EXHIBIT 10.3
PLEDGE AGREEMENT dated as of April 7, 1998, among XXXXXX
RESPIRATORY CARE INC., a California corporation (the "Borrower"),
RIVER HOLDING CORP., a Delaware corporation ("Holding"), each
Subsidiary of the Borrower listed on Schedule I hereto (each such
Subsidiary individually a "Subsidiary Pledgor" and collectively,
the "Subsidiary Pledgors"; the Borrower, Holding and the
Subsidiary Pledgors are referred to collectively herein as the
"Pledgors") and BANKERS TRUST COMPANY, a New York banking
corporation ("BTCo."), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of April 7, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, Holding, the lenders from time to time party
thereto (the "Lenders"), BTCo., as administrative agent for the Lenders,
Collateral Agent, swingline lender and as issuing bank (in such capacity, the
"Issuing Bank") and (b) the Holding Guarantee Agreement dated as of April 7,
1998 (as amended, supplemented or otherwise modified from time to time, the
"Holding Guarantee Agreement"), between Holding and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Holding and the Subsidiary Guarantors have agreed to guarantee,
among other things, all the obligations of the Borrower under the Credit
Agreement. The obligations of the Lenders to make Loans and of the Issuing Bank
to issue Letters of Credit are conditioned upon, among other things, the
execution and delivery by the Pledgors of a Pledge Agreement in the form hereof
to secure (a) the due and punctual payment by the Borrower of (i) the principal
of and premium, if any, and interest (including interest accruing during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral and
(iii) all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Borrower to the Secured Parties
under the Credit Agreement and the other Credit Documents and (b) the due and
punctual payment and performance of all monetary obligations of the Borrower
under each Interest Rate Protection Agreement entered into with any counterparty
that was a Lender at the time such Interest Rate Protection Agreement was
entered into (all the monetary obligations referred to in the preceding clauses
(a) through (b) being referred to collectively as the "Obligations").
Capitalized terms used herein and not defined herein shall have meanings
assigned to such terms in the Credit Agreement.
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and
each Secured Party (and each of their respective successors or assigns), hereby
agree as follows:
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SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of the Obligations, each Pledgor hereby grants,
hypothecates and pledges to the Collateral Agent, its successors and assigns,
and hereby grants to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, a security interest in all of the
Pledgor's right, title and interest in, to and under (a) the shares of capital
stock owned by it and listed on Schedule II hereto and any shares of capital
stock of the Borrower or any Subsidiary obtained in the future by the Pledgor
and the certificates representing all such shares (the "Pledged Stock");
provided that the Pledged Stock shall not include (i) more than 65% of the
issued and outstanding shares of stock of any Foreign Subsidiary or (ii) to the
extent that applicable law requires that a Subsidiary of the Pledgor issue
directors' qualifying shares, such qualifying shares; (b)(i) the debt securities
listed opposite the name of the Pledgor on Schedule II hereto, (ii) any debt
securities or instruments in the future held the Pledgor and (iii) the
promissory notes and any other instruments evidencing such debt securities (the
"Pledged Debt Securities"); (c) all other property that may be delivered to and
held by the Collateral Agent pursuant to the terms hereof; (d) subject to
Section 5, all payments of principal or interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise distrib
uted, in respect of, in exchange for or upon the conversion of the securities
referred to in clauses (a) and (b); (e) subject to Section 5, all rights and
privileges of the Pledgor with respect to the securities and other property
referred to in clauses (a), (b), (c) and (d); and (f) all proceeds of any of the
foregoing (the items referred to in clauses (a) through (f) being collectively
referred to as the "Collateral"). Upon delivery to the Collateral Agent, (a)
any stock certificates, notes or other securities now or hereafter included in
the Collateral (the "Pledged Securities") shall be accompanied by stock powers
duly executed in blank or other instruments of transfer satisfactory to the
Collateral Agent and by such other instruments and documents as the Collateral
Agent may reasonably request and (b) all other property comprising part of the
Collateral shall be accompanied by proper instruments of assignment duly
executed by the applicable Pledgor and such other instruments or documents as
the Collateral Agent may reasonably request. Each delivery of Pledged
