Exhibit 4.5
ESCROW AND
SECURITY AGREEMENT
Dated as of July 22, 1997
From
DISCOVERY ZONE, INC.
as Pledgor
to
STATE STREET BANK AND TRUST COMPANY
as Collateral Agent
ESCROW AND SECURITY AGREEMENT
This ESCROW AND SECURITY AGREEMENT (as amended, restated, supplemented
or modified from time to time, this "Escrow and Security Agreement") is made and
entered into as of July 22, 1997 by and among DISCOVERY ZONE, INC., a Delaware
corporation (the "Pledgor"), having its principal office at 000 Xxxx Xxxxxxx
Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, XXXXXXXXX & COMPANY, INC., acting as
the Initial Purchaser (the "Initial Purchaser"), and STATE STREET BANK AND TRUST
COMPANY, as trustee under the Indenture (as defined below), having an office at
Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxxx, XX 00000, as escrow agent and collateral agent
(in such capacity, the "Collateral Agent") for the holders (the "Holders") of
the Notes (as defined herein) issued by the Pledgor under the Indenture referred
to below.
W I T N E S S E T H:
WHEREAS, the Pledgor and the Initial Purchaser are a party to a
Purchase Agreement, dated July 15, 1997 (the "Purchase Agreement"), pursuant to
which the Pledgor will issue and sell to the Initial Purchaser 85,000 Units,
each consisting of $1,000 principal amount of its 13 1/2% Senior Secured Notes
due 2002 (collectively, as replaced or exchanged, the "Notes"), and one warrant
to purchase shares of the Pledgor's common stock, par value $.01 per share;
WHEREAS, the Pledgor, the Subsidiary Guarantors and the Collateral
Agent, as trustee thereunder, have entered into that certain Indenture dated as
of the date hereof (as amended, restated, supplemented or otherwise modified
from time to time, the "Indenture"), pursuant to which the Pledgor is issuing
the Initial Notes on the date hereof;
WHEREAS, pursuant to the Purchase Agreement and the Indenture, the
Pledgor is required to deposit on the Issue Date any combination of cash,
securities, instruments and certificates in an escrow account designated by the
Collateral Agent (the "Escrowed Interest Account") with the Collateral Agent to
be held by the Collateral Agent for its benefit and the ratable benefit of the
Holders to secure the Pledgor's obligation to (i) provide for payment in full of
any and all scheduled interest payments due on the Notes from the Issue Date
through August 1, 1999 and (ii) secure repayment of the principal, premium, if
any, and interest on the Notes in the event that the Notes are redeemed, prepaid
or otherwise become due and payable prior to such time as the scheduled interest
payments thereon through August 1, 1999 shall have been paid in full
(collectively, the "Obligations");
WHEREAS, pursuant to the terms and conditions of this Escrow and
Security Agreement, the Pledgor shall instruct the
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Collateral Agent to purchase or caused to be purchased with all or a portion of
the Escrowed Funds (as hereinafter defined) certain Pledged Securities (as
hereinafter defined) to be maintained in the Escrowed Interest Account in the
name of the Collateral Agent (or as otherwise required in accordance with
applicable law), and under the sole dominion and control of the Collateral
Agent, as set forth herein; and
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor has
agreed to (i) pledge to the Collateral Agent for its benefit and the ratable
benefit of the Holders, a security interest in the Escrowed Funds, the Pledged
Securities and the other Collateral (as hereinafter defined) and (ii) execute
and deliver this Escrow and Security Agreement in order to secure the payment
and performance by the Pledgor of all the Obligations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises herein contained, and
in order to induce the Holders to purchase the Notes, the Pledgor, the Initial
Purchaser and the Collateral Agent hereby agree, for the benefit of the
Collateral Agent and for the ratable benefit of the Holders, as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
1.1 Definitions. All defined terms used herein without
definition shall have the respective meanings ascribed to them in the
Indenture. Unless otherwise defined herein or in the Indenture, terms used in
Articles 8 or 9 of the Uniform Commercial Code as in effect in the State of
New York (the "U.C.C.") are used herein as therein defined.
1.2 Appointment of the Collateral Agent. The Pledgor and the
Initial Purchaser hereby appoint the Collateral Agent as escrow agent and
collateral agent hereunder in accordance with the terms and conditions set forth
herein and authorize the Collateral Agent to take such actions, exercise such
powers and perform such duties as are expressly delegated to the Collateral
Agent by the terms of this Escrow and Security Agreement, together with such
other powers as are reasonably incidental thereto, and the Collateral Agent
hereby accepts such appointment, subject to the terms and conditions hereof.
1.3 Pledge and Grant of Security Interest. The Pledgor hereby
pledges to the Collateral Agent for its benefit and for the ratable benefit of
the Holders, and hereby grants to the Collateral Agent for its benefit and for
the ratable benefit of the Holders, a continuing first priority perfected
security interest in and to all of the Pledgor's right, title and interest in,
to and under the following (hereinafter collectively referred to as the
"Collateral"), whether characterized as investment
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property, general intangibles or otherwise: (a) the Escrowed Interest Account,
all funds and securities held therein and all certificates and instruments, if
any, from time to time representing or evidencing the Escrowed Interest Account,
including, without limitation, the Escrowed Funds and the Pledged Securities,
and any and all securities entitlements to the Escrowed Funds and the Pledged
Securities, and any and all related securities accounts in which security
entitlements to the Escrowed Funds and the Pledged Securities are carried, (b)
all notes, certificates of deposit, deposit accounts, checks and other
instruments from time to time hereafter delivered to or otherwise possessed by
the Collateral Agent for or on behalf of the Pledgor in substitution for or in
addition to any or all then existing Collateral, (c) all interest, 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 then
existing Collateral, and (d) all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds that constitute property of
the types described in clauses (a) - (c) above) and, to the extent not otherwise
included, all cash.
1.4. Deposit of Escrowed Funds. On the Issue Date, the Pledgor shall
deposit, or cause the Initial Purchaser to deposit $21,426,000 in cash
(collectively, the "Escrowed Funds") into the Escrowed Interest Account or such
greater amount as will be sufficient to provide for payment in full of the first
nine scheduled interest payments due on the outstanding Notes, being all such
scheduled interest payments from August 1, 1997 through August 1, 1999
(inclusive of the interest payments due and owing on August 1, 1997 and
August 1, 1999, respectively). Prior to the date (the "Effective Date") upon
which the Approved Plan (as defined in the Purchase Agreement) has become
Effective (as defined in the Purchase Agreement), and until invested in
accordance with Section 1.5 or Section 5, the Collateral Agent shall invest the
Escrowed Funds in money market accounts with any bank having capital surplus and
undivided profits aggregating at least $500 million or money market funds
investing only in U.S. Government Obligations to the extent such accounts or
funds do not impose any fee, cost or expense (such as a breakage fee) in
connection with any withdrawal, termination or liquidation of any such
investment; provided, however, that for the first Business Day from the Issue
Date the Escrowed Funds shall be invested in the instruments described in clause
(iv) of the definition of Cash Equivalent in the Indenture.
