Agreement to Provide Guaranty - Visual Bible International Inc. and Elly Herbert Reisman
AGREEMENT TO PROVIDE GUARANTY
Agreement to Provide Guaranty (the "Agreement"), dated as March
13, 2003, by and among Visual Bible International, Inc., a Florida
corporation (the "Company") and Elly Herbert Reisman (the "Guarantor").
A. The Book of John, 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 Company. TBJ has negotiated a
Production credit facility (the "RBC Facility") with Royal Bank of
Canada ("RBC"), and, as a condition to the closing of the RBC
Facility, Guarantor is required to provide RBC with limited
guaranty (the "Limited Guaranty") in the amount of CDN$782,950
(approximately US$510,000).
B. The Guarantor has agreed to provide the Limited Guaranty
to RBC for and on behalf of TBJ in accordance with the terms of this
Agreement in exchange for the Guaranty Consideration (as hereinafter
defined), the Security (as hereinafter defined), the Registration
Rights (as hereinafter defined), the Acquisition Rights (as
hereinafter defined) and the Nomination Rights (as hereinafter
defined).
C. The Company has heretofore issued certain Debentures, as
same may be amended from time to time, (the "Debentures") as an
adjunct to the RBC Facility, and Guarantor or an Affiliate (as such
term is defined under the Securities Act of 1933, as amended [the
"Act"]) of Guarantor is a Holder of such Debentures; and
D. Capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to them in the Debentures.
In consideration of the parties mutual covenants and agreements
contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Guaranty Consideration. In consideration for the
provision of the Guarantee by Guarantor, the Company shall cause
the following payments (collectively, the "Guaranty Consideration")
to be made to Guarantor:
(a) 100,000 validly issued, fully paid and non assessable
shares (the "Guaranty Shares") of the $.001 par value common stock
of the Company (the "Common Stock") shall be issued and delivered to
Guarantor within fourteen (14) business day of the date that
Guarantor provides the Guarantee to RBC (the "Guaranty Commencement
Date").
(b) In the event that the Limited Guaranty, or any portion
thereof, remains binding upon the Guarantor for a period in excess
of forty five (45) days after the Guaranty Commencement Date (the
"Guaranty Termination Deadline Date"), then the Company shall issue
and deliver 25,000 shares of Common Stock (collectively, the
"Additional Guaranty Shares") to the Guarantor for each period (or
part thereof) of 30 days after the Guaranty Termination Deadline
Date that the Limited Guaranty remains binding upon the Guarantor.
Any such Additional Guaranty Shares due to the Guarantor from the
Company pursuant hereto shall be provided to Guarantor within
fourteen (14) business day of the date that such Additional Guaranty
Shares became due and payable to Guarantor.
(c) If Guarantor is required to make any payment under the
Limited Guaranty (a "Guaranty Payment"), then in addition to the
Guaranty Shares and any Additional Guaranty Shares due hereunder,
the Company shall cause a royalty per DVD Unit sold to United States
and Canadian Sources (the "Guaranty Royalty") to be paid to the
Guarantor in the manner as set forth hereinafter and calculated as
follows:
(1) The Guaranty Royalty shall be equal to: (i) US$3.00
for the first 300,000 DVD Units sold (the "First Guaranty
Royalty"); and (ii) US$2.00 for the next 305,000 DVD Unit sold
(the "Second Guaranty Royalty"). After the sale of 605,000 DVD
Units and the payment of the Guaranty Royalty as required
hereby, the obligation upon the Company to pay any amount of
Guaranty Royalty to Guarantor shall terminate.
(2) To the extent, however, that any Guaranty Payment is
repaid to the Guarantor by the Company or by any other source
on behalf of the Company (in each instance, a "Recoupment
Payment") then the Second Guaranty Royalty shall be reduced by
the amount of any such Recoupment Payment.
