PRIORITIES AGREEMENT
This priorities agreement (the "Agreement") is entered
into as of the 23rd day of March, 2004 by and among RED BROOK
DEVELOPMENTS LIMITED, in its capacity as a holder of A Units of VBI
and B Units of VBI, and on behalf of THE PARTIES LISTED ON SCHEDULE
"A" HERETO (the "A Unit Debentureholders"), solely in their capacity
as holders of A Units of VBI, and not in any other capacity, and on
behalf of THE PARTIES LISTED ON SCHEDULE B HERETO (the "B Unit
Debentureholders"), solely in their capacity as holders of B Units
of VBI, and not in any other capacity, XXXX XXXXXXX ("Xxxxxxx"),
VISUAL BIBLE INTERNATIONAL, INC. ("VBI") and DELUXE TORONTO LTD.
("Toronto"), DELUXE MEDIA SERVICES, INC. (formerly Deluxe Video
Services, Inc. and hereinafter referred to as "Media") and DELUXE
LABORATORIES, INC. ("Labs", and along with Media and Toronto,
collectively, "Deluxe").
FACTUAL BACKGROUND
(a) By a video duplication, dvd replication and
distribution services agreement dated as of August, 2002 (the "Video
Agreement"), VBI granted to Media a lien (the "Video Lien") in, to
and over certain property owned by VBI, but in the possession of Media;
(b) By a film processing agreement dated as of
August 27, 2002, VBI granted to Labs a lien (the "Labs Lien") in, to
and over certain property owned by VBI, but in the possession of Labs;
(c) By an inventory security agreement (the
"Inventory Security Agreement") dated as of March 1, 2004, VBI
granted a security interest (the "Deluxe Inventory Security
Interest") to and in favour of Deluxe in, to and over Collateral,
including a Purchase Money Security Interest;
(d) VBI has granted security interests in, to and
over the property described therein to and in favour of the A Unit
Debentureholders pursuant to general security agreements and
security agreements each dated as of December 24, 2002 as amended,
modified and supplemented from time to time;
(e) VBI has granted security interests in, to and
over the property described therein to and in favour of the B Unit
Debentureholders pursuant to general security agreements and
security agreements each dated as of August 28, 2003 as amended,
modified and supplemented from time to time; and
(f) VBI has granted a security interest in, to and
over the property described therein to and in favour of Xxxxxxx
pursuant to a general security agreement and a U.S. indemnity and
security agreement.
In consideration of the sum of $1.00 and for other good
and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged) the undersigned hereby agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Unless otherwise defined herein, capitalized terms shall
have the meaning set out in the Inventory Security Agreement.
1.2 "Access Documents" means:
(a) the letter dated November 12, 2003 from VBI to Toronto and
accepted by ThinkFilm LLC;
(b) the letter dated November 12, 2003 from VBI to Toronto and
accepted by Cinemavault Releasing Inc.;
(c) the letter dated November 26, 2003 from Cinemavault
Releasing Inc. to Labs and agreed to by Cidif Entertainment Group SpA;
(d) the Laboratory Pledgeholder Agreement dated as of February
21, 2003 by and among Royal Bank of Canada ("RBC"), Toronto, Film
Finances Canada (1998) Ltd. ("Film Finances") and The Book of
Xxxx, Inc.("BOJ"); and
(e) the Laboratory Agreement relating to "The Gospel of Xxxx"
dated as of November, 2003 by and among Toronto, The Gospel of
Xxxx Limited, BOJ, RBC, Film Finances, Maybury Media LLP and VBI.
ARTICLE 2 - CONSENT
2.1 This Agreement in no way relates to or affects the Video
Lien or the Labs Lien or the priorities of such liens in comparison
to any other security interest now or hereafter granted by VBI.
