EXHIBIT 9.2
SHAREHOLDERS' AGREEMENT
BY AND AMONG
PRIME INVESTMENTS SA
AND
XXXXX XXXXX & SONS HOLDINGS INC.
AND
XXXXX XXXXX & SONS INC.
MADE AS OF AUGUST 15, 2002
TABLE OF CONTENTS
PAGE
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ARTICLE I INTERPRETATION................................................... 1
1.1 Definitions................................................... 1
1.2 Gender........................................................ 5
1.3 Headings...................................................... 5
1.4 Severability.................................................. 5
1.5 Entire Agreement.............................................. 5
1.6 Amendments.................................................... 5
1.7 Waiver........................................................ 5
1.8 Governing Law................................................. 5
1.9 Language...................................................... 6
1.10 Delays........................................................ 6
1.11 Conflict...................................................... 6
1.12 Statutes...................................................... 6
1.13 Preamble...................................................... 6
ARTICLE II RESTRICTIONS ON TRANSFER........................................ 6
2.1 No Transfer................................................... 6
2.2 Transfer to a Permitted Transferee............................ 6
2.3 Right of First Refusal - Holdings............................. 7
2.4 Right of First Refusal - Investors............................ 8
2.5 Drag Along Rights............................................. 8
2.6 Tag Along Rights.............................................. 9
2.7 Refusal of Corporation........................................ 9
2.8 Offer; Third Party Offer Notice............................... 9
2.9 Irrevocability................................................ 10
2.10 Inscription................................................... 10
2.11 Determination of Value........................................ 10
ARTICLE III CONVERSION..................................................... 11
3.1 Conversion Privilege.......................................... 11
3.2 No Fractional Shares.......................................... 12
ARTICLE IV PREEMPTIVE RIGHTS............................................... 12
4.1 Preemptive Rights............................................. 12
ARTICLE V CLOSING.......................................................... 13
5.1 Time, Place, Terms and Conditions............................. 13
5.2 Further Assurances............................................ 14
ARTICLE VI REGISTRATION RIGHTS............................................. 14
6.1 Registration Rights........................................... 14
ARTICLE VII CORPORATE GOVERNANCE AND COVENANTS............................. 14
7.1 Board of Directors............................................ 14
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7.2 Right of Inspection........................................... 15
7.3 Financial Information......................................... 15
7.4 Covenants..................................................... 17
7.5 Notices of Certain Events..................................... 18
ARTICLE VIII GENERAL PROVISIONS............................................ 19
8.1 Successors in Interest........................................ 19
8.2 Notice........................................................ 19
8.3 Purported Transfers;Applicability of Certain Provisions....... 21
8.4 Time.......................................................... 21
8.5 Execution of Counterpart...................................... 21
8.6 Termination................................................... 22
Schedules
Schedule 8.5 - Counterpart
Exhibit A -
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SHAREHOLDERS' AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 15th day of August, 2002.
BY AND AMONG: PRIME INVESTMENTS SA, a corporation organized under the laws of
Luxembourg (hereinafter, the "INVESTOR");
AND: XXXXX XXXXX & SONS HOLDINGS INC. a corporation incorporated under
the laws of Canada, (hereinafter "HOLDINGS");
AND: XXXXX XXXXX & SONS INC., a corporation amalgamated under the laws
of Canada, (hereinafter, the "CORPORATION").
THIS AGREEMENT WITNESSETH THAT, in consideration of the mutual covenants
herein contained, it is agreed by and among the Parties as follows:
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS
For the purposes of this Agreement or any offer, acceptance, rejection,
notice, consent, request, authorization, permission, direction or other
instrument required or permitted to be given hereunder, the following words and
phrases shall have the following meanings, respectively, unless the context
otherwise requires:
"ACT" shall mean the Canada Business Corporations Act.
"AGREEMENT" shall mean this Shareholders' Agreement and all instruments
supplemental hereto or in amendment or confirmation hereof; "herein",
"hereof", "hereto", "hereunder" and similar expressions mean and refer to
this Agreement and not to any particular Article, Section, Subsection or
other subdivision; "Article", "Section", "Subsection" or other subdivision
of this Agreement means and refers to the specified Article, Section,
Subsection or other subdivision of this Agreement.
"BOARD" shall mean the Board of Directors of the Corporation.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday, or other
day on which the principal commercial banks in Montreal, Quebec are not
open for business during normal banking hours.
"CLOSING" shall mean the sale of Shares pursuant to this Agreement.
"CLOSING DATE" shall mean the date which is ten Business Days after the
acceptance of the Offer or, in the circumstances described in Section
2.10, the date which is ten Business Days after the Value is determined.
"COMMON SHARES" shall mean Common Shares in the capital of the
corporation.
"CONTROL" and any derivative thereof means with respect to any Person
other than an individual the power to direct or cause the direction of the
management or policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
"CORPORATION" shall mean Xxxxx Xxxxx & Sons Inc.
"DOLLAR", "DOLLARS" and the sign "$" shall each mean lawful money of
Canada.
"GAAP" shall have the meaning set forth in Section 7.3(a).
"GOVERNMENTAL BODY" shall mean (i) any domestic or foreign national,
federal, provincial, state, municipal or other government or body, (ii)
any multinational, multilateral or international body, (iii) any
subdivision, agent, commission, board, instrumentality or authority of any
of the foregoing governments or bodies, (iv) any quasi-governmental or
private body exercising any regulatory, expropriation or taxing authority
under or for the account of any of the foregoing governments or bodies, or
(v) any domestic, foreign, international, multilateral or multinational
judicial, quasi-judicial, arbitration or administrative court, tribunal,
commission, board or panel.
"HOLDINGS" shall mean Xxxxx Xxxxx & Sons Holdings Inc.
"INVESTOR" shall mean Prime Investments SA.
"INVESTOR OFFER" shall have the meaning ascribed thereto at Section
2.3(a).
"INSPECTORS" shall have the meaning ascribed thereto at Section 2.3(a)
"LAWS" shall mean (i) all constitutions, treaties, laws, statutes, codes,
ordinances, orders, decrees, rules, regulations, and municipal by-laws,
whether domestic, foreign or international, and (ii) all judgments,
orders, writs, injunctions, decisions, rulings, decrees, and awards of any
Governmental Body, in each case binding on or affecting the Person
referred to in the context in which such word is used; and "LAW" shall
mean any one of them.
"MANAGEMENT INVESTOR" has the meaning set forth in the Management
Shareholders Agreement.
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"MANAGEMENT SHAREHOLDERS AGREEMENT" shall mean the Shareholder Agreement
dated as of April 5, 2002 by and among Holdings, the Management Investors
identified therein and the Corporation.
"MINIMUM NUMBER OF SHARES" shall have the meaning ascribe thereto in
Section 7.3(a).
"NON-VOTING COMMON SHARES" shall mean non-voting Common Shares in the
capital of the corporation.
"NOTES" means the Secured Convertible Notes of the Corporation in the
initial aggregate principal amount of US $5,000,000 issued pursuant to the
Securities Purchase Agreement.
"NOTIFIED PARTY" AND "NOTIFIED PARTIES" shall have the meaning ascribed
thereto at Section 2.1(a).
"OFFER" shall have the meaning ascribed thereto in Article II.
"OFFER PERIOD" shall have the meaning ascribed thereto in Article II.
"OFFERED SECURITIES" shall have the meaning ascribed thereto in Article
II.
"PARTIES" shall mean the Investor, Holdings and the Corporation; and
"PARTY" shall mean any one of them.
"PERMITTED TRANSFEREE" means any Person that directly or indirectly
through one or more intermediaries is controlled by or under common
control with the applicable Person. In connection with the Investor, a
Permitted Transferee is a Person that directly or indirectly through one
or more intermediaries is controlled by Rosy Blue Finance SA Luxembourg.
"PERSON" shall mean an individual, corporation, company, co-operative,
partnership, trust, unincorporated association, Governmental Body; and
pronouns when they refer to a Person shall have a similarly extended
meaning.
"PREFERRED SHARES" shall mean the Corporation's Series A Convertible
Preferred Shares.
