STOCK PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge" or "Pledge Agreement") dated as of
September 30, 1997, is entered into by and between Ngai Xxxxx Xxx (Serleo)
("Pledgor"), and Physical Spa & Fitness, Inc., a Delaware corporation
("Pledgee" or "Company").
RECITALS:
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A. Pledgor is the owner of that number of shares of Common Stock ("Pledged
Shares") set forth on Schedule 1 of Physical Spa & Fitness, Inc.
B. Pledgee and Pledgor have entered into a certain agreement dated as of
March 27, 1997 (the "Agreement"), pursuant to which Company agreed to the
repayment schedule with respect to certain loans in the original principal
amount of $2.1 million, of which $1.9 million is outstanding as of the date
hereof (collectively, the "Loan") advanced by the Company to Pledgor (the
Loan and the Agreement shall be collectively referred to as "Loan
Documents").
NOW, THEREFORE, in order to ensure the repayment of the Loans by the
Pledgor to the Agreement, the parties agree as follows:
1. PLEDGE. Pledgor hereby pledges, hypothecates, assigns,
transfers, sets over and delivers to Pledgee, and grants to Pledgee a
security interest in:
(a) the Pledged Shares;
(b) each certificate or other instrument representing any of
the foregoing;
(c) distributions or dividends or other monies of every kind
and nature payable in respect of any or all of the foregoing; and
(d) the proceeds of the foregoing;
(collectively, the "Collateral"), in order to secure all obligations of
Pledgor hereunder and the obligations of Pledgor under the Agreement.
2. POWER OF ATTORNEY, INCOME.
(a) Pledgor hereby irrevocably appoints Pledgee, Xxxxx X. Xxxxx,
attorney, coupled with an interest, with full power of substitution:
(1) Upon a Default under this Pledge, to arrange for the
transfer of the Pledged Shares or any part thereof into the name of Pledgee
or into the name of Pledgee's nominee, if, at any time, Pledgee shall, in
its sole discretion reasonably exercised, deem such a transfer to be
desirable; and
(2) For the purposes of taking any action and executing
any instrument, in the name of Pledgor or otherwise, which Pledgee may at
any time deem necessary or appropriate in order to (i) perfect its security
interest in the Collateral or any part thereof, and (ii) upon a Default
under this Pledge, foreclose said security interest or otherwise exercise
its rights under this Pledge and in and to the Collateral.
(b) As long as no Default, as hereinafter defined, shall have
occurred and be continuing, Pledgor shall, unless otherwise prohibited, be
entitled to receive and retain any and all dividends and interests on the
Pledged Shares, but any such dividends in stock or other securities of the
Company shall be and become part of the Pledged Shares.
(c) Upon the occurrence and during the continuance of a Default
hereunder, the right of Pledgor to receive the dividends and interest which
Pledgor is authorized to receive and retain pursuant to (b) hereof shall
cease, and all such rights shall thereupon become vested in Pledgee;
provided, however, that Pledgee, as the sole further condition to the
vesting pursuant to this (c) of such rights and powers of Pledgee, shall
notify Pledgor in writing that Pledgee elects to exercise such rights and
power, and Pledgee shall have the sole and exclusive right and authority to
receive and retain the dividends and interest which Pledgor would otherwise
be authorized to retain pursuant to (b) hereof.
(d) In the Event of Default under the Loan or Agreement, Pledgee
shall have an irrevocable proxy to vote all the Pledged Shares, with full
power of substitution, at all meetings and actions, without meeting and any
action for which shareholders consent is required or given. This proxy
coupled with an interest may not be revoked while the Loan is outstanding.
3. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants
that, subject to the representations made by Pledgee in the Agreement:
(a) The Pledged Shares are duly authorized, validly issued and
outstanding, and nonassessable, and Pledgor will warrant and defend
Pledgor's title thereto and sole beneficial ownership thereof against all
persons claiming any interest therein except Pledgee or any person claiming
through Pledgee.
(b) Except for restrictions imposed by the Agreement,
restrictions imposed by this Pledge and restrictions on public offerings, if
any, and sales of securities imposed by applicable securities laws of the
United States of America or any state or commonwealth thereof, there are not
and will not be any restrictions upon the sale or other disposition of any
of the Collateral.
(c) Except as contemplated by 3(b) above, Pledgor now has and
will have, without obtaining the consent of any governmental authority,
stock exchange or any other person except Pledgee, the right to pledge, to
grant a security interest in and otherwise to transfer and to dispose of the
Collateral free of any liens, security interests or other encumbrances, and
free of any rights or equities in favor of any other persons, except those
created by this Pledge.
