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SUBSIDIARY
PLEDGE AGREEMENT
From
DISCOVERY ZONE (CANADA) LIMITED,
DISCOVERY ZONE (PUERTO RICO), INC.,
and
DISCOVERY ZONE LICENSING, INC.
as Pledgors
to
FIRSTAR BANK OF MINNESOTA, N.A.,
as Collateral Agent
Dated as of July 17, 1998
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SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (together with any
amendments, replacements and supplements hereafter entered into, the "Subsidiary
Pledge Agreement"), dated as of July 17, 1998, between Discovery Zone (Canada)
Limited, an entity formed under the laws of Canada ("DZL"), Discovery Zone
(Puerto Rico), Inc., a corporation formed under the laws of Puerto Rico
("DZPR"), Discovery Zone Licensing, Inc., a Nevada corporation (together with
DZL, DZPR and any subsidiaries of the Company that may become Subsidiary
Guarantors after the date hereof and their permitted respective successors and
assigns, the "Pledgors" and, each individually, a "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
Discovery Zone, Inc., a Delaware corporation (the "Company"), Pledgors and the
Collateral Agent, relating to the Company'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 Company has issued or will issue $20 million
aggregate principal amount of Notes pursuant to the Indenture;
WHEREAS, each 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 under such Pledgor's name on Schedule A attached hereto;
WHEREAS, pursuant to the Indenture or a supplement thereto,
each Pledgor has guaranteed the payment and performance in full of the
Obligations of the Company and the Pledgors under the Indenture and the Notes
(the "Subsidiary Guarantees"); and
WHEREAS, in order to secure the payment and performance of
the Obligations secured by the Subsidiary Guarantees, 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 Pledgors 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 all the Obligations of the Company and the
Pledgors under the Indenture, the Notes and the Collateral Agreements (as
contemplated by Article Eight of the Indenture), each Pledgor hereby pledges,
assigns, transfers, sets over and delivers unto the Collateral Agent, and
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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 each 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 as being owned by each
Pledgor in any of its subsidiaries (the "Pledged Subsidiaries");
(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 each 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 each 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
Subsidiary 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 its benefit and the benefit of
the Holders and unto their respective successors and assigns.
Section 2. Representations, Warranties and Covenants of the
Pledgor. Each of the Pledgors 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, each 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 and except
for Liens 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.
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(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 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 all of the Obligations, subject
only to the New Intercreditor Agreements.
(d) As of the Issue Date, each 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 Subsidiary
Pledge Agreement shall remain in full force and effect, subject to the Permitted
Liens.
(e) Neither the execution and delivery of this
Subsidiary Pledge Agreement by any Pledgor, the performance by each Pledgor of
its obligations hereunder, nor the transactions herein contemplated will violate
any Pledgor's or any Pledged Subsidiary's Certificate of Incorporation or
bylaws, each as currently 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 any Pledgor or any
Pledged Subsidiary of any court or any government, regulatory body or
administrative agency or other governmental body having jurisdiction over any
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 any Pledgor or any Pledged Subsidiary, which violation or conflict
would have a material adverse effect on the financial condition, business,
assets or liabilities of any Pledgor or any Pledged Subsidiary, taken as a
whole, or on the value of the Pledged Collateral or on the security interests
hereunder.
(f) Other than the occurrence of the Issue Date, 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
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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 any
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) Each Pledgor shall deliver to the Collateral
Agent concurrently with the execution of this Subsidiary Pledge Agreement or, to
the extent acquired subsequent to the date of execution hereof, immediately upon
such 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. Each 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 each 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 each Pledgor agrees to render to the Collateral
Agent, at such Pledgor's costs and expense, such clerical and other assistance
as may be requested by the Collateral Agent with regard thereto.
(j) No Pledgor shall 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 Subsidiary 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 each 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 Subsidiary 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.
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(l) Each 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) Each 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.