"PRIME RATE" shall mean the rate of interest per annum reported, quoted,
published and commonly known as the prime rate of interest of the Canadian
Imperial Bank of Commerce for loans in dollars made in Canada to
substantial and responsible customers. Each announced change in the prime
rate of interest of the Canadian Imperial Bank of Commerce will be
effective as of the effective date specified in the relevant announcement
or, if no effective date is so specified, as of the date of such
announcement. With each change in the Prime Rate there shall be a
corresponding change in any rate of interest based thereon and payable
pursuant hereto.
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"QUALIFIED PUBLIC OFFERING" means the sale by the Corporation of its
Common Shares in a bona fide firm commitment underwritten public offering
pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the United States Securities
Act of 1933, as amended (the "US SECURITIES ACT") or under a prospectus
filed with and receipted by, the relevant securities commissions or
similar regulatory authorities in Canada (the "CANADIAN PROSPECTUS"),
raising aggregate net proceeds to the Corporation of at least US
$55,000,000 at a minimum share price of US $4.94 per Common Share
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations) and in which the Common Shares are listed on a US
national securities exchange or a Canadian stock exchange or quoted on the
National Association of Securities Dealers Automated Quotation System (the
"NASDAQ"), National Market System ("NMS") or Small Cap.
"SECURITIES PURCHASE AGREEMENT" means that certain securities purchase
agreement dated as of August 15, 2002 between the Corporation and the
Investors named therein, including the Investor (as defined herein.)
"SHARES" shall mean (i) any share of any class, series or category of the
share capital of the Corporation, (ii) any equity security in the capital
of the Corporation including, without limitation, purchase warrants,
options or securities in whole or in part convertible or exchangeable for
or into shares of any class, series or category of the capital stock of
the Corporation; and "SHARE" shall mean any one of them.
"SHAREHOLDERS" means the Investor and Holdings together with such other
Persons as may become Parties to this Agreement as a shareholder of the
corporation, collectively and "SHAREHOLDER" means one of such Persons
individually.
"THIRD PARTY" shall have the meaning ascribed thereto in Article II.
"THIRD PARTY OFFER" shall have the meaning ascribed thereto in Article II.
"TRANSFER", and any derivative thereof, shall, when used as a verb or a
noun in this Agreement, mean to sell, assign, surrender, exchange, give,
donate, transfer, pledge, mortgage, charge, create a security interest in,
hypothecate, grant an option in, or otherwise dispose, alienate, encumber
or deal with any of the Shares; however, if the Shareholder is a body
corporate, then (i) any amalgamation, merger, dissolution, liquidation or
winding up of such body corporate, or (ii) any change of control of such
body corporate, shall each also be deemed a Transfer.
"VALUE" shall mean the value of a Share as determined by the auditors of
the Corporation pursuant to Section 2.11 and in accordance with Canadian
generally accepted accounting principles, consistently applied.
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1.2 GENDER
Any reference in this Agreement to any gender shall include all genders
and words used herein importing the singular number only shall include the
plural and vice versa.
1.3 HEADINGS
The division of this Agreement into Articles, Sections, Subsections and
other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect or be utilized in the construction or
interpretation of this Agreement.
1.4 SEVERABILITY
Any Article, Section, Subsection or other subdivision of this Agreement or
any other provision of this Agreement which is, or becomes, illegal, invalid or
unenforceable shall be severed therefrom and shall be ineffective to the extent
of such illegality, invalidity or unenforceability and shall not affect or
impair the remaining provisions hereof, which provisions shall be severed from
an illegal or unenforceable Article, Section, Subsection or other subdivision of
this Agreement or any other provisions of this Agreement.
1.5 ENTIRE AGREEMENT
This Agreement together with any other instruments to be delivered
pursuant hereto, constitute the entire agreement among the Parties pertaining to
the subject matter hereof and supersede all prior agreements, understandings,
negotiations, and discussions, whether oral or written, among any or all of the
Parties.
1.6 AMENDMENTS
No amendment of this Agreement shall be binding unless otherwise expressly
provided in an instrument duly executed in writing by the Parties.
1.7 WAIVER
Except as otherwise provided in this Agreement, no waiver of any of the
provisions of this Agreement shall be deemed to constitute a waiver of any other
provisions (whether or not similar) nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided in an instrument duly
executed in writing by the Parties.
1.8 GOVERNING LAW
This Agreement shall be governed, interpreted and construed by and in
accordance with the Laws of the Province of Quebec and the Laws of Canada
applicable therein and shall be treated in all respects as a Quebec contract.
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1.9 LANGUAGE
The Parties have required that this Agreement and all instruments relating
thereto be in the English language; les parties ont exige que la presente
convention et tout autre document afferent aux presentes soient en langue
anglaise.
1.10 DELAYS
When calculating the period of time within which or following which any
act is to be done or step taken pursuant to this Agreement, the day which is the
reference day in calculating such period shall be excluded.
1.11 CONFLICT
If any conflict should appear between this Agreement and the by-laws or
resolutions of the Corporation, then the provisions of this Agreement shall
prevail.
1.12 STATUTES
References in this Agreement to statutes shall include any statute
amending, modifying, re-enacting, restating, extending or made pursuant to the
same or which is amended, modified, re-enacted, restated, or extended by the
same.
1.13 PREAMBLE
The preamble hereto is incorporated herein by reference and deemed to be a
part of this Agreement.
ARTICLE II
RESTRICTIONS ON TRANSFER
2.1 NO TRANSFER
Except as permitted in this Article II, neither the Investor nor Holdings
may transfer, pledge, encumber or otherwise dispose of in whole or in part,
directly or indirectly, any Shares or any right, title or interest therein.
2.2 TRANSFER TO A PERMITTED TRANSFEREE
Each of Holdings and the Investor may assign some or all of its Shares to
its Permitted Transferee(s), provided that each such Permitted Transferee has
executed prior to such Transfer, a counterpart of this Agreement in accordance
with Section 8.5 hereof. A Permitted Transferee of the Investor will have all of
the rights and be subject to all of the obligations of the Investor with respect
to the Shares Transferred. A Permitted Transferee of Holdings will have all of
the rights and be subject to all of the obligations of Holdings with respect to
the Shares Transferred.
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2.3 RIGHT OF FIRST REFUSAL - HOLDINGS
(a) Subject to Section 2.2, if the Investor desires to sell any or all
of its Shares (the "INVESTOR OFFER"), or wishes to accept a bona
fide irrevocable written offer from a Person dealing at arms' length
(within the meaning of the Income Tax Act (Canada)) with the
Investor (in this section the "THIRD PARTY") to purchase any or all
of the Shares held by the Investor (in this section the "THIRD PARTY
OFFER"), then it shall first offer to sell (the "OFFER") all, but
not less than all, of the Shares (the "OFFERED SECURITIES") to the
Corporation and to Holdings (the "NOTIFIED PARTIES") in accordance
with the procedure set forth in this Section 2.3. The Offer shall be
sent to each Notified Party and shall respect the following
conditions:
(i) in the case of a Third Party Offer, the Offer shall include a
copy of the Third Party Offer, and reasonable detail as to the
identity and, where applicable, the ownership of the Third
Party, and the terms and conditions of the Offer shall be not
less favorable, in the aggregate, for the Notified Parties
than those contained in the Third Party Offer;
(ii) in the case of a an Investor Offer, the sale price in the
Offer shall be the Value of the Offered Securities as at the
last day of the Corporation's most recently-completed fiscal
year, or as otherwise determined pursuant to Section 2.11
hereof; and
(iii) in all cases, the Offer shall be open for acceptance by the
Notified Parties for twenty (20) Business Days (the "OFFER
PERIOD") from the receipt of the Offer by the Notified
Parties.
The Notified Parties shall be obliged by delivering notice to the
Investor within, but not after the expiration of, the Offer Period
at their sole option to either accept the Offer or reject the Offer.
If a Notified Party does not accept the Offer, then such Notified
Party shall be deemed to have rejected the Offer. If a Notified
Party has accepted the Offer, then the Investor shall sell to the
Notified Party, and the Notified Party shall purchase from the
Investor, the Offered Securities in accordance with this Agreement.
If both Notified Parties accept the Offer, the Offered Securities
shall be sold to the Corporation.
