EXHIBIT 7
SHAREHOLDERS AGREEMENT
THIS AGREEMENT made as of the 12 day of June, 1998.
BY AND AMONG:
XXXXX X. XXXXXXXXX,
of the City of Toronto in the
Province of Ontario,
(hereinafter referred to as "Drabinsky"),
OF THE FIRST PART,
- and -
XXXXX X. XXXXXXXX,
of the City of Toronto in the
Province of Ontario,
(hereinafter referred to as "Xxxxxxxx"),
OF THE SECOND PART,
- and -
XXX X. XXXXXX,
of the City of New York in the
State of New York,
(hereinafter referred to as "Xxxxxx"),
OF THE THIRD PART,
- and -
XXXXX X. XXXXXX,
of the City of Xxxxxxx Hills in the
State of California,
(hereinafter referred to as "Xxxxxx"),
OF THE FOURTH PART,
- and -
LYNX VENTURES L.P.,
a limited partnership existing under the laws of
the State of Delaware,
(hereinafter referred to as the "Investor"),
OF THE FIFTH PART,
- and -
LIVENT INC.,
a corporation incorporated under the laws of
the Province of Ontario,
(hereinafter referred to as the "Corporation"),
OF THE SIXTH PART,
- and -
XXXXXX X. XXX EQUITY PARTNERS, L.P.,
a limited partnership existing under the laws
of the State of Delaware,
for purposes of Section 4.4 only,
(hereinafter referred to as "THL"),
OF THE SEVENTH PART,
- and -
THL-CCI LIMITED PARTNERSHIP,
a limited partnership existing under the
laws of the Commonwealth of Massachusetts,
for purposes of Section 4.4 only,
(hereinafter referred to as "THL-CCI"),
OF THE EIGHTH PART.
WHEREAS the Shareholders (as defined below) have purchased, or
have rights to purchase, shares of common stock, no par value, of the
Corporation (the "Common Shares");
WHEREAS the Shareholders, the Corporation and Montreal Trust
Company of Canada, as depositary (the "Depositary"), have entered into a
Voting Trust Agreement, dated as of the date hereof (the "Voting Trust
Agreement"), pursuant to which each of the Executives (as defined below)
have agreed to deposit all Common Shares beneficially owned by him which
are free and clear of any encumbrances with the Depositary to allow such
securities to be voted by the Investor, in its capacity as Voting Trustee
(as defined therein), pursuant to the terms thereof;
WHEREAS the Shareholders and the Investor have each entered into
a Voting Agreement, dated as of the date hereof, pursuant to which all
Common Shares or voting securities beneficially owned by the Shareholders
and not subject to the Voting Trust Agreement are subject to the voting
arrangement set forth therein;
WHEREAS THL, THL-CCI and the Investor have each entered into a
Voting, Right of First Offer and Waiver Agreement, dated as of the date
hereof, pursuant to which each of the parties, among other things, have
agreed to vote Common Shares owned by it in favor of certain director
nominees;
WHEREAS the execution and delivery of this Shareholders Agreement
is a condition precedent to the closing of the transactions contemplated by
the Investment Agreement, dated as of April 13, 1998 (the "Investment
Agreement"), between the Corporation and the Investor; and
WHEREAS the parties hereto wish to establish their respective
rights and obligations in respect of certain matters pertaining to the
Corporation, the transfer and disposition of securities of the Corporation
and various other matters, on the terms and conditions hereinafter set
forth.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of
the respective covenants and agreements of the parties contained herein and
for other good and valuable consideration (the receipt and sufficiency of
which are hereby acknowledged by each of the parties hereto), the parties,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
Where used in this Agreement, unless there is something in the
context or the subject matter inconsistent therewith, the following terms
shall have the following meanings, respectively:
"ANTIDILUTION ADJUSTMENTS" shall mean appropriate adjustments made
from time to time to the Common Shares in question in order to take
into account dilutive effects resulting from changes in the number of
shares of common stock outstanding subsequent to the Closing Date,
whether by recapitalization, declaration of a stock split, payment of
a stock dividend or otherwise;
"AUDIT COMMITTEE" means the Audit Committee of the Board which has the
power and authority to review the financial statements of the
Corporation and to report thereon to the Board.
"BOARD" means the board of directors of the Corporation;
"BUSINESS" means the Corporation's business of live entertainment
production and theatre management;
"BUSINESS DAY" means a day on which both the TSE and the NASDAQ are
open for trading;
"BUYER" has the meaning attributed to that term in Section 4.4(f);
"CLOSING DATE" has the meaning attributed to that term in the
Investment Agreement;
"COMMON SHARES" has the meaning attributed to that term in the
recitals;
"COMPENSATION COMMITTEE" means the Compensation Committee of the Board
which has the power and authority to determine compensation of
officers and directors of the Corporation;
"CONVERTIBLE SECURITIES" means, collectively, (i) the 8.95%
Subordinated Convertible Notes of the Corporation in the aggregate
principal amount of $15,000,000 owned by Xxxxxx X. Xxx Equity
Partners, L.P. and THL-CCI Limited Partnership and (ii) the 10%
Subordinated Convertible Debentures of the Corporation in an aggregate
amount of $8,500,000;
"DEBT", with respect to the Corporation and its subsidiaries,
determined on a consolidated basis, means (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to
capital leases that is properly classified as a liability on a balance
sheet in conformity with Canadian generally acceptable accounting
principles, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for
borrowed money (other than accounts payable incurred in the ordinary
course of business and accrued expenses incurred in the ordinary
course of business), (iv) any obligation owed for all or any part of
the deferred purchase price of property or services, which obligation
is due more than one year from the date of incurrence of the
obligation, and (v) all indebtedness secured by any lien on any
property or asset owned or held by the Corporation regardless of
whether the indebtedness secured thereby shall have been assumed by
the Corporation or is nonrecourse to the credit of the Corporation,
but excluding deferred performance revenues attributable to advance
ticket sales and letters of credit in respect thereof;
"DEPOSITED SHARES" has the meaning attributed to that term in the
Voting Trust Agreement;
"DISPOSITION PERIOD" has the meaning attributed to that term in
Section 4.5(h);
"DRAG-ALONG NOTICE" has the meaning attributed to that term in Section
4.5(b);
"DRAG-ALONG PURCHASER" has the meaning attributed to that term in
Section 4.5(c);
"DRAG-ALONG SALE" has the meaning attributed to that term in Section
4.5(c);
"EXECUTIVES" means, collectively, Drabinsky, Gottlieb, Xxxxxx and
Xxxxxx;
"EXECUTIVE COMMITTEE" means the Executive Committee of the Board which
has the full delegated power and authority of the Board (to the extent
Permitted By Law) in the absence of a meeting of the full Board;
"FULLY DILUTED BASIS" means, with respect to the ownership of Common
Shares by a Shareholder at any particular time, such ownership
determined on the assumption that immediately prior to such time all