Securities shall be accompanied by a schedule describing the securities
theretofore and then being pledged hereunder, which schedule shall be attached
hereto as Schedule II and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly
to deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to the
Pledgor by any person (except for Indebtedness representing advances made to
persons other than customers in the ordinary cause of business) to be evidenced
by a duly executed promissory note that is pledged and delivered to the
Collateral Agent pursuant to the terms thereof.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor
hereby represents, warrants and covenants, as to itself and the Collateral
pledged by it hereunder, to and with the Collateral Agent that:
(a) the Pledged Stock represents that percentage as set forth on
Schedule II of the issued and outstanding shares of each class of the
capital stock of the issuer with respect thereto;
(b) except for the security interest granted hereunder, the Pledgor
(i) is and will at all times continue to be the direct owner, beneficially
and of record, of the Pledged Securities indicated on Schedule II, (ii)
holds the same free and clear of all
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Liens (other than Liens permitted under Section 6.02 of the Credit
Agreement), (iii) will make no assignment, pledge, hypothecation or
transfer of, or create or permit to exist any security interest in or other
Lien on, the Collateral, other than pursuant hereto, and (iv) subject to
Section 5, will cause any and all Pledged Securities, whether for value
paid by the Pledgor or otherwise, to be forthwith deposited with the
Collateral Agent and pledged or assigned hereunder;
(c) the Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will defend
its title or interest thereto or therein against any and all Liens (other
than the Lien created by this Agreement), however arising, of all persons
whomsoever;
(d) no consent of any other person (including stockholders or
creditors of any Pledgor) and no consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity of
the pledge effected hereby;
(e) by virtue of the execution and delivery by the Pledgors of this
Agreement, when the Pledged Securities, certificates or other documents
representing or evidencing the Pledged Securities are delivered to the
Collateral Agent in accordance with this Agreement, the Collateral Agent
will obtain a valid and perfected first lien upon and security interest in
such Pledged Securities as security for the payment and performance of the
Obligations;
(f) upon delivery of the Pledged Securities to the Collateral Agent,
the pledge effected hereby is effective to vest in the Collateral Agent, on
behalf of the Secured Parties, the rights of the Collateral Agent in the
Pledged Securities as set forth herein;
(g) all of the Pledged Stock has been duly authorized and validly
issued and is fully paid and nonassessable and none of the Pledged Stock is
subject to preemptive rights;
(h) all information set forth herein relating to the Pledged Stock is
accurate and complete in all material respects as of the date hereof; and
(i) the pledge of the Pledged Stock pursuant to this Agreement does
not violate Regulation G, T, U or X of the Federal Reserve Board or any
successor thereto as of the date hereof.
SECTION 4. Registration in Nominee Name; Denominations. The Collateral
Agent, on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent.
Each Pledgor will promptly give to the Collateral Agent copies of any notices or
other communications received by it with respect to Pledged Securities
registered in the name of such Pledgor. The Collateral Agent shall at all times
have the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.
SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting
and/or other consensual rights and powers inuring to an owner of Pledged
Securities or any part thereof for any purpose consistent with the terms of
this Agreement, the Credit
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Agreement and the other Credit Documents; provided, however, that such
Pledgor will not be entitled to exercise any such right if the result
thereof would reasonably be expected to materially and adversely affect the
rights inuring to a holder of the Pledged Securities or the rights and
remedies of any of the Secured Parties under this Agreement or the Credit
Agreement or any other Credit Document or the ability of the Secured
Parties to exercise the same.
(ii) The Collateral Agent shall execute and deliver to each Pledgor,
or cause to be executed and delivered to each Pledgor, all such proxies,
powers of attorney and other instruments as such Pledgor may reasonably
request for the purpose of enabling such Pledgor to exercise the voting
and/or consensual rights and powers it is entitled to exercise pursuant to
subclause (i) and to receive the cash dividends it is entitled to receive
pursuant to subclause (iii).
