THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT
PRIOR TO THE DATE (THE "RESALE DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
VISUAL BIBLE INTERNATIONAL, INC.
(a corporation existing under the laws of the State of Florida,
United States of America)
DEBENTURE
(the "B Unit Debenture")
1. This B Unit Debenture is executed by Visual Bible
International, Inc. (the "Corporation") on the ____ day of
_____________, 2003 (the "Effective Date").
2. The Corporation for value received acknowledges
itself indebted to and hereby covenants to pay to
_______________________________________________________ (hereinafter
called the "Lender") at
_________________________________________________________________ or
at such other address designated by the Lender from time to time,
the principal sum (the "Principal Amount") of
_____________________________________________________________________
United States Dollars (US$______________________), together with
interest (the "Interest") on the Principal Amount outstanding from
time to time at the rate of 15% per annum calculated on the basis of
a 365 day year and compounded annually. Such Interest shall accrue
on the outstanding Principal Amount from the Effective Date until
the date on which the Principal Amount has been repaid in full.
Repayment of the outstanding Principal Amount and the Interest
thereon will be undertaken by the Corporation in the manner
described in paragraph 6 below.
3. This is one of a series of debentures
(collectively, the "B Unit Debentures") to be issued by the
Corporation to purchasers thereof (collectively, the "Holders") in
connection with a financing (the "B Unit Financing") in an aggregate
principal amount of up to Eight Million Five Hundred Thousand United
States Dollars (US$8,500,000.00). The aggregate Principal Amount
under the B Unit Debentures shall be collectively referred to herein
as the "B Unit Financing Proceeds".
4. The Corporation hereby represents, warrants and
covenants with the Lender as set forth in this paragraph 4 (the
"Representations"). The Representations shall be true and correct
on and as of the Effective Date and shall survive the execution of
this Debenture. The Representations are as follows:
(a) The B Unit Financing Proceeds are expected to be
used as follows: (i) US$300,000 for legal and accounting fees and
other costs associated with the B Unit Financing; (ii) US$300,000
for certain costs associated with the pre-production by the
Corporation of the Gospel of Xxxx (the "Xxxx Production"); (iii)
US$250,000 for certain costs associated with the production by the
Corporation of the Gospel of Xxxx (the "Production"); (iv)
US$3,500,000 for certain marketing and advertising costs associated
with the Production; and (v) the remaining B Unit Financing Proceeds
for general corporate purposes.
(b) The Corporation shall engage, and at all times while
the Principal Amount, Interest and B Unit Accrued Royalties (defined
below) remain unpaid, shall utilize the services of one or more
fulfillment corporations (each, a "Fulfillment Corporation") to
handle, process, account for and collect all proceeds from all
direct market orders received for all double video/DVD units and/or
any other audio visual medium, whether currently existing or
developed in the future (collectively, the "DVD Units"), of the
Production from United States and Canadian sources. In the event
that the Corporation engages the services of more than one
Fulfillment Corporation, the Corporation will negotiate in good
faith with the Holders of the B Unit Debentures regarding the
implementation of a trust or other suitable arrangement pursuant to
which the payments due hereunder will be administered.
(c) The Corporation lawfully owns and will continue to
lawfully own, subject solely to encumbrances under the Existing
Security Documents (as defined below), and is and will be lawfully
in the possession of, all the property necessary for Corporation to
carry on its business operations in substantially the same manner as
conducted on the Effective Date.
(d) The Corporation will maintain its corporate
existence, and it will carry on and conduct its business in a manner
substantially consistent with manner in which it conducts its
business on the Effective Date.
(e) The Corporation will comply in all material respects
with all laws, rules, governmental restrictions and regulations
applicable to it and it will obtain and maintain in good standing
all leases, licences, permits and approvals from any and all
governments, governmental commissions, boards or agencies required
in respect of its operations.
(f) The Corporation will fulfill all covenants and
obligations hereunder including the obligation to make the payments
of the Principal Amount, Interest and B Unit Royalties in the manner
required hereunder.
