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Exhibit 10.45
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "Pledge Agreement"),
dated as of September 19, 2000, is by and between Xxxxxx Xxxxx ("Xxxxx"), an
individual residing at 000 Xxxx Xxxxxxxxxx Xxxxxx, #0X, Xxx Xxxx City, New York,
and The Princeton Review, Inc., a Delaware corporation having an address at 0000
Xxxxxxxx, Xxx Xxxx Xxxx, Xxx Xxxx ("TPR").
W I T N E S S E T H:
THAT WHEREAS, contemporaneously herewith TPR is making a loan
(the "Loan") to Xxxxx in an aggregate amount of two hundred and fifty thousand
dollars ($250,000), the terms of which are set forth in a non-recourse
promissory note, dated the date hereof (the "Note"); and
WHEREAS, it is a condition precedent to TPR's obligation to
make the Loan to Xxxxx that Xxxxx enter into this Pledge Agreement to provide
TPR with 53,001 shares of the Class B non-voting common stock of TPR (the
"Shares") as security for the payment of the obligations of Xxxxx to TPR under
the Note;
NOW, THEREFORE, in consideration of TPR's agreement to make
the Loan to Xxxxx and in order to provide TPR with assurance of the payment of
Xxxxx'x obligations under the Note, 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 Agreement the
following terms shall have the following meanings:
"Collateral" means the Shares and all Proceeds.
"Proceeds" shall mean "proceeds" as such term is
defined in Article 9 of the UCC and, in any event, shall mean and include, but
not be limited to, the following at any time whatsoever arising or receivable:
(i) whatever is received upon any collection, exchange, sale or other
disposition of any of the Collateral and any property into which any of the
Collateral is converted, whether cash or non-cash proceeds, (ii) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to Xxxxx from
time to time with respect to any of the Collateral, (iii) any and all payments
(in any form whatsoever) made or due and payable to Xxxxx from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person acting under color or governmental
authority) and (iv) any and all other amounts from time to time paid, payable,
distributed or distributable under or in connection with any of the Collateral.
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"UCC" shall mean the Uniform Commercial Code as the
same may be in effect in the State of New York from time to time.
2. Grant and Perfection of Security Interest. To secure the
Secured Obligations (as defined in Section 3 of this Pledge Agreement), Xxxxx
hereby pledges the Shares to TPR and grants to TPR a first priority security
interest in the Collateral. From time to time after the execution of this
Agreement, Xxxxx shall execute such financing statements and other instruments
and documents which, in the judgment of TPR, may be reasonably necessary,
desirable or appropriate to perfect, record or evidence the security interest of
TPR in the Collateral. Xxxxx hereby authorizes TPR to execute and file such
financing statements, instruments and documents on behalf of Xxxxx as its
attorney-in-fact. Xxxxx shall pay to TPR reasonable and customary costs and
expenses (including, without limitation, filing fees and recording and stamp
taxes) incurred in filing and recording such financing statements, instruments
and documents as well as any such fees and taxes which may be imposed on or with
respect to the Collateral or this Agreement.
3. Secured Obligations. This Pledge Agreement secures, and the
Collateral is collateral security for, (i) the prompt payment in full when due,
whether by acceleration or otherwise, of the principal of and interest on the
Note and (ii) the performance of all obligations and liabilities of Xxxxx to TPR
pursuant to the provisions of the Note and this Pledge Agreement. All such
obligations are hereinafter collectively referred to as the "Secured
Obligations."
4. Delivery of Pledged Shares. Simultaneously with the
execution of this Pledge Agreement Xxxxx shall deliver the certificates
representing the Shares (the "Certificates") to TPR at such place as TPR shall
reasonably request. Xxxxx hereby authorizes TPR to indicate in its stock
records, or to cause TPR's registrar or stock-transfer agent to indicate in the
records it maintains, that the Shares are subject to a security interest in
favor of TPR.
