SECURITIES PLEDGE AGREEMENT
Exhibit
10.4
THIS AGREEMENT dated for reference May
7, 2008 is between:
RED MILE ENTERTAINMENT, INC.,
a Delaware corporation, having its chief executive office at at 000 Xxx Xxxxxxx
Xxxxxx, Xxxxx #0, Xxx Xxxxxxx, XX 00000
(the
“Borrower”)
AND
SILVERBIRCH INC., an Ontario company having
an office at Xxxxx 000, 000 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx X0X 0X0
(the
“Lender”)
BACKGROUND
A. The
Lender has agreed to lend CAD$750,000 to the Borrower.
B. The
Borrower has agreed to execute and deliver this Agreement to the Lender as
security for the payment and performance of its obligations to the
Lender.
AGREEMENTS
For good and valuable consideration,
the receipt and sufficiency of which each party acknowledges, the parties agree
as follows:
1. Securities
Pledge. The Borrower hereby assigns, mortgages, charges and
pledges to and deposits with the Lender, and grants to the Lender a security
interest in all of the securities in the capital of: (i) 2WG Media, Inc (Texas
Corporation); (ii) Roveractive LTD (a Delaware Corporation); and (iii) Red Mile
Entertainment PTY LTD (an Australian corporation) and any other corporation,
limited liability company, partnership or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower (“Subsidiaries”), along with any
substitutions, additions, proceeds or claims by the Borrower in respect of them
(collectively, the “Pledged
Securities”), as general and continuing collateral security for the
payment and performance of all present and future debts, liabilities and
obligations of the Borrower to the Lender (collectively the “Obligations”) until payment
and performance in full of the Obligations.
2. Delivery of Pledged
Securities. On or before the execution and delivery
of this Agreement, the Borrower will deliver to the Lender share certificates
representing the Pledged Securities, together with duly executed undated
medallion signature guaranteed stock powers of attorney and certified directors'
resolutions for each share certificate so delivered to the Lender, all in form
and terms satisfactory to the Lender and sufficient to permit the transfer of
such Pledged Securities on the registers maintained by the transfer agent for
Subsidiaries, free and clear of all liens, claims, encumbrances, restrictions or
other notations, to be held by the Lender pursuant to this
Agreement until payment and performance in full of the
Obligations.
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The Borrower acknowledges and confirms
that at all times in which Xxxxx LLP holds or is otherwise in possession or has
control or direction over the share certificates representing the Pledged
Securities and/or the transfer documentation referred to above, it shall hold
all such Pledged Securities and transfer documentation as agent for the
Lender.
3. Representations and
Warranties. The Borrower represents and warrants to the Lender
that:
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(a)
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it
is the sole legal and beneficial owner of all of the Pledged
Securities;
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(b)
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no
person holds any options, warrants, or other rights to acquire the Pledged
Securities;
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(c)
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the
Pledged Securities are validly issued, fully paid, non-assessable common
shares in the capital of the
Subsidaries;
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(d)
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the
Pledged Securities are free and clear of all liens, mortgages, charges and
security interests other than those created under this Agreement in favour
of the Lender;
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(e)
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the
Pledged Securities are not subject to any shareholders or other agreement
or commitment, cease trade order, stop transfer restriction, or any resale
restrictions or hold period that would in any way restrict or prevent the
Lender from assigning or transferring such shares upon the occurrence of
an Event of Default;
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(f)
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the
Borrower has no reasonable grounds to believe that the Subsidaries is in
default of its obligations under applicable securities
law;
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(g)
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each
of the Subsidiaries is in compliance, in all material respects, with its
continuous disclosure obligations under applicable securities laws and,
without limiting the generality of the foregoing, no adverse material
change has occurred since the last financial statement and no adverse
material fact exists in relation to the Pledged Securities which has not
been publicly disclosed; and
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(h)
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no
consent, approval, authorization or other order or other action by, and no
notice to or filing with, any governmental authority or any other Person
(other than the filing of a financing statement under the PPSA) will be
required for the exercise by the Lender of the voting or other rights and
the remedies provided for in this Agreement or in connection with the
transfer of the Pledged Securities to the Lender or to a third party at
the Lender’s direction pursuant to this Agreement, except as may be
required by laws affecting the offering and sale of securities
generally.
