Exhibit 10.46
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of July 31, 2002 (this "Agreement"),
by EDISON SCHOOLS INC. ("Pledgor") in favor of SCHOOL SERVICES LLC ("Pledgee").
WHEREAS, the parties hereto have entered into that certain
Credit and Security Agreement dated as of even date herewith among Pledgor, as
borrower, Pledgee, as lender, 110th and 5th Associates, LLC, as a guarantor, and
▇▇▇▇▇▇ ▇▇▇▇▇▇ Charter School, LLC, as a guarantor (as the same may be amended,
supplemented, restated, replaced or otherwise modified from time to time, the
"Credit Agreement");
WHEREAS, Pledgor has requested Pledgee to make certain
revolving loans and a term loan to Pledgor under the Credit Agreement, and
Pledgee is prepared to make such loans upon the terms and subject to the
conditions of the Credit Agreement;
WHEREAS, it is a condition, among others, to the obligations
of Pledgee to make extensions of credit to Pledgor under the Credit Agreement
that the parties enter into this Agreement; and
WHEREAS, Pledgee has requested, and Pledgor has agreed to
provide, collateral security for the performance of Pledgor's obligations under
the Credit Agreement;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. Defined Terms. Except where otherwise specifically
provided, all capitalized terms which are not defined herein but which are
defined in the Credit Agreement are used herein as so defined.
Section 2. Grant of Security Interest. As collateral security for (a)
the prompt and complete payment and performance when due of Pledgor's
obligations under the Credit Agreement (collectively, the "Secured Obligations")
and (b) all costs and expenses incurred by Pledgee in connection with the
enforcement of Pledgee's rights against the Pledgor under the Facility
Documents, Pledgor hereby assigns, transfers, pledges and grants to Pledgee a
security interest in and to all of its right, title and interest in, to and
under (all of such property being hereinafter collectively referred to as the
"Collateral"):
(i) distributions of profits and income of Edison Receivables
Company LLC, a Delaware limited liability company ("ERC"), (ii) capital
distributions from ERC, (iii) distributions of cash flow by ERC, (iv)
property of ERC to which Pledgor now or in the future may be entitled
with respect to the Pledgor's membership interest in ERC, (v) other
claims which Pledgor now has or may in the future acquire against ERC
and its property with respect to the Pledgor's membership interest in
ERC, (vi) proceeds of any liquidation upon the dissolution of the ERC
and winding up of its affairs, (vii) general
intangibles for money due or to become due (as described in Section
9-406 of the UCC) from ERC with respect to the Pledgor's membership
interest in ERC, (viii) all certificates, instruments, or other
writings representing or evidencing any of the foregoing or any portion
thereof, and (ix) other rights of Pledgor to receive any proceeds,
distributions or other payments of any kind whatsoever from or in
respect of Pledgor's membership interest in ERC, provided, that, in no
event shall Pledgee have any interest in any amounts owing, paid, or to
be paid by ERC to Pledgor as the purchase price for any receivables and
the related rights thereto in connection with any Permitted ERC
Financing (all of the foregoing being collectively referred to as the
"Pledged LLC Interest").
Section 3. Certain Understandings of the Parties.
(a) The parties acknowledge and agree that the Pledged LLC
Interest constitutes general intangibles (as defined in Section 9-102(a)(42) of
the UCC); and (ii) the Pledgor represents and warrants that (1) neither the
Pledged LLC Interest nor any portion thereof is or will be traded in and/or
dealt in on securities exchanges or securities markets, (2) neither the Pledged
LLC Interest nor the Articles of Organization of ERC will provide that the
Pledged LLC Interest constitutes securities governed by the UCC, (3) the Pledged
LLC Interest is not and will not be investment company securities within the
meaning of Section 8-103 of the UCC, and (4) the Pledged LLC Interest is not
held in a securities account by the Pledgor.
(b) To better assure the perfection of the security interest of
the Pledgee in the Pledged LLC Interest, concurrently with the execution and
delivery of this Agreement, the Pledgor shall send written instructions in the
form of Exhibit A hereto to ERC, and shall cause ERC to, and ERC shall, deliver
to the Pledgor the Confirmation Statement and Instruction Agreement in the form
of Exhibit B hereto pursuant to which ERC will confirm that it has registered
the pledge effected by this Agreement on its books and agrees to comply with the
instructions of Pledgee in respect of the Pledged LLC Interest without further
consent of the Pledgor or any other Person.