existing rights to acquire Common Shares (whether through options,
warrants, rights of conversion, rights of exchange or otherwise,
including, without limitation, the conversion rights attached to the
Convertible Securities, and including the purchase rights attached to
options issued under the Corporation's Stock Option Plan (other than
to the extent that any such option is not exercisable by the
optionholder at that time and the exercise price of which is higher
than the closing price of the Common Shares on the NASDAQ on the
Business Day immediately prior to such time), but excluding the Pre-
emptive Opportunity) will be exercised by all holders of such rights
including the Shareholders;
"INVESTMENT AGREEMENT" has the meaning attributed to that term in the
recitals;
"MANAGEMENT VOTING TRUST AGREEMENT" has the meaning attributed to that
term in Section 2.2(b);
"MARKET PRICE", as of a particular date, means the closing price of
the Common Shares on the NASDAQ on the last Business Day preceding the
date in question on which the Common Shares were traded; provided,
however, that if the Common Shares are not then listed and posted on
the NASDAQ (or any other stock exchange on which the Common Shares are
actively traded and from which a Market Price can be determined), the
Market Price shall be the fair market value of the Common Shares as
determined by such firm or corporation having substantial experience
in business valuation as may be agreed upon by the Shareholders;
"MARKET TRANSACTION" has the meaning attributed to that term in
Section 4.3(f);
"NASDAQ" means the NASDAQ National Market;
"NET INCOME" means, for any fiscal year, consolidated net income of
the Corporation for such year, calculated after taxes but before
extraordinary items of income (loss) and determined on a basis
consistent with prior periods and in accordance with accounting
principles and practices generally accepted in Canada, as set forth in
the audited consolidated financial statements for the Corporation for
such fiscal year;
"1993 SHAREHOLDERS AGREEMENT" has the meaning attributed to that term
in Section 2.2(a);
"1995 INVESTMENT AGREEMENT" means the Investment Agreement, dated
February 3, 1995, among the Corporation, Xxxxxx X. Xxx Equity
Partners, L.P. and THL-CCI Limited Partnership;
"1995 SHAREHOLDERS AGREEMENT" means the Shareholders Agreement, dated
February 3, 1995, among Drabinsky, Gottlieb, Xxxxxx X. Xxx Equity
Partners, L.P. and THL-CCI Limited Partnership;
"NOMINATING COMMITTEE" means the Nominating Committee of the Board
which has the power and authority to nominate candidates for election
to the Board;
"NOTICE PARTY" has the meaning attributed to that term in Section
4.4(g);
"OPTION AGREEMENT" has the meaning attributed to that term in the
recitals;
"OPTIONED SHARES" has the meaning attributed to that term in the
Option Agreement;
"PARTICIPANT" has the meaning attributed to that term in Section
4.4(b);
"PARTICIPATING OFFER" has the meaning attributed to that term in
Section 4.4(c);
"PARTICIPATING SHARES" has the meaning attributed to that term in
Section 4.4(b);
"PARTICIPATION ELECTION" has the meaning attributed to that term in
Section 4.4(b);
"PERMITTED BY LAW" means the Corporation shall cause an event to
happen to the extent that a failure to take such action will give rise
to an action against the Corporation at law or in equity;
"PERMITTED ENCUMBRANCE" means, collectively, any mortgage, pledge,
charge, hypothecation or other encumbrance on Shares granted to a bank
or other bona fide financial institution as collateral security for
bone fide indebtedness incurred by the owner of such Shares;
"PERMITTED TRANSFEREE" means, in relation to any particular
Shareholder:
(a) a corporation or other entity of which all of the outstanding
voting securities or interests are beneficially owned, directly
or indirectly, by such Shareholder, or
(b) the spouse or children of such Shareholder, or a
corporation, trust or partnership of which none of the
shareholders, beneficiaries or partners, as the case may be, is
a Person other than such Shareholder, his spouse or his
children for bona fide estate planning purposes;
"PERSON" includes an individual, a firm, a corporation, a syndicate, a
partnership, a trust, an association, a joint venture, an incorporated
or unincorporated organization, a government, a governmental authority
or other entity;
"PRE-EMPTIVE OPPORTUNITY" has the meaning attributed to that term in
Section 3.1(f);
"QUALIFYING BID" means a bid by any party, which is supported by the
Investor, to purchase more than a majority of the Common Shares of the
Corporation;
"RESPONSE PERIOD" has the meaning attributed to that term in Section
4.3(g);
"RESTRICTED PERIOD" means the period commencing from the Closing Date
and ending on the earlier of (i) the first anniversary of the Closing
Date and (ii) a Qualifying Bid;
"SALE NOTICE" has the meaning attributed to that term in Section
4.4(a);
"SALE PERCENTAGE" has the meaning attributed to that term in Section
4.5(a);
"SHAREHOLDERS" means, collectively, Drabinsky, Gottlieb, Furman,
Maisel, the Investor and any Permitted Transferee of any of the
foregoing that complies with Article 4 hereof;
"SHARE LIMIT" has the meaning attributed to that term in Section
6.1(b);
"SHARES" means any and all Common Shares beneficially owned by such
Shareholder, whether presently owned or acquired following the Closing
Date;
"TAG-ALONG SALE" has the meaning attributed to that term in Section
4.4(f);
"TRANSACTION DOCUMENT" has the meaning attributed to that term in the
Investment Agreement;
"TRANSFER" of a security includes any sale, exchange, transfer,
assignment, gift, pledge, encumbrance, hypothecation, alienation,
disposition or other transaction, whether voluntary, involuntary or by
operation of law, by which the legal or beneficial ownership of, or
any security interest or other right, title or interest in, such
security passes from one Person to another or to the same Person in a
different capacity, whether or not for value, and any change of
control of the legal or beneficial owner of the security or of any
Person which controls, directly or indirectly, in any manner
whatsoever, such legal or beneficial owner of the security, and "to
transfer", "transferred" and similar expressions shall have
corresponding meanings;
"TSE" means The Toronto Stock Exchange;
"U.S. EXCHANGE" means any of NASDAQ, the New York Stock Exchange or
the American Stock Exchange; and
"VOTING TRUST AGREEMENT" has the meaning attributed to that term in
the recitals.
1.2 GENDER/NUMBERS
Words importing the singular number only shall include the plural
and vice versa and words importing the use of any gender shall include both
genders.
1.3 HEADINGS
The article and section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
1.4 PROPER LAW
This Agreement and all documents ancillary hereto shall be
governed by and interpreted in accordance with the laws of the Province of
Ontario and the federal laws of Canada applicable therein.
1.5 BUSINESS DAYS
If any act is required hereunder to be done, any notice is
required hereunder to be given or any period of time is to expire hereunder
on any day that is not a Business Day, such act shall be required to be
done or notice shall be required to be given or time shall expire on the
next succeeding Business Day.