(b) If both of the Notified Parties have or are deemed to have rejected
the Offer, then the Investor shall be free for a period of thirty
(30) Business Days immediately following the last day of the Offer
Period to sell all, but not less than all, of the Offered Securities
(i) in the case of a Third Party Offer, to the Third Party on
terms not more favorable in the aggregate for the Third Party
than those contained in the Third Party Offer; or
(ii) in the case of an Investor Offer, to any Person on terms not
more favorable, in the aggregate, for such Person than those
contained in the Offer;
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provided, however, that in either case it shall be a condition
precedent to the right of the Investor to sell the Offered
Securities that the purchaser has executed a counterpart of this
Agreement in accordance with Section 8.5. If no sale takes place
within the said thirty (30) Business Day period, then the Investor
shall not transfer the Offered Securities without again following
and being subject to this ARTICLE II.
2.4 RIGHT OF FIRST REFUSAL - INVESTOR
Subject to Holdings' obligations under Section 3.4 of the Management
Shareholders Agreement, Holdings and the Corporation, if the Management
Investors do not elect to purchase all of the Offered Securities, (as defined in
Section 3.4(a) of the Management Shareholders' Agreement), then the Investor
shall have the right to purchase the Offered Securities (as defined in Section
3.4(a) of the Management Shareholders' Agreement) upon the terms and conditions
set forth in the Offer (as defined in Section 3.4(a) of the Management
Shareholders Agreement) during the twenty (20) Business Day period immediately
following the last day of the Offer Period (as defined in Section 3.4(a) of the
Management Shareholders' Agreement).
Holdings shall provide the Investor with any and all notices it provides
to or receives from the Management Investors under Section 3.4 of the Management
Shareholders' Agreement no later that one (1) Business Day after Holdings sends
or receives such notice. The Investor shall exercise its rights under this
Section 2.3 by notifying Holdings and the Corporation in writing within twenty
(20) Business Days of the Investor's receipt of the Offer (as defined in Section
3.4(a) of the Management Shareholders' Agreement) which Offer shall be sent to
the Investor by Holdings as if the Investor were a Management Investor as
provided in Section 3.4 of the Management Shareholders' Agreement.
If the Investor does not elect to purchase the Offered Securities (as
defined in Section 3.4(a) of the Management Shareholders' Agreement) as provided
in this Section 2.4, then Holdings shall be free to sell all of such Offered
Securities in accordance with Section 3.4(d) of the Management Shareholders'
Agreement, provided that it shall be a condition precedent to the right of
Holdings to sell the Offered Securities (as defined in Section 3.4(a) of the
Management Shareholders' Agreement, that the purchaser has executed a
counterpart of this Agreement in accordance with Section 8.5. If no sale takes
place within the period set forth in Section 3.4(d) of the Management
Shareholders' Agreement, then Holdings shall not transfer the Offered Securities
(as defined in Section 3.4(a) of the Management Shareholders' Agreement),
without again following and being subject to this Article II.
2.5 DRAG ALONG RIGHTS
If Holdings (and/or its Permitted Transferees) holds, in the aggregate,
not less than seventy-five percent (75%) of the outstanding Shares and it
receives a bona fide irrevocable written offer (in this section the "THIRD PARTY
OFFER") from a Person dealing at arms' length (within the meaning of the Income
Tax Act (Canada)) with Holdings (in this section the "THIRD PARTY"), to purchase
all (but not less than all) of the Shares held by Holdings (and its Permitted
Transferees), which it has accepted or intends to accept, then Holdings shall
have the right, upon written notice to the Investor, to require that the
Investor sell all of the Shares held by the
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Investor together with the Shares held by Holdings on the same terms as those
contained in the Third Party Offer. In such event, the Investor shall be obliged
to sell all of the Shares held by it in accordance with the terms of the Third
Party Offer.
2.6 TAG ALONG RIGHTS
If Holdings (and its Permitted Transferees) holds, in the aggregate, not
less than fifty percent (50%) of the outstanding Shares and it receives a bona
fide irrevocable written offer (in this section the "THIRD PARTY OFFER") from a
Person dealing at arms' length (within the meaning of the Income Tax Act
(Canada)) with Holdings (in this section the "THIRD PARTY") to purchase any or
all of the Shares held by Holdings (and/or its Permitted Transferees), which it
has accepted or intends to accept, Holdings shall so notify the Investor in
writing, setting forth the terms of the Third Party Offer, including the name of
the Third Party, the number of Shares Holdings (and/or its Permitted
Transferees) intend to sell to the Third Party (in this section the "OFFERED
SECURITIES") and the material terms of the sale, including the price per Share
and the expected Closing Date. The Investor shall have the right, upon written
notice to Holdings sent within ten (10) days of Investor's receipt of the notice
from Holdings, to require the Third Party (or the Management Investors,
exercising their rights under the Management Shareholders' Agreement) to acquire
from the Investor (rather than from Holdings) a number of Shares equal to the
product of the number of Offered Securities multiplied by a fraction, the
numerator of which is the number of Shares owned by the Investor and the
denominator of which is the number of Shares owned by Holdings (and its
Permitted Transferees). Any Shares sold by the Investor hereunder shall be sold
on the same terms as those contained in the Third Party Offer.
2.7 REFUSAL OF CORPORATION
The Corporation shall record each transfer of Shares; provided, however,
that the Corporation shall refuse to record a transfer of Shares made in
contravention of this Agreement. The Corporation and its board of directors,
prior to consenting to the transfer of Shares, shall be entitled to require
proof that the transfer took place in accordance with this Agreement.
2.8 OFFER; THIRD PARTY OFFER NOTICE
Each Offer and Third Party Offer Notice shall be in writing signed by the
offering party and shall:
(a) identify the Section pursuant to which it is delivered;
(b) identify and provide particulars of the Offered Securities;
(c) state the purchase price per Offered Security;
(d) in the case of a Third Party Offer, state the identity and address
of the Person (who shall deal at arm's length with the offering
party within the meaning of the Income Tax Act (Canada)) to whom it
proposes to sell the Offered Securities;
(e) in the case where a Third Party Offer is made, the Offer or Third
Party Offer Notice shall be accompanied by a true copy of the Third
Party Offer;
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(f) in the case where a Third Party Offer is made, be accompanied by an
affidavit of the offering party attesting that there is no
commission or similar fee that may be or may become due and payable
to any broker, agent or other intermediary in connection with the
sale of the Offered Securities; and
(g) in the case of an Offer, be accompanied by the certificate or
certificates representing the Offered Securities.
2.9 IRREVOCABILITY
All Offers and Third Party Offer Notices and their acceptance, rejection
or deemed acceptance or rejection are irrevocable.
2.10 INSCRIPTION
The Corporation shall cause, and the Shareholders shall vote their Shares
to cause the Corporation to cause, all certificates for Shares to be endorsed
with the following inscription:
"OWNERSHIP, ALIENATION AND ENCUMBRANCE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF THE SHAREHOLDERS' AGREEMENT
MADE AS OF AUGUST 15, 2002 AS AMENDED, A COPY OF WHICH IS ON FILE AT THE
REGISTERED OFFICE OF THE CORPORATION."
2.11 DETERMINATION OF VALUE
The auditors of the Corporation or a nationally recognized valuation or
investment banking firm (the "AUDITORS") shall determine the Value of a Share at
least once in every fiscal year of the Corporation and, in any event, they shall
determine the Value as at the last day of each fiscal year of the Corporation.
In the event that, at the time a Value must be attributed to Shares for purposes
of any of the provisions of this Article II or Section 3.1, the Value has not
been determined by the Auditors as at the last day of the most recently
completed fiscal year of the Corporation, then the Closing of the relevant
transaction shall be deferred until such Value has been determined, and it is
such Value which shall be applied to such transaction.
Notwithstanding the foregoing, in the event that, at the time that a Value
must be attributed to Shares for purposes of any of the provisions of this
Article II or Section 3.1, more than three (3) months have passed since the date
as of which the Value of the Shares was last determined by the Auditors, the
Investor who is selling Shares pursuant to this Article III shall be entitled to
require a new valuation of the Shares, in which case the Auditors shall
determine the Value of the Shares as at the last day of the most
recently-completed month-end of the Corporation, and all costs, fees and
expenses of such valuation shall be borne equally by the Investor and the
Corporation.
