ADDENDUM TO THE DEBENTURES
This Addendum to the Debentures (this "Addendum"), dated as of
February 17th, 2003 (the "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.
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, Xxxxxxx Xxxxxxx,
Xxxx Xxxxxxx Limited, Xxxxxx X. Steels, (collectively, the "Group A
Lenders") and to each of 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
the "Lenders".
B. As of the Modification Date, the Group A Lenders HAVE NOT
advanced the Maximum Principal Amount under the Debentures held by
the Group A Lenders.
C. As of the Modification Date, the Group B Lenders HAVE
advanced the Maximum Principal Amount under the Debentures held by
the Group B Lenders.
D. 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 Modification Date.
E. In order to fund the certain capital requirements of TBJ
associated with the Production prior to the conclusion by TBJ of the
RBC Facility, the Corporation and the Lenders have agreed to modify
the Debentures in accordance with the terms of this Addendum in
exchange for the Royalty (as hereinafter defined) and the Additional
Security (as hereinafter defined).
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. Interim Advance.
(a) Each Group A Lender shall, in the manner provided herein,
make one or more Advances (each, an "Interim Advance") up to the
aggregate amount of US$1,000,000.00 (the "Maximum Interim Advance
Amount"), provided that prior to any obligation upon the Group A
Lenders to make any such Interim Advance, the Corporation shall have
provided the certificate, executed by the Responsible Officer, as
required by paragraph 2(e) of the Debenture. Except as set forth in
paragraph 1.(h), the Group A Lenders shall have no obligation to
make the Initial Marketing Advance or any Subsequent Marketing
Advances.
(b) The Responsible Officer shall be entitled to make a
written demand (each, an "Interim Advance Demand") simultaneously
upon all Group A Lenders for an Interim Advance in the amount set
forth in the Interim Advance Demand, provided no Interim Advance
Demand shall include a request for an Interim Advance in an amount
less than US$150,000.00. In the event that any such Interim Advance
Demand is made upon the Group A Lenders, each Group A Lender shall
be required to make an Interim Advance to the Corporation within
three (3) business days of receipt of any such Interim Advance
Demand in an amount (the "Group A Lender's Pro Rata Percentage")
determined by multiplying (x) the amount of the Interim Advance
requested in any such Interim Advance Demand by (y) the quotient
resulting from the division of (i) the Maximum Principal Amount of
such Group A Lender's Debenture by (ii) the sum of the Maximum
Principal Amounts of all of Debentures held by the Group A Lenders;
provided that, in no event shall the Group A Lenders be required to
make Interim Advances in excess of the Maximum Interim Advance
Amount.
(c) The Corporation acknowledges and agrees that the
obligation of each Group A Lender to make Interim Advances is
several, not joint, and the failure any Group A Lender to make one
or more Interim Advances shall not result in any liability to any
other Lender. The Group A Lenders acknowledge and agree that in the
event that any Group A Lender fails to make any such Interim
Advance, then such Group A Lender shall not be entitled to any
Royalty that would otherwise have been paid to such Group A Lender
had such Group A Lender made the required Interim Advance.
(d) The Group A Lenders shall only be obligated to make
Interim Advances so long as no Default exists under the Debentures
at the time the Interim Advance Demand is received by the Group A
Lenders. The parties agree that the Interim Advances shall only be
used for Production Expenses.
(e) Interest on a Group A Lender's Interim Advances made from
time to time pursuant hereto shall accrue at the rate of 15% per
annum calculated on the basis of a 365 day year and the number of
days actually elapsed. Unpaid Interest shall compounded annually.
Such Interest shall accrue from the date upon which the Corporation
receives an Interim Advance from a Group A Lender until the date
upon which the Interim Advances by such Group A Lender have been
repaid.
(f) Any and all amounts of Interim Advances outstanding from
time to time shall be paid in accordance with the terms of Section
7(b) of the Debentures, as if such Interim Advances were Initial
Marketing Advances or Subsequent Marketing Advances under the
Debentures.
