Pledge Agreement

PLEDGE AGREEMENT (GORACING.COM)


THIS PLEDGE AGREEMENT (this "Agreement"), dated as of October 2, 2000, is between GORACING.COM, INC., a Delaware corporation ("Pledgor"), and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a national banking association ("Pledgee"), as agent for the benefit of the "Lenders" (as such term is hereinafter defined).


WITNESSETH:


WHEREAS, Pledgor, a wholly-owned subsidiary of Action Performance, Inc. (the "Company") as Subsidiary Guarantor, the Company as a Borrower, certain other Subsidiaries of the Company as Borrowers and Subsidiary Guarantors, and Pledgee, as Agent and a Lender, are parties to that certain Loan and Security Agreement dated as of September 29, 2000 (the same, as it may be amended, restated, modified or supplemented and in effect from time to time, being herein referred to as the "Loan Agreement"), providing for Loans and other financial accommodations thereunder by Lenders to Borrowers.


WHEREAS, Pledgor legally and beneficially owns that number of the issued and outstanding shares of capital stock or that percentage of the outstanding membership interests, as applicable, of the corporations and limited liability companies listed on Exhibit A hereto (each such corporation and limited liability company, together with each other corporation and limited liability company, the stock or membership interests of which is hereafter acquired by Pledgor and described on a Joinder to Pledge Agreement executed by Pledgor in the form of Exhibit B hereto ("Joinder"), is referred to herein as a "Subsidiary" and collectively as the "Subsidiaries"); and


WHEREAS, to induce Pledgee and the Lenders to enter into the Loan Agreement and to make the Loans and other financial accommodations thereunder, and in order to secure the payment and performance by Pledgor of the Liabilities (as hereinafter defined), Pledgor has agreed to pledge to Pledgee, for the benefit of Pledgee and the Lenders, the Pledged Collateral (as hereinafter defined);


NOW, THEREFORE, in consideration of the premises and in order to induce Pledgee and the Lenders to enter into the Loan Agreement and to make the Loans and other financial accommodations to Borrowers under the Loan Agreement, Pledgor hereby agrees with Pledgee, for the benefit of Pledgee and the Lenders, as follows:


Section 1. Defined Terms. Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings ascribed thereto in the Loan Agreement. Terms defined in the Uniform Commercial Code, as in effect in the State of Illinois from time to time (the "UCC"), which are not otherwise defined in this Agreement or in the Loan Agreement, are used in this Agreement as defined in the UCC as in effect in the State of Illinois on the date hereof. As used herein, the following terms shall have the following respective meanings (such meanings being equally applicable to both the singular and plural form of the terms defined):


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"Liabilities" has the meaning assigned to such term in Section 2 hereof.


"Pledged Collateral" has the meaning assigned to such term in Section 2 hereof.


"Pledged Interests" has the meaning assigned to such term in Section 2 hereof.


"Pledged Shares" has the meaning assigned to such term in Section 2 hereof.


Section 2. Pledge. Pledgor hereby pledges, assigns, hypothecates, transfers, delivers and grants to Pledgee, for the benefit of Pledgee and the Lenders, a first lien on and first security interest in (a) the shares of capital stock of the Subsidiaries owned by Pledgor and set forth in Part 1 of Exhibit A attached hereto (collectively, the "Pledged Shares") and (b) the membership interests of the Subsidiaries owned by Pledgor and set forth in Part 2 of Exhibit A (the "Pledged Interests"), (c) all other property hereafter delivered to, or in the possession or in the custody of, Pledgee in substitution for or in addition to the Pledged Shares or the Pledged Interests, (d) any other property described in Section 4 below, now or hereafter delivered to, or in the possession or custody of, Pledgor and (e) all proceeds of the collateral described in the preceding clauses (a), (b), (c) and (d) (the collateral described in clauses (a) through (e) of this Section 2 being collectively referred to as the "Pledged Collateral"), as collateral security for:


(a) the prompt and complete payment when due (whether at the stated maturity, by acceleration or otherwise) of all the Liabilities of Pledgor under the Loan Agreement; and


(b) the due and punctual payment and performance by Pledgor of its obligations and liabilities under, arising out of or in connection with this Agreement;


(the liabilities described in the preceding subsections (i) and (ii) being referred to hereinafter collectively as the "Liabilities"). All of the Pledged Collateral now owned by Pledgor which is presently represented by stock certificates is listed in Part 1 of Exhibit A hereto, which stock certificates, together with undated stock powers duly executed in blank by Pledgor, are being delivered to Pledgee, for the benefit of Pledgee and the Lenders, simultaneously herewith. All of the Pledged Interests now owned by Pledgor are listed in Part 2 of Exhibit A hereto, none of which are certificated. Pledgor shall execute a Joinder to Pledge Agreement (in the form of Exhibit B hereto) upon creation or acquisition of any new Subsidiary and will cause each such Subsidiary to execute an Acknowledgment (in the form of Exhibit C hereto). Pledgee, on behalf of the Lenders, shall maintain possession and custody of the certificates and other instruments representing the Pledged Shares, the Pledged Interests and any additional Pledged Collateral.


Section 3. Representations and Warranties of Pledgor. Pledgor represents and warrants to Pledgee, and covenants with Pledgee, that:


(a) Pledgor is the record and beneficial owner of, and has legal title to, the Pledged Collateral, and such Pledged Collateral is and will remain, and all other shares of stock,


2 3 membership units or other instruments constituting Pledged Collateral will be, free and clear of all pledges, liens, security interests and other encumbrances and restrictions whatsoever, except the liens and security interests created by this Agreement;


(b) Pledgor has full power, authority and legal right to execute the pledge provided for herein and to pledge the Pledged Collateral to Pledgee, for the benefit of Pledgee and the Lenders;


(c) this Agreement has been duly authorized, executed and delivered by Pledgor and constitutes a legal, valid and binding obligation of Pledgor enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, moratorium, reorganization and other similar laws affecting the enforcement of creditors' rights generally;


(d) there are no outstanding options, warrants or other agreements with respect to any of the Pledged Collateral;


(e) the Pledged Shares have been duly and validly authorized and issued, are fully paid and non-assessable, and represent the percentage of the issued and outstanding shares of capital stock of the Subsidiaries as set forth on Part 1 of Exhibit A. All additional Pledged Collateral constituting capital stock will be duly and validly authorized and issued, and will be fully paid and non-assessable.


(f) the Pledged Interests have been duly and validly authorized and issued, are fully paid and non-assessable, and represent the percentage of the membership interests of the Subsidiaries as set forth on Part 2 of Exhibit A.


(g) no consent, approval or authorization of, or designation or filing with, any governmental authority on the part of Pledgor is required in connection with the pledge and security interest granted under this Agreement or the exercise by Pledgee of the voting and other rights provided for in this Agreement;


(h) the execution, delivery and performance of this Agreement by Pledgor 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 charter or by-laws of Pledgor or of any Subsidiary, or of any securities issued by any Subsidiary, or of any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which Pledgor or any Subsidiary is a party or which purports to be binding upon Pledgor or any Subsidiary or upon any of their respective assets, and will not result in the creation or imposition of any lien, charge or encumbrance on or security interest in any of the assets of Pledgor or any Subsidiary except as contemplated by this agreement;


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(i) The pledge, assignment and delivery to Pledgee of the Pledged Collateral pursuant to this Agreement creates a valid first lien on and a first perfected security interest in such Pledged Collateral and the proceeds thereof in favor of Pledgee, for the benefit of Pledgee and the Lenders, subject to no prior pledge, lien, mortgage, hypothecation, security interest, charge, option or encumbrance or to any agreement purporting to grant to any third party a security interest in the property or assets of Pledgor which would include the Pledged Collateral. Pledgor covenants and agrees that it will defend Pledgee's right, title and security interest in and to the Pledged Collateral and the proceeds thereof against the claims and demands of all persons whomsoever; and


(j) the membership interests in those Subsidiaries which are limited liability companies are not certificated and the provisions of the Subsidiaries' operating agreements do not provide that such membership interests constitute "securities" within the meaning of the UCC.


