------------------------------------------------------------------- 3 SEC USE ONLY - -------- ----------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------- ----------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------- ----------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------- ----------------------------------------------------------------------- - ------------------- ------- ---------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 8,978,177 shares of Common Stock (83.4%)* ------- ---------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 ------- ---------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 8,978, 177 shares of Common Stock * (83.4%)* ------- ---------------------------------------------------- PERSON 10 SHARED DISPOSITIVE POWER WITH 0 - ------------------- ------- ---------------------------------------------------- - -------- ----------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 8,978,177 shares of Common Stock* - -------- ----------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* - -------- ----------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 83.4%* - -------- ----------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------- ----------------------------------------------------------------------- * Includes the exercise of 360,000 warrants that can be exercised within 60 days of the date of the filing. SCHEDULE 13D - ----------------------------------------------- ----------------------------- CUSIP No. 82773R 20 2 Page 3 of 8 Pages --- --- - ----------------------------------------------- ----------------------------- - -------- ----------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR IRS. IDENTIFICATION NO. OF ABOVE PERSON R. Allen Stanford - -------- ----------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------- ----------------------------------------------------------------------- 3 SEC USE ONLY - -------- ----------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - -------- ----------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------- ----------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware and Antigua - -------- ----------------------------------------------------------------------- - ------------------- ------- ---------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 8,978, 177 shares of Common Stock (83.4%)** ------- ---------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 ------- ---------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 8,978, 177 shares of Common Stock (83.4%)** ------- ---------------------------------------------------- PERSON 10 SHARED DISPOSITIVE POWER WITH 0 - ------------------- ------- ---------------------------------------------------- - -------- ----------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 8,978,177 shares of Common Stock* - -------- ----------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* - -------- ----------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 83.4% of Common Stock* - -------- ----------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------- ----------------------------------------------------------------------- * Includes the exercise of 360,000 warrants that can be exercised within 60 days of the date of the filing. Introductory Statement This Amendment No. 2 relates to the Schedule 13D filed on behalf of Stanford Venture Capital Holdings, Inc., a Delaware corporation ("SVCH") and R. Allen Stanford (" Mr. Stanford"), the sole shareholder of SVCH (SVCH and Mr. Stanford are sometimes collectively referred to herein as the "Reporting Persons") and relates to the Common Stock, $0.001 par value per share (the "Common Stock") of Health Systems Solutions, Inc., a Nevada corporation ("Issuer). This Schedule 13D also reports SVCH and Mr. Stanford's ownership of warrants (Warrants") to acquireshares of Common Stock. As described in this Schedule 13D, Mr. Stanford is joining SVCH in filing this Schedule 13D because, as the sole shareholder of SVCH, Mr. Stanford may be deemed to indirectly beneficially own the shares of Common Stock that are directly beneficially owned by SVCH. This Amendment No. 2 amends the Schedule 13D filed with the Securities and Exchange Commission on November 4, 2003 and Amendment No. 1 filed on January 2, 2004. This Amendment No. 2 amends Items 3, 4, 5, 6 and 7 of a statement of Schedule 13D previously filed by the Reporting Persons. Item 3. Source and Amount of Funds or Other Consideration On July 6, 2004, SVCH entered into a loan and security agreement (the "Agreement") with Healthcare Quality Solutions, Inc. ("HQS"), a subsidiary of the Issuer pursuant to which SVCH agreed to advance an aggregate of $1.6 million to HQS pursuant to a revolving credit facility. The loan accrues interest at the rate of 8% per annum and expires in three years on July 5, 2007. The loan is secured by a security interest in all of the assets of HQS and the Issuer and a corporate guaranty executed by the Issuer in favor of SVCH. Additionally, as consideration for entering into the Agreement, SVCH received warrants ("Warrants") to purchase an aggregate of 720,000 shares of the Issuer's common stock pursuant to a warrant purchase agreement dated July 6, 2004 ("Warrant Purchase Agreement"). The exercise price of the Warrants is $0.001 per share and the Warrants expire on June 30, 2009. On July 6, 2004, SVCH assigned 360,000 Warrants to four of its employees pursuant to a warrant assignment agreement (the "Warrant Assignment Agreement"). The Issuer is obligated to register the shares of common stock issuable upon exercise of the Warrants pursuant to a registration rights agreement. The summary of the Agreement, the Warrant Purchase Agreement, the Warrants and the Warrant Assignment Agreement are qualified by reference to the complete text of the agreements, which are filed in their entirety as exhibits to this Amendment No. 2 to the Schedule 13D. Item 4. Purpose of Transaction The Reporting Persons purpose in acquiring the Warrants reported in Item 5(a) hereof is for investment purposes. Except as set forth herein and in the attached exhibits, the Reporting Persons do not have any plans or proposals that relate to or would result in: (i) the acquisition by any person of additional securities of the Issuer or the disposition of securities of the Issuer; (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer; (iii) a sale or transfer of a material amount of assets of the Issuer; (iv) any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (v) any material change in the present capitalization or dividend policy of the Issuer; (vi) any other material change in the Issuer's business or corporate structure; (vii) changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (viii) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an interdealer quotation system of a registered national securities association; (ix) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (x) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer (a) As of July 6, 2004, SVCH directly owns 8,618,177 shares of Common Stock and Warrants to purchase 360,000 shares of the Issuer's common stock. The Reporting Persons are deemed to beneficially own 8,978,177 shares of the Issuer's issued and outstanding Common Stock, which represents approximately 83.4% of the Issuer's issued and outstanding Common Stock. SVCH directly beneficially owns all the shares of Common Stock to which this Schedule 13D relates. Mr. Stanford, as the sole shareholder of SVCH, could be deemed to have direct beneficial ownership of the shares of Common Stock directly beneficially owned by SVCH. (b) Mr. Stanford , together with SVCH, has the sole power to vote or direct the vote and the sole power to dispose or to direct the disposition of the shares of Common Stock reported as beneficially owned by it in Item 5(a) hereof. (c) The Reporting Persons only transaction in shares of Common Stock and Preferred Stock, respectively, during the past 60 days was the acquisition of the 720,000 Warrants described herein and the subsequent assignment of 360,000 Warrants to four of its employees pursuant to the Warrant Assignment Agreement and the conversion of the outstanding Series A preferred stock and Series B preferred stock into common stock. (d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer Except as described in Item 3 of this Amendment No. 2 to Schedule 13D and in the attached exhibits, there are no contracts, arrangements, understandings or relationships (legal or otherwise) with respect to any securities of the Issuer to which SVCH or Mr. Stanford is a party or is subject. Item 7. Materials to be filed as Exhibits c. Exhibits. 10.1 Loan and Security Agreement dated July 6, 2004 by and among HQS and SVCH. 10.2 Warrant Purchase Agreement dated July 6, 2004 by and between HSS and SVCH 10.3 Warrant Assignment Agreement dated July 6, 2004 by and between SVCH, Daniel Bogar, Ronald Stein, William Fusselmann and Osvaldo Pi. 10.4 Registration Rights Agreement dated as of July 6, 2004 among HSS, SVCH, Daniel Bogar, Ronald Stein, Osvaldo Pi and William Fusselmann SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: July 6, 2004 /s/ R. Allen ------------------------------ Stanford R. Allen Stanford STANFORD VENTURE CAPITAL HOLDINGS, INC. Date: July 6, 2004 By: /s/ James M. Davis ------------------------------ Name: James M. Davis Title: President EXHIBIT INDEX c. Exhibits. 10.1 Loan and Security Agreement dated July 6, 2004 by and among HQS and SVCH. 10.4 Warrant Purchase Agreement dated July 6, 2004 by and between HSS and SVCH 10.5 Warrant Assignment Agreement dated July 6, 2004 by and between SVCH, Daniel Bogar, Ronald Stein, William Fusselmann and Osvaldo Pi. 10.4 Registration Rights Agreement dated as of July 6, 2004 among HSS, SVCH, Daniel Bogar, Ronald Stein, Osvaldo Pi and William Fusselmann EX-10.1 2 loanagreement.txt LOAN AND SECURITY AGREEMENT LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT is made on July 6, 2004, by and between HEALTHCARE QUALITY SOLUTIONS, INC., a Florida corporation (the "Borrower"), and STANFORD VENTURE CAPITAL HOLDINGS, INC., a Delaware corporation (together with its successors and assigns, the "Lender"). Capitalized terms used in this Agreement have the meanings assigned to them in Appendix A, General Definitions. R e c i t a l s: Borrower has requested that Lender extend financing to Borrower in accordance with the provisions of this Agreement. Health Systems Solutions, Inc., a Nevada corporation ("the "Guarantor"), owns all of the issued and outstanding capital stock of the Borrower and is willing to unconditionally guarantee the obligations of the Borrower to the Lender as set forth in a Guarantee of even date herewith as a material inducement to the Lender to extend the financing contemplated hereby. Lender is willing to make loans and other extensions of credit to Borrower, subject to the terms and conditions of this Agreement. NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable consideration, receipt of which is acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: SECTION 1. FACILITY Subject to the terms and conditions of, and in reliance upon the representations and warranties made in, this Agreement and the other Financing Documents, Lender agrees, to the extent and in the manner hereinafter set forth, to establish the Facility in an aggregate amount up to $1,600,000.00, as follows: 1.1. Revolver Facility. 1.1.1. Revolver Loans. Lender agrees, upon the terms and subject to the conditions set forth herein, to make Revolver Loans to Borrower on any Business Day during the period from the date hereof through the day before the last day of the Term, not to exceed the Gross Availability at such time, and not in excess of the amount set forth in the Budget, which Revolver Loans may be repaid and reborrowed in accordance with the provisions of this Agreement; provided, however, that Lender shall have no obligation whatsoever to make any Revolver Loan if at the time of the proposed funding thereof either (a) the aggregate principal amount of all of the Revolver Loans and Pending Revolver Loans then outstanding exceeds, or would exceed after the funding of such Revolver Loan, the Gross Availability, or (b) the amount of consolidated EBITDA to have been earned by the Guarantor as of the end of the month prior to the date of borrowing or re-borrowing any Revolver Loan. The Revolver Loans shall bear interest as set forth in Section 2.1 hereof. 1.1.2. Use of Proceeds. The proceeds of the Revolver Loans shall be used by Borrower exclusively for one or more of the following purposes: (i) to pay expenses of the financing provided for herein; (ii) to pay any of the Obligations; (iii) for general working capital of the Borrower; (iv) to pay property taxes with respect to any Collateral to the extent such property taxes constitute a Lien senior to Lender's Liens; and (v) to pay up to $400,000 to satisfy obligations to the Internal Revenue Service. Notwithstanding anything to the contrary contained herein, in no event shall proceeds of Revolver Loans be used to pay expenses incurred in connection with the assertion of or joinder in any claim, counterclaim, action, contested matter, objection, defense or other proceeding, the purpose of which is to seek or the result of which would be to obtain any order, judgment, declaration, or similar relief (a) seeking damages on account of any alleged cause of action arising on, before or after the Effective Date; (b) invalidating, setting aside, avoiding or subordinating, in whole or in part, any of the Obligations or Liens and security interests in any Collateral granted to Lender under this Agreement; (c) declaring any of the Financing Documents to be invalid, not binding or unenforceable in any respect; (d) preventing, enjoining, hindering or otherwise delaying Lender's enforcement of any of the Financing Documents or any realization upon any Collateral; (e) declaring any Liens granted or purported to be granted under any of the Financing Documents to have a priority other than the priority set forth therein; (f) objecting to the amount or method of calculation by Lender of any of the Obligations or any accounting rendered by Lender with respect to any of those obligations; or (g) seeking to use the cash proceeds of any of the Collateral without the prior written consent of Lender. 1.1.3. Revolver Note. The Revolver Loans made by Lender and interest accruing thereon shall be evidenced by the records of Lender and by the Revolver Note payable to Lender (or the assignee of Lender), which shall be executed by Borrower, completed in conformity with this Agreement and delivered to Lender on the Closing Date. All outstanding principal amounts and accrued interest under the Revolver Note shall be due and payable as set forth in Section 4.2 hereof. SECTION 2. INTEREST, FEES AND CHARGES 2.1. Interest. 2.1.1. Rates of Interest. Borrower agrees to pay interest in respect of all unpaid principal amounts of the Loans from the respective dates such principal amounts are advanced until paid (whether at stated maturity, on acceleration or otherwise) at a fixed rate per annum equal to 8%. Interest on each Loan shall accrue from and including the date on which such Loan is made to (but excluding) the date of any repayment thereof; provided, however, that, if a Loan is repaid on the same day made, one day's interest shall be paid on such Loan. 2 2.1.2. Default Rate of Interest. From and after the occurrence of any Event of Default, the principal amount of the Obligations (and, to the extent permitted by Applicable Law, all past due interest) shall bear interest at the Default Rate. To the fullest extent permitted by Applicable Law, the Default Rate shall apply and accrue on any judgment entered with respect to any of the Obligations. Borrower acknowledges that the cost and expense to Lender attendant upon the occurrence of an Event of Default are difficult to ascertain or estimate and that the Default Rate is a fair and reasonable estimate to compensate Lender for such added cost and expense. 2.2. Fees. 2.2.1. Audit and Appraisal Fees. Borrower shall be obligated to reimburse Lender for all reasonable costs and expenses incurred by Lender in connection with all appraisals of any Collateral and audits of any Obligor's books and records and such other matters pertaining to any Obligor or any Collateral as Lender shall deem appropriate. 2.2.2 General Provisions. All fees shall be fully earned by the identified recipient thereof pursuant to the foregoing provisions of this Agreement on the due date thereof and, except as otherwise set forth herein or required by Applicable Law, shall not be subject to rebate, refund or proration. All fees provided for in this Section 2.2 are and shall be deemed to be compensation for services and are not, and shall not be deemed to be, interest or any other charge for the use, forbearance or detention of money. 2.3. Computation of Interest and Fees. Interest shall be calculated on a daily basis, commencing on the date hereof, and shall be payable monthly, in arrears, on the tenth day of each month. All interest, fees and other charges provided for in this Agreement shall be calculated daily and shall be computed on the actual number of days elapsed over a year of 360 days. Borrower acknowledges that the calculation of interest on the basis of a 360-day year, as opposed to a year of 365 days, results in a higher effective rate of interest hereunder. For purposes of computing interest hereunder, all Payment Items received by Lender shall be deemed applied by Lender on account of the Obligations (subject to Full Payment of such items) one Business Day after Lender receives such items in immediately available funds in the Payment Account, and Lender shall be deemed to have received such Payment Item on the date specified in Section 4.5 hereof. 2.4. Reimbursement Obligations. 2.4.1. Borrower shall reimburse Lender, for all reasonable legal, accounting, appraisal and other fees and expenses incurred by Lender (including fees and expenses of Lender Professionals) in connection with (i) the negotiation and preparation of any of the Financing Documents, any amendment or modification thereto, any waiver of any Default or Event of Default thereunder, or any restructuring or forbearance with respect thereto; (ii) the administration of the Financing Documents and the transactions contemplated thereby, to the extent that such fees and expenses are expressly provided for in this Agreement or any of the other Financing Documents; (iii) action taken to perfect or maintain the perfection or priority of any of Lender's Liens with respect to any of the Collateral; (iv) any inspection of or audits conducted with respect to any of Borrower's books and records or any of the Collateral; 3 (v) any effort to verify, protect, preserve, or restore any of the Collateral or to collect, sell, liquidate or otherwise dispose of or realize upon any of the Collateral; (vi) any litigation, contest, dispute, suit, proceeding or action (whether instituted by or against Lender, any Obligor or any other Person) in any way arising out of or relating to any of the Collateral (or the validity, perfection or priority of any of Lender's Liens thereon), any of the Financing Documents or the validity, allowance or amount of any of the Obligations; (vii) the protection or enforcement of any rights or remedies of Lender in any Insolvency Proceeding; and (viii) any other action taken by Lender to enforce any of the rights or remedies of Lender against any Obligor or any Account Debtors to enforce collection of any of the Obligations or payments with respect to any of the Collateral. All amounts chargeable to Borrower under this Section 2.4 shall constitute Obligations that are secured by all of the Collateral and shall be payable on demand to Lender. Borrower shall also reimburse Lender for reasonable expenses incurred by Lender in its administration of any of the Collateral to the extent and in the manner provided in Section 7 hereof or in any of the other Financing Documents. The foregoing shall be in addition to, and shall not be construed to limit, any other provision of any of the Financing Documents regarding the reimbursement by Borrower of costs, expenses or liabilities suffered or incurred by Lender. 2.4.2. If at any time Lender shall agree to indemnify any Person against losses or damages that such Person may suffer or incur in its dealings or transactions with Borrower, or shall guarantee any liability or obligation of Borrower to such Person, or otherwise shall provide assurances of Borrower's payment or performance under any agreement with such Person, then Borrower shall indemnify and defend Lender and shall hold them harmless from and against any and all liability any of them may have under any such indemnity, guaranty or assurance, and any amounts so paid by Lender shall be repaid to them immediately by Borrower. Borrower's agreement to indemnify and defend Lender shall constitute part of the Obligations that are secured by the Collateral and Borrower shall repay, on demand, any amount so paid or any liability incurred by Lender in connection with any such indemnity, guaranty or assurance. Nothing herein shall be construed to impose upon Lender any obligation to provide any such indemnity, guaranty or assurance. The foregoing agreement of Borrower shall apply whether or not such indemnity, guaranty or assurance is in writing or oral and regardless of Borrower's knowledge of the existence thereof, and shall be in addition to any of the provision of the Financing Documents regarding reimbursement by Borrower of costs, expenses or liabilities suffered or incurred by Lender. 2.5. Bank Charges. Borrower shall pay to Lender, on demand, any and all fees, costs or expenses which Lender pays to a bank or other similar institution (including any fees paid by Lender to any Participant) arising out of or in connection with (i) the forwarding to Borrower or any other Person on behalf of Borrower by Lender of proceeds of Loans made by Lender to Borrower pursuant to this Agreement and (ii) the depositing for collection by Lender of any Payment Item received or delivered to Lender on account of the Obligations. Borrower acknowledges and agrees that Lender may charge such costs, fees and expenses to Borrower based upon Lender's good faith estimate of such costs, fees and expenses as they are incurred by Lender. 4 2.6. Maximum Interest. Regardless of any provision contained in this Agreement or any of the other Financing Documents, in no contingency or event whatsoever shall the aggregate of all amounts that are contracted for, charged or received by Lender pursuant to the terms of this Agreement or any of the other Financing Documents and that are deemed interest under Applicable Law exceed the highest rate permissible under any Applicable Law. No agreements, conditions, provisions or stipulations contained in this Agreement or any of the other Financing Documents or the exercise by Lender of the right to accelerate the payment or the maturity of all or any portion of the Obligations, or the exercise of any option whatsoever contained in any of the Financing Documents, or the prepayment by Borrower of any of the Obligations, or the occurrence of any contingency whatsoever, shall entitle Lender to charge or receive in any event, interest or any charges, amounts, premiums or fees deemed interest by Applicable Law (such interest, charges, amounts, premiums and fees referred to herein collectively as "Interest") in excess of the Maximum Rate and in no event shall Borrower be obligated to pay Interest exceeding such Maximum Rate, and all agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate or compel Borrower to pay Interest exceeding the Maximum Rate shall be without binding force or effect, at law or in equity, to the extent only of the excess of Interest over such Maximum Rate. If any Interest is charged or received in excess of the Maximum Rate ("Excess"), Borrower acknowledges and stipulates that any such charge or receipt shall be the result of an accident and bona fide error, and such Excess, to the extent received, shall be applied first to reduce the principal Obligations and the balance, if any, returned to Borrower, it being the intent of the parties hereto not to enter into a usurious or otherwise illegal relationship. The right to accelerate the maturity of any of the Obligations does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of any such acceleration. Borrower recognizes that, with fluctuations in the rates of interest set forth in Section 2.1.1 of this Agreement, and the Maximum Rate, such an unintentional result could inadvertently occur. All monies paid to Lender hereunder or under any of the other Financing Documents, whether at maturity or by prepayment, shall be subject to any rebate of unearned interest as and to the extent required by Applicable Law. By the execution of this Agreement, Borrower covenants that (i) the credit or return of any Excess shall constitute the acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable, against Lender, based in whole or in part upon contracting for, charging or receiving any Interest in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by Lender, all interest at any time contracted for, charged or received from Borrower in connection with any of the Financing Documents shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Obligations. Borrower and Lender 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) exclude voluntary prepayments and the effects thereof. The provisions of this Section 2.6 shall be deemed to be incorporated into every DIP Financing Document (whether or not any provision of this Section is referred to therein). All such Financing Documents and communications relating to any Interest owed by Borrower, and all figures set forth therein shall, for the sole purpose of computing the extent of Obligations, be automatically recomputed by Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section 2.6. 5 SECTION 3. LOAN ADMINISTRATION 3.1. Manner of Borrowing and Funding Revolver Loans. Borrowings under the Revolver Commitment of the Facility established pursuant to Section 1 hereof shall be made and funded as follows: 3.1.1. Notice of Borrowing. (i) Whenever Borrower desires to make a Borrowing under this Agreement, Borrower shall give Lender prior written notice (or telephonic notice promptly confirmed in writing) of such Borrowing request (a "Notice of Borrowing"), which shall be in the form of Exhibit B annexed hereto and signed by an authorized officer of Borrower. Such Notice of Borrowing shall be given by Borrower at the office of Lender designated by Lender from time to time no later than ten (10) Business Days prior to the requested funding date of such Borrowing. Notices received after 11:00 a.m. shall be deemed received on the next Business Day. Each Notice of Borrowing (or telephonic notice thereof) shall be irrevocable and shall specify (a) the principal amount of the Borrowing, and (b) the date of Borrowing (which shall be a Business Day). (ii) Unless payment is otherwise timely made by Borrower, the becoming due of any amount required to be paid under this Agreement or any of the other Financing Documents with respect to the Obligations (whether as principal, accrued interest, fees or other charges) shall be deemed irrevocably to be a request for Revolver Loans on the due date of, and in an aggregate amount required to pay, such principal, accrued interest, fees or other charges, and the proceeds of such Revolver Loans may be disbursed by way of direct payment of the relevant Obligation. Lender shall not have any obligation to Borrower to honor any deemed request for a Revolver Loan after the Commitment Termination Date, but may do so in its discretion and without regard to the existence of, and without being deemed to have waived, any Default or Event of Default. (iii) Lender shall have no obligation to honor any deemed request for a Revolver Loan after the Commitment Termination Date or when any condition precedent in Section 10 hereof is not satisfied, but may do so in its discretion and without regard to the existence of, and without being deemed to have waived, any Default or Event of Default and regardless of whether such Revolver Loan is funded after the Commitment Termination Date. (iv) As an accommodation to Borrower, Lender may permit telephonic requests for Borrowings and electronic transmittal of instructions, authorizations, agreements or reports to Lender by Borrower. Lender shall not have any liability to Borrower for any loss or damage suffered by Borrower as a result of Lender's honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically and purporting to have been sent to Lender by Borrower and Lender shall not have any duty to verify the origin of any such communication or the identity or authority of the Person sending it. 6 3.1.2. Disbursement Authorization. Borrower hereby irrevocably authorizes Lender to disburse the proceeds of each Revolver Loan requested by Borrower, or deemed to be requested pursuant to Section 3.1.1, as follows: (i) the proceeds of each Revolver Loan requested under Section 3.1.1(i) shall be disbursed by Lender in accordance with the terms of the written disbursement letter from Borrower in the case of the initial Borrowing, and, in the case of each subsequent Borrowing, by wire transfer to such bank account as may be agreed upon by Borrower and Lender from time to time in writing; and (ii) the proceeds of each Revolver Loan requested under Section 3.1.1(ii) shall be disbursed by Lender by way of direct payment of the relevant interest or other Obligation. Any proceeds disbursed in payment of any of the Obligations shall be deemed to have been received by Borrower. 