SECURITIES PLEDGE AGREEMENT
TO: Name of Creditor: Arthur Anderson Inc., in its capacity as receiver and
manager of GalaVu Entertainment Inc.
Address: 1900 - 79 Wellington Street West
P.O. Box 29, Toronto-Dominion Centre
Toronto, Ontario
M5K 1B9
Attention: Brian Deazeley
Facsimile: (416) 947-7788
RECITALS:
A. NETWORKS NORTH INC. (the "Debtor") is, or may become, indebted or liable to
ARTHUR ANDERSON INC., in its capacity as receiver and manager of GalaVu
Entertainment Inc. (in such capacity, together with its successors and assigns,
the "Creditor").
B. To secure the payment and performance of the Liabilities (this term, and
other capitalized terms used in this Agreement, have the meanings set forth in
Section 1), the Debtor has agreed to grant to the Creditor security interests
over the Collateral in accordance with the terms of this Agreement.
For valuable consideration, the receipt and adequacy of which are
acknowledged by the Debtor, the Debtor agrees with the Creditor as follows:
1. Definitions. In this Agreement:
"Books and Records" means all books, records, files, papers, disks,
documents and other repositories of data recording in any form or medium,
evidencing or relating to the Collateral which are at any time owned by the
Debtor or to which the Debtor (or any Person on the Debtor's behalf) has access.
"Business Day" means any day other than a Saturday, Sunday or
statutory holiday in the Province of Ontario.
"Collateral" means the collateral described in Section 2 of this
Agreement, including the Pledged Securities and all Proceeds thereof.
"Corporation" means 1373224 Ontario Limited.
"Default" means the occurrence of any of the following events or
conditions:
(a) the Debtor does not pay any of the Liabilities when due;
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(b) the Debtor becomes insolvent or bankrupt, or makes or files a
proposal, a notice of intention to make a proposal or an assignment
for the benefit of creditors under the Bankruptcy and Insolvency Act
(Canada) or comparable legislation in Canada or any other
jurisdiction; a petition in bankruptcy is filed against the Debtor;
or, proceedings are initiated under any legislation by or against
the Debtor seeking its liquidation, winding-up, dissolution or
reorganization or any arrangement or composition of its debts; or
(c) a Receiver, trustee, custodian or other similar official is
appointed in respect of the Debtor or any of the Collateral.
"Guarantee" means the limited recourse guarantee dated on or about
the date hereof granted by the Debtor to the Creditor in respect of the debts,
liabilities and obligations of the Corporation to the Creditor.
"Liabilities" means all present and future indebtedness, liabilities
and obligations of the Debtor to the Creditor under the Guarantee.
"Permitted Encumbrances" means any Security Interests granted by the
Debtor to secure financing for the Corporation, with the consent of the
Creditor, such consent not to be unreasonably withheld (and in respect of such
Security Interests, the Creditor agrees to subordinate the Security Interests
created under this Agreement thereto).
"Person" will be broadly interpreted and includes an individual, a
corporation, a limited liability company, a partnership, a trust, a joint
venture, an association, an unincorporated organization, the government of a
country or any political subdivision thereof, any agency or department of any
such government, a regulatory agency or any other juridical entity and the
heirs, executors, administrators or other legal representatives of an
individual.
"PPSA" means the Personal Property Security Act of the Province of
Ontario, as such legislation may be amended, renamed or replaced from time to
time (and includes all regulations from time to time made under such
legislation).
"Pledged Securities" means the securities listed in Schedule A.
"Prime Rate" means the rate quoted by the Canadian Imperial Bank of
Commerce from time to time as its prime rate for Canadian Dollar commercial
loans made in Canada.
"Proceeds" has the meaning given to that term in the PPSA.
"Security Interest" means any mortgage, charge, pledge,
hypothecation, lien (statutory or otherwise), assignment, finance lease, title
retention agreement or arrangement,
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security interest or other encumbrance or adverse claim of any nature, or any
other security agreement or arrangement creating in favour of any creditor a
right in respect of a particular property.
