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 February 1998
Commission File No. 333-7006
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TECHNICAL MAINTENANCE CORPORATION
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(Exact name of Registrant as specified in its charter)
NEVADA 87-048534
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1800 E. SAHARA, SUITE 107
LAS VEGAS, NEVADA 89104
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(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 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 non-
controlled 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. Finally, 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. They bear interest at the rate of 12% per annum, payable in one
single installment, concurrently with the payment of the principal amount of
the Debentures. 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>
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 $4,000,000
principal amount of Debentures into an additional 2,000,000 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 21.437% 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.
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.
ITEM 4. Changes in Registrant's Certifying Accountant.
Registrant has engaged the accounting firm of Ernst & Young to audit
its financial statements for the fiscal year ended December 31, 1997, thereby
terminating the engagement of its prior auditor. Management had no prior
contact or disagreement of any kind with Armstrong Gilmour Accountancy
Corporation, the Registrant's prior auditor, with respect to any accounting
matter and has no reason to believe that any disclosure is required affecting
the Registrant's financial statements of the type or kind discussed in Item
304(a)(1) of Regulation S-K. The Board of Directors made this decision to
change the Registrant's auditors on February 25, 1998.
ITEM 7. Financial Statements and Exhibits.
Exhibits:
1. Letter from Armstrong Gilmour Accountancy Corporation, relative
to the information set forth above in Item 4.
2. Subscription Agreement dated February 11, 1998, by and among
Societe Innovatech du Grand Montreal, Sofinov Societe Financiere D'Innovation
Inc. and Touchtunes Digital Jukebox Inc. for the purchase of up to an aggregate
of $10,000,000 (US) Debentures.
3<PAGE>
3. Debenture Put Right Agreement dated February 11, 1998, by and
among Societe Innovatech du Grand Montreal, Sofinov Societe Financiere
D'Innovation Inc. and Technical Maintenance Corporation.
4. Amended and Restated Shareholders' Agreement dated February 11,
1998, by and among Techno Expres S.A., Societe Innovatech du Grand Montreal,
Sofinov Societe Financiere D'Innovation Inc. and Technical Maintenance
Corporation.
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: March 30, 1998 Per: /s/Tony Mastronardi
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Tony Mastronardi
President and Director
4<PAGE>
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SUBSCRIPTION AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 11TH DAY OF FEBRUARY, 1998
BY AND AMONG: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to An Act respecting Societe
Innovatech du Grand Montreal, R.S.Q., ch. S-17.2, having
its head office and principal place of business in the City
of Montreal, Province of Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE FIRST PART
AND: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC., a body
politic, duly incorporated according to the Companies Act
(Quebec), having its head office and principal place of
business in the City of Montreal, Province of Quebec,
(hereinafter referred to as "Sofinov")
PARTY OF THE SECOND PART
AND: TOUCHTUNES DIGITAL JUKEBOX INC., a body politic and
corporate, duly incorporated according to the Canada
Business Corporations Act, having its head office and
principal place of business in the City of Montreal,
Province of Quebec,
(hereinafter referred to as the "Corporation")
PARTY OF THE THIRD PART
SECTION 1 - PREAMBLE
1.1 WHEREAS each of Innovatech and Sofinov wishes to subscribe for and
purchase from the Corporation debentures in the aggregate principal amount of
up to $10,000,000, the whole on the terms and conditions hereinafter set out in
this Agreement; and
1.2 WHEREAS on January 29, 1998, Sofinov loaned to the Corporation the
sum of $400,000 CDN., which sum the Corporation agreed to repay by applying
same against a portion of the total subscription price payable by Sofinov
pursuant to the present Agreement;
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2 - INTERPRETATION
2.1 Definitions. In this Agreement:
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2.1.1 "Agreement" means this Subscription Agreement and all instruments
supplemental hereto or in amendment or confirmation hereof; "herein",
"hereof", "hereto", "hereunder" and similar expressions mean and refer
to this Agreement and not to any particular Section, subsection or other
subdivision; "Section", "subsection" or other subdivision of this
Agreement means and refers to the specified Section, subsection or other
subdivision of this Agreement;
2.1.2 "Applicable Law" means any domestic or foreign federal, state,
provincial, county, local, municipal and regional statute, law,
ordinance, rule, regulation, restriction, regulatory policy or
guideline, by-law (zoning or otherwise), principles of common law, civil
law or equity, as well as Permits, Orders, decrees and rules (having the
force of law); and any judgments or injunctions issued, prolongated,
approved or entered thereunder;
2.1.3 "Assets" means all of the assets, rights and properties of the
Corporation, of whatsoever nature, kind or description, including
movable or immovable, real or personal, tangible or intangible;
2.1.4 "Balance Sheet Date" means September 30, 1997;
2.1.5 "Benefit Plans" means all pension, retirement, profit sharing, bonus,
savings, compensation, incentive, severance, stock option, stock
purchase, stock appreciation, group insurance, medical, dental,
hospitalization, disability, death and other fringe benefit plans,
programs, arrangements or practices covering any or all past or present
employees, shareholders, directors or officers of the Corporation;
2.1.6 "Books and Records" means all books of account, accounting records,
files, data and writings and other financial information; lists and
files of past, present and prospective clients and contacts, purchasing
and marketing records, personnel and payroll records; and all data
stored on computer support devices relating to any of the aforementioned
materials;
2.1.7 "Business Day" means any day, other than a Saturday or Sunday or a day
on which the principal commercial banks in the Province of Quebec are
not open for business during normal banking hours;
2.1.8 "Business Plan" means the business plan of the Corporation annexed
hereto as Schedule 0;
2.1.9 "Contracts" means all agreements, obligations and undertakings of
whatsoever nature, kind or description;
2.1.10"dollar", "dollars" and the sign "$" each mean, unless otherwise
indicated, lawful money of the United States of America;
2.1.11 "Debentures" means, collectively, the Innovatech A Debenture, the
Innovatech B Debenture, the Innovatech C Debenture, the Innovatech D
Debenture, the Innovatech E Debenture, the Innovatech F Debenture,
the Innovatech G Debenture, the Sofinov A Debenture, the Sofinov B
Debenture, the Sofinov C Debenture, the Sofinov D Debenture, the
Sofinov E Debenture, the Sofinov F Debenture and the Sofinov G
Debenture;<PAGE>
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2.1.12 "Encumbrances" means any encumbrance of any nature, kind or description
whatever and includes a security interest, mortgage, lien,
hypothecation, pledge, prior claim, assignment, charge, trust or
deemed trust (whether contractual, statutory or howsoever otherwise
arising), voting trust or pooling agreement with respect to
securities, right of first refusal, easement, servitude, restrictive
covenant, encroachment or other survey or title defect, any adverse
claim or any other right, option or claim of any Person of any
nature, kind or description whatever, or any covenant or other
agreement, restriction or limitation on transferability;
2.1.13 "Environment" means surface waters, ground water, drinking water supply,
land-surface, subsurface strata, air, both inside and outside of
buildings and structures, and plant and animal life;
2.1.14 "Environmental Law" means any Applicable Law relating to the pollution
or protection of the Environment;
2.1.15 "Equipment" means all furnishings, fixtures, machinery, equipment,
tooling, spare parts, leasehold improvements, supplies, computer
hardware, telephone systems, signs and all other tangible property,
together with all related accessories and maintenance equipment;
2.1.16 "Event" means:
2.1.16.1 any material violation, contravention or breach of any
covenant, agreement or obligation of the Corporation under or
pursuant to this Agreement, provided such violation, contravention
or breach has not been cured by the Corporation within 5 Business
Days;
2.1.16.2 any material adverse change in the financial condition or
operations of the Corporation between the date hereof and the First
Additional Closing Date, the Second Additional Closing Date, the
Third Additional Closing Date, the Fourth Additional Closing Date,
the Fifth Additional Closing Date or the Sixth Additional Closing
Date, as the case may be; or
2.1.16.3 any incorrectness in, or breach of, any material
representation or warranty made by the Corporation in this Agreement
or any incorrectness in any financial information provided to the
Investors pursuant to this Agreement.
2.1.17 "Fifth Additional Closing Date" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.18 "Fifth Additional Debentures" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.19 "Financial Statements" means the unaudited financial statements of the
Corporation for the 9-month period ended September 30, 1997,
consisting of the balance sheet, statements of operations and
statements of shareholders' equity of the Corporation as at
September 30, 1997 annexed hereto as Schedule 0;
2.1.20 "First Additional Closing Date" has the meaning ascribed thereto in
subsection 0 hereof;<PAGE>
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2.1.21 "First Additional Debentures" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.22 "Fourth Additional Closing Date" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.23 "Fourth Additional Debentures" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.24 "Guarantors" means the Corporation, Tony Mastronardi and Guy Nathan,
collectively;
2.1.25 "Generally Accepted Accounting Principles" means generally accepted
accounting principles in Canada applicable as at the date on which
any calculation or determination is required to be made in
accordance with generally accepted accounting principles,
consistently applied since the incorporation of the Corporation;
2.1.26 "Governmental Body" means (i) any domestic or foreign national, federal,
provincial, state, county, local, municipal or other government or
body, (ii) any multinational, multilateral or international body,
(iii) any subdivision, agent, commission, board, instrumentality or
authority of any of the foregoing governments or bodies, (iv) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing governments or bodies, or (v) any domestic, foreign,
international, multilateral or multinational judicial,
quasi-judicial, arbitration or administrative court, tribunal,
commission, board or panel;
2.1.27 "including" and "includes" is to be deemed to be followed by the
statement "without limitation" and neither of such terms shall be
construed as limiting any word or statement which precedes it to the
specific or similar items or matters immediately following it;
2.1.28 "Innovatech A Debenture" has the meaning ascribed thereto in subsection
0;
2.1.29 "Innovatech B Debenture" has the meaning ascribed thereto in subsection
0;
2.1.30 "Innovatech C Debenture" has the meaning ascribed thereto in subsection
0;
2.1.31 "Innovatech D Debenture" has the meaning ascribed thereto in subsection
0;
2.1.32 "Innovatech E Debenture" has the meaning ascribed thereto in subsection
0;
2.1.33 "Innovatech F Debenture" has the meaning ascribed thereto in subsection
0;
2.1.34 "Innovatech G Debenture" has the meaning ascribed thereto in subsection
0;<PAGE>
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2.1.35 "Intellectual Property Rights" means, collectively:
2.1.35.1 all intellectual property rights of whatsoever nature, kind
or description including:
2.1.35.1.1 all trade marks, service marks, trade mark and service
mark registrations, trade mark and service mark
applications, rights under registered user agreements,
trade names and other trade mark and service mark rights,
2.1.35.1.2 all copyrights, industrial designs and registrations
thereof and applications therefor,
2.1.35.1.3 all inventions, patents, patent applications and
patent rights (including any patents issuing on such
applications or rights),
2.1.35.1.4 all licenses, sub-licenses and franchises,
2.1.35.1.5 all trade secrets and proprietary and confidential
information,
2.1.35.1.6 all computer software and rights related thereto,
2.1.35.1.7 all renewals, modifications, developments and
extensions of any of the items listed in subsections 0
through 0 (inclusively) hereof; and
2.1.35.2 all patterns, plans, designs, research data, other
proprietary know-how, processes, drawings, technology, inventions,
formulae, specifications, performance data, quality control
information, unpatented blue prints, flow sheets, equipment and
parts lists, instructions, manuals, records and procedures, and all
licenses, agreements and other contracts and commitments relating to
any of the foregoing;
2.1.36 "Investors" means Innovatech and Sofinov, collectively, and "Investor"
means either of them;
2.1.37 "Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
2.1.37.1 such individual is actually aware of such fact or other
matter, or
2.1.37.2 a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer,
partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other
matter;<PAGE>
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2.1.38 "Order" means any order (draft or otherwise), judgment, injunction,
decree, award or writ of any Governmental Body;
2.1.39 "ordinary course of business" means an action taken by a Person that is:
2.1.39.1 consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of
such Person,
2.1.39.2 not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar
authority) and is not required to be specifically authorized by the
parent company (if any) of such Person, and
2.1.39.3 similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons
that are in the same line of business as such Person;
2.1.40 "Permit" means any license, permit, certificate, authorization,
approval, right, privilege, consent, concession or franchise issued,
granted, conferred or otherwise created by a Governmental Body;
2.1.41 "Person" means an individual, corporation, company, cooperative,
partnership, trust, unincorporated association, entity with judicial
personality, Governmental Body; and pronouns when they refer to a
Person have a similarly extended meaning;
2.1.42 "Premises" means the real property, together with all buildings,
structures, fixtures and improvements thereon, covered by the Real
Property Lease;
2.1.43 "Prime Rate" means the interest rate quoted publicly by the
Corporation's regular bankers as the reference rate of interest for
commercial demand loans made in Canadian dollars and commonly known
as such bank's prime rate, as adjusted from time to time, on the
basis of the Prime Rate in effect on the first day of each month;
2.1.44 "Real Property Lease" means the existing tenancy agreement between the
Corporation, as tenant, and Jesta Management Corp., as landlord,
covering the Premises, a copy of which is annexed hereto as Schedule
0;
2.1.45 "Second Additional Closing Date" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.46 "Second Additional Debentures" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.47 "Sixth Additional Closing Date" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.48 "Sixth Additional Debentures" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.49 "Sofinov A Debenture" has the meaning ascribed thereto in subsection 0;<PAGE>
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2.1.50 "Sofinov B Debenture" has the meaning ascribed thereto in subsection 0;
2.1.51 "Sofinov C Debenture" has the meaning ascribed thereto in subsection 0;
2.1.52 "Sofinov D Debenture" has the meaning ascribed thereto in subsection 0;
2.1.53 "Sofinov E Debenture" has the meaning ascribed thereto in subsection 0;
2.1.54 "Sofinov F Debenture" has the meaning ascribed thereto in subsection 0;
2.1.55 "Sofinov G Debenture" has the meaning ascribed thereto in subsection 0;
2.1.56 "Third Additional Closing Date" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.57 "Third Additional Debentures" has the meaning ascribed thereto in
subsection 0 hereof;
2.1.58 "TMC" means Technical Maintenance Corporation;
2.1.59 "TMC Put Right Agreement" means that certain agreement entered into
between TMC and the Investors on the date hereof pursuant to which
the Investors are entitled to oblige TMC to purchase the Debentures
in consideration for the issuance of shares from the treasury of
TMC;
2.1.60 "Tax Returns" means all reports, returns or other information, or any
amendment thereof, required to be filed in connection with any
Taxes; and
2.1.61 "Taxes" means all taxes, foreign or domestic, whether federal, state,
provincial, county, local, municipal or otherwise (including income,
profit, corporation, business, excise, sales, goods and services,
value-added, franchise, withholding, capital, transfer, stamp,
unemployment compensation, payroll, property, and duties), whether
or not measured in whole or in part by net income, and including
interest and penalties with respect thereto.
2.2 Gender. Any reference in this Agreement to any gender shall include both
genders and the neutral, and words used herein importing the singular number
only shall include the plural and vice versa.
2.3 Headings. The division of this Agreement into Sections, subsections and
other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
2.4 Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed therefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability
and shall not affect or impair the remaining provisions hereof, which
provisions shall be severed from an illegal or unenforceable Section,
subsection or other subdivision of this Agreement or any other provisions of
this Agreement.<PAGE>
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2.5 Entire Agreement. This Agreement together with any other instruments to
be delivered pursuant hereto, constitute the entire agreement among the parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations, and discussions, whether oral or written, among
any or all of the parties.
2.6 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by each of the
parties hereto.
2.7 Waiver. Except as otherwise provided in this Agreement, no waiver of any
of the provisions of this Agreement shall be deemed to constitute a waiver of
any other provisions (whether or not similar), nor shall such waiver constitute
a continuing waiver unless otherwise expressly provided in an instrument duly
executed by the parties.
2.8 Delays. When calculating the period of time within which or following
which any act is to be done or step taken pursuant to this Agreement, the day
which is the reference day in calculating such period shall be excluded. If the
day on which such delay expires is not a Business Day, then the delay shall be
extended to the next succeeding Business Day.
2.9 Preamble. The preamble hereof shall form an integral part of this
Agreement.
2.10 Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the Province of Quebec and the laws of
Canada applicable therein.
2.11 Currency. Unless otherwise specified, all statements of or references to
dollar amounts in this Agreement are of or to the lawful currency of the United
States of America.
2.12 Language. This Agreement is executed by all the parties hereto in French
and only by the Corporation and TMC in English. The parties hereto expressly
agree that in the event of any misunderstanding, dispute or controversy
(collectively, a "Dispute") amongst them with respect to any of the provisions
of this Agreement, the French version of this Agreement 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 any of the parties
hereto in connection with the interpretation given to any provision of this
Agreement, any court or arbitrator before which any such Dispute is referred
for resolution will be permitted to refer to the English version of this
Agreement in order to determine the intention of the parties at the time the
provisions of this Agreement were drafted.<PAGE>
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SECTION 3 - SUBSCRIPTION FOR DEBENTURES AND CALL RIGHTS
3.1 Sofinov Subscription. Subject to the terms and conditions of this
Agreement and in reliance upon the representations, warranties, covenants,
agreements and obligations of the Corporation and TMC herein contained, Sofinov
hereby subscribes for a debenture in the principal amount of $2,800,000, in the
form of debenture set forth in the specimen copy attached as Schedule 0 hereto
(the "Sofinov A Debenture"), at the aggregate subscription price of $2,800,000.
The Corporation hereby accepts the subscription of Sofinov for the Sofinov A
Debenture.
3.2 Payment, Issuance and delivery of Sofinov A Debenture. Sofinov hereby
remits to the Corporation the aggregate subscription price set forth in
subsection 0, payable as to (i) $2,520,533.78 by cheque and (ii) $400,000 CDN.
by Sofinov agreeing to extinguish the indebtedness of the Corporation to
Sofinov in the like amount, and the Corporation hereby issues and delivers to
Sofinov a certificate representing the Sofinov A Debenture.
3.3 Innovatech Subscription. Subject to the terms and conditions of this
Agreement and in reliance upon the representations, warranties, covenants,
agreements and obligations of the Corporation and TMC herein contained,
Innovatech hereby subscribes for a debenture in the principal amount of
$1,200,000, in the form of debenture set forth in the specimen copy attached as
Schedule 0 hereto (the "Innovatech A Debenture"), at the aggregate subscription
price of $1,200,000. The Corporation hereby accepts the subscription of
Innovatech for the Innovatech A Debenture.
3.4 Payment, Issuance and delivery of Innovatech A Debenture. Innovatech
hereby remits to the Corporation the aggregate subscription price set forth in
subsection 0, and the Corporation hereby issues and delivers to Innovatech a
certificate representing the Innovatech A Debenture.
3.5 First Call Right. Subject to the fulfilment of the conditions precedent
set forth in subsection 0 hereof, the Corporation shall have the right, at any
time prior to February 11, 1999, to require each of the Investors, by written
notice, to subscribe and pay for the following number of additional Debentures
(collectively, the "First Additional Debentures"): (i) in the case of Sofinov,
a Debenture in the principal amount of $700,000, in the form of debenture set
forth in the specimen copy attached as Schedule 0.1 hereto (the "Sofinov B
Debenture"), at the aggregate subscription price of $700,000 and (ii) in the
case of Innovatech, a Debenture in the principal amount of $300,000, in the
form of debenture set forth in the specimen copy attached as Schedule 0.2
hereto (the "Innovatech B Debenture"), at the aggregate subscription price of
$300,000. Following the fulfilment of said conditions precedent and within 45
Business Days of its receipt of said written notice, each of the Investors will
be required to subscribe and pay for the number of First Additional Debentures
applicable to it (the "First Additional Closing Date") by remitting to the
Corporation the aggregate subscription price for the First Additional
Debentures applicable to it, and the Corporation shall issue and deliver to
each of the Investors, respectively, certificates representing such First
Additional Debentures.
3.6 Second Call Right. Subject to the fulfilment of the conditions precedent
set forth in subsection 0 hereof, the Corporation shall have the right, at any
time after the First Additional Closing Date and prior to February 11, 1999, to
require each of the Investors, by written notice, to subscribe and pay for the<PAGE>
- 10 -
following number of additional Debentures (collectively, the "Second Additional
Debentures"): (i) in the case of Sofinov, a Debenture in the principal amount
of $700,000, in the form of debenture set forth in the specimen copy attached
as Schedule 0.1 hereto (the "Sofinov C Debenture"), at the aggregate
subscription price of $700,000 and (ii) in the case of Innovatech, a Debenture
in the principal amount of $300,000, in the form of debenture set forth in the
specimen copy attached as Schedule 0.2 hereto (the "Innovatech C Debenture"),
at the aggregate subscription price of $300,000. Following the fulfilment of
said conditions precedent and within 45 Business Days of its receipt of said
written notice, each of the Investors will be required to subscribe and pay for
the number of Second Additional Debentures applicable to it (the "Second
Additional Closing Date") by remitting to the Corporation the aggregate
subscription price for the Second Additional Debentures applicable to it, and
the Corporation shall issue and deliver to each of the Investors, respectively,
certificates representing such Second Additional Debentures.
3.7 Third Call Right. Subject to the fulfilment of the conditions precedent
set forth in subsection 0 hereof, the Corporation shall have the right, at any
time after the Second Additional Closing Date and prior to February 11, 1999,
to require each of the Investors, by written notice, to subscribe and pay for
the following number of additional Debentures (collectively, the "Third
Additional Debentures"): (i) in the case of Sofinov, a Debenture in the
principal amount of $700,000, in the form of debenture set forth in the
specimen copy attached as Schedule 0.1 hereto (the "Sofinov D Debenture"), at
the aggregate subscription price of $700,000 and (ii) in the case of
Innovatech, a Debenture in the principal amount of $300,000, in the form of
debenture set forth in the specimen copy attached as Schedule 0.2 hereto (the
"Innovatech D Debenture"), at the aggregate subscription price of $300,000.
Following the fulfilment of said conditions precedent and within 45 Business
Days of its receipt of said written notice, each of the Investors will be
required to subscribe and pay for the number of Third Additional Debentures
applicable to it (the "Third Additional Closing Date") by remitting to the
Corporation the aggregate subscription price for the Third Additional
Debentures applicable to it, and the Corporation shall issue and deliver to
each of the Investors, respectively, certificates representing such Third
Additional Debentures.