The standard for determining Value shall be the highest price available in
an open and unrestricted market between informed, prudent parties acting at
arm's length and under no compulsion to act, expressed in terms of money. In
furtherance of the foregoing, in determining the Value for the Shares, no
discount shall be taken with respect to any Shares by virtue of the fact that
they lack marketability, are not freely transferable or that they represent a
minority
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interest in the Corporation, nor shall any premium be attributable to any freely
transferable Shares or Shares that are part of a controlling interest in the
Corporation.
In the event that the outstanding Shares shall be subdivided into a
greater or lesser number of Shares, whether by stock dividend, stock split or
combination of Shares, subsequent to the date as of which the Value is
determined but prior to any Closing pursuant to Article V occasioned by any
event described in Article II or III, the Value for purposes of Articles II, III
and V shall be proportionately decreased or increased as the case may be and the
number of Shares to be sold or purchased shall be adjusted so as to
appropriately reflect such stock dividend, split, subdivision or combination. No
such adjustment shall be made, however, by reason of the issuance of Shares for
cash, property or services, by way of stock options, stock warrants,
subscription rights or otherwise.
ARTICLE III
CONVERSION
3.1 CONVERSION PRIVILEGE
(a) In the event that the Corporation does not issue and does not intend
to issue shares of its share capital to the general public and
Holdings intends to issue shares in its share capital to the general
public and such offering subsequently occurs, then the Investor
shall have the right and option (exercised by written notice to
Holdings) to cause Holdings to exchange the Shares held by the
Investor for securities in the share capital of Holdings, which
securities shall have a value (without reference to their proposed
issue price) identical to the value of the Shares held by the
Investor. In the event of any dispute between Holdings and the
Investor as to the number or value of the securities in the share
capital of Holdings to be issued in accordance herewith (or anything
incidental thereto), such number shall be absolutely determined by
an Auditor to be designated by Holdings with the approval of the
Investor, whose determination shall be final and binding on the
parties hereto, to the complete exclusion of any court or trial. The
standard for determining value shall be the highest price available
in an open and unrestricted market between informed, prudent parties
acting at arm's length and under no compulsion to act, expressed in
terms of money.
(b) Holdings agrees that its rights and obligations under Articles III
and VI hereof shall be assumed by any other issuer of securities
into which all or substantially all of the equity securities of
Holdings are directly or indirectly converted or exchanged if such
issuer has securities which have been sold to the general public or
if such issuer intends to issue such securities to the general
public and such offering subsequently occurs. Such other issuer
shall expressly acknowledge its obligations under Articles III and
VI in connection with any such conversion or exchange by Holdings
with such issuer.
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3.2 NO FRACTIONAL SHARES
Notwithstanding anything herein contained, Holdings shall in no case be
required to issue fractional securities upon the conversion of the Shares. If
any fractional share would, except for this Section 3.2, be deliverable upon the
conversion of the Shares, Holdings shall satisfy all of its obligations under
this Agreement with respect to such fractional share by paying to the
Shareholder an amount in cash equal (to the nearest cent) to the value of the
fractional share.
In determining the value, no discount shall be taken with respect to any
securities by virtue of the fact that they lack marketability, are not freely
transferable or represent a monetary interest in the issues nor shall any
premium be attributable to any freely transferable securities or securities that
are part of a controlling interest in the applicable issuer.
ARTICLE IV
PREEMPTIVE RIGHTS
4.1 PREEMPTIVE RIGHTS
If the Corporation proposes to sell additional equity securities other
than (a) to employees of the Corporation pursuant to employee benefit plans and
other employee compensation plans approved by the Board, (b) pursuant to an
acquisition or business combination approved by the Board, (c) in an offering
registered under the US Securities Act of 1933, as amended or qualified for sale
under the securities laws of any province of Canada, or (d) in connection with
the exercise, exchange or conversion of securities of the Corporation, the
Investor shall have the right to purchase up to such Shareholder's "pro rata
share" of such additional securities. The Investor's "pro rata share" shall be
that number of additional securities that would result in the Investor owning
the same percentage of the Corporation's fully diluted shares (assuming all
convertible securities or instruments were converted into Common Shares or
Non-Voting Common Shares) after the issuance of the additional securities (the
"ISSUANCE") as the Investor owned immediately prior to the Issuance. In the
event of a proposed Issuance, the Corporation shall deliver to the Investor
written notice describing the proposed Issuance, specifying the Investor's pro
rata share and stating the purchase price for the additional securities, and the
date, time and place of settlement for payment for the additional securities
(which shall be no sooner than twenty-five (25) Business Days following the date
of the notice). For a period of twenty (20) Business Days following such notice,
the Investor shall have the right to subscribe, at the offering price
established by the Corporation, by written notice to the Corporation, to
purchase all or any portion of the Investor's pro rata share of the additional
securities. Following such twenty (20) Business Day period, the Corporation
shall be free for a period of ninety (90) Business Days thereafter to sell all
or any part of the unsubscribed for additional securities and any Shares that
have not been purchased as of the applicable Closing Date at a price no more
favorable to such purchasers than the price offered to the Investor
-12-
ARTICLE V
CLOSING
5.1 TIME, PLACE, TERMS AND CONDITIONS
(a) Each Closing shall be held at the registered office of the
Corporation at 10:00 a.m. (Montreal, Canada time) on the Closing
Date, or at such other place, at such other time or on such other
date as the Parties thereto may agree, in accordance with the
following terms and conditions:
(i) at Closing, the selling shareholder shall deliver to the
purchaser certificates representing the Shares being
transferred, which certificates shall, in the case of a sale,
be accompanied by a duly executed assignment of the Shares to
the purchaser; and
(ii) payment for Shares shall be made in full at Closing.
(b) At Closing, the selling shareholder shall deliver to the purchaser a
written warranty that:
(i) there are no contractual or other restrictions on the transfer
of the purchased Shares (other than the restrictions set out
in the Articles of the Corporation and in this Agreement); and
(ii) the selling shareholder is the sole beneficial owner of the
purchased Shares with full right, title and authority to
transfer the purchased Shares to the purchaser, free and clear
of all claims, liens and other encumbrances whatsoever.
(c) At Closing, all necessary and proper corporate proceedings required
by counsel for the purchaser, acting reasonably, shall be taken for
the transfer of the purchased Shares.
(d) If the purchaser fails for any reason whatsoever to proceed with
Closing or to pay to the selling shareholder any amount due
hereunder, then all amounts due hereunder but not paid shall bear
interest from the date of Closing until paid in full at a rate of
interest per annum equal to the Prime Rate plus three percent (3%).
Such interest shall be payable on demand.
The conditions set forth in this Section 5.1 are each made for the
exclusive benefit of the purchaser and if any such conditions is not satisfied
at the Closing, then the purchaser may, at its option, either refuse to proceed
with the Closing or proceed with the Closing, in either case without prejudice
to its remedies and recourses against the selling shareholder as a result of
such condition not being satisfied.
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5.2 FURTHER ASSURANCES
Each Party upon the request of the other, whether before or after a
Closing, shall do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged or delivered all such further acts, deeds, documents,
assignments, transfers, conveyances, powers of attorney and assurances as may be
reasonably necessary or desirable to effect complete consummation of the
transactions contemplated by this Agreement.
ARTICLE VI
REGISTRATION RIGHTS
6.1 REGISTRATION RIGHTS
(a) The Investor shall have the registration rights described in Exhibit
A attached hereto which shall be deemed an integral part hereof with
respect to any Shares now or hereafter acquired by the Investor,
including Shares acquired upon the conversion of the Preferred
Shares, Shares acquired upon conversion of the Notes and Shares
acquired by the Investor under Articles II, III or IV, or otherwise.
(b) Notwithstanding anything herein to the contrary, and without
limiting any of the rights of the Investor hereunder or under
applicable Law, if at any time after the date hereof, there shall be
(i) any reclassification, recapitalization or other change of the
outstanding Shares (other than as a result of a subdivision or
combination thereof), (ii) any consolidation, combination,
amalgamation, merger or similar transaction of the Corporation with
any other entity (other than a merger in which the Corporation is
the surviving or continuing entity and its capital stock is
unchanged) in which the Shares are converted into any other
securities or (iii) any share exchange or similar transaction
pursuant to which the outstanding Shares are converted into other
securities, then the registration rights of the Investor as set
forth in Exhibit A shall be deemed to apply to the securities
received by the Investor in or as a consequence of such transaction
and the issuer of such securities shall expressly acknowledge its
obligations under this Article VI.
