EXHIBIT (d)(6)
PLEDGE AGREEMENT
This is a pledge agreement made as of the 15th day of November, 1999
between H. Xxxxxxxxxxx Xxxxxxx ("Pledgor") and Edison Schools Inc., a
corporation organized under the laws of Delaware with its principal office at
000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Pledgee").
1. Pledge of Collateral. Pledgor hereby grants Pledgee a security
interest in the Shares (as defined in that certain Loan Agreement, dated as of
the date hereof, between Pledgor and Pledgee (the "Loan Agreement")), which
Pledgor has delivered to Pledgee, as well as all other instruments, documents,
stock certificates, money and goods as may be issued to Pledgee or become
issuable to Pledgee in connection with such stock from time to time, whether
through delivery by Pledgor or otherwise (collectively, the "Collateral").
2. Obligations Secured. The security interest in the Collateral
granted hereby secures payment and performance of the Note and, if and when
issued by Pledgor, the Second Note and the Third Note (each as defined in the
Loan Agreement), together with all interest, fees, charges and expenses with
respect to the Note and, if and when issued by Pledgor, the Second Note and the
Third Note (collectively, the "Obligations").
3. Pledgee's Rights and Duties with Respect to the Collateral.
Pledgee's only duty with respect to the Collateral shall be to exercise
reasonable care to secure the safe custody thereof. Pledgee shall have the right
but not the obligation to (a) demand, xxx for, receive and collect all money or
money damages payable on account of any Collateral, (b) protect, preserve or
assert any other rights of Pledgor or take any other action with respect to the
Collateral and (c) pay any taxes, liens, assessments, insurance premiums or
other charges pertaining to Collateral. Any expenses incurred by Pledgee under
the preceding sentence shall be paid by Pledgor upon demand, become part of the
Obligations secured by the Collateral and bear interest at the rate provided in
the first paragraph of the Note until paid. Pledgee shall be relieved of all
responsibility for the Collateral upon surrendering it to Pledgor.
4. Pledgor's Warranties and Indemnity. Pledgor represents,
warrants and covenants (a) that he is and will be the lawful owner of the
Collateral, (b) that the Collateral is and will be fully paid and
non-assessable, (c) that the Collateral is and will remain free and clear of all
liens, encumbrances and security interests other than (x) the security interest
granted by Pledgor hereunder and (y) the security interests granted by Pledgor
to Xxxxxx Guaranty Trust Company of New York, as agent, and First Vantage Bank -
Tennessee (f.k.a. First Knoxville Bank), which security interests are
subordinated to the security interest granted by Pledgor hereunder, (d) that
Pledgor has the sole right and lawful authority to pledge the Collateral and
otherwise to comply with the provisions hereof and (e) that Pledgor has obtained
the consent and agreement of all persons who have contractual rights or
restrictions with respect to the Collateral to the pledge, disposition and other
rights of Pledgee herein. In the event that any adverse claim is asserted in
respect of the Collateral or any portion thereof, except such as may result from
an act of Pledgee not authorized hereunder, Pledgor promises and agrees to
indemnify Pledgee and hold Pledgee harmless from and against any losses,
liabilities, damages, expenses, costs and reasonable counsel fees incurred by
Pledgee in exercising any right, power or remedy of Pledgee hereunder or
defending, protecting or enforcing the security interests created hereunder. Any
such loss, liability or expense so incurred shall be paid by Pledgor upon
demand, become part of the Obligations secured by the Collateral and bear
interest at the rate provided in the Notes until paid.
5. Voting of Collateral. While Pledgor is not in default
hereunder, Pledgor may vote stock and other securities pledged as Collateral.
6. Dividends and Other Distributions. While Pledgor is not in
default hereunder, Pledgor may receive cash dividends and other cash
distributions payable with respect to Collateral, provided, however, that
Pledgor shall immediately inform Pledgee of the receipt of any such dividend or
other distribution and shall hold the amount thereof in trust for Pledgee unless
and until Pledgee shall in writing release Pledgor from such trust. Pledgor
shall cause all non-cash dividends and distributions with respect to Collateral
to be distributed directly to Pledgee, to be held by Pledgee as additional
Collateral, and if any such distribution is made to Pledgor, Pledgor shall
receive such distribution in trust for Pledgee and shall immediately transfer it
to Pledgee.
7. Pledgor's Default. Pledgor shall be in default hereunder upon
the occurrence of any of the following events:
(a) if any proceeding under the United States Bankruptcy
Code or any other federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors generally is
instituted against Pledgor or any indorser or guarantor of the Notes, which
proceeding is not dismissed within thirty (30) days of filing;
(b) if any proceeding under the United States Bankruptcy
Code or any other federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors generally is
instituted by Pledgor or any indorser or guarantor of the Notes, or if a
composition or an assignment or trust mortgage for the benefit of creditors is
made by Pledgor or any indorser or guarantor of the Notes;
(c) if Pledgor dies or becomes incapacitated, or if a
conservator or guardian of Pledgor is appointed, or if Pledgor suffers any other
legal disability;
(d) if any lien, encumbrance or adverse claim of any
nature whatsoever is asserted with respect to any Collateral;
(e) if any warranty of Pledgor hereunder is or shall
become false;
(f) if Pledgor fails to fulfill any obligation hereunder;
or
(g) if Pledgor fails to pay or perform any of the
Obligations when such payment or performance is due.
