SECOND ADDENDUM TO THE DEBENTURES
This Second Addendum to the Debentures (this "Second
Addendum"), dated as of March _, 2003 (the "Second Modification
Date"), is made by and among Visual Bible International, Inc., a
Florida corporation (the "Corporation") and each Lender signatory
hereto. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to such terms in the Debentures
and/or in the First Addendum (as hereinafter defined).
RECITALS:
A. The Corporation has executed and delivered a Debenture to
each of Augusta Holding, Inc., Xxxxxx Xxxxxxxxxx, Xxxxxxx Maznic,
Xxxxxx Xxxxxxxxxx, Red Brook Developments Limited ("Red Brook"),
Xxxxxxx Xxxxxxx, Xxxx Xxxxxxx Limited and Xxxxxx X. Steels
(collectively, the "Group A Lenders") and AGF Growth Equity Fund,
GWL Growth Equity Fund, London Life Growth Equity Fund, IG AGF
Diversified Growth Fund, IG AGF Diversified Growth Class, Xxxxxxx
XxXxxxxxx and Xxxxxxx Xxxxxx (collectively, the Group B Lenders").
Hereinafter the Group A Lenders and the Group B Lenders are
collectively referred to as Lenders.
B. The Corporation and the Lenders have executed and
delivered an Addendum To The Debentures (the "First Addendum") dated
as of February 17, 2003.
C. The Book of Xxxx, Inc. (hereinafter, "TBJ" or the
"Canadian Co Producer") is an Ontario, Canada corporation and is a
wholly owned Subsidiary of Visual Bible International (Canada), Inc.
("VBI Canada"). VBI Canada is an Ontario, Canada corporation and is
a wholly owned Subsidiary of the Corporation. TBJ is currently
negotiating a Production credit facility (the "RBC Facility") with
Royal Bank of Canada ("RBC"), but TBJ does not expect the RBC
Facility to be concluded prior to the Second Modification Date.
D. In order to fund certain capital requirements of TBJ
associated with the Production prior to the conclusion by TBJ of the
RBC Facility, Red Brook has agreed, in connection herewith, to
purchase an additional Debenture (the "Second Red Brook Debenture").
The Second Red Brook Debenture is in substantially the same form of
the Initial Funding Debentures, and the Second Red Brook Debenture
shall be deemed to have been modified by the First Addendum in the
same manner as the Initial Funding Debentures were modified thereby.
A copy of the Second Red Brook Debenture is attached hereto as
Exhibit ___.
E. The Corporation and Red Brook desire to further amend
certain terms of the Second Red Brook Debenture as set forth in this
Second Addendum.
F. The Corporation and the Lenders have agreed to further
modify all of the Debentures (including the Second Red Brook
Debenture) in accordance with the terms of this Second Addendum.
AGREEMENTS:
In consideration of the premises and the mutual covenants set
forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Modifications exclusive to the Second Red Brook Debenture.
The Corporation and Red Brook agree as follows:
(a) Pursuant to the Second Red Brook Debenture, Red Brook is
making a loan of $380,000 (the "Second Red Brook Debenture Maximum
Principal Amount") to the Corporation on the date hereof. $295,000
of the Second Red Brook Debenture Maximum Principal Amount shall be
considered a Production Advance under the Second Red Brook
Debenture, and $95,000 of the Second Red Brook Debenture Maximum
Principal Amount shall be considered an Interim Advance in
accordance with the First Addendum. Red Brook shall have no further
obligation to make Production Advances under the Second Red Brook
Debenture.
(b) The Corporation agrees, to the extent permitted by the RBC
Facility, that it shall pay or it shall cause TBJ to repay Red Brook
$95,000 (the "Red Brook Repayment") from the proceeds, if any,
derived from the RBC Facility. The Red Brook Repayment shall be
made by the Corporation pari passu with repayment of the Interim
Advances under the First Addendum.
(c) Red Brook shall have no obligation to make the Initial
Marketing Advance or the Subsequent Marketing Advances under the
Second Red Brook Debenture unless and until the Red Brook Repayment
has been made by TBJ or the Corporation. At such time as the Red
Brook Repayment is made in full, then the obligation of Red Brook to
make the Initial Marketing Advance and the Subsequent Marketing
Advances in the manner required under the Second Red Brook Debenture
shall be reinstated up to the amounts set forth in the Second Red
Brook Debenture.