(d) The Company shall effect payment of the Guaranty Royalty
by causing an irrevocable instruction, in a form substantially the
same as the form of irrevocable instruction provided to Holders of
the Debentures in connection with the payment of Royalties pursuant
thereto, to be sent immediately after being advised that a Guaranty
Payment has been made by Guarantor to each Fulfillment Corporation
utilized by the Company 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 "Guaranty Royalty Retained
Portion") in the amount of United States Dollars necessary to pay
the Guaranty Royalties, or, in the event that proceeds of any such
sale are in Canadian Dollars (the "Canadian Guaranty Royalty
Retained Portion"), then the Canadian Guaranty Royalty Retained
Portion shall be an amount of Canadian Dollars equal to the United
States Dollar equivalent of Canadian Dollars necessary to pay the
Guaranty Royalties, and the Fulfillment Corporation shall be
obligated to cause the Canadian Guaranty Royalty Retained Portion to
be converted into United States Dollars, and to pay Guarantor
therefrom the Guaranty Royalty (each such payment to Guarantor of
any Guaranty Royalty Retained Portion being defined as a "Guaranty
Royalty Fulfillment Payment"). The Company shall cause each
Fulfillment Corporation so utilized by the Company to commence such
Guaranty 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
Guaranty Royalty Fulfillment Payments shall continue to be made on
the tenth day of each subsequent month thereafter until the earlier
to occur of: (i) Guaranty 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.
2. Representations and Warranties of Guarantor. The
Guarantor acknowledges, represents, warrants and agrees as follows:
(a) The acquisition of the Guaranty Shares and the Additional
Guaranty Shares involves a high degree of risk, in that:
(1) an investment in the Guaranty Shares and the
Additional Guaranty Shares is highly speculative, and only
those parties that can afford the loss of the entire investment
should consider investing in the Guaranty Shares and the
Additional Guaranty Shares;
(2) Guarantor may not be able to liquidate an investment
in the Guaranty Shares and the Additional Guaranty Shares; and
(3) Guarantor could sustain the loss of Guarantor's
entire investment in the Guaranty Shares and the Additional
Guaranty Shares.
(b) This Guaranty Agreement has not been reviewed by the
Securities and Exchange Commission (the "SEC") or any state
securities agency. The Guaranty Shares and the Additional Guaranty
Shares have not be registered under the Securities Act of 1933 (the
"Act") and/or applicable state securities laws (collectively, the
"Securities Laws") and are "Restricted Securities" as such term is
defined by Rule 144 under the Securities Act.
(c) Neither the SEC nor any state securities agency has made
any finding or determination of the fairness or suitability for
investment in or any endorsement of Company or of the Guaranty
Shares and the Additional Guaranty Shares.
(d) The current value of the Guaranty Shares and the
Additional Guaranty Shares should not be considered as an indication
of any price at which the Guaranty Shares and the Additional
Guaranty Shares may be subsequently sold or the price at which any
of the Guaranty Shares and the Additional Guaranty Shares may trade
in the future.
(e) In addition to the other acknowledgments, representations,
warranties and agreements contained herein, Guarantor represents and
warrants that he has reached the age of majority in the jurisdiction
in which he resides and has the legal capacity to purchase and hold
the Guaranty Shares and the Additional Guaranty Shares.
(f) Guarantor is an accredited investor (an "Accredited
Investor") as such term is defined in Rule 501 of Regulation D
promulgated under the Act in that, among other things, the personal
net worth or past and anticipated income of Guarantor are in excess
of the amounts required pursuant to such rule.
(g) The Guarantor is able to bear the economic risks of the
investment in the Guaranty Shares and the Additional Guaranty Shares
and, consequently, without limiting the generality of the foregoing,
is able to hold the Guaranty Shares and the Additional Guaranty
Shares for an indefinite period of time and has a sufficient net
worth to sustain a loss of the entire investment in the Guaranty
Shares and the Additional Guaranty Shares in the event such loss
should occur.
(h) The Guaranty Shares and the Additional Guaranty Shares are
being acquired by the Guarantor for the Guarantor's own account with
no intention of selling, assigning or otherwise disposing of any
participation or interest therein, and not with a view toward the
distribution thereof.