1.6 RECLASSIFICATION OF SHARES
The provisions of this Agreement shall apply, mutatis mutandis,
to any shares or securities of any nature into which the Common Shares or
any of them may be converted, exchanged, reclassified, redivided,
redesignated, subdivided or consolidated, to any shares or securities of
any nature that are received by a Shareholder as a stock dividend or
distribution payable in shares, securities, warrants, rights or options of
any nature of the Corporation, to any shares, securities, warrants, rights
or options of any nature of the Corporation or any successor, continuing
company or corporation of the Corporation that may be received by a
Shareholder on a reorganization, amalgamation, arrangement, consolidation
or merger, statutory or otherwise, and to any shares, securities, warrants,
rights or options hereafter issued or allotted by the Corporation to a
Shareholder including, without limitation, Common Shares issued to a
Shareholder upon conversion or exercise of any other security, warrant
right or option, all of which shares, securities, warrants, rights or
options shall be deemed to be Shares for all purposes of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTEES
2.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to each other
Shareholder as follows and acknowledges that each such other Shareholder is
relying upon such representations and warranties in connection with the
entering into of this Agreement:
(a) the Shareholder has all necessary capacity, power and
authority to enter into this Agreement and perform his or its
obligations hereunder;
(b) all necessary action has been taken by the Shareholder to
authorize the execution and delivery of this Agreement by the
Shareholder and the performance by the Shareholder of his or its
obligations hereunder, and this Agreement has been duly executed
and delivered by the Shareholder and constitutes a legal, valid
and binding obligation of the Shareholder, enforceable against
the Shareholder in accordance with its terms;
(c) neither the execution and delivery of this Agreement by the
Shareholder nor the performance by the Shareholder of his or its
obligations hereunder will conflict with or result in the
violation, in the case of the Investor, of any of the terms and
provisions of its organizational documents and, in the case of
each Shareholder, of any agreement, obligation, contract,
commitment, law or regulation to which such Shareholder is a
party or by which he or it is bound;
(d) that the Shareholder is free to enter into this Agreement and is
not subject to any obligations or agreements which will or might
prevent or interfere with the performance of his or its
obligations hereunder; and
(e) that the Shareholder has had the opportunity to seek, and was not
prevented or discouraged from seeking, independent legal advice
prior to the execution and delivery of this Agreement and that,
in the event that he or it did not avail himself or itself of
that opportunity prior to signing this Agreement, he or it did so
voluntarily without any undue duress or pressure and agrees that
this failure to obtain legal advice shall not be used by him or
it as a defense as to the enforcement of his or its obligations
under this Agreement.
2.2 REPRESENTATIONS AND WARRANTIES OF DRABINSKY AND XXXXXXXX
Each of Drabinsky and Xxxxxxxx hereby represents and warrants to
each other Shareholder as follows and acknowledges that each such other
Shareholder is relying upon such representations and warranties in
connection with the entering into of this Agreement:
(a) the Shareholders Agreement, dated May 17, 1993, between Drabinsky
and Xxxxxxxx (the "1993 Shareholders Agreement") will, effective
as of the Closing Date, pursuant to Section 5.1 hereof, be
terminated and the operative provisions thereof shall have no
further force and effect thereafter;
(b) as of the date hereof, Drabinsky and Xxxxxxxx possess no rights
of first refusal or first offer with respect to any Common
Shares, other than those held (i) pursuant to the Voting Trust
Agreement, dated May 19, 1993 (the "Management Voting Trust
Agreement"), among Drabinsky, Gottlieb and the Management
Shareholders (as defined therein), which have been effectively
assigned to the Investor contemporaneously herewith pursuant to
an Assignment and Assumption Agreement, dated as of the date
hereof, by and among Xxxxxxxx, Xxxxxxxxx and the Investor and
(ii) pursuant to Sections 4.5 and 4.6 of the 1995 Shareholders
Agreement which have been effectively assigned to the Investor
contemporaneously herewith pursuant to Section 5.2 hereof; and
(c) other than the Option Agreement, the 1993 Shareholders Agreement,
the 1995 Shareholders Agreement and the Management Voting Trust
Agreement, neither Drabinsky nor Xxxxxxxx were party to any other
agreements with shareholders of the Corporation (or persons who
have rights to acquire Common Shares in the Corporation), that
was in effect on or after April 13, 1998, pertaining to the
Business and affairs of the Corporation or the transfer and
disposition of securities of the Corporation.
ARTICLE 3
COVENANTS
3.1 COVENANTS OF THE SHAREHOLDERS AND THE CORPORATION
The Corporation agrees and covenants that, and each of the
Shareholders, in his or its capacity as a shareholder of the Corporation,
agrees to vote or cause to be voted all Shares and any other voting
securities in the Corporation beneficially owned by him or it (including
any Common Shares and voting securities acquired after the date hereof),
and to exercise his or its influence in respect of the Corporation
(including with respect to his or its nominees who are directors of the
Corporation) in an effort to ensure that, unless otherwise agreed to in
writing by the Investor:
(a) Xxxxxxx X. Xxxxx shall, to the extent Permitted By Law, be
elected or appointed as a member of the Board and Chairman of
each of the Executive Committee;
(b) a Nominating Committee shall be formed which shall have the
authority to nominate candidates for election to the Board and
thereafter, to the extent that nominees for election as directors
approved from time to time by the Nominating Committee are not
otherwise elected by shareholders to the Board, the Corporation
shall, to the extent Permitted By Law, cause each such nominee to
be appointed to the Board;
(c) up to five qualified persons identified by the Investor shall be
appointed as members of the Board promptly following the 1998
annual meeting of the shareholders of the Corporation and
thereafter the Investor shall have the right to propose nominees
for election as directors and consult with the Corporation on the
identity of such proposed nominees, and, to the extent Permitted
By Law, all individuals nominated by the Nominating Committee
shall be acceptable to the Investor;
(d) the Executive Committee, Compensation Committee, Nominating
Committee and Audit Committee of the Board shall to the extent
Permitted By Law be composed of members acceptable to the
Investor;
(e) in the event of a tie with respect to any vote of the Executive
Committee, the Chairman of the committee shall be entitled to
break the tie;
(f) if the Corporation proposes to issue any Common Shares or any
securities convertible into or exchangeable for Common Shares,
whether to the public or to private investors, the Corporation
will give the Investor as much prior notice thereof as is
practicable in the circumstances and will give the Investor a
reasonable and equal opportunity (the "Pre-emptive Opportunity")
to purchase up to that number of Common Shares or such other
securities that will enable him or it, after giving effect to
such issue of Common Shares or other securities (including the
issue of Common Shares upon the exercise of any conversion or
exchange rights attached to any such other securities by all
holders of any such securities), to maintain his or its pro rata
ownership of Common Shares; provided that the Corporation shall
ensure that (i) the Investor will have a period of not less than
five calendar days following notice of any such issue within
which to decide whether to exercise its rights under any Pre-
emptive Opportunity and (ii) the Investor will not be required to
pay the purchase price for any securities it elects to purchase
under any Pre-emptive Opportunity until not earlier than the
tenth Business Day following expiry of the period referred to in
clause (i) of this paragraph; and provided further that the Pre-
emptive Opportunity shall not apply with respect to the issue of
any Common Shares or securities pursuant to (A) the Investment
Agreement, (B) any Transaction Document, (C) the Convertible
Securities, or (D) the stock option plans of the Corporation or
the exercise of options issued pursuant to the stock option plans
of the Corporation; and further provided that for purposes of
this paragraph 3.1(f) the Investor's pro rata ownership of Common
Shares at any time shall be determined on a fully diluted basis;
(g) the Corporation will register any Shares beneficially owned by
the Shareholders for resale under Canadian or U.S. securities
laws in accordance with Schedule A;
(h) the Corporation shall not adopt or otherwise create any
restriction or limitation on the ability of the Investor to
purchase additional Common Shares; and
(i) if requested by the Investor, to the extent Permitted By Law, the
Corporation shall take all such action as is required under
applicable law to obtain shareholder approval of the relocation
of the jurisdiction of incorporation of the Corporation from the
Province of Ontario to the Yukon Territory or such other
jurisdiction in Canada specified by the Investor on the time
schedule outlined by the Investor at an annual or special meeting
of the shareholders as specified in such request, including
making a Board recommendation with respect to such relocation;
provided, however, that the Corporation's and the Shareholders'
obligation to cause the above mentioned relocation to occur shall
terminate if the relocation is not commenced prior the third
anniversary of the Closing Date.
With respect to the matters set forth in subsections (a), (b),
(c), (d) and (i) above, Investor acknowledges that such provisions do not
require the members of the Board of Directors to take action in derogation
of their fiduciary duties under the then applicable corporate statute.
