EXHIBIT 10.4
PLEDGE AND
SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT is dated as of January 19, 2005,
between Pioneer Railcorp ("Borrower") and National City Bank of the Midwest
("Bank").
1. Grant of Security Interest. Borrower hereby pledges and grants to Bank
a security interest in the following described property and all additions,
accessions and substitutions thereto or therefor ("Collateral"):
a. The following investment property owned by Borrower:
- 300,000 shares of common stock of Alabama Railroad Co.;
- 15,000,000 shares of common stock of Alabama & Florida
Railway Co. Inc.;
- 500,000 shares of common stock of Decatur Junction Railway
Co.;
- 1,000 shares of common stock of Elkhart & Western Railroad
Co.;
- 300,000 shares of common stock of Fort Xxxxx Railroad Co.;
- 250 shares of common stock of The Garden City Western
Railway, Inc.;
- 1,000 shares of common stock of Gettysburg & Northern
Railroad Co.;
- 1,000 shares of common stock of Indiana Southwestern Railway
Co.;
- 1,000 shares of common stock of Kendallville Terminal
Railway Co.;
- 189,430 shares of common stock of Keokuk Junction Railway
Co.;
- 2,000,000 shares of common stock of Michigan Southern
Railroad Company;
- 1,100,000 shares of common stock of Mississippi Central
Railroad Co.;
- 1,000 shares of common stock of Pioneer Industrial Railway
Co.;
- 100 shares of common stock of Shawnee Terminal Railroad Co.;
- 10 shares of common stock of Vandalia Railroad Company; and
- 60,000 shares of common stock of West Michigan Railroad Co.;
b. All present and future dividends, distributions, cash
instruments, proceeds, including insurance proceeds, and products
received, and all other right, title and interest of Borrower, with
respect to (a) above.
2. Obligations. Bank and Borrower have entered into a Loan Agreement of
even date herewith (the "Loan Agreement") providing for certain loans from Bank
to Borrower. Bank has required, as a condition to its execution of the Loan
Agreement and its disbursement of said loan, that
Borrower grant a security interest in the Collateral to secure said loans.
Accordingly, the security interest granted hereby is to secure the payment and
performance of all of the liabilities and obligations of Borrower to Bank
hereunder and all obligations of Borrower to Bank described in the Loan
Agreement or any other document executed in connection therewith (all
hereinafter called "Obligations").
3. Warranties. Borrower represents and warrants as follows:
a. Borrower is duly organized and existing under the laws of the
jurisdiction of its formation and is duly qualified and in
good standing in every other state in which it is doing
business.
b. The execution, delivery and performance hereof are within
Borrower's organizational powers, have been duly authorized,
are not in contravention of law or the terms of Borrower's
organizational documents, or of any indenture, agreement or
undertaking to which Borrower is a party or by which it is
bound.
c. Borrower's (i) sole place of business (or its chief executive
office, if it has more than one place of business); and (ii)
the office where it keeps its records concerning the
Collateral is at the address stated in Section 16 of this
Agreement.
d. The Borrower is the sole and absolute owner of the Collateral
free and clear of liens and encumbrances of every kind and
nature except only the lien and encumbrance hereby granted and
created, other liens and encumbrances to Bank and other liens
and encumbrances disclosed in writing to Bank by Borrower.
e. The Borrower has signed no financing statements covering the
above described property, except the financing statements
signed with respect to this Security Agreement, other
financing statements in favor of Bank and the other financing
statements disclosed in writing to Bank by Borrower.
f. The officer of the Borrower executing this Security Agreement
has been duly elected and qualified and has been duly
authorized and empowered so to execute and deliver this
Security Agreement on behalf of the Borrower.
4. Records. Borrower will at all reasonable times and from time to time
allow Bank by or through any of its officers, agents, employees, attorneys or
accountants, to examine and inspect and make extracts or copies from Borrower's
books and other records to arrange for verification of the Collateral, directly
with account debtors or by other methods. Borrower will furnish to Bank upon
request statements of any account, together with all notes or other papers
evidencing the same and any guaranties, securities or other documents and
information relating thereto; and generally at all times and from time to time
furnish to Bank such statements and information as it may reasonably request.