(d) The Lenders acknowledge the creation of the Second Red
Brook Debenture, as same is modified by the terms of this Second
Addendum, and that Red Brook shall be bound by, and shall be
entitled to the benefits of, the provisions of the First Addendum as
if such terms were set forth herein or in the Second Red Brook
Debenture.
2. Representations and Warranties. The representations and
warranties of the Corporation as set forth in: (i) Section 3 of the
Subscription Agreements, dated as of December 24, 2002, between the
Corporation and the Group A Lenders and (ii) Section 6 of the
Debentures, shall be true and correct in all material respects as of
the date hereof.
3. Second Royalty Payments.
(a) In consideration for (i) the agreement by Red Brook to
make the loan represented by the Second Red Brook Debenture and (ii)
the agreement by the Lenders to permit the further modification of
the Debentures pursuant to this Second Addendum, the Corporation
shall cause an additional royalty per DVD Unit sold to United States
and Canadian Sources (the "Second Royalty") to be paid to the
Lenders in the manner as set forth hereinafter and calculated as
follows:
(1) If the Red Brook Repayment is made within ninety
(90) days of the Second Modification Date, then the Second
Royalty shall be equal to US$0.50 for each DVD Units sold; or
(2) If the Red Brook Repayment is not made within ninety
(90) days of the Second Modification Date, then the Second
Royalty shall be equal to US$4.00 for the first 25,000 DVD
Units sold and US$0.50 for each DVD Unit sold after the first
25,000 of such DVD Units.
(b) Once the amount of the Second Royalty is determined in
accordance with paragraph 3.(a), the Corporation shall cause payment
of the Second Royalty as follows:
(1) All payments of the Second Royalty from the Second
Royalty Retained Portion (as defined in paragraph 3.(b)(2),
below) shall be made to each Lender in an amount (the "Second
Pro Rata Royalty Portion") determined by multiplying (x) the
Second Royalty Retained Portion by (y) the quotient resulting
from the division of (i) the Existing Principal Amount advanced
under a particular Lender's Debenture as of any particular
payment date by (ii) the Existing Principal Amounts advanced
under all of the Debentures (including the Second Red Brook
Debenture) as of such payment date.
(2) The Corporation agrees that it will cause, by an
irrevocable instruction in the form attached hereto as Exhibit
3.(b)(2), to be sent to each Fulfillment Corporation utilized
by the Corporation in connection with sales of the DVD Units
from United States and Canadian sources to segregate a portion
of the proceeds derived from the sale of each DVD Unit from
United States and Canadian sources (the "Second Royalty
Retained Portion") in the amount of Fifty United States Cents,
or, in the event that proceeds of any such sale are in Canadian
Dollars (the "Canadian Second Royalty Retained Portion"), then
the Second Canadian Royalty Retained Portion shall be an amount
of Canadian Dollars equal to the United States Dollar
equivalent of Canadian Dollars necessary to pay the Second
Royalties, and the Fulfillment Corporation shall be obligated
to cause the Second Canadian Royalty Retained Portion to be
converted into United States Dollars, and to pay each Lender
therefrom such Lender's Additional Pro Rata Royalty Portion
thereof (each such payment to Lender of Lender's Second Pro
Rata Royalty Portion of the Second Royalty Retained Portion
being defined as a "Second Royalty Fulfillment Payment"). The
Corporation shall cause each Fulfillment Corporation so
utilized by the Corporation to commence such Second Royalty
Fulfillment Payments not later than the tenth day of the month
commencing with the first month after receipt by each such
Fulfillment Corporation of any proceeds derived from the sale
of any DVD Unit from United States and Canadian sources, and
such Second Royalty Fulfillment Payments shall continue to be
made on the tenth day of each subsequent month thereafter until
such time as the Fulfillment Corporation no longer derives any
proceeds from the sale any DVD Unit from United States and
Canadian sources. The Second Royalty Retained Portion shall be
in addition to, and not in lieu of, the Royalty Retained
Portion to be segregated pursuant to the First Addendum and the
Unit Retained Portion required to be segregated pursuant to the
terms of the Debentures.
