Document:

Exhibit 10.16(iv)

FIRST
AMENDMENT AND WAIVER TO

LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT AND WAIVER TO LOAN AND SECURITY
AGREEMENT (this “Amendment”) is entered into this 26th day of March, 2007, by
and between SILICON VALLEY BANK (“Bank”), MEDECISION, INC., a Pennsylvania
corporation (“MEDecision”), and MEDECISION INVESTMENTS, INC., a Delaware
corporation (“MEDecision Investments”; and together with MEDecision, jointly,
severally and collectively, “Borrower”) whose address is 601 Lee Road, Wayne, Pennsylvania
19087.

RECITALS

A.            Bank
and Borrower have entered into that certain Loan and Security Agreement dated
as of September 28, 2006 (as the same may from time to time be further amended,
modified, supplemented or restated, the “Loan Agreement”).

B.            Bank
has extended credit to Borrower for the purposes permitted in the Loan
Agreement.

C.            Borrower
has also requested that Bank amend the Loan Agreement to (i) waive the Existing
Default (as defined below), (ii) increase the amount available to be borrowed
under the Equipment Line, (iii) extend the Equipment Maturity Date, (iv)
replace the Liquidity and Net Income covenants with the Adjusted Quick Ratio
and Tangible Net Worth covenants, and (v) make certain other revisions to the
Loan Agreement as more fully set forth herein.

D.            Although
Bank is under no obligation to do so, Bank is willing to waive the Existing
Default on the terms and conditions set forth in this Agreement, so long as
Borrower complies with the terms, covenants and conditions set forth in this
Agreement in a timely manner.

E.             Bank
has agreed to so amend certain provisions of the Loan Agreement, but only to
the extent, in accordance with the terms, subject to the conditions and in
reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE,
in consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, and
intending to be legally bound, the parties hereto agree as follows:

1.             Definitions.  Capitalized
terms used but not defined in this Amendment shall have the meanings given to
them in the Loan Agreement.

2.             Waiver of
Default.  Borrower hereby
acknowledges and agrees that it has failed to comply with the Net Income
financial covenant set forth in Section 6.8(b) of the Loan Agreement, for the
quarter ending December 31, 2006 (the “Existing Default”).  Borrower further acknowledges and agrees that
unless the foregoing Existing Default were waived by Bank, such Existing
Default would constitute an Event of Default under the Loan Documents.

Bank hereby waives
the Existing Default. Bank’s agreement to waive the Existing Default shall in
no way obligate Bank to make any modifications to the Loan Agreement or to
waive Borrower’s compliance with any other terms of the Loan Documents, and
shall not limit or impair Bank’s right to demand strict performance of all
other terms and covenants as of any date.

3.             Amendments
to Loan Agreement.

3.1.         Section 2.1.4 Equipment
Advances.  Section 2.1.4(a) is
amended in its entirety and replaced with the following:

2.1.4       Equipment Advances.

a.             Subject to the terms and conditions
of this Agreement, during the Draw Period, Bank shall make advances (each, an “Equipment Advance” and, collectively, “Equipment
Advances”) not exceeding the Equipment Line. Equipment Advances may
only be used to finance Eligible Equipment purchased within ninety (90) days
(determined based upon the applicable invoice date of such Eligible Equipment)
before the date of each Equipment Advance; provided,
however, that the initial Equipment Advance shall be made on or
within thirty (30) days of March 13, 2007, and such initial Equipment Advance
shall be used to finance equipment purchased after September 30, 2006. No
Equipment Advance may exceed the total invoice for Eligible Equipment,
excluding taxes, shipping, warranty charges, freight discounts and installation
expenses relating to such Eligible Equipment. After repayment, no Equipment
Advance may be reborrowed.

3.2.         Financial Statements;
Reports, Certificates.  Section
6 2(a) is amended in its entirety and replaced with the following:

6.2          Financial Statements; Reports, Certificates.

a.             Borrower
shall provide Bank with the following:

(i)            within thirty (30) days after the
end of each month, a duly completed Borrowing Base Certificate signed by a
Responsible Officer, with aged listings of accounts receivable and accounts
payable (by invoice date); provided, however, Borrower’s monthly accounts
receivable agings and accounts payable, aged by invoice date, for the month
ending January 31, 2007, shall be delivered to Bank no later than March 15,
2007;

(ii)           as soon as available, and in any
event within thirty (30) days after the end of each month, monthly unaudited
financial statements; provided, however, Borrower’s monthly unaudited financial
statements for the month ending January 31, 2007, shall be delivered to Bank no
later than March 15, 2007;