5. Covenants. The Borrower hereby covenants and agrees with Bank that so
long as the Borrower shall owe any amounts under any of the Obligations to Bank,
the Borrower will from time to time at the request of Bank, do, make, execute
and deliver all such additional and further acts, things, deeds, assurances and
instruments as Bank may require, to more completely vest in and assure to Bank
its rights hereunder and in or to the Collateral and the proceeds thereof.
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6. Financing Statements. At the request of Bank, Borrower execute one or
more financing statements pursuant to the Illinois Commercial Code in a form
satisfactory to Bank and will pay the cost of filing the same in all public
offices wherever filing is deemed by Bank to be necessary or desirable. Without
the written consent of Bank, Borrower will not allow any financing statement
covering any Collateral, proceeds thereof or any of Borrower's inventory to be
on file in any public office. The Borrower will pay all costs of filing any
financing, continuation or termination statements with respect to the security
interest created by this Security Agreement.
7. Certificates. Borrower warrants that all of the Collateral is evidenced
by certificates which have been delivered to the Bank, and the number of shares
listed for each corporation in Section 1 above constitutes all of the
outstanding shares of capital stock of such company.
8. Control. Borrower agrees to take all steps necessary for Bank to obtain
"control" of the Collateral as defined in Section 8-106 of the Illinois Uniform
Commercial Code (810 ILCS 5/8-106), and agrees that it will not allow any other
party to obtain "control" over all or any part of the Collateral.
9. Taxes. All taxes that may be assessed upon or paid by Bank with respect
to any of the Collateral shall be charged to and paid by the Borrower who agrees
to indemnify Bank against loss by reason of any such taxes. The Borrower will
make due and timely payment or deposit of all federal, state and local taxes,
assessments or contributions required of the Borrower by law, and will execute
and deliver to Bank, on demand, appropriate certificates attesting to the
payment or deposit thereof.
10. Proceeds. The proceeds from the sale or other disposition of the
Collateral that are delivered by Borrower to Bank, or the net sums collected
directly by Bank, after first deducting all costs of collection, shall be
credited against the amount owed by Borrower.
11. Default.
a. If Borrower fails to pay when due to Bank any amount payable
on any Obligations, or fails to observe or perform any of the
covenants and warranties in this Security Agreement, or if an
event of default occurs under the Loan Agreement or any
document or agreement executed in connection therewith,
Borrower shall be in default.
b. In addition, at the election of Bank and without necessity of
demand or notice, all or any part of the indebtedness of
Borrower secured hereby shall become immediately due and
payable, irrespective of any agreed maturity date, on the
occurrence of any of the following events of default:
(i) Any warranty, representation, financial statement, or
other information made, given, or furnished to Bank by
or on behalf of Borrower shall prove to have been untrue
in any material respect when made, given, or furnished;
or
(ii) The issuance or filing of any attachment, levy,
garnishment, or other judicial process of or on Borrower
or any of the Collateral; or
(iii) The sale or other disposition by Borrower of any
substantial portion of its assets or property, except in
the ordinary course of business; or, dissolution,
termination of existence, insolvency, business failure,
or assignment for the benefit of creditors of or by
Borrower; or
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commencement of any proceedings under any
state or federal bankruptcy or insolvency laws by or
against Borrower; or the appointment of a receiver or
trustee for all or any party of the property of
Borrower.
