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STOCKHOLDERS AGREEMENT
BETWEEN
THE SEAGRAM COMPANY LTD.
AND
KONINKLIJKE PHILIPS ELECTRONICS N.V.
DATED AS OF JUNE 21, 1998
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms ........................................... 1
1.2 Other Definitional Provisions ................................... 5
1.3 Methodology for Calculations .................................... 5
ARTICLE II
CORPORATE GOVERNANCE
2.1 Designee to the Board ........................................... 6
2.2 Audit Committee ................................................. 7
2.3 Voting .......................................................... 7
2.4 Irrevocable Proxy ............................................... 8
2.5 Cooperation ..................................................... 8
2.6 Confidential Information ........................................ 9
ARTICLE III
TRANSFER OF VOTING SHARES
3.1 Restrictions on Transfer During Two Years Following Closing ..... 9
3.2 Restrictions on Transfer After Two Years Following Closing ...... 9
3.3 Right of First Offer ............................................ 10
3.4 Permitted Transferees ........................................... 11
3.5 Required Sale ................................................... 11
3.6 Notice of Transfer .............................................. 12
3.7 Compliance with Transfer Provisions ............................. 12
ARTICLE IV
STANDSTILL
4.1 No Acquisitions ................................................. 12
4.2 Other Restrictions .............................................. 12
4.3 Restrictions Following Any Spin-off ............................. 14
ARTICLE V
INCIDENTAL REGISTRATIONS
5.1 Right to Include Registrable Securities ......................... 15
5.2 Company's Ability to Postpone ................................... 16
5.3 Expenses ........................................................ 16
5.4 Priority in Incidental Registrations ............................ 16
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ARTICLE VI
REGISTRATION ON REQUEST
6.1 Request by Holders ....................................... 17
6.2 Expenses ................................................. 17
6.3 Effective Registration Statement ......................... 18
6.4 Selection of Underwriters ................................ 18
6.5 Priority in Requested Registrations ...................... 18
6.6 Company's Ability to Postpone ............................ 18
6.7 Holdback Agreements ...................................... 19
ARTICLE VII
REGISTRATION PROCEDURES
7.1 Registration Procedures .................................. 19
7.2 Information .............................................. 22
7.3 Discontinuance of Disposition ............................ 22
7.4 Sale by Way of Prospectus ................................ 22
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by the Company ........................... 22
8.2 Indemnification by the Sellers ........................... 23
8.3 Notices of Claims, Etc ................................... 24
8.4 Contribution ............................................. 24
8.5 Other Indemnification .................................... 25
ARTICLE IX
TERM AND TERMINATION
9.1 Term ..................................................... 25
ARTICLE X
GENERAL PROVISIONS
10.1 Notices .................................................. 26
10.2 Interpretation ........................................... 27
10.3 Counterparts ............................................. 27
10.4 Entire Agreement; No Third Party Beneficiaries ........... 27
10.5 Governing Law ............................................ 28
10.6 Severability ............................................. 28
10.7 Assignment ............................................... 28
10.8 Submission to Jurisdiction; Waivers ...................... 28
10.9 Enforcement .............................................. 29
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10.10 Legends .................................................. 30
10.11 Other Agreements ......................................... 31
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STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of June 21, 1998 (this
"AGREEMENT"), between THE SEAGRAM COMPANY LTD., a corporation organized under
the laws of Canada (the "COMPANY"), and KONINKLIJKE PHILIPS ELECTRONICS N.V., a
corporation incorporated under the laws of The Netherlands, with corporate seat
at Eindhoven, The Netherlands ("STOCKHOLDER").
WHEREAS, upon the terms and subject to the conditions set forth in
the Offer Agreement, dated as of the date hereof (the "OFFER AGREEMENT"), among
Stockholder, the Company and PolyGram N.V., a corporation incorporated under the
laws of the Netherlands, with corporate seat at Baarn, The Netherlands
("POLYGRAM"), the Company has agreed to commence an offer (the "OFFER") to
purchase all of the issued and outstanding shares, par value NLG 0.50 per share
(the "POLYGRAM SHARES"), of PolyGram for a combination of cash and/or Common
Shares (as defined below).
WHEREAS, Stockholder is the beneficial and record owner of
135,000,000 PolyGram Shares, constituting 75% of the issued PolyGram Shares, and
will acquire Common Shares pursuant to the Offer; and
WHEREAS, as a condition to its willingness to enter into the Offer
Agreement and consummate the transactions contemplated thereby, the Company has
required Stockholder to enter into this Agreement with respect to its rights and
obligations as a holder of Common Shares, effective as of the closing of the
Offer (the "CLOSING").
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement:
(a) "AFFILIATE" means, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person.
(b) "AGREEMENT" means this Stockholders Agreement as it may be
amended, supplemented, restated or modified from time to time.
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(c) "APPLICABLE PERCENTAGE" means, at any time, the ratio, expressed
as a percentage, of (i) the number of Voting Shares beneficially owned by
Stockholder and Stockholder's Permitted Transferees to (ii) the total then
outstanding Voting Shares.
(d) "BENEFICIAL OWNER" or "BENEFICIALLY OWN" has the meaning given
such term in Rule 13d-3 under the Exchange Act and a Person's beneficial
ownership of Voting Shares shall be calculated in accordance with the provisions
of such Rule; provided, however, that (i) in determining beneficial ownership
for purposes of Section 2.1, a Person shall not be deemed to be the beneficial
owner of any Voting Shares (x) which may be acquired by such Person upon the
conversion, exchange or exercise of any Voting Share Equivalents or (y) in
respect of which such Person does not have a pecuniary interest, and (ii) in
determining beneficial ownership for purposes of the other provisions of this
Agreement, a Person shall be deemed to be the beneficial owner of any Voting
Shares which may be acquired by such Person, whether within 60 days or
thereafter, upon the conversion, exchange or exercise of any Voting Stock
Equivalents.
(e) "BOARD" means the Board of Directors of the Company.
(f) "BUSINESS DAY" shall mean any day that is not a Saturday, a
Sunday or other day on which banks are required or authorized by law to be
closed in The City of New York or The Netherlands.
(g) "COMMON SHARES" means common shares without nominal or par value
of the Company and any securities issued in substitution therefor, in connection
with any stock split, dividend or combination, or any reclassification,
recapitalization, merger, consolidation, exchange or other similar
reorganization.
(h) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting securities, as trustee or executor, by contract or
otherwise.
(i) "CURRENT MARKET VALUE" means, with respect to any security, the
average of the daily closing prices on the New York Stock Exchange (or such
principal exchange or market on which such security may be listed or may trade)
for such security for the 20 consecutive trading days commencing on the 22nd
trading day prior to the date with respect to which the Current Market Value is
being determined. The closing price for each day shall be the closing price, if
reported, or, if the closing price is not reported, the average of the closing
bid and asked prices as reported by the New York Stock Exchange (or such
principal exchange or market) or a similar source selected from time to time by
the Company for such purpose. In the event such closing prices or bid and asked
prices, as applicable, are unavailable, the Current Market Value shall be the
Fair Market Value of such security established by a Determination of the
Directors.
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(j) "DETERMINATION OF THE DIRECTORS" means, with respect to any
matter, a determination made on an informed basis and in good faith, on the
basis of such relevant factors as the Directors consider, in their judgment,
appropriate, by the vote of a majority of the Directors present at a meeting of
the Board if a quorum of the Directors is present at such meeting), or without a
meeting if a majority of all Directors consent thereto in writing.
(k) "DIRECTOR" means any member of the Board.
(l) "ENCUMBRANCE" means any claim, lien (statutory or other),
pledge, option, charge, security interest, encumbrance, mortgage or other rights
of third parties of any nature whatsoever.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as to any securities or other
property, the cash price at which a willing seller would sell and a willing
buyer would buy such securities or property in an arm's-length negotiated
transaction without time constraints.
(o) "GROUP" shall have the meaning assigned to it in Section
13(d)(3) of the Exchange Act.
(p) "HOLDER" means Stockholder or any Permitted Transferee that is
the record holder of Registrable Securities.
(q) "MARKET SALE" means a sale or other transfer which is effected
in accordance with the provisions of Rule 144 under the Securities Act.
(r) "MEI" means Matsushita Electric Industrial Co., Ltd.
(s) "PECUNIARY INTEREST" has the meaning given such term in Rule
16a-1(a)(2) under the Exchange Act.
(t) "PERMITTED TRANSFEREE" means any direct or indirect wholly-owned
Subsidiary of Stockholder. In addition, Stockholder shall be a Permitted
Transferee of its Permitted Transferees.
(u) "PERSON" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivisions thereof or any Group comprised of two or more of the
foregoing.
