Document:

EXHIBIT 10.5

SECURITY AND PLEDGE AGREEMENT

This SECURITY AND PLEDGE AGREEMENT (the “Agreement”) is made and entered into on August 21, 2017, by and among NEXEON MEDSYSTEMS INC, a Nevada corporation (the “Debtor”), the other parties identified as “Obligors” on the signature pages hereto and such other parties that may become Obligors hereunder after the date hereof (together with the Debtor, individually an “Obligor,” and collectively the “Obligors”) and Leonite Capital LLC, a Delaware limited liability company, and its permitted endorsees, transferees and assigns (collectively, the “Secured Party”).

RECITALS

A.          Concurrently herewith, Debtor and the Secured Party have entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) and certain other agreements, pursuant to which the Debtor issued that certain senior secured convertible promissory note in the principal amount of $1,120,000.00 (the “Note”) to the Secured Party.

B.          Debtor and the other Obligors now enters into this Agreement with the Secured Party as security for Debtor’s Obligations (as defined below).

AGREEMENT

NOW, THEREFORE, in consideration of their respective promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.          Definitions.  Terms used but not otherwise defined in this Agreement that are defined in Division 9 of the Uniform Commercial Code as adopted in the state of Delaware (the “UCC”) (such as “account,” “adverse claim,” “chattel paper,” “deposit account,” “document,” “equipment,” “fixtures,” “general intangibles,” “goods,” “instruments,” “inventory,” “investment property,” “proceeds,” and “supporting obligations”) shall have the respective meanings given such terms in Division 9 of the UCC.  Capitalized terms used in this Agreement and not defined elsewhere herein or in the Securities Purchase Agreement shall have the meanings set forth below:

 

“Collateral” means all of the collateral identified on Exhibit A hereto, as well as all of Oblogors’ tangible and intangible personal property assets, including, but not limited to, all of the following: (i) all accounts, cash and currency, chattel paper, deposit accounts, documents, equipment, fixtures, general intangibles, instruments, intellectual property, inventory, investment property, Negotiable Collateral, loans receivable, motor vehicles, Pledged Equity, goods, supporting obligations, Obligors’ Books, and such other assets of Obligors as may hereafter arise or Obligors may hereafter acquire or as to which the Secured Party may from time-to-time be granted a security interest, and (ii) the proceeds of any of the foregoing, including, but not limited to, proceeds of insurance covering the foregoing or any portion thereof; provided, however, that notwithstanding anything to the contrary contained in this Agreement, the Collateral does not include any “hazardous waste” as that term is defined under 42 U.S.C. section 6903(5), as such section may be from time to time amended, or under any regulations thereunder.

“Obligors’ Books” means and includes all of Obligors’ books and records, including, but not limited to, all records, ledgers and computer programs, disk or tape files, printouts and other computer-prepared information indicating, summarizing or evidencing the Collateral.

 

 

“Equity Interests” means, with respect to any person, all of the shares of capital stock of (or other ownership or profit interests in) such person, all of the warrants, options or other rights for the purchase or acquisition from such person of shares of capital stock of (or other ownership or profit interests in) such person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such person or warrants, rights or options for the purchase or acquisition from such person of such shares (or such other interests), and all of the other ownership or profit interests in such person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

“Event of Default” has the meaning specified in Section 6 of this Agreement.

“Negotiable Collateral” means and includes all of Obligors’ presently existing and hereafter acquired or arising letters of credit, advices of credit, promissory notes, drafts, instruments, documents, equity interests in any entity, leases of personal property and chattel paper, as well as Obligors’ Books relating to any of the foregoing.

“Obligations” means and includes any and all present or future indebtedness or obligations of Debtor owing to the Secured Party under the Note and the other Subscription Documents, including, without limitation, (i) any amendments to any of the foregoing and (ii) all interest and other payments required thereunder that are not paid when due, and (iii) all of the Secured Party Expenses which Debtor is required to pay or reimburse by this Agreement, by law, or otherwise.

“Permitted Liens” means (i) statutory liens of landlords and liens of carriers, warehousemen, bailees, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and securing amounts not yet due (or which are being contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens), and with respect to which adequate reserves or other appropriate provisions are being maintained by Debtor in accordance with generally accepted accounting principles (“GAAP”) , (ii) deposits made (and the liens thereon) in the ordinary course of business of Debtor (including, without limitation, security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), statutory obligations and other similar obligations arising as a result of progress payments under government contracts, (iii) liens for taxes not yet due and payable or which are being contested in good faith and with respect to which adequate reserves are being maintained by Debtor in accordance with GAAP, (iv) purchase money liens relating to the acquisition of equipment, machinery or other goods of Debtor approved in writing by the Secured Party (which approval shall not be unreasonably withheld, conditioned or delayed) and (v) liens in favor of the Secured Party under the Subscription Documents.

“Pledged Equity” means, with respect to each Obligor, 100% of the issued and outstanding Equity Interests of each Subsidiary that is directly owned, or will be owned, by such Obligor, excluding, however, the to-be-owned shares of Ingest, SPRL, including the Equity Interests of the Subsidiaries currently owned by such Obligor as set forth on Schedule 1 hereto, in each case together with the certificates (or other agreements or instruments), if any, representing such shares, and all options and other rights, contractual or otherwise, with respect thereto, including, but not limited to, the following:

 

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(1) all Equity Interests representing a dividend thereon, or representing a distribution or return of capital upon or in respect thereof, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder thereof, or otherwise in respect thereof; and

(2) in the event of any consolidation or merger involving the issuer thereof and in which such issuer is not the surviving person, all shares of each class of the Equity Interests of the successor person formed by or resulting from such consolidation or merger, to the extent that such successor person is a direct subsidiary of an Obligor.

 

“Secured Party Expenses” means and includes (i) all costs or expenses required to be paid by Debtor under this Agreement that are instead paid or advanced by the Secured Party, including without limitation, all taxes, liens, securities interests, encumbrances or other claims at any time levied or placed on the Collateral, (ii) all reasonable costs and expenses incurred to correct any default or enforce any provision of this Agreement, or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale or advertising to sell all or any part of the Collateral, irrespective of whether a sale is consummated, and (iii) all reasonable costs and expenses (including reasonable attorney’s fees) incurred by the Secured Party in enforcing or defending this Agreement, irrespective of whether suit is brought.

“Subsidiaries” means those subsidiaries of the Debtor listed as subsidiaries on Schedule 1 hereto.

2.          Construction.  Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and vice versa, to the part include the whole, “including” is not limiting, and “or” has the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.  Section references are to this Agreement, unless otherwise specified.

 

3.          Creation of Security Interest. In order to secure Debtor’s timely payment of the Obligations and timely performance of each and all of its covenants and obligations under this Agreement and any other document, instrument or agreement executed by Debtor or delivered by Debtor to the Secured Party in connection with the Obligations, each Obligor hereby unconditionally and irrevocably grants, pledges and hypothecates to the Secured Party a continuing first-priority security interest in and to, a lien upon, assignment of, and right of set-off against, all presently existing and hereafter acquired or arising Collateral.  Such security interest shall attach to all Collateral without further act on the part of the Secured Party or Obligors.

 

 

		4.	
Filings; Further Assurances.

 

(a)          General.  The Secured Party is authorized to file a UCC-1 Financing Statement with the Secretary of State of the State of Nevada, with respect to the Debtor, and, with respect to the other Obligors, with the Secretaries of State or other applicable offices in the jurisdictions where the other Obligors, as indicated on Schedule 1, are organized, evidencing its security interest in the Collateral.  Obligors also authorize the filing by the Secured Party of such other UCC financing statements, continuation financing statements, fixture filings, security agreements, mortgages, deeds of trust, chattel mortgages, assignments, motor vehicle lien acknowledgments and other documents as the Secured Party may reasonably require in order to perfect, maintain, protect or enforce its security interest in the Collateral or any portion thereof and in order to fully consummate all of the transactions contemplated under this Agreement.  Subject to the foregoing, if so requested by the Secured Party at any time hereafter, each Obligor shall promptly execute and deliver to the Secured Party such fixture filings, security agreements, mortgages, deeds of trust, chattel mortgages, assignments, motor vehicle lien acknowledgments and other documents as the Secured Party may reasonably require from such Obligor in order to perfect, maintain, protect or enforce its rights under this Agreement.  Obligors shall promptly deliver to the Secured Party all certificates and instruments constituting the Pledged Equity in suitable form for transfer by delivery and accompanied by duly executed instruments of transfer or assignment in blank.  Each Obligor hereby irrevocably makes, constitutes and appoints the Secured Party as such Obligor’s true and lawful attorney with power, upon Obligor’s failure or refusal to promptly comply with its obligations in this Section 4(a), to sign the name of Obligor on any of the above-described documents or on any other similar documents which need to be executed, recorded or filed in order to perfect, maintain, protect or enforce the Secured Party’s security interest in the Collateral.