(g) The Corporation agrees, to the extent permitted by the RBC
Facility, that it shall cause TBJ to repay any outstanding Interim
Advances from the proceeds, if any, derived from the RBC Facility.
Likewise, the Corporation agrees that all such Interim Advances
shall be repaid prior to the time that it shall be authorized to
repay any other amounts outstanding under the Debentures.
(h) At such time as all or any portion of the Interim Advances
are repaid, then the obligation upon the Group A Lenders to make the
Initial Marketing Advance and the Subsequent Marketing Advances in
the manner required under the Debentures shall be reinstated up to
an amount equal to the difference between (x) the aggregate amount
of the Initial Marketing Advance and the Subsequent Marketing
Advances and (y) the then outstanding amount of the Interim Advances
(the "Remaining Marketing Amount"). At such time as the obligation
to make the Initial Marketing Advance and the Subsequent Marketing
Advances is reinstated, the Group A Lenders shall have no further
obligation to make any Interim Advances and the obligation upon each
Group A Lender to Advance shall be limited to the such Group A
Lender's pro rata portion of the Remaining Marketing Amount.
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 and as of the date of each Interim Advance.
3. Royalty Payments.
(a) In consideration for (i) the agreement by the Group A
Lenders to make the Interim Advances available on the terms and
conditions set forth herein and (ii) the Group B Lenders early
advancement of the Maximum Principal Amounts set forth in their
Debentures, the Corporation shall cause a royalty per DVD Unit sold
to United States and Canadian Sources (the "Royalty") to be paid to
the Lenders in the manner as set forth hereinafter and calculated as
follows:
(1) If the aggregate amount of the Interim Advances
obtained by the Corporation is less than US$500,000 and such
Interim Advances are outstanding for a period of fifteen (15)
days or less, then the Royalty shall be equal to US$0.40 for
each DVD Unit sold;
(2) If the Interim Advances obtained by the Corporation
are outstanding for a period of more than fifteen (15) days but
less than thirty one (31) days, then, notwithstanding the
amount of Interim Advances obtained by the Corporation from the
Group A Lenders, the Royalty shall be equal to US$0.50 for each
DVD Unit sold;
(3) If the Interim Advances obtained by the Corporation
are outstanding for a period of more than thirty (30) days but
less than sixty one (61) days, then, notwithstanding the amount
of Interim Advances obtained by the Corporation from the Group
A Lenders, the Royalty shall be equal to US$0.75 for each DVD
Unit sold;
(4) If the Interim Advances obtained by the Corporation
are outstanding for a period of more than sixty (60) days but
less than ninety one (91) days, then, notwithstanding the
amount of Interim Advances obtained by the Corporation from the
Group A Lenders, the Royalty shall be equal to US$1.00 for each
DVD Unit sold; and
(5) If the Interim Advances obtained by the Corporation
are outstanding for a period of more than ninety (90) days
then, notwithstanding the amount of Interim Advances obtained
by the Corporation from the Group A Lenders, the aggregate
Royalty shall be equal to: (i) US$4.00 for the first 250,000
DVD Units sold; and (ii) US$1.00 for each DVD Unit sold
thereafter.
(b) Once the Royalty rate is determined in accordance with
paragraph 3.(a), the Corporation shall cause payment of the Royalty
as follows:
(1) All payments of the Royalty from the Royalty
Retained Portion (as defined in paragraph 3.(b)(2), below) to
each Lender in an amount (the "Pro Rata Royalty Portion")
determined by multiplying (x) the 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
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) sent immediately after the Royalty is finally
determined in accordance with paragraph 3.(a), 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
"Royalty Retained Portion") in the amount of United States
Dollars necessary to pay the Royalties, or, in the event that
proceeds of any such sale are in Canadian Dollars (the
"Canadian Royalty Retained Portion"), then the 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 Royalties, and the Fulfillment Corporation
shall be obligated to cause the Canadian Royalty Retained
Portion to be converted into United States Dollars, and to pay
Lender therefrom Lender's Pro Rata Royalty Portion thereof
(each such payment to Lender of Lender's Pro Rata Royalty
Portion of the Royalty Retained Portion being defined as a
"Royalty Fulfillment Payment"). Corporation shall cause each
Fulfillment Corporation so utilized by the Corporation to
commence such 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 Royalty Fulfillment Payments shall
continue to be made on the tenth day of each subsequent month
thereafter until the earlier to occur of: (i) Royalties are no
longer payable 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. The
Royalty Retained Portion shall be in addition to, and not in
lieu of, the Unit Retained Portion required to be segregated
pursuant to the terms of the Debenture.