12. Remedies. On any such default and at any time thereafter:
a. Bank may declare all Obligations secured under this Security
Agreement immediately due and payable and may proceed to
enforce payment and exercise any and all of the rights and
remedies provided by the Illinois Commercial Code, as well as
any and all other rights and remedies possessed by Bank.
b. Bank shall have the right to take immediate possession of the
Collateral, and for that purpose may pursue the same wherever
the Collateral may be found.
c. Bank may sell at public or private sale, for such price as
Bank may deem fair, any and all of the Collateral and any
other security or property held by Bank. Bank may be the
purchaser of the Collateral or other property or security so
sold and may hold the Collateral thereafter in its own right
absolutely against any claims of Borrower or right of
redemption.
d. In the case of public sale, notice shall be deemed to be
adequate and reasonable if such notice appears three (3) times
in a newspaper published in the City or County wherein the
sale is to be held, the first such publication being at least
ten (10) days before such sale. In the case of a private sale,
notice shall be deemed to be adequate and reasonable if such
notice is mailed to the Borrower at its last known address at
least ten (10) days before such sale.
e. The net proceeds of any sale or sales shall be applied against
the amount owed Bank by Borrower and any other indebtedness of
Borrower to Bank. Borrower shall forthwith pay to Bank any
deficiency on demand of Bank and shall be entitled to any
surplus resulting from such sale or sales. Demand of
performance, advertisement, and presence of the Collateral at
sale are hereby waived by Borrower. All demands and
presentments of every kind or nature are expressly waived by
Borrower.
f. Bank may require Borrower to assemble the Collateral at a
place mutually convenient to Bank and Borrower at the expense
of Borrower.
13. Expenses. Borrower shall pay to Bank on demand any and all expenses,
including legal expenses and reasonable attorneys' fees, reasonably incurred or
expended by Bank in the recovery and sale or attempted recovery and sale of
Collateral and in protecting and enforcing the Obligations and other rights of
Bank hereunder.
14. Termination. This Security Agreement shall be terminable only by the
filing of a termination statement in accordance with applicable provisions of
the Illinois Commercial Code. Until terminated, the security interest created
hereunder shall continue in full force and effect and shall secure and be
applicable to all advances now or hereafter made by Bank to Borrower, whether or
not Borrower is indebted to Bank immediately prior to the time of any such
advance. Any termination of this Security Agreement by either party shall not
affect the obligation of Borrower or Bank with respect to accounts assigned by
Borrower to Bank prior to such termination.
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15. Applicable Law.
a. The validity of this Security Agreement and any provision
hereof shall be determined under and shall be construed
according to the Illinois Commercial Code and other applicable
laws of the State of Illinois, and all duties of the parties
created under this Security Agreement are performable in the
State of Illinois.
b. Unless otherwise defined, all terms used in this Security
Agreement that are defined in the Illinois Commercial Code
shall have the same meaning in this Security Agreement as
therein defined.
16. Notices. All notices provided for herein shall be in writing and shall
be deemed to have been given when delivered personally or when deposited in the
United States mail, postage prepaid, addressed as follows, or to such other
address as may hereafter be designated in writing by the respective parties
hereto:
If to Lender:
National City Bank of the Midwest
000 XX Xxxxx Xx, Xxxxxxx X-X00-00
XX Xxx 000
Xxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx
with copy to:
Xxxxxxx X. Xxxxxxxx
Elias, Meginnes, Xxxxxx & Seghetti
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
If to Debtor:
Pioneer Railcorp
0000 X. Xxxxxxxx Xx
Xxxxxx, XX 00000-0000
Attn: J. Xxxxxxx Xxxx
17. No Waiver. The failure of Bank to exercise any right or remedy,
including acceptance by Bank of partial or delinquent payments, shall not
constitute a waiver of any obligation from Borrower or right of Bank or
constitute a waiver of any other similar default occurring subsequently.
18. Intent. This Security Agreement expresses the entire understanding of
the parties and may not be altered or amended except with the written consent of
each of the parties and except as provided in any other written document signed
and delivered by Borrower to Bank.
19. Successors and Assigns. This Security Agreement shall be binding upon
and inure to the benefit of the Borrower and Bank and their respective
successors and assigns.
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NATIONAL CITY BANK OF THE MIDWEST PIONEER RAILCORP
BY: /s/ Xxxxxxx X. Xxxxxx BY: /s/ X. X. Xxxx
--------------------------------- ---------------------------------
ITS: Vice-President ITS: President
304-1440.d2
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