(iii) Each Pledgor shall be entitled to receive and retain any and all
cash dividends, interest and principal paid on the Pledged Securities to
the extent and only to the extent that such cash dividends, interest and
principal are permitted by, and otherwise paid in accordance with, the
terms and conditions of the Credit Agreement, the other Credit Documents.
All noncash dividends, interest and principal, and all dividends, interest
and principal paid or payable in cash or otherwise in connection with a
partial or total liquidation or dissolution, return of capital, capital
surplus or paid-in surplus, and all other distributions (other than
distributions referred to in the preceding sentence) made on or in respect
of the Pledged Securities, whether paid or payable in cash or otherwise,
whether resulting from a subdivision, combination or reclassification of
the outstanding capital stock of the issuer of any Pledged Securities or
received in exchange for Pledged Securities or any part thereof, or in
redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party
or otherwise, shall be and become part of the Collateral, and, if received
by any Pledgor, shall not be commingled by such Pledgor with any of its
other funds or property but shall be held separate and apart therefrom,
shall be held in trust for the benefit of the Collateral Agent and shall be
forthwith delivered to the Collateral Agent in the same form as so received
(with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to dividends, interest or principal that such Pledgor
is authorized to receive pursuant to clause (a)(iii) shall cease, and all such
rights shall thereupon become vested in the Collateral Agent, which shall have
the sole and exclusive right and authority to receive and retain such dividends,
interest or principal. All dividends, interest or principal received by the
Pledgor contrary to the provisions of this Section 5 shall be held in trust for
the benefit of the Collateral Agent, shall be segregated from other property or
funds of such Pledgor and shall be forthwith delivered to the Collateral Agent
upon demand in the same form as so received (with any necessary endorsement).
Any and all money and other property paid over to or received by the Collateral
Agent pursuant to the provisions of this clause (b) shall be retained by the
Collateral Agent in an account to be established by the Collateral Agent upon
receipt of such money or other property and shall be applied in accordance with
the provisions of Section 7. After all Events of Default have been cured or
waived, the Collateral Agent shall, within five Business Days after all such
Events of Default have been cured or waived, repay to each Pledgor all cash
dividends, interest or principal (without interest), that such Pledgor would
otherwise be permitted to retain pursuant to the terms of clause (a)(iii) and
which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to exercise the voting and consensual rights and
powers it is entitled to
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exercise pursuant to clause (a)(i) of this Section 5, and the obligations of the
Collateral Agent under clause (a)(ii) of this Section 5, shall cease, and all
such rights shall thereupon become vested in the Collateral Agent, which shall
have the sole and exclusive right and authority to exercise such voting and
consensual rights and powers, provided that, unless otherwise directed by the
Required Lenders, the Collateral Agent shall have the right from time to time
following and during the continuance of an Event of Default to permit the
Pledgors to exercise such rights. After all Events of Default have been cured or
waived, such Pledgor will have the right to exercise the voting and consensual
rights and powers that it would otherwise be entitled to exercise pursuant to
the terms of clause (a)(i).
