EXHIBIT 10.1
CONVERSION AGREEMENT ENTERED INTO ON JUNE 10, 2003
BY AND AMONG: CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, a body politic duly
constituted pursuant to the LOI SUR XX XXXXXX DE DEPOT ET
PLACEMENT DU QUEBEC (L.R.Q. c. C-2), having its principal
place of business in the City of Montreal, Province of Quebec,
(hereinafter referred to as "CDPQ")
AND: TOUCHTUNES MUSIC CORPORATION, a corporation, duly incorporated
according to the laws of the State of Nevada,
(hereinafter referred to as the "CORPORATION")
1. PREAMBLE
1.1 WHEREAS Capital Communications CDPQ Inc. loaned to the Corporation the
sum of US$250,000 on July 5, 2001, the sum of US$250,000 on August 22, 2001, the
sum of US$250,000 on February 19, 2002, the sum of US$500,000 on March 27, 2002,
the sum of US$500,000 on April 10, 2002 and the sum of US$250,000 on May 22,
2002 (for a total principal amount outstanding of US$2,000,000), the whole as
evidenced by promissory notes issued by the Corporation to Capital
Communications CDPQ Inc. on such dates (the "COMMUNICATIONS PROMISSORY NOTES").
1.2 WHEREAS Capital Technologies CDPQ Inc. loaned to the Corporation the
sum of US$250,000 on July 6, 2001, the sum of US$250,000 on August 22, 2001, the
sum of US$500,000 on November 15, 2001 (which sum of US$500,000 was reimbursed
with interest on November 28, 2001), the sum of US$500,000 on December 20, 2001,
the sum of US$250,000 on February 20, 2002 and the sum of US$250,000 on April
11, 2002 (for a total principal amount outstanding of US$1,500,000), the whole
as evidenced by promissory notes issued by the Corporation to Capital
Technologies CDPQ Inc. on such dates (the "TECHNOLOGIES PROMISSORY NOTES").
1.3 WHEREAS Capital Communications CDPQ Inc. and Capital Technologies CDPQ
Inc. each loaned to the Corporation the sum of US$400,000 on December 20, 2002,
the whole as evidenced by convertible debentures issued by the Corporation to
each of Capital Communications CDPQ Inc and Capital Technologies CDPQ Inc. on
December 20, 2002 (the "DEBENTURES") having a maturity date of June 30, 2003.
1.4 WHEREAS Capital Communications CDPQ Inc. and Capital Technologies Inc.
have assigned, on the date hereof, all the Communications Promissory Notes,
Technologies Promissory Notes, Debentures (collectively, the "NOTES") and all
the shares held by them in the capital stock of the Corporation to CDPQ.
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1.5 WHEREAS CDPQ holds the following number and class of shares of the
Corporation as of the date hereof:
INVESTOR NUMBER AND CLASS
-------- ----------------
CDPQ 9,235,774 Series A Preferred Shares
8,888,889 Series B Preferred Shares
1.6 WHEREAS The Second Amended and Restated Articles of Incorporation of
the Corporation provided that the holders of Series B Preferred Shares are
entitled to receive, during each fiscal year of the Corporation, a cumulative
and preferential dividend of 9% on the full amount of the consideration received
by the Corporation for each share held, which is $2.25, which dividend shall
accrue daily from and after the date of issuance of each share.
1.7 WHEREAS The Second Amended and Restated Articles of Incorporation of
the Corporation will be further amended and Third Amended and Restated Articles
of Incorporation will be duly filed by the Corporation (the "THIRD AMENDED
CHARTER").
1.8 WHEREAS The Third Amended Charter creates Series C Preferred Stock and
provides that if shares of Class A voting common stock or Series C Preferred
Stock of the Corporation are issued for a per share price that is lower than the
conversion price of the Series A Preferred Shares or the Series B Preferred
Shares, then the respective conversion prices of the Series A Preferred Shares
and/or the Series B Preferred Shares, as the case may be, shall be adjusted to
such lower price.