(g) From and after payment in full of all principal and
interest outstanding under the A Unit Debentures (as hereinafter
defined), the direct market sale price of the DVD Units will not be
reduced below US$39.95 without the prior approval of the Holders of
a majority (based upon the original principal amounts of the B Unit
Debentures which gave rise to the B Unit Financing Proceeds) of the
B Unit Debentures. From and after payment in full of all principal
and interest outstanding under the A Unit Debentures, in the event
that the Corporation produces a product containing the Production on
a medium other than a DVD Unit and such product is sold through
direct market sales in the United States or Canada, such product
shall not be sold for less than US$39.95 without the consent of a
majority (based upon the original principal amounts of the B Unit
Debentures which gave rise to the B Unit Financing Proceeds) of the
B Unit Debentures.
(h) Other than contracts and agreements necessary for
the completion of the B Unit Financing, from and after payment in
full of all principal and interest outstanding under the A Unit
Debentures, the Corporation shall not execute any future contract or
agreement that would obligate the Corporation to pay any amount from
the direct market sales of the DVD Units to United States or
Canadian purchasers unless such obligation is approved by the
Holders of a majority (based upon the original principal amounts of
the B Unit Debentures which gave rise to the B Unit Financing
Proceeds) of the B Unit Debentures.
(i) Unless otherwise determined by the holders of the A
Unit Debentures in the manner required thereunder, prior to a date
which is twenty four (24) months from the Effective Date (the
"Restriction Period"), the Corporation shall not, without the
approval by the Holders of a majority (based upon the original
principal amounts of the B Unit Debentures which gave rise to the B
Unit Financing Proceeds) of the B Unit Debentures, sell, transfer or
otherwise dispose of all or any of its rights and interests in and
to the Production (the "Ownership Rights").
5. B Unit Royalty Payments.
(a) Following the time at which the Corporation has paid
an amount equal to the Maximum Principal Amounts (as defined under
the A Unit Debentures), whether such payment is in the form of
Existing Principal, Interest or Royalties (each as defined under the
A Unit Debentures), to the those parties (the "A Unit Debenture
Holders") holding those certain existing debentures (the "A Unit
Debentures") issued by the Corporation (the "B Unit Royalty
Condition"), then Lender shall become entitled to Lender's pro rata
portion of the B Unit Royalties. Prior to satisfaction of the B
Unit Royalty Condition, there shall be no entitlement to the B Unit
Royalties and the B Unit Royalties shall not accrue or be paid.
Commencing upon the satisfaction of the B Unit Royalty Condition,
the "B Unit Royalties" shall consist, in the aggregate, of five
percent (5%) of: (i) the gross proceeds, net of returns and any
sales or similar taxes payable on account thereof, received as a
result of any and all commercial exploitation, exclusive of any
revenues generated as a result of any theatrical release, derived
from the Production, including but not limited to sales of DVD Units
sold to United States or Canadian purchasers thereof; and (ii) the
actual amount of revenue to which the Corporation is entitled from
any and all commercial exploitation of the Production, net of
returns and any sales or similar taxes payable on account thereof
and exclusive of any revenues to which the Corporation may be
entitled as a result of any theatrical release of the Production,
sold to parties other than a Unites States or Canadian purchaser
thereof.
(b) The Corporation shall cause payment of the B Unit
Royalties as follows:
(1) The B Unit Royalties shall not be paid to
the Holders, but shall instead accrue (the "B Unit Accrued
Royalties") from and after the satisfaction of the B Unit
Royalty Condition until the date on which all outstanding
amounts of Existing Principal, Interest and Accrued
Royalties (each as defined in the A Unit Debentures) have
been paid (the "A Unit Repayment Date") to the A Unit
Debenture Holders. The B Unit Accrued Royalties will be
paid from the B Unit Repayment Proceeds and the Additional B
Unit Repayment Proceeds (each as defined below) pursuant to
paragraph 6. From and after the A Unit Repayment Date, the
B Unit Royalties shall no longer accrue, but shall be paid
to the Holders as described below. The amount of the B Unit
Royalties payable by the Corporation to the Holders shall
not exceed the amount of gross proceeds received by the
Corporation from the sale of the B Units (the "B Unit
Royalties Maximum") and at such time as the B Unit Royalty
Maximum has been paid to the Holders, the obligation upon
the Corporation to pay the B Unit Royalties shall cease.
(2) The Corporation agrees that it will promptly
cause the Fulfillment Corporation utilized by the
Corporation in connection with the direct market sales of
the DVD Units to United States and Canadian purchasers to
execute an irrevocable instruction in the form attached
hereto as Exhibit 5.(b)(2) (the "B Unit Royalty Instruction
Letter").
