EXHIBIT 9
[EXECUTION COPY]
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PLEDGE AND SECURITY AGREEMENT
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THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made and entered
into as of the 13th day of May, 1997 by SGI Holding Corporation Limited, a
Bermuda exempted company ("Pledgor"), for the benefit of Xxxxxx'x Interactive
Investment Company, a Nevada corporation ("Pledgee").
RECITALS
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A. Pursuant to the terms of that certain Funding Agreement of even date
herewith among Interactive Entertainment Limited, a Bermuda exempted company, as
borrower ("IEL" or Borrower"), and Sky Games International Ltd., a Bermuda
exempted company, ("SGI"), and Pledgee, as lender (the "Funding Agreement"),
Pledgee has agreed to loan to IEL funds required by IEL to fund its day-to-day
business activities up to the amounts set forth in the Funding Agreement. Such
loans shall be evidenced by a Convertible Promissory Note in the form attached
to the Funding Agreement (the "Note").
B. As a condition precedent to making the loans under the Funding
Agreement, Pledgee has required that Pledgor pledge to Pledgee, as security for
the performance of the obligations of Pledgor under a Guaranty dated as of the
date hereof in favor of Pledgee (the "Guaranty"), all of the shares of capital
stock of IEL (the "IEL Shares") received by Pledgor in respect to its capital
contributions to IEL after the date of this Agreement and during the term of the
Note. All capitalized terms contained herein and not otherwise defined shall
have the meanings ascribed to them in the Funding Agreement.
AGREEMENT
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NOW THEREFORE, in consideration of the foregoing recitals, and the
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Pledge of Collateral. Pledgor does hereby convey, transfer, assign, set
over and grant unto Pledgee, as security for the payment and performance of all
of Pledgor's obligations under the Guaranty a continuing general lien upon and
security interest in the Collateral (as hereinafter defined) and in Pledgor's
right to receive all distributions attributable to the Collateral, including,
without limitation, all of Pledgor's right, title and interest in and to all
goods, instruments, money and other property, of whatever kind or character,
whether cash or noncash, real or personal, now or hereafter due to Pledgor in
respect of the Collateral Shares (as hereinafter defined), together with all of
the interest of Pledgor, whether now owned or hereafter acquired, as a member in
any successor entity or as an owner in any other entity, whether said successor
is a continuation of IEL or a reformation thereof, or otherwise, together with
all other property which, absent this assignment would, now or hereafter, be
distributable or distributed, transferable or transferred, payable or paid, or
deliverable or delivered to Pledgor by IEL or by such successor, whether at any
time prior to, or in connection with, or after the liquidation of IEL,
including, without limitation, distributions of cash and distributions of
property in kind, by IEL (collectively, the "Distributions"). Pledgor hereby
irrevocably authorizes and directs IEL, upon receipt of written notice from
Pledgee that an uncured Event of Default has occurred to distribute, transfer,
pay and deliver any and all of said Distributions to Pledgee, at such address as
it may direct, at such time and in such manner as such distributions would
otherwise be distributed, transferred, paid or delivered to Pledgor with respect
to the period following the date of such notice.
2. Collateral. For the purpose of this Agreement, "Collateral" shall mean
all of Pledgor's right, title and interest in and to any and all IEL Shares
issued as of the date hereof or issuable to Pledgor on and after the date of
this Agreement and so long as any amounts or obligations are outstanding under
the
Financing Agreements ("Collateral Shares"), whether now owned or hereafter
acquired, together with all other rights, interests, claims and other property
of Pledgor in any manner arising out of or relating to Collateral Shares,
whether such rights, interests, claims or other property are now owned or
hereafter acquired by Pledgor, whatever their respective kind or character,
whether they are tangible or intangible property, and wheresoever they may exist
or be located, including, without limitation, all of the rights of Pledgor
(whether now owned or hereafter acquired) to Distributions of or from IEL in
respect to the Collateral Shares, whether cash or noncash, and whether prior to
or in connection with the liquidation of IEL and all proceeds, whether cash
proceeds or noncash proceeds (as such terms are defined in the Uniform
Commercial Code), and products of any and all of the foregoing.