Section 4. Representations, Warranties and Covenants of Pledgor -
General. Pledgor hereby represents, warrants and covenants as follows:
(a) Pledgor (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted, and
(ii) has filed or caused to be filed all federal and state tax returns which are
required to be filed and has paid or caused to be paid all amounts of taxes
required to be paid by it, except for such taxes (x) as are being contested in
good faith by proper proceedings and (y) against which adequate reserves shall
have been established in accordance with and to the extent required by GAAP.
(b) The execution, delivery and performance by the Pledgor of this
Agreement will not contravene or constitute a default under any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Pledgor, the Amended and Restated Limited Liability Operating Agreement
of ERC dated as of October 24, 2001, as amended by that certain
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Amendment dated July 31, 2002 (as amended, the "LLC Agreement") or any material
agreement to which the Pledgor or ERC is a party or by which any property of
either of them is bound, and will not result in the creation or imposition of
any Lien on any of the Collateral pursuant to any requirement of law or
contractual obligation except for (i) the Liens created pursuant to this
Agreement, and (ii) Liens (x) securing taxes, assessments, governmental charges
or levies not yet delinquent or the payment of which is being contested in good
faith by appropriate proceedings diligently conducted and with respect to which
adequate reserves have been established in accordance with GAAP and which do
not, singly or in the aggregate, adversely affect in any material respect the
Collateral or the Pledgor's ownership interest therein, and (y) arising by
operation of law securing any amount not yet delinquent or the payment of which
is being contested in good faith by appropriate proceedings diligently conducted
and with respect to which adequate reserves have been established in accordance
with GAAP and which do not, singly or in the aggregate, adversely affect in any
material respect the Collateral or the Pledgee's ownership interest therein (the
Liens described in the foregoing clauses (i) through (ii) collectively, the
"Permitted Liens").
(c) Pledgor acknowledges that UCC financing statements have been
or will be filed in connection with the perfection of the security interest
granted hereby. Pledgor understands that Pledgee has relied on Pledgor's
representations set forth in the Credit Agreement and the Officer's Certificate
delivered in connection therewith as to jurisdiction of organization, location
of chief executive offices, name, and transactions involving merger in order to
conduct appropriate UCC financing statement searches with respect to the
Pledgor. Pledgor covenants and agrees that Pledgor will not change its name,
identity or corporate structure at any time during the term of this Agreement in
any way that would make any financing statement or continuation statement filed
in connection with this Agreement seriously misleading within the meaning of
Section 9-506, 9-507 or 9-508 of the UCC unless it shall have given the Pledgee
at least 30 days' prior written notice thereof and causes such financing
statements or continuation statement to be amended or a new financing statement
to be filed. The Pledgor shall give the Pledgee 15 days' prior written notice of
any relocation of its chief executive office or jurisdiction of incorporation.
(d) This Agreement is the valid and binding obligation of Pledgor,
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy and other similar laws affecting creditors' rights generally.
(e) No consent or authorization of, filing with, or other act by
any governmental authority and no consent of any other person or entity is
required in connection with the execution, delivery, performance, validity or
enforceability of this Agreement that has not already been obtained.
(f) Except as expressly provided for in the Credit Agreement or
herein, Pledgor shall not sell, assign, transfer, pledge or otherwise dispose of
any portion of the Collateral, or contract to do so without the written consent
of the Pledgee.
(g) Pledgor will advise Pledgee promptly, in reasonable detail, of
(i) any Lien on, or claim asserted against, any portion of the Collateral, other
than Permitted Liens, and (ii) the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the value of the
Collateral or on the Liens created hereunder.
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(h) Pledgor will not take or omit to take any action, the taking
or the omission of which would result in an alteration or impairment of the
Collateral or the security of this Agreement.
Section 5. Representations, Warranties and Covenants of Pledgor -
Pledged LLC Interest. Pledgor hereby represents, warrants and covenants as
follows:
(a) ERC (i) is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all company powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted, and
(ii) has filed or caused to be filed all federal and state tax returns which are
required to be filed and has paid or caused to be paid all amounts of taxes
required to be paid by it, except for such taxes (x) as are being contested in
good faith by proper proceedings and (y) against which adequate reserves shall
have been established in accordance with and to the extent required by GAAP.
(b) Pledgor is the sole member of ERC.
(c) As of the date hereof, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, Lord SPV, is the
sole Independent Manager (as defined in the LLC Agreement) of ERC, and
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ are the only Managers (as defined in the
LLC Agreement) of ERC.
(d) Pledgor owns the Pledged LLC Interest free and clear of any
Liens, other than Permitted Liens.
(e) Pledgee has and shall have a valid, enforceable and perfected
first priority Lien on the Pledged LLC Interest and the proceeds thereof. No
security agreement, financing statement or other public notice with respect to
all or any part of the Pledged LLC Interest is on file or of record in any
public office, except as may be filed pursuant to the terms of this Agreement.
