Fill and Sign the Pledge Agreement Form

PLEDGE AGREEMENT THIS PLEDGE AGREEMENT, dated as of September [A], 1999 is executed by ADAC LABORATORIES, a California corporation ("Borrower"), in favor of ABN AMRO BANK N.V., a Netherlands public company acting through its San Francisco Representative Office, acting as agent (in such capacity, "Agent") for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, the "Lenders"). RECITALS A. Pursuant to an Amended and Restated Credit Agreement, dated as of March 29, 1999, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of August 17, 1999 (as amended, and as further amended from time to time, (the "Credit Agreement"), among Borrower, the Lenders and Agent, the Lenders have agreed to extend certain credit facilities to Borrower upon the terms and subject to the conditions set forth therein. B. The Lenders' obligations to continue to extend the credit facilities to Borrower under the Credit Agreement are subject, among other conditions, to receipt by Agent of this Pledge Agreement, duly executed by Borrower. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower hereby agrees with Agent, for the ratable benefit of the Lenders and Agent, as follows: 1. Definitions and Interpretation. When used in this Pledge Agreement, the following terms shall have the following respective meanings: "Agent" shall have the meaning given to that term in the introductory paragraph hereof. "Borrower" shall have the meaning given to that term in the introductory paragraph hereof. "Collateral" shall have the meaning given to that term in paragraph 2 hereof. "Credit Agreement" shall have the meaning given to that term in Recital A hereof. J-1 "Domestic Subsidiary" shall have the meaning given to that term in the Credit Agreement and shall include, without limitation, as of the date hereof each of the Subsidiaries listed in Part A of Attachment 1 hereto. "Domestic Subsidiary Shares" shall mean all Subsidiary Shares in Domestic Subsidiaries. "Equity Securities" shall have the meaning given to that term in the Credit Agreement. "Foreign Subsidiary" shall have the meaning given to that term in the Credit Agreement and shall include, without limitation as of the date hereof, each of the Subsidiaries listed in Part B of Attachment 1 hereto. "Foreign Subsidiary Nonvoting Shares" shall mean all Subsidiary Shares in Foreign Subsidiaries having no voting power, including without limitation as of the date hereof, the Subsidiary Shares so designated in Part B of Attachment 1 hereto. "Foreign Subsidiary Voting Shares" shall mean all Subsidiary Shares in Foreign Subsidiaries having voting power, including without limitation as of the date hereof, the Subsidiary Shares so designated in Part B of Attachment 1 hereto. "IRC" shall have the meaning given to that term in the Credit Agreement. "Lenders" shall have the meaning given to that term in the introductory paragraph hereof. "Maximum Percentage" shall mean, with respect to the Foreign Subsidiary Voting Shares of any Foreign Subsidiary, the maximum percentage of such shares that can be pledged to Agent without increasing the gross income of Borrower pursuant to Sections 951 and 956(c) (or any successor provisions) of the IRC, which percentage as of the date hereof shall be sixty-six percent (66%). "Pledged Shares" shall mean the Subsidiary Shares described in subparagraphs 2(a), 2(b) and 2(c) hereof. "Secured Obligations" shall have the meaning given to that term in the Credit Agreement. "Subsidiary" shall have the meaning given to that term in the Credit Agreement. J-2 "Subsidiary Shares" shall mean, with respect to any Subsidiary of Borrower, all Equity Securities issued by such Subsidiary. "UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time. Unless otherwise defined herein, all other capitalized terms used herein and defined in the Credit Agreement shall have the respective meanings given to those terms in the Credit Agreement, and all terms defined in the UCC shall have the respective meanings given to those terms in the UCC. The rules of construction set forth in Section I of the Credit Agreement shall, to the extent not inconsistent with the terms of this Pledge Agreement, apply to this Pledge Agreement and are hereby incorporated by reference. 2. Pledge. As security for the Secured Obligations, Borrower hereby pledges and assigns to Agent (for the ratable benefit of the Lenders and Agent) and grants to Agent (for the ratable benefit of the Lenders and Agent) a security interest in all right, title and interest of Borrower in and to the property described in subparagraphs (a) - (e) below, whether now owned or hereafter acquired (collectively and severally, the "Collateral"): (a) All Domestic Subsidiary Shares; (b) All Foreign Subsidiary Voting Shares of each Foreign Subsidiary equal to the Maximum Percentage therefor; (c) All Foreign Subsidiary Nonvoting Shares; (d) 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 of the Pledged Shares; and (e) All proceeds of the foregoing. 