1.5. Purchase of Pledged Securities. At the direction of the Pledgor,
as set forth in a written notice (the "Pledged Securities Notice"), the form of
which is acceptable to the Collateral Agent, the Collateral Agent shall as soon
as practicable upon receipt of the Pledged Securities Notice (but in no event
earlier than the Effective Date) invest the Escrowed Funds in U.S. Government
Obligations in the manner as directed in the Pledged Securities Notice (such
U.S. Government Obligations,
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hereinafter, the "Pledged Securities"), which Pledged Securities shall be
deposited in the Escrowed Interest Account and shall be maintained by the
Collateral Agent for its benefit and the ratable benefit of the Holders in
accordance with the terms and conditions of this Escrow and Security Agreement.
Each Pledged Securities Notice shall (i) specify the amount and nature of the
Pledged Securities required to be purchased by the Collateral Agent with the
Escrowed Funds and contain all necessary directions or authorizations necessary
or reasonably required by the Collateral Agent to make such investment and (ii)
be accompanied by a written opinion of a nationally recognized firm of
independent public accountants or a recognized financial advisor, selected by
the Company and approved by the Initial Purchaser (the "Independent Financial
Advisor"), in form and substance reasonably acceptable to the Collateral Agent,
confirming (A) the investment of the Escrowed Funds in Pledged Securities as set
forth in the Pledged Securities Notice and (B) that the aggregate amount of the
Pledged Securities and Escrowed Funds, after giving effect to the investment in
the Pledged Securities referred to in such Pledged Securities Notice, will be
sufficient upon receipt of scheduled interest and principal payments of all
Pledged Securities to provide for payment in full of all scheduled interest
payments due on the outstanding Notes from August 1, 1997 through August 1,
1999.
SECTION 2. Security for Obligation. This Escrow and Security
Agreement secures the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all the
Obligations.
SECTION 3. Delivery of Collateral. On the Issue Date, all Escrowed
Funds shall be delivered to and held by or on behalf of the Collateral Agent
pursuant hereto and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance sufficient to convey a valid security interest in and
lien on such Collateral to the Collateral Agent, or shall be credited to the
Escrowed Interest Account. In order to perfect or establish the perfection of
the Collateral Agent's rights in and to the Collateral, the Pledgor shall
forthwith, upon the pledge of any Collateral hereunder, cause all such
Collateral, including the Escrowed Interest Account, the Escrowed Funds, the
Pledged Securities and all other accounts representing a security entitlement to
or containing any Collateral to be registered in the name of the Collateral
Agent or such of its nominees as the Collateral Agent shall direct, and to be
under the sole dominion and control of the Collateral Agent, which dominion and
control shall be agreed to and acknowledged by any securities intermediary
holding any such account in an acknowledgement substantially in the form of
Exhibit B hereto, subject only to the revocable rights specified in Section 7.
In addition, the Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing the Collateral for
certificates or instruments of
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smaller or larger denominations. The Pledgor shall timely execute and deliver,
in form for filing and recordation, all necessary or appropriate UCC financing
statements with respect to the perfection of the security interest contemplated
hereby in the Pledged Securities and Escrowed Funds as determined by the
Collateral Agent.
SECTION 4. Maintaining the Escrowed Interest Account.
(a) So long as any Obligation shall remain unpaid, the Pledgor
will maintain the Escrow Interest Account with the Collateral Agent.
(b) It shall be a term and condition of the Escrowed Interest
Account, notwithstanding any term or condition to the contrary in any other
agreement relating to the Escrowed Interest Account, and except as otherwise
provided by the provisions of Section 7 and Section 14, that no amount
(including interest on Escrowed Funds or Pledged Securities) shall be paid or
released to or for the account of, or withdrawn by or for the account of, the
Pledgor or any other Person, from the Escrowed Interest Account.
(c) The Escrowed Interest Account shall be subject to such
applicable laws, and such applicable regulations of the Board of Governors of
the Federal Reserve System and of any other appropriate banking or governmental
authority, as may now or hereafter be in effect.
SECTION 5. Investments. If requested in writing by the Pledgor, the
Collateral Agent will, subject to the provisions of Section 7 and Section 14,
from time to time (a) invest Escrowed Funds and other amounts on deposit in the
Escrowed Interest Account (other than Pledged Securities) in accordance with
Section 1.5 in the name of the Collateral Agent, as the Pledgor may select in
writing, and (b) invest interest paid on the Pledged Securities referred to in
clause (a) above, and so reinvest other proceeds of such Pledged Securities that
may mature or be sold, in each case in accordance with Section 1.5 in the name
of the Collateral Agent, as the Pledgor may select in writing, all of which
Pledged Securities shall be maintained in the Escrowed Interest Account.
Interest and proceeds that are not invested or reinvested in Pledged Securities
as provided above shall be deposited or remain on deposit in, as the case may
be, and held in the Escrowed Interest Account. In no event shall the Collateral
Agent be liable for any loss in the investment or reinvestment of amounts held
in the Escrowed Interest Account. All such investments selected by the Pledgor
shall be subject to availability to the Collateral Agent. The Collateral Agent
shall be under no duty to invest (or otherwise pay interest on) any amounts held
by it hereunder, absent specific written investment instructions from the
Pledgor in accordance with the terms hereof.
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SECTION 6. Delivery of Collateral Investments; Filing.
(a) The Collateral Agent shall become the holder of Pledged
Securities, Escrowed Funds, if applicable, and of any and all security
entitlements to the Pledged Securities and Escrowed Funds, if applicable,
through action by the Federal Reserve Bank of Boston ("FRBB") or another
securities intermediary, as confirmed (in writing or electronically or otherwise
in accordance with standard industry practice) to the Collateral Agent by FRBB
or such other securities intermediary (i) indicating by book-entry that the
Pledged Securities or a security entitlement thereto has been credited to the
Escrowed Interest Account, or (ii) acquiring the Pledged Securities or a
security entitlement thereto for the Collateral Agent and accepting the same for
credit to the Escrowed Interest Account.
(b) Prior to or concurrently with the execution and delivery
hereof and prior to the transfer to the Collateral Agent of Pledged Securities
(or acquisition by the Collateral Agent of any security entitlement thereto) or
any Escrowed Funds, as provided in subsection (a) of this Section 6, the
Collateral Agent shall establish the Escrowed Interest Account on its books as
an account segregated from all other custodial or collateral accounts at its
office at State Street Bank and Trust Company, Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxxx,
XX 00000, Attention: Corporate Trust Department. Upon transfer of the Pledged
Securities (or the Collateral Agent's acquisition of a security entitlement
thereto) or any Escrowed Funds, to the Collateral Agent, as confirmed to the
Collateral Agent by FRBB or another securities intermediary, the Collateral
Agent shall make appropriate book entries indicating that the Pledged Securities
and/or such security entitlement and all Escrowed Funds, if applicable, have
been credited to and are held in the Escrowed Interest Account. Subject to the
other terms and conditions of this Escrow and Security Agreement, all Pledged
Securities and all other Escrowed Funds held by the Collateral Agent pursuant to
this Escrow and Security Agreement shall be held in the Escrowed Interest
Account subject (except as expressly provided in subsections 7(a)-7(f) hereof)
to the exclusive dominion and control of the Collateral Agent and exclusively
for the benefit of the Collateral Agent and for the ratable benefit of the
Holders and segregated from all other funds or other property otherwise held by
the Collateral Agent.