5. Non-Recourse. The Note and all Secured Obligations are
non-recourse to Xxxxx. Notwithstanding any provision hereof or of the Note to
the contrary, no deficiency or other judgment for payment of the principal or
interest under the Note or any other amount payable under the Note or this
Pledge Agreement shall be sought or entered by TPR against Xxxxx in any action
to enforce the Note or this Pledge Agreement, provided, however, the foregoing
shall not (a) release or impair the Secured Obligations or the lien of the
security interest granted in this Pledge Agreement, (b) affect the rights and
remedies of TPR under this Pledge Agreement, (c) prejudice the rights of TPR
under any other collateral instrument further securing the Secured Obligations,
or (d) release Xxxxx from any liability for fraud, misrepresentation or breach
of Section 9 of this Pledge Agreement. If, on the Maturity Date (as defined in
the Note), the stock of Payee constituting the Collateral may not be sold by
Xxxxx either pursuant to an effective registration statement under the
Securities Act of 1933 or the provisions of Rule 144 under that act, Xxxxx may,
by notice to TPR, satisfy all Secured Obligations in full by relinquishing his
rights in (a) the Collateral or (b) that portion of the Collateral (valued at
Fair Market Value as described below) necessary to satisfy such obligations,
with the balance of the Collateral being forthwith assigned, transferred and
delivered by TPR to Xxxxx. For all purposes under this Pledge Agreement and the
Note, Fair Market Value
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of the Collateral shall be determined as follows: (a) if the stock of TPR is
then listed on Nasdaq or a national securities exchange, the Fair Market Value
of the stock of TPR shall be the average closing price of such stock as reported
on Nasdaq or the applicable exchange for the five trading days preceding the
date of the action which requires the determination of Fair Market Value under
this Pledge Agreement or (b) if the stock of TPR is not then traded on Nasdaq or
a national securities exchange, the Fair Market Value will be the then
applicable Agreed Value (as determined pursuant to the Stockholders' Agreement,
dated April 1, 2000, among TPR and its stockholders).
6. Representations and Warranties of Xxxxx. Xxxxx hereby
represents and warrants to TPR as follows:
(a) Xxxxx is the legal owner of the Shares, free and clear of
any liens, claims or encumbrances whatsoever other than the lien and security
interest created by this Pledge Agreement.
(b) Xxxxx has full power, authority and legal right to pledge
and grant a first priority security interest in all the Collateral to TPR
pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly and validly executed
and delivered by Xxxxx and constitutes the legal and valid obligation of Xxxxx,
enforceable against Xxxxx in accordance with its terms.
(d) No notice by Xxxxx to any governmental authority or
regulatory body or filing by Xxxxx with any governmental authority or regulatory
body is required, nor is Xxxxx required to obtain any consent, authorization,
approval or other action by any governmental authority or regulatory body, for
(i) the execution, delivery or performance of this Pledge Agreement by Xxxxx,
(ii) the grant by Xxxxx of a security interest in the Collateral pursuant to
this Pledge Agreement or (iii) the exercise by TPR of the rights provided for in
this Pledge Agreement, except for the filing of a financing statement in the
appropriate jurisdictions to record the security interest created hereby.
(e) The execution of this Pledge Agreement and the delivery of
the Certificates to TPR pursuant to this Pledge Agreement create a valid and
perfected first priority security interest in the Collateral in favor of TPR
securing the payment of the Secured Obligations (assuming the filing of a
financing statement in the appropriate jurisdictions to record the security
interest created hereby).