(iii)          within thirty (30) days after the end
of each month, a monthly Compliance Certificate signed by a Responsible
Officer, certifying that as of the end of such month, Borrower was in full
compliance with all of the 

 2
 

terms and
conditions of this Agreement, and setting forth calculations showing compliance
with the financial covenants set forth in this Agreement and such other
information as Bank shall reasonably request, including, without limitation, a
statement that at the end of such month there were no held checks; provided,
however, Borrower’s monthly Compliance Certificate signed by a Responsible Officer
for the month ending January 31, 2007, shall be delivered to Bank no later than
March 15, 2007;

(iv)          thirty (30) days prior to the end of
each fiscal year of Borrower, annual internal operating plans (including income
statements, balance sheets and cash flow statements, by month) for the upcoming
fiscal year of Borrower, and prior to the end of each fiscal year of Borrower,
annual financial projections for the following fiscal year (on a quarterly
basis) as approved by Borrower’s board of directors, together with any related
business forecasts used in the preparation of such annual financial
projections; and

(v)           as soon as available, and in any
event within one hundred twenty (120) days following the end of Borrower’s
fiscal year, annual financial statements certified by, and with an unqualified
opinion of, independent certified public accountants acceptable to Bank.

3.3.         Section 6.3 (Accounts
Receivable).  Section 6.3(a)
is amended in its entirety and replaced with the following:

6.3          Accounts Receivable

a.             Schedules and Documents Relating
to Accounts. If requested by Bank, Borrower shall furnish Bank with copies
(or, at Bank’s request, originals) of all contracts, orders, invoices, and
other similar documents, and all shipping instructions, delivery receipts,
bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts. In addition, Borrower shall
deliver to Bank, on its request, the originals of all instruments, chattel
paper, security agreements, guarantees and other documents and property
evidencing or securing any Accounts, in the same form as received, with all
necessary endorsements, and copies of all credit memos.

3.4.         Section 6.7 (Access to
Collateral; Books and Records).  Section
6.7 is amended in its entirety and replaced with the following:

6.7          Access to Collateral; Books and
Records. At reasonable times, on one (1) Business Day’s
notice (provided no notice is
required if an Event of Default has occurred and is continuing), Bank, or its
agents, shall have the right to inspect the Collateral and the right to audit
and copy Borrower’s Books. Borrower hereby acknowledges that provided that no
Event of Default has occurred and is continuing, no more than one (1) audit
shall be conducted in any twelve month period. The foregoing inspections and
audits shall be at Borrower’s expense, and the charge therefor shall be Seven
Hundred Fifty Dollars ($750) per person per day (or such higher amount as shall

 3
 

represent Bank’s
then-current standard charge for the same), plus reasonable out-of-pocket
expenses. In the event Borrower and Bank schedule an audit more than ten (10)
days in advance, and Borrower cancels or seeks to reschedules the audit with
less than ten (10) days written notice to Bank, then (without limiting any of
Bank’s rights or remedies), Borrower shall pay Bank a fee of One Thousand
Dollars ($1,000) plus any out-of-pocket expenses incurred by Bank to compensate
Bank for the anticipated costs and expenses of the cancellation or rescheduling.

3.5.         Section 6.8 (Financial
Covenants).  Section 6.8 is
amended in its entirety and replaced with the following:

6.8          Financial Covenants.

Borrower shall
maintain on a consolidated basis with respect to Borrower and its Subsidiaries:

(a)           Adjusted Quick Ratio.  A ratio of Quick Assets to Current
Liabilities minus fifty percent (50.0%) of Deferred Revenue, of at least the
following amounts at the following times:

	
  Months Ending:

  	
   

  	
   

  	
  Adjusted Quick Ratio:

  
	
  February 28,
  2007 through September 31, 2007

  	
   

  	
  1.50 to 1.00;

  
	
  October 31, 2007
  and at all times thereafter

  	
   

  	
  1.75 to 1.00.

  

 

(b)           Tangible Net Worth.  A Tangible Net Worth of at least the
following amounts at the following times:

	
  Quarter Ending:

  	
   

  	
   

  	
  Tangible Net Worth:

  
	
  March 31, 2007

  	
   

  	
  $9,000,000;

  
	
  June 30, 2007

  	
   

  	
  $9,000,000;

  
	
  September 30,
  2007

  	
   

  	
  $9,000,000;

  
	
  December 31,
  2007

  	
   

  	
  $12,000,000; and

  
	
  At all times
  thereafter

  	
   

  	
  $12,000,000.