8. Pledgee's Rights upon Default. Upon the occurrence of any
default as defined in the preceding section, Pledgee may, if Pledgee so elects
in its sole option:
(a) at any time and from time to time, sell, assign and
deliver the whole or any part of the Collateral at a sale through a broker in a
public market where securities of the type constituting such Collateral are
usually traded, without any advertisement, presentment, demand for performance,
protest, notice of protest, notice of dishonor or any other notice;
(b) at any time and from time to time sell, assign and
deliver all or any part of the Collateral, or any interest therein, at any other
public or private sale, for cash, on credit or for other property, for immediate
or future delivery without any assumption of credit risk, and for
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such price or prices and on such terms as Pledgee in its absolute discretion may
determine, provided that (i) at least ten days' notice of the time and place of
any such sale shall be given to Pledgor and (ii) in the case of any private
sale, such notice shall also contain the minimum terms of the proposed sale;
(c) exercise the right to vote, the right to receive cash
dividends and other distributions and all other rights with respect to the
Collateral as though Pledgee were the absolute owner thereof, whether or not
such rights were retained by Pledgor as against Pledgee before default; and
(d) exercise all other rights available to a secured
party under the Uniform Commercial Code and other applicable law.
9. Application of Sale Proceeds. In the event of a sale of
Collateral pursuant to Section 8, the proceeds shall first be applied to the
payment of the expenses of the sale, including brokers' commissions, counsel
fees, any taxes or other charges imposed by law upon the Collateral or the
transfer thereof and all other charges paid or incurred by Pledgee pertaining to
the sale; and, second, to satisfy outstanding Obligations, in the order in which
Pledgee elects in its sole discretion; and, third, the surplus (if any) shall be
paid to Pledgor.
10. Sale of Collateral to Third Party.
(a) At any time and from time to time while Pledgor is
not in default hereunder, Pledgor may sell a number of Shares such that,
immediately after such sale and the repayment of Obligations by Pledgor pursuant
to Section 10(b), the fair market value of the remaining Shares is at least
equal to 150% of the outstanding Obligations. Pledgee shall release such number
of Shares to Pledgor at such time as Pledgee is in receipt of the proceeds set
forth in Section 10(b). For purposes of this Section 10(a), the fair market
value of the remaining Shares shall be determined in good faith by Pledgee's
board of directors, until such time as Pledgee has a class of securities
registered under the Securities Exchange Act of 1934, as amended, in which case
the fair market value of each Share shall be the average of the high and low
prices of such registered securities on a national exchange or The Nasdaq
National Market on the trading day immediately preceding the date of such sale
and repayment of Obligations. If less than all of the Shares are to be sold by
Pledgor, Pledgee shall, after endorsement of the existing certificate evidencing
the Shares by Pledgor and Pledgee's receipt of the proceeds set forth in Section
10(b), which shall be paid by certified check or wire transfer of immediately
available funds to an account designated in writing by Pledgee, cancel the
existing certificate and issue (x) one certificate evidencing the number of
Shares sold by Pledgor, and deliver such certificate to Pledgor, and (y) one
certificate evidencing the remaining Shares, and such certificate shall be held
by Pledgee and remain subject to this Pledge Agreement.
(b) A portion of the proceeds from the sale of Shares
under this Section 10 shall be applied to satisfy outstanding Obligations, in
the order in which Pledgee elects in its sole discretion, such portion shall be
the greater of:
(i) the amount that is the product of (x) the
number of Shares sold multiplied by (y) the quotient of (A) the amount of the
Obligations outstanding immediately prior to such sale divided by (B) the number
of Shares held by Pledgor immediately prior to such sale; or
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(ii) the amount necessary such that the fair
market value of the remaining Shares is at least equal to 150% of the
outstanding Obligations.
(c) Right of First Offer.
(i) Prior to any sale pursuant to Section 10(a),
Pledgor shall first provide written notice to Pledgee (the "Offer Notice") of
his desire to sell such Shares (the "Offered Shares"), which notice shall
describe (x) the cash price per Share (the "Offer Price") for the Shares
proposed to be sold and (y) all other material terms and conditions of the
proposed sale. The Offer Notice shall constitute an offer by Pledgor to sell, to
Pledgee, the Offered Shares on the terms and conditions set forth in the Offer
Notice and on the terms and provisions contained in this Pledge Agreement.
(ii) Pledgee shall have twenty (20) business days
from the date such notice is deemed given as herein provided to elect to
purchase all (but not less than all) of the Offered Shares on the same terms and
conditions as set forth in the Offer Notice by giving written notice as herein
provided (the "Response Notice") within such 20-business day period to Pledgor
of its desire to do so, which notice shall constitute the irrevocable agreement
of Pledgee to so purchase such pro rata portion.