3. Representations and Warranties. Borrower represents and warrants to the Lenders and Agent as follows: (a) Borrower is the record legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Borrower acquires rights in the Collateral, will be the record legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Borrower acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Collateral (other than with respect to Collateral other than the Pledged Shares, Permitted Liens). J-3 (b) Agent has (or in the case of after-acquired Collateral, at the time Borrower acquires rights therein, will have) a first priority perfected security interest in the Pledged Shares and the other Collateral. (c) All Pledged Shares have been (or in the case of after-acquired Pledged Shares, at the time Borrower acquires rights therein, will have been) duly authorized, validly issued and fully paid and are (or in the case of after-acquired Pledged Shares, at the time Borrower acquires rights therein, will be) non-assessable. (d) Borrower has (or will have within fourteen (14) days of the date hereof) delivered to Agent, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all Pledged Shares, other certificated securities, other Collateral and all certificates, instruments and other writings evidencing the same. (e) Set forth in Attachment 1 hereto is a true, complete and accurate list of all Subsidiary Shares. All information set forth in Attachment 1 is true, complete and accurate. 4. Covenants. Borrower hereby agrees as follows: (a) Borrower, at Borrower's expense, shall promptly procure, execute and deliver to Agent all documents, instruments and agreements and perform all acts which are necessary, or which Agent may reasonably request, to establish, maintain, preserve, protect and perfect the Collateral, the Lien granted to Agent therein and the first priority of such Lien or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, Borrower shall (i) procure, execute and deliver to Agent all stock powers, endorsements, assignments, financing statements and other instruments of transfer requested by Agent, (ii) deliver to Agent promptly upon receipt the originals of all Pledged Shares, other certificated securities, other Collateral and all certificates, instruments and other writings evidencing the same and (iii) cause the Lien of Agent to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Agent. (b) Borrower shall pay promptly when due all taxes and other governmental charges, all Liens and all other charges now or hereafter imposed upon, relating to or affecting any Collateral. (c) Upon demand by Agent after the occurrence and during the continuation of any Event of Default, Borrower shall deposit, or cause to be deposited, all remittances, checks and other funds (in whatever form) received with respect to Collateral to a deposit account for which Borrower J-4 has complied with subparagraph 4(e) of the Borrower Security Agreement and in which Agent has a first priority perfected security interest. (d) Borrower shall appear in and defend any action or proceeding which may affect its title to or Agent's security interest in the Collateral if an adverse decision is reasonably likely to have a Material Adverse Effect. (e) Borrower shall not surrender or lose possession of (other than to Agent), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein except as permitted in the Credit Agreement, and, notwithstanding any provision of the Credit Agreement, Borrower shall keep the Collateral free of all Liens (except with respect to Collateral other than the Pledged Shares, Permitted Liens. 5. Voting Rights and Dividends Prior to Default. Unless an Event of Default has occurred and is continuing: (a) Borrower may exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Shares or any part thereof; provided, however, that Borrower shall not exercise or refrain from exercising any such rights where the consequence of such action or inaction would be (i) to impair any Collateral, the Lien granted to Agent therein, the first priority of such Lien or Agent's rights and remedies hereunder with respect to any Collateral or (ii) otherwise inconsistent with the terms of this Pledge Agreement and the other Credit Documents. (b) Borrower may receive and retain all dividends and interest paid in cash in respect of the Pledged Shares, except for any such dividends and interest paid in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus. Borrower shall promptly deliver to Agent to hold as Collateral all dividends and interest which Borrower is not entitled to receive and retain pursuant to the preceding sentence, in the same form as so received (with any necessary endorsement), and, until so delivered, shall hold such dividends and interest in trust for the benefit of Agent, segregated from the other property or funds of Borrower. 