EXHIBIT (d)(4)
AGREEMENT REGARDING PLEDGE
OF SECURITIES OF EDISON SCHOOLS INC.
This Agreement ratifies and confirms the pledge by each of H.
Xxxxxxxxxxx Xxxxxxx ("BORROWER") and Xxxxxxx Schools Inc., a company
wholly-owned by the Borrower ("WSI" or the "GUARANTOR") in favor of JPMorgan
Chase Bank, as Agent ("AGENT") for JPMorgan Chase Bank (formerly known as The
Chase Manhattan Bank, successor by merger to Xxxxxx Guaranty Trust Company of
New York) ("XXXXXX") with respect to securities issued by Edison Schools Inc.
("EDISON") and owned, directly or indirectly, by Borrower.
WHEREAS, Borrower, WSI and the Agent have entered into the
Amended and Restated Credit Agreement dated as of February 29, 2000, as amended
(the "CREDIT AGREEMENT");
WHEREAS, WSI has entered into the Guaranty Agreement dated as
of February 10, 1995, as amended, in favor of the Agent; and
WHEREAS, WSI and the Agent have entered into the Guarantor
Security Agreement dated as of February 10, 1995, as amended;
NOW, THEREFORE, each of the Borrower and WSI hereby ratifies
and confirms the pledge of Edison's securities as set forth below.
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. Capitalized terms not defined herein
are used as defined in the Credit Agreement.
ARTICLE II
SECURITY INTEREST PURSUANT TO CREDIT AGREEMENT
Section 2.01 CREATION OF SECURITY INTEREST. In order to secure
(i) the payment of the principal of and any interest on the Loans and the Notes,
including any and all extensions, modifications and renewals thereof and/or
notes issued in substitution therefor, (ii) the observance and performance of
all covenants and agreements of the Borrower contained in the Credit Agreement
and the Notes or in any other instruments or documents delivered by the Borrower
pursuant to the Credit Agreement or now or hereafter further evidencing and/or
securing his indebtedness with respect to the Loans or setting forth any terms
and conditions applicable thereto and (iii) payment of all expenses and charges,
legal or otherwise, suffered or incurred by the Agent or Xxxxxx in enforcing
payment of the Loans and the indebtedness evidenced by the Notes or performance
by the Borrower of his covenants and agreements or in realizing upon, protecting
or preserving the collateral security therefor created pursuant to the Credit
Agreement (all of the foregoing set forth in clauses (i), (ii) and (iii) being
sometimes referred to herein as the "SECURED OBLIGATIONS"), the Borrower has
previously granted to the Agent for the benefit of Xxxxxx a security interest
in, and hereby agrees, acknowledges and confirms that the Agent, for the benefit
of Xxxxxx, has and shall continue to have a security interest in, among other
collateral, the following:
(i) the ten shares of Class A common stock of WSI owned
beneficially and of record by the Borrower, and any other shares of capital
stock of WSI owned by the Borrower from time to time (the "WSI SHARES"),
together with the right to receive all cash and other dividends or other
distributions in respect of, and the right to receive all proceeds from the sale
or other dispositions of, the WSI Shares;
(ii) 59,205 Class A Shares and 665,795 Class B Shares owned
beneficially and of record by the Borrower, and any other shares of capital
stock of Edison owned by the Borrower from time to time (the "EDISON SHARES"),
together with the right to receive all cash and other dividends or other
distributions in respect of, and the right to receive all proceeds from the sale
or other dispositions of, the Edison Shares, subject to the prior Lien of Edison
pursuant to the Edison Loan;
(iii) all proceeds of the foregoing.
The property described in the preceding clauses (i), (ii), and
(iii) is referred to collectively as the "COLLATERAL." The Edison Shares and the
WSI Shares are referred to herein collectively as the "SECURITY SHARES."
Section 2.02 CERTAIN MATTERS WITH RESPECT TO THE COLLATERAL.