(v) "PRIVATE PLACEMENT" means one or a series of related
privately-negotiated Transfers pursuant to which an insurance company,
foundation or charitable organization, pension fund or other employee benefit
plan, broker dealer, investment company, private investment fund (provided that
such private investment fund is not, and will not in connection with such
Private Placement be, required to file a Schedule 13D regarding Voting Shares)
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investment adviser, bank, savings bank, savings association or other financial
institution shall acquire up to 4% of the then outstanding Voting Shares or
Voting Share Equivalents.
(w) "REGISTRABLE SECURITIES" means any Common Shares issued pursuant
to the Offer Agreement and held by a Holder. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such Registrable Securities shall
have been disposed of in accordance with such registration statement, (ii) such
securities shall have ceased to be outstanding or (iii) such securities shall
have been sold or otherwise Transferred to any Person who is not a Permitted
Transferee.
(x) "REGISTRATION EXPENSES" means any and all expenses incident to
the Company's performance of its obligations under Articles V, VI and VII of
this Agreement, including (i) all SEC, provincial securities commissions and
stock exchange or National Association of Securities Dealers, Inc. registration
and filing fees, (ii) all fees and expenses of complying with securities or blue
sky laws (including reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities), (iii) all printing, messenger and delivery expenses, (iv) all fees
and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange pursuant to Article VII, (v) the
out-of-pocket fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance, (vi)
the reasonable fees and disbursements of one counsel selected by Stockholder in
connection with each such registration or prospectus, and (vii) any fees and
disbursements of underwriters customarily paid by the issuers or sellers of
securities, including liability insurance if the Company so desires or if the
underwriters so require, and the fees and expenses of any special experts
retained by the Company in connection with the requested registration or
prospectus, but excluding underwriting discounts, fees or commissions, fees and
expenses of counsel for the underwriters (except as otherwise set forth in
clause (ii) above) and transfer taxes, if any.
(y) "SEC" means the United States Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act or the
Exchange Act.
(z) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(aa) "SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, joint venture, limited liability company or other
entity controlled by such Person directly or indirectly through one or more
intermediaries; provided, that for purposes of Article IV, a Person shall be
deemed to be "controlled" by another Person if such other Person possesses,
directly or indirectly, the power to prohibit the taking of any action by such
controlled Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise.
(ab) "TRANSFER" means, directly or indirectly, to sell, transfer,
assign, pledge, encumber, hypothecate or similarly dispose of, either
voluntarily or involuntarily, or to enter
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into any contract, option or other arrangement or understanding with respect to
the sale, transfer, assignment, pledge, Encumbrance, hypothecation or similar
disposition of, any Voting Shares or Voting Share Equivalents or any interest in
any Voting Shares or Voting Share Equivalents.
(ac) "UNDERWRITTEN OFFERING" means the sale of Common Shares for
cash in an underwritten public offering or block trade or in an offering
effected pursuant to Regulation S under the Securities Act, which, in any case,
is designed to effect a broad distribution of such Common Shares in which no
purchaser is intended to acquire 4% or more of the Common Shares. Underwritten
offering shall also include a sale of debt securities of the Holder or any
Permitted Transferee for cash, which debt securities are exchangeable for Common
Shares, at the option of the holder or the issuer of such debt securities or as
required by the terms of such debt securities, and which sale is effected
pursuant to an offering under Rule 144A and Regulation S which is designed to
effect a broad distribution of such debt securities in which no purchaser is
intended to acquire Voting Share Equivalents equal to or greater than 4% of the
Common Shares.
(ad) "VOTING SHARE EQUIVALENTS" means any warrants, options, rights
or securities convertible into, or exchangeable or exercisable for, Voting
Shares.
(ae) "VOTING SHARES" means any securities of the Company the holders
of which are generally entitled to vote for members of the Board and any
securities issued in substitution therefor, in connection with any stock split,
dividend or combination, or any reclassification, recapitalization, merger,
consolidation, exchange or other similar reorganization.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Article and Section references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 METHODOLOGY FOR CALCULATIONS. For purposes of this Agreement,
the Transfer of a Voting Share Equivalent shall be treated as the Transfer of
the Voting Shares into which such Voting Share Equivalent can be converted,
exchanged or exercised. For purposes of calculating the amount of outstanding
Voting Shares as of any date and the amount of Voting Shares beneficially owned
by any Person as of any date, the amount of any Voting Shares shall be equal to
the number of votes such Voting Shares shall then entitle the holder thereof to
cast in an election for members of the Board.
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ARTICLE II
CORPORATE GOVERNANCE
2.1 DESIGNEE TO THE BOARD. (a) Effective as of the Closing, the
Company agrees to appoint the Chief Executive Officer of Stockholder (the
"DESIGNEE") to the Board.
(b) After the Closing, Stockholder shall be entitled to designate
its then Chief Executive Officer as its Designee for nomination for election to
the Board for so long as the Applicable Percentage is at least 5%. There shall
be no requirement that the Designee or any subsequent Designee be a "resident
Canadian" as defined in the Canada Business Corporations Act.
(c) At any time that Stockholder is entitled to designate a Director
hereunder, Stockholder shall be entitled to appoint one ex officio member of the
Board, who shall be entitled to notice of and to attend meetings of the Board
and to receive all information circulated or made available to the Board. Such
ex officio member of the Board shall not be deemed to be a member of the Board
for purposes of determining a quorum or for any other purpose, and shall not
have the right to vote on any matter voted on by the Board.
(d) The Company agrees to use its best efforts to cause the election
of the Designee to the Board, including nominating such individual to be elected
to the Board.
(e) If the Designee shall cease to serve as the Chief Executive
Officer of Stockholder, Stockholder shall cause such individual to promptly
resign as a Director, and upon such resignation, Stockholder shall have the
right to designate a replacement Designee as provided in the following sentence.
In the event that a vacancy in the Board is created at any time by the death,
disability, retirement, resignation or removal (with or without cause) of the
Designee, Stockholder shall have the right to designate a replacement Designee
to fill such vacancy and the Company agrees to use its best efforts to cause
such vacancy to be filled as promptly as possible with the replacement Designee,
provided that such replacement Designee then serves as the Chief Executive
Officer of Stockholder. The Company shall not take any action to cause the
removal of the Designee without cause, except (i) if such individual shall cease
to serve as the Chief Executive Officer of Stockholder or (ii) pursuant to
Section 2.1(f)(ii). Unless the Company otherwise agrees, Stockholder shall not,
and shall use its best efforts to cause the Designee not to, take any action to
cause the removal of any Director (other than the Designee) with or without
cause. The Designee will be entitled to directors fees to the same extent as
other independent directors of the Company. The Designee and the Stockholder's
designated ex officio member of the Board will be entitled to be reimbursed by
the Company for all reasonable travel and out-of-pocket expenses incurred by the
Designee and ex officio member as a result of attending meetings of the Board to
the same extent as other independent directors of the Company. For purposes of
this paragraph, "cause" shall mean the wilful and continuous failure of a
Director to substantially perform such Director's duties to the Company or the
wilful engaging by a Director in gross misconduct materially and demonstrably
injurious to the Company. Notwithstanding anything
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to the contrary contained herein, in the event that the Designee is removed from
the Board for cause, Stockholder shall have the right to designate an executive
officer of Stockholder (who shall be reasonably acceptable to the Company) as a
replacement Designee.
(f) If, at any time, the Applicable Percentage of Stockholder is
less than 5%, then:
(i) Stockholder shall use its best efforts to cause the
Designee to resign from the Board as promptly as practicable;
(ii) if the Designee shall not have resigned within 5 days
of the event requiring such resignation, the Company may take or cause to
be taken all actions necessary to remove the Designee from the Board and
any committee of the Board upon which the Designee may be serving and
Stockholder shall vote (and cause each of its Affiliates to vote, if
applicable) or act by written consent with respect to, all Voting Shares
beneficially owned by it and otherwise take or cause to be taken all
actions necessary to remove such Designee; and
(iii) any ex officio member of the Board or any other
committee of the Board designated by Stockholder pursuant to Section
2.1(c) shall cease to be entitled to notice of, or to attend, meetings of
the Board or such committee and shall cease to be an ex officio member of
the Board.
2.2 AUDIT COMMITTEE. For so long as Stockholder has an ex officio
designee to the Board pursuant to Section 2.1(c), such individual shall be
entitled to notice of and to attend meetings of the Audit Committee and to
receive all information circulated or made available to the members of the Audit
Committee. Such individual shall not be deemed to be a member of the Audit
Committee for purposes of determining a quorum or for any other purpose, and
shall not have the right to vote on any matter voted on by such committee.