ARTICLE VII
CORPORATE GOVERNANCE AND COVENANTS
7.1 BOARD OF DIRECTORS
From and after the date hereof, Holdings agrees to vote (including by
execution of a written consent or in any other manner permitted by Law and the
Corporation's Articles and By-Laws) all of the voting securities in the
Corporation registered or owned beneficially by Holdings and any other voting
securities of the Corporation over which it has control, and will take all other
necessary or desirable actions within its control in order to cause:
(a) the Board of the Corporation at all times to consist of not less
than eight (8) members;
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(b) the election to the Board of one representative designated by the
Investor, which designee shall be reasonably acceptable to the
Corporation;
(c) the removal from the Board of the representative designated by the
Investor at the Investor's written request; and
(d) if the representative of the Board designated by the Investor ceases
to serve as a member of the Board during his or her term of office
for any reason, the resulting vacancy on the Board to be filled by a
representative designated by the Investor and acceptable to the
Corporation.
7.2 RIGHT OF INSPECTION
So long as the Investor owns any Shares or any securities or instruments
convertible into or exchangeable for Shares, the Investor and its
representatives and agents (collectively, the "INSPECTORS") shall have the right
at the Investor's expense, to visit and inspect any of the properties of the
Corporation and its subsidiaries, to examine the books of account and records of
the Corporation and its subsidiaries, to make or be provided with copies and
extracts therefrom, to discuss the affairs, finances and accounts of the
Corporation and its subsidiaries with, to be advised as to the same by, its and
their officers, and independent public accountants (and by this provision the
Corporation authorizes such accountants to discuss such affairs, finances and
accounts, whether or not a representative of the Corporation is present) all at
such reasonable times and intervals and to such reasonable extent as such
Investor may desire; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to the Investor) of any
such information which the Corporation determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the release of such information is ordered pursuant to a subpoena or other
order form a court or government body of competent jurisdiction, or (b) such
information to any Inspector until and unless such Inspector shall have entered
into confidentiality agreements (in form and substance satisfactory to the
Corporation) with the Corporation with respect thereto. The Investor agrees that
it shall, upon learning that disclosure of such information is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Corporation and allow the Corporation, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the information deemed confidential. Notwithstanding the
first sentence of this Section 7.2, the Corporation shall bear the costs of
Investor's expenses under this section 7.2 after and during the continuance of
any Event of Default as defined in the Notes. Notwithstanding the foregoing, the
Corporation shall be entitled to restrict the rights of inspection granted to
the Investors hereunder and shall not be required to disclose to the Investors
any information where the Corporation deems in good faith that the exercise of
such inspection rights or the disclosure of such information would entail
disclosure of a trade secret or other confidential information of the
Corporation or information of a commercially sensitive nature the disclosure of
which would be detrimental to the Corporation or its business.
7.3 FINANCIAL INFORMATION
So long as the Investor owns any Preferred Shares, Notes and/or Shares
which, on an as-converted basis, equal at least twenty-five percent (25%) of the
Shares issuable upon conversion
-15-
of the Preferred Shares and Notes as of the date hereof, subject to adjustment
as a result of any stock dividend, split-up, combination or other similar event
after the date hereof (the "MINIMUM NUMBER OF SHARES"), the Corporation shall
deliver to the Investor:
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Corporation, an income
statement of the Corporation and its subsidiaries for such fiscal
year, a balance sheet of the Corporation and its subsidiaries and
statement of shareholder's equity as of the end of such year, and a
schedule as to the sources and applications of funds for such year,
such year-end financial reports to be in reasonable detail, prepared
in accordance with Canadian generally accepted accounting
principles("GAAP"), and audited and certified by independent
chartered accountants of nationally recognized standing selected by
the Corporation;
(b) as soon as practicable, but in any event within forty-five (45) days
after the end of each of the first three (3) quarters of each fiscal
year of the Corporation, an unaudited profit or loss statement,
not-consolidated. If available, Corporation will further provide a
schedule as to the sources and application of funds for such fiscal
quarter and a statement showing the number of Shares of each class
and series of capital stock and securities convertible into or
exercisable for Shares of capital stock outstanding at the end of
the period, the number of Common Shares issuable upon conversion or
exercise of any outstanding securities convertible or exercisable
for Common Shares and the exchange ratio or exercise price
applicable thereto, all in sufficient detail as to permit the
Investor to calculate its percentage equity ownership in the
Corporation;
(c) as soon as practicable, but in any event thirty (30) days after
approval of the Corporation's Board of Directors, a budget and
business plan for the next fiscal year, prepared on a including
balance sheets and sources and applications of funds statements;
(d) with respect to the financial statements called for in subsection
(b) of this Section 7.3, an instrument executed by the Chief
Financial Officer or President of the Corporation and certifying
that such financials were prepared in accordance with GAAP
consistently applied with prior practice for earlier periods (with
the exception of footnotes that may be required by GAAP) and fairly
present the financial condition of the Corporation and its results
of operation for the period specified, subject to year-end audit
adjustment;
Notwithstanding the foregoing, the Corporation shall not be obligated
under this Section 7.3 to provide the Investors with information which it deems
in good faith to be a trade secret or similar confidential information.
-16-
7.4 COVENANTS
So long as the Investor owns Preferred Shares, Notes and Shares which on
an as-converted basis equal the Minimum Number of Shares, the Corporation agrees
to take the actions listed below.
(a) The Corporation will promptly pay and discharge, or cause to be paid
and discharged when due and payable, all lawful taxes, assessments,
and governmental charges or levies imposed upon the income, profits,
property, or business of the Corporation or any subsidiary;
provided, however, that any such tax, assessment, charge, or levy
need not be paid if the validity hereof shall currently be contested
in good faith by appropriate proceedings and if the Corporation
shall have set aside on its books adequate reserves with respect
thereof, and provided further, that the Corporation will pay all
such taxes, assessments, charges, or levies forthwith upon the
commencement of proceedings to foreclose any lien that may have
attached as security therefor. The Corporation will promptly pay or
cause to be paid when due, or in conformance with customary trade
terms, all other indebtedness incident to the operations of the
Corporation.
(b) The Corporation will keep its properties and those of its
subsidiaries in good repair, working order, and condition,
reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions, and
improvements thereto; and the Corporation and its subsidiaries will
at all times comply with the provisions of all material leases to
which any of them is a party or under which any of them occupies
property so as to prevent any loss or forfeiture thereof or
thereunder.
(c) Except as otherwise decided in accordance with policies adopted by
the Board, the Corporation will keep its assets and those of its
subsidiaries that are of an insurable character insured by
financially sound and reputable insurers against loss or damage by
fire, extended coverage, and explosion insurance in amounts
customary for companies in similar businesses similarly situated;
and the Corporation will maintain, with financially sound and
reputable insurers, insurance against other hazards, risks, and
liabilities to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated.
(d) The Corporation and all of its subsidiaries will keep records and
books of account in which full, true, and correct entries will be
made of all dealings or transactions in relation to its business and
affairs in accordance with GAAP applied on a consistent basis.
(e) The Corporation and all its subsidiaries shall duly observe and
conform to all valid requirements of governmental authorities
relating to the conduct of their businesses or to their properties
or assets.
-17-
(f) The Corporation shall maintain in full force and effect its
corporate existence, rights, and franchises and all licenses and
other rights to use patents, processes, licenses, trademarks, trade
names, or copyrights owned or possessed by it or any subsidiary and
deemed by the Corporation to be necessary to the conduct of its
business.
(g) The Corporation will retain independent public accountants of
recognized national standing who shall certify the Corporation's
financial statements at the end of each fiscal year. In the event
the services of the independent public accountants so selected, or
any firm of independent public accountants hereafter employed by the
Corporation are terminated, the Corporation will promptly thereafter
notify the Investor and will request the firm of independent public
accountants whose services are terminated to deliver to the
Investors a letter from such setting forth the reasons for the
termination of their services. In the event of such termination the
Corporation will promptly thereafter engage another firm of
independent public accountants of recognized national standing. In
its notice to the Investor the Corporation shall state whether the
change of accountants was recommended or approved by the Board of
Directors of the Corporation or any committee thereof.
