Exhibit 10.4
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of November 15, 2005, between
TRACKPOWER INC., a Wyoming corporation, having an address at _____________ (the
"Pledgor") and SOUTHERN TIER ACQUISITIONS LLC, a New York limited liability
company, having an address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Lender").
1. SECURITY FOR NOTE. This Agreement is for the benefit of the
Lender to secure the payment of that certain noted dated on even date herewith
in the principal amount of $849,341 (the "Note") and the obligations of the
Pledgor arising out of or in connection with that certain Capital Contribution
Agreement dated on even date herewith (herein collectively called the
"Obligations").
2. ASSIGNMENT OF MEMBERSHIP INTERESTS. To secure the Obligations and
for the purposes set forth in Section 1, the Pledgor hereby assigns, transfers,
pledges and grants, as collateral security, a security interest in so much of
the Pledgor's membership interests as may be necessary to satisfy the Pledgor's
obligations according to the terms of the Note, together with all right, title
and interest as a member in American Racing and Entertainment LLC (the "Limited
Liability Company") including without limitation: (i) all payments to become due
to such Pledgor in respect of such membership interests and under the Operating
Agreement of the Limited Liability Company Agreement (the "Operating
Agreement"), whether as contractual obligations, damages, insurance proceeds or
otherwise; (ii) all of its claims, rights, powers, privileges, security
interest, liens and remedies under the Operating Agreement; and (iii) all of its
rights under the Operating Agreement to make determinations, to exercise any
election (including, but not limited to, election of remedies) or option or to
give or receive any notice, consent, amendment, waiver or approval together with
full power and authority to demand, receive, enforce, collect or receipt for any
of the foregoing or any property of the subject of the Operating Agreement, to
enforce or execute any checks, or other instruments or orders, to file any
claims and to take any action which (in the opinion of the Lender) may be
necessary or advisable in connection with any of the foregoing; provided, that
unless and until the fifth (5th) day following the day of written demand made by
the Lender for the payment of the Note and the failure of the Borrower to pay
the Note prior thereto (the "Specified Date"), the Pledgor shall be entitled to
retain all payments and exercise all of the rights assigned pursuant to this
Section 2. All the rights assigned to the Lender pursuant to this Section 2 are
hereinafter referred to as the "Collateral". The Pledgor shall cause each of the
other members to consent to (a) the assignment of and the security interest
granted in the foregoing rights and (b) exercise of such rights by the Lender
pursuant to Section 3 hereof. From and after the Specified Date, all of the
Pledgor's right, title and interest in and to the Limited Liability Company
shall cease to exist and the Pledgor shall have no further right to act in any
respect as a member of the Limited Liability Company.
3. REMEDIES. Commencing on the Specified Date, the Lender shall be
entitled to exercise all of the rights, powers and remedies (whether vested in
it by this Agreement or by law) for the protection and enforcement of its rights
in respect of the Collateral, and the Lender shall be entitled, without
limitation, to exercise the following rights, which the Pledgor hereby agrees to
be commercially reasonable:
(a) to give all consents, waivers and ratifications in
respect of the Collateral and otherwise act with respect
thereto as though it were the outright owner thereof
(the Pledgor hereby irrevocably constituting and
appointing the Lender the proxy and attorney in-fact of
the Pledgor, with full power of substitution to do so),
including, without limitation, the right to exercise all
-1-
of the rights and interests granted to the Lender
hereunder pursuant to Section 2 in respect of the
Operating Agreement; and
(b) The Pledgor hereby waives and releases to the fullest
extent permitted by law any right or equity of
redemption with respect to the Collateral, acknowledging
that only the Lender may hold such Collateral after
default pursuant to this Agreement.
4. REMEDIES, CUMULATIVE. Each right, power and remedy of the Lender
provided for in this Agreement or now or hereafter existing at law or in equity
or by statute shall be cumulative and concurrent and shall be in addition to
every other such right, power or remedy. The exercise or beginning of the
exercise by the Lender of any one or more of the rights, powers or remedies
provided for in this Agreement or now or hereafter existing at law or in equity
or by statute or otherwise shall not preclude the simultaneous or later exercise
by the Lender of all such other rights, powers or remedies, and no failure or
delay on the part of the Lender to exercise any such right, power or remedy
shall operate as a waiver thereof.
5. FURTHER ASSURANCES. The Pledgor agrees that it will join with the
Lender in executing and, at its own expense, file and refile under the Uniform
Commercial Code or any similar statute of any other jurisdiction, such financing
statements, continuation statements and other documents in such offices as the
Lender may deem necessary or appropriate and wherever required or permitted by
law in order to perfect and preserve the Lender's security interest in the
Collateral and hereby authorizes the Lender to file financing statements and
amendments thereto relative to all or any part of the Collateral without the
signature of such Pledgor where permitted by law, and agrees to do such further
acts and things and to execute and deliver to the Lender such additional
conveyances, assignments, agreements and instruments as the Lender may
reasonably require or deem advisable to carry into effect the purposes of this
Agreement or to further assure and confirm unto the Lender its rights, powers
and remedies hereunder.