(i) The Guarantor has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Guaranty Shares and the
Additional Guaranty Shares and of protecting the Guarantor's
interests in connection with this transaction, or Guarantor has
employed the services of an investment advisor, attorney or
accountant to review any documents furnished or made available by
Company to Guarantor in connection with the acquisition of the
Guaranty Shares and the Additional Guaranty Shares by Guarantor in
order to evaluate, on behalf of Guarantor, the merits and risks of
an investment in the Guaranty Shares and the Additional Guaranty
Shares. The Guarantor recognizes that an investment in the Guaranty
Shares and the Additional Guaranty Shares involves a high degree of
risk and that the Guarantor may lose the entire investment in the
Guaranty Shares and the Additional Guaranty Shares.
(j) The terms upon which Guarantor has agreed to acquire the
Guaranty Shares and the Additional Guaranty Shares is set forth in
this Guaranty Agreement and the documents and instruments executed
by and between Guarantor and the Company in connection therewith.
Guarantor has been encouraged to review all filings of the Company
with the SEC which are available at an internet site maintained by
the SEC at http://www.sec.gov. THE GUARANTOR ACKNOWLEDGES THAT
GUARANTOR HAS OBTAINED SUCH INFORMATION OR DATA AS GUARANTOR MAY
DEEM APPROPRIATE IN ORDER TO PROVIDE THE GUARANTOR WITH THE BASIS OF
MAKING AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE
ACQUISITION OF THE GUARANTY SHARES AND THE ADDITIONAL GUARANTY
SHARES. Except as may be set forth herein, no representations or
warranties have been made to Guarantor by Company or any agent,
employee or affiliate of Company, as a condition to executing this
Guaranty Agreement, and Guarantor is not relying on any information
other than that which results from the independent investigation of
Guarantor.
(k) Guarantor understands that the Company may at anytime and
from time to time offer additional securities of the Company to such
parties and in such manner as may be deemed appropriate by the
Company (collectively, the "Subsequent Issuances"), subject to the
rights of the Guarantor in regard thereto as set forth in that
certain Investor Rights Agreement (as hereinafter defined) executed
even date herewith. Guarantor further understands that, subject to
the Investor Rights Agreement, in connection with the Subsequent
Issuances, the Company may offer rights, preferences or privileges
which are more or less favorable to any potential purchaser than
those offered by the Company pursuant to this Guaranty Agreement
and, except to the extent indicated in the Investor Rights
Agreement, the Company makes no representation or warranty to the
Guarantor in regard to any term or condition that may be offered in
connection with any such Subsequent Issuance. As a result of the
Subsequent Issuances, the percentage ownership of the then existing
stockholders of the Company will be reduced and such stockholders
may experience dilution.
(l) Guarantor understands that NOTWITHSTANDING THE FACT THAT A
LIMITED PUBLIC MARKET MAY PRESENTLY EXIST FOR OTHER SECURITIES OF
THE COMPANY, neither the Guaranty Shares nor the Additional Guaranty
Shares can be sold publicly. Furthermore, Guarantor understands
that at such time as any of the foregoing may be sold publicly,
there is no assurance that a public market will then exist..
(m) Guarantor understands that none of the Guaranty Shares
and the Additional Guaranty Shares or the offer and sale thereof
have been registered under the Act or under the Securities Laws,
that the transfer of any and all of the foregoing is restricted and
that the all of same must be held indefinitely unless any of same
are subsequently registered under the Act or an exemption from
registration is available to Guarantor. Guarantor understands that
Company is the only party that may register any of the foregoing
under the Act and that Company is under no obligation to do so
except as specifically set forth in that certain Registration Rights
Agreement (as hereinafter defined) executed even date herewith.
(n) The Guarantor is not acquiring the Guaranty Shares and the
Additional Guaranty Shares as a result of, nor is the Guarantor
aware of any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media or broadcast
over television or radio, or presented at any seminar or meeting
with respect to the Guaranty Shares and the Additional Guaranty
Shares or the Company.
