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GENERAL SECURITY AGREEMENT
THIS
AGREEMENT dated for reference May__, 2008 is
between:
RED MILE ENTERTAINMENT, INC. a Delaware company having an
office at 223 San Anselmo Avenue, Suite #3, San Anselmo, CA
94960
(the
“ Debtor
”)
AND
SILVERBIRCH INC., an Ontario company
having an office at Suite 500, 150 Ferrand Drive, Toronto, Ontario
M3C 3E5
(the
“ Secured Party
”)
PART 1- SECURITY INTERESTS
1.1
Security Interests. For valuable consideration
and as security for the payment and performance of the Obligations
(as later defined) the Debtor hereby mortgages, charges, assigns
and transfers to the Secured Party, and grants to the Secured Party
a security interest in, and the Secured Party hereby takes a
security interest in, all the Debtor’s right, title and
interest in and to all of the Debtor’s present and
after-acquired property and all proceeds thereof (except the
property of the Debtor described in paragraphs 1.2 and 1.4) of
whatsoever nature and kind and wherever situate including, without
limiting the generality of the foregoing:
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(a)
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Accounts. All debts, accounts, claims, monies
and choses in action which now are, or which may at any time
hereafter be due or owing to or owned by the Debtor, and all books,
records, documents, papers and electronically recorded data
recording, evidencing, securing or otherwise relating to such
debts, accounts, claims, monies and choses in action or any part or
parts thereof (collectively “ Accounts
”);
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(b)
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Equipment. All present and future equipment now
or hereafter owned by the Debtor, including all machinery,
fixtures, plants, tools, furniture, vehicles of any kind or
description, all spare parts, accessions and accessories located at
or installed in or affixed or attached to any of the foregoing, and
all drawings, specifications, plans and manuals relating thereto
and any other goods that are not Inventory (collectively “
Equipment
”);
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(c)
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Inventory. All present and future inventory of whatever kind
now or hereafter owned by the Debtor, including all raw materials,
materials used or consumed in the business or profession of the
Debtor, goods, work in progress, finished goods, returned goods,
repossessed goods, goods used for packing, all packaging materials,
supplies and containers, materials used in the business of the
Debtor whether or not intended for sale and goods acquired or held
for sale, lease or resale or furnished or to be furnished under
contracts of rental or service (collectively “ Inventory ”);
and
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(d)
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Other Personal Property. All chattel paper,
documents of title, instruments and securities now or hereafter
owned by the Debtor that are not Accounts, Equipment or
Inventory.
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-2-
1.2
Intangibles. For valuable consideration and as
security for the payment and performance of the Obligations (as
later defined) the Debtor grants to the Secured Party a security
interest in, and the Secured Party takes a security interest in,
all the Debtor’s right, title and interest in and to all the
Debtor’s present and after-acquired intangible property (save
and except for Accounts) wherever situate and now or hereafter
owned by the Debtor including, without limitation, all contractual
rights, licenses, goodwill, patents, trademarks, trade names,
copyrights, other industrial designs and other industrial or
intellectual property and undertaking of the Debtor and all other
choses in action of the Debtor of every kind which now are, or
which may at any time hereafter be, due or owing to or owned by the
Debtor and all other intangible property of the Debtor which is not
Accounts, goods, chattel paper, documents of title, instruments,
money or securities.
1.3
Collateral. The term “ Collateral ”
means collectively all of the Debtor’s right, title and
interest in and to all of the Debtor’s present and
after-acquired property and all proceeds thereof (except the
property of the Debtor described in paragraph 1.4) of
whatsoever nature and kind and wherever situate including without
limiting the generality of the foregoing all of the property
described in paragraphs 1.1(a) to (d) inclusive and
paragraph 1.2.
1.4
Exclusions. The security interests granted in this Agreement
do not apply or extend to:
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(a)
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any
real property or interests therein of the Debtor;
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(b)
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the
last day of any term created by any lease or agreement therefor now
held or hereafter acquired by the Debtor but the Debtor will stand
possessed of the reversion thereby remaining in the Debtor of any
leasehold premises upon trust for the Secured Party to assign and
dispose thereof as the Secured Party or any purchaser of such
leasehold premises directs;
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(c)
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other
than the in connection with a United States General Security
Agreement, any lease or other agreement which contains a provision
which provides in effect that such lease or agreement may not be
assigned, subleased, charged or encumbered without the leave,
licence, consent or approval of the lessor, until such leave,
licence, consent or approval is obtained and the security interest
created hereby will attach and extend to such lease or agreement as
soon as such leave, licence, consent or approval is obtained;
and
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(d)
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any
consumer goods of the Debtor.