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4. Realization on Default. On the
occurrence and during the continuance of any default by the Borrower in the
payment or performance of the Obligations or any default hereunder (each, an
“Event of Default”), the
Lender may at any time in its sole discretion, in accordance with any applicable
law, realize upon or otherwise dispose of the Pledged Securities by sale,
transfer, or delivery or may, to the fullest extent permitted by law, exercise
and enforce all rights and remedies of a holder of the Pledged Securities as if
the Lender were absolute owner of them, without notice to or control by the
Borrower, and such remedies may be exercised separately or in combination and
will be in addition to and not in substitution for any other rights the Lender
may have. The Borrower acknowledges and agrees that it shall continue
to be liable for the outstanding Obligations, despite any action or inaction on
the part of the Lender in selling or disposing of the Pledged
Securities.
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5. Costs and
Expenses. All costs and charges incurred by or on behalf of
the Lender in connection with the Pledged Securities or their realization
(including without limitation all legal fees (on a solicitor and own client
basis) and court costs and all expenses of taking possession of, protecting and
realizing upon the Pledged Securities including costs and charges in connection
with realizing, collecting, selling, transferring or delivering the Pledged
Securities or exercising or enforcing any rights under them) will be added to
and form part of the Obligations and will be a first charge on the proceeds of
any realization, collection, sale, transfer, delivery, exercise or
enforcement.
6. Application of
Proceeds. The proceeds of the Pledged Securities will be
applied by the Lender on account of the Obligations in such manner, order and
priority as set out in or pursuant to the Credit Agreement. If the
proceeds of disposition of the Pledged Securities are insufficient to satisfy
all of the Obligations, the Borrower will remain liable for any
deficiency. If, after the realization or disposition of the Pledged
Securities and satisfaction of the Obligations there are any surplus Pledged
Securities or proceeds of disposition, the Lender will account for such surplus
Pledged Securities or process of disposition to the Borrower.
7. No Exhaustion of
Recourse. The Lender will not be obliged to exhaust its
recourses against any other covenantor or any other person or persons, or
against any other security it may hold in respect of the Obligations before
realizing upon or otherwise dealing with the Pledged Securities in such manner
as it considers desirable. The Lender may grant extensions or other
indulgences, take and give up securities, accept compositions, grant releases
and discharges and otherwise deal with the Borrower and with other parties,
guarantors, indemnitors or securities as the Lender may see fit without
prejudice to the rights of the Lender in respect of the Pledged
Securities.
8. No Merger. This
security will not operate by way of merger of any of the Obligations and no
judgment recovered by the Lender will operate by way of merger, of or in any way
affect, the security now or in the future held by the Lender in respect of the
Obligations or in respect of any other obligations of the Borrower.
9. Appointment of
Attorney. Any person who is at any relevant time an officer of
the Lender is irrevocably appointed attorney of the Borrower, with full powers
of substitution from time to time to endorse or transfer, or both, the Pledged
Securities or any of them to the Lender, its nominees, or transferees, and the
Lender and its nominees or transferees are empowered to exercise all rights and
powers and to perform all acts of ownership concerning the Pledged Securities to
the same extent as the Borrower may (including, without limitation, the right to
execute on behalf of the Borrower any and all stock powers of attorney to
transfer any of the Pledged Securities). The power of attorney
granted in this Agreement is in addition to, and not in substitution for, any
stock power of attorney delivered by the Borrower with the delivery of the
Pledged Securities, and such powers of attorney may be relied upon by the Lender
severally or in combination.
