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PLEDGE AGREEMENT
From
DISCOVERY ZONE, INC.,
as Pledgor
to
FIRSTAR BANK OF MINNESOTA, N.A.,
as Collateral Agent
Dated as of July 17, 1998
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PLEDGE AGREEMENT
This PLEDGE AGREEMENT (together with any amendments,
replacements and supplements hereafter entered into, the "Pledge Agreement"),
dated as of July 17, 1998, between Discovery Zone, Inc., a Delaware corporation
(together with its successors and assigns, the "Pledgor"), and Firstar Bank of
Minnesota, N.A., as Trustee under the Indenture (as defined below), acting as
Collateral Agent hereunder (together with its successors and assigns, in such
capacity, the "Collateral Agent"), is made for the ratable benefit of the
Holders. As used herein, all capitalized terms not otherwise defined herein
shall have the meanings set forth in the Indenture, dated as of the date hereof
(together with all amendments and supplements thereto, the "Indenture"), among
the Pledgor, each of the Subsidiary Guarantors and the Collateral Agent,
relating to the Pledgor's 13 1/2% Senior Collateralized Notes due 2002 (the
"Initial Notes") and 13 1/2% Senior Collateralized Notes due 2002, Series B, to
be issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement, the Purchase Agreement and the Indenture ("Exchange Notes" and,
together with the Initial Notes, the "Notes"), as amended from time to time in
accordance with the terms thereof.
W I T N E S S E T H:
WHEREAS, the Pledgor has issued or will issue $20 million
aggregate principal amount of Notes pursuant to the Indenture;
WHEREAS, the Pledgor is or, as of the Issue Date, will be the
legal and beneficial owner of the issued and outstanding shares of Capital Stock
set forth on Schedule A attached hereto; and
WHEREAS, in order to secure the payment and performance in
full of the Obligations of the Pledgor under the Indenture and the Notes, the
parties hereto desire to set forth their mutual understanding and certain
agreements regarding the terms and conditions of the pledge of the Pledged
Collateral (as defined below) made by the Pledgor to the Collateral Agent for
the ratable benefit of the Holders.
NOW, THEREFORE, in consideration of the premises and other
benefits to the Pledgor, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Pledge. As collateral security for the complete
payment and performance in full of the Obligations of the Pledgor under the
Indenture, the Notes and the Collateral Agreements (as contemplated by Article
Eight of the Indenture), the Pledgor hereby pledges, assigns, transfers, sets
over and delivers unto the Collateral Agent, and hereby grants unto the
Collateral Agent for the ratable benefit of the Holders and unto their
respective successors and assigns, a continuing security interest in all of the
right, title and interest of the Pledgor in, to and under any and all of the
following described property, rights and interests (collectively, the "Pledged
Collateral"):
(a) all of the issued and outstanding shares of
Capital Stock identified on Schedule A attached hereto of the Subsidiaries and
all other wholly-owned subsidiaries of the Pledgor therein set forth (the
"Pledged Subsidiaries");
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(b) all other shares of Capital Stock or other equity
securities issued, or in the future issued by the Pledged Subsidiaries now or
hereafter owned or acquired by the Pledgor in any manner, and the certificates
representing such securities, and any present or future options, warrants or
other rights to subscribe for or purchase any property described in Section 1(a)
or any notes, bonds, debentures or other evidences of indebtedness that are at
any time convertible, exchangeable or exercisable into Capital Stock or other
equity securities of the Pledged Subsidiaries or have or at any time could by
their terms have voting rights with respect to any matter affecting the Pledged
Subsidiaries and all securities, certificates and instruments representing or
evidencing ownership of any of the property described in Section 1(a) and this
Section 1(b) hereof;
(c) all shares of Capital Stock, other equity
securities of any entity issued to the Pledgor or any other security described
in Section 1(b) if, at the time of issuance, the entity is or as a result of
such issuance becomes a Subsidiary under the Indenture (the property described
in Section 1(a), Section 1(b) and this Section 1(c) being referred to herein
collectively as the "Pledged Securities");
(d) any additional property of the kind or type
described in this Section 1 required to be supplied under the terms of this
Pledge Agreement; and
(e) all proceeds and products of the Pledged
Securities, including without limitation dividends, distributions, cash,
instruments and other property or securities, now or hereafter at any time or
from time to time received or receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of the Pledged
Securities;
TO HAVE AND TO HOLD the Pledged Collateral, together with all
rights, titles, interests, powers, privileges and preferences pertaining or
incidental thereto, unto the Collateral Agent for the benefit of the Holders and
unto their respective successors and assigns.
Section 2. Representations, Warranties and Covenants of the
Pledgor. The Pledgor hereby represents and warrants (as of the date of execution
hereof as to the Pledged Collateral existing on such date and as of the date of
acquisition as to the Pledged Collateral acquired subsequently), covenants and
agrees that:
(a) As of the Issue Date, the Pledgor will be the
legal and beneficial owner of the Pledged Collateral, will hold the Pledged
Collateral free and clear of all Liens (except for the security interest granted
hereunder to the Collateral Agent for the ratable benefit of Holders of Notes
and except for taxes not yet payable and except for Liens securing the Eligible
Credit Facility and the Existing Notes), and has not made and will not make any
other pledge, assignment, mortgage, hypothecation or transfer of the Pledged
Collateral except for Liens securing the Eligible Credit Facility and the
Existing Notes.
(b) The Pledged Securities have been or, upon the
Issue Date, will be duly authorized and validly issued and are fully paid and
non-assessable.