6. Authorized Action by Agent. Borrower hereby irrevocably appoints Agent as its attorney-in-fact and agrees that Agent may perform (but Agent shall not be obligated to and shall incur no liability to Borrower or any third party for failure so to do) any act which Borrower is obligated by this Pledge Agreement to perform, and to exercise such rights and powers as Borrower might exercise with respect to the Collateral, including, without limitation, the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, J-5 deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) insure, process, preserve and enforce the Collateral; (d) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (e) pay any Indebtedness of Borrower relating to the Collateral; and (f) execute UCC financing statements and other documents, instruments and agreements required hereunder; provided, however, that Agent may exercise such powers only after the occurrence and during the continuance of an Event of Default. Borrower agrees to reimburse Agent upon demand for all reasonable costs and expenses, including attorneys' fees, Agent may incur while acting as Borrower's attorney-in-fact hereunder, all of which costs and expenses are included in the Secured Obligations. Borrower agrees that such care as Agent gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Agent's possession; provided, however, that Agent shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other Person in connection with the Secured Obligations or with respect to the Collateral. 7. Events of Default. (a) Event of Default. Borrower shall be deemed in default under this Pledge Agreement upon the occurrence and during the continuance of an Event of Default, as that term is defined in the Credit Agreement. (b) Voting Rights and Dividends. Upon the occurrence and during the continuance of an Event of Default: (i) All rights of Borrower to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to subparagraph 5(b) hereof and to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to subparagraph 5(a) hereof shall cease and all such rights shall thereupon become vested in Agent which shall thereupon have the sole right, but not the obligation, to exercise such voting and other consensual rights and to receive and hold as Collateral such dividends and interest payments. (ii) Borrower shall promptly deliver to Agent to hold as Collateral all dividends and interest received by Borrower after the occurrence and during the continuance of any Event of Default, in the same form as so received (with any necessary endorsement), and, until so delivered, shall hold such dividends and interest in trust for the benefit of Agent, segregated from the other property or funds of Borrower. J-6 (c) Other Rights and Remedies. In addition to all other rights and remedies granted to Agent by this Pledge Agreement, the Credit Agreement, the other Credit Documents, the UCC and other applicable Governmental Rules, Agent may, upon the occurrence and during the continuance of any Event of Default, exercise any one or more of the following rights and remedies: (i) collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce Agent's security interests in any or all Collateral in any manner permitted by applicable Governmental Rules or in this Pledge Agreement; (ii) notify any or all issuers of or transfer or paying agents for the Collateral or any applicable clearing corporation, financial intermediary or other Person to register the Collateral in the name of Agent or its nominee and/or to pay all dividends, interest and other amounts payable in respect of the Collateral directly to Agent; (iii) sell or otherwise dispose of any or all Collateral at one or more public or private sales, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner as Agent may determine; and (iv) require Borrower to assemble all records and information relating to the Collateral and make it available to Agent at a place to be designated by Agent. In any case where notice of any sale or disposition of any Collateral is required, Borrower hereby agrees that seven (7) days notice of such sale or disposition is reasonable. (d) Securities Laws. (i) Borrower acknowledges and recognizes that Agent may be unable to effect a public sale of all or a part of the Pledged Shares and may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obligated to agree, among other things, to acquire the Pledged Shares for their own account, for investment and not with a view to the distribution or resale thereof. Borrower acknowledges that any such private sales may be at prices and on terms less favorable to Agent than those of public sales, and agrees that such private sales shall be deemed to have been made in a commercially reasonable manner and that Agent has no obligation to delay sale of any Pledged Shares to permit the issuer thereof to register it for public sale under the Securities Act of 1933, as amended, or under any state securities law. (ii) Upon the occurrence and during the continuation of an Event of Default and at Agent's request, Borrower shall, and shall cause all issuers of Collateral and all officers and directors thereof and all other necessary Persons to, execute and deliver all documents, instruments and agreements and perform all other acts necessary or, in the opinion of Agent, advisable to sell the Collateral in any public or private sale, including any acts requested by Agent to (A) register J-7 any Collateral under the Securities Act of 1933, (B) qualify any Collateral under any state securities or "Blue Sky" laws or (C) otherwise permit any such sale to be made in full compliance with all applicable Governmental Rules. 