(o) Guarantor understands that a legend (the "Legend") will be
placed on the certificates representing the Guaranty Shares and the
Additional Guaranty Shares stating that the each of same has not
been registered under the Act or other applicable Securities Laws
and setting forth or referring to the restrictions on
transferability and sale thereof..
3. Representations, Warranties and Covenants by Company.
Company hereby represents and warrants to and covenants with
Guarantor that as of the date hereof and the date of issuance by the
Company of the Guaranty Shares and the Additional Guaranty Shares,
if any:
(a) Company is a corporation duly organized, existing and in
good standing under the laws of the State of Florida and has the
corporate power to conduct the business presently conducted by it.
(b) The execution, delivery and performance of this Guaranty
Agreement by Company has been duly approved by the board of
directors (the "Board") of Company and all other actions required to
authorize and effect the issuance of the Guaranty Shares and the
Additional Guaranty Shares has been duly taken and approved.
(c) The Guaranty Shares and the Additional Guaranty Shares are
duly authorized. The Guaranty Shares and the Additional Guaranty
Shares, when issued in accordance with the terms hereof will be
fully paid and non-assessable with no personal liability attaching
thereto.
(d) The authorized capital stock of the Company consists of
300,000,000 shares of Common Stock and 200,000,000 shares of
preferred stock, par value $.001 per share (the "Preferred Stock").
Without giving effect to the issuance of the Common Stock issued in
connection with the Units, any Other Units and any Subsequent
Issuances, as of the date hereof, there are approximately 41,000,000
shares of Common Stock issued and outstanding and 1.55 million
shares of Series B Preferred Stock outstanding. Such Series B
Preferred Stock provides, among other things, for the ability to
convert the Series B Preferred Stock into 1.55 million shares of
Common Stock. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could
require the Company to issue, sell, or otherwise cause to become
outstanding additional shares of its capital stock except in
connection with the Units. The Company expects to implement an
incentive stock option plan as to 2.5 million or less shares of its
Common Stock. The holders of outstanding shares of the Common Stock
are entitled to receive dividends out of assets legally available
therefor at such times and in such amounts, if any, as the Board
from time to time may determine. Holders of Common Stock are
entitled to one vote for each share held on all matters submitted to
a vote of stockholders. Holders of the Series B Preferred Stock are
entitled to one vote for each share held on all matters submitted to
a vote of stockholders. Holders of the Common Stock are not
entitled to preemptive rights, and the Common Stock is not subject
to conversion or redemption.
(e) The execution and delivery of this Guaranty Agreement, the
Registration Rights Agreement (as hereinafter defined) and the
Investor Rights Agreement (as hereinafter defined), the consummation
of the transactions contemplated by this Guaranty Agreement, the
Registration Rights Agreement and the Investor Rights Agreement
(hereinafter collectively referred to as the "Related Agreements")
and the issuance of the Guaranty Shares and the Additional Guaranty
Shares will not conflict with or result in a violation of the terms
or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or asset of the Company or its Subsidiaries (as hereinafter
defined) pursuant to:
(1) the articles of incorporation or bylaws of Company;
(2) any bond, debenture, note or other evidence of
indebtedness, any other material agreement or instrument to
which Company or any of its Subsidiaries is a party or by which
Company or any of the property of Company or any of its
Subsidiaries may be bound; or
(3) of any material order, rule, regulation, writ,
injunction or decree of any government, governmental
instrumentality or court, domestic or foreign.
(f) Company shall not pay any commissions or finder or other
fees to any party in connection with the sale of the Guaranty Shares
and the Additional Guaranty Shares.
(g) Company shall, if Purchaser so requests, permit the
transfer of the Guaranty Shares and the Additional Guaranty Shares
out of the name of the Guarantor when a request therefor is
accompanied by an opinion of counsel reasonably satisfactory to
Company to the effect that neither the sale nor the proposed
transfer results in a violation of the Act or other applicable
Securities Laws and/or conformity with any Legend placed upon any
document, instrument or certificate representing the foregoing.