2.3 VOTING. (a) Stockholder agrees to vote or act by written consent
with respect to (and to cause each of its Affiliates that beneficially own
Voting Shares to vote or act by written consent with respect to), any Voting
Shares beneficially owned by it to cause each of the nominees designated by the
Board to be elected to the Board; provided, however, that the foregoing shall
not be applicable if the Company has not complied with its obligations under
Sections 2.1(a) and 2.1(d).
(b) In connection with any vote or action by written consent of the
shareholders of the Company relating to any matter other than election of
Directors, unless the Company otherwise consents in writing, Stockholder agrees
to vote or act by written consent with respect to (and to cause each of its
Affiliates that beneficially own Voting Shares to vote or act by written consent
with respect to), any Voting Shares beneficially owned by it, at Stockholder's
option, either proportionately on the same basis as the other holders of Voting
Shares so vote or as recommended by the Board; provided, that Stockholder shall
be entitled to vote its shares in its discretion (and not in such proportion or
as so recommended) with respect to any transaction submitted to holders of
Voting Shares pursuant
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to which Voting Shares beneficially owned by Stockholder or any of its Permitted
Transferees will not be entitled to receive (or will not be permitted to elect
to receive on an equitable basis with the Voting Shares held by all other
shareholders), in such transaction, the same consideration as Voting Shares held
by all other shareholders of the Company.
2.4 IRREVOCABLE PROXY. (a) Prior to any meeting of shareholders of
the Company, Stockholder agrees to deliver to the extent required under Section
2.3(a) or 2.3(b), and to cause its Permitted Transferees to deliver, not later
than five Business Days following receipt of the Company's request, a duly
executed irrevocable proxy to the Company specifying how Stockholder intends to
vote as to each matter to be brought before the meeting with respect to all
Voting Shares beneficially owned by Stockholder and its Affiliates. Such proxy
shall appoint the Chief Executive Officer of the Company and Secretary of the
Company as the true and lawful proxies and attorneys-in-fact of Stockholder and
its Affiliates as to the matters to be voted at the meeting, shall state that it
is irrevocable and shall be voted in accordance with the terms of this
Agreement.
(b) In connection with any proposed action by written consent of the
shareholders of the Company, Stockholder agrees that, at the Company's request,
it shall, and shall cause its Permitted Transferees to, execute and deliver to
the Company a written consent with respect to all Voting Shares beneficially
owned by Stockholder and its Affiliates, within 10 days of receipt of such
proposed action. Any such written consent shall be made in accordance with the
terms of this Agreement.
(c) If Stockholder (and its Permitted Transferees, if applicable)
shall fail to deliver a proxy to the Company by the date described in Section
2.4(a) or a consent to the Company by the date described in Section 2.4(b) or if
such proxy (or consent) shall not comply with the terms of this Agreement, or
shall be voted in a manner that is contrary to this Agreement, the irrevocable
proxies set forth in Section 2.4(d) below shall thereupon be irrevocably
activated with respect to the matters to be brought before the meeting or which
are subject to the consent, as the case may be.
(d) In order to secure Stockholder's obligation to vote (or to act
or not act by written consent with respect to) all Voting Shares beneficially
owned by it and its Permitted Transferees in accordance with the provisions of
this Article II, Stockholder, on behalf of itself and its Permitted Transferees,
hereby appoints the Chief Executive Officer of the Company and the Secretary of
the Company as its true and lawful proxies and attorneys-in-fact, with full
power of substitution, to vote (or to act or not act by written consent with
respect to) all of the Voting Shares beneficially owned by it and its Permitted
Transferees in accordance with the terms of Section 2.3(a) or, as recommended by
the Board, with respect to any matter described in Section 2.3(b). The proxies
and powers granted pursuant to this Section 2.4 are irrevocable and are coupled
with an interest and are given to secure the performance of Stockholder's
obligations under this Article II. Such proxies and powers shall survive the
bankruptcy, insolvency, dissolution or liquidation of Stockholder.
2.5 COOPERATION. Stockholder shall, and shall cause its Permitted
Transferees that beneficially own Voting Shares to, vote (or act or not act by
written consent with respect
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to) all of its Voting Shares and take all other necessary or desirable actions
within its control (including attending all meetings in person or by proxy for
purposes of obtaining a quorum and executing all written consents in lieu of
meetings), and the Company shall take all necessary and desirable actions within
its control to effectuate the provisions of this Article II.
2.6 CONFIDENTIAL INFORMATION. To the extent that MEI is an investor
in the Company or its Subsidiaries and has provided confidential and proprietary
information or trade secrets of MEI and its Affiliates to the Company or its
Subsidiaries, Stockholder understands that access to such information may be
restricted by the Company and that the Designee and any ex officio designee of
Stockholder may be required to be excluded from Board deliberations to the
extent such confidential information is discussed. To the extent that
Stockholder has provided confidential and proprietary information or trade
secrets of Stockholder and its Affiliates to the Company or its Subsidiaries,
the Company understands that access to such information may be restricted by
Stockholder and that it may be required to cause any designee of MEI to any
board of a subsidiary of the Company to be excluded from board deliberations to
the extent such confidential information is discussed.
ARTICLE III
TRANSFER OF VOTING SHARES
3.1 RESTRICTIONS ON TRANSFER DURING TWO YEARS FOLLOWING CLOSING.
Without the consent of the Company, during the period commencing on the Closing
and ending on the second anniversary thereof, Stockholder agrees not to, and to
cause its Permitted Transferees not to, Transfer any Voting Shares beneficially
owned by Stockholder or any of its Permitted Transferees except (a) to any
Permitted Transferee, (b) as required by Section 3.5 (so long as such Transfer
is effected in a manner which would be permitted by Section 3.2 if such Transfer
were to occur after the second anniversary of the Closing), or (c) pursuant to a
bona fide third party tender offer or exchange offer which was not induced
directly or indirectly by Stockholder or any of its Affiliates and (i) which is
approved by the Board or (ii) in which Stockholder would be disadvantaged, in
any material respect, if Stockholder failed to tender because the offer is a
partial tender offer for less than all of the outstanding Common Shares or a
tender offer for all Common Shares with no undertaking by the offeror or its
Affiliates for a second step or similar "back-end" transaction providing for the
same consideration as in the offer; provided, that all conditions to such tender
offer (other than the minimum condition) are reasonably likely to be satisfied
at the scheduled expiration date and the minimum condition is reasonably likely
to be satisfied at the scheduled expiration date for such offer even if
Stockholder does not tender (any such offer, a "PERMITTED TENDER OFFER").
3.2 RESTRICTIONS ON TRANSFER AFTER TWO YEARS FOLLOWING CLOSING.
Without the consent of the Company, following the second anniversary of the
Closing, Stockholder agrees not to, and to cause its Affiliates not to, Transfer
any Voting Shares except (a) to any Permitted Transferee, (b) pursuant to a
Permitted Tender Offer, (c) pursuant to an Underwritten Offering, (d) pursuant
to a Private Placement or (e) pursuant to a Market Sale.
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3.3 RIGHT OF FIRST OFFER. (a) Any Transfer of Voting Shares by
Stockholder or its Permitted Transferees (the proposed transferor, the
"TRANSFERRING PARTY") pursuant to a Permitted Tender Offer, an Underwritten
Offering, a Private Placement, a Market Sale or otherwise consented to by the
Company will be subject to the right of first offer provisions of this Section
3.3. Notwithstanding the foregoing, and subject to compliance with Section 3.4,
the provisions of this Section 3.3 shall not apply to any Transfer between
Stockholder and any of its Permitted Transferees or between Permitted
Transferees.
(b) Prior to effecting any Transfer, the Transferring Party shall
deliver a written notice (the "OFFER NOTICE") to the Company, which Offer Notice
shall specify the number or amount and description of the Voting Shares intended
to be Transferred and whether such Transfer shall be effected as a Permitted
Tender Offer, an Underwritten Offering, a Private Placement or a Market Sale.
The Offer Notice shall constitute an irrevocable offer to the Company or its
designee, for the period of time described below, to purchase all (but not less
than all) of such Voting Shares at the Offer Price (as defined in Section 3.3(c)
below), in the case of a Permitted Tender Offer, or at the Current Market Value,
in all other cases, in any case plus a gross-up and an indemnification
(including, for the avoidance of doubt, any withholding taxes on such gross-up
or indemnification) in respect of all applicable Canadian withholding taxes on
such purchase.
