SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Month of July 1998
Commission File No. 33-7006
TECHNICAL MAINTENANCE CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 87-048534
- -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1800 E. SAHARA, SUITE 107
LAS VEGAS, NEVADA 89104
- ----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (702) 792-7405
----------------
Registrant's facsimile number, including area code (702) 734-7500
----------------
1<PAGE>
ITEM 1. Changes in Control of Registrant.
As previously reported on Registrant's Form 8-K for the month of
March 1997, on March 21, 1997, two independent Canadian Investors, Societe
Innovatech du Grand Montreal and Sofinov Societe Financiere D'Innovation Inc.
(the "Canadian Investors"), agreed to invest $4,000,000 Canadian Dollars (CDN)
for the development and promotion of the Registrant's Digital Jukebox, upon
certain terms and conditions. To accomplish this, the Canadian Investors
agreed to invest $4,000,000 CDN in Touchtunes Digital Jukebox Inc.
("Touchtunes"), a Canadian subsidiary which was organized by the Registrant
specifically for that purpose. The Registrant entered into an agreement by
which Touchtunes agreed to carry out the research and development work needed
for the Digital Jukeboxes and to provide all such additional services
reasonably requested by the Registrant in connection with the implementation of
the Digital Jukebox project.
The Canadian Investors initially purchased 100 Class B shares and 20
Class C shares of Touchtunes, at a price of $5,000 CDN per share, for an
immediate cash consideration of $600,000 CDN. They also subscribed to an
additional 680 Class C shares of Touchtunes, at a price of $5,000 CDN per
share, for a consideration of $3,400,000 CDN. Both the Class C shares and the
$3,400,000 CDN were deposited in escrow. The Class B and the Class C shares of
Touchtunes may be exchanged at the option of the Canadian Investors, into
2,000,000 shares of Series A Preferred Stock of the Registrant and then
converted share for share into Common Stock. Subsequently, on May 9, 1997, the
Canadian Investors released an additional $750,000 CDN against delivery of 150
Class C shares, leaving a balance of $2,650,000 CDN and 530 Class C shares in
escrow. On July 17, 1997, the Canadian Investors released the remaining
$2,650,000 CDN to Touchtunes against delivery to them of the remaining 530
Class C shares of Touchtunes. These funds have been used to implement the
start-up business activities of the Registrant.
The Registrant is the owner of 800 Class A shares of Touchtunes. As
a result of the foregoing transactions, the Canadian Investors own 100 Class B
shares and 700 Class C shares of Touchtunes. The Class A shares entitle the
holder to one vote per share. The Class B shares entitle the holder to eight
votes per share and the Class C shares are non-voting. Therefore, the
Registrant and the Canadian Investors have equal voting rights in Touchtunes.
On February 11, 1998, the Canadian Investors subscribed for an
aggregate principal amount of $4,000,000 (US) of debentures ("Debentures")
issued by Touchtunes. The Debentures are payable by Touchtunes on demand, only
after the occurrence of an event of default as defined by the subscription
agreement. Upon default, the Debentures would bear interest at the rate of 12%
per annum, payable in one single installment, concurrently with the payment of
the principal amount. At any time prior to February 11, 1999, Touchtunes has
the right to require the Canadian Investors to purchase additional Debentures,
up to an aggregate principal amount of $10,000,000 (US), bearing the same terms
and conditions, in six increments of $1,000,000 each.
On that same date, February 11, 1998, the Registrant entered into a
"Debenture Put Right Agreement" with the Canadian Investors, providing them
with the right and option to require the Registrant to purchase all or any part
of the principal amount of Debentures they have acquired (up to $10,000,000 in
principal amount), at an exchange rate of $2.00 per share, for the issuance by
the Registrant of up to 5,000,000 shares of Series A Preferred Stock,
convertible at the option of the holders, share for share, into an aggregate of
up to 5,000,000 shares of the Registrant's Common Stock.
2<PAGE>
On February 11, 1998, the Registrant and the Canadian Investors
amended and restated their Shareholders' Agreement of March 21, 1997. Among
other things, the Amended and Restated Agreement provides that the Canadian
Investors collectively are entitled to two seats on the Registrant's Board of
Directors, which shall consist of at least six directors.
On August 5, 1998, Touchtunes required the Canadian Investors to
purchase an additional $2,000,000 (US) principal amount of Debentures with the
same terms as those previously issued on February 11, 1998.
Based on the present number of shares of the Registrant's Common
Stock issued and outstanding (14,658,644 shares), upon the exchange of their
Touchtune Class B Shares of Series A Preferred shares of the Registrant and the
conversion of such Series A Preferred shares into 2,000,000 shares of the
Registrant's Common Stock, the Canadian Investors will own approximately 12% of
the Common Stock of the Registrant. Upon the exchange of their $6,000,000
principal amount of Debentures into an additional 3,000,000 shares of the
Registrant's Series A Preferred Stock and their conversion of such Series A
Preferred shares into the Registrant's Common Stock, the Canadian Investors
will own approximately 25.434% of the Registrant's Common Stock. This would
increase to approximately 32.32% if the Canadian Investors are required to
purchase the entire $10,000,000 principal amount of Debentures and convert all
their securities of Touchtunes into shares of Common Stock of the Registrant.
ITEM 5. Other Events.
In July 1998 a lawsuit was filed in the United States District Court
for the Northern District of Illinois Eastern Division by Arachnid, Inc.
("Arachnid"), naming Touchtunes and the Registrant as defendants. The suit
seeks a judgment ruling that Arachnid's patent is valid,enforceable and is
being infringed by the Registrant's Digital Jukebox. The Registrant has
obtained an opinion from its patent counsel that its patents on the Digital
Jukebox do not infringe upon Arachnid's patent and intends to vigorously defend
against this claim..
