Exhibit 10.9
SECURITY AND PLEDGE AGREEMENT
(Contribution of LVHE Shares)
THIS SECURITY AND PLEDGE AGREEMENT (the "Agreement") is made and
entered into this 25th day of February 1997, by and between Xxxx X. Xxxxxx, an
individual (hereinafter referred to as "Debtor"), and On Stage Entertainment,
Inc., a Nevada corporation ("Secured Party').
RECITALS
WHEREAS, Debtor and the Secured Party have entered into a Contribution
Agreement dated the date of this Agreement (the "Contribution Agreement");
WHEREAS, in order to secure Debtor's payment and performance of its
obligations to Secured Party under Section 1.1 of the Contribution Agreement,
Debtor agrees to the terms and conditions hereof, including the pledge and
security interest as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, Debtor and Secured Party hereby agree as follows:
AGREEMENT
SECTION 1
PLEDGE AND SECURITY INTEREST
1.01 Pledge and Security Interest. In accordance with Article 9 of the
Nevada Uniform Commercial Code-Secured Transactions, Debtor hereby pledges,
assigns, transfers and grants to Secured Party a security interest in the
collateral described in Section 1.02, below, (the "Collateral") to secure the
payment and the performance of the obligations of Debtor under this Agreement.
1.02 Description of Collateral. The Collateral which is the subject of
the security interest granted herein is: (a) All Debtor's right, title and
interest in, to and under 200,000 of his shares of the common stock of On Stage
Entertainment, Inc. evidenced by stock certificate number ____ ("Pledged
Securities"); (b) all dividends and distributions in connection with the Pledged
Securities (whether consisting of cash, stock, or other property); and (c) all
substitutions for and proceeds of the foregoing.
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1.03 Security for Secured Obligations. This Agreement secures the
Collateral for the prompt payment and performance of all obligations of Debtor
under Section 1.1 of the
Contribution Agreement.
1.04 Perfection of Security Interest. Debtor has delivered the Pledged
Securities to a representative of Secured Party ("Secured Party's
Representative") to be held by said representative at 0000 X. Xxxxx, Xxxxx 0,
Xxx Xxxxx, Xxxxxx 00000. Debtor agrees that Secured Party's Representative is a
person designated by Secured Party to acquire possession of the Collateral for
purposes of perfecting Secured Party's security interest therein. Debtor shall
promptly execute and deliver such other documents or take such other actions,
and provide such other information as may be reasonably requested by Secured
Party to perfect or continue the perfection of the security interest granted
pursuant to this Agreement.
SECTION 2
REPRESENTATIVES AND WARRANTIES
Debtor represents and warrants to Secured Party that Debtor has good
title to the Collateral and has not sold, assigned, or otherwise transferred any
interest in the Collateral to any person or entity other than Secured Party and
that the Collateral is free and clear of any and all liens, security interests
and other charges.
SECTION 3
COVENANTS
3.01 Prohibition Against Sale of Collateral. Debtor will not sell,
transfer or otherwise dispose of the Collateral or any rights therein until
after such time as the Collateral is released from the security interest as set
forth in Section 8 hereof.
3.02 Endorsement. Debtor will execute an appropriate endorsement in
blank relating to the Collateral in form and substance acceptable to Secured
Party.
SECTION 4
POWER OF ATTORNEY
4.01 Grant of Power-of-Attorney. Secured Party is hereby appointed
Debtor's attorney-in-fact, to take the following actions in the event of
Debtor's default hereunder in the sole discretion of Secured Party: (a) to do
any act which Debtor is obligated hereby to do; (b) to exercise such rights, as
Debtor might exercise; (c) to enforce all Debtor's rights under the Collateral;
(d) to collect the Collateral and proceeds thereof; (e) to execute and file in
Debtor's name any financing statements and amendments thereto required to
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perfect Secured Party's security interest hereunder and such other documents as
may be necessary or appropriate to implement the provisions of this Agreement
for the benefit of Secured Party; and (f) to defend the Collateral against
claims of third parties.