4. Security.
(a) In addition to the provisions of paragraph 9 of the
Debentures, as additional security for the payment of the amounts
owing under the Debentures and for the payment of the Royalty (the
"Additional Security"), the Corporation will cause VBI Canada and
TBJ, as applicable, to provide, after the Modification Date, and in
form and substance reasonably satisfactory to the Lenders, the
following security instruments (collectively, the "Additional
Security Instruments") to the Lenders:
(1) a Guarantee and Postponement issued by VBI Canada in
favor of the Lenders in respect of (i) the obligations of the
Corporation under the Debentures and (ii) the other documents
delivered by the Corporation in connection with the financing
of the Production (the "Transaction Documents");
(2) a Guarantee and Postponement issued by the Canadian
Co Producer in favor of the Lenders in respect of (i) the
obligations of the Corporation under the Debentures and (ii)
the other documents delivered by the Corporation in connection
with the financing of the Production (the "Transaction
Documents");
(3) a Guarantee and Postponement issued by the Gospel of
Xxxx Limited (the "UK Co-Producer") in favor of the Lenders in
respect of the obligations of the Corporation under the
Transaction Documents;
(4) a UK Deed of Guarantee issued by the UK Co-Producer
in favor of the Lenders in respect of the obligations of the
Corporation under the Transaction Documents;
(5) a General Security Agreement (a "GSA") issued by VBI
Canada in favor of the Lenders;
(6) a GSA issued by the Canadian Co-Producer in favor of
the Lenders;
(7) a GSA issued by the UK Co-Producer in favor of the
Lenders;
(8) a UK Charge issued by the UK Co-Producer in favor of
the Lenders;
(9) a Co-Producer Acknowledgment issued by the UK
Co-Producer in favor of the Lenders;
(10) an assignment from the Canadian Co-Producer in favor
of the Lenders, of all proceeds of (i) the Canadian Film or
Video Production Tax Credit for the Production (the "Federal
Tax Credit") and (ii) the Ontario Film and Television Tax
Credit for the Production (the "Ontario Tax Credit"),
(hereinafter, the Federal Tax Credit and the Ontario Tax Credit
shall collectively be referred to as the "Tax Credits")
together with (x) payment directions from the Co-Producers to
CAVCO, the Canada Customs and Revenue Agency ("CCRA"), the OMDC
and the Ontario Ministry of Finance ("Finance") and (ii) powers
of attorney from the Co-Producers in favor of the Lenders,
which will permit the Lenders to take over the application
process for the Tax Credits in the event of any default by the
Co-Producers (the "Powers of Attorney");
(11) a Copyright Mortgage and Assignment; Power of
Attorney from the Canadian Co Producer in favor of the Lenders
in respect of the Production;
(12) a Copyright Mortgage and Assignment; Power of
Attorney from the UK Co Producer in favor of the Lenders in
respect of the Production;
(13) an undertaking to comply with the clearance
procedures required by the carrier of the Errors and Omissions
Insurance for the Production given by the Co-Producers in favor
of the Lenders;
(14) a consent to communicate with certain
counterparties, such as CAVCO, the CCRA, the OMDC, Finance, RBC
and CinemaVault Releasing, Inc., ThinkFilm LLC, the
Corporation, CIDIF Entertainment Group SPA, the Department of
Media, Culture and Sport (U.K.) Telefilm Canada and Grosvenor
Park Productions UK Limited (each a "Counterparty") given by
the Co-Producers in favor of the Lenders;
(15) a pledge of securities by the Corporation in favor
of the Lenders in respect of all of the capital stock of VBI
Canada owned by the Corporation;
(16) a pledge of securities by the VBI Canada in favor of
the Lenders in respect of all of the capital stock of the
Canadian Co Producer owned by VBI Canada;
(17) a notice of assignment and payment direction in
respect of each Funding Agreement signed by the Co-Producers
