EXHIBIT 10.4
LOAN NO. 21-139
STOCK PLEDGE AGREEMENT
(SECURITY AGREEMENT)
This STOCK PLEDGE AGREEMENT (SECURITY AGREEMENT) is made as of
the 3rd day of October, 2001 by ASSISTED LIVING CONCEPTS, INC., a Nevada
corporation and Chapter 11 debtor-in-possession ("GRANTOR"), to and in favor of
HELLER HEALTHCARE FINANCE, INC., a Delaware corporation ("LENDER").
RECITALS
A. Grantor and Carriage House Assisted Living, Inc., a Delaware
corporation and Chapter 11 debtor-in-possession (together with Grantor,
"BORROWER") and Lender have entered into a Loan Agreement of even date herewith
(said Loan Agreement as amended from time to time, the "LOAN AGREEMENT"). All
capitalized terms herein shall have the meanings ascribed to them in the Loan
Agreement unless otherwise defined in this Pledge.
B. Pursuant to the Loan Agreement, Lender agreed, subject to the
terms and conditions contained therein, to make the Loan to Borrower as
evidenced by the Notes.
C. Grantor is the legal and beneficial owner of all of the issued
and outstanding capital stock (the "STOCK") of each of the Subsidiaries (all of
such entities are collectively referred to as the "CORPORATE SUBSIDIARIES").
D. As a condition precedent to Lender's making the Loan, Lender
has further required that Grantor execute and deliver this Pledge to Lender, to
secure the prompt and complete performance all of the obligations and payment of
all of the indebtedness under the Loan Documents and the Subsidiary Loan
Documents (all such obligations and indebtedness are hereinafter referred to
collectively as the "LIABILITIES").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS. As used in this Pledge, the following terms
shall have the following meanings:
"PLEDGE" shall mean this Stock Pledge Agreement (Security
Agreement), as the same may from time to time be amended or supplemented.
"CODE" shall mean the Uniform Commercial Code as the same may
from time to time be in effect in the State of Illinois.
"FORMATION AGREEMENT" shall mean, collectively, each of the
following as they have been and may hereafter be amended from time to time in
accordance with the
terms of this Pledge: (i) Certificate and Articles of Incorporation of each
Corporate Subsidiary; and (ii) Bylaws of each Corporate Subsidiary.
"PROCEEDS" shall mean "proceeds", as such term is defined in the
Code and, in any event, shall include, but not be limited to, (a) any and all
payments (in any form whatsoever) made or due and payable to Grantor from time
to time in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Pledged Collateral by any governmental
body, authority, bureau or agency (or any person acting under color of
governmental authority), (b) any and all amounts paid or payable to Grantor for
or in connection with any sale or other disposition of Grantor's interests in
the Corporate Subsidiaries and (c) any and all other amounts from time to time
paid or payable under or in connection with any of the Pledged Collateral.
2. GRANT OF SECURITY INTEREST. As security for the prompt and
complete payment and performance when due of the Liabilities, Grantor hereby
pledges, assigns, hypothecates, transfers, delivers and grants to Lender a
security interest in (a) all of the Stock of the Corporate Subsidiaries now or
at any time hereafter owned by Grantor and all options, warrants and other
rights to purchase Stock of the Corporate Subsidiaries now or hereafter held by
Grantor together with the Stock of the Corporate Subsidiaries underlying such
options, warrants and other rights (collectively, the "PLEDGED SHARES"), (b) all
other property hereafter delivered to Grantor in substitution for or in addition
to the Pledged Shares, (c) any other property of Grantor described in Section 4
below now or hereafter delivered to, or in the possession or custody of, Lender
and (d) any and all Proceeds of any of the foregoing (all of which being herein
collectively called the "PLEDGED COLLATERAL").
All certificates or instruments representing or evidencing the
Pledged Shares shall be delivered to and held by or on behalf of Lender pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed undated instruments of transfer or assignment in
blank, all in form and substance satisfactory to Lender. Lender shall maintain
possession and custody of the certificates representing the Pledged Shares in
accordance with Section 5 below.
3. REPRESENTATIONS AND WARRANTIES. Grantor represents and
warrants to Lender that:
(a) Exhibit A hereto sets forth (i) the authorized capital stock
of the Corporate Subsidiaries (ii) the number of shares of capital stock of the
Corporate Subsidiaries that are issued and outstanding as of the date hereof,
(iii) the number of shares of capital stock of the Corporate Subsidiaries that
are held in its treasury and (iv) the percentage of the issued and outstanding
shares of capital stock of the Corporate Subsidiaries held by Grantor. Grantor
is the record and beneficial owner of, and has good and marketable title to, the
Pledged Shares, and such shares are and will remain free and clear of all
pledges, liens, security interests and other encumbrances and restrictions
whatsoever, except the liens and security interests created by this Pledge;
(b) there are no outstanding options, warrants or other
agreements with respect to the Pledged Shares;
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(c) the Pledged Shares have been duly and validly authorized and
issued, are fully paid and non-assessable, and represent all of the issued and
outstanding shares of capital stock of the Corporate Subsidiaries;
(d) No security agreement, financing statement, assignment,
equivalent security or lien instrument or continuation statement covering all or
any part of the Pledged Collateral is on file or of record in any public office
or at the records of the Corporate Subsidiaries, except financing statements
with respect to the Pledged Collateral filed by Lender pursuant to this Pledge.
