Exhibit 10.4
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STOCK PLEDGE AGREEMENT
WITH ESCROW PROVISIONS
AGREEMENT, made the 30th day of May, 1997, by and among
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware corporation
with its principal place of business at Xxxxxx Xxxx, Xxxxxxxx, Xxx
Xxxx 00000 ("Pledgor"), PROGRAMS FOR EDUCATION, INC., a New Jersey
corporation with its principal place of business at Building #0
Xxxx Xxxx, Xxxxxxxx, Xxx Xxxxxx 00000 ("Pledgee"), and PLUESE,
LIHOTZ, XXXXXXXXXX & LEONE, 00 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxx
Xxxxxx 00000 ("Escrow Agent").
W I T N E S S E T H :
WHEREAS, Pledgor is the owner of one hundred (100%) percent of
the issued and outstanding common shares of MODERN LEARNING PRESS,
INC., a Delaware corporation with its principal place of business
at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxx, (the "Corporation);
and
WHEREAS, Pledgor in connection with the purchase by the
Corporation of substantially all of the assets of Pledgee pursuant
to an Asset Purchase Agreement dated the 30th day of May, 1997
among the Pledgor, the Corporation and Pledgee (the "Asset Purchase
Agreement") acknowledges the indebtedness and other obligations of
the Corporation to Pledgee under the Asset Purchase Agreement, Note
and Royalty Agreement (as defined in the Asset Purchase Agreement)
and of the guaranty of such indebtedness and obligations by
Pledgor; and
WHEREAS, as security for such indebtedness and obligations and
to induce Pledgee to enter into the Asset Purchase Agreement and to
accept the Note and Royalty Agreement, Pledgor shall deliver to the
Escrow Agent, in escrow, TEN (10) SHARES of the capital stock of
the Corporation or such greater number as shall represent one
hundred (100%) percent of the issued and outstanding stock of the
Corporation (the "Shares"); and
WHEREAS, Pledgee desires to accept the Note and Royalty
Agreement and the pledge of the Shares as security therefor, all
according to the terms and conditions contained herein and therein.
NOW, THEREFORE, it is agreed as follows:
1. PLEDGE. As security for the performance of the
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Corporation's and Pledgor's obligations under the Asset Purchase
Agreement, the Corporation's payment and performance under the
terms of the Note and Royalty Agreement, the Pledgor's obligations
under that certain guaranty in favor of and delivered to Pledgee of
even date hereof (the "Guaranty"), and all other obligations of the
Corporation and Pledgor to the Pledgee in connection with the
purchase by the Corporation of substantially all the assets and
business of Pledgee, Pledgor hereby delivers, pledges, and assigns
and grants to Pledgee a security interest in instruments of the
following description: ten (10) common shares of MODERN LEARNING
PRESS, INC. represented by Certificate No. 1 duly indorsed in
blank, or with appropriate stock powers, in blank, and herewith
delivered to the Escrow Agent (the "Pledged Shares"). The Escrow
Agent shall hold the Pledged Shares, in escrow, as security for the
performance and payment of all obligations of the Corporation and
the Pledgee as described herein, and the Pledged Shares shall not
be delivered to Pledgee, nor encumbered or disposed of by the
Pledgee except in accordance with the provisions of paragraphs "4"
and "5" of this Agreement.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR.
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(a) Pledgor hereby represents and warrants (i) that it
is the record and beneficial owner of, and has good and marketable
title to the Pledged Shares, (ii) such shares are validly issued,
fully paid and non-assessable and are free and clear of all
pledges, liens, security interests, and other encumbrances and
restrictions on the transfer and assignment thereof, except as
affected by or arising pursuant to this Agreement, (iii) the
Pledged Shares constitute one hundred (100%) percent of the issued
and outstanding capital stock of the Corporation, and (iv) this
Pledge creates a valid first lien on and security interest in the
Pledged Shares.
(b) Pledgor will not (i) sell, convey, or otherwise
dispose of the Pledged Shares, (ii) permit any person to acquire a
lien or security interest therein, and (iii) vote or consent with
respect to the Pledged Shares so as to authorize any change in the
authorized shares or stated capital of the Corporation or a
dissolution or liquidation of the Corporation, without, in each of
the above instances, the prior written consent of Pledgee which
consent shall not be unreasonably withheld. As sole shareholder of
the Corporation, Pledgor shall not authorize the Corporation to
take any such action without such written consent.
