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STOCK PLEDGE AND ESCROW AGREEMENT
THIS STOCK PLEDGE AND ESCROW AGREEMENT dated this the 16th day of
December, 1997, by and among XXXXXXX X. XXXXXX, M.D., an individual residing in
the State of Ohio (the "Pledgor"); in favor of OMEGA HEALTH SYSTEMS OF OHIO,
INC., an Ohio corporation ("Omega Ohio"), and OMEGA HEALTH SYSTEMS, INC., a
Delaware corporation ("Omega") (collectively, the "Secured Party"); and UNION
PLANTERS NATIONAL BANK (the "Escrow Agent").
W I T N E S S E T H:
That for good and valuable considerations, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby mutually agree as follows:
1. PLEDGE AND GRANT OF SECURITY INTEREST. As collateral security for
the Indemnities (as defined in Section 2 hereof) given to the Secured Party, the
Pledgor hereby (i) transfers and assigns to the Escrow Agent, (ii) pledges to
the Secured Party, and (iii) grants to the Secured Party a continuing security
interest in Two Hundred Forty Thousand (240,000) shares of common stock of Omega
represented by Certificate No. OH 4101 (the "Pledged Collateral").
2. SECURITY FOR OBLIGATIONS. The security interest created hereby in
the Pledged Collateral constitutes continuing collateral security to secure the
indemnities (the "Indemnities") contained in that certain Stock Purchase
Agreement, dated as of December 16, 1997, between Pledgor, Omega and Omega Ohio
(the "Acquisition Agreement").
3. DELIVERY OF THE PLEDGED COLLATERAL. (a) All certificates
representing the Pledged Collateral shall be delivered to the Escrow Agent
simultaneously with the execution and delivery of this Agreement, accompanied by
stock powers executed in blank by Pledgor.
(b) If the Pledgor shall receive, by virtue of Pledgor being or having
been an owner of the Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate issued in connection with any increase or
reduction of capital, reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spinoff or split-off), promissory note or
other instrument or (ii) option or right, whether as an addition to,
substitution for, or in exchange for the Pledged Collateral, or otherwise; the
Pledgor shall receive such stock certificate, promissory note, instrument,
option, or right and shall segregate it from the Pledgor's other property and
shall deliver it forthwith to the Escrow Agent in the exact form received, with
any necessary endorsement and appropriate stock powers duly executed in blank,
to be held by the Escrow Agent as Pledged Collateral.
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4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants
as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, security interest or other charge or
encumbrance except for the security interest created by this Agreement.
(b) The exercise by the Secured Party of its rights and remedies
hereunder will not contravene any law or governmental regulation or any
contractual restriction binding on or affecting the Pledgor or any of the
Pledgor's properties and will not result in or require the creation of any lien,
security interest or other charge or encumbrance upon or with respect to any of
the Pledgor's properties.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required either
(i) for the pledge hereunder by the Pledgor of, or the grant by the Pledgor of
the security interest created hereby in, the Pledged Collateral or (ii) except
as may be required by laws affecting the offering and sale of securities
generally, for the exercise by the Secured Party of its rights and remedies
hereunder.
(d) This Agreement creates a valid security interest in favor of the
Secured Party in the Pledged Collateral. The taking possession by the Escrow
Agent of the certificates representing the Pledged Shares and all other
certificates, instruments and cash constituting Pledged Collateral from time to
time will perfect, and establish the first priority of, the Secured Party's
security interest hereunder in the Pledged Collateral. Except as set forth in
this Section 4(d), no action is necessary or desirable to perfect or otherwise
protect such security interest.
5. ADDITIONAL PROVISIONS CONCERNING THE PLEDGED COLLATERAL. (a) The
Pledgor hereby agrees to take any reasonable action and to execute any
instruments which may be necessary or advisable to accomplish the purposes of
this Agreement.
(b) The Pledgor hereby irrevocably appoints the Escrow Agent as the
Pledgor's attorney-in-fact and proxy, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or otherwise, from time to time in
the Escrow Agent's discretion, to take any action and to execute any instrument
which the Escrow Agent may deem necessary or advisable to accomplish the
purposes of this Agreement.
