PLEDGE AGREEMENT
BETWEEN
PEAK MEDICAL CORPORATION
AND
INTEGRATED HEALTH SERVICES, INC.
DATED AS OF MAY 29, 1998
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), made as of May 29, 1998,
between PEAK MEDICAL CORPORATION ("Pledgor") for the benefit of INTEGRATED
HEALTH SERVICES, INC. ("IHS").
The circumstances underlying the execution of this Pledge Agreement are as
follows:
A. Two wholly owned subsidiaries of IHS, IHS Acquisition No. 104, Inc. and
IHS Acquisition No. 105, Inc. (collectively, the "IHS Subsidiaries") leased to
Peak Medical of Idaho, Inc. ("Subsidiary") two (2) health care facilities
(collectively, the "Facilities") pursuant to Leases (collectively, the
"Leases"), each dated as of June 1, 1998.
B. IHS has required, as a condition to the execution and delivery of the
Leases to Subsidiary, that Pledgor execute and deliver to IHS this Pledge
Agreement, pursuant to which Pledgor pledges to IHS, as security for the
Guaranty, all shares of common stock now or hereafter owned by Pledgor in the
Subsidiary, on the terms and conditions hereinafter set forth.
C. Capitalized words not defined herein shall have the definitions given
them in the Lease.
NOW, THEREFORE, in consideration of the foregoing, and other valuable
consideration, the receipt, legal adequacy and sufficiency of which hereby are
acknowledged, Pledgor agrees with IHS as follows:
1. DEFINITION OF "PLEDGED STOCK". For purposes of this Pledge Agreement,
the term "Pledged Stock" means and includes all of the issued and outstanding
shares of the common stock or other securities of the Subsidiary now or
hereafter owned by Pledgor or voting trust certificates or other documents of
any kind evidencing any and all ownership or other interests of Pledgor in the
Subsidiary, including, without limitation, those listed on Exhibit A hereto and
any supplemental Exhibit A attached hereto or delivered to IHS from time to
time.
2. PLEDGE; RIGHTS AND REMEDIES. (a) As collateral security for the due
payment and performance of all indebtedness and other liabilities and
obligations payable or due to the IHS Subsidiaries from Subsidiary under the
Lease, whether now existing or hereafter arising (collectively, the
"Obligations"), Pledgor hereby pledges, assigns, hypothecates, delivers and sets
over to IHS all of Pledgor's right, title and interest in and to the Pledged
Stock, and hereby grants to IHS a security interest in all of its right, title
and interest in and to the Pledged Stock and in the proceeds thereof.
Concurrently herewith, Pledgor has delivered to IHS all certificates
representing the currently existing Pledged Stock, together with a Stock
Assignment Separate from Certificate ("Assignments"), substantially in the form
of attached Exhibit B hereto, for each certificate representing the Pledged
Stock, all duly executed in blank. IHS shall hold such
certificates and Assignments as security for performance by Pledgor of the
obligations secured hereby and shall at all times have the first priority and
only lien therein.
(b) If Pledgor becomes entitled to receive, or if Pledgor receives,
any additional stock or voting trust certificate of the Subsidiary (including,
without limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase, or reduction of
capital), option or rights, whether as an addition to, in substitution of, or in
exchange for any Pledged Stock, or otherwise, Pledgor shall accept any such
instruments as IHS's agent, shall hold them in trust for IHS, and shall deliver
them forthwith to IHS in the exact form received, with Pledgor's endorsement
when necessary, and/or appropriate stock powers duly executed in blank, to be
held by IHS, subject to the terms hereof, as further collateral security for the
Obligations.
(c) Upon the occurrence and continuation of an Event of Default, or
the occurrence and continuation beyond any applicable cure or grace period of
any other material breach of or default under the Obligations:
(i) Any or all shares of the Pledged Stock held by IHS hereunder may,
at the option of IHS, be registered in the name of IHS or its nominee as
pledgee, and IHS or its nominee may thereafter, without notice, exercise
all available voting and corporate rights at any meetings of the Subsidiary
and exercise any and all rights of conversion, exchange, subscription or
any other rights, privileges or options pertaining to any of the Pledged
Stock as if it were the absolute owner thereof, including, without
limitation, the right to receive dividends payable thereon and the right to
exchange, at its discretion, any and all of the Pledged Stock upon the
merger, consolidation, reorganization, recapitalization or other
readjustment of any corporation issuing any of such securities or upon the
exercise by any such issuer of any right, privilege or option pertaining to
any of the Pledged Stock, and in connection therewith, to deposit and
deliver any and all of the Pledged Stock with any committee, depository,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine, all without liability except to account for
property actually received by it, but IHS shall have no duty to exercise
any of the foregoing rights, privileges or options and shall not be
responsible for any failure or omission to do so or delay in so doing.
