EXHIBIT 10.16
PLEDGE AGREEMENT dated as of August 28, 1995 ("Pledge Agreement"),
made by Integrated Medical Systems, Inc., a Colorado corporation (the "Pledgor")
to Eli Lilly and Company, an Indiana corporation (together with its successors
and assigns, "Pledgee").
PRELIMINARY STATEMENTS
1. Reference is made to paragraph 11 of the Term Sheet, dated June
12, 1995, and to Section 7.15 of the Agreement and Plan of Merger, dated as of
August 2, 1995, among the Pledgor, the Pledgee and a subsidiary of the Pledgee
(the "Merger Agreement"), pursuant to which the Pledgee has made loans, and
hereafter may make additional loans, to the Pledgor.
Loans of $3,000,000 and $1,000,000 were made on June 12 and July 27,
1995, respectively, each evidenced by a Promissory Note, due July 1, 1996, and
secured by a Security Agreement and Pledge Agreement dated as of the date of the
loan. Such Security Agreements and such Pledge Agreements are herein called the
Prior Security Agreements and the Prior Pledge Agreements, respectively.
The parties desire to make additional loans (the "New Loans"), each to
be evidenced by a Promissory Note, dated the date of the loan, and due July 1,
1996 (a "New Note"), and secured by this Pledge Agreement and the Security
Agreement of even date herewith.
2. It is a condition precedent to the obligation of the Pledgee to
provide New Loans to the Pledgor that the Pledgor shall have granted the
security interest contemplated by this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Pledgee to provide New Loans to the Pledgor, the Pledgor hereby
agrees as follows:
SECTION 1. Pledge. The Pledgor hereby pledges and grants a security
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interest to the Pledgee in all of the following (the "Pledged Collateral"):
(i) all of the stock described in Schedule I (the "Pledged
Shares") and the certificates representing the Pledged Shares, and all
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of the Pledged Shares; and
(ii) all additional shares of stock of any and all issuers of any of
the Pledged Shares from time to time acquired by the Pledgor in any manner,
and the certificates representing such additional shares, and all
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such shares; and
(iii) all proceeds of any and all of the foregoing.
SECTION 2. Security for Obligations. The Pledged Collateral secures
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the prompt and complete payment when due of all obligations of Pledgor under the
New Notes (the "Obligations").
SECTION 3. Delivery of Pledged Collateral. All certificates or
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instruments representing or evidencing the Pledged Collateral have been
delivered to and are held by the Pledgee pursuant to the Prior Pledge
Agreements, in suitable form for transfer by delivery, or accompanied by duly
executed instruments of transfer or assignment in blank. As of the date hereof,
such certificates and instruments shall be deemed held by Pledgee hereunder as
well as under the Prior Pledge Agreements. The Pledgee shall have the right, at
any time in its discretion and without notice to the Pledgor, to transfer to or
to register in the name of the Pledgee or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights specified in Section
6(a). In addition, the Pledgee shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. The Pledgor represents
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and warrants to the Pledgee as follows:
(i) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(ii) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, option or other charge or encumbrance,
except for the security interest created by this Pledge Agreement and the
security interest created by the Prior Pledge Agreements.
(iii) The pledge of the Pledged Shares pursuant to this Pledge
Agreement creates a valid and perfected first priority security interest,
subject only to the Prior Pledge Agreements, in the Pledged Collateral securing
the payment of Pledgor's obligation under the New Notes.
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(iv) No authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority is required either (i) for the pledge
by the Pledgor of the Pledged Collateral pursuant to this Pledge Agreement or
for the execution, delivery or performance of the Pledge Agreement by the
Pledgor, or (ii) for the exercise by the Pledgee of the voting or other rights
provided for in this Pledge Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Pledge Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
(v) The Pledged Shares constitute all of the issued and outstanding
shares of stock of each issuer thereof as set forth on Schedule I.
SECTION 5. Further Assurances. The Pledgor agrees that at any time
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and from time to time, at the expense of the Pledgor, it will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Pledgee may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Pledgee to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends; Etc. (a) So long as no Default
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(as defined in the New Notes) shall have occurred and be continuing:
(i) The 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 Pledge
Agreement or the New Notes; provided, however, that the Pledgor shall not
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exercise or refrain from exercising any such right if, in the Pledgee's
reasonable judgment, such action would modify or in any way adversely
change the Pledgor's or the Pledgee's rights with respect to the Pledged
Collateral or any part thereof.