Such acknowledgement shall not, however, excuse the Corporation from its
obligations under such provisions to the extent that such obligations are
Permitted By Law.
ARTICLE 4
TRANSFER OF SHARES
4.1 RESTRICTIONS ON TRANSFER
(a) Notwithstanding anything to the contrary contained herein, under
no circumstance shall an Executive, a Permitted Transferee of
such Executive or any affiliate of either of them transfer
Shares, without the prior written consent of the Investor, unless
such transfer is in compliance with each of the following:
(i) if the proposed transfer involves Deposited Shares, the
terms and conditions set forth in the Voting Trust
Agreement regarding the transfer of Deposited Shares must
be complied with to the extent any such Deposited Shares
are to be transferred;
(ii) if the proposed transfer involves Optioned Shares, the
terms and conditions set forth in the Option Agreement
regarding the transfer of Optioned Shares must be
complied with to the extent any such Optioned Shares are
to be transferred; and
(iii) except in the case of a transfer (A) in connection with
the incurrence of, or a foreclosure pursuant to, a
Permitted Encumbrance which complies with the
provisions of clauses (i) and (ii) above or (B) to a
Permitted Transferee in accordance with Section 4.2,
the provisions of Section 4.3 shall have been complied
with.
(b) Subject to compliance with the provisions of Section 4.1(a),
during the Restricted Period, neither of the Executives nor their
affiliates shall transfer any Shares except in accordance with
one of the following:
(i) a transfer of Shares to a Permitted Transferee in
accordance with the provisions of Section 4.2;
(ii) a transfer of Shares, which are not Optioned Shares,
pursuant to a foreclosure on Shares subject to a Permitted
Encumbrance;
(iii) transfers by Drabinsky which aggregate to no more than
100,000 Shares, which are not Optioned Shares, during
the Restricted Period; or
(iv) transfers by Xxxxxxxx which aggregate to no more than
100,000 Shares, which are not Optioned Shares, during the
Restricted Period.
(c) In the event of the death of an Executive, the transfer
restrictions set out in this Section 4.1 shall apply and be
binding against the estate of such deceased Executive.
4.2 PERMITTED TRANSFERS
In order for a transfer to a Permitted Transferee to be in
compliance with provisions of Section 4.1, the Executive shall have
provided the other Shareholders with written notice of such proposed
transfer at least 15 days prior to consummating such transfer stating the
name and address of the Permitted Transferee, the relationship between the
transferring Shareholder and the Permitted Transferee, and the Permitted
Transferee shall have executed a copy of this Agreement as an assignee of
such Executive with respect to the transferred Shares and such Permitted
Transferee shall assume all of the obligations of such Executive, with
respect to the transferred Shares. If any Permitted Transferee to whom
Shares have been transferred pursuant to this Section 4.2 by an Executive
ceases to be a Permitted Transferee, unless the transfer restrictions set
forth in Section 4.1 shall have otherwise been complied with on or before
such Person ceases to be a Permitted Transferee of such Executive, all
such Shares shall be transferred back to the transferring Executive
immediately prior to the time such Person ceases to be a Permitted
Transferee. The transferring Executive and such Permitted Transferee shall
be jointly and severally liable for any breach of this Agreement by such
Permitted Transferee.
4.3 RIGHTS OF FIRST REFUSAL
(a) Subject to compliance with the provisions of Section 4.1 hereof,
if an Executive, his Permitted Transferee or an affiliate of
either of them (each, a "Selling Shareholder") desires to
transfer all or some of his Shares to any Person (the "Proposed
Transferee") other than (x) to a Permitted Transferee in
accordance with Section 4.2 or (y) pursuant to a foreclosure on
Shares subject to a Permitted Encumbrance, such Selling
Shareholder shall, prior to consummating any such Transfer, give
written notice (a "Sale Offer") to the Investor, containing (i)
the number of Shares proposed to be transferred (the "Offered
Shares") pursuant to a bona fide written offer or a Market
Transaction (as defined below), (ii) where such sale is other
than pursuant to a Market Transaction, the name and address of
the Proposed Transferee, (iii) the proposed purchase price
(which, in the case of a Market Transaction, shall not be less
than the average closing price on the applicable stock exchange
for the five preceding trading days), terms and payment and other
material terms and conditions of the Proposed Transferee's offer
and (iv) an offer to sell the Offered Shares set forth in the
Sale Offer at the same price and on the same terms and conditions
as offered to the Proposed Transferee.
(b) The Investor shall have the right, during the applicable Response
Period (as defined below), to purchase all of the Offered Shares
pursuant to the Sale Offer, exercisable by delivering a written
notice to the Selling Shareholder, within the applicable Response
Period. The provision of such notice shall be deemed to create a
binding agreement between the Investor and the Selling
Shareholder with respect to the purchase and sale of the Offered
Shares.
(c) In the event that the Investor shall have notified the Selling
Shareholder within the applicable Response Period that the
Investor desires to purchase all of the Offered Shares, the
Investor shall have 20 days from the last day of the Response
Period to complete such purchase. In the event that the Investor
shall not have completed such purchase within such 20 day period,
then the Selling Shareholder shall have the right to sell such
Shares without the restrictions set forth in this Section 4.3.
(d) If at the end of the applicable Response Period the Investor has
not given notice of its decision to purchase all of the Offered
Shares, then the Selling Shareholder shall be entitled to sell
not less than all of the Offered Shares to the Proposed
Transferee during the applicable Disposition Period (as defined
below) at a price not lower than that contained in the Sale
Offer and on terms not more favorable to the Proposed Transferee
than were contained in the Sale Offer. Promptly after any sale
pursuant to this Section 4.3, the Selling Shareholder shall
notify the Corporation and the Investor of the consummation
thereof and shall furnish such evidence of the completion
(including time of completion) of such sale and of the terms
thereof as the Corporation or the Investor may request. Shares
sold to a Proposed Transferee in compliance with the provisions
of this Section 4.3 shall thereafter not be subject to the terms
of this Agreement.
(e) If at the end of the applicable Disposition Period the Selling
Shareholder has not completed the sale of all of the Offered
Shares to the Proposed Transferee, the Selling Shareholder shall
no longer be permitted to sell such Offered Shares pursuant to
this Section 4.3 without again fully complying with the
provisions of this Section 4.3 and all the restrictions on sale,
transfer, assignment or other disposition contained in this
Agreement shall again be in effect.
(f) As used herein, the term "Market Transaction" shall mean a sale
of Shares through the facilities of the TSE, NASDAQ or any other
stock exchange on which the Common Shares are actively traded.
(g) As used herein, the term "Response Period" shall mean: (i) in the
case where the proposed sale is not a Market Transaction and the
Offered Shares amount to less than or equal to 250,000 Common
Shares (which shall be subject to appropriate Antidilution
Adjustments), a period of 7 days after receipt the Sale Offer;
(ii) in the case where the proposed sale is not a Market
Transaction and the Offered Shares amount to more than 250,000
Common Shares (which shall be subject to appropriate Antidilution
Adjustments), a period of 12 days after receipt of the Sale
Offer; and (iii) in the case where the proposed sale is a Market
Transaction, a period of 3 Business Days after receipt of the
Sale Offer.
(h) As used herein, the term "Disposition Period" shall mean: (i) in
the case of a Market Transaction, a period of 10 trading days
following the end of the applicable response period; and (ii) in
the case of sales other than pursuant to a Market Transaction, a
period of 30 days following the end of the applicable response
period.