(n) The chief executive office and principal place
of business of each Pledgor is located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇. No Pledgor shall relocate its principal place of business or chief
executive office to another county or state or change its name, identity or
corporate structure unless such 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 any Pledgor acquiring or forming any
subsidiary, such 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 such 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 Subsidiary 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 Subsidiary Pledge Agreement, each
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 Subsidiary Pledge Agreement or any agreement giving rise to any of the
Indenture Obligations;
(ii) except as otherwise provided in this
Subsidiary Pledge Agreement, each Pledgor shall be entitled to retain and use
any and all dividends, distributions or
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other payments which are permitted by the Indenture and paid in cash or property
(other than securities which are subject to this Subsidiary Pledge Agreement)
and the Collateral Agent, upon receipt of any of the foregoing, shall promptly
pay or distribute the same to such Pledgor; and
(iii) The Collateral Agent shall execute
and deliver to each Pledgor or cause to be executed and delivered to each
Pledgor, all such proxies, powers of attorney, dividend orders and other
instruments as such Pledgor may reasonably request for the purpose of enabling
it to exercise the voting or consensual rights and powers which such Pledgor is
entitled to exercise pursuant to the foregoing Section 5(a)(i) or to receive the
dividends, distributions or other payments which such Pledgor is authorized to
retain pursuant to the foregoing Section 5(a)(ii).
(b) Upon the occurrence and during the continuation
of an Event of Default, (i) upon notice from the Collateral Agent, all rights of
each 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 each 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 Subsidiary 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 each 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 Subsidiary Pledge
Agreement, as provided in the preamble of this Subsidiary Pledge Agreement, the
terms "Default" and "Event of Default" shall have the respective meanings
provided in the Indenture.
(b) Exercise of Remedies Under the Subsidiary 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 Subsidiary 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 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
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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 rights and remedies hereunder or under
the Indenture, or any other instrument or agreement securing, evidencing or
relating to the Obligations, the Notes or under applicable laws (including all
of the rights and remedies of a secured creditor under the Uniform Commercial
Code 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 Pledgors, and each Pledgor
hereby waives (to the full extent permitted by law) all rights of redemption,
stay or appraisal which any 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 Pledgors ten (10) days' written notice (which
each 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.
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(d) Remedies; Obtaining the Pledged Collateral Upon
Default. Each 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 New
Intercreditor Agreements, may:
(i) personally, or by agents or
attorneys, immediately take possession of the Pledged Collateral or any part
thereof from the Pledgors or any other person who then has possession of any
part thereof, with or without notice or process of law, in accordance with
applicable law, and for that purpose may enter upon the Pledgors' 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 Pledgors 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 Pledgors in writing to deliver
the same to the Collateral Agent at any place or places designated by the
Collateral Agent, in which event the Pledgors shall at their 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 Pledgors' obligation so to deliver the Pledged Collateral is of the essence
of this Subsidiary 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 Pledgors 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 Pledgors 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. Each 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.
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(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. Each
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 Subsidiary 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 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 each 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 Pledgors for the proceeds of such sale
(except in the event that there is a surplus of such proceeds in excess of the
Company's and the Pledgor's Obligations under the Indenture, the Notes and the
Collateral Agreements, in which case, the Collateral Agent shall account to the
Pledgor for such surplus). Each 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 Subsidiary
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 Subsidiary Pledge Agreement, EACH 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:
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(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
(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
Subsidiary Pledge Agreement or the sale or other disposition of the Pledged
Collateral or any portion thereof, and each 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 each Pledgor
therein and thereto, and shall be a perpetual bar both at law and in equity
against each 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 Pledgors hereunder shall, of itself, entitle the Pledgors 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 Pledgors and without impairment of the security interests and
rights created by this Subsidiary Pledge Agreement, the Collateral Agent may
accept from any Person or Persons additional collateral or other security for
the Obligations of the Company or the Pledgors' under the Indenture or the
Notes. 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. Each Pledgor agrees that it
shall, at its own expense, promptly file or record such notices, financing
statements, continuation statements or other
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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 Subsidiary Pledge
Agreement or relative to the 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) Each Pledgor agrees, jointly and severally, to
indemnify, reimburse and hold the Collateral Agent from and against any and all
claims, losses and liabilities arising or resulting from or relating to this
Subsidiary Pledge Agreement (including, without limitation, enforcement of this
Subsidiary 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) Each 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 any 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, each 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 Pledgors 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 any 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. Each Pledgor acknowledges
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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.