(c) All Collateral shall be retained in the Escrowed Interest
Account pending disbursement pursuant to the terms hereof.
(d) Concurrently with the execution and delivery of this Escrow
and Security Agreement, the Collateral Agent is delivering to the Pledgor and
the Initial Purchaser a duly executed certificate, in the form of Exhibit A
hereto, of an officer of the Collateral Agent confirming the Collateral Agent's
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establishment and maintenance of the Escrowed Interest Account and its receipt
and holding of the Escrowed Funds, the Pledged Securities or any security
entitlement thereto and the crediting of the Pledged Securities, Escrowed Funds
or such security entitlement to the Escrowed Interest Account, all in accordance
with this Escrow and Security Agreement.
(e) Concurrently with the execution and delivery of this Escrow
and Security Agreement, the Pledgor is delivering to the Collateral Agent
acknowledgement copies or stamped receipt copies of proper financing statements,
duly filed on or before the Issue Date under the Uniform Commercial Code of the
State of New York and the State of Florida, together with all necessary account
assignments and security interest confirmation letters, covering the Collateral
described in this Escrow and Security Agreement. The Collateral Agent shall be
under no duty to determine the sufficiency of the foregoing.
SECTION 7. Disbursements. The Collateral Agent shall hold the
Collateral in the Escrowed Interest Account and release the same, or a portion
thereof, only as follows:
(a) At least five Business Days prior to the due date of any of
the first nine scheduled interest payments on the Notes from the Issue Date
through August 1, 1999 (or one Business Day in the case of the first such
interest payment), the Pledgor may, pursuant to written instructions executed by
the Pledgor (an "Issuer Order"), direct the Collateral Agent to release from the
Escrowed Interest Account and pay to the Holders proceeds sufficient to provide
for payment in full of such interest then due on the Notes. Upon receipt of an
Issuer Order, the Collateral Agent will take any action necessary to provide for
the payment of the interest on the Notes in accordance with the payment
provisions of the Indenture to the Holders from (and to the extent of) the
Pledged Securities, Escrowed Funds and proceeds thereof in the Escrowed Interest
Account. Nothing in this Section 7 shall affect the Collateral Agent's rights
to apply the Collateral to the payments of amounts due on the Notes upon
acceleration thereof.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Collateral is security from a source of funds
other than the Escrowed Interest Account ("Pledgor Funds"), the Pledgor may,
after payment in full of such interest payment or portion thereof from proceeds
of the Collateral or such Pledgor Funds or both, direct the Collateral Agent to
release to the Pledgor or to another party at the direction of the Pledgor (the
"Pledgor's Designee"), net of any costs, fees or expenses (such as breakage
fees) incurred to permit such release, proceeds from the Escrowed Interest
Account in an amount less than or equal to the amount of Pledgor Funds
appropriately applied to such interest payment so that there remains in the
Escrowed Interest Account an amount at least sufficient to pay in full, after
receipt of scheduled interest
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and principal payments on Pledged Securities, in the written opinion of an
Independent Financial Advisor (which written opinion shall accompany any Issuer
Order), the remaining of the first nine interest payments due on the Notes.
Upon receipt of an Issuer Order and the related written opinion of such
Independent Financial Advisor by the Collateral Agent, the Collateral Agent
shall pay over to the Pledgor or the Pledgor's Designee, as the case may be, the
appropriate requested amount from proceeds in the Escrowed Interest Account.
Immediately prior to any release of funds to the Pledgor pursuant to this
Section 7(b), Section 7(d)or Section 7(g), the Pledgor shall deliver to the
Collateral Agent a certificate signed by an officer of the Pledgor stating that
such release has been duly authorized by the Pledgor and will not contravene any
provision of applicable law or the Certificate of Incorporation of the Pledgor
or any material agreement or other material instrument binding upon the Pledgor
or any of its subsidiaries or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Pledgor or any of its
subsidiaries or result in the creation or imposition of any security interest in
or lien on any assets of the Pledgor, except for the security interests granted
under this Escrow and Security Agreement.
(c) At least five Business Days prior to the due date of any of
the first nine scheduled interest payments on the Notes (or one Business Day in
the case of the first such interest payment), the Pledgor covenants to give the
Collateral Agent (by Issuer Order) notice as to whether payment of interest will
be made pursuant to Section 7(a) or 7(b) and as to the respective amounts of
interest that will be paid pursuant to Section 7(a) or 7(b). If no such notice
is given by such fifth Business Day (or one Business Day in the case of the
first such interest payment) prior to the respective first nine scheduled
interest payments on the Notes, the Collateral Agent will act pursuant to
Section 7(a) as if it had received an Issuer Order pursuant thereto for the
payment in full of the interest then due.
(d) If Pledgor has optionally redeemed Notes with the net
proceeds of a Primary Offering, the Pledgor may, pursuant to an Issuer Order,
direct the Collateral Agent to release to Pledgor or any Pledgor's Designee
proceeds from the Escrowed Interest Account in an amount which bears the same
proportion to the aggregate value of the Escrowed Interest Account immediately
prior to the release of such proceeds as the aggregate principal amount of the
Notes so redeemed by Pledgor bears to the aggregate principal amount of the
Notes outstanding immediately prior to such redemption, net of any costs, fees
or expenses (such as breakage fees) incurred to permit such release, so that
there remains in the Escrowed Interest Account an amount sufficient to pay in
full, after receipt of scheduled interest and principal payments on Pledged
Securities, in the written opinion of an Independent Financial Advisor (which
written opinion shall accompany any Issuer Order) the remaining of the first
nine
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interest payments due on the Notes. Immediately prior to any release of funds
to the Pledgor pursuant to this Section 7(d), the Pledgor shall deliver any and
all certificates described in and pursuant to Section 7(b).
(e) Upon the occurrence and after the continuation of an Event
of Default, the Collateral Agent in its sole and absolute discretion may apply
any or all Collateral, including the Escrowed Funds and the Pledged Securities,
to the payment of all Obligations and any and all principal of and interest and
expenses on the Notes, in accordance with the terms and provisions of Section
14.
(f) Upon payment in full of the first nine scheduled interest
payments on the Notes in a timely manner, and if no Event of Default has
occurred and is continuing, the security interest in the Collateral evidenced by
this Escrow and Security Agreement will automatically terminate and be of no
further force and effect and the Collateral remaining, if any, shall promptly be
paid over and transferred to the Pledgor or Pledgor Designee. Furthermore, upon
the release of any Collateral from the Escrowed Interest Account in accordance
with the terms of this Escrow and Security Agreement, whether upon release of
Collateral to Holders as payment of interest or otherwise, the security interest
evidenced by this Escrow and Security Agreement in such released Collateral will
automatically terminate and be of no further force and effect.