3.2. All Loans to Constitute One Obligation. The Loans shall constitute one general Obligation of Borrower and shall be secured by Lender's Lien upon all of the Collateral. SECTION 4. PAYMENT 4.1. General Payment Provisions. All payments of principal of and interest on the Loans and other Obligations that are payable to Lender shall be made to Lender in Dollars without any offset or counterclaim and free and clear of (and without deduction for) any present or future Taxes, and, with respect to payments made other than by application of balances in the Payment Account, in immediately available funds not later than 12:00 noon on the due date (and payment made after such time on the due date to be deemed to have been made on the next succeeding Business Day). All payments received by Lender shall be distributed by Lender in accordance with Section 4.5 hereof. 4.2. Repayment of Revolver Loans. 4.2.1. Payment of Principal. The outstanding principal amounts with respect to the Revolver Loans shall be due and payable by Borrower to Lender immediately upon (a) each receipt by Lender or Borrower of any proceeds of any of the Collateral, to the extent of such proceeds; and (b) the Commitment Termination Date. 4.2.2. Payment of Interest. Interest accrued on each Revolver Loan shall be due and payable on the first calendar day of each month (for the immediately preceding month), computed through the last calendar day of the preceding month. Accrued interest shall also be paid by Borrower on the Commitment Termination Date. 7 4.3. Payment of Other Obligations. The balance of the Obligations requiring the payment of money, including the Extraordinary Expenses incurred by Lender, shall be repaid by Borrower to Lender, as and when provided in the Financing Documents, or, if no date of payment is otherwise specified in the Financing Documents, on demand. 4.4. Marshaling; Payments Set Aside. Lender shall not be under any obligation to marshal any assets in favor of any Obligor or against or in payment of any or all of the Obligations. To the extent that Borrower makes a payment or payments to Lender or Lender receives payment from the proceeds of any Collateral or exercises its right of setoff, and such payment or payments or the proceeds of Collateral or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. The provisions of the immediately preceding sentence of this Section 4.4 shall survive any termination of the Facility and Full Payment of the Obligations. 4.5. Application of Payments and Collections. All Payment Items received by Lender by 12:00 noon, Miami, Florida time, on any Business Day shall be deemed received on that Business Day. All Payment Items received by Lender after 12:00 noon, Miami, Florida time, on any Business Day shall be deemed received on the following Business Day. Except to the extent that the manner of application to the Obligations of payments or proceeds of Collateral is expressly governed by other provisions of this Agreement, Borrower irrevocably waives the right to direct the application of any and all payments and Collateral proceeds at any time or times received by Lender from or on behalf of Borrower, and Borrower does hereby irrevocably agree that Lender shall have the continuing exclusive right to apply and reapply any and all such payments and Collateral proceeds received at any time or times hereafter by Lender or its agent against the Obligations, in such manner as Lender may deem advisable, notwithstanding any entry by Lender upon any of its books and records. Without limiting the generality of the foregoing, Borrower acknowledges and agrees that Lender may apply all payments and Collateral proceeds to all of the Obligations prior to application of the same to the Term Loan. If as the result of Lender's collection of proceeds of Accounts and other Collateral as authorized by Section 7.2.5 a credit balance exists, 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 Default or Event of Default exists. Lender may, at its option, offset such credit balance against any of the Obligations upon and after the occurrence of an Event of Default. 4.6. Loan Account. Lender shall establish an account on its books (the "Loan Account") and shall enter all Loans as debits to the Loan Account and shall also record in the Loan Account all payments made by Borrower on any Obligations and all proceeds of Collateral which are finally paid to Lender, and may record therein, in accordance with customary accounting practice, other debits and credits, including interest and all charges and expenses properly chargeable to Borrower. 8 4.7. Gross Up for Taxes. If Borrower shall be required by Applicable Law to withhold or deduct any Taxes from or in respect of any sum payable under this Agreement or any of the other Financing Documents, (a) the sum payable to Lender shall be increased as may be necessary so that, after making all required withholding or deductions, Lender receives an amount equal to the sum it would have received had no such withholding or deductions been made, (b) Borrower shall make such withholding or deductions, and (c) Borrower shall pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with Applicable Law. SECTION 5. TERM AND TERMINATION OF THE FACILITY 5.1. Term. Subject to Lender's right to cease making Loans to Borrower when any Default or any Event of Default exists or upon the Commitment Termination Date, the Facility shall be in effect for the Term. The Term may be extended by written agreement between Borrower and Lender. 5.2. Termination of Facility. 5.2.1. Termination by Lender. Lender may terminate the Facility at any time, without notice to Borrower, upon or after the occurrence of an Event of Default. 5.2.2. Effect of Termination. On the Commitment Termination Date, all of the Obligations (including Contingent Obligations owing to Lender) shall be immediately due and payable, and Lender shall have no further obligation to make any Loans. All undertakings, agreements, covenants, warranties and representations of Borrower contained in the Financing Documents shall survive any such termination and Lender shall retain its Liens in the Collateral and all of its rights and remedies under the Financing Documents notwithstanding such termination until Full Payment of the Obligations. With respect to any Obligations that are Contingent Obligations on the Commitment Termination Date, Borrower shall, on the Commitment Termination Date, either deposit with Lender cash or procure and deliver to Lender a direct pay letter of credit naming Lender as beneficiary (to be in form and substance, and from an issuing bank, satisfactory to Lender), in each case in an amount not less than 105% of the aggregate amount of all such Contingent Obligations to Lender. Notwithstanding Full Payment of the Obligations, Lender shall not be required to terminate its security interests in any of the Collateral unless, with respect to any loss or damage Lender may incur as a result of the dishonor or return of any Payment Items applied to the Obligations, Lender shall have received either (i) a written agreement, executed by Borrower and any Person whose loans or other advances to Borrower are used in whole or in part to satisfy the Obligations, indemnifying Lender from any such loss or damage; or (ii) such monetary reserves and Liens on the Collateral for such period of time as Lender, in its reasonable discretion, may deem necessary to protect Lender from any such loss or damage. The provisions of Sections 2.4, 4.4, 4.7 and this Section 5.2.2 and all obligations of Borrower to indemnify Lender pursuant to this Agreement shall in all events survive any termination of the Facility. 9 SECTION 6. COLLATERAL SECURITY 6.1. Grant of Security Interest in Collateral. To secure the prompt and Full Payment and performance of all of the Obligations, Borrower hereby grants to Lender a continuing security interest in and Lien upon all of the assets of Borrower, whether now owned or existing or hereafter created, acquired or arising (irrespective of whether the same existed on or was created or acquired after the Effective Date), including the following Property and interests in Property of Borrower: (i) all Accounts; (ii) all Inventory; (iii) all Equipment; (iv) all General Intangibles; (v) all Instruments; (vi) all Chattel Paper; (vii) all Documents; (viii) all Investment Property; (ix) all Supporting Obligations; (x) all Letter-of-Credit Rights; (xi) all Deposit Accounts; (xii) all monies and other Property of any kind, now or at any time or times hereafter in the possession or under the control of Lender or a bailee or Affiliate of Lender, including any Cash Collateral in the Cash Collateral Account; (xiii) all cash and non-cash proceeds of (i) through (xii) above, including proceeds of and unearned premiums with respect to insurance policies insuring any of the Collateral; and (xiv) all books and records (including customer lists, files, correspondence tapes, computer programs, print-outs, and other computer materials and records) of Borrower pertaining to any of (i) through (xiii) above. 10 6.2. Other Collateral. In addition to the items of Property referred to in Section 6.1 above, the Obligations shall also be secured by the Cash Collateral to the extent provided herein and all of the other items of Property from time to time described in any of the Security Documents as security for any of the Obligations. 6.3. Lien on Deposit Accounts. As additional security for the Full Payment and performance of the Obligations, Borrower hereby grants to Lender a continuing security interest in and Lien upon, and hereby collaterally assigns to Lender, all of Borrower's right, title and interest in and to each Deposit Account and all deposits or other sums at any time credited to each such Deposit Account, including any sums in any blocked account or any special lockbox account and in the accounts in which sums are deposited from such blocked accounts and special lockbox accounts. In connection with the foregoing, Borrower hereby authorizes and directs each such bank or other depository to pay or deliver to Lender upon its written demand therefor made at any time upon the occurrence and during the continuation of an Event of Default and without further notice to Borrower (such notice being hereby expressly waived), all balances in each Deposit Account maintained by Borrower with such depository for application to the Obligations then outstanding, and the rights given Lender in this Section shall be cumulative with and in addition to Lender's other rights and remedies in regard to the foregoing Property as proceeds of Collateral. Borrower hereby irrevocably appoints Lender as Borrower's attorney-in-fact to collect any and all such balances to the extent any such payment is not made to Lender by such bank or other depository after demand thereon is made by Lender pursuant hereto. 6.4. Lien Perfection; Further Assurances. Promptly after Lender's request therefor, Borrower shall execute or cause to be executed and delivered to Lender (and consent to Lender's filing without Borrower's signature where permitted by Applicable Law) such instruments, assignments, title certificates or other documents as are necessary under the UCC or other Applicable Law (including any motor vehicle certificates of title act) to perfect (or continue the perfection of) Lender's Lien upon the Collateral, and shall take such other action as may be requested by Lender to give effect to or carry out the intent and purposes of this Agreement. Unless prohibited by Applicable Law, Borrower hereby authorizes Lender to execute and file any such financing statement on Borrower's behalf. The parties agree that a carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in any appropriate office in lieu thereof. 6.5. Lien Priority. The Liens and security interests granted to Lender pursuant to the provisions of this Section 6 and pursuant to any of the Financing Documents shall be first priority Liens and security interests in the Collateral. 11 SECTION 7. COLLATERAL ADMINISTRATION 7.1. General Provisions. 7.1.1. Locations of Collateral. All tangible items of Collateral, other than Inventory in transit, shall at all times be kept by Borrower at one or more of the business locations of Borrower previously disclosed to Lender and shall not be moved therefrom, without the prior written approval of Lender, except that prior to an Event of Default and acceleration of the maturity of the Obligations in consequence thereof, Borrower may (i) make sales or other dispositions of any Collateral to the extent such sales or other dispositions are not prohibited by Section 9.2.4 hereof and (ii) may move Inventory or any record relating to any Collateral to a location in the United States other than those previously disclosed to Lender, so long as Borrower has given Lender at least 30 days prior written notice of such new location and prior to moving any Inventory to such location there shall have been filed all UCC-1 financing statements and any other appropriate documentation necessary to perfect or continue the perfection of Lender's Liens with respect to such Inventory and all proceeds thereof. 7.1.2. Insurance of Collateral; Condemnation Proceeds. Borrower shall maintain and pay for insurance upon all Collateral, wherever located, covering casualty, hazard, public liability, theft, malicious mischief, and such other risks in such amounts and with such insurance companies as are reasonably satisfactory to Lender. All proceeds payable under each such policy shall be payable to Lender for application to the Obligations. Borrower shall deliver the originals or certified copies of such policies to Lender with lender's loss payable endorsements reasonably satisfactory to Lender, naming Lender as sole loss payee, assignee or additional insured, as appropriate. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than 30 days prior written notice to Lender in the event of cancellation of the policy for any reason whatsoever and a clause specifying that the interest of Lender shall not be impaired or invalidated by any act or neglect of Borrower or the owner of the Property or by the occupation of the premises for purposes more hazardous than are permitted by said policy. If Borrower fails to provide and pay for such insurance, Lender may, at its option, but shall not be required to, procure the same and charge Borrower therefor. Borrower agrees to deliver to Lender, promptly as rendered, true copies of all reports made in any reporting forms to insurance companies. For so long as no Event of Default exists, Borrower shall have the right to settle, adjust and compromise any claim with respect to any insurance maintained by Borrower provided that all proceeds thereof are applied in the manner specified in this Agreement, and Lender agrees promptly to provide any necessary endorsement to any checks or drafts issued in payment of any such claim. At any time that an Event of Default exists, only Lender shall be authorized to settle, adjust and compromise such claims. Lender shall have all rights and remedies with respect to such policies of insurance as are provided for in this Agreement and the other Financing Documents. 12 7.1.3. Protection of Collateral. All expenses of protecting, storing, warehousing, insuring, handling, maintaining and shipping any Collateral, all Taxes imposed under any Applicable Law on any of the Collateral or in respect of the sale thereof, and all other payments required to be made by Lender to any Person to realize upon any Collateral shall be borne and paid by Borrower. If Borrower fails to pay promptly any portion thereof when due, Lender may, at its option, but shall not be required to, pay the same and charge Borrower therefor. Lender shall not be liable or responsible in any way for the safekeeping of any of the Collateral or for any loss or damage thereto (except for reasonable care in the custody thereof while any Collateral is in Lender's actual possession) or for any diminution in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency, or other Person whomsoever, but the same shall be at Borrower's sole risk. 7.1.4. Defense of Title to Collateral. Borrower shall at all times defend its title to the Collateral and Lender's Liens therein against all Persons and all claims and demands whatsoever. 7.2. Administration of Accounts. 7.2.1. Records and Schedules of Accounts. Borrower shall keep accurate and complete records of its Accounts and all payments and collections thereon and shall submit to Lender on a daily basis or such other periodic basis as Lender shall request a sales and collections report for the preceding period, in form satisfactory to Lender. On or before the 15th day of each month from and after the date hereof, Borrower shall deliver to Lender, in form acceptable to Lender, a detailed aged trial balance of all Accounts existing as of the last day of the preceding month, specifying the names, addresses, face value, dates of invoices and due dates for each Account Debtor obligated on an Account so listed ("Schedule of Accounts"), and, upon Lender's request therefor, copies of proof of delivery and a copy of all documents, including repayment histories and present status reports relating to the Accounts so scheduled and such other matters and information relating to the status of then existing Accounts as Lender shall reasonably request. At the request of Lender made at any time, Borrower shall deliver to Lender copies of invoices or invoice registers related to all of its Accounts. 7.2.2. Discounts, Disputes and Returns. If Borrower grants any discounts, allowances or credits that are not shown on the face of the invoice for the Account involved, Borrower shall report such discounts, allowances or credits, as the case may be to Lender as part of the next required Schedule of Accounts. If any amounts due and owing in excess of $10,000 are in dispute between Borrower and any Account Debtor, or if any returns are made in excess of $10,000 with respect to any Accounts owing from an Account Debtor, Borrower shall provide Lender with written notice thereof at the time of submission of the next Schedule of Accounts, explaining in detail the reason for the dispute or return, all claims related thereto and the amount in controversy. Upon and after the occurrence of an Event of Default, Lender shall have the right to settle or adjust all disputes and claims directly with the Account Debtor and to compromise the amount or extend the time for payment of any Accounts comprising a part of the Collateral upon such terms and conditions as Lender may deem advisable, and to charge the deficiencies, costs and expenses thereof, including attorneys' fees, to Borrower. 7.2.3. Taxes. If an Account of Borrower includes a charge for any Taxes payable to any governmental taxing authority, Lender is authorized, in its sole discretion, to pay the amount thereof to the proper taxing authority for the account of Borrower and to charge Borrower therefor; provided, however, that Lender shall not be liable for any Taxes that may be due by Borrower. 13 7.2.4. Account Verification. Whether or not a Default or an Event of Default exists, Lender shall have the right at any time, in the name of Lender, any designee of Lender or Borrower to verify the validity, amount or any other matter relating to any Accounts of Borrower by mail, telephone, telegraph or otherwise. Borrower shall cooperate fully with Lender in an effort to facilitate and promptly conclude any such verification process. 7.2.5. Collection of Accounts and Proceeds of Collateral. To expedite collection, Borrower shall endeavor in the first instance to make collection of Borrower's Accounts for Lender. All Payment Items received by Borrower in respect of its Accounts, together with the proceeds of any other Collateral, shall be held by Borrower as trustee of an express trust for Lender's benefit and Borrower shall immediately deposit same in kind in the Dominion Account. Lender retains the right at all times after the occurrence of a Default or an Event of Default to notify Account Debtors of Borrower that Accounts have been assigned to Lender and to collect Accounts directly in its own name and to charge to Borrower the collection costs and expenses, incurred by Lender, including reasonable attorneys' fees. 7.3. Administration of Equipment. 7.3.1. Records and Schedules of Equipment. Borrower shall keep accurate records itemizing and describing the kind, type, quality, quantity and cost of its Equipment and all dispositions made in accordance with Section 7.3.2 hereof, and shall furnish Lender with a current schedule containing the foregoing information on at least an annual basis and more often if requested by Lender. Promptly after request therefor by Lender, Borrower shall deliver to Lender any and all evidence of ownership, if any, of any of the Equipment. 7.3.2. Dispositions of Equipment. Borrower will not sell, lease or otherwise dispose of or transfer any of the Equipment or any part thereof without the prior written consent of Lender; provided, however, that the foregoing restriction shall not apply, for so long as no Default or Event of Default exists, to (i) dispositions of Equipment which, in the aggregate during any consecutive 12-month period, has a fair market value or book value, whichever is more, of $10,000 or less, provided that all Net Proceeds thereof are remitted to Lender for application to the Obligations in such order of application as Lender shall elect, or (ii) replacements of Equipment that is substantially worn, damaged or obsolete with Equipment of like kind, function and value, provided that the replacement Equipment shall be acquired prior to or concurrently with any disposition of the Equipment that is to be replaced, the replacement Equipment shall be free and clear of Liens other than Permitted Liens that are not Purchase Money Liens, and Borrower shall have given Lender at least 10 days prior written notice of such disposition. Nothing herein shall be construed to authorize Borrower to sell any Equipment subject to a lease between Lender and Borrower without Lender's prior written consent. 14 7.3.3. Condition of Equipment. The Equipment is in good operating condition and repair, and all necessary replacements of and repairs thereto shall be made so that the value and operating efficiency of the Equipment shall be maintained and preserved, reasonable wear and tear excepted. Borrower will not permit any of the Equipment to become affixed to any real Property leased to Borrower so that an interest arises therein under the real estate laws of the applicable jurisdiction unless the landlord of such real Property has executed a landlord waiver or leasehold mortgage in favor of and in form acceptable to Lender, and Borrower will not permit any of the Equipment to become an accession to any personal Property that is subject to a Lien unless the Lien is a Permitted Lien. SECTION 8. REPRESENTATIONS AND WARRANTIES 8.1. General Representations and Warranties. To induce Lender to enter into this Agreement and to establish the Facility, Borrower warrants and represents to Lender that: 8.1.1. Organization and Qualification. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of its organization, has the power to own Properties and to transact the business in which it is presently engaged or proposed to be engaged and is duly qualified and in good standing in each jurisdiction in which it presently is, or proposes to be, engaged in business. 8.1.2. Power and Authority. The execution, delivery and performance by Borrower of the Financing Documents are within Borrower's corporate power, has been duly authorized by all necessary or proper corporate action and, on the date of initial funding of Loans hereunder; are not in contravention of any provision of its own Organizational Documents; will not violate any Applicable Law; will not conflict with any Material Contract of Borrower; and does not require the consent or approval of any Governmental Authority or any other Person. 8.1.3. Enforceable Agreements. Each of the Financing Documents has been duly executed and delivered by Borrower and constitutes a legal, valid and binding obligation of Borrower, enforceable against each Borrower in accordance with its terms. 8.1.4. Priority of Liens. The security interests granted pursuant to the Financing Documents constitute valid, enforceable, perfected and first priority Liens on the Collateral. 8.1.5. Places of Business. Borrower has no office or place of business, nor does Borrower store any Collateral, at any location other than those previously disclosed to the Lender. 8.1.6. Compliance With Laws. All of Borrower's business, operations and Properties are conducted, maintained and owned in accordance with Applicable Law, including all Environmental Laws, except to the extent that any such noncompliance could not reasonably be expected to have a Material Adverse Effect and except as heretofore described by Borrower in filings with the SEC. 15 8.1.7. Governmental Approvals. Borrower has obtained and holds in full force and effect all Governmental Approvals necessary for the operation of its business as presently and proposed to be constructed to the extent that the failure to obtain same could not reasonably be expected to have a Material Adverse Effect. 8.1.8. No Adverse Changes. Since the Effective Date, no event has occurred that has or could reasonably be expected to have a Material Adverse Effect. 8.1.9. Taxes. The FEIN of Borrower is _______________, and Borrower has filed all federal, state and local tax returns and other reports that it is required by Applicable Law to file and has paid, or made for provision of the payment of, all Taxes upon it, its income and properties as and when such Taxes are due and payable, except to the extent being Properly Contested. 8.1.10. Brokers. There are no claims for brokerage commissions, finders' fees or investment banking fees in connection with the transactions contemplated by this Agreement or any of the other Financing Documents. 8.1.11. No Default. No Default or Event of Default exists at the time, or would result from the funding, of any Loan or other extension of credit hereunder; 8.1.12. Accounts. Except as set forth on Schedule 8.1.12 hereto, with respect to each Account of Borrower, such Account is genuine and in all respects what it purports to be and is not evidenced by a judgment; arises out of a completed sale and delivery of goods or rendition of services by Borrower in the Ordinary Course of Business and substantially in accordance with the terms and conditions of all purchase orders, contracts or other documents relating thereto and forming a part of the contract between Borrower and the Account Debtor; is for a sum certain maturing, as stated in the duplicate invoice covering such sale, a copy of which is available to Lender upon request; such Account is absolutely owing to such Borrower and is not contingent in any respect or for any reason, and the Account is not subject to any offset, Lien, deduction, defense, dispute, counterclaim or any other adverse condition, except for disputes resulting in returned goods where the amount in controversy is deemed by Lender to be immaterial; the contract under which such Account arose does not condition or restrict Borrower's right to assign to Lender the right to payment thereunder; Borrower has not made any agreement with any Account Debtor thereunder for any extension, compromise, settlement or modification of any such Account or any deduction therefrom, other than deductions, discounts and allowances that are granted in the Ordinary Course of Business for prompt payment and are reflected in the calculation of the net amount of each respective invoice related thereto and reflected in the Schedule of Accounts submitted to Lender pursuant to this Agreement; and to the best of Borrower's knowledge, there are no facts, events or occurrences that are reasonably likely to impair the validity or enforceability of any such Accounts or reduce the amount payable thereunder from the face amount of the invoice with respect thereto. 16 8.1.13. Intellectual Property. Borrower and its Subsidiaries each owns or has the lawful right to use all Intellectual Property necessary for the present and planned future conduct of its business without any conflict with the rights of others; there is no objection to, or pending (or, to Borrower's knowledge, threatened) Intellectual Property Claim with respect to, Borrower's or any Subsidiary's right to use any such Intellectual Property and Borrower is not aware of any grounds for challenge or objection thereto; and neither Borrower nor any Subsidiary pays any royalty or other compensation to any Person for the right to use any Intellectual Property. All such Intellectual Property and other similar rights have been previously described to the Lender, to the extent they are registered under any Applicable Law or are otherwise material to Borrower's or any Subsidiary's business. 