ITEM 7. Financial Statements and Exhibits.
Exhibits:
10. (xxii) Debenture dated August 5, 1998, registered in the name of Sofinov
Societe Financiere D'Innovation Inc. in the principal amount of $700,000.
10. (xxiii) Debenture dated August 5, 1998, registered in the name of Sofinov
Societe Financiere D'Innovation Inc. in the principal amount of $700,000.
10. (xxiv) Debenture dated August 5, 1998, registered in the name of Societe
Innovatech Du Grand Montreal in the principal amount of $300,000.
10. (xxv) Debenture dated August 5, 1998, registered in the name of Societe
Innovatech Du Grand Montreal in the principal amount of $300,000.
3<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TECHNICAL MAINTENANCE CORPORATION
Date: September 2, 1998 Per: /s/Tony Mastronardi
------------------------
Tony Mastronardi
President and Director
4<PAGE>
DEBENTURE
OF
TOUCHTUNES DIGITAL JUKEBOX INC.
(the "Company")
Holder:SOFINOV SOCIETE FINANCIERE D'INNOVATION INC. (the "Holder")
Capital: US $700,000 (the "Capital")
Maturity Date: On Demand, After the Occurrence of an Event of Default
1. AMOUNT OF THE DEBENTURE
1.1 The Company, for value received, hereby promises to pay to the Holder at
the head office of the Holder or at any other address which the Holder
indicates to the Company in writing, upon presentation and delivery of
this debenture (the "Debenture"), the Capital of this Debenture in one
single instalment, in lawful money of Canada, upon the demand of the
Holder, provided that the Holder shall only be entitled to demand such
payment after the occurrence of an event of default mentioned in
subsection 0 of these presents.
2. INTEREST
2.1 The Capital outstanding from time to time shall bear interest at an
annual rate of 12%, calculated monthly in arrears and computed on a 365-
day year. Interest shall be payable in one single instalment
concurrently with the payment of the Capital of this Debenture in
accordance with subsection 0 of these presents.
3. PREPAYMENT PROHIBITTED
3.1 The Company shall not be permitted to prepay the Capital or interest
under the Debenture without the prior written consent of the Holder.
4. COVENANTS
4.1 Affirmative Covenants of the Company. So long as any amount of Capital
is outstanding under the Debenture and except as otherwise permitted in
writing by the Holder, the Company shall:
4.1.1 do or cause to be done all things necessary to keep in full force and
effect its corporate existence and all properties, rights, franchises,
licenses and qualifications required to carry on its business in each
jurisdiction in which it shall own property or carry on business from
time to time;
4.1.2 maintain insurance with responsible insurers of such types, in such
amounts and against such risks as is appropriate and customary for a
company engaged in similar businesses;
4.1.3 comply with all applicable governmental restrictions and regulations and
obtain and maintain in good standing all licenses, permits and approvals
required in respect of its operations from any and all governments,
governmental commissions, boards or agencies of jurisdictions in which
it carries on business;<PAGE>
4.1.4 forthwith notify the Holder of the occurrence of any event of default
within the meaning of Section 0 of these presents or any event of which
it is aware which with notice or lapse of time or both would constitute
such an event of default;
4.1.5 comply with all of its obligations under the various agreements entered
into between the Company and the Holder prior to, on and after the date
hereof (collectively, the "Material Agreements"), including, without
limitation, (i) the Shareholders Agreement (the "Shareholders
Agreement") entered into among the Company, the Holder, Technical
Maintenance Corporation and Societe Innovatech du Grand Montreal
("Innovatech") on March 24, 1997, (ii) the Share Subscription Agreement
entered into among the Company, the Holder and Innovatech on March 21,
1997 and (iii) the Debenture Subscription Agreement (the "Debenture
Subscription Agreement") entered into among the Company, the Holder and
Innovatech on February 11, 1998.
4.2 Negative Covenants of the Company. So long as any amount of Capital is
outstanding under the Debenture and except with the prior written
consent of the Holder or as otherwise permitted, the Company will not:
4.2.1 create or permit to exist any security interest in its assets, business
or properties, except (i) security interests in respect of borrowings of
money from its bankers or other reputable commercial lenders in respect
of the financing of its individual juke-boxes and other equipment in the
manner set forth in its Business Plan as adopted by the board from time
to time or (ii) in connection with the issuance by the Company to
Innovatech and the Holder of debentures in substance and form similar to
this Debenture in an aggregate principal amount of US$10,000,000 in
accordance with the provisions of the Debenture Subscription Agreement;
4.2.2 directly or indirectly make loans or advances to or investments in or
repay loans owing to or give security for or guarantee the debts and
obligations of, any other person, except in the ordinary course of
business to arm's length third parties;
4.2.3 redeem, repurchase or acquire any of its outstanding share capital;
4.2.4 declare or pay any dividends, make any distribution to shareholders or
set aside funds for any of the foregoing purposes;
4.2.5 sell, lease, assign, transfer or otherwise dispose of, any material
asset, whether now owned or hereafter acquired, except in the ordinary
course of business;
4.2.6 change, in any material respect, its business or the manner in which
same is carried on; or
4.2.7 take any action resulting in a fundamental change of the types referred
to in Section 173 of the Canada Business Corporations Act.
