<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1999
REGISTRATION NO. 333-78395
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
THE SEAGRAM COMPANY LTD. --
LA COMPAGNIE SEAGRAM LTEE JOSEPH E. SEAGRAM & SONS, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
<TABLE>
<S> <C>
CANADA INDIANA
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
NONE 13-1285240
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1430 PEEL STREET 375 PARK AVENUE
MONTREAL, QUEBEC, CANADA H3A 1S9 NEW YORK, NEW YORK 10152
(514) 849-5271 (212) 572-7000
</TABLE>
(ADDRESSES, INCLUDING ZIP CODES, AND TELEPHONE NUMBERS, INCLUDING
AREA CODES, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
ROBERT W. MATSCHULLAT
JOSEPH E. SEAGRAM & SONS, INC.
375 PARK AVENUE
NEW YORK, NEW YORK 10152
(212) 572-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANTS' AGENT FOR SERVICE AND AUTHORIZED REPRESENTATIVE OF THE SEAGRAM
COMPANY LTD. IN THE UNITED STATES)
COPIES TO:
<TABLE>
<S> <C>
GEORGE R. KROUSE, JR., ESQ. ROBERT E. BUCKHOLZ, JR., ESQ.
SARAH E. COGAN, ESQ. SULLIVAN & CROMWELL
SIMPSON THACHER & BARTLETT 125 BROAD STREET
425 LEXINGTON AVENUE NEW YORK, NEW YORK 10004
NEW YORK, NEW YORK 10017-3909
</TABLE>
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
-------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
-------------------------
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PROPOSED
MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(e) PRICE(e)(f) FEE(g)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Purchase Units.............. 21,275,000 $54.00 $1,148,850,000 319,380
Debt Securities(a)................ -- -- -- --
Common Shares(b).................. -- -- -- --
Stock Purchase Contracts(c)....... -- -- -- --
Guarantees(d)..................... -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) No separate consideration will be received by Joseph E. Seagram & Sons, Inc.
Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
registration fee is required.
(b) No separate consideration will be received by The Seagram Company Ltd.
Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
registration fee is required.
(c) No separate consideration will be received by The Seagram Company Ltd.
Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
registration fee is required.
(d) No separate consideration will be received by The Seagram Company Ltd.
Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
registration fee is required.
(e) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
(f) Exclusive of accrued interest, distributions and dividends, if any.
(g) A filing fee of $310,700 was paid with respect to this registration
statement on May 13, 1999.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED MAY 24, 1999.
18,500,000 Units
THE SEAGRAM COMPANY LTD.
% Adjustable Conversion-rate Equity Security Units
------------------------
Each unit consists of a contract to purchase common shares of The Seagram
Company Ltd. and a subordinated deferrable note of its subsidiary, Joseph E.
Seagram & Sons, Inc., that is guaranteed by The Seagram Company Ltd. You will
receive from each unit:
- interest payments at the rate of % per year, paid quarterly,
- contract fee payments at the rate of an additional % per year,
paid quarterly, and
- on June , 2002, between and one common share of The Seagram
Company Ltd., depending on the average trading price of the common
shares at that time.
You may use the proceeds of a remarketing of the notes to satisfy your
payment obligation under the contracts, which is due on June , 2002. You may
also elect to deliver treasury securities or cash to satisfy that obligation, in
which case the notes will be returned to you.
The interest rate on the notes will be reset on March , 2002. We can
defer payments of interest for up to 5 years and contract fees for up to 3
years. Amounts that we defer will bear interest at the rate of % until
March , 2002, and at the reset interest rate on the notes after that date.
You may not separate the notes from the contracts, except in limited
circumstances. The notes and contracts will therefore trade together as units.
We have applied to list the units on the New York Stock Exchange. Our common
shares are listed on the New York Stock Exchange under the symbol "VO". The last
reported sale price on the New York Stock Exchange on May 21, 1999 was $53 3/8
per share.
Investing in units involves risks described beginning on page 6.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
Per Unit Total
------------ ------------
<S> <C> <C>
Initial public offering price............................ $ $
Underwriting discount.................................... $ $
Proceeds to us, before expenses.......................... $ $
</TABLE>
The underwriters may, under the terms of the underwriting agreement,
purchase up to an additional 2,775,000 units from us at the initial public
offering price less the underwriting discount.