3. Delivery of Share Certificates; Stock Powers. Pledgor shall promptly
deliver to Pledgee share certificates, if any, or other documents representing
Collateral acquired or received after the date of this Agreement with stock
powers duly executed by Pledgor. If at any time Pledgee notifies Pledgor that
additional stock powers endorsed in blank held by Pledgee with respect to the
Collateral or other documents with respect to the Collateral are required,
Pledgor shall promptly execute in blank and deliver such stock powers or other
documents as Pledgee may request.
4. Stock Dividends and Distributions. If the Collateral Shares or any
additional shares of capital stock, instruments, or other property distributable
on or by reason of the Collateral, shall come into the possession or control of
Pledgor, and such property is such that a security interest therein can be
perfected only by possession by Pledgee, Pledgor shall hold the same in trust
and forthwith transfer and deliver the same to Pledgee subject to the provisions
hereof. Notwithstanding the above, absent the occurrence of an uncured Event of
Default, Pledgor shall retain the right to vote, receive and retain all
dividends or other Distributions declared on all interests included in the
Collateral Shares. Upon or at any time after the occurrence an uncured Event of
Default, Pledgee, at its option to be exercised in its sole discretion, may
foreclose under the terms of this Agreement and/or deliver written notice to IEL
to pay all Distributions to Pledgee. IEL shall be entitled to rely conclusively
on such notice and is hereby authorized and directed by Pledgor to pay all
Distributions to Pledgee upon receipt of such notice auld shall have no
liability to Pledgor for any loss or damage Pledgor may incur by reason of said
reliance.
5. Power of Attorney. Pledgor hereby constitutes and irrevocably appoints
Pledgee, with full power of substitution and revocation by Pledgee, as Pledgor's
true and lawful attorney-in-fact, to the full extent permitted by law, at any
time or times when an Event of Default has occurred and is continuing, to: affix
to certificates and documents representing the Collateral the stock powers or
other documents delivered with respect thereto; transfer or cause the transfer
of the Collateral or any part thereof on the books of IEL to the name of Pledgee
or Pledgee's nominee and thereafter exercise as to such Collateral all the
rights, powers and remedies of an owner; and execute and file on its behalf any
financing statements, continuation statements or other documentation required to
perfect or continue the security interest created hereby or otherwise protect
Pledgee's interest in the Collateral. The power of attorney granted pursuant to
this Agreement and all authority hereby conferred are granted and conferred
solely to protect Pledgee's interest in the Collateral and shall not impose any
duty upon Pledgee to exercise any power. This power of attorney shall be
irrevocable as one coupled with an interest.
6. No Assumption. Notwithstanding any of the foregoing and except as
otherwise provided herein, whether or not a default by Pledgor shall have
occurred under the terms of the Financing Agreements and whether or not Pledgee
elects to foreclose on its security interest in the Collateral and Distributions
as set forth herein, neither receipt by Pledgee of any of Pledgor's right, title
and interest in and to the Distributions, now or hereafter due to Pledgor from
IEL nor Pledgee's foreclosure of its security interest
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in the Collateral, shall in any way be deemed to obligate Pledgee to assume any
of Pledgor's obligations, duties, expenses or liabilities under, or under any
and all agreements now existing or hereafter drafted or executed (collectively,
the "Obligations"). In the event of foreclosure by Pledgee, Pledgor shall remain
bound and obligated to perform the Obligations and Pledgee shall not be deemed
to have assumed any of such Obligations.
7. Representations, Warranties and Covenants. Pledgor represents,
warrants, covenants and agrees that it has the full right and title to its
interest in the Collateral and the Distributions free and clear of any liens,
encumbrances or security interests other than in favor of Pledgee and the full
power and authority to pledge, convey, transfer and assign its interest therein.
Pledgor shall not convey, transfer, assign, set over or pledge to any other
party any of its interest in the Collateral or the Distributions.
8. Defaults, Remedies.
(a) An "Event of Default" under the Financing Agreements shall be an Event
of Default hereunder (an "Event of Default").