8. Miscellaneous. (a) Notices. Except as otherwise specified herein, all notices, requests, demands, consents, instructions or other communications to or upon Borrower or Agent under this Pledge Agreement shall be given as provided in Paragraph 8.01 of the Credit Agreement. (b) Waivers; Amendments. Any term, covenant, agreement or condition of this Pledge Agreement may be amended or waived only as provided in the Credit Agreement. No failure or delay by Agent or any Lender in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in any such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. (c) Successors and Assigns. This Pledge Agreement shall be binding upon and inure to the benefit of Agent, the Lenders and Borrower and their respective successors and assigns; provided, however, that Agent, the Lenders and Borrower may sell, assign and delegate their respective rights and obligations hereunder only as permitted by the Credit Agreement. Agent may disclose this Pledge Agreement as provided in the Credit Agreement. (d) Partial Invalidity. If at any time any provision of this Pledge Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Pledge Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. (e) Cumulative Rights, etc. The rights, powers and remedies of Agent and the Lenders under this Pledge Agreement shall be in addition to all rights, powers and remedies given to Agent and the Lenders by virtue of any applicable Governmental Rule, the Credit Agreement, any other Credit Document or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Agent's rights hereunder. Borrower waives any right to require Agent or any Lender to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Agent's or such Lender's power. J-8 (f) Payments Free of Taxes, Etc. All payments made by Borrower under this Pledge Agreement shall be made by Borrower free and clear of and without deduction for any and all present and future taxes, levies, charges, deductions and withholdings. In addition, Borrower shall pay upon demand any stamp or other taxes, levies or charges of any jurisdiction with respect to the execution, delivery, registration, performance and enforcement of this Pledge Agreement. Upon request by Agent, Borrower shall furnish evidence satisfactory to Agent that all requisite authorizations and approvals by, and notices to and filings with, governmental authorities and regulatory bodies have been obtained and made and that all requisite taxes, levies and charges have been paid. (g) Borrower's Continuing Liability. Notwithstanding any provision of this Pledge Agreement or any other Credit Document or any exercise by Agent of any of its rights hereunder or thereunder (including, without limitation, any right to collect or enforce any Collateral), (i) Borrower shall remain liable to perform its obligations and duties in connection with the Collateral and (ii) neither Agent nor any Lender shall assume or be considered to have assumed any liability to perform such obligations and duties or to enforce any of Borrower's rights in connection with the Collateral. (h) Governing Law. This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules (except to the extent otherwise provided in the UCC). J-9 IN WITNESS WHEREOF, Borrower has caused this Pledge Agreement to be executed as of the day and year first above written. ADAC LABORATORIES By: ------------------------------------------ Name: ------------------------------------- Title: ------------------------------------ J-10 ATTACHMENT 1 TO PLEDGE AGREEMENT PART A DOMESTIC SUBSIDIARY SHARES Shares Shares Owned Subsidiary Jurisdiction Outstanding(1) by Borrower ADAC Research & Manufacturing, Inc. California 1,000 100% ADAC Healthcare Information Systems, Inc. Texas 100% ADAC Medical Technologies, Inc. (formerly known as J.D. Technical Services, Inc.) Delaware 1,000 100% ADAC Laboratories Pacific, Inc. California 1,000 100% ADAC Healthcare Partners, Inc. Delaware 1 common 100% 1,000,000 preferred 100% Cortet, Inc. Florida 100% O.N.E.S. Medical Services, Inc. New Hampshire 100% CT Solutions California 100% - -------------------- (1) All shares common unless otherwise indicated. J-11 PART B FOREIGN SUBSIDIARY SHARES Shares Shares Owned Subsidiary Jurisdiction Outstanding(1) by Borrower(2) ADAC Laboratories Canada Ltd. Canada 100 100% ADAC Laboratories Europe, BV. Netherlands 20,646 100% ADAC Foreign Sales Corporation Virgin Islands 1,000 100% ADAC do Brasil Brazil 85,000 100% - -------------------- (1) All shares common unless otherwise indicated. (2) An immaterial number of directors' qualifying shares or the equivalent may be outstanding for some Foreign Subsidiaries.