(a) On or prior to the Closing Date, the Borrower delivered to
the Agent certificates representing all of the WSI Shares, duly registered in
his name, together with (i) an undated, signed, irrevocable stock power with the
blanks therein not completed and (ii) an undated, signed, irrevocable
instruction to WSI to pay any and all cash or other dividends or other
distributions on the WSI Shares to the Agent for the benefit of Xxxxxx from and
after WSI's receipt thereof until all of the Borrower's obligations hereunder
have been satisfied in full, each of such documents in form and substance
satisfactory to the Agent. The Agent is granted the authority to complete, date
and deliver such instruction (or any such instruction delivered with respect to
Additional WSI Securities as hereinafter provided) to WSI on the occurrence of
any Event of Default. The Borrower authorizes WSI to comply with any such
instruction delivered to WSI by the Agent and agrees that any such instruction
may not be terminated, amended or otherwise modified without the written consent
of the Agent. The Agent is granted the authority to complete, date and deliver
the stock power with respect to the WSI Shares in connection with any sale
thereof pursuant to the Credit Agreement. If the Borrower shall acquire any
additional shares or any other securities of WSI ("ADDITIONAL WSI SECURITIES"),
the Borrower grants an equivalent security interest in such Additional WSI
Securities as if those such Additional WSI Securities were originally included
in the description of the WSI Shares in Section 6.01 of the Credit Agreement,
and the Borrower shall immediately deliver the certificates or other instruments
representing such Additional WSI Securities to the Agent, accompanied (1) by an
undated, signed, irrevocable stock power with the blanks therein not completed,
and (2) by an undated, signed, irrevocable instruction to WSI to pay any and all
cash or other dividends or other distributions on the WSI Shares to the Agent.
The Borrower shall take such other actions as the Agent may deem necessary or
desirable to prefect, protect and maintain the security interests hereunder in
favor of the Agent on behalf of Xxxxxx hereunder.
(b) The Borrower delivered to Edison a notice to the effect
that the Borrower has granted a second priority security interest in the Edison
Shares to the Agent and that, upon the satisfaction of the Borrower's
obligations under the Edison Loan, the Borrower shall deliver to the Agent
certificates representing all of the Edison Shares, duly registered in his name,
together with an undated, signed, irrevocable stock power with the blanks
therein not completed, in form and substance satisfactory to the Agent. The
Agent is granted the authority to complete, date and deliver the stock power
with respect to the Edison Shares in connection with any sale thereof pursuant
to the Credit Agreement. If the Borrower
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shall acquire any additional shares or any other securities of Edison
("ADDITIONAL EDISON SECURITIES"), the Borrower grants an equivalent security
interest in such Additional Edison Securities as if those such Additional Edison
Securities were originally included in the description of the Edison Shares in
Section 6.01 of the Credit Agreement, and the Borrower shall immediately deliver
the certificates or other instruments representing such Additional Edison
Securities to the Agent, accompanied by an undated, signed, irrevocable stock
power with the blanks therein not completed. The Borrower shall take such other
actions as the Agent may deem necessary or desirable to perfect, protect and
maintain the security interests under the Credit Agreement in favor of the Agent
on behalf of Xxxxxx under the Credit Agreement.
(c) Prior to an Event of Default, the Borrower shall be
entitled to retain all distributions in respect of the Security Shares, any
Additional Edison Securities and any Additional WSI Securities and to vote the
Security Shares, any Additional Securities and any Additional WSI Securities;
PROVIDED, HOWEVER, that the Borrower shall not vote or take or refrain from
taking any other action with respect to the Security Shares, any Additional
Securities or any Additional WSI Securities which would be inconsistent with the
intentions of the Credit Agreement; and PROVIDED FURTHER, that the Borrower
shall not vote the Edison Shares, any Additional Edison Securities, the WSI
Shares or any Additional WSI Securities with respect to any matter other than
the election or removal of directors of WSI or Edison without the prior written
consent of Xxxxxx. Upon the occurrence of an Event of Default, the Agent shall
be entitled to receive and retain all cash or other dividends or other
distributions paid in respect thereof and to direct the voting with respect
thereto as though the Agent were the outright owner thereof until all
obligations of the Borrower under the Credit Agreement and the Notes have been
satisfied in full; PROVIDED that, in the case of the Edison Shares, the Agent
shall have such rights only in the event that the Lien of Edison securing the
Edison Loan has been satisfied. In connection with the foregoing and without
limitation of the provisions of Section 6.04 of the Credit Agreement, the
Borrower irrevocably constitutes and appoints the Agent as his proxy and
attorney-in-fact, with full power of substitution, to accomplish any and all
acts necessary to permit the Agent so to act under such circumstances as though
the Agent were the outright owner of the WSI Shares, any Additional Edison
Securities, and any Additional WSI Securities, and, provided the Lien on the
Edison Shares securing the Edison Loans has been satisfied, the Edison Shares.