(c) Upon delivery of physical certificates evidencing
the Pledged Securities to the Collateral Agent, and the continued possession
thereof by the Collateral Agent, or upon written acknowledgement, confirmation
and agreement (a "Pledge Possession Agreement") by the Lender under the Eligible
Credit Facility, the collateral agent under the Existing Notes or any other
person who holds or has acquired possession of any such certificates, that such
person is
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holding such certificates and related collateral for the Collateral Agent or
holders of the Notes in connection with this Pledge Agreement, the Collateral
Agent will have a continuing perfected security interest in the Pledged
Securities, securing the Obligations, subject only to the New Intercreditor
Agreements.
(d) As of the Issue Date, the Pledgor will have the
requisite corporate power and authority to pledge the Pledged Collateral in
accordance herewith and will defend its title thereto against the claims of all
persons whomsoever and shall maintain and preserve the security interest granted
hereunder with respect to the Pledged Collateral as long as this Pledge
Agreement shall remain in full force and effect, subject to the Permitted Liens.
(e) Neither the execution and delivery of this Pledge
Agreement by the Pledgor, the performance by the Pledgor of its obligations
hereunder, nor the transactions herein contemplated will violate the Pledgor's
or any Pledged Subsidiary's Certificate of Incorporation or bylaws, each as will
be in effect as of the Issue Date, violate the terms of any agreement,
indenture, mortgage, deed of trust, equipment lease, instrument or other
document to which the Pledgor or any Pledged Subsidiary is a party, violate any
law, order, rule or regulation applicable to the Pledgor or any Pledged
Subsidiary of any court or any government, regulatory body or administrative
agency or other governmental body having jurisdiction over the Pledgor or any
Pledged Subsidiary or their properties, or result in or require the creation or
imposition of any Lien (other than the Lien contemplated hereby), upon or with
respect to any of the property now owned or hereafter acquired by the Pledgor or
any Pledged Subsidiary, which violation or conflict would have a material
adverse effect on the financial condition, business, assets or liabilities of
the Pledgor or any Pledged Subsidiary, taken as a whole, or on the value of the
Pledged Collateral or on the security interests hereunder.
(f) The Pledged Securities, described in Schedule A
attached hereto, include all of the issued and outstanding shares of Capital
Stock of the Pledged Subsidiaries, and, as of the date of execution hereof,
there are no outstanding options, warrants or other rights to subscribe for or
purchase any property described in Section 1(a) or any notes, bonds, debentures
or other evidences of indebtedness that are at any time convertible into Capital
Stock of the Pledged Subsidiaries or have or at any time could by their terms
have voting rights with respect to any matters affecting the Pledged
Subsidiaries.
(g) Other than the occurrence of the Issue Date, no
consent or approval which has not been obtained prior to the date hereof of any
other person or entity, no authorization, approval or other action (other than
delivery of physical certificates evidencing the Pledged Securities or the
execution and delivery of a Pledge Possession Agreement, as the case may be) by,
and no notice to or filing with, any governmental body (other than UCC filings),
regulatory authority or securities exchange, was or is necessary as a condition
to the validity of the pledge hereunder of the Pledged Collateral, and such
pledge is effective to vest in the Collateral Agent the rights of the Collateral
Agent in the Pledged Collateral as set forth herein. Except under the Indenture
and this Pledge Agreement, there are no restrictions on the transferability of
any of the Pledged Collateral transferred or delivered by the Pledgor hereunder
or, except for restrictions related to federal and state securities laws
governing the sale of "restricted stock" or "control stock," with respect to the
foreclosure, transfer or disposition thereof by the Collateral Agent.
(h) The Pledgor shall deliver to the Collateral Agent
concurrently with the execution of this Pledge Agreement or, to the extent
acquired subsequent to the date of execution
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hereof, immediately upon the Pledgor's acquisition thereof, all certificates and
instruments representing the Pledged Securities, and each other item of Pledged
Collateral (including all certificates, instruments and notes representing any
such Pledged Collateral), or an executed Pledge Possession Agreement, in form
and substance satisfactory to the Collateral Agent, as the case may be. Any and
all Pledged Securities so delivered to the Collateral Agent shall be accompanied
by undated duly executed powers in blank and by such other instruments of
transfer or documents as the Collateral Agent may reasonably request. The
Collateral Agent shall hold the certificates representing the Pledged Securities
delivered to it in its own name or in the name of its nominee, all in form and
substance satisfactory to the Collateral Agent. The Pledgor hereby acknowledges
that the Collateral Agent may, in its discretion, appoint one or more financial
institutions to act as the Collateral Agent's agent in holding in custodial
accounts instruments or other financial assets in which the Collateral Agent is
granted a security interest hereunder, including, without limitation,
certificates of deposit and other instruments evidencing short term obligations.
(i) The Collateral Agent shall at all times have full
and free access during normal business hours to all of the books, correspondence
and records of the Pledgor relating to the Pledged Collateral (other than
information that is privileged and confidential) and the Collateral Agent and
its representatives may examine the same, make abstracts therefrom and make
photocopies thereof, and the Pledgor agrees to render to the Collateral Agent,
at the Pledgor's costs and expense, such clerical and other assistance as may be
requested by the Collateral Agent with regard thereto.
(j) The Pledgor shall not permit any of the Pledged
Subsidiaries to issue any securities of the type required to be pledged
hereunder unless such securities are promptly pledged and delivered hereunder to
the Collateral Agent in accordance with Section 2(h).
(k) If, while this Pledge Agreement is in effect,
subject to the terms and conditions of Section 2(c), any stock dividend, stock
split, reclassification, readjustment, reorganization, merger, consolidation,
exchange offer, tender offer or other change in the capital structure, including
the creation of any subscription or other rights relating to the Pledged
Securities, is declared or made, by any of the Pledged Subsidiaries or any other
issuer of Pledged Collateral, all substituted and additional securities or
interest issued with respect to the Pledged Collateral and evidenced by
certificates shall be endorsed in blank by the Pledgor promptly upon receipt
thereof or otherwise appropriately transferred to the Collateral Agent in
negotiable form, and all certificates or instruments evidencing such securities
shall be delivered to the Collateral Agent to be held under the terms of this
Pledge Agreement in the same manner as, and as a part of, the Pledged
Collateral. All Pledged Securities shall be evidenced by one or more
certificates. Any securities that may be issued upon exercise of any
subscription or other rights relating to the Pledged Securities shall be
endorsed in blank and delivered to the Collateral Agent with any necessary
powers.