and acknowledged by the applicable Counterparty;
(18) subordination agreements or intercreditor agreements
with any creditor of the Corporation, VBI Canada, the Canadian
Co Producer or the UK Co Producer that has a registered or
possessory lien ranking prior to the security interests granted
in favor of the Lenders;
(19) such other documents, opinions and materials as the
Lenders or their counsel may reasonably require;
(20) a certificate of insurance for the Entertainment
Package Insurance for the Production, naming each Lender as an
additional loss payee, with an acceptable endorsement regarding
no cancellation of such policy without ten (10) days prior
written notice;
(21) a certificate of insurance for the Comprehensive
General Liability Insurance for the Production, naming each
Lender as an additional insured, with an acceptable endorsement
regarding no cancellation of such policy without ten (10) days
prior written notice;
(22) a certificate of insurance for the Umbrella
Liability Insurance for the Production, naming each Lender as
an additional insured, with an acceptable endorsement regarding
no cancellation of such policy without ten (10) days prior
written notice;
(23) a certificate of insurance for the Errors and
Omissions Insurance for the Production, each Lender as an
additional insured, with an acceptable endorsement regarding no
cancellation of such policy without ten (10) days prior written
notice;
(24) laboratory pledgeholder agreements from each
production facility, post-production facility and bonded
storage facility that may come into possession of the physical
elements of the Production;
(25) satisfactory opinions from Ontario counsel to the
Co-Producers and VBI Canada, relating to: (i) the incorporation
and subsistence of the Canadian Co-Producer and VBI Canada;
(ii) the issued and outstanding shares in the capital of the
Canadian Co-Producer and VBI Canada; (iii) the authorization,
execution and delivery of the Chain of Title Documents and the
Ontario Security Documents by the Canadian Co-Producer and VBI
Canada; (iv) the creation of security interests over the assets
of both Co-Producers and VBI Canada by the Ontario Security
Documents; (v) the perfection of such security interests by
registration of the Personal Property Security Act (the "PPSA")
financing statements against both Co-Producers and VBI Canada;
(vi) the absence of conflict between the Chain of Title
Documents and the Ontario Security Documents and (x) the
constating documents of the Canadian Co-Producer and VBI
Canada, (y) any Ontario or Canadian law applicable to either
Co-Producer or VBI Canada and (z) any agreement, indenture or
other instrument governing the affairs of the Canadian
Co-Producer or VBI Canada; (vii) the absence of any litigation
against the Co-Producers and VBI Canada; and (viii) the
enforceability of the Chain of Title Documents and the Ontario
Security Documents against the Co-Producers and VBI Canada.
(26) satisfactory opinions from UK counsel to the
Co-Producers relating to: (i) the incorporation and subsistence
of the UK Co-Producer; (ii) the issued and outstanding shares
in the capital of the UK Co-Producer; (iii) the authorization,
execution and delivery of the Chain of Title Documents, the
Ontario Security Documents and the UK Security Documents by the
UK Co-Producer; (iv) the creation of security interests over
the assets of the UK Co-Producer by the UK Security Documents;
(v) the perfection of such security interests by registration
of the UK Charge; (vi) absence of conflict between the Chain of
Title Documents and the Ontario Security Documents and (x) the
constating documents of the UK Co-Producer, (y) any UK law
applicable to the UK Co-Producer and (z) any agreement,
indenture or other instrument governing the affairs of the UK
Co-Producer; (vii) the absence of any litigation against the UK
Co-Producer; and (viii) the enforceability of the UK Security
Documents against the UK Co-Producer.