5. EVENTS OF DEFAULT
5.1 The Company will be in default hereunder if any of the following
events occurs:
5.1.1 the Company fails to fulfil any of its obligations to pay contemplated
in subsections 0 or 0 of these presents, within five (5) days after
receiving written notice of such failure;
5.1.2 the Company fails to fulfil any of its other obligations hereunder,
within thirty (30) days after receiving written notice of such failure;<PAGE>
5.1.3 the Company fails to fulfil any of its obligations under any of the
Material Agreements, within the applicable cure period (if any) provided
for in such Material Agreement after receiving written notice of such
failure or, if no cure period is specified, within thirty (30) days
after receiving written notice of such failure;
5.1.4 the Company makes an assignment for benefit of its creditors or is
declared bankrupt or is the object of a receiving order or files a
notice of intention to make a proposal pursuant to the Bankruptcy and
Insolvency Act (Canada) or submits a proposal to its creditors or takes
advantage of the Companies Creditors Arrangement Act (R.S.C. 1985,
ch. C-36) or any other legislation governing bankruptcy or insolvency;
5.1.5 an order is rendered or a resolution is adopted requiring the
liquidation or dissolution of the Company;
5.1.6 a third party having security on the assets of the Company takes
possession of same or proceedings in execution of any final judgment are
instituted against the Company and such taking of possession is not
stayed within the following ten (10) days, or such proceedings in
execution are not stayed within the following twenty (20) days with
respect to execution on movable property or within the following sixty
(60) days with respect to execution on immovable property;
5.1.7 a default occurs pursuant to any term debt instrument or agreement of
the Company, whether such instrument or agreement exists at the date of
these presents or is executed subsequently, which results in the
acceleration of the indebtedness evidenced thereby, unless such
indebtedness is reimbursed within two (2) business days of such default;
5.1.8 a representation or warranty made in writing by the Company to the
Holder or for its benefit in connection with the issuance of the
Debenture (including, but not limited to, those representations and
warranties contained in the Debenture Subscription Agreement) proves to
be false or inaccurate in any material respect.
5.2 Upon the occurrence of an event of default mentioned in these presents,
the Holder may declare the unpaid Capital of the Debenture, as well as
all accrued and unpaid interest on the Debenture, to be immediately due
and payable and the Holder may thereupon exercise all its rights
pursuant to these presents and at law, the whole without need of a
demand or other notice, which the Company hereby waives.
6. GENERAL PROVISIONS
6.1 Notice. All notices, requests, demands and other communications
contemplated herein shall be given in writing by personal delivery or
transmitted by telecopier or mailed by registered mail correctly stamped
to the last address of the Holder known by the Company and, in the case
of the latter, to 3 Place du Commerce, 4th Floor, Nun's Island, Quebec,
telecopier: (514) 762-6483, to the attention of Guy Nathan. Any such
notice, request, demand or communication shall be deemed to have been
received on the first business day after personal delivery or its
transmission by telecopier or on the third business day after its
mailing, as the case may be.
6.2 Mutilated or Lost Debenture. If this Debenture is stolen, lost,
mutilated or destroyed, the Company shall, on such reasonable terms as
to indemnity or otherwise as it may in its discretion impose, issue a
new Debenture of like denomination, tenor and date as the Debenture so
stolen, lost, mutilated or destroyed.
6.3 Recourses. The exercise by the Holder of any recourse under this<PAGE>
Debenture shall not preclude the Holder from exercising any other
recourse provided herein or by law. All the recourses of the Holder are
cumulative and not alternative. The non-exercise by the Holder of any
of its recourses shall not constitute a renunciation of the exercise of
such recourse at a later date.
6.4 Invalid Provisions. If any provision hereof is determined to be void or
unenforceable in whole or in part, it shall be deemed not to affect or
impair any other provision hereof.
6.5 Modification. This Debenture cannot be modified or otherwise amended
unless the Holder gives its written approval.
6.6 Applicable Law. This Debenture is governed by the laws of the Province
of Quebec and the federal laws of Canada applicable therein.
6.7 Negotiability. Notwithstanding the provisions of the Shareholders
Agreement, this Debenture shall be negotiable, provided that the Holder
provides the Company with written notice of any transfer of this
Debenture.
6.8 Language. The Holder, by accepting this Debenture, confirms having
expressly requested that this Debenture and all documents and notices
relating hereto be drafted in English and French. The Holder, by
accepting this Debenture, and the Company expressly agree that in the
event of any misunderstanding, dispute or controversy (collectively, a
"Dispute") between them with respect to any of the provisions of this
Debenture, the French version of this Debenture will have precedence and
be the only version to apply and be used for the resolution of such
Dispute. As an exception only, and recognizing the principle that the
French version shall have precedence, if a Dispute arises between the
Holder and the Company in connection with the interpretation given to
any provision of this Debenture, any court or arbitrator before which
any such Dispute is referred for resolution will be permitted to refer
to the English version of this Debenture in order to determine the
intention of the parties at the time the provisions of this Debenture
were drafted. The Holder, by accepting this Debenture, confirms having
expressly requested that this version of this Debenture and all
documents and notices relating hereto be drafted in English. Le
porteur, en acceptant cette version de cette obligation, confirme avoir
requis que celui-ci et tous les documents et avis qui y sont afferents
soient rediges en anglais.
IN WITNESS WHEREOF, the Company has executed this Debenture at Montreal,
this 5th day of August, 1998.
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/Tony Mastronardi
----------------------<PAGE>
DEBENTURE
OF
TOUCHTUNES DIGITAL JUKEBOX INC.
(the "Company")
Holder:SOFINOV SOCIETE FINANCIERE D'INNOVATION INC. (the "Holder")
Capital: US $700,000 (the "Capital")
Maturity Date: On Demand, After the Occurrence of an Event of Default
1. AMOUNT OF THE DEBENTURE
1.1 The Company, for value received, hereby promises to pay to the Holder at
the head office of the Holder or at any other address which the Holder
indicates to the Company in writing, upon presentation and delivery of
this debenture (the "Debenture"), the Capital of this Debenture in one
single instalment, in lawful money of Canada, upon the demand of the
Holder, provided that the Holder shall only be entitled to demand such
payment after the occurrence of an event of default mentioned in
subsection 0 of these presents.
