PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT made this 13th day of June, 1997 by and between BLUE
CROSS AND BLUE SHIELD OF NEW JERSEY, INC., a health service corporation
organized under the laws of the State of New Jersey (the "Guarantor"), and
SUMMIT BANK, a banking institution of the State of New Jersey (the "Bank").
W I T N E S S E T H:
WHEREAS, the Guarantor presently owns approximately 50% of the issued and
outstanding capital stock of CareAdvantage, Inc. (the "Borrower"); and
WHEREAS, the Guarantor, the Borrower and the Bank have entered into a
Credit Agreement dated the date hereof (the "Credit Agreement") pursuant to
which the Bank has agreed to extend credit and make loans to the Borrower in the
maximum principal amount of $3,000,000; and
WHEREAS, in order to induce the Bank to enter into the Credit Agreement and
make the loans provided therein, the Guarantor has agreed to guaranty the prompt
and complete payment thereof and to provide collateral security therefor.
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
1.1 Definitions. Unless otherwise defined herein, words and terms defined
in the Credit Agreement shall have the same meaning when used herein.
ARTICLE II
2.1 Collateral. As collateral security for the prompt and complete payment
and performance when due (whether at the stated maturity, by acceleration or
otherwise) of all Obligations and in order to induce the Bank to enter into the
Credit Agreement and, pursuant thereto, make the Loans and Advances described
therein, the Guarantor hereby pledges, hypothecates, conveys, assigns,
mortgages, transfers, delivers, and grants to the Bank a first lien security
interest in all of the Guarantor's right, title and interest in and to the
following (all of which being hereinafter collectively called the "Collateral"):
(a) (i) the Government Securities listed on Schedule I attached hereto and
incorporated herein by reference (the "Schedule
of Collateral") and (ii) any other Government Securities which may be set forth
on any amendment, modification or supplement to the Schedule of Collateral
(collectively, the "Pledged Collateral");
(b) any and all other moneys, securities, drafts, notes and other property
of any kind of the Guarantor, now or hereafter held or received by or in transit
to the Bank from or for the Guarantor, or which may now or hereafter be in the
possession of the Bank, or as to which the Bank may now or hereafter control
possession, by documents of title or otherwise, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and any and all
deposits, general or special, balances, sums, proceeds and credits of the
Guarantor, and all rights and remedies which the Guarantor might exercise with
respect to any of the foregoing but for this Agreement; and
(c) all proceeds, including Payments and Redemption Proceeds (as
hereinafter defined), of the foregoing.
2.2. Certain Rights. All Collateral heretofore, herein or hereafter given
or granted to the Bank shall secure the Obligations and shall remain in full
force and effect until such time as (i) the Obligations have been fully and
irrevocably paid in full and (ii) the Credit Agreement has been terminated and
the Bank has no further obligation to make any Advance thereunder. The Bank
shall not be required to proceed against any or all of the Collateral before
proceeding directly against the Guarantor.
2.3 Further Documentation. At any time and from time to time upon the
Bank's written request and at the Guarantor's sole expense, the Guarantor shall
deliver to the Bank all such other endorsements, instruments or other documents
as the Bank may reasonably request in order for it to obtain the full benefit of
this Agreement and the rights and powers herein granted.
2.4 Custodian. The parties hereto acknowledge and agree that some or all of
the Pledged Collateral may be held by the Custodian on behalf of and for the
benefit of the Bank pursuant to the Custody Agreement. Any transfer or delivery
of the Pledged Collateral by the Guarantor or any other party to the Custodian
shall be deemed for all purposes to be a transfer and delivery to the Bank.
2.5 Payments; Redemption Proceeds.
(a) The Guarantor shall instruct, and hereby irrevocably authorizes the
Bank and/or the Custodian to instruct, each issuer or paying agent of each item
of Pledged Collateral to pay directly to the Bank (i) any and all payments of
principal or interest or any non-cash proceeds, certificates, options or rights,
in respect of, in addition to, in substitution of, in exchange for,
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or as proceeds from the sale of, any Pledged Collateral (all of the foregoing
being hereinafter collectively referred to as "Payments") and (ii) any and all
redemption proceeds, liquidation proceeds, payments upon final maturity or other
similar distribution proceeds (regardless of whether any of the foregoing are in
the form of cash or other property), in respect of, in addition to, in
substitution of, in exchange for, or as proceeds from the sale of, any Pledged
Collateral (all of the foregoing being hereinafter collectively referred to as
"Redemption Proceeds"), in each case to be held by the Bank in accordance with
the terms of this Agreement.
