EXHIBIT 4.1
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") dated as of April 11,
2003 is by and among the parties identified as "Pledgors" on the signature pages
hereto and such other parties as may become Pledgors hereunder after the date
hereof (individually a "Pledgor", and collectively the "Pledgors") and BANK OF
AMERICA, N.A., as administrative agent (in such capacity, the "Administrative
Agent") for the holders of the Secured Obligations referenced below.
W I T N E S S E T H
WHEREAS, a $250 million credit facility has been established in favor
of School Specialty, Inc., a Wisconsin corporation (the "Borrower"), pursuant to
the terms of that Credit Agreement (as amended, modified, supplemented and among
extended from time to time, the "Credit Agreement") dated as of the date hereof
the Borrower, the Guarantors identified therein, the Lenders identified therein
and Bank of America, N.A., as Administrative Agent;
WHEREAS, this Pledge Agreement is required under the terms of the
Credit Agreement; and
WHEREAS, this Pledge Agreement is given in amendment to, restatement of
and substitution for the Amended and Restated Pledge Agreement dated as of
September 30, 1998 among the Grantors and Bank of America, N.A., as
administrative agent.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Capitalized terms used and not otherwise defined herein shall
have the meanings provided in the Credit Agreement.
(b) As used herein, the following terms shall have the meanings
assigned thereto in the Uniform Commercial Code in effect in the State of North
Carolina on the date hereof: Accession, Financial Asset, Proceeds and Security.
(c) As used herein, the following terms shall have the meanings set
forth below:
"Pledged Collateral" has the meaning provided in Section 2
hereof.
"Pledged Shares" has the meaning provided in Section 2 hereof.
"Secured Obligations" means, without duplication, (a) all of the
obligations of the Loan Parties to the Lenders (including the L/C
Issuer and the Swing Line Lender) and the Administrative Agent under
the Credit Agreement or any other Loan Document (including, but not
limited to, any interest accruing after the commencement by or against
any Loan Party of a proceeding under any Debtor Relief Laws, regardless
of whether such interest is an allowed claim under such proceeding),
whether now existing or hereafter arising, due or to become due, direct
or indirect, absolute or contingent, howsoever evidenced, created, held
or acquired, whether primary,
secondary, direct, contingent, or joint and several, as such
obligations may be amended, modified, increased, extended, renewed or
replaced from time to time, (b) all of the obligations owing by the
Loan Parties under any Swap Contract with any Lender or any Affiliate
of a Lender, whether now existing or hereafter arising, and (c) all
costs and expenses incurred in connection with enforcement and
collection of the foregoing obligations, including reasonable
attorneys' fees and the allocated cost of internal counsel.
"UCC" means the Uniform Commercial Code.
2. Pledge and Grant of Security Interest. To secure the prompt
payment and performance in full when due, whether by lapse of time,
acceleration, mandatory prepayment or otherwise, of the Secured Obligations,
each Pledgor hereby grants, pledges and assigns to the Administrative Agent, for
the benefit of the holders of the Secured Obligations, a continuing security
interest in, and a right to set-off against, any and all right, title and
interest of such Pledgor in and to the following, whether now owned or existing
or owned, acquired, or arising hereafter (collectively, the "Pledged
Collateral"):
(a) Pledged Shares. (i) One hundred percent (100%) (or, if
less, the full amount owned by such Pledgor) of the issued and
outstanding Capital Stock owned by such Pledgor of each Domestic
Subsidiary set forth on Schedule 2(a) attached hereto and (ii)
sixty-five percent (65%) (or, if less, the full amount owned by such
Pledgor) of the issued and outstanding shares of Capital Stock entitled
to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
("Voting Equity") and one hundred percent (100%) (or, if less, the full
amount owned by such Pledgor) of the issued and outstanding Capital
Stock not entitled to vote (within the meaning of Treas. Reg. Section
1.956-2(c)(2)) ("Non-Voting Equity") owned by such Pledgor of each
Foreign Subsidiary set forth on Schedule 2(a) attached hereto, in each
case together with the certificates (or other agreements or
instruments), if any, representing such Capital Stock, and all options
and other rights, contractual or otherwise, with respect thereto
(collectively, together with the Capital Stock described in Section
2(b) and 2(c) below, the "Pledged Shares"), including, but not limited
to, the following:
(A) all shares, securities, membership interests or
other equity interests representing a dividend on any of the
Pledged Shares, or representing a distribution or return of
capital upon or in respect of the Pledged Shares, or resulting
from a stock split, revision, reclassification or other exchange
therefor, and any subscriptions, warrants, rights or options
issued to the holder of, or otherwise in respect of, the Pledged
Shares; and
(B) without affecting the obligations of the Pledgors
under any provision prohibiting such action hereunder or under
the Credit Agreement, in the event of any consolidation or merger
involving the issuer of any Pledged Shares and in which such
issuer is not the surviving entity, all Capital Stock of the
successor entity formed by or resulting from such consolidation
or merger.