2. INTEREST
2.1 The Capital outstanding from time to time shall bear interest at an
annual rate of 12%, calculated monthly in arrears and computed on a 365-
day year. Interest shall be payable in one single instalment
concurrently with the payment of the Capital of this Debenture in
accordance with subsection 0 of these presents.
3. PREPAYMENT PROHIBITTED
3.1 The Company shall not be permitted to prepay the Capital or interest
under the Debenture without the prior written consent of the Holder.
4. COVENANTS
4.1 Affirmative Covenants of the Company. So long as any amount of Capital
is outstanding under the Debenture and except as otherwise permitted in
writing by the Holder, the Company shall:
4.1.1 do or cause to be done all things necessary to keep in full force and
effect its corporate existence and all properties, rights, franchises,
licenses and qualifications required to carry on its business in each
jurisdiction in which it shall own property or carry on business from
time to time;
4.1.2 maintain insurance with responsible insurers of such types, in such
amounts and against such risks as is appropriate and customary for a
company engaged in similar businesses;
4.1.3 comply with all applicable governmental restrictions and regulations and
obtain and maintain in good standing all licenses, permits and approvals
required in respect of its operations from any and all governments,
governmental commissions, boards or agencies of jurisdictions in which
it carries on business;<PAGE>
4.1.4 forthwith notify the Holder of the occurrence of any event of default
within the meaning of Section 0 of these presents or any event of which
it is aware which with notice or lapse of time or both would constitute
such an event of default;
4.1.5 comply with all of its obligations under the various agreements entered
into between the Company and the Holder prior to, on and after the date
hereof (collectively, the "Material Agreements"), including, without
limitation, (i) the Shareholders Agreement (the "Shareholders
Agreement") entered into among the Company, the Holder, Technical
Maintenance Corporation and Societe Innovatech du Grand Montreal
("Innovatech") on March 24, 1997, (ii) the Share Subscription Agreement
entered into among the Company, the Holder and Innovatech on March 21,
1997 and (iii) the Debenture Subscription Agreement (the "Debenture
Subscription Agreement") entered into among the Company, the Holder and
Innovatech on February 11, 1998.
4.2 Negative Covenants of the Company. So long as any amount of Capital is
outstanding under the Debenture and except with the prior written
consent of the Holder or as otherwise permitted, the Company will not:
4.2.1 create or permit to exist any security interest in its assets, business
or properties, except (i) security interests in respect of borrowings of
money from its bankers or other reputable commercial lenders in respect
of the financing of its individual juke-boxes and other equipment in the
manner set forth in its Business Plan as adopted by the board from time
to time or (ii) in connection with the issuance by the Company to
Innovatech and the Holder of debentures in substance and form similar to
this Debenture in an aggregate principal amount of US$10,000,000 in
accordance with the provisions of the Debenture Subscription Agreement;
4.2.2 directly or indirectly make loans or advances to or investments in or
repay loans owing to or give security for or guarantee the debts and
obligations of, any other person, except in the ordinary course of
business to arm's length third parties;
4.2.3 redeem, repurchase or acquire any of its outstanding share capital;
4.2.4 declare or pay any dividends, make any distribution to shareholders or
set aside funds for any of the foregoing purposes;
4.2.5 sell, lease, assign, transfer or otherwise dispose of, any material
asset, whether now owned or hereafter acquired, except in the ordinary
course of business;
4.2.6 change, in any material respect, its business or the manner in which
same is carried on; or
4.2.7 take any action resulting in a fundamental change of the types referred
to in Section 173 of the Canada Business Corporations Act.
5. EVENTS OF DEFAULT
5.1 The Company will be in default hereunder if any of the following
events occurs:
5.1.1 the Company fails to fulfil any of its obligations to pay contemplated
in subsections 0 or 0 of these presents, within five (5) days after
receiving written notice of such failure;
5.1.2 the Company fails to fulfil any of its other obligations hereunder,
within thirty (30) days after receiving written notice of such failure;<PAGE>
5.1.3 the Company fails to fulfil any of its obligations under any of the
Material Agreements, within the applicable cure period (if any) provided
for in such Material Agreement after receiving written notice of such
failure or, if no cure period is specified, within thirty (30) days
after receiving written notice of such failure;
5.1.4 the Company makes an assignment for benefit of its creditors or is
declared bankrupt or is the object of a receiving order or files a
notice of intention to make a proposal pursuant to the Bankruptcy and
Insolvency Act (Canada) or submits a proposal to its creditors or takes
advantage of the Companies Creditors Arrangement Act (R.S.C. 1985,
ch. C-36) or any other legislation governing bankruptcy or insolvency;
5.1.5 an order is rendered or a resolution is adopted requiring the
liquidation or dissolution of the Company;
5.1.6 a third party having security on the assets of the Company takes
possession of same or proceedings in execution of any final judgment are
instituted against the Company and such taking of possession is not
stayed within the following ten (10) days, or such proceedings in
execution are not stayed within the following twenty (20) days with
respect to execution on movable property or within the following sixty
(60) days with respect to execution on immovable property;
5.1.7 a default occurs pursuant to any term debt instrument or agreement of
the Company, whether such instrument or agreement exists at the date of
these presents or is executed subsequently, which results in the
acceleration of the indebtedness evidenced thereby, unless such
indebtedness is reimbursed within two (2) business days of such default;
5.1.8 a representation or warranty made in writing by the Company to the
Holder or for its benefit in connection with the issuance of the
Debenture (including, but not limited to, those representations and
warranties contained in the Debenture Subscription Agreement) proves to
be false or inaccurate in any material respect.