(e) Upon the filing of all appropriate financing statements under
the applicable Uniform Commercial Code and provided that Lender remains in
continuous possession of the Pledged Shares, all steps necessary to create and
perfect the security interest created by this Pledge as a valid and continuing
first lien on and first perfected security interest in the Pledged Collateral in
favor of Lender, prior to all other liens, security interests and other claims
of any sort whatsoever will have been taken. This Pledge and the security
interest created hereby are enforceable as such against creditors of and
purchasers from Grantor.
(f) Grantor has not changed its name, or used, adopted or
discontinued the use of any trade name, fictitious name or other trade name or
trade style.
(g) Subject to the approval of the Bankruptcy Court, Grantor has
all power, statutory and otherwise, to execute and deliver this Pledge, perform
its obligations hereunder and subject the Pledged Collateral to the security
interest created hereby; all of which has been duly authorized by all necessary
action.
(h) No amendments or supplements have been made to the Formation
Agreement since it was originally entered into; such Formation Agreement remains
in effect; and no party to the Formation Agreement is presently in default
thereunder.
(i) Grantor has the right to transfer all or any part of the
Pledged Collateral free of any lien or encumbrance.
(j) No authorization, approval, or other action by, and no notice
to or filing with, any governmental authority or regulatory body (other than the
Bankruptcy Court) is required either (i) for Grantor's granting of a security
interest in the Pledged Collateral pursuant to this Pledge or for the execution,
delivery or performance of this Pledge by Grantor or (ii) for the exercise by
Lender of the rights provided for in this Pledge or the remedies in respect of
the Pledged Collateral pursuant to this Pledge (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
(k) Grantor is a Nevada corporation with its principal place of
business at 11835 NE Glenn Widing Drive, Building E, Portland, Oregon.
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(l) As of the date hereof, Grantor has delivered to Lender all
original certificates, instruments or other documents evidencing any of the
Pledged Collateral.
4. COVENANTS. Grantor covenants and agrees that from and after
the date of this Pledge and until the Liabilities are fully satisfied:
(a) Further Documentation; Pledge of Instruments. At any time and
from time to time, upon the written request of Lender, and at the sole expense
of Grantor, Grantor will promptly and duly execute and deliver any and all such
further instruments and documents and take such further actions as Lender may
reasonably deem necessary or desirable to obtain the full benefits of this
Pledge and of the rights and powers herein granted, including, without
limitation, the execution and filing of any financing or continuation statements
under the Uniform Commercial Code in effect in any jurisdiction with respect to
the security interest granted hereby and, if otherwise required hereunder,
transferring Pledged Collateral to the possession of Lender (if a security
interest in such Pledged Collateral can be perfected by possession). Grantor
also hereby authorizes Lender to file any such financing or continuation
statement without the signature of Grantor to the extent otherwise permitted by
applicable law. If any amount payable under or in connection with any of the
Pledged Collateral shall be or become evidenced by any promissory note,
certificate, or other instrument (other than an instrument which constitutes
chattel paper under the Code), such note or instrument shall be immediately
pledged hereunder and a security interest therein hereby granted to Lender and
shall be duly endorsed in a manner satisfactory to Lender delivered to Lender.
If at any time Grantor's right or interest in any of the Pledged Collateral
becomes an interest in real property, Grantor immediately shall execute,
acknowledge and deliver to Lender such further documents as Lender deems
necessary or advisable to create a first priority perfected mortgage lien in
favor of Lender in such real property interest.
(b) Priority of Liens. Grantor will defend the right, title and
interest hereunder of Lender, as a first priority security interest in the
Pledged Collateral, against the claims and demands of all persons whomsoever.
(c) Notices. Grantor will advise Lender promptly, in reasonable
detail, (i) of any lien, security interest, encumbrance or claim made or
asserted against any of the Pledged Collateral, (ii) of any distribution of cash
or other property by the Corporate Subsidiaries, whether in complete or partial
liquidation or otherwise and of any other change in the composition of the
Pledged Collateral, Grantor or the Corporate Subsidiaries, and (iii) of the
occurrence of any other event which would have a material adverse effect on the
aggregate value of the Pledged Collateral or on the security interest created
hereunder, including the priority thereof.
(d) Continuous Perfection. Grantor will not change its name in
any manner which might make any financing or continuation statement filed
hereunder seriously misleading within the meaning of Section 9-402(7) of the
Code (or any other then-applicable provision of the Code) unless Grantor shall
have given Lender at least thirty (30) days prior written notice thereof and
shall have taken all action (or made arrangements to take such
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action substantially simultaneously with such change if it is impossible to take
such action in advance) necessary or reasonably requested by Lender to amend
such financing statement or continuation statement so that it is not seriously
misleading. Grantor will not sign or authorize the signing on their behalf of
any financing statement naming Grantor as a debtor covering all or any portion
of the Pledged Collateral, except financing statements naming Lender as secured
party.
(e) Place of Business. Grantor will not change its principal
place of business unless it has previously notified Lender thereof and taken
such action as is necessary or reasonably requested by Lender to cause the
security interest of Lender in the Pledged Collateral to continue to be
perfected.