(b) Additional Shares. (i) One hundred percent (100%) (or, if
less, the full amount owned by such Pledgor) of the issued and
outstanding Capital Stock owned by such Pledgor of any Person that
hereafter becomes a Domestic Subsidiary and (ii) sixty-five percent
(65%) (or, if less, the full amount owned by such Pledgor) of the
Voting Equity and one hundred percent (100%) (or, if less, the full
amount owned by such Pledgor) of the Non-Voting Equity owned by
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such Pledgor of any Person that hereafter becomes a Foreign Subsidiary,
including, without limitation, the certificates (or other agreements or
instruments) representing such Capital Stock.
(c) Accessions and Proceeds. All Accessions and all Proceeds
of any and all of the foregoing.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional Capital Stock to the Administrative Agent as
collateral security for the Secured Obligations. Upon delivery to the
Administrative Agent, such additional Capital Stock shall be deemed to be part
of the Pledged Collateral of such Pledgor and shall be subject to the terms of
this Pledge Agreement whether or not Schedule 2(a) is amended to refer to such
additional Capital Stock.
3. Security for Secured Obligations. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the Secured Obligations.
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees
that:
(a) Each Pledgor shall deliver to the Administrative Agent (i)
simultaneously with or prior to the execution and delivery of this
Pledge Agreement, all certificates representing the Pledged Shares of
such Pledgor and (ii) promptly upon the receipt thereof by or on behalf
of a Pledgor, all other certificates and instruments constituting
Pledged Collateral of a Pledgor. Prior to delivery to the
Administrative Agent, all such certificates and instruments
constituting Pledged Collateral of a Pledgor shall be held in trust by
such Pledgor for the benefit of the Administrative Agent pursuant
hereto. All such certificates shall be delivered in suitable form for
transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, substantially in the
form provided in Schedule 4(a) attached hereto.
(b) Additional Securities. If such Pledgor shall receive by
virtue of its being or having been the owner of any Pledged Collateral,
any (i) certificate, including without limitation, any certificate
representing a dividend or distribution in connection with any increase
or reduction of capital, reclassification, merger, consolidation, sale
of assets, combination of shares or other equity interests, stock
splits, spin-off or split-off, promissory notes or other instruments;
(ii) option or right, whether as an addition to, substitution for, or
an exchange for, any Pledged Collateral or otherwise; (iii) dividends
payable in securities; or (iv) distributions of securities in
connection with a partial or total liquidation, dissolution or
reduction of capital, capital surplus or paid-in surplus, then such
Pledgor shall receive such certificate, instrument, option, right or
distribution in trust for the benefit of the Administrative Agent,
shall segregate it from such Pledgor's other property and shall deliver
it forthwith to the Administrative Agent in the exact form received
together with any necessary endorsement and/or appropriate stock power
duly executed in blank, substantially in the form provided in Schedule
4(a), to be held by the Administrative Agent as Pledged Collateral and
as further collateral security for the Secured Obligations.
