STOCK PLEDGE AND SECURITY AGREEMENT
STOCK PLEDGE AND SECURITY AGREEMENT dated as of August 29, 1997, among RT
INDUSTRIES, INC. (the "Pledgor"), each of XXXX X. XXXXX, XXXXX X. RAM, XXXXXX
XXXXXXXXX and XXXXXXX X. XXXXXXXXX, individuals residing in New York and the
Commonwealth of Virginia, respectively (collectively, the "Pledgees"); and
QUALITY AUTOMOTIVE COMPANY (the "Issuer").
The parties hereto hereby agree as follows:
The covenants and agreements in this Stock Pledge Agreement are junior to
and subordinate to those obligations of the Pledgor contained in a certain
Pledge Agreement dated as of August __, 1997 (the "Senior Pledge Agreement"), by
and between the Pledgor and LaSalle Business Credit, Inc., (the "Senior
Lender"), wherein the same collateral secured by this Stock Pledge and Security
Agreement has been pledged to secure the obligations of the Issuer to the Senior
Lender. The Pledgor's representations, warranties and covenants contained in
this Pledge Agreement shall be construed as made with reference to the prior
obligations of Pledgor to, and the senior rights of the Senior Lender in the
collateral as set forth in that certain Subordination and Inter-Creditor
Agreement between Pledgees and the Senior Lender dated as of August 29, 1997
(the "Subordination Agreement").
1. Pledge of Securities and Grant of Security Interest.
(a) To secure the payment and performance by Pledgor of its obligations to
the Pledgees under two guaranties issued by Pledgor (the "Guaranties") to the
Pledgees guaranteeing the payment of two promissory notes (collectively, the
"Notes") issued by the Issuer, in the aggregate principal amount of $4,500,000
(collectively, the "Obligations"), the Pledgor hereby pledges to the Pledgees,
and grants to the Pledgees a continuing security interest in, all shares of the
common stock of the Issuer which are owned by the Pledgor, as more particularly
described on Schedule A hereto (the "Pledged Securities"). Upon termination of
the rights of the Senior Lender under the Senior Pledge Agreement, LaSalle
National Bank Trust Services ("LaSalle") shall deliver or cause to be delivered
the Pledged Securities, together with duly executed stockpowers, to (or retained
by as the case may be) LaSalle pursuant to an escrow agreement to be entered
into between LaSalle, the Pledgers and the Pledgor, or to such other entity
mutually agreeable to Pledgor and Pledgees who shall serve as pledge agent (the
"Pledge Agent").
(b) In the event of any share dividend, stock split, reclassification,
readjustment or change is declared or made in the capital structure of the
Issuer resulting in the issuance of new, substituted or additional securities of
the Issuer in respect of the Pledged Securities or in the event subscription
warrants or other rights or options shall be issued in connection with the
Pledged Securities, the Pledgor shall deliver to the Pledge Agent all such new,
substituted and additional other securities issued and warrants, rights and
options, together with stock powers or other similar transfer documents duly
executed in blank, all of which shall be deemed to be part of Pledged Securities
and shall be held by the Pledge Agent under the terms of this Agreement.
2. Representations, Warranties and Covenants of Pledgor and/or Issuer.
Except for and subject to the provisions of the Subordination Agreement and the
Senior Pledge Agreement:
(a) The Pledgor represents, warrants and covenants that (i) it is, and at
all times during the term of this Agreement will be, the legal and beneficial
owner of the Pledged Securities, free and clear of any lien, security interest,
charge or other encumbrance except for the security interest created hereby and
(ii) it shall not sell, assign, transfer, exchange, or otherwise dispose of, or
grant any option with respect to, the Pledged Securities or vote to enable the
Issuer to, or otherwise permit the Issuer to, issue any other securities in
respect of, in lieu of or in substitution for, shares of the capital stock of
Issuer or otherwise.
(b) During the duration of this Agreement, Pledgor and Issuer jointly and
severally represent, warrant and covenant that (i) the Pledged Securities
constitute one-hundred percent (100%) of the issued and outstanding shares of
the capital stock of the Issuer and (ii) except in accordance with the terms
hereof or unless Pledgees shall otherwise consent or agree in writing, Issuer
shall not, issue, deliver, sell or agree to commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or otherwise encumber,
any shares of the capital stock of Issuer or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, convertible
securities or any other securities or equity equivalents.