  

 

3.6.         Section
13 (Definitions).

(a)           The following terms and their
respective definitions set forth in Section 13.1 are amended in their entirety
and replaced with the following:

“Draw
Period” is the period of time from the Effective Date through
the earliest to occur of (a) June 30, 2007, (b) an Event of Default, or (c) the
existence of any Default.

“Equipment
Line” is an Equipment Advance or Equipment Advances in an
aggregate amount of up to One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) outstanding at any time.

 4
 

 

“Equipment
Maturity Date” is, for each Equipment Advance, the earliest
of (a) a date thirty (30) months after the calendar quarter subsequent to such
Equipment Advance, but no later than December 1, 2009 as to the final Equipment
Advance, or (b) the occurrence of an Event of Default.

“Tangible
Net Worth” is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus (a) any amounts attributable to (i)
goodwill, (ii) intangible items including unamortized debt discount and
expense, capitalized software, deferred tax assets, patents, trade and service
marks and names, copyrights and research and development expenses except
prepaid expenses, (iii) notes, accounts receivable and other obligations owing
to Borrower from its officers or other Affiliates, and (iv) reserves not
already deducted from assets, minus (b) Total Liabilities.

(b)           The following terms and their
respective definitions are hereby inserted in Section 13.1 as follows:

“Current
Liabilities” are all obligations and liabilities of Borrower
to Bank due within one (1) year, plus, without duplication, the aggregate
amount of Borrower’s Total Liabilities that mature within one (1) year.

“Quick
Assets” is, on any date, Borrower’s unrestricted cash and
Cash Equivalents maintained with Bank, Accounts, and investments with Bank with
maturities of fewer than twelve (12) months determined according to GAAP.

“Responsible
Officer” is any of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.

(c)           The following term and its respective
definition set forth in Section 13.1 is hereby deleted in its entirety:

“Committed
Availability” means, as the date of determination, an amount
equal to the sum of the Revolving Line plus the Equipment Line minus all
outstanding Credit Extensions.

3.7.         Compliance
Certificate.  The Compliance
Certificate to the Loan Agreement is replaced in its entirety with Exhibit D
attached hereto.

4.             Limitation
of Amendments.

4.1.         The
amendments set forth in Section 3, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any
other term or condition of any Loan Document, or (b) otherwise prejudice any
right or remedy which Bank may now have or may have in the future under or in
connection with any Loan Document.

4.2.         This Amendment shall be construed in
connection with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and 

 5
 

agreements set forth in the Loan Documents, except as
herein amended, are hereby ratified and confirmed and shall remain in full
force and effect.

5.             Representations and
Warranties.  To induce Bank to
enter into this Amendment, Borrower hereby represents and warrants to Bank as
follows:

5.1.         Immediately after giving effect to this
Amendment (a) the representations and warranties contained in the Loan
Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to
an earlier date, in which case they are true and correct as of such date), and
(b) no Event of Default has occurred and is continuing;

5.2.         Borrower has the power and authority to
execute and deliver this Amendment and to perform its obligations under the
Loan Agreement, as amended by this Amendment;

5.3.         The organizational documents of
Borrower delivered to Bank on the Effective Date remain true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;

5.4.         The execution and delivery by Borrower
of this Amendment and the performance by Borrower of its obligations under the
Loan Agreement, as amended by this Amendment, have been duly authorized;

5.5.         The execution and delivery by Borrower
of this Amendment and the performance by Borrower of its obligations under the
Loan Agreement, as amended by this Amendment, do not and will not contravene
(a) any law or regulation binding on or affecting Borrower, (b) any contractual
restriction with a Person binding on Borrower, (c) any order, judgment or
decree of any court or other governmental or public body or authority,  or subdivision thereof, binding on Borrower,
or (d) the organizational documents of Borrower;

5.6.         The execution and delivery by Borrower
of this Amendment and the performance by Borrower of its obligations under the
Loan Agreement, as amended by this Amendment, do not require any order,
consent, approval, license, authorization or validation of, or filing,
recording or registration with, or exemption by any governmental or public body
or authority, or subdivision thereof, binding on Borrower, except as already
has been obtained or made; and

5.7.         This Amendment has been duly executed
and delivered by Borrower and is the binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, except  as 
such  enforceability  may 
be  limited by  bankruptcy, 
insolvency,  reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors’ rights.