 

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(b)          Additional Matters.  Without limiting the generality of Section 4(a), each Obligor will at the reasonable written request of the Secured Party, appear in and defend any action or proceeding which is reasonably expected to have a material and adverse effect with respect to such Obligor’s title to, or the security interest of the Secured Party in, the Collateral.

 

5.              Representations, Warranties and Agreements. Each Obligor represents, warrants and agrees as follows:

 

(a)          No Other Encumbrances.  Debtor and each other Obligor has good and marketable title to its Collateral, free and clear of any liens, claims, encumbrances and rights of any kind, except the Permitted Liens or as otherwise approved in writing by the Secured Party, and has the right to pledge, sell, assign or transfer the same.  There exists no adverse claim with respect to the Pledged Equity of such Obligor.

 

(b)          Authorization of Pledged Equity. All Pledged Equity is duly authorized and validly issued, is fully paid and, to the extent applicable, nonassessable and is not subject to the preemptive rights of any person.

 

(c)          Security Interest/Priority. This Agreement creates a valid security interest in favor of the Secured party in the Collateral of such Obligor and, when properly perfected by filing, shall constitute a valid and perfected, first priority security interest in such Collateral (including all uncertificated Pledged Equity consisting of partnership or limited liability company interests that do not constitute securities), to the extent such security interest can be perfected by filing under the UCC, free and clear of all liens except for liens permitted by the Securities Purchase Agreement. The taking possession by the Secured Party of the certificated securities (if any) evidencing the Pledged Equity and all other Instruments constituting Collateral will perfect and establish the first priority of the Secured Party’s security interest in all the Pledged Equity evidenced by such certificated securities and such instruments. With respect to any Collateral consisting of a deposit account, securities entitlement or held in a securities account, upon execution and delivery by the applicable Obligor, the applicable depository bank or securities intermediary and the Secured Party of an agreement granting control to the Secured Party over such Collateral, the Secured Party shall have a valid and perfected, first priority security interest in such Collateral.

 

(d)          Consents; Etc. There are no restrictions in any organizational document governing any Pledged Equity or any other document related thereto which would limit or restrict (i) the grant of a lien pursuant to this Agreement on such Pledged Equity, (ii) the perfection of such lien or (iii) the exercise of remedies in respect of such perfected lien in the Pledged Equity as contemplated by this Agreement. Except for (i) the filing or recording of UCC financing statements, (ii) the filing of appropriate notices with the United States Patent and Trademark Office and the United States Copyright Office, (iii) obtaining control to perfect the liens created by this Agreement (to the extent required under Section 4(a) hereof), (iv) such actions as may be required by laws affecting the offering and sale of securities, (v) such actions as may be required by applicable foreign laws affecting the pledge of the Pledged Equity of foreign Subsidiaries and (vi) consents, authorizations, filings or other actions which have been obtained or made, 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 (including, without limitation, any stockholder, member or creditor of such Obligor), is required for (A) the grant by such Obligor of the security interest in the Collateral granted hereby or for the execution, delivery or performance of this Agreement by such Obligor, (B) the perfection of such security interest (to the extent such security interest can be perfected by filing under the UCC, the granting of control (to the extent required by Section 4(a) hereof) or by filing an appropriate notice with the United States Patent and Trademark Office or the United States Copyright Office) or (C) the exercise by the Secured party of the rights and remedies provided for in this Agreement.

 

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(e)          Right to Inspect the Collateral.  The Secured Party shall have the right, during Debtor’s usual business hours and upon reasonable advance notice, to inspect and examine the Collateral.  Debtor agrees that any reasonable expenses incurred by the Secured Party in connection with this Section 5(b) during the continuance of an Event of Default shall constitute Secured Party Expenses.

 

(f)          Negative Covenants.   Obligors shall not (i) sell, lease or otherwise dispose of, relocate or transfer, any of the Collateral, except dispositions of Collateral that is worn out, obsolete or no longer necessary in the business of Obligors, (ii) allow any liens on the Collateral except the Permitted Liens or (iii) change their names or add any new fictitious name without the written consent of the Secured Party.

 

(g)          Relocation of Principal Place of Business.  The principal place of business of Debtor, and the addresses at which the Collateral is located 1708 Jaggie Fix Way, Lexington, Kentucky 40511, and suvh other address as indicated on Schedule 5(e) hereto.  Debtor shall not, without at least thirty (30) days prior written notice to the Secured Party, relocate such principal place of business or the Collateral, with no relocation being permitted outside the United States in any event.

 

(h)          Further Information.  Obligors shall promptly supply the Secured Party with such information concerning Obligors’ business as the Secured Party may reasonably request from time-to-time hereafter, and shall within five (5) business days of obtaining knowledge thereof, notify the Secured Party of any event which constitutes an Event of Default.

 

(i)          Solvency.  Each Obligor is now and shall be at all times hereafter able to pay its debts (including trade debts) as they mature.

 

(j)          Secured Party Expenses.  Debtor shall, within fifteen (15) business days of written demand from the Secured Party accompanied by adequate documentation of such expenses, reimburse the Secured Party for all sums expended by it which constitute Secured Party Expenses and, in the event that Debtor does not pay any Secured Party Expenses payable to a third party within fifteen (15) business days after notice thereof, then the Secured Party may immediately and without further notice pay such Secured Party Expenses on Debtor’s behalf.  All such expenses shall become a part of the Obligations and, at the Secured Party’s option, will (i) be payable on demand or (ii) be added to the balance of the Note and be payable proportionately with any installment payments that become due during the remaining term of the Note or otherwise be treated as a balloon payment which will be due and payable at the maturity of the Note.  This Agreement shall also secure payment of those amounts.

 

(k)           Commercial Tort Claims.   Obligors have no pending commercial tort claim (as a plaintiff) against any individual or entity (a “Commercial Claim”).  Obligors shall promptly deliver to the Secured Party notice of any Commercial Claim that an Obligor may bring against any individual or entity, together with such information with respect thereto as the Secured Party may reasonably request.  Within ten (10) days after a written request by the Secured Party, Obligors shall grant the Secured Party a security interest in any pending Commercial Claim to the extent such security interest is permitted by applicable law.

 

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(l)          Reliance by the Secured Party; Representations Cumulative.  Each representation, warranty and agreement contained in this Agreement shall be conclusively presumed to have been relied on by the Secured Party regardless of any investigation made or information possessed by the Secured Party.  The representations, warranties and agreements set forth herein shall be cumulative and in addition to any and all other representations, warranties and agreements set forth in the Subscription Documents or any other documents created after the Closing Date and signed by Obligors.

 

6.            Events of Default.  The occurrence of any Event of Default under the Note, after the expiration of any applicable grace or cure period, shall constitute an “Event of Default” by Obligors under this Agreement.

 

		7.	
Rights and Remedies.

 

		(a)	
Rights and Remedies of the Secured Party.

 

(i)          Upon the occurrence and during the continuance of an Event of Default, without notice of election and without demand, the Secured Party may cause any one or more of the following to occur, all of which are authorized by Obligors:

 

(A)          The Secured Party may make such payments and do such acts as it reasonably considers necessary to protect its security interest in the Collateral.  Obligors agree to promptly assemble and make available the Collateral if the Secured Party so requires.  Obligors authorize the Secured Party to enter the premises where the Collateral is located, take and maintain possession of the Collateral, or any part thereof, and pay, purchase, contest or compromise any encumbrance, claim, right or lien which, in the reasonable opinion of the Secured Party, appears to be prior or superior to its security interest in violation of this Agreement, and to pay all reasonable expenses incurred in connection therewith.

 

(B)          The Secured Party shall be automatically deemed to be granted a license or other appropriate right to use, without charge or representation or warranty, Obligors’ labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, and any other property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale and selling any Collateral.

 

(C)          The Secured Party may ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale and sell (in the manner provided for herein) the Collateral.

 

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(D)          The Secured Party may sell the Collateral at either a public or private sale, or both (which in the case of a private sale of Pledged Equity, shall be to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof), by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Obligors’ premises) as is commercially reasonable (it not being necessary that the Collateral be present at any such sale).  In the case of a sale of Pledged Equity, the Secured party shall have no obligation to delay sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act of 1933. Each Obligor further acknowledges and agrees that any offer to sell any Pledged Equity which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such offer may be advertised without prior registration under the Securities Act of 1933), or (ii) made privately in the manner described above shall be deemed to involve a “public sale” under the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act of 1933, and the Secured Party may, in such event, bid for the purchase of such securities

 

(E)          The Secured Party shall be entitled to give notice of the disposition of the Collateral as follows:  (1) the Secured Party shall give Obligors a notice in writing of the time and place of public sale, or, if the sale is a private sale or some other disposition other than a public sale is to be made of the Collateral, the time on or after which the private sale or other disposition is to be made, (2) the notice shall be personally delivered or mailed, postage prepaid, to Obligors at least ten (10) days before the date fixed for the sale, or at least ten (10) days before the date on or after which the private sale or other disposition is to be made, unless the Collateral is perishable or threatens to decline speedily in value in which case the Secured Party shall use commercially reasonable efforts to provide such notice to Obligors as far in advance of such disposition as is practicable, and (3) if the sale is to be a public sale, the Secured Party shall also give notice of the time and place by publishing a notice at least twice, the first at least twenty (20) days before the date of the sale, in a newspaper of general circulation, if one exists, in the county in which the sale is to be held.