(i) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 4.3 shall not apply to (i) sales of
Shares by a Shareholder pursuant the Shareholder's exercise of
its right to have such Shares included in a registration
statement filed by the Corporation on the Investor's behalf in
accordance with the provisions of Section 1(a) of Schedule A
hereto and (ii) bona fide charitable contributions by Xxxxxx of
up to 250,000 Common Shares.
4.4 SHAREHOLDER, THL AND THL-CCI "TAG-ALONG" RIGHTS
(a) In the event that the Investor determines to sell Shares pursuant
to a proposed Tag- Along Sale (as defined below), the Investor
shall give written notice of such intention (a "Sale Notice") to
each Notice Party (as defined below), specifying the number of
Shares intended to be sold, identifying the Buyer and describing,
in reasonable detail, the terms of the intended sale.
(b) Each Notice Party desiring to participate with the Investor in
such Tag-Along Sale may elect to sell Shares to the buyer
pursuant to this Section 4.4 by giving written notice (the
"Participation Election") of such election (each such Notice
Party, a "Participant") to the Investor not later than 5:00 p.m.
(Eastern Time) on the fifth Business Day after having received
the Sale Notice, specifying the number of Shares such Participant
wishes to sell to the Buyer (the "Participating Shares").
(c) Following receipt of a Participation Election, the Investor shall
use reasonable efforts to cause the Buyer to make an offer (the
"Participating Offer") to the Participants to purchase, in
addition to Shares being sold by the Investor, the Participating
Shares on the same terms (including the purchase price per share)
on which Shares owned by the Investor are to be sold to the
Buyer.
(d) If the Buyer is unwilling to make a Participating Offer, the
Investor shall not sell any Shares to the Buyer unless the Buyer
agrees to permit the Shares it desires to purchase to be
allocated among the Investor and the Participants, as a group, on
the basis that the number of Shares to be sold by each
Participant shall be the lesser of (i) the number of
Participating Shares and (ii) such Participant's pro rata portion
of the Shares to be purchased based on the proportionate
ownership of Shares by such Participant, the other Participants
and the Investor, determined on a fully diluted basis.
(e) Each Participant, by giving a Participant Election, shall be
deemed to have made an irrevocable election to sell to the buyer
all or some of the Participating Shares either pursuant to a
Participating Offer or clause (d) of this section unless, in
either case, the Tag-Along Sale is not completed in which case
the Investor may cause the buyer and all Participants to
terminate any transaction between them involving Shares by
written notice given to the buyer or the Participants prior to
the completion of any such transaction.
(f) As used herein, a "Tag-Along Sale" shall mean an intended sale of
Shares by the Investor to any Person who is not a Permitted
Transferee (a "Buyer") where (i) the proposed sale is in
connection with a Qualifying Bid or (ii) the number of Shares to
be sold by the Investor is in excess of 75% of the Shares then
currently beneficially owned by the Investor.
(g) As used herein, the term "Notice Party" shall refer to each of
Maisel, Furman, Gottlieb, Drabinsky, THL and THL-CCI.
(h) For purposes of this Section 4.4 only, the term "Shares" shall
include Common Shares owned by THL and THL-CCI.
4.5 DRAG-ALONG RIGHTS
(a) Each Shareholder hereby agrees, if requested by the Investor, to
participate in a Drag- Along Sale (as defined below) by selling
the equivalent Sale Percentage (as defined below) of Shares owned
by such Shareholder as that being sold by the Investor in such
Drag-Along Sale to the Drag-Along Purchaser (as defined below)
in the manner and on the terms set forth in this Section 4.5. As
used herein, the term "Sale Percentage" shall mean the percentage
that the Shares being sold by a Shareholder represents of the
total Shares beneficially owned by such Shareholder.
(b) If the Investor elects to exercise its rights under this Section
4.5, a notice (the "Drag- Along Notice") of such election shall
be furnished by the Investor to the other Shareholders. The
Drag-Along Notice shall set forth the principal terms of the
Drag- Along Sale, the purchase price, the Sale Percentage of
Shares being sold by the Investor and the name and address of the
Drag-Along Purchaser. If the Investor consummates the sale
referred to in the Drag-Along Notice, each Shareholder shall be
bound and obligated to sell its Sale Percentage of Shares in the
Drag-Along Sale on the same terms and conditions. If at the end
of the 90th day following the date of the effectiveness of the
Drag-Along Notice the Investor has not completed the Drag- Along
Sale, the other Shareholders shall be released from their
obligations under the Drag-Along Notice, the Drag-Along Notice
shall be null and void, and it shall be necessary for a separate
Drag-Along Notice to have been furnished and the terms and
provisions of this Section 4.5 separately complied with, in order
to consummate such Drag-Along Sale pursuant to this Section 4.5,
unless the failure to complete such sale resulted from any
failure by the other Shareholders to comply in any material
respect with the terms of this Section 4.5.
(c) As used herein, a "Drag-Along Sale" shall mean an intended sale
of Shares by the Investor to any Person who is not a Permitted
Transferee (the "Drag-Along Purchaser") where (i) the proposed
sale is in connection with a Qualifying Bid or (ii) the number of
Shares to be sold by the Investor is in excess of 75% of the
Shares then currently beneficially owned by the Investor.
4.6 LEGEND
Each certificate representing the Shares beneficially owned by an
Executive shall be stamped with or otherwise imprinted with a legend in the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, PURSUANT TO A SHAREHOLDERS AGREEMENT,
DATED AS OF JUNE 12, 1998. A COPY OF SUCH SHAREHOLDERS
AGREEMENT IS ON FILE AT THE COMPANY. ANY ATTEMPTED TRANSFER OF
THESE SHARES, OTHER THAN IN COMPLIANCE WITH THE TERMS OF THE
SHAREHOLDERS AGREEMENT SHALL BE NULL AND VOID."
Each Executives shall, within 5 days after the Closing, cause
such legend to be stamped or otherwise imprinted on all certificates
representing Shares beneficially held by him in accordance with the
preceding sentence.
4.7 EFFECT
Any purported transfer of Shares that is inconsistent with the
provisions of this Article 4 shall be null and void and of no force and
effect and will not be registered on the stock transfer books of the
Corporation.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 TERMINATION OF 1993 SHAREHOLDERS AGREEMENT
Each of Xxxxxxxx and Drabinsky hereby agree that the 1993
Shareholders Agreement is hereby, subject to and effective upon Closing,
terminated and the provisions thereof shall, upon Closing, be superceded in
all respects by this Agreement.
5.2 ASSIGNMENT OF CERTAIN RIGHTS
Subject to and effective upon Closing, each of Xxxxxxxx and
Xxxxxxxxx hereby assign to the Investor all of their rights to purchase
securities of the Corporation pursuant to the exercise of the rights of
first offer set forth in Sections 4.5 and 4.6 of the 1995 Shareholders
Agreement. Drabinsky and Xxxxxxxx shall promptly deliver to the Investor
any notices they receive pursuant to Section 4.5 or 4.6 of the 1995
Shareholders Agreement regarding a proposed transfer of securities of the
Corporation. Each of Drabinsky and Xxxxxxxx agree that, except as may be
required in order to effectuate the exercise by the Investor of the rights
of first offer assigned to the Investor pursuant to this Section 5.2,
neither of them shall, for so long as this Agreement remains in effect,
seek to exercise, whether directly or indirectly, any of the rights granted
to them under the 1995 Shareholders Agreement and each of them further
agree to waive any and all such rights during the term of this Agreement.