(g) If on the Effective Date the total of the Escrowed Funds and
the Pledged Securities exceed the amount sufficient to pay in full, after
receipt of scheduled interest and principal payments on the Pledged Securities,
in the written opinion of the Independent Financial Advisor delivered to the
Collateral Agent, the remaining of the first nine scheduled interest payments
due on the Notes, and no Event of Default has occurred and shall be continuing,
the Pledgor may, on the Effective Date only, pursuant to an Issuer Order, direct
the Collateral Agent to release from the Escrowed Interest Account any such
overfunded amount of the Escrowed Funds (existing on the Effective Date) to the
Pledgor, net of any costs, fees and expenses (such as brokerage fees) incurred
to permit such release, so that there remains in the Escrowed Interest Account
an amount at least sufficient to pay in full, after receipt of scheduled
interest and principal payments on the Pledged Securities, in such written
opinion of the Independent Financial Advisor, the remaining of the first nine
scheduled interest payments due on the Notes. Immediately prior to any release
of such funds to the Pledgor pursuant to this Section 7 (g), the Pledgor shall
deliver any and all certificates described in and pursuant to Section 7(b). Upon
receipt of the foregoing certificates, Issue Order and opinion, the Collateral
Agent shall pay over to the Pledgor, on the Effective Date, such overfunded
amounts, net of such costs, fees or expenses.
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(h) The Collateral Agent may, but shall not be required to,
liquidate any Escrowed Funds or Pledged Securities, in whole or in part, in
order to make any scheduled payment of interest or any release or other required
payment hereunder and shall not be responsible for any loss, cost or expense,
including any breakage fee, diminution in principal or penalty in connection
therewith, all of which loss, cost or expense shall be borne solely by the
Pledgor.
(i) Nothing contained in Section 1, Section 5, this Section 7 or
any other provision of this Escrow and Security Agreement shall (i) afford the
Pledgor any right to issue entitlement orders with respect to any security
entitlement to the Escrowed Funds, the Pledged Securities or any securities
account in which any such security entitlement may be carried, or otherwise
afford the Pledgor control of any such security entitlement or (ii) otherwise
give rise to any rights of Pledgor with respect to the Escrowed Funds, the
Pledged Securities, any security entitlement thereto or any securities account
in which any such security entitlement may be carried, other than the Pledgor's
rights under this Escrow and Security Agreement as the beneficial owner of
Collateral pledged to and subject to the exclusive dominion and control (except
as expressly provided in Sections 7(a) - (g) hereof) of the Collateral Agent in
its capacity as such (and not as a securities intermediary). The Pledgor
acknowledges, confirms and agrees that the Collateral Agent holds a security
entitlement to the Escrowed Funds and the Pledged Securities, as applicable,
solely as collateral agent for the Holders and not as a securities intermediary.
(j) The Collateral Agent shall make any distribution from the
Escrow Interest Account required to be made by it (in its capacity as Escrow
Agent under the Escrow Agreement) pursuant to the Escrow Agreement.
SECTION 8. Representations and Warranties. The Pledgor hereby
represents and warrants that:
(a) As of the Issue Date, the execution and delivery by the
Pledgor of, and the performance by the Pledgor of its obligations under, this
Escrow and Security Agreement will not contravene any provision of applicable
law or the Certificate of Incorporation of the Pledgor or any material agreement
or other material instrument binding upon the Pledgor or any of its subsidiaries
or any judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Pledgor or any of its subsidiaries, or result in
the creation or imposition of any security interest on any assets of the
Pledgor, except for the security interest granted under this Escrow and Security
Agreement; giving effect to the occurrence of the Issue Date (assuming that the
Confirmation Order (as defined in the Plan
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of Reorganization) has become a Final Order (as defined in the Plan of
Reorganization) and the Approved Plan (as defined in the Plan of Reorganization)
has become Effective (as defined in the Plan of Reorganization)), no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required (i) for the performance by the Pledgor of its
obligations under this Escrow and Security Agreement, (ii) for the pledge by the
Pledgor of the Collateral pursuant to this Escrow and Security Agreement or
(iii) except for any such consents, approvals, authorizations or orders required
to be obtained by the Collateral Agent (or the Holders) for reasons other than
the consummation of this transaction, for the exercise by the Collateral Agent
of the rights provided for in this Escrow and Security Agreement or the remedies
in respect of the Collateral pursuant to this Escrow and Security Agreement.
(b) As of the Issue Date (assuming that the Confirmation Order
has become a Final Order and the Approved Plan has become Effective), the
Pledgor is the beneficial owner of the Collateral, free and clear of any
security interest or any Lien or claims of any person or entity (except for the
security interests granted under this Escrow and Security Agreement). No
financing statement covering the Pledgor's interest in the Collateral is on file
in any public office other than the financing statements, if any, filed pursuant
to this Escrow and Security Agreement or the Indenture or the Security Agreement
and except for financing statements filed by pre-petition creditors as set forth
in the Pledgor's Plan of Reorganization but which no longer evidence valid or
existing security interests; no Pledged Security is in the possession of any
third party other than the Collateral Agent; and no notice to or arrangement
with any financial institution has been made regarding any security interest in
or Lien on or nominee arrangement for any Pledged Security or other Collateral.
(c) As of the Issue Date (assuming that the Confirmation Order
has become a Final Order and the Approved Plan has become Effective), this
Escrow and Security Agreement will have been duly authorized, validly executed
and delivered by the Pledgor and (assuming the due authorization and valid
execution and delivery of this Escrow and Security Agreement by the Collateral
Agent and enforceability of the Escrow and Security Agreement against the
Collateral Agent in accordance with its terms) will constitute a valid and
binding agreement of the Pledgor, enforceable against the Pledgor in accordance
with its terms, except as (i) the enforceability hereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, preference, reorganization,
moratorium or similar laws now or hereafter in effect relating to or affecting
creditors' rights or remedies generally, (ii) the liability of equitable
remedies may be limited by equitable principles of general applicability and the
discretion of the court before which any proceeding therefor may be brought,
(iii) the exculpation provisions and rights to indemnification hereunder may be
limited by U.S. federal and state securities laws and public policy
considerations and (iv) the waiver of rights and defenses contained in Section
14(b),
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Section 17.11 and Section 17.16 hereof may be limited by applicable law.
(d) Upon the delivery to the Collateral Agent of the
certificates or instruments, if any, representing or evidencing the Collateral,
the filing of financing statements, if any, required by the UCC in the
appropriate offices in the State of New York and Florida, and the transfer and
pledge to the Collateral Agent of the Collateral and the acquisition by the
Collateral Agent of any security entitlement thereto, in accordance with Section
3, the continued possession by the Collateral Agent thereof and assuming that
the Collateral Agent, directly or by its agent, has maintained sole dominion and
control over the deposit and cash accounts, the pledge of and grant of a
security interest in the Collateral securing the payment of the Obligations for
the benefit of the Collateral Agent and the Holders will constitute a first
priority perfected security interest in such Collateral, enforceable as such
against all creditors of the Pledgor (and any persons purporting to purchase any
of the Collateral from the Pledgor), other than as permitted under the
Indenture.
