SECOND PRIORITIES AGREEMENT
This priorities agreement (the "Agreement") is entered
into as of the 1st day of April, 2004 by and among RED BROOK
DEVELOPMENTS LIMITED, in its capacity as a holder of A Units of VBI
and B Units of VBI, and on behalf of THE PARTIES LISTED ON SCHEDULE
"A" HERETO (the "A Unit Debentureholders"), solely in their capacity
as holders of A Units of VBI, and not in any other capacity, and on
behalf of THE PARTIES LISTED ON SCHEDULE B HERETO (the "B Unit
Debentureholders"), solely in their capacity as holders of B Units
of VBI, and not in any other capacity, ▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇", and
along with the A Unit Debentureholders and the B Unit
Debentureholders, collectively, the "Debentureholders"), VISUAL
BIBLE INTERNATIONAL, INC. ("VBI") and DELUXE TORONTO LTD.
("Toronto"), DELUXE MEDIA SERVICES, INC. (formerly Deluxe Video
Services, Inc. and hereinafter referred to as "Media") and DELUXE
LABORATORIES, INC. ("Labs", and along with Media and Toronto,
collectively, "Deluxe").
FACTUAL BACKGROUND
(a) By a video duplication, dvd replication and distribution
services agreement dated as of August, 2002 (the "Video Agreement"),
VBI granted to Media a lien (the "Video Lien") in, to and over
certain property owned by VBI, but in the possession of Media;
(b) By a film processing agreement dated as of August 27, 2002, VBI
granted to Labs a lien (the "Labs Lien") in, to and over certain
property owned by VBI, but in the possession of Labs;
(c) VBI has granted security interests (the "Debentureholder
Security Interests") in, to and over the property described therein
(the "Debenture Collateral") to and in favour of each of the
Debentureholders pursuant to general security agreements and
security agreements as amended, modified and supplemented from time
to time (the "Debentureholder Security Documents"), which security
interests secured certain obligations of VBI to the Debentureholders
(the "Debenture Obligations");
(d) By an inventory security agreement (the "Inventory Security
Agreement") dated as of March 1, 2004, VBI granted a security
interest (the "Deluxe Inventory Security Interest") to and in favour
of Deluxe in, to and over certain collateral referred to therein,
the priority of which security interest vis a vis the
Debentureholder Security Interests is governed by a priorities
agreement (the "PMSI Priorities Agreement") made as of March 23,
2004 between the parties hereto; and
(e) By a security agreement (the "Security Agreement") dated as of
the date hereof, VBI granted a security interest (the "Deluxe
Security Interest") to and in favour of Deluxe in, to and over
certain collateral referred to therein (the "Collateral"), which
Deluxe Security Interest secured certain obligations of VBI to
Deluxe as set out in the Inventory Security Agreement (the
"Subordinated Obligations").
In consideration of the sum of $1.00 and for other good
and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged) the undersigned hereby agree as follows:
Article 1
DEFINITIONS
1.1 Unless otherwise defined herein, capitalized terms shall have
the meaning set out in the Security Agreement.
Article 2
CONSENT
2.1 This Agreement in no way relates to or affects the Video Lien or
the Labs Lien or the Deluxe Inventory Security Interest or the
priorities of such Liens in comparison to any other security
interest now or hereafter granted by VBI, including those specified
in PMSI Priorities Agreement.
2.2 Nothing herein modifies, amends or affects the Disbursement
Agreement or the PMSI Priorities Agreement, or relieves Deluxe or
the Debentureholders from their respective obligations under the
PMSI Priorities Agreement, including Deluxe's obligations under
Article 4 thereof. In the event of any conflict or inconsistency
between the provisions of this Agreement and the Disbursement
Agreement, the provisions of the Disbursement Agreement shall
prevail and be paramount to the extent of the conflict or
inconsistency. In the event of any conflict or inconsistency
between the provisions of this Agreement and the PMSI Priorities
Agreement, the provisions of the PMSI Priorities Agreement shall
prevail and be paramount to the extent of the conflict or
inconsistency.
2.3 Each of the Debentureholders hereby respectively acknowledges
and consents to the creation and issuance by VBI to Deluxe of the
Deluxe Security Interest and to the incurrence by VBI of the
Subordinated Obligations, and that the creation, issuance and
incurrence of the same does not constitute a default under any of
the respective Debentureholder Security Interests.
Article 3
SUBORDINATION
3.1 The Debentureholder Security Interests shall have priority with
respect to the Debenture Collateral over the Deluxe Security
Interest, but notwithstanding the foregoing, during the term of the
Disbursement Agreement, the Subordinated Obligations and the
Debenture Obligations are to be paid to Deluxe and the
Debentureholders respectively in accordance with the priority of
distributions provided for in the Disbursement Agreement.