5.3 SUPPORT QUALIFYING BIDS
In the event of a Qualifying Bid, each of the Shareholders hereby
agrees to take all actions necessary to cause such bid to be consummated,
including, without limitation, voting or causing to be voted all Shares and
any other voting securities in the Corporation beneficially owned by him or
it in favor of the Qualifying Bid and to exercise his or its influence in
respect of the Corporation (including with respect to his or its nominees
who are directors of the Corporation) to cause the Corporation to take such
actions as shall be appropriate in furtherance of the consummation of the
Qualifying Bid. For greater certainty, the covenants contained in this
Section 5.3 binds each of the Executives in his capacity as a shareholder
of the Corporation only and do not apply to actions take by any such
Executive in his capacity as a director of the Corporation.
ARTICLE 6
GENERAL PROVISIONS
6.1 TERM AND TERMINATION
(a) This Agreement shall become effective as of the Closing Date and
shall remain in full force and effect, unless otherwise
terminated in accordance with the terms of this Agreement,
through to the thirtieth (30th) anniversary of the Closing Date.
(b) This Agreement shall automatically terminate if at any time
following the Closing Date the Investor and its affiliates
beneficially own (as determined in accordance with the provisions
of Rule 13d(3) of the 1934 Securities Exchange Act, as amended
from time to time) less than the Share Limit (as defined below).
As used herein, the term "Share Limit" shall mean initially 5% of
the Common Shares issued and outstanding and shall be adjusted in
the following manner from time to time in the event that the
Corporation issues, pursuant to a single transaction or a series
of related transactions, Common Shares amounting to more than 10%
of the Common Shares then outstanding: the new Share Limit shall
be the Share Limit in effect prior to the issuance of Common
Shares by the Corporation multiplied by the quotient of which the
numerator is the number of Common Shares outstanding immediately
prior to such issuance and the denominator of which is the number
of Common Shares outstanding immediately following such issuance.
(c) This Agreement shall automatically terminate six months after the
death of Xxxxxxx X. Xxxxx, or, if at any time following the
Closing Date, Xx. Xxxxx ceases, as a result of circumstances
other than the death of Xx. Xxxxx, to control the Investor.
Notwithstanding the foregoing, the covenants and agreements of
the parties set forth in Sections 3.1(a),3.1(b), 3.1(c), 3.1(d),
3.1(e), 4.3, 4.4, 4.5 and 5.3 hereof shall terminate and cease to
be in force and effect upon Xx. Xxxxx'x death; provided, however,
that no party hereto shall, without the consent of the Investor,
take any action to cause the composition of the Board or any
committee thereof to change during the six month period following
Xx. Xxxxx'x death except to the extent that such change is in
furtherance of a request made to the Board by Xx. Xxxxx prior to
his death in accordance with the provisions of Sections 3.1(b),
3.1(c) and 3.1(d) hereof.
6.2 NOTICE
All notices, requests, demands and other communications shall be
in writing and shall be deemed to have been duly given if personally
delivered or sent by United States or Canadian mails or by telegram or
telex confirmed by letter, or by facsimile transmission, receipt confirmed,
to the address set forth below:
(i) in the case of Drabinsky:
Livent Inc.
000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx
(ii) in the case of Xxxxxxxx:
Livent Inc.
000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
(iii) in the case of Xxxxxx:
c/o Schulte, Xxxx & Xxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
X.X.X.
Fax No.: (000) 000-0000
Attention: Xxxxxx Xxxxxx
(iv) in the case of Xxxxxx:
Lynx Ventures L.P.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
X.X.X.
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
(v) in the case of the Investor:
Lynx Ventures L.P.
c/x Xxxxxx, Xxxxxxx & Associates
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
U.S.A.
Fax No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
U.S.A.
Fax No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
with a courtesy copy to:
Xxxxxx, Xxxxxx & Xxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000-0000
U.S.A.
Fax No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
(vi) in the case of THL or THL-CCI:
Xxxxxx X. Xxx Company
75 State Street
Boston, MA 02109
U.S.A.
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
X.X.X.
Fax No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
(vii) in the case of the Corporation:
Livent Inc.
000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Fax No.: (000) 000-0000
Attention: The Secretary
All notices requiring timely attention shall be sent by facsimile
transmission, telex or overnight mail. Any notice shall be deemed
received, unless earlier received, (a) if sent by certified or registered
mail, return receipt requested, when actually received, (b) if sent by
overnight mail, on the next Business Day, (c) if sent by telegram or telex,
on the date sent, and (d) if sent by facsimile transmission or delivered by
hand, on the date of receipt. Any party may change its address for service
from time to time by notice given in accordance with the foregoing
provisions.
6.3 ENTIRE AGREEMENT
This Agreement sets forth the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions of the parties,
whether oral or written, including without limitation, the 1993
Shareholders Agreement, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter
hereof except as specifically set forth herein.
6.4 SEVERABILITY
In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the parties shall
negotiate in good faith with a view to the substitution therefor of a
suitable and equitable solution in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid provision,
provided, however, that the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions
contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the parties hereto shall
be enforceable to the fullest extent permitted by law.
6.5 FURTHER ASSURANCES
Each of the parties to this Agreement shall do all such acts and
things and shall execute and deliver, or cause to be executed and
delivered, all such documents, instruments and agreements as may be
necessary or desirable to give effect to the provisions of and the intent
of this Agreement.
6.6 NO INCONSISTENT ARRANGEMENTS
Each of the parties hereby covenants and agrees that, except as
expressly provided in this Agreement, he or it shall not take any action
that would in any way restrict, limit or interfere with the performance of
his or its obligations hereunder or the transactions contemplated hereby.
6.7 AMENDMENT
No supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by all of the parties
hereto or by their respective successors or permitted assigns.
6.8 WAIVER
No waiver of any of the provisions of this Agreement shall be
deemed to be or shall constitute a waiver of any other provision, nor shall
such waiver constitute a continuing waiver unless otherwise expressly
provided.
6.9 TIME
Time shall be of the essence of this Agreement.
6.10 BENEFIT OF THE AGREEMENT
This Agreement shall enure to the benefit of and be binding upon
the parties hereto, all Persons who subsequently become Shareholders and
become bound hereby and their respective heirs, executors, administrators,
legal personal representatives, successors and permitted assigns.
6.11 ASSIGNMENT
Except in the case of an assignment to a Permitted Transferee in
accordance with the provisions of Section 4.2 hereof, neither this
Agreement nor any of the rights or obligations hereunder shall be assigned
by any of the parties hereto without the prior written consent of the other
parties hereto.
6.12 INJUNCTIVE RELIEF
Each of the Shareholders acknowledges that their interests in the
business and affairs of the Corporation vis-a-vis each other may only be
protected through the enforcement of the terms, conditions and other
provisions of this Agreement. Accordingly, each of the Shareholders agree
that in the event of any breach of the provisions of this agreement, the
non-breaching Shareholder, in addition to any other right or relief to
which it may be entitled, shall be entitled to an injunction restraining
further breaches of this Agreement.
6.13 COUNTERPARTS
This Agreement may be executed in any number of counterparts by
any one or more of the parties to be bound hereby. Each executed
counterpart shall be deemed to be an original and such counterparts shall
together constitute one and the same agreement.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement.
