Exhibit 10
PLEDGE AND SECURITY AGREEMENT
(Seven & Flax-Flex)
This PLEDGE AND SECURITY AGREEMENT ~ Seven ~ Flax-Flex (this "Pledge") is made
by and between (a) XXXXXXX X. SEVEN, an individual ("Seven"), and FLAX-FLEX
FABRICATORS, LTD., a Gibraltar company ("Flax-Flex"), on the one hand
(collectively, "Pledgors"), and (b) XXXXXX X. XXXXXXXXX, an individual, on the
other hand ("Secured Party"), effective as of January 29, 2003 (the
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"Effective Date"), based on the following recitals:
A. Seven holds 1,000,000 shares of common stock of Thinka Weight-Loss
Corporation, a Nevada corporation (the "Company"), and Flax-Flex holds 1,000,000
shares of the Company (collectively, the "Shares" and with respect to each
Pledgor, its "Shares"), as evidenced by those certain share certificates issued
by the Company to Pledgors (the "Certificates").
B. Secured Party has executed and entered into that certain Put and
Call Agreement, dated as of the Effective Date hereof (the "Put Agreement"). In
connection therewith, Pledgors have executed that certain Indemnity Agreement,
dated as of the Effective Date hereof (the "Indemnity Agreement"), pursuant to
which Pledgors have agreed to assume full responsibility and to indemnify and
save harmless Secured Party from and against all liabilities, losses, damages,
costs, charges, counsel fees and other expenses of every kind, nature and
character, which Indemnitee may incur as a result of the obligations set forth
in the Put Agreement pursuant to the terms and conditions set forth in the
Indemnity Agreement.
C. As required by the Indemnity Agreement, Pledgors have agreed to
pledge to Secured Party their respective Shares and grant a security interest to
Secured Party therein in order to secure Pledgors' performance of their
obligations under the Indemnity Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Security Interest.
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1.1 Grant of Security Interest. Pledgors hereby pledge their
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respective Shares and hereby grant to Secured Party a present and continuing
security interest in such Shares (including any and all distributions and
proceeds thereof) to secure Pledgors' payment and performance of Pledgors'
obligations arising under the Indemnity Agreement (the "Obligations"). Upon
Secured Party's reasonable request, Pledgors shall complete, execute and file
one or more Form UCC-1 financing statements to perfect the pledge hereunder.
1.2 Acknowledgments. Notwithstanding any provision contained
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herein to the contrary, the parties hereto acknowledge that (a) if suit is
brought by Secured Party to enforce Secured Party's rights under the Indemnity
Agreement or this Pledge, any judgment obtained will be enforced only against
the Shares and against the proceeds of sale or other disposition thereof, and
not personally against any Pledgor, its heirs or assigns; and (b) pursuant to
the Indemnity Agreement, either Pledgor may substitute its Shares pledged
hereunder with other shares of common stock of the Company and, following such
substitution of collateral, substitute a new indemnitor under the Indemnity
Agreement and a new pledgor under this Pledge.
2. Pledgeholder. Pledgors and Secured Party hereby jointly appoint
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Xxxxxxx X. Xxx, Esq. of Xxx & Xxxxxxx LLP to serve and act as pledgeholder
("Pledgeholder") and to hold and dispose of the Certificates in accordance with
this Pledge. Pledgors hereby collaterally assigns to Pledgeholder the
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Certificates without claim of right during the term of this Pledge. Upon
execution of this Pledge, each Pledgor shall deliver its Certificate to
Pledgeholder and shall also make, execute and deliver to Pledgeholder an
assignment separate from certificate, endorsed in blank, permitting transfer of
such Certificate to Pledgeholder or Pledgeholder's designee (each, an
"Assignment"), in the form attached hereto as Exhibit "1."
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2.1 Liability of Pledgeholder. Secured Party and Pledgors
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acknowledge, understand and agree that Pledgeholder has accepted Pledgeholder's
appointment under this Pledge and shall perform and satisfy Pledgeholder's
duties, liabilities and obligations under this Pledge only as an accommodation
to Secured Party and Pledgors. Secured Party and Pledgors, jointly and
severally, hereby indemnify Pledgeholder and each representative of Pledgeholder
and hereby agree to hold Pledgeholder and each such representative free and
harmless from and to defend and protect Pledgeholder and such representative
against any claim made, asserted or threatened against Pledgeholder or such
representative (including any such claim made, asserted or threatened by either
Secured Party or Pledgors or all of them), and any claim incurred by
Pledgeholder or such representative, excluding, however, any claim arising from
the gross negligence, willful misconduct, criminal conduct or intentionally
tortious conduct of Pledgeholder or such representative.