(f) Transfer of Assets. Grantor will not directly or indirectly
sell, pledge, mortgage, assign, transfer, or otherwise dispose of or create or
suffer to be created any lien, security interest, charging order, or encumbrance
on any of the Pledged Collateral or the assets of the Corporate Subsidiaries.
(g) Performance of Obligations. Grantor will perform all of its
obligations under the Formation Agreement prior to the time that any interest or
penalty would attach against Grantor or any of the Pledged Collateral as a
result of failure to perform any of such obligations, and Grantor will do all
things necessary to maintain each of the Corporate Subsidiaries as a corporation
under the laws of the jurisdiction of organization and to maintain Grantor's
interest in the Corporate Subsidiaries in full force and effect without
diminution.
(h) Formation Agreement. Grantor will not (i) suffer or permit
any amendment or modification of the Formation Agreement without the prior
written consent of Agent, (ii) sell, transfer, encumber or convey any of its
interest in the Corporate Subsidiaries or (iii) waive, release, or compromise
any rights or claims Grantor may have against any other party with respect to
the Corporate Subsidiaries which arise under the Formation Agreement. Grantor
will not vote under the Formation Agreement to cause the Corporate Subsidiaries
to dissolve, liquidate, merge or consolidate with any other entity or take any
other action under the Formation Agreement that would adversely affect the
security interest created by this Agreement, including, without limitation, the
value or priority thereof. Grantor will not permit, suffer or otherwise consent
to the modification or redemption of any Stock in the Corporate Subsidiaries or
the issuance of any new or additional Stock in the Corporate Subsidiaries or
options or other agreements granting any right to receive Stock in the Corporate
Subsidiaries.
(i) Stay or Extension Laws. Grantor will not at any time claim,
take, insist upon or invoke the benefit or advantage of or from any law now or
hereafter in force providing for the valuation or appraisement of the Pledged
Collateral prior to any sale or sales thereof to be made pursuant to the
provisions hereof or pursuant to the decree, judgment, or order of any court of
competent jurisdiction; nor, after such sale or sales, claim or exercise any
right under any statute now or hereafter made or enacted by any state to redeem
the property so sold or any part thereof, and Grantor hereby expressly waives,
on
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behalf of itself and each and every person claiming by, through and under it,
all benefit and advantage of any such law or laws, and covenants that Grantor
will not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power, right or remedy herein or hereby granted and
delegated to Lender, but will authorize, allow and permit the execution of every
such power, right or remedy as though no such law or laws had been made or
enacted.
(j) Delivery of Certificates. Grantor agrees (i) immediately to
deliver to Lender, or Lender's designee, all certificates, instruments or other
documents evidencing any of the Pledged Collateral which may at any time come
into the possession of Grantor, together with any executed undated instruments
of transfer or assignments in blank with respect thereto, and (ii) to execute
and deliver a notice of the security interest of Lender in the Pledged
Collateral (which notice shall be satisfactory to Lender in form and substance
and which may request acknowledgment from the addressee) to any third party
which either has possession of the Pledged Collateral or any certificates
evidencing any of the Pledged Collateral or otherwise has the ability under
applicable law or the terms of any agreement to record transfers or transfer
ownership of any of the Pledged Collateral (whether at the direction of Grantor
or otherwise). Grantor hereby appoints Lender as Grantor's attorney-in-fact,
with authority at any time or times to take any of the foregoing actions on
behalf of Grantor. Grantor agrees that this Pledge or a photocopy of this Pledge
shall be sufficient as a financing statement.
(k) Corporate Subsidiaries' Records. Grantor shall cause the
Corporate Subsidiaries to make a notation on the records of the Corporate
Subsidiaries indicating the security interest granted hereby.
(l) Certificated Securities. Grantor shall, and shall permit
Lender to, promptly take all action necessary or appropriate to cause Lender to
have sole and exclusive "control" over the Pledged Collateral, as such term is
defined in Article 9 of the UCC.
5. GRANTOR'S POWERS.
(a) So long as an Event of Default does not exist, Grantor shall
be the sole party entitled (i) to exercise for any purpose any and all (A)
voting rights and (B) powers, and (ii) to receive any and all distributions, in
each case arising from or relating to the Pledged Collateral; provided, however,
that Grantor shall not exercise such rights or powers, or consent to any action
of the Corporate Subsidiaries that would be in contravention of the provisions
of, or constitute an Event of Default under, this Pledge or any of the other
Loan Documents.
(b) Upon the occurrence of an Event of Default, unless Lender
designates in writing to Grantor to the contrary, all rights of Grantor provided
in Section 5(a) hereof shall cease, and all voting rights and powers and rights
to distributions included in the Pledged Collateral or otherwise described in
such Section 5(a) shall thereupon become vested in Lender, and Lender shall
thereafter have the sole and exclusive right and authority to exercise such
voting rights and powers. Grantor shall execute such documents and instruments,
including but not limited to, statements that Grantor no longer has the right to
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act as a shareholder of the Corporate Subsidiaries or otherwise relating to such
change as Lender may request. Grantor hereby grants to Lender or its nominee an
irrevocable proxy to exercise all voting and corporate rights relating to the
Pledged Shares in any instance, which proxy shall be effective, at the
discretion of Lender, upon the occurrence and during the continuance of an Event
of Default. After the occurrence and during the continuance of an Event of
Default and upon request of Lender, Grantor agrees to deliver to Lender such
further evidence of such irrevocable proxy or such further irrevocable proxies
to vote the Pledged Shares as Lender may request. Grantor agrees that the
Corporate Subsidiaries may rely conclusively upon any notice from Lender that
Lender has the right and authority to exercise all rights and powers of Grantor
under the Formation Agreement. Grantor irrevocably waives any claim or cause of
action against the Corporate Subsidiaries following receipt of such notice from
Lender.
6. LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Grantor hereby irrevocably constitutes and appoints Lender
and each officer or agent of Lender with full power of substitution, as
Grantor's true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Grantor and in the name of Grantor or in
such attorney-in-fact's own name, from time to time in the discretion of each
such attorney-in-fact following the occurrence and during the continuance of an
Event of Default, for the purpose of carrying out the terms of this Pledge, to
take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Pledge and, without limiting the generality of the foregoing, hereby gives
each such attorney-in-fact the power and right, during the continuance of an
Event of Default, on behalf of Grantor, without notice to or assent by Grantor,
to do the following:
(i) to collect and otherwise take possession of and title
to any and all distributions of cash or other property due or
distributable at any time after the date hereof to Grantor as a
shareholder of the Corporate Subsidiaries, whether in complete or
partial liquidation or otherwise, and to prosecute or defend any
action or proceeding in any court of law or equity and to convert
any non-cash distributions to cash, and to apply any such cash
distributions, interest or proceeds of conversion in the manner
specified in Section 10(d) of this Pledge;
(ii) to ask, demand, collect, receive and give acceptances
and receipts for any and all moneys due and to become due under
any Pledged Collateral and, in the name of Grantor or such
attorney-in-fact's own name or otherwise, to take possession of
and endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any Pledged
Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by such attorney-in-fact for the purpose of
collecting any and all such moneys due under any Pledged
Collateral whenever payable;
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(iii) to pay or discharge taxes, liens, security interests
or other encumbrances levied or placed on or threatened against
the Pledged Collateral; and
(iv) (A) to direct any party liable for any payment under
any of the Pledged Collateral to make payment of any and all
moneys due and to become due thereunder directly to Lender or as
such attorney-in-fact shall direct; (B) to receive payment of and
receipt for any and all moneys, claims and other amounts due and
to become due at any time in respect of or arising out of any
Pledged Collateral; (C) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Pledged Collateral or any
portion thereof and to enforce any other right in respect of any
Pledged Collateral; (D) to defend any suit, action or proceeding
brought against Grantor with respect to any Pledged Collateral;
(E) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give
such discharges or releases as such attorney-in-fact may deem
appropriate; and (F) generally to sell, transfer, pledge,
exercise any rights or options granted to the owner of, make any
agreement with respect to or otherwise deal with any of the
Pledged Collateral as fully and completely as though such
attorney-in fact were the absolute owner thereof for all
purposes, and to do, at the option of such attorney-in-fact at
Grantor's expense, at any time, or from time to time, all acts
and things which such attorney-in-fact reasonably deems necessary
to protect, preserve or realize upon the Pledged Collateral and
the security interest of Lender therein, in order to effect the
intent of this Pledge, all as fully and effectively as Grantor
might do.
Grantor hereby ratifies, to the extent permitted by law, all that
said attorney shall lawfully do or cause to be done by virtue hereof. This power
of attorney is a power coupled with an interest and shall be irrevocable.
(b) The powers conferred on each attorney-in-fact hereunder are
solely to protect the interest in the Pledged Collateral of Lender, and shall
not impose any duty upon any such attorney-in-fact to exercise any such powers.
Each such attorney-in-fact shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be responsible to
Grantor for any act or failure to act unless such action or failure to act
constitutes gross negligence or willful misconduct.
(c) Grantor also authorizes Lender and each officer or agent of
Lender at any time and from time to time during the continuance of any Event of
Default, to execute, in connection with the sale provided for in Section 10 of
this Pledge, any endorsements, assignments or other instruments of conveyance or
transfer with respect to any of the Pledged Collateral.
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7. DISTRIBUTIONS. During the continuance of an Event of Default,
Grantor hereby grants Lender full irrevocable power and authority to receive and
hold at any such time cash and non-cash distributions by the Corporate
Subsidiaries on account of any of the Pledged Collateral (together with all
interest, if any, earned thereon), which may be held free and clear of the liens
created hereby, and to convert any such non-cash distributions to cash, and to
apply any such cash distributions, interest or proceeds of conversion in the
manner specified in Section 10(d) of this Pledge.
8. PERFORMANCE BY LENDER OF GRANTOR'S OBLIGATIONS. If Grantor
fails to perform or comply with any of their agreements contained herein and
Lender as provided for by the terms of this Pledge shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
expenses of Lender incurred in connection with such performance or compliance,
together with interest thereon at the rate following a default specified in the
Notes in effect from time to time shall be payable by Grantor to Lender on
demand and shall constitute Liabilities secured hereby.