SECTION 6. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and legal
requirements, the Collateral Agent may sell the Collateral, or any part thereof,
at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as the Collateral Agent
shall deem appropriate. The Collateral Agent shall be authorized at any such
sale (if it deems it advisable to do so) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing the
Collateral for their own account for investment and not with a view to the
distribution or sale thereof, and upon consummation of any such sale the
Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely free from any claim or
right on the part of any Pledgor, and, to the extent permitted by applicable
law, the Pledgors hereby waive all rights of redemption, stay, valuation and
appraisal any Pledgor now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give a Pledgor 10 days' prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of Section 9-
504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of such Pledgor's Collateral. Such notice, in the case of a
public sale, shall state the time and place for such sale and, in the case of a
sale at a broker's board or on a securities exchange, shall state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may fix and
state in the notice of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid in
full by the purchaser or purchasers thereof, but the Collateral Agent shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the extent
permitted by applicable law, private) sale made pursuant to this Section 6, any
Secured Party may bid for or purchase, free from any right of redemption, stay
or appraisal on the part of any Pledgor (all said rights being also hereby
waived and released), the Collateral or any part thereof offered for sale and
may make payment on account thereof by using any claim then due and payable to
it from such Pledgor as a credit against the purchase price, and it may, upon
compliance with the
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terms of sale, hold, retain and dispose of such property without further
accountability to such Pledgor therefor. For purposes hereof, (a) a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof, (b) the Collateral Agent shall be free to carry out such sale
pursuant to such agreement and (c) such Pledgor shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such an
agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose upon the Collateral and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale
pursuant to the provisions of this Section 6 shall be deemed to conform to the
commercially reasonable standards as provided in Section 9-504(3) of the Uniform
Commercial Code as in effect in the State of New York or its equivalent in other
jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied by the Collateral Agent as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent in connection with such sale or otherwise in connection
with this Agreement, any other Credit Document or any of the Obligations,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Credit Document on behalf of
any Pledgor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Credit
Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
THIRD, to the Pledgors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.
SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees
to pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collec tion from, or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the rights of
the Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or
observe any of the provisions hereof.
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(b) Without limitation of its indemnification obligations under the other
Credit Documents, each Pledgor agrees to indemnify the Collateral Agent and the
Indemnitees (as defined in Section 9.05 of the Credit Agreement) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, other
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Credit Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect regardless
of the termination of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other Credit
Document or any investigation made by or on behalf of the Collateral Agent or
any other Secured Party. All amounts due under this Section 8 shall be payable
on written demand therefor and shall bear interest at the rate specified in
Section 2.06 of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
irrevocably makes, constitutes and appoints the Collateral Agent (and all
officers, employees or agents designated by the Collateral Agent) as such
Pledgor's true and lawful agent and attorney-in-fact, and in such capacity the
Collateral Agent shall have the right, with power of substitution for each
Pledgor and in each Pledgor's name or otherwise, for the use and benefit of the
Collateral Agent and the Secured Parties, upon the occurrence and during the
continuance of an Event of Default, to ask for, demand, xxx for, collect,
receive and give acquittance for any and all moneys due or to become due under
and by virtue of any Collateral, to endorse checks, drafts, orders and other
instruments for the payment of money payable to the Pledgor representing any
interest or dividend or other distribution payable in respect of the Collateral
or any part thereof or on account thereof and to give full discharge for the
same, to settle, compromise, prosecute or defend any action, claim or proceeding
with respect thereto, and to sell, assign, endorse, pledge, transfer and to make
any agreement respecting, or otherwise deal with, the same; provided, however,
that nothing herein contained shall be construed as requiring or obligating the
Collateral Agent to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby. The Collateral Agent and the other Secured Parties
shall be accountable only for amounts actually received as a result of the
exercise of the powers granted to them herein, and neither they nor their
officers, directors, employees or agents shall be responsible to any Pledgor for
any act or failure to act hereunder, except for their own gross negligence or
wilful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the
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exercise of any other right or power. The rights and remedies of the Collateral
Agent hereunder and of the other Secured Parties under the other Credit
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provisions of this Agreement or
consent to any departure by any Pledgor therefrom shall in any event be
effective unless the same shall be permitted by clause (b), and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on any Pledgor in any case shall entitle
such Pledgor to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Collateral Agent and the Pledgor or Pledgors with respect to which such waiver,
amendment or modification is to apply, subject to any consent required in
accordance with Section 9.08 of the Credit Agreement.