(c) For purposes hereof, the "OFFER PRICE" shall mean with respect
to any Permitted Tender Offer, the tender offer or exchange offer price per
Voting Share taking into account any provisions thereof with respect to
proration and any proposed second step or "back-end" transaction. To the extent
the Offer Price consists of consideration other than cash or a publicly traded
security for which a closing market price is published for each Business Day,
such consideration shall be valued by a determination of a nationally recognized
investment bank (selected by the Company and reasonably satisfactory to
Stockholder) of the Fair Market Value thereof per Voting Share. Notwithstanding
anything to the contrary contained in this Section 3.3, the time periods
applicable to an election by the Company to purchase the offered securities set
forth in Section 3.3(d) shall not be deemed to commence until the determination
of the investment bank under this Section 3.3(c) has been made; provided, that,
in no event shall any such election be permitted later than 24 hours prior to
the latest time by which Voting Shares shall be tendered in order to be accepted
pursuant to such offer or to qualify for any proration applicable to such offer
if all conditions to such offer (other than the number of shares tendered) are
reasonably likely to be satisfied or waived. The Company agrees to use its best
efforts to cause the determination of the investment bank under this Section
3.3(c) to be made as promptly as practicable.
(d) If the Company elects to purchase all or a portion of the
offered Voting Shares at the price described in Section 3.3(b), it shall give
notice to the Transferring Party if it shall wish to purchase such Voting Shares
within 14 days (in the case that the Transferring Party discloses in the Offer
Notice that it intends to effect an Underwritten Offering) or 10 days (in the
case that the Transferring Party discloses in the Offer Notice that it intends
to effect a Market Sale or a Private Placement) of its receipt of the Offer
Notice (or in the case of a Permitted Tender Offer, not later than five Business
Days prior to the expiration date of such offer; provided, that all conditions
to such offer (other than with respect to the number
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of Voting Shares tendered) are reasonably likely to be satisfied or waived at
the scheduled expiration date and the Offer Notice shall have been provided at
least ten Business Days prior to the expiration date of such offer). If the
Company shall deliver such a notice, it shall constitute a binding obligation,
subject to obtaining governmental and other similar required approvals, to
purchase the offered Voting Shares, which notice shall include the date set for
the closing of such purchase, which date shall be no later than 30 days
following the delivery of such election notice, subject to extension to the
extent necessary to obtain required governmental approvals and other required
approvals which the Transferring Party and the Company shall use their
respective best efforts to obtain. Notwithstanding the foregoing, such time
periods shall not be deemed to commence with respect to any purported notice
that does not comply in all material respects with the requirements of this
Section 3.3(d). The Company may assign its rights to purchase under this Section
3.3 to any Person.
(e) If the Company does not respond to the Offer Notice within the
required response time period or elects not to purchase the offered Voting
Shares, the Transferring Party shall be free to complete, with respect to the
offered Voting Shares, an Underwritten Offering, Private Placement or Market
Sale, or to tender such Voting Shares into a Permitted Tender Offer; provided,
that (x) such Transfer is closed within 1 year (in the case of a registered
Underwritten Offering) or 6 months (in the case of any other Transfer) after the
latest of (A) the expiration of the foregoing required response time periods, or
(B) the receipt by the Transferring Party of the foregoing election notice, and
(y) the price at which the Voting Shares are Transferred must be equal to or
higher than the fair market value of such Voting Shares pursuant to a
transaction of the type being effected at the time of such Transfer (taking into
account any applicable market discounts for such a transaction).
3.4 PERMITTED TRANSFEREES. Any Permitted Transferee shall be subject
to the terms and conditions of this Agreement as if such Permitted Transferee
were Stockholder. Prior to the initial acquisition of beneficial ownership of
any Voting Shares by any Permitted Transferee, and as a condition thereto,
Stockholder agrees (a) to cause such Permitted Transferees to agree in writing
with the Company to be bound by the terms and conditions of this Agreement to
the extent described in the preceding sentence and (b) that it shall remain
directly liable for the performance by the Permitted Transferees of all
obligations of such Permitted Transferees under this Agreement. Stockholder
agrees not to cause or permit any of the Permitted Transferees to cease to be
directly or indirectly wholly-owned by Stockholder so long as such Permitted
Transferee beneficially owns any Voting Shares, and if any such Permitted
Transferee shall cease to be so wholly-owned, such Permitted Transferee shall
automatically upon the occurrence of such event cease to be a "Permitted
Transferee" for any purpose under this Agreement. Stockholder agrees not to
Transfer any Voting Shares to any Affiliate other than a Permitted Transferee of
Stockholder.
3.5 REQUIRED SALE. If, due to repurchases of Common Shares by the
Company at any time following the Closing, the Applicable Percentage exceeds
17-1/2%, then the Company may, at its option, cause Stockholder or any Permitted
Transferees to Transfer Voting Shares (subject to Section 4.2) during the 180
day period commencing following notice by the Company of its exercise of such
option; provided that such 180 day period shall be extended to the extent
Stockholder has made a registration or prospectus request pursuant
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to Section 6.1 for the period following receipt of notice of the Company's
election of its rights under this Section 3.5 until such registration statement
has been declared effective and a final prospectus, if applicable, has been
receipted, but only if such request shall have been made by Stockholder within
30 days following receipt of such notice. With respect to any Transfer pursuant
to this Section 3.5, Stockholder shall select the method or methods of Transfer,
which methods shall consist of one or more of the following: a Private
Placement, an Underwritten Offering or a Market Sale.
3.6 NOTICE OF TRANSFER. To the extent Stockholder and any Permitted
Transferees shall Transfer any Voting Shares, Stockholder shall, within three
Business Days following consummation of such Transfer, deliver notice thereof to
the Company.
3.7 COMPLIANCE WITH TRANSFER PROVISIONS. Any Transfer or attempted
Transfer of Voting Shares in violation of any provision of this Agreement shall
be void, and the Company shall not record such Transfer on its books or treat
any purported transferee of such Voting Shares as the owner of such Voting
Shares for any purpose.
ARTICLE IV
STANDSTILL
4.1 NO ACQUISITIONS. (a) Stockholder covenants and agrees with the
Company that Stockholder shall not, and shall cause each of its Subsidiaries not
to, directly or indirectly, acquire, or agree to acquire, by purchase or
otherwise, beneficial ownership of any Voting Shares (except pursuant to the
Offer or by way of stock dividends, stock reclassifications or other
distributions or offerings made available to holders of Voting Shares
generally).
(b) The provisions of Section 4.1(a) shall terminate in the event
(i) the Board approves a tender offer for 50% or more of the outstanding Voting
Shares (provided that if such offer is withdrawn or expires without being
consummated, Section 4.1(a) shall be reinstated) or (ii) it is publicly
disclosed that Voting Shares representing 33-1/3% of the voting power have been
acquired by any Person or Group (other than Stockholder or an Affiliate thereof
or any Group in which Stockholder or any Affiliate is a member) which does not
own more than 20% of the Voting Shares immediately following the Closing.
(c) Stockholder represents and warrants that neither it nor any of
its Subsidiaries beneficially own any Voting Shares or Voting Share Equivalents
as of the date of this Agreement and agrees that, as of the Closing, except for
Common Shares issued pursuant to the Offer, neither Stockholder nor any of its
Subsidiaries shall beneficially own any Voting Shares or Voting Share
Equivalents.
4.2 OTHER RESTRICTIONS. Except as expressly set forth in Article II,
Stockholder covenants and agrees with the Company that Stockholder shall not,
and it will cause its Subsidiaries not to, directly or indirectly, alone or in
concert with others, unless specifically
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requested in writing by the Chief Executive Officer of the Company or by a
resolution of a majority of the Directors of the Company, take any of the
actions set forth below (or take any action that would require the Company to
make an announcement regarding any of the following); provided, however, that
Stockholder shall not be required to take any such action as a result of the
request of the Company:
(a) effect, seek, offer, engage in, propose (whether publicly or
otherwise) or cause or participate in, or assist any other Person to effect,
seek, engage in, offer or propose (whether publicly or otherwise) or participate
in:
(i) any acquisition of Beneficial Ownership of Voting Shares
which would result in a breach of Section 4.1 of this Agreement;
(ii) any tender or exchange offer, merger, consolidation,
share exchange, business combination, recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction involving the
Company or any material portion of its business or any purchase of all or
any substantial part of the assets of the Company or any material portion
of its business; or
(iii) any "solicitation" of "proxies" (as such terms are used
in the proxy rules of the SEC but without regard to the exclusion set
forth in Section 14a- 1(1)(2)(iv) from the definition of "solicitation")
with respect to the Company or any of its Affiliates or any action
resulting in Stockholder, any of its Subsidiaries, or such other Person
becoming a "participant" in any "election contest" (as such terms are used
in the proxy rules of the SEC) with respect to the Company or any of its
Subsidiaries.