9. DEFAULT. Any of the following shall constitute an "EVENT OF
DEFAULT" hereunder:
(a) A failure by Grantor to observe or perform any obligation,
covenant, condition, or agreement hereof to be performed by Grantor which
involves the payment of money for a period of five (5) days after written demand
from Lender;
(b) A failure by the Corporate Subsidiaries or Grantor to observe
or perform any nonmonetary obligation, covenant, condition, or agreement hereof
to be performed by Grantor (which is not otherwise included in Section 9(a),
(c), or (d)) which is not cured within thirty (30) days after written notice
thereof to Grantor;
(c) Any representation or warranty made by Grantor in this Pledge
is not true and correct in any material respect; or
(d) The occurrence of any "Event of Default" under any of the
Loan Documents.
10. REMEDIES, RIGHTS UPON DEFAULT.
(a) If any Event of Default shall occur, Lender or Lender's
designee may exercise in addition to all other rights and remedies granted to
them in this Pledge and in any other instrument or agreement securing,
evidencing or relating to the Liabilities, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, Grantor
expressly agrees that in any such event Lender, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon Grantor or any
other person (all and each of which demands, advertisements and/or notices are
hereby expressly waived), may forthwith collect, receive, appropriate and
realize upon the Pledged Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase, or sell or otherwise dispose
of and deliver said Pledged Collateral (or contract to do so), or any
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part thereof, at public or private sale or sales, at any exchange or broker's
board or at any of Lender's offices or elsewhere at such prices as it may deem
best, for cash or on credit or for future delivery without the assumption of any
credit risk. Grantor expressly acknowledges that private sales may be less
favorable to a seller than public sales but that private sales shall
nevertheless be deemed commercially reasonable and otherwise permitted
hereunder. In view of the fact that federal and state securities laws and/or
other applicable laws may impose certain restrictions on the method by which a
sale of the Pledged Collateral may be effected, Grantor agrees that during the
continuance of an Event of Default, Lender may, from time to time, attempt to
sell all or any part of the Pledged Collateral by means of a private placement,
restricting the prospective purchasers to those who will represent and agree
that they are purchasing for investment only and not for distribution and who
otherwise satisfy all of the requirements of applicable federal and state
securities laws. In so doing, Lender may solicit offers to buy the Pledged
Collateral, or any part thereof, for cash, from a limited number of investors
deemed by Lender in its judgment, to be financially responsible parties who
might be interested in purchasing the Pledged Collateral, and if Lender solicits
such offers, then the acceptance by Lender of the highest offer obtained
therefrom shall be deemed to be a commercially reasonable method of disposing of
the Pledged Collateral.
Lender or Lender's designee shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of said Pledged Collateral so
sold, free of any right or equity of redemption, which equity of redemption
Grantor hereby releases. Grantor further agrees, at the request of Lender, to
deliver to Lender or any purchaser or purchasers of the Pledged Collateral any
agreements, instruments and other documents evidencing or relating to the
Pledged Collateral. Lender shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale as provided in Section
10(d) of this Pledge. Only after so applying such net proceeds and after the
payment by Lender of any other amount required by any provision of law,
including Section 9-504(1)(c) of the Code, need Lender account for the surplus,
if any, to Grantor. To the extent permitted by applicable law, Grantor waives
all claims, damages, and demands against Lender arising out of the repossession,
retention or sale of the Pledged Collateral. Grantor agrees that Lender need not
give more than ten (10) days' notice (which notification shall be deemed given
when mailed or delivered on an overnight basis, postage prepaid, addressed to
Grantor at Grantor's addresses referred to in Section 12 hereof) of the time and
place of any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such matters.
(b) Grantor also agrees to pay all costs of Lender, including
reasonable attorneys' fees and expenses, incurred with respect to the collection
of any of the Liabilities or the enforcement of any of Lender's rights
hereunder.
(c) Grantor hereby waives presentment, demand, or protest (to the
extent permitted by applicable law) of any kind in connection with this Pledge
or any Pledged Collateral. Except for notices expressly provided for herein,
Grantor hereby waives notice (to the extent permitted by applicable law) of any
kind in connection with this Pledge.
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(d) The proceeds of any sale, disposition or other realization
upon all or any part of the Pledged Collateral shall be distributed by Lender in
the following order of priorities:
first, to Lender in an amount sufficient to pay in full the
expenses of Lender in connection with such sale, disposition or other
realization, including all expenses, liabilities and advances incurred
or made by Lender in connection therewith, including reasonable
attorneys' fees and expenses;
second, to Lender, until the other Liabilities are paid in full;
and
finally, upon payment in full of all of the Liabilities, to
Grantor, or their representative or as a court of competent jurisdiction
may direct.
Grantor agrees to indemnify and hold harmless Lender, its
directors, officers, employees, agents and parent, and subsidiary corporations,
and each of them, from and against any and all liabilities, obligations, claims,
damages, or expenses incurred by any of them arising out of or by reason of
entering into this Pledge or the consummation of the transactions contemplated
by this Pledge and to pay or reimburse Lender for the fees and disbursements of
counsel incurred in connection with any investigation, litigation or other
proceedings (whether or not Lender is a party thereto) arising out of or by
reason of any of the aforesaid, except to the extent any such liability,
obligation, claim, damage or expense results from the gross negligence or
willful misconduct of such indemnified party. Any amounts properly due under
this Section 10 shall be payable to Lender immediately upon demand.
11. LIMITATION ON LENDER'S DUTY IN RESPECT OF PLEDGED COLLATERAL.
Except as expressly provided in the Code, Lender shall have no duty as to any
Pledged Collateral in its possession or control or in the possession or control
of any agent or nominee of Lender or as to any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto.