(iii) If Pledgee does not elect to purchase all of
the Offered Shares available for purchase under the Offer Notice, Pledgor may,
within a period of four (4) months from the date of the Offer Notice, sell the
Offered Shares to one or more third parties for cash per share of not less than
95% of the Offer Price and on such other terms and conditions as are not
materially more favorable to such transferee than those specified in the Offer
Notice. If Pledgor does not complete the sale of the Offered Shares within such
four (4) mouth period, the provisions of this Section 10(c) shall again apply,
and no sale of Shares shall be made other than in accordance with the terms and
conditions of this Pledge Agreement.
(iv) The closing of the purchase of Offered
Shares by Pledgee pursuant to this Section 10(c) shall take place within 20
business days after the delivery of the Response Notice (provided that if such
day is not a business day in New York, New York, then the closing shall occur
prior to the next succeeding such business day) such date to be specified by
Pledgor, at 11:00 A.M. local time at the principal offices of Pledgee, or at
such other date, time or place as the parties to the sale may agree. At such
closing, Pledgor shall sell, transfer and deliver to Pledgee full right, title
and interest in and to the Offered Shares so purchased by Pledgee, free and
clear of all liens, security interests or adverse claims of any kind and nature
(except as otherwise set forth in this Pledge Agreement). Simultaneously with
Pledgor's delivery of the certificate representing the Offered Shares to Pledgee
duly endorsed for transfer, Pledgee shall deliver to Pledgor, by certified check
or wire transfer of immediately available funds to an account designated in
writing by Pledgor, a cash amount equal to the product of the purchase price and
the number of Offered Shares being acquired by Pledgee, less any proceeds to
Pledgee pursuant to Section 10(b), in full payment of the purchase price of the
Offered Shares purchased.
(d) The provisions of Section 10(c) shall terminate upon
the consummation of an initial public offering of Pledgee's securities pursuant
to a registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), filed with the Securities and Exchange Commission.
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(e) Any sale pursuant to this Section 10 shall, at
Pledgee's option, be subject to the prior receipt by Pledgee of an opinion of
counsel, which may be counsel to Pledgee, that such sale is exempt from the
registration requirements of the Securities Act.
11. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, courier
service, personal delivery or facsimile (provided that "answer back"
confirmation is received by the sender of the facsimile):
(a) if to Pledgee:
Edison Schools Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: General Counsel
with a copy to:
Xxxx and Xxxx LLP
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx, Esq.
(b) if to Pledgor:
H. Xxxxxxxxxxx Xxxxxxx
c/o Edison Schools Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxx and Xxxx LLP
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx, Esq.
All such notices and communications shall be deemed to have been duly
given (a) when delivered by hand, if personally delivered, (b) when delivered by
courier, if delivered by commercial overnight courier service, (c) when mailed,
five business days after being deposited in the mail, postage prepaid, or (d)
when transmitted, if sent by facsimile. Any party may, from time to time, change
its address by sending a notice with the new address in accordance with the
provisions of this Section 11.
12. Duration of Pledge Agreement. The rights and obligations of
Pledgor and Pledgee under this Pledge Agreement shall terminate at such time as
all of the Obligations are paid in full. At such time, the remaining Collateral,
if any, shall be surrendered to Pledgor.
13. Heirs, Successors, Etc. This Pledge Agreement and all of its
terms and provisions shall benefit and bind the heirs, successors, assigns,
transferees, executors and administrators of both of the parties hereto.
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14. Amendment and Waiver.
(a) No failure or delay on the part of Pledgor or Pledgee
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
(b) Any amendment, supplement or modification of or to
any provision of this Pledge Agreement, any waiver of any provision of this
Pledge Agreement and any consent to any departure by any party from the terms of
any provision of this Pledge Agreement shall be effective (i) only if it is made
or given in writing and signed by Pledgor and Pledgee and (ii) only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Pledge Agreement, no notice to or
demand on any party in any case shall entitle any party hereto to any other or
further notice or demand in similar or other circumstances.
15. Counterparts. This Pledge Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
16. Headings. The headings in this Pledge Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
17. 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 principles of conflicts of law of such state.
18. Jurisdiction. Each party to this Pledge Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Pledge Agreement or any agreements or transactions contemplated
hereby shall be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum. Each party hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such suit, action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth in Section 11, such service to become
effective 10 days after such mailing.
19. Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired.
20. Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any governmental authority or
any other person or entity) as may be reasonably required to carry out or to
perform the provisions of this Pledge Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be executed and delivered by their authorized representatives as of
the date first above written.
EDISON SCHOOLS INC.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Chairman
H. XXXXXXXXXXX XXXXXXX
/s/ H. Xxxxxxxxxxx Xxxxxxx.
--------------------------
Name: H. Xxxxxxxxxxx Xxxxxxx
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