/s/ Xxxxx X. Xxxxxxxxx /s/ Xxxxx X. Xxxxxxxx
------------------------------ ---------------------------
Xxxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxx
/s/ Xxx X. Xxxxxx /s/ Xxxxx X. Xxxxxx
------------------------------ ---------------------------
Xxx X. Xxxxxx Xxxxx X. Xxxxxx
LYNX VENTURES L.P.
By: Lynx Ventures L.L.C.,
its General Partner
By /s/ Xxxxxxx X. Xxxxx
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Member
LIVENT INC.
By /s/ Xxxxx X. Xxxxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman and
Chief Executive Officer
XXXXXX X. XXX EQUITY
PARTNERS, L.P.
By: THL Equity Advisors Limited
Partnership, its General Partner
By: THL Equity Trust,
its General Partner
By /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director and Trustee
THL-CCI LIMITED PARTNERSHIP
By: THL Investment Management Corp.,
its General Partner
By /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Director
SCHEDULE A
REGISTRATION OF SHARES
This Schedule A is the schedule referenced in Section 3.1(g) of
the Shareholders Agreement, dated as of June 12, 1998 (the "Shareholders
Agreement"), by and among Xxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxxxx, Xxx X.
Xxxxxx, Xxxxx X. Xxxxxx, Lynx Ventures L.P., Xxxxxx X. Xxx Equity Partners,
L.P., THL-CCI Limited Partnership and Livent Inc. Defined terms used
herein and not defined herein shall have the meaning ascribed thereto in
the Shareholders Agreement.
1. REQUIRED REGISTRATION.
(a) If the Investor at any time and from time to time in connection
with the sale of any Shares beneficially owned by the Investor requests in
writing that the Corporation register such Shares under the Securities Act
of 1933, as amended, of the United States or any other statute in effect
from time to time corresponding to such Act (the "1933 Act"), the
Corporation shall promptly (and in any event not later than 60 days after
the date of such request) prepare and file a registration statement under
the 1933 Act covering the Shares which are subject to such request and
shall use its best efforts to cause such registration statement to become
effective as soon as practicable so as to permit the sale of the Shares
specified in such request in such manner as the Investor may designate.
Except for the registration of Shares of other Shareholders pursuant to
subsection 1(b), neither the Corporation nor any other person shall have
any right to sell Shares or other securities of the Corporation under any
such registration statement except with the prior written consent of the
Investor and on such terms and conditions as the Investor may require.
(b) The Corporation shall, upon receipt of a request from the
Investor to register Shares pursuant to subsection 1(a), give written
notice as promptly as possible of such proposed registration to the other
Shareholders and, subject the terms hereof, use all reasonable efforts to
include in such registration the sale of such number of Shares held by the
other Shareholders as each such Shareholder shall request (by giving notice
thereof to the Corporation within fifteen Business Days after being
notified of the proposed registration) upon the same terms (including the
method of distribution) as such offering; provided, that if either the
Investor or the Corporation is advised in writing by the managing
underwriters that the inclusion of all of the Shares in the registration
may, in their opinion, interfere with the orderly sale and distribution of
the Shares being offered for sale by the Investor, the Corporation shall
only be required to include in such registration the maximum number of
Shares that the managing underwriters advise can be sold, allocated (a)
first, to all of the Shares requested to be included in such registration
by the Investor and (b) second, among the Shares requested to be included
in such registration by each of the other Shareholders, which shall be
allocated pro rata among the other Shareholders according to the number of
Shares beneficially owned by each of them on a fully diluted basis.
(c) The obligations of the Corporation pursuant to subsection 1(a) to
file a registration statement under the 1933 Act are subject to the
limitation that the Corporation shall be entitled to postpone for a
reasonable period of time (not to exceed six months) the filing of any
registration statement otherwise required to be prepared and filed by it
pursuant hereto if, at the time it receives a request for such
registration, the Corporation determines in its reasonable judgment that,
as a result of a pending acquisition or disposition by the Corporation or a
similar event involving the Corporation, such registration and sale would
be seriously detrimental to the Corporation or its shareholders and gives
prompt written notice of such determination to the Investor; provided,
however, that the Corporation shall not obtain such a deferral more than
once in any 12-month period. If the Corporation shall so postpone the
filing of a registration statement, the Investor shall have the right to
withdraw the demand for registration by giving written notice to the
Corporation within 30 days after receipt of the notice of postponement and,
in the event of such withdrawal, such request shall not be counted as a
request for registration hereunder.
(d) If the Corporation shall, at any time and from time to time,
propose the registration under the 1933 Act of an underwritten offering for
cash of any of the Common Shares, the Corporation shall give written notice
as promptly as possible of such proposed registration to the Investor and
the other Shareholders and shall use all reasonable efforts to include in
such registration the sale of such number of Shares held by the
Shareholders as each such Shareholder shall request (by giving notice
thereof to the Corporation within fifteen Business Days after being
notified of the proposed registration) upon the same terms (including the
method of distribution) as such offering; provided that (i) if the
Corporation is advised in writing by the managing underwriters that the
inclusion of all of the Shares in the registration may, in their opinion,
interfere with the orderly sale and distribution of the Shares being
offered for sale by the Corporation, the Corporation shall only be required
to include in such registration the maximum number of securities that the
managing underwriters advise can be sold, allocated (a) first, to all
securities the Corporation proposes to sell for its own account ("Company
Securities"), (b) second, up to the full number of Shares requested to be
included in such registration by the Investor and any other holder of
Common Shares other than the Shareholders who, based upon its respective
registration rights, is entitled to participate in such registration pari
passu with the Investor, which, in the good faith opinion of such firm, can
be so sold without so materially and adversely affecting such offering (and
if less than the full number of Common Shares requested to be included in
such registration by the Investor and each such additional registrant,
allocated pro rata among the Investor and each such additional registrant
on the basis according to the number of Shares beneficially owned by each
of them on a fully diluted basis) and (c) third, up to the full number of
Shares requested to be included in such registration by each other
Shareholder, which, in the good faith opinion of such firm, can be so sold
without so materially and adversely affecting such offering (and if less
than the full number of such Shares requested to be included in such
registration by the other Shareholders, allocated pro rata among the other
Shareholders on the basis according to the number of Shares beneficially
owned by each of them on a fully diluted basis); and (ii) the Corporation
may at any time prior to the effectiveness of any such registration
statement at its sole discretion and without the consent of the
Shareholders, withdraw such registration statement and abandon the proposed
offering in which the Shareholders had requested to participate.
(e) It shall be a condition precedent to the obligations of the
Corporation to take any action pursuant to this Section 1 that the
Shareholders shall furnish to the Corporation such information regarding
itself, the Shares, the intended method of sale or other disposition of
such Shares and the intended purchasers as the Corporation shall reasonably
request in connection with the registration of the Shares.