5.2 Upon the occurrence of an event of default mentioned in these presents,
the Holder may declare the unpaid Capital of the Debenture, as well as
all accrued and unpaid interest on the Debenture, to be immediately due
and payable and the Holder may thereupon exercise all its rights
pursuant to these presents and at law, the whole without need of a
demand or other notice, which the Company hereby waives.
6. GENERAL PROVISIONS
6.1 Notice. All notices, requests, demands and other communications
contemplated herein shall be given in writing by personal delivery or
transmitted by telecopier or mailed by registered mail correctly stamped
to the last address of the Holder known by the Company and, in the case
of the latter, to 3 Place du Commerce, 4th Floor, Nun's Island, Quebec,
telecopier: (514) 762-6483, to the attention of Guy Nathan. Any such
notice, request, demand or communication shall be deemed to have been
received on the first business day after personal delivery or its
transmission by telecopier or on the third business day after its
mailing, as the case may be.
6.2 Mutilated or Lost Debenture. If this Debenture is stolen, lost,
mutilated or destroyed, the Company shall, on such reasonable terms as
to indemnity or otherwise as it may in its discretion impose, issue a
new Debenture of like denomination, tenor and date as the Debenture so
stolen, lost, mutilated or destroyed.
6.3 Recourses. The exercise by the Holder of any recourse under this<PAGE>
Debenture shall not preclude the Holder from exercising any other
recourse provided herein or by law. All the recourses of the Holder are
cumulative and not alternative. The non-exercise by the Holder of any
of its recourses shall not constitute a renunciation of the exercise of
such recourse at a later date.
6.4 Invalid Provisions. If any provision hereof is determined to be void or
unenforceable in whole or in part, it shall be deemed not to affect or
impair any other provision hereof.
6.5 Modification. This Debenture cannot be modified or otherwise amended
unless the Holder gives its written approval.
6.6 Applicable Law. This Debenture is governed by the laws of the Province
of Quebec and the federal laws of Canada applicable therein.
6.7 Negotiability. Notwithstanding the provisions of the Shareholders
Agreement, this Debenture shall be negotiable, provided that the Holder
provides the Company with written notice of any transfer of this
Debenture.
6.8 Language. The Holder, by accepting this Debenture, confirms having
expressly requested that this Debenture and all documents and notices
relating hereto be drafted in English and French. The Holder, by
accepting this Debenture, and the Company expressly agree that in the
event of any misunderstanding, dispute or controversy (collectively, a
"Dispute") between them with respect to any of the provisions of this
Debenture, the French version of this Debenture will have precedence and
be the only version to apply and be used for the resolution of such
Dispute. As an exception only, and recognizing the principle that the
French version shall have precedence, if a Dispute arises between the
Holder and the Company in connection with the interpretation given to
any provision of this Debenture, any court or arbitrator before which
any such Dispute is referred for resolution will be permitted to refer
to the English version of this Debenture in order to determine the
intention of the parties at the time the provisions of this Debenture
were drafted. The Holder, by accepting this Debenture, confirms having
expressly requested that this version of this Debenture and all
documents and notices relating hereto be drafted in English. Le
porteur, en acceptant cette version de cette obligation, confirme avoir
requis que celui-ci et tous les documents et avis qui y sont afferents
soient rediges en anglais.
IN WITNESS WHEREOF, the Company has executed this Debenture at Montreal,
this 5th day of August, 1998.
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/Tony Mastronardi
-------------------------<PAGE>
DEBENTURE
OF
TOUCHTUNES DIGITAL JUKEBOX INC.
(the "Company")
Holder:SOCIETE INNOVATECH DU GRAND MONTREAL (the "Holder")
Capital: US $300,000 (the "Capital")
Maturity Date: On Demand, After the Occurrence of an Event of Default
1. AMOUNT OF THE DEBENTURE
1.1 The Company, for value received, hereby promises to pay to the Holder at
the head office of the Holder or at any other address which the Holder
indicates to the Company in writing, upon presentation and delivery of
this debenture (the "Debenture"), the Capital of this Debenture in one
single instalment, in lawful money of Canada, upon the demand of the
Holder, provided that the Holder shall only be entitled to demand such
payment after the occurrence of an event of default mentioned in
subsection 0 of these presents.
2. INTEREST
2.1 The Capital outstanding from time to time shall bear interest at an
annual rate of 12%, calculated monthly in arrears and computed on a 365-
day year. Interest shall be payable in one single instalment
concurrently with the payment of the Capital of this Debenture in
accordance with subsection 0 of these presents.
3. PREPAYMENT PROHIBITTED
3.1 The Company shall not be permitted to prepay the Capital or interest
under the Debenture without the prior written consent of the Holder.
4. COVENANTS
4.1 Affirmative Covenants of the Company. So long as any amount of Capital
is outstanding under the Debenture and except as otherwise permitted in
writing by the Holder, the Company shall:
4.1.1 do or cause to be done all things necessary to keep in full force and
effect its corporate existence and all properties, rights, franchises,
licenses and qualifications required to carry on its business in each
jurisdiction in which it shall own property or carry on business from
time to time;
4.1.2 maintain insurance with responsible insurers of such types, in such
amounts and against such risks as is appropriate and customary for a
company engaged in similar businesses;
4.1.3 comply with all applicable governmental restrictions and regulations and
obtain and maintain in good standing all licenses, permits and approvals
required in respect of its operations from any and all governments,
governmental commissions, boards or agencies of jurisdictions in which
it carries on business;
4.1.4 forthwith notify the Holder of the occurrence of any event of default<PAGE>
within the meaning of Section 0 of these presents or any event of which
it is aware which with notice or lapse of time or both would constitute
such an event of default;
4.1.5 comply with all of its obligations under the various agreements entered
into between the Company and the Holder prior to, on and after the date
hereof (collectively, the "Material Agreements"), including, without
limitation, (i) the Shareholders Agreement (the "Shareholders
Agreement") entered into among the Company, the Holder, Technical
Maintenance Corporation and Sofinov Societe Financiere d'Innovation Inc.