(l) The Pledgor shall pay and discharge all taxes,
assessments and governmental charges or levies against any Pledged Collateral
prior to delinquency thereof and shall keep all Pledged Collateral free of all
unpaid charges whatsoever, unless contested in good faith by appropriate
proceedings, properly instituted and diligently conducted, and adequate reserves
have been set aside in accordance with GAAP.
(m) The Pledgor shall promptly notify the Collateral
Agent in writing of any material changes in any fact or circumstance represented
or warranted by the Pledgor with respect to any material portion of the Pledged
Collateral, of any impairment of the Pledged Collateral and of any claim, action
or proceeding affecting title to all or any of the Pledged Collateral.
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(n) The chief executive office and principal place of
business of the Pledgor is located at 000 Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000.
The Pledgor shall not relocate its principal place of business or chief
executive office to another county or state or change its name, identity or
corporate structure unless the Pledgor (i) gives at least thirty (30) days'
prior written notice to the Collateral Agent, which notice shall specify such
new name, identity, corporate structure or new location and provide such other
information as the Collateral Agent may reasonably request and (ii) takes all
action reasonably satisfactory to the Collateral Agent to maintain the security
interest of the Collateral Agent in the Collateral.
(o) Upon Pledgor acquiring or forming any subsidiary,
the Pledgor shall amend Schedule A attached hereto to include such subsidiary
and such subsidiary shall thenceforth be treated hereunder for all purposes as a
Pledged Subsidiary and all shares of Capital Stock or other equity securities of
such subsidiary issued to Pledgor shall be treated hereunder for all purposes as
Pledged Collateral.
Section 3. Administration of the Pledged Collateral. The
Collateral Agent shall administer the Pledged Collateral in accordance with the
provisions hereof and of the Indenture.
Section 4. Release and Substitution of Pledged Collateral. The
Pledged Collateral shall not be released from the security interest created
hereunder and no property shall be substituted for any of the Pledged
Collateral, except in accordance with the provisions of Article Ten of the
Indenture and in accordance with the provisions of Section 18 hereof. The
Collateral Agent shall return the physical certificates and related stock powers
evidencing Pledged Collateral in its possession when so permitted by the
Indenture and this Pledge Agreement.
Section 5. Voting Rights, Dividends, Etc.
(a) Until an Event of Default (as defined below)
shall have occurred and be continuing:
(i) except as otherwise provided in Sections
5(b) and (c) and Section 6 of this Pledge Agreement, the Pledgor shall be
entitled to exercise any and all voting or consensual rights and powers,
including subscription rights, accruing to an owner of the Pledged Collateral or
any part thereof for any purpose not inconsistent with the terms of this Pledge
Agreement or any agreement giving rise to any of the Indenture Obligations;
(ii) except as otherwise provided in this
Pledge Agreement, the Pledgor shall be entitled to retain and use any and all
dividends, distributions or other payments which are permitted by the Indenture
and paid in cash or property (other than securities which are subject to this
Pledge Agreement) and the Collateral Agent, upon receipt of any of the
foregoing, shall promptly pay or distribute the same to the Pledgor; and
(iii) the Collateral Agent shall execute and
deliver to the Pledgor or cause to be executed and delivered to the Pledgor, all
such proxies, powers of attorney, dividend orders and other instruments as the
Pledgor may reasonably request for the purpose of enabling it to exercise the
voting or consensual rights and powers which the Pledgor is entitled to exercise
pursuant to the foregoing Section 5(a)(i) or to receive the dividends,
distributions or other payments which the Pledgor is authorized to retain
pursuant to the foregoing Section 5(a)(ii).
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NY2-146897.5
(b) Upon the occurrence and during the continuation
of an Event of Default, (i) upon notice from the Collateral Agent, all rights of
the Pledgor to exercise the voting or consensual rights and powers which the
Pledgor would otherwise be entitled to exercise pursuant to Section 5(a)(i), and
(ii) all rights of the Pledgor to receive the dividends, distributions and other
payments which the Pledgor would otherwise be authorized to receive and retain
pursuant to Section 5(a)(ii), shall automatically cease, and all such rights
shall thereupon become vested in the Collateral Agent, which, subject to the New
Intercreditor Agreements, shall then have the sole and exclusive right and
authority to exercise, in its sole discretion, all such voting and consensual
rights and powers and to receive and retain as Pledged Collateral all such
dividends, distributions and other payments.
(c) Upon the occurrence and during the continuation
of an Event of Default, the Collateral Agent shall have the sole and exclusive
right and authority to receive and retain as Pledged Collateral all dividends,
distributions and other payments which are paid on the Pledged Collateral (other
than dividends, distributions or other payments permitted by the Indenture and
paid on the shares of common stock of the company issuing such shares) in cash
or property. Any and all money and other property paid over to or received by
the Collateral Agent pursuant to the provisions of Section 5(b) or this Section
5(c) shall be retained by the Collateral Agent as additional Pledged Collateral
hereunder and shall be administered and applied in accordance with the
provisions of this Pledge Agreement, the Indenture, and the New Intercreditor
Agreements. All dividends and interest payments which are received by the
Pledgor contrary to the provisions of Section 5(b) or this Section 5(c) shall be
received in trust for the benefit of the Collateral Agent, shall be segregated
from other funds of the Pledgor and shall be forthwith paid over to the
Collateral Agent as Pledged Collateral in the same form as so received (with any
necessary endorsement).