(c) Financing Statements. Each Pledgor authorizes the
Administrative Agent to file one or more financing statements (with
collateral descriptions broader and/or less specific than the
description of the Collateral contained herein) disclosing the
Administrative Agent's security interest in the Pledged Collateral.
Each Pledgor agrees to execute and deliver to the Administrative Agent
such financing statements and other filings as may be reasonably
requested
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by the Administrative Agent in order to perfect and protect the
security interest created hereby in the Pledged Collateral of such
Pledgor.
5. Representations and Warranties. Each Pledgor hereby represents
and warrants to the Administrative Agent, for the benefit of the holders of the
Secured Obligations, that so long as any of the Secured Obligations remains
outstanding and until all of the commitments relating thereto have been
terminated:
(a) Authorization of Pledged Shares. The Pledged Shares are
duly authorized and validly issued, are fully paid and, subject to
Section 180.0622 of the Wisconsin General Statutes in the case of the
Pledged Shares in any Subsidiary formed under the laws of the State of
Wisconsin, nonassessable and are not subject to the preemptive rights
of any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and is the legal and beneficial
owner of such Pledged Collateral free and clear of any Lien, other than
Permitted Liens. There exists no "adverse claim" within the meaning of
Section 8-102 of the UCC with respect to the Pledged Shares of such
Pledgor.
(c) Exercising of Rights. The exercise by the Administrative
Agent of its rights and remedies hereunder will not violate any law or
governmental regulation or any material contractual restriction binding
on or affecting a Pledgor or any of its property.
(d) Pledgor's Authority. No authorization, approval or action
by, and no notice or filing with any Governmental Authority or with the
issuer of any Pledged Stock is required either (i) for the pledge made
by a Pledgor or for the granting of the security interest by a Pledgor
pursuant to this Pledge Agreement (except as have been already
obtained) or (ii) for the exercise by the Administrative Agent or the
holders of the Secured Obligations of their rights and remedies
hereunder (except as may be required by laws affecting the offering and
sale of securities).
(e) Security Interest/Priority. This Pledge Agreement creates
a valid security interest in favor of the Administrative Agent for the
benefit of the holders of the Secured Obligations, in the Pledged
Collateral. The taking of possession by the Administrative Agent of the
certificates representing the Pledged Shares and all other certificates
and instruments constituting Pledged Collateral will perfect and
establish the first priority of the Administrative Agent's security
interest in the Pledged Shares and, when properly perfected by filing
or registration, in all other Pledged Collateral represented by such
Pledged Shares and instruments securing the Secured Obligations. Except
as set forth in this Section 5(e), no action is necessary to perfect or
otherwise protect such security interest.
(f) Partnership and Membership Interests. Except as previously
disclosed to the Administrative Agent, none of the Pledged Shares
consisting of partnership or limited liability company interests (i) is
dealt in or traded on a securities exchange or in a securities market,
(ii) by its terms expressly provides that it is a security governed by
Article 8 of the UCC, (iii) is an investment company security, (iv) is
held in a securities account or (v) constitutes a Security or a
Financial Asset.
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6. Covenants. Each Pledgor hereby covenants, that so long as any of
the Secured Obligations remains outstanding and until all of the commitments
relating thereto have been terminated, such Pledgor shall:
(a) Defense of Title. Warrant and defend title to and
ownership of the Pledged Collateral of such Pledgor at its own expense
against the claims and demands of all other parties claiming an
interest therein, keep the Pledged Collateral free from all Liens,
except for Permitted Liens, and not sell, exchange, transfer, assign,
lease or otherwise dispose of Pledged Collateral of such Pledgor or any
interest therein, except as permitted under the Credit Agreement and
the other Loan Documents.