("Sofinov") on March 24, 1997, (ii) the Share Subscription Agreement
entered into among the Company, the Holder and Sofinov on March 21, 1997
and (iii) the Debenture Subscription Agreement (the "Debenture
Subscription Agreement") entered into among the Company, the Holder and
Sofinov on February 11, 1998.
4.2 Negative Covenants of the Company. So long as any amount of Capital is
outstanding under the Debenture and except with the prior written
consent of the Holder or as otherwise permitted, the Company will not:
4.2.1 create or permit to exist any security interest in its assets, business
or properties, except (i) security interests in respect of borrowings of
money from its bankers or other reputable commercial lenders in respect
of the financing of its individual juke-boxes and other equipment in the
manner set forth in its Business Plan as adopted by the board from time
to time or (ii) in connection with the issuance by the Company to
Sofinov and the Holder of debentures in substance and form similar to
this Debenture in an aggregate principal amount of US$10,000,000 in
accordance with the provisions of the Debenture Subscription Agreement;
4.2.2 directly or indirectly make loans or advances to or investments in or
repay loans owing to or give security for or guarantee the debts and
obligations of, any other person, except in the ordinary course of
business to arm's length third parties;
4.2.3 redeem, repurchase or acquire any of its outstanding share capital;
4.2.4 declare or pay any dividends, make any distribution to shareholders or
set aside funds for any of the foregoing purposes;
4.2.5 sell, lease, assign, transfer or otherwise dispose of, any material
asset, whether now owned or hereafter acquired, except in the ordinary
course of business;
4.2.6 change, in any material respect, its business or the manner in which
same is carried on; or
4.2.7 take any action resulting in a fundamental change of the types referred
to in Section 173 of the Canada Business Corporations Act.
5. EVENTS OF DEFAULT
5.1 The Company will be in default hereunder if any of the following events
occurs:
5.1.1 the Company fails to fulfil any of its obligations to pay contemplated
in subsections 0 or 0 of these presents, within five (5) days after
receiving written notice of such failure;
5.1.2 the Company fails to fulfil any of its other obligations hereunder,
within thirty (30) days after receiving written notice of such failure;
5.1.3 the Company fails to fulfil any of its obligations under any of the<PAGE>
Material Agreements, within the applicable cure period (if any) provided
for in such Material Agreement after receiving written notice of such
failure or, if no cure period is specified, within thirty (30) days
after receiving written notice of such failure;
5.1.4 the Company makes an assignment for benefit of its creditors or is
declared bankrupt or is the object of a receiving order or files a
notice of intention to make a proposal pursuant to the Bankruptcy and
Insolvency Act (Canada) or submits a proposal to its creditors or takes
advantage of the Companies Creditors Arrangement Act (R.S.C. 1985,
ch. C-36) or any other legislation governing bankruptcy or insolvency;
5.1.5 an order is rendered or a resolution is adopted requiring the
liquidation or dissolution of the Company;
5.1.6 a third party having security on the assets of the Company takes
possession of same or proceedings in execution of any final judgment are
instituted against the Company and such taking of possession is not
stayed within the following ten (10) days, or such proceedings in
execution are not stayed within the following twenty (20) days with
respect to execution on movable property or within the following sixty
(60) days with respect to execution on immovable property;
5.1.7 a default occurs pursuant to any term debt instrument or agreement of
the Company, whether such instrument or agreement exists at the date of
these presents or is executed subsequently, which results in the
acceleration of the indebtedness evidenced thereby, unless such
indebtedness is reimbursed within two (2) business days of such default;
5.1.8 a representation or warranty made in writing by the Company to the
Holder or for its benefit in connection with the issuance of the
Debenture (including, but not limited to, those representations and
warranties contained in the Debenture Subscription Agreement) proves to
be false or inaccurate in any material respect.
5.2 Upon the occurrence of an event of default mentioned in these presents,
the Holder may declare the unpaid Capital of the Debenture, as well as
all accrued and unpaid interest on the Debenture, to be immediately due
and payable and the Holder may thereupon exercise all its rights
pursuant to these presents and at law, the whole without need of a
demand or other notice, which the Company hereby waives.
6. GENERAL PROVISIONS
6.1 Notice. All notices, requests, demands and other communications
contemplated herein shall be given in writing by personal delivery or
transmitted by telecopier or mailed by registered mail correctly stamped
to the last address of the Holder known by the Company and, in the case
of the latter, to 3 Place du Commerce, 4th Floor, Nun's Island, Quebec,
telecopier: (514) 762-6483, to the attention of Guy Nathan. Any such
notice, request, demand or communication shall be deemed to have been
received on the first business day after personal delivery or its
transmission by telecopier or on the third business day after its
mailing, as the case may be.
6.2 Mutilated or Lost Debenture. If this Debenture is stolen, lost,
mutilated or destroyed, the Company shall, on such reasonable terms as
to indemnity or otherwise as it may in its discretion impose, issue a
new Debenture of like denomination, tenor and date as the Debenture so
stolen, lost, mutilated or destroyed.
6.3 Recourses. The exercise by the Holder of any recourse under this
Debenture shall not preclude the Holder from exercising any other<PAGE>
recourse provided herein or by law. All the recourses of the Holder are
cumulative and not alternative. The non-exercise by the Holder of any
of its recourses shall not constitute a renunciation of the exercise of
such recourse at a later date.
6.4 Invalid Provisions. If any provision hereof is determined to be void or
unenforceable in whole or in part, it shall be deemed not to affect or
impair any other provision hereof.