Section 6. Default; Remedies.
(a) Defined. For purposes of this Pledge Agreement,
as provided in the preamble to this Pledge Agreement, the terms "Default" and
"Event of Default" shall have the respective meanings provided in the Indenture.
(b) Exercise of Remedies Under the Pledge Agreement.
If an Event of Default shall have occurred and be continuing, the Collateral
Agent shall commence the taking of such actions (or refrain from taking actions)
toward collection or enforcement of this Pledge Agreement and the Pledged
Collateral (or any portion thereof), including, without limitation, action
toward foreclosure upon any Pledged Collateral, as it deems appropriate in
accordance with and subject to the applicable terms of the Indenture or within
three (3) Business Days after written instructions from the Requisite Holders
(as defined in Section 6(f) below), to the extent allowed by law (and subject to
the applicable terms of the Indenture and pursuant to the terms hereof). If any
Event of Default that was the basis for the commencement of such action shall
have been cured or waived, and, in the case where there has been an
acceleration, rescission of such acceleration shall have occurred, in each case
in accordance with the terms of the Indenture, any direction to the Collateral
Agent to take any action in connection with the aforementioned notice shall be
deemed rescinded upon notification by that percentage of Holders necessary to
effect such waiver with respect to such Event of Default as provided for in the
Indenture. The Collateral Agent shall have no obligation to take any collection
or enforcement action except upon satisfaction of the conditions set forth in
Section 7.01 and Section 7.02 of the Indenture.
(c) Remedies Generally. If an Event of Default shall
have occurred and be continuing, the Collateral Agent itself or by its agents or
attorneys may exercise any or all of its
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rights and remedies hereunder or under the Indenture, or any other instrument or
agreement securing, evidencing or relating to the Indenture Obligations, the
Notes or under applicable laws (including all of the rights and remedies of a
secured creditor under the UCC then in effect in the State of New York, the
"UCC"), retain possession of the Pledged Collateral or sell, assign, transfer,
or dispose of, endorse and deliver the whole or, from time to time, any part of
the Pledged Collateral at public or private sale or sales, at any exchanges,
brokers board or at any of the Collateral Agent's offices or elsewhere, for
cash, upon credit or for other property, for immediate or future delivery, and,
to the extent permitted by applicable law, for such price or prices and on such
other terms as the Collateral Agent may deem commercially reasonable. Upon
consummation of any such sale, the Collateral Agent shall have the right to
assign, transfer, endorse and deliver to the purchaser or purchasers thereof the
Pledged Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of the
Pledgor, and the Pledgor hereby waives (to the full extent permitted by law) all
rights of redemption, stay or appraisal which the Pledgor now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. The Collateral Agent shall give the Pledgor ten (10) days'
written notice (which the Pledgor agrees shall be deemed to be reasonable
notification within the meaning of Section 9-504(3) of the UCC) in accordance
with Section 19 of the Collateral Agent's intention to make any such public or
private sale. Any such sale shall be held at such time or times and at such
place or places as the Collateral Agent may fix. At any such sale, the Pledged
Collateral, or portion thereof to be sold, may be sold as an entirety or in
separate portions, as the Collateral Agent may, in its sole discretion,
determine. The Collateral Agent shall not be obligated to make any sale of the
Pledged Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of the Pledged Collateral may have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case sale
of all or any part of the Pledged Collateral is made on credit for future
delivery, the Pledged Collateral so sold may be retained by the Collateral Agent
until the sale price is paid by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Pledged Collateral so sold and,
in case of any such failure, such Pledged Collateral may be sold again upon like
notice. As an alternative to exercising the power of sale herein conferred upon
it, the Collateral Agent may proceed by suit or suits at law or in equity to
exercise its remedies regarding the Pledged Collateral and sell the Pledged
Collateral or any portion thereof pursuant to judgment or decree of a court or
courts having competent jurisdiction. If under mandatory requirements of
applicable law, the Collateral Agent shall be required to make disposition of
the Pledged Collateral within a period of time that does not permit the giving
of notice to the Pledgor as hereinbefore provided, the Collateral Agent need
give the Pledgor only such notice of disposition as shall be reasonably
practicable in view of such mandatory requirements of law.
(d) Remedies; Obtaining the Pledged Collateral Upon
Default. The Pledgor agrees that if any Event of Default shall have occurred and
be continuing, then and in every such case, and in addition to the rights and
remedies available to a secured party under any applicable provision of the UCC,
or any other applicable law, the Collateral Agent, subject to the terms of the
New Intercreditor Agreements, may:
(i) personally, or by agents or attorneys,
immediately take possession of the Pledged Collateral or any part thereof from
the Pledgor or any other person who then has possession of any part thereof,
with or without notice or process of law, in accordance with
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applicable law, and for that purpose may enter upon the Pledgor's premises where
any of the Pledged Collateral is located and remove the same;
(ii) instruct the obligor or obligors on any
agreement, instrument or other obligation constituting Pledged Collateral to
make any payment or render any performance required by the terms of such
agreement, instrument or obligation directly to the Collateral Agent or its
designee;
(iii) sell or otherwise liquidate, or direct
the Pledgor to sell or otherwise liquidate, any or all investments made in whole
or in part with the Pledged Collateral or any part thereof, and take possession
of the proceeds of any such sale or liquidation; and
(iv) take possession of the Pledged
Collateral or any part thereof by directing the Pledgor in writing to deliver
the same to the Collateral Agent at any place or places designated by the
Collateral Agent, in which event the Pledgor shall at its own expense:
(A) forthwith cause the same to be
moved to the place or places so designated by the Collateral Agent and there
delivered to the Collateral Agent;
(B) store and keep any Pledged
Collateral so delivered to the Collateral Agent at such place or places pending
further action by the Collateral Agent as provided in this Section 6(d); and
(C) while any such Pledged
Collateral shall be so stored and kept, provide such guard, security and
maintenance services as shall be necessary to protect the same and to preserve
and maintain such Pledged Collateral in good condition; it being understood that
the Pledgor's obligation so to deliver the Pledged Collateral is of the essence
of this Pledge Agreement and that, accordingly, upon application to a court of
equity having jurisdiction, the Collateral Agent shall be entitled to a decree
requiring specific performance by the Pledgor of such obligation.
