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EXHIBIT 10.3
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of March 31,
2001, by and between BEACON EDUCATION MANAGEMENT, INC., a Delaware corporation
with his principal place of business located at 000 Xxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000, as the pledgor and debtor (the "Pledgor"), and
KINDERCARE LEARNING CENTERS, INC., a Delaware corporation with its principal
place of business at 000 XX Xxxxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx 00000, as the
pledgee and secured party (the "Pledgee").
WITNESSETH:
WHEREAS, the Pledgor is the owner and holder of three promissory notes
more particularly described as follows: (1) that certain Promissory Note dated
as of April 26, 1999 (the "LCA Note"), in the original principal amount of Two
Hundred Thirty Thousand and 00/100 Dollars ($230,000.00) made by Learning Center
Academy, a Michigan public school academy ("LCA"); (2) that certain Promissory
Note dated as of July 31, 2000 (the "TMA Note"), in the original principal
amount of One Million Two Hundred Fifty Thousand and 00/100 Dollars
($1,250,000.00) made by Xxxxxxxx Xxxxxxxx Academy, a Missouri nonprofit
corporation incorporated pursuant to Chapter 355, RSMo ("TMA"); and (3) that
certain Promissory Note dated as of September 22, 2000 (the "SLCS Note"), in the
original principal amount of Nine Hundred Twenty Five Thousand and 00/100
Dollars ($925,000.00) made by St. Louis Charter School, a Missouri nonprofit
corporation incorporated pursuant to Chapter 355, RSMo ("SLCS"), and all
amendments, extensions, substitutions and replacements thereof or relating
thereto (the LCA Note, the TMA Note and the SLCS Note are sometimes hereinafter
referred to individually and collectively as the "Notes"); and
WHEREAS, the Pledgor and the Pledgee are parties to that certain Equity
Purchase and Loan Agreement dated as of February 17, 2000, as amended by that
certain Amendment to Loan Agreement dated as of September 28, 2000, and as
further amended by that certain Second Amendment to Loan Agreement of even date
herewith (the "Second Amendment") (collectively, the "Loan Agreement"), pursuant
to which the Pledgee has, inter alia, made a loan to the Pledgor in the original
principal amount of Two Million Three Hundred Thousand and 00/100 Dollars
($2,300,000.00) as evidenced by that certain Amended and Restated Promissory
Note of even date herewith in said principal amount, which Amended and Restated
Promissory Note is defined in the Second Amendment as the Temporary Loan Note
(the "Temporary Loan Note"); and
WHEREAS, the terms of the Second Amendment require that the Temporary
Loan Note be secured by a pledge of the Notes pursuant to this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and in consideration of the making by the Pledgee of
the loan to the Pledgor evidenced by the Temporary Loan Note, the parties hereto
hereby agree as follows:
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SECTION 1. Pledge. In order (i) to secure the due and punctual payment
and performance of all obligations of the Pledgor contained herein; and (ii) to
secure the due and punctual payment of the indebtedness of the Pledgor to the
Pledgee evidenced by the Temporary Loan Note (all of the foregoing being
hereinafter collectively called the "Obligations"), the Pledgor hereby pledges
unto the Pledgee, and hereby grants to the Pledgee a security interest in, the
Notes and all of the Pledgor's right, title and interest therein, now or
hereafter, and together with all proceeds of any of the foregoing (the Notes and
all other property and proceeds described in this Section 1, whether now
existing or hereafter arising, being herein collectively called the "Pledged
Collateral").
TO HAVE AND TO HOLD the Pledged Collateral, together with all rights,
titles, interests, privileges and preferences appertaining or incidental
thereto, unto the Pledgee, its successors and assigns, forever, subject,
however, to the terms, covenants and conditions of this Agreement and the
hereinafter defined Subordination Agreements. The Pledged Collateral shall be
delivered to the Pledgee simultaneously with the execution and delivery of this
Agreement and shall be held by the Pledgee at all times during the term of this
Agreement. Upon payment and satisfaction of the Obligations, the Pledgee shall
deliver all of the Pledged Collateral back over to the Pledgor.
SECTION 2. Representations and Warranties. The Pledgor hereby
represents and warrants to the Pledgee as follows:
(a) The execution, delivery and performance by the
Pledgor of this Agreement have been duly authorized by all necessary corporate
action, and do not and will not (i) violate any provision of any law, rule or
regulation, including, without limitation, any injunction, decree, determination
or award presently in effect having applicability to the Pledgor, (ii) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Pledgor is a
party or by which it or the Pledged Collateral may be bound or affected, or
(iii) result in, or require, the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance of any
nature (other than pursuant to this Agreement) upon or with respect to any of
the Pledged Collateral; and the Pledgor is not in default under any such law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award or any such indenture, agreement, lease or instrument.
(b) This Agreement constitutes the legal, valid and
binding obligation of the Pledgor enforceable against the Pledgor and all third
parties in accordance with its terms.