2.2 Each of the A Unit Debentureholders, B Unit
Debentureholders and Xxxxxxx (collectively, the "Third Party Secured
Parties") hereby respectively confirms, acknowledges and consents to
the creation and issuance by VBI to Deluxe of the Deluxe Inventory
Security Interest and to the incurrence by VBI of the obligations
secured thereby, and that the creation, issuance and incurrence of
the same does not constitute a default under any of the respective
security interests granted by VBI to each of the Third Party Secured
Parties (collectively, the "Third Party Security Interests").
ARTICLE 3 - SUBORDINATION
3.1 In the event that:
(a) the Deluxe Inventory Security Interest has attached and been
perfected in all relevant jurisdictions;
(b) the Deluxe Inventory Security Interest has obtained and
maintained the super-priority status given to a purchase money
security interest in inventory and its proceeds under all relevant
statutes, including without limiting the generality of the foregoing
Uniform Commercial Code Article 9 and PPSA (Ontario); and
(c) the Deluxe Inventory Security Interest continuously maintains
its perfection and does not lose its super-priority status of a
purchase money security interest in all relevant jurisdictions,
the Deluxe Inventory Security Interest shall have priority to the
Third Party Security Interests;
3.2 In the event that :
(a) the Deluxe Inventory Security Interest has attached and been
perfected in all relevant jurisdictions;
(b) the Deluxe Inventory Security Interest has not obtained and
maintained the super-priority status of a purchase money security
interest in inventory and in proceeds under all relevant statutes;
and
(c) the Deluxe Inventory Security Interest continuously maintains
its perfection in all relevant jurisdictions,
the Third Party Security Interests shall be subordinate to the
Deluxe Inventory Security Interest if and only if there are no other
security interests in the Collateral which rank in priority to the
Deluxe Inventory Security Interest and subordinate to the Third
Party Security Interests (an "Intervening Security Interest"), other
than the security interests in favour of Royal Bank of Canada and
Film Finances, Inc.
3.3 Notwithstanding the provisions of paragraph 3.2 hereof, if
it is determined that a creditor holds an Intervening Security
Interest and Deluxe has otherwise satisfied the conditions in
paragraph 3.2 hereof, Deluxe may take such steps as may be necessary
to either:
(a) fully satisfy the obligations secured by the Intervening
Security Interest without resort to or claim against any of the
assets of VBI in respect thereof, or
(b) obtain the discharge and release of such Intervening Security
Interest or the subordination of the such security interest to below
the ranking of the Deluxe Inventory Security Interest
in which event, the Deluxe Inventory Security Interest shall have
priority to the Third Party Security Interests.
3.4 In all other events, the Third Party Security Interests shall
rank in priority to the Deluxe Inventory Security Interest
ARTICLE 4 - COVENANTS OF DELUXE
4.1 Upon receipt by Deluxe of all outstanding amounts owing to
Deluxe by VBI, excluding all amounts owing by VBI to Deluxe under
the US$450,000 trade line of credit granted to VBI by Deluxe
pursuant to the Video Agreement,(the "Net Amount"), Deluxe shall:
(a) provide to VBI copies of any and all property and assets
provided by VBI to Deluxe (or any of its affiliates) and any copies,
reproductions, replications or derivative works in any form, which
are or may be required or are used to produce, manufacture or
distribute the Collateral, including without limiting the generality
of the forgoing the original digital linear tape masters, original
digital versatile disc masters, original videotapes and the Elements
and any and all items included in the schedules to the Access
Documents (the "Materials"), with the cost of such copying being for
the account of VBI, such costs estimated at the date hereof to be
US$25,000; or
(b) if the agreements underlying the Access Documents, with
the exception of the Access Documents set out in sections 1.2(a) and
(b) above, have been terminated or the necessary consents of the
various parties thereto obtained and delivered to Deluxe, return the
originals of the Materials to VBI, without requiring any further
payment.
4.2 In the event that the Net Amount is paid, but neither the
agreements underlying the Access Documents have been terminated nor
the necessary consents of the various parties to the Access
Documents have been delivered to Deluxe, as required by section
4.1(b) above, then at the option of Deluxe, Deluxe may return the
originals of the Materials to VBI without requiring further payment,
provided VBI provides an indemnity in favour of Deluxe in form and
substance satisfactory to Deluxe.