(e) Preventing Impairment of the Pledged Collateral.
Regardless of whether or not there shall have occurred any Default or Event of
Default, the Collateral Agent may institute and maintain or cause in the name of
the Pledgor or of the Collateral Agent, or any of them, to be instituted and
maintained, such suits and proceedings as the Collateral Agent may be advised by
counsel shall be necessary or expedient to prevent any impairment of the
security interest in or perfection of the Pledged Collateral in contravention of
the terms of the Indenture. The Pledgor agrees not to knowingly take or permit
to be taken any action which would impair the Pledged Collateral or the
Collateral Agent's rights in the Pledged Collateral.
(f) Requisite Holders. For purposes of this Section
6, "Requisite Holders" means the Holder or Holders of a majority in principal
amount of the outstanding Notes or as otherwise provided in Article Six of the
Indenture.
Section 7. Collateral Agent Appointed Attorney-in-Fact. The
Pledgor hereby constitutes and appoints the Collateral Agent its
attorney-in-fact for the purpose of carrying out the provisions, but subject to
the terms and conditions, of this Pledge Agreement and taking any action and
executing any instrument, including, without limitation, any financing statement
or continuation statement, and taking any other action to maintain the validity,
perfection, priority and enforcement of
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the security interest intended to be created hereunder, that the Collateral
Agent may reasonably deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest; provided,
however, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by it, or to present or
file any claim or notice, or to take any action with respect to the Pledged
Collateral or any part thereof or the monies due or to become due in respect
thereof or any property covered thereby, and no action taken or omitted shall
give rise to any defense, counterclaim or right of action against the Collateral
Agent, unless the Collateral Agents actions are taken or omitted to be taken
with gross negligence or bad faith or constitute willful misconduct.
Section 8. Purchase of Pledged Collateral by Collateral Agent
or Holders. At any sale of the Pledged Collateral, whether pursuant to power of
sale or otherwise hereunder, the Collateral Agent or any Holder may, to the
extent permitted by applicable law, bid for and purchase, free from any right of
redemption, stay or appraisal (all such rights being hereby waived and released
by the Pledgor to the extent permitted by law), the Pledged Collateral or any
part thereof or an interest therein and upon compliance with the terms of such
sale, may hold, retain, exploit, resell or otherwise dispose of such property
without further accountability to the Pledgor for the proceeds of such sale
(except in the event that there is a surplus of such proceeds in excess of the
Pledgor's Obligations under the Indenture and the Notes, in which case, the
Collateral Agent shall account to the Pledgor for such surplus). The Pledgor
will execute and deliver or cause to be executed and delivered, such
instruments, endorsements, assignments, waivers, certificates and other
documents and take such further action as the Collateral Agent shall request in
connection with any such sale.
Section 9. Disposition of Proceeds. The proceeds of any sale
of the whole or any part of the Pledged Collateral, together with any other
monies held by the Collateral Agent under the provisions of this Pledge
Agreement, shall be applied by the Collateral Agent in accordance with the
provisions of the Indenture.
Section 10. Waiver of Claims. Except as otherwise provided in
this Pledge Agreement, THE PLEDGOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NOTICE OF JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL
AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
PLEDGED COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICES AND
HEARINGS FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT THE
PLEDGOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED
STATES OR OF ANY STATE, and, to the full extent permitted by applicable law, the
Pledgor hereby further waives:
(a) all damages occasioned by such taking of
possession or disposition except any damages which are the direct result of the
Collateral Agent's negligence, bad faith or willful misconduct;
(b) all other requirements as to the time, place and
terms of sale or other requirements, with respect to the enforcement of the
Collateral Agent's rights and powers hereunder; and
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(c) except as provided in Section 6(c) hereof, all
rights of redemption, appraisement, valuation, stay, marshalling of assets,
extension or moratorium, existing at law or in equity, by statute or otherwise,
now or hereafter in force, in order to prevent or delay the enforcement of this
Pledge Agreement or the sale or other disposition of the Pledged Collateral or
any portion thereof, and the Pledgor, for itself and all who may claim under it,
insofar as it now or hereafter lawfully may, hereby waives all such rights.
Any sale of, or the exercise of any options to purchase, or
any other realization upon, any Pledged Collateral shall operate to divest all
right, title, interest, claim and demand, at law or in equity, of the Pledgor
therein and thereto, and shall be a perpetual bar both at law and in equity
against the Pledgor and against any and all persons claiming or attempting to
claim the Pledged Collateral so sold, optioned or realized upon, or any part
thereof, through and under the Pledgor.
Section 11. Remedies Cumulative; No Waiver. Each right, power
and remedy of the Collateral Agent provided for herein or in the Indenture or in
another agreement pursuant to which a Lien is created in favor of the Collateral
Agent for the benefit of any Holder, or now or hereafter existing at law or in
equity, by statute or otherwise, shall be cumulative and concurrent and shall be
in addition to every other right, power or remedy of the Collateral Agent or any
Holder provided for herein or in the Indenture, the Notes or in another
agreement pursuant to which a Lien is created in favor of the Collateral Agent
for the benefit of any Holder or now or hereafter existing at law or in equity,
by statute or otherwise. No failure on the part of the Collateral Agent or any
Holder to exercise, and no delay in exercising, any right, power or remedy
hereunder or under the Indenture, the Notes or under another agreement pursuant
to which a Lien is created in favor of the Collateral Agent for the benefit of
any Holder or now or hereafter existing at law or in equity, by statute or
otherwise, 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. No notice
to or demand on the Pledgor hereunder shall, of itself, entitle the Pledgor to
any other or further notice or demand in the same, similar or other
circumstances.