(b) propose any matter for submission to a vote of shareholders of
the Company or any of its Affiliates;
(c) seek election to, seek to place a representative (other than the
Designee) on, or seek the removal of, any Director, except pursuant to Section
2.1;
(d) except as contemplated by this Agreement, grant any proxy with
respect to any Voting Shares;
(e) except as contemplated by this Agreement, execute any written
consent with respect to any Voting Shares;
(f) form, join or participate in a Group with respect to any Voting
Shares or deposit any Voting Shares in a voting trust or subject any Voting
Shares to any arrangement or agreement with respect to the voting of such Voting
Shares or other agreement having similar effect;
(g) take any other action to seek to affect the control of the
management or Board of the Company or any of its Affiliates, including publicly
suggesting or announcing its willingness to engage in or have another Person
engage in a transaction that could reasonably
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be expected to result in a business combination or to increase the ownership
percentage of Stockholder; provided that nothing in this Section 4.2(g) shall
restrict the manner in which the Designee may (i) vote on any matter submitted
to the Board or (ii) participate in deliberations or discussions of the Board
(so long as such actions do not otherwise violate any other provision of Section
4.1 or Section 4.2) in his or her capacity as a Director so long as such action
is required by the Designee's fiduciary duty to the Company or its shareholders
or by securities or similar laws, in each case as advised by outside counsel to
the Designee (to the extent practicable under the then-existing circumstances);
(h) enter into any discussions, negotiations, arrangements or
understandings with any Person with respect to any of the foregoing, or advise,
assist, encourage or seek to persuade others to take any action with respect to
any of the foregoing;
(i) disclose to any Person (other than an Affiliate), or otherwise
induce, encourage, discuss or facilitate, any intention, plan or arrangement
inconsistent with the foregoing or with the restrictions on transfer set forth
in Article III or form any such intention which would result in the Company or
any of its Affiliates or Stockholder or any of its Affiliates being required to
make any such disclosure in any filing with a Governmental Authority or being
required to make a public announcement with respect thereto; or
(j) request the Company or any of its Affiliates, directors,
officers, employees, representatives, advisors or agents, directly or
indirectly, to amend or waive this Agreement (including this Section 4.2) or the
articles of amalgamation or bylaws (or similar constituent documents) of the
Company or any of its Affiliates;
provided, however, that notwithstanding the foregoing restrictions, Stockholder
shall be entitled to make any disclosure required by securities or similar
disclosure laws, as advised in writing by outside counsel reasonably
satisfactory to the Company.
4.3 RESTRICTIONS FOLLOWING ANY SPIN-OFF. In the event that, on or at
any time following the Closing, the Company effects any spin-off of one or more
of its Subsidiaries to holders of Voting Shares, there shall be deemed to exist
between Stockholder and such spun off Subsidiary (the "SPINOFF COMPANY") a
binding agreement (the "SPINOFF STOCKHOLDERS AGREEMENT") substantially identical
to this Agreement; provided that, for purposes of the Spinoff Stockholders
Agreement, (i) references to the Company shall mean the Spinoff Company; (ii)
references to Voting Shares and Voting Share Equivalents shall refer to the
equivalent securities of the Spinoff Company; and (iii) references to "the date
hereof" and "the date of this Agreement" shall mean the date of the spin-off of
the Spinoff Company. Prior to any such spin-off, Stockholder shall, and the
Company shall cause such Spinoff Company to, enter into an agreement
memorializing such Spinoff Stockholders Agreement; and, provided, further, that
in the event that the spirits and wine business of the Company becomes a
separate publicly traded company, the applicable Spinoff Stockholders Agreement
shall not subject Stockholder to the transfer restrictions set forth in Article
III hereof with respect to such Spinoff Company (except for the provisions of
such Article III that restrict Transfers pursuant to a tender offer or exchange
offer only to Permitted Tender Offers, and the related right of first offer
provisions).
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ARTICLE V
INCIDENTAL REGISTRATIONS
5.1 RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any
time after the second anniversary of the Closing proposes (i) to register Common
Shares under the Securities Act (other than a registration on Form S-4 or S-8,
or any successor or other forms promulgated for similar purposes), for sale for
its own account, pursuant to a registration statement on which it is permissible
to register Registrable Securities for sale to the public under the Securities
Act, or (ii) to sell Common Shares pursuant to a prospectus in any Canadian
province it will each such time give prompt written notice to Stockholder of its
intention to do so. Upon the written request of any Holder made within 15 days
after the receipt of any such notice (which request shall specify the maximum
number of Registrable Securities intended to be disposed of by such Holder), the
Company will use its reasonable best efforts, as applicable, (i) to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holders thereof (with the
securities that the Company at the time proposes to register) or (ii) to qualify
for sale as a secondary offering pursuant to a prospectus under the securities
legislation of applicable Canadian provinces all Registrable Securities which
the Company has been so requested to qualify for sale by the Holders thereof
(with the securities that the Company at the time proposes to sell by way of
prospectus), to permit the sale or other disposition by such Holders (in
accordance with the intended method of distribution thereof) of the Registrable
Securities to be so registered or qualified for sale; provided, that (a) the
Company shall not be obligated to include any Common Shares of any Holder in any
registration statement or prospectus pursuant to this Section 5.1 within a
period of 365 days after the effective date of any other registration statement
or prospectus which included Common Shares of any Holder under this Section 5.1,
(b) if, at any time after giving written notice of its intention to register or
sell any Common Shares and prior to the effective date of the registration
statement or prospectus filed in connection with such registration or sale by
way of prospectus, the Company shall determine for any reason not to proceed
with the proposed registration or sale by way of prospectus of the Common Shares
to be sold by it, the Company may, at its election, give written notice of such
determination to Stockholder and, thereupon, shall be relieved of its obligation
to register or qualify for sale pursuant to a prospectus any Registrable
Securities in connection with such registration or sale (but not from its
obligation to pay the Registration Expenses in connection therewith), and (c) if
such registration or sale by way of prospectus involves an Underwritten
Offering, all Holders of Registrable Securities requesting to be included in the
registration or sale by way of prospectus must sell their Registrable Securities
to the underwriters selected by the Company on the same terms and conditions as
apply to the Company, with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate in
combined primary and secondary offerings. If a registration or sale by way of
prospectus requested pursuant to this Section 5.1 involves an Underwritten
Offering, any Holder of Registrable Securities requesting to be included in such
registration or sale by way of prospectus may elect, in writing prior to the
effective date of the registration statement or prospectus filed in connection
with such registration or sale by way of prospectus, not to register such
Registrable Securities in connection with such registration or sell such
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Registrable Securities pursuant to such sale by way of prospectus; provided,
however, that such withdrawal shall be irrevocable and, after making such
withdrawal, a Holder shall no longer have any right to include Registrable
Securities in the registration or sale by way of prospectus as to which such
withdrawal was made.
5.2 COMPANY'S ABILITY TO POSTPONE. The Company shall be entitled to
postpone for a reasonable period of time (but not exceeding a total of 120 days
in any 360 day period) the filing of any registration statement or prospectus or
suspend the effectiveness of any registration statement or prospectus otherwise
effecting any registration or permitting any sale by way of prospectus under
this Article V, if, upon a Determination of the Directors, the Company concludes
that, a registration or sale by way of prospectus of Registrable Securities
pursuant to this Article V would materially adversely affect any financing,
offering, acquisition or disposition, corporate reorganization or other material
transaction involving the Company or any of its Affiliates, or would require
premature disclosure thereof. The Company shall promptly give Stockholder notice
of such conclusion. If the Company shall so postpone the filing of a
registration statement or prospectus, the Holders of Registrable Securities
requesting registration or sale by way of prospectus thereof pursuant to Section
5.1 shall have the right to withdraw the request for registration or sale by way
of prospectus by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration or
sale by way of prospectus to which Holders of Registrable Securities are
entitled pursuant to Section 5.1 hereof.
5.3 EXPENSES. The Company will pay all Registration Expenses in
connection with each registration or sale by way of prospectus of Registrable
Securities requested pursuant to this Article V.
5.4 PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration or sale
by way of prospectus pursuant to this Article V involves an Underwritten
Offering and the managing underwriter advises the Company that, in its opinion,
the number of Registrable Securities requested to be included in such
registration or sale by way of prospectus exceeds the number which can be sold
in such offering, so as to be likely to have an adverse effect on the successful
marketing of such offering (including the price at which such securities can be
sold pursuant thereto), then the Company will include in such registration or
sale by way of prospectus (a) first, 100% of the securities the Company proposes
to sell, (b) second, up to 100% of the securities requested to be registered or
sold by any shareholder of the Company pursuant to demand registration rights in
any agreement between the Company and such Person, and (c) third, to the extent
of the number of Registrable Securities (and securities held by other Persons
with similar incidental registration rights) requested to be included in such
registration or sale by way of prospectus which, in the opinion of such managing
underwriter, can be sold without having the adverse effect referred to above,
the number of Registrable Securities (and such securities) which the Holders
(and such other Persons) have requested to be included in such registration or
sale by way of prospectus, such amount to be allocated pro rata among all
requesting Holders (and such other Persons) on the basis of the relative number
of shares of Registrable Securities then held by each such Holder (or Voting
Shares then held by such other Person) (provided, that any shares thereby
allocated to any such
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Holder (or such other Person) that exceed such Holder's (or such other Person's)
request will be reallocated among the remaining requesting Holders (and such
other Persons) in like manner).