(3) As soon as practicable, but in no event
later than two (2) days following the A Unit Repayment Date,
the Corporation shall deliver to the Fulfillment Corporation
(i) the Schedule A (certified by the Chief Executive Officer
or the Chief Financial Officer of the Corporation (each, a
"Responsible Officer")) to the B Unit Royalty Instruction
Letter and (y) a written notice (the "B Unit Royalty
Notice") directing the Fulfillment Corporation to segregate
a portion of the proceeds derived from the sale of each DVD
Unit to United States or Canadian purchasers in an amount
equal to 5.0% (the "5.0% Retained Portion") of the gross
proceeds (net of returns and sales or other similar taxes
payable thereon) resulting from each such DVD Unit sale. In
the event that proceeds of any such sale are in Canadian
Dollars, such proceeds shall be converted by the Fulfillment
Corporation into United States Dollars. The 5.0% Retained
Portion is not related to the B Unit Repayment Proceeds or
the B Unit Additional Repayment Proceeds which are
separately required to be segregated pursuant to paragraph 6
hereof.
(4) The Schedule A to the B Unit Royalty
Instruction Letter shall set forth: (i) each Holder's name
and address; and (ii) each Holder's Pro Rata Percentage.
Each Holder's "Pro Rata Percentage" shall equal the quotient
resulting from the division of: (x) the Principal Amount
under a particular Holder's B Unit Debenture by (y) the B
Unit Financing Proceeds. The Corporation shall deliver to
the Fulfillment Corporation a revised Schedule A (certified
by a Responsible Officer) to the B Unit Royalty Instruction
Letter as soon as possible following any and all changes in
ownership of the B Unit Debentures or changes in the number
of B Unit Debentures outstanding.
(5) Each Holder shall be paid an amount (each, a
"Monthly Fulfillment Payment") equal to the 5% Retained
Portion multiplied by such Holder's Pro Rata Percentage not
later than the tenth day of each month following the
immediately preceding month if the Fulfillment Corporation
received any proceeds derived from the sale of any DVD Unit
to United States or Canadian purchasers in such immediately
preceding month.
(6) In addition to the Monthly Fulfillment
Payment, the Corporation shall, not later than the tenth day
of each month following the immediately preceding month if
the Corporation received any B Unit Royalties in such
immediately preceding month, pay Lender therefrom an amount
(each, an "Additional Royalties Payment") equal to such B
Unit Royalties multiplied by Lender's Pro Rata Percentage.
The Corporation shall provide the Fulfillment Corporation
prompt notice of all Additional Royalties Payments.
(7) The Corporation and Lender acknowledge and
agree that, subject to the provisions hereof, the B Unit
Royalties shall continue to be paid by or on behalf of the
Corporation until such time as the Maximum B Unit Royalty
has been paid by or on behalf of the Corporation, and if the
Corporation sells all or substantially all of its assets or
merges or otherwise combines with another entity (an
"Acquiring Entity"), as a condition to the closing of such
transaction, the Corporation will cause such Acquiring
Entity to acknowledge and agree to be bound by all of the
Corporation's obligations hereunder.
6. Payments of Principal Amounts, Interest and B Unit
Accrued Royalties.