(c) During the term of this Agreement, and so long as the Pledgor is
not in default under Section 6 of this Agreement, the parties acknowledge that
the Pledgor has all rights of ownership in the Pledged Collateral, including the
right to vote the shares of the Pledged Collateral, to issue proxies, and to
receive dividends, except where prohibited under this Agreement and subject to
any restrictions contained in the Stock Restriction and Registration Rights
Agreement, dated as of December 16, 1997, between Pledgor and the Secured Party.
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6. DEFAULT. In the event that Pledgor shall fail to make full and
prompt payment of any amount in connection with any Indemnities owed to the
Secured Party under the provisions of the Acquisition Agreement, according to
its terms, or upon any default by Pledgor in the full and prompt payment or
performance of any of the Indemnities to be paid pursuant to the provisions
hereof or of the Acquisition Agreement, the Secured Party shall give notice of
such failure to Pledgor and Escrow Agent by certified mail, return receipt
requested, or delivered to Pledgor and Escrow Agent in hand, and if such failure
shall continue for thirty (30) days after such notice, the Secured Party shall
give further notice to Pledgor and Escrow Agent in like manner of its intention
to exercise the remedies upon default as provided herein. A copy of all notices
pursuant to this Section 6 shall be sent to Xx. Xxxxxxx X. Xxxxxx at 000 Xxxxxx
xxxx, Xxxxxxxxxxx, Xxxx 00000, with a copy to Xx. Xxxxxxx X. Xxxxx at Xxxxx &
Xxxxx, 00 Xxxxx Xxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxx 00000.
7. REMEDIES UPON DEFAULT. Upon the occurrence of a Default (after
expiration of any applicable cure period, as described in Section 6 hereof):
(a) The Secured Party may deliver to the Escrow Agent (with a copy to
the Pledgor) a notice (the "Release Notice") stating the section number of the
Acquisition Agreement pursuant to which the Release Notice is given and the
dollar amount due to Secured Party. In addition, the Release Notice shall state
the number of shares of the Pledged Collateral whose value, based on the
"Valuation Price" (as hereinafter defined), is equal to the dollar amount due to
Secured Party. For purposes of this Stock Pledge and Escrow Agreement, the
Valuation Price shall be the amount per share as determined pursuant to Section
2.1 of the Acquisition Agreement.
(b) The Secured Party shall have the sole right to exercise such
voting, option and other consensual rights and to receive and retain any
dividends declared with respect to said Pledged Collateral transferred to
Pledgor pursuant to the Release Notice after the occurrence of Default; and
(c) Without limiting the generality of the foregoing, with the consent
of Pledgor or pursuant to an arbitration determination pursuant to Paragraph 8
hereof: (i) the number of shares of the Pledged Collateral required under the
Release Notice may be released by the Escrow Agent to Secured Party and may be
registered in the name of the Secured Party or its nominee, and (ii) the Secured
Party at its option may exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to said
shares of the Pledged Collateral as if it were the absolute owner thereof.
8. CONTROVERSY BETWEEN THE PARTIES. (a) Mediation. In the event a
dispute arises out of or relating to this Agreement, or the breach thereof, and
if said dispute cannot be settled through negotiation, the parties agree to
attempt in good faith to settle the dispute by mediation under the Commercial
Mediation Rules of the American Arbitration Association. Unless the
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parties reach an agreement reduced to writing, this mediation will be
non-binding, but the parties must participate in good faith in non-binding
mediation, before resorting to binding arbitration.
(b) Binding Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or its breach, not satisfied through either
negotiation or mediation, shall be settled by binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction.
As soon as reasonably practical after submission of a demand for
binding arbitration, the parties shall select one arbitrator, agreeable to all
parties. This arbitrator will be selected from lists prepared by the American
Arbitration Association. From the American Arbitration Association list the
parties will submit to the American Arbitration Association a ranked list of
arbitrators which are acceptable. The highest ranking acceptable candidate will
be selected by the American Arbitration Association. If no arbitrators from the
list composed by the American Arbitration Association are acceptable by either
of the parties, the American Arbitration Association will compile a second list.
This procedure will be followed until the parties have selected an arbitrator.
The results of the arbitrator's finding will be binding on the parties, and the
prevailing party in such arbitration shall be entitled to recover reasonable
attorney's fees and costs from the losing party.
9. ADMINISTRATION. The Escrow Agent undertakes to perform only the
duties expressly set forth herein. The Escrow Agent's duties begin upon the date
of receipt of the Pledged Collateral. The Escrow Agent may rely, and shall be
authorized to act or refrain from acting upon, any written notice, demand,
instruction or request (including a photocopy or telecopy of an original
document) furnished to it as provided herein which Escrow Agent believes in good
faith to be genuine and to have been signed and presented by the proper party.