Section 2.03 REMEDIES WITH RESPECT TO COLLATERAL. Upon the
occurrence of any Event of Default, the Agent shall, in addition to all other
rights and remedies, have all the rights and remedies of a secured party under
the Uniform Commercial Code. The Agent may require the Borrower to take any
steps necessary to make the Collateral available to the Agent at a place
designated by the Agent which is reasonably convenient. Any requirement of the
Code for reasonable notice to the Borrower shall be met if such notice is given
to the Borrower at least ten days before the time of the sale, disposition or
other event or thing giving rise to the required notice. The Agent may sell,
assign and deliver the whole or, from time to time, any part of the Collateral
or any interest therein or any part thereof, at any private sale or at a public
auction, with or without demand, advertisement or notice of the time and place
or sale or adjournment thereof or otherwise, except that, consistent with the
preceding sentence, a notice of any such sale shall be given to the Borrower ten
days before such sale, which may be for cash, on credit or for other property,
for immediate or future delivery, and for such price or prices and on such terms
as the Agent its sole discretion may determine. The Borrower waives and releases
any and all right or equity of redemption either before or after any such sale
except for his right to redeem such Collateral upon payment of the Secured
Obligations. At any such sale, the Agent may bid and purchase for its own
account, the whole or any part of the Collateral so sold free from any such
right or equity of redemption. The proceeds from any such sale shall be applied
by the Agent to satisfy the Secured Obligations in such order as it may deem
appropriate. The Borrower agrees to pay all costs and expenses including court
costs and reasonable attorneys' fees, incurred by the Agent and Xxxxxx in
enforcing any of the terms hereof or in retaking, holding, preparing for sale,
selling, protecting, collecting or otherwise realizing
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upon any of the Collateral (including any such of the foregoing actions taken or
done in any proceeding for relief of debtors under the Bankruptcy Code of the
United States); and all such costs and expenses shall constitute additional
indebtedness under the Credit Agreement payable on demand together with interest
thereon at the default rate specified in Section 2.04 of the Credit Agreement,
and shall also constitute part of the Secured Obligations secured by the
security interest created by the Credit Agreement.
Section 2.04 POWER OF ATTORNEY. The Borrower irrevocably
appoints the Agent as his attorney-in-fact, with full power of substitution, to
execute, deliver and file such financing and continuation statements and other
documents and to take such other actions in the name of the Borrower as the
Agent shall deem necessary or desirable to protect, perfect, maintain and, if
applicable, realize upon the security interests created by the Credit Agreement.
ARTICLE III
SECURITY INTEREST PURSUANT TO
GUARANTOR SECURITY AGREEMENT
Section 3.01 THE SECURITY INTERESTS.
(a) In order to secure the full and punctual payment of the
Secured Obligations in accordance with the terms thereof, and to secure the
performance of all of the obligations of the Guarantor under the Guarantor
Security Agreement and under the Guaranty Agreement, the Guarantor grants to the
Agent for the benefit of the Lender a continuing security interest in all rights
and privileges of the Guarantor to, in, under, with respect or relating to any
right, title or interest of the Guarantor in or with respect to Edison (all
being collectively referred to as the "GUARANTOR COLLATERAL"); and all proceeds
of all or any of the Guarantor Collateral.
(b) The Security Interests are granted as security only and
shall not subject the Agent or any Bank to, or transfer or in any way affect or
modify, any obligation or liability of the Guarantor with respect to any of the
Guarantor Collateral or any transaction in connection therewith.
ARTICLE IV
GOVERNING LAW
Section 4.01 GOVERNING LAW. This Agreement shall be construed
in accordance with and governed by the laws of the State of New York.
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IN WITNESS WHEREOF, each of the Borrower and the Guarantor has
caused this Agreement to be duly executed and delivered as of August 15, 2003.
/s/ H. Xxxxxxxxxxx Xxxxxxx
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H. Xxxxxxxxxxx Xxxxxxx
WSI Inc.
By: /s/ H. Xxxxxxxxxxx Xxxxxxx
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Name: H. Xxxxxxxxxxx Xxxxxxx
Title: President
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