 

(F)          The Secured Party may purchase all or any portion of the Collateral at any public sale by credit bid or other appropriate payment therefor.

 

(G)          To the extent permitted by applicable law, the Secured Party shall have the following rights and remedies regarding the appointment of a receiver:  (1) the Secured Party may have a receiver appointed as a matter of right, (2) the receiver may be an employee of  the Secured Party and may serve without bond, and (3) all fees of the receiver and his or her attorney shall be Secured Party Expenses and become part of the Obligations and shall be payable on demand, with interest at the Rate specified in the Note from the date of expenditure until repaid.

 

(H)          The Secured Party, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral.  The Secured Party may at any time, in its reasonable discretion, transfer any Collateral into its own name or that of its nominee(s) and receive the payments, rents, income, and revenues therefrom and hold the same as security for the Obligations or apply it to payment of the Obligations in such order of preference as the Secured Party may determine.  Insofar as the Collateral consists of accounts, general intangibles, loans receivable, insurance policies, instruments, chattel paper, choses in action, or similar property, the Secured Party may demand, collect, issue receipts for, settle, compromise, adjust, sue for, foreclose, or otherwise realize on the Collateral as the Secured Party may determine (in its reasonable discretion), whether or not the Obligations are then due.  For these purposes, the Secured Party may, on behalf of and in the name of Obligors, (1) receive, open and dispose of mail addressed to Obligors, (2) change any address to which mail and payments are to be sent, and (3) endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to the payment, shipment, or storage of any Collateral.  To facilitate collection, the Secured Party may notify account debtors and obligors on any Collateral to make payments directly to the Secured Party.

 

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(ii)          The Secured Party may deduct from the proceeds of any sale of the Collateral all Secured Party Expenses incurred in connection with the enforcement and exercise of any of the rights and remedies of the Secured Party provided for herein, irrespective of whether suit is commenced.  If such deduction does not occur (in the Secured Party’s reasonable discretion), upon demand, Obligors shall pay all of such Secured Party Expenses.  Any deficiency which exists after disposition of the Collateral as provided herein will be paid immediately by Obligors, and any excess that exists will be returned, without interest and subject to the rights of third parties, to Obligors by the Secured Party; provided, however, that if any excess exists at a time when any of the Obligations remain outstanding, such excess shall instead remain as part of the Collateral and continue to be subject to the security interest in Section 3(a) above until such time as all of the Obligations have been fully satisfied or otherwise terminated.

 

(iii)          Voting and payment Rights in Respect of the Pledged Equity.

 

(A)          So long as no Event of Default shall exist, each Obligor may (1) exercise any and all voting and other consensual rights pertaining to the Pledged Equity of such Obligor or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Securities Purchase Agreement and (2) receive and retain any and all dividends (other than stock dividends and other dividends constituting Collateral which are addressed hereinabove), principal or interest paid in respect of the Pledged Equity to the extent they are allowed under the Securities Purchase Agreement; and

(B)          During the continuance of an Event of Default, (1) all rights of an Obligor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to clause (A)(1) above shall cease and all such rights shall thereupon become vested in the Secured Party which shall then have the sole right to exercise such voting and other consensual rights, (2) all rights of an Obligor to receive the dividends, principal and interest payments which it would otherwise be authorized to receive and retain pursuant to clause (A)(2) above shall cease and all such rights shall thereupon be vested in the Secured Party which shall then have the sole right to receive and hold as Collateral such dividends, principal and interest payments, and (3) all dividends, principal and interest payments which are received by an Obligor contrary to the provisions of clause (B)(2) above shall be received in trust for the benefit of the Secured Party, shall be segregated from other property or funds of such Obligor, and shall be forthwith paid over to the Secured Party as Collateral in the exact form received, to be held by the Secured Party as Collateral and as further collateral security for the Secured Obligations.

(b)          Rights and Remedies Cumulative.  The rights and remedies of the Secured Party under this Agreement and any other agreements and documents delivered or executed in connection with the Obligations shall be cumulative.  The Secured Party shall also have all other rights and remedies not inconsistent herewith as are provided under applicable law, or in equity.  No exercise by the Secured Party of any one right or remedy shall be deemed an election.

 

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8.          Additional Waivers.  The Secured Party shall not in any way or manner be liable or responsible for (i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency or other person whomsoever, except to the extent that such loss, damage, liability, cost or expense has resulted from the gross negligence or willful misconduct of the Secured Party or its affiliates.  If the Secured Party at any time has possession of any Collateral, whether before or after an Event of Default, the Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if the Secured Party takes such action for that purpose as Obligors shall request or as the Secured Party, in its reasonable discretion, shall deem appropriate under the circumstances, but failure to honor any request by Obligors shall not of itself be deemed to be a failure to exercise reasonable care.  The Secured Party shall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve, or maintain any security interest given to secure the Obligations.

 

9.          Notices.  All notices or demands by any party relating to this Agreement shall be made in writing as provided in the Note, and with respect to the Obligors other than the Debtor, such notices shall be delivered to the addresses indicated herein.  Each party shall provide written notice to the other party of any change in address.

 

10.       Choice of Law.  The validity of this Agreement, its construction, interpretation and enforcement, and the rights of the parties hereunder and concerning the Collateral, shall be determined under, governed by, and construed in accordance with the laws of the state of New York as applied to contracts made and to be fully performed in such state, without regard to the conflicts of laws provisions thereof, except to the extent that the validity, perfection or enforcement of a security interest hereunder in respect of any Collateral is governed by the laws of the state of New York or some other state, in which case such laws shall govern.

 

 

11.          Waiver of Jury Trial.  THE OBLIGORS EACH WAIVE, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT.

 

12.          General Provisions.

 

(a)          Effectiveness.  This Agreement shall be binding and deemed effective when executed by Obligors and the Secured Party.

 

(b)          Successors and Assigns.  This Agreement shall bind and inure to the benefit of the successors and permitted endorsees, transferees and assigns of the Secured Party.  Obligors shall not assign this Agreement or any rights or obligations hereunder, and any such assignment shall be absolutely void.

 

(c)          Section Headings.  Section headings are for convenience only.

 

(d)          Interpretation.  No uncertainty or ambiguity herein shall be construed or resolved against the Secured Party or Obligors, whether under any rule of construction or otherwise.  This Agreement shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties.

 

(e)          Severability of Provisions.  Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

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(f)          Entire Agreement; Amendments.  This Agreement and the documents referenced herein contain the entire understanding of the parties with respect to the subject matter covered herein and supersede all prior agreements, negotiations and understandings, written or oral, with respect to such subject matter.  No provision of this Agreement shall be waived or amended other than by an instrument in writing signed by Obligors and the Secured Party.

 

(g)          Good Faith.  The parties intend and agree that their respective rights, duties, powers, liabilities and obligations shall be performed, carried out, discharged and exercised reasonably and in good faith.

 

(h)          Waiver and Consent.  No delay or omission on the part of the Secured Party in exercising any right shall operate as a waiver of such right or any other right.  A waiver by the Secured Party of a provision of this Agreement shall not prejudice or constitute a waiver of the Secured Party’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement.  No prior waiver by the Secured Party, nor any course of dealing between the Secured Party and Obligors, shall constitute a waiver of any of the Secured Party’s rights or of any of Obligors’ obligations as to any future transactions.  Whenever the consent of the Secured Party is required under this Agreement, the granting of such consent by the Secured Party in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the reasonable discretion of the Secured Party.

 

(i)          Counterparts.  This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement.

 

(j)          Termination.           Upon full satisfaction or other termination of the Obligations (i) the Secured Party shall release and return to Obligors all of the Collateral and any and all certificates and other documentation representing or relating to the Collateral and (ii) the security interests provided for under this Agreement shall be terminated and of no further force and effect.  At Debtor’s expense, the Secured Party shall take all actions reasonably requested by Debtor in connection with the foregoing.

 

(k)          Consent of Obligors as Issuers of Pledged Equity. Each Obligor/issuer of Pledged Equity party to this Agreement hereby acknowledges, consents and agrees to the grant of the security interests in such Pledged Equity pursuant to this Agreement, together with all rights accompanying such security interest as provided by this Agreement and applicable law, notwithstanding any anti-assignment provisions in any operating agreement, limited partnership agreement or similar organizational or governance documents of such issuer.

