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SUBSCRIPTION AGREEMENT MADE AND ENTERED INTO IN ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇ 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;
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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;
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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, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇,
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;
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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 ▇▇▇▇ and service
▇▇▇▇ registrations, trade ▇▇▇▇ and service ▇▇▇▇
applications, rights under registered user agreements,
trade names and other trade ▇▇▇▇ and service ▇▇▇▇ 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;
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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;
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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.
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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.
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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
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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.
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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
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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
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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
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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 ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇
▇▇▇▇▇▇ is presently being reviewed, (ii) the Corporation's parent
company, Technical Maintenance Corporation, intends to put into a place
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a stock option plan that will benefit certain of the employees of the
Corporation, and (iii) the Corporation has agreed to pay to ▇▇. ▇▇▇
▇▇▇▇▇▇ the annual sum of $15,000 CDN in respect of ▇▇. ▇▇▇▇▇▇'▇ 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;
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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
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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
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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
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
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
- 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
- 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
- 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;
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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,
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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:
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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
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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
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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.
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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:
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if to Sofinov: SOFINOV SOCIETE FINANCIERE D'INNOVATION INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: The President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to Innovatech: SOCIETE INNOVATECH DU GRAND MONTREAL
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
if to the
Corporation: TOUCHTUNES DIGITAL JUKEBOX INC.
▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇'▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: The President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy
in all cases to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇ Blvd. West
Suite 1400
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy
in all cases to: GUY & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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
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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 ▇▇▇▇▇ 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/▇▇▇▇▇ ▇▇▇▇▇▇
---------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Per: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
SOCIETE INNOVATECH DU GRAND MONTREAL
Per: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
TOUCHTUNES DIGITAL JUKEBOX INC.
Per: /s/▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
---------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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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/▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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/▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
/s/▇▇▇ ▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇▇▇