7.5 NOTICES OF CERTAIN EVENTS
So long as the Investor owns any Preferred Shares or Notes the Corporation
shall not effect any of the transactions listed below unless (i) the Investor
has received written notice of such transaction at least Fifteen (15) Business
Days prior thereto, but in no event later than ten (10) Business Days prior to
the record date for the determination of shareholders entitled to vote with
respect thereto, (ii) if required by the Articles of the Corporation, the Notes
or any other Transaction Document (as defined in the Securities Purchase
Agreement, the consent of the holders of Preferred Shares or Notes shall have
been obtained in accordance with such Articles and Transaction Documents or
(iii) the resulting successor, acquiring or amalgamated entity (if not the
Corporation) assumes by written instrument (in form and substance reasonably
satisfactory to the Investor), the obligations of the Corporation under this
Agreement and the other Transaction Documents:
(a) the declaration or payment of any dividends on Common Shares,
Non-Voting Common Shares or Preferred Shares other than dividends
payable solely in Common Shares, Non-Voting Common Shares or
Preferred Shares;
(b) the Corporation's merger with or into or consolidation, combination
or amalgamation with or into any other Person, or the sale, lease or
other disposition of all or substantially all of the properties or
assets of the Corporation or any of its subsidiaries;
(c) the filing by the Corporation or any of its subsidiaries of a
registration statement under the securities laws of the United
States or of a prospectus under the securities laws of any province
of Canada; and
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(d) the occurrence of an Event of Default under the Note.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SUCCESSORS IN INTEREST
This Agreement and the provisions hereof shall inure to the benefit of and
be binding upon the Parties and their respective heirs, legatees, successors,
testamentary executors and permitted assigns.
8.2 NOTICE
Any offer, acceptance, rejection, notice, consent, request, authorization,
permission, direction or other instrument required or permitted to be given
hereunder shall be in writing and given by delivery or sent by telecopier or
similar telecommunications device and addressed:
-19-
in the case of the Investor, to it at:
PRIME INVESTMENTS SA
Saphine Building 1st Floor
00 Xxxxxxxxx Xxxxxx Xxxxx
X0000- Xxxxxxxxxx
X.X. Xxx 000
X-0000 Xxxxxxxxxx
Attn: Xx. Xxxxx Xxxxxxxxx
Telecopier: 352-4271961
with a copy to
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone 000-000-0000
Telecopier: 000-000-0000
Attn: Xxxxxxxx X. Xxxxxxxx, Esq.
(a) in the case of Holdings, to it at:
XXXXX XXXXX & SONS HOLDINGS INC.
X/X XXXXXXXX XXXXXXXXXX XXXX
00X, Xxxxxxxxx Xxxxx
Xxxxxxxxxx, 0000
Attention: The President, and Xxxxxx Xxxxxxxx, Corporate Secretary
Telecopier: 011 39 118 174 827
with a copy to:
XXXXX XXXXX & SONS INC.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: The President, and the Corporate Secretary
Telecopier: (000) 000-0000
(b) in the case of the Corporation, to it at:
-00-
XXXXX XXXXX & SONS INC.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: The President, and the Corporate Secretary
Telecopier: (000) 000-0000
Any offer, acceptance, rejection, notice, consent, request, authorization,
permission, direction or other instrument given as aforesaid shall be deemed to
have been received, if sent by telecopier or similar telecommunications device
on the next Business Day following such transmission or, if delivered, to have
been given and received on the date of such delivery. Any address for service
may be changed by written notice given as aforesaid.
8.3 PURPORTED TRANSFERS; APPLICABILITY OF CERTAIN PROVISIONS
Any purported transfer of Shares contrary to the terms of this Agreement
shall be null and void and have no legal effect. Notwithstanding any other
provisions of this Agreement, the rights of first refusal set forth in Sections
2.3 and 2.4 and the preemptive rights set forth in Section 4.1 shall not apply
to a merger, amalgamation or similar corporate transaction that is taken to
reorganize the relationship between the Corporation and Mayor's Jewelers, Inc.,
provided that all shareholders of the Corporation are treated equally in such
restructuring.
8.4 TIME
Time shall be of the essence in this Agreement.
8.5 EXECUTION OF COUNTERPART
No Person shall become a holder of Shares of the Corporation without first
having executed a counterpart of this Agreement in accordance with Schedule 8.5.
Each such counterpart so executed shall be deemed to be an original and
such counterparts together shall constitute one and the same instrument.
Each Person who becomes a holder of Shares of the Corporation and who has
executed a counterpart of this Agreement in accordance with Schedule 8.5 shall
become a Party hereto. To the extent such Person is the transferee of the
Investor, such person shall be deemed to have the rights and obligations of the
Investor hereunder with respect to the Shares so transferred and to the extent
such Person is the transferee of Holdings, such Person shall be deemed to have
the rights and obligations of Holdings hereunder with respect to the Shares so
transferred. The preceding sentence shall not apply (i) to the Investor (or its
Permitted Transferees) to the extent such Person is the transferee of Shares
from Holdings and/or its Permitted Transferees or (ii) Holdings (or its
Permitted Transferees) to the extent such Person is the transferee of Shares
from the Investor and/or its Permitted Transferees.
-21-
8.6 TERMINATION
(a) This Agreement shall terminate automatically upon occurrence of any
of the following events: (i) all issued and outstanding Shares of
the Corporation are held by one Person only; or (ii) by written
agreement of the Shareholders and the Corporation.
(b) The provisions of Articles II, III, IV, V and VII hereof shall
terminate upon (i) the consummation by the Corporation of a
Qualified Public Offering, or (ii) the conversion by the Investor of
its Shares under Article III hereof or (iii) the consummation of a
transaction described in Section 6.1(b)(ii) or (iii) of the
Shareholders' Agreement with an issuer whose Shares are listed on a
US securities exchange or a national Canadian stock exchange or
quoted on the NASDAQ-NMS or Small Cap.
[SIGNATURE PAGES FOLLOW]
-22-
IN WITNESS WHEREOF this Agreement was executed on the date and at the
place first mentioned above.
XXXXX XXXXX & SONS INC. XXXXX XXXXX & SONS HOLDINGS INC.
By: /s/ Xxxxxx X. Xxxxxxxxxxxx By: /s/ Xxxx Xxxxxx
---------------------------- --------------------------
Name: Xxxxxx X. Xxxxxxxxxxxx Name: Xxxx Xxxxxx
Title: President and Chief Executive Title: Director
Officer
President et Chef de l'Executif
PRIME INVESTMENTS SA XXXXX XXXXXXXX
By: /s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxx Xxxxxxxx
---------------------------- --------------------------
Name: Xxxx X. Xxxxxxxx Name: Xxxxx Xxxxxxxx
Title:
-23-
SCHEDULE 8.5
To the Shareholders' Agreement by and among Prime Investments SA, Xxxxx
Xxxxx & Sons Holdings Inc. and Xxxxx Xxxxx & Sons Inc. made as of August 15,
2002.
COUNTERPART
THIS INSTRUMENT forms part of the Shareholders' Agreement (the
"Agreement") made as of _________________________ as amended, by and among Prime
Investments SA, Xxxxx Xxxxx & Sons Holdings Inc. and Xxxxx Xxxxx & Sons Inc.,
which Agreement permits execution by counterparts. The undersigned hereby
acknowledges having received a copy of the said Agreement (which is annexed
hereto as Schedule A) and, having read the said Agreement in its entirety,
hereby agrees that the terms and conditions of the said Agreement shall be
binding upon the undersigned as if the undersigned had been an original party to
the Agreement as a Shareholder (as such term is defined in the Agreement) and
such terms and conditions shall inure to the benefit of and be binding upon the
undersigned, its successors and assigns.
IN WITNESS WHEREOF the undersigned has executed this instrument this
[____] day of [____],____.
[SHAREHOLDER]
Per: ______________________
EXHIBIT A TO SHAREHOLDERS' AGREEMENT
This Exhibit A is a part of and is incorporated into that certain
Shareholders' Agreement (the "SHAREHOLDERS' AGREEMENT"), dated as of August 15,
2002, among Xxxxx Xxxxx & Sons Inc., a corporation amalgamated under the laws of
Canada (the "CORPORATION"), Xxxxx Xxxxx & Sons Holdings Inc., a corporation
incorporated under the laws of Canada ("HOLDINGS") and Prime Investments SA, a
Luxembourg corporation (together, with each transferee thereof of Common Shares
that agrees to be bound by the terms of the Shareholders' Agreement in
accordance with Section 8.5 thereof, the "INVESTORS.") Capitalized terms used in
this Exhibit A without definition herein shall have the meanings assigned to
them in the Shareholders' Agreement.