(b) Further Assurances. Promptly execute and deliver at its
expense all further instruments and documents and take all further
action that may be necessary and desirable or that the Administrative
Agent may reasonably request in order to (i) perfect and protect the
security interest created hereby in the Pledged Collateral of such
Pledgor (including, without limitation, any and all action necessary to
satisfy the Administrative Agent that the Administrative Agent has
obtained a first priority perfected security interest in all Pledged
Collateral); (ii) enable the Administrative Agent to exercise and
enforce its rights and remedies hereunder in respect of the Pledged
Collateral of such Pledgor; and (iii) otherwise effect the purposes of
this Pledge Agreement, including, without limitation and if requested
by the Administrative Agent, delivering to the Administrative Agent
irrevocable proxies in respect of the Pledged Collateral of such
Pledgor.
(c) Amendments. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or enter into any agreement or allow to exist any
restriction with respect to any of the Pledged Collateral of such
Pledgor other than pursuant hereto or as may be permitted under the
Credit Agreement.
(d) Compliance with Securities Laws. File all reports and
other information now or hereafter required to be filed by such Pledgor
with the United States Securities and Exchange Commission and any other
state, federal or foreign agency in connection with the ownership of
the Pledged Collateral of such Pledgor.
(e) Issuance or Acquisition of Capital Stock. Not, without
executing and delivering, or causing to be executed and delivered, to
the Administrative Agent such agreements, documents and instruments as
the Administrative Agent may require, issue or acquire any Capital
Stock consisting of an interest in a partnership or a limited liability
company that (i) is dealt in or traded on a securities exchange or in a
securities market, (ii) by its terms expressly provides that it is a
security governed by Article 8 of the UCC, (iii) is an investment
company security, (iv) is held in a securities account or (v)
constitutes a Security or a Financial Asset.
7. Advances by Holders of the Secured Obligations. On failure of any
Pledgor to perform any of the covenants and agreements contained herein, the
Administrative Agent may, at its sole option and in its sole discretion, perform
the same and in so doing may expend such sums as the Administrative Agent may
reasonably deem advisable in the performance thereof, including, without
limitation, the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in
defending against any adverse claim and all other expenditures that the
Administrative Agent or the holders of the Secured Obligations may make for the
protection of the security hereof or may be compelled to make by operation of
law. All such sums and amounts so expended shall be repayable by
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the Pledgors on a joint and several basis promptly upon timely notice thereof
and demand therefor, shall constitute additional Secured Obligations and shall
bear interest from the date said amounts are expended at the default rate
specified in Section 2.08 of the Credit Agreement for Base Rate Revolving Loans.
No such performance of any covenant or agreement by the Administrative Agent or
the holders of the Secured Obligations on behalf of any Pledgor, and no such
advance or expenditure therefor, shall relieve the Pledgors of any default under
the terms of this Pledge Agreement, the other Loan Documents or any other
documents relating to the Secured Obligations. The holders of the Secured
Obligations may make any payment hereby authorized in accordance with any xxxx,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such xxxx,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by a Pledgor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.
8. [Reserved].
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, the Administrative Agent and the holders of the
Secured Obligations shall have, in addition to the rights and remedies provided
herein, in the Loan Documents, in any other documents relating to the Secured
Obligations, or by law (including, without limitation, levy of attachment and
garnishment), the rights and remedies of a secured party under the UCC of the
jurisdiction applicable to the affected Pledged Collateral.
