1
Exhibit 10.17(iii)
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of January 10, 2001 made by XXXXXXX X.
XXXXXX III ("Pledgor"), in favor of ACCELERATED CLAIMS PROCESSING, INC., a
Delaware corporation ("ACP").
WHEREAS Pledgor is acquiring an aggregate 550,000 shares and options
to acquire 750,000 shares (the "Pledged Shares") of Common Stock, $.01 par
value, of Health Management Systems, Inc., a New York corporation and the
corporate parent of ACP (the "Company"), in accordance with the terms and
provisions of the Restricted Stock Purchase Agreement dated January 10, 2001
(the "Purchase Agreement") and an option agreement dated January 10, 2001 (the
"Option Agreement, and collectively with the Purchase Agreement, the
"Agreements") between the Company and Pledgor; and
WHEREAS in connection with the purchase by Pledgor of shares
pursuant to the Purchase Agreement, Pledgor has executed and delivered to ACP a
promissory note of Pledgor in the principal amount of $721,875 (the "Note"), in
order to pay the purchase price of such shares; and
WHEREAS, it is a condition precedent to the obligation of the
Company to enter into the Agreements and to consummate the transactions
contemplated thereby that Pledgor shall have executed and delivered this
Agreement to ACP to secure the obligations of Pledgor under the Note;
NOW, THEREFORE, Pledgor, in consideration of the premises and in
order to induce ACP to make the loan evidenced by the Note, intending to be
bound hereby, does hereby agree with ACP as follows:
1. Pledge. Pledgor hereby pledges to ACP and grants to ACP a
security interest in the following (collectively, the "Pledged Collateral"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, including the shares issued upon exercise of the options granted
pursuant to the Option Agreement, and all dividends, cash, instruments and
other property from time to time received, receivable or otherwise
distributed or distributable in respect of or in exchange for any or all
of the Pledged Shares; and
(b) any and all proceeds and substitutions of the foregoing.
2
2. Security for Obligations. This Agreement secures the full and
prompt payment and performance of all obligations and liabilities of Pledgor to
ACP now or hereafter existing under the Note, whether for principal, interest,
fees, expenses or otherwise, and all obligations of Pledgor now or hereafter
existing under this Agreement, in each case, direct or indirect, absolute or
contingent and whether or not evidenced by any note or written instrument (all
such obligations of Pledgor being hereinafter called collectively the
"Obligations"). The Pledged Collateral shall serve as collateral for, and
additional security to ACP securing the repayment of, the Obligations, but shall
not in any way limit Pledgor's liability for repayment of the Obligations.
3. Delivery of Pledged Collateral. All certificates or instruments
representing or evidencing the Pledged Collateral shall be delivered to and held
by or on behalf of ACP pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to ACP.
4. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default (as such term is defined in the
Note) or event which, with the giving of notice or the lapse of time, or
both, would become an Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Agreement; provided, however, that Pledgor shall not exercise
or refrain from exercising any such right if, in judgment of ACP
reasonably exercised, such action would have a material adverse
effect on the value of the Pledged Collateral or any part thereof.
(ii) Pledgor shall be entitled to receive and retain any and
all dividends paid in respect of the Pledged Collateral; provided,
however, that any and all:
(A) dividends paid or payable other than in cash in
respect of, and instruments and other property received,
receivable or otherwise distributed or distributable in
respect of, or in exchange for, any Pledged Collateral;
(B) dividends and other distributions paid or payable in
cash in respect of any Pledged Collateral in connection with a
partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or
paid-in-surplus; and
2
3
(C) cash paid, payable or otherwise distributed or
distributable in respect of redemption of, or in exchange for,
any Pledged Collateral; shall be, and shall forthwith be
delivered to ACP to hold as, Pledged Collateral, and shall, if
received by Pledgor, be received in trust for the benefit of
ACP, be segregated from the other property or funds of
Pledgor, and be forthwith delivered to ACP as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
(iii) ACP shall execute and deliver (or cause to be executed
and delivered) to Pledgor all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgor
to exercise the voting and other rights which Pledgor is to exercise
pursuant to paragraph (i) above and to receive the dividend payments
which Pledgor is authorized to receive and retain pursuant to
paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default or an event which, with the giving of notice or the lapse of time,
or both, would become an Event of Default under the Note:
(i) all rights of Pledgor to receive the dividend and other
payments which Pledgor would otherwise be authorized to receive and
retain pursuant to Section 4(a)(ii) of this Agreement shall cease,
and all such rights shall thereupon become vested in ACP which shall
thereupon have the sole right to receive and hold as Pledged
Collateral such dividend and other payments;
(ii) all dividend and other payments which are received by
Pledgor contrary to the provisions of Section 4(b)(i) of this
Agreement shall be received in trust for the benefit of ACP, shall
be segregated from other funds of Pledgor and shall be forthwith
paid over to ACP as Pledged Collateral in the same form as so
received (with any necessary endorsement); and
(iii) the rights of Pledgor to exercise the voting and other
consensual rights which Pledgor would otherwise be entitled to
exercise pursuant to Section 4(a)(i) of this Agreement shall cease
immediately upon receipt by Pledgor of notice of the termination of
such rights, given by ACP in accordance with Section 10, and all
such rights shall thereupon become vested in ACP which shall
thereupon have the sole right to exercise such voting and other
consensual rights.