(27) satisfactory opinions from US counsel to the
Corporation relating to: (i) the incorporation and subsistence
of the Corporation; (ii) the issued and outstanding shares in
the capital of the Corporation; (iii) the authorization,
execution and delivery of the pledge of its shares of VBI
Canada; and (iv) the authorization, execution, delivery and
enforceability of any amendments to the Related Agreements.
(28) satisfactory chain of title opinions from Ontario
counsel to the Co-Producers confirming that the Chain of Title
Documents provide the Co-Producers with sufficient rights to
develop, produce and exploit the Production.
(29) satisfactory opinions regarding corporate matters
relating to the Canadian Co-Producer, the UK Co-Producer and
the Corporation;
(30) copies of the applications to register the copyright
in the screenplay for the Production with the Canadian
Intellectual Copyright Office and the U.S. Copyright Office;
(31) a financing statement registered under the PPSA
against VBI Canada in favor of the Lenders;
(32) a financing statement registered under the PPSA
against the Canadian Co Producer in favor of the Lenders;
(33) a financing statement registered under the PPSA
against the UK Co Producer in favor of the Lenders; and
(34) a completion guarantee issued by an acceptable third
party completion guarantor, together with a loss payee
endorsement from the re-insurer of such completion guarantor;
provided, however, that such completion guarantee shall only be
required upon the earlier of (i) the closing of the RBC
Facility and (ii) March 31, 2003.
(b) The Additional Security Instruments shall be provided to
the Lenders within fifteen (15) business days after the
Modification Date, and the failure to do so shall be a Default under
the Debentures. In the event of a Default, all amounts advanced
pursuant to the Debentures, including all Interim Advances made
hereunder, and all Interest thereon, shall become immediately due
and payable to the Lenders by the Corporation.
(c) The Lenders acknowledge that one or more Lenders or their
affiliates may be required to guarantee a portion of the RBC
Facility (the "RBC Guarantor"). To the extent that such guarantee
is required, the Lenders agree to subordinate their security
interest provided hereunder in the Production to the RBC Guarantor
to the extent that such RBC Guarantor is required to make a payment
to RBC under its guarantee; provided that the RBC Guarantor and the
Lenders enter into an intercreditor agreement in form and substance
satisfactory to the Lenders and the RBC Guarantor.
(d) Simultaneously with the repayment in full of the Interim
Advances, and assuming the RBC Facility is consummated, the Lenders
agree to subordinate their security interest provided hereunder in
the Production to RBC, provided that RBC and the Lenders enter into
an intercreditor agreement in form and substance satisfactory to the
Lenders.
5. Modification of Paragraph 6 (j). Paragraph 6 (j) of the
Debenture is deleted in its entirety and is replaced by the following:
The Corporation shall not execute any contract or agreement
that would obligate 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$23.00 plus the amounts necessary to pay the Royalties and
the amount necessary to pay royalties, if any to the RBC
Guarantor, 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.
6. Addition of Paragraph 18. Paragraph 18 is added to the
Debentures as follows:
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 same shall not have been discharged within
thirty (30) days.
7. Conflict; Ratification. The Corporation and the Lenders
acknowledge and agree that the Debenture is 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 Addendum. Except as specifically modified hereby, all
covenants, terms, obligations and conditions of the Debenture are
hereby ratified and confirmed. In the event of a conflict between
this Addendum and the Debentures then this Addendum shall control.
8. Execution. This Addendum may be executed in two or more
counterparts and shall be deemed to be fully executed when the
Corporation and each of 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
Addendum effective on and as of the Modification Date.
Visual Bible International, Inc.
By: _______________________________
Xxxxxx Xxxxxx, Executive Vice
President and Chief Financial
Officer
This terms and conditions of this Addendum relating to The Book
of Xxxx, Inc. are acknowledged and agreed to effective on and as of
the 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
Addendum effective on and as of the Modification Date.
Lender:
___________________________________
(Name of Lender)
___________________________________
(Signature)
___________________________________
(Title, if applicable)
