EXHIBIT 2
SHAREHOLDER RIGHTS AGREEMENT
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This Agreement is dated as of 17 June, 1997 between Sky Games International Ltd.
("Sky Games"), a Bermuda exempted company, and Xxxxxx'x Interactive Investment
Company, a Nevada corporation ("HIIC").
WHEREAS:
A. Interactive Entertainment Limited ("IEL"), a Bermuda exempted company,
proposes to amalgamate with and into SGI Holding Corporation Limited
("SGIHC"), a Bermuda exempted company (the "Amalgamation"), pursuant to a
Plan and Agreement of Merger and Amalgamation dated 13 May, 1997 (the
"Amalgamation Agreement"), whereby each issued and outstanding share of
common stock, US $1.00 par value per share of IEL will be cancelled and, in
respect of such shares owned by HIIC, which will be converted into shares
of common stock of CDN $.01 par value each of the Sky Games;
B. SGIHC will amalgamate with and into Sky Games immediately after the
Amalgamation (the "Parent Amalgamation"; the company continuing therefrom
is hereafter referred to as the "Amalgamated Company").
NOW, THEREFORE, in consideration of the premises, representations, warranties
and agreements herein contained, the receipt and sufficiency of which are hereby
acknowledged, each party hereto agrees as follows:
I. TERMS
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Capitalised terms not defined herein shall have the same meanings ascribed to
them as set out in the Bye-laws of Sky Games as in effect upon the closing of
the Amalgamation (the "Bye-laws").
II. BOARD APPROVAL RIGHTS
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(A) As long as the HIIC Entities own 20% or more of the outstanding Voting
Shares of the Amalgamated Company on a "fully diluted basis" (as such term is
defined in the Bye-laws), none of the following actions shall be taken by the
Amalgamated Company unless the same shall first be approved by a Special Board
Majority:
(a) the sale of all or any material portion of the assets of the
Amalgamated Company together with any corporation, partnership, joint
venture or other legal entity of which the Amalgamated Company (either
alone or through or together with any other of its Subsidiaries),
owns, directly or indirectly, fifty percent (50%) or more of the
capital stock or other equity interest the holders of which are
generally entitled to vote with respect to the election of directors
or other managing authority and/or other matters to be
voted on in such corporation, partnership, joint venture or other
legal entity (each a "Subsidiary").
(b) the incurrence, renewal, refinancing, prepayment or amendment of the
terms of indebtedness of the Amalgamated Company together with its
Subsidiaries in excess of US$5 million in any one fiscal year;
(c) the Amalgamated Company or any of its Subsidiaries entering into
any material joint venture or partnership agreement outside of the
Amalgamated Company's scope of business as approved by the Board of
Directors of Sky Games prior to the Amalgamation;
(d) any material acquisition of assets by the Amalgamated Company or
any of its Subsidiaries, including by lease or otherwise (other than
by merger, consolidation or amalgamation) and other than pursuant to a
previously approved budget or plan, or the acquisition by the
Amalgamated Company or any of its Subsidiaries of the stock of another
entity, in each case involving an acquisition valued at US$5 million
or more;
(e) any material change in the nature of the business conducted by the
Amalgamated Company or any of its Subsidiaries;
(f) any material amendments to the MIP (as defined in the Amalgamation
Agreement) for 12 months following the closing of the Parent
Amalgamation;
(g) the adoption of any stock option plans for greater than 5% of the
then outstanding Common Shares of the Amalgamated Company on a fully-
diluted basis other than the MIP in any one fiscal year;
(h) material changes in accounting policies; and
(i) the creation or adoption of any shareholder rights plan.
(B) As long as the HIIC Entities own 10% of the outstanding Voting Shares of
the Amalgamated Company on a fully diluted basis, none of the following actions
shall be taken by the Amalgamated Company unless the same shall first be
approved by a Special Board Majority:
(a) any change in or conduct of the Amalgamated Company's or any of its
Subsidiaries' business or proposed business (including, but not limited to,
the terms of repurchase or redemption of any debt from any holder thereof
if such holder would be a Disqualified Holder (as defined in the
Bye-laws if such Person held shares of the Amalgamated Company) that would
constitute or result in; or (b) any action or inaction of or by the
Amalgamated Company or any of its Subsidiaries which HIIC or the Affiliates
of HIIC determine in their reasonable business judgment would result in, in
the case of either (a) or (b), any actual or threatened disciplinary action
or any actual or threatened regulatory sanctions with respect to or
affecting the loss of, or the inability to obtain or failure to secure the
reinstatement of, any registration, certification, license or other
regulatory approval held by HIIC or the Affiliates of HIIC in any
jurisdiction in which HIIC or any of the Affiliates of HIIC are actively
conducting business or as to which any of them has received final approval
or authorisation or proceed, even on a preliminary basis, from its
respective board of directors (or any appropriate committee established by
such board of directors) of plans to conduct business (each such change,
conduct, action or inaction referred to herein as a "Disqualifying
Action"); provided, the reasonable business judgment to be exercised by
HIIC and the Affiliates of HIIC in determining whether a Disqualifying
Action has occurred or would result need not involve any consideration of
the effect of the Disqualifying Action on the Amalgamated Company alone or
together with its Subsidiaries because the purpose of the protections
afforded by the determination of a Disqualifying Action is for the benefit
of the separate businesses and investments of HIIC and the Affiliates of
HIIC.
III. ENTIRE AGREEMENT; AMENDMENT
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This Agreement constitutes the entire agreement between the parties in respect
of the subject matter hereof. No provision of this Agreement may be amended or
waived except by an instrument in writing executed by the parties.
IV. GOVERNING LAW
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This Agreement shall be governed by and construed in accordance with the laws of
Bermuda, regardless of the laws that might otherwise govern under applicable
principles of conflict of laws of such country, and the parties hereby submit
expressly to the non-exclusive jurisdiction of the courts of Bermuda.
V. HEADINGS
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The headings appearing above certain paragraphs of this Agreement are for
convenience only and shall not affect the construction or interpretation hereof.
VI. ASSIGNMENT
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Neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by operation of law or otherwise by any party hereto
without the prior written consent of the other party, and any purported
assignment without such consent shall be void; provided that HIIC may assign
this Agreement to any of its Affiliates without consent. Subject to the
foregoing sentence, this Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties
VII. SEVERABILITY
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If any term or provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other terms, provisions
and conditions of this Agreement shall nevertheless remain in full force and
effect so long as the economic and legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party hereto. Upon any determination that any term or other provision hereof is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of such parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
VIII. ENFORCEMENT OF THIS AGREEMENT
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The parties hereto agree that irreparable damage would occur in the event that
any of the terms or provisions of this Agreement were not performed in
accordance with their specific wording or were otherwise breached. It is
accordingly agreed that each of the parties hereto shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
of America or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party may be entitled at law or in equity. In any
action to enforce its rights hereunder, the prevailing party shall be entitled
to recover its reasonable fees and expenses (including reasonable attorney's
fees and expenses) from the non-prevailing party.
IX. COUNTERPARTS
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This Agreement may be executed in any number of counterparts, all of which shall
be considered one and the same agreement.
IN WITNESS WHEREOF the parties have caused this Agreement to be duly
executed and delivered.
SIGNED by )
for and on behalf of SKY GAMES) /s/ Xxxxxxxx Xxxxxx
INTERNATIONAL LTD. in the )
presence of )
SIGNED by )
for and on behalf of XXXXXX'X ) /s/ Xxxx X. Xxxxxx
INTERACTIVE INVESTMENT )
COMPANY in the presence of )