(ii) The Pledgor shall be entitled to receive and retain any and
all dividends paid in respect of the Pledged Collateral, provided, however,
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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 in respect of, or in exchange for, any Pledged
Collateral,
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(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a liquidation or
dissolution, and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Pledged
Collateral,
shall be, and shall be forthwith delivered to the Pledgee to hold as,
Pledged Collateral and shall, if received by the Pledgor, be received in
trust for the benefit of the Pledgee, be segregated from the other property
or funds of the Pledgor, and be forthwith delivered to the Pledgee as
Pledged Collateral in the same form as so received (with any necessary
indorsement).
(iii) The Pledgee hereby authorizes the Pledgor to exercise all
voting and other rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends which it is authorized to
receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of a Default:
(i) Upon the request of the Pledgee, all rights of the Pledgor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 6(a)(i) and to receive the
dividends which it would otherwise be authorized to receive and retain
pursuant to Section 6(a)(ii) shall cease, and all such rights shall
thereupon become vested in the Pledgee, and the Pledgee shall thereupon
have the sole right to exercise such voting and other consensual rights and
to receive and hold as Pledged Collateral such dividends.
(ii) All dividends which are received by the Pledgor contrary to
the provisions of paragraph (i) of this Section 6(b) shall be received in
trust for the benefit of the Pledgee, shall be segregated from other funds
of the Pledgor and shall be forthwith paid over to the Pledgee as Pledged
Collateral in the same form as so received (with any necessary
indorsement).
SECTION 7. Transfers and Other Liens; Additional Shares.
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(a) The Pledgor agrees that it will neither (i) sell or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral,
nor (ii) create or permit to exist any lien, security interest, or other
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charge or encumbrance upon or with respect to any of the Pledged Collateral,
except for the security interest under this Pledge Agreement or the Prior Pledge
Agreements.
(b) The Pledgor agrees that it will (i) cause each issuer of the
Pledged Shares not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares, except to its existing shareholders so that
after giving effect to such issuance all such shareholders, including the
Pledgor, still own the same percentage of the outstanding stock of such issuer,
and (ii) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
of each issuer of the Pledged Shares.
SECTION 8. Pledgee Appointed Attorney-in-Fact. The Pledgor hereby
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appoints the Pledgee, the Pledgor's attorney-in-fact, with full authority in the
place and stead of the Pledgor and in the name of the Pledgor or otherwise, to
take any action and to execute any instrument which the Pledgee may deem
necessary or advisable to accomplish the purposes of this Pledge Agreement,
including, without limitation, to receive, endorse and collect all instruments
made payable to the Pledgor representing any dividend or other distribution in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same, provided, however, the Pledgee agrees it will only exercise such
rights upon the occurrence and during the continuance of a Default.
SECTION 9. Pledgee May Perform. If the Pledgor fails to perform any
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agreement contained herein, the Pledgee may itself perform or cause performance
of, such agreement, and the expenses of the Pledgee incurred in connection
therewith shall be payable by the Pledgor under Section 12.
SECTION 10. The Pledgee's Duties and Reasonable Care. The powers
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conferred on the Pledgee hereunder are solely to protect its interests in the
Pledged Collateral and shall not impose any duty upon it to exercise any such
powers. The Pledgee shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially equal to that which the
Pledgee accords its own property, it being understood that the Pledgee shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Pledged Collateral, whether or not the Pledgee has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
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SECTION 11. Remedies. If any Default shall have occurred and be
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continuing:
(a) The Pledgee may 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 (the "Code") in effect in the State of New York at that
time, and the Pledgee may also, without notice, except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Pledgee's offices
or elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Pledgee may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be required by law, at least ten (10) days'
notice to the Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Pledgee shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. The Pledgee may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) Any cash held by the Pledgee as Pledged Collateral and all cash
proceeds received by the Pledgee 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 the Pledgee, be held by the Pledgee as collateral for, and/or then
or at any time thereafter applied (after payment of any amounts payable to the
Pledgee pursuant to Section 12) in whole or in part by the Pledgee against, all
or any part of the Obligations in such order as the Pledgee shall elect. Any
surplus of such cash or cash proceeds held by the Pledgee and remaining after
payment in full of all Obligations shall be paid over to the Pledgor or to
whosoever may be lawfully entitled to receive such surplus. If the proceeds of
the sale of the Collateral are insufficient to pay all the Obligations the
Pledgor agrees to pay upon demand any deficiency to the Pledgee.