(c) Each Pledgor further agrees to do or use all
reasonable efforts to cause to be done, to the extent such 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. Each Pledgor further agrees that a breach of any of the
covenants contained in this Subsidiary 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 each Pledgor and, to the full extent
permitted by applicable law, each 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. Pledgors' Indenture Obligations Absolute. The
liability of the Pledgors under this Subsidiary 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 Company's or the Pledgors' 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 Pledgors or any Person
other than the Pledgors, or any action taken with respect to this Subsidiary
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 Pledgors has granted a security interest.
Section 17. Waiver. To the extent permitted by applicable
law, each Pledgor hereby waives promptness, diligence, notice of acceptance and
any other notice with respect to the this Subsidiary 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 Pledgors 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.
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Section 18. Termination. Upon complete payment and
performance in full and satisfaction of all of the Company's and Pledgors'
Obligations under the Indenture, the Notes and the Collateral Agreements (as
contemplated by Article Eight of the Indenture), this Subsidiary Pledge
Agreement shall terminate, subject to the applicable terms of the Indenture, and
the Collateral Agent shall assign and redeliver to the Pledgors 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, and shall be at the expense of the Pledgors.
At such time, this Subsidiary 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 Pledgors' expense deliver to the Pledgors
written acknowledgment thereof and of cancellation of this Subsidiary Pledge
Agreement in a form reasonably requested by the Pledgors; provided, however,
that this Subsidiary 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
Company's and the Pledgors' 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 Pledgors, all as though such
payment had not been made; and provided, further, however, this Subsidiary
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 (Canada) Limited:
Discovery Zone, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to attn: General Counsel
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
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if to Discovery Zone (Puerto Rico), Inc.:
Discovery Zone, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to attn: General Counsel
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
if to Discovery Zone Licensing, Inc.:
Discovery Zone Licensing, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to attn: General Counsel
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
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if to the Collateral Agent:
Firstar Bank of Minnesota, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Corporate Trust
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Each of the Pledgors 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 Pledgors 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 Subsidiary
Pledge Agreement shall be binding upon and inure to the benefit of the
Collateral Agent, the Pledgors and their respective successors and permitted
assigns. Neither this Subsidiary Pledge Agreement nor any interest herein or in
the Pledged Collateral, or any part thereof, may be assigned by the Pledgors
without the prior written consent of the Collateral Agent, except as expressly
permitted herein or in the Indenture. This Subsidiary Pledge Agreement shall be
deemed to be automatically assigned by the Collateral Agent to any person who
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 Subsidiary Pledge Agreement
shall be construed in accordance with, and this Subsidiary 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 Subsidiary 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 Subsidiary 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
-15-
holding of illegality or invalidity exists, and to the extent only of such
illegality or invalidity, this Subsidiary 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 Subsidiary Pledge Agreement.
Section 25. Counterparts. This Subsidiary 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. Each 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 Pledgor and such entity becomes a
subsidiary of the Pledgor, the Pledgor shall cause such Subsidiary to enter into
a supplement hereto, substantially in the form of this Subsidiary Pledge
Agreement, pursuant to which such 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 Company's and the Pledgors'
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 Subsidiary 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
-16-
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.
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 Subsidiary 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.
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Section 31. Other Pledgees. The Pledgors hereby acknowledge
and agree 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 Pledgors and the Collateral Agent
have caused this Subsidiary Pledge Agreement to be duly executed and delivered
by its officer thereunto duly authorized as of the date first above written.
DISCOVERY ZONE (CANADA) LIMITED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
DISCOVERY ZONE (PUERTO RICO), INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
DISCOVERY ZONE LICENSING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
FIRSTAR BANK OF MINNESOTA, N.A., as
Collateral Agent
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: Vice President
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 17th day of July, 1998 before me personally came ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, to me known, who being by me duly sworn, did depose and say that he
is the President of DISCOVERY ZONE (CANADA) LIMITED, 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/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Notary Public
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 17th day of July, 1998 before me personally came ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, to me known, who being by me duly sworn, did depose and say that he
is the President of DISCOVERY ZONE (PUERTO RICO), 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/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Notary Public
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 17th day of July, 1998 before me personally came ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, to me known, who being by me duly sworn, did depose and say that he
is the President of DISCOVERY ZONE LICENSING, 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/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Notary Public
Schedule A
Subsidiary Shares of Capital Stock Pledged
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