(d) Pledgor is fully aware of the financial condition of
Company, and Pledgor delivers this Pledge based solely upon its own
independent investigation of Company's financial condition and in no part
upon any representation or statement of Pledgee with respect thereto.
Pledgor further represents and warrants that it is in a position to and
hereby does assume full responsibility for obtaining such additional
information concerning Company's financial condition as Pledgor may deem
material to its obligations hereunder, and Pledgor is not relying upon, nor
expecting Pledgee to furnish it any information in Pledgee's possession
concerning Company's financial condition or concerning any circumstances
bearing on the existence or creation, or the risk of nonpayment or
nonperformance of the obligations set forth in the Agreement.
4. DEFAULTS AND REMEDIES. Any of the following shall constitute a
"Default" under this Pledge:
(a) if any representation or warranty made by Pledgor in this
Pledge or in any instrument, document or certificate furnished hereunder or
in connection herewith shall prove to have been incorrect in any material
respect at the time it was made if a Notice of Default has been given under
this Pledge;
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(b) if Pledgor fails to observe or perform any of Pledgor's
covenants, agreements, obligations and undertakings contained in this Pledge
after thirty (30) days' written notice by Pledgee; or
(c) if an Event of Default exists under the Loan, or the
Agreement.
In the event of any such Default, Pledgee shall be cumulatively or
alternatively entitled, without further notice to Pledgor, and without
necessity for legal proceedings, to apply any or all cash Collateral to the
debt secured hereby, to sell any or all of the securities serving as
Collateral; and to transfer to the name of, or register in the name of,
Pledgee or its nominee, as owner rather than a secured party, any or all
Collateral. In addition, and not by way of limitation of the foregoing,
Pledgee shall have any or all remedies provided by law, including, but not
limited to, all rights and powers of a secured party after default pursuant
to the California Commercial Code.
5. APPLICATION OF PROCEEDS OF SALE, ETC. The proceeds of any sale
or other disposition of, or any collection of or realization on, any of the
Collateral, and any cash held by Pledgee as part of the Collateral
hereunder, shall be applied by Pledgee from time to time to pay:
(a) First, all costs, fees and expenses paid or incurred by
Pledgee (including all amounts paid by Pledgee for the account of Pledgor or
to Pledgee's agents, broker, counsel and consultants) in connection with the
exercise, protection or enforcement of Pledgee's rights and remedies under
this Pledge and in and to the Collateral, including any and all taxes,
assessments, charges and encumbrances of every kind prior to the security
interest created by this Pledge which Pledgee may consider necessary or
desirable to pay;
(b) Second, to the payment of the entire indebtedness due
Pledgee under the Loan or Agreement; and
(c) Third, the excess, if any, shall be paid to Pledgor or to
whomever is then legally entitled to receive the same.
6. DUTY OF PLEDGEE; EXERCISE OF RIGHTS AND REMEDIES. Pledgee shall
have no duty as to the protection of any of the Collateral or any income
with respect thereto, nor as to the preservation of rights against prior
parties, nor as to the preservation of any rights pertaining to any of the
Collateral beyond reasonable care in its custody. Upon Default, Pledgee may
exercise its rights and remedies with respect to any of the Collateral
without resort or regard to other security or sources of payment for the
Pledgor's obligations.
7. NO LIMITATION OF RIGHTS. Pledgor further agrees that nothing
contained herein shall prevent Pledgee from suing on the Loan or from
exercising any rights available to it thereunder or under any of the Loan
Documents and that the exercise of any of the aforesaid rights shall not
constitute a legal or equitable discharge of Pledgor. Pledgor understands
that the exercise by Pledgee of certain rights and remedies contained in the
Loan Documents may affect or eliminate Pledgor's right of subrogation
against Company and that Pledgor may therefore incur a partially or totally
nonreimbursable liability hereunder; nevertheless, Pledgor hereby authorizes
and empowers Pledgee to exercise, in its sole discretion, any rights and
remedies, or any combination thereof, which may then be available, since it
is the intent and purpose of Pledgor that the obligations hereunder shall be
absolute, independent and unconditional under any and all circumstances as
if the same were direct obligations of the Pledgor.
8. CUMULATIVE REMEDIES. The remedies provided in this Pledge in
favor of Pledgee shall not be deemed exclusive by shall be cumulative and
shall be in addition to all of the remedies in favor of Pledgee existing at
law or in equity.