Article 4
COVENANTS OF DELUXE
4.1 Deluxe hereby acknowledges and agrees that it will not
challenge, contest or bring into question the validity, perfection
or enforceability of any of the Debentureholder Security Interests,
or the priority of the distributions provided for hereunder and
under the Disbursement Agreement.
4.2 Deluxe hereby covenants and agrees with the Debentureholders
that Deluxe shall not take any steps under the Security Agreement to
enforce the Deluxe Security Interest until the Debentureholders have
been paid in full for all Debenture Obligations, including, without
limiting the generality of the foregoing, all royalty payments,
interest, repayment of principal and all other amounts payable
thereunder.
Article 5
COVENANTS OF DEBENTUREHOLDERS
5.1 The Debentureholders hereby acknowledge and agree that they will
not challenge, contest or bring into question the validity,
perfection or enforceability of the Deluxe Security Interest, or the
priority of the distributions provided for hereunder, and during the
term of the Disbursement Agreement under the Disbursement Agreement.
Article 6
COVENANTS OF COMPANY
6.1 VBI hereby confirms to and agrees with the Debentureholders and
Deluxe that so long as VBI remains obligated or indebted to the
Debentureholders and Deluxe, it shall hold its assets for the
Debentureholders and Deluxe in accordance with their respective
interests and priorities under this Agreement.
Article 7
GENERAL
7.1 From time to time upon request therefor, the Debentureholders
and Deluxe may advise each other of the particulars of the
indebtedness and liability of VBI to each other and all security
held by each therefor.
7.2 The Debentureholders, Deluxe and VBI shall do, perform, execute
and deliver all acts, deeds and documents as may be necessary from
time to time to give full force and effect to the intent of this
Agreement. The parties each agree to sign and register, as
required, such further documentation as may be requested to give
effect to this Agreement from time to time.
7.3 Any demand on VBI for repayment of any funds owed and any
notices of default given to VBI shall be copied to the
Debentureholders and Deluxe (as applicable). Neither the
Debentureholders nor Deluxe shall be liable for any accidental
omission to provide notice to the other of them as required pursuant
to this section 7.3.
7.4 None of the Debentureholders shall transfer or assign any of the
Debentureholder Security Interests without the assignee or
transferee being bound by the provisions of this Agreement.
7.5 Deluxe shall not transfer or assign any of the Deluxe Security
Interests without the assignee or transferee being bound by the
provisions of this Agreement.
7.6 This Agreement may be executed in several counterparts, each of
which when so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same instrument
and shall be effective as of the formal date hereof. Counterparts
may be executed either in original or faxed form and the parties
adopt any signatures received by a receiving fax machine as original
signatures of the parties, provided however, that any party
providing its signature in such manner shall promptly forward to the
other party an original of the signed copy of this Agreement which
was so faxed.
7.7 This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns, and
shall be governed by the laws of Ontario.
7.8 This Agreement shall continue in full force and effect until the
date on which it is terminated by the mutual consent of the
Debentureholders and Deluxe; provided, however, that unless
otherwise agreed no such termination shall affect the priorities set
out herein with respect to the property of VBI subject to this
Agreement at the time of such termination.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement under the hands of the duly authorized officers as of the
date first set out above.
RED BROOK DEVELOPMENTS LIMITED, for and on behalf of the
Debentureholders
By:
Authorized Signing Officer
We have authority to bind the Debentureholders
DELUXE MEDIA SERVICES, INC.
Per:
Authorized Signing Officer
DELUXE LABORATORIES, INC.
Per:
Authorized Signing Officer
DELUXE TORONTO LTD.
Per:
Authorized Signing Officer
VISUAL BIBLE INTERNATIONAL, INC.
Per:
Authorized Signing Officer
SIGNED, SEALED AND DELIVERED
in the presence of
Witness
▇▇▇▇ ▇▇▇▇▇▇▇
SCHEDULE "A"
Red Brook Developments Limited
Augusta Holding Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ Limited
Art ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Maznic
▇▇▇▇▇▇ Steels
GWL Growth Equity Fund
AGF Growth Equity Fund
IGF AGF Diversified Growth Fund
London Life Growth Equity Fund
IG AGF Diversified Growth Class
New Century Investments Holdings Ltd.
SCHEDULE "B"
Red Brook Developments Limited
Westdale Construction Co. Limited
The ▇▇▇▇ ▇▇▇▇▇ Investment Corporation
▇▇. ▇▇▇▇▇▇ Grad
Art ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Glow
▇▇▇▇ ▇▇▇▇▇▇
Inglewood Holdings Inc.
▇▇▇ ▇▇▇▇▇▇
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