3. Remedies.
(a) Unless and until a Default (as such term is defined in the Notes)
occurs and is continuing, the Pledgor shall be entitled to exercise any voting
and other consensual rights pertaining to the Pledged Securities and shall be
entitled to receive and retain any cash dividends thereon and any cash
distributions made in respect thereof.
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(b) In the event the Pledgees obtain possession of the Pledged Securities
hereunder, Pledgees shall have either of the following remedies:
(i) Pledgees shall have all of the rights of a secured party upon the
occurrence of a default under the Uniform Commercial Code in effect in the
Commonwealth of Virginia as of the date of this Agreement and without
limiting the generality of the foregoing, upon the occurrence of a Default,
the Pledgees shall have the right at any time or times to sell, resell,
assign and deliver, all in a commercially reasonable manner, the Pledged
Securities or any part thereof, in one or more parcels, at such price of
prices as shall be commercially reasonable, at public or private sale, at
any exchange or broker's board or elsewhere. The proceeds of any such sale
or sales, and any proceeds the Pledgees receive in respect of any
realization upon the Pledged Securities, shall be received and applied:
first, to the payment of the obligations under the respective Notes and,
second, any surplus thereafter remaining shall be paid to the Pledgor or to
whosoever may be lawfully entitled to receive the same.
(ii) Pledgees as a group shall have the option, which option may be
exercised by the Pledgees in their sole discretion, to take the following
actions in lieu of their other remedies hereunder and in lieu of their
rights and obligations under the Uniform Commercial Code:
(1) Transfer the Pledged Securities and ownership thereof to the
Pledgees and take ownership of the Pledged Securities;
(2) Cancel or otherwise terminate the Notes;
(3) Return all Share Consideration (as defined in that certain
Agreement and Plan of Merger, dated as of June 6, 1997, among the
Pledgees, Pledgor and its subsidiary, QUAC Acquisition Corp. (the
"Merger Agreement"), held by the Pledgees at the time of the Event of
Default; and
(4) Pay to the Pledgor the amount of $1,500,000.
Upon the exercise of such option and the taking of the foregoing actions by
the Pledgees, the Notes shall be deemed satisfied in full and this
Agreement shall terminate.
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(c) (i) In the event the Pledged Securities are delivered to Pledgees and
transferred in accordance with the provisions of 4(b)(i) of this Agreement and
the provisions of the Uniform Commercial Code, the Pledged Securities shall be
transferred to the Pledgees and/or other transferees, as the case may be,
without any requirement of recordation in the Issuer's stock transfer records or
stock transfer book or other action. Each of the Pledgor and Issuer hereby
agrees to recognize the Pledgees and/or other transferees as the legal and
beneficial owner(s) of the Pledged Securities upon the exercise by the Pledgees
of any of the remedies hereunder and to take such action as the Pledge Agent,
Pledgees and/or other transferees, as the case may be, may reasonably request to
confirm or evidence such transfer, including the execution of new stock
certificates in the name of the Pledgees and/or other transferees, as the case
may be, subject to the provisions of this Article 4 and the Uniform Commercial
Code.
(ii) In the event the Pledged Securities are delivered to Pledgees and
transferred in accordance with the provisions of 4(b)(ii) of this Agreement, the
Pledged Securities shall be transferred to the Pledgees without any requirement
of recordation in the Issuer's stock transfer records or stock transfer book or
other action. Each of the Pledgor and Issuer hereby agrees to recognize the
Pledgees as the legal and beneficial owner(s) of the Pledged Securities upon the
exercise by the Pledgees of any of the remedies hereunder and to take such
action as the Pledge Agent and/or the Pledgees may reasonably request to confirm
or evidence such transfer, including the execution of new stock certificates in
the name of the Pledgees, subject the provisions of this Article 4.