Section 12. Additional Pledged Collateral. Without notice or
consent of the Pledgor and without impairment of the security interests and
rights created by this Pledge Agreement, the Collateral Agent may accept from
any Person or Persons additional collateral or other security for the
Obligations of any Pledged Subsidiary or the Pledgor's Obligations under the
Indenture. Neither the creation of the security interests created hereunder nor
the acceptance of any such additional collateral or security shall prevent the
Collateral Agent from resorting to such additional collateral or security or to
the Pledged Collateral, in any order, without affecting the Collateral Agent's
rights hereunder.
Section 13. Further Assurances. The Pledgor agrees that it
shall, at its own expense, promptly file or record such notices, financing
statements, continuation statements or other documents and take all further
action as may be necessary to perfect, maintain and protect the perfection of
the security interests of the Collateral Agent hereunder or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to the Pledged Collateral, and as the Collateral Agent may reasonably
request, such instruments to be in form and substance satisfactory to the
Collateral Agent, and that it shall, at its own expense, do such further acts
and things and execute and deliver to the Collateral Agent such additional
conveyances, assignments, endorsements, agreements and instruments as the
Collateral Agent may at any time request in connection with the administration
and enforcement of this Pledge Agreement or relative to the
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Pledged Collateral or any part thereof or in order to assure and confirm unto
the Collateral Agent its rights, powers and remedies hereunder.
Section 14. Indemnification and Expenses.
(a) The Pledgor agrees to indemnify the Collateral
Agent from and against any and all claims, losses and liabilities arising or
resulting from or relating to this Pledge Agreement (including, without
limitation, enforcement of this Pledge Agreement), except claims, losses or
liabilities resulting from the Collateral Agent's gross negligence, bad faith or
willful misconduct, as determined by a final judgment of a court of competent
jurisdiction. The indemnification of the Collateral Agent set forth in the
immediately preceding sentence is cumulative and not exclusive of any indemnity
of the Collateral Agent set forth in the Indenture or provided for under the
TIA.
(b) The Pledgor will pay upon demand to the
Collateral Agent the amount of any and all out-of-pocket expenses, including the
reasonable fees and charges of its counsel and of any experts and agents, that
the Collateral Agent may incur in connection with the custody, preservation, use
or operation of, or the sale of, collection from or other realization upon, any
of the Pledged Collateral, the exercise or enforcement of any of the rights of
the Collateral Agent or the Holders hereunder or the failure by the Pledgor to
perform or observe any of the provisions hereof, and all amounts so incurred by
the Collateral Agent shall be entitled to the benefits of Section 7.07 of the
Indenture.
Section 15. Registration Rights, etc.
(a) If the Collateral Agent determines that the
registration of any of the securities included in the Pledged Collateral under,
or other compliance with, the Securities Act or any similar Federal or state law
is desirable, upon or at any time after an Event of Default and acceleration of
the Notes in accordance with Section 6.02 of the Indenture, the Pledgor will use
its best efforts to cause such registration or compliance to be effectively
made, at no expense to the Collateral Agent or to the Holders, and to continue
any such registration effective for such time as may be necessary in the opinion
of the Collateral Agent. The Pledgor will reimburse the Collateral Agent upon
demand for any expenses incurred by the Collateral Agent (including reasonable
attorneys' fees) incurred in connection therewith, which obligation to pay such
expenses shall be secured hereunder.
(b) If the Pledgor is unable to effect a public sale
of any or all of the Pledged Collateral or if the Collateral Agent determines
that it is desirable to sell the Pledged Collateral in one or more private
sales, the Collateral Agent may limit such sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to
distribution or resale. The Pledgor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. The Collateral Agent shall be under no
obligation to delay a sale of any of the Pledged Collateral for the period of
time necessary to permit the issuer of such securities to register such
securities for public sale under the Securities Act or under applicable state
securities laws even if such issuer would agree to do so.
-11-
(c) The Pledgor further agrees to do or use all
reasonable efforts to cause to be done, to the extent the Pledgor may legally do
so, all such other acts and things as may be necessary to make such sale or
sales of all or any part of the Pledged Collateral valid and binding and in
compliance with any and all applicable laws, rules and regulations and orders
and decrees of any and all courts having jurisdiction over such sales, all at
the Pledgor's expense. The Pledgor further agrees that a breach of any of the
covenants contained in this Pledge Agreement will cause irreparable injury to
the Collateral Agent, as secured party, for which the Collateral Agent would
have no adequate remedy at law in respect of such breach and, as a consequence,
agrees that each and every covenant contained in this Section 15 shall be
specifically enforceable against the Pledgor and, to the full extent permitted
by applicable law, the Pledgor waives and agrees not to assert as a defense
against an action for specific performance of such covenant that Pledgor's
failure to perform such covenants will not cause irreparable injury to the
Collateral Agent or the Holders or that the Collateral Agent on behalf of the
Holders has an adequate remedy at law in respect of such breach.