The underwriters expect to deliver the units against payment in New York,
New York on June , 1999.
------------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
------------------------
Prospectus dated June , 1999.
<PAGE> 4
[INSIDE FRONT COVER]
PHOTOGRAPHS OF SEAGRAM'S RECORDED MUSIC
PRODUCTS, FILMS, THEME PARKS AND
BEVERAGE ALCOHOL PRODUCTS
<PAGE> 5
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and financial statements and notes to the financial statements
appearing elsewhere in or incorporated by reference into this prospectus.
THE SEAGRAM COMPANY LTD.
We operate in two global business segments: entertainment and spirits and
wine. The entertainment segment produces and distributes recorded music and
motion picture, television and home video products throughout the world. It also
operates theme parks and retail stores. The spirits and wine segment produces
and markets distilled spirits, wines, coolers, beers and mixers in more than 190
countries and territories.
BUSINESS STRATEGY
We have transformed ourselves into a leading entertainment company with a
first-tier global spirits and wine business. Our objective is to enhance
shareholder value by executing the following strategies:
- - CAPITALIZE ON OUR LEADING POSITION IN THE MUSIC INDUSTRY: With the completion
of the PolyGram acquisition, we are the world's largest music company with a
22% market share (based on 1998 unit sales) and have the #1 position in every
major region in the world, including North America, South America, Europe and
Asia, and in every major music genre, including Hip-Hop, R&B, rock, country,
jazz and classical. We also have the largest music catalog in the world.
- - DEVELOP E-COMMERCE FOR MUSIC DISTRIBUTION: Our strategy is to be at the
forefront of the development of music distribution through e-commerce and
electronic delivery. We are actively participating in the development of
worldwide standards for the protection of digitized music which will allow
the commercial sale and distribution of music over the internet and all
future broadband channels. In April 1999, Seagram and BMG formed GetMusic, an
on-line music alliance, to create internet sites to promote and sell music.
- - PURSUE SIGNIFICANT POTENTIAL COST-SAVINGS FROM THE UNIVERSAL/POLYGRAM
COMBINATION: The PolyGram acquisition combined two of the leading music
companies with top record labels across all music genres and complementary
distribution capabilities. This combination has created the potential for
significant cost savings through consolidation of labels, manufacturing and
distribution facilities and corporate overhead reductions. We expect these
cost savings to reach $300 million annually by fiscal year 2001.
- - EXPAND BRANDED THEME PARKS: Recently, we have significantly expanded our
branded theme parks in North America, and made investments in Europe and
Asia. This month, in Orlando, Florida, we will open with our partner
Universal Studios Islands of Adventure, a second major theme park, and
CityWalk, a dining, retail and entertainment complex. The new theme park
features attractions that draw on such well-known entertainment names as
Jurassic Park, Dr. Seuss and Marvel Comic Super Heroes. With the expected
opening of The Portofino Bay Hotel in September 1999 and two additional
hotels in 2000 and 2001, adjacent to Universal Studios Florida and Universal
Studios Islands of Adventure, we intend to create a world-class destination
1
<PAGE> 6
resort, Universal Studios Escape. In May 1999 we added Terminator 2:3D at our
California theme park, Universal Studios Hollywood. We acquired an interest
in and manage Universal's Port Aventura, a theme park near Barcelona, Spain.
The Universal Studios Japan theme park is under construction and is scheduled
to open in Osaka in 2001.
- - ENHANCE FILMED ENTERTAINMENT RETURNS: We have a valuable library of 3,000
feature films. We are committed to increasing its value through our current
development, production and marketing of motion pictures. We also plan to
seek to reduce the capital used in our motion picture business through
increased co-financing and co-production arrangements. In addition, we are
using our television library of nearly 24,000 episodes and our motion picture
library to gain equity stakes in new television channels internationally,
particularly in Europe.
- - STRENGTHEN STAKE IN DOMESTIC TELEVISION: In February 1998, we combined our
domestic television businesses with Home Shopping Network to form USA
Networks, a public company in which we own a 45% effective interest. USA
Networks has strong positions in programming, broadcast and cable
distribution, and e-commerce. As of May 21, 1999, the market value of this
investment was approximately $5.8 billion.
- - GROW OUR KEY SPIRITS AND WINE BRANDS AND MARKETS: It is our objective to grow
our key global brands: Chivas Regal, Crown Royal, Captain Morgan, Martell
Cognac and ABSOLUT VODKA. We have identified the United States, Germany,
Spain, the United Kingdom, Japan and Korea as priority established markets.