7. Further Assurances. Xxxxx agrees that at any time and from
time to time Xxxxx will promptly execute and deliver all such further
instruments and documents and take all such further actions, as may be necessary
or as TPR may reasonably request, in order further to perfect and protect the
security interest in the Collateral in favor of TPR granted or purported to be
granted pursuant to this Pledge Agreement and to enable TPR to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
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8. Income, Dividends, Distributions or Other Payment. As long
as no Event of Default (as defined in the Note) shall have occurred and be
continuing, Xxxxx shall be entitled to receive and retain any and all regular
cash dividends paid on or with respect to the Collateral. Upon the occurrence
and during the continuance of an Event of Default, all rights of Xxxxx to
receive such dividends which Xxxxx would otherwise be authorized to receive and
retain pursuant to this Section 7 shall cease and all such rights shall
thereupon become vested in TPR which shall thereafter have the sole right to
receive and hold as Collateral such dividends during the continuance of such
Event of Default. All regular cash dividends which are received by Xxxxx
contrary to the provisions of this Section 7 and all other dividends or other
distributions paid on or with respect to the Collateral during the term of this
Pledge Agreement (including, without limitation, extraordinary cash dividends
and dividends in the form of property other than cash) shall be received by
Xxxxx in trust for the benefit of TPR, shall be segregated from other funds of
Xxxxx and shall immediately be paid over to TPR as Collateral in the same form
as so received (with any necessary endorsement). In order to permit TPR to
receive the dividends and other distributions paid on or with respect to the
Collateral which it is authorized to receive and retain pursuant to this Section
7, Xxxxx shall, if necessary, upon written request of TPR, from time to time
execute and deliver (or cause to be executed and delivered) to TPR all such
payment orders and other instruments as TPR may reasonably request.
9. Transfer and Other Liens. Xxxxx agrees that he will not (a)
sell or otherwise dispose of any of the Collateral or (b) create or permit to
exist any lien, security interest, charge or other encumbrance upon or with
respect to any of the Collateral, except for the lien and security interest
granted under this Pledge Agreement. Any such lien, security interest, charge or
other encumbrance shall be null and void and of no force or effect whatsoever.
10. Remedies Upon Default.
10.1 Upon the occurrence of an Event of Default (as defined in
the Note), TPR shall have (but shall have no obligation to exercise or pursue)
all of the default rights, powers and remedies of a TPR under Section 9-501 et
seq. of the UCC, all of the rights, powers and remedies available at law or in
equity for the enforcement of the Secured Obligations and the realization of the
benefits of this Agreement and the Collateral, and all of the following rights,
powers and remedies:
(a) to declare all of the Secured Obligations to be
immediately due and payable;
(b) to take immediate possession of the Collateral and sell,
at public or private sale or sales, lease, assign, collect, transfer or
otherwise dispose of it or realize upon it, provided that TPR shall sell or
dispose of only that portion of the Collateral necessary to fulfill the Secured
Obligations;
(c) to exercise and enforce all of the rights and powers and
pursue all of the remedies of Xxxxx in respect of the Collateral;
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(d) to settle, adjust or compromise any claim or dispute in
respect of the Collateral; and
(e) on behalf of Xxxxx, to give receipts and to endorse
checks, notes, drafts, money orders, instruments and other evidences of payment
or indebtedness with respect to the Collateral.
10.2 TPR may apply all amounts actually realized by it
resulting from the exercise of any right or power or the pursuit of any remedy
after an Event of Default in such manner and in such order of priority as TPR in
its sole discretion may determine.
10.3 Xxxxx agrees that 10 days' prior notice of any public
sale, private sale or other disposition is a reasonable notification. Any and
all sales or other dispositions of the Collateral may, in TPR's sole discretion,
be public or private dispositions and may include all or any part of the
Collateral. All such sales and other dispositions shall be at such times and
places, upon such terms and conditions (including, without limitation, for cash
or on credit and for immediate or future delivery) and at such price or prices
as TPR in its discretion may determine, provided that at no time shall the sale
of the Shares be at a price that is below Fair Market Value. TPR or any nominee
of TPR may be the purchaser, assignee or transferee of all or any part of the
Collateral.