(3) The Corporation and the Lenders acknowledge and
agree that the Royalty and the Second Royalty shall continue to
be paid on behalf of the Corporation (or by the Corporation if
the Corporation no longer uses a Fulfillment Corporation for
whatever reason) for so long as DVD Units are sold to United
States and Canadian Sources, and if the Corporation sells all
or substantially all of its assets or merges or otherwise
combines with another entity (the "Acquiring Entity"), as a
condition to the closing of such transaction, the Corporation
will cause such Acquiring Entity to acknowledge its continuing
obligation hereunder. The Corporation acknowledges that
notwithstanding the fact that the Existing Principal Amount and
any and all amounts of accrued and unpaid Interest shall be
paid in full under the Debentures, the Debentures shall remain
in full force and effect solely to evidence the obligation upon
the Corporation (or any successor to the Corporation (by merger
or otherwise) to pay or cause the Royalty and the Second
Royalty to be paid under the First Addendum and hereunder and
to set forth the terms and conditions associated with such
Royalty and Second Royalty payment obligation.
(4) The Corporation and the Lenders acknowledge and
agree that any change in the business plan (the "Business
Plan") of the Corporation or any successor of the Corporation
(which Business Plan currently anticipates direct market sales
of the DVD Units following completion of the Production) or any
sale of material assets of the Corporation or any merger or
other combination involving the Corporation shall require the
consent of a majority (based upon the then Existing Principal
Amount under the Debentures which gave rise to the Facility
Proceeds) of the Debentures.
4. Security. As security for the payment of the Second
Royalty, the Corporation and the Lenders acknowledge and agree that
the security provided by the Corporation under the Debentures and
under the First Addendum shall also secure payment of the Second
Royalty in accordance with the terms hereof.
5. Modification of Paragraph 2. Paragraph 2 of the
Debentures is hereby amended by deleting the proviso at the end of
subsection (b), and inserting the following:
"provided that, in no event shall the aggregate of all
Production Advances under all Debentures exceed US$ 3,850,000
(the "Production Limit")."
6. Modification of Paragraph 4. Paragraph 4 of the
Debenture is deleted in its entirety and is replaced by the following:
"This Debenture is one of a series of debentures to be issued
by the Corporation in connection with a bridge production
financing facility (the "Production Facility") in an aggregate
principal amount of up to Five Million Five Hundred Thousand
United States Dollars (US$5,500,000.00). In that regard,
Corporation has, on the Effective Date concluded debentures for
a portion of the Production Facility in an amount of Four
Million United States Dollars (US$4,000,000.00) (the "Initial
Funding"). Subsequent to the conclusion of the Initial
Funding, the Corporation shall be entitled, on or before March
31, 2003, to execute debentures (the "Subsequent Funding
Debentures") on terms substantially the same as the terms of
the Initial Funding Debentures for the remaining Xxx Xxxxxxx
Xxxx Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$1,500,000.00)
of the Production Facility (the "Subsequent Funding"). The
aggregate of the Maximum Principal Amount under the Initial
Funding Debentures and under the Subsequent Funding Debentures
shall be collectively referred to herein as the "Facility
Proceeds".
7. Modification of Paragraph 6.(j). Paragraph 6.(j) of the
Debenture as modified by the First Addendum is deleted in its
entirety and is replaced by the following:
"The Corporation shall not execute any contract or agreement
that would obligate the Corporation to pay from proceeds
received by it from the direct market sale price of the DVD
Units from United States and Canadian sources any amount in
excess of US$35.50, unless such obligation is approved by the
holders of a majority (based upon the then Existing Principal
Amount under the Debentures which gave rise to the Facility
Proceeds) of the Debentures."
8. Modification of Paragraph 7. (b). Paragraph 7. (b) of
the Debenture is deleted in its entirety and is replaced by the
following:
"The Corporation agrees that it will cause, by an irrevocable
instruction in the form attached hereto as Exhibit 7.(b), each
Fulfillment Corporation utilized by the Corporation in
connection with sales of the DVD Units from United States and
Canadian sources to segregate a portion of the proceeds derived
from the sale of each DVD Unit from United States and Canadian
sources (the "Unit Retained Portion") in the amount of Sixteen
United States Dollars (US$16.00), or, in the event that
proceeds of any such sale are in Canadian Dollars (the
"Canadian Unit Retained Portion"), then the Canadian Unit
Retained Portion shall be an amount of Canadian Dollars equal
to US$16.00, and the Fulfillment Corporation shall be obligated
to cause the Canadian Unit Retained Portion to be converted
into US$16.00, and to pay Lender therefrom Lender's Pro Rata
Portion thereof (each such payment to Lender of Lender's Pro
Rata Portion of the Unit Retained Portion being defined as a
"Fulfillment Payment"). The Corporation, further, agrees that
sales of DVD Unit from United States and Canadian sources
undertaken by the Fulfillment Corporations shall account for
ninety five percent (95%) of sales of the DVD Units from United
States and Canadian sources at all times when any Existing
Principal Amount remains outstanding. The Corporation shall
cause each Fulfillment Corporation so utilized by the
Corporation to commence such Fulfillment Payments not later
than the tenth day of the month commencing with the first month
after receipt by each such Fulfillment Corporation of any
proceeds derived from the sale of any DVD Unit from United
States and Canadian sources, and such Fulfillment Payments
shall continue to be made on the tenth day of each subsequent
month thereafter until the earlier to occur of: (i) the payment
in full of the Principal Amount outstanding hereunder and all
accrued and unpaid Interest due hereunder; or (ii) the time
that such Fulfillment Corporation no longer derives any
proceeds from the sale any DVD Unit from United States and
Canadian sources. Each Fulfillment Payment shall be applied in
the following order of priority:
(1) first, toward any amounts of accrued Interest due
hereunder;
(2) next, toward the Existing Principal Amount."