8.1.14. Burdensome Contracts. Neither Borrower nor any of the Subsidiaries is a party or subject to any contract, agreement, or charter or other corporate restriction, which has or could be reasonably expected to have a Material Adverse Effect. Neither Borrower nor any of the Subsidiaries is a party or subject to any Restrictive Agreements. 8.1.15. ERISA. Neither Borrower nor any of the Subsidiaries has any Plan on the date hereof. Borrower and each of its Subsidiaries is in full compliance with the requirements of ERISA and the regulations promulgated thereunder with respect to each Plan. No fact or situation that is reasonably likely to result in a material adverse change in the financial condition of Borrower or any of the Subsidiaries exists in connection with any Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal liability in connection with a Multiemployer Plan. 8.1.16. Labor Matters. Neither Borrower nor any of the Subsidiaries is a party to any collective bargaining agreement on the date hereof. On the date hereof, there are no material grievances, disputes or controversies with any union or any other organization of Borrower's or any Subsidiary's employees, or, to Borrower's knowledge, any threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization. 8.1.17. Not a Regulated Entity. No Obligor is (i) an "investment company" or a "person directly or indirectly controlled by or acting on behalf of an investment company" within the meaning of the Investment Company Act of 1940; (ii) a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935; or (iii) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any public utilities code or any other Applicable Law regarding its authority to incur Debt. 8.1.18. Margin Stock. Neither Borrower nor any of the Subsidiaries is engaged, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. 17 8.1.19. Customer and Trade Relations. Except as set forth on Schedule 8.1.19 hereto, there exists no actual or threatened termination, cancellation or limitation of, or any materially adverse modification or change in, the business relationship between Borrower and any customer or any group of customers whose purchases individually or in the aggregate are material to the business of Borrower, or with any material supplier or group of suppliers, and there exists no condition or state of facts or circumstances which is reasonably likely to have a Material Adverse Effect or prevent Borrower from conducting such business after the consummation of the transactions contemplated by this Agreement in substantially the same manner in which it conducted its business on the Effective Date. 8.1.20. Budget. Borrower has furnished to Lender a copy of the Budget. The Budget has been prepared by Borrower in light of the past operations of the business of Borrower and its Subsidiaries and represents as of the respective dates thereof the good faith opinion of Borrower and its senior management concerning the likely course of business of Borrower and its Subsidiaries. 8.2. Reaffirmation of Representations and Warranties. All of the foregoing representations and warranties made by Borrower in this Agreement or in any of the other Financing Documents shall survive the execution and delivery of this Agreement and such other Financing Documents, and shall be deemed to have been remade and reaffirmed on each day that any Obligations are outstanding or that Borrower requests or is deemed to have requested the funding of a Loan under the Facility, except for changes that may occur after the date hereof in the Ordinary Course of Business as long as Lender has consented to such changes or such changes are not violative of any provision of this Agreement. SECTION 9. COVENANTS AND CONTINUING AGREEMENTS 9.1. Affirmative Covenants. During the Term and thereafter until Full Payment of the Obligations, Borrower covenants that it shall and shall cause each of its Subsidiaries to: 9.1.1. Business and Existence. Preserve and maintain its separate corporate existence and all rights, privileges, and franchises in connection therewith, and maintain its qualification and good standing in all states in which such qualification is necessary to the ownership of its Properties or the conduct of its businesses. 9.1.2. Business Records. Keep adequate records and books of account with respect to its business activities in which proper entries are made in accordance with GAAP reflecting all of its financial transactions. 9.1.3. Visits and Inspections. 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, inspect and make extracts from Borrower's books and records, and discuss with Borrower's officers, its employees and its independent accountants, Borrower's business, assets, liabilities, financial condition, business prospects and results of operations. 9.1.4. Further Assurances. At Lender's request, promptly execute or cause to be executed and deliver to Lender any and all documents, instruments and agreements deemed necessary by Lender to give effect to or carry out the terms or intent of this Agreement or any of the other Financing Documents. 18 9.1.5. Financial Reporting. Cause to be prepared and to be furnished to Lender the following (which, in the case of financial reporting, shall be prepared in accordance with GAAP applied on a consistent basis, unless Borrower's certified public accountants concur in any change therein, such change is disclosed to Lender and is consistent with GAAP): (i) as soon as available, and in any event within 90 days after the close of each Fiscal Year, consolidated balance sheets of Guarantor as of the end of such Fiscal Year and related statements of income, shareholders' equity and cash flow, and setting forth in each case in comparative form the corresponding figures for the preceding Fiscal Year; (ii) as soon as available, and in any event within 45 days after the end of each calendar quarter hereafter (but within 90 days after the last calendar quarter in a Fiscal Year), reviewed consolidated interim financial statements of Guarantor as of the end of such quarter and the related reviewed consolidated statements of income and cash flow for such quarter and for the portion of Guarantor's Fiscal Year then elapsed, certified by the principal financial officer of Guarantor as prepared in accordance with GAAP and fairly presenting the consolidated financial position and consolidated results of operations of Guarantor for such quarter and period subject only to changes from audit and year-end adjustments and except that such statements need not contain notes; (iii) promptly after the filing thereof, copies of any annual report to be filed in accordance with ERISA in connection with each Plan; (iv) such other data and information (financial or otherwise) as Lender, from time to time, may reasonably request, bearing upon or related to the Collateral or Borrower's financial condition or results of operations; and 9.1.6. Notices. Notify Lender in writing, promptly after Borrower's obtaining knowledge thereof, of the termination or breach of any Material Contract; the occurrence of any Default or Event of Default; Borrower's violation (or asserted violation) of any Applicable Law (including any Environmental Law); any claim that Borrower may make under any policy of insurance with respect to the Collateral; and any proposed sale of any of the Collateral (including with such notice copies of drafts of all instruments and agreements applicable to any such sale), which shall specify the identity of the proposed purchaser, the terms of the proposed sale and the expected date of closing. 9.1.7. Insurance. In addition to the insurance required herein with respect to the Collateral, maintain with financially sound and reputable insurers, insurance with respect to its Properties and business against such casualties and contingencies of such type (including product liability, business interruption, larceny, embezzlement or other criminal misappropriation insurance) and in such amounts as is customary in the business of Borrower. 19 9.1.8. Compliance With Laws. Comply with all Applicable Law, including ERISA, FLSA, OSHA, all Environmental Laws, the Bankruptcy Code and all laws, statutes, regulations and ordinances regarding the collection, payment and deposit of Taxes, and obtain and keep in force any and all Governmental Approvals necessary to the ownership of its Properties or to the conduct of its business, to the extent that any such failure to comply, obtain or keep in force could be reasonably expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, if any Environmental Release shall occur at or on any of the Properties of Borrower or any Subsidiary, Borrower shall, or shall cause the applicable Subsidiary to, act immediately to investigate and report to Lender and all appropriate Governmental Authorities the extent of, and to make appropriate remedial action to eliminate, such Environmental Release, whether or not ordered or otherwise directed to do so by any Governmental Authority. 9.1.9. Taxes. Pay and discharge all Taxes (other than Taxes that accrued or arose prior to the Petition and that are not secured by a Lien senior to the Liens in favor of Lender) prior to the date on which such Taxes become delinquent or penalties attach thereto, except and to the extent only that such Taxes are being Properly Contested. 9.1.10. Turn Over of Collateral Proceeds. Promptly turn over to Lender all proceeds received from any sale or other disposition of any Collateral (such proceeds to be applied to the Obligations). After Full Payment of all of the Obligations that are not Contingent Obligations, Lender shall be authorized to retain and apply any remaining proceeds for the purposes set forth in Section 5.2.2. 9.2 Negative Covenants. During the Term and thereafter until Full Payment of the Obligations, Borrower covenants that it shall not and shall not permit any Subsidiary to: 9.2.1. Fundamental Changes. Merge, reorganize, consolidate or amalgamate with any Person, or liquidate, wind up its affairs or dissolve itself, except for mergers or consolidations of any Subsidiary with another Subsidiary; change Borrower's name or conduct business under any new fictitious name; or change Borrower's FEIN. 9.2.2. Loans. Make any loans or other advances of money (other than for salary, travel advances, advances against commissions and other similar advances in the Ordinary Course of Business) to any Person. 20 9.2.3. Limitation on Liens. Create or suffer to exist any Lien upon any of its Property, income or profits, whether now owned or hereafter acquired, except: (i) Liens at any time granted in favor of Lender and other Liens in existence on the Effective Date; (ii) post-Effective Date Liens for Taxes (excluding any Lien imposed pursuant to any of the provisions of ERISA) not yet due or being Properly Contested; (iii) post-Effective Date statutory Liens (excluding Liens imposed pursuant to any of the provisions of ERISA) securing the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons for labor, materials, supplies or rentals incurred in the Ordinary Course of Business, but only if the payment thereof is not at the time required or the Debt secured by such Lien is being Properly Contested; (iv) post-Effective Date Liens resulting from deposits made in the Ordinary Course of Business in connection with workmen's compensation, unemployment insurance, social security and other like laws; (v) reservations, exceptions, easements, rights-of-way, and other similar encumbrances affecting real Property of Borrower that were in existence on the Effective Date; (vi) Purchase Money Liens securing Permitted Purchase Money Debt; and (vii) such other Liens as Lender may consent to in writing from time to time, in its sole and absolute discretion. 9.2.4. Disposition of Assets. Sell, lease or otherwise dispose of any of the Collateral, including any disposition of the Collateral as part of a sale and leaseback transaction, to or in favor of any Person, except (i) sales of Inventory in the Ordinary Course of Business for so long as no Event of Default exists hereunder, (ii) dispositions of Equipment as authorized by Section 7.3 hereof, (iii) dispositions of Property that is not Collateral or that is consented to in writing by Lender, (iv) dispositions in connection with which Full Payment is made of all of the Obligations (and all Contingent Obligations of Borrower as provided for in Section 5.2.2 hereof), and (v) other sales, leases or dispositions that are consented to by Lender. 9.2.5. Compromise of Accounts. Compromise or settle, or extend the time of payment of, any Account without Lender's prior written consent. 9.2.6. Payment of Claims. Other than any Claims assumed by the Borrower, with the prior written consent of the Lender, make any payment of principal or interest on account of any Claim against Borrower that arose prior to the Effective Date, other than Claims for property taxes assessed against any of the Collateral and Claims that may be paid from the proceeds of Loans pursuant to Section 1.1.2. 9.2.7. Restricted Investments. Make or have any Restricted Investment. 9.2.8. Distributions. Make any Distribution. 9.2.9. Permitted Debt. Incur or suffer to exist any Debt other than Claims in existence on the Effective Date; the Obligations; Capitalized Lease Obligations and Permitted Purchase Money Debt to the extent expenditures in connection therewith are not in violation of Section 9.3 hereof; Debt (other than Debt for Money Borrowed, Capitalized Lease Obligations and Permitted Purchase Money Debt) incurred in the Ordinary Course of Business of Borrower, so long as such Debts are not past due and payable and are not secured by any Lien that is not a Permitted Lien; and Permitted Contingent Obligations. 9.2.10. Conduct of Business. Engage in any business other than the business engaged in by it on the Effective Date and any business or activities that are substantially similar, related or incidental thereto. 9.2.11. Use of Proceeds. Use any proceeds of Loans for a purpose that is not expressly permitted by Section 1.1.2. 21 9.2.12. Tax Consolidation. File or consent to the filing of any consolidated income tax return with any Person other than a Subsidiary. 9.2.13. Accounting Changes. Make any significant change in accounting treatment or reporting practices, except as may be required by GAAP, or establish a fiscal year different from the Fiscal Year. 9.2.14. Organization Documents. Amend, modify or otherwise change any of the terms or provisions in any of its Organization Documents as in effect on the date hereof, except for changes that do not affect in any way Borrower's or such Subsidiary's rights and obligations to enter into and perform the Financing Documents to which it is a party and to pay all of the Obligations and that do not otherwise have a Material Adverse Effect. 9.2.15. Restrictive Agreements. Enter into or become party to any Restrictive Agreement. 9.3 Financial Covenants. During the Term and thereafter until Full Payment of the Obligations, Borrower covenants that, unless otherwise consented to by Lender in writing, it shall not make or commit or agree to make, or permit any of its Subsidiaries to make or commit or agree to make, any Capital Expenditures in excess of $150,000. SECTION 10. CONDITIONS PRECEDENT 10.1. Conditions Precedent to Initial Credit Extensions. Notwithstanding any other provision of this Agreement or any of the other Financing Documents, and without affecting in any manner the rights of Lender under other sections of this Agreement, Lender shall not be required to fund any Loan requested by Borrower, unless each of the following conditions has been and continues thereafter to be satisfied: 10.1.1. All of the Financing Documents shall have been executed in form and substance satisfactory to Lender by each of the signatories thereto and accepted by Lender, and each Obligor shall be in compliance with all of the terms thereof, and all representations and warranties contained therein shall be true and correct in all material respects. 10.1.2. No Default or Event of Default shall exist at the time of, and would not result from the funding of, any requested Loan, and no event shall have occurred and no condition shall exist since the Effective Date that has had or could reasonably be expected to have a Material Adverse Effect. 22 10.1.3. All fees and expenses required to be paid by Borrower hereunder on the Closing Date shall have been paid in full. 10.1.4. Lender shall have received satisfactory proof of insurance by Borrower, in accordance with the terms of this Agreement, together with loss payable endorsements on Lender's standard form of loss payable endorsement, naming Lender as loss payee with respect to each policy and certified copies of Borrower's liability insurance policies, together with endorsements naming Lender as an additional insured. 10.1.5. Lender shall have received, reviewed and found satisfactory a copy of the Budget. 10.2. Conditions Precedent to All Credit Extensions. Notwithstanding any other provision of this Agreement or any of the other Financing Documents, and without affecting in any manner the rights of Lender under other sections of this Agreement, Lender shall not be required to fund any Loans, unless and until each of the following conditions has been and continues to be satisfied: 10.2.1. No Default or Event of Default exists at the time, or would result from the funding, of any Loan or other extension of credit. 10.2.2. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court or Governmental Authority to enjoin, restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of, any of the Financing Documents or the consummation of any of the transactions contemplated thereby. 10.2.3. No event shall have occurred and no condition shall exist that could reasonably be expected to have a Material Adverse Effect. 10.3. Limited Waiver of Conditions Precedent. If Lender shall make any Loan or otherwise extend any credit to Borrower under this Agreement at a time when any of the foregoing conditions precedent are not satisfied (regardless of whether the failure of satisfaction of any of such conditions precedent is known or unknown to Lender), the funding of such Loans shall not operate as a waiver of the right of Lender to insist upon the satisfaction of all conditions precedent with respect to each subsequent Borrowing requested by Borrower or a waiver of any Default or Event of Default as a consequence of the failure of any such conditions to be satisfied. 23 SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT 11.1. Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default": 11.1.1. Payment of Obligations. Borrower shall fail to pay (a) the principal of or accrued interest with respect to any Loan Outstanding on the due date thereof (whether due at stated maturity, on demand, upon acceleration or otherwise) or (b) any of the other Obligations on the due date thereof (whether due at stated maturity, on demand, upon acceleration or otherwise). 11.1.2. Misrepresentations. Any warranty, representation, or other statement made or furnished to Lender by or on behalf of Borrower or Guarantor or in any instrument, certificate or financial statement furnished in compliance with or in reference to this Agreement or any of the Financing Documents proves to have been false or misleading in any material respect when made or furnished. 11.1.3. Breach of Specific Covenants. Borrower shall fail or neglect to perform, keep or observe any covenant contained in Sections 1.1.2, 6.4, 7.1.1, 7.1.2, 7.2, 7.3.2., 9.1.1, 9.1.3, 9.1.4, 9.1.5, 9.1.6, 9.1.7, 9.1.8, 9.1.9, 9.1.10, 9.2 or 9.3 hereof on the date that Borrower is required to perform, keep or observe such covenant. 11.1.4. Breach of Other Covenants. Borrower or Guarantor shall fail or neglect to perform, keep or observe any covenant contained in this Agreement (other than a covenant which is dealt with specifically elsewhere in this Section 11.1) or the Guarantee and the breach of such other covenant is not cured to Lender's satisfaction within 10 days after the sooner to occur of any Senior Officer's receipt of notice of such breach from Lender or the date on which such failure or neglect first becomes known to any Senior Officer; provided, however, that such notice and opportunity to cure shall not apply in the case of any failure to perform, keep or observe any covenant which is not capable of being cured at all or within such 10-day period or which is a willful and knowing breach by Borrower or Guarantor or which was the subject of a breach during the prior 60-day period. 11.1.5. Default Under Other Financing Documents. Any event of default shall occur under, or Borrower or Guarantor shall default in the performance or observance of any term, covenant, condition or agreement contained in, any of the other Financing Documents and such default shall continue beyond any applicable period of grace. 11.1.6. Cross-Defaults. There shall occur any default or event of default on the part of Borrower or Guarantor under any agreement, document or instrument, which is entered into after the Effective Date and which relates to any Debt for Money Borrowed, if, as a consequence of such default or event of default, the holder of such Debt shall be authorized to accelerate the maturity or demand payment thereof. 24 11.1.7. Uninsured Losses; Unauthorized Dispositions. There shall occur any material loss, theft, damage or destruction not fully covered by insurance (as required by this Agreement and subject to such deductibles as Lender shall have agreed to in writing), or any sale, lease or encumbrance of any of the Collateral or the making of any levy, seizure, or attachment thereof or thereon, except as may be specifically permitted by other provisions of this Agreement. 11.8. Change of Control. Any of the following shall have occurred: (i) any Person or group of Persons shall acquire for the first time direct or indirect ownership or the power to vote more than 50% of the issued and outstanding capital stock of Borrower or Guarantor; (ii) a change in the composition of the board of directors of Borrower or Guarantor, the result of which is fewer than a majority of the directors are directors of the Borrower or Guarantor as of the date hereof; or (iii) a change in the management of the Borrower or Guarantor, the result of which is the principal executive officers of the Borrower or Guarantor as of the date hereof resign or are otherwise removed from such positions. 11.9. Judgments. One or more judgments or orders for the payment of money in an amount that exceeds, individually or in the aggregate, $25,000 shall be rendered against Borrower or Guarantor and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there should be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. 11.10. Failure of Financing Documents. Any covenant, agreement or obligation of Borrower or Guarantor contained in or evidenced by any of the Financing Documents shall cease to be enforceable or shall be determined to be unenforceable in accordance with its terms; Borrower or Guarantor shall deny or disaffirm its obligations under any of the Financing Documents or Liens granted in connection therewith; or the Liens granted in any of the Collateral shall be determined to be voidable, invalid or subordinated or shall be determined, with respect to any material part of the Collateral, to be unperfected or not to have the priority contemplated by this Agreement. 11.11. Material Adverse Effect. Any event shall occur or any condition shall exist that could reasonably be expected to have a Material Adverse Effect. 11.12. Criminal Forfeiture. Any Obligor shall be convicted under any criminal law that could lead to a forfeiture of any Property of such Obligor. 11.13. Event of Bankruptcy. In addition, the Borrower covenants and agrees that in the event the Borrower or Guarantor shall: (i) file any petition with any Bankruptcy Court or be the subject of any petition under the Bankruptcy Code; (ii) file or be the subject of any petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency or other relief for the Borrower or Guarantor; (iii) have sought or consented to or acquiesce in the appointment of 25 any Trustee, Receiver, Conservator or Liquidator; or, (iv) be the subject of any order, judgment or decree entered by any court of competent jurisdiction approving a petition filed against such party for any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency or relief for the Borrower or Guarantor, the Lender shall thereupon be entitled, and the Borrower irrevocably consents, to the entry of an order by a bankruptcy court granting to the Lender, relief from any automatic stay imposed by Section 362 of the Bankruptcy Code, or otherwise, on or against the exercise of the rights and remedies otherwise available to the Lender the Financing Documents or as otherwise provided by law or in equity, and the Borrower or Guarantor irrevocably waives its right to object to, attempt to enjoin or otherwise interfere with such relief and the exercise and enforcement by the Lender of its rights and remedies following entry of such order. Without limiting the generality of the immediately preceding sentence, the Borrower agrees that the Lender will be entitled to immediate relief from the automatic stay imposed by the Bankruptcy Code to allow the Lender to take any and all actions necessary, desirable or appropriate to enforce any rights the Lender may have under the Financing Documents, including but not limited to, the right to possession of the Collateral, the right to prohibit the use of proceeds from the sale of Collateral and/or the commencement or continuation of an action to foreclose liens granted hereunder. The Borrower further agrees that the filing of any petition for relief under the Bankruptcy Code which postpones, prevents, delays or otherwise hinders the Lender's efforts to collect the amounts due under the Financing Documents or to liquidate any of the Collateral shall be deemed to have been filed in bad faith and, therefore, shall be subject to prompt dismissal or conversion to a liquidation case under the Bankruptcy Code upon motion therefore by the Lender. Further, the Borrower agrees it will not seek, apply for or cause the entry of any order enjoining, staying or otherwise prohibiting or interfering with the Lender's obtaining an order granting relief from the automatic stay and enforcement of any rights which the Lender may have under the Financing Documents, including but not limited to, the Lender's right to possession of the Collateral. 11.2 Acceleration of the Obligations. Without in any way limiting the right of Lender to demand payment of any portion of the Obligations payable on demand in accordance with this Agreement, upon or at any time after the occurrence of an Event of Default as above provided, Lender may, in its discretion (i) declare the principal of and any accrued interest on the Loans and all other Obligations owing under any of the Financing Documents to be, whereupon the same shall become, without further notice or demand (all of which notice and demand Borrower expressly waives), forthwith due and payable and Borrower shall forthwith pay to Lender the entire principal of and accrued and unpaid interest on the Loans and other Obligations plus reasonable attorneys' fees and expenses if such principal and interest are collected by or through an attorney-at-law; and (ii) terminate the Facility. 11.3 Remedies. Upon or at any time after the occurrence of an Event of Default, Lender may, in its discretion, exercise from time to time all rights and remedies available to Lender including, without limitation, the following rights and remedies to enforce collection of the Obligations: 26 11.3.1. All of the rights and remedies of a secured party under the UCC or under other Applicable Law, and all other legal and equitable rights to which Lender may be entitled under any of the Financing Documents, all of which rights and remedies shall be cumulative and shall be in addition to any other rights and remedies contained in this Agreement or any of the other Financing Documents, and none of which shall be exclusive. 11.3.2. The right to collect Accounts, Chattel Paper, Instruments and General Intangibles and all other rights of Borrower to the payment of money from any Person obligated therefor. 11.3.3. The right to take immediate possession of all tangible items of the Collateral and (i) to require Borrower to assemble such Collateral, at Borrower's expense, and make it available to Lender at a place designated by Lender that is reasonably convenient to both parties and (ii) to enter any of the premises of Borrower or wherever any of the Collateral shall be located, and to keep and store the same on said premises until sold (and if said premises be the Property of Borrower, Borrower agrees not to charge Lender for storage thereof). 