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SECURITIES PLEDGE AGREEMENT
THIS AGREEMENT dated for
reference May 7, 2008 is between:
RED MILE ENTERTAINMENT, INC. , a Delaware corporation,
having its chief executive office at at 223 San Anselmo Avenue,
Suite #3, San Anselmo, CA 94960
(the
“ Borrower
”)
AND
SILVERBIRCH INC. , an Ontario company
having an office at Suite 500, 150 Ferrand Drive, Toronto, Ontario
M3C 3E5
(the
“ Lender
”)
BACKGROUND
A. The
Lender has agreed to lend CAD$750,000 to the
Borrower.
B. The
Borrower has agreed to execute and deliver this Agreement to
the Lender as security for the payment and performance of its
obligations to the Lender.
AGREEMENTS
For good and valuable
consideration, the receipt and sufficiency of which each
party acknowledges, the parties agree as
follows:
1.
Securities Pledge. The Borrower hereby assigns,
mortgages, charges and pledges to and deposits with the Lender, and
grants to the Lender a security interest in all of the securities
in the capital of: (i) 2WG Media, Inc (Texas Corporation); (ii)
Roveractive LTD (a Delaware Corporation); and (iii) Red Mile
Entertainment PTY LTD (an Australian corporation) and any other
corporation, limited liability company, partnership or other entity
of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or
indirectly owned by the Borrower (“ Subsidiaries ”),
along with any substitutions, additions, proceeds or claims by the
Borrower in respect of them (collectively, the “ Pledged Securities
”), as general and continuing collateral security for the
payment and performance of all present and future debts,
liabilities and obligations of the Borrower to the Lender
(collectively the “ Obligations ”)
until payment and performance in full of the
Obligations.
2.
Delivery of Pledged Securities. On or before the execution and
delivery of this Agreement, the Borrower will deliver to the Lender
share certificates representing the Pledged Securities, together
with duly executed undated medallion signature guaranteed stock
powers of attorney and certified directors' resolutions for each
share certificate so delivered to the Lender, all in form and terms
satisfactory to the Lender and sufficient to permit the transfer of
such Pledged Securities on the registers maintained by the transfer
agent for Subsidiaries, free and clear of all liens, claims,
encumbrances, restrictions or other notations, to be
held by the Lender
pursuant to this Agreement until payment and performance in full of
the Obligations.
-2-
The Borrower acknowledges and confirms that at all times in which
Davis LLP holds or is otherwise in possession or has control or
direction over the share certificates representing the Pledged
Securities and/or the transfer documentation referred to above, it
shall hold all such Pledged Securities and transfer documentation
as agent for the Lender.
3.
Representations and Warranties. The Borrower represents and
warrants to the Lender that:
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(a)
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it
is the sole legal and beneficial owner of all of the Pledged
Securities;
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(b)
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no
person holds any options, warrants, or other rights to acquire the
Pledged Securities;
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(c)
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the
Pledged Securities are validly issued, fully paid, non-assessable
common shares in the capital of the Subsidaries;
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(d)
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the
Pledged Securities are free and clear of all liens, mortgages,
charges and security interests other than those created under this
Agreement in favour of the Lender;
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(e)
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the
Pledged Securities are not subject to any shareholders or other
agreement or commitment, cease trade order, stop transfer
restriction, or any resale restrictions or hold period that would
in any way restrict or prevent the Lender from assigning or
transferring such shares upon the occurrence of an Event of
Default;
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(f)
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the
Borrower has no reasonable grounds to believe that the Subsidaries
is in default of its obligations under applicable securities
law;
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(g)
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each
of the Subsidiaries is in compliance, in all material respects,
with its continuous disclosure obligations under applicable
securities laws and, without limiting the generality of the
foregoing, no adverse material change has occurred since the last
financial statement and no adverse material fact exists in relation
to the Pledged Securities which has not been publicly disclosed;
and
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(h)
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no
consent, approval, authorization or other order or other action by,
and no notice to or filing with, any governmental authority or any
other Person (other than the filing of a financing statement under
the PPSA) will be required for the exercise by the Lender of the
voting or other rights and the remedies provided for in this
Agreement or in connection with the transfer of the Pledged
Securities to the Lender or to a third party at the Lender’s
direction pursuant to this Agreement, except as may be required by
laws affecting the offering and sale of securities
generally.
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4.
Realization on Default. On the occurrence and during the
continuance of any default by the Borrower in the payment or
performance of the Obligations or any default hereunder (each, an
“ Event of
Default ”), the Lender may at any time in its sole
discretion, in accordance with any applicable law, realize upon or
otherwise dispose of the Pledged Securities by sale, transfer, or
delivery or may, to the fullest extent permitted by law, exercise
and enforce all rights and remedies of a holder of the Pledged
Securities as if the Lender were absolute owner of them, without
notice to or control by the Borrower, and such remedies may be
exercised separately or in combination and will be in addition to
and not in substitution for any other rights the Lender may
have. The Borrower acknowledges and agrees that it shall
continue to be liable for the outstanding Obligations, despite any
action or inaction on the part of the Lender in selling or
disposing of the Pledged Securities.
-3-
5.
Costs and Expenses. All costs and charges
incurred by or on behalf of the Lender in connection with the
Pledged Securities or their realization (including without
limitation all legal fees (on a solicitor and own client basis) and
court costs and all expenses of taking possession of, protecting
and realizing upon the Pledged Securities including costs and
charges in connection with realizing, collecting, selling,
transferring or delivering the Pledged Securities or exercising or
enforcing any rights under them) will be added to and form part of
the Obligations and will be a first charge on the proceeds of any
realization, collection, sale, transfer, delivery, exercise or
enforcement.
6.
Application of Proceeds. The proceeds of the
Pledged Securities will be applied by the Lender on account of the
Obligations in such manner, order and priority as set out in or
pursuant to the Credit Agreement. If the proceeds of
disposition of the Pledged Securities are insufficient to satisfy
all of the Obligations, the Borrower will remain liable for any
deficiency. If, after the realization or disposition of
the Pledged Securities and satisfaction of the Obligations there
are any surplus Pledged Securities or proceeds of disposition, the
Lender will account for such surplus Pledged Securities or process
of disposition to the Borrower.
7.
No Exhaustion of Recourse. The Lender will not
be obliged to exhaust its recourses against any other
covenantor
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