(a) The Corporation agrees that all sales of DVD Units
to United States and Canadian purchasers will be undertaken by the
Corporation on a direct market basis through one Fulfillment
Corporation at all times when any Principal Amount, accrued but
unpaid Interest or B Unit Accrued Royalties remain outstanding. The
Corporation agrees that it will promptly cause the Fulfillment
Corporation to execute an irrevocable instruction in the form
attached hereto as Exhibit 6.(a) (the "B Unit Debenture Instruction
Letter"). The Corporation shall deliver to the Fulfillment
Corporation the Schedule A (certified by a Responsible Officer) to
the B Unit Debenture Instruction Letter no later than two (2) days
after the receipt of notice from the Fulfillment Corporation that a
DVD Unit was sold by the Fulfillment Corporation. Schedule A to the
B Unit Debenture Instruction Letter shall set forth: (i) the name
and address of each Holder; (ii) the Principal Amount of each
Holder's B Unit Debenture; and (iii) each Holder's Pro Rata
Percentage. As soon a practicable, but in no event later than two
(2) days following the date on which the Corporation has paid an
amount equal to the Maximum Principal Amounts (as defined under the
A Unit Debentures), whether such payment is in the form of Existing
Principal, Interest or Royalties (each as defined under the A Unit
Debentures), to the A Unit Debenture Holders (the "A Unit Recoupment
Date"), the Corporation shall deliver to the Fulfillment Corporation
a notice that the A Unit Recoupment Date has occurred (the "A Unit
Recoupment Notice"). As soon as practicable, but in no event later
than two (2) days following the A Unit Repayment Date, the
Corporation shall deliver to the Fulfillment Corporation: (x) the
Schedule B (certified by a Responsible Officer) to the B Unit
Debenture Instruction Letter; and (y) a notice that the A Unit
Repayment Date has occurred (the "A Unit Repayment Notice"). The
Schedule B to the B Unit Debenture Instruction Letter shall set
forth each Holder's: (a) outstanding Principal Amount; (b) accrued
but unpaid Interest; and (c) B Unit Pro Rata Accrued Royalty (as
hereinafter defined). Each Holder's "B Unit Pro Rata Accrued
Royalty" shall equal the aggregate amount of the B Unit Accrued
Royalties multiplied by such Holder's Pro Rata Percentage. The
Corporation shall deliver to the Fulfillment Corporation a revised
Schedule A (certified by a Responsible Officer) and a revised
Schedule B (certified by a Responsible Officer) to the B Unit
Debenture Instruction Letter as soon as possible following any and
all changes in ownership of the B Unit Debentures or changes in the
number of B Unit Debentures outstanding following the initial
delivery of the applicable schedule.
(b) Repayments of the outstanding Principal Amount and
payments of Interest and the Lender's B Unit Pro Rata Accrued
Royalty will be made by the Corporation from the B Unit Repayment
Proceeds and from the B Unit Additional Repayment Proceeds (each as
defined below). Such repayments shall be made pro rata to Lender
(each a "Payment") in amounts determined by multiplying the B Unit
Repayment Proceeds or the B Unit Additional Repayment Proceeds, as
applicable, by the Lender's Pro Rata Percentage. The Payments shall
be applied in the following order of priority:
(1) first, toward the outstanding Principal Amount;
(2) second, toward the accrued and unpaid
Interest due hereunder; and
(3) third, toward Lender's B Unit Pro Rata
Accrued Royalty.
(c) Pursuant to the B Unit Debenture Instruction Letter,
the Corporation agrees to cause the Fulfillment Corporation utilized
by the Corporation in connection with direct market sales of the DVD
Units to United States or Canadian purchasers to segregate a
variable portion (the "B Unit Repayment Proceeds") of the gross
proceeds, net of returns and any sales or similar taxes payable on
account thereof, received by the Fulfillment Corporation from United
States and Canada direct market sales of the DVD Units (the Gross
Proceeds") in amounts equal to: (i) six percent (6%) of Gross
Proceeds for sales of DVD Units up to the sale of 120,000 of such
DVD Units; (ii) nine percent (9%) of Gross Proceeds for sales of DVD
Units from the sale of 120,001 to 250,000 of such DVD Units; (iii)
fifteen percent (15%) of Gross Proceeds for sales of DVD Units until
the receipt by the Fulfillment Corporation of the A Unit Recoupment
Notice; (iv) thirty five percent (35%) of Gross Proceeds for sales
of DVD Units from the receipt of the A Unit Recoupment Notice until
the date (the "B Unit Recoupment Date") that the Holders receive an
aggregate amount equal to the aggregate amount of the Principal
Amounts under the B Unit Debentures, whether such payment is in the
form of outstanding Principal Amounts, Interest or B Unit Royalties;
(v) zero percent (0%) from the B Unit Recoupment Date until receipt
by the Fulfillment Corporation of the A Unit Repayment Notice (the
"Trigger Date"); and (vi) twenty five percent (25%) of Gross
Proceeds (the "25% Retained Portion") for sales of DVD Units from
the Trigger Date until such time as any and all amounts of accrued
but unpaid Interest and the B Unit Accrued Royalties due under the B
Unit Debentures have been paid in full (the "B Unit Repayment
Date"). In the event that the segregated proceeds are in Canadian
Dollars, such proceeds shall be converted by the Fulfillment
Corporation into United States Dollars.