(e) As of the Issue Date (assuming that the Confirmation Order
has become a Final Order and the Approved Plan has become Effective), there will
be no legal or governmental proceedings pending or, to the best of the Pledgor's
knowledge, threatened to which the Pledgor or any of its subsidiaries is a party
or to which any of the properties of the Pledgor or any such subsidiary will be
subject that would materially adversely affect the power or ability of the
Pledgor to perform its obligations under this Escrow and Security Agreement or
to consummate the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Escrow and
Security Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System) applicable to the Pledgor.
(g) As of the Issue Date (assuming that the Confirmation Order
has become a Final Order and the Approved Plan has become Effective), no Event
of Default, or event which with notice or passage of time or both would be an
Event of Default, exists.
SECTION 9. Further Assurances. The Pledgor will, promptly upon
request by the Collateral Agent (which request the Collateral Agent may submit
at the direction of the Holders of at least a majority in principal amount of
the Notes then outstanding), execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, deliver any instruments to the Collateral Agent
and take any other actions that are necessary or desirable to perfect, continue
the
12
perfection of or protect the first priority of the Collateral Agent's security
interest in and to the Collateral, to protect the Collateral against the rights,
claims, or interests of third persons (other than any such rights, claims or
interests created by or arising through the Collateral Agent) or to effect the
purposes of this Escrow and Security Agreement. The Pledgor also hereby
authorizes the Collateral Agent to file any financing or continuation statements
in the United States with respect to the Collateral without the signature of the
Pledgor (to the extent permitted by applicable law). The Pledgor will promptly
pay all costs incurred in connection with any of the foregoing within 30 days of
receipt of an invoice therefor. The Pledgor also agrees, whether or not
requested by the Collateral Agent, to take all actions that are necessary to
perfect or continue the perfection of, or to protect the first priority of, the
Collateral Agent's security interest in and to the Collateral, including the
filing of all necessary financing and continuation statements, and to protect
the Collateral against the rights, claims or interests of third persons (other
than any such rights, claims or interests created by or arising through the
Collateral Agent).
SECTION 10. Covenants. The Pledgor covenants and agrees with the
Collateral Agent and the Holders that from and after the date of this Escrow and
Security Agreement until the earlier of payment in full in cash of (x) each of
the first nine scheduled interest payments due on the Notes under the terms of
the Indenture or (y) all obligations due and owing under the Indenture and the
Notes in the event such obligations become due and payable prior to the payment
of the first nine scheduled interest payments on the Notes:
(a) that (i) it will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to, any of the
Collateral or (ii) it will not create or permit to exist any Lien upon or with
respect to any of the Collateral (except for the security interests granted
under this Escrow and Security Agreement and any Lien created by or arising
through the Collateral Agent) and at all times will be the sole beneficial owner
of the Collateral; or
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or inhibit the
Collateral Agent's rights or remedies hereunder, including, without limitation,
the Collateral Agent's right to sell or otherwise dispose of the Collateral or
(ii) fail to pay or discharge any tax, assessment or levy of any nature with
respect to the Collateral not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment with respect to
the Collateral.
SECTION 11. Power of Attorney. In addition to all of the powers
granted to the Collateral Agent pursuant to the Indenture, the Pledgor hereby
appoints and constitutes the Collateral Agent as the Pledgor's attorney-in-fact
(with full
13
power of substitution) to exercise to the fullest extent permitted by law all of
the following powers upon and at any time after the occurrence and during the
continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Collateral Agent in its sole reasonable discretion, and
such payments made by the Collateral Agent to become part of the Obligations,
due and payable immediately upon demand. The Collateral Agent's authority under
this Section 11 shall include, without limitation, the authority to endorse and
negotiate any checks, certificates or instruments representing proceeds of
Collateral in the name of the Pledgor, execute and give receipt for any
certificate of ownership or any document constituting Collateral, transfer title
to any item of Collateral, sign the Pledgor's name on all financing statements
(to the extent permitted by applicable law) or any other documents deemed
necessary or appropriate by the Collateral Agent to preserve, protect or perfect
the security interest in the Collateral and to file the same, prepare, file and
sign the Pledgor's name on any notice of Lien, and to take any other actions
arising from or incident to the powers granted to the Collateral Agent in this
Escrow and Security Agreement. This power of attorney is coupled with an
interest and is irrevocable by the Pledgor.
SECTION 12. No Assumption of Duties; Reasonable Care. The rights
and powers granted to the Collateral Agent hereunder are being granted in order
to preserve and protect the security interest of the Collateral Agent and the
Holders in and to the Collateral granted hereby and shall not be interpreted to,
and shall not impose any duties on the Collateral Agent in connection therewith
other than those expressly provided herein or imposed under applicable law and
no implied covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Escrow and Security Agreement or otherwise
exist against the Collateral Agent. Except as provided by applicable law or by
the Indenture, the Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords similar property held by the Collateral Agent for
similar accounts, it being understood that the Collateral Agent in its capacity
as such shall not have any responsibility for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities or other matters
relative to any Collateral, whether or not the Collateral Agent has or is deemed
to have knowledge of such matters, (b) taking any necessary steps to preserve
rights against any parties with respect to any Collateral or (c) investing or
reinvesting any of the Collateral, provided, however, that nothing contained in
this Escrow and Security Agreement shall relieve the Collateral Agent of any
14
responsibilities as a securities intermediary under applicable law.
SECTION 13. Indemnity. The Pledgor shall indemnify, hold harmless
and defend the Collateral Agent and its directors, officers, agents and
employees, from and against any and all claims, actions, obligations,
liabilities and expenses, including reasonable defense costs and expenses,
reasonable investigative fees and costs, and reasonable legal fees and damages
arising from the Collateral Agent's performance as Collateral Agent under this
Escrow and Security Agreement, except to the extent that such claim, action,
obligation, liability or expense is directly attributable to the bad faith,
gross negligence or wilful misconduct of such indemnified person.
SECTION 14. Remedies Upon Event of Default. If any Event of Default
under the Indenture or a material default hereunder (any such Event of Default
or default being referred to in this Escrow and Security Agreement as an "Event
of Default") shall have occurred and be continuing:
(a) The Collateral Agent and the Holders shall have, in addition
to all other rights given by law or by this Escrow and Security Agreement or the
Indenture or any other Collateral Agreement, all of the rights and remedies with
respect to the Collateral of a secured party under the UCC in effect in the
State of New York at that time. In addition, with respect to any Collateral
that shall then be in or shall thereafter come into the possession or custody of
the Collateral Agent, the Collateral Agent may and, at the direction of the
Holders of a majority in principal amount of the Notes then outstanding, shall,
sell or cause the same to be sold at any broker's board or at public or private
sale, in one or more sales or lots, at such price or prices as the Collateral
Agent may deem best, for cash or on credit or for future delivery, without
assumption of any credit risk. The purchaser of any or all Collateral so sold
shall thereafter hold the same absolutely, free from any claim, encumbrance or
right of any kind whatsoever created by or through the Pledgor. Unless any of
the Collateral threatens, in the reasonable judgment of the Collateral Agent, to
decline speedily in value or is or becomes of a type sold on a recognized
market, the Collateral Agent will give the Pledgor reasonable notice of the time
and place of any public sale thereof, or of the time after which any private
sale or other intended disposition is to be made. Any sale of the Collateral
conducted in conformity with reasonable commercial practices of banks, insurance
companies, commercial finance companies, or other financial institutions
disposing of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be met if
such notice is delivered to the address of the recipient in and in accordance
with Section 17.1 hereof at least ten days before the time of the sale or
disposition. The Collateral Agent or any Holder of Notes may, in its own name
or in the name of a designee or nominee, buy any of the Collateral
15
at any public sale and, if permitted by applicable law, at any private sale.