2.2 Proceeding. Pledgeholder, in Pledgeholder's sole discretion,
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may commence any judicial proceeding necessary or appropriate to determining the
respective rights of Secured Party or Pledgors under this Pledge or to
interpreting or enforcing any term, condition or other provision of this Pledge.
Secured Party and Pledgors shall jointly and severally be liable for any and all
costs and expenses (including attorneys fees, expert witness fees, accounting
fees and related costs) incurred by Pledgeholder in connection with such
proceeding.
2.3 Release of Escrowed Documents. Pledgeholder shall hold the
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Certificates and Assignments (collectively, the "Escrowed Documents") and shall
release the Escrowed Documents in the following manner:
(a) To Pledgors. If Pledgeholder receives an affidavit sworn
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(or affirmed) by a Pledgor stating that all Obligations have been fully paid,
performed and otherwise satisfied, then Pledgeholder shall forthwith deliver a
copy of the affidavit to Secured Party. Upon the fifteenth (15th) day following
delivery of such copy to Secured Party, Pledgeholder shall deliver the Escrowed
Documents to such Pledgor, unless, on or before such fifteenth (15th) day, (a)
Pledgeholder has been prohibited by order of a court of competent jurisdiction
from delivering such Escrowed Documents to such Pledgor or (b) Pledgeholder has
received notice from Secured Party objecting to such Pledgor's affidavit and
stating with particularity those certain Obligations remaining unpaid,
unperformed or otherwise unsatisfied.
(b) To Secured Party. If Pledgeholder receives an affidavit
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sworn (or affirmed) by Secured Party stating that any Pledgor is in "Default"
(as defined in Section 7 below) and stating with particularity the nature of
such Default, then Pledgeholder shall forthwith deliver a copy of the affidavit
to Pledgors. Upon the fifteenth (15th) day following such delivery,
Pledgeholder shall deliver the Escrowed Documents to Secured Party unless, on or
before such fifteenth (15th) day, (a) Pledgeholder has been prohibited by order
of a court of competent jurisdiction from delivering the Escrowed Documents or
(b) Pledgeholder has received notice from any Pledgor objecting to Secured
Party's affidavit and stating with particularity the reasons for such objection.
2.4 Conflict. If Pledgeholder receives conflicting affidavits
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from Secured Party and Pledgors, then in Pledgeholder's reasonable discretion,
Pledgeholder may refuse to deliver Escrowed Documents to either Secured Party or
Pledgors and may interplead the Escrowed Documents with a court of competent
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jurisdiction and apply to such court for a determination of Secured Party's and
Pledgors' respective rights regarding the Escrowed Documents and for such other
relief as Pledgeholder may be entitled under applicable law.
3. Secured Party's Rights. Upon any Default hereunder, Secured Party,
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without obligation to do so and without notice to or demand upon Pledgors, may
take any action and make any expenditure, including attorneys fees, as Secured
Party may deem necessary to protect its security interest in the Shares.
Pledgors hereby agree to repay immediately and without demand all sums expended
by Secured Party pursuant to the provisions of this Section, with interest from
the date of expenditure at the maximum rate allowed by law.
4. Representations and Warranties of Pledgors. Each Pledgor hereby
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represents and warrants to Secured Party the following, each of which shall be
true, accurate and complete as of the Effective Date:
4.1 No Violation. Neither (a) such Pledgor's grant of the
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security interest in and pledge of its Shares to Secured Party nor (b) such
Pledgor's payment, performance or satisfaction of any duty, liability or
obligation under this Pledge shall result in any violation of, any breach of or
any default under (1) any contract, agreement, covenant, indemnity,
representation or warranty to which such Pledgor is a party or which is
otherwise binding upon such Pledgor or which affects its Shares or (2) any
order, decree, injunction, judgment or award which is binding upon such Pledgor
or which affects its Shares.