3.8 Fourth Call Right. Subject to the fulfilment of the conditions precedent
set forth in subsection 0 hereof, the Corporation shall have the right, at any
time after the Third Additional Closing Date and prior to February 11, 1999, to
require each of the Investors, by written notice, to subscribe and pay for the
following number of additional Debentures (collectively, the "Fourth Additional
Debentures"): (i) in the case of Sofinov, a Debenture in the principal amount
of $700,000, in the form of debenture set forth in the specimen copy attached
as Schedule 0.1 hereto (the "Sofinov E Debenture"), at the aggregate
subscription price of $700,000 and (ii) in the case of Innovatech, a Debenture
in the principal amount of $300,000, in the form of debenture set forth in the
specimen copy attached as Schedule 0.2 hereto (the "Innovatech E Debenture"),
at the aggregate subscription price of $300,000. Following the fulfilment of
said conditions precedent and within 45 Business Days of its receipt of said
written notice, each of the Investors will be required to subscribe and pay for
the number of Fourth Additional Debentures applicable to it (the "Fourth
Additional Closing Date") by remitting to the Corporation the aggregate
subscription price for the Fourth Additional Debentures applicable to it, and
the Corporation shall issue and deliver to each of the Investors, respectively,
certificates representing such Fourth Additional Debentures.<PAGE>
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3.9 Fifth Call Right. Subject to the fulfilment of the conditions precedent
set forth in subsection 0 hereof, the Corporation shall have the right, at any
time after the Fourth Additional Closing Date and prior to February 11, 1999,
to require each of the Investors, by written notice, to subscribe and pay for
the following number of additional Debentures (collectively, the "Fifth
Additional Debentures"): (i) in the case of Sofinov, a Debenture in the
principal amount of $700,000, in the form of debenture set forth in the
specimen copy attached as Schedule 0.1 hereto (the "Sofinov F Debenture"), at
the aggregate subscription price of $700,000 and (ii) in the case of
Innovatech, a Debenture in the principal amount of $300,000, in the form of
debenture set forth in the specimen copy attached as Schedule 0.2 hereto (the
"Innovatech F Debenture"), at the aggregate subscription price of $300,000.
Following the fulfilment of said conditions precedent and within 45 Business
Days of its receipt of said written notice, each of the Investors will be
required to subscribe and pay for the number of Fifth Additional Debentures
applicable to it (the "Fifth Additional Closing Date") by remitting to the
Corporation the aggregate subscription price for the Fifth Additional
Debentures applicable to it, and the Corporation shall issue and deliver to
each of the Investors, respectively, certificates representing such Fifth
Additional Debentures.
3.10 Sixth Call Right. Subject to the fulfilment of the conditions precedent
set forth in subsection 0 hereof, the Corporation shall have the right, at any
time after the Fifth Additional Closing Date and prior to February 11, 1999, to
require each of the Investors, by written notice, to subscribe and pay for the
following number of additional Debentures (collectively, the "Sixth Additional
Debentures"): (i) in the case of Sofinov, a Debenture in the principal amount
of $700,000, in the form of debenture set forth in the specimen copy attached
as Schedule 0.1 hereto (the "Sofinov G Debenture"), at the aggregate
subscription price of $700,000 and (ii) in the case of Innovatech, a Debenture
in the principal amount of $300,000, in the form of debenture set forth in the
specimen copy attached as Schedule 0.2 hereto (the "Innovatech G Debenture"),
at the aggregate subscription price of $300,000. Following the fulfilment of
said conditions precedent and within 45 Business Days of its receipt of said
written notice, each of the Investors will be required to subscribe and pay for
the number of Sixth Additional Debentures applicable to it (the "Sixth
Additional Closing Date") by remitting to the Corporation the aggregate
subscription price for the Sixth Additional Debentures applicable to it, and
the Corporation shall issue and deliver to each of the Investors, respectively,
certificates representing such Sixth Additional Debentures.
3.11 Conditions Precedent to Subscription. The obligation of each of the
Investors to proceed with its respective subscription for each of the First
Additional Debentures, the Second Additional Debentures, the Third Additional
Debentures, the Fourth Additional Debentures, the Fifth Additional Debentures
and the Sixth Additional Debentures is subject to the fulfilment of the
conditions precedent hereinbelow set forth, it being agreed that all such
conditions precedent are material and are inserted for the exclusive benefit of
the Investors, and may be waived in whole or in part by either of the
Investors, provided that any waiver to be effective must be in writing:
3.11.1 the Guarantors shall have delivered to each of the Investors a
certificate duly executed by each of the Guarantors, dated the First
Additional Closing Date, the Second Additional Closing Date, the
Third Additional Closing Date, the Fourth Additional Closing Date,
the Fifth Additional Closing Date or the Sixth Additional Closing
Date, as the case may be, confirming that each of the Corporation's<PAGE>
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representations and warranties contained in this Agreement (except
as updated or qualified in a manner satisfactory to each of the
Investors, in their absolute discretion) are true and complete in
all respects as of the First Additional Closing Date, the Second
Additional Closing Date, the Third Additional Closing Date, the
Fourth Additional Closing Date, the Fifth Additional Closing Date or
the Sixth Additional Closing Date, as the case may be. The
Guarantors hereby acknowledge and agree that the only
representations and warranties which they shall be entitled to
update or qualify are those representations and warranties which are
affected by events occurring between the date hereof and the First
Additional Closing Date, the Second Additional Closing Date, the
Third Additional Closing Date, the Fourth Additional Closing Date,
the Fifth Additional Closing Date, or the Sixth Additional Closing
Date, as the case may be. The Guarantors shall also have delivered
to each of the Investors such additional documentation, including
updated financial statements, as the Investors may reasonably
request; and
3.11.2 no Event shall have occurred.
3.12 Additional Debentures. The Corporation hereby covenants that, upon
issuance, each of the First Additional Debentures, the Second Additional
Debentures, the Third Additional Debentures, the Fourth Additional Debentures,
the Fifth Additional Debentures and the Sixth Additional Debentures shall be
validly issued from the treasury of the Corporation and free and clear of any
Encumbrance.
SECTION 4 - REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Investors. Each Investor hereby
represents and warrants, severally and not solidarily, that the following
representations and warranties are true and complete and acknowledges and
confirms that the Corporation and the other Investor are relying upon such
representations and warranties in connection herewith and would not have
entered into this Agreement without same:
4.1.1 it is duly incorporated, constituted or formed, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
under the laws pursuant to which it was constituted or formed;
4.1.2 it has the necessary power and authority to execute this Agreement and
perform its obligations hereunder. The execution of this Agreement and
the performance of its obligations hereunder have been duly authorized
by all necessary action on its part and do not require any action or
consent of, any filing or registration with, or notification to, any
Person, or any action or consent under any Applicable Law;
4.1.3 neither the execution and delivery of this Agreement nor the performance
of the transactions contemplated hereby will, with or without the giving
of notice or the passage of time, or both,:
4.1.3.1 conflict with, or constitute a default under, its constating
documents or by-laws;
4.1.3.2 conflict with, or constitute a default under, any Contract to
which it may be a party or by which it or any of its assets may be<PAGE>
- 13 -
bound; or
4.1.3.3 conflict with, or constitute a default under, any Applicable
Law;
4.1.4 this Agreement constitutes its valid and binding obligation enforceable
against it in accordance with its terms; and
4.1.5 neither it nor any of its respective shareholders, directors, officers,
employees or agents has employed or incurred any liability to any
broker, finder or agent for any brokerage fees, finder's fees,
commissions or other amounts with respect to this Agreement or any of
the transactions contemplated hereby, except for the commitment fee
payable by the Corporation to the Investors.
4.2 Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants that the following representations and
warranties are true and complete and acknowledges and confirms that the
Investors are relying upon such representations and warranties in connection
herewith and would not have entered into this Agreement without same:
4.2.1 Corporate Organization and Authority. The Corporation is duly
incorporated and organized, validly existing, and in good standing under
the laws of its jurisdiction of incorporation. The Corporation has all
the requisite power and authority to own, lease and operate its
properties and carry on its business as presently conducted. Neither
the nature of its business nor the location or character of any of its
Assets requires the Corporation to be registered, licensed or otherwise
qualified as an out of state or foreign corporation or to be in good
standing in any jurisdiction other than jurisdictions where it is duly
registered, licensed or otherwise qualified and in good standing for
such purpose being the jurisdictions described in Schedule 0 annexed
hereto. The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby will not, with or
without the giving of notice and/or the passage of time, or both (i)
violate any provision of law applicable to the Corporation, or require
any consent, approval or authorization of, or any declaration, filing or
registration with or notice to, any third party, Governmental Body or
otherwise, (ii) result in the loss of any right under or conflict with
or result in a default of any provision or termination of or accelerate
the date of performance of any obligation under any agreement,
obligation or undertaking to which the Corporation may be a party or by
which the Corporation or any of its Assets may be bound, or (iii)
conflict with or result in a default of any provision or termination of
any of the constating documents or by-laws of the Corporation. This
Agreement constitutes a valid and binding obligation of the Corporation
enforceable against it in accordance with its terms;
4.2.2 Constating and Corporate Documents. Schedule 0 annexed hereto contains
a true and complete copy of the constating documents and by-laws of the
Corporation, which have not been amended other than as reflected in said
Schedule, and there is no application pending for the amendment of any
of same. The minute books and corporate records of the Corporation, true
and complete copies of which have been made available to the Investors
prior to the date hereof, have been maintained in accordance with
Applicable Law and contain true and complete records of all meetings and
consents in lieu of meetings of its board of directors (and all<PAGE>
- 14 -
committees thereof) and its shareholders, and accurately and completely
reflect all matters referred to therein. All resolutions contained in
the Corporation's minute books have been duly adopted and all such
meetings have been duly called and held. The share certificate books and
the registers of shareholders, directors and transfers of the
Corporation are true and complete;
4.2.3 Issued and Outstanding Shares. The only issued and outstanding shares
in the capital stock of the Corporation are those set forth in
Schedule 0 annexed hereto, all of which are validly issued, fully paid
and non-assessable;
4.2.4 Options to Acquire Securities. There are no outstanding subscriptions,
calls, warrants, rights, options or other agreements or rights to
purchase or subscribe for any shares or other securities of the
Corporation;
4.2.5 Subsidiaries. The Corporation does not have any equity or other
interest in any Person;
4.2.6 Powers of Attorney. No Person holds any powers of attorney on behalf of
the Corporation;
4.2.7 Financial Statements. The Financial Statements have been prepared in
accordance with Generally Accepted Accounting Principles, are true and
complete in all respects, accurately disclose the Assets and liabilities
(whether accrued, absolute, contingent or otherwise) of the Corporation,
present fairly, accurately and completely its financial condition and
results of operations, as at the dates thereof and for the periods
covered thereby, reflect all proper accruals, as at the dates thereof
and for the periods covered thereby, and contain or reflect adequate
reserves;
4.2.8 Undisclosed Liabilities of the Corporation. The Corporation has no
liabilities (whether accrued, absolute, contingent or otherwise) of any
kind except liabilities disclosed or provided for in the Financial
Statements and liabilities incurred in the ordinary course of business
since the Balance Sheet Date which are not, individually or in the
aggregate, material and adverse to its business, or to its financial
condition or results of operations;
4.2.9 Subsequent Activities of the Corporation. Without limiting the
generality of paragraph 0 hereof, since the Balance Sheet Date, the
Corporation has not, directly or indirectly:
4.2.9.1 declared or paid any dividend on its capital stock or redeemed,
purchased or otherwise acquired any shares of its capital stock, or
otherwise reduced its paid up capital or altered its capital stock,
4.2.9.2 entered into any Contract outside the ordinary course of
business,
4.2.9.3 increased the salary, benefits, bonuses or other compensation of
its officers, directors or employees or adopted any Benefit Plan, save
that: (i) the compensation of each of Mr. Tony Mastronardi and Mr. Guy
Nathan is presently being reviewed, (ii) the Corporation's parent
company, Technical Maintenance Corporation, intends to put into a place<PAGE>
- 15 -
a stock option plan that will benefit certain of the employees of the
Corporation, and (iii) the Corporation has agreed to pay to Mr. Guy
Nathan the annual sum of $15,000 CDN in respect of Mr. Nathan's living
expenses,
4.2.9.4 mortgaged, hypothecated, pledged or otherwise subjected any
Assets to any Encumbrance,
4.2.9.5 settled any liability, claim, dispute, proceedings, suit or
appeal pending against it,
4.2.9.6 suffered any extraordinary loss,
4.2.9.7 purchased or leased any Assets, except for purchases of
Equipment and supplies in the ordinary course of business,
4.2.9.8 made any change in personnel practices, except in the ordinary
course of business,
4.2.9.9 made any change in its accounting principles, policies or
practices, including the basis upon which the Assets or its liabilities
are recorded on its Books and Records, its earnings are ascertained or the
methods or rates of depreciation or amortization employed,
4.2.9.10 violated any provision of any Contract to which it is a party or
by which it or any Assets may be bound, or
4.2.9.11 agreed to do any of the things described in paragraphs 0 through
0, inclusively, hereof;
4.2.10 Title to Assets. Except as disclosed in Schedule 0 annexed hereto, the
Corporation is the legal and beneficial owner of, has good and
marketable title to and possesses all its Assets free and clear of
any Encumbrances;
4.2.11 Equipment. Schedule 0 annexed hereto sets forth a true and complete
list of all of the Equipment owned or used by the Corporation that
was acquired since March 21, 1997, all of which, together with all
of the Equipment owned or used by the Corporation that was acquired
prior to March 21, 1997 is located at the Premises or at the
premises occupied by TMC in Buffalo Grove, Illinois. All of such
Equipment (i) is in good working order and operating condition and
has been regularly serviced and properly maintained and (ii) is
adequate and sufficient for the continuing conduct of the business
of the Corporation. There are no outstanding work orders relating to
any of the Equipment which have been received from or required by
any applicable Governmental Body;
4.2.12 Litigation. There is no existing or threatened claim, demand, suit,
action, cause of action, dispute, proceeding, litigation,
investigation, grievance, arbitration, governmental proceeding or
other proceeding against or by the Corporation, and there is no
state of facts which could provide a valid basis for any of the
foregoing. There is no outstanding Order which adversely affects the
Corporation or relates to this Agreement or the transactions
contemplated hereby;<PAGE>
- 16 -
4.2.13 Insurance. Schedule 0 annexed hereto contains a true and complete copy
of each insurance policy currently maintained by the Corporation.
All such policies are in full force and effect and are not void or
voidable and nothing has been done or omitted to be done by the
Corporation that would make any such policy void or voidable. All
liability policies maintained by the Corporation provide coverage on
an occurrence basis, and not on a claims basis. The Corporation has
not failed to give any notice or present any claim under any
insurance policy when due or in a timely fashion. No claim presented
by the Corporation has been or continues to be disputed or is under
negotiation, nor does any amount recoverable from any insurer in
respect of any such claim remain unpaid. The insurance coverage
maintained by the Corporation is in such amounts and against such
losses as are reasonable based on the Corporation's claims history;
4.2.14 Real Property Lease and Premises
4.2.14.1 The Real Property Lease is the only lease, offer to lease,
sublease, license or other agreement under which the Corporation uses or
occupies or has the right to use or occupy, now or in the future, any
immovable or real property,
4.2.14.2 all of the land, buildings, structures, fixtures and
improvements currently used by the Corporation in the conduct of its
business are included in the Real Property Lease,
4.2.14.3 the Corporation has not entered into any sublease, license
or other agreement granting to any Person any right to the possession,
use, occupancy or enjoyment of the Premises, or any portion thereof,
4.2.14.4 there are no work orders outstanding against the Premises,
and the Premises are in compliance with the requirements of all
insurance companies who have policies covering the Premises,
4.2.14.5 to the Knowledge of the Corporation, all water, gas,
electrical, steam, compressed air, telecommunication, sanitary and storm
sewage lines and systems and other similar systems serving the Premises
are in good working order and operating condition. To the Knowledge of
the Corporation, the continued existence, use, occupancy and operation
of each such line and system is not dependent on the granting of any
Permit,
4.2.14.6 all Permits, as well as all approvals and authorizations
from all insurance companies and fire rating organizations, required to
have been issued to the Corporation to enable the Premises to be
lawfully occupied and used by the Corporation for all of the purposes
for which it is currently occupied and used have been lawfully issued
and are in full force and effect;
4.2.15 Place of Business. The Corporation carries on business at the Premises
and has no other place of business;
4.2.16 Environmental Matters.
Without limiting the generality of subsection 0 or 0 hereof:
4.2.16.1 the operations of, and the use of the Premises and
Equipment by, the Corporation are now and have been in compliance, in<PAGE>
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all material respects, with applicable Environmental Law, and the
operations of and use of the Premises by any predecessor in interest of
the Corporation have, to the Knowledge of the Corporation, been in
compliance, in all material respects, with applicable Environmental Law,
4.2.16.2 there has been no Release by the Corporation (or to the
Knowledge of the Corporation by any predecessor in interest of the
Corporation), of Hazardous Substances in, under or on the Premises and
the Premises are free of any material contamination by the Corporation
(or to the Knowledge of the Corporation by any predecessor in interest
of the Corporation) of the Environment by Hazardous Substances therein
or thereon,
4.2.16.3 the Corporation has not received, nor is it likely to
receive, any notification pursuant to Environmental Law that any of its
current or past operations (or to the Knowledge of the Corporation,
those of any predecessor in interest of the Corporation) or any
by-product thereof or of the Premises, is or may be implicated in or
subject to any proceeding, investigation, claim, lawsuit, order,
agreement or evaluation by any Person as to whether (i) any Remedial
Action is or may be needed to respond to a Release or threatened Release
of a Hazardous Substance into the Environment; (ii) any recovery is
sought from the Corporation or its directors, officers or other
executives for any liability, damage or loss, or any action, suit or
proceeding commenced against the Corporation, related to or arising from
the current or past operations of the Corporation or the operation of
the Premises; or (iii) the Corporation is or may be a potentially
responsible party for a Remedial Action, pursuant to applicable
Environmental Law, and
4.2.16.4 to the Knowledge of the Corporation there is no basis for
any action, suit, claim, penalty, fine, investigation or proceeding with
respect to any obligation of the Corporation to remediate conditions
pursuant to applicable Environmental Law or any other potential source
of liability for the Corporation or its directors, officers or other
executives under applicable Environmental Law in connection with any
Release of Hazardous Substance by the Corporation (or any predecessor in
interest of the Corporation);
4.2.16.5 the operations of, and the use of the Premises and
Equipment by the Corporation are now and have been in compliance, in all
material respects, with Environmental Law, and the operations of and use
of the Premises by any predecessor in interest of the Corporation have,
to the Knowledge of the Corporation, been in compliance, in all material
respects, with Environmental Law, and
4.2.16.6 the Corporation does not require any Permits under
Environmental Law for the conduct of its operations. The Corporation has
not received any notice requiring the issuance of any Permits;
4.2.17 Books and Records. The Books and Records of the Corporation are true
and complete in all material respects;
4.2.18 Employees and Labour Relations
4.2.18.1 Schedule 0 annexed hereto contains a true and complete list
of the employees of the Corporation detailing dates of hire, total<PAGE>
- 18 -
remuneration and position held. Each of the employees listed on
Schedule 0 annexed hereto received compensation from the Corporation
solely in consideration of services performed on its behalf. The
compensation of all officers and employees of the Corporation was paid
entirely by the Corporation,
4.2.18.2 To the Knowledge of the Corporation, none of the officers,
directors or other key employees of the Corporation has any present
intention to terminate its relationship with the Corporation, save for
Sylvain Duchesne,
4.2.18.3 without limiting the generality of paragraph 0 hereof, the
Corporation is in compliance with Applicable Law respecting employment
and employment practices, terms and conditions of employment, wages,
hours of work and human and civil rights,
4.2.18.4 without limiting the generality of paragraph 0 hereof, the
Corporation is not bound by or subject to any collective bargaining
agreement or collective bargaining obligation (or any ongoing organizing
activity),
4.2.18.5 without limiting the generality of paragraph 0 hereof,
there are no labour disruptions pending or threatened against the
Corporation and the Corporation is not involved in any controversy with
any of its employees except in the ordinary course of business, and
4.2.18.6 except as set forth in Schedule 0 annexed hereto, no
employment agreement to which the Corporation is a party provides for a
specified notice of termination or fixed term of employment. There is no
director, officer or employee of the Corporation who cannot be dismissed
upon such notice as is required by Applicable Law;
4.2.19 Benefit Plans.
4.2.19.1 Schedule 0 annexed hereto contains a true and complete list
of all Benefit Plans. True and complete copies of each Benefit Plan have
been furnished to the Investors,
4.2.19.2 without limiting the generality of paragraph 0 hereof, all
Benefit Plans which are funded plans are funded in accordance with their
rules and Applicable Law and are fully funded on both a going-concern
and a termination basis. Without limiting the generality of paragraph 0
hereof, all required employer contributions, premium payments and
source-deducted employee contributions under the Benefit Plans have been
made and remitted to the funding agents thereunder, including all
current service costs and special payments,
4.2.19.3 no step has been taken to terminate any Benefit Plan, and
4.2.19.4 no promises or commitments have been made by the
Corporation to amend any Benefit Plan or to provide increased benefits
thereunder or to establish any additional Benefit Plan;
4.2.20 Contracts. Schedule 0 annexed hereto contains a true and complete list
of all Contracts entered into since March 21, 1997 to which the
Corporation is a party or by which it or its Assets may be bound,
such Contracts together with the Contracts listed on Schedule 4.2.19
of the Subscription Agreement dated March 21, 1997 among the parties<PAGE>
- 19 -
hereto constitute a true and complete list of all Contracts to which
the Corporation is a party or by which it or its Assets may be
bound, and none of them will be affected by the transactions
contemplated hereby. The Corporation has delivered to the Investors
a true and complete copy of each of the Contracts listed in
Schedule 0 annexed hereto. The Corporation is not in violation of or
in default with respect to and no event has occurred which, with
lapse of time or action by a third party, or both, could result in
violation of or a default with respect to any of the aforesaid
Contracts. Each of the aforesaid Contracts is in full force and
effect and valid, binding and enforceable in accordance with its
terms and, to the Knowledge of the Corporation, all parties to the
such Contracts (other than the Corporation) are in compliance with
their obligations thereunder. Neither of the Corporation and, to the
Knowledge of the Corporation, none of the parties to the aforesaid
Contracts (other than the Corporation) intends to terminate its
obligations under any of such Contracts;