(d) Pursuant to the B Unit Debenture Instruction Letter,
the Corporation shall cause the Fulfillment Corporation to make
Payments not later than the tenth day of each month following the
immediately preceding month if the Fulfillment Corporation received
any B Unit Repayment Proceeds in such immediately preceding month,
and the Payments shall continue to be made until the payment in full
in United States dollars of the outstanding Principal Amount,
Interest and the B Unit Pro Rata Accrued Royalty outstanding hereunder.
(e) In addition to and not in lieu of the Payments made
by the Fulfillment Corporation, until the A Unit Repayment Date, in
the event that the Corporation is not prohibited from doing so under
any documents existing as of August 15, 2003 (the "Existing Security
Documents"), as well as any supplements thereto executed by the
Corporation and the secured creditors under the Existing Security
Documents (the "Existing Secured Creditors"), the Corporation shall
segregate (in a separate account established by the Corporation for
this purpose) an amount (the "B Unit Additional Repayment Proceeds")
equal to twelve and one half percent (12.5%) (the "Additional
Percentage") of: (i) the gross proceeds, net of returns and any
sales or similar taxes payable on account thereof, received by the
Corporation from the exploitation of the Production from all sources
other than in the United States and Canada, provided that such B
Unit Additional Repayment Proceeds shall not include any proceeds
derived from theatrical releases; and (ii) the gross proceeds, net
of returns and any sales or similar taxes payable on account thereof
received by the Corporation, or any intermediary acting on
directions from the Corporation, from any and all commercial
exploitation of the Production in the United States or Canada other
than the direct market sale of DVD Units, provided that such B Unit
Additional Repayment Proceeds shall not include any proceeds derived
from theatrical releases. Immediately following the A Unit
Repayment Date, until the B Unit Repayment Date, the Additional
Percentage shall be increased to twenty five percent (25%). The
Corporation shall cease segregating the B Unit Additional Repayment
Proceeds on the B Unit Repayment Date.
(f) The Corporation shall, not later than the tenth day
of each month following the immediately preceding month if the
Corporation received any B Unit Additional Repayment Proceeds in
such immediately preceding month, pay Lender therefrom an amount
equal to the B Unit Additional Repayment Proceeds multiplied by
Lender's Pro Rata Percentage (each such payment to Lender being a "B
Unit Additional Proceeds Payment"). The Corporation shall provide
the Fulfillment Corporation prompt notice of all B Unit Additional
Proceeds Payments.
(g) In the event that the Corporation fails to pay any
amount due to be paid the Lender (a "Deficiency"), then in addition
to such other remedies that may be available to the Lender, the
Lender shall be entitled to elect to recoup any such Deficiency form
revenues generated from any and all subsequent productions (such as,
but not limited to, the Xxxx Production) undertaken by the
Corporation.
(h) If not sooner paid pursuant to the terms hereof, the
outstanding Principal Amount and accrued and unpaid Interest shall
be due and payable in United States dollars in full on October 15,
2005 (the "Maturity Date"). Notwithstanding the foregoing, in the
event that the Corporation sells, transfers or otherwise disposes of
all of its Ownership Rights, the Maturity Date shall be accelerated
to a date coincident with the date of transfer by the Corporation of
such Ownership Rights.
(i) Notwithstanding anything contained or inferred in
this B Unit Debenture to the contrary, the outstanding Principal
Amount may be prepaid by the Corporation, in whole or in part, at
any time and from time to time without premium or penalty.
(j) Upon payment in full by the Corporation of the
outstanding Principal Amount and any and all amounts of accrued and
unpaid Interest due hereunder, this B Unit Debenture shall
automatically be cancelled and shall no longer be of any force or
effect notwithstanding the actual cancellation hereof; provided
however, that notwithstanding the foregoing, the Corporation
acknowledges and agrees that this B Unit Debenture shall, until such
time as the Maximum B Unit Royalty is paid in full, 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 B Unit Royalties to be paid and to
set forth the terms and conditions of the Corporation's payment
obligations with respect to the B Unit Royalties.
7. This B Unit Debenture is executed and delivered in
accordance with a commercial transaction described in a certain B
Unit Subscription Agreement (the "B Unit Subscription Agreement")
between Lender and the Corporation, the terms of which are
incorporated herein by this reference.