SECTION 11. Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Securities for their own account, for investment, and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges
and agrees that in light of such restrictions and limitations, the Collateral
Agent, in its sole and absolute discretion, (a) may proceed to make such a sale
whether or not a registration statement for the purpose of registering such
Pledged Securities or part thereof shall have been filed under the Federal
Securities Laws and (b) may approach and negotiate with a single potential
purchaser to effect such sale. Each Pledgor acknowledges and agrees that any
such sale might result in prices and other terms less favorable to the seller
than if such sale were a public sale without such restrictions. In the event of
any such sale, the Collateral Agent shall incur no responsibility or liability
for selling all or any part of the Pledged Securities at a price that the
Collateral Agent, in its sole and absolute discretion, may in good xxxxx xxxx
commercially reasonable under the circumstances, notwithstanding the possibility
that a substantially higher price might have been realized if the sale were
deferred until after registration as aforesaid or if more than a single
purchaser were approached. The provi sions of this Section 11 will apply
notwithstanding the existence of a public or private market upon which the
quotations or sales prices may exceed substantially the price at which the
Collateral Agent sells.
SECTION 12. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent desires to sell any of the Pledged Securities of
the Borrower at a public sale, it will, at any time and from time to time, upon
the written request of the Collateral Agent, use its best efforts to take or to
cause the issuer of such Pledged Securities to take such action and prepare,
distribute and/or file such documents, as are required or advisable in the
reasonable
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opinion of counsel for the Collateral Agent to permit the public sale of such
Pledged Securities. Each Pledgor further agrees to indemnify, defend and hold
harmless the Collateral Agent, each other Secured Party, any underwriter and
their respective officers, directors, affiliates and controlling persons from
and against all loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of legal
counsel), and claims (including the costs of investigation) that they may incur
insofar as such loss, liability, expense or claim arises out of or is based upon
any alleged untrue statement of a material fact contained in any prospectus (or
any amendment or supplement thereto) or in any notification or offering
circular, or arises out of or is based upon any alleged omission to state a
material fact required to be stated therein or necessary to make the statements
in any thereof not misleading, except insofar as the same may have been caused
by any untrue statement or omission based upon information furnished in writing
to such Pledgor or the issuer of such Pledged Securities by the Collateral Agent
or any other Secured Party expressly for use therein. Each Pledgor further
agrees, upon such written request referred to above, to use its best efforts to
qualify, file or register, or cause the issuer of such Pledged Securities to
qualify, file or register, any of the Pledged Securities under the Blue Sky or
other securi ties laws of such states as may be requested by the Collateral
Agent and keep effective, or cause to be kept effective, all such
qualifications, filings or registrations. Each Pledgor will bear all costs and
expenses of carrying out its obligations under this Section 12. Each Pledgor
acknowledges that there is no adequate remedy at law for failure by it to comply
with the provisions of this Section 12 and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section 12 may be specifically enforced.
SECTION 13. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Credit
Agreement, any other Credit Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit Agreement, any other Credit
Document or any other agreement or instrument relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in
respect of the Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations (other than
inchoate indemnification and expense reimbursement obligations) have been
indefeasibly paid in full and the Lenders have no further commitment to lend
under the Credit Agreement, the L/C Exposure has been reduced to zero and the
Issuing Bank has no further obligation to issue Letters of Credit under the
Credit Agreement.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any person that is not a Pledgor, or,
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08(b) of the
Credit Agreement, the security interest in such Collateral shall be
automatically released.
(c) In connection with any termination or release pursuant to clause (a)
or (b), the Collateral Agent shall execute and deliver to any Pledgor, at such
Pledgor's expense, all
10
documents that such Pledgor shall reasonably request to evidence such
termination or release. Any execution and delivery of documents pursuant to this
Section 14 shall be without recourse to or warranty by the Collateral Agent.
SECTION 15. Notices. All communications and notices hereunder shall be
in writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it in care of the Borrower.