SECTION 12. Indemnity and Expenses. (a) The Pledgor hereby
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indemnifies the Pledgee from and against any and all claims, losses, damages and
liabilities growing out of or resulting from this Pledge Agreement (including,
without limitation, enforcement of this Pledge Agreement), except claims,
losses, damages or liabilities resulting from the Pledgee's gross negligence and
willful misconduct.
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(b) The Pledgor will upon demand pay to the Pledgee the amount of any
and all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Pledgee may incur in connection
with (i) any amendment to this Pledge Agreement; (ii) the administration of this
Pledge Agreement; (iii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral; (iv)
the exercise or enforcement of any of the rights of the Pledgee hereunder; or
(v) the failure by the Pledgor to perform or observe any of the provisions
hereof.
SECTION 13. Amendments, Etc. No amendment or waiver of any provision
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of this Pledge Agreement, nor consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Pledgee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 14. Addresses for Notices. All notices and other
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communications provided for hereunder shall be in writing and, if to the
Pledgor, mailed or delivered by messenger or sent by facsimile, addressed to it
at in the Note; if to the Pledgee, mailed or delivered by messenger or sent by
facsimile to it, addressed to it at Eli Lilly and Company, Lilly Corporate
Center, Indianapolis, Indiana 46285, Telephone (317) 276-2000, Telecopy (317)
276-9152, Attention: General Counsel. All such notices and other communications
shall, when mailed or delivered by messenger or sent by facsimile, respectively,
be effective when deposited in the mails or delivered to the messenger or sent
by facsimile, respectively, addressed as aforesaid.
SECTION 15. Continuing Security Interest; Transfer of the Note. This
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Pledge Agreement shall create a continuing security interest in the Pledged
Collateral and shall (i) remain in full force and effect until payment in full
of all Obligations, (ii) be binding upon the Pledgor, its successors and
assigns, and (iii) inure to the benefit of the Pledgee and its successors,
transferees and assigns. Without limiting the generality of the foregoing
clause (iii), the Pledgee may assign or otherwise transfer all or a portion of
its rights or obligations under the New Notes to any other person or entity, and
such other person or entity shall thereupon become vested with all the benefits
in respect thereof granted to the Pledgee herein or otherwise. Upon the payment
in full of the Obligations, the Pledgor shall be entitled to the return, upon
its request and at its expense, of such of the Pledged Collateral as shall not
have been sold or otherwise applied pursuant to the terms hereof.
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SECTION 16. Governing Law; Terms. This Pledge Agreement shall be
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governed by and construed in accordance with the laws of the State of New York.
Unless otherwise defined herein, terms defined in Article 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
SECTION 17. Miscellaneous. This Pledge Agreement is in addition to
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and not in limitation of any other rights and remedies the Pledgee may have by
virtue of any other instrument or agreement heretofore, contemporaneously
herewith or hereafter executed by the Pledgor or any other person or by law or
otherwise, including, without limitation, the Prior Pledge Agreements and the
Prior Security Agreements, all of which are not superseded hereby and shall
continue in full force and effect. If any provision of this Pledge Agreement is
contrary to applicable law, such provision shall be deemed ineffective without
invalidating the remaining provisions hereof. The Pledgee shall not, by any
act, delay, omission or otherwise, be deemed to have waived any of its rights or
remedies hereunder.
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IN WITNESS WHEREOF, the Pledgor has caused this Pledge Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
INTEGRATED MEDICAL SYSTEMS, INC.
By /s/ Charles I. Brown
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Charles I. Brown
Executive Vice President and
Chief Financial Officer
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SCHEDULE I