4.2.21 Intellectual Property.
4.2.21.1 Schedule 0 annexed hereto contains a true and complete list
and copy of all Intellectual Property Rights used by the Corporation in
the conduct of its business, none of which has been opposed or held
unenforceable and each of which is in full force and effect. Except as
set forth in Schedule 0 annexed hereto, the Corporation is the absolute
owner and has the sole and exclusive right to use the Intellectual
Property Rights listed beside its name on Schedule 0 annexed hereto,
without making any payment to any Person or granting rights to any
Person in exchange. Unless otherwise indicated in Schedule 0, the
Corporation owns the entire right, title and interest in and to the
Intellectual Property Rights (including, without limitation, the right
to use and license the same) which are necessary for the research,
development, manufacture, use, sale, lease, license and service of
products of the Corporation's business and the equipment used to
manufacture the Corporation's products. The Corporation's patents and
trademarks, as listed and explained in Schedule 0, have been duly
registered with, filed in or issued by, as the case may be, such
Governmental Body as is indicated in Schedule 0 and, except as otherwise
set forth on Schedule 0, such registrations, filing and issuances remain
in full force and effect and such patents and trademarks cover the
technology and equipment used to manufacture the Products. The
Intellectual Property Rights of the Corporation are sufficient for the
lawful conduct, ownership and operation of the Corporation's business
and enable the manufacturing of the Products as represented in the
Business Plan and there are no Intellectual Property Rights of any
Person which impair or prevent the development, manufacture, use, sale,
lease, license and service of products, now existing or under
development by the Corporation. The Corporation has the unabridged
right to bring actions for the infringement of all of its Intellectual
Property Rights,
4.2.21.2 without limiting the generality of paragraph 0 hereof, the
execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated thereby will not breach,
violate or conflict with any instrument or agreement governing any of
the Corporation's Intellectual Property Rights, and will not cause the
forfeiture or termination or give rise to a right of forfeiture or<PAGE>
- 20 -
termination of the Corporation's Intellectual Property Rights or in any
way impair the right of the Corporation to use, sell, license or dispose
of or to bring any action for the infringement of any of the
Corporation's Intellectual Property Rights or portion thereof,
4.2.21.3 none of the Intellectual Property Rights have been derived,
in part or in whole, from the Intellectual Property Rights of any other
Person. All employees of, and consultants to, the Corporation have
entered into agreements with the Corporation pursuant to which all
Intellectual Property Rights developed by them in the course of their
relationship with the Corporation belong solely, without any
restrictions or obligations whatsoever, to the Corporation, and all such
agreements are included in the Contracts. The Corporation has taken all
reasonable and practical steps (including, without limitation, entering
into confidentiality and non-disclosure agreements with all employees of
the Corporation or consultants, third party developers or any other
Persons with access to or knowledge of the Corporation's Intellectual
Property Rights) sufficient to safeguard and maintain the secrecy and
confidentiality of, and its proprietary rights in, all of the
Corporation's Intellectual Property Rights,
4.2.21.4 none of the development, manufacture, marketing, license,
sale or use of any product or service currently licensed or sold by the
Corporation or currently under development or proposed to be developed
by the Corporation violates or will violate any Contract with any Person
or infringe or will infringe any Intellectual Property Rights of any
Person. There are no pending or threatened proceedings, litigation or
other adverse claims affecting, or with respect to, any part of the
Intellectual Property Rights of the Corporation and, except as set forth
in Schedule 0, to the Knowledge of the Corporation, no Person is
infringing any Intellectual Property Right of the Corporation,
4.2.21.5 no license or sub-license has been granted or other
Contract has been entered into with respect to any of the Intellectual
Property Rights of the Corporation. The Corporation has not conducted
business under any name other than its current corporate name;
4.2.22 Related Transactions. Except as set forth in Schedule 0 annexed hereto
and except for current unpaid salaries, the Corporation has no
indebtedness to any of its shareholders, directors, officers or
employees, past or present, or to any Person not dealing at
arm's-length with any of such Persons; and no shareholder, director,
officer or employee, past or present, of the Corporation or any
Person not dealing at arm's-length with any of such Persons has any
indebtedness to the Corporation;
4.2.23 Compliance with Applicable Law. The Corporation has conducted and is
conducting its business in compliance with Applicable Law, and the
Corporation is not in breach of Applicable Law, including any
securities law;
4.2.24 Qualifications. Without limiting the generality of paragraph 0 hereof,
the Corporation has not been required to suspend operations of its
business or been liable for a fine or penalty as a result of the
operation of its business. The Corporation has all Permits necessary
for the conduct of its business and such Permits are validly issued,
in full force and effect and the Corporation is in compliance<PAGE>
- 21 -
therewith, and none of such Permits will be affected by the
transactions contemplated hereby;
4.2.25 Absence of Guarantees. Without limiting the generality of paragraph 0
hereof, the Corporation is not a party to or bound by any comfort
letter, understanding or agreement of guarantee, indemnification,
assumption or endorsement or any like commitment with respect to the
liabilities (whether accrued, absolute, contingent or otherwise) or
obligations of any Person;
4.2.26 Tax Matters. Without limiting the generality of paragraph 0 hereof:
4.2.26.1 all Tax Returns required by Applicable Law to be filed by
the Corporation have been properly and timely filed and all such Tax
Returns are true and complete, and all Taxes shown to be due on such Tax
Returns have been paid,
4.2.26.2 there are no unpaid Taxes now due by the Corporation and no
deficiency for Taxes has been assessed against the Corporation by any
applicable Governmental Body. No Tax Return of the Corporation has ever
been audited and no audit of any Tax Return is in progress or pending
or, to the Knowledge of the Corporation, threatened, in connection with
the Corporation. No waiver of any statute of limitations has been given
or is in effect with respect to the assessment of any Taxes against the
Corporation,
4.2.26.3 all Taxes shown on all Tax Returns for which the
Corporation is liable have been paid or accrued and adequately reserved
on its Books and Records and financial statements,
4.2.26.4 the Corporation has never entered into any closing or
similar agreement with any taxing Governmental Body,
4.2.26.5 copies of all Tax Returns, deficiencies, assessments and
notices from all taxing authorities relating to the Corporation have
been delivered to the Investors,
4.2.26.6 the Corporation has not taken any action outside of the
ordinary course of business that would have the effect of deferring any
Tax liability from any taxable period ending prior to the date hereof,
4.2.26.7 the Corporation has collected all Taxes required to be
collected by it and has remitted same on a timely basis to the
appropriate Governmental Body, or has been furnished properly completed
exemption certificates for all exempt transactions. The Corporation has
in its possession all Books and Records, including supporting documents,
required by Applicable Law regarding the collection and payment of all
sales, goods and services and use Taxes required to be collected and
paid over by it and regarding all exempt transactions for all periods
open under the applicable statutes of limitations, and the Corporation
has maintained all such Books and Records, including supporting
documents, in accordance with Applicable Law,
4.2.26.8 the Corporation has withheld from each payment made to each
of its past and present shareholders, agents, employees, officers and
directors all deductions required to be made therefrom and has paid same
to the proper Governmental Body;<PAGE>
- 22 -
4.2.27 No Broker. Without limiting the generality of subsection 0 hereof, none
of the directors of the Corporation or the Corporation has employed,
nor is any of them subject to any claim of, any broker, finder,
consultant or other intermediary in connection with any of the
transactions contemplated by this Agreement;
4.2.28 Product Liability, Warranties and Returns. To the Knowledge of
Corporation, and without limiting the generality of paragraph 0
hereof, the Corporation has designed, manufactured, marketed,
packaged and labelled its products and continues to design,
manufacture, market, package and label products in accordance with
Applicable Law. Subject to any warranty required by Applicable Law,
the Corporation has not issued any warranty to, nor has any other
understanding or made any other agreement with, any Person relating
to warranties, including warranties, understandings or agreements
relating to the quality or condition of any products sold by the
Corporation. The Corporation has not entered into consignment sales
and no purchaser of goods from the Corporation has any contractual
or other right to return any part of such goods for credit or
refund, except for returns of merchandise in the ordinary course of
business;
4.2.29 Grants and Subsidies. Without limiting the generality of paragraph 0
hereof, neither the execution and delivery of this Agreement nor the
completion of the transactions contemplated hereby will result in
any obligation or liability of the Corporation to repay, in whole or
in part, any grant, subsidy, loan or other benefit which has been
paid to or for the benefit of the Corporation, nor will the
Corporation suffer any reduction in the amount of, loss of right to
or any adverse change in the terms and conditions of any grant,
subsidy, loan or other benefit paid to or for the benefit of the
Corporation or which are or may become payable to the Corporation
after the date hereof;
4.2.30 Business Plan. The information contained in the Business Plan was
prepared in good faith based on the Corporation's past practices,
and represents the Corporation's reasonable estimates;
4.2.31 Accuracy of Information.
4.2.31.1 The Corporation has made or caused to be made reasonable
inquiry with respect to each covenant, agreement, obligation,
representation and warranty of the Corporation contained in this
Agreement and any other document or certificate referred to herein or
furnished by the Corporation to the Investors pursuant thereto, and none
of the aforesaid covenants, agreements, obligations, representations,
warranties or documents or certificates contains any untrue statement of
a material fact or omits to state a material fact necessary to make such
covenant, agreement, obligation, representation, warranty or other
document or certificate not misleading, and
4.2.31.2 to its Knowledge, there is no fact, condition or
circumstance, including without limitation, in connection with the
Corporation's Intellectual Property Rights and the equipment and the
products developed and/or manufactured by the Corporation, which
(i) materially adversely or in the future may (so far as the Corporation
can now reasonably foresee) materially adversely affect the business,<PAGE>
- 23 -
operations, properties, prospects, or condition of the Corporation or
the ability of the Corporation to perform its covenants, agreements and
obligations under this Agreement or (ii) relates to the business of the
Corporation and might reasonably be expected to deter an Investor from
entering into this Agreement or any other agreements entered into
between the Investors and the Corporation on the date hereof.
SECTION 5 -SURVIVAL OF REPRESENTATIONS AND WARRANTIES
5.1 Survival. Notwithstanding any investigation conducted prior or subsequent
to the date hereof, the parties shall be entitled to rely upon the
representations and warranties set forth herein and all representations and
warranties made by, and all covenants, obligations and agreements of, the
parties, under or pursuant to this Agreement or any other document or
certificate delivered in connection therewith shall survive the date hereof.
SECTION 6 -INDEMNIFICATION
6.1 Definitions. As used in this Section 0:
6.1.1 "Additional Indemnity" means indirect damages;
6.1.2 "Claim" means any act, omission or state of facts and any demand,
action, suit, proceeding, investigation, arbitration, trial, claim,
assessment, judgment, settlement or compromise relating thereto which
may give rise to a right to indemnification under subsection 0 or 0
hereof;
6.1.3 "Direct Claim" means any Claim by an Indemnified Party against an
Indemnifying Party which does not result from a Third Party Claim;
6.1.4 "Indemnifying Party" means any party obligated to provide
indemnification under this Agreement (including the parties intervening
into this Agreement);
6.1.5 "Indemnified Party" means any party entitled to indemnification under
this Agreement;
6.1.6 "Indemnity Payment" means the aggregate amount of each Loss and
Additional Indemnity required to be paid pursuant to subsection 0 or the
amount of each Loss required to be paid pursuant to subsection 0 hereof;
6.1.7 "Loss" means any and all loss (including diminution in value),
liability, damage, cost, expense, charge, fine, penalty or assessment,
resulting from or arising out of any Claim, including the costs and
expenses of any action, suit, proceeding, demand, assessment, judgment,
settlement or compromise relating thereto and all interest, punitive
damages, fines and penalties and reasonable attorneys', accountants' and
experts' fees and expenses incurred in connection therewith; and
6.1.8 "Third Party Claim" means any Claim asserted against an Indemnified
Party by any Person who is not a party to this Agreement.
6.2 Indemnification by the Corporation. The Corporation hereby agrees to
indemnify and save and hold harmless the Investors from and against any Loss
suffered or incurred, directly or indirectly, by the Investors as a result of,
arising out of or relating to:<PAGE>
- 24 -
6.2.1 any violation, contravention or breach of any covenant, agreement or
obligation of the Corporation under or pursuant to this Agreement or any
other document or certificate delivered to the Investors by or on behalf
of the Corporation in connection therewith, as well as any Claim by any
Person containing allegations which, if true, would constitute such an
event; and
6.2.2 any incorrectness in, or breach of, any representation or warranty made
by the Corporation in this Agreement, or made or to be made in any other
document or certificate delivered or to be delivered to the Investors by
or on behalf of the Corporation in connection therewith, as well as any
Claim by any Person containing allegations which, if true, would
constitute such an event.
6.3 Indemnification by the Investors. Each Investor hereby agrees to
indemnify and save and hold harmless the Corporation from and against any Loss
suffered or incurred, directly or indirectly, by it as a result of, arising out
of or relating to:
6.3.1 any violation, contravention or breach of any covenant, agreement or
obligation of such Investor under or pursuant to this Agreement or any
other document or certificate delivered to the Corporation by or on
behalf of such Investor in connection therewith, as well as any Claim by
any Person containing allegations which, if true, would constitute such
an event; and
6.3.2 any incorrectness in, or breach of, any representation or warranty made
by such Investor in this Agreement, or made or to be made in any other
document or certificate delivered or to be delivered to the Corporation
by or on behalf of such Investor in connection therewith, as well as any
Claim by any Person containing allegations which, if true, would
constitute such an event.
6.4 Payment and Interest. The Indemnifying Party shall reimburse, on demand,
to the Indemnified Party the amount of each Loss suffered or incurred by the
Indemnified Party and, in the event that subsection 0 applies, shall pay, on
demand, to the Indemnified Party the amount of the Additional Indemnity, the
whole as of the date that the Indemnified Party incurs such Loss, together with
interest on such amount(s) from the aforesaid date until payment in full at a
rate per annum equal to the Prime Rate, plus three (3) percentage points.
Interest shall be calculated and payable monthly on the last day of each month
during which any amount in respect of any Loss, and/or any Additional Indemnity
if applicable, remained unpaid, both before and after an arbitration award
and/or judgment, with interest on overdue interest calculated and payable at
the same rate. The interest payable in any month shall be calculated on the
average amount of all amounts in respect of any Loss, and/or any Additional
Indemnity if applicable, that remained unpaid at any time during such month.
This amount shall be calculated by i) multiplying any amount in respect of each
Loss that remained unpaid at any time during such month by the number of days
that amount remained unpaid during such month and ii) dividing the aggregate of
all such products by the number of days in such month. If such Claim is
subsequently determined not to have been valid, the Indemnified Party shall
reimburse the Indemnifying Party for the amount so paid together with interest
at the Prime Rate per annum, plus three (3) percentage points, calculated and
payable monthly as provided previously in this subsection, from the month such
payment was made by the Indemnifying Party to the month in which the<PAGE>
- 25 -
Indemnified Party repaid such amount.
6.5 Additional Indemnity. If the Corporation is the Indemnifying Party, in
addition to the reimbursement to the Indemnified Party of the amount of each
Loss suffered or incurred by the Indemnified Party as provided in subsection 0
hereof, the Indemnifying Party shall pay, on demand to the Indemnified Party
the Additional Indemnity, the whole as provided in subsection 0 hereof.
6.6 Notification. Promptly upon obtaining knowledge thereof, the Indemnified
Party shall notify the Indemnifying Party of each Claim which the Indemnified
Party has determined has given or could give rise to indemnification under this
Section 0, describing such Claim in reasonable detail. In circumstances where
the Indemnifying Party is notified of such Claim but not promptly, the
Indemnifying Party shall not be relieved from any duty to indemnify and save
and hold harmless which otherwise might exist with respect to such Claim unless
(and only to that extent) the omission to notify promptly materially prejudices
the ability of the Indemnifying Party to exercise its right to defend provided
in this Section 0.
6.7 Defense of Third Party Claims. The Indemnifying Party shall have the
right, after receipt of the Indemnified Party's notice under subsection 0
hereof with respect to a Third Party Claim and upon giving written notice to
the Indemnified Party within ten (10) Business Days of such receipt, and
subject to the rights of any insurer or other third party having potential
liability therefor, to defend the Third Party Claim at its own cost and expense
with counsel of its own selection, provided that:
6.7.1 the Indemnified Party shall at all times have the right to fully
participate in the defense at its own expense;
6.7.2 the Third Party Claim seeks only monetary damages and does not seek any
injunctive or other relief against the Indemnified Party;
6.7.3 the Indemnifying Party unconditionally acknowledges in writing its
obligation to indemnify and save and hold the Indemnified Party harmless
with respect to the Third Party Claim, if it is found that such
obligation exists;
6.7.4 legal counsel chosen by the Indemnifying Party is satisfactory to the
Indemnified Party, acting reasonably; and
6.7.5 the Indemnifying Party delivers a letter of credit, surety bond or
similar security in form and substance satisfactory to the Indemnified
Party, acting reasonably, in the amount of such Third Party Claim as
security for the payment of amounts payable by the Indemnifying Party to
the Indemnified Party pursuant hereto, inclusive of reasonably estimated
interest and costs. Amounts payable by the Indemnifying Party pursuant
to a Third Party Claim shall be paid in accordance with the terms of the
settlement or judgment, as applicable, but in any event prior to the
expiry of any delay for a judgment to become executory.
6.8 Settlement of a Third Party Claim. The Indemnifying Party shall not be
permitted to compromise and settle or to cause a compromise and
settlement of any Third Party Claim, without the prior written consent
of the Indemnified Party, unless:
6.8.1 the terms of the compromise and settlement require only the payment of<PAGE>
- 26 -
money and do not require the Indemnified Party to admit any wrongdoing
or take or refrain from taking any action;
6.8.2 the Indemnifying Party delivers to the Indemnified Party a letter of
credit, surety bond or similar security in form and substance
satisfactory to the Indemnified Party, acting reasonably, in the amount
of such compromise and settlement (including interest and costs, if any,
payable pursuant thereto) as security for the payment thereof;
6.8.3 the Indemnified Party receives, as part of the compromise and
settlement, a legally binding and enforceable unconditional satisfaction
and release, which is in form and substance satisfactory to the
Indemnified Party, acting reasonably; and
6.8.4 the Third Party Claim and any claim or liability of the Indemnified
Party with respect to such Third Party Claim is being fully satisfied
because of the compromise and settlement and the Indemnified Party is
being released from any and all obligations or liabilities it may have
with respect to the Third Party Claim.
6.9 Waiver of Right to Defend Third Party Claims. If the Indemnifying Party
fails:
6.9.1 within fifteen (15) Business Days from receipt of the notice of a Third
Party Claim to give notice of its intention to defend the Third Party
Claim in accordance with subsection 0 hereof, or
6.9.2 to comply at any time with any of subsections 0 through 0 (inclusively)
hereof,
then the Indemnifying Party shall be deemed to have waived its right to defend
the Third Party Claim and the Indemnified Party shall have the right (but not
the obligation) to undertake the defense of the Third Party Claim and
compromise and settle the Third Party Claim on behalf, for the account and at
the risk and expense of the Indemnifying Party.
6.10 Direct Claims. If the Indemnifying Party fails to respond in writing to
any written notice of a Direct Claim given by the Indemnified Party pursuant to
subsection 0 hereof, and fails to make an Indemnity Payment to the Indemnified
Party within ten (10) Business Days thereof, the Indemnifying Party shall be
deemed to have rejected such Direct Claim, in which event the Indemnified Party
shall be free to pursue such rights, recourses and remedies as may be available
to it.
6.11 Right of Offset. Without in any way limiting the terms of this Section 0,
each party shall have the right to offset against all amounts payable from time
to time by it to any other party, howsoever arising, including under this
Agreement, any amount owing by such other party pursuant to the indemnification
obligations contained in this Agreement to the party intending to offset.
6.12 Cumulative Rights. The rights, recourses and remedies provided to an
Indemnified Party under this Section 0 are cumulative with any other right,
recourse and remedy such Indemnified Party may have or may hereafter acquire
under Applicable Law, and any right, recourse or remedy of such Indemnified
Party may be asserted completely against the Indemnifying Party, without regard
to the rights, recourses or remedies the Indemnified Party may have against any
other Person.<PAGE>
- 27 -
6.13 Representations and Warranties of TMC. TMC hereby agrees and confirms
that the representations and warranties made by it in the TMC Put Right
Agreement shall apply in favour of each of the Investors as if made in this
Agreement. TMC hereby acknowledges and confirms that the Investors are relying
upon such representations and warranties in connection herewith and would not
have entered into this Agreement without such representations and warranties.
In addition, TMC hereby agrees and confirms that any Loss suffered or incurred,
directly or indirectly, by the Investors pursuant to the TMC Put Right
Agreement shall be considered as a Loss for the purposes hereof.
SECTION 7 - COVENANTS OF THE CORPORATION
7.1 Use of Proceeds. The Corporation hereby covenants and agrees that the
subscription price to be delivered by the Investors to the Corporation pursuant
to this Agreement shall be used solely in the manner set forth in the Business
Plan.
SECTION 8 - GENERAL PROVISIONS
8.1 Further Assurances. Each party upon the request of the others, shall do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged or
delivered all such further acts, deeds, documents, assignments, transfers,
conveyances, powers of attorney and assurances as may be reasonably necessary
or desirable to effect complete consummation of the transactions contemplated
by this Agreement.
8.2 Successors in Interest. This Agreement and the provisions hereof shall
enure to the benefit of and be binding upon the parties and their respective
successors and permitted assigns.
8.3 Arbitration. All disputes or controversies between the parties in respect
of the validity, interpretation or performance of the provisions of this
Agreement shall be definitively dealt with using the rules of conciliation and
arbitration of the International Chamber of Commerce, by one or more
arbitrators appointed in accordance with said rules, and to the exclusion of
any courts except for any provisional remedy including injunctive relief and
seizure before judgment which may be obtained from any court or tribunal, the
whole in accordance with said rules in force at the time of execution of this
Agreement. Any arbitration proceeding required pursuant to the terms thereof
shall take place in Montreal, Quebec and shall be conducted in both the English
and French language.
8.4 Expenses. All legal fees and expenses incurred by the Investors in
connection with this Agreement and all other agreements entered into among the
Investors and the Corporation on the date hereof shall be borne by the
Corporation.
8.5 Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions directions, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other party at the following addresses:<PAGE>
- 28 -
if to Sofinov: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
1981 McGill College Avenue, 7th Floor
Montreal, Quebec
H3A 3C7
Attention: The President
Telecopier: (514) 847-2628
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: Hubert Manseau
Telecopier: (514) 864-4220
if to the
Corporation: TOUCHTUNES DIGITAL JUKEBOX INC.
1 Place du Commerce
Suite 330
Nun's Island, Quebec
H3E 1A2
Attention: The President
Telecopier: (514) 762-6483
with a copy
in all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Claude Bergeron
Telecopier: (514) 925-9001
with a copy
in all cases to: GUY & GILBERT
770 Sherbrooke Street West
Suite 2300
Montreal, Quebec
H3A 1G1
Attention: Jacques Bourque
Telecopier: (514) 281-1059
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of<PAGE>
- 29 -
any notice sent by telecopier shall be forwarded to the other party by
registered mail, receipt return requested.
8.6 Time of the essence. Time shall be of the essence in this Agreement.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.
