Exhibit 10.4
PLEDGE AGREEMENT
Dated as of June 10, 2003
This Pledge Agreement (as modified from time to time, this "Agreement") has
been executed by NUWAY MEDICAL, INC., a Nevada corporation, as debtor
("Debtor"), in favor of XXXXXXXXX XX, LLC, a Delaware limited liability company
("Secured Party").
In consideration of Secured Party making a term loan to Debtor under that
certain Term Loan Agreement dated as of even date herewith entered into between
Debtor and Secured Party (as amended, restated, supplemented or otherwise
modified from time to time, the "Loan Agreement"; capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in the
Loan Agreement) and under the Term Note executed by Debtor in connection with
the Loan Agreement, and for other valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor agrees as follows:
1. PLEDGE. Debtor hereby assigns, pledges, hypothecates, delivers, sets over and
transfers to Secured Party and grants to Secured Party a continuing security
interest in the following, in each case whether certificated or uncertificated,
whether now owned or hereafter acquired, wherever located (any or all of such,
the "Collateral"):
(a) The securities listed on Exhibit A attached hereto.
(b) With respect to any Collateral referred to in (a), but without limiting
(a):
(i) all stock powers, certificates and instruments; and
(ii) all replacements, substitutions, interest, cash and stock
dividends, distributions, warrants, options, and other rights and amounts
paid, accrued, received, receivable, or distributed with respect thereto
from time to time.
(c) With respect to the foregoing, all products and proceeds thereof,
including without limitation insurance proceeds and payments under the
Securities Investor Protection Act of 1970, as amended.
2. LIABILITIES. The Collateral shall secure the payment and performance of all
obligations and liabilities of Debtor to Secured Party under the Loan Agreement
and the Term Note and of Debtor hereunder (the "Liabilities").
3. REPRESENTATIONS. Debtor hereby represents and warrants to Secured Party that:
(a) Debtor's exact legal name is as set forth in the preamble to this
Agreement; Debtor's type of organization and jurisdiction of organization are as
set forth in the preamble to this Note; Debtor's place of business or, if Debtor
has more than one place of business, Debtor's chief executive office is located
at the address set forth next to its signature line to this Agreement; and
Debtor has never been organized in any jurisdiction other than the jurisdiction
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set forth in the preamble to this Agreement. During the five (5) years and six
months prior to the date of this Agreement Debtor has not been known by any
legal name different from the one set forth in the preamble to this Agreement
nor has Debtor been the subject of any merger, consolidation, or other
organizational reorganization.
(b) Debtor is existing and in good standing under the laws of its state of
organization, is duly qualified, in good standing and authorized to do business
in each jurisdiction where failure to do so might have a material adverse impact
on the consolidated assets, condition or prospects of Debtor; the execution,
delivery and performance of this Agreement and all related documents and
instruments are within Debtor's powers and have been authorized by all necessary
limited liability company action.
(c) To the best of Debtor's knowledge, the execution, delivery and
performance of this Agreement have received any and all necessary governmental
approval, and do not and will not contravene or conflict with any provision of
law or of the operating agreement or of the articles of organization of Debtor
or any agreement affecting Debtor or its property.
(d) The Collateral is duly and validly authorized and issued,
non-assessable, fully paid and paid for, issued and outstanding, and Debtor is
the legal and equitable owner of the Collateral, with the right to pledge,
assign and deliver the Collateral to secure the Liabilities and do or cause to
be done all other actions provided for or referenced in this Agreement, free and
clear of all liens, claims, encumbrances and security interests of any nature
except any in favor of Secured Party.
(e) Sale of the Collateral by Secured Party is not prohibited or regulated
by any federal or state law or regulation or any agreement binding upon Debtor
and requires no registration or filing with, or consent or approval of, any
governmental body, regulatory authority or securities exchange.
(f) No financing statement, notice of judgment, or any similar instrument
(unless filed on behalf of Secured Party) covering any of the Collateral is on
file in any public office.