6.5 Modification. This Debenture cannot be modified or otherwise amended
unless the Holder gives its written approval.
6.6 Applicable Law. This Debenture is governed by the laws of the Province
of Quebec and the federal laws of Canada applicable therein.
6.7 Negotiability. Notwithstanding the provisions of the Shareholders
Agreement, this Debenture shall be negotiable, provided that the Holder
provides the Company with written notice of any transfer of this
Debenture.
6.8 Language. The Holder, by accepting this Debenture, confirms having
expressly requested that this Debenture and all documents and notices
relating hereto be drafted in English and French. The Holder, by
accepting this Debenture, and the Company expressly agree that in the
event of any misunderstanding, dispute or controversy (collectively, a
"Dispute") between them with respect to any of the provisions of this
Debenture, the French version of this Debenture will have precedence and
be the only version to apply and be used for the resolution of such
Dispute. As an exception only, and recognizing the principle that the
French version shall have precedence, if a Dispute arises between the
Holder and the Company in connection with the interpretation given to
any provision of this Debenture, any court or arbitrator before which
any such Dispute is referred for resolution will be permitted to refer
to the English version of this Debenture in order to determine the
intention of the parties at the time the provisions of this Debenture
were drafted. The Holder, by accepting this Debenture, confirms having
expressly requested that this version of this Debenture and all
documents and notices relating hereto be drafted in English. Le
porteur, en acceptant cette version de cette obligation, confirme avoir
requis que celui-ci et tous les documents et avis qui y sont afferents
soient rediges en anglais.
IN WITNESS WHEREOF, the Company has executed this Debenture at Montreal,
this 5th day of August, 1998.
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/Tony Mastronardi
--------------------------- <PAGE>
DEBENTURE
OF
TOUCHTUNES DIGITAL JUKEBOX INC.
(the "Company")
Holder:SOCIETE INNOVATECH DU GRAND MONTREAL (the "Holder")
Capital: US $300,000 (the "Capital")
Maturity Date: On Demand, After the Occurrence of an Event of Default
1. AMOUNT OF THE DEBENTURE
1.1 The Company, for value received, hereby promises to pay to the Holder at
the head office of the Holder or at any other address which the Holder
indicates to the Company in writing, upon presentation and delivery of
this debenture (the "Debenture"), the Capital of this Debenture in one
single instalment, in lawful money of Canada, upon the demand of the
Holder, provided that the Holder shall only be entitled to demand such
payment after the occurrence of an event of default mentioned in
subsection 0 of these presents.
2. INTEREST
2.1 The Capital outstanding from time to time shall bear interest at an
annual rate of 12%, calculated monthly in arrears and computed on a 365-
day year. Interest shall be payable in one single instalment
concurrently with the payment of the Capital of this Debenture in
accordance with subsection 0 of these presents.
3. PREPAYMENT PROHIBITTED
3.1 The Company shall not be permitted to prepay the Capital or interest
under the Debenture without the prior written consent of the Holder.
4. COVENANTS
4.1 Affirmative Covenants of the Company. So long as any amount of Capital
is outstanding under the Debenture and except as otherwise permitted in
writing by the Holder, the Company shall:
4.1.1 do or cause to be done all things necessary to keep in full force and
effect its corporate existence and all properties, rights, franchises,
licenses and qualifications required to carry on its business in each
jurisdiction in which it shall own property or carry on business from
time to time;
4.1.2 maintain insurance with responsible insurers of such types, in such
amounts and against such risks as is appropriate and customary for a
company engaged in similar businesses;
4.1.3 comply with all applicable governmental restrictions and regulations and
obtain and maintain in good standing all licenses, permits and approvals
required in respect of its operations from any and all governments,
governmental commissions, boards or agencies of jurisdictions in which
it carries on business;<PAGE>
4.1.4 forthwith notify the Holder of the occurrence of any event of default
within the meaning of Section 0 of these presents or any event of which
it is aware which with notice or lapse of time or both would constitute
such an event of default;
4.1.5 comply with all of its obligations under the various agreements entered
into between the Company and the Holder prior to, on and after the date
hereof (collectively, the "Material Agreements"), including, without
limitation, (i) the Shareholders Agreement (the "Shareholders
Agreement") entered into among the Company, the Holder, Technical
Maintenance Corporation and Sofinov Societe Financiere d'Innovation Inc.
("Sofinov") on March 24, 1997, (ii) the Share Subscription Agreement
entered into among the Company, the Holder and Sofinov on March 21, 1997
and (iii) the Debenture Subscription Agreement (the "Debenture
Subscription Agreement") entered into among the Company, the Holder and
Sofinov on February 11, 1998.
4.2 Negative Covenants of the Company. So long as any amount of Capital is
outstanding under the Debenture and except with the prior written
consent of the Holder or as otherwise permitted, the Company will not:
4.2.1 create or permit to exist any security interest in its assets, business
or properties, except (i) security interests in respect of borrowings of
money from its bankers or other reputable commercial lenders in respect
of the financing of its individual juke-boxes and other equipment in the
manner set forth in its Business Plan as adopted by the board from time
to time or (ii) in connection with the issuance by the Company to
Sofinov and the Holder of debentures in substance and form similar to
this Debenture in an aggregate principal amount of US$10,000,000 in
accordance with the provisions of the Debenture Subscription Agreement;
4.2.2 directly or indirectly make loans or advances to or investments in or
repay loans owing to or give security for or guarantee the debts and
obligations of, any other person, except in the ordinary course of
business to arm's length third parties;
4.2.3 redeem, repurchase or acquire any of its outstanding share capital;
4.2.4 declare or pay any dividends, make any distribution to shareholders or
set aside funds for any of the foregoing purposes;
4.2.5 sell, lease, assign, transfer or otherwise dispose of, any material
asset, whether now owned or hereafter acquired, except in the ordinary
course of business;
4.2.6 change, in any material respect, its business or the manner in which
same is carried on; or
4.2.7 take any action resulting in a fundamental change of the types referred
to in Section 173 of the Canada Business Corporations Act.