8.8 Public Statement. No public statement regarding the transactions
contemplated herein shall be made without the prior written consent of the
parties hereto, acting reasonably.
8.9 Language. The parties hereto state their express wish that this version
of this Agreement as well as all documentation contemplated hereby or
pertaining hereto or to be executed in connection herewith be also drawn up in
English; les parties expriment leur desir explicite a l'effet que cette version
de cette convention de meme que tous documents envisages par les presentes ou y
ayant trait ou qui seront signes relativement aux presentes soient aussi
rediges en anglais.
IN WITNESS WHEREOF, the parties have signed at the place and on the date
first hereinabove mentioned.
SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
Per: /s/Denis Dionne
---------------------
Denis Dionne
Per: /s/Pierre Pharand
---------------------
Pierre Pharand
SOCIETE INNOVATECH DU GRAND MONTREAL
Per: /s/Hubert Manseau
---------------------
Hubert Manseau
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/Tony Mastronardi
---------------------
Tony Mastronardi<PAGE>
- 30 -
INTERVENTION
THE UNDERSIGNED INTERVENES TO THESE PRESENTS and agrees to be bound by the
provisions of subsection 0 of this Agreement which are applicable to it.
Montreal, this 11th day of February, 1998
TECHNICAL MAINTENANCE CORPORATION
Per: /s/Tony Mastronardi
----------------------
Tony Mastronardi
INTERVENTION
EACH OF THE UNDERSIGNED HEREBY INTERVENES TO THESE PRESENTS, hereby
declares having taken cognizance of all of the provisions contained in this
Agreement, with which he declares himself to be entirely satisfied and
familiar, and hereby represents and warrants to each of the Investors,
solidarily with the Corporation, waiving the benefits of division and
discussion, that all of the representations and warranties of the Corporation
set forth in paragraphs 0, 0, 0, 0, 0, 0, 0, 0, 0, 0 and 0 are true, accurate
and complete.
Montreal, this 11th day of February, 1998
/s/Tony Mastronardi
- -----------------------
TONY MASTRONARDI
/s/Guy Nathan
- -----------------------
GUY NATHAN<PAGE>
- 1 -
DEBENTURE PUT RIGHT AGREEMENT MADE AND ENTERED INTO IN THE CITY AND DISTRICT OF
MONTREAL, ON THE 11TH DAY OF FEBRUARY, 1998
BY AND AMONG: SOCIETE INNOVATECH DU GRAND MONTREAL, a body
politic duly constituted according to An Act
respecting Societe Innovatech du Grand Montreal,
R.S.Q., ch. S-17.2, having its head office and
principal place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE FIRST PART
AND: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC., a
body politic, duly incorporated according to the
Companies Act (Quebec), having its head office and
principal place of business in the City of
Montreal, Province of Quebec,
(hereinafter referred to as "Sofinov")
PARTY OF THE SECOND PART
AND: TECHNICAL MAINTENANCE CORPORATION, a body politic
and corporate, duly incorporated according to the
laws of the State of Nevada, having its head
office and principal place of business in the City
of Las Vegas, State of Nevada,
(hereinafter referred to as the "Company")
PARTY OF THE THIRD PART
SECTION 1 - PREAMBLE
1.1 WHEREAS on the date hereof, Innovatech and Sofinov have subscribed for
debentures from Touchtunes Digital Jukebox Inc. ("Canco");
1.2 WHEREAS the Company has agreed to grant to each of Innovatech and
Sofinov the right to oblige the Company to purchase their debentures in
consideration for shares in the capital stock of the Company, on the terms and
conditions set out in this Agreement.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2 - DEFINITIONS
2.1 Definitions. In this Agreement:
2.1.1 "Additional Securities" has the meaning ascribed thereto in paragraph 0;
<PAGE>
- 2 -
2.1.2 "Agreement" means this Agreement and all instruments supplemental hereto
or in amendment or confirmation hereof; "herein", "hereof", "hereto",
"hereunder" and similar expressions mean and refer to this Agreement and
not to any particular Section, subsection or other subdivision;
"Section", "subsection" or other subdivision of this Agreement means and
refers to the specified Section, subsection or other subdivision of this
Agreement;
2.1.3 "Applicable Law" means any domestic or foreign federal, state,
provincial, county, local, municipal and regional statute, law,
ordinance, rule, regulation, restriction, regulatory policy or
guideline, by-law (zoning or otherwise), principles of common law, civil
law or equity, as well as Permits, Orders, decrees and rules (having the
force of law); and any judgments or injunctions issued, prolongated,
approved or entered thereunder;
2.1.4 "Assets" means all of the assets, rights and properties of the Company,
of whatsoever nature, kind or description, including movable or
immovable, real or personal, tangible or intangible;
2.1.5 "Balance Sheet Date" means September 30, 1997;
2.1.6 "Benefit Plans" means all pension, retirement, profit sharing, bonus,
savings, compensation, incentive, severance, stock option, stock
purchase, stock appreciation, group insurance, medical, dental,
hospitalization, disability, death and other fringe benefit plans,
programs, arrangements or practices covering any or all past or present
employees, shareholders, directors or officers of the Company;
2.1.7 "Books and Records" means all books of account, accounting records,
files, data and writings and other financial information; lists and
files of past, present and prospective clients and contacts, purchasing
and marketing records, personnel and payroll records; and all data
stored on computer support devices relating to any of the aforementioned
materials;
2.1.8 "Business Day" means any day, other than a Saturday or Sunday or a day
on which the principal commercial banks in the State of New York or the
Province of Quebec are not open for business during normal banking
hours;
2.1.9 "Canco" has the meaning ascribed thereto in subsection 0;
2.1.10 "Canco Shares" means the shares of Canco currently held by the
Purchasers;
2.1.11 "Charges" means any security interest, hypothec, prior claim, lien,
charge, pledge, encumbrance, mortgage, adverse claim or title retention
agreement of any nature or kind whatsoever;
2.1.12 "Closing" means the closing of any purchase of a Debenture in
consideration for the issuance of Preferred Shares pursuant to any
exercise of the Put Option;
2.1.13 "Closing Date" means the date of each Closing;<PAGE>
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2.1.14 "Common Shares" means shares of the Company's Class A voting common
stock having the rights, privileges and preferences as set forth in the
Amended and Restated Articles of Incorporation of the Company dated
March 19, 1997;
2.1.15 "Company SEC Documents" has the meaning ascribed thereto in paragraph 0;
2.1.16 "Contracts" means all agreements, obligations and undertakings of
whatsoever nature, kind or description;
2.1.17 "Debentures" has the meaning ascribed thereto in the Debenture
Subscription Agreement;
2.1.18 "Debenture Subscription Agreement" means the subscription agreement
dated the date hereof among the Purchasers and Canco setting forth the
rights and obligations of each of the Purchasers with respect to its
subscription for its respective Debentures;
2.1.19 "dollar", "dollars" and the sign "$" , unless otherwise indicated, each
mean lawful money of the United States of America;
2.1.20 "Encumbrance" means any encumbrance of any nature, kind or description
whatever and includes a security interest, mortgage, lien,
hypothecation, pledge, prior claim, assignment, charge, trust or deemed
trust (whether contractual, statutory or howsoever otherwise arising),
voting trust or pooling agreement with respect to securities, right of
first refusal, easement, servitude, restrictive covenant, encroachment
or other survey or title defect, any adverse claim or any other right,
option or claim of any Person of any nature, kind or description
whatever, or any covenant or other agreement, restriction or limitation
on transferability;
2.1.21 "Environment" means surface waters, ground water, drinking water supply,
land-surface, subsurface strata, air, both inside and outside of
buildings and structures, and plant and animal life;
2.1.22 "Environmental Law" means any Applicable Law relating to the pollution
or protection of the Environment;
2.1.23 "Equipment" means all furnishings, fixtures, machinery, equipment,
tooling, spare parts, leasehold improvements, supplies, computer
hardware, telephone systems, signs and all other tangible property,
together with all related accessories and maintenance equipment;
2.1.24 "Exchange Act" means the Securities Exchange Act of 1934 (United
States), as amended from time to time;
2.1.25 "Financial Statements" has the meaning ascribed thereto in paragraph 0
hereof;
2.1.26 "Future Debentures" has the meaning ascribed thereto in paragraph 0;
2.1.27 "Generally Accepted Accounting Principles" means generally accepted
accounting principles in the United States of America applicable as at
the date on which any calculation or determination is required to be
made in accordance with generally accepted accounting principles,
consistently applied since the incorporation of the Company, including<PAGE>
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those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants, or any successor institute, and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as is approved by a significant
segment of the accounting profession in the United States of America;
2.1.28 "Governmental Body" means (i) any domestic or foreign national, federal,
provincial, state, county, local, municipal or other government or body,
(ii) any multinational, multilateral or international body, (iii) any
subdivision, agent, commission, board, instrumentality or authority of
any of the foregoing governments or bodies, (iv) any quasi-governmental
or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the foregoing governments
or bodies, or (v) any domestic, foreign, international, multilateral or
multinational judicial, quasi-judicial, arbitration or administrative
court, tribunal, commission, board or panel;
2.1.29 "Intellectual Property Rights" means, collectively:
2.1.29.1 all intellectual property rights of whatsoever nature, kind
or description including:
2.1.29.1.1 all trade marks, service marks, trade mark and service mark
registrations, trade mark and service mark applications,
rights under registered user agreements, trade names and
other trade mark and service mark rights,
2.1.29.1.2 all copyrights, industrial designs and registrations thereof
and applications therefor,
2.1.29.1.3 all inventions, patents, patent applications and patent
rights (including any patents issuing on such applications or
rights),
2.1.29.1.4 all licenses, sub-licenses and franchises,
2.1.29.1.5 all trade secrets and proprietary and confidential
information,
2.1.29.1.6 all computer software and rights related thereto,
2.1.29.1.7 all renewals, modifications, developments and extensions of
any of the items listed in subsections 0 through 0
(inclusively) hereof; and
2.1.29.2 all patterns, plans, designs, research data, other
proprietary know-how, processes, drawings, technology, inventions,
formulae, specifications, performance data, quality control information,
unpatented blue prints, flow sheets, equipment and parts lists,
instructions, manuals, records and procedures, and all licenses,
agreements and other contracts and commitments relating to any of the
foregoing;
2.1.30 "Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:<PAGE>
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2.1.30.1 such individual is actually aware of such fact or other
matter, or
2.1.30.2 a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving,
or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or
at any time had, Knowledge of such fact or other matter;
2.1.31 "Notice of Exercise" has the meaning ascribed thereto in subsection 0;
2.1.32 "Order" means any order (draft or otherwise), judgment, injunction,
decree, award or writ of any Governmental Body;
2.1.33 "ordinary course of business" means an action taken by a Person that is:
2.1.33.1 consistent with the past practices of such Person and is taken
in the ordinary course of the normal day-to-day operations of such
Person,
2.1.33.2 not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar
authority) and is not required to be specifically authorized by the
parent company (if any) of such Person, and
2.1.33.3 similar in nature and magnitude to actions customarily taken,
without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course
of the normal day-to-day operations of other Persons that are in the
same line of business as such Person;
2.1.34 "Permit" means any license, permit, certificate, authorization,
approval, right, privilege, consent, concession or franchise issued,
granted, conferred or otherwise created by a Governmental Body;
2.1.35 "Person" is to be broadly interpreted and includes an individual, body
corporate, legal person, moral person, partnership, joint venture,
trust, association, incorporated organization, governmental authority or
any other entity recognized by law;
2.1.36 "Preferred Shares" means the shares of Series A Preferred Stock as
described in the Amended and Restated Articles of Incorporation of the
Company dated March 19, 1997;
2.1.37 "Premises" means the real property, together with all buildings,
structures, fixtures and improvements thereon, covered by the Real
Property Leases;
2.1.38 "Proportionate Share" means, the amount of the Additional Securities
determined by multiplying the number of Common Shares offered by a
fraction, the numerator of which is the number of Common Shares held by<PAGE>
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the particular Purchaser to whom reference is made and the denominator
of which is the total number of Common Shares held by both Purchasers,
it being understood that for the purposes hereof, each Purchaser shall
be deemed to hold that number of Common Shares as would be issuable to
such Purchaser upon the conversion into Common Shares of (i) all
Preferred Shares held by such Purchaser and (ii) all Preferred Shares
issuable to such Purchaser upon the full exercise of (a) all of such
Purchaser's exchange rights under the Stock Exchange Agreement and (b)
all of such Purchaser's Put Rights;
2.1.39 "Purchasers" means Innovatech and Sofinov and all transferees of Canco
Shares held by Innovatech and Sofinov (other than the Company) in
accordance with the shareholders agreement entered into on March 24,
1997 among Canco and the shareholders of Canco, collectively, and
"Purchaser" shall mean either of them;
2.1.40 "Put Rate" means, at any time, the number of Preferred Shares that each
Purchaser shall be entitled to receive for its respective Debentures
from time to time pursuant to subsection 0;
2.1.41 "Put Right" has the meaning ascribed thereto in subsection 0;
2.1.42 "Real Property Leases" means (i) the existing tenancy agreement between
the Company, as tenant, and Nevada Corporate Services, as landlord, (ii)
the existing month-to-month tenancy agreement in respect of the premises
located in Willow Grove, Pennsylvania and (iii) the existing tenancy
agreement in respect of the premises located in Buffalo Grove, Illinois,
covering, collectively, the Premises, a copy of each of which is annexed
hereto as Schedule 0;
2.1.43 "Registrable Shares" means all shares of the Company's Class A voting
common stock issuable to the Purchasers upon the conversion of (i) any
Preferred Shares currently held by the Purchasers; (ii) any Preferred
Shares issuable to the Purchasers pursuant to the exercise of their
exchange rights under the Stock Exchange Agreement and (iii) any
Preferred Shares issuable to the Purchasers pursuant to the exercise of
their Put Rights;
2.1.44 "Registration Statement" means the registration statement required to be
filed pursuant to paragraph 0 hereinbelow, and includes any preliminary
prospectus, final prospectus, exhibit, supplement or amendment included
in or relating to such registration statement;
2.1.45 "SEC" means the United States Securities and Exchange Commission;
2.1.46 "SEC Documents" means the documents filed by the Company with the SEC at
any time;
2.1.47 "Securities Act" means the Securities Act of 1933 (United States), as
amended from time to time;
2.1.48 "Shareholders Agreement" means the amended and restated shareholders
agreement entered into on the date hereof among the parties hereto and
Techno Expres S.A. setting forth the terms and conditions which will
govern the relationship of the shareholders of the Company;
2.1.49 "Stock Exchange Agreement" means the stock exchange agreement dated<PAGE>
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March 21, 1997 among the Purchasers and the Company, providing inter
alia for the exchange by the Purchasers of the Canco Shares held by them
for Preferred Shares;
2.1.50 "Strike Price" has the meaning ascribed thereto in paragraph 0;
2.1.51 "Tax Returns" means all reports, returns or other information, or any
amendment thereof, required to be filed in connection with any Taxes;
and
2.1.52 "Taxes" means all taxes, foreign or domestic, whether federal, state,
provincial, county, local, municipal or otherwise (including income,
profit, corporation, business, excise, sales, goods and services, value-
added, franchise, withholding, capital, transfer, stamp, unemployment
compensation, payroll, property, and duties), whether or not measured in
whole or in part by net income, and including interest and penalties
with respect thereto;
2.1.53 "Third-Party Offer" has the meaning ascribed thereto in paragraph 0.
SECTION 3 - AUTHORIZATION AND PUT RIGHT
3.1 Authorization. Prior to the date hereof, the Company has authorized the
issuance, in accordance with the terms hereof, of up to 5,000,000 Preferred
Shares issuable upon the exercise of the Put Option and 5,000,000 Common Shares
issuable upon the conversion of such Preferred Shares.
3.2 Put Right. Subject to the terms and conditions hereof, each Purchaser
shall have the right (the "Put Right") to oblige the Company to purchase, at
any time and from time to time, all or a portion of the principal amount then
outstanding under any of its respective Debentures in consideration for
Preferred Shares at the Put Rate.
3.3 Put Rate. Subject to the provisions of paragraph 0 below, the Company
shall issue to each Purchaser upon delivery by such Purchaser of any of its
Debentures, in consideration therefor, that number of Preferred Shares as is
equal to the number of shares obtained when dividing (i) the principal amount
then outstanding under such Debenture(s) by (ii) $2.00.
3.4 Deemed Issuance Date of Preferred Shares. Upon the conversion into
Common Shares, in accordance with the Amended and Restated Articles of
Incorporation of the Company dated March 19, 1997, of any Preferred Shares
issued upon the exercise of the Put Right pursuant to subsection 0, the number
of Common Shares to be issued upon the conversion of such Preferred Shares
shall be adjusted to take into account changes to and dilutive events in
respect of the Common Shares as contemplated in the Amended and Restated
Articles of Incorporation of the Company dated March 19, 1997 occurring from
the date hereof until the date such Preferred Shares were issued.
SECTION 4 - EXERCISE OF PUT RIGHT
4.1 Closing. Each Closing shall be held at the offices of Canco in
Montreal, at 10:00 a.m., local time, ten (10) Business Days after receipt by
the Company of a properly completed and executed notice of exercise in the form
attached hereto as Schedule "0" (the "Notice of Exercise") on behalf of either
Purchaser or at such other time and place upon which the Company and such
Purchaser shall mutually agree.<PAGE>
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4.2 Delivery. At each Closing, each Purchaser who has given a Notice of
Exercise shall surrender its Debenture(s) contemplated therein duly endorsed.
Thereupon, the Company shall issue and deliver at such office to such Purchaser
a certificate or certificates for the number of Preferred Shares to which such
Purchaser is entitled pursuant to subsection 0. Such exercise of the Put Right
shall be deemed to have been made at the close of business on the date of
receipt by the Company of the Notice of Exercise and the Purchaser entitled to
receive Preferred Shares issuable upon such exercise of the Put Right shall be
treated for all purposes as the record-holder of such Preferred Shares on the
date of receipt by the Company of the Notice of Exercise.
4.3 Covenants of the Company upon Closing. The Company hereby covenants and
agrees to cause all of the conditions hereinbelow set forth to be satisfied as
of the Closing Date, all of which conditions are agreed to be material and are
inserted for the exclusive benefit of each Purchaser, and may be waived in
whole or in part by such Purchaser, provided that any waiver to be effective
must be in writing:
4.3.1 the representations and warranties of the Company contained in this
Agreement shall be true and correct in all respects as if made at and as
of the date of such Closing;
4.3.2 the Company shall have complied with all its covenants, obligations and
agreements contained in this Agreement;
4.3.3 the Company shall have furnished to such Purchaser an opinion addressed
to it and dated the date of such Closing from United States counsel to
the Company, covering substantially the same matters as were covered in
the opinion furnished by such counsel to the Purchasers on the date
hereof;
4.3.4 the Company shall have furnished to such Purchaser an officer's
certificate certifying that the representations and warranties of the
Company contained in this Agreement are true and correct in all respects
as if made at and as of the date of such Closing and confirming that the
Company has complied with all its covenants, obligations and agreements
contained in this Agreement; and
4.3.5 the Company shall have delivered to such Purchaser all consents and
approvals of all Persons required in order to consummate the
transactions contemplated by the exercise of the Put Right set forth in
subsection 0.
4.4 Failure to Satisfy Conditions Precedent to Closing. In the event that
any of the conditions precedent set forth in subsection 0 hereof shall not have
been fulfilled and/or performed as of the Closing Date, each Purchaser may, at
its option, either (i) advise the Company that it shall not proceed with the
exercise of its Put Right as contemplated in the Notice of Exercise; or
(ii) proceed with the exercise of its Put Right, in either case without
prejudice to such Purchaser's rights, recourses and remedies.
SECTION 5 - REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
AND COVENANTS OF THE COMPANY
5.1 Representations and Warranties. The Company hereby represents and
warrants to each of the Purchasers, as of the date hereof, the following:<PAGE>
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5.1.1 Public Filings. The Company has delivered to the Purchasers accurate
and complete copies (excluding copies of exhibits) of each report,
registration statement (on a form other than Form S-8) and definitive
proxy statement filed by the Company with the SEC prior to the date
hereof (the "Company SEC Documents"). As of the time it was filed with
the SEC (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing): (i) each of the
Company SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act, as
the case may be; and (ii) none of the Company SEC Documents contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
5.1.2 Financial Statements. The financial statements contained in the Company
SEC Documents (the "Financial Statements"): (i) complied as to form in
all material respects with the published rules and regulations of the
SEC applicable thereto; (ii) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods covered, except as may be indicated in the notes to such
financial statements and (in the case of unaudited statements) as
permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to normal and
recurring year-end audit adjustments (which will not, individually or in
the aggregate, be material in magnitude); and (iii) fairly present the
financial position of the Company as of the respective dates thereof and
the results of operations of the Company for the periods covered
thereby.
5.1.3 Undisclosed Liabilities of the Company. The Company has no liabilities
(whether accrued, absolute, contingent or otherwise) of any kind except
(i) liabilities disclosed or provided for in the Financial Statements,
(ii) liabilities disclosed in the minutes of the meetings of the board
of directors of the Company held since March 21, 1997, which minutes are
attached as Schedule 0 hereto, and (iii) liabilities incurred in the
ordinary course of business since the Balance Sheet Date which are not,
in the aggregate, material and adverse to its business, or to its
financial condition or results of operations and do not constitute a
violation, contravention or breach of any covenant, agreement or
obligation contained in this Agreement or constitute a breach of any
representation or warranty made in or pursuant to this Agreement;
5.1.4 Subsequent Activities of the Company. Since the Balance Sheet Date
there has not occurred any change in the condition, financial or
otherwise, or prospects of the Company other than changes occurring in
the ordinary course of business which changes, individually or in the
aggregate, have not materially adversely affected its business,
financial condition, results of operations or prospects; without
limiting the generality of the foregoing, since the Balance Sheet Date,
the Company has not, directly or indirectly:
5.1.4.1 declared or paid any dividend on its capital stock or
redeemed, purchased or otherwise acquired any shares of its capital
stock, or otherwise reduced its paid up capital or altered its capital
stock,<PAGE>
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5.1.4.2 entered into any Contract outside the ordinary course of
business,
5.1.4.3 increased the salary, benefits, bonuses or other compensation
of its officers, directors or employees or adopted any Benefit Plan,
save that: (i) the compensation of each of Mr. Tony Mastronardi and Mr.