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9. TERMS SUBJECT TO APPLICABLE LAW. All rights, powers and remedies
provided herein may be exercised only to the extent that the exercise
thereof does not violate any applicable laws and are further subject to any
subordination and standby agreements, if any, required to be entered into
pursuant to the Agreement, and are intended to be limited to the extent
necessary so that they will not render this Pledge invalid, unenforceable or
entitled to be recorded, registered or filed under any applicable law. If
any term of this Pledge or any application thereof shall be held to be
invalid, illegal or unenforceable, the validity of any other terms of this
Pledge or any other applications of such term shall in no way be affected
thereby.
10. Miscellaneous.
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(a) WAIVERS. No failure to exercise and no delay in exercising
on the part of Pledgee, any right, power or remedy under this Pledge shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or remedy hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
failure of Pledgee to insist upon the strict observance or enforcement of
any provision of this Pledge shall not be construed as a waiver or
relinquishment of such provision. Any waiver of any right, power, remedy,
term or condition contained herein shall only be effective if it is in
writing and signed by Pledgee.
(b) SURVIVAL OF AGREEMENTS, ETC. All representations,
warranties, covenants and agreements made by Pledgor in this Pledge or in
any instrument, document or certificate furnished hereunder or in connection
herewith shall be deemed to have been relied upon by Pledgee,
notwithstanding any investigation heretofore or hereafter made by Pledgee,
and shall survive the delivery of this Pledge, the Collateral and the
incurrence of any obligations.
(c) NOTICES. Any notice, demand or other communication required
or permitted under the terms of this Agreement shall be in writing and shall
be made by telegram, telex or electronic transmitter or certified or
registered mail, return receipt requested, and shall be deemed to be
received by the addressee one (1) business day after sending, if sent by
Federal Express, Express Mail, or other similar overnight delivery service,
the date of sending, if sent by telegram, telex, telecopy or electronic
transmitter, and three (3) business days after mailing, if sent by certified
or registered mail, with postage prepaid, and properly addressed. Notices
shall be addressed as provided below:
(1) If to Pledgor, to: Xx. Xxxx Xxxxx Xxx
12/F - 15/F Xxx Theatre Plaza
00 Xxxxxxxx Xxxxxx, Xxxxxxxx Xxx
Xxxx Xxxx
(2) If to Pledgee, to: Xx. Xxxxxx Xxx
00/X - 00/X Xxx Xxxxxxx Xxxxx
00 Xxxxxxxx Xxxxxx, Xxxxxxxx Xxx
Xxxx Xxxx
with a copy to: Xxxxx X. Xxxxx, Esq.
000 Xxxxxxx Xxxxxx Xx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
or to such other person or address, as to either party hereto, as such party
shall designate in a written notice to the other party hereto.
(d) AMENDMENTS. This Pledge may only be amended by a writing
executed by Pledgor and Pledgee.
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(e) GOVERNING LAW. This Pledge shall be governed by and
construed in accordance with the laws of the State of California. As part
of the consideration for Pledgee's investment under the Loan Documents,
Pledgor and Pledgee hereby agree that all actions or proceedings arising
directly or indirectly hereunder, whether instituted by Pledgee or Pledgor,
may, at the option of Pledgee be litigated in courts having situs within the
State of California, County of Orange and Pledgor hereby expressly consents
to the jurisdiction of any local, state or federal court located within said
state and county, and consents that any service of process in such action or
proceeding may be made by personal service upon Pledgor wherever Pledgor may
be located, or by certified or registered mail directed to Pledgor at his
last known address. Pledgor and Pledgee waive trial by jury, any objection
based on forum non conveniens, and any objection to venue of any action
instituted hereunder.
(f) SUCCESSORS AND ASSIGNS. This Pledge shall be binding upon
and shall inure to the benefit of Pledgor and Pledgee and their respective
successors and assigns.
(g) SECTION HEADINGS. The headings set forth in this Pledge are
for convenience of reference only and shall not be deemed to define or limit
the provisions hereof or to affect in any way their construction and
application.
(h) TERMINATION. This Pledge shall terminate and the Collateral
returned to Pledgor after payment of the Loan in full.
IN WITNESS WHEREOF, Pledgor and Pledgee have executed and delivered
this Pledge on the date first above written.
PLEDGOR:
Physical Spa & Fitness Inc.
By: /s/ Ngai Xxxxx Xxx
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Ngai Xxxxx Xxx
PLEDGEE:
/s/ Ngai Xxxxx Xxx
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Ngai Xxxxx Xxx
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SCHEDULE 1
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Certificate No. Shares
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1,500,000 shares of common stock of
Physical Spa & Fitness Inc.
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