5. EVENTS OF DEFAULT
5.1 The Company will be in default hereunder if any of the following
events occurs:
5.1.1 the Company fails to fulfil any of its obligations to pay contemplated
in subsections 0 or 0 of these presents, within five (5) days after
receiving written notice of such failure;
5.1.2 the Company fails to fulfil any of its other obligations hereunder,
within thirty (30) days after receiving written notice of such failure;<PAGE>
5.1.3 the Company fails to fulfil any of its obligations under any of the
Material Agreements, within the applicable cure period (if any) provided
for in such Material Agreement after receiving written notice of such
failure or, if no cure period is specified, within thirty (30) days
after receiving written notice of such failure;
5.1.4 the Company makes an assignment for benefit of its creditors or is
declared bankrupt or is the object of a receiving order or files a
notice of intention to make a proposal pursuant to the Bankruptcy and
Insolvency Act (Canada) or submits a proposal to its creditors or takes
advantage of the Companies Creditors Arrangement Act (R.S.C. 1985,
ch. C-36) or any other legislation governing bankruptcy or insolvency;
5.1.5 an order is rendered or a resolution is adopted requiring the
liquidation or dissolution of the Company;
5.1.6 a third party having security on the assets of the Company takes
possession of same or proceedings in execution of any final judgment are
instituted against the Company and such taking of possession is not
stayed within the following ten (10) days, or such proceedings in
execution are not stayed within the following twenty (20) days with
respect to execution on movable property or within the following sixty
(60) days with respect to execution on immovable property;
5.1.7 a default occurs pursuant to any term debt instrument or agreement of
the Company, whether such instrument or agreement exists at the date of
these presents or is executed subsequently, which results in the
acceleration of the indebtedness evidenced thereby, unless such
indebtedness is reimbursed within two (2) business days of such default;
5.1.8 a representation or warranty made in writing by the Company to the
Holder or for its benefit in connection with the issuance of the
Debenture (including, but not limited to, those representations and
warranties contained in the Debenture Subscription Agreement) proves to
be false or inaccurate in any material respect.
5.2 Upon the occurrence of an event of default mentioned in these presents,
the Holder may declare the unpaid Capital of the Debenture, as well as
all accrued and unpaid interest on the Debenture, to be immediately due
and payable and the Holder may thereupon exercise all its rights
pursuant to these presents and at law, the whole without need of a
demand or other notice, which the Company hereby waives.
6. GENERAL PROVISIONS
6.1 Notice. All notices, requests, demands and other communications
contemplated herein shall be given in writing by personal delivery or
transmitted by telecopier or mailed by registered mail correctly stamped
to the last address of the Holder known by the Company and, in the case
of the latter, to 3 Place du Commerce, 4th Floor, Nun's Island, Quebec,
telecopier: (514) 762-6483, to the attention of Guy Nathan. Any such
notice, request, demand or communication shall be deemed to have been
received on the first business day after personal delivery or its
transmission by telecopier or on the third business day after its
mailing, as the case may be.
6.2 Mutilated or Lost Debenture. If this Debenture is stolen, lost,
mutilated or destroyed, the Company shall, on such reasonable terms as
to indemnity or otherwise as it may in its discretion impose, issue a
new Debenture of like denomination, tenor and date as the Debenture so
stolen, lost, mutilated or destroyed.
6.3 Recourses. The exercise by the Holder of any recourse under this<PAGE>
Debenture shall not preclude the Holder from exercising any other
recourse provided herein or by law. All the recourses of the Holder are
cumulative and not alternative. The non-exercise by the Holder of any
of its recourses shall not constitute a renunciation of the exercise of
such recourse at a later date.
6.4 Invalid Provisions. If any provision hereof is determined to be void or
unenforceable in whole or in part, it shall be deemed not to affect or
impair any other provision hereof.
6.5 Modification. This Debenture cannot be modified or otherwise amended
unless the Holder gives its written approval.
6.6 Applicable Law. This Debenture is governed by the laws of the Province
of Quebec and the federal laws of Canada applicable therein.
6.7 Negotiability. Notwithstanding the provisions of the Shareholders
Agreement, this Debenture shall be negotiable, provided that the Holder
provides the Company with written notice of any transfer of this
Debenture.
6.8 Language. The Holder, by accepting this Debenture, confirms having
expressly requested that this Debenture and all documents and notices
relating hereto be drafted in English and French. The Holder, by
accepting this Debenture, and the Company expressly agree that in the
event of any misunderstanding, dispute or controversy (collectively, a
"Dispute") between them with respect to any of the provisions of this
Debenture, the French version of this Debenture will have precedence and
be the only version to apply and be used for the resolution of such
Dispute. As an exception only, and recognizing the principle that the
French version shall have precedence, if a Dispute arises between the
Holder and the Company in connection with the interpretation given to
any provision of this Debenture, any court or arbitrator before which
any such Dispute is referred for resolution will be permitted to refer
to the English version of this Debenture in order to determine the
intention of the parties at the time the provisions of this Debenture
were drafted. The Holder, by accepting this Debenture, confirms having
expressly requested that this version of this Debenture and all
documents and notices relating hereto be drafted in English. Le
porteur, en acceptant cette version de cette obligation, confirme avoir
requis que celui-ci et tous les documents et avis qui y sont afferents
soient rediges en anglais.
IN WITNESS WHEREOF, the Company has executed this Debenture at Montreal,
this 5th day of August, 1998.
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/Tony Mastronardi
-------------------------<PAGE>