(b) Sale of Pledged Collateral. Upon the occurrence of an Event of
Default and during the continuation thereof, without limiting the generality of
this Section 9 and without notice, the Administrative Agent may, in its sole
discretion, sell or otherwise dispose of or realize upon the Pledged Collateral,
or any part thereof, in one or more parcels, at public or private sale, at any
exchange or broker's board or elsewhere, at such price or prices and on such
other terms as the Administrative Agent may deem commercially reasonable, for
cash, credit or for future delivery or otherwise in accordance with applicable
law. To the extent permitted by law, any holder of the Secured Obligations may
in such event, bid for the purchase of such securities. Each Pledgor agrees
that, to the extent notice of sale shall be required by law and has not been
waived by such Pledgor, any requirement of reasonable notice shall be met if
notice, specifying the place of any public sale or the time after which any
private sale is to be made, is personally served on or mailed, postage prepaid,
to such Pledgor, in accordance with the notice provisions of Section 11.02 of
the Credit Agreement at least ten days before the time of such sale. The
Administrative Agent shall not be obligated to make any sale of Pledged
Collateral of such Pledgor regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(c) Private Sale. Upon the occurrence of an Event of Default and
during the continuation thereof, the Pledgors recognize that the Administrative
Agent may deem it impracticable to effect a public sale of all or any part of
the Pledged Shares or any of the securities constituting Pledged Collateral and
that the Administrative Agent may, therefore, determine to make one or more
private sales of any such Pledged Collateral to a restricted group of purchasers
who will be obligated to agree, among other things, to acquire such Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges that any such private
sale may be at prices and on terms less favorable to the seller than the prices
and other terms that might have been obtained at
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a public sale and, notwithstanding the foregoing, agrees that such private sale
shall be deemed to have been made in a commercially reasonable manner and that
the Administrative Agent shall have no obligation to delay sale of any such
Pledged Collateral for the period of time necessary to permit the issuer of such
Pledged Collateral to register such Pledged Collateral for public sale under the
Securities Act. Each Pledgor further acknowledges and agrees that any offer to
sell such Pledged Collateral that has been (i) publicly advertised on a bona
fide basis in a newspaper or other publication of general circulation in the
financial community of New York, New York (to the extent that such offer may be
advertised without prior registration under the Securities Act), or (ii) made
privately in the manner described above shall be deemed to involve a "public
sale" under the UCC, notwithstanding that such sale may not constitute a "public
offering" under the Securities Act, and the Administrative Agent may, in such
event, bid for the purchase of such Pledged Collateral.
(d) Retention of Pledged Collateral. To the extent permitted under
applicable law, in addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default, the Administrative Agent may, after providing
the notices required by Sections 9-620 and 9-621 of the UCC or otherwise
complying with the requirements of applicable law of the relevant jurisdiction,
accept or retain all or any portion of the Pledged Collateral in satisfaction of
the Secured Obligations. Unless and until the Administrative Agent shall have
provided such notices, however, the Administrative Agent shall not be deemed to
have accepted or retained any Pledged Collateral in satisfaction of any Secured
Obligations for any reason.
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Administrative Agent or the holders of the Secured Obligations are legally
entitled, the Pledgors shall be jointly and severally liable for the deficiency,
together with interest thereon at the default rate specified in Section 2.08 of
the Credit Agreement for Base Rate Revolving Loans, together with the costs of
collection and reasonable attorneys' fees (including the allocated cost of
internal counsel). Any surplus remaining after the full payment and satisfaction
of the Secured Obligations shall be returned to the Pledgors or to whomsoever a
court of competent jurisdiction shall determine to be entitled thereto.