6.             Counterparts.  This Amendment may be executed in
any number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.

 6
 

 

7.             Effectiveness. This
Amendment shall be deemed effective upon (a) the due execution and delivery to
Bank of this Amendment by each party hereto, (b) Borrower’s payment of a
non-refundable waiver fee in an amount equal to Two Thousand Five Hundred
Dollars ($2,500), (c) Borrower’s payment of a non-refundable amendment fee in
an amount equal to Five Thousand Dollars ($5,000), and (d) payment of Bank’s
legal fees and expenses in connection with the negotiation and preparation of
this Amendment.

[Signature page follows.]

 7
 

 

IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.

 

	
  BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SILICON VALLEY
  BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ RICHARD WHITE

  	
   

  	
   

  	
   

  	 

	
  Name: Richard
  White

  	
   

  	
   

  
	
  Title:
  Relationship Manager

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BORROWER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MEDECISION, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ CARL E. SMITH

  	
   

  	
   

  	
   

  
	
  Name: Carl E.
  Smith

  	
   

  	
   

  
	
  Title: Executive
  Vice President

  	
   

  	
   

  
	
  and Chief
  Financial Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MEDECISION
  INVESTMENTS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ HAROLD F. KALBACH, JR.

  	
   

  	
   

  	
   

  
	
  Name: Harold F.
  Kalbach, Jr.

  	
   

  	
   

  
	
  Title: Treasurer

  	
   

  	
   

  
									

 

[Signature Page to First
Amendment and Waiver to Loan and Security Agreement]

 8

EXHIBIT
D

COMPLIANCE
CERTIFICATE

 

	
  TO:

  	
   

  	
  SILICON VALLEY BANK

  	
   

  	
  Date:

  
	
  FROM:

  	
   

  	
  MEDECISION, INC.

  	
   

  	
   

  

 

The undersigned authorized officer of MEDecision, Inc.
(“Borrower”) certifies that under the terms and conditions of the Amended and
Restated Loan and Security Agreement between Borrower and Bank (the “Agreement”),
(1) Borrower is in complete compliance for the period ending
                               
with all required covenants except as noted below, (2) there are no Events of
Default, (3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, (4)
Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower
except as otherwise permitted pursuant to the terms of Section 6.8 of the
Agreement, and (5) no Liens have been levied or claims made against Borrower or
any of its Subsidiaries relating to unpaid employee payroll or benefits of
which Borrower has not previously provided written notification to Bank.
Attached are the required documents supporting the certification. The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.
Capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Agreement.

Please indicate compliance status by circling
Yes/No under “Complies” column.

	
  

  	
  Reporting Covenant

  	
   

  	
   

  	
   

  	
  Required

  	
   

  	
   

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial
  statements with Compliance Certificate

  	
   

  	
  Monthly within 30 days*

  	
   

  	
  Yes o
  No o

  
	
  Annual financial
  statement (CPA Audited) + CC

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes o
  No o

  
	
  Field Audits

  	
   

  	
  1x a year

  	
   

  	
  Yes o
  No o

  
	
  10-Q

  	
   

  	
  Within 45 days after
  filing with SEC

  	
   

  	
  Yes o
  No o

  
	
  10-K and 8-K

  	
   

  	
  Within 90 days after
  filing with SEC

  	
   

  	
  Yes o
  No o

  
	
  Borrowing Base
  Certificate A/R & A/P Agings

  	
   

  	
  Monthly within 30
  days**

  	
   

  	
  Yes o
  No o

  
	
  Board Projections
  (Annual internal operating plans)

  	
   

  	
  Annually, 30 days prior
  to FYE

  	
   

  	
  Yes o
  No o

  
	
  Board Projections
  (Annual financial projections)

  	
   

  	
  Annually, 15 days prior
  to FYE

  	
   

  	
  Yes o
  No o

  
	
  *Receipt of 1/31/07
  reporting due to Bank no later than 3/15/07.