Guy Nathan is presently being reviewed and (ii) the Company intends to
put into a place a stock option plan that will benefit certain of its
employees,
5.1.4.4 sold, leased, mortgaged, hypothecated, pledged or otherwise
subjected any of its Assets to any Encumbrance,
5.1.4.5 settled any liability, claim, dispute, proceedings, suit or
appeal pending against it or any of its Assets,
5.1.4.6 except as disclosed in Schedule 0 annexed hereto or in the
Financial Statements, suffered any extraordinary loss, or loss from
operations,
5.1.4.7 purchased or leased, or made any commitment to purchase or
lease, any Assets, except for purchases of Equipment and supplies in the
ordinary course of business,
5.1.4.8 made any change in personnel practices, except in the ordinary
course of business,
5.1.4.9 cancelled or released any debts or claims,
5.1.4.10 made any change in its accounting principles, policies or
practices as heretofore applied, including the basis upon which its
assets and liabilities are recorded on its books, its earnings are
ascertained or the methods or rates of depreciation or amortization
employed,
5.1.4.11 violated any provision of any Contract to which it is a party
or by which it or any of its Assets may be bound, or
5.1.4.12 agreed to do any of the things described in subsections 0
through 0, inclusively, hereof;
5.1.5 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Nevada. The Company has full power and
authority to own and operate its properties and assets, and to carry on
its business as presently conducted and as presently proposed to be
conducted.
5.1.6 Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement and to carry
out and perform its obligations under the terms of this Agreement.
Without limiting the generality of the foregoing, all corporate action
on the part of the Company, its directors and shareholders necessary (i)
for the authorization, execution, delivery and performance of this
Agreement by the Company and (ii) for the authorization, issuance and
delivery of the Preferred Shares pursuant to this Agreement and the<PAGE>
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Common Shares issuable upon the conversion of such Preferred Shares.
5.1.7 Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 0 hereof, the offer,
sale and issuance of the Preferred Shares pursuant to this Agreement and
the Common Shares issuable upon the conversion of such Preferred Shares
is or will be exempt from the registration requirements of the
Securities Act and all state "blue sky" laws or has been or will have
been registered or qualified under the registration, permit or
qualification requirements of all applicable federal and state
securities laws.
5.1.8 Binding Agreement. This Agreement, when executed and delivered by the
Company, shall constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms.
5.1.9 Issuance of Preferred Shares and Common Shares. The issuance of
Preferred Shares pursuant to this Agreement and the issuance of Common
Shares issuable upon the conversion of such Preferred Shares is and will
not be subject to any preemptive rights or rights of first refusal. When
issued in compliance with the provisions of this Agreement and the
Amended and Restated Articles of Incorporation of the Company dated
March 19, 1997, as amended, the Preferred Shares and Common Shares
issuable upon the conversion of such Preferred Shares will be validly
issued, fully paid and non-assessable, and will be free of all Charges
and restrictions on transfer other than restrictions on transfer under
state and/or federal securities laws at the time a transfer by a
Purchaser is proposed.
5.1.10 Consents. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body or any
Person is required for the consummation by the Company of the
transactions contemplated by this Agreement, except such consents,
approvals, authorizations, orders, registrations or qualifications which
have been obtained by the Company prior to the date hereof;
5.1.11 Compliance with Laws. The Company is not in violation of any law,
ordinance, administrative or governmental rule or regulation or court
decree applicable to it, and is not in violation with any term or
condition of, and has not failed to obtain, any license, permit,
franchise or other administrative or governmental authorization
necessary to the ownership of its property or to the conduct of its
business, which violation, non-compliance or failure to obtain,
individually or in the aggregate, would adversely affect the
consummation by the Company of the transactions contemplated by this
Agreement;
5.1.12 Compliance with Other Instruments. The execution and delivery of this
Agreement and the fulfilment of the terms hereof do not result in a
breach of, do not conflict with, and do not constitute a default under,
whether after notice or lapse of time, (i) any statute, rule or
regulation applicable to the Company; (ii) any court judgment, decree or
order binding the Company; or (iii) the constating documents and by-laws
of the Company.
5.1.13 Reservation of Stock. The Company has reserved up to 5,000,000
Preferred Shares and 5,000,000 Common Shares issuable upon the<PAGE>
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conversion of the Preferred Shares for issuance hereunder. The number
of Preferred Shares and Common Shares to be reserved for issuance shall
be adjusted in accordance with the Amended and Restated Articles of
Incorporation of the Company dated March 19, 1997.
5.1.14 Brokers or Finders. The Purchasers have not incurred and will not
incur, directly or indirectly, as a result of any action taken by the
Company any liability for any brokerage fees, finder's fees, or agents'
commissions or other similar charges in connection with this Agreement.
5.1.15 Constating and Corporate Documents. Schedule 0 annexed hereto contains
a true and complete copy of the constituant documents of the Company
including the authorized capital stock of the Company, which have not
been amended other than as reflected in said Schedule, and there is no
application pending for the amendment of any of same. The minute books
and corporate records of the Company, which have been made available to
the Purchasers' solicitors for review prior to the date hereof, have
been maintained in accordance with the Applicable Law and contain true
and complete records of all the by-laws of the Company and all meetings
and consents in lieu of meetings of the board of directors of the
Company and its shareholders, and accurately and completely reflect all
matters referred to in such minutes and consents. All resolutions
contained in such records have been duly passed and all such meetings
have been duly called and held. The share certificate books and the
registers of shareholders, directors and transfers of the Company are
complete and accurate;
5.1.16 Issued Shares. The only issued and outstanding shares in the capital
stock of the Company (and rights, options and warrants to acquire same)
are as set out in Schedule 0 annexed hereto. All such shares are
validly issued, fully paid and non-assessable, there are no other
outstanding shares, warrants, rights, options, securities convertible
into shares of the capital stock of the Company or any other agreements
or rights to purchase or subscribe for any shares of the capital stock
of the Company or convert any obligation or shares into any shares of
the capital stock of the Company and the Company has not agreed to issue
or sell any shares of its capital stock or any securities of any kind
except as set out in this Agreement, the Debenture Subscription
Agreement and the Stock Exchange Agreement;
5.1.17 Subsidiaries. Except for its 50% equity interest in Canco, the Company
has no subsidiary nor owns any equity or other interest in any
corporation, partnership, joint venture or other entity;
5.1.18 Title to Assets. The Company is the legal and beneficial owner of, has
good and marketable title to and possesses all its Assets free and clear
of any Encumbrances;
5.1.19 Equipment. The Company owns or leases all Equipment necessary to
conduct its business as presently conducted;
5.1.20 Assets and Condition of Assets. All the Assets owned or used by the
Company are located at the Premises and, as at March 1, 1998, shall be
located at 3 Place du Commerce, 4th Floor, Nun's Island, Quebec. All of
the Assets of the Company (i) are in good working order and operating
condition and have been regularly serviced and properly maintained and
(ii) are adequate and sufficient for the continuing conduct of the<PAGE>
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business of the Company as now conducted. There are no outstanding work
orders relating to any of the Assets of the Company which have been
received from or required by any Governmental Body;
5.1.21 Litigation. Except as set out in the demand letters from (i) Julius Di
Staulo claiming unpaid commissions and (ii) Paul Vigneault claiming
shares from Techno Expres S.A, copies of each of which are attached as
Schedule 0 hereto, there is no existing or threatened claim, demand,
suit, action, cause of action, dispute, proceeding, litigation,
investigation, grievance, arbitration, governmental proceeding or other
proceeding, including appeals and applications for review, in progress
against, by, affecting or relating to the Company and/or any of its
Assets. There is no state of facts which could provide a valid basis
for any of the foregoing. There is not at present outstanding against,
affecting or relating to the Company and/or its Assets any Order which
adversely affects the Company in any way or that in any way relates to
this Agreement or the transactions contemplated hereby;
5.1.22 Insurance. The Company has no policies of insurance in place;
5.1.23 Real Property Lease and Premises The Real
Property Lease, is the only lease, offer to lease, sublease, license or
other agreement under which the Company uses or occupies or has the
right to use or occupy, now or in the future, any immovable or real
property or any buildings, structures, fixtures or improvements thereon;
5.1.24 Place of Business. The Company carries on business at the Premises and
at the residence of Mr. Dan McAllister, regional sales manager of the
Company, in Lawrenceville, Georgia, and has no other place of business;
5.1.25 Environmental Matters.
Without limiting the generality of subsection 0 or 0 hereof:
5.1.25.1 the operations of, and the use of the Premises and Equipment
by the Company are now and have been in compliance, in all material
respects, with Environmental Law, and the operations of and use of the
Premises by any predecessor in interest of the Company have, to the
Knowledge of the Company, been in compliance, in all material respects,
with Environmental Law, and
5.1.25.2 the Company does not require any Permits under Environmental
Law for the conduct of its operations. The Company has not received any
notice requiring the issuance of any Permits;
5.1.26 Books and Records. The Books and Records of the Company are true and
complete in all material respects;
5.1.27 Employees and Labour Relations. The Company has no employees, nor is
the Company a party to any employment agreements other than the
employment agreements with each of Mr. Tony Mastronardi and Mr. Guy
Nathan, both of which are presently under review;
5.1.28 Benefit Plans. The Company does not maintain or contribute to any
Benefit Plans other than the Benefit Plan attached as Schedule 0 hereto;
5.1.29 Contracts. Schedule 0 annexed hereto contains a true and complete list<PAGE>
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of all Contracts entered into since March 21, 1997 to which the Company
is a party or by which it or its Assets may be bound, such Contracts
together with the Contracts listed on Schedule 4.2.22 of the
Subscription Agreement dated March 21, 1997 among the parties hereto
constitute a true and complete list of all Contracts to which the
Corporation is a party or by which it or its Assets may be bound, and
none of them will be affected by the transactions contemplated hereby.
The Company has delivered to the Purchasers a true and complete copy of
each of the Contracts listed in Schedule 0 annexed hereto. The Company
is not in violation of or in default with respect to and no event has
occurred which, with lapse of time or action by a third party, or both,
could result in violation of or a default with respect to any of the
aforesaid Contracts. Each of the aforesaid Contracts is in full force
and effect and valid, binding and enforceable in accordance with its
terms and, to the Knowledge of the Company, all parties to the such
Contracts (other than the Company) are in compliance with their
obligations thereunder. Neither of the Company and, to the Knowledge of
the Company, none of the parties to the aforesaid Contracts (other than
the Company) intends to terminate its obligations under any of such
Contracts;
5.1.30 Intellectual Property.
5.1.30.1 Schedule 0 annexed hereto contains a true and complete list of
all Intellectual Property Rights used by the Company in the conduct of
its business, none of which has been opposed or held unenforceable and
each of which is in full force and effect. Except as set forth in
Schedule 0 annexed hereto, the Company is the absolute owner and has the
sole and exclusive right to use the Intellectual Property Rights listed
beside its name on Schedule 0 annexed hereto, without making any payment
to any Person or granting rights to any Person in exchange. Unless
otherwise indicated in Schedule 0, the Company owns the entire right,
title and interest in and to the Intellectual Property Rights
(including, without limitation, the right to use and license the same)
which are necessary for the research, development, manufacture, use,
sale, lease, license and service of products of the Company's business
and the equipment used to manufacture the Company's products. The
Company's patents and trademarks, as listed and explained in Schedule 0,
have been duly registered with, filed in or issued by, as the case may
be, such Governmental Body as is indicated in Schedule 0 and, except as
otherwise set forth on Schedule 0, such registrations, filing and
issuances remain in full force and effect and such patents and
trademarks cover the technology and equipment used to manufacture the
Products. The Intellectual Property Rights of the Company are
sufficient for the lawful conduct, ownership and operation of the
Company's business and enable the manufacturing of its products and
there are no Intellectual Property Rights of any Person which impair or
prevent the development, manufacture, use, sale, lease, license and
service of products, now existing or under development by the Company.
The Company has the unabridged right to bring actions for the
infringement of all of its Intellectual Property Rights,
5.1.30.2 the execution, delivery and performance of the Agreement and
the consummation of the transactions contemplated thereby will not
breach, violate or conflict with any instrument or agreement governing
any of the Company's Intellectual Property Rights, and will not cause
the forfeiture or termination or give rise to a right of forfeiture or
termination of the Company's Intellectual Property Rights or in any way<PAGE>
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impair the right of the Company to use, sell, license or dispose of or
to bring any action for the infringement of any of the Company's
Intellectual Property Rights or portion thereof,
5.1.30.3 except as disclosed in Schedule 0 annexed hereto, none of the
Intellectual Property Rights have been derived, in part or in whole,
from the Intellectual Property Rights of any other Person. All employees
of, and consultants to, the Company have entered into agreements with
the Company pursuant to which all Intellectual Property Rights developed
by them in the course of their relationship with the Company belong
solely, without any restrictions or obligations whatsoever, to the
Company, and all such agreements are included in the Contracts. The
Company has taken all reasonable and practical steps (including, without
limitation, entering into confidentiality and non-disclosure agreements
with all employees of the Company or consultants, third party developers
or any other Persons with access to or knowledge of the Company's
Intellectual Property Rights) sufficient to safeguard and maintain the
secrecy and confidentiality of, and its proprietary rights in, all of
the Company's Intellectual Property Rights,
5.1.30.4 none of the development, manufacture, marketing, license, sale
or use of any product or service currently licensed or sold by the
Company or currently under development or proposed to be developed by
the Company violates or will violate any Contract with any Person or
infringe or will infringe any Intellectual Property Rights of any
Person. There are no pending or threatened proceedings, litigation or
other adverse claims affecting, or with respect to, any part of the
Intellectual Property Rights of the Company and, except as set forth in
Schedule 0, to the Knowledge of the Company, no Person is infringing any
Intellectual Property Right of the Company,
5.1.30.5 except for the license granted to Canco pursuant to that
certain Research License Agreement dated March 18, 1997 between the
Company and Canco, no license or sub-license has been granted or other
Contract has been entered into with respect to any of the Intellectual
Property Rights of the Company. The Company has not conducted business
under any name other than its current corporate name;
5.1.31 Related Transactions. Except as set forth in Schedule 0 annexed hereto
and except for current unpaid salaries, the Company has no indebtedness
to any of its shareholders, directors, officers or employees, past or
present, or to any Person not dealing at arm's-length with any of such
Persons; and no shareholder, director, officer or employee, past or
present, of the Company or any Person not dealing at arm's-length with
any of such Persons has any indebtedness to the Company;
5.1.32 Compliance with Applicable Law. The Company has conducted and is
conducting its business in compliance with Applicable Law, and the
Company is not in breach of Applicable Law, including any securities
law;
5.1.33 Qualifications. The Company has not been required to suspend operations
of its business or been liable for a fine or penalty as a result of the
operation of its business. The Company has all Permits necessary for the
conduct of its business and such Permits are validly issued, in full
force and effect and the Company is in compliance therewith, and none of
such Permits will be affected by the transactions contemplated hereby;<PAGE>
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5.1.34 Absence of Guarantees. Without limiting the generality of subsection 0
hereof and except for commitments disclosed in the Financial Statements
and in Schedule 0 annexed hereto, the Company is not a party to or bound
by any comfort letter, understanding or agreement of guarantee,
indemnification, assumption or endorsement or any like commitment with
respect to the liabilities (whether accrued, absolute, contingent or
otherwise) or obligations of any Person;
5.1.35 Tax Matters.
5.1.35.1 Tax Returns required by Applicable Law to be filed by, or with
respect to the activities of the Company with applicable Governmental
Bodies have been properly and timely filed with the appropriate
Governmental Bodies and all such Tax Returns are true and complete and
all Taxes shown to be due on such Tax Returns have been paid,
5.1.35.2 with respect to the Company: i) there are no unpaid Taxes now
due and no deficiency for Taxes has been assessed by any applicable
Governmental Body, ii) no audit of any Tax Return is in progress or
pending or threatened, and iii) no waiver of any statute of limitations
has been given or is in effect with respect to the assessment of any
Taxes,
5.1.35.3 all Taxes shown on all Tax Returns for which the Company is
liable have been paid or accrued and adequately reserved on its Books
and Records and financial statements (including the Financial
Statements) of the Company. The Company is not taxed as an "S
corporation" (within the meaning of Section 1361(a) of the United States
Internal Revenue Code of 1986, as amended),
5.1.35.4 none of the Tax Returns of the Company have ever been examined
or audited by any taxing Governmental Body at any time,
5.1.35.5 the Company has never entered into any closing or similar
agreement with any taxing Governmental Body,
5.1.35.6 in each jurisdiction in which the Company is paying or has
paid sales tax, sales tax audits have been conducted and completed
through the years shown on Schedule 0 annexed thereto,
5.1.35.7 copies of all Tax Returns, deficiencies, assessments and
notices from all taxing Governmental Bodies have been delivered to the
Purchasers,
5.1.35.8 the Company was not a member of an entity required to file a
federal partnership Tax Return that is expected to have taxable income
for any taxable period beginning prior to the date hereof that is in
excess of cash distributions of such income to be made after the date
hereof,
5.1.35.9 the Company has not adopted a plan of complete liquidation and
no consent has been filed on behalf of any of them pursuant to
Section 341(f) of the United States Internal Revenue Code of 1986, as
amended, or any predecessor provision,
5.1.35.10 the Company has not taken any action not in the ordinary
course of business that would have the effect of deferring any Tax<PAGE>
- 17 -
liability from any taxable period ending prior to the date hereof,
5.1.35.11 without limiting the generality of the foregoing, the Company
has collected all sales, goods and services and use taxes required to be
collected and has remitted same on a timely basis to the appropriate
Governmental Body, or has been furnished properly completed exemption
certificates for all exempt transactions. The Company has in its
possession all Books and Records, including supporting documents,
required by Applicable Law regarding the collection and payment of all
sales, goods and services and use taxes required to be collected and
paid over and regarding all exempt transactions for all periods open
under the applicable statutes of limitations as of the date hereof, and
the Company has maintained all such Books and Records, including
supporting documents, in the manner required by applicable sales, goods
and services and use tax statutes and regulations,
5.1.35.12 the Company has withheld from each payment made to each of its
past and present shareholders, agents, employees, officers and directors
all deductions required to be made therefrom and has paid same to the
proper Governmental Body;
5.1.36 Accounts Receivable and Payable. Schedule 0 annexed hereto sets forth a
true and complete (i) trade accounts receivable listing of the Company
as of December 31, 1997 and (ii) accounts payable listing of the Company
as of December 31, 1997. The accounts receivable of the Company
reflected on the Financial Statements and those created after the
Balance Sheet Date, are genuine and bona fide receivables which arose in
the ordinary course of business, and net of reserves (which reserves are
adequate and determined in accordance with Generally Accepted Accounting
Principles, consistently applied) are collectible in full when due
without any discount, set-off or counterclaim;
5.1.37 Accounts Receivable of the Company. There exist no accounts receivable
in respect of any fees described by Rule 12b-1 promulgated under the
United States Investment Company Act of 1940, as amended;
5.1.38 No Broker. Without limiting the generality of subsection 0 hereof, none
of the directors of the Company or the Company has employed, nor is any
of them subject to any claim of, any broker, finder, consultant or other
intermediary in connection with any of the transactions contemplated by
this Agreement;
5.1.39 Accuracy of Information.
5.1.39.1 The Company has made or caused to be made reasonable inquiry
with respect to each covenant, agreement, obligation, representation and
warranty of the Company contained in this Agreement and any other
document or certificate referred to herein or furnished by the Company
to the Purchasers pursuant thereto, and none of the aforesaid covenants,
agreements, obligations, representations, warranties or documents or
certificates contains any untrue statement of a material fact or omits
to state a material fact necessary to make such covenant, agreement,
obligation, representation, warranty or other document or certificate
not misleading, and
5.1.39.2 to its Knowledge, there is no fact, condition or circumstance,
including without limitation, in connection with the Company's
Intellectual Property Rights and the equipment and the products<PAGE>
- 18 -
developed and/or manufactured by the Company, which (i) materially
adversely or in the future may (so far as the Company can now reasonably
foresee) materially adversely affect the business, operations,
properties, prospects, or condition of the Company or the ability of the
Company to perform its covenants, agreements and obligations under this
Agreement or (ii) relates to the business of the Company and might
reasonably be expected to deter a Purchaser from entering into this
Agreement or any other agreements entered into between the Purchasers
and the Company on the date hereof, save as disclosed in the Company's
prospectus dated December 15, 1997, a copy of which has been previously
delivered to each of the Purchasers.
5.2 Covenants of the Company. The Company hereby covenants as follows:
5.2.1 SEC Documents. As soon as practicable after the filing of any SEC
Documents, and in any event within twenty (20) days thereafter, the
Company will furnish each of the Purchasers with such SEC Documents;
5.2.2 Reservation of Stock. So long as any amount of principal remains
outstanding under any of the Debentures, the Company will at all times
reserve and keep available, solely for issuance and delivery upon the
exercise of the Put Right, all Preferred Shares issuable from time to
time upon such exercise and all Common Shares issuable upon the
conversion of such Preferred Shares;
5.2.3 Listing of Shares. Promptly after the issuance of the Common Shares
issuable upon the conversion of any of the Preferred Shares issuable to
any of the Purchasers pursuant to this Agreement, if the Company's
securities are publicly traded, the Company shall take all necessary
action to list such Common Shares, to the extent not already listed, on
the securities exchange or over-the-counter market where the Company's
securities are listed;
5.2.4 Regulation S. At the request of either of the Purchasers, the Company
shall use its best efforts to ensure the application of Regulation S
under the Securities Act to the issuance of the Common Shares issuable
upon the conversion of the Preferred Shares issued to such Purchaser
pursuant to this Agreement;
5.2.5 Notice and Information Rights. The Company shall from the date hereof
deliver to each Purchaser such information and notices as the Company is
required to deliver to the holders of Common Shares of the Company
pursuant to the Company's Amended and Restated Articles of Incorporation
dated March 19, 1997, as amended, or otherwise;
5.2.6 Declaration of Dividends. The Company shall, at least ninety (90) days
prior to the declaration of any dividend (other than a stock dividend),
advise each Purchaser of same in writing;
5.2.7 Conditions Precedent. Without limiting the provisions of this
Agreement, the Company shall use its best efforts to fulfil the
conditions precedent set forth in subsection 0 prior to any Closing.