1.9 WHEREAS On the date hereof, the Corporation owes CDPQ the following
amounts pursuant to the Notes (including principal, accrued interest calculated
up to and including December 31, 2002 and accrued dividends on the Series B
Preferred Shares):
INVESTOR AMOUNT DUE
-------- ----------
CDPQ US$ 15,003,123
1.10 WHEREAS Following the amendments to the capital stock of the
Corporation as provided in the Third Amended Charter and in consideration
thereof, the Corporation and CDPQ have agreed to convert the principal and
accrued interest on the Notes as well as all accrued dividends on the Series B
Preferred Shares into Series C Preferred Shares, the whole on the terms and
conditions set out in this
Conversion Agreement.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
2. INTERPRETATION
2.1 In this Agreement:
2.1.1 "CLOSING" has the meaning ascribed thereto in subsection 4.1;
2.1.2 "COMMON SHARES" means the shares of Class A voting common stock of the
Corporation, as such shares are described in the Third Amended Charter;
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2.1.3 "COMMUNICATIONS PROMISSORY NOTES" has the meaning ascribed thereto in
subsection 1.1;
2.1.4 "CONVERSION SHARES" has the meaning ascribed thereto in subsection 3.1;
2.1.5 "CONVERTED AMOUNT" has the meaning ascribed thereto in subsection 3.1;
2.1.6 "DEBENTURES" has the meaning ascribed thereto in subsection 1.3;
2.1.7 "EXCHANGE ACT" means the SECURITIES EXCHANGE ACT OF 1934 (United
States), as amended from time to time;
2.1.8 "NOTES" has the meaning ascribed thereto in subsection 1.4;
2.1.9 "SEC" means the United States Securities and Exchange Commission;
2.1.10 "SECURITIES ACT" means the SECURITIES ACT OF 1933, as amended from
time to time;
2.1.11 "SERIES A PREFERRED SHARES" means the shares of Series A Preferred
Stock as described in the Third Amended Charter;
2.1.12 "SERIES B PREFERRED SHARES" means the shares of Series B Preferred
Stock as described in the Third Amended Charter;
2.1.13 "SERIES C PREFERRED SHARES" means the shares of Series C Preferred
Stock as described in the Third Amended Charter;
2.1.14 "SHAREHOLDERS AGREEMENT" means the Amended and Restated Voting Trust
and Limited Shareholders Agreement to be entered into on the date
hereof among the Corporation, CDPQ, Societe Innovatech du Grand
Montreal and Techno Expres S.A.;
2.1.15 "TMC SEC DOCUMENTS" has the meaning ascribed there in subsection 5.1.3;
2.1.16 "TECHNOLOGIES PROMISSORY NOTES" has the meaning ascribed thereto in
subsection 1.2;
2.1.17 "THIRD AMENDED CHARTER" has the meaning ascribed thereto in subsection
1.7.
3. DEBT CONVERSION
3.1 Subject to the terms and conditions of this
Conversion Agreement, CDPQ
hereby agrees to convert, at the Closing, the following aggregate amount which
is owed to it by the Corporation pursuant to the Notes and all dividends accrued
on the Series B Preferred Shares:
INVESTOR AGGREGATE AMOUNT DUE
-------- --------------------
CDPQ US$15,003,123
(the "CONVERTED AMOUNT") into, and the Corporation hereby agrees to issue to
CDPQ, at the Closing, in full repayment of the Converted Amount and satisfaction
in full of indebtedness, the following number and class of shares (the
"CONVERSION SHARES"), at a conversion and issuance price of US$0.50 per share:
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INVESTOR NUMBER AND CLASS OF SHARES
------- --------------------------
CDPQ 25,000,000 Series C Preferred Shares
3.2 CDPQ hereby acknowledges that the above number of Series C Preferred
Shares shall be issued, at the Closing, as complete and final payment of the
Converted Amount.
4. CLOSING
4.1 The consummation of the transactions described in Section 3 above (the
"CLOSING") shall take place, by facsimile, overnight delivery, e-mail or other
means, at the offices of Xxxxxx & Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000
within three (3) business days following the satisfaction of the closing
conditions set forth below or at such other time and place as the Corporation
and CDPQ shall mutually agree.