(f) Pledgor's membership interest in ERC has been duly authorized,
validly issued and is fully paid and non-assessable. Pledgor has paid in full
its capital contribution to ERC as recorded on the books and records of ERC,
and, except as set forth in the ▇▇▇▇▇▇▇ Loan Agreement, Pledgor is not required
to contribute any additional amounts to the capital of ERC.
(g) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the knowledge of the
Pledgor, threatened by or against ERC or against any of its properties or
assets.
(h) Pledgor will not create, incur or permit to exist, will defend
the Pledged LLC Interest against, and will take such other action as is
necessary to remove, any Lien or claim on or to the Pledged LLC Interest, other
than the Lien created by this Agreement and any other Permitted Liens, and will
defend the right, title and interest of the Pledgee in, to and under the Pledged
LLC Interest against the claims and demands of all persons whomsoever.
(i) The LLC Agreement does not and will not prohibit, restrict or
otherwise interfere with Pledgee's rights under this Agreement, including, but
not limited to Pledgee's right, in the event of a default by Pledgor, under
Section 6 of this Agreement, to receive and
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retain as additional collateral all distributions and interest in respect of the
Pledged LLC Interests.
(j) Pledgor will not cause or permit ERC to violate the terms of
the LLC Agreement. Except as provided in the ▇▇▇▇▇▇▇ Loan Agreement, the
Purchase and Contribution Agreement, and with respect to any Permitted ERC
Financing, Pledgor will not cause or permit ERC to (i) acquire any assets, (ii)
transfer or dispose of all or any portion of any asset (including by license,
lease, participation or encumbrance of any kind), (iii) incur any indebtedness,
(iv) issue any guarantees, or (v) otherwise incur or contract to incur any
obligation of any kind whatsoever.
Section 6. Default; Remedies.
(a) If Pledgor fails to perform any of the Secured Obligations in
accordance with their terms, (i) the Pledgee may exercise, in addition to all
other rights and remedies granted to it in the Credit Agreement and this
Agreement, all rights and remedies of a secured party under the applicable UCC,
and (ii) Pledgor shall pay Pledgee's costs of collection, including the
reasonable fees and expenses of counsel, and the obligation to pay such costs
shall constitute an additional obligation secured by the Collateral.
(b) If any notice of a proposed sale or other disposition of the
Pledged LLC Interest shall be required by Law, such notice shall be deemed
reasonable and proper if given as provided herein at least 10 Business Days
before such sale or other disposition.
Section 7. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The parties hereto hereby
submit to the nonexclusive jurisdiction of the courts of the State of New York
and the courts of the United States located in the State of New York for the
purpose of adjudicating any claim or controversy arising under this Agreement,
and for such purpose, to the extent they may lawfully do so, waive any objection
which they may now or hereafter have to such jurisdiction or to venue therein
and any claim of inconvenient forum with respect thereto. Nothing in this
Section 7(a) shall affect the right of Pledgee (or its assignee) to bring any
action or proceeding against the Pledgor in the courts of other jurisdictions.
EACH PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE ARISING OUT OF, IN CONNECTION WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM ESTABLISHED BY THIS AGREEMENT
OR ANY OTHER CONTRACT, INSTRUMENT, DOCUMENT OR AGREEMENT ENTERED IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF
ANY OTHER PERSON.
(b) All notices, requests, consents and demands hereunder shall be
in writing and shall together with any payments be personally delivered or sent
postage prepaid to the intended
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party at the address set forth below or such other address as a party may
specify by written notice to the other party:
If to Pledgor:
Edison Schools Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Coudert Brothers LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Pledgee:
School Services LLC
c/o Leeds Weld & Co.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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(c) The date or mailing of a notice or other statement shall be
deemed the date the notice is given or statement rendered.
(d) The terms of this Agreement may be waived, altered or amended
only in writing signed by the parties hereto.
(e) This Agreement shall be binding on the parties hereto and
their respective successors and assigns; provided, however, that the Pledgor may
not assign any of its rights or delegate any of its duties hereunder without the
prior written consent of the Pledgee. Subject to the provisions of the Credit
Agreement, no provision of this Agreement shall in any manner restrict the
ability of the Pledgee to assign, participate, grant security interests in, or
otherwise transfer all or any portion of the Pledgee's interest in this
Agreement and the Collateral.
(f) This Agreement may be executed in counterparts, which together
shall constitute one and the same instrument.
(g) No delay or failure by the Pledgee in the exercise of any
right or remedies shall constitute a waiver thereof, and no single or partial
exercise by the Pledgee of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy.