4.02 Irrevocability. The power-of-attorney granted under this Section 4
is supported by adequate consideration and is irrevocable.
SECTION 5
CERTAIN RIGHTS OF SECURED PARTY
WITH RESPECT TO PLEDGED SECURITIES
5.01 Secured Party's Rights Under Contribution Agreement. Secured
Party's rights under this Agreement have been separately bargained for, and are
independent of the rights and obligations provided in the Contribution
Agreement. Secured Party's rights under the Contribution Agreement are in no way
impaired or limited by this Agreement.
5.02 Additional Rights of Secured Party. In addition to any other
rights provided under the Contribution Agreement, the Secured Party shall have
the following rights set forth in this Section with respect to the Collateral:
(a) Prior to the full payment and performance of all of Debtor's
obligations under this Agreement, Secured Party shall be entitled
to receive as additional Collateral any and all cash, additional
shares of stock or any other property of any kind payable to
Debtor or distributable on or by reason of the Pledged
Securities, whether in the form of or by way of dividends,
warrants, partial or complete liquidation, conversion,
prepayments or redemption's (in whole or in part), or otherwise.
If any of the foregoing property shall come into the possession
or control of Debtor, Debtor shall hold or control that property
in trust for the benefit of Secured Party and forthwith transfer
and deliver the same to Secured Party subject to the provisions
hereof.
(b) Debtor recognizes that Secured Party may be unable to effect a
sale to the public of all or part of the Pledged Securities by
reason of certain prohibitions or restrictions in federal or
state securities laws and regulation (herein collectively
referred to as "Securities Laws"), or the provisions of other
federal and state laws, regulations or rulings, but may be
compelled to resort to one or more sales to restricted group of
purchasers who will be required to agree to acquire the Pledged
Securities for their own account, for investment and not with a
view to the further distribution or resale thereof without
restriction. Debtor agrees that any sale(s) so made may be at
prices and on other terms less favorable to Debtor than if the
Pledged Securities were sole to the public, and that Debtor has
no obligation to delay the sale of the Pledged Securities for
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period(s) of time necessary to permit the issuer thereof to
register the Pledged Securities for sale to the public under any
of the Securities laws. Debtor agrees that negotiated sales
whether for cash or credit made under the foregoing circumstances
shall not be deemed for that reason not to have been made in a
commercially reasonable manner. Debtor shall cooperate with
Secured Party and shall satisfy any requirements under the
Securities laws applicable to the sale or transfer of the Pledged
Securities by Secured Party.
SECTION 6
DEFAULT
6.01 Events of Default. Debtor agrees that this Agreement shall be in
default if there is a breach of any covenant, representation or warranty
contained in this Agreement ("Event of Default").
6.02 Secured Party's Rights Upon Default. Upon the occurrence of an
Event of Default, Secured Party shall have the rights and remedies provided at
law, in equity and pursuant to this Agreement. Debtor agrees that any proceeds
of the Collateral that are received in connection with any liquidation of the
Collateral or otherwise may be applied by Secured Party to the satisfaction of
the Secured Obligations and that the surplus, if any, shall be returned to
Debtor.
SECTION 7
IRREVOCABLE PROXY
Debtor's execution of this Agreement constitutes Debtor's written
authorization that, upon the occurrence of any Event of Default, Secured Party
shall be entitled to exercise in Secured Party's discretion all voting rights,
if any, pertaining to the Pledged Securities pursuant to an exclusive proxy
authorized by this Section 7. This proxy is coupled with an interest and is
irrevocable.