(ii) IHS shall have the right to require that all cash dividends
payable with respect to any part of the Pledged Stock be paid to IHS to be
held by IHS as additional security hereunder until applied to the
Obligations.
(iii) IHS, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of
the time and place of public or private sale) to or upon Pledgor or any
other person or entity, including without limitation, any trustee (all and
each of which demands, advertisements and/or notices are, to the extent
permitted by law, hereby expressly waived), immediately may collect,
receive, appropriate and realize upon the Pledged Stock, or any part
thereof, and/or immediately
may sell, assign, give an option or options to purchase, contract to sell
or otherwise dispose of and deliver the Pledged Stock, or any part thereof,
in one or more parcels at public or private-sale or sales, in whatever
order IHS may select, at any exchange, broker's board or at any of IHS's
offices or elsewhere at such prices and on such terms (including, without
limitation, a requirement that any purchaser of all or any part of the
Pledged Stock shall be required to purchase the securities constituting the
Pledged Stock for investment and without any intention to make a
distribution thereof) as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk, with the right of
IHS or any IHS affiliate upon any such sale or sales, whether public or
private, to purchase the whole or any part of the Pledged Stock so sold,
free of any right or equity of redemption in Pledgor, which right or equity
is hereby expressly waived and released.
(f) The proceeds of any collection, recovery, receipt, appropriation,
realization, sale or other disposition shall be applied as follows:
(i) First, to the reasonable costs and expenses of every kind incurred
in connection therewith or incidental to the care, safekeeping, or
otherwise of any and all of the Pledged Stock or in any way relating to the
rights of IHS hereunder, including reasonable attorneys fees and legal
expenses;
(ii) Second, to the satisfaction of the Obligations in such order as
IHS may determine in its sole discretion;
(iii) Third, to the payment of any other amounts required by
applicable law; and
(iv) Fourth, to Pledgor, to the extent of the surplus proceeds, if
any.
IHS shall have no duty to account to Pledgor unless a surplus exists upon
liquidation of the Pledged Stock and any other collateral.
(g) IHS shall give Pledgor at least ten (10) business days' written
notice of the time and place of any public sale or of the time after which a
private sale may take place, and such notice shall be deemed to be reasonable
notification of such matters.
3. RIGHTS OF PLEDGOR UNTIL GUARANTY DEFAULT. Unless and until an Event of
Default shall have occurred and be continuing, Pledgor shall be entitled:
(a) to vote all or any part of the Pledged Stock at any and all
shareholder meetings of the Subsidiary and to execute consents in respect
thereof, and to consent to, ratify or waive notice of any or all shareholder
meetings of the Subsidiary with the same force and effect as if this Pledge
Agreement had not been made and, if necessary and upon the receipt of the
written request from the Pledgor, IHS shall from time to time execute and
deliver appropriate proxies for that purpose provided that Pledgor covenants and
agrees not to vote the Pledged Stock in a manner that would create a Guaranty
Default or breach of or default under the Obligations or
create circumstances that, with the passage of time and/or the giving of notice,
would create a Guaranty Default or breach of or default under the Obligations,
and
(b) to receive and collect or to have paid over all dividends declared
or paid on the Pledged Stock, except (i) dividends or distributions constituting
stock dividends, (ii) dividends or distributions in kind, or (iii) liquidating
dividends (either partial or complete), provided that any and all such excepted
dividends and distributions shall constitute additional collateral for the
purposes of this Pledge Agreement and shall be delivered and pledged with IHS in
accordance with Section 2(b) hereof.
4. REPRESENTATIONS. Pledgor represents and warrants that:
(a) Pledgor is, as of the date hereof, the legal and beneficial owner
of all of the Pledged Stock.