11.3.4. The right to sell or otherwise dispose of all or any Inventory in its then condition, or after any further manufacturing or processing thereof, at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as Lender, in its sole discretion, may deem advisable; Borrower agrees that 10 days written notice to Borrower of any public or private sale or other disposition of such Collateral shall be reasonable notice thereof, and such sale shall be at such locations as Lender may designate in said notice. Lender shall have the right to conduct such sales on Borrower's premises, without charge therefor, and such sales may be adjourned from time to time in accordance with Applicable Law; Lender may sell, lease or otherwise dispose of such Collateral, or any part thereof, for cash, credit or any combination thereof, and Lender may purchase all or any part of such Collateral at public or, if permitted by Applicable Law, private sale and, in lieu of actual payment of such purchase price, may set off the amount of such price against the Obligations. Lender is hereby irrevocably granted a license or other right to use throughout the world, without royalty, fee or other charge, Borrower's labels, patents, copyrights, rights of use of any name, trade secrets, tradenames, trademarks and advertising matter, or any Property of a similar nature, as it pertains to the Collateral, in advertising for sale and selling any Collateral and Borrower's rights under all licenses and all franchise agreements shall inure to Lender's benefit. Any proceeds realized from the sale or other disposition of any Collateral may be applied to the Obligations, after allowing 2 Business Days for collection, to principal, interest, fees and expenses (including Extraordinary Expenses) in such order and manner as Lender, in its sole discretion, may determine. 11.4. Setoff. In addition to any Liens granted under any of the Financing Documents and any rights now or hereafter available under Applicable Law, Lender (and each of its Affiliates) is hereby authorized by Borrower at any time that an Event of Default exists, without notice to Borrower or any other Person (any such notice being hereby expressly waived) to set off and to appropriate and to apply any and all deposits, general or special (including Debt evidenced by certificates of deposit whether matured or unmatured (but not 27 including trust accounts)) and any other Debt at any time held or owing by Lender or any of its Affiliates to or for the credit or the account of Borrower against and on account of the Obligations of Borrower arising under the Financing Documents to Lender or any of its Affiliates, including all Loans Outstanding and all claims of any nature or description arising out of or in connection with this Agreement, irrespective of whether or not (i) Lender shall have made any demand hereunder, (ii) Lender shall have declared the principal of and interest on the Loans and other amounts due hereunder to be due and payable as permitted by this Agreement and even though such Obligations may be contingent or unmatured or (iii) the Collateral for the Obligations is adequate. 11.5 Remedies Cumulative; No Waiver. 11.5.1. All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings of Borrower contained in this Agreement and the other Financing Documents, or in any document referred to herein or contained in any agreement supplementary hereto or in any schedule or in any Guaranty given to Lender or contained in any other agreement between Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions, or agreements of Borrower herein contained. The rights and remedies of Lender under this Agreement and the other Loan Documents shall be cumulative and not exclusive of any rights or remedies that Lender would otherwise have. 11.5.2. The failure or delay of Lender to require strict performance by Borrower or Guarantor of any provision of any of the Financing Documents or to exercise or enforce any rights, Liens, powers or remedies under any of the Financing Documents or with respect to any Collateral shall not operate as a waiver of such performance, Liens, rights, powers and remedies, but all such requirements, Liens, rights, powers, and remedies shall continue in full force and effect until all Loans and all other Obligations owing or to become owing from Borrower to Lender shall have been fully satisfied. None of the undertakings, agreements, warranties, covenants and representations of Borrower contained in this Agreement or any of the other Loan Documents and no Event of Default by Borrower under this Agreement or any other Financing Documents shall be deemed to have been suspended or waived by Lender, unless such suspension or waiver is by an instrument in writing specifying such suspension or waiver and is signed by a duly authorized representative of Lender and directed to Borrower. 11.5.3. If Lender shall accept performance by Borrower, in whole or in part, of any obligation that Borrower is required by any of the Financing Documents to perform only when a Default or Event of Default exists, or if Lender shall exercise any right or remedy under any of the Financing Documents that may not be exercised other than when a Default or Event of Default exists, Lender's acceptance of such performance by Borrower or Lender's exercise of any such right or remedy shall not operate to waive any such Event of Default or to preclude the exercise by Lender of any other right or remedy, unless otherwise expressly agreed in writing by Lender, as the case may be. 28 SECTION 12. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS 12.1. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower shall not have the right to assign its rights or delegate performance of any of its obligations under any of the Financing Documents. Borrower hereby consents to Lender's participation, sale, assignment, transfer or other disposition, at any time or times hereafter, of all of any part of the Obligations, this Agreement and any of the other Financing Documents, or of any portion hereof or thereof, including Lender's rights, title, interests, remedies, powers, and duties hereunder or thereunder. In the case of an assignment, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as it would if it were "Lender" hereunder, and Lender shall be relieved of all obligations hereunder upon any such assignment. Borrower further agrees that Lender may disclose credit information regarding Borrower to any potential participant or assignee. 12.2. Participations. 12.2.1. Permitted Participants; Effect. Lender may, in the ordinary course of its business and in accordance with Applicable Law, at any time sell to one or more banks or other financial institutions (each a "Participant") a participating interest in any of the Obligations owing to Lender or any other interest of Lender under any of the Financing Documents. In the event of any such sale by Lender of participating interests to a Participant, Lender's obligations under the Loan Documents shall remain unchanged, Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, Lender shall remain the holder of any Note for all purposes under the Financing Documents, all amounts payable by Borrower under this Agreement and any of the Notes shall be determined as if Lender had not sold such participating interests, and Borrower shall continue to deal solely and directly with Lender in connection with Lender's rights and obligations under the Financing Documents. If Lender sells a participation to a Person other than an Affiliate of Lender, then Lender shall give prompt written notice thereof to Borrower. 12.2.2. Voting Rights. Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Financing Documents other than in the case of any Participant, an amendment, modification or waiver with respect to any Loans in which such Participant has an interest which forgives principal, interest or fees or reduces the stated interest rate or the stated rates at which fees are payable with respect to any such Loan, postpones the Commitment Termination Date, or any date fixed for any regularly scheduled payment of interest or fees on such Loan, or releases from liability Borrower or releases any substantial portion of any of the Collateral. 12.2.3. Benefit of Set-Off. Borrower agrees that each Participant shall be deemed to have the right of set-off provided in Section 11.4 hereof in respect of its participating interest in amounts owing under the Financing Documents to the same extent and subject to the same requirements under this Agreement as if the amount of its participating interest were owing directly to it as a Lender under the Financing Documents, provided that Lender shall retain the right of set-off provided in Section 11.4 hereof with respect to the amount of participating interests sold to each Participant. Lender agrees to share with each Participant, and each Participant by exercising the right of set-off provided in Section 11.4 agrees to share with Lender, any amount received pursuant to the exercise of its right of set-off. 29 12.2.4. Notices. Lender shall be solely responsible for notifying its Participants of any matters relating to the Financing Documents to the extent that any such notice may be required. SECTION 13. MISCELLANEOUS 13.1. Power of Attorney. Borrower hereby irrevocably designates, makes, constitutes and appoints Lender (and all Persons designated by Lender) as Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's designee, may, without notice to Borrower and in either Borrower's or Lender's name, but at the cost and expense of Borrower: 13.1.1. At such time or times as Lender or said designee, in its sole discretion, may determine, endorse Borrower's name on any Payment Item or proceeds of the Collateral which come into the possession of Lender or under Lender's control. 13.1.2. At any time that an Event of Default exists: (i) demand payment of the Accounts from the Account Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and generally exercise all of Borrower's rights and remedies with respect to the collection of the Accounts; (ii) settle, adjust, compromise, discharge or release any of the Accounts or other Collateral or any legal proceedings brought to collect any of the Accounts or other Collateral; (iii) sell or assign any of the Accounts and other Collateral upon such terms, for such amounts and at such time or times as Lender deems advisable; (iv) take control, in any manner, of any item of payment or proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name to a proof of claim in bankruptcy or similar document against any Account Debtor or to any notice of lien, assignment or satisfaction of Lien or similar document in connection with any of the Collateral; (vi) receive, open and dispose of all mail addressed to Borrower and to notify postal authorities to change the address for delivery thereof to such address as Lender may designate; (vii) endorse the name of Borrower upon any of the items of payment or proceeds relating to any Collateral and deposit the same to the account of Lender on account of the Obligations; (viii) endorse the name of Borrower upon any Chattel Paper, Document, Instrument, invoice, freight bill, bill of lading or similar document or agreement relating to any Accounts or Inventory of any Obligor and any other Collateral; (ix) use Borrower's stationery and sign the name of Borrower to verifications of the Accounts and notices thereof to Account Debtors; (x) use the information recorded on or contained in any data processing equipment and computer hardware and software relating to the Accounts, Inventory and any other Collateral; (xi) make and adjust claims under policies of insurance; and (xii) do all other acts and things necessary, in Lender's determination, to fulfill Borrower's obligations under this Agreement. 30 13.2. General Indemnity. Borrower hereby agrees to indemnify and defend the Lender Indemnitees and to hold the Lender Indemnitees harmless from and against any Claim ever suffered or incurred by any of the Lender Indemnitees arising out of or related to this Agreement or any of the other Financing Documents, the performance by Lender of its duties or the exercise of any of its rights or remedies hereunder, or the result of Borrower's failure to observe, perform or discharge any of Borrower's duties hereunder. Borrower shall also indemnify and defend the Lender Indemnitees against and save the Lender Indemnitees harmless from all Claims of any Person arising out of, related to, or with respect to any transactions entered into pursuant to this Agreement or Lender's Lien upon the Collateral. Without limiting the generality of the foregoing, these indemnities shall extend to any Claims asserted against any of the Lender Indemnitees by any Person under any Environmental Laws or similar laws by reason of Borrower's or any other Person's failure to comply with laws applicable to solid or hazardous waste materials or other toxic substances. Additionally, if any Taxes (excluding Taxes imposed upon or measured solely by the net income of Lender, but including, any intangibles tax, stamp tax, recording tax or franchise tax) shall be payable by Lender or any Obligor on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any of the other Financing Documents, or the creation or repayment of any of the Obligations hereunder, by reason of any Applicable Law now or hereafter in effect, Borrower shall pay (or will promptly reimburse Lender for the payment of) all such Taxes, including any interest and penalties thereon, and will indemnify and hold Lender Indemnitees harmless from and against liability in connection therewith. The foregoing indemnities shall not apply to protect any of the Lender Indemnitees for the consequences of their own gross negligence or willful misconduct. 13.3. Survival of All Indemnities. Notwithstanding anything to the contrary in this Agreement or any of the other Financing Documents, the obligations of Borrower and Lender with respect to each indemnity given by it in this Agreement, whether given by Borrower to Lender Indemnitees, shall survive the Full Payment of the Obligations and the termination of the Facility. 13.4. Indulgences Not Waivers. Lender's failure at any time or times hereafter, to require strict performance by Borrower of any provision of this Agreement shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith. 13.5. Modification of Agreement. This Agreement may not be modified, altered or amended, except by an agreement in writing signed by Borrower and Lender. 13.6. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement shall be prohibited by or invalid under Applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 31 13.7. Cumulative Effect; Conflict of Terms. To the fullest extent permitted by Applicable Law, the provisions of the Other Agreements and the Security Documents are hereby made cumulative with the provisions of this Agreement. Except as otherwise provided in any of the other Financing Documents by specific reference to the applicable provision of this Agreement, if any provision contained in this Agreement is in direct conflict with, or inconsistent with, any provision in any of the other Financing Documents, the provision contained in this Agreement shall govern and control. 13.8. Execution in Counterparts. This Agreement and any amendments hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. 13.9. Lender's Consent. Whenever Lender's consent is required to be obtained under this Agreement or any of the other Financing Documents as a condition to any action, inaction, condition or event, Lender shall be authorized to give or withhold its consent in its sole and absolute discretion and to condition its consent upon the giving of additional collateral security for the Obligations, the payment of money or any other matter. 13.10. Notices. All notices, requests and demands to or upon a party hereto shall be in writing and shall be sent by certified or registered mail, return receipt requested, personal delivery against receipt or by telecopier or other facsimile transmission and shall be deemed to have been validly served, given or delivered when delivered against receipt or 3 Business Days after deposit in the U.S. mail, certified mail postage prepaid, or, in the case of facsimile transmission, when received (if on a Business Day and, if not received on a Business Day, then on the next Business Day after receipt) at the office where the noticed party's telecopier is located, in each case addressed to the noticed party at the address shown for such party on the signature page hereof. Notwithstanding the foregoing, no notice to or upon Lender pursuant to Sections 3.1 or 5.2.2 shall be effective until after actually received by the individual to whose attention at Lender such notice is required to be sent. Any written notice or demand that is not sent in conformity with the provisions hereof shall nevertheless be effective on the date that such notice is actually received by the noticed party. 13.11. Performance of Borrower's Obligations. If Borrower shall fail to discharge any covenant, duty or obligation hereunder or under any of the other Financing Documents, Lender may, in its sole discretion at any time or from time to time, for Borrower's account and at Borrower's expense, pay any amount or do any act required of Borrower hereunder or under any of the Financing Documents or otherwise lawfully requested by Lender to enforce any of the Financing Documents or Obligations, preserve, protect, insure or maintain any of the Collateral, or preserve, defend, protect or maintain the validity or priority of Lender's Liens in any of the Collateral, including the payment of any judgment against Borrower, any insurance premium, any warehouse charge, any finishing or processing charge, any landlord claim, any other Lien upon or with respect to any of the Collateral. All payments that Lender may make under this Section and all out-of-pocket costs and expenses (including Extraordinary Expenses) that Lender pays or incurs in connection with any action taken by it hereunder shall be reimbursed to Lender by Borrower on demand with interest from the date such payment is made or such costs or expenses are incurred to the date of payment thereof at the Default Rate. Any payment made or other action taken by Lender under this Section shall be without prejudice to any right to assert, and without waiver of, an Event of Default hereunder and to proceed thereafter as provided herein or in any of the other Loan Documents. 32 13.12. Time of Essence. Time is of the essence of this Agreement, the Other Agreements and the Security Documents. 13.13. Entire Agreement; Appendix A and Exhibits. This Agreement and the other Financing Documents, together with all other instruments, agreements and certificates executed by the parties in connection therewith or with reference thereto, embody the entire understanding and agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and inducements, whether express or implied, oral or written. Appendix A and each of the Exhibits attached hereto are incorporated into this Agreement and by this reference made a part hereof. 13.14. Interpretation. No provision of this Agreement or any of the other Financing Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having, or being deemed to have, structured, drafted or dictated such provision. 13.15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. 13.16. Waivers by Borrower. To the fullest extent permitted by Applicable Law, Borrower waives (i) the right to trial by jury (which Lender hereby also waives) in any action, suit, proceeding or counterclaim of any kind arising out of or related to any of the Financing Documents, the Obligations or the Collateral; (ii) presentment, demand and protest and notice of presentment, protest, default, non payment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which Borrower may in any way be liable and hereby ratifies and confirms whatever Lender may do in this regard; (iii) notice prior to taking possession or control of the Collateral or any bond or security which might be required by any court prior to allowing Lender to exercise any of Lender's remedies; (iv) the benefit of all valuation, appraisement and exemption laws; and (v) notice of acceptance hereof. Borrower acknowledges that the foregoing waivers are a material inducement to Lender's entering into this Agreement and that Lender is relying upon the foregoing waivers in its future dealings with Borrower. Borrower warrants and represents that it has reviewed the foregoing waivers with its legal counsel and has knowingly and voluntarily waived its jury trial rights following consultation with legal counsel. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court in which such litigation is brought. [SIGNATURES ON FOLLOWING PAGE] 33 IN WITNESS WHEREOF, this Agreement has been duly executed on the day and year specified at the beginning of this Agreement. BORROWER: HEALTHCARE QUALITY SOLUTIONS, INC. By: ---------------------------- B.M. Milvain, President 405 North Reo Street, Suite 300 Tampa, Florida 33609 Telephone No.: (813) 282-3303 Telecopier No.: (813) 282-8907 LENDER: STANFORD VENTURE CAPITAL HOLDINGS, INC. By: ---------------------------- James M. Davis, President 6075 Poplar Avenue Suite 202 Memphis, Tennessee Attention: James M. Davis Telecopier No.: (901) 680-5265 34 APPENDIX A GENERAL DEFINITIONS When used in the Loan and Security Agreement dated July 6, 2004 (as at any time amended, the "Agreement"), by and between HEALTHCARE QUALITY SOLUTIONS, INC., a Florida corporation (collectively, the "Borrower"), and STANFORD VENTURE CAPITAL HOLDINGS, INC., a Delaware corporation, (together with its successors and assigns, the "Lender"), the following terms shall have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa): Account - shall have the meaning ascribed to "account" in the UCC and shall include a right to payment for goods sold or leased or for services rendered that is not evidenced by an Instrument or Chattel Paper, whether or not any such right to payment has been earned by performance. Account Debtor - any Person who is or may become obligated under or on account of an Account. Affiliate - a Person (other than a Subsidiary): (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, another Person; (ii) which beneficially owns or holds 10% or more of any class of the Equity Interests of another Person; or (iii) 10% or more of the Equity Interests of which is beneficially owned or held by another Person or a Subsidiary of another Person. Agreement - the Loan and Security Agreement referred to in the first sentence of this Appendix A, all Exhibits thereto and this Appendix A. Applicable Law - all laws, rules and regulations applicable to the Person, conduct, transaction, covenant or Financing Documents in question, including all applicable common law and equitable principles; all provisions of all applicable state and federal constitutions, statutes, rules, regulations and orders of governmental bodies; and orders, judgments and decrees of all courts and arbitrators. Availability - on any date, an amount equal to the difference derived when the sum of the principal amount of Revolver Loans then outstanding (including any amounts that Lender may have paid for the account of Borrower pursuant to any of the Financing Documents and that have not been reimbursed by Borrower) is subtracted from the Gross Availability on such date; provided that in no event shall the Availability be deemed to exceed the following amounts on the following dates, in each case in addition to up to $400,000 as and when needed to satisfy an up to $400,000 payment to the Internal Revenue Service assumed in connection with the purchase of assets from the Assignee of Provider Solutions corporation: 35 July 6, 2004 $300,000 July 31, 2004 $550,000 August 15, 2004 $850,000 October 15, 2004 $1,050,000 November 15, 2004 $1,200,000 Provided, further that the increase of the Availability on August 15, 2004 and October 15, 2004 is subject to the timely filing by the Guarantor of a Form 10-QSB for the quarter ended June 30, 2004 that sets forth a consolidated EBITDA of ($50,000) or better; and provided further the increase of the Availability on November 15, 2004 is subject to the timely filing by the Guarantor of a Form 10-QSB for the quarter ended September 30, 2004 that sets forth a consolidated EBITDA of $50,000 or better. If the amount outstanding is equal to or greater than the Gross Availability, Availability is 0. Availability Reserve - on any date of determination thereof, an amount equal to the sum of the following (without duplication): (i) a reserve for general Inventory shrinkage that is determined by Lender from time to time in its reasonable credit judgment based upon Borrower's historical losses due to such shrinkage; (ii) any amount that Borrower is obligated to pay pursuant to the provisions of any of the Financing Documents that Lender elects to pay for the account of Borrower in accordance with authority contained in any of the Financing Documents; (iii) all amounts of rent or other charges that accrue after the Effective Date and are past due and payable and owing at such time by Borrower to any landlord of any premises where any of the Collateral is located plus, commencing on the 30th day prior to the date on which Borrower shall be obligated to assume or reject any lease of a premises where any of the Collateral is located, the amount of any rent or other charges that accrued prior to the Effective Date and that remain unpaid under such lease; (iv) such additional reserves as Lender may, in its sole credit judgment, determine to be appropriate from time to time to protect Lender against any changes in the composition, amount, quality, nature or value of any Collateral or the priority of Lender's Liens upon the Collateral. Bankruptcy Code - title 11 of the United States Code. Board of Governors - the Board of Governors of the Federal Reserve Board. Borrowing - a borrowing consisting of Loans made on the same day by Lender. Business Day - any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of Florida or is a day on which banking institutions located in such state are closed. Capital Expenditures - expenditures made for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations. 36 Capitalized Lease Obligation - any Debt represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP. Cash Collateral - cash or Cash Equivalents, and any interest earned thereon, that is deposited with Lender in accordance with the Agreement as security for the Obligations to the extent provided in the Agreement. Cash Collateral Account - a demand deposit, money market or other account established by Lender at such financial institution as Lender may select in its discretion, which account shall be in Lender's name and subject to Lender's Liens. Cash Equivalents - (i) marketable direct obligations issued or unconditionally guaranteed by the United States government and backed by the full faith and credit of the United States government having maturities of not more than 12 months from the date of acquisition; (ii) domestic certificates of deposit and time deposits having maturities of not more than 12 months from the date of acquisition, bankers' acceptances having maturities of not more than 12 months from the date of acquisition and overnight bank deposits, in each case issued by any commercial bank organized under the laws of the United States, any state thereof or the District of Columbia, which at the time of acquisition are rated A-1 (or better) by S&P or P-1 (or better) by Moody's, and (unless issued by Lender) not subject to offset rights in favor of such bank arising from any banking relationship with such bank; (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (i) and (ii) entered into with any financial institution meeting the qualifications specified in clause (ii) above; and (iv) commercial paper having at the time of investment therein or a contractual commitment to invest therein a rating of A-1 (or better) by S&P or P-1 (or better) by Moody's, and having a maturity within 9 months after the date of acquisition thereof. CERCLA - the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq. and its implementing regulations. Chattel Paper - shall have the meaning ascribed to the term "chattel paper" in the UCC. Claims - any and all claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, awards, remedial response costs, expenses or disbursements of any kind or nature whatsoever (including reasonable attorneys', accountants', consultants' or paralegals' fees and expenses), whether arising under or in connection with the Financing Documents, any Applicable Law (including any Environmental Laws) or otherwise, that may be suffered or incurred by a Person prior to, on or after the Effective Date and whether suffered or incurred in or as a result of any investigation, litigation, arbitration or other judicial or non-judicial proceeding or any appeals related thereto. 