 

[remainder of page intentionally left blank]

 

10

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized persons on the date first written above.

 

	 	 	
Obligors

	 	 	 
	 	 	
The Debtor:

	 	 	 
	 	 	
Nexeon Medsystems Inc

	 	 	 
	 	
By:

	
Will Rosellini

	 	
Name:

	
Will Rosellini

	 	
Title:

	
CEO

	
The Other Obligors

 

	 
	
Nexeon Medsystems Puerto Rico

	
Pulsus Medical LLC,

	
Operating Company Corporation,

	
a Kentucky limited liability company

	
a Puerto Rico stock corporation

	 
	 	
By:

	
/s/ Will Rosellini

	 
	
By:

	
/s/ Will Rosellini

	 	
Name:

	
Will Rosellini

	 
	
Name:

	
Will Rosellini

	 	
Title:

	
  CEO

	 
	
Title:

	
  CEO

	 	 	 
	 	 
	 	
Rosellini Scientific LLC,

	 	
a Texas limited liability company

	 	 
	 	
By:

	
/s/ Will Rosellini

	 
	 	
Name:

	
Will Rosellini

	 
	 	
Title:

	
  CEO

	 
	 	 

 

	 	 	
The Secured Party:

	 	 	 
	 	 	
Leonite Capital LLC

	 	 	 
	 	
By:

	
/s/Avrohom Geller

	 	
Name:

	
Avrohom Geller

	 	
Title:

	
CIO

 

11

 

SCHEDULE 1

PLEDGED EQUITY

 

 

 

	
Name of

Subsidiary

	
Jurisdiction

of

Organization

	
Number of

Shares

	
Certificate

Number

	
Percentage

Ownership

	
Percentage

Pledged

	
Nexeon

Medsystems

 Europe, SARL

	
 

Luxembourg

	
25,000

	
1

	
100%

	
100%

	
Nexeon

Medsystems

 Belgium, SPRL

	
 

Belgium

	
107,154

	
N/A

ownership

reflected

on share

register

	
100%

	
100%

	
Nexeon

 Medsystems

Puerto Rico

Operating

Company

 Corporation

 

	
 

 

Puerto Rico

	
N/A – wholly owned subsidiary formed by Nexeon MedSystems Inc.

	
N/A

	
100%

	
100%

	
Pulsus Medical

 LLC

 

	
Kentucky

	
N/A – wholly owned subsidiary formed by Nexeon MedSystems Inc.

	
N/A

	
100%

	
100%

	
Nuviant Medical

 Inc

	
Nevada

	
1,735,000

	
Certificate not issued

	
10%

	
100%

	
MicroTransponder,

 Inc.

	
Delaware

	
267

	
Certificate not issued

	
Less than 1%

	
100%

 

12

 

Schedule 5(e)

 

Locations of Collateral/Addresses of Obligors

Nexeon Medsystems, Inc.

1910 Pacific Avenue, Suite 20000

Dallas, TX 75201

Nexeon Medsystems Belgium, SPRL

Headquarters: Nexeon MedSystems Belgium SPRL,

Rue Bois Saint-Jean 15/1, 4102 Liege, Belgium

Delivery address: Waterfront, Galileilaan 18, 2845 Niel, Belgium

Nexeon Medsystems Europe, SARL

33, rue du Puits Romain, L-8070 Bertrange, Grand Duchy of Luxembourg

Nexeon Medsystems Puerto Rico Operating Company, Inc.

Antiguq Pentinciaria Estata

Carr #21 Bo Monacillos

Rio Piedras, Puerto Rico 00927

Nexeon Medsystems Belgium, SPRL

Headquarters: Nexeon MedSystems Belgium SPRL, Rue Bois Saint-Jean 15/1, 4102

Liege, Belgium,

Delivery address: Waterfront, Galileilaan 18, 2845 Niel, Belgium

Pulsus Medical, LLC

1708 Jaggie Fox Way

Lexington, KY 40511

 

13

 

EXHIBIT A 

 

COLLATERAL

 

 

1.        All accounts, chattel paper, contracts, contract rights, accounts receivable, tax refunds, tax credits, Note receivable, Pledged Equity, documents, other choses in action and general intangibles, including, but not limited to, proceeds of inventory and returned goods and proceeds from the sale of goods and services, and all rights, liens, securities, guaranties, remedies and privileges related thereto, including the right of stoppage in transit and rights and property of any kind forming the subject matter of any of the foregoing;

 

2.         All time, savings, demand, certificate of deposit or other accounts in the name of Obligor or in which Obligor has any right, title or interest, including but not limited to all sums now or at any time hereafter on deposit, and any renewals, extensions or replacements of and all other property which may from time to time be acquired directly or indirectly using the proceeds of any of the foregoing;

 

3.         All inventory and equipment of every type or description wherever located, including, but not limited to all raw materials, parts, containers, work in process, finished goods, goods in transit, wares, merchandise furniture, fixtures, hardware, machinery, tools, parts, supplies, automobiles, trucks, other intangible property of whatever kind and wherever located associated with the Obligor's business, tools and goods returned for credit, repossessed, reclaimed or otherwise reacquired by Obligor;

 

4.         All documents of title and other property from time to time received, receivable or otherwise distributed in respect of, exchange or substitution for or addition to any of the foregoing including, but not limited to, any documents of title;

 

5.         All know-how, information, permits, patents, copyrights, goodwill, trademarks, trade names, licenses and approvals held by Obligor, including all other intangible property of Obligor;

 

6.         All assets of  any type or description  that may at any time be assigned or delivered to or come into possession of Obligor for any purpose for the account of Obligor or as to which Debtor may have any right, title, interest or power, and property in the possession or custody of or in transit to anyone for the account of Obligor, as well as all proceeds and products thereof and accessions and annexations thereto; and

 

7.         All proceeds (including but not limited to insurance proceeds) and products of and accessions and annexations to any of the foregoing.EXHIBIT 10.6

SHARE PLEDGE AGREEMENT

in respect of the shares in

Nexeon Medsystems Belgium SPRL

between

Rosellini Scientific LLC

Nexeon Medsystems Europe S.à.r.l.

as Pledgor

and

Leonite Capital LLC

as Pledgee

Date: August 18, 2017

 

i

 

TABLE OF CONTENTS

 

 

	
1.          DEFINITIONS - INTERPRETATION

	
2

	 	 	 
	
1.1

	
Definitions

	
2

	
1.2

	
Interpretation

	
3

	 	 
	
2.          PLEDGE

	
5

	 	 	 
	
2.1

	
Creation of pledge

	
5

	
2.2

	
Undertaking to pledge

	
5

	
2.3

	
Form

	
5

	 	 
	
3.          RECORDATION AND DECLARATION

	
6

	 	 	 
	
3.1

	
Recordation of Pledge

	
6

	
3.2

	
Declaration by the Company

	
6

	 	 
	
4.          SCOPE OF THE PLEDGE

	
7

	 	 	 
	
4.1

	
Continuing security

	
7

	
4.2

	
Rights additional

	
7

	
4.3

	
Preservation of security

	
7

	 	 
	
5.          ANCILLARY RIGHTS ATTACHED TO THE SHARES

	
8

	 	 	 
	
5.1

	
Voting rights

	
8

	
5.2

	
Cash and non-cash returns on the Shares

	
8

	
5.3

	
Subscription rights and contribution calls

	
9

	 	 
	
6.          REPRESENTATIONS AND WARRANTIES

	
9

	 	 	 
	
6.1

	
Representations and warranties relating to the Pledgors

	
9

	
6.2

	
Representations and warranties relating to the Shares

	
10

	
6.3

	
Representations and warranties relating to the Pledge

	
10

	 	 
	
7.          COVENANTS OF THE PLEDGORS

	
11

	 	 	 
	
7.1

	
Affirmative covenants

	
11

	
7.2

	
Negative covenants

	
11

	 	 
	
8.          ENFORCEMENT

	
11

	 	 
	
9.          APPLICATION OF PROCEEDS

	
13

	 	 
	
10.        DISCLAIMER

	
13

	 	 
	
11.        DISCHARGE OF PLEDGE

	
14

	 	 	 
	
11.1

	
Release

	
14

	
11.2

	
Retention of security

	
14

	 	 
	
12.        POWER OF ATTORNEY

	
14

	 	 	 
	
12.1

	
Appointment

	
14

	
12.2

	
Ratification

	
14

	 	 
	
13.        EVIDENCE OF DEBT

	
15

	 	 
	
14.        WAIVER

	
15

	 	 
	
15.        MISCELLANEOUS PROVISIONS

	
15

	 	 	 
	