(h) The invalidity or unenforceability of any provision(s) of this
Agreement shall not affect any other provision hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
(i) All representations and warranties of Pledgor contained in
this Agreement shall be true and correct at the time of execution of this
Agreement and until this Agreement terminates.
(j) This Agreement contains the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior arrangements or understandings, oral or written, with respect to the
subject matter hereof.
(k) When the obligations secured hereby are paid in full or
released in writing by the Pledgee (or its assignees), this Agreement shall
terminate.
(l) The Pledgor shall, upon the request of the Pledgee, from time
to time, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, within a reasonable period following such request, further
information, instruments or documentation and take such further action as may
reasonably be requested by Pledgee to effectuate the intention, performance and
provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
EDISON SCHOOLS INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Senior Vice President
and General Counsel
SCHOOL SERVICES LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Treasurer
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EXHIBIT A
FORM OF NOTICE OF PLEDGE
Dated: , 2002
-------
To: Edison Receivables Company LLC (the "LLC")
[Address]
Dear Sirs:
In accordance with the requirements of that certain Pledge
Agreement dated as of July 31, 2002 (as amended, supplemented and otherwise
modified from time to time, the "Pledge Agreement") between Edison Schools Inc.,
as pledgor (the "Pledgor") and School Services LLC, (the "Pledgee") (defined
terms used herein as therein defined), you are hereby instructed,
notwithstanding your and our understanding that the Pledged LLC Interest is not
a security under the UCC, as a precaution in the event that such interest was
nevertheless held to be a security, to ▇▇▇▇ all appropriate books and records of
the LLC to evidence the pledge of the Pledged LLC Interest in favor of School
Services LLC.
You are hereby further authorized and instructed to execute
and deliver to the Pledgee a Confirmation Statement and Instruction Agreement,
substantially in the form of Exhibit B to the Pledge Agreement and, to the
extent provided more fully therein, to comply with the instructions of the
Pledgee in respect of the Pledged LLC Interest without further consent of, or
notice to, the undersigned. The Pledged LLC Interests do not include any rights
to vote as a member of the LLC. Notwithstanding the foregoing, the Pledgor will
be entitled to receive payment for the Pledged LLC Interests until such time as
you receive conflicting instructions from Pledgee.
Very truly yours,
EDISON SCHOOLS INC.
By:
-----------------------
Name:
Title:
Acknowledged:
SCHOOL SERVICES LLC
By:
--------------------------
Name:
Title:
EXHIBIT B
FORM OF CONFIRMATION STATEMENT AND INSTRUCTION AGREEMENT
Dated: ____________, 2002
To: School Services LLC.
Pursuant to the requirements of that certain Pledge Agreement dated as of July
31, 2002 (as amended, supplemented or otherwise modified from time to time, the
"Pledge Agreement"), between School Services LLC as pledgee (the "Pledgee") and
Edison Schools Inc. a Delaware corporation (the "Pledgor") (defined terms used
herein as therein defined), this Confirmation Statement and Instruction
Agreement relates to the Pledged LLC Interest in the undersigned Edison
Receivables Company LLC (the "LLC").
The Pledged LLC Interest is not (i) comprised of "investment company securities"
(within the meaning of Section 8-103 of the UCC), (ii) dealt in or traded on
securities exchanges or in securities markets, or (iii) held in a securities
account by the Pledgor. No term of any Pledged LLC Interest provides that it is
a "security" (within the meaning of Sections 8-102(a)(15) and 8-103 of the UCC).
Nevertheless, in the event that the Pledged LLC Interest should be determined to
be "securities" (within the meaning of Sections 8-102(a)(15) and 8-103 of the
UCC), for purposes of perfecting the security interest of the Pledgee therein,
the LLC agrees as follows:
On the date hereof, the registered owner of 100% of Edison Receivables Company
LLC is: Edison Schools Inc.
The registered pledgee of the Pledged Interests is: School Services LLC
There are no liens of the LLC on the Pledged LLC Interest or any adverse claims
thereto for which the LLC has a duty under Section 8-403 of the UCC. The LLC has
by book-entry registered the Pledged LLC Interest in the name of the registered
pledgee on or before the date hereof. No other pledge is currently registered on
the books and records of the LLC with respect to the Pledged LLC Interest.
The LLC agrees to: (i) comply with the instructions of the Pledgee, as
registered pledgee, without any further consent from the Pledgor or any other
Person, in respect of the Pledged LLC Interest; and (ii) disregard any request
made by the Pledgor or any other Person which contravenes the instructions of
the Pledgee with respect to the Pledged LLC Interest.
Edison Receivables Company LLC
By:_________________________
Name:
Title: