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Exhibit 3.5
EXECUTION COPY
OPTION AGREEMENT
OPTION AGREEMENT dated this 19th day of June, 2000.
B E T W E E N:
VIVENDI S.A.,
a corporation existing under the laws of France
(hereinafter referred to as "VIVENDI"),
- and -
THE SEAGRAM COMPANY LTD.,
a corporation existing under the laws of Canada
(hereinafter referred to as "SEAGRAM"),
WHEREAS Vivendi, Seagram and the other parties thereto have entered
into a Merger Agreement dated as of the date hereof (the "MERGER AGREEMENT")
which provides, upon the terms and subject to the conditions set forth therein,
for the completion of an arrangement (the "ARRANGEMENT") involving Seagram and
its securityholders;
AND WHEREAS, unless the context otherwise requires, words and phrases
used herein with initial capital letters and not otherwise defined herein shall
have the meanings assigned to such words and phrases in the Merger Agreement;
AND WHEREAS as a condition to Vivendi entering into the Merger
Agreement, Vivendi has required that Seagram agree, and in order to induce
Vivendi to enter into the Merger Agreement, Seagram has agreed, to grant Vivendi
an option to purchase, in accordance with the terms and conditions of this
Agreement, up to 86,862,212 newly issued Seagram Common Shares, provided that in
no event will the number of shares for which this option is exercisable exceed
19.9% of the issued and outstanding Seagram Common Shares;
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
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ARTICLE 1
THE OPTION
SECTION 1.1 GRANT OF OPTION.
Subject to the terms and conditions set forth herein, Seagram hereby
grants to Vivendi, subject to acceptance of the notice in respect of
such option under Section 19.06 of the General Bylaws of the Toronto
Stock Exchange, an irrevocable option (the "OPTION") to purchase up to
86,862,212 newly issued Seagram Common Shares (the "OPTION SHARES")
(provided that in no event will the number of shares for which this
option is exercisable exceed 19.9% of the number of issued and
outstanding Seagram Common Shares at the time of exercise without
giving effect to any shares subject to or issued pursuant to the
Option) in the manner set forth below at a purchase price (the
"PURCHASE PRICE") per Option Share equal to U.S. $77.35 per Option
Share. The number of Common Shares purchasable upon exercise of the
Option and the Purchase Price are subject to adjustment as set forth in
this Agreement. Subject to the parenthetical proviso in the first
sentence hereof, in the event that any additional Common Shares are
either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement and other than
pursuant to an event described in Section 1.5 hereof) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the
date of this Agreement, the number of Common Shares subject to the
Option shall be increased or decreased, as appropriate, so that, after
such issuance, such number, together with any Common Shares previously
issued pursuant to this Agreement, equals 19.9% of the number of Common
Shares then issued and outstanding without giving effect to any shares
subject to or issued pursuant to the Option.
SECTION 1.2 EXERCISE OF OPTION.
(1) The Option may be exercised by Vivendi, in whole or in part, at any
time or from time to time after the occurrence of an Exercise Event (as
defined below) and prior to the Termination Date (as defined below).
(2) An "EXERCISE EVENT" shall occur for purposes of this Agreement on the
date on which Vivendi becomes unconditionally entitled to receive the
Seagram Fee pursuant to Section 6.3(1) of the Merger Agreement.
(3) The "TERMINATION DATE" shall occur for purposes of this Agreement upon
the first to occur of any of the following:
(a) the Effective Time;
(b) the date on which the Option shall have been exercised in
full; or
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(c) the date of termination of the Merger Agreement, unless, in
the case of this clause (c), Vivendi has the right to receive
the Seagram Fee either upon, or following such termination
upon the occurrence of certain events, in which case the
Option will not terminate until the later of (x) 30 Business
Days following the time the Seagram Fee becomes
unconditionally payable and (y) the expiration of the period
in which Vivendi has such potential right to receive the
Seagram Fee.
Notwithstanding the termination of the Option, Vivendi shall
be entitled to purchase those Option Shares with respect to
which it shall have exercised the Option by delivery of an
Exercise Notice (as defined below) prior to the Termination
Date (subject to the other limitations set forth herein), and
the termination of the Option will not affect any rights
hereunder which by their terms do not terminate or expire
prior to or at the Termination Date.
(4) Subject to Section 5.1 hereof, in the event Vivendi is entitled to and
wishes to exercise the Option, Vivendi shall send a written notice (an
"EXERCISE NOTICE") to Seagram specifying the total number of Option
Shares that Vivendi wishes to purchase, the denominations of the
certificate or certificates evidencing such Option Shares which Vivendi
wishes to receive, the date (subject to the earlier of the satisfaction
or waiver of the conditions set forth in Section 1.3) (the "CLOSING
DATE") which shall be a Business Day not later than the tenth Business
Day and not earlier than the second Business Day after delivery of such
notice, and the place in New York City for the closing (the "CLOSING")
of such purchase; provided, however, that the Closing shall be held
only if (i) such purchase would not otherwise violate or cause the
violation of, any applicable material law, statute, ordinance, rule or
regulation (collectively, "LAWS"), and (ii) no material judgment,
order, writ, injunction, ruling or decree of any Governmental Entity
(collectively, "ORDERS") shall have been promulgated, enacted, entered
into, or enforced by any Governmental Entity which prohibits delivery
of the Option Shares, whether temporary, preliminary or permanent;
provided, however, that the parties hereto shall use their reasonable
best efforts to (x) promptly make and process all necessary filings and
applications and obtain all consents, approvals, Orders,
authorizations, registrations and declarations or expiration or
termination of any required waiting periods (collectively, "APPROVALS")
and to comply with any such applicable Laws and (y) have any such Order
vacated or reversed. In the event the Closing is delayed pursuant to
clause (i) or (ii) of the immediately preceding sentence, the Closing
shall be within ten Business Days following the cessation of such
restriction, violation, Law or Order or the receipt of any necessary
Approval, as the case may be (so long as the Exercise Notice was
delivered prior to the Expiration Date); provided, further, that,
notwithstanding any prior Exercise Notice, Vivendi shall be entitled to
rescind such Exercise Notice and shall not be obligated to purchase any
Option Shares in
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connection with such exercise upon written notice to such effect to
Seagram. In the event (i) Vivendi receives official notice that an
Approval required for the purchase of any Option Shares will not be
issued or granted or (ii) such Approval has not been issued or granted
within six months of the date of the Exercise Notice, Vivendi shall
have the right to exercise its rights pursuant to Section 1.2(5) with
respect to the Option Shares for which such Approval will not be issued
or granted or has not been issued or granted.
(5) Subject to Section 5.1 hereof, if at any time the Option is then
exercisable pursuant to the terms of Section 1.2(l) hereof and
notwithstanding whether the condition set forth in Section 1.3(l) shall
have been fulfilled, Vivendi may elect, in lieu of exercising the
Option to purchase Option Shares as provided in Section 1.2(4) hereof,
to send a written notice to Seagram (a "CASH EXERCISE NOTICE")
specifying a date not later than the tenth Business Day and not earlier
than the second Business Day following the date such notice is given,
on which date Seagram shall pay to Vivendi an amount in cash equal to
the Spread (as defined below) multiplied by such number of Option
Shares as Vivendi shall specify in the Cash Exercise Notice. As used
herein, "SPREAD" shall mean the excess, if any, over the Purchase Price
of the higher of (the "APPLICABLE PRICE"): (x) if applicable, the
highest price per share (the "COMPETING PURCHASE PRICE") for Seagram
Common Shares offered (and not subsequently withdrawn) or paid to
Seagram shareholders in any Seagram Acquisition Proposal announced,
proposed, offered or made after the date hereof and prior to the date
of the Cash Exercise Notice; or (y) the simple average of the closing
prices (the "CLOSING PRICE"), if any, of the Seagram Common Shares on
the NYSE during the 20 trading days immediately prior to the date of
the Cash Exercise Notice. If the Competing Purchase Price includes any
property other than cash, the Competing Purchase Price shall be the sum
of: (i) the fixed cash amount, if any, included in the Competing
Purchase Price; and (ii) the fair market value of such other property.
If such other property includes securities listed on an existing public
trading market, the fair market value of such securities shall be
deemed to be equal to the average of the closing prices (or the average
of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the
five trading days ending five days prior to the date of the Cash
Exercise Notice. If such other property includes something other than
cash or securities listed on an existing public trading market and, as
of the payment date for the Spread, agreement on the value of such
other property has not been reached, the Competing Purchase Price shall
be deemed to be the amount of any cash included in the Competing
Purchase Price plus the fair market value of such other property as
determined by an internationally recognized investment banking firm
selected by Seagram and reasonably acceptable to Vivendi (the
"VALUATION PROCEDURE"). For this purpose, the parties shall use their
reasonable best efforts to cause any determination of the fair market
value of such other property to be made within two Business Days after
the date of delivery of the Cash Exercise Notice. Upon exercise
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of its right to receive the Spread pursuant to this Section 1.2(5), the
obligations of Seagram to deliver Option Shares pursuant to Section 1.1
shall be terminated with respect to such number of Option Shares for
which Vivendi shall have elected to be paid the Spread pursuant to the
Cash Exercise Notice.
To the extent that, upon or following the giving by Vivendi to Seagram of an
Exercise Notice, Seagram is prohibited by Law or Order from delivering to
Vivendi a certificate or certificates representing the number of Common Shares
purchased by Vivendi, Seagram shall immediately so notify Vivendi in writing,
and thereafter deliver or cause to be delivered, from time to time, to Vivendi
the portion of the Option Shares that Seagram is no longer prohibited from
delivering, within five business days after the date on which it is no longer so
prohibited; provided, however, that upon notification by Seagram in writing of
such prohibition, Vivendi may, upon any time after receipt of such notification
from Seagram, revoke in writing its Exercise Notice, whether in whole or to the
extent of the prohibition, whereupon, in the latter case, Seagram shall promptly
(i) deliver to Vivendi that portion of the Option Shares that Seagram is not
prohibited from delivering pursuant to the time periods set forth in Section
1.2(4); and (ii) deliver to Vivendi, as appropriate, with respect to the Option,
a new Option Agreement evidencing the right of Vivendi to purchase that number
of Common Shares for which the surrendered Option Agreement was exercisable at
the time of giving the written notice of exercise referred to in Section 1.2(4).
Notwithstanding anything to the contrary in this Agreement, the period for
exercise of rights related to the Option set forth in Sections 1.2(1), 1.2(2)
and 1.2(3) shall be extended, at the request of Vivendi, for a period not to
exceed (180) days from the date that the Option would have terminated pursuant
to Sections 1.2(1), 1.2(2) and 1.2(3) hereof or such shorter period necessary to
permit the delivery of all the Option Shares subject to the exercise notice.
SECTION 1.3 CONDITIONS TO CLOSING.
The obligation of Seagram to deliver Option Shares upon any exercise of
the Option is subject to the following conditions:
(1) The Option Shares shall have been approved for listing on the NYSE
(subject to notification of issuance) and the TSE (subject to
satisfaction of customary conditions); provided, however, that Seagram
and Vivendi agree that Seagram shall not be obligated to register the
Option Shares under the 1933 Act or otherwise qualify the Option Shares
for resale in the United States or Canada other than on the terms and
subject to the conditions set forth in Section 3.2; and
(2) The conditions to a Closing set forth in the first proviso contained in
Section 1.2(4) hereof shall have been satisfied.
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The obligation of Seagram to pay the Spread under Section 1.2(5) shall
only be subject to the conditions to a Closing set forth in the first proviso
contained in Section 1.2(4) hereof having been satisfied.
SECTION 1.4 CLOSINGS.
(1) In the event of a Closing pursuant to Section 1.2(4), Seagram shall
deliver to Vivendi a certificate or certificates evidencing the
applicable number of Option Shares (in the denominations specified
therein), and Vivendi shall purchase each such Option Share from
Seagram at the Purchase Price.
(2) If the Option should be exercised in part only, a new Option evidencing
the rights of Vivendi thereof to purchase the balance of the shares
purchasable hereunder shall be delivered by Seagram, and Vivendi shall
deliver to Seagram this Agreement and a letter agreeing that Vivendi
will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(3) In the event of a Closing pursuant to Section 1.2(5), Seagram shall
deliver to Vivendi cash in the amount determined pursuant to Section
1.2(5), which payment shall be made by wire transfer of immediately
available funds to a bank account designated by Vivendi; provided,
however, that failure or refusal of Vivendi to designate such a bank
account shall not relieve Seagram of its obligations to make such
payment.
(4) In the event of a Closing pursuant to Section 1.2(4), payment of the
Purchase Price shall be made by wire transfer of immediately available
funds to a bank account designated by Seagram; provided, however, that
failure or refusal of Seagram to designate such a bank account shall
not preclude Vivendi from exercising the Option.
(5) Seagram shall pay all expenses and any and all federal, provincial,
state and local transfer taxes and other similar charges that may be
payable in connection with the preparation, issue and delivery of share
certificates under this section in the name of Vivendi.
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(6) Certificates for Common Shares delivered at a Closing hereunder may be
endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate may be
subject to certain provisions of a stock option agreement between the
registered holder hereof and The Seagram Company Ltd. and to resale
restrictions arising under the U.S. Securities Act of 1933, as amended,
the Securities Act (Ontario) and other Canadian securities legislation.
A copy of such agreement is on file at the principal office of The
Seagram Company Ltd. and will be provided to the holder hereof without
charge upon receipt by The Seagram Company Ltd. of a written request
therefor."
It is understood and agreed that: (i) the respective references to the resale
restrictions of the 1933 Act, the Securities Act and other Canadian securities
legislation in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Vivendi shall have delivered to Seagram
a copy of an opinion or opinions of counsel, in form and substance reasonably
satisfactory to Seagram, to the effect that such legend is not required for the
purposes of the 1933 Act, the Securities Act or any other Canadian securities
legislation; (ii) the reference to the provisions to the Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as
required by law.
SECTION 1.5 ADJUSTMENTS UPON SHARE ISSUANCES, CHANGES IN CAPITALIZATION, ETC.
(1) The number of Common Shares purchasable upon the exercise of the Option
and the Option Price shall be subject to adjustment from time to time
as provided in this Section 1.5 (other than in connection with an event
for which adjustment is made pursuant to Section 1.1 of this
Agreement). In the event of any change in the number of outstanding
Seagram Common Shares by reason of a stock dividend, split-up,
spin-off, recapitalization, combination, exchange of shares or similar
transaction or any other extraordinary change in the corporate or
capital structure of Seagram which would have the effect of diluting or
otherwise diminishing Vivendi's rights hereunder, the type and number
of shares or securities to be issued by Seagram upon exercise of the
Option and the Purchase Price shall be adjusted appropriately, and
proper provision shall be made in the agreements governing such
transaction, so that Vivendi shall receive upon exercise of the Option
the number and class of shares and/or other securities and/or property
that Vivendi would have received in respect of Seagram Common Shares if
the Option had been exercised immediately prior to such event, or the
record date therefor, as applicable, and elected, to the fullest extent
it would have been permitted to elect, to receive such securities or
other property.
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For greater certainty, following any such transaction, Vivendi shall
continue to be entitled (if otherwise entitled hereunder) to give a
Cash Exercise Notice and be paid the Spread, determined in light of the
Purchase Price, adjusted as aforesaid.
(2) In the event that Seagram shall enter into an agreement (other than the
Merger Agreement): (i) to consolidate with, amalgamate or merge,
whether by plan of arrangement or otherwise, into any person, other
than Canal, Vivendi or any of their respective affiliates, and shall
not be the continuing or surviving corporation of such consolidation,
amalgamation or merger; (ii) to permit any person, other than Canal,
Vivendi or any of their respective affiliates, to merge into Seagram
and Seagram shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding Seagram Common Shares
shall be changed into or exchanged for shares or other securities of
Seagram or any other person or cash or any other property or the then
outstanding Seagram Common Shares shall after such merger represent
less than 50% of the outstanding shares and share equivalents of the
surviving corporation; or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Canal,
Vivendi or any of their respective affiliates, then, and in each such
case, proper provision shall be made in the agreements governing such
transaction and the Option shall be adjusted so that, unless earlier
exercised by Vivendi, Vivendi shall receive upon exercise of the
Option, the percentage and class of shares and/or other securities
and/or cash and/or property that Vivendi would have received in respect
of Seagram Common Shares if the Option had been exercised immediately
prior to such transaction, or the record date therefor, as applicable,
and elected, to the fullest extent it would have been permitted to
elect, to receive such securities, cash or other property, and the
Purchase Price shall be adjusted appropriately. For greater certainty,
following any such transaction, Vivendi shall continue to be entitled
(if otherwise entitled hereunder) to give a Cash Exercise Notice and be
paid the Spread, determined in light of the Purchase Price, adjusted as
aforesaid.
(3) The provisions of this Agreement, including, without limitation,
Sections 1.1, 1.2, 1.4 and 3.2, shall apply with appropriate
adjustments to any securities for which the Option becomes exercisable
pursuant to this Section 1.5.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SEAGRAM
Seagram hereby represents and warrants to Vivendi as follows:
SECTION 2.1 AUTHORITY RELATIVE TO THIS AGREEMENT.
Seagram has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Seagram and the consummation by Seagram of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of Seagram are
necessary to authorize this Agreement or to consummate such transactions. This
Agreement has been duly executed and delivered by Seagram and, assuming the due
authorization, execution and delivery by Vivendi, constitutes the legal, valid
and binding obligation of Seagram, enforceable against Seagram in accordance
with its terms.
SECTION 2.2 AUTHORITY TO ISSUE SHARES.
Seagram has taken all necessary corporate action to authorize and
reserve and permit it to issue, and at all times from the date hereof through
the Termination Date shall have reserved, all the Option Shares issuable
pursuant to this Agreement, and Seagram shall take all necessary corporate
action to authorize and reserve and permit it to issue all additional Seagram
Common Shares or other securities which may be issued pursuant to this
Agreement, all of which, upon their issuance and delivery in accordance with the
terms of this Agreement, shall be duly authorized, validly issued, fully paid
and non-assessable, shall be delivered free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements, charges
and other encumbrances of any nature whatsoever (other than as provided in this
Agreement) and shall not be subject to any pre-emptive rights.
SECTION 2.3 NO CONFLICTS.
The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any breach pursuant to any provision of the constituent documents of
Seagram or any subsidiary of Seagram or result in any breach of any material
loan or credit agreement, note, mortgage, indenture, lease, pension plan or
other agreement or obligation of Seagram or any subsidiary of Seagram or their
respective properties or assets.
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SECTION 2.4 NO AVOIDANCE.
Seagram will not, by amendment to its articles or by-laws or through
reorganization, consolidation, amalgamation, plan of arrangement, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Seagram.
ARTICLE 3
COVENANTS OF SEAGRAM
SECTION 3.1 LISTING; OTHER ACTION.
(1) As promptly as practicable following an Exercise Event, Seagram shall
use all reasonable best efforts to cause the Option Shares to be
approved for listing on the NYSE and the TSE, subject to notice of
issuance, and shall provide prompt notice to the TSE of the issuance of
each Option Share.
(2) Seagram shall use all reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable law, regulation
or policy to consummate and make effective the transactions
contemplated hereunder, including, without limitation, using all
reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of any government
or regulatory authority; provided however, that Seagram shall not be
obligated to register the Option Shares under the 1933 Act or otherwise
qualify the Option Shares for resale in the United States or Canada
other than on the terms and subject to the conditions set forth in
Section 3.2.
SECTION 3.2 QUALIFICATION
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(1) In the event that Vivendi shall desire to sell any of the Option Shares
within one year after their receipt by Vivendi and requests in writing
to Seagram that Seagram register such Option Shares under the 1933 Act
or qualify such Option Shares for resale under applicable Canadian
securities laws, unless in the opinion of counsel to Seagram (which
opinion shall be reasonably satisfactory to Vivendi and its counsel)
such registration under the 1933 Act or qualification under applicable
Canadian securities laws is not required in order to lawfully sell and
distribute such Option Shares in the manner contemplated by Vivendi,
Seagram shall cooperate with Vivendi and any underwriters in
registering or qualifying of such Option Shares for resale, including,
without limitation, promptly filing a registration statement and/or
prospectus which complies with the requirements of applicable U.S.
federal and state securities laws and/or Canadian federal, provincial
and territorial securities laws, as the case may be, and entering into
and complying with an underwriting agreement with such underwriters
upon such terms and conditions as are customarily contained in
underwriting agreements with respect to secondary distributions;
provided, however, that Seagram shall not be required to file more than
two registration statements which are declared effective and/or
prospectuses hereunder and shall be entitled to delay the filing or
effectiveness of any registration statement and/or prospectus for up to
120 days in any 12-month period if the offering would, in the judgment
of the Board of Directors of Seagram, require premature disclosure of
any material corporate development or otherwise materially interfere
with or materially adversely affect any pending or proposed offering of
securities of Seagram, acquisition or divestiture or any other material
transaction involving Seagram or any of its subsidiaries. Vivendi
agrees to use its reasonable best efforts to cause, and to use its
reasonable best efforts to cause any underwriters of any sale or other
disposition to cause, any sale or other disposition pursuant to such
registration statement and/or prospectus to be effected on a widely
distributed basis so that upon consummation thereof no purchaser or
transferee will own beneficially more than 3% of the then-outstanding
voting power of Seagram.
(2) If Option Shares are registered or qualified pursuant to the provisions
of this Section 3.2, Seagram agrees (i) to furnish copies of the
registration statement and/or prospectus relating to the Option Shares
covered thereby in such numbers as Vivendi may from time to time
reasonably request and (ii) if any event shall occur as a result of
which it becomes necessary to amend or supplement any registration
statement or prospectus, to prepare and file under the applicable
securities laws such amendments and supplements as may be necessary to
keep available for at least 120 days a prospectus covering the Option
Shares meeting the requirements of such securities laws, and to furnish
Vivendi with such numbers of copies of the registration statement and
prospectus, as amended or supplemented, as may reasonably be requested.
Seagram shall bear the cost of the registration or qualification,
including but not limited to, all registration and filing fees,
printing expenses, and fees and disbursements of counsel and
accountants for Seagram, and Vivendi shall pay the
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fees and disbursements of its counsel and the underwriting fees and
commissions applicable to the Option Shares sold by Vivendi. Seagram
shall indemnify and hold harmless Vivendi, its affiliates and their
respective officers and directors from and against any and all losses,
claims, damages, liabilities and expenses arising out of or based upon
any statements contained in or omissions or alleged omissions from,
each registration statement or prospectus (or any amendment thereto)
filed pursuant to this paragraph; provided, however, that this
provision shall not apply to any loss, liability, claim, damage or
expense to the extent it arises out of any untrue statement or omission
made in reliance upon and in conformity with written information
furnished to Seagram by Vivendi, its affiliates and its officers and
other representatives expressly for use in any registration statement
or prospectus (or any amendment thereto) filed pursuant to this
paragraph. Seagram shall also indemnify and hold harmless each
underwriter and each person who controls any underwriter against any
and all losses, claims, damages, liabilities and expenses arising out
of or based upon any statements contained in or omissions or alleged
omissions from, each registration statement or prospectus (or any
amendment thereto) filed pursuant to this paragraph; provided, however,
that this provision shall not apply to any loss, liability, claim,
damage or expense to the extent it arises out of any untrue statement
or omission made in reliance upon and in conformity with written
information furnished to Seagram by the underwriters expressly for use
in any registration statement or prospectus (or any amendment thereto)
filed pursuant to this Section 3.2.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF VIVENDI
SECTION 4.1 OFFERING RESTRICTIONS.
Until such time as Vivendi has requested that Seagram take such action
as may be required by Section 3.2 to register the Option Shares for resale under
the 1933 Act, Vivendi agrees to comply with the requirements of Regulation S
promulgated under the 1933 Act, including but not limited to the following:
(1) Vivendi shall not make any offer or sale of the Option Shares to a U.S.
person or for the account or benefit of a U.S. person (within the
meaning of Regulation S under the ▇▇▇▇ ▇▇▇) during the 40 day period
following issuance of the Option Shares;
(2) All offering materials and documents used in connection with any offer
or sale of the Option Shares during the 40 day period following
issuance of the Option Shares shall include statements on the cover or
inside cover page and in the underwriting or distribution section of
any prospectus or offering circular and in any advertisement to the
effect that the Option Shares have not been registered under the 1933
Act and
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may not be offered or sold in the United States or to U.S. persons
unless the Option Shares are so registered or an exemption from the
registration requirements is available; and
(3) Vivendi shall send written confirmation to any purchaser of the Option
Shares during the 40 day period following the issuance of the Option
Shares that the purchaser is subject to the foregoing restrictions on
offers and sales of the Option Shares.
SECTION 4.2 NO PUBLIC DISTRIBUTION.
Vivendi hereby represents and warrants to Seagram that the Option is
not being, and any Common Shares or other securities acquired by Vivendi upon
exercise of the Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise disposed of except
in a transaction registered or exempt from registration under both the
Securities Act and the 1933 Act and otherwise in compliance with applicable Law.
SECTION 4.3 OTHER RESTRICTIONS.
(a) The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of by Vivendi or any of its Affiliates except (i) in an
underwritten public offering as provided in Section 3.2, (ii) to any purchaser
who would not, to the knowledge of Vivendi after reasonable due inquiry,
immediately following such sale, assignment, transfer or disposal, Beneficially
Own (as defined in Rule 13d-3 under the Exchange Act) more than 3% of the
then-outstanding voting power of Seagram or (iii) pursuant to a bona fide third
party tender offer or exchange offer (A) that has been approved or recommended
by a majority of the members of the Board of Directors of Seagram (which
majority shall include a majority of directors who were directors as of the date
hereof) or (B) if in the good faith judgment of Vivendi there is a reasonable
possibility it would be, as a result of not tendering or exchanging, relegated
to different consideration than would be available to those shareholders who did
tender or exchange, taking into account any provisions thereof with respect to
proration and any proposed second step or back-end transaction, provided in the
case of this clause (B) that all conditions to such tender or exchange offer
(other than the minimum tender or exchange condition) could reasonably be
expected to be satisfied or waived at the scheduled expiration date and the
minimum tender or exchange condition could reasonably be expected to be
satisfied or waived at the scheduled expiration date for such offer even if
Vivendi did not tender.
(b) In connection with any vote or action by written consent of the
shareholders of the Company relating to any matter, unless the Company otherwise
consents in writing, Vivendi shall vote or act by written consent with respect
to (and shall cause each of its Affiliates that Beneficially Own Voting Shares
to vote or act by written consent with respect to) any Option Shares
Beneficially Owned by it, at Vivendi's option, either proportionately on the
same basis as the other holders of Seagram Common Shares so vote or as
recommended by the Board of Directors of Seagram; provided, however, that
Vivendi shall
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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
Seagram Common Shares pursuant to which Option Shares Beneficially Owned by
Vivendi or any of its Affiliates will not be entitled to receive (or will not be
permitted to elect to receive on an equitable basis with the Seagram Common
Shares held by all other shareholders), in such transaction, the same
consideration as Seagram Common Shares held by all other shareholders of
Seagram.
ARTICLE 5
CERTAIN LIMITATIONS
SECTION 5.1 MAXIMUM TOTAL PROCEEDS.
(a) Notwithstanding any other provision of this Agreement or the Merger
Agreement, in no event shall Vivendi's Total Proceeds (as hereinafter defined)
at any time exceed US$800 million and, if it otherwise would exceed such amount,
Vivendi, at its sole election, shall either: (i) reduce the number of Option
Shares subject to this Option; (ii) deliver to Seagram for cancellation Option
Shares previously purchased by Vivendi hereunder; (iii) pay cash to Seagram; or
(iv) any combination thereof, so that Vivendi's Total Proceeds shall not exceed
US$800 million after taking into account the foregoing actions. As used herein,
the term "Total Proceeds" shall mean the aggregate amount (before taxes) of the
following: (i) the amount received by Vivendi pursuant to a cash exercise
pursuant to Section 1.2(5); (ii) (x) the net cash amounts, or fair value of any
securities or property (determined pursuant to the Valuation Procedure),
received or receivable by Vivendi pursuant to the then agreed or consummated
sale of Option Shares purchased or acquired pursuant to this Agreement (or any
other securities or property into which such Option Shares are converted or
exchanged in any manner whatsoever) to any unaffiliated party less (y) Vivendi's
Purchase Price for such shares; and (iii) any amounts received by Vivendi
pursuant to Section 6.3(l) of the Merger Agreement.