15.1

	
Notices

	
15

	
15.2

	
Costs and expenses

	
15

 

ii

 

	
15.4

	
No implied waiver

	
15

	
15.5

	
Severability

	
16

	
15.6

	
Benefit of this Agreement

	
16

	
15.7

	
Assignment

	
16

	
15.8

	
Counterparts

	
16

	
15.9

	
Governing law

	
16

	
15.10

	
Jurisdiction

	
16

	
15.11

	
Waiver of immunity

	
17

	 	 
	
SCHEDULE 1. DECLARATION BY THE COMPANY

	
19

 

iii

 

THIS SHARE PLEDGE AGREEMENT is dated August 18, 2017 and is made between:

BETWEEN:

	1.	
Rosellini Scientific LLC, a limited liability company organized under the laws of the State of Texas, United States of America, having its seat at 2820 Lynn Dell Tool, Dallas, Texas 75143, Division of Corporations under number 46.0827294, acting as pledgor;

hereinafter referred to as the “Pledgor”, it being understood that upon the exercise of the right to purchase, granted by Rosellini Scientific LLC to the benefit of Nexeon Medsystems Europe S.à.r.l. by means of an acquisition agreement dated 10 January 2017 (the “Right to Purchase”), Nexeon Medsystems Europe S.à.r.l. shall be the legal and beneficial owner of 100% of the issued share capital of the Company (as defined below) and all references in this Agreement to Pledgor shall be deemed to be a reference to:

 

Nexeon Medsystems Europe S.à.r.l., a limited liability company organized under the laws of the Grand Dutchy of Luxembourg, having its registered address at 33, rue du Puits Romain, L-8070 Bertrange, registered with the Luxembourg Trade and Companies register under number B 210009,

 

AND

	2.	
Leonite Capital LLC., a limited liability company organized under the laws of the  State of Delaware, United States of America, having its seat at 1 Hillcrest Centre Drive, Suite 232, Spring Valley, New York 10977, acting as pledgee

Hereinafter referred to as Leonite Capital or as the “Pledgee”

The Pledgor and the Pledgee are hereinafter collectively referred to as the “Parties”.

WHEREAS

 

	A.	
Reference is made to a $1,120,000 Senior Secured Convertible Promissory Note issued by Nexeon Medsystems Inc. (the “Issuer”) to Leonite Capital LLC as lender, as documented by (i) that certain Securities Purchase Agreement, dated on or about the date hereof between the Issuer and the Pledgee, (ii) that certain senior secured convertible promissory note by the Issuer in favor of Pledgee, dated on or about the date hereof, and (iii) the security agreement, dated on or about the date hereof, among the Issuer and certain of its affiliates and the Pledgee, (iv) certain warrants granted by the Issuer in favor of the Pledgee, and (v) such other subscription documents as are referenced in the foregoing documents (collectively, the “Note Subscription Documents”).

 

1

 

	B.	
The Parties have agreed that the Pledgor will create the security rights purported to be created hereunder in favor of the Pledgee.

 

	C.	
The Pledgor holds all shares in the Company (as defined below), which represent 100% of its entire issued share capital.

 

	D.	
It is a condition precedent under the Note Subscription Documents that the Pledgor enters into this Agreement.

NOW, THEREFORE, THE PARTIES HAVE AGREED AS FOLLOWS:

	1.	
DEFINITIONS - INTERPRETATION

	1.1	
Definitions

	a)	
Capitalized terms used in this Agreement, including the preamble and the recitals, shall have the meaning specified in the Note Subscription Documents, except where the context requires otherwise or when defined herein.

	b)	
In addition the following terms shall have the following meanings for the purpose of this Pledge Agreement:

 

	 	
Agreement

	
the present share pledge agreement (including its schedules).

	 	 	 
	 	
Ancillary Rights

	
all rights attached to any of the Shares or the Future Shares (as the case may be), including (without limitation) dividends or redemption proceeds or any other values, securities, rights or property received in respect of such shares, and all warrants, options and other rights to subscribe for, purchase or otherwise acquire any shares in the Company.

	 	 	 
	 	
Collateral Act

	
the Act of 15 December 2004 on financial collateral (Wet van 15 december 2004 betreffende financiële zekerheden/ Loi du 15 décembre 2004 relative aux sûretés financières), as amended from time to time.

	 	 	 
	 	
Company

 

	
Nexeon Medsystems Belgium SPRL, a private limited liability company (société privée à responsabilité limitée/besloten vennootschap met beperkte aansprakelijkheid) organized under the laws of Belgium, having its registered office at Rue du Bois Saint-Jean, 15/1, 4102 Ougrée and registered with the Crossroads Bank for Enterprises under number 0525.673.682.

 

2

 

	 	
Encumbrance

	
any mortgage, charge, pledge, lien, security interest, attachment (saisie / beslag) or similar restriction of any kind or other security interest securing any obligation of any person or any other agreement, undertaking or arrangement having a similar effect.

	 	 	 
	 	
Enforcement Event

	
an Event of Default within the meaning of the Note Subscription Documents which is continuing unremedied and unwaived.

	 	 	 
	 	
Future Shares

	
any shares in the Company that the Pledgor may subscribe to or otherwise acquire after the date hereof, together with the Ancillary Rights attached to such shares.

	 	 	 
	 	
Pledge

	
the right of pledge (pand/gage) on shares created or expressed to be created by this Agreement.

	 	 	 
	 	
Pledged Assets

	
the Shares and the Future Shares.

	 	 	 
	 	
Shares

	
107,154 registered shares, in the share capital of the Company, representing 100% of the entire issued share capital of the Company, together with the Ancillary Rights attached to such shares.

	 	 	 
	 	
Secured Obligations

	
any and all obligations and liabilities, whether present or future, actual or contingent, and whether incurred solely or jointly and whether as principal, guarantor or in some other capacity, owed to the Pledgee (i) by the Issuer under or in connection with the Note Subscription Documents, and (ii) by the Pledgor under or in connection with this Agreement, such obligations and liabilities to be increased by interests, commissions, fees and all other costs, charges and incidental amounts related or in connection with the foregoing.

	1.2	
Interpretation

		a)	
Unless indicated to the contrary in this Agreement, a reference to:

		(i)	
a provision of law shall be construed to refer to that provision as amended or re-enacted;

		(ii)	
a person includes its successors, transferees and assignees; and

		(iii)	
the plural form shall be construed to include the singular and vice versa, and words denoting one gender shall be construed to include the other.

		b)	
No provision of this Agreement shall be interpreted against a Party solely because that Party was responsible for drafting, or is relying on, that particular provision.

 

3

 

		c)	
English terms are used in this Agreement only to describe Belgian legal concepts, and the meaning of these words under any foreign law shall be disregarded.

		d)	
In respect of any jurisdiction other than Belgium, any Belgian legal concept referred to in this Agreement shall be deemed to refer in that jurisdiction to the concept that most closely approximates the Belgian legal concept.

		e)	
Titles and headings in this Agreement are used for convenience and reference purposes only and in no way affect the meaning, construction or interpretation of any provision of this Agreement.

		f)	
A reference to any "Pledged Asset" is a reference to that Pledged Asset in whole or in part and includes all rights attached to that Pledged Asset, including dependent rights and ancillary rights.

		g)	
A reference to "Pledge" or a "right of pledge" is, unless the context requires otherwise, a reference to a right of pledge purported to be created under this Agreement over each individual asset falling within the scope of the definition of Pledged Assets.

		h)	
A reference to a "Pledgee" is also a reference to any successor or assignee of the Pledgee, and a reference to the "Pledgor" is also a reference to any successor or assignee of the Pledgor and the Pledgor as successor or assignee of any other party.

		i)	
References to this Pledge, this Agreement, the Note Subscription Documents or any other document or agreement (or to any specified provision thereof) shall be construed as references to this Pledge, this Agreement, the Note Subscription Documents, that document or agreement (including for the purpose of the Secured Obligations and without prejudice to any restriction on amendments) as in force for the time being and as, from time to time, amended, modified, restated, novated, varied, extended or supplemented, which the Pledgor specifically agrees and acknowledges, in relation to any relevant document, may include, without limitation (i) any additional facilities and any increase in any amount made available thereunder and/or any alteration and/or addition to the purposes for which any such amount, or increased amount, may be used, (ii) any facilities provided in substitution or in addition to the facilities originally made available thereunder, (iii) any rescheduling of the indebtedness incurred thereunder whether in isolation or in connection with any of the foregoing, and (iv) any combination of any of the foregoing in accordance with the terms thereof or, as the case may be, with the agreement of the relevant parties and (where any consents are, by the terms of this Agreement or the relevant document, required to be obtained as a condition to such amendment, extension or restatement being permitted) with the requisite consents.  Similarly, references in this Agreement to Secured Obligations will be deemed to include (y) such Secured Obligations as they may be so varied, amended, modified, novated, restated, extended or supplemented from time to time, and (z) any obligations and liabilities which are assumed by any successor to the Pledgor further to any merger, demerger, partial merger, contribution of assets or other corporate restructuring affecting the Pledgor, any assignment, novation, delegation, subrogation of obligations or liabilities, or otherwise.