4. Legend. The certificates representing the Pledged Securities shall bear
the following legend:
THE STOCK REPRESENTED BY THIS STOCK CERTIFICATE IS HELD SUBJECT TO THE
TERMS OF A STOCK PLEDGE AND SECURITY AGREEMENT, DATED AS OF AUGUST 29, 1997
AMONG RT INDUSTRIES, INC., XXXX X. XXXXX, XXXXX X. RAM, XXXXXX XXXXXXXXX,
XXXXXXX X. XXXXXXXXX AND QUALITY AUTOMOTIVE COMPANY, AS PLEDGE AGENT, AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF EXCEPT AS PROVIDED IN SAID AGREEMENT. ANY PURPORTED
TRANSFER IN VIOLATION OF SAID AGREEMENT SHALL BE VOID.
5. Pledge Agent. The Pledge Agent may resign at any time and, in such
event, shall deliver the Pledged Securities pursuant to the joint written
instructions of the Pledgor and the Pledgees or, in the absence of such
instructions, may deposit the Pledged Securities with the clerk of an
appropriate court.
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6. Notices. All notices and/or other communications relating to this
Agreement shall be in writing and deemed delivered as of the date delivered, if
delivered personally, or one (1) business day after having been deposited with
courier, if sent by overnight courier, or after being sent by telecopy, if sent
by telecopy (receipt confirmed), or three (3) business days after having been
mailed, if mailed by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to Pledgor, to:
RT INDUSTRIES, INC.
d/b/a US Automotive Manufacturing
Xxxxx 000, Xxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxxxxxx, XX 00000
Attn: President
Telephone: 000-000-0000
Telecopier: 000-000-0000
and
and each of the outside directors (or their respective duly appointed
successors), as follows:
Xxxxxx Xxxxxxx Xxxxx Xxxx
Elmgrove Associates II, L.P. 00 Xxxxxxx Xxxx Xxxxxxx
000 Xxxxxxxxx Xxxxxxxx Xxxx, XX 00000
Xxxxxxxxx, XX 00000 Telecopier: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Frankfurt, Xxxxxx, Xxxxx & Xxxx
Attn: Xxxx X. Xxxxxxxxx, Esq.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Telecopier: (000) 000-0000
if to Pledgees, to:
Xxxx X. Xxxxx Xxxxx X. Ram
00 X. 00xx Xxxxxx 00 X. 00xx Xxxxxx
Xxxxxxxxx #00X Xxxxxxxxx #00X
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Telecopier: 000-000-0000 Telecopier: 000-000-0000
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Xxxxxx Xxxxxxxxx Xxxxxxx X. Xxxxxxxxx
00 Xxxxxxxxxx Xxxxx 00 Xxxxxxxxxx Xxxxx
Xxxx Xxxxx Xxxx Xxxxxxx Cold Xxxxx Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000 Xxxxxxxxxxxx, XX 00000
Telecopier: Telecopier:
with a copy to:
XxXxxxxxx, Xxxxxx & Xxxxx PC
Attn: Xxxxxxxx X. Xxxxx, Esq.
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or to such other address as either of such parties shall have designated by like
notice to the other party.
7. Miscellaneous. This Agreement (a) may only be modified by a written
instrument which is executed by both of the parties hereto; (b) shall be
governed by the laws of the Commonwealth of Virginia; (c) sets forth the entire
agreement of the parties with respect to the subject matter hereof; (d) may not
be assigned by either party hereto without the prior written consent of the
other party, and (e) shall inure to the benefit of, and be binding upon, each of
the parties hereto and their respectively successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first-above written.
RT INDUSTRIES, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, President
/s/ Xxxx X. Xxxxx
--------------------------------
XXXX X. XXXXX
/s/ Xxxxx X. Ram
--------------------------------
XXXXX X. RAM
/s/ Xxxxxx Xxxxxxxxx
--------------------------------
XXXXXX XXXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
XXXXXXX X. XXXXXXXXX
For purposes of the representations, warranties and covenants, agreements
and provisions of the Issuer set forth in Subsections 2(b) and 4(c) of the
foregoing Agreement, the undersigned has executed and delivered this Agreement
as of the date first-above written.
QUALITY AUTOMOTIVE COMPANY
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Chairman of the Board
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SCHEDULE A
Stock Certificates Shares
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Certificate No. 1 100
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