3. PAYMENT OF PURCHASE PRICE. The Corporation hereby
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delivers to Pledgee the Note. Upon payment in full and performance
of all other obligations of the Corporation and the Pledgor, as the
case may be, under the Note, the Royalty Agreement, and the
Guaranty, and further provided that no "Event of Default", as
defined below, has occurred and is continuing, the Escrow Agent
shall transfer and redeliver to the Pledgor all the Pledged Shares
and the stock power, and upon such redelivery, this Agreement shall
terminate and be of no further force and effect.
4. DEFAULT. In the event that the Corporation or the
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Pledgor, as the case may be, defaults in the performance of any of
the terms of this Agreement, or in the payment or performance of
their respective obligations under the Asset Purchase Agreement,
the Note, Royalty Agreement, or Guaranty, and in each case upon the
expiration of any applicable cure periods (each an "Event of
Default"), Pledgee shall have the rights and remedies provided in
the Uniform Commercial Code in force in the State of New Jersey at
the date of this Agreement (the "UCC"), and Pledgee shall, subject
to the conditions contained in Paragraph 5 hereof, be entitled,
without limitation to (i) cause the Pledged Shares to be titled in
the name of Pledgee or its designated nominee, (ii) vote any or all
of the Pledged Shares, give all consents, waivers and ratifications
in respect thereto as though it were the absolute owner thereof;
and (iii) receive or obtain any dividend or other distribution on
account of such shares, and (iv) require any or all of the officers
and directors of the Corporation to resign. Further, in the event
of any Event of Default, the Escrow Agent shall, subject to the
conditions contained in Paragraph 5 hereof, deliver the Pledged
Shares to the Pledgee, or its successors or assigns. Pledgee may,
upon thirty (30) days' notice to the Pledgor, sent by registered
mail, and without liability for any diminution in price which may
have occurred, purchase or sell all or any part of the Pledged
Shares at such price and in such manner as required by the UCC as
the Pledgee may determine. Out of the proceeds of any sale the
Pledgee may retain an amount equal to the principal, interest and
late charges, if any, and all other amounts then due, on the Note,
plus the amount of the expenses of the sale, plus the amount of any
other obligation of Pledgor to Pledgee, including under the Royalty
Agreement, and shall pay any balance of such proceeds to the
Pledgor as provided by law.
5. Escrow.
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(a) Pledgor and Pledgee hereby appoint Pluese, Lihotz,
Xxxxxxxxxx & Leone ("PLIL") the Escrow Agent hereunder, and PLIL
hereby agrees to accept the appointment as Escrow Agent for all
purposes of this Agreement.
(b) Escrow Agent hereby acknowledges the receipt from
Pledgor of the Pledged Shares.
(c) Upon an Event of Default as defined in Paragraph 4
hereof, Pledgee shall send written notice to Escrow Agent, with
proof of delivery of same to the Pledgor, and to Pledgor and its
counsel in accordance with the notice provision contained in
Paragraph 10 hereof. Escrow Agent shall be authorized to release
the Pledged Shares to the Pledgee thirty (30) days after receipt of
such written notice unless Escrow Agent receives within such thirty
(30) days (i) written objection by the Pledgor, stating the basis
for its objection, or (ii) proof of cure of such default.
(d) Upon receipt by Escrow Agent of written notice of
objection from Pledgor as set forth in (c) above, Escrow Agent
shall continue to hold such Pledged Shares until the earlier of:
i. Written notice to release same signed by
Pledgor and Pledgee or
ii. Receipt of a non-appealable decision of a
Court of competent jurisdiction, or award of
binding arbitration, setting forth the party to
which the Pledged Shares should be released.
(e) The Escrow Agent shall not be liable to any of the
parties for any act or omission, except for bad faith or gross
negligence, and the parties hereby agree to indemnify the Escrow
Agent and hold the Escrow Agent harmless from any claims, damages,
losses or expenses (including reasonable attorneys' fees) arising
in connection herewith. The parties acknowledge that the Escrow
Agent is acting solely as a stakeholder for their convenience. In
the event of a dispute between the parties, the Escrow Agent shall
not be bound to release and deliver the Pledged Shares to either
party but may either continue to hold the Pledged Shares as set
forth in (d) above, or Escrow Agent may deposit the Pledged Shares
with the clerk of any court of competent jurisdiction. Upon such
deposit, the Escrow Agent will be released from all duties and
responsibilities hereunder.