(h) Company shall not permit any Subsidiary to (i) undertake
any financing (debt, equity or combination thereof); (ii) incur any
indebtedness; (iii) permit any liens or other encumbrances on its
assets (tangible or intangible); or (iv) sell all or all of its
assets (tangible or intangible) other than in the ordinary course of
business consistent with past practice.
(i) For the purposes hereof, "Subsidiary" means any
corporation with respect to the Company (or a Subsidiary thereof)
owns a majority of the common stock or has the power to vote or
direct the voting of sufficient securities to elect a majority of
the directors. The Company presently has three (3) Subsidiaries.
All of the issued and outstanding shares of capital stock of each
Subsidiary of the Company have been duly authorized and are validly
issued, fully paid, and nonassessable. Company holds of record and
owns beneficially all of the outstanding shares of each Subsidiary
of Company, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities
laws), taxes, security interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands.
There are no outstanding or authorized options, warrants, purchase
rights, conversion rights, exchange rights, or other contracts or
commitments that could require any of Company and its Subsidiaries
to sell, transfer, or otherwise dispose of any capital stock of any
of its Subsidiaries or that could require any Subsidiary of Company
to issue, sell, or otherwise cause to become outstanding any of its
own capital stock. There are no outstanding stock appreciation,
phantom stock, profit participation, or similar rights with respect
to any Subsidiary of the Company. There are no voting trusts,
proxies, or other agreements or understandings with respect to the
voting of any capital stock of any Subsidiary of the Company. None
of the Company nor its Subsidiaries controls directly or indirectly
or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which
is not a Subsidiary of the Company.
(j) No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county,
local or foreign governmental authority, instrumentality, agency or
commission ("Governmental Entity") or any third party is required by
or with respect to the Company in connection with the execution and
delivery of this Guaranty Agreement or the Related Agreements or
the consummation of the transactions contemplated hereby or thereby,
except for such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as have been
obtained.
(k) There is no action, suit or proceeding of any nature
pending or, to the Company's knowledge, threatened against the
Company or any Subsidiary, or their properties or any of their
officers, directors or managers, in their respective capacities as
such nor, to the knowledge of the Company, is there any reasonable
basis therefore, except to the extent previously disclosed to
Guarantor. To the Company's knowledge, there is no investigation
pending or threatened against the Company or any Subsidiary, or
their properties or any of their officers or directors by or before
any Governmental Entity. No Governmental Entity has at any time
challenged or questioned the legal right of the Company or any
Subsidiary to conduct its operations as presently or previously
conducted.
(l) The execution and delivery of this Guaranty Agreement and
the Related Agreements by the Company does not, and the consummation
of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation of acceleration of any obligation
or loss of any benefit under (any such event, a "Conflict"): (i) any
provision of the articles of incorporation or bylaws of the Company
or (ii) any mortgage, indenture, lease, contract or other agreement
or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to the Company, the Subsidiaries or their properties or
assets.
(m) The Company and each of its Subsidiaries is not (i) in
violation of its charter or bylaws; (ii) in default, and not event
has occurred which with notice or lapse of time or both, would
constitute a default, in the due performance or observation of any
term, covenant or condition contained in any material indenture,
mortgage or deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which its is
bound or to which any of its properties or assets is subject; or
(iii) in violation of any law ordinance, governmental rule,
regulation or court decree to which it or its property or assets may
be subject except in the case of clause (ii) or (iii) for any
default or violation that could not reasonably be expected to result
in a material adverse change in the business, financial condition,
operations, results of operations, or future prospects of Company
and its Subsidiaries.
(n) Company and its Subsidiaries posses all material
consents, licenses, permits, grants or other authorization issued by
the Governmental Entity (i) pursuant to which the Company and its
Subsidiaries currently operate or hold any interest in any of their
properties or (ii) which is required for the operation of their
businesses or the holding of any such interests (herein collectively
called the "Company Authorizations"). The Company Authorizations
are in full force and effect and constitute all the Company
Authorizations required to permit the Company and its Subsidiaries
to operate or conduct their businesses or hold any interest in their
properties.