ARTICLE VI
REGISTRATION ON REQUEST
6.1 REQUEST BY HOLDERS. At any time, and from time to time, after
the second anniversary of the Closing, upon the written request of Stockholder
requesting that the Company effect the registration under the Securities Act or
the qualification for sale by way of prospectus in one or more Canadian
provinces of all or part of the Registrable Securities and specifying the
intended method of disposition thereof, the Company shall, as promptly as
practicable, use its reasonable best efforts, as applicable, (i) to effect the
registration under the Securities Act (including by means of a shelf
registration (which the Company shall not be required to keep effective for more
than 60 days) pursuant to Rule 415 under the Securities Act if so requested and
if the Company is then eligible to effect a shelf registration for such
disposition) of the Registrable Securities which the Company has been so
requested to register so as to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities so to be
registered, or (ii) to qualify for sale as a secondary offering pursuant to a
prospectus under the securities legislation of applicable Canadian provinces all
Registrable Securities which the Company has been so requested to qualify in
order to permit the disposition of the Registrable Securities so to be qualified
for sale by way of prospectus; provided, that the Company shall not be obligated
to file a registration statement or prospectus relating to any request for
registration or sale by way of prospectus under this Section 6.1 within a period
of 365 days after the effective date of any other registration statement or
prospectus which included Common Shares of any Holder under this Section 6.1;
provided, further, that the Company shall not be required to effect more than
four (4) requested registrations or sales by way of prospectus pursuant to this
Article VI (except that a demand in response to a sale pursuant to Section 3.5
shall not be included in such total). If requested by the Holder or a Permitted
Transferee after consultation with the Company, any such registration may be
effected in respect of a transaction relating to a debt security of the Holder
or a Permitted Transferee, which is exchangeable for Common Shares, and
constitutes an offering outside the United States which is exempt from the
registration requirements of the Securities Act pursuant to Regulation S and a
placement in the United States exempt from registration pursuant to Rule 144A
under the Securities Act and in which the Company undertakes to effect a
registration of the Shares as soon as possible after completion of such
transaction in order to permit such shares to be freely tradeable in the United
States of America.
6.2 EXPENSES. The Company will pay all Registration Expenses in
connection with the registrations or sales by way of prospectus of Registrable
Securities pursuant to this Article VI.
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6.3 EFFECTIVE REGISTRATION STATEMENT. A registration or sale by way
of prospectus requested pursuant to this Article VI will not be deemed to have
been effected unless it has become effective; provided, that if, within 60 days
after it has become effective, the offering of Registrable Securities pursuant
to such registration or prospectus is interfered with by any stop order,
injunction or other order or requirement of the SEC, any provincial securities
commission or other governmental agency or court, such registration or sale by
way of prospectus will be deemed not to have been effected.
6.4 SELECTION OF UNDERWRITERS. If a requested registration or sale
by way of prospectus pursuant to this Article VI involves an Underwritten
Offering, Stockholder shall have the right to select the investment banker or
bankers and managers to administer the offering and the method of distribution
for the offering, subject to the consent of the Company, which shall not be
unreasonably withheld.
6.5 PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
or sale by way of prospectus pursuant to this Article VI involves an
Underwritten Offering and the managing underwriter advises the Company that, in
its opinion, the number of securities requested to be included in such
registration or sale by way of prospectus (including securities of the Company
or other Persons which are not Registrable Securities) exceeds the number which
can be sold in such offering, so as to be likely to have an adverse effect on
the successful marketing of such offering (including the price at which such
securities can be sold pursuant thereto), the Company will include in such
registration or sale by way of prospectus only the Registrable Securities
requested to be included in such registration or sale by way of prospectus. In
the event that the number of Registrable Securities requested to be included in
such registration or sale by way of prospectus exceeds the number which, in the
opinion of such managing underwriter, can be sold without having the adverse
effect referred to above, the number of such Registrable Securities to be
included in such registration or sale by way of prospectus shall be allocated
pro rata among all requesting Holders on the basis of the relative number of
shares of Registrable Securities then held by each such Holder and requested to
be included (provided, that any shares thereby allocated to any such Holder that
exceed such Holder's request shall be reallocated among the remaining requesting
Holders in like manner). In the event that the number of Registrable Securities
requested to be included in such registration or sale by way of prospectus is
less than the number which, in the opinion of the managing underwriter, can be
sold without having the adverse effect referred to above, the Company may
include in such registration or sale by way of prospectus the securities the
Company (or any other stockholder) proposes to sell up to the number of
securities that, in the opinion of the underwriter, can be sold without having
the adverse effect referred to above.
6.6 COMPANY'S ABILITY TO POSTPONE. The Company shall be entitled to
postpone for a reasonable period of time (but not exceeding a total of 120 days
in any 360 day period) the filing of any registration statement or prospectus or
suspend the effectiveness of any registration statement or prospectus otherwise
effecting any registration or qualifying Registrable Securities for sale by way
of prospectus under this Article VI, if, upon a Determination of the Directors
the Company concludes that, a registration or sale by way of prospectus of
Registrable Securities pursuant to this Article VI would materially adversely
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affect any financing, offering, acquisition or disposition, corporate
reorganization or other material transaction involving the Company or any of its
Affiliates, or would require premature disclosure thereof; provided, however,
that in any event the Company shall not be required to effect any registration
or sale by way of prospectus prior to the termination, waiver or reduction of
any reasonable "blackout period" required by the underwriters to be applicable
to the Holders or the Company, if any, in connection with any offering. The
Company shall promptly give Stockholder notice of such conclusion. If the
Company shall so postpone the filing of a registration statement or prospectus
or suspend the effectiveness or use of any registration statement or prospectus,
the Holders of Registrable Securities requesting registration or sale by way of
prospectus thereof pursuant to Section 6.1 shall have the right to withdraw the
request for registration or sale by way of prospectus by giving written notice
to the Company within 30 days after receipt of the notice of postponement or
suspension and, in the event of such withdrawal, such request shall not be
counted for purposes of the requests for registration or sale by way of
prospectus to which Holders of Registrable Securities are entitled pursuant to
Section 6.1 hereof.
6.7 HOLDBACK AGREEMENTS. Notwithstanding anything in this Agreement
to the contrary, the Company shall not be required to effect any requested
registration or sale by way of prospectus under Section 6.1 within a period of 7
days prior to or 90 days after the effective date of any other registration
statement or prospectus relating to an Underwritten Offering or any other
offering of Common Shares (a "RECENT OFFERING"), if, in the opinion of the
underwriters of such Recent Offering (or the good faith judgment of the Board,
in the case of a Recent Offering that is not an Underwritten Offering), such
requested registration or sale by way of prospectus could have an adverse effect
on such Recent Offering or the market for the Common Shares. In addition, the
Company shall be entitled to postpone for a reasonable period of time, but not
in excess of 90 days, the filing of any registration statement or prospectus
otherwise required to be prepared and filed by the Company under Section 6.1 if
the Company, at such time, is conducting an Underwritten Offering, has commenced
registration procedures, or intends in good faith to effect an Underwritten
Offering, and is advised in writing by its managing underwriter or underwriters
that such Underwritten Offering would in its or their opinion be adversely
affected by the registration or sale by way of prospectus so requested.
