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Stock Pledge Agreement

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Governing Law: Maryland     Date: 3/10/2004
Industry: Recreational Activities     Sector: Services

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Exhibit 10.7




THIS PLEDGE AGREEMENT (as amended, restated or otherwise modified, this “Agreement”), executed February 17, 2004 and effective as of February 19, 2004 is made by DOVER MOTORSPORTS, INC., a Delaware corporation, formerly known as Dover Downs Entertainment, Inc. (“Pledgor”) in favor of MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, as agent (the “Agent”) for the ratable benefit of each of the financial institutions (the “Lenders”) as are, or may from time to time become, parties to the Credit Agreement (as defined below).




The Pledgor, together with Dover International Speedway, Inc., Gateway International Motorsports Corporation, Gateway International Services Corporation, Grand Prix Association of Long Beach, Inc., Memphis International Motorsports Corporation, M&N Services Corp. and Nashville Speedway USA, Inc. (collectively, “Borrowers”), the Lenders and the Agent, as agent for the Lenders, are parties to a Credit Agreement of even date herewith (as the same may be amended, supplemented or otherwise modified, the “Credit Agreement”). Pursuant to the terms of the Credit Agreement the Lenders are providing credit accommodations to the Borrowers and as a condition of providing such credit accommodations the Lenders have required that the Pledgor execute and deliver this Agreement to secure the obligations of the Borrowers under the Credit Agreement.


The Pledgor is the legal and beneficial owners of the shares of Pledged Securities (as hereinafter defined) issued by the issuers (the “Issuers”) listed on Schedule I hereto.


NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, the parties hereto hereby agree as follows:


SECTION 1. Defined Terms . Capitalized terms used and not otherwise defined in this Agreement, including the preambles and recitals hereof shall have the meaning assigned thereto in the Credit Agreement. The following terms shall have the following meanings:


Agreement ” means this Pledge Agreement, as further amended, restated or otherwise modified.


Code ” means the Uniform Commercial Code from time to time in effect in the State of Maryland.


Collateral ” means the Stock Collateral.


Event of Default ” means an Event of Default (as such term is defined in the Credit Agreement).


Pledged Securities ” means the shares of capital stock of each Issuer listed on Schedule I hereto, together with all stock certificates, options or rights of any nature whatsoever that may be issued or granted by such Issuer to Pledgor while this Agreement is in effect.


Proceeds ” means all “proceeds” as such term is defined in Section 9-102(65) of the Code on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon, proceeds of sale thereof or distributions with respect thereto.


Secured Obligations ” means the Obligations as that term is defined in the Credit Agreement.


Secured Parties ” means the Agent and the Lenders.


Stock Collateral ” means the Pledged Securities and all Proceeds therefrom.


SECTION 2. Pledge and Grant of Security Interests . Pledgor hereby delivers to the Agent, for the ratable benefit of the Secured Parties, all of the Pledged Securities and hereby grants to the Agent, for the ratable benefit of the Secured Parties, a first priority security interest in the Pledged Securities, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations.


SECTION 3. Stock Powers and Transfer Instruments . Concurrently with the execution of this Agreement and delivery to the Agent of each certificate representing one or more shares of Pledged Securities, (i) Pledgor shall deliver an undated stock power covering such certificate, duly executed in blank by Pledgor and (ii) each Pledgor shall cause each Issuer of such Pledged Securities to, and each such Issuer shall, acknowledge and consent to this Agreement on the signature pages hereto.


SECTION 4. Pledgor Remain Liable . Anything herein to the contrary notwithstanding, (a) each Pledgor shall remain liable to perform all of its duties and obligations as an owner of the Issuers, as applicable, to the same extent as if this Pledge Agreement had not been executed, (b) the exercise by the Agent of any of its rights hereunder shall not release Pledgor from any of its duties or obligations as owner of the Issuers, and (c) neither the Agent nor any other Secured Party shall have any obligation or liability as an owner of the Issuers, by reason of this Agreement.


SECTION 5. Representations and Warranties . To induce the Agent and the Lenders to execute the Credit Agreement, provide any credit facilities under the Credit Agreement and accept the security contemplated hereby, Pledgor hereby represents and warrants that:


(a) Pledgor has the corporate authority and legal right to execute and deliver, to perform its obligations under, and to grant the lien on the Collateral pursuant to, this



Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of, and grant of the lien on the Collateral pursuant to, this Agreement;


(b) this Agreement constitutes a legal, valid and binding obligation of Pledgor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies;


(c) the execution, delivery and performance of this Agreement will not violate any provision of any applicable law or contractual obligation of Pledgor and will not result in the creation or imposition of any lien on any of the properties or revenues of Pledgor pursuant to any applicable law or contractual obligation, except as contemplated hereby;


(d) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority and no consent of any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement;


(e) the shares of Pledged Securities listed on Schedule I constitute all the issued and outstanding shares of all classes of the capital stock of each of the Issuers and all the shares of the Pledged Securities have been duly and validly issued and are fully paid and non-assessable;


(f) Pledgor is the record and beneficial owner of, and has good and marketable title to, the Collateral listed on Schedule I , free of any and all liens or options in favor of, or claims of, any other Person, except the lien created by this Agreement;


(g) upon (i) the execution of this Agreement by the Pledgor and Issuers, (ii) delivery to the Agent of the stock certificates evidencing the Pledged Securities, and (iii) the filing of properly completed financing statements in all necessary jurisdictions, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the Collateral and the Proceeds related thereto, enforceable as such against all creditors of Pledgor and any Persons purporting to purchase any of the Collateral from Pledgor.