(b) All of the shares of the Pledged Stock have been duly and validly
issued, are fully paid and non-assessable and are owned by Pledgor free and
clear of any pledge, mortgage, hypothecation, lien, charge, encumbrance or
security interest in such shares or the proceeds thereof, except for the
security interest granted to IHS under this Pledge Agreement.
(c) Upon delivery of the Pledged Stock to IHS or an agent for IHS,
this Pledge Agreement creates and grants a valid first lien on and perfected
security interest in the shares of the Pledged Stock and the proceeds thereof,
subject to no prior security interest, lien, charge or encumbrance and subject
to no other security interest, lien, charge or encumbrance or to any agreement
purporting to grant to any third party a security interest in the property or
assets of Pledgor that would include the Pledged Stock.
(d) To the best of Pledgor's knowledge, no authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required to be obtained or made by Pledgor either (i) for the
pledge by Pledgor of the Pledged Stock pursuant to this Pledge Agreement or for
the execution, delivery or performance of this Pledge Agreement by Pledgor, or
(ii) for the exercise by IHS of the voting or other rights provided for in this
Pledge Agreement or the remedies in respect of the Pledged Stock pursuant to
this Pledge Agreement, subject to applicable state and securities laws. Pledgor
has the right and power and is duly authorized to enter into this Pledge
Agreement.
(e) Neither the execution or, delivery of this Pledge Agreement, nor
the consummation of the transactions contemplated hereby, nor the compliance
with or performance of the terms and conditions of this Pledge Agreement by
Pledgor is prevented by, limited by, conflicts with or will result in the breach
or violation of or a default under the terms, conditions or provisions of (i)
any mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, trust agreement, stockholder agreement, or other agreement
or instrument to which Pledgor is a party or by which he is bound or (ii) any
provision of law, any order of any
court or administrative agency or rule or regulation applicable to Pledgor,
subject to applicable state and federal securities laws.
(f) Any assignee of all or any portion of the Pledged Stock is
entitled to receive payments with respect thereto without any defense,
counterclaim, set-off, abatement, reduction, recoupment or other claims arising
out of the actions of Pledgor.
(g) There are no actions, suits or proceedings (whether or not
purportedly on behalf of Pledgor) pending or, to the best knowledge of Pledgor,
threatened or affecting Pledgor that involve the Pledged Stock.
(h) All consents or approvals, if any, required as a condition
precedent to or in connection with the due and valid execution, delivery and
performance by Pledgor of this Pledge Agreement have been obtained, subject to
applicable state and federal securities laws.
(i) The Subsidiary is duly organized, validly existing and in good
standing under the laws of the State of Delaware.
5. COVENANTS. (a) Pledgor hereby covenants that, so long as the Obligations
shall be outstanding and unpaid, in whole or in part, Pledgor will not, without
IHS's prior written consent, sell, convey or otherwise dispose of any shares of
the Pledged Stock or any interest therein, nor will Pledgor create, incur or
permit to exist any pledge, mortgage, lien, charge, encumbrance or any security
interest whatsoever with respect to any of the Pledged Stock or the proceeds
thereof other than that created or permitted hereby, nor shall Pledgor vote the
Pledged Stock to permit or authorize the Subsidiary to issue any new debt or
equity securities.
(b) Pledgor warrants and will defend IHS's right, title and security
interest in and to the Pledged Stock against the claims of any person, firm,
corporation or other entity.
6. SALE OF PLEDGED STOCK. (a) If IHS shall determine to exercise its right
to sell any part of the Pledged Stock, and if, in the opinion of counsel for
IHS, it is necessary to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act of 1933, as amended
(the "Securities Act"), Pledgor will use its best efforts to cause the
Subsidiary to (i) execute and deliver, and cause the directors and officers of
the Subsidiary, to execute and deliver, all at Pledgor's expense, all such
instruments and documents, and to do or cause to be done all such other acts and
things, as may be necessary to register the Pledged Stock, or that portion
thereof to be sold, under the provisions of the Securities Act and to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one (1) year from the date of the first public
offering of the Pledged Stock, or that portion thereof so to be sold, and to
make all amendments thereto and/or to the related prospectus which, in the
opinion of IHS or its counsel, are necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereto; (ii) comply with the provisions of
the securities laws and regulations of any jurisdiction which IHS shall
designate; and (iii) make available to its security holders, as soon as
practicable,
an earnings statement (which need not be audited) covering a period of twelve
(12) months, but not more than eighteen (18) months, beginning with the first
month after the effective date of any such registration statement, which
earnings statement will satisfy the provisions of Section 11(a) of the
Securities Act.