2. REGISTRATION PROCEDURES. If and whenever the Corporation is required
by the provisions of Section 1 hereof to effect the registration of
Shares under the 1933 Act, the Corporation shall:
(a) promptly prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement with respect to such
Shares, and use its best efforts to cause such registration statement to
become and remain effective for such period as may be reasonably necessary
to effect the sale of such Shares in the manner reasonably designated by
the Investor;
(b) prepare and file with the SEC amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective for such period as
may be reasonably necessary to effect the sale of such Shares in the manner
reasonably designated by the Investor;
(c) furnish to the Investor and to the underwriters (if any) and the
other Shareholders of the Shares being registered a reasonable number of
copies of the registration statement, preliminary prospectus, final
prospectus, and other such documents as such underwriters or the Investor
or the other Shareholders may reasonably request in order to facilitate the
sale or other disposition of such Shares;
(d) notify the Investor and the other Shareholders (to the extent
their Shares are registered), promptly after the Corporation shall receive
notice thereof, of the time when such registration statement or amendment
thereof has become effective or a supplement to any prospectus forming a
part of such registration statement has been filed;
(e) notify the Investor and the other Shareholders (to the extent
their Shares are registered) promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or
for additional information;
(f) prepare and file with the SEC, promptly upon the request of the
Investor and the other Shareholders (to the extent their Shares are
registered), any amendment or supplement to such registration statement or
prospectus which is required under the 1933 Act or the rules and
regulations thereunder in connection with the sale or other disposition of
the Shares by the Investor and the other Shareholders;
(g) prepare and promptly file with the SEC and promptly notify the
Investor and the other Shareholders (to the extent their Shares are
registered) of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
Shares is required to be delivered under the 1933 Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus
as then in effect would include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(h) advise the Investor and the other Shareholders (to the extent
their Shares are registered), promptly after the Corporation shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for such purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued;
(i) at least three days prior to the filing of any amendment or
supplement to such registration statement or prospectus, furnish copies
thereof to the Investor and the other Shareholders (to the extent their
Shares are registered) and refrain from filing any such amendment or
supplement to which the Investor or the other Shareholders shall have
reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the 1933 Act
or the rules and regulations thereunder, unless, in the opinion of counsel
for the Corporation, the filing of such amendment or supplement is
reasonably necessary to protect the Corporation from any liabilities under
any applicable federal or state law and such filing will not violate
applicable law;
(j) at the request of the Investor, furnish on the date or dates
provided for in any underwriting agreement entered into pursuant to
subsection 2(k): (i) an opinion of counsel satisfactory to the Investor,
addressed to the underwriters (if any) and to the Investor, opining as to
such matters as such underwriters and the Investor may reasonably request;
and (ii) a letter or letters from the independent auditors of the
Corporation, addressed to the underwriter (if any) and to the Investor,
covering such matters as such underwriters and the Investor may reasonably
request;
(k) enter into an underwriting agreement containing representations,
warranties, indemnities, provisions relating to contribution and agreements
then customarily included by an issuer in underwriting agreements with
respect to secondary distributions;
(l) use its best efforts to register or qualify the Shares for sale
under such securities or blue sky laws of such states of the United States
of America as the Investor or the other Shareholders may reasonably request
and do such other acts which may be reasonably required to enable the
Investor or the other Shareholders to consummate the disposition of the
Shares in such jurisdictions; provided, however, that the Corporation shall
not be obligated to qualify as a foreign corporation to do business or to
file a general consent to service or process in any such jurisdictions; and
(m) list such Shares on any stock exchange on which any Shares are
then listed.
3. EXPENSES. With respect to any registration pursuant to Section 1
hereof, the Corporation shall bear all fees, costs and expenses
thereof including, without limitation, all registration, filing and
National Association of Securities Dealers fees, printing expenses,
transfer fees, fees and disbursements of counsel and accountants for
the Corporation, reasonable fees and disbursements of one firm of
counsel for the Investor, and all legal fees and disbursements and
other expense of complying with the 1933 Act and state securities or
blue sky laws; except that the Shareholders shall pay all underwriting
discounts and commissions attributable to Shares proposed to be sold
or otherwise disposed of by it.
4. INDEMNIFICATION.
(a) The Corporation shall indemnify and hold harmless the
Shareholders, their directors and officers, and any underwriter
participating in an offering for the Shareholders and each person (if any)
who controls the Shareholders or such underwriter within the meaning of
control as defined in the 1933 Act, and their respective directors and
officers, from and against any and all loss, damage, liability, cost and
expense to which they or any of them may become subject under the 1933 Act
or otherwise, and shall reimburse them for any legal or other expenses
incurred by them in connection with investigating any claims and defending
any actions, insofar as such losses, damages, liabilities, costs or
expenses shall arise out of or shall be based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement relating to the sale or other disposition of such Shares, any
prospectus contained therein or any amendment or supplement thereto, or
shall arise out of or be based upon the omission or alleged omission to
state therein, a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
Corporation will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon the
grossly negligent or wilful action of (except to the extent there is
contributory negligence or wilful action by the Corporation), or an untrue
statement or alleged untrue statement or omission or alleged omission so
made in reliance upon written information furnished specifically for use in
the preparation thereof by, the Shareholders, such underwriter or such
controlling person.
(b) Each Shareholder shall indemnify and hold harmless the
Corporation, its directors and officers, and any underwriter for the
Corporation and each person (if any) who controls the Corporation or such
underwriter within the meaning of control as defined in the 1933 Act, and
their respective directors and officers, from and against any and all loss,
damage, liability, cost or expense to which they or any of them may become
subject under the 1933 Act or otherwise, and shall reimburse them for any
legal or other expenses incurred by them in connection with investigating
and defending any actions, insofar as such losses, damages, liabilities,
costs or expenses shall arise out of or shall be based upon any untrue or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein, or any amendment
or supplement thereto, or arise out of or shall be based upon the omission
or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading; in each case to
the extent but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission resulted from a grossly
negligent or wilful act of (except to the extent there is contributory
negligence or wilful action by the Corporation), or was made in reliance
upon written information furnished specifically for use in the preparation
thereof by, such Shareholder.
5. NOTICE. Promptly after receipt by an indemnified party, pursuant to
the provisions of subsection (a) or (b) of Section 4, of notice of the
commencement of any action involving the subject matter of the
applicable foregoing indemnity provision, such indemnified party
shall, if a claim thereof is to be made against the indemnifying party
pursuant to the provisions of said subsection (a) or (b), promptly
notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve
the indemnifying party from any liability in respect to such action
which it may have to such indemnified party on account of the
indemnity agreement contained in this section unless the indemnifying
party was prejudiced by such omission, and in no event shall relieve
the indemnifying party. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party.
6. PROSPECTUS QUALIFICATION RIGHTS IN CANADA. In addition to the rights
of the Shareholders to require the Corporation to register Shares
under the 1933 Act when such registration is required under the
Business Corporations Act (Ontario), pursuant to and in accordance
with Sections 1 through 5 above, the Shareholders shall have the right
to require the Corporation to file a prospectus pursuant to the
securities laws of any or all of the provinces of Canada,
contemporaneously with or independently of the exercise of such
registration rights by the Shareholders, and the provisions of
Sections 1 through 5 above shall apply, mutatis mutandis, to such
prospectus qualification rights provided that the provisions of
Section 3 shall apply only to the extent permitted under the
applicable laws of the provinces of Canada.
7. NUMBER OF REQUESTS. The aggregate number of requests that may be made
by the Investor pursuant to subsection 1(a) and Section 6 shall be
four, and each such request must pertain to a minimum of 500,000
Shares, as constituted on the Closing Date; provided that requests
made with respect to the same Shares contemporaneously under
subsection 1(a) and Section 6 shall be considered to be one request.
In the event that the offering or sale of Shares by the Investor
pursuant to a request for registration under subsection 1(a) is not
consummated for any reason, such request for registration of Shares
shall not be counted among the four requests for registration that the
Investor is entitled to exercise pursuant to this Section 7.
8. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date hereof, the Corporation shall not enter into any agreements with
respect to its securities which is inconsistent with the rights
granted to the Shareholders hereunder, or otherwise conflicts with the
provisions hereof, in any case, without the prior written consent of
the Shareholders.