ARTICLE VII
REGISTRATION PROCEDURES
7.1 REGISTRATION PROCEDURES. If and whenever the Company is required
to use its reasonable best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company will, as promptly as practicable:
(a) prepare and, in any event within 60 days after the end of the
period within which a request for registration may be given to the Company, file
with the SEC a registration statement with respect to such Registrable
Securities and use its reasonable best efforts to cause such registration
statement to become effective;
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(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period not
in excess of 60 days (or such shorter period during which the distribution of
securities thereunder continues) and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
covered by such registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (so long as such intended methods of disposition are
commercially reasonable); provided, that before filing a registration statement
or prospectus, or any amendments or supplements thereto, the Company will
furnish to one counsel selected by Stockholder to represent all Holders of
Registrable Securities covered by such registration statement, copies of all
documents proposed to be filed, which documents will be subject to the
reasonable review of such counsel;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities by such seller;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this Section 7.1(d), it would not be
obligated to be so qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction;
(e) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) notify each seller of any such Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in Section 7.1(b), of the Company's becoming aware that the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such seller
and subject to Section 7.1(b), prepare and furnish to such seller a reasonable
number of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to
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the purchasers of such Registrable Securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing;
(g) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable (but not more than 18 months) after
the effective date of the registration statement, an earnings statement which
shall satisfy the provisions of Section 11(a) of the Securities Act and the
rules and regulations promulgated thereunder;
(h) use its reasonable efforts to list such Registrable Securities
on any securities exchange on which the Common Shares are then listed;
(i) enter into such customary agreements (including an underwriting
agreement in customary form) and take such other actions as sellers of a
majority of shares of such Registrable Securities or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(j) use its reasonable efforts to obtain a "cold comfort" letter or
letter from the Company's independent public accountants in customary form and
covering matters of the type customarily covered by "cold comfort" letters as
Stockholder shall reasonably request (provided, that Registrable Securities
constitute at least 25% of the securities covered by such registration
statement);
(k) make reasonably available for inspection by representatives of
the sellers of such Registrable Securities covered by such registration
statement, by any underwriter participating in any disposition to be effected
pursuant to such registration statement and by any attorney, accountant or other
agent retained by such sellers or any such underwriter, all pertinent financial
and other records, pertinent corporate documents and properties of the Company,
and cause all of the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement (subject to
each party referred to in this Section 7.1(k) entering into customary
confidentiality agreements in a form reasonably acceptable to the Company and
provided that the Company shall not be required to disclose any information
which it is prohibited by law or any agreement from disclosing, or which could
in its judgment result in a waiver or loss of any attorney-client privilege to
which it may be entitled); and
(l) use its reasonable efforts (taking into account the interests of
the Company) to make available members of the Company's management to
participate in customary "road show" presentations that may be reasonably
requested by the Holders and the managing underwriter in any Underwritten
Offering; provided, that the participation of such individuals shall not
interfere in any material respect with the conduct of their duties to the
Company.
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7.2 INFORMATION. The Company may require each seller of Registrable
Securities as to which any registration is being effected to furnish the Company
with such information regarding such seller and pertinent to the disclosure
requirements relating to the registration and the distribution of such
securities as the Company may from time to time reasonably request in writing.
7.3 DISCONTINUANCE OF DISPOSITION. Each Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 7.1(f), such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 7.1(f), and, if so directed by the Company, such Holder will deliver to
the Company (at the Company's expense) all copies of the prospectus covering
such Registrable Securities current at the time of receipt of such notice. In
the event the Company shall give any such notice, the period mentioned in
Section 7.1(b) shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 7.1(f)
and including the date when each seller of Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 7.1(f).
7.4 SALE BY WAY OF PROSPECTUS. The provisions of this Article VII
shall apply, mutatis mutandis, to a sale by way of prospectus of Registrable
Securities in any Canadian province if and whenever the Company is requested to
use its reasonable best efforts as provided in this Agreement to qualify
Registrable Securities for sale by way of prospectus; provided, that the Company
shall only be required to file such prospectus with the securities commission or
similar regulatory authority of the province or provinces in which the
Registrable Securities need to be qualified for sale.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Securities Act pursuant to Articles V
or VI, the Company will, and it hereby does, indemnify and hold harmless, the
seller of any Registrable Securities covered by such registration statement and
each person who participates as an underwriter in any offering or sale of the
Registrable Securities, their directors and officers or general and limited
partners (and the directors and officers and general and limited partners
thereof), and each other Person, if any, who controls such seller or underwriter
within the meaning of the Securities Act (collectively, the "INDEMNIFIED
PARTIES"), against any and all losses, claims, damages or liabilities, joint or
several, and expenses to which such seller, any such director or officer or
general or limited partner or controlling Person may become subject under the
Securities Act, common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon (a) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities
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Act, any preliminary, final or summary prospectus contained therein, or any
amendment or supplement thereto, or (b) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of a prospectus or a
preliminary prospectus, in light of the circumstances under which they are
made), and the Company will reimburse such Indemnified Party for any legal or
any other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided, that
the Company shall not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement or amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such indemnified
parties for use in the preparation thereof; and provided, further, that the
Company will not be liable to any Indemnified Party (including any person
controlling such Indemnified Party), who is obligated to deliver a prospectus in
transactions in a security as to which a registration statement has been filed
pursuant to the Securities Act, under the indemnity agreement in this Section
8.1, with respect to any preliminary prospectus or the final prospectus or the
final prospectus as amended or supplemented, as the case may be, to the extent
that any such loss, claim, damage or liability of such Indemnified Party arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission contained in any preliminary prospectus and such
Registrable Securities were sold to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the final
prospectus (excluding any documents incorporated by reference therein) or of the
final prospectus as then amended or supplemented (excluding any documents
incorporated by reference therein), whichever is most recent, if the Company has
previously furnished copies thereof to such Indemnified Party and such
prospectus corrects such untrue statement or omission or alleged untrue
statement or omission. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any
Indemnified Party and shall survive the transfer of such securities by such
seller.
8.2 INDEMNIFICATION BY THE SELLERS. In the event of any registration
of any securities of the Company under the Securities Act pursuant to Article V
or VI, each prospective seller of Registrable Securities shall indemnify and
hold harmless (in the same manner and to the same extent as set forth in Section
8.1) the Company, all other prospective sellers, and any of their respective
directors, officers or general or limited partners, and other Persons, if any,
who control the Company or such sellers, as the case may be, within the meaning
of the Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement, or a document incorporated by reference into any of the foregoing.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any of the prospective
sellers, or any
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of their respective Affiliates, directors, officers or controlling Persons and
shall survive the transfer of such securities by such seller.
8.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Article VIII, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action; provided, that the failure of
the indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under Sections 8.1 or 8.2, as the case may
be, except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of investigation, unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim (in
which event such indemnified party and any other indemnified party to which such
conflict of interest applies shall be reimbursed for the reasonable expenses
incurred in connection with retaining one separate legal counsel for all such
indemnified parties in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances). No indemnifying party will,
without the prior written consent of the indemnified party (which consent shall
not be unreasonably withheld), consent to entry of any judgment or enter into
any settlement in respect of any such indemnifiable claim, unless any such
judgment or settlement includes as an unconditional term thereof, the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation. No indemnified party will,
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), consent to entry of any judgment or enter into
any settlement in respect of any such indemnifiable claim which the indemnifying
party is defending in good faith.
8.4 CONTRIBUTION. (a) If for any reason the indemnity provided for
in Section this Article VIII is unavailable or is insufficient to hold harmless
an indemnified party under this Article VIII, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and of the indemnified party in connection with
the actions, statements or omissions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
The relative fault of the indemnifying party, on the one hand, and of the
indemnified party, on the other, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
relates
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to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(b) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 8.4 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
8.5 OTHER INDEMNIFICATION. Indemnification similar to that specified
in Sections 8.1 and 8.2 (with appropriate modifications) shall be given by the
Company and each seller of Registrable Securities with respect to any required
registration or other qualification of securities under any federal, state or
provincial law or regulation or governmental authority other than the Securities
Act.
8.6 NON-EXCLUSIVITY. The obligations of the parties under this
Article VIII shall be in addition to any liability which any party may otherwise
have to any other party.
ARTICLE IX
TERM AND TERMINATION
9.1 TERM. (a) This Agreement shall become effective upon
consummation of the Offer and prior thereto shall be of no force or effect. If
the Offer Agreement shall be terminated in accordance with its terms, this
Agreement shall automatically be deemed to have been terminated and shall
thereafter be of no force or effect.
(b) Subject to earlier termination pursuant to paragraph (c) below
or Section 4.1(b), the rights and obligations of Stockholder and its Permitted
Transferees hereunder shall terminate upon the Applicable Percentage equalling
less than 5%; provided that Sections 2.3, 2.4 and 2.5 and Articles III and IV of
this Agreement shall automatically become effective and reinstated if, within 12
months following the date that the Applicable Percentage is less than 5%, the
Applicable Percentage shall equal or exceed 5% as a result of the acquisition of
Voting Shares by Stockholder or any Subsidiary.
(c) In addition, the rights and obligations of Stockholder and its
Permitted Transferees under Section 2.3(b) and Article III of this Agreement
shall terminate immediately at the time (x) any Person or Group (excluding any
Person or Group that beneficially owns more than 20% of the Voting Shares as of
the date hereof) becomes the beneficial owner of more than 25% of the Voting
Shares (excluding any Voting Shares
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acquired from Stockholder or a Permitted Transferee) if such Person or Group
beneficially owns more Voting Shares than any other Person or Group or (y)(i) no
Person or Group beneficially owns more than 20% of the Voting Shares and (ii)
none of Xxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxx or Xxxxx Xxxxxxxx, Xx. shall
serve as Chairman of the Board of the Company, Co-Chairman of the Board of the
Company or Chief Executive Officer of the Company.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by facsimile, upon confirmation of receipt, (b) on the
first Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(i) if to Company, to
The Seagram Company Ltd.
c/o Xxxxxx X. Xxxxxxx & Sons, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
with a copy to
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxx
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(ii) if to Stockholder, to
Koninklijke Philips Electronics N.V.