(c) The Pledgor is the legal and equitable owner of the
Pledged Collateral free and clear of all liens, security interests, charges and
encumbrances of every kind and nature; the Pledgor has legal title, and good,
right and lawful authority, to pledge, assign and deliver the Pledged Collateral
in the manner hereby done or contemplated, except as otherwise provided by the
terms of (l) in the case of the TMA Note, that certain Subordination Agreement
dated as of July 31, 2000 (the "TMA Subordination Agreement"), by and among NCB
Capital Corporation, a Delaware corporation ("NCB"), as senior lender, the
Pledgor, as subordinate lender, and TMA, as borrower, and (2) in the case of the
SLCS Note, that certain Subordination Agreement dated
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as of September 22, 2000 (the "SLCS Subordination Agreement"), by and among NCB,
as senior lender, the Pledgor, as subordinate lender, and SLCS, as borrower (the
TMA Subordination Agreement and the SLCS Subordination Agreement are hereinafter
referred to individually and collectively as the "Subordination Agreements").
(d) No authorization, consent, approval, license,
exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary to the valid execution, delivery or performance
by the Pledgor of this Agreement or the validity of the rights created
hereunder.
(e) This Agreement and the delivery of possession of the
Pledged Collateral creates a valid and perfected first priority security
interest in and pledge of the Pledged Collateral enforceable against all third
parties securing the payment of the Obligations and all action required to
perfect fully the security interest so constituted has been taken and completed,
including, without limitation, the consent of NCB as required by the terms of
the Subordination Agreements.
SECTION 3. Events of Default. Each of the following events (each an
"Event of Default") shall constitute an event of default hereunder:
(a) default by the Pledgor in the observance or
performance of any covenant or agreement contained herein or breach by the
Pledgor of any representation or warranty contained herein; or
(b) the occurrence of an "Event of Default" as defined in
the Temporary Loan Note or the Loan Agreement (but only to the extent applicable
to the Temporary Loan Note); or
(c) this Agreement shall at any time for any reason cease
to be in full force and effect or shall be declared to be null and void, or the
validity or enforceability thereof shall be contested by the Pledgor, or the
Pledgor shall deny that it has any or further liability or obligation hereunder.
SECTION 4. Remedies upon Default. If an Event of Default shall have
occurred and be continuing, then, in addition to exercising any rights and
remedies of a secured party under the Uniform Commercial Code in effect in the
Commonwealth of Massachusetts (the exercise of all rights and remedies being in
all events subject to the terms and conditions of the Subordination Agreements),
the Pledgee may, after ten (10) days written notice to and demand upon the
Pledgor, apply the Pledged collateral first, to the payment of interest, fees
and expenses accrued and unpaid on the Obligations to and including the date of
such application; second, to the payment or prepayment of principal and other
obligations under the Obligations; and third deliver any remaining surplus to
the Pledgor.
SECTION 5. The Pledgor Appointed Attorney-in-Fact. The Pledgor hereby
appoints the Pledgee, effective upon and during the continuation of an Event of
Default, the Pledgor's attorney-in-fact for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which it may deem necessary or advisable to accomplish the
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purposes hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Pledgee shall have the
right and power to receive, endorse and collect all checks and other orders for
the payment of money made payable to the Pledgor representing any principal or
interest payment or other distribution payable or distributable in respect of
the Pledged Collateral or any part thereof and to give full discharge for the
same.
SECTION 6. No Waiver, Cumulative Remedies. No failure on the part of
the Pledgee to exercise, and no delay 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 by the Pledgee preclude any other
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
SECTION 7. Notices. All communications, notices, requests and demands
hereunder shall be given in accordance with the terms of the Loan Agreement.
SECTION 8. Further Assurances. The Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Pledgee may at any time request
in connection with the administration or enforcement of this Agreement or
related to the Pledged Collateral or any part thereof or in order better to
assure and confirm unto the Pledgee its, rights, powers and remedies hereunder.
SECTION 9. Binding Agreement; Assignment. This Agreement, and the terms
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, heirs and assigns.
SECTION 10. Miscellaneous. Neither this Agreement nor any provisions
hereof may be amended, modified, waived, discharged or terminated orally nor may
any of the Pledged Collateral be released or the pledge or the security interest
created hereby terminated, except by an instrument in writing signed by a duly
authorized officer of the Pledgee. The Section headings used herein are for
convenience of reference only and shall not define or limit the provisions of
this Agreement.
SECTION 11. Severability. In case any lien, security interest or other
right of any part hereto shall be held to be invalid, illegal or unenforceable,
such invalidity, illegality and/or unenforceability shall not affect any other
lien, security interest or other right granted hereby.
[SPACE INTENTIONALLY LEFT BLANK]
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SECTION 12. Governing Law. This Agreement is made under and shall be
governed by the laws of the Commonwealth of Massachusetts in all respects,
including matters of construction, validity and performance.
IN WITNESS WHEREOF, the parties hereto have executed this Pledge and
Security Agreement or caused this Pledge and Security Agreement to be duly
executed as of the date first above written.
WITNESSES: PLEDGOR:
BEACON EDUCATION MANAGEMENT,
INC.
/s/ Xxxx Xxxx Xxxxxxxx By: /s/ Xxxxxxx X. XxXxxxxx, Xx.,
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Chairman
PLEDGEE:
KINDERCARE LEARNING CENTERS,
INC.
/s/ Xxx Xxxxxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Title: Chairman and CEO
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