Section 16. Pledgor's Indenture Obligations Absolute. The
liability of the Pledgor under this Pledge Agreement shall remain in full force
and effect without regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by: any change in the time, place or manner of
payment of all or any of the Pledgor's Obligations under the Indenture or the
Notes, or in any other term of the Indenture, the Notes or any Collateral
Agreement, any waiver, indulgence, renewal, extension, amendment or modification
of or addition, consent or supplement to or deletion from or any other action or
inaction under or in respect of the Indenture, the Notes or any Collateral
Agreement, or any assignment or transfer thereof; any lack of validity or
enforceability, in whole or in part, of the Indenture, the Notes or any
Collateral Agreement; any furnishing of any additional security for such
Obligations or any acceptance thereof or any release or nonperfection of any
security interest in property; any limitation on any party's liability or
obligations under the Indenture, the Notes or any Collateral Agreement; any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to the Pledgor or any Person other
than the Pledgor, or any action taken with respect to this Pledge Agreement by
any trustee or receiver, or by any court, in any such proceeding, whether or not
the Pledgor shall have notice or knowledge of any of the foregoing; or any
exchange, release or amendment or waiver of or consent to departure from any
other agreement pursuant to which a Lien is created in favor of the Collateral
Agent for the benefit of the Holder, pursuant to which a person other than the
Pledgor has granted a security interest.
Section 17. Waiver. To the extent permitted by applicable law,
the Pledgor hereby waives promptness, diligence, notice of acceptance and any
other notice with respect to this Pledge Agreement and any requirement that the
Collateral Agent protect, secure, perfect or insure any security interest or any
property subject thereto or exhaust any right or take any action against the
Pledgor or any other person or entity; provided, however, that the Collateral
Agent shall in any event take such care in the handling of any Pledged
Securities in its possession as it takes with respect to its own property of a
similar nature in its possession.
Section 18. Termination. Upon complete payment and performance
in full and satisfaction of all of the Pledgor's Obligations under the
Indenture, the Notes and the Collateral Agreements (as contemplated by Article
Eight of the Indenture), this Pledge Agreement shall terminate, subject to the
applicable terms of the Indenture, and the Collateral Agent shall assign and
redeliver to the Pledgor all of the Pledged Collateral hereunder that has not
been sold, disposed of, retained or applied by the Collateral Agent in
accordance with the terms hereof and the Indenture. Such reassignment and
redelivery shall be without warranty by, or recourse to, the Collateral Agent,
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and shall be at the expense of the Pledgor. At such time, this Pledge Agreement
shall no longer constitute a Lien upon or a grant of any security interest in
any of the Pledged Collateral, and the Collateral Agent shall, at the Pledgor's
expense deliver to the Pledgor written acknowledgment thereof and of
cancellation of this Pledge Agreement in a form reasonably requested by the
Pledgor; provided, however, that this Pledge Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Pledgor's Obligations under the Indenture, the Notes or the
Collateral Agreements is rescinded or must otherwise be returned upon the
insolvency, bankruptcy or reorganization of the Pledgor, all as though such
payment had not been made; and provided, further, however, this Pledge Agreement
shall no longer constitute a Lien upon or a grant of any security interest in
any of the Pledged Collateral that has been released in accordance with the
provisions of Section 10.05 of the Indenture.
Section 19. Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to Discovery Zone, Inc.:
--------------------------
Discovery Zone, Inc.
000 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
with a copy to attn: General Counsel
Telecopy Number: (000) 000-0000
with a copy to:
--------------
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
if to Discovery Zone Limited:
----------------------------
Discovery Zone, Inc.
000 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
with a copy to attn: General Counsel
Telecopy Number: (000) 000-0000
with a copy to:
--------------
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
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Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
if to Discovery Zone (Puerto Rico), Inc.:
----------------------------------------
Discovery Zone, Inc.
000 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
with a copy to attn: General Counsel
Telecopy Number: (000) 000-0000
with a copy to:
--------------
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
if to Discovery Zone Licensing, Inc.:
------------------------------------
Discovery Zone, Inc.
000 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
with a copy to attn: General Counsel
Telecopy Number: (000) 000-0000
with a copy to:
--------------
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
if to DZ Party, Inc.:
--------------------
Discovery Zone, Inc.
000 Xxxxxx Xxxx, 0xx Xxxxx
-00-
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
with a copy to attn: General Counsel
Telecopy Number: (000) 000-0000
with a copy to:
--------------
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
if to the Collateral Agent:
--------------------------
Firstar Bank of Minnesota, N.A.
000 Xxxx 0xx Xxxxxx
Xx. Xxxx, XX 00000
Attn: Corporate Trust
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
Each of the Pledgor and the Collateral Agent by written notice
to each other such person may designate additional or different addresses for
notices to such person. Any notice or communication to the Pledgor or the
Collateral Agent shall be deemed to have been given or made as of the date so
delivered if personally delivered; when answered back, if telexed; when receipt
is acknowledged, if faxed; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Holder shall be mailed
to such Holder by first class mail or other equivalent means at such Holder's
address as it appears on the registration books of the Registrar and shall be
sufficiently given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 20. Binding Agreement; Assignment. This Pledge
Agreement shall be binding upon and inure to the benefit of the Collateral
Agent, the Pledgor and their respective successors and permitted assigns.
Neither this Pledge Agreement nor any interest herein or in the Pledged
Collateral, or any part thereof, may be assigned by the Pledgor without the
prior written consent of the Collateral Agent, except as expressly permitted
herein or in the Indenture. This Pledge Agreement shall be deemed to be
automatically assigned by the Collateral Agent to any person who
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succeeds to the Collateral Agent in accordance with Section 7.08 or Section 7.09
of the Indenture, and its assignee shall have all rights and powers of, and act
as, the Collateral Agent hereunder.
Section 21. Governing Law. This Pledge Agreement shall be
construed in accordance with, and this Pledge Agreement and the transactions
described herein shall be governed by, the laws of the State of New York as to
all issues, including (without limitation) issues of validity, interpretation,
effect, performance and remedies.