 

4

 

	2.	
PLEDGE

	2.1	
Creation of pledge

	a)	
As security for the due performance of the Secured Obligations, the Pledgor hereby unconditionally and irrevocably grants to the Pledgee a first-ranking pledge (pand/gage en premier rang/pand in eerste rang) over all Pledged Assets it currently owns and all Pledged Assets it will acquire in the future, to the extent legally possible, as further set out herein. The Pledgee, where applicable in advance, hereby accepts such Pledge.

	b)	
The Pledge shall be governed by the Collateral Act.

	c)	
The Pledgor confirms that it has taken note of the content of the Note Subscription Documents and that it is aware of the scope of the Secured Obligations and the provisions relating to the payment thereof.

	2.2	
Undertaking to pledge

	a)	
To the extent not covered by Clause 2.1Error! Reference source not found. (Creation of Pledge) and permitted by applicable law, as security for the due performance of the Secured Obligations, the Pledgor undertakes to grant a first ranking pledge (pand in eerste rang/gage de premier rang) to the Pledgee over the Future Shares under the same terms and conditions as set out in this Agreement.

	b)	
Upon the acquisition of Future Shares by the Pledgor, the Pledgor shall forthwith (i) notify the Pledgee of the acquisition of the Future Shares, (ii) confirm that the Future Shares are pledged to the benefit of the Pledgee under this Agreement, and (iii) arrange for a similar notice as mentioned in Clause 3.1 (Recordation of Pledge) to be recorded on the folio of the relevant Pledgor in the share register of the Company and provide to the Pledgee forthwith upon such recording a copy of the relevant folio of the share register of the Company reflecting such recording.

	c)	
Upon the acquisition and pledge of Future Shares in accordance with this Agreement, any reference to Shares in this Agreement shall be deemed to include a reference to such Future Shares.

	2.3	
Form

The Shares are in registered form.  The Pledgor shall not, without the Pledgee's prior written consent, permit the conversion of the Shares into dematerialized shares.

 

5

	3.	
RECORDATION AND DECLARATION

	3.1	
Recordation of Pledge

	a)	
Simultaneously with the execution hereof, the Pledgor shall arrange for the following notice to be recorded and dated on the relevant folio in the share register of the Company and signed therein on behalf of the Pledgor and the Pledgee:

“En vertu d’une convention de gage sur actions (parts) (Share Pledge Agreement) en date du ___ ________ 2017 tous les parts de la Société ont été mis en gage au bénéfice de Leonite Capital LLCen conformité avec l’article 5 de la Loi du 15 décembre 2004 relative aux sûretés financières et portant des dispositions fiscales diverses en matière de conventions constitutives de sûreté réelle et de prêts portant sur des instruments financiers.”

(“Pursuant to a share pledge agreement (Share Pledge Agreement) dated _____, 2017, all the shares of the Company have been pledged to the benefit of Leonite Capital LLC in accordance with Article 5 of the Collateral Act.”)

	b)	
Forthwith upon (i) the recordation of the Pledge as referred to in the previous paragraph, the Pledgor shall deliver to the Pledgee a copy of the relevant folio of the share register of the Company reflecting such recordation, and (ii) the exercise of the Right to Purchase, the Pledgor shall deliver to the Pledgee a copy of the relevant folio of the share register reflecting the recordiation of the Pledge as referred to in the previous paragraph.

	c)	
The Pledgor and the Pledgee hereby appoint as their special attorneys each of (i) Pascal Faes, Marian Vanden Broeck, attorneys-at-law, and/or any other attorney-at-law (advocaat/avocat) at law firm Antaxius, and (ii) Pieter Meeus, Inez Vermeesch, Pieterjan Van Assche, Tom Geudens and any other attorney-at-law (advocaat/avocat) at law firm Lydian CVBA, , each with power to act individually and with power of substitution, for the purposes of recording the Pledge (including a pledge over any Future Shares) in the share register of the Company.

	3.2	
Declaration by the Company

The Pledgor shall procure (porte-fort/sterkmaking) that the Company shall immediately upon the execution hereof provide the Pledgee with the declaration in the form of Schedule 1 (Declaration by the Company) signed by the Company.

 

6

	4.	
SCOPE OF THE PLEDGE

	4.1	
Continuing security

	a)	
The Pledge shall constitute continuing security for the due performance of the Secured Obligations and shall remain in full force and effect until released in accordance with the provisions of Clause 11 (Discharge of Pledge) below.

	b)	
Without prejudice to Clause 11 (Discharge of Pledge), the Pledge shall not be discharged by virtue of the fact that the Pledgor does not currently owe the Pledgee any Secured Obligations. Nor shall the Pledge be discharged by any intermediate payment, satisfaction of any part of the Secured Obligations or any settlement of accounts.

	c)	
The Pledge shall not be discharged by the entry of any Secured Obligations into any current account (compte courant /rekening-courant), in which case the Pledge shall secure any provisional or final balance of such account up to the amount of Secured Obligations contained therein.

	d)	
The Pledgee may at any time, without discharging or in any way affecting the Pledge (i) grant the Pledgor additional time or any indulgence, (ii) agree to any moratorium of payments in respect of the Secured Obligations, (iii) amend the terms and conditions of the Secured Obligations in accordance with their terms, (iv) abstain from taking, perfecting or discharging any other security, and (v) abstain from exercising any right or recourse or from proving or claiming any debt and waive any right or recourse.

	4.2	
Rights additional

	a)	
All rights of the Pledgee under this Agreement are in addition to and without prejudice to any other rights vested in the Pledgee. The Pledge may be enforced by the Pledgee without prior recourse to any other security interest or remedy and is in addition to and shall not prejudice or otherwise affect any such security interest or remedy.

	b)	
The Pledgor waives any right it may have to first require the Pledgee to take action against or seek payment from any other party or enforce any other Encumbrance granted by such Pledgor or any other person before seeking to enforce the Pledge.

	4.3	
Preservation of security

In accordance with article 1278 of the Civil Code and without prejudice to the scope of the Secured Obligations, the Pledgor and the Pledgee agree that in the event of novation of all or any parts of the Secured Obligations or any party to this Agreement, the Note Subscription Documents or any other document or agreement pertaining thereto, the Pledge will be maintained automatically, without any further formality or consent, and will continue in full force and effect.

 

7

	5.	
ANCILLARY RIGHTS ATTACHED TO THE SHARES

	5.1	
Voting rights

	a)	
As long as no Enforcement Event has occurred which is continuing, the Pledgor shall retain and exercise its voting rights in respect of the Shares to the extent that the Pledgor in exercising those rights does not: (i) cause an Enforcement Event to occur, or (ii) materially prejudice the validity or enforceability of the Pledge.

	b)	
The Pledgor shall not without the prior written consent of the Pledgee vote in favor of:

		(i)	
the issuance, cancellation or transfer of any shares in the Company's capital by the Company or any reduction of any reserve of the Company;

		(ii)	
a resolution to transfer the authority of the general meeting to issue shares in the Company's capital or to grant rights to subscribe for shares in the Company's capital to any other corporate body;

		(iii)	
a resolution to amend the articles of association of the Company;

		(iv)	
a resolution to dissolve the Company or relating to the liquidation of the Company's business or disposal of all or a material part of the Company's assets;

		(v)	
a resolution which would adversely affect the validity and enforceability of the rights of Pledge;

		(vi)	
a resolution for any merger (fusie) or demerger (splitsing) in which the Company is involved; or

		(vii)	
a resolution for the granting of any security interest in, or encumbrance upon the Shares or any Future Shares.

	c)	
Without limiting the Pledgee's rights under Clause 8 (Enforcement), if an Enforcement Event has occurred and is continuing, the Pledgor (i) shall cast the votes attaching to the Shares in accordance with the Pledgee's instructions, which instructions the Pledgor shall timeously seek, and (ii) shall not, unless with the Pledgee’s prior consent, waive the right (whether statutory or in accordance with the Company's articles of association) to any notice period in respect of the convening of shareholders' meetings of the Company.

	5.2	
Cash and non-cash returns on the Shares

	a)	
As long as no Enforcement Event has occurred and is continuing, all dividends or any other cash return on the Shares (whether in the form of repayment of capital, or otherwise) shall be paid to the Pledgor.

	b)	
After the occurrence and continuance of an Enforcement Event, any dividend or any other cash return on the Shares (whether in the form of repayment of capital, or otherwise) shall be paid exclusively to the Pledgee, which shall apply the same towards the Secured Obligations.  If no Secured Obligations are due and payable, the Pledgee shall hold the amount in pledge as collateral for the Secured Obligations on an account bearing interest at a market rate applicable at such time for similar deposits. If the Pledgor nevertheless receives any dividends or any other cash return on the Shares, such Pledgor shall hold such dividend or other cash return on behalf of the Pledgee and shall transfer it immediately to the Pledgee.