12. NOTICES. Any notice or other communication required or
permitted to be given shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied or sent by overnight
courier or U.S. Mail and shall be deemed given: (a) if served in person, when
served; (b) if telecopied, on the date of transmission if before 3:00 p.m.
(Chicago time) on a business day; provided, that a hard copy of such notice is
also sent pursuant to clause (c) or (d) below; (c) if by overnight courier, on
the first business day after delivery to the courier; or (d) if by U.S. Mail, on
the fourth (4th) day after deposit in the mail, postage prepaid, certified mail,
return receipt requested.
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Notices to Grantor: Assisted Living Concepts, Inc.,
11835 NE Glenn Widing Drive
Building E
Portland, Oregon 97220
Attn: Drew Miller and Sandra Campbell
Telecopy: (503) 252-2916
with a copy to: Latham & Watkins
633 West Fifth Street
Suite 400
Los Angeles, California 90071
Attn: Gary Olson
Telecopy: (213) 891-8763
Notices to Lender: Heller Healthcare Finance, Inc.
Loan No. 21-139
2 Wisconsin Circle
Suite 400
Chevy Chase, Maryland 20815
Attn: Manager, Portfolio Administration Group
Telecopy: (301) 664-9843
With a copy to: Heller Healthcare Finance, Inc.
Loan No. 21-139
500 West Monroe Street
Chicago, Illinois 60661
Attn: Kevin McMeen, Senior Vice President
Telecopy: (312) 441-7119
And a copy to: Heller Healthcare Finance, Inc.
Loan No. 21-139
816 Congress Avenue
Suite 1900
Austin, Texas 78701
Attn: Diana Pennington, Vice President and Chief
Counsel, Senior Living Group
Telecopy: (512) 505-5487
Any party may change its respective address for the giving of
notice to another address by giving at least 10 business days' notice of such
change.
13. SEVERABILITY. Any provision of this Pledge which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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14. NO WAIVER; CUMULATIVE REMEDIES. Lender shall not, by any act,
delay, omission or otherwise, be deemed to have waived any of its rights or
remedies hereunder. No waiver hereunder shall be valid unless in writing signed
by the party to be charged with such waiver and then only to the extent therein
set forth. A waiver of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which Lender would otherwise
have had on any future occasion. No failure to exercise nor any delay in
exercising on the part of Lender any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies hereunder and under the other Loan Documents provided are cumulative
and may be exercised singly or concurrently, and are not exclusive of any rights
and remedies provided by law. Lender may resort to and realize on the Pledged
Collateral simultaneously with any acts or proceedings initiated by Lender in
its sole and conclusive discretion to resort to or realize upon any other
sources of repayment of the Liabilities, including, but not limited to,
collateral granted by other security agreements and the personal liability of
Grantor and any person or corporation which has guaranteed repayment of the
Liabilities. None of the terms or provisions of this Pledge may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by Grantor and Lender.
15. SUCCESSORS AND ASSIGNS; GOVERNING LAW. This Pledge and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor, except that Grantor, unless otherwise expressly provided in
the Loan Agreement and then only to the extent provided in the Loan Agreement
and subject to any conditions set forth therein, shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of Lender. All rights and remedies of Lender hereunder shall inure to
the benefit of Lender and its participants, successors and assigns. This Pledge
shall be governed by, and be construed and interpreted in accordance with, the
laws of the State of Illinois. Neither this Pledge nor anything set forth herein
is intended to, nor shall it, confer any rights on any person or entity other
than the parties hereto and all third party rights are expressly negated.
16. TERMINATION. This Pledge, and the assignments, pledges and
security interests created or granted hereby, shall terminate when the
Liabilities shall have been fully paid and satisfied, at which time Lender shall
release and reassign (without recourse upon, or any warranty whatsoever by
Lender), and deliver to Grantors all Pledged Collateral and related documents
then in the custody or possession of Lender, including termination statements
under the Code, all without recourse upon, or warranty whatsoever, by Lender and
at the cost and expense of Grantor.
17. INJUNCTIVE RELIEF. Grantor recognizes that in the event
Grantor fails to perform, observe or discharge any of Grantor's obligations
hereunder, no remedy of law will provide adequate relief to Lender, and agree
that Lender shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.
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18. WAIVER OF SUBROGATION. Grantor shall have no rights of
subrogation as to any of the Pledged Collateral until full and complete
performance and payment of the Liabilities.
19. WAIVER OF JURY TRIAL. GRANTOR AND LENDER, BY ITS ACCEPTANCE
OF THIS PLEDGE, HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
PLEDGE AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY GRANTOR AND LENDER, AND GRANTOR
ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS
MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS
TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. GRANTOR AND
LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS PLEDGE AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS
WAIVER IN THEIR RELATED FUTURE DEALINGS. GRANTOR AND LENDER FURTHER ACKNOWLEDGE
THAT THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED)
IN THE SIGNING OF THIS PLEDGE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL.