Section 22. Amendments. This Pledge Agreement may not be
amended or modified, except in accordance with Article Nine of the Indenture.
Section 23. Severability. In the event that any provisions
contained in this Pledge Agreement shall for any reason be held to be illegal or
invalid under the laws of any jurisdiction, such illegality or invalidity shall
in no way impair the effectiveness of any other provision hereof, or of such
provision under the laws of any other jurisdiction; provided, that in the
construction and enforcement of such provision under the laws of the
jurisdiction in which such holding of illegality or invalidity exists, and to
the extent only of such illegality or invalidity, this Pledge Agreement shall be
construed and enforced as though such illegal or invalid provision had not been
contained herein.
Section 24. Headings. Section headings used herein are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
Section 25. Counterparts. This Pledge Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be an original, and all of which shall together constitute but
one and the same instrument. A complete set of counterparts shall be lodged with
the Collateral Agent.
Section 26. Cooperation of Pledged Subsidiaries. The Pledgor
shall cause the Pledged Subsidiaries to take all actions necessary to facilitate
the Pledgor's compliance with the terms hereof. If any entity issues shares of
Capital Stock or other equity securities to a Pledged Subsidiary and, at the
time of such issuance, the entity is, or as a result of such issuance becomes, a
Pledged Subsidiary under the Indenture, the Pledgor shall cause such Pledged
Subsidiary to enter into a supplement hereto, substantially in the form of this
Pledge Agreement, pursuant to which such
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Pledged Subsidiary shall pledge, assign, transfer, set over and deliver unto the
Collateral Agent, and grant unto the Collateral Agent for the ratable benefit of
the Holders and their respective successors and assigns, a continuing security
interest in all of the right, title and interest of the Pledged Subsidiary in,
to and under any and all of such Capital Stock or other equity securities as
collateral security for the indefeasible payment and performance in full of the
Pledgor's Obligations under the Indenture, the Notes and the Collateral
Agreements. Such Capital Stock or equity security shall thereafter be included
as "Pledged Securities" hereunder, such Pledged Subsidiary shall thereafter be
included as a "Pledgor" hereunder, and such entity shall thereafter be included
as one of the "Pledged Subsidiaries" hereunder.
Section 27. Confidentiality. The parties agree that they and
their employees have maintained and will maintain, in confidence, all data,
summaries, reports or information of all kinds, whether oral or written,
provided pursuant to this Pledge Agreement or acquired or delivered in any
manner from the other party's personnel or files (the "Confidential
Information"), and that they have not and will not reveal the same to any
persons not employed by the other party except: at the written direction of such
party; to the extent necessary to comply with applicable law, reporting
requirements imposed by the Securities and Exchange Commission, or the valid
order of a court of competent jurisdiction, in which event the disclosing party
shall so notify the other party as promptly as practicable (and, if possible,
prior to making any disclosure) and shall seek confidential treatment of such
information, or in connection with any arbitration proceeding; as part of its
normal reporting or review procedure to its parent company, its auditors and its
attorneys, and such parent company, auditors and attorneys agree to be bound by
the provisions of this Section; in order to enforce any of its rights pursuant
to, or in any other dispute with respect to, this Agreement; if, at the time of
disclosure to the recipient, the Confidential Information is in the public
domain; if, after disclosure to the recipient, the Confidential Information
becomes part of the public domain by written publication through no fault of the
recipient; or to any one or more Holders and their representatives and agents.
Section 28. 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 Pledged 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 Pledge 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 Pledged Collateral in its
possession if the Pledged 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 Pledged 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 Pledged Collateral or (c) investing or reinvesting any of the Pledged
Collateral, provided, however, that nothing contained in this Pledge Agreement
shall relieve the Collateral Agent of any responsibilities as a securities
intermediary under applicable law.
-17-
Section 29. 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 Pledged 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 Pledge 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 Pledged
Collateral.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Collateral Agent under this Pledge 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
Pledge 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 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.
Section 30. Intercreditor Agreements. Notwithstanding any term
hereof to the contrary, the terms and conditions of this Pledge Agreement are in
all respects subject to, and all rights and remedies of the parties hereunder
shall be exercised only in accordance with, the terms, conditions, benefits and
protections contained in the New Intercreditor Agreements.
Section 31. Other Pledgees. The Pledgor hereby acknowledges
and agrees that the certificates evidencing the Pledged Collateral may be held
by the Lender under the Eligible Credit Facility, the collateral agent under the
Existing Notes or any other person who holds or has acquired possession of such
certificates, on behalf of or for the benefit of the Collateral Agent or the
holders of the Notes in connection with this Pledge Agreement, and that at such
time as the indebtedness and obligations to such Lender or collateral agent have
been paid in full, as the case may be, the Pledgor shall immediately deliver,
cause to be delivered and direct such Lender or collateral agent, to deliver, as
the case may be, such certificates to the Collateral Agent or such party
designated thereby, and no other person.
-18-
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have
caused this Pledge Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above written.
DISCOVERY ZONE, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
FIRSTAR BANK OF MINNESOTA, N.A.,
as Collateral Agent
By: /s/ Xxxxx X. Xxxxxx, III
---------------------------------------------------
Name: Xxxxx X. Xxxxxx, III
Title: Vice President
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 17th day of July, 1998 before me personally came Xxxxx
X. Xxxxxxxxx, to me known, who being by me duly sworn, did depose and say that
he is the President and CEO 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.
/s/ Xxxxxxxxx Xxxxxx
-----------------------------------------
Notary Public
Schedule A
Subsidiary Shares of Capital Stock Pledged
1. Discovery Zone (Canada) Limited 1
2. Discovery Zone (Puerto Rico), Inc. 1
3. DZ Party, Inc. 1
4. Discovery Zone Licensing, Inc. 1,000