 

8

 

	c)	
Any return on the Shares other than a cash return, irrespective of whether in the form of dividend shares, bonus shares, shares allocated on the occasion of a partial scission or otherwise, shall be delivered (to hold the same in pledge in accordance with the terms of this Agreement) exclusively to the Pledgee, or shall as the case may be give rise to the recording in the Company's share register of a notice as provided in Clause 3.1 (Recordation of Pledge) in the name of the Pledgee and shall be part of the Pledged Assets.

	d)	
The Pledge shall not in any way be affected by any stamping, regrouping, splitting or renewal of the Shares, or by any similar operation, and the securities resulting from any such operation shall be part of the Pledged Assets and subject to this Agreement and the Pledge created hereunder.

	5.3	
Subscription rights and contribution calls

	a)	
Unless expressly agreed otherwise by the Pledgee, the Pledgor shall exercise all subscription rights to which its Shares may be entitled.  The shares resulting from the exercise of any such right shall be held in pledge by the Pledgee as collateral for the Secured Obligations, shall be part of the Shares for the purposes of this Agreement, and shall be delivered to the Pledgee or shall as the case may be give rise to the recording in the Company's share register of a notice as provided in Clause 3.1 (Recordation of pledge) in the name of the Pledgee.

	b)	
The Pledgor shall forthwith pay up any contribution duly called in respect of the Shares.

	6.	
REPRESENTATIONS AND WARRANTIES

The Pledgor makes the following representations and warranties to the Pledgee and represents to the Pledgee that these representations and warranties are and shall remain true, correct and not misleading at all times, each time with reference to the facts and circumstances then existing, until full release of the Pledge in accordance with the provisions of Clause 11 (Discharge of the Pledge) below.

	6.1	
Representations and warranties relating to the Pledgor

	a)	
The Pledgor has satisfied itself that it is in its own interest to grant this Pledge for the due performance of the Secured Obligations.

	b)	
The assets of the Pledgor are not subject to any Encumbrance; nor has any authority been granted or commitment made to create the same (other than as set forth or permitted under the Note Subscription Documents).

 

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	6.2	
Representations and warranties relating to the Shares

	a)	
The Pledgor has full right and title to its Shares and it has full power to dispose of and encumber those Shares.  Except as permitted under the Note Subscription Documents, there is no Encumbrance on any Pledged Assets other than the Pledge, nor has any authority been granted or commitment made to create the same.

	b)	
The share capital of the Company is represented entirely by the Shares and except for the Shares no other shares of the capital stock of the Company are outstanding and no options, warrants, securities or other rights for the purchase of share capital of the Company or for conversion or exchange into the share capital of the Company are outstanding. The Shares are validly issued. There are no profit shares or other shares which do not represent the capital of the Company in existence, nor any warrant, convertible bond or other right whatsoever to acquire shares in the Company.

	c)	
The Shares represent 100% of the issued share capital of the Company.  There is no cause for suspension of the voting rights attached to the Shares and there are no restrictions on the exercise of the voting rights attached thereto.

	d)	
The Shares are capable of being pledged hereunder without the consent of the Company or any third party.

	e)	
The Shares have not been acquired by the Pledgor, or by any earlier owner, as part of an acquisition of a business or of another set of assets falling under Article 442bis of the Income Tax Code 1992, Article 93undecies.B of the VAT Code or Article 16ter of the Royal Decree No. 38 of 27 July 1967 on the social status of self-employed persons.

	f)	
The Company has not declared any dividends in respect of the Shares that are still unpaid on the date hereof.

	g)	
No share certificates have been or will be issued in respect of the Shares.

	6.3	
Representations and warranties relating to the Pledge

	a)	
This Agreement creates a valid and first ranking pledge on the Pledged Assets.

	b)	
No filing, authorization, consent or approval other than as provided in Clause 3 (Recordation) is required to render the Pledge enforceable.

	c)	
The signor of this Agreement on behalf of Leonite Capital LLC is duly authorized to enter in to this Agreement on behalf of the Pledgee.

	d)	
There is no fact known to the Pledgor which materially adversely affects, or which is reasonably likely in the future to materially adversely affect, the Pledge.

 

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	7.	
COVENANTS OF THE PLEDGOR

	7.1	
Affirmative covenants

	a)	
The Pledgor shall ensure that no executory seizure (saisie exécutoire / uitvoerend beslag) is made on any of the Pledged Assets and that any conservatory seizure (saisie conservatoire /  bewarend beslag) thereon is lifted within 60 Business Days of the date on which it was first made.

	b)	
The Pledgor shall notify the Pledgee of the occurrence of (i) any seizure or attachment on any of the Pledged Assets, or (ii) any event or circumstance which could adversely affect  the Pledge or the value of the Pledged Assets.

	c)	
At the Pledgee's first reasonable request, the Pledgor shall supply such information and copies of all documents relating to the Pledged Assets as the Pledgee may require.

	7.2	
Negative covenants

The Pledgor shall not, without the prior written consent of the Pledgee:

	a)	
create or permit any Encumbrance on any of the Pledged Assets or any part thereof (irrespective of whether said Encumbrance has priority over the Pledge), other than the Pledge and as permitted under the Note Subscription Documents;

	b)	
(agree to) sell, lend, transfer or otherwise dispose of any of the Pledged Assets;

	c)	
permit the conversion of the Shares into dematerialized shares;

	d)	
permit or perform any act liable to adversely affect the Pledge; or

	e)	
do anything or permit anything to be done which jeopardizes or could reasonably likely jeopardize the Pledge or the rights of the Pledgee under this Agreement.

	8.	
ENFORCEMENT

	a)	
Upon the occurrence of an Enforcement Event which is continuing, the Pledgee shall be entitled:

		(i)	
to enforce the Pledge in accordance with the laws and regulations applicable at such time of enforcement, and in particular:

		A.	
sell the Pledged Assets or any part thereof even without prior written notice or judgement in accordance with Article 8, §1 of the Collateral Act; or

 

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		B.	
appropriate the Pledged Assets or any part thereof in accordance with Article 8, § 2 of the Collateral Act and the following provisions:

		i.	
The Pledgee shall notify the Pledgor and the Company of its intention to appropriate the Shares, and the transfer of the Shares resulting from the appropriation shall take effect on the date of such notice.  The Pledgor shall procure that, in such event, the transfer is recorded in the share register of the Company on the day on which the Pledgee notifies the Pledgor that it appropriates the Shares, and the Pledgor hereby grants a power of attorney to the Pledgee to record in the share register of the Company the transfer of ownership of the Shares or any part thereof to the Pledgee, as appropriated by the Pledgee in accordance with the provisions of Article 8§2 of the Collateral Act.

		ii.	
For the purposes of this Clause 8.a) B, the value of the Shares or any part thereof shall be the value as determined by an independent expert who must be a member of the Institut des Réviseurs d'Entreprises/Instituut der Bedrijfsrevisoren and a partner in an independent firm of accountants of good international repute and who has not acted for any of the Parties in any material capacity for a period of at least two years before the date of his appointment as expert (the "Expert"). Such Expert shall be appointed by the Parties or, if the Parties fail to agree on the identity of such Expert with five (5) Business Days after the request to appoint such Expert is made by the Pledgee, the Pledgee shall propose to the Pledgor at least three Experts, members of at least two different firms.  The Pledgor shall within five (5) Business Days of the proposal notify the Pledgee (i) that it accepts the proposal, or (ii) that it rejects some, but not all, of the proposed Experts.  The Pledgee shall then select the Expert among those who have not been validly rejected, and inform the Pledgor of the appointment made.

		iii.	
The Expert shall value the Shares in going concern as at the date of the notice under Clause 8 a) (i) B.i (unless the Expert reasonably determines that given the circumstances at the time of the valuation, that assumption is no longer appropriate) based on a multi-criteria approach consistent with best practices for business calculations (including discounted cash flow method, publicly traded comparables, asset valuation, EBIT or EBITDA multiples). The Pledgor shall procure that all necessary documents and data are promptly made available by the Company to the Expert. If the Company fails to make any documents or data promptly available to the Expert, the Expert may value the Shares on the basis of information publicly available or otherwise available to the Pledgee as at the date on which the Pledgee appropriates the Shares.

 

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		iv.	
The valuation of the Shares determined by the Expert shall be final and binding on the Parties except in case of manifest error.

		v.	
Notwithstanding the foregoing, the Pledgor may at all times refrain from appropriating the Pledged Assets and proceed with the option set out under Clause 8 a)(i)A, above.