6. TRANSFER BY THE PLEDGOR. The Pledgor will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. The
Pledgor represents and warrants, as applicable to it, that:
(a) it is the legal and beneficial owner of, and has good
and marketable title to, the Collateral assigned
hereunder, subject to no pledge, lien, mortgage,
hypothecation, security interest, charge, option or
other encumbrance whatsoever, except the liens and
security interests created by this Agreement;
(b) it has full power, authority and legal right to assign
all the Collateral assigned hereunder;
(c) this Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes a legal, valid
and binding obligation of such Pledgor enforceable in
accordance with its terms except as enforcement may be
limited by Lenderruptcy, insolvency and other laws
affecting the enforcement of creditors' rights
generally, by moratorium laws from time to time in
effect, and by general principles of equity;
(d) no consent of any other party (including, without
limitation, any member, manager, stockholder, member or
creditor of the Pledgor) and no consent, license,
permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or
declaration with, any governmental authority is required
-2-
which has not been obtained by the Pledgor in connection
with the execution, delivery or performance by the
Pledgor of this Agreement;
(e) the execution, delivery and performance of this
Agreement will not violate any provision of any
applicable law or regulation or of any order, judgment,
writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of the
operating agreement, certificate of incorporation or
by-laws (as applicable) of the Pledgor or of any
securities issued by the Pledgor, or of any mortgage,
indenture, lease, contract or other agreement,
instrument or undertaking to which the Pledgor is a
party or which is binding upon the Pledgor or upon any
of its assets and will not result in the creation or
imposition of any lien or encumbrance on any of the
assets of the Pledgor except as contemplated by this
Agreement; and
(f) by virtue of the execution and delivery by the Pledgor
of this Agreement and possession of the membership
certificate(s) and, at Lender's option, the filing of
UCC-1 financing statements, which financing statements
will, at Lender's option, be duly and validly filed in
the appropriate offices, the Lender will obtain a valid
and perfected lien upon and security interest in all of
the Pledgor's right, title and interest as a member in
the Limited Liability Company (the "Limited Liability
Company Interest"), as security for the repayment of the
Obligations, prior to the rights of all other third
parties and all other liens and encumbrances thereon and
security interest therein.
The Pledgor covenants and agrees that if there is any
currently effective financing statement under the Code
covering the Limited Liability Company Interest, it
shall promptly cause the outstanding obligation secured
by such financing statement to be satisfied and to cause
a termination statement to that effect to be filed with
each filing officer with whom any such financing
statement was filed. The Pledgor covenants and agrees
that it will defend the Lender's right, title and
security interest in and to the Collateral and the
proceeds thereof against the claims and demands of all
persons whomsoever; and the Pledgor covenants and agrees
that it will have like title to and right to pledge any
other property at any time hereafter pledged or assigned
to the Lender as additional Collateral hereunder and
will likewise defend the right thereto and security
interest therein of the Lender.
8. PLEDGOR'S OBLIGATIONS ABSOLUTE. The obligations of the Pledgor
under this Agreement shall be absolute and unconditional and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (a) any renewal, extension, amendment
or modification of or addition or supplement to or deletion from the Capital
Contribution Agreement, the Note or any other instrument or agreement referred
to therein, or any assignment or transfer of any thereof; (b) any waiver,
consent, extension, indulgence or other action or inaction under or in respect
of any such agreement or instrument or this Agreement; (c) any furnishing of any
additional security to the Lender or any acceptance thereof or any release of
any security by the Lender; (d) any limitation on any party's liability or
obligations under any such instrument or agreement or any invalidity or
unenforceability, in whole or in part, of any such instrument or agreement or
any term thereof; or (e) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to the Pledgor, or any action taken with respect to this 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.
9. TERMINATION OF RELEASE. At such time as the principal of and
interest on the Note has been paid in full, this Agreement shall terminate, and
the Lender, at the request and expense of the Pledgor, will execute and deliver
to the Pledgor a proper instrument or instruments acknowledging the satisfaction
and termination of this Agreement, and will duly assign, transfer and deliver to
the Pledgor (without recourse and without any representation or warranty) such
of the Collateral as may be in-the possession of the Lender and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement.
-3-
10. NOTICES. All notices and other communications hereunder shall be
in writing, shall be effective upon receipt and shall be delivered or mailed by
first class mail, postage prepaid, addressed, as follows:
(a) if to the Pledgor, at Pledgor's address set forth above
with a copy to: The Towne Law Offices, P.C.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(b) if to the Lender, at its address set forth above
with a copy to: ▇▇▇▇▇▇▇▇ Weprin & Ustin LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
or at such other address as shall have been furnished in writing by any person
described above to the party required to give notice hereunder.
11. MISCELLANEOUS. This Agreement shall be binding upon the
successors and permitted assigns of the Pledgor and shall inure to the benefit
of and be enforceable by the Lender and its successors and assigns. This
Agreement may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Agreement shall be construed and
enforced in accordance with a governed by the law of the State of New York. The
headings in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. In any judicial proceeding involving,
directly or indirectly, any matter arising out of or related to this Note, the
maker hereby irrevocably submits to the non-exclusive jurisdiction of any sate
or federal court located in New York county in the State of New York and agrees
not to raise any objection to such jurisdiction or to the laying or maintaining
of the venue of any such proceeding in such county. The maker agrees that
service of process in any such proceeding may be duly effected by mailing a copy
thereof to the maker by nationally recognized overnight courier with no receipt
required. This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which shall constitute one instrument. In
the event that any provision of this Agreement shall prove to be invalid or
unenforceable, such provision shall be deemed to be severable from the other
provisions of this Agreement which shall remain binding on all parties hereto.
IN WITNESS WHEREOF, the Pledgor and the Lender have executed by this
Agreement as of the date first above written.
PLEDGOR:
TRACKPOWER INC.
By:
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
-4-
LENDER:
SOUTHERN TIER ACQUISITIONS LLC
By:
--------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
-5-