(o) The Company and its Subsidiaries have filed all tax
returns (federal, state and local) required to be filed by each
them. All taxes shown to be due and payable on such returns, any
assessments imposed and all other taxes due and payable by the
Company and its Subsidiaries have been paid or will be paid prior to
the time they become delinquent. Neither the Company nor any
Subsidiary has been advised (a) that any of its returns, federal,
state or other, have been or are being audited as of the date hereof
or (b) of any deficiency in assessment or proposed judgment to its
federal, state or other taxes.
(p) The Company is not an "investment company" or an Affiliate
of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act") and
the rules and regulations of the SEC thereunder.
(q) The Company is not an "holding company" or a Subsidiary of
an "holding company" within the meaning of the Public Utility
Holding Company Act of 1955, as amended (the "Public Utility Holding
Company Act").
(r) The Company and each Subsidiary maintains a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted account principals
and to maintain asset accountability; (iii) access to financial
assets is permitted only in accordance with management's general or
specific authorizations; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences to
the necessary.
(s) The Company and its Subsidiaries maintain commercial and
general liability insurance policies of a nature and in amounts as
is customary and sufficient for similarly situated businesses.
(t) Except in connection with matters relating to the
International Bible Society, the Company and its Subsidiaries have
sufficient legal rights to all patents, copyrights, trade secrets,
trademarks, trade names, service marks, domain names, information,
proprietary rights and processes (collectively "Proprietary
Information") necessary their businesses as conducted, or as
reasonably contemplated to be conducted, by the Company and its
Subsidiaries without any conflict with or infringement upon the
rights of others. There are no outstanding options, licenses, or
agreements of any kind relating to the foregoing, nor is the Company
or any of its Subsidiaries bound by or a party to any options,
licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other
person or entity. The Company has not received any written
communications alleging that the Company or any of its Subsidiaries
has violated or infringed, or that the Company or any of its
Subsidiaries would, by conducting its business as proposed, violate
or infringe any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of
any other person or entity.
(u) The Company and its Subsidiaries have never owned any real
property. The Company and its Subsidiaries have valid right to
lease or otherwise use all items of real and personal property which
are material to the businesses of the Company and its Subsidiaries,
in each case, such rights are in full force and effect, are valid
and binding in accordance with their respective terms of use or
occupancy, and there is not, under any of the foregoing, any
existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default). The Company
and its Subsidiaries have good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all
of their tangible properties and assets, real, personal and mixed,
used or held for use in their businesses, free and clear of any
liens, except for liens for taxes not yet due and payable and other
statutory liens for amounts not yet due.
(v) Neither the Company nor any of its Subsidiaries is bound
by or subject to (and none of their assets or properties is bound by
or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union
has requested or has sought to represent any of the employees,
representatives or agents of the Company or any Subsidiary. There
is no strike or other labor dispute involving the Company or any of
its Subsidiaries pending, or to the best of the Company's knowledge,
threatened, nor is the Company aware of any labor organization
activity involving its employees or the employees of its
Subsidiaries. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate
their employment with the Company or any of its Subsidiaries, nor
does the Company have a present intention to terminate the
employment of any of the foregoing. The Company and its Subsidiaries
have complied with all applicable state and federal equal employment
opportunity and other laws related to employment.
(w) For the purposes hereof , "Prohibited Transaction" has the
meaning set forth in ERISA Sec. 406 and Code Sec. 4975, "Reportable
Event" has the meaning set forth in ERISA Sec. 4043, "Multiemployer
Plan" has the meaning set forth in ERISA Sec. 3(37), "Fiduciary"
has the meaning set forth in ERISA Sec. 3(21), "PBGC" means the
Pension Benefit Guaranty Corporation; "Code" means the Internal
Revenue Code of 1986, as amended; "Employee Pension Benefit Plan"
has the meaning set forth in ERISA Sec. 3(2) and "Employee Welfare
Benefit Plan" has the meaning set forth in ERISA Sec. 3(1).