  **Receipt of 1/31/07 reporting (with respect to A/R & A/P Agings) due to
  Bank no later than 3/15/07.

  
	
  The following
  Intellectual Property was registered after the Effective Date (if no
  registrations, state “None”)         

  

 

Exhibit D

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Tangible Net Worth (Tested Quarterly):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  March 31 2007

  	
   

  	
  $9,000,000

  	
   

  	
  $

  	
   

  	
  Yes o
  No o

  
	
  June 30, 2007

  	
   

  	
  $9,000,000

  	
   

  	
  $

  	
   

  	
  Yes o
  No o

  
	
  September 30,
  2007

  	
   

  	
  $9,000,000

  	
   

  	
  $

  	
   

  	
  Yes o
  No o

  
	
  December 31,
  2007

  	
   

  	
  $12,000,000

  	
   

  	
  $

  	
   

  	
  Yes o
  No o

  
	
  At all times
  thereafter

  	
   

  	
  $12,000,000

  	
   

  	
  $

  	
   

  	
  Yes o
  No o

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted Quick Ratio (Tested Monthly):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  February 28,
  2007 through September 30, 2007

  	
   

  	
  1.50:1.00

  	
   

  	
  ____:1.00

  	
   

  	
  Yes o
  No o

  
	
  October 31, 2007
  and at all times thereafter

  	
   

  	
  1.75:1.00

  	
   

  	
  ____:1.00

  	
   

  	
  Yes o
  No o

  

 

The following financial covenant analyses and
information set forth in Schedule 1 attached hereto are true and accurate as of
the date of this Certificate.

The following are the exceptions with respect to the
certification above:  (If no exceptions
exist, state “No exceptions to note.”)

	
  MEDECISION, INC.

  	
   

  	
  BANK USE ONLY  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by: 

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Date: 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Verified: 

  	
   

  	
   

  
	
   

  	
   

  	
  AUTHORIZED SIGNER

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Date: 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status: Yes o  No
  o

  

 

Exhibit D

 

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:                                 

I.              Adjusted Quick Ratio (Section 6.8(a))

Required:

	
  February 28, 2007 through September 30, 2007

  	
   

  	
  1.50:1.00

  
	
  October 31, 2007 and at all times thereafter

  	
   

  	
  1.75:1.00

  

 

Actual:

	
  A.

  	
   

  	
  Aggregate value of the
  unrestricted cash and cash equivalents of Borrower and its Subsidiaries

  	
   

  	
  $

  	
   

  	
   

  
	
  B.

  	
   

  	
  Aggregate value of
  accounts receivable of Borrower and its Subsidiaries

  	
   

  	
  $

  	
   

  	
   

  
	
  C.

  	
   

  	
  Aggregate value of the
  Investments with maturities of fewer than 12 months of Borrower and it
  Subsidiaries

  	
   

  	
  $

  	
   

  	
   

  
	
  D.

  	
   

  	
  Quick Assets (the sum
  of lines A through C)

  	
   

  	
  $

  	
   

  	
   

  
	
  E.

  	
   

  	
  Aggregate value of Obligations
  to Bank

  	
   

  	
  $

  	
   

  	
   

  
	
  F.

  	
   

  	
  Aggregate value of
  liabilities that should, under GAAP, be classified as liabilities on
  Borrower’s consolidated balance sheet, including all Indebtedness, and not
  otherwise reflected in line E above that matures within one (1) year

  	
   

  	
  $

  	
   

  	
   

  
	
  G.

  	
   

  	
  Current Liabilities
  (the sum of lines E and F)

  	
   

  	
  $

  	
   

  	
   

  
	
  H.

  	
   

  	
  50% of deferred
  revenues

  	
   

  	
  $

  	
   

  	
   

  
	
  I.

  	
   

  	
  Line G minus line H

  	
   

  	
  $

  	
   

  	
   

  
	
  J.

  	
   

  	
  Adjusted Quick Ratio (line D divided by line I)

  	
   

  	
   

  	
   

  

 

Is line E equal to or greater than            
: 1:00?

	
  o
  No, not in compliance

  	
   

  	
  o
  Yes, in compliance

  

 

 

Schedule 1 to Exhibit D

 

 

II.            Tangible Net Worth (Section 6.8(b))

Required:

	
  March 31, 2007

  	
   

  	
  $9,000,000

  
	
  June 30, 2007

  	
   

  	
  $9,000,000

  
	
  September 30,
  2007

  	
   

  	
  $9,000,000

  
	
  December 31,
  2007

  	
   

  	
  $12,000,000

  
	
  At all times
  thereafter

  	
   

  	
  $12,000,000

  

 

Actual:

	
  A.

  	
   

  	
  Aggregate value of
  total assets of Borrower and its Subsidiaries

  	
   

  	
  $

  	
   

  	
   

  
	
  B.

  	
   

  	
  Aggregate value of
  goodwill of Borrower and its Subsidiaries

  	
   

  	
  $

  	
   

  	
   

  
	
  C.