4.2 Consents. No consent, approval or waiver of any person or
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entity is required in connection with the authorization, execution, delivery or
performance of all obligations of such Pledgor under this Pledge.
4.3 No Prior Sale. Such Pledgor has not, prior to the Effective
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Date hereof, sold, assigned, conveyed, pledged, encumbered, or otherwise
disposed of all or any portion of its right, title or interest in or to its
Shares, and is hereby granting a security interest in and pledging its Shares to
Secured Party free and clear of any and all claims, liens and encumbrances.
4.4 No Litigation. There are no actions, suits, proceedings,
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orders, decrees, judgments, investigations, or claims pending or, to such
Pledgor's knowledge, threatened against or affecting such Pledgor, the Company,
or its Shares which, if adversely determined, would materially and adversely
affect such Pledgor or the Company, or such Pledgor's ability to perform its
obligations under this Pledge, or for which Secured Party could become liable.
5. Pledgors' Covenants. Except to the extent waived or consented to in
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writing by Secured Party, each Pledgor agrees that, pending the payment,
performance or satisfaction in full of all Obligations:
5.1 No Assignment. Such Pledgor shall not sell, assign, convey,
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pledge, encumber, or otherwise dispose of all or any portion of its right, title
or interest in or to its Shares without the prior written consent of Secured
Party, which consent may be given or withheld in Secured Party's sole
discretion. Such Pledgor shall maintain its right, title and interest in and to
its Shares free and clear of all liens, encumbrances and claims.
5.2 No Default. Such Pledgor shall not do any act or omit to do
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any act, or permit any act or omission which will cause a breach of any
representation or warranty made in this Pledge.
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6. Benefits of Shares. So long as Pledgors are not in Default under
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this Pledge and subject to the covenants set forth in Section 5, all benefits of
or otherwise related to the Shares shall inure to Pledgors and Pledgors may
exercise any right, power, privilege, authority or remedy attendant the Shares,
including without limitation, any and all management, approval, consent and
voting rights and any and all rights to receive distributions related to or
derived from the Shares. Upon or at any time after the occurrence of a Default
under this Pledge, regardless of whether such Default has been cured, Secured
Party, at Secured Party's sole option, may require the Company to remit all
distributions relating to the Shares to Secured Party. Each Pledgor hereby
authorizes and directs the Company, upon receipt of written notice from Secured
Party that a Default has occurred under this Pledge, to remit any and all such
distributions to Secured Party, at such address as Secured Party may direct, at
such time and in such manner as such distributions would otherwise be remitted
to such Pledgor. The Company and the constituent shareholders thereof shall be
entitled to conclusively rely on such notice and remit all such distributions to
Secured Party and shall have no liability to such Pledgor for any loss or damage
such Pledgor may incur by reason of said reliance.
7. Default/Remedies. Pledgors shall be in Default of this Pledge upon
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the occurrence of any of the following events (each, a "Default"): (a) Pledgors
fail to pay, perform or satisfy any Obligation and, to the extent that such cure
is reasonably susceptible to completion within fifteen (15) calendar days
following Secured Party's delivery to Pledgors of notice thereof, Pledgors fail
to cure such failure within such 15-day period; (b) any Pledgor admits in
writing Pledgor's inability to pay such Pledgor's debts as such debts become
due; makes a general assignment for the benefit of creditors; or files any
petition or action for relief under any bankruptcy, reorganization, insolvency
or moratorium law or under any other law for the relief of debtors; or (c) any
Pledgor fails to have dismissed or vacated within thirty (30) calendar days
following the date of filing any involuntary petition filed against such Pledgor
under any bankruptcy, reorganization, insolvency or moratorium law or under any
other law for the relief of debtors. Upon any Default hereunder, Secured Party,
at its option, without demand upon or notice to such Pledgor, may do any one or
more of the following, subject to the provisions of the Indemnity Agreement: (a)
declare all Obligations secured hereby to be immediately due and payable; (b)
dispose of the Shares in accordance with California Commercial Code Section
9610; (c) retain the Shares in accordance with California Commercial Code
Section 9620 and Section 2 above in full satisfaction of the Obligations; and
(d) exercise any and all other rights and remedies provided a secured party
under the California Commercial Code or any other applicable law. Subject to
the provisions of the Indemnity Agreement and subject to Section 1.2 hereof, all
rights and remedies set forth herein are cumulative and the exercise of one
right or remedy shall not prevent Secured Party from exercising any other right
or remedy provided herein or by law or at equity.