(b) The Bank shall waive its right to receive all Payments and Redemption
Proceeds, or if received by the Bank, shall remit all Payments and Redemption
Proceeds to the Guarantor, in each case, so long as (i) the Bank shall receive
an itemized list of such Payments and Redemption Proceeds not later than five
days prior to the date of payment thereof (it being agreed that it shall not be
necessary to deliver such list so long as the payment dates of such Payments and
Redemption Proceeds are fully set forth on the Schedule of Collateral), (ii) no
Default or Event of Default exists under any of the Loan Documents and (iii)
after giving effect thereto, the aggregate principal amount of Loans then
outstanding does not exceed the Borrowing Base.
(c) If (i) a Default or an Event of Default exists under any of the Loan
Documents or (ii) the aggregate principal amount of Loans then outstanding
exceeds the Borrowing Base, then, upon each such event and at all times
thereafter, the Bank is irrevocably authorized to receive and hold all Payments
and all Redemption Proceeds as additional Collateral and/or apply such Payments
or Redemption Proceeds against the Obligations in such manner as the Bank shall
determine in its sole discretion. In any such event, any Payments or Redemption
Proceeds received by the Guarantor shall be held by the Guarantor as the Bank's
agent and in trust on behalf of and for the benefit of the Bank and shall be
delivered forthwith to the Bank in the exact form received, with the endorsement
of the Guarantor when necessary, to be held by the Bank in accordance with the
terms of this Agreement.
2.6 Voting Rights. So long as no Default or Event of Default exists under
any of the Loan Documents, the Guarantor shall have the right to vote the
Pledged Collateral and to give consents, waivers and ratifications in respect of
the Pledged Collateral, provided, however, that no vote shall be cast or
consent, waiver or ratification given or action taken which would impair the
value of the Pledged Collateral.
2.7 Substitution or Release of Collateral.
At any time and from time to time during the term of this Agreement, upon
prior written notice to the Bank, the
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Guarantor shall have the right to add or substitute additional Government
Securities to or for any or all of the Government Securities then held by the
Bank as part of the Pledged Collateral or to request the release of all or any
part of the Pledged Collateral, provided that:
(a) The Guarantor shall deliver a written notice to the Bank setting forth
a list of the Government Securities to be released and/or the Government
Securities to be substituted therefor or added thereto, as the case may be, and,
in each case, the Fair Market Value thereof, together with a revised Schedule of
Collateral after giving effect thereto;
(b) The sum of (i) the principal amount of the Term Loan then outstanding
plus (ii) the Commitment, does not exceed the Borrowing Base after giving effect
to such release, substitution or addition of Pledged Collateral; and
(c) No Default or Event of Default exists under any of the Loan Documents.
2.8 Rights of the Bank. The Bank shall not be liable for failure to collect
or realize upon the Obligations or any security or guarantee therefor, or any
part thereof, or for any delay in so doing nor shall it be under any obligation
to take any action whatsoever with regard thereto. Any or all of the Pledged
Collateral held by the Bank may, if an Event of Default has occurred and is
continuing, be registered in the name of, or delivered to, the Bank or its
nominee, and the Bank or its nominee may thereafter without notice, receive any
and all Payments and Redemption Proceeds, exercise all voting and other rights
at any meeting of any issuer issuing any of the Pledged Collateral and exercise
any and all rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the Pledged Collateral as if it were
the absolute owner thereof, including, without limitation, the right to
exchange, at its discretion, any and all of the Pledged Collateral upon the
merger, consolidation, reorganization, recapitalization or other readjustment of
any issuer issuing any of such Pledged Collateral or upon the exercise by any
such issuer or the Bank of any right, privilege or option pertaining to any of
the Pledged Collateral, and in connection therewith, to deposit and deliver any
and all of the Pledged Collateral with any committee, depositary, 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 the Bank shall have no duty to exercise any of the aforesaid
rights, privileges or options and shall not be responsible for any failure to do
so or delay in so doing.
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ARTICLE III
3.1 Representations and Warranties. The Guarantor represents and warrants
to the Bank as follows:
(a) The Guarantor is the legal and beneficial owner of, and has good and
marketable title to, the Collateral, subject to no lien or other encumbrance
except the lien created by this Agreement.