(b) Pledgor acknowledges that a breach of any of the covenants
contained in subparagraph 6(a) above will cause irreparable injury to IHS, that
IHS shall have no adequate remedy at law in respect of such breach and, as a
consequence, the covenants of Pledgor contained in said subparagraph 6(a) shall
be specifically enforceable against Pledgor. Pledgor hereby waives, and shall
not assert, any defenses against an action for specific performance of such
covenants, except for a defense that no other breach of or default under the
Obligations has occurred and is continuing.
(c) Notwithstanding the foregoing, Pledgor recognizes that IHS may be
unable to effect a public sale of all or a part of the Pledged Stock, and may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that any such private sales
may be at places and on terms less favorable to the seller than if sold at
public sales and agrees that such private sales shall be deemed to have been
made in a commercially reasonable manner, and that IHS has no obligation to
delay sale of any such securities for the period of time necessary to permit the
issuer of such securities to register such securities for public sale under the
Securities Act.
7. COOPERATION. Pledgor shall, at any time and from time to time upon the
request of IHS, execute and deliver such further documents and do such further
acts and things as IHS reasonably may request in order to effectuate the
purposes of this Pledge Agreement, including, without limitation, delivering to
IHS on the date hereof or at any time hereafter irrevocable proxies in respect
of the Pledged Stock in the form of Exhibit C hereto.
8. GENERAL. (a) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Stock while held hereunder, IHS shall have no duty or
liability to preserve rights pertaining thereto and shall be relieved of all
responsibility for the Pledged Stock upon surrendering it to Pledgor.
(b) No course of dealing between Pledgor and IHS, nor any failure to
exercise, nor any delay in exercising, on the part of IHS, any right, power, or
privilege, whether now existing or hereafter arising hereunder or under the
obligations, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power, or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege.
(c) The rights and remedies herein provided and provided in all other
agreements, instruments and documents delivered or to be delivered pursuant to
any of the
foregoing or the Obligations are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law, including, without
limitation, the rights and remedies of a secured party under the Uniform
Commercial Code.
(d) The provisions of this Pledge Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision in this Pledge Agreement in any jurisdiction.
(e) This Pledge Agreement shall inure to the benefit of, and be
binding upon, the successors and assigns of the parties hereto. Notwithstanding
the foregoing, Pledgor shall not have the right to assign or delegate any of its
rights or obligations hereunder without the prior written consent of IHS, and
any purported assignment or delegation in the absence of such consent shall be
void.
(f) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. PLEDGOR CONSENTS TO IN
PERSONAM JURISDICTION BEFORE THE STATE AND FEDERAL COURTS OF THE STATE OF IDAHO
AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT BE HEARD IN THE STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF IDAHO. PLEDGOR AGREES THAT SERVICE OF
PROCESS MAY BE EFFECTED UPON PLEDGOR UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS
OF THE STATE OF IDAHO AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE
AND FEDERAL COURTS OF THE STATE OF IDAHO.
(g) Pledgor recognizes that IHS has relied on the pledge and security
interest granted herein by Pledgor in permitting the IHS Subsidiaries to extend
credit and make the financial accommodations contemplated by the Lease and
Pledgor agrees that such reliance by IHS shall be sufficient consideration for
this pledge.
(h) This Pledge Agreement may be signed in any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
(i) The section headings used herein are for convenience only and
shall not be read or construed as limiting the substance or generality of this
Pledge Agreement.
(j) Whenever the singular shall be used hereunder, it shall be deemed
to include the plural (and vice-versa) and reference to one gender shall be
construed to include all other genders, including neither, whenever the context
of this Pledge Agreement so requires.
SIGNATURE PAGE FOLLOWS
IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be
duly executed and delivered as of the day and first year first written above.
PEAK MEDICAL CORPORATION
By: /s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
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Title: Senior Vice President and General Counsel
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INTEGRATED HEALTH SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
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Title: Senior Vice President
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