4.2 The obligations of the Corporation and CDPQ under this
Conversion
Agreement are subject to the fulfilment, on or before the Closing, of each of
the following conditions:
4.2.1 All corporate action on the part of (i) the Corporation and its
officers, directors and shareholders and (ii) CDPQ and its officers,
directors and shareholders necessary for the authorization,
execution and delivery of this
Conversion Agreement and the
performance of all obligations contemplated hereunder shall have
been taken;
4.2.2 The Corporation shall have obtained the requisite stockholder
approval of the Third Amended Charter in compliance with
Nevada law
and shall have filed the Third Amended Charter with the appropriate
authority in the State of
Nevada and received confirmation of the
receipt of such filing;
4.2.3 The Corporation, CDPQ, Societe Innovatech du Grand Montreal and
Techno Expres S.A. shall have executed and delivered the Shareholders
Agreement; and
4.2.4 The Corporation shall have delivered to CDPQ an opinion letter from
its legal counsel confirming the matters raised in subsections 5.1.1,
5.1.2, 5.1.4 (i) and (iii), 5.1.5, 5.1.9 (i) and (iii) and the last
sentence of 5.1.10 hereof.
5. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
5.1 The Corporation hereby represents and warrants to CDPQ as of the date
of Closing as follows and acknowledges that CDPQ is relying upon the accuracy of
each and every one of such representations and warranties in connection herewith
and would not have entered into this
Conversion Agreement without such
representations and warranties:
5.1.1 SECURITIES ACT REPRESENTATION. Assuming the accuracy of the
representations and warranties of CDPQ contained in Section 6
hereof, the offer, issuance and sale by the Corporation of the
Conversion Shares hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act;
5.1.2 "BLUE SKY" LAW COMPLIANCE. Assuming the accuracy of the
representations and warranties of CDPQ contained in Section 6 hereof,
the Corporation has made all filings and taken all actions necessary
to comply with all U.S. "blue sky" laws with regard to the issuance of
the Conversion Shares;
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5.1.3 PUBLIC FILINGS. The Corporation has delivered to CDPQ 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 Corporation with the SEC from May 18,
2000 until the date hereof (the "TMC 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
Conversion Agreement, then on the date of
such filing): (i) each of the TMC 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 TMC
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. Without
limiting the foregoing, the financial statements of the Corporation
for the period ended December 31, 2002 provided to CDPQ are true and
correct and present fairly the financial position of the Corporation
as at such date and have been prepared in accordance with generally
accepted accounting principles in the United States of America;
5.1.4 INCORPORATION. The Corporation and each of its subsidiaries (i) has
been duly incorporated and organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, (ii) is duly licensed and registered and qualified as a
corporation to do business in each jurisdiction in which it owns or
leases property or carries on business, except where failure to be so
qualified would not have a material adverse effect on the business,
properties or financial condition of the Corporation and its
subsidiaries taken as a whole, and (iii) has all necessary corporate
power to own its properties and to carry on its business;
5.1.5 VALID AGREEMENT. The Corporation has the requisite corporate power,
capacity and authority (i) to execute, deliver and perform its
obligations under this
Conversion Agreement; (ii) to issue the
Conversion Shares to CDPQ in the manner and for the purposes set out
in this
Conversion Agreement; and (iii) to execute, deliver and
perform its obligations under all other agreements and instruments
executed and delivered by it pursuant to or in connection with this
Conversion Agreement. All corporate action on the part of the
Corporation, its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Conversion
Agreement, and the performance of all obligations of the Corporation
hereunder and the authorization, issuance and delivery of the
Conversion Shares has been taken, and this Conversion Agreement
constitutes a valid and legally binding obligation of the Corporation,
enforceable in accordance with its terms;
5.1.6 ISSUANCE OF CONVERSION SHARES. The issuance of the Conversion Shares
pursuant to this Agreement are not and will not be subject to any
pre-emptive rights or rights of first refusal other than as provided
in the Shareholders Agreement. When issued at the Closing in
accordance with the terms of this Conversion Agreement, all Conversion
Shares will be validly issued, fully paid and non-assessable, and will
be free of all liens, mortgages, charges, security interests, burdens,
encumbrances and other restrictions or limitations of any kind
whatsoever, and restrictions on transfer other than restrictions on
transfer provided in the Shareholders Agreement and under the state
and/or federal securities laws at the time a transfer by CDPQ is
proposed;
5.1.7 SHARE CAPITAL. After the issuance of the Conversion Shares, at the
Closing, the only issued and outstanding shares in the capital stock
of the Corporation and its
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subsidiaries (and rights, options and warrants to acquire same) shall
be as set out in SCHEDULE 5.1.7 annexed hereto, all of which, except
as indicated in such SCHEDULE 5.1.7, will be 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 Corporation or any other agreements or rights to
purchase or subscribe for any shares of the capital stock of the