Neither the Company nor any Subsidiary has never maintained any
Employee Benefit Plan and there have been no Prohibited Transactions
with respect to any Employee Benefit Plan. No Fiduciary has any
liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the
assets of any Employee Benefit Plan of the Company or any
Subsidiary. No action, suit, proceeding, hearing, or investigation
with respect to the administration or the investment of the assets
of any Employee Benefit Plan is pending or, to the knowledge of the
Company, threatened. Neither the Company nor any Subsidiary has
ever incurred, and the Company has no reason to expect that Company
or any Subsidiary will incur, any liability to the PBGC or otherwise
under Title IV of ERISA or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
Neither the Company nor any Subsidiary has ever contributed to or
ever has been required to contribute to any Multiemployer Plan or
has any liability under any Multiemployer Plan. Neither the Company
nor any Subsidiary has ever maintained or contributed to, or ever
has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees,
their spouses, or their dependents.
(x) For the purposes hereof, "Environmental, Health, and
Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation
and Recovery Act of 1976, and the Occupational Safety and Health Act
of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local,
and foreign governments (and all agencies thereof) concerning
pollution or protection of the environment, public health and
safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes. The Company,
and its predecessors and Affiliates has, to the best knowledge of
the Company, complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or
commenced against any of it alleging any failure so to comply.
Neither the Company nor any Subsidiary has any liability for and
neither it nor its predecessors and Affiliates has handled or
disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance
or condition, or owned or operated any property or facility in any
manner that could form the basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand against the Company or any Subsidiary for damage to any
site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual,
or for any reason under any Environmental, Health, and Safety Law.
(y) To the best knowledge of the Company, neither the Company
nor any director, officer, employee, agent, or other person
associated with or acting on behalf of either the Company or any
Subsidiary has (i) used any corporate funds for any unlawful
contribution, gift, entertainment, or other unlawful expense
relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic governmental official or
employee from corporate funds; (iii) violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribes, rebate, payoff, influence
payment, kickback or other unlawful payment.
(z) The Company does not own any "margin securities" as that
term is defined in Regulation U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") and none of the
proceeds of the Units will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, for the
purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for
any other purpose which might cause the Guaranty Shares or the
Additional Guaranty Shares to be considered a "purpose credit"
within the meanings of Regulation T, U or X of the Federal Reserve
Board.
(aa) Neither the Company nor any Affiliate thereof has,
directly or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security
(as such term is defined in the Securities Act) which is or will be
integrated with the issuance of the Guaranty Shares or the
Additional Guaranty Shares in a manner that would require
registration of the Guaranty Shares or the Additional Guaranty
Shares under the Securities Act.
(bb) None of the Company, any of its Affiliates or any other
person acting on its behalf or their behalf has engaged, in
connection with the issuance of the Guaranty Shares or the
Additional Guaranty Shares in any form of general solicitation or
general advertising within the meaning of Rule 502 (c) under the
Securities Act.
(cc) The Company has not taken nor will it take, directly or
indirectly, any action prohibited by Regulation M under the
Securities Exchange Act of 1934 (the "Securities Exchange Act") in
connection with the issuance of the Guaranty Shares or the
Additional Guaranty Shares.
(dd) Neither the Company nor any of its Subsidiaries does
business with the government of Cuba or with any person or Affiliate
located in Cuba within the meaning of Florida Statute Section 517.075.
(ee) Assuming the accuracy of the representations and
warranties of the Guarantor contained herein and compliance by the
Guarantor with the representations, warranties and covenants
contained as part of the Related Agreements, the offer, sale and
issuance of the Guaranty Shares or the Additional Guaranty Shares
will be exempt from the registration requirements of the Securities
Act, and such offer, sale and issuance complies with the
requirements of the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
4. Security.
(a) As security for payment of the Guaranty Royalty (the
"Guaranty Security"), the Company will provide security to the
Guarantor identical in form and content to the security provided by
the Company to the Holders of the Debentures (with the exception of
a United States Security Agreement which will not be delivered
herewith, although a Uniform Commercial Code Financing Statement
will be filed on the date hereof). Such Guaranty Security shall be
established by such security agreements (the "Guaranty Security
Agreements") to be executed by the Company and Guarantor on the date
hereof. The Guaranty Security Agreements shall be in a form
identical to the form of security agreements executed by the Company
and Holders of the Debentures, except as noted above.