4. APPOINTMENT OF SUB-AGENTS; REGISTRATION IN NOMINEE NAME.
(a) The Secured Party shall have the right to appoint one or more
sub-agents for the purpose of retaining physical possession of any certificates
or instruments representing or evidencing the Collateral. In addition, Secured
Party shall at all times have the right to exchange certificates or instruments
representing or evidencing Collateral for certificates or instruments of smaller
or larger denominations for any purpose consistent with its performance of this
Agreement.
(b) For the better perfection of Secured Party's rights in and to the
Collateral and to facilitate implementation of such rights, Debtor shall, upon
written request of Secured Party, cause all the certificates, notes, documents
and other instruments evidencing, representing or otherwise comprising the
Collateral to be registered or otherwise put into the name of Secured Party or a
nominee or nominees of Secured Party subject only to the revocable voting rights
specified herein.
(c) Debtor hereby consents and agrees that the issuers of, or any
depository, registrar, transfer agent or similar party for any of, the
Collateral shall be entitled to accept the provisions hereof as conclusive
evidence of the right of Secured Party to effect any transfer pursuant hereto,
notwithstanding any notice or direction to the contrary heretofore or hereafter
given by Debtor or any other person to any such issuer or any such depository,
registrar, transfer agent or similar party.
5. VOTING RIGHTS. Upon the occurrence and during the continuance of an Event of
Default, any and all voting or similar rights with respect to the Collateral
shall be exercisable only by Secured Party.
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6. COVENANTS OF DEBTOR. Debtor agrees that so long as this Agreement remains in
effect, it will:
(a) Promptly deliver any cash, securities or other property received with
respect to the Collateral, whether as proceeds of the disposition thereof,
dividends with respect thereto, or otherwise, to be held by Secured Party or
Bailee as Collateral. Notwithstanding the foregoing, until Secured Party
notifies Debtor to the contrary or an Event of Default occurs, Debtor may
continue to receive regular cash dividends and interest payments on the
Collateral.
(b) Defend the Collateral against the claims and demands of all persons
other than Secured Party and promptly pay all taxes, assessments, and charges
upon the Collateral, and not sign (or permit to be signed) any documents
creating or perfecting a lien upon or security interest in any of the Collateral
except in favor of Secured Party, or otherwise create, suffer, or permit to
exist any liens or security interests upon any Collateral other than in favor of
Secured Party.
(c) Keep at its address for notices set forth under or opposite its
signature hereto its records concerning the Collateral, which records shall be
of such character as will enable Secured Party to determine at any time the
status of the Collateral; furnish to Secured Party such information concerning
the Collateral as Secured Party may from time to time reasonably request; and
permit Secured Party from time to time to inspect, audit, and make copies of,
and extracts from, all records and all other papers in the possession of Debtor
pertaining to the Collateral.
(d) Make appropriate entries upon its financial statements and its books
and records disclosing Secured Party's security interest in the Collateral.
(e) Provide to Secured Party from time to time such financial statements of
and other information concerning the Collateral and Debtor as Secured Party
shall reasonably request.
(f) Not sell, transfer, grant an option or similar right with respect to,
or otherwise dispose of or agree to dispose of any Collateral or any interest
therein.
7. EVENTS OF DEFAULT. The occurrence or continuance of any of the following
shall constitute an "Event of Default":
(a) failure to pay, when and as due, any principal and interest or other
amounts payable hereunder or in connection with any of the Liabilities; or
(b) failure to comply with or perform any agreement or covenant of Debtor
contained herein; or
(c) any default, event of default, or similar event shall occur or continue
under the Loan Agreement or the Term Note, and shall continue beyond any
applicable notice, grace or cure period set forth in the Loan Agreement or Term
Note, respectively; or
(d) any representation, warranty, schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of Debtor
to Secured Party is false or misleading in any material respect on the date as
of which the facts therein set forth are stated or certified; or
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(e) this Agreement shall be repudiated or shall become unenforceable or
incapable of performance in accord with its terms; or
(f) Debtor shall grant or any Person (other than Secured Party) shall
obtain a security interest in any of the Collateral, or shall file any financing
statement purportedly covering any Collateral; Debtor or any other Person shall
perfect (or attempt to perfect) such a security interest; a court shall
determine that Secured Party does not have a first-priority security interest in
any of the Collateral or in any other assets constituting security for the
Liabilities, enforceable in accord with this Agreement (as to the Collateral) or
the related collateral documents (as to such other assets).