10. Rights of the Administrative Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the Administrative
Agent, on behalf of the holders of the Secured Obligations, and each of its
designees or agents, as attorney-in-fact of such Pledgor, irrevocably and with
power of substitution, with authority to take any or all of the following
actions upon the occurrence and during the continuation of an Event of Default:
(i) to demand, collect, settle, compromise and adjust, and
give discharges and releases concerning the Pledged Collateral, all as
the Administrative Agent may reasonably deem appropriate;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any of the Pledged Collateral and enforcing any
other right in respect thereof;
(iii) to defend, settle or compromise any action brought and,
in connection therewith, give such discharge or release as the
Administrative Agent may reasonably deem appropriate;
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(iv) to pay or discharge taxes, liens, security interests or
other encumbrances levied or placed on or threatened against the Pledged
Collateral;
(v) to direct any parties liable for any payment in connection
with any of the Pledged Collateral to make payment of any and all monies
due and to become due thereunder directly to the Administrative Agent or
as the Administrative Agent shall direct;
(vi) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect of
or arising out of any Pledged Collateral;
(vii) to sign and endorse any drafts, assignments, proxies, stock
powers, verifications, notices and other documents relating to the
Pledged Collateral;
(viii) to execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements, security
and pledge agreements, affidavits, notices and other agreements,
instruments and documents that the Administrative Agent may reasonably
deem appropriate in order to perfect and maintain the security interests
and liens granted in this Pledge Agreement and in order to fully
consummate all of the transactions contemplated therein;
(ix) to exchange any of the Pledged Collateral or other property
upon any merger, consolidation, reorganization, recapitalization or other
readjustment of the issuer thereof and, in connection therewith, deposit
any of the Pledged Collateral with any committee, depository, transfer
agent, registrar or other designated agency upon such terms as the
Administrative Agent may reasonably deem appropriate;
(x) to vote for a shareholder resolution, or to sign an
instrument in writing, sanctioning the transfer of any or all of the
Pledged Collateral into the name of the Administrative Agent or one or
more of the holders of the Secured Obligations or into the name of any
transferee to whom the Pledged Collateral or any part thereof may be sold
pursuant to Section 9 hereof; and
(xi) to do and perform all such other acts and things as the
Administrative Agent may reasonably deem appropriate or convenient in
connection with the Pledged Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable for so long as any of the Secured Obligations shall remain
outstanding and until all of the commitments relating thereto shall have been
terminated. The Administrative Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and options
expressly or implicitly granted to the Administrative Agent in this Pledge
Agreement, and shall not be liable for any failure to do so or any delay in
doing so. The Administrative Agent shall not be liable for any act or omission
or for any error of judgment or any mistake of fact or law in its individual
capacity or its capacity as attorney-in-fact except acts or omissions resulting
from its gross negligence or willful misconduct. This power of attorney is
conferred on the Administrative Agent solely to protect, preserve and realize
upon its security interest in the Pledged Collateral.
(b) Performance by the Administrative Agent of Obligations. If any
Pledgor fails to perform any agreement or obligation contained herein, the
Administrative Agent itself may perform, or cause performance of, such agreement
or obligation, and the expenses of the Administrative Agent incurred in
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connection therewith shall be payable by the Pledgors on a joint and several
basis pursuant to Section 25 hereof.
(c) Assignment by the Administrative Agent. The Administrative Agent
may from time to time assign the Secured Obligations and any portion thereof
and/or the Pledged Collateral and any portion thereof, and the assignee shall be
entitled to all of the rights and remedies of the Administrative Agent under
this Pledge Agreement in relation thereto.
(d) The Administrative Agent's Duty of Care. Other than the exercise
of reasonable care to assure the safe custody of the Pledged Collateral while
being held by the Administrative Agent hereunder, the Administrative Agent shall
have no duty or liability to preserve rights pertaining thereto, it being
understood and agreed that the Pledgors shall be responsible for preservation of
all rights in the Pledged Collateral, and the Administrative Agent shall be
relieved of all responsibility for the Pledged Collateral upon surrendering it
or tendering the surrender of it to the Pledgors. The Administrative Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equal to that which the Administrative Agent accords its
own property, which shall be no less than the treatment employed by a reasonable
and prudent agent in the industry, it being understood that the Administrative
Agent shall not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Pledged Collateral, whether or not the Administrative Agent has
or is deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to any of the Pledged
Collateral.
(e) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have occurred and be
continuing, to the extent permitted by law, each Pledgor may exercise any
and all voting and other consensual rights pertaining to the Pledged
Collateral of such Pledgor or any part thereof for any purpose not
inconsistent with the terms of this Pledge Agreement or the Credit
Agreement; and
(ii) Upon the occurrence and during the continuance of an Event
of Default, all rights of a Pledgor to exercise the voting and other
consensual rights that it would otherwise be entitled to exercise
pursuant to paragraph (i) of this subsection shall cease and all such
rights shall thereupon become vested in the Administrative Agent, which
shall then have the sole right to exercise such voting and other
consensual rights.