37 Closing Date - the date on which all of the conditions precedent in Section 10.1 of the Agreement are satisfied and the initial Loans are made under the Agreement. Collateral - all of the Property and interests in Property of Borrower that are described in Section 6 of the Agreement, and all other Property and interests in Property that now or hereafter secure the payment and performance of any of the Obligations, whether or not such Property or interest in Property was in existence on or acquired by Borrower after the Effective Date. Commercial Tort Claim - shall have the meaning ascribed to "commercial tort claim" in the UCC. Commitment Termination Date - the date that is the soonest to occur of: (i) the last day of the Term, (ii) the effective date of any sale of all or a substantial part of the Collateral, or (iii) the date on which Lender terminates the Facility pursuant to Section 5.2.1 of the Agreement. Compliance Certificate - a Compliance Certificate to be provided by Borrower to Lender in accordance with, and in the form annexed as Exhibit C to, the Agreement, and the supporting schedules to be annexed thereto. Contingent Obligation - with respect to any Person, any obligation of such Person arising from any guaranty, indemnity, or other assurance of payment or performance of any Debt, lease, dividend or other obligation ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including (i) the direct or indirect guaranty endorsement (other than for collection or deposit in the Ordinary Course of Business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of a primary obligor, (ii) the obligation to make take-or-pay or similar payments, if required, regardless of non-performance by any other party or parties to an agreement, (iii) any obligation of such Person, whether or not contingent, (A) to purchase any such primary obligation or any Property constituting direct or indirect security therefor, (B) to advance or supply funds (1) for the purchase or payment of any such primary obligations or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to purchase Property, Securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (D) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term "Contingent Obligation" shall not include any product warranties extended in the Ordinary Course of Business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation with respect to which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto (assuming such Person is required to perform thereunder), as determined by such Person in good faith. 38 Current Assets - at any date, the amount at which all of the current assets of a Person would be properly classified as current assets shown on a balance sheet at such date, in accordance with GAAP, except that amounts due from Affiliates and investments in Affiliates shall be excluded therefrom. Debt - as applied to a Person means, without duplication: (i) all items which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person on the date as of which Debt is to be determined, including Capitalized Lease Obligations; (ii) all obligations of other Persons which such Person has guaranteed; (iii) all reimbursement obligations in connection with letters of credit or letter of credit guaranties issued for the account of such Person; and (iv) in the case of Borrower (without duplication), the Obligations. Default - an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default. Default Rate - on any date, a rate per annum that is equal to 15%. Deposit Account - shall have the meaning ascribed to "deposit account" in the UCC and shall include any demand, time, savings, passbook, money market or other depository account, or a certificate of deposit, maintained by Borrower with any bank, savings and loan association, credit union or other depository institution. Disbursements - the total of "advance requests" as shown on the Budget. Distribution - in respect of any entity, (i) any payment of any dividends or other distributions on Equity Interests of the entity (except distributions in such Equity Interests) and (ii) any purchase, redemption or other acquisition or retirement for value of any Equity Interests of the entity or any Affiliate of the entity unless made contemporaneously from the net proceeds of the sale of Equity Interests. Document - shall have the meaning ascribed to the term "document" in the UCC. Dollars and the sign $ - lawful money of the United States of America. 39 Dominion Account - a special account of Lender established by Borrower at a bank selected by Borrower, but acceptable to Lender in its discretion, and over which Lender shall have sole and exclusive access and control for withdrawal purposes. EBITDA - shall mean consolidated earnings of the Guarantor before interest, taxes, depreciation and amortization, all in accordance with GAAP. Effective Date - July 6, 2004. Environmental Laws - all federal, state and local laws, rules, regulations, ordinances, programs, permits, guidance documents promulgated by regulatory agencies, orders and consent decrees relating to human health and safety or the protection or pollution of the environment, including CERCLA. Environmental Release - a release as defined in CERCLA or under any applicable Environmental Laws. Equipment - shall have the meaning ascribed to the term "equipment" in the UCC. Equity Interest - the interest of a shareholder in a corporation, a partner (whether general or limited) in a partnership (whether general, limited or limited liability), a member in a limited liability company, or any other Person having any other form of equity security. ERISA - the Employee Retirement Income Security Act of 1974 and all rules and regulations from time to time promulgated thereunder. Event of Default - as defined in Section 11 of the Agreement. Extraordinary Expenses - all reasonable costs, expenses, fees (including fees incurred to Lender Professionals) or advances that Lender may suffer or incur, whether prior to or after the occurrence of an Event of Default, on account of or in connection with (i) the audit, inspection, repossession, storage, repair, appraisal, insuring, completion of the manufacture of, preparing for sale, advertising for sale, selling, collecting or otherwise preserving or realizing upon any Collateral; (ii) the defense of Lender's Lien upon any Collateral or the priority thereof or any adverse claim with respect to the Loans, the Financing Documents or the Collateral asserted by any Obligor, any receiver or trustee for any Obligor or any creditor or representative of creditors of any Obligor; (iii) the settlement or satisfaction of any Liens upon any Collateral (whether or not such Liens are Permitted Liens); (iv) the collection or enforcement of any of the Obligations; (v) the negotiation, documentation, and closing of any restructuring or forbearance agreement with respect to the Financing Documents or Obligations; (vi) amounts advanced by Lender pursuant to Section 7.1.3 of the Agreement; (vii) the enforcement of any of the provisions of any of the Financing Documents; or (viii) any payment under indemnity or other payment agreement provided by Lender to any financial institution in connection with any Dominion Account or any lockbox arrangement. Such costs, expenses and advances may include transfer fees, taxes, storage fees, insurance costs, permit fees, utility reservation and standby fees, legal fees, appraisal fees, brokers' fees and commissions, auctioneers' fees and commissions, consultants' fees, accountants' fees, environmental study fees, wages and salaries paid to 40 employees of Borrower or independent contractors in liquidating any Collateral, travel expenses, all other fees and expenses payable or reimbursable by Borrower or any other Obligor under any of the Financing Documents, and all other fees and expenses associated with the enforcement of rights or remedies under any of the Financing Documents, but excluding compensation paid to employees (including inside legal counsel who are employees) of Lender. FEIN - with respect to any Person, the Federal Employer Identification Number of such Person. Facility - the $1,600,000.00 credit facility established by Lender in favor of Borrower under Section 1 of the Agreement consisting of the Revolver Commitment. Financing Documents - the Agreement, the Other Agreements and the Security Documents and any and all other agreements, instruments and documents now or hereafter executed by Borrower in favor of Lender with respect to any of the transactions contemplated by the Agreement. Fiscal Year - the fiscal year of Borrower and its Subsidiaries for accounting and tax purposes, which ends on the last Friday of each year. FLSA - the Fair Labor Standards Act of 1938. Full Payment - with respect to any Debt (including the Obligations), full, final and indefeasible payment of such Debt in cash or immediately available funds and, in the case of any Contingent Obligations, Lender's receipt of either cash or a direct pay letter of credit naming Lender as beneficiary and in form and substance, and from an issuing bank, acceptable to Lender, in each case in an amount not less than 105% of the aggregate amount of all such contingent Debt. GAAP - generally accepted accounting principles in the United States of America in effect from time to time. General Intangible - shall have the meaning ascribed to the term "general intangible" in the UCC and shall include all interests in Intellectual Property. Governmental Approvals - all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities. 41 Governmental Authority - any federal, state, municipal, national or other governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the District of Columbia or a foreign entity or government. Gross Availability - The amount set forth in the Budget as the maximum amount to be drawn hereunder as of the end of the month immediately prior to the date in question, up to the amount of the Facility. Guarantor - Health Systems Solutions, Inc., a Nevada corporation. Indemnified Amount - the amount of any loss, cost, expenses or damages suffered or incurred by Lender Indemnitees and against which Lender and/or Borrower have agreed to indemnify such Lender Indemnitees pursuant to the terms of the Agreement or any of the other Financing Documents. Insolvency Proceeding - any action, case or proceeding commenced by or against a Person, or any agreement of such Person, for (a) the entry of an order for relief under any chapter of the Bankruptcy Code or other insolvency or debt adjustment law (whether state, federal or foreign), (b) the appointment of a receiver, trustee, liquidator or other custodian for such Person or any part of its Property, (c) an assignment or trust mortgage for the benefit of creditors of such Person, or (d) the liquidation, dissolution or winding up of the affairs of such Person. Instrument - shall have the meaning ascribed to the term "instrument" in the UCC. Intellectual Property - Property constituting under any Applicable Law a patent, patent application, copyright, trademark, service mark, tradename, mask work, trade secret or license or other right to use any of the foregoing. Intellectual Property Claim - the assertion by any Person of a claim (whether asserted in writing, by action, suit or proceeding or otherwise) that Borrower's ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other Property is violative of any ownership of or right to use any Intellectual Property of such Person. Inventory - shall have the meaning ascribed to "inventory" in the UCC and shall include, in the case of Borrower, all goods intended for sale or lease by Borrower, or for display or demonstration; all work in process; all raw materials and other materials and supplies of every nature and description used or which might be used in connection with the manufacture, printing, packing, shipping, advertising, selling, leasing or furnishing of such goods or otherwise used or consumed in Borrower's business; and all Documents evidencing and General Intangibles relating to any of the foregoing, whether now owned or hereafter acquired by Borrower. 42 Investment Property - shall have the meaning ascribed to "investment property" in the UCC. Lender Indemnities - Lender and all of its present and future officers, directors and agents. Lender Professionals - attorneys, accountants, appraisers, business valuation experts, environmental engineers or consultants, turnaround consultants and other professionals or experts retained by Lender. Letter-of-Credit Right - shall have the meaning ascribed to the term "letter-of-credit right" in the UCC. Lien - any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on common law, statute or contract. The term "Lien" shall also include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property. For the purpose of the Agreement, Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes. Loan - a Revolver Loan. Loan Account - the loan account established by Lender on its books pursuant to Section 4.6 of the Agreement. Material Adverse Effect - the effect of any event, condition, act, omission or circumstance, which, alone or when taken together with other events, conditions, acts, omissions or circumstances occurring or existing concurrently therewith, (i) has a material adverse effect upon the business, operations, Properties or condition (financial or otherwise) of any Obligor; (ii) has or may be reasonably expected to have any material adverse effect whatsoever upon the validity or enforceability of the Agreement or any of the other Financing Documents; (iii) has any material adverse effect upon the value of the whole or any material part of the Collateral, the Liens of Lender with respect to the Collateral or the priority of any such Liens; (iv) materially impairs the ability of any Obligor to perform its obligations under the Agreement or any of the other Financing Documents, including repayment of any of the Obligations when due; or (v) materially impairs the ability of Lender to enforce or collect the Obligations or realize upon any of the Collateral in accordance with the Financing Documents and Applicable Law. 43 Material Contract - any agreement between Borrower and one or more other Persons, the termination of which could reasonably be expected to have a Material Adverse Effect. Maximum Rate - the maximum non-usurious rate of interest permitted by Applicable Law that at any time, or from time to time, may be contracted for, taken, reserved, charged or received on the Debt in question or, to the extent that at any time Applicable Law may thereafter permit a higher maximum non-usurious rate of interest, then such higher rate. Notwithstanding any other provision hereof, the Maximum Rate shall be calculated on a daily basis (computed on the actual number of days elapsed over a year of 365 or 366 days, as the case may be). Money Borrowed - as applied to any Person, (i) Debt arising from the lending of money by any other Person to such Person; (ii) Debt, whether or not in any such case arising from the lending of money by another Person to such Person, (A) which is represented by notes payable or drafts accepted that evidence extensions of credit, (B) which constitutes obligations evidenced by bonds, debentures, notes or similar instruments, or (C) upon which interest charges are customarily paid (other than accounts payable) or that was issued or assumed as full or partial payment for Property; (iii) Debt that constitutes a Capitalized Lease Obligation; (iv) reimbursement obligations with respect to letters of credit or guaranties of letters of credit and (v) Debt of such Person under any guaranty of obligations that would constitute Debt for Money Borrowed under clauses (i) through (iii) hereof, if owed directly by such Person. Moody's - Moody's Investors Services, Inc. Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of ERISA. Net Proceeds - proceeds (including cash receivable (when received) by way of deferred payment) received by Borrower from the sale, lease, transfer or other disposition of any Property, including insurance proceeds and awards of compensation received with respect to the destruction or condemnation of all or part of such Property, net of: (i) the reasonable and customary costs of such sale, lease, transfer or other disposition; and (ii) amounts applied to repayment of Debt (other than the Obligations) that is secured by a Permitted Lien on the Property disposed of that is senior to Lender's Liens. Notes - the Revolver Note and any other promissory note hereafter executed by Borrower at Lender's request to evidence any of the Obligations. Notice of Borrowing - as defined in Section 3.1.1(i) of the Agreement. 44 Obligations - in each case, whether now in existence or hereafter arising, (i) the principal of, and interest and premium, if any, on, the Loans; and (ii) all other Debts, covenants, duties and obligations (including Contingent Obligations) now or at any time or times hereafter owing by any Obligor to Lender under or pursuant to the Agreement or any of the other DIP Financing Documents, whether evidenced by any note or other writing, whether arising from any extension of credit, opening of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise and whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, or joint or several, including all interest, charges, expenses, fees or other sums (including Extraordinary Expenses) chargeable to any or all Obligors hereunder or under any of the other Financing Documents. Obligor - Borrower and any other Person that is at any time liable for the payment of the whole or any part of the Obligations or that has granted in favor of Lender a Lien upon any of any of such Person's assets to secure payment of any of the Obligations. Ordinary Course of Business - with respect to any Person, the ordinary course of such Person's business, as conducted by such Person in accordance with past practices and undertaken by such Person in good faith and not for the purpose of evading any covenant or restriction in any Loan Document. Organization Documents - with respect to any Person, its charter, certificate or articles of incorporation, bylaws, articles of organization, operating agreement, members agreement, partnership agreement, voting trust, or similar agreement or instrument governing the formation or operation of such Person. OSHA - the Occupational Safety and Hazard Act of 1970. Other Agreements - the Notes and any and all agreements, instruments and documents (other than the Agreement and the Security Documents), heretofore, now or hereafter executed by Borrower, any Obligor or any other Person and delivered to Lender in respect of the transactions contemplated by the Agreement. Participant - as defined in Section 12.2.1 of the Agreement. Payment Account - an account maintained by Lender (currently at Bank) to which all monies from time to time deposited to a Dominion Account shall be transferred and all other payments shall be sent in immediately available federal funds. Payment Intangible - shall have the meaning ascribed to the term "payment intangible" in the UCC. Payment Items - all checks, drafts, or other items of payment payable to Borrower, including proceeds of any of the Collateral. Pending Revolver Loans - at any date, the aggregate principal amount of all Revolver Loans which have been requested in any Notice of Borrowing received by Lender but which have not theretofore been advanced by Lender. 45 Permitted Contingent Obligations - Contingent Obligations arising from endorsements for collection or deposit in the Ordinary Course of Business; Contingent Obligations arising from entered into in the Ordinary Course of Business pursuant to the Agreement or with Lender's prior written consent; Contingent Obligations of Borrower and its Subsidiaries existing as of the Closing Date, including extensions and renewals thereof that do not increase the amount of such Contingent Obligations as of the date of such extension or renewal; Contingent Obligations incurred in the Ordinary Course of Business with respect to surety bonds, appeal bonds, performance bonds and other similar obligations; and other Contingent Obligations not to exceed $25,000 in the aggregate at any time. Permitted Liens - any Lien of a kind specified in Section 9.2.3 of the Agreement. Permitted Purchase Money Debt - Purchase Money Debt of Borrower and its Subsidiaries which is incurred after the date of the Agreement and which is secured by no Lien or only by a Purchase Money Lien, provided that the aggregate amount of Purchase Money Debt outstanding at any time does not exceed $25,000 and the incurrence of such Purchase Money Debt does not violate any limitation in the Financing Documents regarding Capital Expenditures. For the purposes of this definition, the principal amount of any Purchase Money Debt consisting of capitalized leases shall be computed as a Capitalized Lease Obligation. Person - an individual, partnership, corporation, limited liability company, limited liability partnership, joint stock company, land trust, business trust, or unincorporated organization, or a Governmental Authority. Plan - an employee benefit plan now or hereafter maintained for employees of Borrower that is covered by Title IV of ERISA. Properly Contested - in the case of any Debt of an Obligor (including any Taxes) that is not paid as and when due or payable by reason of such Obligor's bona fide dispute concerning its liability to pay same or concerning the amount thereof, (i) such Debt is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (ii) such Obligor has established appropriate reserves as shall be required in conformity with GAAP; (iii) the non-payment of such Debt will not have a Material Adverse Effect and will not result in a forfeiture of any assets of such Obligor; (iv) no Lien is imposed upon any of such Obligor's assets with respect to such Debt unless such Lien is at all times junior and subordinate in priority to the Liens in favor of Lender (except only with respect to property taxes that have priority as a matter of applicable state law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (v) if the Debt results from, or is determined by the entry, rendition or issuance against an Obligor or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such contest is abandoned, settled or determined adversely (in whole or in part) to such Obligor, such Obligor forthwith pays such Debt and all penalties, interest and other amounts due in connection therewith. 46 Property - any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. Purchase Money Debt - means and includes (i) Debt (other than the Obligations) for the payment of all or any part of the purchase price of any fixed assets, (ii) any Debt (other than the Obligations) incurred at the time of or within 10 days prior to or after the acquisition of any fixed assets for the purpose of financing all or any part of the purchase price thereof, and (iii) any renewals, extensions or refinancings thereof, but not any increases in the principal amounts thereof outstanding at the time. Purchase Money Lien - a Lien upon fixed assets which secures Purchase Money Debt, but only if such Lien shall at all times be confined solely to the fixed assets acquired through the incurrence of the Purchase Money Debt secured by such Lien and such Lien constitutes a purchase money security interest under the UCC. Receipts - the total "collections" as shown on the Budget. Rentals - rent owing by Borrower in respect of a lease of Property that is owned by the lessor. Reportable Event - any of the events set forth in Section 4043(b) of ERISA. Restricted Investment - any acquisition of Property by Borrower or any of its Subsidiaries in exchange for cash or other Property, whether in the form of an acquisition of Equity Interests or indebtedness or obligations, or the purchase or acquisition by Borrower or any of its Subsidiaries of any other Property, or a loan, advance, capital contribution or subscription, except acquisitions of the following: (a) fixed assets to be used in the business of Borrower or any of its Subsidiaries so long as the acquisition costs thereof constitute Capital Expenditures permitted hereunder; (b) goods held for sale or lease or to be used in the manufacture of goods or the provision of services by Borrower or any of its Subsidiaries in the ordinary course of business; (c) Current Assets arising from the sale or lease of goods or the rendition of services in the ordinary course of business of Borrower or any of its Subsidiaries; (d) investments in Subsidiaries of Borrower to the extent existing on the Closing Date; and (e) Cash Equivalents. 47 Restrictive Agreement - an agreement (other than any of the Financing Documents) that, if and for so long as an Obligor or any Subsidiary of such Obligor is a party thereto, would prohibit, condition or restrict such Obligor's or Subsidiary's right to incur or repay Debt for Money Borrowed (including any of the Obligations); grant Liens upon any of such Obligor's or Subsidiary's assets (including Liens granted in favor of Lender pursuant to the Financing Documents); declare or make Distributions; amend, modify, extend or renew any agreement evidencing Debt for Money Borrowed (including any of the Financing Documents); or repay any Debt owed to any Obligor. Revenue - the total of "sales" as shown on the Budget. Revolver Commitment - the obligation of Lender to make Revolver Loans pursuant to the terms and conditions of the Agreement, which shall not exceed on any date $1,600,000.00. Revolver Loan - a Loan made by Lender as provided in Section 1.1 of the Agreement. Revolver Note - a Revolver Note to be executed by Borrower in favor of Lender in the form of Exhibit A attached hereto, which shall be in the face amount of the Facility and which shall evidence all Revolver Loans made by Lender to Borrower pursuant to the Agreement. S&P - Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. Schedule of Accounts - as defined in Section 7.2.1 of the Agreement. SEC - the Securities Exchange Commission. Security - shall have the same meaning as in Section 2(1) of the Securities Act of 1933. Security Documents - any and all other instruments and agreements now or at any time hereafter securing the whole or any part of the Obligations. Senior Officer - the chairman of the board of directors, the president or the chief financial officer of, or in-house legal counsel to, such Person. Solvent - as to any Person, such Person (i) owns Property whose fair saleable value is greater than the amount required to pay all of such Person's Debts (including Contingent Obligations), (ii) is able to pay all of its Debts as such Debts mature, (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; and (iv) is not "insolvent" within the meaning of Section 101(32) of the Bankruptcy Code. 48 Subsidiary - any Person a majority of the Equity Interests of which is at the time owned, directly or indirectly, by another Person or by one or more other Subsidiaries or by such other Person and one or more other Subsidiaries. Supporting Obligation - shall have the meaning ascribed to the term "supporting obligation" in the UCC. Taxes - any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatever nature, including income, receipts, excise, property, sales, use, transfer, license, payroll, withholding, social security and franchise taxes now or hereafter imposed or levied by the United States, or any state, local or foreign government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interest, penalties, additions to tax and similar liabilities with respect thereto, but excluding, in the case of Lender, taxes imposed on or measured by the net income or overall gross receipts of Lender. Term - a period commencing on the Effective Date and ending 36 months later. UCC - the Uniform Commercial Code (or any successor statute) as adopted and in force in the State of Florida from time to time or, when the laws of any other state govern the method or manner of the creation or perfection of any security interest in any of the Collateral, the Uniform Commercial Code (or any successor statute) of such state. Value - with reference to the value of Inventory, value determined on the basis of the lower of cost or market of such Inventory, with the cost thereof calculated on a first-in, first-out basis. Accounting Terms. Unless otherwise specified herein, all terms of an accounting character used in the Agreement shall be interpreted, all accounting determinations under the Agreement shall be made, and all financial statements required to be delivered under the Agreement shall be prepared in accordance with GAAP, applied on a basis consistent with the most recent audited consolidated financial statement of Borrower and its Subsidiaries heretofore delivered to Lender and using the same method for inventory valuation as used in such audited financial statements, except for any change in which Borrower's independent public accountants concur or as required by GAAP unless (i) Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements or (ii) Lender shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made. In the event of any change in GAAP that occurs after the date of the Agreement and that is material to Borrower, Lender shall have the right to require either that conforming adjustments be made to any financial covenants set forth in the Agreement, or the components thereof, that are affected by such change or that Borrower reports its financial condition based on GAAP as in effect immediately prior to the occurrence of such change. 