10.4 Xxxxx shall pay, immediately upon demand therefor, all
reasonable and customary costs and expenses (including counsel fees and
expenses) incurred by TPR in seeking to exercise any right or power or to pursue
any remedy in any manner relating to the Collateral or this Agreement together
with simple interest thereon at the rate of twelve percent (12%) per annum from
the date incurred to the date paid by Xxxxx. The liability of Xxxxx arising
under this Section 10.4 shall be included within the Secured Obligations secured
by the Collateral.
11. No Waiver. No failure on the part of TPR to exercise, no
course of dealing with respect to and no delay in exercising any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by TPR of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein provided are to the fullest extent permitted by law
cumulative and are not exclusive of any other remedies provided by law.
12. Amendments. No amendment or waiver of any provision of
this Pledge Agreement or consent to departure therefrom shall be effective
unless agreed to in writing by Xxxxx and TPR in the case of an amendment or by
TPR in the case of a waiver or consent to departure therefrom.
13. Termination of Security Interest and Release.
(a) When all Secured Obligations have been paid in full, this
Pledge Agreement shall terminate and TPR shall forthwith assign, transfer and
deliver to or on the order of Xxxxx,
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against receipt and without recourse to TPR, such of the Collateral as shall not
have been released, sold or otherwise applied pursuant to the terms hereof.
(b) Xxxxx shall at all times retain the right to sell shares
represented by the Collateral, provided that the net proceeds from such sales
are used to prepay the Loan, and also provided that such sales are in accordance
with the provisions of the Stockholders Agreement and any applicable
underwriters' lock-up or similar agreements. TPR will release its security
interest in the Collateral to the extent necessary to permit any such sales.
14. Addresses for Notices. All notices, requests, demands or
other communications to or from TPR or Xxxxx shall be in writing and shall be
deemed to have been duly given and made on the third day following deposit in
the mail if sent postage prepaid by certified mail, return receipt requested, on
the next business day following delivery to the delivery service if sent by a
recognized overnight delivery service (with charges prepaid) or when received if
delivered by hand. Any such notice, request, demand or communication shall be
addressed or delivered as follows, or to such other addresses as the parties may
designate by like notice:
If to Xxxxx:
Xxxxxx Xxxxx
000 Xxxx Xxxxxxxxxx Xxxxxx, #0X
Xxx Xxxx, XX 00000
If to TPR:
The Princeton Review, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxx
with a copy to:
Patterson, Belknap, Xxxx & Tyler LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
15. Continuing Security Interest. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall remain in full
force and effect until payment in full of all Secured Obligations, be binding
upon Xxxxx and his heirs, executors, administrators, successors and assigns and
inure, together with the rights and remedies of TPR hereunder, to the benefit of
TPR and each of its successors, transferees and assigns.
16. Governing Law. This Pledge Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to the choice of
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law provisions thereof. Venue in any action or proceeding arising out of or
relating to this Pledge Agreement shall be in any state or federal court sitting
in New York, New York, and Xxxxx hereby irrevocably waives any objection he may
have to the laying of venue of any such action or proceeding in any such court
and any claim he may have that any such action or proceeding has been brought in
an inconvenient forum. A final judgment in any such action or proceeding shall
be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law.
17. Attorney-in-Fact. Xxxxx hereby appoints TPR as Xxxxx'
attorney-in-fact and proxy for the purpose of carrying out the provisions of
this Pledge Agreement and taking any action and executing any instrument which
TPR may reasonably deem necessary or advisable to accomplish the purposes
hereof. The foregoing power of attorney is coupled with an interest and shall be
irrevocable prior to payment in full of the Secured Obligations. TPR shall give
Xxxxx prior written notice of any actions taken by TPR as attorney-in-fact for
Xxxxx.
IN WITNESS WHEREOF, Xxxxx and TPR have caused this Pledge and
Security Agreement to be executed as of the day and year first above written.
THE PRINCETON REVIEW, INC.
By: /s/ Xxxx Xxxxxxx /s/ Xxxxxx Xxxxx
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Xxxx Xxxxxxx Xxxxxx Xxxxx
President
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