We also see growth potential in Brazil, Russia, Poland, China and India. We
are a leading producer and importer of fine wines in North America. We expect
to benefit from a recovery in the Asian markets and continued strong demand
in North America.
2
<PAGE> 7
THE OFFERING
THE UNITS
COMPONENTS OF UNITS
Each unit consists of a contract to purchase common shares of Seagram and a
subordinated deferrable note of Joseph E. Seagram & Sons, Inc., a subsidiary of
Seagram which we refer to as JES. The notes are guaranteed by Seagram. You will
receive from each unit:
- - interest payments at the rate of % per year, paid quarterly,
- - contract fee payments at the rate of an additional % per year, paid
quarterly, and
- - on June , 2002, between and one common share of Seagram, depending
on the average trading price of the common shares at that time.
The notes will be pledged to secure the unit holder's obligations to
Seagram to purchase the common shares under the contracts.
You may not separate the notes from the contracts, except in limited
circumstances. The notes and contracts will therefore trade together as units.
SETTLEMENT RATE
The number of common shares you will receive for each unit will be
determined by one of the following settlement rates:
- - If the average trading price equals or exceeds $ , you will receive
common shares.
- - If the average trading price is less than $ but greater than
$ , you will receive common shares having a value, based on the
average trading price, equal to $ .
- - If the average trading price is less than or equal to $ , you will
receive one common share.
The average trading price used to determine the settlement rate will be the
average closing price of the common shares during a 20-trading day period ending
before June , 2002. The settlement rate will be subject to anti-dilution
adjustment in case of stock splits, stock dividends, or other events affecting
the common shares. You can find more information about the settlement rate
starting on page 30.
SETTLEMENT MECHANICS
REMARKETING OF NOTES. On the third business day preceding March , 2002
the remarketing agent will remarket the notes and use the proceeds to purchase
substitute collateral. After the notes have been remarketed, the interest rate
on the notes will be reset at the rate determined by the remarketing agent.
Alternatively, you may elect not to participate in the remarketing and
retain the notes underlying the units by delivering treasury securities as
substitute collateral. After the notes have been remarketed, the interest rate
on the notes will be reset at the rate determined by the remarketing agent.
EARLY SETTLEMENT. You may settle the purchase contracts underlying your
units at any time until the seventh business day preceding March , 2002, by
delivering $ in cash per unit. You will receive common shares
per unit and the notes underlying the units upon delivery of the cash.
THE NOTES
The notes will:
- bear interest at an annual rate of % prior to March , 2002, and at
the reset rate after that date, paid quarterly, subject to the deferral
provisions described below,
3
<PAGE> 8
- mature on June , 2004, and
- not be redeemable prior to maturity.
The interest rate on the notes will be reset on March , 2002 in
connection with the remarketing of the notes described above.
JES may defer payments of interest on the notes. Any deferred payments of
interest will bear additional interest at an annual rate equal to the deferral
rate of % prior to March , 2002, and at the reset rate thereafter.
OTHER TERMS OF THE UNITS
CONTRACT FEES. Seagram may defer contract fee payments for up to 3 years
at a deferral rate of % per year.
LISTING. We have applied to list the units on the NYSE.
U.S. FEDERAL INCOME TAX CONSEQUENCES. The notes will be subject to the
regulations concerning contingent payment debt instruments. As such, you will be
subject to federal income tax on the accrual of original issue discount in
respect of the notes. In addition, the contract fees and deferred contract fees
may be taxed to you as ordinary income, when received or accrued, in accordance
with your method of accounting. Because there is no statutory, judicial or
administrative authority directly addressing the tax treatment of the units or
instruments similar to the units, you are urged to consult your own tax advisor
concerning the tax consequences of an investment in the units.
USE OF PROCEEDS. JES estimates (assuming a unit offering price of $54)
that it will receive net proceeds from this unit offering of approximately $968
million. Seagram also estimates (assuming a common share offering price of $54)
that it will receive net proceeds of approximately $1,525 million from the
common share offering described below. The proceeds to Seagram of the offerings
will be used:
- to repay borrowings under our bank credit facilities of approximately
$1.3 billion,
- to repay commercial paper borrowings of approximately $1.1 billion, and
- for general corporate purposes.