SECTION 16. Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or with respect to the Collateral or any part thereof or in order
better to assure and confirm unto the Collateral Agent its rights and remedies
hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to any Pledgor when a
counterpart hereof executed on behalf of such Pledgor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Pledgor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of such Pledgor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
no Pledgor shall have the right to assign its rights hereunder or any interest
herein or in the Collateral (and any such attempted assignment shall be void),
except as expressly contemplated by this Agreement or the other Credit
Documents. If all of the capital stock of a Pledgor is sold, transferred or
otherwise disposed of to a person that is not an Affiliate of the Borrower
pursuant to a transaction permitted by Section 6.05 of the Credit Agreement,
such Pledgor shall be released from its obligations under this Agreement without
further action. This Agreement shall be construed as a separate agreement with
respect to each Pledgor and may be amended, modified, supplemented, waived or
released with respect to any Pledgor without the approval of any other Pledgor
and without affecting the obligations of any other Pledgor hereunder
SECTION 18. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Credit Document shall be considered
to have been relied upon by the Collateral Agent and the other Secured Parties
and shall survive the making by the Lenders of the Loans, the issuance of the
Letters of Credit by the Issuing Bank and the execution and delivery to the
Lenders of the Notes evidencing such Loans, regardless of any investigation made
by the Secured Parties or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
other fee or amount payable under this Agreement or any other Credit Document is
outstanding and unpaid or the L/C Exposure does not equal zero and as long as
the Commitments and the L/C Commitments have not been terminated.
(b) In the event any one or more of the provisions contained in this
Agreement should be held 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 (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any
11
other jurisdiction). The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 19. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 17. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 21. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.
SECTION 22. Jurisdiction; Consent to Service of Process. (a) Each
Pledgor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Credit Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that, to the extent permitted by applicable law, all
claims in respect of any such action or proceeding may be heard and determined
in such New York State court or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Collateral Agent or
any other Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement or the other Credit Documents against any Pledgor or
its properties in the courts of any jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Credit Documents in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
12
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 24. Additional Pledgors. Pursuant to Section 5.11 of the Credit
Agreement, each Restricted Subsidiary of the Borrower that was not in existence
or not a Subsidiary on the date of the Credit Agreement is required to enter in
this Agreement as a Subsidiary Pledgor upon becoming a Restricted Subsidiary if
such Subsidiary owns or possesses property of a type that would be considered
Collateral hereunder. Upon execution and delivery by the Collateral Agent and a
Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become
a Subsidiary Pledgor hereunder with the same force and effect as if originally
named as a Subsidiary Pledgor herein. The execution and delivery of such
instrument shall not require the consent of any Pledgor hereunder. The rights
and obligations of each Pledgor hereunder shall remain in full force and effect
notwithstanding the addition of any new Subsidiary Pledgor as a party to this
Agreement.
SECTION 25. Certain Other Rights. (a) The Pledgors authorize the
Collateral Agent, without notice or demand and without affecting their liability
hereunder, from time to time, either before or after revocation hereof, to (i)
renew, compromise, extend, accelerate, or otherwise change the time for payment
of, or otherwise change the terms of the indebtedness or any part thereof,
including increase or decrease of the rate of interest thereon; (ii) receive and
hold security for the payment of the Obligations, and exchange, enforce, waive,
release, fail to perfect, sell, or otherwise dispose of any such security; (iii)
apply such security and direct the order or manner of sale thereof as the
Collateral Agent in its discretion may determine; and (iv) release or substitute
any one or more of the endorsers or guarantors.
(b) The Pledgors waive any right to require the Collateral Agent to (i)
proceed against the Borrower; (ii) proceed against or exhaust any security held
from the Borrower; or (iii) pursue any other remedy in the Collateral Agent's
power whatsoever. The Pledgors waive any defense arising by reason of any
disability or other defense of the Borrower, or the cessation from any cause
whatsoever of the liability of the Borrower, or any claim that the Pledgors'
obligations exceed or are more burdensome than those of the Borrower. Until the
indebtedness shall have been paid in full, even though the indebtedness is in
excess of the Pledgors' liability hereunder, the Pledgors will not pursue any
right of subrogation, reimbursement, indemnification, and contribution
(contractual, statutory, or otherwise) including, without limitation, any claim
or right of subrogation under the Bankruptcy Code (Title 11, United States Code)
or any successor statute, arising from the existence or performance of this
Agreement, and until such payment in full, the Pledgors will not pursue any
right to enforce any remedy which the Collateral Agent and the Lenders now have
or may hereafter have against the Borrower and will not pursue any benefit of,
and any right to participate in, any security now or hereafter held by the
Collateral Agent. The Pledgors waive all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Agreement and of the existence, creation, or
incurring of new or additional indebtedness.