10. LIMITATION OF LIABILITY OF ESCROW AGENT. The Secured Party and
Pledgor agree to indemnify and hold Escrow Agent harmless from any acts or
omissions of Escrow Agent taken or to be taken in connection with its
performance of services pursuant to this Stock Pledge and Escrow Agreement,
except acts or omissions which constitute gross, willful, or wanton negligence
or misconduct.
11. REMOVAL AND RESIGNATION. (a) The Escrow Agent may be removed at any
time, with or without cause, upon written agreement of the Secured Party and the
Pledgor. In such event a successor escrow agent shall be appointed by the
Secured Party and the Pledgor and the Pledged Collateral shall be promptly
transferred to said successor.
(b) The Escrow Agent may resign from its appointment hereunder upon
five (5) days prior written notice to the Secured Party and the Pledgor. In such
event the Secured Party and the Pledgor shall appoint a successor escrow agent.
However, in the event the Secured Party and
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the Pledgor are unable to agree on a successor within said five (5) day period,
the Escrow Agent shall appoint a national bank or other similar institution as
successor escrow agent to serve pursuant to the terms and conditions of this
Stock Pledge and Escrow Agreement.
12. ESCROW AGENT FEES. In consideration for the services to be rendered
hereunder by the Escrow Agent, the Escrow Agent shall be paid a fee of $1,000
upon execution of this Agreement. The Pledgor shall pay 50% of the Escrow Agent
Fee and the Secured Party will pay 50% of the fee.
13. FEES OF LEGAL COUNSEL. In the event any party to this Stock Pledge
and Escrow Agreement shall employ legal counsel to protect its rights hereunder,
or to enforce any term or provision hereof, the party prevailing in any such
action shall have the right to recover from the other party all of its
reasonable attorneys' fees and expenses incurred in connection therewith. In the
event Escrow Agent employs counsel for purposes of an interpleader or other
action, the Secured Party and the Pledgor shall reimburse Escrow Agent for all
reasonable attorneys' fees and expenses incurred in good faith in connection
with such action.
14. MISCELLANEOUS. (a) No amendment or waiver of any provision of this
Agreement, and no consent to any departure by the parties therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No failure on the part of the Secured Party to exercise, and no
delay in exercising, any right hereunder or under the Acquisition Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall be binding on the Pledgor and Pledgor's
successors and permitted assigns and shall inure, together with all rights and
remedies of the Secured Party hereunder, to the benefit of the Secured Party and
its successors, transferees and assigns. Without limiting the generality of the
foregoing, the Secured Party may assign or otherwise transfer all or part of its
rights to all or any part of the Acquisition Agreement to any of the Secured
Party's Affiliates (as hereinafter defined), and such other person or entity
shall thereupon become vested with all of the benefits in respect thereof
granted to the Secured Party herein or otherwise. None of the rights or
obligations of the Pledgor hereunder may be assigned or otherwise transferred
without the prior written consent of the Secured Party, except as otherwise
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permitted under the Acquisition Agreement. For purposes of this Section 13(d),
"Affiliates" means subsidiaries of Omega or of Omega Ohio.
(e) On December 15, 1999, this Agreement and the security interest
created hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor. The Escrow Agent shall thereupon, at Pledgor's request
and at the expense of the Secured Party, (i) return to the Pledgor the then
remaining Pledged Collateral; and (ii) execute and deliver to the Pledgor such
documents as Pledgor may reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee.
(g) The captions or headings of the Sections of this Agreement are
inserted merely for convenience of reference and shall not be deemed to limit or
modify the terms and provisions hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by its officers thereunto duly authorized on the date
first above written.
PLEDGOR:
/s/ XXXXXXX X. XXXXXX
---------------------------------
XXXXXXX X. XXXXXX, M.D.
ESCROW AGENT: SECURED PARTY:
UNION PLANTERS NATIONAL OMEGA HEALTH SYSTEMS, INC.
BANK
By: /s/ By: /s/ XXXXXX X. XXXXXXX
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Title: Xxxxxx X. Xxxxxxx, Executive Vice
President
OMEGA HEALTH SYSTEMS OF OHIO, INC.
By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx, Vice President
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