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1.5
Attachment. The Debtor and the Secured Party do not intend
to postpone the attachment of the security interests hereby created
save as provided in paragraph 1.4(c) and except as provided
therein the security interests hereby created will attach
when:
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(a)
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this
Security Agreement has been executed, or in the case of
after-acquired property, such property has been acquired by the
Debtor;
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(b)
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value
has been given; and
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(c)
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the
Debtor has rights in the Collateral, or in the case of
after-acquired property, acquires rights in the
Collateral.
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1.6
Notification. If this Security Agreement grants
a security interest in Accounts, after an Event of Default (as
later defined) has occurred, the Secured Party may notify any
debtor of the Debtor on an intangible, chattel paper, or account,
or any obligor on an instrument (“ Account Debtor ”)
to make all payments on Collateral to the Secured Party and the
Debtor acknowledges that the proceeds of all sales, or any payments
on or other proceeds of the Collateral, including but not limited
to payments on, or other proceeds of, the Collateral received by
the Debtor from any Account Debtor, after notification to such
Account Debtor and after default under this Agreement will be
received and held by the Debtor in trust for the Secured Party and
will be turned over to the Secured Party upon request and the
Debtor will not commingle any proceeds of or payments on the
Collateral with any of the Debtor’s funds or property, but
will hold them separate and apart.
1.7
Purchase Money Security Interests. The security
interests created hereby will constitute purchase money security
interests to the extent that any of the Obligations (as later
defined) are monies advanced by the Secured Party to the Debtor for
the purpose of enabling the Debtor to purchase or acquire rights in
any of the Collateral and were so used by the Debtor and a
certificate of an officer of the Secured Party as to the extent
that the Obligations are monies so advanced and used will be prima
facie proof of the purchase money security interests constituted
hereby.
PART 2- OBLIGATIONS SECURED
2.1
Obligations. This Security Agreement and the
security interests hereby created will be continuing security for
the payment of all and every indebtedness, both present and future,
of the Debtor to the Secured Party (the “ Obligations
”).
PART 3- REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties. The Debtor
represents and warrants to the Secured Party the
following:
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(a)
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Corporate Requirements. If the Debtor is a
corporation:
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(i)
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it
is duly incorporated and it is in good standing under the laws of
its incorporating jurisdiction;
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(ii)
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it
has the power and authority to carry on the business now being
carried on by it and has the full power and authority to execute
and deliver this Security Agreement;
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(iii)
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all
necessary and requisite corporate proceedings, resolutions and
authorizations have been taken, passed, done and given by it and by
its directors to authorize, permit and enable it to execute and
deliver this Security Agreement; and
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(iv)
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the
entering into of this Security Agreement is not in contravention of
any statute, the organizational or constating documents of the
Debtor or any agreement or other document to which the Debtor is a
party;
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(b)
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No Actions. There are no actions or proceedings
pending or, to the knowledge of the Debtor, threatened which
challenge the validity of this Security Agreement or which might
result in a material adverse change in the financial condition of
the Debtor or any of its subsidiaries or which would materially
adversely affect the ability of the Debtor to perform its
obligations under this Security Agreement or any document
evidencing any indebtedness of the Debtor to the Secured
Party;
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(c)
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Owns Collateral. Other than the subordinated interest held
by Tiger Paw Capital Corp., the Debtor owns and possesses all
presently held Collateral and has good title thereto, free from all
security interests, charges, encumbrances, liens and
claims;
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(d)
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Right and Authority. The Debtor has the right
and authority to create the security interests created in this
Agreement;
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(e)
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Location of Collateral. The only locations of
Collateral (other than Inventory in transit) and the only places
the Debtor carries on business are described in Schedule
2;
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(f)
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Financial Information. All financial information
and financial statements supplied to the Secured Party by or for
the Debtor:
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(i)
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are
not untrue in any material respect;
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(ii)
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have
revealed all material facts the omission of which would make such
information or statements misleading;
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(iii)
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disclose
all facts which materially adversely affect, or so far as the
Debtor can reasonably foresee will materially adversely affect, the
Debtor’s financial condition, the Collateral or the
Debtor’s ability to perform its obligations hereunder;
and
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(iv)
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in
the case of financial statements, have been prepared in accordance
with generally accepted accounting principles.
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3.2
Reliance and Survival. All representations and
warranties of the Debtor made in this Agreement or in any
certificate or other document delivered by or on behalf of the
Debtor for the benefit of the Secured Party are material, will
survive the execution and delivery of this Security Agreement and
will continue in full force and effect without time
limit. The Secured Party will be considered to have
relied upon each such representation and warranty in spite of any
investigation made by or on behalf of the Secured Party at any
time.
