Pledge Agreement - John J. Poelman and Netgateway Inc.
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") dated as of February
4, 2000 is made between JOHN J. POELMAN, in his individual capacity (the
"Obligor") and NETGATEWAY, INC., a Delaware corporation ("Netgateway").
(Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Note (as hereinafter defined).
R E C I T A L S:
WHEREAS, Netgateway will advance $150,000 to Obligor and
Galaxy Enterprises, Inc., a Nevada corporation ("Galaxy", and together with
Obligor, collectively, the "Maker") pursuant to that certain Promissory Note of
even date herewith (the "Note"), and may in the future advance additional sums
pursuant to terms of additional promissory note and other agreements. Netgateway
requires that the Obligor execute and deliver, and grant the Liens provided for
in, this Agreement prior to advancing any sums to Galaxy.
WHEREAS, Obligor is a founder, officer and shareholder of
Galaxy and will benefit substantially by reason of Netgateway's advancing sums
to Galaxy.
NOW, THEREFORE, to induce Netgateway to advance such sums and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Obligor has agreed to pledge and grant a security
interest in the Collateral as security for the performance of any and all
obligations of the Maker for the performance by it of its agreements, covenants
and undertakings under or in respect of the Note or this Agreement (the "Secured
Obligations").
Section 1. Pledge.
a. Grant. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Obligor hereby pledges and grants to
Netgateway a security interest in all of the Obligor's right, title and interest
in and to the following property, whether now owned or hereafter acquired by the
Obligor and whether now existing or hereafter coming into existence
(collectively, the "Collateral"):
i. 100,000 shares of common stock of Galaxy represented by
the respective certificates identified in Annex 1, together with the
certificates representing the same (collectively, the "Pledged Stock");
ii. all shares, securities, moneys or property representing
a dividend on, or a distribution or return of capital in respect of any of the
Pledged Stock, resulting from a split-up, revision, reclassification or other
like change of any of the Pledged Stock or otherwise received in exchange for
any of the Pledged Stock and all other rights issued to the holders of, or
otherwise in respect of, any of the Pledged Stock;
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iii. in the event of any consolidation or merger in which
Galaxy is not the surviving corporation, all shares of each class of the capital
stock of the successor corporation (unless such successor corporation is Galaxy
itself) formed by or resulting from such consolidation or merger (collectively,
and together with the property described in clauses (i) and (ii) above, the
"Stock Collateral")
b. Perfection. Concurrently with the execution and delivery of
this Agreement, the Obligor shall (i) deliver to Netgateway all certificates
identified in Annex 1, accompanied by undated stock powers duly executed in
blank and (ii) take all such other actions as shall be necessary or as
Netgateway may request to perfect and establish the priority of the liens
granted by this Agreement.
c. Preservation and Protection of Security Interests. The
Obligor shall:
i. upon the acquisition after the date hereof by the
Obligor of any Stock Collateral, promptly either (x) transfer and deliver to
Netgateway all such Stock Collateral (together with the certificates
representing such Stock Collateral securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank) or (y) take such
other action as Netgateway shall deem necessary or appropriate to perfect, and
establish the priority of, the liens granted by this Agreement in such Stock
Collateral; and
ii. give, execute, deliver, file or record any and all
financing statements, notices, contracts, agreements or other instruments,
obtain any and all governmental approvals and take any and all steps that may be
necessary or as Netgateway may request to create, perfect, establish the
priority of, or to preserve the validity, perfection or priority of the liens
granted by this Agreement or to enable Netgateway to exercise and enforce its
rights, remedies, powers and privileges under this Agreement with respect to
such liens, including causing any or all of the Stock Collateral to be
transferred of record into the name of Netgateway or its nominee (and Netgateway
agrees that if any Stock Collateral is transferred into its name or the name of
its nominee, Netgateway will thereafter promptly give to the Obligor copies of
any notices and communications received by it with respect to the Stock
Collateral pledged by the Obligor).