(f) The Escrow Agent shall not be required to defend any
legal proceedings which may be instituted against it in respect to
the subject matter of this Paragraph 5 unless requested to do so by
Pledgor or Pledgee and indemnified to its satisfaction against the
cost and expense of such defense (including attorneys' fees). The
Escrow Agent shall not be required to institute legal proceedings
of any kind and shall have no responsibility for the genuineness or
validity of any document or other item deposited with it in
connection with this Paragraph 5.
(g) The parties agree that, notwithstanding the role of
PLIL as Escrow Agent, PLIL may and does represent Pledgee as legal
counsel in connection with the subject matter of this Agreement and
the Asset Purchase Agreement and otherwise. The foregoing shall
not be deemed to be nor create a conflict of interest that will
prevent PLIL from acting as counsel for Pledgee with respect to
this or any other matter.
6. VOTING. Provided no Event of Default has occurred and is
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continuing and subject to the limitations set forth in this
Agreement, at all meetings of shareholders or in connection with
any rights of shareholders of the Corporation, at any time while
Pledgor is indebted to Pledgee under the Note or Royalty Agreement,
the Pledged Shares shall continue to be voted by the Pledgor, and
the Pledgee shall execute at any time, if required, any instruments
requested by the Pledgor necessary to evidence such rights,
including without limitation, an appointment of Pledgor as proxy.
7. DIVIDENDS. Provided no Event of Default has occurred and
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is continuing, all dividends and other amounts declared on the
Pledged Shares during the term of this pledge and received by the
Pledgor as a result of its record ownership of the Pledged Shares
shall be retained by Pledgor. Upon the occurrence of an Event of
Default such dividends and other amounts shall be paid to Pledgee
and applied against such obligations of Pledgor to Pledgee as
Pledgee shall in its sole discretion determine.
8. ADJUSTMENTS. In the event that, during the term of this
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pledge, any share dividend, reclassification, readjustment, or
other change is declared or made in the capital structure of the
Corporation, all new substituted, or additional shares, or other
securities, issued by reason of any such change shall be deposited
with and held by the Escrow Agent under the terms of this Agreement
in the same manner as the Pledged Shares.
9. BENEFIT. This Agreement shall bind and inure to the
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benefit of the parties, their legal representatives and assigns.
10. NOTICE. Whenever under this Agreement notice is required
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to be given, it shall be given in writing and shall be deemed to
have been given three (3) business days after the date such notice
is deposited in the United States mails, postage prepaid, by
certified or registered mailing and addressed as follows:
If to the Pledgor: Touchstone Applied Science
Associates, Inc.
c/o Xx. Xxxxxx X. Xxxxx, President
Xxxxxx Xxxx
Xxxxxxxx, XX 00000
with a copy to Xxxxxxx Crush, Esq., Rider, Weiner, Xxxxxxx &
Calhelha, P.C., 000 Xxxxxx Xxxxxxx Xxxx, Xxx Xxxxxxx, XX 00000,
If to the Pledgee: Xx. Xxxxxxx X. Xxxxxxx
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
with a copy to Xxxxxx Xxxxx, Esq., Pluese, Lihotz, Xxxxxxxxxx &
Leone, 00 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000.
If to Escrow Agent: Pluese, Lihotz, Xxxxxxxxxx & Leone
c/o Xxxxxx Xxxxx, Esq.
00 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
11. GOVERNING LAW. This Agreement shall be governed by and
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construed under the laws of the State of New Jersey.
12. ASSIGNMENT/AMENDMENT. This Agreement and the rights and
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obligations thereunder cannot be assigned by either party without
the written consent of the others. No amendment or waiver under
this Agreement shall be effective unless in writing and signed by
the parties hereto.
IN WITNESS WHEREOF, the undersigned have set their hands and
seals as of the date first above written.
PLEDGEE:
PROGRAMS FOR EDUCATION, INC.
/s/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx, President
PLEDGOR:
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
/s/ XXXXXX X. XXXXX
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Xxxxxx X. Xxxxx, President
ESCROW AGENT:
PLUESE, LIHOTZ, XXXXXXXXXX & LEONE
/s/ XXXXXX XXXXX
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Xxxxxx Xxxxx, Esq.