  	
   

  	
  Aggregate value of
  intangible assets of Borrower and its Subsidiaries (including unamortized
  debt discount and expense, capitalized software, deferred tax assets,
  patents, trade and service marks and names, copyrights and research and
  development expenses except prepaid expenses)

  	
   

  	
  $

  	
   

  	
   

  
	
  D.

  	
   

  	
  Aggregate value of all
  notes, accounts receivable and other obligations owing to Borrower from its
  officers or other Affiliates

  	
   

  	
  $

  	
   

  	
   

  
	
  E.

  	
   

  	
  Aggregate value of any
  reserves not already deducted from assets

  	
   

  	
  $

  	
   

  	
   

  
	
  F.

  	
   

  	
  Tangible Net Worth (line A minus line B minus line C minus line D
  minus line E)

  	
   

  	
  $

  	
   

  	
   

  

 

Is line F equal to or greater than required amount?

	
  o
  No, not in compliance

  	
   

  	
  o
  Yes, in compliance

  

 

Schedule 1 to Exhibit DExhibit 10.18(ii)

INCENTIVE STOCK
OPTION AGREEMENT

UNDER THE

MEDECISION, INC. 2006 EQUITY INCENTIVE PLAN

This Incentive Stock Option Agreement (this “Agreement”)
evidences the grant by MEDecision, Inc. to [                    ]
(the “Optionee”) of an option to purchase up to [                      ]
shares of MEDecision, Inc. common stock at the price and on the terms set forth
herein (the “Option”).  This
Option is in all respects subject to the terms of the MEDecision, Inc. 2006
Equity Incentive Plan, which terms are incorporated herein by this
reference.  Unless the context otherwise
requires, capitalized terms used herein will have the meanings defined in the
Plan.

1.     Nature
of the Option.  To the
maximum extent permitted by Section 422(d) of the Code, this Option is intended
to be an Incentive Stock Option.  To the
extent this Option exceeds the limit set forth in Section 422(d) of the Code,
it will be treated as a Non-Qualified Stock Option.

2.     Date of Grant; Term of
Option.  This Option was
granted on [                      ]
 (the “Grant Date”) and may not be
exercised later than the tenth anniversary of the Grant Date, subject to
earlier termination as provided in the Plan and in this Agreement.

3.     Option
Exercise Price.  The
purchase price for Shares subject to this Option is $[                      ]
 per Share, an amount intended to reflect
the Fair Market Value on the Grant Date.

4.     Exercise
of Option.

(a)   Right
to Exercise.  Subject to Section 7 of
the Plan (and provided, in each case, that the Optionee remains in continuous
service with the Company or an Affiliate of the Company through the applicable
vesting date), the Option will become exercisable during its term only in
accordance with the terms and provisions of the Plan and this Agreement, as
follows:

[insert vesting
provision]

(b)   Method of Exercise.  This Option shall be exercisable by
written notice which shall state the election to exercise this Option, the
number of Shares in respect to which the Option is being exercised and such
other representations of agreements as to the Optionee’s investment intent with
respect to such Shares as may be required by the Company hereunder or pursuant
to the provisions of the Plan.  Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company or such other person as
may be designated by the Company.  The
written notice shall be accompanied by payment of the purchase price and the
amount of any tax withholding arising in connection with the exercise of the
Option.  Payment of the purchase price
shall be in cash, by cashier’s check or by such other method of payment
authorized by the Board.

(c)   Issuance of Shares.  The
Optionee will have no right to vote or receive dividends and will have no other
rights as a shareholder with respect to any Shares subject hereto,
notwithstanding the exercise of the Option with respect to those Shares, until
the issuance

(as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of those Shares.  Any certificate evidencing Shares
acquired upon exercise of this Option will be legended as required under the
Plan and/or as appropriate under applicable law.

5.     Compliance
with Laws.  Notwithstanding
any other provision of this Agreement, this
Option may not be exercised if the issuance of Shares upon such exercise would
violate any law, regulation or exchange listing requirement (including, without
limitation, Exchange Act Rule 16b-3).  The
Board may from time to time modify the terms of this Option or impose
additional conditions on the exercise of this Option as it deems necessary or
appropriate to facilitate compliance with any law, regulation or exchange listing requirement.