		(ii)	
to exercise all or any of its rights and remedies and may act generally in relation to the Pledged Assets in such manner as it shall reasonably determine,

but always in accordance with the terms of this Agreement, the terms of the Note Subscription Documents and applicable law.

	b)	
Unless otherwise provided for under any mandatory law, the exercise by the Pledgee of the rights set out in this Clause 8 (Enforcement) shall not be subject to any prior notice to, nor any authorizations from, the courts.

	c)	
The Pledgee shall not have any responsibility in connection with enforcement measures contemplated hereunder, except for its gross negligence or wilful misconduct.

	9.	
APPLICATION OF PROCEEDS

	a)	
All monies received under this Agreement by the Pledgee shall be applied towards performance of the Secured Obligations, subject to mandatory provisions of Belgian law.

	b)	
The Pledgor explicitly waives the benefit of articles 1253 and 1256 of the Belgian Civil Code.

	10.	
DISCLAIMER

	a)	
The Pledgee (including any attorney, agent or other person appointed by the Pledgee) shall not be liable for any costs, losses, claims, duties or expenses in connection with the exercise or non-exercise of any of its rights and powers under this Agreement, except for its gross negligence or willful misconduct.

	b)	
The Pledgor shall fully indemnify the Pledgee, its officers, directors and employees at first request, in respect of all reasonable costs, claims and losses incurred by the Pledgee (including any attorney, agent or other person appointed by the Pledgee) in connection with the exercise or non-exercise of any of its rights and powers under this Agreement, except for the gross negligence or willful misconduct of the Pledgee.

 

13

 

	11.	
DISCHARGE OF PLEDGE

	11.1	
Release

	a)	
Subject to Clause 11.2 (Retention of security), as soon as all Secured Obligations have been irrevocably and fully discharged and all facilities liable to give rise to Secured Obligations terminated and there is no possibility of any further Secured Obligations coming into existence, the Pledgee shall at the request and cost of the Pledgor and without undue delay release the Pledge.

	11.2	
Retention of security

Any release of the Pledge shall be null and void and without effect if any payment received by the Pledgee and applied towards satisfaction of all or part of the Secured Obligations (i) is avoided or declared invalid against creditors of the maker of such payment, or (ii) becomes repayable by the Pledgee or (iii) proves not to have been effectively received by the Pledgee and the Pledgee shall be entitled upon notice to the Pledgor to enforce the Pledge as if such discharge had not occurred.

	12.	
POWER OF ATTORNEY

	12.1	
Appointment

The Pledgor hereby irrevocably appoints the Pledgee, as its agent (with power of substitution) to act in its name and on its behalf for the purposes of:

	a)	
doing anything the Pledgor is obliged to do but has failed to do under this Agreement, following a period of five (5) Business Days after notification of the omission or negligence; and

	b)	
upon the occurrence and during the continuance of an Enforcement Event, exercising any rights conferred on the Pledgor in relation to the Pledged Assets under this Agreement, the Note Subscription Documents or any applicable law.

	12.2	
Ratification

The Pledgor agrees to ratify and confirm any actions taken by the Pledgee as its agent in the exercise or purported exercise of the power of attorney granted pursuant to Clause 12.1 (Appointment).

 

14

 

	13.	
EVIDENCE OF DEBT

A certificate signed by the Pledgee setting forth any amounts due by the Pledgor in respect of the Secured Obligations shall, in the absence of manifest error and until evidence to the contrary is produced, constitute evidence of the existence and amount of the Secured Obligations.

	14.	
WAIVER

In general, and to the extent applicable, the Pledgor waives the benefit of article 1285 of the Belgian Civil Code.

	15.	
MISCELLANEOUS PROVISIONS

	15.1	
Notices

All notices or other communications under or in connection with this Agreement shall be made in accordance with the Note Subscription Documents.

	15.2	
Costs and expenses

The Pledgee may charge all costs, losses, claims and expenses of whatever nature (including legal fees in accordance with the fee arrangements made between the Issuer and the Pledgee) incurred by it in connection with this Agreement. The Pledgor’s obligation of reimbursement shall form part of the Secured Obligations.

	15.3	
Delegation of authority

The Pledgee shall be entitled, at any time and as often as may be expedient, to delegate any or all of the power vested in it by this Agreement in such a manner, upon such terms and to such person(s) as the Pledgee sees fit.

	15.4	
No implied waiver

Nothing shall be construed as a waiver of the rights or powers of the Parties under this Agreement unless a document to this effect has been signed by the relevant Party or notice to that effect has been given. No failure or delay by any Party to exercise any right, power or remedy under this Agreement shall operate as a waiver of the same.

 

15

 

	15.5	
Severability

	a)	
Each provision of this Agreement is several and distinct from the others. If at any time one or more provisions of this Agreement is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired in any way.

	b)	
In the event of any such illegality, invalidity or unenforceability, the Parties shall negotiate in good faith with a view to agreeing on a legal, valid and enforceable replacement provision which, to the extent practicable, is in accordance with the intent and purposes of this Agreement and in its economic effect comes as close as possible to the illegal, invalid or unenforceable provision.

	15.6	
Benefit of this Agreement

This Agreement shall be binding on, and inure to the benefit of, the Parties and their respective successors, transferees and assignees.

	15.7	
Assignment

	a)	
The Pledgor may not assign or transfer their rights and obligations under this Agreement, in whole or in part, without the prior written consent of the Pledgee.

	b)	
The Pledgee may assign or transfer its rights and obligations under this Agreement, in whole or in part.

	15.8	
Counterparts

This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts, each of which when signed shall be an original, but all counterparts shall together constitute one and the same original of this Agreement.

	15.9	
Governing law

This Agreement shall be governed by and construed in accordance with Belgian law.

	15.10	
Jurisdiction

	a)	
All disputes arising out of or in connection with this Agreement which the Parties are unable to settle amicably shall be submitted to the jurisdiction of the relevant Brussels courts (French division).

	b)	
Submission to the jurisdiction of the Brussels courts (French division), as referred to under paragraph a) above, shall not limit the Pledgee's right to initiate proceedings before any other court that may otherwise have jurisdiction.

 

16

 

	15.11	
Waiver of immunity

The Pledgor irrevocably and unconditionally:

	a)	
agrees not to claim immunity from proceedings brought by the Pledgee against it in relation to this Agreement and to ensure that no such claim is made on its behalf; and

	b)	
waives all rights of immunity in respect of it or its assets.

(signature page follows on next page)

 

17

 

Executed on August 18, 2017 in three (3) originals, each Party acknowledging receipt of one original.

This Agreement was executed outside Belgium.

Rosellini Scientific LLC as Pledgor

 

	By:	/s/ Will Rosellini	 	 	 
	 	 	 	 
	Name:	Will Rosellini	 	 
	Title: 	CEO	 	 

 

Nexeon Medsystems Europe S.à.r.l. as Pledgor

 

 

	By:	/s/ Will Rosellini	 	 	 
	 	 	 	 
	Name:	Will Rosellini	 	 
	Title: 	CEO	 	 

 

Leonite Capital LLC as Pledgee

 

 

	By:	/s/ Avrohom Geller	 	 	 
	 	 	 	 
	Name:	Avrohom Geller	 	 
	Title: 	CIO	 	 

 

18

 

SCHEDULE 1.

 DECLARATION BY THE COMPANY

TO:          Leonite Capital LLC

1 Hillcrest Centre Drive, Suite 232

Spring Valley, New York 10977

Dear Sir/Madam,

Re : Share Pledge Agreement dated August 18, 2017

We refer to the share pledge agreement dated on or about the date of this declaration (the “Pledge Agreement”), between Rosellini Scientific LLC as pledgor and Leonite Capital LLC  as pledgee, in respect of 107,154  shares (the “Shares”) representing the entire issued share capital of Nexeon Medsystems Belgium SPRL, a private limited liability company (société privée à responsabilité limitée/besloten vennootschap met beperkte aansprakelijkheid) organized under the laws of Belgium, having its registered office at Rue du Bois Saint-Jean, 15/1, 4102 Ougrée and registered with the Crossroads Bank for Enterprises under number 0525.673.682 (the “Company”).

 

We hereby declare, confirm and acknowledge as follows:

	1.	
Rosellini Scientific LLC is recorded in the share register of the Company as the holder of 100% of the Shares;

	2.	
we have not received notice of and there has been no transfer of the Shares by the Pledgor;

	3.	
we have not received notice of and are not aware of any pledge, attachment or other encumbrance on the Shares other than the Pledge created under the Pledge Agreement;

	4.	
we have full knowledge of the terms and conditions of the above-referenced Pledge Agreement.

Signed on ____ ___________ 2017

For Nexeon Medsystems Belgium SPRL:

Name:

Title:

 

 

19

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