d. Attorney-in-Fact. Subject to the rights of the Obligor
hereunder, Netgateway is hereby appointed the attorney-in-fact of the Obligor
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instruments which Netgateway may deem necessary or
advisable to accomplish the purposes of this Agreement, to preserve the
validity, perfection and priority of the liens granted by this Agreement and,
following any Event of Default (as defined in the Note), to exercise its rights,
remedies, powers and privileges under this Agreement. This appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, Netgateway shall be entitled under this
Agreement upon the occurrence and continuation of any Event of Default (i) to
ask, demand, collect, sue for, recover, receive and give receipt and discharge
for amounts due and to become due under and in respect of all or any part of the
Collateral; (ii) to receive, endorse and collect any instruments or other
drafts, instruments, documents and chattel paper in connection with clause (i)
above; (iii) to file any claims or take any action or proceeding that Netgateway
may deem necessary or advisable for the collection of all or any part of the
Collateral; and (iv) to execute, in connection with any sale or disposition of
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the Collateral hereunder, any endorsements, assignments, bills of sale or other
instruments of conveyance or transfer with respect to all or any part of the
Collateral.
e. Special Provisions Relating to Stock Collateral.
i. So long as no Event of Default shall have occurred and
be continuing, the Obligor shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Stock Collateral; and
Netgateway shall, at the Obligor's expense, execute and deliver to the Obligor
or cause to be executed and delivered to the Obligor all such proxies, powers of
attorney, dividend and other orders and other instruments, without recourse, as
the Obligor may reasonably request for the purpose of enabling the Obligor to
exercise the rights and powers which it is entitled to exercise pursuant to this
Section 2.e.
ii. So long as no Event of Default shall have occurred and
be continuing, the Obligor shall be entitled to receive and retain any dividends
on the Stock Collateral paid in cash out of earned surplus.
iii. If any Event of Default shall have occurred and be
continuing, and whether or not Netgateway exercises any available right to
declare any Secured Obligation due and payable or seeks or pursues any other
right, remedy, power or privilege available to it under applicable law, this
Agreement or the Note, all dividends and other distributions on the Stock
Collateral shall be paid directly to Netgateway and retained by it as part of
the Stock Collateral, subject to the terms of this Agreement, and, if Netgateway
shall so request, the Obligor agrees to execute and deliver to Netgateway
appropriate additional dividend, distribution and other orders and instruments
to that end, provided that if such Event of Default is cured, any such dividend
or distribution paid to Netgateway prior to such cure shall, upon request of the
Obligor (except to the extent applied to the Secured Obligations), be returned
by Netgateway to the Obligor.
f. Collateral Protection. If, on any date following the date
of this Agreement and the Note (the "Calculation Date"), the arithmetic mean of
the closing bid price of the common stock as reported on the OTC Bulletin Board
for the 5 consecutive trading days ending on the trading day preceding the
Calculation Date (the "Calculated Price") is equal to or less than 75% of the
closing bid price of the common stock of Galaxy on the date of this Agreement
and the Note (the "Closing Price"), then within 10 days after the Calculation
Date, Obligor shall deliver to Netgateway certificates representing an
additional number of shares of Galaxy's common stock equal to (i) the
difference, in dollars, between the Closing Price and the Calculated Price,
multiplied by the number of shares of the common stock of Galaxy representing
the Stock Collateral, divided by (ii) the Calculated Price.
g. Termination. Galaxy and Netgateway intend to enter into the
Merger Agreement pursuant to which Galaxy Acquisition Corp. shall merge with and
into Galaxy and Galaxy will become a wholly-owned subsidiary of Netgateway (the
"Transaction"). This Agreement shall terminate when (i) all Secured Obligations
shall have been paid in full, or (ii) all conditions precedent to the
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Transaction shall have been satisfied or waived. Upon termination of this
Agreement, Netgateway shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect of the
Collateral, to or on the order of the Obligor.