See "Use of Proceeds."
OTHER OFFERING
Seagram and certain selling shareholders are also offering 37,000,000
common shares in a separate offering. The common share and unit offering are not
conditioned on each other.
4
<PAGE> 9
SUMMARY FINANCIAL DATA
(US$ IN MILLIONS EXCEPT PER SHARE)
(UNAUDITED)
The historical consolidated financial data presented below is unaudited.
The pro forma financial data shows the effect of the acquisition of PolyGram as
if it had been consummated on July 1, 1997.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
FISCAL YEARS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
JUNE 30, MARCH 31, MARCH 31,
----------------- ----------- -----------
1997 1998 1999 1999
------- ------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues
Entertainment
Music................................................... $ 1,427 $ 1,461 $ 2,409 $ 4,994
Filmed entertainment.................................... 3,168 2,793 2,141 2,588
Recreation & other...................................... 825 695 618 618
Gain on sale of Putnam.................................. 64 -- -- --
------- ------- ------- -------
Entertainment............................................. 5,484 4,949 5,168 8,200
Spirits and wine.......................................... 4,870 4,525 3,621 3,621
------- ------- ------- -------
Total revenues.............................................. $10,354 $ 9,474 $ 8,789 $11,821
======= ======= ======= =======
Operating income (loss)
Entertainment
Music................................................... $ (58) $ (44) $ (80) $ 121
Filmed entertainment.................................... 157 229 (119) (194)
Recreation & other...................................... 31 24 31 31
Gain on sale of Putnam.................................. 64 -- -- --
------- ------- ------- -------
Entertainment............................................. 194 209 (168) (42)
Spirits and wine.......................................... 663 464 438 438
Restructuring charge...................................... -- -- (405) --
Corporate................................................. (138) (120) (68) (68)
------- ------- ------- -------
Total operating income (loss)............................... $ 719 $ 553 $ (203) $ 328
======= ======= ======= =======
Interest, net and other..................................... $ 147 $ 228 $ 301 $ 526
Net income (loss)........................................... $ 502 $ 946 $ 739 $ (155)
Basic earnings (loss) per share............................. $ 1.36 $ 2.70 $ 2.00 $ (0.39)
Diluted earnings (loss) per share........................... $ 1.35 $ 2.68 $ 2.00 $ (0.39)
FINANCIAL POSITION DATA (AT END OF PERIOD)
Current assets.............................................. $ 6,131 $ 6,971 $ 8,786
Total assets................................................ $20,447 $22,179 $35,699
Net debt.................................................... $ 2,227 $ 2,704 $ 8,450
Minority interest........................................... $ 1,851 $ 1,915 $ 1,878
Shareholders' equity........................................ $ 9,422 $ 9,316 $12,057
Shares outstanding at period end (thousands)................ 365,281 347,132 401,796
CASH FLOW DATA
Cash flow from operating activities....................... $ 664 $ (241) $ 387
Capital expenditures...................................... $ (393) $ (410) $ (314)
Other investing activities, net........................... $ 2,101 $ 1,109 $(5,356)
Dividends paid............................................ $ (239) $ (231) $ (181)
Depreciation and amortization............................. $ 393 $ 416 $ 506 $ 592
SUPPLEMENTAL INFORMATION
EBITDA
Entertainment
Music................................................... $ 72 $ 90 $ 208 $ 722
Filmed entertainment.................................... 373 463 (67) (131)
Recreation & other...................................... 158 159 92 92
------- ------- ------- -------
Entertainment............................................. 603 712 233 683
Spirits and wine.......................................... 810 590 536 536
------- ------- ------- -------
Total EBITDA................................................ $ 1,413 $ 1,302 $ 769 $ 1,219
======= ======= ======= =======
Net income from continuing operations, plus amortization.... $ 584 $ 405 $ 231 $ 460
Net income from continuing operations, plus amortization,
per share................................................. $ 1.58 $ 1.16 $ .63 $ 1.16
</TABLE>
Summary financial data includes earnings before interest, taxes,
depreciation and amortization ("EBITDA"), which we believe is an appropriate
measure of our operating performance, given the significant goodwill associated
with our acquisitions. However, EBITDA should be considered in addition to, not
as a substitute for operating income, net income, cash flows and other measures
of financial performance in accordance with generally accepted accounting
principles.