49 Other Terms. All other terms contained in the Agreement shall have, when the context so indicates, the meanings provided for by the UCC to the extent the same are used or defined therein. Certain Matters of Construction. The terms "herein," "hereof" and "hereunder" and other words of similar import refer to the Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." The section titles, table of contents and list of exhibits appear as a matter of convenience only and shall not affect the interpretation of the Agreement. All references to statutes (including the UCC) and related regulations shall include any amendments of same after the date hereof and any successor statutes and regulations; to any of the Financing Documents shall include any and all amendments or modifications thereto and any and all restatements, extensions or renewals thereof; to any Person shall mean and include the successors and permitted assigns of such Person; to "including" and "include" shall be understood to mean "including, without limitation" and "include, without limitation;" to the time of day shall mean the time of day on the day in question in Miami, Florida, unless otherwise expressly provided in the Agreement; and to any Property of Borrower shall mean and include all Property of the Estate. A Default or an Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided in this Agreement; and an Event of Default shall "continue" or be "continuing" until such Event of Default has been waived in writing by Lender. Whenever the phrase "to the best of Borrower's knowledge" or words of similar import relating to the knowledge or the awareness of Borrower are used herein, such phrase shall mean and refer to (i) the actual knowledge of a Senior Officer of Borrower or (ii) the knowledge that a Senior Officer would have obtained if they had engaged in good faith and the diligent performance of their duties, including the making of such reasonable specific inquiries as may be necessary of the officers, employees or agents of Borrower and a good faith attempt to ascertain the existence or accuracy of the matter to which such phrase relates. IN WITNESS WHEREOF, this Appendix has been duly executed on July 6, 2004. BORROWER: HEALTHCARE QUALITY SOLUTIONS, INC. By: ------------------------ B.M. Milvain, President 50 LENDER: STANFORD VENTURE CAPITAL HOLDINGS, INC. By: ------------------------- James M. Davis, President 51 EXHIBIT A FORM OF REVOLVER NOTE U.S. $1,600,000.00 July 6, 2004 FOR VALUE RECEIVED, the undersigned, HEALTHCARE QUALITY SOLUTIONS, INC. a Florida corporation (the "Borrower"), promises to pay to the order of STANFORD VENTURE CAPITAL HOLDINGS, INC. (herein, together with any subsequent holder hereof, called the "Lender") the principal sum of ONE MILLION SIX HUNDRED THOUSAND AND 00/100 DOLLARS ($1,600,000.00) or such lesser sum as may be the outstanding principal amount of all Revolver Loans pursuant to the terms of the Loan Agreement referred to below on the date on which such outstanding principal amounts become due and payable pursuant to Section 4.2 of the Loan Agreement (as defined below), in strict accordance with the terms thereof. Borrower, each jointly and severally, likewise unconditionally promises to pay to Lender interest from and after the date hereof on the outstanding principal amount of Revolver Loans at the interest rate, payable at such times, and computed in such manner as is specified in Section 2.1 of the Loan Agreement, in strict accordance with the terms thereof. This Revolver Note ("Note") is issued pursuant to, and is the "Revolver Note" referred to in, the Loan and Security Agreement dated July 6, 2004 (as the same may be amended from time to time, the "Loan Agreement"), between Borrower and Lender, and Lender is and shall be entitled to all benefits thereof and of all Financing Documents executed and delivered in connection therewith. The provisions of the Loan Agreement are incorporated herein by this reference. All capitalized terms used herein, unless otherwise defined herein, shall have the meanings ascribed to such terms in the Loan Agreement. The repayment of the principal balance of this Note is subject to the provisions of Section 4.2 of the Loan Agreement. The entire unpaid principal balance and all accrued interest on this Note shall be due and payable on the Commitment Termination Date. All payments of principal and interest shall be made in Dollars in immediately available funds as specified in the Loan Agreement. Upon or after the occurrence of an Event of Default and for so long as such Event of Default exists, the principal balance and all accrued interest of this Note may be declared due and payable in the manner and with the effect provided in the Loan Agreement, and the unpaid principal balance hereof shall bear interest at the Default Rate as and when provided in Section 2.1.2 of the Loan Agreement. Borrower agrees to pay, and save Lender harmless against, any liability for the payment of, all costs and expenses, including, but not limited to, reasonable attorneys' fees, arising in connection with the enforcement by Lender of any of its rights under this Note, the Loan Agreement or any of the other Financing Documents. All principal amounts of Revolver Loans made by Lender to Borrower pursuant to the Loan Agreement, and all accrued and unpaid interest thereon, shall be deemed outstanding under this Note and shall continue to be owing by Borrower in accordance with the terms of this Note and the Loan Agreement. In no contingency or event whatsoever, whether by reason of advancement of the proceeds hereof or otherwise, shall the amount paid or agreed to be paid to Lender for the use, forbearance or detention of money advanced hereunder exceed the highest lawful rate permissible under any law which a court of competent jurisdiction may deem applicable hereto; and, in the event of any such payment inadvertently paid by Borrower or inadvertently received by Lender, such excess sum shall be, at Borrower's option, returned to Borrower forthwith or credited as a payment of principal, but shall not be applied to the payment of interest. It is the intent hereof that Borrower not pay or contract to pay, and that Lender not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by Borrower under Applicable Law. Time is of the essence of this Note. To the fullest extent permitted by Applicable Law, Borrower, for itself and its legal representatives, successors and assigns, expressly waives presentment, demand, protest, notice of dishonor, notice of non-payment, notice of maturity, notice of protest, presentment for the purpose of accelerating maturity, diligence in collection, and the benefit of any exemption or insolvency laws. Wherever possible each provision of this Note shall be interpreted in such a manner as to be effective and valid under Applicable Law, but if any provision of this Note shall be prohibited or invalid under Applicable Law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or remaining provisions of this Note. No delay or failure on the part of Lender in the exercise of any right or remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in any default, nor shall any single or partial exercise by Lender of any right or remedy preclude any other right or remedy. Lender, at its option, may enforce its rights against any Collateral securing this Note without enforcing its rights against Borrower, any guarantor of the indebtedness evidenced hereby or any other property or indebtedness due or to become due to Borrower. Borrower agrees that, without releasing or impairing Borrower's liability hereunder, Lender may at any time release, surrender, substitute or exchange any Collateral securing this Note and may at any time release any party primarily or secondarily liable for the indebtedness evidenced by this Note. The rights and obligations of Lender and Borrower hereunder shall be construed in accordance with and governed by the laws (without giving effect to the conflict of law principles thereof) of the State of Florida. This Note is intended to take effect as an instrument under seal under Florida law. IN WITNESS WHEREOF, Borrower has caused this Note to be executed and delivered by its duly authorized officer on the date first above written. HEALTHCARE QUALITY SOLUTIONS INC. By: ------------------------ B.M. Milvain, President EXHIBIT B Form of Notice of Borrowing Date ______________, 20___ Stanford Venture Capital Holdings, Inc. 6075 Poplar Avenue Suite 202 Memphis, Tennessee Re: Loan and Security Agreement dated April ____, 2004, by and between healthcare Quality Solutions Inc. and Stanford Venture Capital Holdings, Inc. (as at any time amended, the "Loan Agreement") Ladies and Gentlemen: This Notice of Borrowing is delivered to you pursuant to Section 3.1.1 of the Loan Agreement. Unless otherwise defined herein, capitalized terms used herein shall have the meanings attributable thereto in the Loan Agreement. Borrower hereby requests a Revolver Loan in the aggregate principal amount of $______________ to be made on _____________, 20___. Borrower hereby ratifies and reaffirms all of its liabilities and obligations under the Financing Documents and hereby certifies that no Default or Event of Default exists on the date hereof. In addition, Borrower confirms that it is in compliance with the Availability requirements set forth in the Loan Agreement. Borrower has caused this Notice of Borrowing to be executed and delivered by its duly authorized representative, this ______ day of _____________, 20___. BORROWER: HEALTHCARE QUALITY SOLUTIONS INC. By: ------------------------------ B.M. Milvain, President EXHIBIT C COMPLIANCE CERTIFICATE [Letterhead of Borrower] __________________, 20__ Stanford Venture Capital Holdings, Inc. 6075 Poplar Avenue Suite 202 Memphis, Tennessee The undersigned, the chief financial officer of Healthcare Quality Solutions Inc., a Florida corporation ("Borrower"), gives this certificate to Stanford Venture Capital Holdings, Inc. ("Lender") in accordance with the requirements of Section 9.1.5 of that certain Loan and Security Agreement dated July 6, 2004, between Borrower and Lender ("Loan Agreement"). Capitalized terms used in this Certificate, unless otherwise defined herein, shall have the meanings ascribed to them in the Loan Agreement. 1. Based upon my review of the balance sheets and statements of income of Borrower and its Subsidiaries for the [Fiscal Year] [quarterly period] ending __________________, 20__, copies of which are attached hereto, I hereby certify that: (a) Consolidated EBITDA of the Guarantor for the fiscal quarter ended __________________ as set forth in the Guarantor's Form 10-QSB for such period duly and timely filed with the Securities & Exchange Commission was $----------------. 2. No Default exists on the date hereof, other than: _________________________________________ [if none, so state]; and 3. No Event of Default exists on the date hereof, other than _____________________________________________ [if none, so state]. 4. As of the date hereof, Borrower is current in its payment of all accrued rent and other charges to Persons who own or lease any premises where any of the Collateral is located, and there are no pending disputes or claims regarding Borrower's failure to pay or delay in payment of any such rent or other charges. Very truly yours, --------------------------- Chief Financial Officer EX-10.2 3 warrantpurchaseagreement.txt WARRANT PURCHASE AGREEMENT HEALTH SYSTEMS SOLUTIONS, INC. A Nevada Corporation WARRANT PURCHASE AGREEMENT THIS WARRANT PURCHASE AGREEMENT, dated as of July 6, 2004 (the "Agreement"), is entered into by and between Health Systems Solutions, Inc., a Nevada corporation (the "Company") and Stanford Venture Capital Holdings, Inc., a Delaware corporation (the "Purchaser"). W I T N E S S E T H: WHEREAS, Health Quality Solutions, Inc., a Florida corporation ("HQS") is a wholly-owned subsidiary of the Company; WHEREAS, the Purchaser and HQS entered into a Loan and Security Agreement of even date herewith pursuant to which, among other things, HQS borrowed from the Purchaser up to an aggregate of $1,600,000 (the "Loan Agreement"); and WHEREAS, as partial consideration for the Purchaser entering into the Loan Agreement and upon the terms and conditions of this Agreement, the Purchaser has agreed to purchase, and the Company wishes to issue and sell, warrants to purchase up to an aggregate of 720,000 of the Company's common stock $0.001 par value per share (the "Common Stock"), at an exercise price of $0.001 per share (the "Warrants"), which Warrants will be in the form attached hereto as Exhibit A; and WHEREAS, the Company and the Purchaser are executing and delivering this Agreement in reliance upon the exemptions from registration provided by Regulation D ("Regulation D") promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), and/or Section 4(2) of the Securities Act. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. AGREEMENT TO PURCHASE; PURCHASE PRICE (a) Capitalized terms used herein not otherwise defined herein shall have the same meaning ascribed to such terms as in the Loan Agreement. (b) Subject to the terms and conditions in this Agreement, the Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to issue and sell to the Purchaser, the Warrants as additional consideration for the funding of the Loan in the aggregate principal amount of $1,600,000, on the date hereof. 1 2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION The Purchaser represents and warrants to, and covenants and agrees with, the Company as follows: (a) Qualified Investor. The Purchaser is (i) experienced in making investments of the kind described in this Agreement and the related documents, (ii) able to afford the entire loss of its investment in the Warrants, and (iii) an "Accredited Investor" as defined in Rule 501(a) of Regulation D and knows of no reason to anticipate any material change in its financial condition for the foreseeable future. (b) Restricted Securities. The Warrants are "restricted Securities" as defined in Rule 144 promulgated under the Securities Act. All subsequent offers and sales by the Purchaser of the Warrants and the Common Stock issuable upon exercise of the Warrants shall be made pursuant to an effective registration statement under the Securities Act or pursuant to an applicable exemption from such registration. (c) Reliance on Representations. The Purchaser understands that the Warrants are being offered and sold to it in reliance upon exemptions from the registration requirements of the United States federal Securities laws, and that the Company is relying upon the truthfulness and accuracy of the Purchaser's representations and warranties, and the Purchaser's compliance with its covenants and agreements, each as set forth herein, in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Warrants. (d) Legality. The Purchaser has the requisite corporate power and authority to enter into this Agreement. (e) Authorization. This Agreement and any related agreements, and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Purchaser, and such agreements, when executed and delivered by each of the Purchaser and the Company will each be a valid and binding agreement of the Purchaser, enforceable in accordance with their respective terms, except to the extent that enforcement of each such agreement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors rights generally and to general principles of equity. (f) Broker's Fees and Commissions. Neither the Purchaser nor any of its officers, partners, employees or agents has employed any investment banker, broker, or finder in connection with the transactions contemplated by the Primary Documents (as defined below). 3. REPRESENTATIONS OF THE COMPANY The Company represents and warrants to, and covenants and agrees with, the Purchaser that: 2 (a) Organization. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted after the consummation of the transactions contemplated by this Agreement. The Company is duly qualified as a foreign corporation and in good standing in all jurisdictions in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification. The minute books and stock record books and other similar records of the Company have been provided or made available to the Purchaser or its counsel prior to the execution of this Agreement, are complete and correct in all material respects and have been maintained in accordance with sound business practices. Such minute books contain true and complete records of all actions taken at all meetings and by all written consents in lieu of meetings of the directors, stockholders and committees of the board of directors of the Company from the date of organization through the date hereof. The Company has, prior to the execution of this Agreement, delivered to the Purchaser true and complete copies of the Company's Articles of Incorporation, and Bylaws, each as amended through the date hereof. The Company is not in violation of any provisions of its Articles of Incorporation or Bylaws. (b) Capitalization. On the date hereof, the authorized capital of the Company consists of: (i) Common Stock; $.001 par value; 150,000,000 shares authorized; 5,523,199 shares issued and outstanding. (ii) Preferred Stock; 15,000,000 authorized: a. Series A $1.17 Convertible; 1,880,341 shares authorized issued and outstanding. b. Series B $.80 Convertible; 2,500,000 shares authorized issued and outstanding. The Company has no authorized or outstanding options or warrants issued and outstanding except for the Warrants to purchase 720,000 shares of Common Stock to be issued to the Purchaser hereunder, there are no outstanding rights, agreements, arrangements or understandings to which the Company is a party (written or oral) which would obligate the Company to issue any equity interest, option, warrant, convertible note, or other types of Warrants or to register any shares in a registration statement filed with the Commission. There is no agreement, arrangement or understanding between or among any entities or individuals which affects, restricts or relates to voting, giving of written consents, dividend rights or transferability of shares with respect to any voting shares of the Company, including without limitation any voting trust agreement or proxy. There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire for value any outstanding shares of capital stock or other ownership interests of the Company or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other entity. There are no anti-dilution or price adjustment provisions regarding any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Warrants. 3 (c) Concerning the Warrants. The Common Stock issuable upon exercise of the Warrants shall be duly and validly issued, fully paid and non-assessable and will not subject the holder thereof to personal liability by reason of being such a holder. (d) Authorized Shares. The Company has available and has reserved a sufficient number of authorized and unissued shares of Common Stock as may be necessary to effect exercise of the Warrants. The Company understands and acknowledges the potentially dilutive effect to the Common Stock of the issuance of shares of Common Stock upon the exercise of the Warrants. The Company further acknowledges that its obligation to issue shares of Common Stock upon exercise of the Warrants is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company. (e) Legality. The Company has the requisite corporate power and authority to enter into this Agreement, and to issue and deliver the Common Stock issuable upon exercise of the Warrants. (f) Transaction Agreements. This Agreement, the Warrants, and the Registration Rights Agreement of even date herewith among the Company and the Purchaser (the "Registration Rights Agreement") (collectively, the "Primary Documents"), and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Company; this Agreement has been duly executed and delivered by the Company and this Agreement is, and the other Primary Documents, when executed and delivered by the Company, will each be, a valid and binding agreement of the Company, enforceable in accordance with their respective terms, except to the extent that enforcement of each of the Primary Documents may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and to general principles of equity. (g) Financial Statements. The financial statements and related notes thereto contained in the Company's filings with the Commission (the "Company Financials") are correct and complete in all material respects, comply in all material respects with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission promulgated thereunder and have been prepared in accordance with United States generally accepted accounting principles applied on a basis consistent throughout the periods indicated and consistent with each other. The Company Financials present fairly and accurately the financial condition and operating results of the Company in all material respects as of the dates and during the periods indicated therein and are consistent with the books and records of the Company. Except as set forth in the Company Financials, the Company has no material liabilities, contingent or otherwise, other than liabilities disclosed on the balance sheet as of March 31, 2004. Since January 1, 2004, there has been no change in any accounting policies, principles, methods or practices, including any change with respect to reserves (whether for bad debts, contingent liabilities or otherwise), of the Company. 4 (h) Commission Filings. The Company has made all filings with the Commission that it has been required to make under the Securities Act and the Exchange Act and has furnished or made available to the Purchaser true and complete copies of all the documents it has filed with the Commission since its inception, all in the forms so filed. As of their respective filing dates, such filings already filed by the Company or to be filed by the Company after the date hereof complied or, if filed after the date hereof, will comply in all material respects with the requirements of the Securities Act and the Exchange Act, and the rules and regulations of the Commission promulgated thereunder, as the case may be, and none of the filings with the Commission contained or will contain any untrue statement of a material fact or omitted or will omit any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except to the extent such filings have been all prior to the date of this Agreement corrected, updated or superseded by a document subsequently filed with Commission. (i) Non-Contravention. The execution and delivery of this Agreement and each of the other Primary Documents, and the consummation by the Company of the transactions contemplated by this Agreement and each of the other Primary Documents, do not and will not conflict with, or result in a breach by the Company of, or give any third party any right of termination, cancellation, acceleration or modification in or with respect to, any of the terms or provisions of, or constitute a default under, (A) its Articles of Incorporation or Bylaws, as amended through the date hereof, (B) any material indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, or (C) any existing applicable law, rule, or regulation or any applicable decree, judgment or order of any court or federal, state, securities industry or foreign regulatory body, administrative agency, or any other governmental body having jurisdiction over the Company or any of their properties or assets (collectively, "Legal Requirements"), other than those which have been waived or satisfied on or prior to the date hereof. (j) Approvals and Filings. No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the entry into or the performance of this Agreement and the other Primary Documents. (k) Compliance With Legal Requirements. The Company has not violated in any material respect, and is not currently in material default under, any Legal Requirement applicable to the Company, or any of the assets or properties of the Company, where such violation could reasonably be expected to have material adverse effect on the business or financial condition of the Company. (l) Absence of Certain Changes. There has been no material adverse change nor any material adverse development in the business, properties, operations, financial condition, prospects, outstanding securities or results of operations of the Company, and no event has occurred or circumstance exists that may result in such a material adverse change. (m) Indebtedness to Officers, Directors and Stockholders. Except as set disclosed in the Company Financials, the Company is not indebted to any of the Company's stockholders, officers or directors or their Affiliates in any amount whatsoever (including, without limitation, any deferred compensation, salaries or rent payable). 5 (n) Relationships With Related Persons. Except as set forth in the SEC filings of the Company, no officer, director, or principal stockholder of the Company nor any Related Person (as defined below) of any of the foregoing has had any interest in any property (whether real, personal, or mixed and whether tangible or intangible) used in or pertaining to the business of the Company. No officer, director, or principal stockholder of the Company nor any Related Person of the any of the foregoing is or has owned an equity interest or any other financial or profit interest in, a Person (as defined below) that has (i) had business dealings or a material financial interest in any transaction with the Company, or (ii) engaged in competition with the Company with respect to any line of the merchandise or services of such company (a "Competing Business") in any market presently served by such company except for ownership of less than one percent of the outstanding capital stock of any Competing Business that is publicly traded on any recognized exchange or in the over-the-counter market. No director, officer, or principal stockholder of the Company nor any Related Person of any of the foregoing is a party to any Contract with, or has claim or right against, the Company. As used in this Agreement, "Person" means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or any governmental body; "Related Person" means, (X) with respect to a particular individual, (a) each other member of such individual's Family (as defined below); (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual's Family; (c) any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest (as defined below); and (d) any Person with respect to which such individual or one or more members of such individual's Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity); (Y) with respect to a specified Person other than an individual, (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) any Person that holds a Material Interest in such specified Person; (c) each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); (d) any Person in which such specified Person holds a Material Interest; (e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (f) any Related Person of any individual described in clause (b) or (c). For purposes of the foregoing definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse and former spouses, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership of voting Warrants or other voting interests representing at least 1% of the outstanding voting power of a Person or equity Warrants or other equity interests representing at least 1% of the outstanding equity Warrants or equity Warrants in a Person. 6 (o) Title to Properties; Liens and Encumbrances. Except as set forth in the SEC filings of the Company, the Company has good and marketable title to all of its material properties and assets, both real and personal, and has good title to all its leasehold interests. All material properties and assets reflected in the Company Financials are free and clear of all Encumbrances (as defined below) except liens for current Taxes not yet due and except as disclosed in the Company Financials. As used in this Agreement, "Encumbrance" means any charge, claim, community property interest, condition, equitable interest, lien, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. (p) Permits. The Company has all permits, licenses and any similar authority necessary for the conduct of its business as now conducted, the lack of which would materially and adversely affect the business or financial condition of such company. The Company is not in default in any respect under any of such permits, licenses or similar authority. (q) Absence of Litigation. Except as set forth in the Company SEC Filings, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body, or arbitration tribunal pending or, to the Knowledge of the Company, threatened against or affecting the Company, in which an unfavorable decision, ruling or finding would have a material adverse effect on the properties, business, condition (financial or other) or results of operations of the Company, taken as a whole, or the transactions contemplated by the Primary Documents, or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, the Primary Documents. All references to the "Knowledge of the Company" in this Agreement shall mean the actual knowledge of the Company or any of its officers or the knowledge that the Company or any of its officers could reasonably be expected to have, after reasonable investigation and due diligence. (r) No Default. The Company is not in default in the performance or observance of any obligation, covenant or condition contained in any indenture, mortgage, deed of trust or other instrument or agreement to which it is a party or by which it or its property may be bound. (s) Taxes. (i) All Tax Returns (as defined below) required to have been filed by or with respect to the Company (including any extensions) have been filed. All such Tax Returns are true, complete and correct in all material respects. All Taxes (as defined below) due and payable by the Company, whether or not shown on any Tax Return, or claimed to be due by any Taxing Authority (as defined below), have been paid. (ii) The Company does not have any material liability for Taxes outstanding. (iii) The Company is not a party to any agreement extending the time within which to file any Tax Return. No claim has ever been made by a Taxing Authority of any jurisdiction in which the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction. 