5.2.8 Registration Statement. The Company hereby covenants and agrees to:
5.2.8.1 file, as soon as practicable after the written request of either of the
Purchasers, which request may be exercised at any time at the<PAGE>
- 19 -
Purchaser's entire discretion, a Registration Statement with the SEC
under the Securities Act on a form which is appropriate to register the
sale or the resale of the Registrable Shares;
5.2.8.2 use its best efforts, subject to receipt of necessary information from
the Purchasers owning such Registrable Shares, to cause such
Registration Statement to become effective, as that term is used in the
Securities Act, within 120 days of the Company's receipt of the written
request referred to in paragraph 0;
5.2.8.3 prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective until
the earlier to occur of (i) such time as all the Registrable Shares
have been sold pursuant thereto or otherwise, or (ii) the date on which
Purchasers who are not deemed to be "affiliates" of the Company as
defined in Rule 144 under the Securities Act are permitted to publicly
sell or resell such Registrable Shares under Rule 144(k) under the
Securities Act, as the same may be amended from time to time, or any
successor regulation;
5.2.8.4 furnish to the Purchasers with respect to the Registrable Shares
registered on the Registration Statement (and to each underwriter, if
any, of such Registrable Shares) such number of copies of prospectuses
in conformity with the requirements of the Securities Act as the
Purchasers may reasonably request, in order to facilitate the public
sale or other disposition of all or any of the Registrable Shares by
the Purchasers; provided, however, that the obligation of the Company
to deliver copies of prospectuses to the Purchasers shall be subject to
the receipt by the Company of reasonable assurances from the Purchasers
that the Purchasers will comply with the applicable provisions of the
Securities Act and of such other securities laws as may be applicable
in connection with any use of such prospectus;
5.2.8.5 file such documents as may be required of the Company for normal
securities law clearance for the sale or the resale of Registrable
Shares in such states of the United States as may be reasonably
requested by the Purchasers; provided, however, that the Company shall
not be required in connection with this paragraph 0 to qualify as a
foreign corporation or execute a general consent to service of process
in any jurisdiction; and
5.2.8.6 bear all expenses in connection with the procedures set forth in
paragraphs 0 through 0, but excluding underwriting discounts, selling
commissions and any expenses required by law to be borne by the
Purchasers.
5.2.9 Pre-Emptive Right. The Company hereby covenants and agrees that in the
event that any third party or group of third parties offers to invest
at least US $5,000,000 in the Company by way of subscription of Common
Shares or other securities convertible into or exchangeable for Common
Shares or Canco Shares which are ultimately convertible into or
exchangeable for Common Shares (the "Additional Securities"), by way of
one transaction or a series of related transactions, then each
Purchaser shall have preemptive rights with respect to the issue of
such Additional Securities, such that the Corporation shall not issue
any Additional Securities without: (i) in the event that the price per<PAGE>
- 20 -
Common Share of such Additional Securities (or the price per Common
Share into which such Additional Securities are convertible into or
exchangeable for Common Shares) is no greater than $2.00, offering to
each Purchaser the right to subscribe for its Proportionate Share of
the Additional Shares to be issued by the Corporation. or (ii) in the
event that the price per Common Share of such Additional Securities (or
the price per Common Share into which such Additional Securities are
convertible into or exchangeable for Common Shares) is greater than
$2.00, offering to each Purchaser the right to subscribe for its
Proportionate Share of 50% of the aggregate amount of Additional Shares
to be issued by the Corporation. The provisions of Section 5 of the
Shareholders Agreement shall apply, mutatis mutandis, to the issuance
of Additional Securities pursuant to this paragraph 0.
5.2.10 Adjustment to Put Rate. In the event of any issuance, or the
acceptance by the Company of any offer (a "Third-Party Offer") from any
third party or group of third parties in connection with any issuance
of Additional Securities at a price (the "Strike Price") per Common
Share (or, in the event that such Additional Securities are convertible
into or exchangeable for Common Shares, at a price per Common Share
into which such Additional Securities are convertible into or
exchangeable for Common Shares) that is greater than $2.00, then the
Put Rate in respect of any Debentures (the "Future Debentures") not yet
issued as of the date of such issuance (or as of the date of the
acceptance of such Third-Party Offer, as the case may be) shall be
automatically adjusted to provide that the Company shall issue to each
Purchaser exercising its Put Right, upon delivery by such Purchaser of
any of its Future Debentures, in consideration therefor, that number of
Preferred Shares as is equal to the number of shares obtained when
dividing (i) the principal amount then outstanding under such Future
Debenture(s) by (ii) the product obtained by multiplying the Strike
Price by 0.85 (subject to such product being no less than $2.00).
Notwithstanding the foregoing, in the event that the transactions
contemplated by the Third-Party Offer are not consummated within 90
Business Days of the date of the acceptance of such Third-Party Offer,
then the Put Rate in respect of the Future Debentures shall be
automatically re-adjusted to the Put Rate in effect immediately prior
to the date of the acceptance of such Third-Party Offer.<PAGE>
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SECTION 6 - REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
OF THE PURCHASERS
6.1 Representation and Warranties. Each Purchaser hereby, severally and not
jointly and severally, represents and warrants to the Company as follows:
6.1.1 Investment. It is acquiring the right to acquire the Preferred Shares
as provided in this Agreement and the Common Shares issuable upon the
conversion of such Preferred Shares for investment for its own account
or for the account of the other Purchaser, and not with the view to, or
for resale in connection with, any distribution thereof other than to
the other Purchaser.
6.1.2 Title to Debentures. It is upon the date hereof the owner of record of
its Debenture(s) and shall be upon each Closing Date the owner (both
beneficially and of record) of its Debenture(s). It will have upon each
Closing Date good and marketable title to its Debenture(s) and the
absolute right, power and capacity to transfer and deliver its
Debenture(s) to the Company pursuant to this Agreement, free and clear
of all Charges.
6.1.3 Brokers or Finders. The Company has not incurred and will not incur,
directly or indirectly, as a result of any action taken by it any
brokerage fees, finder's fees, agents' commissions or other similar
charges in connection with this Agreement, other than the commitment
fees payable to each of the Purchasers.
6.2 Acknowledgements. Each Purchaser hereby makes the following
acknowledgements:
6.2.1 Registration. It understands that the right to acquire the Preferred
Shares as provided in this Agreement and the Common Shares issuable upon
the conversion of such Preferred Shares has not been, and will not be,
registered under the Securities Act or applicable state securities laws,
and is being extended to the Purchasers pursuant to a specific exemption
from the registration provisions of the Securities Act and such laws,
the availability of which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of its
representations as expressed in paragraph 0.
6.2.2 Non-transferability. Subject to the Corporation's undertakings pursuant
to paragraph 0 hereof, it acknowledges that any resale of any of the
Preferred Shares and the Common Shares issuable upon the conversion of
such Preferred Shares may be subject to restrictions under applicable
securities laws unless a subsequent disposition thereof is registered
under the Securities Act or exempt from such registration.
6.2.3 Accredited Investor. It is an "accredited investor" within the meaning
of Rule 501 under the Securities Act.<PAGE>
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SECTION 7 - GENERAL PROVISIONS
7.1 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of New York as they are applied to agreements entered into in
the State of New York between New York residents and performed entirely within
New York.
7.2 Survival. Notwithstanding any investigation conducted prior or
subsequent to the date hereof, the parties shall be entitled to rely upon the
representations and warranties set forth herein and all representations and
warranties made by, and all covenants, obligations and agreements of, the
parties, under or pursuant to this Agreement or any other document or
certificate delivered in connection therewith shall survive the date hereof.
7.3 Further Assurances. Each party upon the request of the others, shall
do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged or delivered all such further acts, deeds, documents, assignments,
transfers, conveyances, powers of attorney and assurances as may be reasonably
necessary or desirable to effect complete consummation of the transactions
contemplated by this Agreement.
7.4 Successors and Assigns. The provisions hereof shall enure to the
benefit of and be binding upon the parties hereto and their respective
successors, assigns, heirs, executors and administrators. Notwithstanding the
foregoing, the Company shall not be entitled to assign its rights hereunder.
The parties hereto hereby confirm that each transferee of Debentures shall
benefit from the Put Rights contemplated in this Agreement provided that the
transfer of such Debenture(s) was made in conformity with the terms thereof.
7.5 Arbitration. All disputes or controversies between the parties in
respect of the validity, interpretation or performance of the provisions of
this Agreement shall be definitively dealt with using the rules of conciliation
and arbitration of the International Chamber of Commerce, by one or more
arbitrators appointed in accordance with said rules, and to the exclusion of
any courts, except for any provisional remedy, including injunctive relief and
seizure before judgment, which may be obtained from any court or tribunal. Any
arbitration proceeding required pursuant to the terms hereof shall take place
in Montreal, Quebec and shall be conducted in both the English and French
language.
7.6 Notices. All offers, acceptances, rejections, notices, requests,
authorizations, permissions, directions, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other parties at the following addresses:<PAGE>
- 23 -
if to Sofinov: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
1981 McGill College Avenue, 7th Floor
Montreal, Quebec
H3A 3C7
Attention: The President
Telecopier: (514) 847-2628
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: Hubert Manseau
Telecopier: (514) 864-4220
if to the Company: TECHNICAL MAINTENANCE CORPORATION
1800 East Sahara
Suite 107
Las Vegas, Nevada
89104, U.S.A.
Attention: The President
Telecopier: (702) 734-7500
with a copy
in all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Claude Bergeron
Telecopier: (514) 925-9001
with a copy
in all cases to: KARP & SOMMERS
Attorneys At Law
950 Third Avenue
New York, N.Y.
10022, U.S.A.
Attention: Aaron Karp
Telecopier: (212) 421-1650<PAGE>
- 24 -
with a copy
in all cases to: GUY & GILBERT
770 Sherbrooke Street West
Suite 2300
Montreal, Quebec
H3A 1G1
Attention: Jacques Bourque
Telecopier: (514) 281-1059
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of
any notice sent by telecopier shall be forwarded to the other parties by
registered mail, receipt return requested.
7.7 Time of the Essence. Time shall be of the essence in this Agreement.
7.8 Delays. When calculating the period of time within which or following
which any act is to be done or step taken pursuant to this Agreement, the day
which is the reference day in calculating such period shall be excluded. If the
day on which such delay expires is not a Business Day, then the delay shall be
extended to the next succeeding Business Day.
7.9 Entire Agreement; Amendment. This Agreement and the Shareholders
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. In the event that any provision of
this Agreement conflicts with any provision of the Shareholders Agreement, the
former provision shall prevail. Except as expressly provided herein, neither
this Agreement nor any term hereof may be amended, other than by a written
instrument signed by all the parties hereto.
7.10 Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the singular
number only shall include the plural and vice versa.
7.11 Headings. The division of this Agreement into Sections, subsections and
other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
7.12 Waiver. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative.
7.13 Preamble. The preamble hereof shall form an integral part of this
Agreement.<PAGE>
- 25 -
7.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.
7.15 Severability. In the event that any provision of this Agreement becomes
or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
7.16 Survival. This Agreement shall terminate with respect to each Purchaser
upon the exercise by such Purchaser of its Put Right.
7.17 Language. The parties hereto state their express wish that Agreement as
well as all documentation contemplated hereby or pertaining hereto or to be
executed in connection herewith be also drawn up in English; les parties
expriment leur desir explicite a l'effet que cette convention de meme que tous
documents envisages par les presentes ou y ayant trait ou qui seront signes
relativement aux presentes soient aussi rediges en anglais.
IN WITNESS WHEREOF, the parties have signed at the place and on the date
first hereinabove mentioned.
SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
Per: /s/Denis Dionne
------------------------------
Denis Dionne
Per: /s/Pierre Pharand
------------------------------
Pierre Pharand
SOCIETE INNOVATECH DU GRAND MONTREAL
Per: /s/Hubert Manseau
------------------------------
Hubert Manseau
TECHNICAL MAINTENANCE CORPORATION
Per: /s/Tony Mastronardi
------------------------------
Tony Mastronardi<PAGE>
- 26 -
INTERVENTION
THE UNDERSIGNED INTERVENES TO THESE PRESENTS and agrees to be bound by
the provisions of paragraph 0 of this Agreement such that in the event that any
Additional Securities are comprised of Canco Shares or securities which are
convertible into or exchangeable for Canco Shares, the undersigned hereby
agrees that the provisions of the said paragraph 0 shall apply to it, mutatis
mutandis, with respect to such Additional Securities.
Montreal, this 11th day of February, 1998
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/Tony Mastronardi
------------------------------
Tony Mastronardi<PAGE>
Debenture Put Right Agreement
Technical Maintenance Corporation
SCHEDULE 0
NOTICE OF EXERCISE
In accordance with the terms of that certain Debenture Put Right
Agreement, dated February 11, 1998, by and among Technical Maintenance
Corporation (the "Company") and the Purchasers (as defined therein) (the "Put
Right Agreement"), notice is hereby given pursuant to subsection 4.1 of the Put
Right Agreement that the undersigned Purchaser elects to exchange, on the date
hereof, US$ ___________ of the outstanding capital of its Debenture (as
defined in the Put Right Agreement) issued on ______________ , for the number
of Preferred Shares (as defined in the Put Right Agreement) calculated pursuant
to the relevant provisions of the Put Right Agreement.
Date: _____________,_______.
PURCHASER
Per: _________________________________
Print Name: __________________________
Title: _______________________________<PAGE>
- 1 -
DEBENTURE
OF
TOUCHTUNES DIGITAL JUKEBOX INC.
(the "Company")
Holder: SOCIETE INNOVATECH DU GRAND MONTREAL (the "Holder")
Capital: US $1,200,000 (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;
<PAGE>
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
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 the date hereof.
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) loan agreements or 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<PAGE>
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
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<PAGE>
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 1 Place du Commerce, Suite 330, Nun's Island, Quebec H3E 1A2 (and, as of
March 1, 1998, 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 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<PAGE>
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 11th day of February, 1998.
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/Tony Mastronardi
-----------------------------<PAGE>
- 1 -
DEBENTURE
OF
TOUCHTUNES DIGITAL JUKEBOX INC.
(the "Company")
Holder: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC. (the "Holder")
Capital: US $2,800,000 (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;
<PAGE>
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
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 the date hereof.
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) loan agreements or 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<PAGE>
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
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<PAGE>
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 1 Place du Commerce, Suite 330, Nun's Island, Quebec H3E 1A2 (and, as of
March 1, 1998, 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 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<PAGE>
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 11th day of February, 1998.
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/Tony Mastronardi
---------------------------<PAGE>
- 1 -
AMENDED AND RESTATED AGREEMENT MADE AND ENTERED INTO AMONG CERTAIN SHAREHOLDERS
OF TECHNICAL MAINTENANCE CORPORATION IN THE CITY AND DISTRICT OF MONTREAL, ON
THE 11th DAY OF FEBRUARY, 1998
BY AND AMONG: TECHNO EXPRES S.A., a corporation duly constituted in
accordance with the laws of France, having its head office
and principal place of business at 36 rue de Marche, 94140
Alfortville, France,
(hereinafter referred to as "Techno Expres")
PARTY OF THE FIRST PART
AND: SOCIETE INNOVATECH DU GRAND MONTREAL, a body politic duly
constituted according to An Act respecting Societe
Innovatech du Grand Montreal, R.S.Q., ch. S-17.2, having
its head office and principal place of business in the City
of Montreal, Province of Quebec,
(hereinafter referred to as "Innovatech")
PARTY OF THE SECOND PART
AND: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC., a body
politic and corporate, duly incorporated according to the
Companies Act (Quebec), having its head office and
principal place of business in the City of Montreal,
Province of Quebec,
(hereinafter referred to as "Sofinov")
PARTY OF THE THIRD PART
AND: TECHNICAL MAINTENANCE CORPORATION, a body politic and
corporate, duly incorporated according to the laws of the
State of Nevada, having its head office and principal place
of business in the City of Las Vegas, Nevada,
(hereinafter referred to as the "Corporation")
PARTY OF THE FOURTH PART
<PAGE>
- 2 -
SECTION 1 - PREAMBLE
1.1 WHEREAS each of the Shareholders holds the following number and class
of Shares as of the date hereof:
Shareholder Number and Class
--------------- -------------------------
Techno Expres 10,000,000 Common Shares
Innovatech 40 Preferred Shares
Sofinov 60 Preferred Shares
1.2 WHEREAS upon the exchange of their Touchtunes Shares for Shares from
the treasury of the Corporation in accordance with the Stock Exchange
Agreement, each of Sofinov and Innovatech will hold a much more substantial
interest in the Corporation than is the case as of the date hereof;
1.3 WHEREAS upon the sale of their Debentures to the Corporation in
consideration for Shares from the treasury of the Corporation in accordance
with the Put Right Agreement, each of Sofinov and Innovatech will hold an even
more substantial interest in the Corporation than is the case as of the date
hereof;
1.4 WHEREAS the parties hereto wish to determine their respective rights,
duties and obligations in and to the Corporation and towards one another.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
SECTION 2 - INTERPRETATION
2.1 Definitions. In this Agreement:
2.1.1 "Accepting Investor" has the meaning ascribed thereto at
subsection 0;
2.1.2 "Accepting Offeree Shareholders" has the meaning ascribed
thereto at paragraph 0;
2.1.3 "Additional Offer" has the meaning ascribed thereto at
paragraph 0;
2.1.4 "Additional Shares" has the meaning ascribed thereto at
subsection 0;
2.1.5 "Affiliate" or "Affiliated" has the meaning ascribed thereto in
the Canada Business Corporations Act;
2.1.6 "Agreement" means this agreement and all instruments
supplemental hereto or in amendment or confirmation hereof; "herein",
"hereof", "hereto", "hereunder" and similar expressions mean and
refer to this Agreement and not to any particular Section, subsection
or other subdivision; "Section", "subsection" or other subdivision of
this Agreement means and refers to the specified Section, subsection
or other subdivision of this Agreement;
2.1.7 "Board" means the Board of Directors of the Corporation;
2.1.8 "Business Day" means any day, other than a Saturday or Sunday or<PAGE>
- 3 -
a day on which the principal commercial banks in the State of Nevada
are not open for business during normal banking hours;
2.1.9 "Closing" means the sale of the Offered Shares by the Offering
Shareholder pursuant to subsection 0;
2.1.10 "Closing Date" means, pursuant to subsections 0 and 0, the date
which is sixty (60) days after the expiry of the last offer period
described therein in which the Purchaser agrees to purchase the
Offered Shares, provided, however, that if on the Closing Date all
Governmental Body and third party approvals, consents, notifications
and assurances (including, without limitation, approvals under the
Investment Canada Act) necessary to permit the consummation of the
transactions contemplated by the Closing have been applied for but
not yet received by the Purchaser, then the Closing Date shall be
postponed to the thirtieth (30th) day after the receipt by the
Purchaser of the last of the aforesaid approvals, consents,
notifications and assurances; notwithstanding the foregoing, the
Closing shall not be extended more than one hundred and eighty (180)
days after the date which was supposed to have been the original
Closing Date herein;
2.1.11 "Common Shares" means the shares of Class A voting common stock of
the Corporation, as such shares are described in the Amended and
Restated Articles of Incorporation of the Corporation dated March 19,
1997;
2.1.12 "Debentures" has the meaning ascribed thereto in the Debenture
Subscription Agreement;
2.1.13 "Debenture Subscription Agreement" means the subscription agreement
dated the date hereof among the Investors and Touchtunes setting
forth the rights and obligations of each of the Investors with
respect to its subscription for its respective Debenture;
2.1.14 "Declining Investor" has the meaning ascribed thereto at
subsection 0;
2.1.15 "Declining Investor's Shares" has the meaning ascribed thereto at
subsection 0;
2.1.16 "First Offer" has the meaning ascribed thereto at paragraph 0;
2.1.17 "Governmental Body" means (i) any domestic or foreign national,
federal, provincial, state, municipal or other government or body,
(ii) any multinational, multilateral or international body, (iii) any
subdivision, agent, commission, board, instrumentality or authority
of any of the foregoing governments or bodies, (iv) any
quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of
the foregoing governments or bodies, or (v) any domestic, foreign,
international, multilateral or multinational judicial,
quasi-judicial, arbitration or administrative court, tribunal,
commission, board or panel;
2.1.18 "Investors" means Innovatech and Sofinov, and all transferees of
Shares of Innovatech or Sofinov and all transferees of Shares of such<PAGE>
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transferees, collectively, and "Investor" means any one of them;
2.1.19 "I Offer" has the meaning ascribed thereto at subsection 0;
2.1.20 "New Meeting" has the meaning ascribed thereto at subsection 0;
2.1.21 "Offer" means for purposes of (i) subsection 0, each of the offers
made by an Investor; and (ii) subsection 0, each of the offers made
by Techno Expres;
2.1.22 "Offered Shares" has the meaning ascribed thereto at subsections 0 or
subsection 0, as the case may be;
2.1.23 "Offeree Shareholders" has the meaning ascribed thereto at
subsection 0;
2.1.24 "Offering Investor" has the meaning ascribed thereto at subsection 0;
2.1.25 "Offering Shareholder" has the meaning ascribed thereto at
subsection 0;
2.1.26 "Other Investor" has the meaning ascribed thereto at paragraph 0;
2.1.27 "Other Shareholders" has the meaning ascribed thereto at
subsections 0 or 0, as the case may be;
2.1.28 "Person" means an individual, corporation, company, cooperative,
partnership, trust, unincorporated association, entity with judicial
personality, Governmental Body; and pronouns when they refer to a
Person have a similarly extended meaning;
2.1.29 "Preferred Shares" means the shares of Series A preferred stock of
the Corporation, as such shares are described in the Amended and
Restated Articles of Incorporation of the Corporation dated March 19,
1997;
2.1.30 "Prime Rate" means the interest rate quoted publicly by the
Corporation's regular bankers as the reference rate of interest for
commercial demand loans made in U.S. dollars and commonly known as
such bank's prime rate, as adjusted from time to time, on the basis
of the Prime Rate in effect on the first day of each month;
2.1.31 "Prior Offers" has the meaning ascribed thereto at paragraph 0;
2.1.32 "Proportion" means a fraction, the numerator of which shall be the
number of Common Shares owned by the particular Shareholder to whom
reference is made and the denominator of which shall be the total of
the issued and outstanding Common Shares, it being understood that
for the purposes hereof, each Investor shall be deemed to hold that
number of Common Shares as would be issuable to such Investor upon
the conversion into Common Shares of (i) all Preferred Shares held by
such Investor and (ii) all Preferred Shares issuable to such Investor
upon the full exercise of (a) all of such Investor's exchange rights
under the Stock Exchange Agreement and (b) all of such Investor's put
rights under the Put Right Agreement;
2.1.33 "Proportionate Share" means, for purposes of subsection 0, the amount<PAGE>
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of the Offered Securities determined by multiplying the number of
Shares offered by a fraction, the numerator of which is the number of
Common Shares held by a particular Offeree Shareholder or Accepting
Offeree Shareholder, as the case may be, entitled to accept an offer
and the denominator of which is the total number of Common Shares
held by all Offeree Shareholders or all Accepting Offeree
Shareholders, as the case may be, entitled to accept the same offer,
it being understood that for the purposes hereof, each Investor shall
be deemed to hold that number of Common Shares as would be issuable
to such Investor upon the conversion into Common Shares of (i) all
Preferred Shares held by such Investor and (ii) all Preferred Shares
issuable to such Investor upon the full exercise of (a) all of such
Investor's exchange rights under the Stock Exchange Agreement and (b)
all of such Investor's put rights under the Put Right Agreement;
2.1.34 "Public Offering" means any offering by the Corporation of its Shares
for distribution to the public;
2.1.35 "Purchaser" has the meaning ascribed thereto at subparagraph 0;
2.1.36 "Put Right Agreement" means that certain agreement entered into among
the Corporation and the Investors on the date hereof pursuant to
which the Investors are entitled to oblige the Corporation to
purchase the Debentures in consideration for the issuance of shares
from the treasury of the Corporation;
2.1.37 "Related" means related as that term is used in the Income Tax Act
(Canada);
2.1.38 "Remaining Offered Shares" has the meaning ascribed thereto at
paragraph 0;
2.1.39 "Share(s)" means any share(s) of any class, series or category in the
capital stock of the Corporation;
2.1.40 "Shareholder" means any of the Shareholders;
2.1.41 "Shareholders" initially means Techno Expres, Innovatech and Sofinov,
and the definition shall be deemed to be modified from time to time
to (i) delete Persons who cease to hold Shares in accordance with the
terms of this Agreement, and (ii) add all Persons who, from time to
time, become holders of Shares and who undertake in writing to be
bound by the provisions of this Agreement;
2.1.42 "Stock Exchange Agreement" means the stock exchange agreement dated
March 21, 1997 among the Investors and the Corporation, providing
inter alia for the exchange by the Investors of the Touchtunes Shares
held by them for shares in the capital stock of the Corporation;
2.1.43 "TE Offer" has the meaning ascribed thereto at subsection 0;
2.1.44 "Third Party" has the meaning ascribed thereto at subsection 0 or 0,
as the case may be;
2.1.45 "TP Offer" has the meaning ascribed thereto at subsection 0 or 0, as
the case may be;<PAGE>
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2.1.46 "TP Offeror" has the meaning ascribed thereto at subsection 0 or 0,
as the case may be;
2.1.47 "Touchtunes" means Touchtunes Digital Jukebox Inc.;
2.1.48 "Touchtunes Shares" means shares in the capital stock of Touchtunes;
2.1.49 "Unaccepted Additional Shares" has the meaning ascribed thereto at
subsection 0;
2.1.50 "Unaccepted Offered Shares" has the meaning ascribed thereto at
subsection 0;
2.1.51 "Voting Shares" means Shares to which are attached votes that may be
cast to elect directors of the Corporation, including Common Shares.