6.     Nontransferability of
Option.  This Option may
not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed
or in any manner either voluntarily or involuntarily by the operation of law,
other than by the will or by the laws of descent or distribution, and may be
exercised during the lifetime of the Optionee only by such Optionee.  Subject to the foregoing and the terms of the
Plan, the terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

7.     Continuation of Service.  Neither the Plan nor this Agreement shall
confer upon any Optionee any right to continue in the service of the Company or
any of its Affiliates or limit in any respect the right of the Company or its
Affiliates to discharge the Optionee at any time, with or without cause and
with or without notice.

8.     Protection
of Confidential Information; Covenant Not to Compete.  

(a)   In view of the fact that the Optionee’s work for the Company will
bring Optionee into close contact with many confidential affairs of the Company
not readily available to the public, the Optionee agrees:

i.              to keep secret and retain in the strictest confidence
all Confidential Information (as defined below) and Trade Secrets (as defined
below) of the Company learned by Optionee heretofore or hereafter, and not to
disclose them to anyone outside of the Company, either during or after the term
of employment or service, except in the course of performing his duties
hereunder or with the Company’s express written consent; and

ii.             To deliver promptly to the Company on termination of
employment or service, or at any time the Company may so request, all
memoranda, notes, records, reports, manuals, drawings and other documents
relating to the Company’s business and all property associated therewith that
the Optionee may then possess or have under the Optionee’s control.

iii.            For purposes of this Agreement, “Confidential
Information” shall mean information disclosed to the Optionee or known by
the Optionee as a consequences or through his employment by or service for the
Company, not generally known in the industry in which the Company is or may
become engaged, about the Company’s products, processes, and services,
including but not limited to information relation to research, development,
inventions, manufacture, purchasing, accounting, engineering, marketing,
merchandising and selling.  For purposes
of this Agreement, “Trade Secret” means the whole or any portion or
phase of any 

 2
 

scientific or technical information, design,
process, formula, or improvement which is secret and is not generally available
to the public, and which gives one who uses it an advantage over competitors
who do not know of or use it.

(b)           For
so long as Optionee is employed by or provides services to the Company, and for
a period of one year thereafter, the Optionee shall not, anywhere within the
United States, directly or indirectly,

i.              Enter the employ of, or render any services to, any
person, firm, corporation or other entity engaged in a Prohibited Business (as
defined below); or

ii.             Engage in any Prohibited Business on his own account or
become interested in any such business, directly or indirectly, as an
individual, partner, shareholder, director, officer, principal, agent,
employee, trustee, director, officer, principal, agent, consultant, or in any
other relationship or capacity; provided, however, that nothing contained in
this Section shall be deemed to prohibit the Optionee from acquiring, solely as
an investment, securities of any corporation whose stock is traded on an
national exchange. The term “Prohibited Business” shall mean selling of
designing software, and providing technical support services and support
services, to the medical utilization management industry.

(c)           Upon
any cessation of service, Optionee shall return any and all lists of actual and
potential customers to the Company and shall not, for a period of one year
following such cessation, directly or indirectly:

i.              Disclose the Company’s lists of actual and potential
customers to any person, firm, corporation or other entity engaged in a
Prohibited Business;

ii.             Solicit the employees to terminate their employment with
the Company and/or any subsidiary or affiliate of the Company;

iii.             Solicit customers of the Company an/or any subsidiary or
affiliate of the Company whose account was handled or supervised by the
Optionee at any time within one year prior to the Optionee’s cessation of
service; or

iv.            Solicit any prospective customer, the solicitation of
which was handled or supervised by Optionee at any time within one year prior
to the termination of the Optionee’s cessation of service.

(d)           The
Optionee hereby recognizes that the services performed by Optionee are of
special, unique, unusual, extraordinary and intellectual character which gives
them particular value, a loss of which cannot be reasonably or adequately
compensated in damages in an action at law. 
The Optionee therefore expressly agrees that the Company, in addition to
any other right or remedies the Company may possess, shall be entitled to
injunctive and other equitable relief to prevent a breach of this Agreement by
the Optionee.  If the Optionee violates
any of the provisions of Paragraphs (a), (b), or (c) of this Section 8, the
Company shall have the following rights and remedies:

i.              In the event of a breach, or a threatened breach, the
right and remedy to have the provisions of Section 8 of this Agreement
specifically enforced by an court 

 3
 

having equity jurisdiction, it being
acknowledged and agreed that ay such breach or threatened breach will cause
irreparable injury to the Company and money damages will not provide an
adequate remedy to the Company; and

ii.             In the event of an actual breach, the right to recover
damages for all losses, actual and contingent, and the right to require the
Optionee to account for and pay over to the Company all profits or other
benefits (collectively “Benefits”) derived or received by the Optionee
as the result of any transactions constituting such a breach, and the Optionee
hereby agrees to account for and pay over such Benefits to the Company.