8. DEFAULT REMEDIES.
(a) Upon the occurrence and during the continuance of any Event of Default,
Secured Party may exercise any rights and remedies under this Agreement, the
Loan Agreement, the Term Note and any related document or instrument (including
without limitation any pertaining to Collateral), and at law or in equity.
(b) If any Event of Default shall have occurred and be continuing, the
Secured Party shall first take all reasonable steps to liquidate the 2,500,000
shares of common stock of Debtor which have been pledged to the Secured Party by
New Millennium Capital Partners, LLC. If, and only if, the proceeds of the sale
of such stock does not satisfy the Liabilities, then and only then, in addition
to having the right to exercise any rights and remedies of a secured party upon
default under the Uniform Commercial Code in effect in the State of Illinois or
in any state where any Collateral is located, Secured Party may, in its sole
discretion:
(i) without being required to give any prior notice to Debtor apply
the cash (if any) then held by it hereunder, toward the Liabilities in such
order as Secured Party shall determine in its sole discretion; and
(ii) if there shall be no such cash or the cash so applied shall be
insufficient to pay all obligations in full, sell the Collateral, or any
part thereof, at any public or private sale, for cash, upon credit or for
future delivery, as Secured Party shall deem appropriate. The Secured Party
shall be authorized at any such sale (to the extent it deems it advisable
to do so, in its sole discretion) to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing
the Collateral then being sold for their own account for investment and not
with a view to the distribution or resale thereof, and upon consummation of
any such sale Secured Party shall have the right to assign, transfer and
deliver to the purchaser(s) thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Debtor, and Debtor hereby waives (to
the extent permitted by law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted. To the extent
that notice of sale shall be required to be given by law, Secured Party
shall give Debtor at least ten days' written notice of Secured Party's
intention to make any such public or private sale or sales. Secured Party
shall not be obligated to make any sale of Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of Collateral may
have been given. Secured Party may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for sale, and such sale
may, without further notice, be made at the time and place to which the
same was so adjourned. In case sale of all or any part of the Collateral is
made on credit or for future delivery, the Collateral so sold may be
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retained by Secured Party until the sale price is paid by the purchaser
thereof, but Secured Party shall not incur any liability in case any such
purchaser shall fail to take up and pay for the Collateral so sold; in the
case of any such failure, such Collateral may be sold again upon like
notice. As an alternative to exercising the power of sale herein conferred
upon it, Secured Party may proceed by a suit at law or in equity to
foreclose this Agreement and to sell the Collateral, or any portion
thereof, pursuant to a judgment or decree of a court of competent
jurisdiction. The proceeds of sale of Collateral sold pursuant hereto shall
be applied by Secured Party in such order as it shall determine.
(c) Secured Party may, by written notice to Debtor, at any time and
from time to time, waive any Event of Default or Unmatured Event of
Default, which shall be for such period and subject to such conditions as
shall be specified in any such notice. In the case of any such waiver,
Secured Party and Debtor shall be restored to their former position and
rights hereunder, and any Event of Default or Unmatured Event of Default so
waived shall be deemed to be cured and not continuing; but no such waiver
shall extend to or impair any subsequent or other Event of Default or
Unmatured Event of Default. No failure to exercise, and no delay in
exercising, on the part of the Secured Party of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and
remedies of Secured Party herein provided are cumulative and not exclusive
of any rights or remedies provided by law.