All expenses (including court costs and reasonable attorneys' fees, expenses and
disbursements) of, or incident to, the enforcement of any of the provisions
hereof shall be recoverable from the proceeds of the sale or other disposition
of the Collateral.
(b) The Pledgor further agrees to do or cause to be done all
such other acts as may be necessary to make such sale or sales of all or any
portion of the Collateral pursuant to this Section 14 valid and binding and in
compliance with the Indenture and any and all other applicable requirements of
law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section 14 will cause irreparable injury to the Collateral Agent and the
Holders, that the Collateral Agent and the Holders have no adequate remedy at
law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 14 shall be specifically enforceable against
the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred.
SECTION 15. Expenses. The Pledgor will upon demand pay to the
Collateral Agent the amount of any and all reasonable expenses, including,
without limitation, the reasonable fees, expenses and disbursements of its
counsel, experts and agents retained by the Collateral Agent, that the
Collateral Agent may incur in connection with (a) the review, negotiation and
administration of this Escrow and Security Agreement, (b) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (c) the exercise or enforcement of any of the rights of the
Collateral Agent and the Holders hereunder or (d) the failure by the Pledgor to
perform or observe any of the provisions hereof.
SECTION 16. Security Interest Absolute. All rights of the
Collateral Agent and the Holders and security interests and Liens hereunder, and
all obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations or other obligations under the
Indenture, or any other amendment or waiver of or any consent to any departure
from the Indenture;
(c) any exchange, surrender, release or non-perfection of any
Liens on any other collateral for all or any of the Obligations; or
16
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Escrow and
Security Agreement.
SECTION 17. Miscellaneous Provisions.
17.1 Notices. Except as otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States mail,
postage prepaid, or, in the case of telex notice, when sent, answer-back
received, or in the case of telecopy notice, when sent, or in the case of a
nationally recognized overnight courier service, one business day after delivery
to such courier service, addressed, in the case of each party hereto to the
following address, or to such other address as may be designated by any party in
a written notice to the other party hereto:
if to the Pledgor:
Discovery Zone, Inc.
000 Xxxx Xxxxxxx Xxxxxxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
if to the Initial Purchaser:
Xxxxxxxxx & Company, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx
with a copy to:
Xxxxxxxx Kill & Olick, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
17
if to the Collateral Agent:
State Street Bank and Trust Company
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Corporate Trust Department
17.2. No Adverse Interpretation of Other Agreements. This Escrow and
Security Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement (other than the Indenture) may be used to interpret this Escrow
and Security Agreement.
17.3. Severability. The provisions of this Escrow and Security
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or provision
of this Escrow and Security Agreement in any jurisdiction.
17.4. Headings. The headings in this Escrow and Security Agreement
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
17.5. Counterpart Originals. This Escrow and Security Agreement may
be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same agreement.
17.6. Benefits of Escrow and Security Agreement. Nothing in this
Escrow and Security Agreement, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder, and the Holders,
any benefit or any legal or equitable right, remedy or claim under this Escrow
and Security Agreement.
17.7. Amendments, Waivers and Consents. Any amendment or waiver of
any provision of this Escrow and Security Agreement and any consent to any
departure by the Pledgor from any provision of this Escrow and Security
Agreement shall be effective only if made or duly given in compliance with
all of the terms and provisions of the Indenture, and neither the Collateral
Agent nor any Holder of Notes shall be deemed, by any act, delay, indulgence,
omission or otherwise, to have waived any right or remedy hereunder or to
have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. Failure of the Collateral Agent or any
Holder
18
of Notes to exercise, or delay in exercising, any right, power or privilege
hereunder shall not preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Collateral
Agent or any Holder of Notes of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that the
Collateral Agent or such Holder of Notes would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
17.8. Interpretation of Agreement. All terms not defined herein or
in the Indenture shall have the meaning set forth in the UCC, except where the
context otherwise requires. To the extent a term or provision of this Escrow
and Security Agreement conflicts with the Indenture, the Indenture shall control
with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Escrow and Security
Agreement shall not be relevant to determine the meaning of this Escrow and
Security Agreement even though the accepting or acquiescing party had knowledge
of the nature of the performance and opportunity for objection.
17.9. Continuing Security Interest; Termination.
(a) This Escrow and Security Agreement shall create a continuing
security interest in and to and Lien on the Collateral and shall, unless
otherwise provided in the Indenture or in this Escrow and Security Agreement,
remain in full force and effect until the payment in full in cash of the
Obligations. This Escrow and Security Agreement shall be binding upon the
Pledgor, its transferees, successors and assigns, and shall inure, together with
the rights and remedies of the Collateral Agent hereunder, to the benefit of the
Collateral Agent, the Holders and their respective successors, transferees and
assigns.
(b) This Escrow and Security Agreement shall terminate upon the
payment in full in cash of the Obligations. At such time, the Collateral Agent
shall, pursuant to an Issuer Order, and subject to and in accordance with the
applicable terms of the Indenture, if any, reassign and redeliver to the Pledgor
all of the Collateral hereunder that has not been sold, disposed of, retained or
applied by the Collateral Agent in accordance with the terms of this Escrow and
Security Agreement and the Indenture, such that such Collateral will be subject
in all respects to a valid and existing security interest and Lien under the
Indenture and Security Agreement. Such reassignment and redelivery shall be
without warranty by or recourse to the Collateral Agent in its capacity as such,
except as to the absence of any Liens on the Collateral created by or arising
through the Collateral Agent (except as may be granted under the Indenture or
Security Agreement or other Collateral Agreement), and shall be at the cost and
expense of the Pledgor.
19
17.10. Survival Provisions. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Escrow and Security Agreement, and shall terminate only upon
the termination of this Escrow and Security Agreement. The obligations of the
Pledgor under Sections 13 and 15 hereof shall survive the termination of this
Escrow and Security Agreement.
17.11. Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
17.12. Authority of the Collateral Agent.
(a) The Collateral Agent shall have and be entitled to exercise
all powers hereunder that are specifically granted to the Collateral Agent by
the terms hereof, together with such powers as are reasonably incident thereto.
The Collateral Agent may perform any of its duties hereunder or in connection
with the Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel concerning all
such matters. Except as otherwise expressly provided in this Escrow and
Security Agreement or the Indenture, neither the Collateral Agent nor any
director, officer, employee, attorney or agent of the Collateral Agent shall be
liable to the Pledgor for any action taken or omitted to be taken by the
Collateral Agent, in its capacity as Collateral Agent, hereunder, except for its
own bad faith, gross negligence or willful misconduct, and the Collateral Agent
shall not be responsible for the validity, effectiveness or sufficiency hereof
or of any document or security furnished pursuant hereto. The Collateral Agent
and its directors, officers, employees, attorneys and agents shall be entitled
to rely on any communication, instrument or document believed by it or them to
be genuine and correct and to have been signed or sent by the proper person or
persons. The Collateral Agent shall have no duty to cause any financing
statement or continuation statement to be filed in respect of the Collateral.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Collateral Agent under this Escrow and Security
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Escrow and Security Agreement shall, as between the Collateral Agent
and the Holders, be governed by the Indenture and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Pledgor, the Collateral Agent shall be conclusively
presumed to be acting as agent for the Holders with full and
20
valid authority so to act or refrain from acting, and the Pledgor shall not be
obligated or entitled to make any inquiry respecting such authority.