(e)           Each
of the rights and remedies enumerated above shall be independent of the other,
and shall be severally enforceable, and all of such rights and remedies shall
be in addition to, and not in lieu of, any other rights and remedies available
to the Company at law or in equity.  If
any of the covenants contained in Paragraphs (a), (b), or (c) of this Section
8, or any part thereof, is hereafter construed to be invalid or unenforceable,
the same shall not affect the remainder of the covenant or covenants, which
shall be given full effect, without regard to the invalid portions.  If any of the covenants contained in
Paragraphs (a), (b), or (c) of this Section 8, or any part thereof, is held to
be unenforceable because of the duration of such provision or the scope of the
subject matter thereof or the area covered thereby, the parties, agree that the
court making such determination shall have the power to reduce the duration,
scope and/or area of such provision and, in its reduced form, said provision
shall then be enforceable.

(f)            For
avoidance of doubt, the covenants contained in this Section 8 will apply (or
continue to apply) following any cessation of the Optionee’s service, without
regard to whether that cessation is initiated by the Company or by the Optionee
and without regard to the reason for that cessation.

9.     Intellectual
Property.  The Company
shall be the sole owner of all the products and proceeds of the Optionee’s
services, including, but not limited to, all materials, ideas, concepts,
formats, suggestions, developments, arrangements, packages, computer programs
and other intellectual properties that the Optionee may acquire, obtain,
develop, or create in connection with the Optionee’s employment or service,
free and clear of any claims by the Optionee (or anyone claiming under the
Optionee) of any kind or character whatsoever. 
The Optionee shall, at the request of the Company, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence establish, maintain, perfect, protect,
enforce, or defend its right, or title and interest in or to any such
properties.

10.  The Plan. 
The Optionee has received a copy of the Plan in its present form,
has read the Plan and is familiar with its terms, and hereby accepts the Option
subject to all of the terms and provisions of the Plan.  Pursuant to the Plan, the Board is authorized
to interpret the Plan and to adopt rules and regulations not inconsistent with
the Plan as it deems appropriate.  The
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board regarding any questions arising under the Plan
or this Agreement.

11.  Market Stand-Off. 
The Optionee agrees that, in connection with any public offering by the
Company of its equity securities pursuant to a registration statement filed
under the Exchange Act, he will not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of or otherwise dispose
of any Shares without the prior written consent of 

 4
 

the
Company or its underwriters, for such period of time before or after the
effective date of such registration as may be reasonably requested by the
Company or such underwriters.

12.  Tax
Consequences.  The Company
does not represent or warrant that this Option (or the purchase or sale of the
Shares subject hereto) will be subject to particular tax treatment.  The Optionee acknowledges that he has
reviewed with his own tax advisors the tax treatment of this Option (including
the purchase and sale of Shares subject hereto) and is relying solely on those
advisors in that regard.  The Optionee
understands that he (and not the Company) will be responsible for his own tax
liabilities arising in connection with this Option.

13.  Entire
Agreement.  This
Agreement, together with the other documents referenced herein, represents the
entire agreement between the parties regarding the Option, and merges and
supersedes all prior and contemporaneous discussions, agreements and
understandings of every nature on that topic.

14.  Governing
Law.  This Agreement will
be construed in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to the application of the principles of conflicts of laws.

15.  Amendment.  Except as otherwise provided herein, this
Agreement may only be amended by a writing signed by each of the parties
hereto.

16.  Notice of Disqualifying Disposition.  The Optionee hereby agrees that if he
disposes of any Shares acquired upon exercise of this Option within one year
after the issuance of such Shares or within two years after the Grant Date, the
Optionee will notify the Company in writing within 30 days after the date of
such disposition.

[This space
intentionally left blank; signature page follows]

 5
 

 

17.  Execution.
 This Agreement may be executed,
including execution by facsimile signature, in one or more counterparts, each
of which will be deemed an original, and all of which together shall be deemed
to be one and the same instrument.  The
Option will terminate automatically if a fully executed copy of this Agreement
is not returned to the Company within 30 days following the date indicated
below the signature of the Company’s authorized representative.

IN
WITNESS WHEREOF, this Agreement has been executed by the parties in each case
on the date indicated below, respectively.

	
   

  	
  MEDECISION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [OPTIONEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date

  

 

 6

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