2. Grant of Security Interest. As general and continuing collateral security for
the due payment and performance of the Liabilities, the Debtor hereby assigns
and pledges to and in favour of the Creditor, and the Debtor hereby grants to
the Creditor a continuing security interest in:
(a) the Pledged Securities, together with any replacements thereof and
substitutions therefor, additions thereto, and all certificates and instruments
evidencing or representing such securities;
(b) all interest and dividends, whether in cash, kind or stock, received or
receivable upon or in respect of any of the Pledged Securities and all moneys or
other property payable or paid on account of any return or repayment of capital
in respect of any of the Pledged Securities or otherwise distributed in respect
thereof or which will in any way be charged to, or payable or paid out of, the
capital of the Corporation on account of the Pledged Securities;
(c) all other property that may at any time be received or receivable by or
otherwise distributed to the Debtor in respect of, or in substitution for, or in
exchange for, any of the foregoing; and
(d) all cash, securities and other proceeds of the foregoing and all rights and
interests of the Debtor in respect thereof or evidenced thereby, including all
moneys received from time to time by the Debtor in connection with the sale or
other disposition of any of the Pledged Securities; provided, however, that the
Debtor will not sell or otherwise dispose of any of the Pledged Securities or
purport to do any of the foregoing without the prior written consent of the
Creditor.
In the event the Debtor acquires additional shares in the capital of
the Corporation after the date hereof, the Debtor will forthwith upon receipt by
the Debtor, deliver to the Creditor any share certificates representing such
after-acquired shares. The term "Pledged Securities" shall be deemed to include
all such after-acquired shares.
3. Delivery of Pledged Securities. The certificates representing the Pledged
Securities duly endorsed by the appropriate Person in blank for transfer or
accompanied by stock powers of attorney satisfactory to the Creditor will
forthwith be delivered to and remain in the custody of the Creditor or its
nominee. The Debtor will also deliver to the Creditor a certified copy of a
resolution of the directors or shareholders of the Corporation consenting to the
transfers contemplated by this Agreement, including any prospective transfer of
the Collateral by the Creditor upon a realization on the security constituted
hereby in accordance with this Agreement. All Pledged Securities may, at the
option of the Creditor, be registered in the name
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of the Creditor or its nominee.
4. Attachment; No Obligation to Advance. The Debtor confirms that value has been
given by the Creditor to the Debtor, that the Debtor has rights in the
Collateral (other than after-acquired property) and that the Debtor and the
Creditor have not agreed to postpone the time for attachment of the Security
Interests created by this Agreement to any of the Collateral.
5. Title; No Security Interests. The Debtor represents and warrants to the
Creditor that except for (i) Security Interests created by this Agreement; and
(ii) Security Interests in respect of Permitted Encumbrances, the Debtor owns
the Collateral fee and clear of any Security Interests.
6. Voting Rights. Unless a Default has occurred and is continuing, the Debtor
will be entitled to exercise all voting power from time to time exercisable in
respect of the Pledged Securities and give consents, waivers and ratifications
in respect thereof; provided, however, that no vote will be cast or consent,
waiver or ratification given or action taken which would be prejudicial to the
interests of the Creditor or which would have the effect of reducing the value
of the Pledged Securities as security for the Liabilities or imposing any
restriction on the transferability of any of the Pledged Securities. Immediately
upon the occurrence and during the continuance of any Default, all such rights
of the Debtor to vote and give consents, waivers and ratifications will cease
and the Creditor will be entitled to exercise all such voting rights and to give
all consents, waivers and ratifications.
7. Dividends; Interest. Unless a Default has occurred and is continuing, the
Debtor will be entitled to receive any and all cash dividends, interest and
other forms of cash distribution on the Pledged Securities which it is otherwise
entitled to receive, but any and all stock and/or liquidating dividends,
distributions of property, returns of capital or other distributions made on or
in respect of the Pledged Securities, whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of the
Corporation or received in exchange for the Pledged Securities or any part
thereof or as a result of any merger, consolidation, acquisition or other
exchange of assets to which the Corporation may be a party or otherwise, and any
and all cash and other property received in exchange for any Collateral, will be
and become part of the Collateral subject to the Security Interest created by
this Agreement and, if received by the Debtor, will forthwith be delivered to
the Creditor or its nominee (accompanied, if appropriate, by proper instruments
of assignment and/or stock powers of attorney executed by the Debtor in
accordance with the Creditor's instructions) to be held subject to the terms of
this Agreement; and if the Pledged Securities have been registered in the name
of the Creditor or its nominee, the Creditor will execute and deliver (or cause
to be executed and delivered) to the Debtor all such dividend orders and other
instruments as the Debtor may request for the purpose of enabling the Debtor to
receive the dividends or other payments which the Debtor is authorized to
receive and retain pursuant to this Section 7. If a Default has occurred and is
continuing, all rights of the Debtor pursuant to this Section 7 will cease and
the Creditor will have the sole and exclusive right and authority to receive and
retain the cash dividends, interest and other forms of cash distribution which
the Debtor would otherwise be authorized to retain pursuant to this Section 7.