Section 2. Representations and Warranties. As of the date hereof, the
Obligor represents and warrants to Netgateway as follows:
a. Title. The Obligor is the sole beneficial owner of the
Collateral in which it purports to grant a lien pursuant to this Agreement, and
such Collateral is free and clear of all liens and other rights in favor of any
other person.
b. Pledged Stock. The Pledged Stock evidenced by the
certificates identified in Annex 1 is duly authorized, validly existing, fully
paid and nonassessable, and none of such Pledged Stock is subject to any
contractual restriction, or any restriction under the charter or by-laws of
Galaxy of such Pledged Stock, upon the transfer of such Pledged Stock.
c. No Breach. None of the execution and delivery of this
Agreement, the consummation of the transactions contemplated by this Agreement
or compliance with the terms and provisions of this Agreement will conflict with
or result in a breach of, or require any consent under any applicable law, or
any agreement or instrument to which the Obligor is a party or by which he is
bound or to which he is subject.
Section 3. Further Assurances. The Obligor agrees that, from time to
time upon the written request of Netgateway, the Obligor will execute and
deliver such further documents and do such other acts and things as Netgateway
may reasonably request in order fully to effect the purposes of this Agreement.
Section 4. Remedies.
a. Events of Default, Etc. Without limitation on the rights,
remedies, powers and privileges of Netgateway under Section 1, if any Event of
Default shall have occurred and be continuing:
i. Netgateway in its discretion may, in its name or in the
name of the Obligor or otherwise, demand, sue for, collect or receive any money
or property at any time payable or receivable on account of or in exchange for
all or any part of the Collateral, but shall be under no obligation to do so;
ii. Netgateway in its discretion may, upon five business
days' prior written notice to the Obligor of the time and place, with respect to
all or any part of the Collateral which shall then be or shall thereafter come
into the possession, custody or control of Netgateway or any of its agents,
sell, lease or otherwise dispose of all or any part of such Collateral, at such
place or places as Netgateway deems best, for cash, for credit or for future
delivery (without thereby assuming any credit risk) and at public or private
sale, without demand of performance or notice of intention to effect any such
disposition or of time or place of any such sale (except such notice as is
required above or by applicable statute and cannot be waived), and Netgateway or
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any other person may be the purchaser, lessee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent permitted by
law, at any private sale) and thereafter hold the same absolutely, free from any
claim or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Obligor, any such demand, notice and right or
equity being hereby expressly waived and released. Netgateway 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
the sale, and such sale may be made at any time or place to which the sale may
be so adjourned; and
iii. Netgateway shall have, and in its discretion may
exercise, all of the rights, remedies, powers and privileges with respect to the
Collateral of a secured party under the Uniform Commercial Code (whether or not
the Uniform Commercial Code is in effect in the jurisdiction where such rights,
remedies, powers and privileges are asserted) and such additional rights,
remedies, powers and privileges to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights, remedies, powers and
privileges in respect of this Agreement or the Collateral may be asserted,
including the right, to the maximum extent permitted by law, to exercise all
voting, consensual and other powers of ownership pertaining to the Collateral as
if Netgateway were the sole and absolute owner of the Collateral (and the
Obligor agrees to take all such action as may be appropriate to give effect to
such right).
b. Limitation on Personal Liability of the Obligor.
Notwithstanding anything herein to the contrary, the Obligor shall have no
personal liability with respect to the payment or performance (or lack thereof)
of the Secured Obligations, provided, however, that the foregoing shall not
limit or restrict the right of Netgateway to proceed against the Collateral to
the extent provided herein and shall also not impair any other rights that
Netgateway may have hereunder or under the Note (so long as such rights do not
give rise to personal liability of the Obligor).
c. Private Sale.
i. Netgateway shall incur no liability as a result of the
sale, lease or other disposition of all or any part of the Collateral at any
private sale conducted in a commercially reasonable manner. The Obligor hereby
waives any claims against Netgateway arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if Netgateway accepts the
first offer received and does not offer the Collateral to more than one offeree.
ii. The Obligor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, Netgateway may be compelled, with respect to any sale of all or
any part of the Collateral, to limit purchasers to those who will agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view to distribution or resale. The Obligor acknowledges that any
such private sales may be at prices and on terms less favorable to Netgateway
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that pursuant
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to Netgateway shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time necessary
to permit Galaxy to register it for public sale.