(f) Dividend Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have occurred and be
continuing and subject to Section 4(b) hereof, each Pledgor may receive
and retain any and all dividends (other than stock dividends and other
dividends constituting Pledged Collateral addressed hereinabove) or
interest paid in respect of the Pledged Collateral to the extent they are
allowed under the Credit Agreement.
(ii) Upon the occurrence and during the continuance of an Event
of Default:
(A) all rights of a Pledgor to receive the dividends and
interest payments that it would otherwise be authorized to receive
and retain pursuant to paragraph (i) of this subsection shall
cease and all such rights shall thereupon be vested in the
Administrative
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Agent, which shall then have the sole right to receive and hold as
Pledged Collateral such dividends and interest payments; and
(B) all dividends and interest payments that are
received by a Pledgor contrary to the provisions of paragraph (A)
of this subsection shall be received in trust for the benefit of
the Administrative Agent, shall be segregated from other property
or funds of such Pledgor, and shall be forthwith paid over to the
Administrative Agent as Pledged Collateral in the exact form
received, to be held by the Administrative Agent as Pledged
Collateral and as further collateral security for the Secured
Obligations.
(g) Release of Pledged Collateral. The Administrative Agent may
release any of the Pledged Collateral from this Pledge Agreement or may
substitute any of the Pledged Collateral for other Pledged Collateral without
altering, varying or diminishing in any way the force, effect, lien, pledge or
security interest of this Pledge Agreement as to any Pledged Collateral not
expressly released or substituted, and this Pledge Agreement shall continue as a
first priority lien on all Pledged Collateral not expressly released or
substituted.
11. Rights of Required Lenders. All rights of the Administrative Agent
hereunder, if not exercised by the Administrative Agent, may be exercised by the
Required Lenders.
12. Application of Proceeds. Upon the occurrence and during the
continuation of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Pledged Collateral, when received by the
Administrative Agent or any of the holders of the Secured Obligations in cash or
its equivalent, will be applied in reduction of the Secured Obligations in the
order set forth in the Credit Agreement or other document relating to the
Secured Obligations, and each Pledgor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Administrative Agent shall have the continuing and exclusive right to apply and
reapply any and all such payments and proceeds in the Administrative Agent's
sole discretion, notwithstanding any entry to the contrary upon any of its books
and records.
13. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the Secured
Obligations remains outstanding and until all of the commitments relating
thereto have been terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the Loan
Documents). Upon such payment and termination, this Pledge Agreement shall be
automatically terminated and the Administrative Agent and the holders of the
Secured Obligations shall, upon the request and at the expense of the Pledgors,
forthwith release all of its liens and security interests hereunder and shall
execute and deliver all UCC termination statements and/or other documents
reasonably requested by the Pledgors evidencing such termination.
Notwithstanding the foregoing, all releases and indemnities provided hereunder
shall survive termination of this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Secured Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any holder of the Secured
Obligations as a preference, fraudulent conveyance or otherwise under any
bankruptcy, insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all
10
reasonable costs and expenses (including, without limitation, attorneys' fees,
the allocated cost of internal counsel and disbursements) incurred by the
Administrative Agent or any holder of the Secured Obligations in defending and
enforcing such reinstatement shall be deemed to be included as a part of the
Secured Obligations.
14. Amendments and Waivers. This Pledge Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated
except as set forth in Section 11.01 of the Credit Agreement.
15. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns, and shall inure, together with the rights
and remedies of the Administrative Agent and the holders of the Secured
Obligations hereunder, to the benefit of the Administrative Agent and the
holders of the Secured Obligations and their successors and permitted assigns;
provided, however, that none of the Pledgors may assign its rights or delegate
its duties hereunder without the prior written consent of the requisite Lenders
under the Credit Agreement. To the fullest extent permitted by law, each Pledgor
hereby releases the Administrative Agent and each holder of the Secured
Obligations, and their respective successors and assigns, from any liability for
any act or omission relating to this Pledge Agreement or the Collateral, except
for any liability arising from the gross negligence or willful misconduct of the
Administrative Agent or such holder, or their respective officers, employees or
agents.
16. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be given as provided in Section 11.02 of the Credit
Agreement.
17. Counterparts. This Pledge Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
18. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
19. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, the LAW OF THE STATE OF NORTH CAROLINA applicable to agreements
made and to be performed entirely within such State; PROVIDED THAT THE
ADMINISTRATIVE Agent AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX
XX XXXXX XXXXXXXX SITTING IN CHARLOTTE, XXXXX XXXXXXXX XX XX XXX XXXXXX XXXXXX
FOR THE WESTERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS
PLEDGE AGREEMENT, THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH
LENDER IRREVOCABLY WAIVES ANY OBJECTION,
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INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS PLEDGE AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE BORROWER, THE
ADMINISTRATIVE Agent AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
THE LAW OF SUCH STATE.
20. Waiver of Right to Trial by Jury.
EACH PARTY TO THIS PLEDGE AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS
RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS PLEDGE
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
21. Severability. If any provision of this Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
22. Entirety. This Pledge Agreement, the other Loan Documents and the
other documents relating to the Secured Obligations represent the entire
agreement of the parties hereto and thereto, and supersede all prior agreements
and understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Loan Documents, any other documents relating to
the Secured Obligations, or the transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement, the
other Loan Documents and the other documents relating to the Secured
Obligations, the delivery of the Notes and the extension of credit thereunder or
in connection therewith.
24. Other Security. To the extent that any of the Secured Obligations
are now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Administrative Agent shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Administrative Agent shall have the right, in its sole discretion, to
determine which rights, security, liens, security interests or remedies the
Administrative Agent shall at any time pursue, relinquish, subordinate, modify
or take with respect thereto, without in any way modifying or affecting any of
them or the Secured Obligations or any of the rights of the Administrative Agent
or the holders of the Secured Obligations under this Pledge
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Agreement, under any of the other Loan Documents or under any other document
relating to the Secured Obligations.
25. Joint and Several Obligations of Pledgors.
(a) Each of the Pledgors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by the
holders of the Secured Obligations, for the mutual benefit, directly and
indirectly, of each of the Pledgors and in consideration of the undertakings of
each of the Pledgors to accept joint and several liability for the obligations
of each of them.
(b) Each of the Pledgors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Pledgors with respect to the payment and
performance of all of the Secured Obligations arising under this Pledge
Agreement, the other Loan Documents and any other documents relating to the
Secured Obligations, it being the intention of the parties hereto that all the
Secured Obligations shall be the joint and several obligations of each of the
Pledgors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein, in
any other of the Loan Documents or in any other documents relating to the
Secured Obligations, the obligations of each Guarantor under the Credit
Agreement and the other Loan Documents shall be limited to an aggregate amount
equal to the largest amount that would not render such obligations subject to
avoidance under Section 548 of the Bankruptcy Code or any comparable provisions
of any applicable state law.
[Signature Pages Follow]
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Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
PLEDGORS: SCHOOL SPECIALTY, INC.
a Wisconsin corporation
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Chief Financial Officer
CHILDCRAFT EDUCATION CORP.,
a New York corporation
XXXXXXXXXXXXXXX.XXX, LLC,
a Delaware limited liability company
BIRD-IN-HAND WOODWORKS, INC.,
a New Jersey corporation
SPORTIME, LLC,
a Delaware limited liability company
GLOBAL VIDEO, LLC,
a Wisconsin limited liability company
PREMIER AGENDAS, INC.,
a Washington corporation
XXXX SCIENTIFIC, INC.,
a Delaware corporation
AMALGAMATED WIDGETS, INC.,
a Wisconsin corporation
SAX ARTS & CRAFTS, INC.,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Treasurer
Accepted and agreed to as of the date first above written.
BANK OF AMERICA, N.A., as Administrative Agent
By: /s/ Xxxxx Xxxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxxx
Title: Vice President