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Any money and other property paid over to or received by the Creditor pursuant
to the provisions of this Section 7 will be retained by the Creditor as
additional Collateral hereunder and be applied in accordance with the provisions
hereof.
8. Rights on Default. On Default, all of the Liabilities will, at the option of
the Creditor, become immediately due and payable and the security constituted by
this Agreement will become enforceable, and the Creditor may, personally or by
agent, at such time or times as the Creditor in its discretion may determine, do
any one or more of the following:
(a) Rights under PPSA, etc. Exercise all of the rights and remedies
granted to secured parties under the PPSA and any other applicable statute, or
otherwise available to the Creditor at law or in equity.
(b) Dispose of Collateral. Realize on any or all of the Collateral and
sell, lease, assign, give options to purchase, or otherwise dispose of and
deliver any or all of the Collateral (or contract to do any of the above), in
one or more parcels at any public or private sale, at any exchange, broker's
board or office of the Creditor or elsewhere, on such terms and conditions as
the Creditor may deem advisable and at such prices as it may deem best, for cash
or on credit or for future delivery.
(c) Court-Approved Disposition of Collateral. Apply to a court of
competent jurisdiction for the sale or foreclosure of any or all of the
Collateral.
(d) Purchase by Creditor. At any public sale, and to the extent permitted
by law on any private sale, bid for and purchase any or all of the Collateral
offered for sale and, upon compliance with the terms of such sale, hold, retain
and dispose of such Collateral without any further accountability to the Debtor
or any other Person with respect to such holding, retention or disposition,
except as required by law. In any such sale to the Creditor, the Creditor may,
for the purpose of making payment for all or any part of the Collateral so
purchased, use any claim for Liabilities then due and payable to it as a credit
against the purchase price.
(e) Transfer of Pledged Securities. Transfer all or part of the Collateral
into the name of the Creditor or its nominee, with or without disclosing that
the Pledged Securities are subject to the Security Interests arising under this
Agreement.
(f) Vote Pledged Securities. Vote any or all of the Pledged Securities
(whether or not transferred to the Creditor or its nominee) and give or withhold
all consents, waivers and ratifications in respect thereof and otherwise act
with respect thereto as though it were the outright owner thereof.
(g) Exercise Other Rights. Exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining to
any of the Pledged Securities as if it were the absolute owner thereof,
including the right to exchange at its discretion any and
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all of the Pledged Securities upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the Corporation or upon the exercise
by the Corporation or the Creditor of any right, privilege or option pertaining
to any of the Pledged Securities, and in connection therewith, to deposit and
deliver any and all of the Pledged Securities with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine, all without liability except to account for
property actually received by the Creditor.
The Creditor may exercise any or all of the foregoing rights and
remedies without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except as required by applicable law) to or
on the Debtor or any other Person, and the Debtor by this Agreement waives each
such demand, presentment, protest, advertisement and notice to the extent
permitted by applicable law. None of the above rights or remedies will be
exclusive of or dependent on or merge in any other right or remedy, and one or
more of such rights and remedies may be exercised independently or in
combination from time to time. Without prejudice to the ability of the Creditor
to dispose of the Collateral in any manner which is commercially reasonable, the
Debtor acknowledges that a disposition of Collateral by the Creditor which takes
place substantially in accordance with the following provisions will be deemed
to be commercially reasonable:
(i) Collateral may be disposed of in whole or in part;
(ii) Collateral may be disposed of by public auction, public tender or
private contract, with or without advertising and without any other
formality;
(iii) any purchaser of Collateral may be a customer of the Creditor;
(iv) a disposition of Collateral may be on such terms and conditions as
to credit or otherwise as the Creditor, in is sole discretion, may
deem advantageous; and
(v) the Creditor may establish an upset or reserve bid or price in
respect of Collateral.