(b) Upon the occurrence of an uncured Event of Default hereunder, Pledgee
may, at its option, do any one or more of the following:
(i) declare all indebtedness secured hereby to be immediately due and
payable, whereupon all unpaid principal of and accrued and unpaid interest
on said indebtedness and other amounts declared due and payable shall be
and become immediately due and payable without presentment, demand, protest
or notice of any kind;
(ii) either personally, or by means of a court appointed receiver, take
possession of all or any of the Collateral and exclude therefrom Pledgor
and all others claiming under Pledgor, and thereafter exercise all rights
and powers of Pledgor with respect to the Collateral or any part thereof.
Upon application to a court of competent jurisdiction, Pledgee shall be
entitled to a receiver as a matter of strict right without notice and
without regard to the adequacy or value of any security for the
indebtedness secured hereby or the solvency of any party bound for its
payment. The receiver shall have all the rights and powers permitted under
the laws of the State of Tennessee. In the event Pledgee demands, or
attempts to take possession of the Collateral in the exercise of any rights
under this Agreement, Pledgor promises and agrees to promptly turn over and
deliver complete possession thereof to Pledgee;
(iii) without notice to or demand upon Pledgor, make such payments and
do such acts as Pledgee may deem necessary to protect its security interest
in the Collateral, including, without limitation, paying, purchasing,
contesting or compromising any encumbrance, charge or lien which is prior
to or superior to the security interest granted hereunder, and in
exercising any such powers or authority to pay all expenses incurred in
connection therewith;
(iv) require Pledgor to take all actions necessary to deliver such
Collateral to Pledgee, or an agent or representative designed by it.
Pledgee, and its agents and representatives, shall have the right to enter
upon any or all of Pledgor's premises and property to exercise Pledgee's
rights hereunder;
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(v) foreclose this Agreement as herein provided or in any manner
permitted by law, and sell or cause to be sold in such order as Pledgee may
determine, the property described in this Agreement;
(vi) sell or otherwise dispose of the Collateral at public or private
sale, without having the Collateral at the place of sale, and upon terms
and in such manner as Pledgee may determine; provided, Pledgee or IEL may
be a purchaser at any sale and may apply any unpaid portion of indebtedness
on account of or in full satisfaction of the purchase price; and
(vii) exercise any remedies of a secured party under the Uniform
Commercial Code of Tennessee or any other applicable law.
(c) Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, Pledgee shall
give Pledgor at least ten (10) days' prior written notice of the time and
place of any public sale of the Collateral or other intended disposition
thereof to be made which notice the parties hereto agree to be reasonable.
Such notice may be mailed to Pledgor at the address set forth in the
Shareholders Agreement.
(d) The proceeds of any sale under subparagraph 7(b)(vi) shall be applied
as follows:
(i) to the repayment of the reasonable costs and expenses of retaking,
holding and preparing for the sale and the selling of the Collateral
(including legal expenses and attorneys' fees) and the discharge of all
assessments, encumbrances, charges or liens, if any, on the Collateral
prior to the lien hereof (except any taxes, assessments, encumbrances,
charges or liens subject to which such sale shall have been made);
(ii) to the payment of all outstanding amounts then due to Pledgee
(including principal and interest) under the Financing Agreements and
(iii) the surplus, if any, shall be paid to the Pledgor or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.
(e) Pledgor recognizes that, by reason of certain prohibitions contained in
the Securities Act of 1933, as amended (the "Securities Act"), and applicable
state securities laws, Pledgee 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 the distribution or resale thereof.
Pledgor acknowledges that any such private sales may be at prices and on terms
less favorable to Pledgor than those obtainable through a public sale without
such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that Pledgee
shall have no obligation to engage in public sale and no obligation to delay
the sale of any Collateral for the period of time necessary to permit the
issuer thereof to register it for a form of public sale requiring registration
under the Securities Act or under applicable state securities laws, even if
Pledgor would agree to do so.
(f) If Pledgee exercises its right to sell any or all of the Collateral,
upon written request from Pledgee, Pledgor shall and shall cause IEL from time
to time to furnish to Pledgee all such
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information as Pledgee may request in order to determine the IEL Shares and
other instruments included in the Collateral which may be sold by Pledgee as
exempt transactions under the Securities Act and the rules of the Securities
and Exchange Commission thereunder, as the same are from time to time in
effect.