Corporation or convert any obligation or shares into any shares of the
capital stock of the Corporation and the Corporation has not agreed to
issue or sell any shares of its capital stock or any securities of any
kind;
5.1.8 SUBSIDIARIES. The Corporation does not currently own or control,
directly or indirectly, any other corporation, association or other
business, entity, other than TouchTunes Digital Jukebox Inc.;
5.1.9 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance by the Corporation of this Conversion Agreement and of the
transactions contemplated hereby will not result in any violation of
or constitute a default under any provision of (i) its Articles of
Incorporation or By-laws, (ii) any material agreement or instrument to
which the Corporation is a party or by which the Corporation is bound,
or (iii) any judgement, decree, order, law, statute, rule or
regulation applicable to the Corporation;
5.1.10 COMPLIANCE WITH LAWS. The Corporation and each of its subsidiaries has
been conducting its business in the ordinary course in compliance with
all applicable federal, provincial, state and local laws, rules and
regulations of each jurisdiction in which it carries on business,
including, without limitation, those pertaining to the environment,
and is not in breach of any such laws, rules and regulations where a
breach would have a material adverse effect on such business. The
Corporation and each of its subsidiaries owns or possesses all
requisite governmental licenses, authorizations and approvals to carry
on its business as now conducted by it. All such licenses,
registrations and qualifications are in good standing. The issuance of
the Conversion Shares by the Corporation to CDPQ pursuant to this
Conversion Agreement is being effected in accordance with all
applicable securities legislation;
5.1.11 DISCLOSURE. None of the written information or statements provided by
the Corporation to CDPQ upon their request prior to Closing contained
any untrue statement of 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;
5.1.12 LITIGATION. Other than as disclosed in the TMC SEC Documents, there is
no suit, action, litigation, arbitration proceeding or governmental
proceeding, including appeals and applications for review, in
progress, pending or, as far as the Corporation is aware of,
threatened against or relating to any of the Corporation or its
subsidiaries or affecting any of the Corporation's business or its
subsidiaries' business and which, if determined adversely to the
Corporation or its subsidiaries, might materially and adversely affect
the business, future prospects or the financial condition of the
Corporation or of any of its subsidiaries;
5.1.13 SOLVENCY. Neither the Corporation nor any of its subsidiaries has
proposed a compromise or arrangement to its creditors, has any
petition for a receiving order filed against it, has taken any
proceeding with respect to a compromise, arrangement or
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winding-up, or otherwise taken advantage of any insolvency or
bankruptcy legislation or has had a receiver appointed with respect to
any of its assets, had any encumbrancer take possession of any of its
property or had any execution of distress or seizure become
enforceable or levied upon any of its property;
5.1.14 PROPERTY. The Corporation and each of its subsidiaries has good and
marketable title to, or other right to use, all property (whether real
or personal, tangible or intangible) that is material to its business.
6. REPRESENTATIONS AND WARRANTIES OF CDPQ
6.1 CDPQ hereby represents and warrants to the Corporation, as of the date
of Closing, as follows and acknowledges that the Corporation is relying upon
such representations and warranties in connection herewith and would not have
entered into this Conversion Agreement without such representations and
warranties:
6.1.1 CORPORATE ORGANIZATION. CDPQ is duly constituted, validly existing and
in good standing under the laws of its jurisdiction of incorporation;
6.1.2 POWER AND AUTHORITY. CDPQ has the necessary corporate power and
authority to execute this Conversion Agreement and to perform its
obligations hereunder. The execution of this Conversion Agreement by
CDPQ 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 registration with, or notification to any
person, or any action or consent under any laws of the Province of
Quebec or any other laws to which CDPQ is subject;
6.1.3 VALIDITY. The execution of this Conversion Agreement, the consummation
of the transactions contemplated herein, the performance by CDPQ of
its obligations hereunder and the compliance by it with this
Conversion Agreement do not:
6.1.3.1 violate, contravene or breach, or constitute a default under,
the constating documents, law or by-laws of CDPQ; or
6.1.3.2 violate, contravene or breach any laws to which CDPQ is
subject;
6.1.4 INVESTMENT. CDPQ is acquiring its Conversion Shares as provided in
this Conversion Agreement for investment for its own account or for
the account of its affiliates, and not with the view to, or for resale
in connection with, any distribution thereof other than to its
affiliates;
6.2 ACKNOWLEDGEMENTS. CDPQ hereby makes the following acknowledgements:
6.2.1 REGISTRATION. It understands that the right to acquire the Conversion
Shares as provided in this Conversion Agreement, has not been, and
will not be, registered under the Securities Act or applicable state
securities laws, and is being extended to CDPQ 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 subsection 6.1.4;
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6.2.2 NON-TRANSFERABILITY. It acknowledges that any resale of any of the
Conversion 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. CDPQ is an "accredited investor" within the
meaning of Rule 501 under the Securities Act.