(b) The Guarantor covenants and agrees that Guarantor will
execute and deliver an intercreditor agreement (the "Intercreditor
Agreement") substantially in the form attached hereto as Exhibit
4.(b) on the date hereof.
5. Registration Rights. The Guarantor shall be entitled to
certain registration rights (the "Registration Rights") as to the
Guaranty Shares and the Additional Guaranty Shares. Such
Registration Rights shall be described in a registration rights
agreement (the "Registration Rights Agreement") to be executed by
the Company and Guarantor on the date hereof. The Registration
Rights Agreement shall be in a form identical to the form of
registration rights agreement executed by the Company and Holders of
the Debentures.
6. Acquisition Rights. The Guarantor shall be entitled to
certain non-transferrable acquisition rights (the "Acquisition
Rights") in connection with certain issuances of Common Stock (the
"Subject Issuances") by the Company and, for so long as Guarantor is
deemed as an Affiliate (as such term is defined under the Act) of
the Company, Guarantor shall be entitled to certain director
nomination rights and/or observer rights (collectively, the
"Nomination Rights"). Such Acquisition Rights and Director
Nomination Rights shall be described in an investor rights agreement
(the "Investor Rights Agreement") to be executed by the Company and
Guarantor on the date hereof. The Investor Rights Agreement shall
be in a form identical to the form of investor rights agreement
executed by the Company and the Holders of the Debentures.
7. Miscellaneous.
(a) Amendments and Waivers. Any term of this Agreement may be
amended or waived in writing and only with the written consent of
the Company and the Guarantor. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon Guarantor and
the Company.
(b) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(c) Entire Agreement. This Agreement and the other documents,
instruments and agreements executed in connection herewith
constitute the entire agreement by, between and among the parties as
to the subject matter hereof and merges and supersedes any prior
discussions, understandings and agreements of any and every nature
by, between and among them as to the subject matter hereof.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS, RULES OR
PRINCIPLES.
(e) JURISDICTION AND VENUE. ANY SUIT, ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT 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. THE PARTIES
HEREBY ACCEPT THE EXCLUSIVE JURISDICTION OF THOSE COURTS FOR THE
PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES 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 SUBSCRIPTION AGREEMENT 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. THE PARTIES, FURTHER, CONSENT TO SERVICE OF
PROCESS IN ANY SUCH ACTION OR LEGAL PROCEEDING BY MEANS OF
REGISTERED MAIL OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, IN CARE
OF THE ADDRESS SET FORTH HEREIN OR SUCH OTHER ADDRESS AS EITHER
PARTY MAY FURNISH IN WRITING TO THE OTHER, PROVIDED PROCESS IS
ACTUALLY RECEIVED.
(f) Notices. Unless otherwise provided, any notice required
or permitted by this Agreement shall be in writing and shall be
deemed sufficient upon delivery, when delivered personally or by
overnight courier or sent by telegram or fax, or forty-eight (48)
hours after being deposited in the United States mail as certified
or registered mail with postage prepaid, and addressed to the party
to be notified at such party's address as set forth as set forth in
the Registration Rights Agreement or as subsequently modified by
written notice.
(g) Paragraphs and Headings. The pargraphs and headings used
in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
(h) Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision
shall be automatically reformed so as to be enforceable while as
nearly as possible preserving the original intent of the parties.
(i) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the
respective permitted successors and assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(Signature Page Follows)
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement to Provide Guaranty as of the date first written above.
Visual Bible International, Inc.
By: _______________________________
Harold Kramer, Executive
Vice President
Guarantor:
__________________________________
(Name of Investor)
___________________________________
(Signature)
___________________________________
(Title, if applicable)
Exhibit 4.(b)
The Intercreditor Agreement