2.2 Gender. Any reference in this Agreement to any gender shall include
both genders and the neutral, and words used herein importing the singular
number only shall include the plural and vice versa.
2.3 Headings. The division of this Agreement into Sections, subsections
and other subdivisions, and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
2.4 Severability. Any Section, subsection or other subdivision of this
Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed therefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability
and shall not affect or impair the remaining provisions hereof, which
provisions shall be severed from an illegal or unenforceable Section,
subsection or other subdivision of this Agreement or any other provisions of
this Agreement.
2.5 Entire Agreement. This Agreement together with any other instruments
to be delivered pursuant hereto, constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations, and discussions, whether oral or
written, among any or all of the parties.
2.6 Amendments. No amendment of this Agreement shall be binding unless
otherwise expressly provided in an instrument duly executed by the Shareholders
and the Corporation.
2.7 Waiver. Except as otherwise provided in this Agreement, no waiver of
any of the provisions of this Agreement shall be deemed to constitute a waiver
of any other provisions (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided in an
instrument duly executed by the parties.
2.8 Delays. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement,
the day which is the reference day in calculating such period shall be
excluded. If the day on which such delay expires is not a Business Day, then
the delay shall be extended to the next succeeding Business Day.
2.9 Conflict. This Agreement shall override the Schedules annexed hereto<PAGE>
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to the extent of any inconsistency. If any conflict should appear between this
Agreement and the Articles, by-laws or resolutions of the Corporation, then the
provisions of this Agreement shall prevail.
2.10 Preamble. The preamble hereof shall form an integral part of this
Agreement.
2.11 Governing Law. This Agreement shall be governed in all respects by
the laws of the Province of Quebec and the laws of Canada applicable therein.
SECTION 3 - COMMISSIONS, FEES, ETC.
3.1 Commissions. No fee, rebate, commission or gain of whatsoever nature
shall be earned by any of the Shareholders as a result of that Shareholder
obtaining financing for or on behalf of the Corporation.
SECTION 4 - DIRECTORS
4.1 Board and Quorum. So long as the Investors collectively own at least
10% (assuming (i) the exercise in full by the Investors of their respective
rights pursuant to each of the Stock Exchange Agreement and the Put Right
Agreement and (ii) the conversion into Common Shares of all Preferred Shares
held by the Investors or to which the Investors would be entitled upon their
exercise, in full, of their respective rights pursuant to each of the Stock
Exchange Agreement and the Put Right Agreement) of the issued and outstanding
Common Shares, the Shareholders agree that (i) each time the shareholders of
the Corporation meet, or act by written consent in lieu of meeting, for the
purposes of electing the directors of the Corporation, they shall vote in such
a manner so as to ensure that at least six (6) directors be elected to the
Board, two (2) of which shall be nominees of the Investors; and (ii) each time
the shareholders of the Corporation meet or act for the purposes of electing or
replacing any of such six (6) directors of the Corporation, they shall vote in
such a manner so as to ensure that in the event that a director(s) nominated by
an Investor dies or resigns or an Investor wishes to replace its nominee
director(s) on the Board, the removal and/or election of such new nominee
director(s) as is(are) designated by the Investor whose nominee died, resigned
or was replaced. The number of nominees that each Investor is entitled to
appoint to the Board shall be determined between the Investors. Nominees of
the Investors must be employees or consultants of the Investors. In such
circumstances, a quorum of a meeting of directors shall be a majority of the
elected directors provided that one director appointed by the Investors forms
part of such quorum and all decisions having the object or purposes set forth
in subsection 0 shall be submitted to the Shareholders pursuant to subsection 0
hereof.
4.2 Designation of nominees. The Investors shall advise Techno Expres
and the Corporation in writing of the names of the individuals the Investors
have designated as their nominees to the Board as soon as practicable before
each meeting of Shareholders. In addition, the Corporation shall reimburse
each nominee to the Board that is an employee of an Investor his reasonable
out-of-pocket expenses (including travelling costs) incurred in connection with
his attendance at each meeting of the Board.
4.3 Non-Transferable. The parties hereto hereby agree that the right
granted to the Investors to designate nominees to the Board pursuant to this
Section 0 is non-transferable.<PAGE>
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4.4 Voting by nominees. Each Shareholder shall at all times carry out
and use its best efforts to cause the Corporation and its nominees on the Board
to carry out the provisions of this Agreement, subject to the fiduciary
obligations of the directors. Each Shareholder shall duly and punctually do,
or cause to be done, all such things, including, without limitation, voting or
causing to be voted all the Shares held by the Shareholder as shall be
necessary or desirable to give effect to this Agreement. In the event any of
the directors does not vote at meetings of the Board in a manner consistent
with this Agreement, all of the Shareholders shall cause a meeting of
Shareholders to be held and agree to vote their Shares either to remove and/or
replace such directors or take such other actions as shall be necessary or
desirable to give effect to this Agreement.
4.5 Directors and Officers Insurance. The Corporation shall as soon as
reasonably practicable but not later than thirty (30) days from the date hereof
take out and thereafter maintain in full force at all times insurance covering
directors and officers liability.
4.6 Matters Requiring Approval of Investors. Until the completion of the
Corporation's next Public Offering and for so long as the Investors
collectively own at least 10% (assuming (i) the exercise in full by the
Investors of their respective rights pursuant to each of the Stock Exchange
Agreement and the Put Right Agreement and (ii) the conversion into Common
Shares of all Preferred Shares held by the Investors or to which the Investors
would be entitled upon their exercise, in full, of their respective rights
pursuant to each of the Stock Exchange Agreement and the Put Right Agreement)
of the issued and outstanding Common Shares, the Shareholders agree to cause
the Corporation, by taking all necessary corporate action including, without
limitation, adopting a new by-law to such effect, to submit to the Investors
for their prior written approval any by-law, resolution or act of the
Shareholders, the Board or officers of the Corporation having any of the
following objects or purposes:
4.6.1 the approval of the annual research and development budget of the
Corporation, the annual operating budget of the Corporation and the
annual capital budget of the Corporation, and any amendments thereto.
Should the Investors refuse to approve the operating budget or the
capital budget for a given fiscal year, the Corporation must conduct
its business in conformity with the budgets of the preceding fiscal
year and the Corporation may not incur capital expenses for the
fiscal year then in progress unless the above-mentioned budgets have
been approved in accordance with the present provisions;
4.6.2 the hiring and firing of any of any senior officers, senior
executives or senior employees of the Corporation;
4.6.3 the engaging of any underwriters in connection with the Corporation's
next Public Offering;
4.6.4 the entering into of any underwriting or similar agreements in
connection with (i) any private placement pursuant to which the
Corporation raises funds in excess of $1,000,000 or (ii) the
Corporation's next Public Offering;
4.6.5 a decrease in the number of directors of the Corporation, except as
provided for in this Agreement;<PAGE>
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4.6.6 the filing of Articles of Amendment or Articles of Amalgamation by
the Corporation;
4.6.7 any change in or alteration to the share capital of the Corporation;
4.6.8 changes in the remuneration paid to the shareholders, directors or
officers of the Corporation or to Persons Related or Affiliated to
the shareholders, directors or officers of the Corporation;
4.6.9 payment of bonuses or other benefits to shareholders, directors or
officers of the Corporation or to Persons Related or Affiliated to
the shareholders, directors or officers of the Corporation;
4.6.10 granting or repayment of any loan to shareholders, directors or
officers of the Corporation or to Persons Related or Affiliated to
shareholders, directors or officers of the Corporation;
4.6.11 guaranteeing any obligations of shareholders, directors or officers
of the Corporation or of Persons Related or Affiliated to
shareholders, directors or officers of the Corporation;
4.6.12 the sale, issue or allotment of Shares from the treasury of the
Corporation, or the granting of options allowing for the subscription
thereof, other than in conformity with Section 5 of this Agreement;
4.6.13 the purchase or sale of any immoveable property on behalf of the
Corporation;
4.6.14 an assignment under the Bankruptcy and Insolvency Act or a proposal
made thereunder, or recourse to any other measure designed for the
protection of insolvent debtors pursuant to any other legislation in
connection with insolvency;
4.6.15 the judicial or voluntary winding-up of the Corporation or the
liquidation of the business or assets of the Corporation;
4.6.16 the entering into of any loan agreement on behalf of the Corporation,
or the granting of any security by the Corporation on any of its
movable or immovable property, except for loan agreements or 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;
4.6.17 the sale of the whole or a substantial part of the assets of the
Corporation or the granting of an option for same or the merger or
consolidation of the Corporation with or into another entity;
4.6.18 the adoption for or on behalf of the Corporation of any contract not
in the ordinary course of the Corporation's business or any contract
with (i) any shareholder, director or officer of the Corporation or
any Person Related or Affiliated to such shareholder, director or
officer of the Corporation or (ii) any Person who is not dealing at
Arm's Length with the Corporation;
4.6.19 the conclusion of any partnership or joint venture agreement or the
creation of a subsidiary or acquisition of another business;<PAGE>
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4.6.20 the declaration of dividends by the Corporation or the redemption,
purchase or repurchase by the Corporation of its share capital;
4.6.21 the amendment, repeal or abrogation of any by-law of the Corporation;
4.6.22 the change in the powers of the directors in general or any one of
them in particular.
SECTION 5 - PREEMPTIVE RIGHT
5.1 Issuance of Common Shares. Should the Board decide that the
Corporation requires additional funds in an amount equal or greater to U.S.
$200,000 and is unable to obtain such funds from its bankers on commercially
reasonable terms, then the Shareholders hereby agree to cause the Corporation
to raise such funds by issuing Common Shares from treasury in accordance with
this Section 0. Each Shareholder shall have preemptive rights with respect to
the issue of such additional Common Shares (the "Additional Shares"), such that
the Corporation shall not issue any Additional Shares without offering to each
Shareholder the right to subscribe for its Proportion of the Additional Shares
to be issued by the Corporation.
The preemptive rights referred to in this Section 0 shall not, however,
apply to Shares and/or options, warrants or other Share purchase rights, and
the Shares issued pursuant to such options, warrants or other rights (as
adjusted for any stock dividends, combinations, splits, recapitalization and
the like) issued or to be issued to employees, officers, or directors of, or
consultants or advisors to the Corporation or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that have been or are
approved by the Board.
5.2 Notice to Shareholders. If the Corporation decides to issue any
Additional Shares, then the Corporation shall give detailed notice thereof to
each Shareholder, describing the Additional Shares, the price, and the general
terms upon which the Corporation proposes to issue the same. Each Investor may
assign to the other Investor all or a portion of its right to subscribe for its
Proportion of the Additional Shares. Each Shareholder shall have thirty (30)
days from the receipt of such notice within which to notify the Corporation of
its intent to exercise its right under subsections 0 and 0 in connection with
such issue of Additional Shares. If a Shareholder fails to so notify the
Corporation within the prescribed delay, then such Shareholder shall be
conclusively deemed to have waived its preemptive right in connection with such
issue of Additional Shares. If all of the Shareholders waive or are deemed to
have waived their preemptive rights in connection with such issue of Additional
Shares, then the Corporation shall be free for a period of ninety (90) days
thereafter to sell such Additional Shares to any Person not Affiliated or
Related to any Shareholder, on terms not more favourable than those provided in
the original offer of the Corporation to issue Additional Shares, provided,
however, that it is a condition precedent to such sale that such Person has
executed a counterpart of this Agreement in accordance with subsection 0 and
has agreed to be bound by the terms and conditions of this Agreement and any
other agreement executed by the parties in connection with this Agreement.
5.3 Declining Investor. If only one of the Investors has agreed to
exercise its right under subsections 0 and 0 hereof to subscribe for its
Proportion of the Additional Shares (the "Accepting Investor") and the other
Investor has, or is deemed to have, declined to exercise such preemptive right<PAGE>
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(the "Declining Investor"), the Corporation shall, within seven (7) days of the
end of the above thirty (30) day period, be required to offer by written notice
to the Accepting Investor all of the Additional Shares which could have been
subscribed for by the Declining Investor (the "Declining Investor's Shares")
before Techno Expres is offered pursuant to subsection 0 its pro rata share of
such Declining Investor's Shares. The Accepting Investor shall have thirty
(30) days from the receipt of the notice mentioned above to notify the
Corporation of its intent to exercise its right to subscribe for the Declining
Investors' Shares, failing which the Accepting Investor shall be deemed to have
waived its preemptive right in connection with the issue of the Declining
Investors' Shares.
5.4 Shareholders Rights. If (i) one (1) or more Shareholders has or is
deemed to have declined its right to subscribe for its Proportion of the
Additional Shares, and, in the event such Additional Shares were offered to the
Accepting Investor pursuant to subsection 0 and the Accepting Investor has or
is deemed to have declined to exercise its right to acquire all of the
Declining Investor's Shares, or (ii) if one (1) or more Shareholders has or is
deemed to have declined its right to subscribe for its Proportion of the
Additional Shares and subsection 0 is not applicable, then the Corporation,
within five (5) days of the end of the above thirty (30) day period provided
for in subsection 0 or within seven (7) days of the end of the seven (7) day
period provided for in subsection 0, shall be required to offer by written
notice to the Shareholder(s) who agreed to exercise its or their right under
subsections 0 and 0 in connection with the initial issue of Additional Shares,
to issue to such Shareholder(s), in addition to any Additional Shares such
Shareholder(s) agreed to subscribe for, its or their pro rata share of the
Additional Shares for which any other Shareholder(s) has, or is deemed to have,
waived its or their preemptive right hereunder (collectively the "Unaccepted
Additional Shares").
5.5 Notice for Unaccepted Additional Shares. Each Shareholder who has
been offered to subscribe for Unaccepted Additional Shares by the Corporation
pursuant to subsection 0 shall have thirty (30) days from the receipt of the
notice mentioned therein to notify the Corporation of its intent to exercise
its right to subscribe for its pro rata share of such Unaccepted Additional
Shares, failing which such Shareholder shall be deemed to have waived its
preemptive right in connection with the issue of such Unaccepted Additional
Shares.
5.6 Sale to any Person. The procedures set forth in subsections 0 and 0
shall be repeated, mutatis mutandis, with respect to any Unaccepted Additional
Shares which have not been subscribed for by a Shareholder until (i) all
Shareholders who have been made the most recent additional offer shall have or
be deemed to have declined it, or (ii) all Additional Shares (including
Unaccepted Additional Shares) which have been offered by the Corporation
pursuant to this Section 0 shall have been subscribed for by some or all of the
Shareholders. If upon completion of the above procedures some or all of the
Additional Shares which the Corporation intended to issue will not be purchased
by the Shareholders pursuant to the exercise of their preemptive rights, the
Corporation shall be free for a period of ninety (90) days thereafter to sell
such Additional Shares, which will not be purchased by a Shareholder, to any
Person not Affiliated or Related to any Shareholder, on terms not more
favourable than those provided in the original offer of the Corporation to
issue Additional Shares, provided, however, that it shall be a condition
precedent to such sale that such Person has executed a counterpart of this
Agreement in accordance with subsection 0 and has agreed to be bound by the<PAGE>
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terms and conditions of this Agreement. The purchase of Additional Shares
(including Unaccepted Additional Shares) by one (1) or more Shareholders, shall
be suspended until the day of the sale by the Corporation to such Person of the
Additional Shares (including Unaccepted Additional Shares) which have not been
subscribed for by a Shareholder. If the Corporation is unable to sell such
Additional Shares which have not been subscribed for by a Shareholder to a
Person as provided for in this subsection 0, then the Corporation shall
forthwith advise the Shareholders of same in writing and any Shareholder who
has agreed to subscribe for Additional Shares (including Unaccepted Additional
Shares) shall have the right to decide not to purchase such Additional Shares
by notifying the Corporation in writing thereof within five (5) days of having
been advised by the Corporation that the Corporation was unable to sell such
Additional Shares to such Person.
5.7 Closing. Subject to subsection 0, the closing in connection with the
issuance of Additional Shares to any Shareholder or Person pursuant to
subsections 0 to 0 shall be held at the principal offices of the Corporation at
10:00 a.m. on the date which is thirty (30) days after the expiry of the
applicable period under subsections 0 to 0, as the case may be, or at such
other place, at such other time or on such other date as the parties thereto
may agree. Payment for the Additional Shares being issued shall be made in
full at such closing. All payments shall be made by way of bank draft or
electronic fund transfer to the Corporation's account.
SECTION 6 - ALIENATION OF SHARES
6.1 Alienation prohibited. Unless otherwise provided for in accordance with
the terms hereof, no Shareholder shall transfer, assign, cede, pledge,
mortgage, hypothecate, charge or otherwise encumber, alienate or dispose of in
any manner whatsoever the whole or any part of its Shares without first
obtaining the written consent of all of the other Shareholders.
6.2 Transfers between Sofinov and Innovatech. Notwithstanding any provision of
this Agreement, each of Sofinov and Innovatech may transfer all or part of its
Shares to each other, or to any Governmental Body of or controlled by the
Government of Quebec or to the Caisse de depot et placement du Quebec or any
Person controlled by the Caisse de depot et placement du Quebec, at any time
and from time to time without being subject to the other terms and conditions
in this Section 0 or in Section 0; provided however, that neither of Sofinov or
Innovatech shall be permitted to transfer its Shares to any Governmental Body
of or controlled by the Government of Quebec unless such Governmental Body
shall have first executed a counterpart of this Agreement in accordance with
subsection 0, and agreed that as long as it shall hold such Shares it shall be
bound by the terms and conditions of this Agreement, as if such Governmental
Body had been an original party to this Agreement as a Shareholder and an
Investor.
6.3 Unrestricted Transfers. Notwithstanding any provision of this Agreement:
6.3.1 in the event of (i) any transaction resulting in the reorganization
of the Corporation or (ii) any third party obtaining control of the
Corporation, the Investors shall be entitled, upon written notice to
the other Shareholders, to transfer to any party, without being
subject to the other terms and conditions in this Section 0 or in
Section 0, all or a portion of the total number of Common Shares held
by them;<PAGE>
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6.3.2 Techno Expres shall be entitled, upon written notice to each of the
Investors, to transfer to any party from time to time at any time on
or prior to March 31, 2003, without being subject to the other terms
and conditions in this Section 0 or in Section 0, up to a total of
100,000 Common Shares, provided that any such transfer is not by way
of solicitation or public offering, but by way of private placement
only in conformity with (i) all applicable securities laws and (ii)
all requirements imposed by any agent or underwriter engaged by the
Corporation as of the date of such transfer.
6.4 Shareholdings of Techno Expres. Guy Nathan and Tony Mastronardi hereby
intervene into the present Agreement and hereby solidarily acknowledge and
confirm that at present they have and that at all times while Techno Expres is
a Shareholder they shall retain control of not less than sixty percent (60%) of
the outstanding securities of Techno Expres carrying voting rights in all
circumstances and they hereby further solidarily undertake that, except for
transfers to members of their immediate families (which shall be permitted
provided that any such transferee shall undertake in writing in favour of the
remaining Shareholders to be bound solidarily with the transferor by the
provisions of this subsection 6.4), neither of them will transfer, assign,
cede, pledge, mortgage, hypothecate, charge or otherwise encumber, alienate or
dispose of in any manner whatsoever the whole or any part of any of his shares
of Techno Expres without first obtaining the written consent of all of the
other Shareholders, and in all cases the transferor shall cause the transferee
to undertake in writing in favour of the remaining Shareholders to be bound
solidarily with the transferor by the provisions hereof.
SECTION 7 - RIGHTS OF FIRST REFUSAL AND PIGGY BACK
7.1 Alienation by Investors. Notwithstanding subsection 0, if, at any time
after the date hereof, (i) one or both of the Investors (the "Offering
Investor") receives an irrevocable offer (the "TP Offer") from a Person acting
at Arm's Length to the Offering Investor (the "TP Offeror") to purchase for
cash, securities, property and/or any other form of consideration (all of which
is payable at closing) 50% or more of the Shares held by the Offering Investor
(including by way of prospectus, whether underwritten or not), which TP Offer
the Offering Investor wishes to accept, in accordance with the procedures set
forth hereinafter, or (ii) the Offering Investor wishes to sell all (but not
less than all) of the Shares held by the Offering Investor, the Offering
Investor shall make an irrevocable offer (the "I Offer") in accordance with the
procedures set forth hereinafter (the TP Offer and I Offer are hereinafter
referred to collectively as the "Investor Offer"):
7.1.1 If there is only one Offering Investor, such Offering Investor shall
first offer to the other Investor (the "Other Investor") the option
to purchase such Shares (the "Offered Shares") in accordance with
subsection 0. Should the Other Investor exercise such option so as
to purchase all of the Offered Shares, the Offering Investor shall
sell to the Other Investor the Offered Shares, for which it has
delivered a notice of exercise, in accordance with this Agreement and
the terms and conditions of the Investor Offer.