1. Registration on Request.
1.1 Request. Subject to the other provisions of this Section 1 and
the other provisions of this Exhibit A, at any time after (i) the Corporation's
initial Qualified Public Offering (ii) a transaction described in Section
6.1(b)(ii) or (iii) of the Shareholders Agreement with an issuer whose Shares
are listed on a US national securities exchange or a Canadian securities
exchange or quoted on the NASDAQ, NMS or Small Cap, or (iii) the conversion by
the Investor of its Shares as provided in Article III of the Shareholders'
Agreement, upon the written request of the Investor, requesting that the issuer
of the Registrable Securities (the "ISSUER") held by the Investor effect the
registration under the securities laws of the jurisdiction in which such
Issuer's Shares are registered or the qualification for sale in Canada (a
"QUALIFICATION") pursuant to a final prospectus (a "CANADIAN PROSPECTUS") filed
with, and in respect of which a receipt has been issued by, each of the
securities commissions or similar regulatory authority of each of the provinces
of Canada (the "CANADIAN COMMISSIONS"), of all or any part of such the
Investor's Registrable Securities (but not less than 250,000 Registrable
Securities), the Issuer will as soon as is practicable give written notice of
such requested registration or Qualification to all holders of Registrable
Securities, and thereupon will use its reasonable best efforts to effect, as
expeditiously as practicable, the registration or Qualification under the
applicable securities laws of Registrable Securities which the Issuer has been
so requested to register by the Investor. Notwithstanding the foregoing, the
Issuer shall not be required to effect a registration or Qualification pursuant
to this Section 1.1:
(a) if the Issuer has already effected one (1) registration or
Qualification pursuant to this Section 1.1 at the request of Investor and such
registration or Qualification has been declared or ordered effective; or
(b) within one hundred eighty (180) days after a merger, amalgamation or
other reorganization pursuant to which the Common Shares have been exchanged or
converted into common shares of Mayor's Jewelers Inc.
1.2 Registration Statement Form. Registrations under this Section 1
shall be on such appropriate registration form and Qualifications shall be made
pursuant to such appropriate type of Canadian Prospectus, as permitted by
applicable securities
laws and the rules and regulations thereunder and as selected by the Issuer and
as acceptable to the Investor. The Issuer agrees to include in any such
registration statement and Canadian Prospectus all information which the
Investor, upon advice of counsel, shall reasonably request. The Issuer may, if
permitted by applicable law, effect any registration requested under this
Section 1 by the filing of a short-form registration statement (such as a Form
S-3 if the registration statement is filed under the United States Securities
Act) unless the Investor (or, if such registration involves an underwritten
public offering of Registrable Securities, the managing underwriter of such
public offering) shall notify the Issuer in writing that, in the reasonable
judgment of such managing underwriter, the use of a more detailed form specified
in such notice is of material importance to the success of such public offering,
in which case such registration shall be effected on the form so specified.
1.3 Effective Registration Statement. A registration or
Qualification requested pursuant to this Section 1 shall not be deemed to have
been effected (a) unless a registration statement with respect thereto has
become effective or a receipt for a Canadian Prospectus has been issued by each
of the Canadian Commissions, provided that a registration which does not become
effective after the Issuer has filed a registration statement with respect
thereto or a Canadian Prospectus which is not receipted by the Canadian
Commissions solely by reason of the refusal to proceed of the Investor (other
than a refusal to proceed based upon the advice of counsel relating to a matter
with respect to the Issuer or the withdrawal of a request for registration or
Qualification pursuant to Subsection 1.1) shall be deemed to have been effected
by the Issuer unless the Investor shall have elected to pay all Registration
Expenses (as defined in Section 6 below) in connection with such registration or
Qualification, (b) if the registration does not remain effective or the
Registrable Securities do not remain qualified for sale pursuant to a Canadian
Prospectus for a period of at least 180 days or, if earlier, until all the
Registrable Securities requested to be registered or qualified for sale in
connection therewith were sold, (c) if, after it has become effective, such
registration or, after the qualification for sale of the Registrable Securities
in Canada, is interfered with by any stop order, injunction or other order or
requirement of the Securities and Exchange Commission (the "COMMISSION"), if the
registration involves a public offering in the United States, any of the
Commissions or other governmental authority or court for any reason, or (d) if
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration or Qualification are
not satisfied and no such registration or Qualification occurs, other than by
reason of some act or omission by the Investor.
1.4 Priority in Requested Registrations. If a requested registration
or Qualification pursuant to this Section 1 involves an underwritten offering,
and the managing underwriter shall advise the Issuer in writing that, in its
opinion, the number of securities requested to be included in such registration
or Qualification exceeds the number which can be sold in such offering within a
price range acceptable to the Investor (such writing to state the basis of such
opinion and the approximate number of shares of securities which may be included
in such offering without such effect), the Issuer will include in such
registration or qualification for sale in Canada, to the extent of the number of
securities which the Issuer is so advised can be sold in such offering, first,
any
A-2
and all securities proposed to be registered or qualified for sale in Canada by
the Issuer for its own account as part of such registration or qualification,
second, Registrable Securities requested by the Investor, and third all other
securities of the Issuer proposed to be included in such registration or
qualification for sale in Canada, in accordance with the priorities, if any,
then existing among the Issuer and the holders of such securities.
1.5 Registration Expenses. In connection with one registration or
Qualification of Registrable Securities pursuant to this Section 1, the Issuer
shall pay all Registration Expenses and the Investor shall pay all underwriting
discounts and commissions applicable to its Registrable Securities and any fees
of separate counsel employed by the Investor.
2. Incidental Registration.
2.1 Right to Include Registrable Securities. If, following the
public offering of the securities of the Issuer (which in the case of the
Corporation shall be a Qualified Public Offering), the Issuer proposes to
register or qualify for sale any of its securities (which are the same type as
Registrable Securities then held by the Investor) under the US Securities Act or
the securities laws of any province or territory of Canada by registration on
any form or qualification for sale in Canada pursuant to any type of Canadian
prospectus, for public sale for its own account or the account of any other
shareholder, it will each such time give prompt written notice to the Investor
of its intention to do so and of the Investor's rights under this Section 2,
prior to the proposed registration or qualification for sale (such notice, a
"REGISTRATION NOTICE"). Upon the written request of the Investor made as
promptly as practicable and in any event within ten (10) days after the receipt
of any such Registration Notice (which request shall specify the Registrable
Securities intended to be disposed of by the Investor), the Issuer will file a
registration statement or a Canadian Prospectus with respect to, and use its
reasonable best efforts to make effective or obtain receipts therefor from each
of the Commissions, at the earliest possible date, the registration or
qualification for sale in Canada under the applicable securities laws of all
Registrable Securities which the Issuer has been so requested to register by the
Investor thereof; provided, however, that if, at any time after giving written
notice of its intention to register or qualify for sale in Canada any
Registrable Securities and prior to the effective date of the registration
statement filed in connection with such registration or date of issuance of
receipts for a Canadian Prospectus, the Issuer shall determine for any reason
not to register or to delay registration or qualification for sale of such
securities, the Issuer may, at its election, give written notice of such
determination to the Investor and (i) in the case of a determination not to
register or qualify for sale, the Issuer shall be relieved of its obligation to
register or qualify for sale in Canada any Registrable Securities in connection
with such registration or offering and (ii) in the case of a determination to
delay registering or qualifying for sale in Canada, the Issuer shall be
permitted to delay registering or qualifying for sale any Registrable
Securities, for the same period as the delay in registering or qualifying for
sale such other securities.