8. Attorneys Fees. In the event of any action by Secured Party to
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collect upon or enforce the Obligations, Secured Party shall be entitled to
collect from Pledgors and Pledgors shall pay to Secured Party any and all
reasonable out-of-pocket costs and expenses, including accountants fees, expert
witness fees and attorneys fees, actually incurred by Secured Party in such
action, with or without the initiation of any judicial proceeding. All such
costs and expenses shall be fully secured by this Pledge. In the event of any
mediation, arbitration, administrative proceeding, investigative proceeding or
judicial proceeding (each, a "Proceeding") to enforce or interpret any term,
condition or other provision of this Pledge, the prevailing party in such
Proceeding shall be entitled to recover any and all reasonable out-of-pocket
attorneys fees, expert witness fees, accounting fees and related costs actually
incurred by such prevailing party.
9. Further Assurances. Each party shall sign any other and further
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instruments and documents and shall take any other and further actions as might
be necessary or proper in order to accomplish the intent and purposes of this
Pledge.
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10. Notices. All notices and other communications under or in
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connection with this Pledge shall be in writing and shall be deemed given (a) if
delivered personally, upon delivery, (b) if delivered by registered or certified
mail (return receipt requested), upon the earlier of actual delivery or three
days after being so mailed, or (c) if delivered by overnight courier, upon
signature acknowledging receipt thereof, in each case to the parties at the
address set forth on the signature page below.
11. General Provisions. Waiver by Secured Party of any Default or
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breach contained in or secured by this Pledge shall not be construed as a waiver
of any subsequent breach. This Pledge cannot be amended or terminated except in
writing signed by all of the parties hereto. This Pledge shall be governed by
and construed in accordance with the laws of the State of California. If any
term of this Pledge is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the provisions shall remain in full
force and effect. This Pledge and all other documents and instruments executed
in connection therewith comprise the entire agreement of the parties hereto and
supersede any prior written or oral agreement between them concerning the
subject matter contained herein. This Pledge may be signed in counterparts and
each counterpart shall be deemed to be an original, and all of such counterparts
shall together constitute one and the same Pledge.
[signatures begin on next page]
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IN WITNESS WHEREOF, the parties have executed this Pledge effective as of the
date first above written.
"SECURED PARTY"
/s/ Xxxxxx X. Xxxxxxxxx
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XXXXXX X. XXXXXXXXX, an individual
ADDRESS FOR NOTICE:
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"PLEDGORS"
/s/ Xxxxxxx X. Seven
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XXXXXXX X. SEVEN, an individual
FLAX-FLEX FABRICATORS, LTD., a Gibraltar company
By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
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Title: Director
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ADDRESS FOR NOTICE:
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EXHIBIT "1"
ASSIGNMENTS
(See attached pages)
1
STOCK TRANSFER POWER
I, XXXXXXX X. SEVEN, hereby sell, assign, and transfer to
____________________ the following shares of common stock of THINKA WEIGHT-LOSS
CORPORATION, a Nevada corporation (the "Corporation"), represented by the
following certificate, standing in my name on the books of the Corporation, and
do hereby irrevocably appoint the Secretary of the Corporation or the transfer
agent to transfer such shares on the books of the Corporation in accordance with
these instructions:
Certificate No. No. of Shares
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1,000,0000
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DATED: /s/ Xxxxxxx X. Seven
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XXXXXXX X. SEVEN, an individual
1
STOCK TRANSFER POWER
The undersigned, FLAX-FLEX FABRICATORS, LTD., a Gibraltar company, hereby
sells, assigns, and transfers to ____________________ the following shares of
common stock of THINKA WEIGHT-LOSS CORPORATION, a Nevada corporation (the
"Corporation"), represented by the following certificate, standing in the
undersigned's name on the books of the Corporation, and does hereby irrevocably
appoint the Secretary of the Corporation or the transfer agent to transfer such
shares on the books of the Corporation in accordance with these instructions:
Certificate No. No. of Shares
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1,000,0000
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DATED: FLAX-FLEX FABRICATORS, LTD.,
--------------------- a Gibraltar company
By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
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Title: Director
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