10. Rights of the Borrower. Until
the occurrence of an Event of Default and a determination by the Lender to
enforce the rights granted to it under this Agreement:
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(a)
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the
Borrower will be entitled to exercise all voting rights in respect of the
Pledged Securities and to give consents, waivers, notices and
ratifications and to take other action in respect thereof, provided,
however, that no votes shall be cast or consent, waiver, notice or
ratification given or action taken which
would:
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(i)
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impair
or reduce the value of or restrict the transferability of the Pledged
Securities; or
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(ii)
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be
inconsistent with or violate any provisions of this Agreement, the Credit
Agreement or any other security granted to or in favour of the Lender to
secure the Obligations;
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(b)
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if
any of the Pledged Securities is registered in the Lender’s name or is
under the control of the Lender, the Lender, on the Borrower’s written
request, shall execute and deliver to the Borrower suitable proxies,
voting powers or powers of attorney in favour of the Borrower or its
nominee or nominees for voting, giving consents, waivers, notices or
ratifications or taking any other action the Borrower is permitted to take
in respect of the Pledged Securities;
and
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(c)
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the
Borrower will be entitled to receive all cash dividends concerning the
Pledged Securities provided that all dividends and distributions will be
applied to reduce the Obligations. Any other monies which may
be received by the Borrower for or in respect of the Pledged Securities
will be received as trustee for the Lender and will immediately be paid
over to the Lender and be held by the Lender under the mortgage, charge,
hypothecation, pledge and grant of security interest made by this
Agreement.
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11. Rights and Duties of the
Lender. Upon the occurrence of an Event of Default and a
determination by the Lender to enforce the rights granted to it under this
Agreement:
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(a)
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all
of the Borrower’s rights pursuant to paragraph 10 shall cease and the Lender may enforce any of
the Borrower’s rights with respect to the Pledged Securities;
and
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(b)
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to
the extent not already done, forthwith transfer control of such Pledged
Securities to the Lender, as the Lender may direct. The Lender
shall not have any duty of care with respect to the Pledged Securities
other than to use the same care in the custody and preservation of the
Pledged Securities as it would with its own property. The
Lender may take no steps to defend or preserve the Borrower’s rights
against the claims or demands of others. The Lender, however,
shall use its reasonable best efforts to give the Borrower notice of any
claim or demand of which it becomes aware to permit the Borrower to have a
reasonable opportunity to defend or contest the claim or
demand.
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12. Attachment. The
Borrower and the Lender acknowledge that it is their intention that the security
interests created by this Agreement attach on execution by the Borrower and that
value has been given.
13. Alteration of
Capital. In the event of any consolidation, subdivision,
reclassification, stock dividend or other alteration to the capital of the
Subsidiaries, the term “Pledged
Securities” as it relates to shares in those companies will be considered
to refer to the Pledged Securities described in paragraph 1 as increased,
decreased, amended or supplemented and the Borrower will deliver immediately any
replacement or additional share certificates, directors' resolutions and such
other documents or instruments the Lender may require, to be held in accordance
with the terms of this Agreement.
14. Discharge. Upon
payment in full of the Obligations, the Lender will return the share
certificates representing the Pledged Securities and will release the Pledged
Securities from the assignment, mortgage, charge, hypothecation, pledge and
security interest created by this Agreement and will execute and deliver to the
Borrower such releases and reassignments as the Borrower may reasonably require
for such purpose.
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15. Defined
Terms. Unless otherwise defined herein, all defined terms used
in this Agreement shall have the meanings ascribed to them in the Credit
Agreement.
16. Binding Effect. The
provisions of this Agreement will be binding upon and enure to the benefit of
the Lender and the Borrower and their respective successors and
assigns.