2.2 Priority in Incidental Registrations. If the managing
underwriter of any underwritten offering shall advise the Issuer that the number
of Registrable Securities
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requested to be included in such registration or qualification exceeds the
number which can be sold in such offering, and the Issuer has so advised the
Investor in writing, then the Issuer will include in such registration or
qualification, to the extent of the number of Registrable Securities which the
Issuer is so advised can be sold in (or during the time of) such offering,
first, any and all securities proposed to be registered or qualified for sale in
Canada by the Issuer for its own account as part of such registration, second,
the Registrable Securities requested to be included in such registration or
qualification by the Investor if exercising its rights under Section 2.1 hereof
and other holders of Registrable Securities, who have exercised demand
registration rights comparable to the Investor's rights under Section 2.1
hereof, pro rata among such holders on the basis of the number of Registrable
Securities requested to be registered or qualified by such holders and third,
all other securities of the Issuer proposed to be included in such registration,
in accordance with the priorities, if any, then existing among the Issuer and
the holders of such securities. In connection with any registration or
qualification for sale in Canada as to which this Subsection 2.2 applies, the
Investor shall have the right, upon written notice to the Issuer within ten (10)
days of receipt of a Registration Notice from the Issuer, to withdraw from such
registration or qualification the Registrable Securities requested to be
registered or qualified for sale by the Investor.
2.3 Registration Expenses. In connection with any registration of
Registrable Securities pursuant to this Section 2, the Issuer shall pay all
Registration Expenses and the Investor shall pay all underwriting discounts and
commissions applicable to its Registrable Securities and any fees of separate
counsel employed by the Investor.
3. Registration Procedures. With respect to any registration pursuant to
Section 1 or Section 2:
3.1 Cooperation. In connection with any registration or
Qualification of Registrable Securities for the account of the Investor, the
Investor shall provide to the Issuer for inclusion in the related registration
statement or Canadian Prospectus any information reasonably requested by the
Issuer or, in the case of an underwritten offering, by the managing underwriter
thereof.
3.2 Withdrawal from Registration. The Investor shall not be
permitted to effect a withdrawal of its Registrable Securities from a requested
registration or Qualification, unless the Investor provides written notice of
such withdrawal to the Issuer not later than 24 hours prior to the pricing of
the Registrable Securities to be sold pursuant to such registration or
Qualification (the "WITHDRAWAL DEADLINE"); provided, that such restriction on
withdrawal shall apply only if (i) not less than 12 hours prior to the
Withdrawal Deadline the Investor shall have been informed by the Issuer or the
managing underwriter of an underwritten offering of the range of prices within
which such Registrable Securities shall be offered in connection with such
registration or Qualification and (ii) the actual price at which such
Registrable Securities are offered in connection with such registration or
Qualification shall have been within such range of prices.
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3.3 Underwriters. The distribution for the account of the Investor
shall in any underwritten offering be underwritten by the same underwriters who
underwrite the distribution of Registrable Securities for the account of any
other holder of Registrable Securities exercising demand registration rights
comparable to those set forth in Section 2.1 hereof and the Issuer.
3.4 Legal Opinions. The Investor shall retain counsel and shall
cause such counsel to deliver to the managing underwriter of any underwritten
offering such opinions of such counsel as such managing underwriter may
reasonably require.
3.5 Execution of Documents. The Investor shall, upon request of the
Issuer, execute power of attorney, deposit and custodian agreements in form and
substance satisfactory to the managing underwriter of any underwritten offering.
The Investor shall execute an underwriting agreement in form and substance
satisfactory to such managing underwriter, which underwriting agreement shall
contain customary representations and warranties to be given by the Investor
(including representations regarding the material accuracy and completeness of
the information provided thereby pursuant to Subsection 3.1) and provisions
whereby the Issuer, on the one hand, and the Investor, on the other hand,
indemnify each other as provided in Section 6.
3.6 Registration Statement. The Issuer will deliver to the Investor
such number of copies of any preliminary Canadian Prospectus, and after the
effectiveness of any registration statement or issuance of receipts in respect
of a Canadian Prospectus such reasonable number of copies of a definitive
prospectus included in such registration statement or Canadian Prospectus and of
any revised or supplemental prospectuses as the Investor may from time to time
request.
4. Hold-Back. Each of the Issuer and the Investor agrees not to effect any
public sale or distribution of Registrable Securities during the period
specified by the managing underwriter or underwriters of an underwritten offer
being made pursuant to such registration statement (which period shall not
exceed seven (7) days prior to and 180 days following the effective date of such
registration statement), except as part of such registration or Qualification,
if and to the extent reasonably requested by such managing underwriter or
underwriters.
5. INTENTIONALLY OMITTED.
6. Indemnity.
(a) The Issuer will indemnify and hold harmless the Investor if its
Registrable Securities were included in a registration statement or Canadian
Prospectuses prepared under Section 1 or Section 2 hereof, against all claims,
losses, damages, liabilities and expenses resulting from any untrue statement or
allegedly untrue statement of a material fact contained or incorporated by
reference in a prospectus or in any related registration statement or in any
Canadian preliminary or final Prospectus, notification or the like or from any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they
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were made, not misleading, except insofar as the same may have been based on
information furnished in writing to the Issuer by the Investor or such
underwriter expressly for use therein and used in accordance with such writing.
The Investor, by acceptance of the provisions herein, agrees to furnish to the
Issuer such information concerning the Investor and the proposed sale or
distribution as shall, in the opinion of counsel for the Issuer, be necessary in
connection with any such registration or Qualification of any Registrable
Securities owned by the Investor, and to indemnify and hold harmless the Issuer,
its officers and directors and each of its underwriters (and any person who
controls the Issuer or such underwriters within the meaning of Section 15 of the
US Securities Act) against all claims, losses, damages, liabilities and expenses
resulting from any untrue statement or allegedly untrue statement of a material
fact furnished in writing by the Investor to the Issuer or to any underwriter of
Registrable Securities sold by the Investor, expressly for use in connection
with such registration or Qualification and used in accordance with such writing
and from any omission therefrom or alleged omission therefrom of a material fact
needed to be furnished or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) Promptly after receipt by the Investor of written notice of the
commencement of any action or proceeding involving a claim referred to in
Section 6(a), the Investor will, if a claim in respect thereof is to be made
against the Issuer, give written notice to the latter of the commencement of
such action; provided, however, that the failure of the Investor to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subsections of this Section 6, except to the extent that the
Issuer is prejudiced by such failure to give notice. In case any such action
shall be brought against the Investor and it shall notify the Issuer of the
commencement thereof, the Issuer shall be entitled to participate therein and,
to the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to the Investor and after written notice from the Issuer
to the Investor of its election so to assume the defense thereof, the Issuer
shall not be liable to the Investor for any legal or other expenses (including
fees and expenses of attorneys) subsequently incurred by the Investor in
connection with the defense thereof. Notwithstanding the foregoing, in any
action or proceeding in which both the Issuer and the Investor is, or is
reasonably likely to become, a party, the Investor shall have the right to
employ separate counsel at the Issuer's expense and to control its own defense
of such action or proceeding if, in the reasonable opinion of counsel to the
Investor, (a) there are or may be legal defenses available to the Investor or to
other indemnified parties that are different from or additional to those
available to the Issuer or (b) any conflict or potential conflict exists between
the Issuer and the Investor that would make such separate representation
advisable. The Issuer shall not be liable for any settlement of any action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld. The Issuer shall not, without the consent of the
Investor, which consent shall not be unreasonably withheld, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to Investor
of a general release from all liability in respect to such claim or litigation
or which requires action by the Investor.
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7. Definitions. As used in this Exhibit A, unless the context otherwise
requires, the following terms have the following respective meanings:
"REGISTRABLE SECURITIES" means any Shares of the Corporation or any
securities received by the Issuer pursuant to Article III or Section 4(b) of the
Shareholders' Agreement, but with respect to any such securities, only until
such time as such Shares (i) have been effectively registered under the US
Securities Act or pursuant to the securities laws of each of the provinces of
Canada and disposed of in accordance with the registration statement or Canadian
Prospectuses covering such securities, or (ii) has ceased to be outstanding.
"REGISTRATION EXPENSES" means all expenses incident to the Issuer's
performance of or compliance with Sections 1, 2 or 3, including, without
limitation, all registration and filing fees, all fees of the national
securities exchanges or the National Association of Securities Dealers, Inc., or
the NASDAQ, NMS or Small Cap, or of any Canadian securities exchange all fees
and expenses of complying with applicable securities or laws, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Issuer and of its independent
public accountants, including the expenses of "cold comfort" letters required by
or incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (excluding any
underwriting discounts or commissions with respect to the Registrable
Securities).
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