(g) Pledgee shall have the right to enforce one or more remedies hereunder,
successively or concurrently, and such action shall not operate to estop or
prevent Pledgee from pursuing any further remedy which it may have, and any
repossession or retaking or sale of the Collateral pursuant to the terms
hereof shall not operate to release Pledgor until full satisfaction of all of
its obligations under the Funding Agreement.
(h) Pledgor agrees that any legal action or proceeding with respect to this
Agreement may be brought in the courts of the State of Tennessee, all as
Pledgee may elect. By execution of this Agreement, Pledgor hereby submits to
such jurisdiction, hereby expressly waiving whatever rights may correspond to
it by reason of its present or future domicile.
9. Further Documentation. Pledgor shall duly execute and/or deliver (or
cause to be duly executed and/or delivered) to Pledgee any instrument, document,
order, financing statement, assignment, waiver, consent, or other writing which
may be reasonably necessary to Pledgee to carry out the terms of this Agreement,
the Funding Agreement and the Note and to perfect its security interest in and
facilitate the collection of the Collateral, the proceeds thereof, and any other
property at any time constituting security to Pledgee. Pledgor shall perform or
cause to be performed such acts as Pledgee may reasonably request to establish
and maintain for Pledgee a valid and perfected security interest in and security
title to the Collateral, free and clear of any liens, encumbrances or security
interest other than in favor of Pledgee.
10. Termination of Agreement and Assignment. This Agreement shall
automatically terminate and shall be surrendered upon satisfaction in full of
all obligations of IEL under the Note, including by way of conversion of amounts
outstanding under the Note into shares of common stock, Cdn. $.01 par value, of
SGI in connection with the amalgamation of IEL with and into SGIH. Upon the
termination of this Agreement, Pledgee shall deliver to Pledgor such instruments
as Pledgor may reasonably request to discharge the lien created by this
Agreement.
11. Governing Law. This Pledge and Security Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee. SGIH
further agrees that the determination of any action relating to this Agreement
or any of the Financing Agreements delivered in favor of Pledgee pursuant to the
terms thereof shall be either an appropriate court of the State of Tennessee or
the United States District Court for the Western District of Tennessee.
12. Successors and Assigns. All agreements, covenants, conditions and
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties hereto.
13. Notices. All notices and other communications to be delivered or made
hereunder shall be in writing and shall be (i) delivered personally, (ii) sent
by postage prepaid certified mail, return receipt requested, (iii) sent by
express courier service, or (iv) sent by facsimile at the following addresses or
at such other addresses as shall be described in a written notice as provided
herein:
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Pledgor: SGI Holding Corporation Limited
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attn: Xxxxxxx X. Xxxxx
Facsimile No.: 604-687-8678
With a copy to: Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. XxXxxx, Esq.
Facsimile No.: 000-000-0000
Pledgee: Xxxxxx'x Interactive Investment Corporation
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Facsimile No.: 000-000-0000
With a copy to: Xxxxxx'x Entertainment, Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx X. XxXxxxxx, Esq.
Facsimile No.: 000-000-0000
All such notices and communications shall be deemed effective, if mailed, upon
expiration of the fifth (5th) day following the date of mailing (except that any
notice of change of address shall be effective only upon receipt by the party to
whom such notice is addressed), if delivered personally or delivered by courier,
upon receipt or refusal of delivery, and if by facsimile, upon the first
business day following confirmed transmission; provided such notice or
communication is also mailed in accordance with the foregoing requirements
within two (2) days of delivery by facsimile.
14. Attorney's Fees. In the event of any dispute or litigation concerning
the enforcement or validity of this Agreement, the losing party shall pay all
reasonable charges, costs, and expenses (including reasonable attorneys' fees
and costs) incurred by the prevailing party whether or not any action or
proceeding is brought relative to such dispute and whether or not such
litigation is prosecuted to judgment.
15. Severability. Every provision of this Agreement is intended to be
severable. In the event any term or provision hereof is declared by a court of
competent jurisdiction to be illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable.
16. Amendment. This Agreement may be modified or rescinded only by a
writing expressly relating to this Agreement and signed by both Pledgor and
Pledgee.
IN WITNESS WHEREOF, Pledgor has executed this Agreement as of the date
first above written.
PLEDGOR
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XXX HOLDING CORPORATION LIMITED
By: /s/ Xxxxxxx X. Xxxxx
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Title: President
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