Building HRT, 24th Floor
Amstelplain 1
1096 H.A. Amsterdam
The Netherlands
Fax: 000-00-00-000-0000
Attention: General Secretary
with a copy to
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: X. Xxxxxx Landau
10.2 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
10.4 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. (a) This
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof, other than the Offer Agreement, the Tender Agreement,
the Voting Agreement and the Confidentiality Agreement (except as provided in
the next sentence) (in the case of each of the three immediately preceding
agreements, as defined in the Offer Agreement), each of which shall survive the
execution and delivery of this Agreement. The second paragraph (other than the
last two sentences thereof) of the letter dated May 5, 1998 constituting part of
the Confidentiality Agreement shall terminate upon execution and delivery of the
Offer Agreement and the seventh paragraph of such letter shall terminate upon
the effectiveness of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall
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confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
10.5 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of New York.
10.6 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
10.7 ASSIGNMENT. Except as provided in Section 3.3(d), neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto, in whole or in part (whether by operation
of law or otherwise), without the prior written consent of the other party, and
any attempt to make any such assignment without such consent shall be null and
void. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns. If the Company assigns its rights to purchase under
Section 3.3(d), the Company shall guarantee the purchase obligations of its
assignee.
10.8 SUBMISSION TO JURISDICTION; WAIVERS. Each of the Company and
Stockholder irrevocably consents to the jurisdiction and venue in the United
States District Court for the Southern District of New York and in the courts
hearing appeals therefrom unless no federal subject matter jurisdiction exists,
in which event, each of the Company and Stockholder irrevocably consents to
jurisdiction and venue in the Supreme Court of the State of New York, New York
County, and in the courts hearing appeals therefrom, for the resolution of any
dispute, action, suit or proceeding arising out of or relating to this
Agreement. Each of the Company and Stockholder hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any action or proceeding with respect to this Agreement, the defense of
sovereign immunity, any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
serve process in accordance with this Section 10.8, that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and to the fullest extent permitted by applicable law, that the
suit, action or proceeding in any such court is brought in an inconvenient
forum, that the venue of such suit, action or proceeding is improper, or that
this Agreement, or the subject matter hereof or thereof, may not be enforced in
or by such courts and further irrevocably waives, to the fullest extent
permitted by applicable law, the benefit of any defense that would hinder,
xxxxxx or delay the levy, execution or collection of any amount to which the
party is entitled pursuant to the final judgment of any court having
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jurisdiction. The Stockholder hereby irrevocably designates Philips Electronics
North America, with an office on the date hereof at 1251 Avenue of the Americas,
Xxx Xxxx, Xxx Xxxx 00000-0000, and the Company hereby irrevocably designates
Xxxxxx X. Xxxxxxx & Sons, Inc., with an office on the date hereof at 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (each a "PROCESS AGENT"), as the designees,
appointees and agents of Stockholder and the Company to receive, for and on such
parties' behalves, service of process in such jurisdiction in any legal action
or proceeding with respect to this Agreement and such service shall be deemed
complete upon delivery thereof to the Process Agent; provided, that in the case
of any such service upon a Process Agent, the party effecting such service shall
also deliver a copy thereof to the party who designated such Process Agent in
the manner provided in Section 10.1. Each party shall take all such action as
may be necessary to continue said appointment in full force and effect or to
appoint another agent so that it will at all times have an agent for service of
process for the above purposes in New York, New York. Each of the Company and
Stockholder further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered airmail, postage prepaid, to such party at its
address set forth in this Agreement, such service of process to be effective
upon acknowledgement of receipt of such registered mail. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the other
party in any other jurisdiction in which the other party may be subject to suit.
Each of the Company and Stockholder expressly acknowledges that the foregoing
waiver is intended to be irrevocable under the laws of the State of New York and
of the United States of America; provided, that each such party's consent to
jurisdiction and service contained in this Section 10.8 is solely for the
purpose referred to in this Section 10.8 and shall not be deemed to be a general
submission to said courts or in the State of New York other than for such
purpose.
In the event of the transfer of all or substantially all of the
assets and business of a Process Agent to any other corporation by
consolidation, merger, sale of assets or otherwise, such other corporation shall
be substituted hereunder for such Process Agent with the same effect as if
originally named herein in place of Xxxxxx X. Xxxxxxx & Sons, Inc. or Philips
Electronics North America, as the case may be.
10.9 ENFORCEMENT. (a) Each of the Company and Stockholder
acknowledges that the other party would not have an adequate remedy at law for
money damages in the event that any of the covenants or agreements of the other
party in this Agreement were not performed in accordance with its terms, and it
is therefore agreed that each of the Company and Stockholder, in addition to and
without limiting any other remedy or right it may have, will have the right to
an injunction or other equitable relief in any court of competent jurisdiction,
subject to Section 10.8, enjoining any such breach and enforcing specifically
the terms and provisions hereof, and each of the Company and Stockholder hereby
waives any and all defenses they may have on the ground of lack of jurisdiction
or competence of the court to grant such an injunction or other equitable
relief. Notwithstanding anything to the contrary contained herein, any action
that the Supervisory Board or the Board of Management of Stockholder is required
to take or is prohibited from taking pursuant to an order of a court shall not
give rise to a breach of this Agreement; provided, that (i) Stockholder is not
prior to
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such order in breach of this Agreement with respect to such action and (ii)
Stockholder has used reasonable best efforts in good faith (including, the
taking of any appropriate appeals) to resist the imposition of such order.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
10.10 LEGENDS. (a) Upon original issuance thereof, and until such
time as the same is no longer required hereunder or under the applicable
requirements of the Securities Act or applicable state securities or "blue sky"
laws, any certificate issued representing any Voting Shares held by Stockholder
or any Permitted Transferee (including all certificates issued in exchange
thereof or in substitution therefor) shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO VOTING AGREEMENTS AND RESTRICTIONS ON TRANSFER SET
FORTH IN A CERTAIN STOCKHOLDERS AGREEMENT DATED AS OF
JUNE 21, 1998 BETWEEN KONINKLIJKE PHILIPS ELECTRONICS N.V.
AND THE SEAGRAM COMPANY LTD. (THE "COMPANY"), COPIES OF
WHICH AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY."
(b) The certificates representing the Voting Shares held by
Stockholder or any Permitted Transferee (including any certificate issued in
exchange thereof or in substitution therefor) shall also bear any legend
required under any applicable state securities or "blue sky" laws.
(c) The Company may make a notation on its records or give
instructions to any transfer agents or registrars for the Voting Shares in order
to implement the restrictions on Transfer set forth in Article III.
(d) In connection with any Transfer of Voting Shares, the transferor
shall provide the Company with such customary certificates, opinions and other
documents as the Company may reasonably request to assure that such Transfer
complies fully with applicable securities and other laws.
(e) The Company shall not incur any liability for any delay in
recognizing any Transfer of Voting Shares if the Company in good faith
reasonably believes that such Transfer may have been or would be in violation in
any material respect of the provisions of the Securities Act, applicable state
securities or "blue sky" laws, or this Agreement.
(f) After such time as the legend described in this Section 10.10 is
no longer required on any certificate or certificates representing the Voting
Shares, upon the request of
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Stockholder, the Company will cause such certificate or certificates to be
exchanged for a certificate or certificates that do not bear such legend.
10.11 OTHER AGREEMENTS. The parties hereto acknowledge and agree
that, except as otherwise expressly set forth in this Agreement, the rights and
obligations of the Company and Stockholder under any other agreement between the
parties shall not be affected by any provision of this Agreement.
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IN WITNESS WHEREOF, the Company and Stockholder have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of June 21, 1998.
THE SEAGRAM COMPANY LTD.
By: /s/ Xxxxxx Xxxxxxxxxxx
--------------------------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: Vice Chairman and Chief Financial
Officer
KONINKLIJKE PHILIPS ELECTRONICS N.V.
By: /s/ Cor Xxxxxxxx
--------------------------------------------
Name: Cor Xxxxxxxx
Title: Chairman of the Board of
Management and Chief Executive
Officer
By: /s/ Xxx Xxxxxx
--------------------------------------------
Name: Xxx Xxxxxx
Title: Chief Financial Officer