SECTION 6. Certain Covenants . The Pledgor covenants and agrees with the Agent for the ratable benefit of the Secured Parties that, from and after the date of this Agreement until the Secured Obligations are paid in full and the Commitments are terminated:


(a) Pledgor will, upon request of the Agent, execute such notices of lien, notices of assignment and continuations or amendments to any of the foregoing, and other documents (and pay the costs of filing or recording the same in all public offices deemed necessary by the Agent) and do such other acts and things, all as the Agent may from time to time request to establish and maintain a valid perfected pledge and first



priority security interest in the Collateral. The Pledgor hereby constitutes and appoints the Agent (and any of its officers) as its attorney-in-fact with full power and authority to execute and deliver all documents necessary to perfect and keep perfected the security interests created hereby, which power of attorney may only be exercised in the event the Pledgor fails to execute and deliver any document necessary to perfect or keep perfected the security interest created hereby within five (5) business days after being requested to do so. This power of attorney hereby granted is a special power of attorney coupled with an interest and shall be irrevocable by the Pledgor.


(b) If Pledgor shall, as a result of its ownership of the Collateral, become entitled to receive or shall receive any stock or other certificate (including, without limitation, any certificate representing a dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any portion of the Collateral, or otherwise in respect thereof, Pledgor shall accept the same as the agent of the Agent, hold the same in trust for the Agent and deliver the same forthwith to the Agent in the exact form received, together with an undated stock power covering such certificate duly executed in blank by such Pledgor, and with, if the Agent so requests, signature guaranteed, to be held by the Agent, subject to the terms hereof, as additional collateral security for the Secured Obligations. In addition, any sums paid upon or in respect of the Collateral upon the liquidation or dissolution of any Issuer shall be held by the Agent as additional collateral security for the Secured Obligations. If any sums of money or property so paid or distributed in respect of any Collateral shall be received by Pledgor, Pledgor shall, until such money or property is paid or delivered to the Agent, hold such money or property in trust for the Agent, segregated from other funds of Pledgor, as additional collateral securing the Secured Obligations.


(c) Without the prior written consent of the Agent, Pledgor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of such Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Collateral, or (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the lien provided for by this Agreement. Pledgor will defend the right, title and interest of the Agent in and to the Collateral against the claims and demands of all Persons whomsoever.


(d) At any time and from time to time, upon the written request of the Agent, and at the sole expense of the Pledgor, Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Agent may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or



chattel paper shall be immediately delivered to the Agent, duly endorsed in a manner satisfactory to the Agent, to be held as Collateral pursuant to this Agreement.


(e) The Pledgor agrees to pay, and to save the Agent and the Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.


SECTION 7. Cash Dividends; Voting Rights . Unless an Event of Default shall have occurred and be continuing and the Agent shall have given notice to the Pledgor of the Agent’s intent to exercise its rights pursuant to Section 8 below, the Pledgor shall be permitted to receive all cash dividends, distributions or other payments paid in accordance with the terms of the Credit Agreement in respect of the Pledged Securities and to exercise all voting and corporate rights with respect to the Pledged Securities; provided , that no vote shall be cast or corporate right exercised or other action taken which would impair the Collateral or which would be inconsistent with or result in any violation of any provision of this Agreement, the Credit Agreement or any other Loan Document.


SECTION 8. Rights of the Agent .


(a) If an Event of Default shall occur and be continuing and the Agent shall give notice of its intent to exercise such rights to the Pledgor, (i) the Agent shall have the right to receive any and all cash dividends, distributions or other payments paid in respect of the Collateral and make application thereof to the Secured Obligations, in the manner set forth in the Credit Agreement and (ii) if applicable, all of the Collateral shall be registered in the name of the Agent or its nominee, and the Agent or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to such Collateral at any meeting of shareholders of the applicable Issuer or otherwise and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such Collateral as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Collateral upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the applicable Issuer or upon the exercise by the Pledgor or the Agent of any right, privilege or option pertaining to such Collateral, and in connection therewith, the right to deposit and deliver any and all of the Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.


(b) The rights of the Agent and the Secured Parties hereunder shall not be conditioned or contingent upon the pursuit by the Agent or any Secured Party of any right or remedy against the Pledgor or against any other Person which may be or become liable in respect of all or any part of the Secured Obligations or against any collateral security therefor, guarantee therefor or right of offset with respect thereto. Neither the Agent nor any Secured Party shall be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any



delay in doing so, nor shall the Agent be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof.


SECTION 9. Remedies . Subject to the terms of the penultimate sentence of this Section, i

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