(b) Notwithstanding any other provision of this Agreement or the Merger
Agreement, in no event may the Option be exercised for a number of Option Shares
as would, as of the date of such exercise, result in Notional Total Proceeds (as
defined below) which would exceed US$800 million; provided, however, that
nothing in this sentence shall restrict any exercise of the Option on any
subsequent date (if otherwise permitted by the terms of this Agreement). As used
herein, the term "NOTIONAL TOTAL PROCEEDS" with respect to any number of Option
Shares as to which Vivendi may propose to exercise the Option shall be the Total
Proceeds determined as of the date of such proposal assuming that the Option was
exercised on such date for such number of Option Shares and assuming that such
Option Shares, together with all other Option Shares held by Vivendi and its
affiliates (as defined in the Merger Agreement) as of such date, were sold for
cash at the closing market
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price (less customary brokerage commissions) for Seagram Common Shares on the
preceding trading day on the NYSE (or on any other nationally recognized
exchange or trading system on which Seagram Common Shares are then principally
listed or traded, if not then listed on the NYSE).
ARTICLE 6
TERMINATION OF AGREEMENT
SECTION 6.1 TERMINATION.
This Agreement, other than the rights and obligations of Vivendi and
Seagram under Section 3.2, Article 4 and Section 5.1, shall terminate on the
Termination Date.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto.
SECTION 7.2 WAIVER.
Either party hereto may (a) extend the time for or waive compliance
with the performance of any obligation or other act of the other party hereto or
(b) waive any inaccuracy in the representations and warranties contained herein
or in any document delivered pursuant hereto. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party to be
bound thereby.
SECTION 7.3 NOTICES.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed duly given and received (i) on
the date of delivery, if delivered in person, (ii) upon confirmation of
transmission by the sender's fax machine, if delivered by facsimile on a
Business Day (or otherwise on the next Business Day), or (iii) on the first
Business Day following the date of dispatch, if delivered by a nationally
recognized next day courier service, to the respective parties at their
addresses and fax numbers (as applicable) as specified in the Merger Agreement.
SECTION 7.4 SEVERABILITY.
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If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions 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 a mutually acceptable manner to the fullest
extent permitted by applicable law in order that the transactions contemplated
hereby may be consummated as originally contemplated to the fullest extent
possible.
SECTION 7.5 ASSIGNMENT; BINDING EFFECT; BENEFIT.
Except as expressly provided herein, neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned (by operation
of law or otherwise) without the prior written consent of any of the parties
hereto. Notwithstanding the foregoing, Vivendi may assign this Agreement and any
of the rights, interests or obligations hereunder to any wholly-owned subsidiary
of Vivendi without the consent of Seagram. Subject to the first and second
sentence of this section, this Agreement shall be binding upon and shall enure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
SECTION 7.6 WITHHOLDING RIGHTS.
Seagram shall be entitled to deduct and withhold from any amount
otherwise payable or deliverable to Vivendi under this Agreement, including the
issuance of Seagram Common Shares pursuant to the exercise of the Option, such
amounts as Seagram is required to deduct and withhold with respect to such
payment or delivery under any provision of federal, provincial, territorial,
state, local or foreign tax law. To the extent that amounts are withheld, such
withheld amounts shall be treated for all purposes as having been paid or
delivered to Vivendi provided that such withheld amounts are actually remitted
to the appropriate taxing authority. To the extent that the amount so required
to be deducted or withheld exceeds the cash portion of the amount otherwise
payable or deliverable to Vivendi, Seagram is hereby authorized to sell or
otherwise dispose of such portion of the consideration as is necessary to
provide sufficient funds to Seagram to enable it to comply with such deduction
or withholding requirement and Seagram shall notify Vivendi thereof and remit to
Vivendi any unapplied balance of the net proceeds of such sale.
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SECTION 7.7 SPECIFIC PERFORMANCE.
The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement were not performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or in equity.
SECTION 7.8 PAYMENT OF COSTS
Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
SECTION 7.9 GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance, with
the laws of the Province of Ontario and the federal laws of Canada applicable
therein. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined exclusively in the courts of the
Province of Ontario.
SECTION 7.10 HEADINGS.
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 7.11 ENTIRE AGREEMENT.
This Agreement and the Merger Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Option Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
VIVENDI S.A.
By: /s/ ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman & Chief
Executive Officer
THE SEAGRAM COMPANY LTD.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Title: President & Chief
Executive Officer
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