PART 4- POSITIVE COVENANTS
4.1
Positive Covenants. The Debtor covenants with
the Secured Party the following:
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(a)
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Defend Collateral. It will defend the Collateral
against all claims and demands of all persons claiming the
Collateral or an interest therein at any time;
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(b)
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Lists of Accounts. If the Collateral includes
Accounts, the Debtor will deliver to the Secured Party, within 30
days following a written request by the Secured Party, an aged list
of the Accounts in a form acceptable to the Secured Party acting
reasonably;
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(c)
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Provide Information. Upon the demand by the
Secured Party it will furnish in writing to the Secured Party all
information requested concerning the Collateral and that it will
promptly advise the Secured Party of the serial number, year, make
and model of each serial numbered good at any time included in the
Collateral;
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(d)
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Other Indebtedness. It will pay and discharge as
they become due all payments due and owing under or concerning any
previous indebtedness created or security given by the Debtor to
any person or corporation and will observe, perform and carry out
all the terms, covenants, provisions and agreements relating
thereto and any default in payment of any monies due and payable
under or relating to any material previous indebtedness or security
or in the observance, performance or carrying out of any of the
material terms, covenants, provisions and agreements relating
thereto will be considered to be a default hereunder at the option
of the Secured Party and any and all remedies available to the
Secured Party hereunder by reason of any default hereunder or by
law or otherwise will be immediately available to the Secured Party
upon any default of the Debtor under the previous material
indebtedness created or security given by the Debtor;
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(e)
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Right of Inspection. Upon an Event of Default, the Secured
Party will have the right either by its officers or authorized
agents upon notice to enter upon the Debtor’s premises and to
inspect the Collateral, all books of account and records of the
Debtor and copies of all returns made from time to time by the
Debtor to boards, agencies or governmental departments and to make
extracts therefrom and generally to conduct such examinations as it
may see fit and without limiting the generality of the foregoing,
the Secured Party may request information from the Debtor and the
Debtor shall provide such information concerning the affairs and
the conduct of business of the Debtor as the Secured Party may
request and any reasonable costs, expenses and outlays which the
Secured Party may incur pursuant hereto will be payable immediately
by the Debtor to the Secured Party, will bear interest at the
highest rate borne by any of the other Obligations and will,
together with such interest, form part of the Obligations secured
by this Security Agreement. Except as may be necessary
for the enforcement of the security provided hereunder and the
recovery of the Obligations by the Secured Party, the Secured Party
will retain all information and documentation received pursuant to
this subsection (e) in confidence. The Secured Party
acknowledges that the information collected under this subsection
(e) may constitute material non-public information of the Debtor
and agrees to comply with all applicable securities laws in
connection with receiving such information, including laws with
respect to insider trading and “tipping”;
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(f)
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Costs of Preparation & Enforcement. It will
pay all reasonable costs, charges and expenses of and incidental to
the taking, preparation, execution and registering notice (and any
amendments and renewals of such notice) of this Security Agreement
and in taking, recovering, keeping possession of or inspecting the
Collateral and generally in any other proceedings taken in
enforcing the remedies in this Security Agreement or otherwise in
connection with this Security Agreement or by reason of non-payment
or procuring payment of the monies hereby secured;
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(g)
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Costs Caused by Default. If the Debtor makes
default in any covenant to be performed by it hereunder, the
Secured Party may perform any covenant of the Debtor capable of
being performed by the Secured Party and if the Secured Party is
put to any costs, charges, expenses or outlays to perform any such
covenant, the Debtor will indemnify the Secured Party for such
reasonable costs, charges, expenses or outlays and such costs,
charges, expenses or outlays (including solicitors’ fees and
charges incurred by the Secured Party on an “own
client” basis) will be payable immediately by the Debtor to
the Secured Party, will bear interest at the highest rate borne by
any of the other Obligations and will, together with such interest,
form part of the Obligations secured by this Security
Agreement;
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(h)
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Court Costs. In any judicial proceedings taken
to enforce this Security Agreement and the covenants of the Debtor
hereunder the Secured Party will be entitled to special
costs.
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Any
costs so recovered will be credited against any solicitors’
fees and charges paid or incurred by the Secured Party relating to
the matters in respect of which the costs were awarded and which
have been added to the monies secured hereunder pursuant to the
foregoing clause;
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(i)
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Notice of Litigation. Other than litigation
ongoing at the date of execution of this Agreement which has been
publicly disclosed by the Debtor, it will give written notice to
the Secured Party of all material litigation before any court,
administrative board or other tribunal affecting the Debtor or the
Collateral or any part thereof;
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(j)
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Corporate Existence etc. It will at all times
maintain its corporate existence; that it will carry on and conduct
its business in a proper, efficient and businesslike manner and in
accordance with good business practice; and that it will keep or
cause to
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