(c) The Collateral Agents shall maintain appropriate books and
records with respect to the Collateral in which shall be recorded all deposits
and transactions in and disbursements from the Escrowed Interest Account and
regarding the Pledged Securities and shall permit the Company to inspect and to
make copies of such books and records at the Company's sole cost and expense.
17.13. Successor Collateral Agent. The term Collateral Agent shall
mean the Person named as the "Collateral Agent" in the first paragraph of the
Escrow and Security Agreement until a successor Collateral Agent shall have
become such, and thereafter "Collateral Agent" shall mean the Person who is then
the Collateral Agent hereunder. If the Collateral Agent consolidates with,
merges or converts into, or transfers all or substantially all of its corporate
trust business to another entity, the resulting, surviving or transferee entity,
without any further act, shall be the successor Collateral Agent.
17.14. Final Expression. This Escrow and Security Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Escrow and
Security Agreement and is intended as a complete and exclusive statement of the
terms and conditions thereof.
17.15. Rights of Holders. No Holder of Notes shall have any rights
granted to individual Holders pursuant to Section 6.07 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Collateral Agent under the Notes or the Indenture.
17.16. GOVERNING LAW, SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES.
(a) THIS ESCROW AND SECURITY AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THE PLEDGOR, THE COLLATERAL AGENT AND THE HOLDERS IN CONNECTION WITH
THIS ESCROW AND SECURITY AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK.
(b) THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS
CAPACITY AS COLLATERAL AGENT OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF
NOTES, HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED
AGAINST THE PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY
SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE
21
PLEDGOR OR THE COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE COLLATERAL AGENT TO
REALIZE ON SUCH COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE PLEDGOR AGREES THAT IT WILL NOT
ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY
THE COLLATERAL AGENT TO REALIZE ON SUCH COLLATERAL OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF THE COLLATERAL AGENT, WITH RESPECT TO SUCH
COLLATERAL, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT
ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
IN THE CITY OF NEW YORK ONCE THE COLLATERAL AGENT HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(c) THE RIGHTS AND POWERS GRANTED TO THE COLLATERAL AGENT
HEREUNDER ARE BEING GRANTED IN ORDER TO PRESERVE AND PROTECT THE SECURITY
INTEREST OF THE COLLATERAL AGENT AND THE HOLDERS IN AND TO THE COLLATERAL
GRANTED HEREBY AND SHALL NOT BE INTERPRETED TO, AND SHALL NOT IMPOSE ANY DUTIES
ON THE COLLATERAL AGENT IN CONNECTION THEREWITH OTHER THAN THOSE EXPRESSLY
PROVIDED HEREIN OR IMPOSED UNDER APPLICABLE LAW AND NO IMPLIED COVENANTS,
FUNCTIONS, RESPONSIBILITIES, DUTIES, OBLIGATIONS, OR LIABILITIES SHALL BE READ
INTO THIS ESCROW AND SECURITY AGREEMENT OR OTHERWISE EXIST AGAINST THE
COLLATERAL AGENT. EXCEPT AS PROVIDED BY APPLICABLE LAW OR BY THE INDENTURE, THE
COLLATERAL AGENT SHALL BE DEEMED TO HAVE EXERCISED REASONABLE CARE IN THE
CUSTODY AND PRESERVATION OF THE COLLATERAL IN ITS POSSESSION IF THE COLLATERAL
IS ACCORDED TREATMENT SUBSTANTIALLY EQUAL TO THAT WHICH THE COLLATERAL AGENT
ACCORDS SIMILAR PROPERTY HELD BY THE COLLATERAL AGENT FOR SIMILAR ACCOUNTS, IT
BEING UNDERSTOOD THAT THE COLLATERAL AGENT IN ITS CAPACITY AS SUCH SHALL NOT
HAVE ANY RESPONSIBILITY FOR (A) ASCERTAINING OR TAKING ACTION WITH RESPECT TO
CALLS, CONVERSIONS, EXCHANGES, MATURITIES OR OTHER MATTERS RELATIVE TO ANY
COLLATERAL, WHETHER OR NOT THE COLLATERAL AGENT HAS OR IS DEEMED TO HAVE
KNOWLEDGE OF SUCH MATTERS, (B) TAKING ANY NECESSARY STEPS TO PRESERVE RIGHTS
AGAINST ANY PARTIES WITH RESPECT TO ANY COLLATERAL OR (C) INVESTING OR
REINVESTING ANY OF THE COLLATERAL, PROVIDED, HOWEVER, THAT NOTHING CONTAINED IN
THIS ESCROW AND SECURITY AGREEMENT SHALL RELIEVE THE COLLATERAL AGENT OF ANY
RESPONSIBILITIES AS A SECURITIES INTERMEDIARY UNDER APPLICABLE LAW.
22
IN WITNESS WHEREOF, the Pledgor, the Initial Purchaser and the Collateral
Agent have each caused this Escrow and Security Agreement to be duly executed
and delivered as of the date first above written.
Pledgor:
DISCOVERY ZONE, INC.
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: President and CEO
Initial Purchaser:
XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: EVP
Collateral Agent:
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxx Xxx Xxxxxx
----------------------------------
Name: Xxxx Xxx Xxxxxx
Title:
EXHIBIT A
STATE STREET BANK AND TRUST COMPANY
OFFICER'S CERTIFICATE
Pursuant to Section 6(d) of the Escrow and Security Agreement (the
"Escrow and Security Agreement") dated as of July 22, 1997 by and among
Discovery Zone, Inc. (the "Pledgor"), Xxxxxxxxx & Company, Inc., as placement
agent (the "Initial Purchaser"), and State Street Bank and Trust Company, as
escrow agent and collateral agent (the "Collateral Agent"), for the holders of
the Pledgor's 13 1/2% Senior Secured Notes Due 2002, the undersigned officer of
the Collateral Agent, on behalf of the Collateral Agent, makes the following
certifications to the Pledgor and the Initial Purchaser. Capitalized terms used
and not defined in this Officer's Certificate have the meanings set forth or
referred to in the Escrow and Security Agreement.
1. Substantially contemporaneously with the execution and delivery
of this Officer's Certificate, the Collateral Agent has established at its
offices, as securities intermediary a securities account in the name of "State
Street Bank and Trust Company Escrowed Interest Account Re: Discovery Zone" (the
"Escrowed Interest Account") with respect to which the Collateral Agent is the
entitlement holder and through which the Collateral Agent has acquired a
security entitlement to certain Escrow Funds and Pledged Securities and has sole
dominion and control and has made appropriate book entries in its records
establishing that such Escrowed Funds and Pledged Securities, as applicable, and
the Collateral Agent's securities entitlement thereto have been credited to and
are held in the Escrowed Interest Account.