7 (iv) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor or independent contractor. (v) There has been no action by any Taxing Authority in connection with assessing additional Taxes against, or in respect of, the Company for any past period. There is no dispute or claim concerning any Tax liability of the Company either (i) claimed, raised or, to the Knowledge of the Company, threatened by any Taxing Authority or (ii) of which the Company is otherwise aware. There are no liens for Taxes upon the assets and properties of the Company other than liens for Taxes not yet due. (vi) There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any Tax Returns required to be filed by, or which include or are treated as including, the Company or with respect to any Tax assessment or deficiency affecting the Company. (vii) The Company has not received any written ruling related to Taxes or entered into any agreement with a Taxing Authority relating to Taxes. (viii) The Company does not have any liability for the Taxes of any person or entity other than the Company (i) under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign Legal Requirements), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise, except for assumed liabilities of the assignee of Provider Solutions Corp. in an amount not to exceed $400,000. (ix) The Company (i) has not agreed to make nor is required to make any adjustment under Section 481 of the Internal Revenue Code by reason of a change in accounting method and (ii) is not a "consenting corporation" within the meaning of Section 341(f)(1) of the Internal Revenue Code. (x) The Company is not a party to or bound by any obligations under any tax sharing, tax allocation, tax indemnity or similar agreement or arrangement. (xi) The Company is not involved in, subject to, or a party to any joint venture, partnership, contract or other arrangement that is treated as a partnership for federal, state, local or foreign Tax purposes. (xii) The Company was not included nor is includible, in the Tax Return of any other entity. As used in this Agreement, a "Tax Return" means any return, report, information return, schedule, certificate, statement or other document (including any related or supporting information) filed or required to be filed with, or, where none is required to be filed with a Taxing Authority, the statement or other document issued by, a Taxing Authority in connection with any Tax; "Tax" means any and all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross, receipts, excise, real or personal property, sales, withholding, social security, retirement, unemployment, occupation, use, service, service use, license, net worth, payroll, franchise, transfer and recording taxes, fees and charges, imposed by Taxing Authority, whether computed 8 on a separate, consolidated, unitary, combined or any other basis; and such term includes any interest whether paid or received, fines, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments; and "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. (t) Certain Prohibited Activities. Neither the Company nor any of its directors, officers or other employees has (i) used any Company funds for any unlawful contribution, endorsement, gift, entertainment or other unlawful expense relating to any political activity, (ii) made any direct or indirect unlawful payment of Company funds to any foreign or domestic government official or employee, (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any bribe, rebate, payoff, influence payment, kickback or other similar payment to any person. (u) Contracts. As used in this Agreement, "Contract" means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding; or any Contract (a) under which the Company has or may acquire any rights, (b) under which the Company has or may become subject to any obligation or liability, or (c) by which the Company or any of the assets owned or used by it is or may become bound. With respect to each Contract (i) the Company is, and has been, in material compliance with all applicable terms and requirements of each Contract under which the Company has or had any obligation or liability or by which the Company or any of the assets owned or used by it is or was bound; (ii) each other person or entity that has or had any obligation or liability under any Contract under which the Company has or had any rights is, and has been, in material compliance with all applicable terms and requirements of such Contract; (iii) no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a material violation or breach of, or give the Company or other person or entity the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Contract; and (iv) the Company has not given to or received from any other person or entity any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract. Each Contract is valid, in full force, and binding on and enforceable against the other party or parties to such contract in accordance with its terms and provisions. There have been no renegotiation of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to the Company under current or completed Contracts with any person or entity and no such person or entity has made written demand for such renegotiation. (v) Agent Fees. The Company has not incurred any liability for any finder's or brokerage fees or agent's commissions in connection with the transactions contemplated by this Agreement. 9 (w) Employees. The Company has no accrued vacation or sick pay due any employees, except as set forth in the Financial Statements. (x) Employee Benefits. (i) The Company does not have, and has not at any time had, any Plans (as defined below). As used in this Agreement, "Plan" means (i) each of the "employee benefit plans" (as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")), of which any of the Company or any member of the same controlled group of businesses as the Company within the meaning of Section 4001(a)(14) of ERISA (an "ERISA Affiliate") is or ever was a sponsor or participating employer or as to which the Company or any of its ERISA Affiliates makes contributions or is required to make contributions, and (ii) any similar employment, severance or other arrangement or policy of any of the Company or any of its ERISA Affiliates (whether written or oral) providing for health, life, vision or dental insurance coverage (including self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits or retirement benefits, fringe benefits, or for profit sharing, deferred compensation, bonuses, stock options, stock appreciation or other forms of incentive compensation or post-retirement insurance, compensation or benefits. (y) Private Offering. Subject to the accuracy of the Purchaser's representations and warranties set forth in Section 2 hereof, (i) the offer, sale and issuance of the Warrants, and (ii) the issuance of Common Stock pursuant to the exercise of the Warrants as contemplated by the Primary Documents, are exempt from the registration requirements of the Securities Act. The Company agrees that neither the Company nor anyone acting on its behalf will offer any of the Warrants or any similar Warrants for issuance or sale, or solicit any offer to acquire any of the same from anyone so as to render the issuance and sale of such Warrants subject to the registration requirements of the Securities Act (z) Mergers, Acquisitions and Divestitures. Except as set forth in the SEC filings of the Company, the Company has never acquired any equity interest in or any major assets of any other Person, or sold the equity interest or any major asset owned by it in a transaction the terms of which were not based on arms' length negotiations. None of the officers and directors of the Company has received any benefit in connection with any of the foregoing transactions or is under any agreement or understanding with any Person (including agreements or understandings among themselves) with respect to the receipt of or entitlement to any such benefit. (aa) Full Disclosure. There is no fact known to the Company (other than general economic conditions known to the public generally) that has not been disclosed to the Purchaser that could (i) reasonably be expected to have a material adverse effect upon the condition (financial or otherwise) or the earnings, business affairs, properties or assets of the Company or (ii) reasonably be expected to materially and adversely affect the ability of the Company to perform the obligations set forth in the Primary Documents. The representations and warranties of the Company set forth in this Agreement do not contain any untrue statement of a material fact or omit any material fact necessary to make the statements contained herein, in light of the circumstances under which they were made, not misleading. 10 4. CERTAIN COVENANTS, ACKNOWLEDGMENTS AND RESTRICTIONS (a) Transfer Restrictions. The Purchaser acknowledges that (i) neither the Warrants nor the Common Stock issuable upon exercise of the Warrants have been registered under the Securities Act, and such Warrants may not be transferred unless (A) subsequently registered thereunder or (B) they are transferred pursuant to an exemption from such registration, and (ii) any sale of the Warrants or the Common Stock issuable upon exercise or exchange thereof (collectively, the "Covered Warrants") made in reliance upon Rule 144 under the Securities Act ("Rule 144") may be made only in accordance with the terms of said Rule 144. The provisions of Section 4(a) and 4(b) hereof, together with the rights of the Purchaser under this Agreement and the other Primary Documents, shall be binding upon any subsequent transferee of the Common Stock. (b) Restrictive Legend. The Purchaser acknowledges and agrees that, until such time as the Covered Warrants shall have been registered under the Securities Act or the Purchaser demonstrates to the reasonable satisfaction of the Company and its counsel that such registration shall no longer be required, such Covered Warrants may be subject to a stop-transfer order placed against the transfer of such Covered Warrants, and such Covered Warrants shall bear a restrictive legend in substantially the following form: THESE WARRANTS (INCLUDING ANY UNDERLYING CAPITAL STOCK) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE WARRANTS UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO LONGER BE REQUIRED. (c) Filings. The Company undertakes and agrees that it will make all required filings in connection with the sale of the Securities to the Purchaser as required by federal and state laws and regulations, or by any domestic securities exchange or trading market, and if applicable, the filing of a notice on Form D (at such time and in such manner as required by the rules and regulations of the Commission), and to provide copies thereof to the Purchaser promptly after such filing or filings. With a view to making available to the holders of the Securities the benefits of Rule 144 and any other rule or regulation of the Commission that may at any time permit such holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3 or Form SB-2, the Company shall (a) at all times make and keep public information available, as those terms are understood and defined in Rule 144, (b) file on a timely basis with the Commission all information that the Commission may require under either of Section 13 or Section 15(d) of the Exchange Act and, so long as it is required to file such information, take all actions that may be required as a condition to the availability of Rule 144 (or any successor exemptive rule hereafter in effect) with respect to the Common Stock; and (d) furnish to any holder of the Securities forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company as filed with the Commission, and (iii) any other reports and documents that a holder of the Securities may reasonably request in order to avail itself of any rule or regulation of the Commission allowing such holder to sell any such Securities without registration. 11 (d) Reservation of Common Stock. The Company will at all times have authorized and reserved for the purpose of issuance a sufficient number of shares of Common Stock to provide for the conversion of the exercise of the Warrants. (e) Return of Certificates on Conversion. Upon any exercise by any holder of the Warrants of less than all of the shares of Common Stock into which such Warrants are exercisable, the Company shall issue and deliver to the holder thereof, within seven business days of the date of exercise, a new Warrant exercisable for the total number of shares of Common Stock which the holder has not yet elected to exercise. (f) Replacement Certificates. The Warrants will be exchangeable, at the option of the Purchaser, at any time and from time to time at the office of the Company, for other Warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock as are purchasable under such Warrants. No service charge will be made for such transfer or exchange. (g) Financial Statements. At the expense of the Company, the Company's accountant shall annually prepare for each calendar year, a report of the Company, including a balance sheet, annual profit and loss statement, and annual cash flow statement to be furnished to the Purchaser within one hundred twenty (120) days after the end of each calendar year. In addition the Company shall cause to be prepared and distributed to the Purchaser for each calendar quarter during the term of this Agreement a report of the Company, including a balance sheet, quarterly profit and loss statement, and quarterly cash flow statement for such calendar quarter to be furnished to the Purchaser within forty-five (45) days after the end of each calendar quarter. The Company shall also cause to be prepared and filed all Federal, state and local income tax returns and information returns, if any, which the Company is required to file. 5. FEES AND EXPENSES The Company shall bear its own costs, including attorney's fees, incurred in the negotiation of this Agreement and consummating of the transactions contemplated herein and in the corporate proceedings of the Company in contemplation hereof and thereof. At the date of execution and delivery hereof, the Company shall reimburse the Purchaser for all of the Purchaser's reasonable out-of-pocket expenses incurred in connection with the negotiation or performance of this Agreement, including without limitation, reasonable fees and disbursements of counsel to the Purchaser. 12 6. SURVIVAL The agreements, covenants, representations and warranties of the Company and the Purchaser shall survive the execution and delivery of this Agreement and the delivery of the Warrants hereunder for a period of two years from the date hereof, except that: (a) the Company's representations and warranties regarding Taxes contained in Section 3(s) of this Agreement shall survive as long as the Company remains statutorily liable for any obligation referenced in Section 3(s), and (b) the Company's representations and warranties contained in Section 3(b) shall survive until the Purchaser and any of its affiliates are no longer holders of any of the Warrants purchased hereunder. 7. INDEMNIFICATION (a) The Company, on the one side, and the Purchaser (each in such capacity under this section, the "Indemnifying Party") agrees to indemnify the other party and each officer, director, employee, agent, partner, stockholder, member and affiliate of such other party (collectively, the "Indemnified Parties") for, and hold each Indemnified Party harmless from and against: (i) any and all damages, losses, claims, diminution in value and other liabilities of any and every kind, including, without limitation, judgments and costs of settlement, and (ii) any and all reasonable out-of-pocket costs and expenses of any and every kind, including, without limitation, reasonable fees and disbursements of counsel for such Indemnified Parties (all of which expenses periodically shall be reimbursed as incurred), in each case, arising out of or suffered or incurred in connection with any of the following, whether or not involving a third party claim: (a) any misrepresentation or any breach of any warranty made by the Indemnifying Party herein or in any of the other Primary Documents, (b) any breach or non-fulfillment of any covenant or agreement made by the Indemnifying Party herein or in any of the other Primary Documents, or (c) any claim relating to or arising out of a violation of applicable federal or state Warrants laws by the Indemnifying Party in connection with the sale or issuance of the Warrants by the Indemnifying Party to the Indemnified Party (collectively, the "Indemnified Liabilities"). To the extent that the foregoing undertaking by the Indemnifying Party may be unenforceable for any reason, the Indemnifying Party shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. 8. NOTICES Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation of error-free transmission and mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or three business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by five days advance written notice to each of the other parties hereto. 13 Company: Health Systems Solutions, Inc. 405 North Reo Street, Suite 300 Tampa, Florida 33609 Attention: B. M. Milvain, President Telephone: 813-282-3303 Facsimile: 813-282-8907 with a copy to: Stanford Financial Group 5050 Westheimer Houston, TX 77056 Attention: Mauricio Alvarado, Esq. Telephone: (713) 964-5145 Facsimile: (713) 964-5245 Purchaser: Stanford Venture Capital Holdings, Inc. 6075 Poplar Avenue Memphis, TN 38119 Attention: James M. Davis, President Telephone: (901) 680-5260 Facsimile: (901) 680-5265 with a copy to: Stanford Financial Group 5050 Westheimer Houston, TX 77056 Attention: Mauricio Alvarado, Esq. Telephone: (713) 964-5145 Facsimile: (713) 964-5245 9. GOVERNING LAW; JURISDICTION This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to its principles of conflict of laws. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any party in the federal courts of Florida or the state courts of the State of Florida, Miami-Dade County and each of the parties consents to the jurisdiction of such courts and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. 14 10. MISCELLANEOUS (a) Entire Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement, together with the other Primary Documents, including any certificate, schedule, exhibit or other document delivered pursuant to their terms, constitutes the entire agreement among the parties hereto with respect to the subject matters hereof and thereof, and supersedes all prior agreements and understandings, whether written or oral, among the parties with respect to such subject matters. (b) Amendments. This Agreement may not be amended except by an instrument in writing signed by the party to be charged with enforcement. (c) Waiver. No waiver of any provision of this Agreement shall be deemed a waiver of any other provisions or shall a waiver of the performance of a provision in one or more instances be deemed a waiver of future performance thereof. (d) Construction. This Agreement and each of the Primary Documents have been entered into freely by each of the parties, following consultation with their respective counsel, and shall be interpreted fairly in accordance with its respective terms, without any construction in favor of or against either party. (e) Binding Effect of Agreement. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of each of the parties hereto, including any transferees of the Warrants. (f) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or unenforceability of this Agreement in any other jurisdiction. (g) Attorneys' Fees. If any action should arise between the parties hereto to enforce or interpret the provisions of this Agreement, the prevailing party in such action shall be reimbursed for all reasonable expenses incurred in connection with such action, including reasonable attorneys' fees. (h) Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of this Agreement. (i) Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, will be deemed to constitute one and the same agreement. [SIGNATURES ON FOLLOWING PAGE] 15 IN WITNESS WHEREOF, this Agreement has been duly executed by each of the undersigned as of the date first written above. HEALTH SYSTEMS SOLUTIONS, INC. By: ------------------------------------ Name: --------------------------------- Title: -------------------------------- STANFORD VENTURE CAPITAL HOLDINGS, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 16 EXHIBIT INDEX EXHIBIT A WARRANT EXHIBIT B HSS CLOSING CERTIFICATE EXHIBIT C SVCH CLOSING CERTIFICATE EXHIBIT B HEALTH SYSTEMS SOLUTIONS, INC. A Nevada Corporation CLOSING CERTIFICATE The undersigned, B.M. Milvain, hereby certifies to Stanford Venture Capital Holdings, Inc., a Delaware Corporation ("SVCH"), that he is the duly elected and acting President of Health Systems Solutions, Inc., a Nevada corporation (the "Company"), and hereby further certifies to SVCH as follows: All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms as in the Warrant Purchase Agreement dated as of July 6, 2004 and entered into by and among the Company and SVCH (the "Warrant Purchase Agreement"): 1. Representations and Warranties. The representations and warranties made by the Company in the Warrant Purchase Agreement are true and correct in all respects on and as of the date hereof, as though made on and as of such date, except to the extent that any such representation or warranty expressly relates solely to an earlier date, in which case such representation or warranty is true and correct in all respects on and as of such earlier date. 2. Covenants and Agreements. The Company has performed all covenants and agreements required to be performed pursuant to the Warrant Purchase Agreement in all respects on and as of the date hereof. 3. Recent Events. Except as disclosed in the Warrant Purchase Agreement, there has not been any: (a) material adverse change or any material adverse development in the business, properties, operations, financial condition, prospects, outstanding securities or results or operations of the Company and no event has occurred or no circumstances exist that may result in such material adverse change; (b) no incurrence of any liability, fixed or contingent by the Company. The Company has not engaged in any practice, taken any action, or entered into any transaction, except as contemplated by the Warrant Purchase Agreement. IN WITNESS WHEREOF, the undersigned has executed this Officers' Certificate this ___ day of July 2004. ___________________ B.M. Milvain President EXHIBIT C STANFORD VENTURE CAPITAL HOLDINGS, INC. A Delaware Corporation CLOSING CERTIFICATE The undersigned, ______________, hereby certifies to Health Systems Solutions, Inc., a Nevada corporation ("HSS"), that he is the duly elected and acting President of Stanford Venture Capital Holdings, Inc., a Delaware Corporation (the "Company"), and hereby further certifies to HSS as follows: All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms as in the Warrant Purchase Agreement dated as of July 6, 2004 and entered into by and among the Company and HSS (the "Warrant Purchase Agreement"): 1. Representations and Warranties. The representations and warranties made by the Company in the Warrant Purchase Agreement are true and correct in all respects on and as of the date hereof, as though made on and as of such date, except to the extent that any such representation or warranty expressly relates solely to an earlier date, in which case such representation or warranty is true and correct in all respects on and as of such earlier date. 2. Covenants and Agreements. The Company has performed all covenants and agreements required to be performed pursuant to the Warrant Purchase Agreement in all respects on and as of the date hereof. IN WITNESS WHEREOF, the undersigned has executed this Officers' Certificate this ___ day of July 2004. _________________ B.M. Milvain President EX-10.3 4 warrantassignment.txt WARRANT ASSIGNMENT WARRANT ASSIGNMENT THIS WARRANT ASSIGNMENT AGREEMENT, dated as of July 6, 2004 (the "Agreement"), is entered into by and among Stanford Venture Capital Holdings, Inc., a Delaware corporation ("Stanford"), Daniel T. Bogar ("Bogar"), Ronald M. Stein ("Stein"), William M. Fusselmann ("Fusselmann") and Osvaldo Pi ("Pi" and together with Bogar, Stein and Fusselmann each an "Assignee" and collectively the "Assignees"). W I T N E S S E T H: WHEREAS, effective as of the date hereof, Health Systems Solutions, Inc., a Nevada corporation ("HSS") entered into a certain Warrant Purchase Agreement by and among HSS and Stanford (the "Securities Purchase Agreement"); WHEREAS, pursuant to, and in accordance with, the Securities Purchase Agreement, Stanford purchased and HSS sold and issued warrants to purchase up to an aggregate of 720,000 shares of HSS common stock (the "HSS Warrants"); WHEREAS, for value received, Stanford agreed to assign and transfer unto each Assignee HSS Warrants exercisable for 90,000 HSS Warrant Shares (as hereinafter defined) (the "HSS Assigned Warrants") with each share of common stock represented by the HSS Warrants ("HSS Warrant Shares") exercisable at an exercise price per HSS Warrant Share of $0.001; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: A. Stanford hereby assigns and transfers unto each Assignee, 90,000 HSS Warrant Shares exercisable at an exercise price per HSS Warrant Share of $0.001. B. The parties hereto hereby covenant and agree to take all such action as may be necessary or appropriate in order to carry out the actions set forth herein. C. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to its principles of conflict of laws. D. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement, constitutes the entire agreement among the parties hereto with respect to the subject matters hereof and thereof, and supersedes all prior agreements and understandings, whether written or oral, among the parties with respect to such subject matters. E. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of each of the parties hereto, including any transferees of the Warrants. F. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, will be deemed to constitute one and the same agreement. *Signatures on Following Page* IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. Stanford Venture Capital Holdings, Inc. "Assignees" - ---------------------------- --------------------------- By: William R. Fusselmann Title: 141 Crandon Blvd., #437 Key Biscayne, Florida 33149 --------------------------- Daniel T. Bogar 1016 Sanibel Drive --------------------------- Ronald M. Stein 6520 Allison Road Miami Beach, Florida 33141 --------------------------- Osvaldo Pi 6405 SW 104th Street Pinecrest, Florida 33156 EX-10.4 5 registrationagreement.txt REGISTRATION RIGHTS AGREEMENT HEALTH SYSTEMS SOLUTIONS, INC. A Nevada Corporation REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 6, 2004 (the "Agreement"), is entered into by and among Health Systems Solutions, Inc., a Nevada corporation (the "Company"), and the holders (the "Investors") of the Company's capital stock and Warrants set forth on the signature page hereof. Capitalized terms not defined herein shall have the meanings ascribed to them in the Warrant Purchase Agreement (as hereinafter defined). WHEREAS, Health Quality Solutions, Inc., a Florida corporation ("HQS") is a wholly-owned subsidiary of the Company; --- WHEREAS, Stanford Venture Capital Holdings, Inc. ("SVCH" and an Investor as defined herein) and HQS entered into a Loan and Security Agreement of even date herewith pursuant to which, among other things, HQS borrowed from SVCH up to an aggregate of $1,600,000 (the "Loan Agreement"); and WHEREAS, as partial consideration for SVCH entering into the Loan Agreement and upon the terms and conditions of this Agreement, the Purchaser has agreed to purchase, and the Company wishes to issue and sell to the Purchaser and/or its assigns, warrants to purchase up to an aggregate of 720,000 of the Company's common stock $0.001 par value per share (the "Common Stock"), at an exercise price of $0.001 per share; and WHEREAS, simultaneously with the execution and delivery of this Agreement, SVCH has agreed to purchase the Warrants from the Company pursuant to the Warrant Purchase Agreement of even date herewith by and between the Company and SVCH (the "Warrant Purchase Agreement"); and WHEREAS, the Company desires to grant to the Investors the registration rights set forth herein with respect to the shares of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") and the shares of Common Stock issuable upon the exercise of the warrants in the event of a registration default pursuant to Section 4(e) (the "Default Warrant Shares"). NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. CERTAIN DEFINITIONS As used herein the term "Registrable Security" means the Warrant Shares until (i) the Registration Statement (as defined below) has been declared effective by the Securities and Exchange Commission (the "Commission"), and all Securities have been disposed of pursuant to the Registration Statement, (ii) all Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 ("Rule 144") (or any similar provision then in force) under the Securities Act of 1933, as amended (the "Securities Act") are met, or (iii) such time as, in the opinion of counsel to the Company reasonably 1 satisfactory to the Investors and upon delivery to the Investors of such executed opinion, all Securities may be sold without any time, volume or manner limitations pursuant to Rule 144 (or any similar provision then in effect). In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be deemed to be made in the definition of "Registrable Security" as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Agreement. As used herein the term "Holder" means any Person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 10 hereof. As used herein "Trading Day" shall mean any business day on which the market on which the Common Stock trades is open for business. 