17. Governing Law. This
Agreement will be governed and construed in accordance with the laws of the
Province of Ontario and the laws of Canada applicable therein. The
Borrower submits to the non-exclusive jurisdiction of the Courts of the Province
of Ontario and agrees to be bound by any suit, action or proceeding commenced in
such Courts and by any order or judgment resulting from such suit, action or
proceeding, but the foregoing will in no way limit the right of the Lender to
commence suits, actions or proceedings based on this Agreement in any
jurisdiction it may deem appropriate.
18. Notices. In this
Agreement:
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(a)
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any
notice or communication required or permitted to be given under this
Agreement will be in writing and will be considered to have been given if
delivered by hand, transmitted by facsimile transmission or mailed by
prepaid registered post to the address or facsimile transmission number of
each party set out below:
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(i)
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if
to the Lender:
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Xxxxx 000, 000 Xxxxxxx
Xxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxx
van der Plaat
Fax
No.: (000)
000-0000
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(ii)
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if
to the Borrower:
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Red Mile
Entertainment, Inc.
000 Xxx
Xxxxxxx Xxxxxx,
Xxxxx #0,
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx
Xxxxxxxx
Fax
No: (000)
000-0000
or to
such other address or facsimile transmission number as any party may designate
in the manner set out above;
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(b)
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notice
or communication will be considered to have been
received:
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(i)
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if
delivered by hand during business hours on a business day, upon receipt by
a responsible representative of the receiver, and if not delivered during
business hours, upon the commencement of business on the next business
day;
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(ii)
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if
sent by facsimile transmission during business hours on a business day,
upon the sender receiving confirmation of the transmission, and if not
transmitted during business hours, upon the commencement of business on
the next business day; and
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(iii)
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if
mailed by prepaid registered post upon the fifth business day following
posting; except that, in the case of a disruption or an impending or
threatened disruption in postal services every notice or communication
will be delivered by hand or sent by facsimile
transmission;
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(c)
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for
the purposes of this paragraph “business day” means a
day which is not a Saturday, Sunday or a holiday in
Ontario.
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19. Counterparts. This
Agreement may be executed in several counterparts, each of which so executed
will be considered to be an original and such counterparts together will be one
and the same instrument.
20. Further
Assurances. The Borrower will from time to time, whether
before or after the occurrence of an Event of Default, do all such acts and
things and execute and deliver all such certificates, deeds, transfers,
assignments and instruments as the Lender may reasonably require for perfecting
the security interest constituted by this Agreement and for facilitating the
sale of the Pledged Securities in connection with any realization and for
exercising all powers, authorities and discretions conferred upon the
Lender. The Borrower covenants and agrees with the Lender to
discharge or cause to be discharged forthwith any encumbrances which may rank in
priority to the Lender's security interest herein, and to provide the Lender
with satisfactory evidence or other confirmation that any encumbrances or liens
against the Borrower do not encumber the Pledged Securities.
21. Severability. If
any term of this Agreement is determined to be invalid or unenforceable, in
whole or in part, such invalidity or unenforceability will attach only to such
term or part term, and the remaining part of the term and all other terms of
this Agreement will continue in full force and effect. The parties
will negotiate in good faith to agree to a substitute term that will be as close
as possible to the intention of any invalid or unenforceable term while being
valid and enforceable. The invalidity or unenforceability of any term
in any particular jurisdiction will not affect its validity or enforceability in
any other jurisdiction where it is valid or enforceable.
22. Acknowledgement and
Waiver. The Borrower hereby:
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(a)
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acknowledges
receiving a copy of this Agreement;
and
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(b)
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waives
all rights to receive from the Lender a copy of any financing statement,
financing change statement or verification statement filed or issued, as
the case may be, at any time in respect of this Agreement or any amendment
thereto.
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TO
EVIDENCE THEIR AGREEMENT each of the parties has executed this Agreement on the
date first above written.
RED
MILE ENTERTAINMENT, INC.
Per:
_______________________________
Authorized
Signatory
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SILVERBIRCH
INC.
Per:
_______________________________
Authorized
Signatory
_______________________________
Authorized
Signatory
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