8. As security for the payment of the amounts owing
under this B Unit Debenture, the Corporation, Visual Bible (Canada)
Inc. ("Visual Canada") and The Book of Xxxx, Inc. ("BOJ") have
delivered or will cause to be delivered, as soon as reasonably
practical after receipt of the Consent (as hereinafter defined), to
all of the Lenders under all of the B Unit Debentures certain
security agreements (collectively, the "B Unit Security Agreements)
of even date herewith, on certain assets of the Corporation, Visual
Canada and BOJ (the "Encumbered Assets"). The B Unit Security
Agreements consist of a version to be utilized in connection with
United States law (the "United States Security Agreement") and a
version to be utilized in connection with Canadian law (the
"Canadian Security Agreement"). The delivery of the B Unit Security
Agreements and performance by the Corporation under the United
States Security Agreement and the Canadian Security Agreement are
subject to receipt of the consent (the "Consent") of the holders of
the Existing Security Interests (as hereinafter defined). Subject to
the receipt of the Consent, the Corporation hereby grants to all B
Unit Lenders under the B Unit Debentures a continuing security
interest in the Encumbered Assets (the "B Unit Security Interest"),
as security for the payment of the B Unit Debentures, which B Unit
Security Interest shall be enforceable and subject to all the
provisions of the B Unit Debentures, as if such Encumbered Assets
were specifically pledged hereunder, provided that the B Unit
Security Interest is junior, inferior and subordinate to each and
every currently existing security interest (the "Existing Security
Interests") as to the Secured Assets granted by the Corporation,
Visual Canada and BOJ under the security documents (the "Existing
Security Agreements") related thereto. A schedule of the Existing
Security Agreements is attached hereto Exhibit 8. After receipt of
the Consent, the B Unit Security Interest shall be perfected in such
jurisdictions as may be deemed reasonably appropriate by the Holders
of a majority (based upon the upon the original principal amounts of
the B Unit Debentures which gave rise to the B Unit Financing
Proceeds) of the B Unit Debentures. Any action to be taken under
the B Unit Security Agreements shall be determined by the procedures
set forth therein. In addition, each of Visual Canada and BOJ
have, even date herewith, executed a guarantee of the obligations of
the Corporation.
9. ANY ACTION TO BE TAKEN UNDER THIS B UNIT DEBENTURE
SHALL BE DETERMINED BY THE HOLDERS OF A MAJORITY (BASED UPON THE
ORIGINAL PRINCIPAL AMOUNTS UNDER ALL OF THE B UNIT DEBENTURES WHICH
GAVE RISE TO THE B UNIT FINANCING PROCEEDS) OF THE B UNIT
DEBENTURES. ACCORDINGLY, AS DETERMINED BY THE HOLDERS OF THE
MAJORITY OF THE B UNIT DEBENTURES, THE B UNIT LENDERS MAY, BY NOTICE
IN WRITING, WAIVE ANY BREACH BY THE CORPORATION OF ANY OF THE
PROVISIONS CONTAINED IN THIS B UNIT DEBENTURE OR ANY DEFAULT BY THE
CORPORATION IN THE OBSERVANCE OR PERFORMANCE OF ANY COVENANT OR
CONDITION REQUIRED TO BE OBSERVED OR PERFORMED BY THE CORPORATION
UNDER THE TERMS OF THIS B UNIT DEBENTURE OR OTHERWISE AMEND THIS B
UNIT DEBENTURE.
10. The Corporation and the Lender acknowledge and agree
that, unless otherwise determined by the holders of the A Unit
Debentures in the manner required thereunder, any change in the
business plan (the "Business Plan") of the Corporation or any
successor 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 the Holders of a majority (based upon the original
principal amounts under the B Unit Debentures which gave rise to the
B Unit Financing Proceeds) of the B Unit Debentures.