2. RESTRICTIONS ON TRANSFER Each of the Investors acknowledges and understands that prior to the registration of the Securities as provided herein, the Securities are "restricted securities" as defined in Rule 144. Each of the Investors understands that no disposition or transfer of the Securities may be made by any of the Investors in the absence of (i) an opinion of counsel to such Investor, in form and substance reasonably satisfactory to the Company, that such transfer may be made without registration under the Securities Act or (ii) such registration. 3. COMPLIANCE WITH REPORTING REQUIREMENTS With a view to making available to the Investors the benefits of Rule 144 or any other similar rule or regulation of the Commission that may at any time permit the holders of the Securities to sell securities of the Company to the public pursuant to Rule 144, the Company agrees to: (a) comply with the provisions of paragraph (c)(1) of Rule 144; (b) file with the Commission in a timely manner all reports and other documents required to be filed with the Commission pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934 (the "Exchange Act") by companies subject to either of such sections, irrespective of whether the Company is then subject to such reporting requirements; and (c) Upon request by any Holder or the Company's transfer agent, the Company shall provide an opinion of counsel, which opinion shall be reasonably acceptable to the Holder and/or the Company's transfer agent, that the such Holder has complied with the applicable conditions of Rule 144 (or any similar provision then in force). 4. REGISTRATION RIGHTS WITH RESPECT TO THE REGISTRABLE SECURITIES (a) The Company agrees that it will prepare and file with the Commission, (i) by December 31, 2004, a registration statement (on Form S-1 or SB-2, or other appropriate registration statement form) under the Securities Act (the "Registration Statement"), and (ii) if at least 20% of the Registrable Securities covered under the Registration Statement filed under (i) remain unsold during the effective period of such Registration Statement, then within 20 days following receipt of a written notice from the holders representing a majority of such unsold Registrable Securities, another Registration Statement so as to permit a resale of the Securities under the Securities Act by the Holders as selling stockholders and not as underwriters. 2 The Company shall use diligent best efforts to cause the Registration Statement to become effective as soon as practical following the filing of the Registration Statement. The number of shares designated in the Registration Statement to be registered shall include 150% of the Warrant Shares and 150% of the Default Warrant Shares, if any, and shall include appropriate language regarding reliance upon Rule 416 to the extent permitted by the Commission. The Company will notify the Holders and its transfer agent of the effectiveness of the Registration Statement within one Trading Day of such event. (b) The Company will maintain the Registration Statement or post-effective amendment filed under this Section 4 effective under the Securities Act until the earlier of (i) the date that none of the Registrable Securities covered by such Registration Statement are or may become issued and outstanding, (ii) the date that all of the Registrable Securities have been sold pursuant to such Registration Statement, (iii) the date all the Holders receive an opinion of counsel to the Company, which counsel shall be reasonably acceptable to the Holders, that the Registrable Securities may be sold under the provisions of Rule 144 without limitation as to volume, (iv) all Registrable Securities have been otherwise transferred to persons who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend, or (v) two years from the Effective Date. (c) All fees, disbursements and out-of-pocket expenses and costs incurred by the Company in connection with the preparation and filing of the Registration Statement under this Section 4 and in complying with applicable securities and blue sky laws (including, without limitation, all attorneys' fees of the Company) shall be borne by the Company. The Company shall also reimburse the fees and expenses of counsel to the Holders incurred in connection with such counsel's review of the Registration Statement and advice concerning the Registration Statement and its filing subject to a cap of $15,000. The Holders shall bear the cost of underwriting and/or brokerage discounts, fees and commissions, if any, applicable to the Registrable Securities being registered. The Holders and their counsel shall have a reasonable period, not to exceed 15 Trading Days, to review the proposed Registration Statement or any amendment thereto, prior to filing with the Commission, and the Company shall provide the Holders with copies of any comment letters received from the Commission with respect thereto within two Trading Days of receipt thereof. The Company shall qualify any of the Registrable Securities for sale in such states as the Holders reasonably designate and shall furnish indemnification in the manner provided in Section 7 hereof. However, the Company shall not be required to qualify in any state which will require an escrow or other restriction relating to the Company and/or the Holders, or which will require the Company to qualify to do business in such state or require the Company to file therein any general consent to service of process. The Company at its expense will supply each of the Investors with copies of the applicable Registration Statement and the prospectus included therein and other related documents in such quantities as may be reasonably requested by any of the Investors. 3 (d) The Company shall not be required by this Section 4 to include the Registrable Securities in any Registration Statement which is to be filed if, in the opinion of counsel for both the Holders and the Company (or, should they not agree, in the opinion of another counsel experienced in securities law matters acceptable to counsel for the Holders and the Company) the proposed offering or other transfer as to which such registration is requested is exempt from applicable federal and state securities laws and would result in all purchasers or transferees obtaining securities which are not "restricted securities," as defined in Rule 144. (e) In the event that (i) the Registration Statement is not filed by the Company in a timely manner as set forth in Section 4(a); or (ii) such Registration Statement is not maintained as effective by the Company for the period set forth in Section 4(b) above (each a "Registration Default"), then the Company will issue to each of the Holders as of the first day of such Registration Default and for every consecutive month in which such Registration Default is occurring, as liquidated damages, and not as a penalty, warrants to purchase one (1) share of the Common Stock ("Default Warrants") for each ten Warrants issued to the Holders pursuant to the Warrant Purchase Agreement until such corresponding Registration Default no longer exists ("Liquidated Damages"); provided, however, that the issuance of such Default Warrants shall not relieve the Company from its obligations to register the Registrable Securities pursuant to this Section. If the Company does not issue the Default Warrants to the Holders as set forth above, the Company will pay any Holder's reasonable costs of any action in a court of law to cause compliance with this Section 4(e), including reasonable attorneys' fees, in addition to the Default Warrants. The registration of the Registrable Securities pursuant to this Section shall not affect or limit a Holder's other rights or remedies as set forth in this Agreement. (f) The Company shall be precluded from including in any Registration Statement which it is required to file pursuant to this Section 4 any other securities apart from the Registrable Securities, without the prior written consent of the Holders. (g) If, at any time any Registrable Securities are not at the time covered by any effective Registration Statement, the Company shall determine to register under the Securities Act (including pursuant to a demand of any stockholder of the Company exercising registration rights) any of its shares of the Common Stock (other than in connection with a merger or other business combination transaction that has been consented to in writing by holders of the Warrants, or pursuant to Form S-8 when such filing has been consented to in writing by holders of the Series A Preferred Stock), it shall send to each Holder written notice of such determination and, if within 20 days after receipt of such notice, such Holder shall so request in writing, the Company shall its best efforts to include in such registration statement all or any part of the Registrable Securities that such Holder requests to be registered. Notwithstanding the foregoing, if, in connection with any offering involving an underwriting of the Common Stock to by issued by the Company, the managing underwriter shall impose a limitation on the number of shares of the Common Stock included in any such registration statement because, in such underwriter's judgment, such limitation is necessary based on market conditions: (a) if the registration statement is for a public offering of common stock on a "firm commitment" basis with gross proceeds to the Company of at least $15,000,000 (a "Qualified Public Offering"), the Company may exclude, to the extent so advised 4 by the underwriters, the Registrable Securities from the underwriting; provided, however, that if the underwriters do not entirely exclude the Registrable Securities from such Qualified Public Offering, the Company shall be obligated to include in such registration statement, with respect to the requesting Holder, only an amount of Registrable Securities equal to the product of (i) the number of Registrable Securities that remain available for registration after the underwriter's cutback and (ii) such Holder's percentage of ownership of all the Registrable Securities then outstanding (on an as-converted basis) (the "Registrable Percentage"); and (b) if the registration statement is not for a Qualified Public Offering, the Company shall be obligated to include in such registration statement, with respect to the requesting Holder, only an amount of Registrable Securities equal to the product of (i) the number of Registrable Securities that remain available for registration after the underwriter's cutback and (ii) such Holder's Registrable Percentage; provided, however, that the aggregate value of the Registrable Securities to be included in such registration may not be so reduced to less than 30% of the total value of all securities included in such registration. If any Holder disapproves of the terms of any underwriting referred to in this paragraph, it may elect to withdraw therefrom by written notice to the Company and the underwriter. No incidental right under this paragraph shall be construed to limit any registration required under the other provisions of this Agreement. 5. COOPERATION WITH COMPANY Each Holder will cooperate with the Company in all respects in connection with this Agreement, including timely supplying all information reasonably requested by the Company (which shall include all information regarding such Holder and proposed manner of sale of the Registrable Securities required to be disclosed in any Registration Statement) and executing and returning all documents reasonably requested in connection with the registration and sale of the Registrable Securities and entering into and performing its obligations under any underwriting agreement, if the offering is an underwritten offering, in usual and customary form, with the managing underwriter or underwriters of such underwritten offering. Nothing in this Agreement shall obligate any Holder to consent to be named as an underwriter in any Registration Statement. The obligation of the Company to register the Registrable Securities shall be absolute and unconditional as to those Registrable Securities which the Commission will permit to be registered without naming any Holder as underwriters. Any delay or delays caused by a Holder by failure to cooperate as required hereunder shall not constitute a Registration Default as to such Holder. 6. REGISTRATION PROCEDURES If and whenever the Company is required by any of the provisions of this Agreement to effect the registration of any of the Registrable Securities under the Securities Act, the Company shall (except as otherwise provided in this Agreement), as expeditiously as possible, subject to the Holders' assistance and cooperation as reasonably required with respect to each Registration Statement: (a) (i) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such Registration Statement whenever any of the Holder shall desire to sell or otherwise dispose of the same 5 (including prospectus supplements with respect to the sales of Registrable Securities from time to time in connection with a registration statement pursuant to Rule 415 promulgated under the Securities Act) and (ii) take all lawful action such that each of (A) the Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (B) the prospectus forming part of the Registration Statement, and any amendment or supplement thereto, does not at any time during the Registration Period include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (b) (i) prior to the filing with the Commission of any Registration Statement (including any amendments thereto) and the distribution or delivery of any prospectus (including any supplements thereto), provide draft copies thereof to the Holders as required by Section 4(c) and reflect in such documents all such comments as the Holders (and their counsel) reasonably may propose; (ii) furnish to each of the Holders such numbers of copies of a prospectus including a preliminary prospectus or any amendment or supplement to any prospectus, as applicable, in conformity with the requirements of the Securities Act, and such other documents, as any of the Holders may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such Holder; and (iii) provide to the Holders copies of any comments and communications from the Commission relating to the Registration Statement, if lawful to do so; (c) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or blue sky laws of such jurisdictions as any of the Holders shall reasonably request (subject to the limitations set forth in Section 4(c) above), and do any and all other acts and things which may be necessary or advisable to enable such Holder to consummate the public sale or other disposition in such jurisdiction of the Registrable Securities owned by such Holder; (d) list such Registrable Securities on the markets where the Common Stock of the Company is listed as of the effective date of the Registration Statement, if the listing of such Registrable Securities is then permitted under the rules of such markets; (e) notify the Holders at any time when a prospectus relating thereto covered by the Registration Statement is required to be delivered under the Securities Act, of the happening of any event of which it has knowledge as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and the Company shall prepare and file a curative amendment under Section 6(a) as quickly as reasonably possible and during such period, the Holders shall not make any sales of Registrable Securities pursuant to the Registration Statement; 6 (f) after becoming aware of such event, notify each of the Holders who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the Commission of any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time and take all lawful action to effect the withdrawal, rescission or removal of such stop order or other suspension; (g) cooperate with the Holders to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts, as the case may be, as any of the Holders reasonably may request and registered in such names as any of the Holders may request; and, within three Trading Days after a Registration Statement which includes Registrable Securities is declared effective by the Commission, deliver and cause legal counsel selected by the Company to deliver to the transfer agent for the Registrable Securities (with copies to the Holders) an appropriate instruction and, to the extent necessary, an opinion of such counsel; (h) take all such other lawful actions reasonably necessary to expedite and facilitate the disposition by the Holders of their Registrable Securities in accordance with the intended methods therefor provided in the prospectus which are customary for issuers to perform under the circumstances; (i) in the event of an underwritten offering, promptly include or incorporate in a prospectus supplement or post-effective amendment to the Registration Statement such information as the managers reasonably agree should be included therein and to which the Company does not reasonably object and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after it is notified of the matters to be included or incorporated in such prospectus supplement or post-effective amendment; and (j) maintain a transfer agent and registrar for the Common Stock. 7. INDEMNIFICATION (a) To the maximum extent permitted by law, the Company agrees to indemnify and hold harmless each of the Holders, each person, if any, who controls any of the Holders within the meaning of the Securities Act, and each director, officer, shareholder, employee, agent, representative, accountant or attorney of the foregoing (each of such indemnified parties, a "Distributing Investor") against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses), to which the Distributing Investor may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, or any related final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent, and only to the extent, that any such loss, claim, damage or liability arises out of or is based 7 upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by the Distributing Investor, its counsel, or affiliates, specifically for use in the preparation thereof or (ii) by such Distributing Investor's failure to deliver to the purchaser a copy of the most recent prospectus (including any amendments or supplements thereto). This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) To the maximum extent permitted by law, each Distributing Investor agrees that it will indemnify and hold harmless the Company, and each officer and director of the Company or person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses) to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, or any related final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by such Distributing Investor, its counsel or affiliates, specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the Distributing Investor may otherwise have under this Agreement. Notwithstanding anything to the contrary herein, the Distributing Investor shall be liable under this Section 7(b) for only that amount as does not exceed the net proceeds to such Distributing Investor as a result of the sale of Registrable Securities pursuant to the Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action against such indemnified party, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent the failure of the indemnified party to provide such written notification actually prejudices the ability of the indemnifying party to defend such action. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 7 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified parties shall have the right to employ one or more separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party 8 has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party unless (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any interpleaded parties) include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by its counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the indemnified party or any other indemnified party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for the indemnified party, which firm shall be designated in writing by the indemnified party). No settlement of any action against an indemnified party shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld so long as such settlement includes a full release of claims against the indemnified party. All fees and expenses of the indemnified party (including reasonable costs of defense and investigation in a manner not inconsistent with this Section and all reasonable attorneys' fees and expenses) shall be paid to the indemnified party, as incurred, within 10 Trading Days of written notice thereof to the indemnifying party; provided, that the indemnifying party may require such indemnified party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such indemnified party is not entitled to indemnification hereunder. 8. CONTRIBUTION In order to provide for just and equitable contribution under the Securities Act in any case in which (i) the indemnified party makes a claim for indemnification pursuant to Section 7 hereof but is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of Section 7 hereof provide for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any indemnified party, then the Company and the applicable Distributing Investor shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys' fees and expenses), in either such case (after contribution from others) on the basis of relative fault as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the applicable Distributing Investor on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Distributing Investor agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred 9 to in this Section 8. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding any other provision of this Section 8, in no event shall (i) any of the Distributing Investors be required to undertake liability to any person under this Section 8 for any amounts in excess of the dollar amount of the proceeds received by such Distributing Investor from the sale of such Distributing Investor's Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Registration Statement under which such Registrable Securities are registered under the Securities Act and (ii) any underwriter be required to undertake liability to any person hereunder for any amounts in excess of the aggregate discount, commission or other compensation payable to such underwriter with respect to the Registrable Securities underwritten by it and distributed pursuant to such Registration Statement. 9. NOTICES Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile (upon receipt of confirmation of error-free transmission and mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or two business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by five days advance written notice to each of the other parties hereto. Company: Health Systems Solutions, Inc. 405 North Reo Street, Suite 300 Tampa, Florida 33609 Attention: B. M. Milvain, President Telephone: 813-282-3303 Facsimile: 813-282-8907 with a copy to: Stanford Financial Group 5050 Westheimer Houston, TX 77056 Attention: Mauricio Alvarado, Esq. Telephone: (713) 964-5145 Facsimile: (713) 964-5245 Investors: At the address and facsimile set forth on the signature page hereof 10 10. ASSIGNMENT The registration rights granted to any Holder under this Agreement may be transferred or assigned provided the transferee is bound by the terms of this Agreement and the Company is given written notice of such transfer or assignment. 11. ADDITIONAL COVENANTS OF THE COMPANY For so long as it shall be required to maintain the effectiveness of the Registration Statement, it shall file all reports and information required to be filed by it with the Commission in a timely manner and take all such other action so as to maintain such eligibility for the use of the applicable form. 12. CONFLICTING AGREEMENTS The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise prevents the Company from complying with all of its obligations hereunder. 13. GOVERNING LAW; JURISDICTION This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida, without regard to its principles of conflict of laws. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any party in the federal courts of Florida or the state courts of the State of Florida, and each of the parties consents to the jurisdiction of such courts and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. 14. MISCELLANEOUS (a) Entire Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement, together with the other Primary Documents, including any certificate, schedule, exhibit or other document delivered pursuant to their terms, constitutes the entire agreement among the parties hereto with respect to the subject matters hereof and thereof, and supersedes all prior agreements and understandings, whether written or oral, among the parties with respect to such subject matters. (b) Amendments. This Agreement may not be amended except by an instrument in writing signed by the party to be charged with enforcement. (c) Waiver. No waiver of any provision of this Agreement shall be deemed a waiver of any other provisions or shall a waiver of the performance of a provision in one or more instances be deemed a waiver of future performance thereof. (d) Construction. This Agreement and each of the Primary Documents have been entered into freely by each of the parties, following consultation with their respective counsel, and shall be interpreted fairly in accordance with its respective terms, without any construction in favor of or against either party. 11 (e) Binding Effect of Agreement. This Agreement shall inure to the benefit of, and be binding upon the successors and assigns of each of the parties hereto, including any transferees of the Securities. (f) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or unenforceability of this Agreement in any other jurisdiction. (g) Attorneys' Fees. If any action should arise between the parties hereto to enforce or interpret the provisions of this Agreement, the prevailing party in such action shall be reimbursed for all reasonable expenses incurred in connection with such action, including reasonable attorneys' fees. (h) Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of this Agreement. (i) Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, will be deemed to constitute one and the same agreement. [SIGNATURES ON FOLLOWING PAGE] 12 IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed, on this _____ day of July, 2004. HEALTH SYSTEMS SOLUTIONS, INC. By: ----------------------------- Name: ----------------------------- Title: ----------------------------- INVESTORS: STANFORD VENTURE CAPITAL HOLDINGS, INC. By: ----------------------------- Name: ----------------------------- Title: ----------------------------- ----------------------------- DANIEL BOGAR 1016 Sanibel Drive Hollywood, Florida 33019 Telephone: 305-960-8530 Facsimile: 305-960-8535 ----------------------------- RONALD STEIN 6520 Allison Road Miami Beach, Florida 33141 Telephone: 305-960-8530 Facsimile: 305-960-8535 ----------------------------- OSVALDO PI 6405 SW 104 Street Pinecrest, Florida 33156 Telephone: 305-960-8530 Facsimile: 305-960-8535 ----------------------------- WILLIAM FUSSELMANN 141 Crandon Boulevard, #437 Key Biscayne, Florida 33149 Telephone: 305-960-8530 Facsimile: 305-960-8535 13 -----END PRIVACY-ENHANCED MESSAGE-----