SECTION 8
RELEASE OF SECURITY INTEREST
Upon the earlier of (i) satisfaction in full of the obligations secured
by this Agreement; (ii) the date it becomes permissible for Stuart to make the
capital contribution to the Company of the LVHE Shares under the Operating
Agreement without breaching any restriction or right of first refusal under the
Operating Agreement; and (iii) when the Secured Party has received cash in
excess of $3 million from Stuart as a result of the contribution of economic
benefit from the LVHE Shares under Section 1.2 of the Contribution Agreement and
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from the Consulting Fee, then upon such event (a) the Collateral shall be
released from the security interest created hereby; and (b) Secured Party shall
execute such documentation as Debtor may reasonably request to document such
release. All capitalized terms used in this Section 8 that are not defined
elsewhere in this Agreement shall have the meanings of those terms as defined in
the Contribution Agreement.
SECTION 9
MISCELLANEOUS
9.01 Notices. Any notice, consent, approval, request, demand or other
communication required or permitted hereunder must be in writing to be effective
and shall be deemed delivered and received when: (a) Personally delivered or if
delivered by facsimile, when electronic confirmation is actually received by the
party to whom notice was sent, or (b) if delivered by mail, whether actually
received or not, at the close of business on the third (3rd) business day
following a day when placed in the United States Mail, postage prepaid,
certified or registered mail, return receipt requested, at the addresses set
forth below (or to such other address as any party shall specify by written
notice so given), and shall be deemed to have been delivered as of the date so
personally delivered or mailed.
The address of Secured Party for purposes of this paragraph is as follows:
On Stage Entertainment, Inc.
0000 X. Xxxxx, Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxx, Esq.
Address for Debtor shall be as follows:
Xxxx X. Xxxxxx
0000 Xxxxxx Xxxxxxx
Xxx Xxxxx, Xxxxxx 00000
9.02 Attorneys' Fees. In the event litigation is commenced to enforce
any of the provisions of this Agreement, to recover damages for breach of any of
the provisions of this Agreement, or to obtain declaratory relief in connection
with any of the provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and costs, whether or not such
action proceeds to judgment.
9.03 Cumulative Remedies. The remedies of Secured Party as provided for
herein, or at law or in equity, shall be cumulative and concurrent, and may be
pursued singly, successfully, or together at the sole discretion of Secured
Party, and may be exercised as often as occasion therefore shall occur and the
failure to exercise any such right or remedy shall in no event be construed as a
waiver or release thereof.
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9.04 Severability. If for any reason whatsoever, any one or more of the
provisions of this Agreement shall be held or deemed to be illegal, inoperative,
unenforceable or invalid as applied to any particular case or in all cases, such
circumstances shall not have the effect of rendering such provision illegal,
inoperative, unenforceable or invalid in any other case or of rendering any
other provisions of this Agreement illegal, inoperative, unenforceable or
invalid.
9.05 Governing Law. This Agreement, and all questions relating to its
validity, interpretation, performance and enforcement (including, but not
limited to provisions concerning limitations of action), shall be governed by
and construed in accordance with the laws of the State of Nevada.
9.06 Binding Effect. The contract shall be binding upon the heirs,
executors, administrators and assigns of the Debtor and any successors in
interest of Secured Party.
9.07 Modification. No change or modification of this Agreement shall be
valid unless the same be made in writing and signed by all parties hereto.
9.08 Captions. The captions contained herein are not a part of this
Agreement. They are only for the convenience of the parties and do not in any
way modify, amplify or give full notice of any of the terms, covenants or
conditions of this Agreement.
9.09 Construction. For purposes of this Agreement, the language of the
contract shall be deemed to be the language of both parties and neither party
shall be construed as the drafter.
9.10 Counterparts/Facsimile Signatures. This Agreement may be executed
in any number of counterparts and each such counterpart as well as any facsimile
signatures thereon shall be deemed to be original for all purposes.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
DEBTOR: SECURED PARTY:
On Stage Entertainment, Inc.
/s/ Xxxx X. Xxxxxx By: /s/ Xxxxx Xxxxx
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Xxxx X. Xxxxxx, an individual Xxxxx Xxxxx
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