9. POWERS OF SECURED PARTY. Secured Party may, from time to time, at its option
(but shall have no duty to):
(a) perform any agreement of Debtor hereunder that Debtor shall have
failed to perform;
(b) take any other action which Secured Party deems necessary or
desirable for the preservation of the Collateral or Secured Party's
interest therein and the carrying out of this Agreement, including without
limiting the generality of the foregoing: (i) any action to collect or
realize upon the Collateral; (ii) the discharge of taxes, liens, security
interests or other encumbrances at any time levied or placed on the
Collateral; or (iii) the discharge or keeping current of any obligation of
Debtor having effect on the Collateral; or (iv) receiving, endorsing and
collecting all checks and other orders for the payment of money made
payable to Debtor representing any dividend, interest payment or other
distribution payable or distributable in respect of the Collateral or any
part thereof, and to give full discharge for the same;
(c) file, or cause to be filed, photocopies or carbon copies of any
financing statement respecting any right of Secured Party in the
Collateral, and any such photocopy or carbon copy of the signature of
Debtor on such photocopy or carbon copy shall be deemed an original for
purposes of such filing. Debtor hereby authorizes Secured Party to sign
financing statements on Debtor's behalf to be filed in all jurisdictions in
which such authorization is permitted; and
(d) (without limiting any other provision hereof) request that any
uncertificated securities or deposits constituting Collateral hereunder be
delivered to it in definitive form. Upon receipt of such request from
Secured Party, Debtor will immediately take all steps (including, without
limitation, the payment by Debtor of all costs and expenses of issuance and
transfer) required to cause such uncertificated securities or deposits to
be issued and delivered in definitive form to Secured Party, together with
any and all documents (executed in blank) required to effect the transfer
of definitive securities or deposits in definitive form to Secured Party.
The parties expressly agree that such securities or deposits when issued in
definitive form shall continue to constitute Collateral for purposes of
this Agreement.
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Debtor hereby appoints Secured Party as Debtor's attorney-in-fact, which
appointment is and shall be deemed to be irrevocable and coupled with an
interest, for purposes of performing acts and signing and delivering any
agreement, document, or instrument, on behalf of Debtor in accordance with this
Section. Debtor immediately will reimburse Secured Party for all expenses so
incurred by Secured Party, together with interest thereon at the interest rates
specified in the Loan Agreement.
10. FURTHER ASSURANCES. Debtor agrees to do (or cause to be done) such further
acts and things, and to execute and deliver (or cause to be executed and
delivered) such additional conveyances, assignments, agreements, and
instruments, as Secured Party may at any time request in connection with the
administration or enforcement of this Agreement or related to the Collateral or
any part thereof or in order better to assure and confirm unto Secured Party its
rights, powers and remedies hereunder.
11. OBLIGATIONS UNCONDITIONAL; WAIVER OF DEFENSES. Debtor irrevocably agrees
that no fact or circumstance whatsoever which might at law or in equity
constitute a discharge or release of, or defense to the obligations of, a
guarantor or surety shall limit or affect any obligations of Debtor under this
Agreement or any document or instrument executed in connection herewith. Without
limiting the generality of the foregoing:
(a) Secured Party may at any time and from time to time, without
notice to Debtor, take any or all of the following actions without
affecting or impairing the liability of Debtor on this Agreement:
(i) renew or extend time of payment of the Liabilities;
(ii) accept, substitute, release or surrender any security for
the Liabilities; and
(iii) release any person primarily or secondarily liable on the
Liabilities.
(b) No delay in enforcing payment of the Liabilities, nor any
amendment, waiver, change, or modification of any terms of any instrument
which evidences or is given in connection with the Liabilities, shall
release Debtor from any obligation hereunder. The obligations of Debtor
under this Agreement are and shall be primary, continuing, unconditional
and absolute (notwithstanding that at any time or from time to time all of
the Liabilities may have been paid in full), irrespective of the value,
genuineness, regularity, validity or enforceability of any documents or
instruments respecting or evidencing the Liabilities. In order to hold
Debtor liable or exercise rights or remedies hereunder, there shall be no
obligation on the part of Secured Party, at any time, to resort for payment
to any other person or to any other security for the Liabilities. Secured
Party shall have the right to enforce this Agreement irrespective of
whether or not other proceedings or steps are being taken against any other
property securing the Liabilities or any other party primarily or
secondarily liable on any of the Liabilities.