11. In connection with any breach or default by the
Corporation hereunder (a "Default"), the Lender shall provide a
written notice of any such Default to Corporation (a "Default
Notice"), and Corporation shall have a period of ten (10) days after
receipt of a Default Notice in which to cure such Default (the "Cure
Period"), provided that if any such Default is of a nature that it
cannot be cured within the Cure Period then if Corporation has
commenced such cure within the Cure Period and, thereafter, uses its
best efforts to cure such Default, the Cure Period shall be extended
for such reasonable period of time as is necessary for Corporation
to cure such Default. Should the Corporation fail to cure any such
Default within in the Cure Period as provided under this paragraph,
Lender shall, thereafter, be entitled to pursue any rights or
remedies in favor of Lender pursuant hereto. It shall be a default
hereunder if Corporation shall become insolvent, make an assignment
for the benefit of creditors, call a meeting of creditors to obtain
any general financial accommodation, or if any case under any
provision of the Bankruptcy Code, or any other bankruptcy,
insolvency, moratorium or other similar law, shall be commenced by
or against the Corporation, or if a receiver shall be appointed for
all or any material portion of the assets of the Corporation and the
same shall not have been discharged within thirty (30) days.
12. THIS B UNIT DEBENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS, RULES OR PRINCIPLES.
ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS B UNIT DEBENTURE
SHALL BE BROUGHT IN THE COURTS OF NEW YORK COUNTY IN THE STATE OF
NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK. LENDER AND CORPORATION HEREBY ACCEPT THE
EXCLUSIVE JURISDICTION OF THOSE COURTS FOR THE PURPOSE OF ANY SUCH
SUIT, ACTION OR PROCEEDING. LENDER AND CORPORATION HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUIT, ACTION OR PROCEEDING RISING OUT OF OR RELATING
TO THIS B UNIT DEBENTURE OR ANY JUDGMENT ENTERED BY ANY COURT IN
RESPECT THEREOF BROUGHT IN ANY OF THE ABOVE DESCRIBED COURTS AND
HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT ANY SUIT, ACTION OR
PROCEEDING BROUGHT IN NEW YORK COUNTY, NEW YORK, HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
13. If any provision of this B Unit Debenture shall be
or shall become illegal or unenforceable in whole or in part, the
remaining provisions shall nevertheless be valid, binding and
subsisting.
14. Any communication to be given to the Corporation
hereunder may be given by delivering, transmitting by telecopier or
mailing the same addressed to the Corporation as indicated
hereinafter. Any communication so delivered or transmitted by
telecopier shall be conclusively deemed to have been received on
delivery or transmittal, as the case may be, or if mailed shall be
conclusively deemed to have been received by the Corporation on the
third business day following that on which it was mailed. For the
purposes hereof the address of the Corporation, until changed by the
Corporation by notice in writing to Lender, shall be:
VISUAL BIBLE INTERNATIONAL, INC.
c/o Visual Bible (Canada), Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Telecopier No: (000) 000-0000
Attention: Xxxxxx Xxxxxx, Executive Vice President and
Chief Financial Officer
with a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxx, P.A.
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Telecopier No: (000) 000-0000
15. No consent or waiver or amendment of this B Unit
Debenture by the Lender shall be effective unless made in writing
and effected pursuant to the provisions of paragraph 9.
16. This B Unit Debenture and all its provisions shall
enure to the benefit of the Lender and its successors and permitted
assigns and shall be binding upon the Corporation and its successors
and assigns. For the purposes hereof, "successors" includes any
corporation resulting from the amalgamation of the Lender with any
other party or the amalgamation of the Corporation with any other
party. Corporation may not assign any benefit to be derived
hereunder to any party other than an Affiliate (as such term is
defined under the Securities Act) without the prior written consent
of a majority (based upon the original principal amount under all B
Unit Debentures which gave rise to the B Unit Financing Proceeds) of
the B Unit Debentures.
17. If Lender retains the services of counsel by reason
of default by Corporation to make the payments in the manner
required hereunder, all costs of suit and all reasonable attorneys'
fees and such other reasonable expenses so incurred by Lender shall
be paid by Corporation. If Corporation retains the services of
counsel by reason of default by Lender hereunder, all costs of suit
and all reasonable attorneys' fees and such other reasonable
expenses so incurred by Corporation shall be paid by Lender and may
be off set by Corporation against any Principal Amount outstanding
hereunder.
(Signature Appears Next Page)
IN WITNESS WHEREOF the Corporation has caused this B Unit
Debenture to be signed by one of its proper officers duly authorized
in that behalf on the Effective Date.
VISUAL BIBLE INTERNATIONAL, INC.
By: /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, Executive Vice-President
and Chief Financial Officer
Exhibit 5.(b)(2)
The B Unit Royalty Instruction Letter
Exhibit 6.(a)
The B Unit Debenture Instruction Letter
Exhibit 8
The Existing Security Agreements
