PLEDGE AGREEMENT
BETWEEN
LYRIC HEALTH CARE HOLDINGS III, INC.
AND
MONARCH PROPERTIES, LP
DATED AS OF JUNE 23, 1998
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") made as of June 23, 1998
between LYRIC HEALTH CARE HOLDINGS III, INC. ("Pledgor") for the benefit of
MONARCH PROPERTIES, LP ("Monarch").
The circumstances underlying the execution of this Pledge Agreement are as
follows:
A. As of June 23, 1998, Monarch purchased from the subsidiaries of Pledgor
listed on Exhibit A hereto ("Subsidiaries") and leased to Pledgor various health
care facilities ("Facilities") pursuant to a Master Lease ("Master Lease").
Pledgor has concurrently subleased the Facilities to Subsidiaries.
B. Monarch has required, as a condition to its purchase of the Facilities
and lease thereof to Pledgor, that Pledgor execute and deliver to Monarch this
Pledge Agreement, pursuant to which Pledgor pledges to Monarch, as security for
the Guaranty, all shares of common stock now or hereafter owned by Pledgor in
Subsidiaries, on the terms and conditions hereinafter set forth.
C. Capitalized words not defined herein shall have the definitions given
them in the Master 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 Monarch 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 each of Subsidiaries 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
Subsidiaries, including, without limitation, those listed on Exhibit B hereto
and any supplemental Exhibit B attached hereto or delivered to Monarch 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 Monarch from Pledgor under the Master Lease,
whether now existing or hereafter arising (collectively, the "Obligations"),
Pledgor hereby pledges, assigns, hypothecates, delivers and sets over to Monarch
all of Pledgor's right, title and interest in and to the Pledged Stock, and
hereby grants to Monarch 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 Monarch all certificates representing the
currently existing Pledged Stock, together with a Stock Assignment Separate from
Certificate ("Assignments"), substantially in the form of attached Exhibit C
hereto, for each
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certificate representing the Pledged Stock, all duly executed in blank. Monarch
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 any of Subsidiaries
(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 Monarch's agent, shall hold them in trust for Monarch, and shall
deliver them forthwith to Monarch in the exact form received, with Pledgor's
endorsement when necessary, and/or appropriate stock powers duly executed in
blank, to be held by Monarch, 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 Monarch hereunder
may, at the option of Monarch, be registered in the name of Monarch or its
nominee as pledgee, and Monarch or its nominee may thereafter, without
notice, exercise all available voting and corporate rights at any meetings
of Subsidiaries 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 Monarch 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) Monarch shall have the right to require that all cash dividends
payable with respect to any part of the Pledged Stock be paid to Monarch to
be held by Monarch as additional security hereunder until applied to the
Obligations.
(iii) Monarch, 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,
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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 Monarch may select, at any
exchange, broker's board or at any of Monarch'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 Monarch or any Monarch
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.
(d) 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 Monarch hereunder, including reasonable attorneys fees and legal
expenses;
(ii) Second, to the satisfaction of the Obligations in such order as
Monarch 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.
(e) Monarch 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 Subsidiaries and to execute consents in respect thereof,
and to consent to, ratify or waive notice of any or all shareholder meetings of
Subsidiaries 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
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request from Pledgor, Monarch 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
Monarch 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 Monarch under this Pledge Agreement.
(c) Upon delivery of the Pledged Stock to Monarch or an agent for
Monarch, 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 Monarch 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 federal securities
laws and subject to change of control rules applicable to the nursing home
licenses and Medicare/Medicaid certifications of the Facilities. Pledgor has the
right and power and is duly authorized to enter into this Pledge Agreement.
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(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 and subject to change of control
rules applicable to the nursing home licenses and Medicare/Medicaid
certifications of the Facilities.
(i) Each of Subsidiaries is duly organized, validly existing and in
good standing under the laws of the State set forth next to such Subsidiary's
name on Exhibit A hereto.
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
Monarch'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 Subsidiaries to issue any new equity
securities or debt convertible into equity securities.
(b) Pledgor warrants and will defend Monarch's right, title and
security interest in and to the Pledged Stock against the claims of any person,
firm, corporation or other entity.
6. INTENTIONALLY OMITTED.
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7. COOPERATION. Pledgor shall, at any time and from time to time upon the
request of Monarch, execute and deliver such further documents and do such
further acts and things as Monarch reasonably may request in order to effectuate
the purposes of this Pledge Agreement, including, without limitation, delivering
to Monarch on the date hereof or at any time hereafter irrevocable proxies in
respect of the Pledged Stock in the form of Exhibit D hereto.
8. GENERAL. (a) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Stock while held hereunder, Monarch 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 Monarch, nor any failure
to exercise, nor any delay in exercising, on the part of Monarch, 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 Monarch,
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 NEW
YORK AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT BE HEARD IN THE
STATE AND FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. PLEDGOR AGREES THAT
SERVICE OF
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PROCESS MAY BE EFFECTED UPON PLEDGOR UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS
OF THE STATE OF NEW YORK AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE
STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK.
(g) Pledgor recognizes that Monarch has relied on the pledge and
security interest granted herein by Pledgor in extending credit and making the
financial accommodations contemplated by the Master Lease and Pledgor agrees
that such reliance by Monarch 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
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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.
LYRIC HEALTH CARE HOLDINGS III, INC.
By:
-----------------------------------------
Name: Xxxxxx X. Xxxxx
---------------------------------------
Title: Senior Vice President
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MONARCH PROPERTIES, LP
By: MP Operating, Inc.,
its General Partner
By:
-----------------------------------------
Name: Xxxx X. Xxxxx
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
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