2. The Collateral Agent has established and maintained and will
maintain the Escrowed Interest Account and all securities entitlements and other
positions carried in the Escrowed Interest Account solely in its capacity as
Collateral Agent and has not asserted and will not assert any claim to or
interest in the Escrowed Interest Account or any such securities entitlements or
other positions except in such capacity.
3. The Collateral Agent has acquired its security entitlement to the
Escrowed Funds and Pledged Securities, as applicable, for value and without
notice of any adverse claim thereto. Without limiting the generality of the
foregoing, the Escrowed Funds and the Pledged Securities are not and the
Collateral Agent's security entitlement to such Escrowed Funds and Pledged
Securities, as applicable, is not, to the Collateral Agent's knowledge, subject
to any Lien granted by or to or arising through or in favor of any securities
intermediary (including, without limitation, the Collateral Agent or the Federal
Reserve Bank of Boston) through which the Collateral Agent derives its security
entitlement to the Escrowed Funds and the Pledged Securities.
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4. The Collateral Agent has not caused or permitted the Escrowed
Funds, the Pledged Securities or its security entitlement thereto or any other
assets in the Escrowed Interest Account to become subject to any Lien created by
or arising through the Collateral Agent.
IN WITNESS WHEREOF, the undersigned officer has executed this
Officer's Certificate on behalf of State Street Bank and Trust Company, as
Collateral Agent this 22 day of July, 1997.
STATE STREET BANK AND TRUST COMPANY
By:
----------------------------------
Name:
Title:
2
EXHIBIT B
FORM OF ESCROWED INTEREST ACCOUNT LETTER
July __, 0000
Xxxxx Xxxxxx Bank and Trust Company
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Corporate Trust Department
Re: Discovery Zone, Inc.
Dear Sir or Madam:
Reference is made to Escrowed Interest Account No. __________ into
which certain securities, instruments and other properties are deposited from
time to time (the "Escrowed Interest Account") maintained with you by State
Street Bank and Trust Company (the "Collateral Agent"). Pursuant to the Escrow
and Security Agreement, dated as of the date hereof (the "Escrow and Security
Agreement"), Discovery Zone, Inc. (the "Pledgor") has granted to the Collateral
Agent for the holders of Notes referred to in the Indenture dated as of July __,
1997 (the "Indenture"), between the Collateral Agent and the Pledgor, a security
interest in certain property of the Pledgor, including, among other things, the
following (collectively, hereinafter, the "Collateral"): (a) the Escrowed
Interest Account, all funds and securities held therein and all certificates and
instruments, if any, from time to time representing or evidencing the Escrowed
Interest Account, including, without limitation, the Escrowed Funds and the
Pledged Securities, and any and all securities entitlements to the Escrowed
Funds and the Pledged Securities, and any and all related securities accounts in
which security entitlements to the Escrowed Funds and the Pledged Securities are
carried; (b) all notes, certificates of deposit, deposit accounts, checks and
other instruments from time to time hereafter delivered to or otherwise
possessed by the Collateral Agent for or on behalf of the Pledgor in
substitution for or in addition to any or all then existing Collateral; (c) all
interest, 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 then existing Collateral; and (d) all proceeds of any and all
of the foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described in clauses (a) - (c) above) and, to
the extent not otherwise included, all cash. It is a condition to the continued
maintenance of the Escrowed Interest Account with you that you agree to this
letter agreement.
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By signing this letter agreement, you acknowledge notice of, and
consent to the terms and provisions of, the Escrow and Security Agreement, a
copy of which is attached hereto, and confirmed to the Collateral Agent that the
description of the Escrowed Interest Account set forth on Schedule I hereof is
correct and that you have received no notice of any other pledge or assignment
of the Escrowed Interest Account. Further, you hereby agree that:
(a) Notwithstanding anything to the contrary in any other agreement
relating to the Escrowed Interest Account, the Escrowed Interest Account
are and will be subject to the terms and conditions of the Escrow and
Security Agreement, will be maintained solely for the benefit of the
Collateral Agent, will be entitled "State Street Bank and Trust Company, as
Collateral Agent for the benefit of the holders of the 13 1/2% Senior
Secured Notes Due 2002 of Discovery Zone, Inc. Collateral Pledge" and will
be subject to written instructions only from an officer of the Collateral
Agent. You hereby agree to comply with all instructions (including,
without limitation, any instructions to liquidate all or less than all the
Pledged Securities and transfer the proceeds thereof to the Collateral
Agent), originated by the Collateral Agent relating to the Escrowed
Interest Account without further consent from any other person (including,
without limitation, the Pledgor), and not to comply with any instructions
originated by any person other than the Collateral Agent.
(b) You will maintain a record of all securities, instruments, checks
and other remittance items received in the Escrowed Interest Account and,
in addition to providing the Collateral Agent and the Pledgor with a report
describing the contents on the Escrowed Interest Account on a daily basis,
furnish to the Collateral Agent a monthly statement of the Escrowed
Interest Account to be transmitted electronically to the Collateral Agent
at: State Street Bank and Trust Company, Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxxx,
XX 00000, Attn: Corporate Trust Department.
(c) All transfers required to be made by the Collateral Agent under
the Escrow and Security Agreement shall be made by you irrespective of, and
without deduction for, any counterclaim, defense, recoupment or set-off and
shall be final, and you will not seek to recover from the Holders or the
Pledgor for any reason any such payment once made.
(d) All service charges and fees with respect to the Escrowed
Interest Account shall be payable by the Pledgor.
(e) The Collateral Agent shall be entitled to exercise any and all
rights of the Pledgor in respect of the Escrowed Interest Account in
accordance with the terms of the
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Security Agreement and the Escrow and Security Agreement, and the
undersigned shall comply in all respects with such exercise.
This letter agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of the Collateral Agent, the holders
of the Notes and their successors, transferees and assigns. You may terminate
this letter agreement only upon thirty days' prior written notice to the Pledgor
and the Collateral Agent. Upon such termination you shall close the Escrowed
Interest Account to a cash collateral account as directed by you. After any
such termination, you shall nonetheless remain obligated promptly to transfer to
the such cash account all securities, instruments, funds and other property
received in respect of the Escrowed Interest Account.
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to conflicts of law
provisions thereof.
Very truly yours,
DISCOVERY ZONE, INC.
By:
----------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By:
----------------------------------
Name:
Title:
Acknowledged and agreed to as of
the date first above written:
---------------------------------
By:
-----------------------------
Name:
Title:
0
XXXXX XX XXX XXXX )
) ss:
COUNTY OF NEW YORK )
On the ___ day of July, 1997 before me personally came __________, to
me known, who being by me duly sworn, did depose and say that he is the
_____________ of DISCOVERY ZONE, INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
Notary Public
Schedule I
to
Escrowed Interest Account Letter
1. Escrowed Interest Account
Discovery Zone, Inc. Escrowed Interest Account
Account No. EW0994
State Street Bank and Trust
Xxxxxx, XX 00000