(c) (i) The Pledgors understand and acknowledge that if the Collateral
Agent forecloses, either by judicial foreclosure or by exercise of power of
sale, any deed of trust securing the Obligations, that foreclosure could impair
or destroy any ability that the Pledgors may have to seek reimbursement,
contribution, or indemnification from the Borrower or others based on any right
the Pledgors may have of subrogation, reimbursement, contribution, or
indemnification for any amounts paid by the Pledgors under this Agreement.
13
The Pledgors further understand and acknowledge that in the absence of this
paragraph, such potential impairment or destruction of the Pledgors' rights, if
any, may entitle the Pledgors to assert a defense to this Agreement based on
Section 580d of the California Code of Civil Procedure as interpreted in Union
-----
Bank x. Xxxxxxx, 265 Cal. App. 2d 40 (1968). By executing this Agreement, the
---------------
Pledgors freely, irrevocably, and unconditionally: (A) waive and relinquish that
defense and agree that the Pledgors will be fully liable under this Agreement
even though the Collateral Agent may foreclose, either by judicial foreclosure
or by exercise of power of sale, any deed of trust securing the Obligations; (B)
agree that the Pledgors will not assert that defense in any action or proceeding
which the Collateral Agent may commence to enforce this Agreement; (C)
acknowledge and agree that the rights and defenses waived by the Pledgors in
this Agreement include any right or defense that the Pledgors may have or be
entitled to assert based upon or arising out of any one or more of Sections
580a, 580b, 580d, or 726 of the California Civil Code; and (iv) acknowledge and
agree that the Collateral Agent and the Lenders are relying on this waiver in
creating the indebtedness, and that this waiver is a material part of the
consideration which the Collateral Agent and the Lenders are receiving for
creating the indebtedness.
(ii) The Pledgors waive any rights and defenses that are or may become
available to the Pledgors by reason of Sections 2787 to 2855, inclusive, of the
California Civil Code.
(iii) The Pledgors waive all rights and defenses that the Pledgors may
have because any of the indebtedness is secured by real property. This means,
among other things: (A) the Collateral Agent may collect from the Pledgors
without first foreclosing on any real or personal property collateral pledged by
the Borrower; and (B) if the Collateral Agent forecloses on any real property
collateral pledged by the Borrower: (x) the amount of the indebtedness may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price, and (y) the
Collateral Agent may collect from the Pledgors even if the Collateral Agent, by
foreclosing on the real property collateral, has destroyed any right the
Pledgors may have to collect from the Borrower. This is an unconditional and
irrevocable waiver of any rights and defenses the Pledgors may have because any
of the indebtedness is secured by real property. These rights and defenses
include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 580d, or 726 of the California Code of Civil Procedure.
(iv) The Pledgors waive any right or defense they may have at law or
equity, including California Code of Civil Procedure Section 580a, to a fair
market value hearing or action to determine a deficiency judgment after a
foreclosure.
(v) No provision or waiver in this Agreement shall be construed as
limiting the generality of any other waiver contained in this Agreement.
(d) The Pledgors acknowledge and agree that they shall have the sole
responsibility for obtaining from the Borrower such information concerning the
Borrower's financial conditions or business operations as the Pledgors may
require, and that the Collateral Agent has no duty at any time to disclose to
the Pledgors any information relating to the business operations or financial
conditions of the Borrower.
14
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
RIVER HOLDING CORP,
by /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
XXXXXX RESPIRATORY CARE INC.,
by /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief
Executive Officer
by /s/ Xxx X. Xxxxx
---------------------------------
Name: Xxx X. Xxxxx
Title: Chief Financial Officer
BANKERS TRUST COMPANY, as Collateral Agent,
by /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Assistant Vice President