d. Application of Proceeds. Except as otherwise expressly
provided in this Agreement, the proceeds of, or other realization upon, all or
any part of the Collateral by virtue of the exercise of remedies hereunder, and
any other cash at the time held by Netgateway hereunder, shall be applied by
Netgateway:
First, to the payment of the costs and expenses of such exercise
of remedies, including reasonable out-of-pocket costs and expenses of
Netgateway, the fees and expenses of its agents and counsel and all other
expenses incurred and advances made by Netgateway in that regard;
Next, to the payment in full of the remaining Secured Obligations
in such manner as Netgateway may determine; and
Finally, to the payment to the Obligor, or its respective
successors or assigns, or as a court of competent jurisdiction may direct, of
any surplus then remaining.
As used in this Section, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Obligor or any issuer of,
or account debtor or other obligor on, any of the Collateral.
Section 5. Miscellaneous.
a. Waiver. No failure on the part of Netgateway to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement shall operate as a waiver of
such right, remedy, power or privilege, nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement, preclude any
other or further exercise of any such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided in this Agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
b. Notices. All notices and communications to be given under
this Agreement shall be given or made in writing to the intended recipient at
the address specified below or, as to any party, at such other address as shall
be designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopier, delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, upon
receipt, in each case, given or addressed as provided in this Section 5.b:
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To the Obligor: John J. Poelman
c/o Galaxy Enterprises, Inc.
754 East Technology Avenue
Orem, Utah 84907
Facsimile No.: (801) 228-9762
with a copy to: Parsons Behle & Latimer, P.C.
One Utah Center
201 South Main Street, Suite 1800
P.O. Box 45898
Salt Lake City, UT 84145-0898
Attn: Brent Christensen, Esq.
Facsimile No.: (801) 536-6111
To Netgateway: Netgateway, Inc.
300 Oceangate, 5th Floor
Long Beach, CA 90802
Attention: Craig Gatarz
Facsimile No.: (562) 308-0021
with a copy to: Nida & Maloney, LLP
800 Anacapa Street
Santa Barbara, CA 93101
Attn: C. Thomas Hopkins, Esq.
Facsimile No.: (805) 568-1955
c. Expenses, Etc. The Obligor agrees to pay or to reimburse
Netgateway for all costs and expenses (including reasonable attorney's fees and
expenses) that may be incurred by Netgateway in any effort to enforce any of the
provisions hereof or in respect of the Collateral or in connection with (a) the
preservation of the lien of, or the rights of Netgateway under this Agreement or
(b) any actual or attempted sale, lease, disposition, exchange, collection,
compromise, settlement or other realization in respect of, or care of, the
Collateral, including all such costs and expenses (and reasonable attorney's
fees and expenses) incurred in any bankruptcy, reorganization, workout or other
similar proceeding.
d. Amendments, Etc. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by the Obligor and Netgateway. Any such modification, supplement or waiver shall
be for such period and subject to such conditions as shall be specified in the
instrument effecting the same and shall be binding upon Netgateway, each holder
of any of the Secured Obligations and the Obligor, and any such waiver shall be
effective only in the specific instance and for the purposes for which given.
e. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Obligor, Netgateway and each holder of any
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of the Secured Obligations and their respective successors and permitted
assigns. The Obligor shall not assign or transfer its rights under this
Agreement without the prior written consent of Netgateway.
f. Survival. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
g. Agreements Superseded. This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
h. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
i. Captions. The captions and section headings appearing in
this Agreement are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
j. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.
k. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
[signature page follows]
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IN WITNESS WHEREOF, the Obligor has caused this Agreement to
be duly executed and delivered as of the day and year first above written.
OBLIGOR:
/s/ John J. Poelman
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JOHN J. POELMAN
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ANNEX 1
PLEDGED STOCK
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Certificate Registered
Issuer No. Owner Number of Shares
------ ----------- ---------- ----------------
Galaxy Enterprises John J. Poelman 100,000
Total: 100,000
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