7.1.2 Unless the Other Investor elects within the time required to exercise
the option pursuant to subsection 0 such that all of the Offered
Shares shall be purchased by the Other Investor (or if there are two
Offering Investors and, as a result, there is no Other Investor),
then the Offering Investor shall offer the Offered Shares which were<PAGE>
- 14 -
unaccepted by the Other Investor or, if there is no Other Investor,
all of the Offered Shares (in either case, the "Unaccepted Offered
Shares") to Techno Expres in accordance with the procedures set forth
in subsection 0.
7.1.3 Should Techno Expres exercise its option pursuant to subsection 0 so
as to purchase all of the Unaccepted Offered Shares, the Offering
Investor shall sell to (i) the Other Investor the Offered Shares, if
any, for which it has delivered notice of exercise and (ii) Techno
Expres the Unaccepted Offered Shares for which it has delivered
notice of exercise, in accordance with this Agreement and the terms
and conditions of the TP Offer, or the I Offer, as the case may be.
7.1.4 Unless the Other Investor and/or Techno Expres (the "Other
Shareholders") have elected within the time required to exercise
their options pursuant to subsections 0 and/or 0 such that all of the
Offered Shares shall be purchased by the Other Shareholders, the
option of the Other Shareholders shall expire, none of the Other
Shareholders shall be eligible to purchase the Offered Shares, and
the Offering Investor shall be free for a period of ninety (90) days
from the end of the expiration of the last offer period to sell all
(but not less than all) of the Offered Shares to either (i) the TP
Offeror on the terms and conditions provided in the TP Offer, or (ii)
in the event of an I Offer, to a Person acting at Arm's Length to the
Offering Investor (the "Third Party") on the terms and conditions
provided in the I Offer, provided, however, that, in both cases, it
shall be a condition precedent to the right of the Offering Investor
to sell the Offered Shares that the TP Offeror or Third Party, as the
case may be, has executed a counterpart of this Agreement in
accordance with subsection 0 and has agreed to be bound by the terms
and conditions of this Agreement, as if the TP Offeror or the Third
Party, as the case may be, had been an original party to this
Agreement in place of the Offering Investor. If no sale takes place
within the ninety (90) day period referred to in this subsection,
then the Offering Investor shall not transfer the Offered Shares
without again following and being subject to this Section 0.
7.2 Alienation by Techno Expres. Notwithstanding subsection 0, if, at any
time after the date hereof, (i) Techno Expres receives an irrevocable offer
(the "TP Offer") from a Person acting at Arm's Length to Techno Expres (the "TP
Offeror") to purchase for cash, securities, property and/or any other form of
consideration (all of which is payable at closing) all (but not less than all)
of the Shares held by Techno Expres (the "Offered Shares") (including by way of
prospectus, whether underwritten or not), which Techno Expres wishes to accept,
in accordance with the procedures set forth hereinafter, or (ii) Techno Expres
wishes to sell all (but not less than all) of the Shares held by Techno Expres,
Techno Expres shall make an irrevocable offer (the "TE Offer") in accordance
with the procedures set forth hereinafter (the TP Offer and TE Offer are
hereinafter collectively referred to as the "Techno Offer"):
7.2.1 Techno Expres shall offer the Offered Shares to the Investors
(together the "Other Shareholders") in accordance with the procedures
set forth in subsection 0.
7.2.2 Should one or both of the Other Shareholders exercise options
pursuant to subsection 0 so as to purchase all of the Offered Shares,
Techno Expres shall sell to each such Other Shareholder the Offered<PAGE>
- 15 -
Shares for which it has delivered notice(s) of exercise, in
accordance with this Agreement and the terms and conditions of the
Techno Offer.
7.2.3 Unless one or both of the Other Shareholders elects within the time
required to exercise its options pursuant to subsection 0 such that
all of the Offered Shares shall be purchased by the Other
Shareholders, the option of the Other Shareholders shall expire, none
of the Other Shareholders shall be eligible to purchase the Offered
Shares, and Techno Expres shall be free for a period of ninety (90)
days from the end of the expiration of the last offer period to sell
all (but not less than all) of the Offered Shares to either (i) the
TP Offeror on the terms and conditions provided in the TP Offer, or
(ii) in the event of a TE Offer, to a Person acting at Arm's Length
to Techno Expres (the "Third Party") on the terms and conditions
provided in the TE Offer, provided, however, that, in both cases, it
shall be a condition precedent to the right of Techno Expres to sell
the Offered Shares that the TP Offeror or Third Party, as the case
may be, has executed a counterpart of this Agreement in accordance
with subsection 0 and has agreed to be bound by the terms and
conditions of this Agreement, as if the TP Offeror or Third Party, as
the case may be, had been an original party to this Agreement in
place of Techno Expres. If no sale takes place within the ninety
(90) day period referred to in this subsection, then Techno Expres
shall not transfer the Offered Shares without again following and
being subject to this Section 0.
7.3 Procedure for Offers. Offers by the Offering Investor (pursuant to
subsection 0) or Techno Expres (pursuant to subsection 0) (the "Offering
Shareholder") to the Other Investors (pursuant to subsection 0), Techno Expres
(pursuant to subsection 0) or the Other Shareholders (pursuant to subsection 0)
(the "Offeree Shareholders") shall be conducted in accordance with the
following procedures:
7.3.1 The Offering Shareholder shall deliver a notice of its desire to sell
the Offered Shares in accordance with the terms of the Offer to the
Offeree Shareholders (a copy of which notice will be forwarded to all
parties hereto), and then each of the Offeree Shareholders shall have
an option to acquire its Proportionate Share of the Offered Shares
or, if subsection 0 applies, the Unaccepted Offered Shares (the
"First Offer"). Each of the Offeree Shareholders who elects to
exercise its option under this subsection shall deliver a notice to
the Offering Shareholder, each other Offeree Shareholder and the
Corporation indicating its exercise of the option, such notice to be
sent no later than [twenty (20] days after the date on which the
notice is received, after which time the option hereby granted to the
Offeree Shareholders shall expire.
7.3.2 If after the First Offer or any Additional Offer made pursuant to
this paragraph 0 (the "Prior Offers"), there remains Offered Shares
that the Offeree Shareholders have not accepted in the Prior Offers
(the "Remaining Offered Shares"), the Offering Shareholder shall
deliver a notice to the Offeree Shareholders that accepted the last
such offer (the "Accepting Offeree Shareholders"), of each such
Accepting Offeree Shareholder's option to purchase its Proportionate
Share of the Remaining Offered Shares (an "Additional Offer"). Each
Accepting Offeree Shareholders who elects to exercise its option<PAGE>
- 16 -
under this subsection shall deliver a notice to the Offering
Shareholder, each other Accepting Offeree Shareholder and the
Corporation indicating its exercise of the option, such notice to be
sent no later than ten (10) days after the date on which the notice
of the Additional Offer is received, after which time the option
hereby granted to the Accepting Offeree Shareholders shall expire.
The Offering Shareholder shall continue to make offers pursuant to
this paragraph 0 until there are no Accepting Offeree Shareholders or
no Remaining Offered Shares.
7.3.3 In the event of any sale by the Offering Shareholder to the Offeree
Shareholders pursuant to an Offer which provides that the purchase
price is to be payable, in whole or in part, by a non-cash
consideration, the Offeree Shareholders shall be entitled to pay to
the Offering Shareholder the cash equivalent of such non-cash
consideration based upon the fair market value of such non-cash
consideration as of the date of the receipt by the Offeree
Shareholders of the notice from the Offering Shareholder to sell the
Offered Shares in accordance with paragraph 0. The fair market value
of such non-cash consideration shall be the value agreed upon by the
parties to such transaction. If no such value has been agreed upon
in writing by the parties to such transaction within ten (10) days
after the receipt by the Offeree Shareholders of the notice from the
Offering Shareholder to sell the Offered Shares in accordance with
paragraph 0, any of such parties shall be entitled to appoint the
auditors of the Corporation to determine such value. The
determination of the auditors shall be final and binding on the
parties without right of appeal and such auditors shall make such
determination within ten (10) days of their appointment.
7.4 Validity of Offer and Closing provisions. Each Offer made pursuant to
subsections 0 and 0 shall be in a writing signed by the Offering Shareholder
and addressed to the Offeree Shareholders and shall:
7.4.1 state the purchase price per Offered Share, which purchase price
shall be payable in full, at Closing;
7.4.2 state the name and address of the TP Offeror to whom it proposes to
sell the Offered Shares, and include a copy of the TP Offer; (this
provision shall not apply in the event of an I Offer or a TE Offer);
7.4.3 provide that the Closing shall be held at the principal offices of
the Corporation at 10:00 a.m. on the Closing Date, or at such other
place, at such other time or on such other date as the parties
thereto may agree, in accordance with the following terms and
conditions:
7.4.3.1 at Closing, the Offering Shareholder shall deliver to the
Offeree Shareholders who have accepted an Offer (the "Purchaser")
certificates representing the Offered Shares being transferred, which
certificates shall be accompanied by a duly executed assignment of the
Offered Shares to the Purchaser;
7.4.3.2 payment for the Offered Shares being transferred shall be made
in full at Closing;
7.4.3.3 such transfer shall be effected in conformity with all<PAGE>
- 17 -
applicable securities laws;
7.4.3.4 if any of the conditions set forth in this paragraph 0 made for
the exclusive benefit of the Purchaser are not satisfied at the Closing,
then the Purchaser may, at its option, either:
7.4.3.4.1 refuse to proceed with the Closing, or
7.4.3.4.2 proceed with the Closing,
in either case without prejudice to its remedies and recourses against the
Offering Shareholder as a result of such condition not being satisfied;
7.4.3.5 however, if at Closing the Offered Shares being transferred are
not free and clear of all claims, liens and other encumbrances whatsoever,
the Purchaser may, without prejudice to any other rights which it may
have, purchase such Offered Shares subject to such claims, liens and other
encumbrances. In that event, the Purchaser shall at the Closing assume
all obligations and liabilities with respect to such claims, liens and
encumbrances and the purchase price payable by the Purchaser for such
Offered Shares shall be satisfied, in whole or in part, as the case may
be, by such assumption in the amount agreed to by the Offering Shareholder
and the Purchaser. The amount so assumed shall reduce the purchase price
payable at Closing;
7.4.3.6 if the Offering Shareholder fails to complete the transaction,
then the amount which the Purchaser would otherwise be required to pay to
the Offering Shareholder at Closing may be deposited by the Purchaser into
an interest-bearing trust account in the name of the Offering Shareholder
at the bank branch used by the Corporation. Upon making such deposit and
giving the Offering Shareholder notice thereof, the purchase of the
Offering Shareholder's Offered Shares by that Purchaser shall be deemed to
have been fully completed and all right, title, benefit and interest in
and to the Offered Shares to which the Purchaser is entitled shall be
deemed to have been transferred and assigned to and vested in the
Purchaser. The Offering Shareholder shall be entitled to receive the
amount deposited in the trust account upon satisfying the Offering
Shareholder's obligations pursuant to subsection 0;
7.4.3.7 the Offering Shareholder hereby irrevocably nominates,
constitutes and appoints each Purchaser as its true and lawful mandatary
and agent for, in the name of and on behalf of the Offering Shareholder to
execute and deliver in the name of the Offering Shareholder all such
instruments as may be necessary to effectively transfer the Offered Shares
being sold to the Purchaser. The Offering Shareholder hereby ratifies and
confirms, and agrees to ratify and confirm, all that the Purchaser may
lawfully do or cause to be done by virtue of such appointment and power of
attorney;
7.4.3.8 it is recognized that serious and irreparable damage for which
monetary damages would not be an adequate remedy would result to the
Purchaser from the violation of the provisions of this Section 0. Each
party agrees that, in addition to any and all remedies available to the
Purchaser in the event of a violation of such covenants, such Purchaser
shall have the immediate remedy of injunction or such other relief as may
be decreed or issued by any court of competent jurisdiction to enforce
this Section 0.<PAGE>
- 18 -
7.5 Piggy Back - Investors. Provided that Techno Expres owns more than [20%]
of the issued and outstanding Shares (assuming (i) the exercise in full by the
Investors of their respective rights pursuant to each of the Stock Exchange
Agreement and the Put Right Agreement and (ii) the conversion into Common
Shares of all Preferred Shares held by the Investors or to which the Investors
would be entitled upon their exercise, in full, of their respective rights
pursuant to each of the Stock Exchange Agreement and the Put Right Agreement),
if Techno Expres receives a TP Offer or makes a TE Offer pursuant to
subsection 0, each Investor shall have the right, at such Investor's option, in
lieu of exercising options to purchase Offered Shares, to require that all of
the Shares held by such Investor (including any Shares issuable upon the
exercise in full by such Investor of its rights pursuant to each of the Stock
Exchange Agreement and the Put Right Agreement and assuming the conversion into
Common Shares of all Preferred Shares held by such Investor or to which such
Investor would be entitled upon its exercise, in full, of its rights pursuant
to each of the Stock Exchange Agreement and the Put Right Agreement) be
included in any sale to the TP Offeror or Third Party, as the case may be,
together with the Offered Shares, on terms and conditions which are identical
to those offered by the TP Offeror to Techno Expres pursuant to the TP Offer or
to those made pursuant to the TE Offer, as the case may be, and it shall be a
condition precedent of the right of Techno Expres to sell any Offered Shares
that the TP Offeror or Third Party, as the case may be, purchase all the Shares
held by an Investor exercising the right granted in this subsection 0. If an
Investor wishes to exercise the right granted in this subsection 0, then it
shall do so by giving written notice thereof to Techno Expres at any time prior
to the end of the expiration of the last offer period of Techno Expres to sell
Offered Shares to the Investors. For greater certainty, the provisions of this
subsection 0 shall only apply if all of the Offered Shares are not purchased by
one or more of the Investors under subsection 0 and are sold to the TP Offeror
or the Third Party, as the case may be, by Techno Expres.
7.6 Offers irrevocable. All Offers and TP Offers are irrevocable for the
period of time during which they are open for acceptance.
7.7 Meaning of "Shares". For the purposes of this Section 0, when reference is
made to the Shares held by either Investor, the term "Shares" shall be deemed
to include any Common Shares as would be issuable to such Investor upon the
conversion into Common Shares of (i) all Preferred Shares held by such Investor
and (ii) all Preferred Shares issuable to such Investor upon the full exercise
of (a) all of such Investor's exchange rights under the Stock Exchange
Agreement and (b) all of such Investor's put rights under the Put Right
Agreement.
SECTION 8 - NOTICES
8.1 Notices. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be given by telecopier, or
delivered by hand, to the other party at the following addresses:<PAGE>
- 19 -
if to Techno Expres:TECHNO EXPRES S.A.
c/o Touchtunes Digital Jukebox Inc.
1 Commerce Place
Suite 330
Nun's Island, Quebec
H3E 1A2
Attention: The President
Telecopier: (514) 762-6483
if to Sofinov: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
1981 McGill College Avenue, 7th Floor
Montreal, Quebec
H3A 3C7
Attention: The President
Telecopier: (514) 847-2628
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
2020 University Avenue
Suite 1527
Montreal, Quebec
H3A 2A5
Attention: Hubert Manseau
Telecopier: (514) 864-4220
if to the
Corporation: TECHNICAL MAINTENANCE CORPORATION
1800 East Sahara
Suite 107
Las Vegas, Nevada
89104, U.S.A.
Attention: The President
Telecopier: (702) 734-7500
with a copy in
all cases to: KARP & SOMMERS
950 Third Avenue
New York, NY
10022, U.S.A.
Attention: Aaron Karp
Telecopier: (212) 421-1650<PAGE>
- 20 -
with a copy in
all cases to: LAPOINTE ROSENSTEIN
1250 Rene-Levesque Blvd. West
Suite 1400
Montreal, Quebec
H3B 5E9
Attention: Claude Bergeron
Telecopier: (514) 925-9001
with a copy
in all cases to: GUY & GILBERT
770 Sherbrooke Street West
Suite 2300
Montreal, Quebec
H3A 1G1
Attention: Jacques Bourque
Telecopier: (514) 281-1059
or at such other address as the parties may have previously indicated to the
other parties in writing in conformity with the foregoing. Any such notice,
request, demand or other communication shall be deemed to have been received on
the date of delivery if delivered by hand, or the next Business Day immediately
following the date of transmission if sent by telecopier. The original copy of
any notice sent by telecopier shall be forwarded to the other party by
registered mail, receipt return requested.
SECTION 9 - ARBITRATION
9.1 Arbitration. All disputes or controversies between the parties in
respect of the validity, interpretation or performance of the provisions of
this Agreement shall be definitively dealt with using the rules of conciliation
and arbitration of the International Chamber of Commerce, by one arbitrator
appointed in accordance with said rules, and to the exclusion of any courts
except for any provisional remedy including injunctive relief and seizure
before judgment which may be obtained from any court or tribunal, the whole in
accordance with said rules in force at the time of execution of this Agreement.
Any arbitration proceeding required pursuant to the terms thereof shall take
place in Montreal, Quebec and shall be conducted in both the English and French
language.
SECTION 10 - MISCELLANEOUS PROVISIONS
10.1 Press release. Any press release or any public announcement,
statement or publicity with respect to the transaction contemplated in this
Agreement shall be made only with the prior consent of the Shareholders unless
such release, announcement, statement or publicity is required by law, in which
case the Shareholder required to make such release, announcement, statement or
publicity shall use its best efforts to obtain the approval of the other
Shareholders to the form, nature and extent of such disclosure, which approval
shall not be unreasonably withheld.
10.2 Further documents. Each party upon the request of the others, shall
do, execute, acknowledge and deliver or cause to be done, executed,<PAGE>
- 21 -
acknowledged or delivered all such further acts, deeds, documents, assignments,
transfers, conveyances, powers of attorney and assurances as may be reasonably
necessary or desirable to effect complete consummation of the transactions
contemplated by this Agreement.
10.3 Successors and assigns. This Agreement and the provisions hereof
shall enure to the benefit of and be binding upon the parties and their
respective successors and permitted assigns.
10.4 Transfer contrary to this Agreement. Any purported transfer of
Shares contrary to the terms of this Agreement shall be null and void and have
no legal effect.
10.5 Time of the essence. Time shall be of the essence in this Agreement.
10.6 Counterpart. No Person shall become a holder of any Shares without
first having executed a counterpart of this Agreement in accordance with
Schedule "0" annexed hereto. Each such counterpart so executed shall be deemed
to be an original and such counterparts together shall constitute one and the
same instrument.
10.7 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matters herein contained
and supersedes and replaces any negotiations, discussions or agreements
previously held or entered into by them with respect to the subject matters
herein contained, including without limitation, the shareholders agreement
dated March 21, 1997 among the parties hereto. The parties hereby renounce to
and waive the benefits of all prior negotiations and discussions concerning the
subject matter hereof which are not embodied herein.
10.8 Originals. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same document.
10.9 Termination of Agreement. This Agreement shall remain in effect
until terminated by any party hereto by written notice upon the occurrence of
any of the following eventualities:
10.9.1 the bankruptcy or dissolution (whether voluntary or involuntary) of
the Corporation;
10.9.2 all issued and outstanding Shares are held by one Person only; or
10.9.3 by written agreement of all of the Shareholders.
10.10 Language. The parties hereto state their express wish that this
Agreement as well as all documentation contemplated hereby or pertaining hereto
or to be executed in connection herewith be also drawn up in English; les
parties expriment leur desir explicite a l'effet que cette convention de meme
que tous documents envisages par les presentes ou y ayant trait ou qui seront
signes relativement aux presentes soient aussi rediges en anglais.<PAGE>
- 22 -
IN WITNESS WHEREOF, the parties have signed at the place and on the
date first hereinabove mentioned.
TECHNO EXPRES S.A.
Per: /s/Tony Mastronardi
----------------------
Tony Mastronardi
SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
Per: /s/Pierre Pharand
----------------------
Pierre Pharand
Per: /s/Denis Dionne
----------------------
Denis Dionne
SOCIETE INNOVATECH DU GRAND MONTREAL
Per: /s/Hubert Manseau
----------------------
Hubert Manseau
TECHNICAL MAINTENANCE CORPORATION
Per: /s/Tony Mastronardi
----------------------
Tony Mastronardi<PAGE>
- 23 -
INTERVENTION
EACH OF THE UNDERSIGNED INTERVENES TO THESE PRESENTS, hereby declares
having taken cognizance of all of the provisions contained in this Agreement,
with which he declares himself to be entirely satisfied and familiar, and
hereby agrees to be bound by the provisions of subsection 6.4 of this Agreement
which are applicable to him.
Montreal, this 11th day of February, 1998
/s/Tony Mastronardi
- ------------------------
TONY MASTRONARDI
/s/Guy Nathan
- ------------------------
GUY NATHAN<PAGE>
- 24 -
Amended and Restated Shareholders Agreement
Technical Maintenance Corporation
SCHEDULE "0"
THIS INSTRUMENT forms part of the Shareholders Agreement (the "Agreement")
made as of February 11, 1998 by and among Techno Expres S.A., Touchtunes Juke
Box Inc., Sofinov Societe Financiere D'Innovation Inc., Societe Innovatech du
Grand Montreal and Technical Maintenance Corporation, into which intervened
each of Tony Mastronardi and Guy Nathan which Agreement permits execution by
counterpart. The undersigned hereby acknowledges having received a copy of the
said Agreement (which is annexed hereto as Schedule "1") and, having read the
said Agreement in its entirety, hereby agrees that the terms and conditions of
the said Agreement shall be binding upon the undersigned (including, without
limitation, the obligations of confidentiality) as if the undersigned had been
an original party to the Agreement as a Shareholder (as such terms are defined
in the Agreement) and such terms and conditions shall enure to the benefit of
and be binding upon the undersigned, its successors and assigns.
IN WITNESS WHEREOF the undersigned has executed this instrument this ___
day of _______, ________ [year]
[Shareholder]
per:
-----------------------<PAGE>
Armstrong Gilmour
Accountancy Corporation Certified Public Accountants and Business Consultants
Securities and Exchange Commission
We concur with the response of Technical Maintenance Corporation as presented
in Item 4 of its February 1998, Form 8-K filing.
/s/Armstrong Gilmour
Accountancy Corporation
March 20, 1998
Walnut Creek, CA
1350 Carlback Avenue, Second Floor, Walnut Creek, CA 94596 . Tel (510) 944-
9118 . FAX (510) 944-9909<PAGE>