(c) Debtor irrevocably waives presentment, protest, demand, notice of
dishonor or default, notice of acceptance of this Agreement, notice of any
loans made, extensions granted or other action taken in reliance hereon,
and all demands and notices of any kind in connection with this Agreement
or the Liabilities.
(d) Debtor waives any claim or other right which Debtor might now have
or hereafter acquire against any person primarily or contingently liable on
the Liabilities or that arises from the existence or performance of
Debtor's obligations under this Agreement, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim or remedy of Secured Party
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against any person or any other collateral security for the Liabilities,
which Secured Party now has or hereafter acquires, however arising.
12. NOTICES. All notices, requests and demands to or upon the respective parties
hereto shall be deemed to have been given or made five business days after a
record has been deposited in the mail, postage prepaid, or one business day
after a record has been deposited with a recognized overnight courier, charges
prepaid or to be billed to the sender, or on the day of delivery if delivered
manually with receipt acknowledged, in each case addressed or delivered if to
Secured Party to its address indicated next to its signature line below and if
to Debtor to its address indicated next to its signature line below, or to such
other address as may be hereafter designated in writing by the respective
parties hereto by a notice in accord with this Section.
13. MISCELLANEOUS. This Agreement and any document or instrument executed in
connection herewith shall be governed by and construed in accordance with the
internal law of the State of Illinois, and shall be deemed to have been executed
in such state. Unless the context requires otherwise, wherever used herein the
singular shall include the plural and vice versa, and the use of one gender
shall also denote the others. Captions herein are for convenience of reference
only and shall not define or limit any of the terms or provisions hereof;
references herein to Sections or provisions without reference to the document in
which they are contained are references to this Agreement. This Agreement shall
bind Debtor, its successors and assigns, and shall inure to the benefit of
Secured Party, its successors and assigns, except that Debtor may not transfer
or assign any of its rights or interest hereunder without the prior written
consent of Secured Party. Debtor agrees to pay upon demand all expenses
(including without limitation attorneys' fees, legal costs and expenses, in each
case whether in or out of court, in original or appellate proceedings or in
bankruptcy) incurred or paid by Secured Party or any holder hereof in connection
with the enforcement or preservation of its rights hereunder or under any
document or instrument executed in connection herewith.
14. WAIVER OF JURY TRIAL, ETC. DEBTOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO
SECURED PARTY'S SOLE AND ABSOLUTE ELECTION, ALL SUITS, ACTIONS OR OTHER
PROCEEDINGS WITH RESPECT TO, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION HEREWITH SHALL BE SUBJECT
TO LITIGATION IN COURTS HAVING SITUS WITHIN OR JURISDICTION OVER XXXX COUNTY,
ILLINOIS. DEBTOR HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURT LOCATED IN OR HAVING JURISDICTION OVER SUCH COUNTY, AND
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO REQUEST OR DEMAND TRIAL BY
JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION OR OTHER PROCEEDING
BROUGHT BY SECURED PARTY IN ACCORDANCE WITH THIS PARAGRAPH, OR TO CLAIM THAT ANY
SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
[Signature Page Follows]
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IN WITNESS WHEREOF, Debtor has executed this Agreement as of the date first
written above.
NUWAY MEDICAL, INC.
By:
--------------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
Address:
-------------------------
-------------------------
Attention:________________
Facsimile:________________
ACCEPTED:
XXXXXXXXX XX, LLC
By: AUGUSTINE CAPITAL
MANAGEMENT, L.L.C., its manager
By:
-------------------------------------
Name: Xxxx X. Xxxxxx
Title: President
Address: 000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
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EXHIBIT A
SECURITIES
Membership Interests Amount
-------------------- ------
NuWay Sports, LLC 100% of NuWay Medical, Inc.'s
membership interests in NuWay
Sports, LLC, which represents 51% of
the issued and outstanding
membership interests in NuWay
Sports, LLC.
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