9. Agreement of the Lenders.
(a) Each Lender acknowledges and agrees that any action to be
taken under the Debentures, as modified by the First Addendum and
this Second Addendum shall be determined by the holders of a
majority (based upon the then Existing Principal Amount under the
Debentures which gave rise to the Facility Proceeds) of the
Debentures. Each Lender agrees that any action so determined to be
undertaken by the majority may be implemented by Red Brook and that
Red Brook may execute any and all documents on behalf of such
Lenders in connection with such actions, including but not limited
to documents relating to the RBC Facility. In that regard, the
Group A Lenders and Xxxxxxx Xxxxxx hereby grant their respective
power-of-attorney, with full power of substitution, to Red Brook for
such limited purposes. Additionally, the Lenders acknowledge that
Red Brook is an affiliate of the RBC Guarantor, Xxxx Xxxxxxx, and
that the Lenders will be subordinating their security interests to
the RBC Guarantor in connection with the RBC Facility. The Lenders
also acknowledge that pursuant to the foregoing, Red Brook has
engaged in good faith negotiations with the Corporation in
connection with the First Addendum and this Second Addendum on
behalf of all of the Lenders and the Lenders hereby waive any and
all claims against Red Brook that such Lender may have in connection
with such negotiations, the First Addendum and this Second Addendum.
(b) The Corporation and the Lenders agree that the Maturity
Date for all of the Debentures, including the Second Red Brook
Debenture, shall be December 24, 2004.
(c) The Corporation and the Lenders agree that should the
Corporation or any successor thereto make any change in the Business
Plan, undertake any sale of material assets of the Corporation or
engage in any merger or other combination involving the Corporation
without the consent of a majority (based upon the then Existing
Principal Amount under the Debentures which gave rise to the
Facility Proceeds) of the Debentures such action shall be a Default
under the Debentures.
10. Conflict; Ratification. The Corporation and the Lenders
acknowledge and agree that the Debentures as modified by the First
Addendum are in full force and effect and binding upon the
Corporation and the Lenders according to the terms thereof without
modification, except as specifically modified by this Second
Addendum. Except as specifically modified hereby, all covenants,
terms, obligations and conditions of the Debentures as modified by
the First Addendum are hereby ratified and confirmed. In the event
of a conflict between this Second Addendum and the Debentures as
modified by First Addendum, then this Second Addendum shall control.
11. Execution. This Second Addendum may be executed in two
or more counterparts and shall be deemed to be fully executed when
the Corporation and each of Red Brook and the Lenders has signed at
least one copy hereof. A faxed copy of this Addendum bearing the
signature of a party shall be deemed acceptable for purposes of
execution hereof; provided, however, that each party shall promptly
provide each other party with an originally executed copy.
(Signatures Appear On Next Pages)
IN WITNESS WHEREOF, the parties hereto have executed this
Second Addendum effective on and as of the Second Modification Date.
Visual Bible International, Inc.
By: _______________________________
Xxxxxx Xxxxxx, Executive
Vice President and Chief
Financial Officer
The terms and conditions of this Second Addendum relating to
The Book of Xxxx, Inc. are acknowledged and agreed to effective on
and as of the Second Modification Date.
The Book of Xxxx, Inc.
By: _______________________________
Xxxxxx Xxxxxx, Executive
Vice President
(Lender Counterpart Signature Page Follows)
COUNTERPART LENDER SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this
Second Addendum effective on and as of the Second Modification Date.
Lender:
___________________________________
(Name of Lender)
___________________________________
(Signature)
___________________________________
(Title, if applicable)