PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated June 10, 2003, between The Classica
Group, Inc., a New York corporation with its address at 0000 Xxxx Xxxxxx, Xxxxx
#00, Xxxxxxxxxx, Xxx Xxxxxx 00000(xxx "Pledgor"), and Pinnacle Investment
Partners, L.P., a New York limited partnership with an address at 000 Xxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Secured Creditor").
WHEREAS, the Secured Creditor has agreed to make a loan (the "Loan") to
the Pledgor in the aggregate principal amount of $325,000.00 for a stated term
of four (4) months, which will be evidenced by a Secured Promissory Note, dated
the date hereof, by Pledgor to the order of the Secured Creditor in the
principal amount of the Loan (the "Note"); and
WHEREAS, it is a condition precedent to the making of the Loan by the
Secured Creditor that the Pledgor shall have executed and delivered to the
Secured Creditor a pledge and security agreement providing for the pledge and
grant to the Secured Creditor of a security interest in the Collateral, as
defined below.
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Secured Creditor to make the Loan, the Pledgor
hereby agrees with the Secured Creditor as follows: SECTION 1. Pledge and Grant
of Security Interest. As collateral security for all of the Obligations (as
defined in Section 2 hereof), the Pledgor hereby pledges, assigns and grants to
the Secured Creditor a continuing security interest in the following collateral
(the "Pledged Collateral"):
(a) 770,000 shares of Pledgor's common stock, which shares, together with stock
powers executed in blank, have been delivered to and placed in escrow with the
Secured Creditor's counsel, Xxxxxx & Xxxxx LLP; and (b) all proceeds of any and
all of the foregoing; in each case, howsoever its interest therein may arise or
appear (whether by ownership, security interest, claim or otherwise).
SECTION 2. Security for Obligations. The security interest created hereby in the
Pledged Collateral constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (the
"Obligations"):
(a) the prompt payment by the Pledgor, as and when due and payable, of all
amounts owing by it in respect of the Loan; and (b) the due performance and
observance by the Pledgor of all of its other obligations from time to time
existing under this Agreement and the Note of even date herewith.
SECTION 3. Other Covenants as to the Pledged Collateral. So long as any of the
Obligations shall remain outstanding, the Pledgor will, unless the Secured
Creditor shall otherwise consent in writing: (a) keep adequate records
concerning the Pledged Collateral and permit the Secured Creditor or any agents
or representatives thereof at any reasonable time and from time to time to
examine and make copies of and abstracts from such records; (b) at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
the Secured Creditor may request in order to (i) perfect and protect the
security interest created hereby; (ii) enable the Secured Creditor to exercise
and enforce their rights and remedies hereunder in respect of the Pledged
Collateral; or (iii) otherwise effect the purposes of this Agreement; and (c)
not create or suffer to exist any lien, security interest or other charge or
encumbrance upon or with respect to any Pledged Collateral except for the
security interest created hereby. SECTION 4. Additional Provisions Concerning
the Pledged Collateral.
(a) The Pledgor hereby authorizes the Secured Creditor to file, without the
signature of the Pledgor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Pledged
Collateral.
(b) The Pledgor hereby irrevocably appoints the Secured Creditor the Pledgor's
attorney-in-fact and proxy, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time in the
Secured Creditor's discretion, to take any action and to execute any instrument
which the Secured Creditor may deem necessary or advisable to accomplish the
purpose of this Agreement. SECTION 5. Remedies Upon Default. If any Event of
Default under the Note shall have occurred and be continuing:
(a) The Secured Creditor may, exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to them, all of the rights and remedies of a secured party on default under the
Commercial Code then in effect in the State of New York, and without limiting
the generality of the foregoing and without notice except as specified below,
sell the Pledged Collateral or any part thereof. (b) All cash proceeds received
by the Secured Creditor in respect of any sale of, collection from, or other
realization upon, all or any part of the Pledged Collateral may, in the
discretion of the Secured Creditor, be held by the Secured Creditor as
collateral for, and/or then or at any time thereafter applied in whole or in
part by the Secured Creditor against, all or any part of the Obligations pro
rata as to the principal amount of the Loan and the Note. Any surplus of such
cash or cash proceeds held by the Secured Creditor and remaining after payment
in full of all of the Obligations shall be paid over to the Pledgor or to such
person as may be lawfully entitled to receive such surplus.
(c) In the event that the proceeds of any such sale, collection or realization
are insufficient to pay all amounts to which the Secured Creditor is legally
entitled, the Pledgor shall remain liable for the deficiency and the Secured
Creditor shall retain all rights to collect on such Obligations provided by
applicable law. SECTION 6. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered: (a)
personally; (b) by facsimile transmission; (c) by a commercial overnight
delivery service (e.g., Federal Express, UPS, Airborne, etc.) and paid for by
the sender; or (d) by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered: (i) personally, upon
such service or delivery; (ii) if sent by facsimile transmission, on the day so
transmitted, if the sender calls to confirm that such notice has been sent by
facsimile and has a printed report which indicates that such transmission was,
in fact, sent to the facsimile number indicated below; (iii) if sent by
commercial overnight delivery service, on the date reflected by such service as
delivered to the addressee; or (iv) if mailed by certified or registered mail,
five (5) business days after the date of deposit in the United States mail. In
each instance, such notice, request, demand or other communications shall be
addressed as follows: (a) in the case of the Pledgor:
Xxxxx X. Xxxxxxxx, Chief Executive Officer
The Classica Group, Inc.
0000 Xxxx Xxxxxx, Xxxxx #00
Xxxxxxxxxx, Xxx Xxxxxx 00000
Telephone (732) 727-7800Facsimile (000) 000-0000
(b) in the case of Secured Creditor to:
PINNACLE INVESTMENT PARTNERS, L.P.
c/o Delta Asset Management, Inc.
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxx
Telecopier No.: (000) 000-0000
or to such other address or to such other person as Pledgor or the Secured
Creditor shall have last designated by written notice given as herein provided.
SECTION 7. Miscellaneous.
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(a) No amendment of any provisions of this Agreement shall be effective unless
it is in writing and signed by the Pledgor and the Secured Creditor, and no
waiver of any provision of this Agreement, and no consent to any departure by
the Pledgor therefrom, shall be effective unless it is in writing and signed by
the Secured Creditor, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
(b) No failure on the part of the Secured Creditor to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Secured Creditor provided herein are cumulative and are in addition to, and
not exclusive of, any rights or remedies provided by law.
(c) Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability with invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
on any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the Pledged
Collateral and shall (i) remain in full force and effect until the payment in
full or release of the obligations and (ii) be binding on the Pledgor and its
assigns and shall inure, together with all rights and remedies of the Secured
Creditor hereunder, to the benefit of the Secured Creditor and its successors,
transferees and assigns. (e) Upon the satisfaction in full of the Obligations,
(i) this Agreement and the security interest created hereby shall terminate and
all rights to the Pledged Collateral shall revert to the Pledgor, and (ii) the
Secured Creditor will, upon the Pledgor's request and at the Pledgor's expense,
(A) return to the Pledgor such of the Pledged Collateral as shall not have been
sold or otherwise disposed of or applied pursuant to the terms hereof and (B)
execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, except as required by mandatory provisions of law
and except to the extent that the validity and perfection or the perfection and
the effect of perfection or non-perfection of the security interest created
hereby, or remedies hereunder, in respect of any particular Pledged Collateral
are governed by the law of a jurisdiction other than the State of New York.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
executed and delivered as of the date first above written.
THE CLASSICA GROUP, INC.
By: ________________________________
Xxxxx X. Xxxxxxxx
Chief Executive Officer