ARTICLE 5 - COVENANTS OF COMPANY
5.1 VBI hereby confirms to and agrees with the Third Party
Secured Parties and Deluxe that so long as VBI remains obligated or
indebted to the Third Party Secured Parties and Deluxe, it shall
hold its assets for the Third Party Secured Parties and Deluxe in
accordance with their respective interests and priorities under this
Agreement.
ARTICLE 6 - GENERAL
6.1 From time to time upon request therefor, the Third Party
Secured Parties and Deluxe may advise each other of the particulars
of the indebtedness and liability of VBI to each other and all
security held by each therefor.
6.2 The Third Party Secured Parties, Deluxe and VBI shall do,
perform, execute and deliver all acts, deeds and documents as may be
necessary from time to time to give full force and effect to the
intent of this Agreement. The parties each agree to sign and
register, as required, such further documentation as may be
requested to give effect to this Agreement from time to time.
6.3 Any demand on VBI for repayment of any funds owed and any
notices of default given to VBI shall be copied to the Third Party
Secured Parties and Deluxe (as applicable). Neither the Third Party
Secured Parties nor Deluxe shall be liable for any accidental
omission to provide notice to the other of them as required pursuant
to this section 6.3.
6.4 None of the Third Party Secured Parties shall transfer or
assign any of the Third Party Security Interests without obtaining
from the assignee or transferee an agreement in favour of Deluxe to
be bound by the provisions of this Agreement in form satisfactory to
Deluxe.
6.5 This Agreement may be executed in several counterparts,
each of which when so executed shall be deemed to be an original and
such counterparts together shall constitute one and the same
instrument and shall be effective as of the formal date hereof.
Counterparts may be executed either in original or faxed form and
the parties adopt any signatures received by a receiving fax machine
as original signatures of the parties, provided however, that any
party providing its signature in such manner shall promptly forward
to the other party an original of the signed copy of this Agreement
which was so faxed.
6.6 This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective successors and
assigns, and shall be governed by the laws of Ontario.
6.7 This Agreement shall continue in full force and effect
until the date on which it is terminated by the mutual consent of
the Third Party Secured Parties and Deluxe; provided, however, that
unless otherwise agreed no such termination shall affect the
priorities set out herein with respect to the property of VBI
subject to this Agreement at the time of such termination.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement under the hands of the duly authorized officers as of the
date first set out above.
RED BROOK DEVELOPMENTS LIMITED
By:
Authorized Signing Officer
DELUXE MEDIA SERVICES, INC.
Per:
Authorized Signing Officer
DELUXE LABORATORIES, INC.
Per:
Authorized Signing Officer
DELUXE TORONTO LTD.
Per:
Authorized Signing Officer
VISUAL BIBLE INTERNATIONAL, INC.
Per:
Authorized Signing Officer
SIGNED, SEALED AND DELIVERED
in the presence of
Witness Xxxx Xxxxxxx
SCHEDULE "A"
Red Brook Developments Limited
Augusta Holding Inc.
Xxxxxxx Xxxxxxx
Xxx Xxxxxxxxxx
Xxxx Xxxxxx
Xxxx Xxxxxxx Limited
Art Xxxxxxxxxx
Xxxxxxx Maznic
Xxxxxx Steels
GWL Growth Equity Fund
AGF Growth Equity Fund
IGF AGF Diversified Growth Fund
London Life Growth Equity Fund
IG AGF Diversified Growth Class
New Century Investments Holdings Ltd.
SCHEDULE "B"
Red Brook Developments Limited
Westdale Construction Co. Limited
The Xxxx Xxxxx Investment Corporation
Xx. Xxxxxx Grad
Art Xxxxxxxxxx
Xxx Xxxxxx
Xxxxxxx Glow
Xxxx Xxxxxx
Inglewood Holdings Inc.
Xxx Xxxxxx