Section 4. Stock Dividends, Distributions, etc. If, while this Agreement is in effect, Pledgor shall become entitled to receive or shall receive any stock or membership interest certificate (including, without limitation, any certificate representing a stock or membership interest dividend, a stock split or a stock or membership interest distribution in connection with any reclassification, increase or reduction of capital, or issued in connection with any reorganization), or any options or rights, whether as an addition to, in substitution for, or in exchange for any of the Pledged Collateral, or otherwise, Pledgor agrees to accept the same as Pledgee's agent and to hold the same in trust for Pledgee, and to deliver the same forthwith to Pledgee in the exact form received, with the endorsement of Pledgor when necessary and/or appropriate undated stock or membership interest, as applicable, powers duly executed in blank, to be held by Pledgee, for the benefit of Pledgee and the Lenders, subject to the terms hereof, as additional Pledged Collateral. In case any distribution of capital stock or membership interests shall be made on or in respect of the Pledged Collateral or any property shall be distributed upon or with respect to the Pledged Collateral pursuant to the recapitalization or reclassification of the capital stock or membership interest of the issuer thereof or pursuant to the reorganization thereof, the property so distributed shall be delivered to Pledgee to be held by it as additional Pledged Collateral. Except as provided in subsection 5(a)(ii) below, all sums of money and property so paid or distributed in respect of the Pledged Collateral which are received by Pledgor shall, until paid or delivered to Pledgee, be held by Pledgor in trust as additional Pledged Collateral.


Section 5. Administration of Security. The following provisions shall govern the administration of the Pledged Collateral:


(a) So long as no Default has occurred and is continuing, Pledgor shall be entitled (subject to the other provisions hereof, including, without limitation, Section 8 below):


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(i) to vote or consent with respect to Pledged Collateral in any manner not inconsistent with this Agreement, the Loan Agreement and the other Financing Agreements; and


(ii) to receive cash dividends or other distributions in the ordinary course made in respect of the Pledged Collateral, to the extent permitted to be paid pursuant to the Loan Agreement.


Pledgor hereby grants to Pledgee or its nominee, on behalf of Lenders, an irrevocable proxy to exercise all voting and corporate and limited liability company rights relating to the Pledged Collateral in any instance, including, without limitation, to approve any merger involving Pledgor or any Subsidiary as a constituent corporation, which proxy shall only be effective immediately upon written notice from Pledgee to Pledgor of the occurrence, and shall remain effective during the continuance, of a Default. After the occurrence and during the continuance of a Default and upon the request of Pledgee, Pledgor agrees to deliver to Pledgee, on behalf of Lenders, such further evidence of such irrevocable proxy or such further irrevocable proxies to vote the Pledged Collateral as Pledgee may request.


(b) If requested by the Pledgee during the continuance of a Default, in the event that Pledgor, as record and beneficial owner of the Pledged Collateral, shall have received or shall have become entitled to receive, any cash dividends or other distributions in the ordinary course, Pledgor shall deliver to Pledgee, for the benefit of Pledgee and the Lenders, and Pledgee, for its own benefit and the benefit of the Lenders, shall be entitled to receive and retain, all such cash or other distributions as additional Pledged Collateral.


(c) Subject to any sale or other disposition by Pledgee, on behalf of the Lenders, of any of the Pledged Collateral pursuant to this Agreement, such Pledged Collateral shall be delivered to Pledgor upon full payment in cash, satisfaction and termination ...