7. SURVIVAL OF REPRESENTATIONS
7.1 The representations, warranties and covenants made by the parties
hereunder will survive the Closing.
8. FURTHER ASSURANCES
8.1 Following the Closing, as may be necessary or desirable, and without
further consideration, each party shall deliver such documents, certificates,
assurances and other instruments as may be reasonably required to carry out the
provisions of this Conversion Agreement.
9. MISCELLANEOUS PROVISIONS
9.1 All notices in connection with this Conversion Agreement shall be in
writing and either hand-delivered, mailed by registered or certified mail,
postage prepaid or sent by facsimile transmission (with confirmation notices
sent as described above). Any notice shall be deemed to have been received on
the date of the hand-delivery, if delivered by hand, on the fifth business day
following the date of mailing if sent by registered or certified mail or on the
next business day following the date of transmission if sent by facsimile
transmission. The parties' respective addresses for the purpose of receiving
such notices are as follows:
If to CDPQ: CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
Centre CDP Capital
0000, Xxxxx Xxxx-Xxxx Xxxxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: President of Capital Technologies
CDPQ Inc.
Telecopier: (000) 000-0000
Attention: President of Capital Communications
CDPQ Inc.
Telecopier: (000) 000-0000
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with a copy in all cases to: XXXXXXXX XXXXXXXXXX
0000 Xxxx-Xxxxxxxx Blvd. West
Suite 1400
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxxxxx Xxxxxx
Telecopier: (000) 000-0000
if to the Corporation:
TOUCHTUNES MUSIC CORPORATION
0000 Xxxx Xxxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxx
00000, X.X.X.
Attention: The President
Telecopier: (000) 000-0000
with a copy in all cases to: XXXXXX & XXXXXX
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
and:
XXXXXXXX CARANO XXXXXX XXXXXX XXXXXX
XXXXXXXXXX & XXXXX LLP
000 Xxxxx Xxxxxx
Xxxx, Xxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
Any party may, at any time, give notice of any change of address to the other
and the address specified therein shall be such party's address for the purpose
of receiving notices.
9.2 The division of this Conversion Agreement into paragraphs and
subparagraphs and the insertion of headings are for convenience of reference
only and will not affect the interpretation of this Conversion Agreement.
9.3 This Conversion Agreement and the provisions hereof shall enure to the
benefit of and be binding upon the parties and their respective successors and
permitted assigns.
9.4 All references to dollar amounts herein mean United States dollars
unless otherwise indicated.
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9.5 This Conversion Agreement may be executed in any number of counterparts
(either originally or by facsimile), each of which shall be deemed to be an
original, and all of which taken together shall be deemed to constitute one and
the same instrument, and it shall not be necessary in making proof of this
Conversion Agreement to produce or account for more than one such counterpart.
9.6 This Agreement shall be governed in all respects by the laws of the
State of
Nevada as they are applied to agreements entered into in
Nevada between
Nevada residents and performed entirely within
Nevada. Whenever possible, each
provision of this Conversion Agreement shall be interpreted in such manner as to
be effective and valid under such law, but if any provision hereof shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions hereof.
IN WITNESS WHEREOF, each of the parties has caused this Conversion Agreement to
be executed on its behalf by a duly authorised officer all as of the date first
written above.
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
TOUCHTUNES MUSIC CORPORATION
Per: /s/ Xxxxx Xxxxxx Per: /s/ Xxxx Xxxxxxxxx
------------------------------ ------------------------------
Name: Xxxxx Xxxxxx Name: Xxxx Xxxxxxxxx
Title: Title: President and C.E.O.
Per: /s/ Xxxxx Xxxxxxxxxxx
------------------------------
Name: Xxxxx Xxxxxxxxxxx
Title:
Conversion Agreement
TouchTunes Music Corporation
SCHEDULE 5.1.7
ISSUED AND OUTSTANDING SHARES
