EXHIBIT
10.1
STOCK PLEDGE AND GUARANTY
AGREEMENT
This STOCK PLEDGE AND GUARANTY
AGREEMENT (this
“ Agreement ”), dated as of February
6, 2007, is made by PacificNet Inc., a Delaware Corporation,
(“ Pledgor ”) in favor of Pope
Investments LLC, a Delaware limited liability company (the “
Pledgee ”). Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them
in the Loan Agreement.
W I T N E S S E T
H
WHEREAS , PACIFICNET GAMES LIMITED ,
a company organized under the laws of the
British Virgin Islands (the “Company”), and Pledgee
have entered into that certain Loan Agreement, dated as of even
date herewith (as amended, supplemented or modified from time to
time, the “Loan Agreement”), and the Company has issued
a Convertible Secured Promissory Note, in favor of Pledgee, dated
as of even date herewith (the “Note”, and together with
the Loan Agreement, the “Loan Documents”) pursuant to
which Pledgee has agreed to make available to the Company during
the period the Note is outstanding loans (the “Loans”)
aggregating $5,000,000 all in accordance with and subject to the
terms and conditions set forth in the Loan Documents;
WHEREAS , the extension and/or continued extension of
the Loans, as aforesaid, by Pledgee is necessary and desirable to
the conduct and operation of the business of the Company and will
inure to the personal and financial benefit of Pledgor;
and
WHEREAS , Pledgor presently owns 51% of the issued and
outstanding shares of the Company (the “ Pledged
Shares ”);
WHEREAS, it is a condition precedent to Pledgee’s
obligation to make the Loans pursuant to the Loan Documents, that
Pledgor executes and delivers this Agreement;
NOW, THEREFORE , for good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged,
Pledgor hereby agrees as follows:
1.
Pledge . Pledgor hereby pledges to Pledgee, and grants to
Pledgee, a security interest in, all of its right, title and
interest in, to and under the following (the “
Pledged Collateral ”):
(a) the Pledged Shares now owned by Pledgor and the
certificates, if any, representing such Pledged Shares, and all
securities, instruments, rights and other property from time to
time received, receivable or otherwise distributed in exchange for
any or all of such Pledged Shares; and
(b) all other property hereafter delivered to
Pledgee in substitution for, as proceeds of, any of the foregoing,
and all certificates, instruments and documents representing or
evidencing such property.
2.
Guaranty; Security for
Liabilities .
(a) Pledgor hereby irrevocably, unconditionally and
absolutely guarantees to Pledgee the prompt, complete and full
payment and performance when due, no matter how the same shall
become due, but subject to any applicable grace periods, of all
Loans outstanding from time to time under the Note, together with
all interest thereon and all other sums payable under the Note,
whether in respect of Loans, interest, fees or otherwise, (the
“Liabilities”). Notwithstanding anything to the
contrary contained in this Guaranty, the aggregate liability
hereunder shall not exceed Loans representing $2,000,000 in the
aggregate (together with interest thereon).
(b) The Pledgor shall also be responsible for all
out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred in the enforcement or protection of rights
hereunder, after demand under this Stock Pledge and Guaranty
Agreement has been made and not timely honored.
(c) It is the intention hereof that Pledgor shall
remain liable as a principal until the full amount of all
Guaranteed Obligations shall have been indefeasibly paid in full in
cash or Conversion Shares (including by enforcement of
Pledgee’s rights in the Pledged Collateral) and performed and
satisfied in full and the Note irrevocably terminated,
notwithstanding any act, omission or anything else which might
otherwise operate as a legal or equitable discharge of
Guarantor.
(d) Pledgor acknowledges and agrees that its
obligations hereunder shall not be impaired, modified, changed,
released or limited in any manner whatsoever by any impairment,
modification, change, release or limitation of the liability of the
Company of the Guaranteed Obligations or any other person or his or
their respective estates in bankruptcy resulting from the operation
of any present or future provision of the bankruptcy laws or other
similar statute, or from the decision of any court.