5. Transfers and Other Liens. Pledgor agrees that he will not (i)
sell or otherwise dispose of, or grant any option or proxy (other than to ACP or
the Company) with respect to, any of the Pledged Collateral or (ii) create or
permit to exist any lien, security interest, or
3
4
other charge or encumbrance upon or with respect to any of the Pledged
Collateral, except for the security interests under this Agreement.
6. ACP Appointed Attorney-in-Fact. Pledgor hereby irrevocably
appoints ACP as his attorney-in-fact, with full authority in his place and xxxxx
and in his name or otherwise, from time to time in the discretion of ACP
reasonably exercised, to take, upon the occurrence and during the continuation
of any Event of Default, any action and to execute any instrument which ACP may
deem reasonably necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and collect all
instruments made payable to Pledgor representing any dividend, interest payment
or other distribution in respect of the Pledged Collateral or any part thereof
and to give full discharge for the same, when and to the extent permitted by
this Agreement.
7. Remedies upon Default. If any Event of Default shall have
occurred and be continuing:
(a) ACP shall exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code in effect in the State of New York at
that time (in compliance with all applicable securities laws), and ACP may
also, without notice except as specified below, sell (in compliance with
all applicable securities laws) the Pledged Collateral or any part thereof
in one or more parcels at public or private sale, at any exchange,
broker's board or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as ACP may deem
commercially reasonable.
(b) Any cash held by ACP as Pledged Collateral and all cash proceeds
received by ACP in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral may, in the
discretion of ACP, be held by ACP as collateral for, and/or then or at any
time thereafter applied in whole or in part by ACP against all or any part
of the Obligations. Any surplus of such cash or cash proceeds held by ACP
and remaining after payment in full of all the Obligations shall be paid
over to Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
8. Security Interests Absolute. All rights of ACP and the security
interests hereunder, and all obligations of Pledgor hereunder, shall be absolute
and unconditional irrespective of:
(a) any lack of validity or enforceability of the Note or any
other agreement or instrument relating thereto;
4
5
(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 this Agreement, the Note or
any other agreement or instrument relating thereto;
(c) any exchange, release or non-perfection 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 which might otherwise constitute a
defense available to, or a discharge of, Pledgor in respect of the
Obligations or the Note.
9. Amendments. No amendment or waiver of any provision of this
Agreement nor consent to any departure by Pledgor herefrom shall in any event be
effective unless the same shall be in writing and signed by ACP, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
10. Addresses for Notices. Any notice or other communication to be
given or made to ACP hereunder shall be sent or otherwise communicated to ACP at
its address at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, with copies to
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxx, or such other address and/or such
other attention as may be notified to Pledgor in accordance with this Section.
Any notice or other communication to be given to Pledgor hereunder shall be sent
or otherwise communicated to Pledgor at 0000 Xxxxxxx, Xxxxxx, Xxxxx 00000. Any
notice or other communication to be given or made pursuant to this Agreement may
be given or made by personal delivery, by certified or registered mail, return
receipt requested and postage prepaid, by a nationally known overnight courier
service or sent via facsimile confined in writing to the recipient.
11. Continuing Security Interests; Assignments. This Agreement shall
create continuing security interests in the Pledged Collateral and shall (i) be
binding upon Pledgor, his heirs, executors, representatives, administrators and
assigns, (ii) inure, together with the rights and remedies hereunder, to the
benefit of ACP, its successors, transferees and assigns and (iii) remain in full
force and effect until Pledgor shall be entitled to the return and release from
the pledge hereunder of the Pledged Collateral pursuant to the next sentence of
this Section 11. When no Obligations are outstanding Pledgor shall be entitled
to the return and release from the pledge hereunder, upon his request, of such
of the Pledged Collateral as shall not have been sold or otherwise disposed of
by ACP pursuant to the terms of this Agreement.
12. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the substantive, internal laws of the State of New
York. All judicial proceedings brought against Pledgor with respect to this
Agreement may be brought in any state or federal court of competent jurisdiction
in the State of New York and, by Pledgor's
5
6
execution and delivery of this Agreement, Pledgor accepts, for himself and in
connection with his properties, generally and unconditionally, the nonexclusive
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any
final judgment rendered thereby in connection with this Agreement from which no
appeal has been taken or is available. Pledgor irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
proceedings by the mailing of copies thereof by registered or certified mail,
postage prepaid, to Pledgor's notice address specified in Section 10 hereof,
such service to become effective five (5) business days after such mailing.
Pledgor irrevocably waives (a) trial by jury in any action or proceeding with
respect to this Agreement and (b) any objection (including, without limitation,
any objection to the laying of venue or based on the grounds of forum non
conveniens) which Pledgor may now or hereafter have the bringing of any such
action or proceeding with respect to this Agreement in any jurisdiction set
forth above. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of ACP to bring proceedings
against Pledgor in the courts of any other jurisdiction.
13. Severability. In the event that any provision of this Agreement
shall be determined to be superseded, invalid or otherwise unenforceable
pursuant to applicable law, such determination shall not affect the validity of
the balance of this Agreement, and the remaining provisions of this Agreement
shall be enforced as if the invalid provision were deleted.
14. Termination; Counterparts. This Agreement shall continue in full
force and effect until all of the Obligations shall have been paid and
satisfied. Section headings used herein are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof. This
Agreement may be executed in any number of counterparts with the same effect as
if the signatures thereto and hereto were upon the same instrument.
6
7
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the date first above written.
____________________________
Xxxxxxx X. Xxxxxx III
ACCEPTED AND AGREED:
ACCELERATED CLAIMS PROCESSING, INC.
By_____________________________________
7