9. Sale of Securities. The Creditor is authorized, in connection with any offer
or sale of any Pledged Securities, to comply with any limitation or restriction
as it may be advised by counsel is necessary to comply with applicable law,
including compliance with procedures that may restrict the number of prospective
bidders and purchasers, requiring that prospective bidders and purchasers have
certain qualifications, and restricting prospective bidders and purchasers to
Persons who will represent and agree that they are purchasing for their own
account or investment and not with a view to the distribution or resale of such
Pledged Securities. The Debtor further agrees that compliance with any such
limitation or restriction will not result in a sale being considered or deemed
not to have been made in a commercially reasonable manner, and the Creditor will
not be liable or accountable to the Debtor for any discount allowed by reason of
the fact that such Pledged Securities are sold in compliance with any such
limitation or
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restriction.
10. Application of Proceeds. All Proceeds of Collateral received by the Creditor
may be applied to discharge or satisfy any expenses (including the expenses of
enforcing the Creditor's rights under this Agreement), Security Interests in
favour of Persons other than the Creditor, borrowings, taxes and other outgoings
affecting the Collateral or which are considered advisable by the Creditor to
protect, preserve, repair, process, maintain or enhance the Collateral or
prepare it for sale or other disposition, or to keep in good standing any
Security Interests on the Collateral ranking in priority to any of the Security
Interests created by this Agreement, or to sell, lease or otherwise dispose of
the Collateral. The balance of such Proceeds may, at the sole discretion of the
Creditor, be held as collateral security for the Liabilities or be applied to
such of the Liabilities (whether or not the same are due and payable) in such
manner and at such times as the Creditor considers appropriate and thereafter
will be accounted for as required by law.
11. Creditor's Appointment as Attorney-in-Fact. The Debtor constitutes and
appoints the Creditor and any officer or agent of the Creditor, with full power
of substitution, as the Debtor's true and lawful attorney-in-fact with full
power and authority in the place of the Debtor and in the name of the Debtor or
in its own name, from time to time in the Creditor's discretion after a Default,
to take any and all appropriate action and to execute any and all documents and
instruments as, in the opinion of such attorney acting reasonably, may be
necessary or desirable to accomplish the purposes of this Agreement. These
powers are coupled with an interest and are irrevocable until this Agreement is
terminated and the Security Interests created by this Agreement are released.
Nothing in this Section affects the right of the Creditor as secured party, or
any other Person on the Creditor's behalf, to sign and file or deliver (as
applicable) all such financing statements, financing change statements, notices,
verification agreements and other documents relating to the Collateral and this
Agreement as the Creditor or such other Person considers appropriate.
12. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective
to the extent of such prohibition or unenforceability and will be severed from
the balance of this Agreement, all without affecting the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
13. Rights of Creditor; Limitations on Creditor's Obligations. The Creditor will
not be liable to the Debtor or any other Person for any failure or delay in
exercising any of the rights of the Debtor under this Agreement (including any
failure to take possession of, collect, sell, lease or otherwise dispose of any
Collateral, or to preserve rights against prior parties). Neither the Creditor
nor any agent of the Creditor is required to take, or will have any liability
for any failure to take or delay in taking, any steps necessary or advisable to
preserve rights against other Persons under any Collateral in its possession.
14. Dealings by Creditor. The Creditor will not be obliged to exhaust its
recourse
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against the Debtor or any other Person or against any other security it may hold
in respect of the Liabilities before realizing upon or otherwise dealing with
the Collateral in such manner as the Creditor may consider desirable. The
Creditor may grant extensions of time and other indulgences, take and give up
security, accept compositions, grant releases and discharges and otherwise deal
with the Debtor and any other Person, and with any or all of the Collateral, and
with other security and sureties, as the Creditor may see fit, all without
prejudice to the Liabilities or to the rights and remedies of the Creditor under
this Agreement.
15. Communication. Any communication required or permitted to be given under
this Agreement will be in writing and will be effectively given if (i) delivered
personally, (ii) sent by prepaid courier service or mail, or (iii) sent prepaid
by facsimile transmission or other similar means of electronic communication, in
each case to the address or facsimile number of the Debtor or Creditor set out
in this Agreement. Any communication so given will be deemed to have been given
and to have been received on the day of delivery if so delivered, or on the day
of facsimile transmission or sending by other means of recorded electronic
communication provided that such day is a Business Day and the communication is
so delivered or sent prior to 4:30 p.m. (local time at the place of receipt).
Otherwise, such communication will be deemed to have been given and to have been
received on the following Business Day. Any communication sent by mail will be
deemed to have been given and to have been received on the fifth Business Day
following mailing, provided that no disruption of postal service is in effect.