(b) The pledge, assignment and delivery of the Pledged Collateral to the
Bank creates a valid first lien on and a first perfected security interest in
such Pledged Collateral in favor of the Bank, subject to no prior lien or to any
agreement purporting to grant to any other party a lien on the property or
assets of the Guarantor which would include the Collateral. All action necessary
to protect and perfect such security interest in the Pledged Collateral has been
taken and shall remain in effect during the term of this Agreement.
ARTICLE IV
4.1 Covenants. The Guarantor covenants and agrees that until all the
Obligations have been satisfied and paid in full and the Credit Agreement has
been terminated and the Bank has no further obligation to make any Advance
thereunder, the Guarantor will comply with the following covenants:
(a) The Guarantor will xxxx its books and records pertaining to the
Collateral to evidence this Agreement and the security interests granted hereby.
Except as otherwise provided in Section 2.7 hereof, the Guarantor will not sell,
assign, transfer, exchange or otherwise dispose of, or grant any option with
respect to, the Collateral or any part thereof, nor will it create, incur or
permit to exist any lien or encumbrance with respect to any of the Collateral or
any interest therein or any proceeds thereof, except for the lien provided by
this Agreement.
(b) The Guarantor will furnish to the Bank, from time to time, statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Bank may reasonably request,
all in reasonable detail. The Guarantor will immediately advise the Bank, in
complete detail (1) of any lien asserted or claim made against any of the
Collateral, (2) of any material change in the composition of the Collateral and
(3) of the occurrence of any other event which would have a material adverse
affect on the aggregate value of the Collateral or on the security interest
created hereunder.
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(c) The Guarantor will defend the Bank's right, title and security interest
in and to the Collateral and the proceeds thereof against the claims and demands
of all persons whomsoever.
4.2 Power of Attorney.
(a) The Guarantor hereby irrevocably constitutes and appoints the Bank, and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Guarantor and in the name of the Guarantor or in its own name,
from time to time in the Bank's discretion, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives the Bank the power and right, on behalf of the
Guarantor without notice to or assent by the Guarantor to do the following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under or in
connection with any Collateral and, in the name of the Guarantor or its own
name or otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under any Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Bank for the purpose of collecting any and all such
moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral; and
(iii) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due and to become due
thereunder directly to the Bank or as the Bank shall direct; to receive
payment of and receipt for any and all moneys, claims and other amounts due
and to become due at any time in respect of or arising out of any
Collateral; to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of
any Collateral; to defend any suit, action or proceeding brought against
the Guarantor with respect to any Collateral; to settle, compromise or
adjust any suit, action or proceeding described above and, in connection
therewith, to give such discharges or releases as the Bank may deem
appropriate; and generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Bank
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were the absolute owner thereof for all purposes, and to do, at the Bank's
option and the Guarantor's expense, at any time or from time to time, all
acts and things which the Bank deems necessary to protect, preserve or
realize upon the Collateral and the Bank's security interest therein, in
order to effect the intent of this Agreement, all as fully and effectively
as the Guarantor might do.
(b) The Guarantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable. Notwithstanding the foregoing, the
Bank agrees that it will not exercise the aforesaid power of attorney unless and
until an Event of Default has occurred hereunder.
(c) The powers conferred on the Bank hereunder are solely to protect the
interests of the Bank in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Bank shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither it nor
any of the officers, employees or agents of the Bank shall be responsible to the
Guarantor for any act or failure to act, except for their respective gross
negligence or willful misconduct.
(d) The Guarantor also authorizes the Bank at any time following an Event
of Default to execute any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
ARTICLE V
5. Events of Default. Each of the following shall constitute an Event of
Default hereunder.
(a) The occurrence of any Event of Default under the Credit Agreement, the
Notes or any of the other Loan Documents;
(b) If any representation or warranty made by or on behalf of the Guarantor
contained in the Loan Documents or in any document furnished in compliance with
the Loan Documents is false or incorrect in any material respect when made; or
(c) If the Guarantor shall default in the performance or observance of any
covenant or agreement contained in this Agreement and such default is not cured
or remedied within ten days after notice thereof.