20. CONSENT TO JURISDICTION. GRANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS AND IRREVOCABLY AGREE THAT, SUBJECT TO LENDER'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. GRANTOR EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. GRANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON GRANTOR BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO GRANTOR, AT
THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE
TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
21. SUBORDINATION AND RELEASE. All indebtedness now or hereafter
owing by the Corporate Subsidiaries, to Grantor for borrowed money or otherwise
is hereby subordinated to the payment in full of the Liabilities, and during the
continuance of an Event of Default under this Pledge or any of the other Loan
Documents, Grantor shall not accept payment of all or any portion of such
subordinated indebtedness, and if any such payment is made to Grantor, Grantor
shall receive such payment in trust for the benefit of Lender and shall promptly
pay over such payment to Lender.
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22. LIABILITY OF GRANTOR NOT AFFECTED. This Pledge shall remain
in full force and effect without regard to, and shall not be released,
discharged or affected in any way by, any circumstances or condition, including,
without limitation:
(a) the attempt or the absence of any attempt by Lender to obtain
payment or performance by Borrower or any other obligor under the Loan Documents
(collectively, "OBLIGORS");
(b) Lender's delay in enforcing the Liabilities or the
obligations of any other party under the Loan Documents, or any prior partial
exercise by Lender of any right or remedy hereunder or under any of the other
Loan Documents;
(c) any renewal, extension, substitution, modification,
replacement of or indulgence with respect to, any indebtedness, liabilities, or
obligations under the Loan Documents (collectively, "BORROWER'S OBLIGATIONS"),
all of which Lender is hereby authorized to make;
(d) the fact that Borrower or any other Obligor may not be liable
for the payment or performance of the Borrower's Obligations, or any portion
thereof, for any reason whatsoever;
(e) any sale, exchange, release, surrender or other disposition
of, or realization upon, any collateral securing the Borrower's Obligations, or
any settlement or compromise of any guaranties of the Borrower's Obligations, or
any other obligation of any person or entity with respect to the Loan Documents;
(f) the acceptance by Lender of any additional security for the
Borrower's Obligations;
(g) the failure by Lender to take any steps to perfect, maintain,
or enforce its security interests or remedies under the Loan Documents, or to
preserve their rights to or protect any security or collateral, for the
Borrower's Obligations;
(h) the lack of validity or enforceability of, or Lender's waiver
or consent with respect to, any provision of any instrument evidencing, securing
or otherwise relating to the Borrower's Obligations, or any part thereof;
(i) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, liquidation, marshaling of assets and
liabilities or similar event or proceedings with respect to Borrower, Grantor or
any other Obligor, as applicable, or any of their respective properties (each,
an "INSOLVENCY PROCEEDING"), or any action taken by Lender, any trustee or
receiver or by any court in any such proceeding;
(j) the failure by Lender to file or enforce a claim against the
estate (either in an Insolvency Proceeding or other proceeding) of Borrower,
Grantor or any other Obligor;
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(k) in any Insolvency Proceeding under Title 11 of the United
States Code (11 U.S.C. Section 101 et seq.), as amended (the "BANKRUPTCY CODE"):
(i) any election by Lender under Section 1111(b)(2) of the Bankruptcy Code, (ii)
any borrowing or grant of a security interest by Borrower or any other Obligor
as debtor-in-possession under Section 364 of the Bankruptcy Code, (iii) the
inability of Lender to enforce the Borrower's Obligations against Borrower or
any other Obligor by application of the automatic stay provisions of Section 362
of the Bankruptcy Code, or (iv) the disallowance, under Section 502 of the
Bankruptcy Code, of all or any portion of Lender's claim(s) against Borrower or
any other Obligor for repayment of the Borrower's Obligations;
(l) the failure of Grantor to receive notice of any intended
disposition of the collateral for the Borrower's Obligations;
(m) any merger or consolidation of Borrower or any other Obligor
into or with any other entity, or any sale, lease or transfer of any of the
assets of Borrower, Grantor or any other Obligor to any other person or entity;
(n) any change in the ownership of Borrower or any other Obligor
or any change in the relationship between Borrower or any other Obligor and
Grantor, or any termination of any such relationship;
(o) the death, incapacity, insanity, disability, dissolution or
other change in states of Borrower, Grantor or any other Obligor;
(p) the absence, impairment or loss of any right of reimbursement
or subrogation or other right or remedy of Grantor; and
(q) the making of additional loans to Borrower or any other
Obligor, the increase or reduction of the maximum principal amount of the
Borrower's Obligations, the increase or reduction in the interest rate provided
in the Notes, or any other modification, amendment, release or waiver of the
terms of the Loan Documents;
(r) any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of Borrower, Grantor or any other
Obligor.
Grantor hereby expressly waives and surrenders any defense to its
liability under this Pledge based upon any of the foregoing acts, omissions,
agreements, waivers or matters, whether or not Grantor had notice or knowledge
of same. It is the purpose and intent of this Pledge that the obligations of
Grantor hereunder shall be absolute and unconditional under any and all
circumstances.