The Debtor and the Creditor may from time to time change their respective
addresses or facsimile numbers for notice by giving notice to the other in
accordance with the provisions of this Section.
16. Waivers. To the extent permitted by applicable law, the Debtor
unconditionally and irrevocably waives (i) all claims, damages and demands it
may acquire against the Creditor arising out of the exercise by the Creditor of
any rights or remedies under this Agreement or at law, and (ii) all of the
rights, benefits and protections given by any present or future statute that
imposes limitations on the rights, powers or remedies of a secured party or on
the methods of, or procedures for, realization of security, including any "seize
or sue" or "anti-deficiency" statute or any similar provision of any other
statute. None of the terms or provisions of this Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Creditor. The Creditor will not, by any act or delay, be deemed
to have waived any right or remedy hereunder or to have acquiesced in any
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Creditor, any
right, power or privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder will preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Creditor of any right or remedy hereunder on any one
occasion will not be construed as a bar to any right or remedy which the
Creditor would otherwise have on any future occasion.
17. Amalgamation. If the Debtor is a corporation, the Debtor acknowledges that
if it amalgamates with any other corporation or corporations, then (i) the
Collateral and the Security Interests created by this Agreement will extend to
and include all the property and assets of the amalgamated corporation and to
any property or assets of the amalgamated corporation thereafter
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owned or acquired, (ii) the term "Debtor", where used in this Agreement, will
extend to and include the amalgamated corporation, and (iii) the term
"Liabilities", where used in this Agreement, will extend to and include the
Liabilities of the amalgamated corporation.
18. Governing Law; Attornment. This Agreement will be governed by and construed
in accordance with the laws of the Province of Ontario. Without prejudice to the
ability of the Creditor to enforce this Agreement in any other proper
jurisdiction, the Debtor irrevocably submits and attorns to the non-exclusive
jurisdiction of the courts of such province. To the extent permitted by
applicable law, the Debtor irrevocably waives any objection (including any claim
of inconvenient forum) that it may now or hereafter have to the venue of any
legal proceeding arising out of or relating to this Agreement in the courts of
such Province.
19. Interpretation. Unless otherwise expressly provided in this Agreement, if
any matter in this Agreement is subject to the consent or approval of the
Creditor or is to be acceptable to the Creditor, such consent, approval or
determination of acceptability will be in the sole discretion of the Creditor.
If any provision in this Agreement refers to any action taken or to be taken by
the Debtor, or which the Debtor is prohibited from taking, such provision will
be interpreted to include any and all means, direct or indirect, of taking, or
not taking, such action. The division of this Agreement into sections and
paragraphs, and the insertion of headings, is for convenience of reference only
and will not affect the construction or interpretation of this Agreement. Unless
the context otherwise requires, words importing the singular include the plural
and vice versa, and words importing gender include all genders. When used in
this Agreement, the word "including" (or includes) means "including (or
includes) without limitation". Any reference in this Agreement to a "Section"
means the relevant Section of this Agreement.
20. Successors and Assigns. This Agreement will enure to the benefit of, and be
binding on, the Debtor and its successors and permitted assigns, and will enure
to the benefit of, and be binding on, the Creditor and its successors and
assigns. The Debtor may not assign this Agreement, or any of its rights or
obligations under this Agreement, without the prior written consent of the
Creditor. The Creditor may assign this Agreement, or any of its rights or
obligations under this Agreement without the prior written consent of the
Debtor.
21. Acknowledgment of Receipt/ Waiver. The Debtor acknowledges receipt of an
executed copy of this Agreement and, to the extent permitted by applicable law,
waives the right to receive a copy of any financing statement, financing change
statement or verification statement in respect of any registered financing
statement or financing change statement prepared, registered or issued in
connection with this Agreement.
Dated: September 10, 1999.
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NETWORKS NORTH INC.
Address: 14 Metero Drive By: _________________________________
Toronto, Ontario Name:
M9W 1A4 Title:
Attention: The President c/s
Facsimile: (416) 674-8838
By: _________________________________
Name:
Title:
SCHEDULE A
PLEDGED SECURITIES
Description of Securities
100 common shares of 1373224 Ontario Limited, as of the date hereof constituting
all of the issued and outstanding shares in the capital of 1373224 Ontario
Limited, represented by certificate number 01 .