ARTICLE VI
6. Remedies. (a) Upon the occurrence of an Event of Default or in the event
that any portion of the Obligations shall have been declared due and payable
(whether at the stated maturity,
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by acceleration or otherwise), the Bank may, without demand of performance or
other demand, advertisement or notice of any kind, immediately set off any or
all of the Obligations against any of the Collateral or any other property of
the Guarantor which may now or hereafter be in the possession or control of the
Bank or the Custodian or any party acting on their behalf, and such right of
setoff shall be deemed to have been exercised immediately upon the occurrence of
such Event of Default even though such setoff is not noted on the Bank's records
until a later time. Without limiting the generality of the foregoing, the
Guarantor agrees that upon the occurrence of an Event of Default, the Bank,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon the Guarantor or any other person (all and each of which
demands, advertisements and/or notices are hereby expressly waived), may
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give option or options to
purchase, contract to sell or otherwise dispose of and deliver said Collateral,
or any part thereof, in one or more parcels at public or private sale or sales,
at any exchange, broker's board or at any of the Bank's offices or elsewhere
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk, with the right to the Bank upon any such sale or sales,
public or private, to purchase the whole or any part of said Collateral so sold,
free of any right or equity or redemption in the Guarantor which right or equity
is hereby expressly waived or released. The Bank shall apply the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred therein
or incidental to the care, safekeeping or otherwise of any and all of the
Collateral or in any way relating to the rights of the Bank hereunder, including
reasonable attorneys' fees and legal expenses, to the payment in whole or in
part, of the Obligations in such order as the Bank may elect. The Guarantor
agrees that the Bank need not give more than ten days' notice of the time and
place of any public sale or of the time after which a private sale or other
intended disposition is to take place and that such notice is reasonable
notification of such matters. In addition to the rights and remedies granted to
it in this Agreement and in any other instrument or agreement securing,
evidencing or relating to any of the Obligations, the Bank shall have all the
rights and remedies to which it may be entitled under applicable law, including
without limitation, all rights and remedies of a secured party under the Uniform
Commercial Code of the State of New Jersey. The Guarantor shall be liable for
the deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all amounts to which the Bank are entitled
hereunder, including the fees of any attorneys employed by the Bank to collect
such deficiency.
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(b) The Guarantor further agrees to do or cause to be done all such
reasonable acts and things as may be necessary to make such sale or sales of any
portion or all of the Pledged Collateral valid and binding and in compliance
with any and all applicable laws, regulations, order, writs, injunctions,
decrees or awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such sale
or sales, all at the Guarantor's expense. The Guarantor further agrees that a
breach of any of the covenants contained in this paragraph will cause
irreparable injury to the Bank, and the Bank has no adequate remedy at law in
respect of such breach and, as a consequence, agrees that each and every
covenant contained in this paragraph shall be specifically enforceable against
the Guarantor, and the Guarantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred and is continuing.
ARTICLE VII
7.1 Notice. All notices and other communications given to or made upon any
party hereto in connection with this Agreement shall be in writing (including
telexed, telecopied or telegraphic communication) and mailed (by first class,
United States mail, postage prepaid), telexed, telecopied, telegraphed or hand
delivered to the respective parties, at the addresses set forth in the Credit
Agreement, or to such changed address as may be fixed by notice. All such
notices and other communications shall be effective when received by the party
to whom properly addressed, the written receipt by any employee of any such
party constituting sufficient evidence of such receipt.
7.2 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Bank, any right, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
7.3 Amendment. No modification, amendment or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing and signed
by the party granting such modification, amendment or waiver, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.
7.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, all
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future holders of the Obligations and their respective successors and assigns.
7.5 Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
7.6 Counterparts. This Agreement may be executed by the parties hereto on
any number of separate counterparts and all such counterparts taken together
shall constitute one and the same instrument.
7.7 Governing Law; No Third Party Rights. This Agreement and the rights and
obligations of the parties hereunder shall be governed by and construed and
interpreted in accordance with the law of the State of New Jersey. This
Agreement is solely for the benefit of the parties hereto and the Custodian and
their respective successors and assigns, and no other person shall have any
right, benefit, priority or interest in, under or because of the existence of,
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
ATTEST: BLUE CROSS AND BLUE SHIELD OF
NEW JERSEY, INC.
By:______________________________ By:_________________________________
Name: Name:
Title: Title:
SUMMIT BANK
By:__________________________________
Name:
Title:
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SCHEDULE I
INTEREST
CUSIP DESCRIPTION RATE MATURITY PAYMENT DATES
----- ----------- ---- -------- -------------
00000XXX0 $5M FNMA 8.00% 4/13/05 4/13, 10/13
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