23. RIGHTS OF LENDER. Lender is hereby authorized, without notice
to or demand of Grantor and without affecting the liability of Grantor
hereunder, to take any of the following actions from time to time: (a) increase
or decrease the amount of, or renew, extend, accelerate or otherwise change the
time for payment of, or other terms relating to, Borrower's Obligations, or
otherwise modify, amend or change the terms of any promissory note or other
agreement evidencing, securing or otherwise relating to any of Borrower's
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Obligations, including, without limitation, the making of additional advances
thereunder; (b) accept and apply any payments on or recoveries against
Borrower's Obligations from any source, and any proceeds of any security
therefor, to Borrower's Obligations in such manner, order and priority as Lender
may elect in its sole discretion; (c) take, hold, sell, release or otherwise
dispose of all or any security for Borrower's Obligations or the payment of this
Pledge; (d) settle, release, compromise, collect or otherwise liquidate
Borrower's Obligations or any portion thereof; (e) accept, hold, substitute, add
or release any other Pledge or endorsements of Borrower's Obligations; and (f)
upon the failure of Borrower to perform any of Borrower's Obligations,
appropriate and apply toward payment of Borrower's Obligations (i) any
indebtedness due or to become due from Lender to Grantor, and (ii) any moneys,
credits, or other property belonging to Grantor at any time held by or coming
into the possession of Lender or any affiliates thereof, whether for deposit or
otherwise.
24. GRANTOR'S WAIVERS
(a) STATUTES OF LIMITATION. Grantor irrevocably waives all
statutes of limitation as a defense to any action or proceeding brought against
Grantor by Lender, to the fullest extent permitted by law.
(b) ELECTION OF REMEDIES. Grantor irrevocably waives any defense
based upon an election of remedies made by Lender or any other election afforded
to Lender pursuant to applicable law, including, without limitation, (i) any
election to proceed by judicial or nonjudicial foreclosure or by Uniform
Commercial Code sale or by deed or assignment in lieu thereof, or any election
of remedies which destroys or otherwise impairs the subrogation rights of the
Grantor or the rights of the Grantor to proceed against Borrower or any other
Obligor for reimbursement, or both, (ii) the waiver by Lender, either by action
or inaction of Lender or by operation of law, of a deficiency judgment against
Borrower or any other Obligor, and (iii) any election pursuant to an Insolvency
Proceeding.
(c) DEMANDS AND NOTICES. Grantor irrevocably waives all
presentments, demands for performance, protests, notices of protest, notices of
dishonor, notices of acceptance of this Pledge and of the existence, creation or
incurring of new or additional Borrower's Obligations, notices of defaults by
Borrower or any other Obligor and demands and notices of every kind that may be
required to be given by any statute or rule or law.
(d) BORROWER INFORMATION. Grantor irrevocably waives (i) any duty
of Lender to advise Grantor of any information known to Lender regarding the
financial condition of Borrower or any other Obligor (it being the obligation of
Grantor to keep informed regarding such condition) and (ii) any defense based on
any claim that Grantor's obligations exceed or are more burdensome than those of
Borrower or any other Obligor.
(e) LIMITATION OF LIABILITY. Grantor irrevocably waives any
impairment, modification, change, release or limitation of the liability of, or
stay of actions or lien enforcement proceedings against, Borrower, Grantor or
any other Obligor, their property, or their estate in bankruptcy, resulting from
the operation of any provision of the state or federal bankruptcy laws, or from
the decision of any court.
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(f) LACK OF DILIGENCE. Grantor irrevocably waives any and all
claims or defenses based upon lack of diligence in: (i) collection of any
Borrower's Obligations; (ii) protection of any collateral or other security for
the Borrower's Obligations; or (iii) realization upon the other Loan Documents.
(g) OTHER DEFENSES. Grantor irrevocably waives any other
defenses, set-offs or counterclaims which may be available to Borrower or any
other Obligor, and any and all other defenses now or at any time hereafter
available to Grantor (including without limitation those given to sureties) at
law or in equity.
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IN WITNESS WHEREOF, Grantor has executed this Stock Pledge
Agreement (Security Agreement) or has caused the same to be executed by
Grantor's duly authorized representative(s) as of the date first above written.
GRANTOR:
ASSISTED LIVING CONCEPTS, INC.,
a Nevada corporation and Chapter 11
debtor-in-possession
By:_____________________________________________
Sandra Campbell, Senior Vice President,
General Counsel and Secretary
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ACKNOWLEDGEMENT
The undersigned hereby (i) acknowledges receipt of a copy of the
foregoing Stock Pledge Agreement, (ii) waives any rights or requirement at any
time hereafter to receive a copy of such Stock Pledge Agreement in connection
with the registration of any Pledged Shares (as defined therein) in the name of
Lender or its nominee or the exercise of voting rights by Lender and (iii)
agrees promptly to note on its books and records the grant of the security
interest in the stock of the undersigned as provided in such Stock Pledge
Agreement.
Dated as of October 3, 2001
ALC OHIO, INC., a Nevada corporation
By:______________________________________
Sandra Campbell, Secretary
ALC PENNSYLVANIA, INC.,
a Nevada corporation
By:______________________________________
Sandra Campbell, Secretary
ALC IOWA, INC.,
a Nevada corporation
By:______________________________________
Sandra Campbell, Secretary
ALC NEBRASKA, INC.,
a Nevada corporation
By:______________________________________
Sandra Campbell, Secretary
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ALC NEW JERSEY, INC.,
a Nevada corporation
By:______________________________________
Sandra Campbell, Secretary
ALC INDIANA, INC.,
a Nevada corporation
By:______________________________________
Sandra Campbell, Secretary
NEVADA ALC, INC.,
a Nevada corporation
By:______________________________________
Sandra Campbell, Secretary
TEXAS ALC, INC.,
a Nevada corporation
By:______________________________________
Sandra Campbell, Secretary
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