(e) Upon payment or satisfaction of any of the
Guaranteed Obligations by the Pledgor or upon enforcement of
Pledgee’s rights in the Pledged Collateral, the Pledgor shall
be subrogated to the rights of the Pledgee against the Company with
respect to such Guaranteed Obligations, and the Pledgee agrees to
take at the Pledgor’s expense such steps as the Pledgor may
reasonably request to implement such subrogation.
3.
Delivery of Pledged
Shares . All certificates, instruments or documents, if
any, representing or evidencing the Pledged Shares shall be
delivered to and held by Loeb & Loeb LLP, as escrow agent
pursuant to that certain escrow agreement, dated as of the date
hereof, on behalf of Pledgee pursuant hereto and shall be in
suitable form for transfer by delivery, shall be accompanied by
duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to Pledgee. Pledgor
agrees that it will not issue new or additional certificates,
instruments or documents to evidence the Pledged Shares without the
prior written approval of Pledgee and, if approved, Pledgor will
comply with all instructions of Pledgee regarding the continued
perfection of the Pledged Shares.
4.
Representations and
Warranties . Pledgor represents and warrants as
follows:
(a) The Pledged Shares have been duly authorized
and validly issued and are fully paid and
non-assessable.
(b) Pledgor is the legal and beneficial owner of
the Pledged Collateral, except for the lien created by this
Agreement, the Loan Agreement and the Note, free and clear of any
lien, security interest, pledge, warrant, option, purchase
agreement, shareholders’ agreement, restriction, redemption
agreement or other charge, encumbrance or restriction of any nature
on the Pledged Collateral, with full right to deliver, pledge,
assign and transfer the Pledged Collateral to Pledgee as Pledged
Collateral hereunder. The grant of a lien in the Pledged Collateral
or the exercise by any Pledgee of any of its rights and remedies
hereunder will not violate the terms of any charter, by-laws,
shareholder agreement or other agreement to which Pledgor is a
party.
(c) Except to the extent already obtained or made,
no authorization, approval, or other action by, and no notice to or
filing with, any governmental authority, regulatory body or other
Person is required either (i) for the pledge by Pledgor of the
Pledged Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by Pledgor, or (ii) for
the exercise by Pledgee of the voting or other rights provided for
in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement (except as may be required in
connection with a disposition of such Pledged Shares pursuant to
laws affecting the offering and sale of securities
generally).
(d) Pledgor has full power and authority to enter
into this Agreement and has the right to pledge and grant a
security interest in the Pledged Collateral as provided by this
Agreement and, has the full power and authority to vote such
Pledged Shares.
(e) None of the Pledged Shares has been issued in
violation of any federal, state or other law, regulation or rule
pertaining to the issuance of securities, or in violation of any
rights, pre-emptive or otherwise, of any present or past
stockholder of Issuer.
5.
Voting Rights; Dividends;
Etc.
(a) So long as no Event of Default (as hereinafter
defined) shall have occurred (and be continuing):
(i) Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged
Shares or any part thereof for any purpose not inconsistent with
the terms of this Agreement, or the Loan Documents; provided
, however , that Pledgor shall not, without Pledgee’s
prior written consent, exercise nor shall it refrain from
exercising any such right if such action (A) violates the terms of
this Agreement, or any of the Loan Documents, (B) impairs the
validity or priority of the security position or interests of
Pledgee in any manner whatsoever in violation of this Agreement, or
(C) causes an Event of Default.
(ii) Pledgor shall be entitled to receive and retain
any and all cash dividends, cash distributions, cash interest and
principal and cash proceeds paid in respect of the its Pledged
Collateral.
(b) Upon the occurrence (and during the
continuance) of an Event of Default:
(i) All rights of Pledgor to exercise the voting
and other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 5(a)(i) and to receive the dividends,
distributions (other than tax distributions), and proceeds which it
would otherwise be authorized to receive and retain pursuant to
Section 5(a)(ii) shall cease, and all such r