5
<PAGE> 10
RISK FACTORS
Before purchasing units, you should carefully consider the following risk
factors relating to the units.
YOU WILL BEAR THE ENTIRE RISK OF A DECLINE
IN THE PRICE OF THE COMMON SHARES
The market value of the common shares you receive on June , 2002 (which
we refer to as the "stock purchase date") may be materially different from the
price you pay for those common shares. If the average trading price of the
common shares on the stock purchase date is less than $ (that is, less
than the closing price of the common shares on the date of this prospectus), you
will, on the stock purchase date, be required to purchase common shares at a
loss. Accordingly, a holder of units assumes the entire risk that the market
value of the common shares may decline. Any such decline could be substantial.
YOU WILL RECEIVE ONLY A PORTION OF ANY
APPRECIATION IN THE COMMON
SHARE PRICE
The number of common shares that will be issued upon settlement may decline
by up to % as the market value of the common shares increases. Therefore,
your opportunity for equity appreciation will be less than if you invested
directly in common shares. In addition, if the average trading price of the
common shares at the stock purchase date exceeds $ but falls below
$ , you will receive no equity appreciation on the common shares.
THE MARKET PRICE FOR THE COMMON
SHARES IS UNPREDICTABLE
It is impossible to predict whether the market price of the common shares
will rise or fall. Many factors influence the trading prices of the common
shares. These factors include changes in our financial condition, results of
operations and prospects and complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally, the
stock exchanges on which the common shares are traded and the market segments of
which we are a part.
YOU MAY SUFFER DILUTION OF THE COMMON SHARES ISSUABLE UPON SETTLEMENT OF
PURCHASE CONTRACTS
The number of common shares issuable upon settlement is subject to
adjustment only for stock splits and combina-
tions, stock dividends and certain other specified transactions. The number of
common shares issuable upon settlement of each purchase contract is not subject
to adjustment for other events, such as employee stock option grants, offerings
of common shares for cash or in connection with acquisitions or certain other
transactions, which may adversely affect the price of the common shares. The
terms of the units do not restrict our ability to offer common shares in the
future or to engage in other transactions that could dilute the common shares.
We have no obligation to consider the interests of the holders of the units for
any reason.
YOU HAVE NO RIGHTS AS COMMON SHAREHOLDERS
Until you acquire common shares upon settlement of your purchase contract,
you will have no rights with respect to the common shares, including voting
rights, rights to respond to tender offers and rights to receive any dividends
or other distributions on the common shares. Upon settlement of your purchase
contract, you will be entitled to exercise the rights of a holder of common
shares only as to actions for which the record date occurs after the settlement
date.
YOUR NOTES WILL BE SUBORDINATED
The obligations of JES under the notes will be unsecured and subordinate
and rank
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<PAGE> 11
junior in right of payment to all present and future senior indebtedness of JES.
JES cannot make payments of principal of or interest on the notes if:
- JES is in default under any payment obligation with respect to senior
indebtedness beyond any applicable grace period,
- JES is otherwise in default with respect to any senior indebtedness
permitting the holders of the senior indebtedness to accelerate the
maturity of the senior indebtedness, or
- any judicial proceeding is pending with respect to any default with
respect to senior indebtedness.
Seagram's guarantees of the notes will be subordinated to present and
future senior indebtedness of Seagram in the same manner.
Neither the indenture nor the master unit agreement, which governs the
terms of the units, places any limitation on the amount of additional secured or
unsecured debt, including senior indebtedness, that may be incurred by Seagram
or JES or any of their subsidiaries.
YOUR PLEDGED SECURITIES
WILL BE ENCUMBERED
Although holders of units will be beneficial owners of the underlying
pledged securities, those pledged securities will be pledged with the collateral
agent to secure the obligations of the holders under the purchase contracts.
Therefore, for so long as the purchase contracts remain in effect, holders will
not be allowed to withdraw their pledged securities from this pledge arrangement
except in the limited circumstances described in this prospectus.
WE WILL HAVE THE OPTION
TO DEFER PAYMENTS
JES will have the right to defer interest payments on the notes at any time
or from time to time. However, deferred payments will bear additional interest
at a rate per year equal to % until March , 2002, and at the reset
rate thereafter (compounding quarterly) until paid.
Seagram will have the right to defer the payment of contract fees on the
purchase contracts at any time or from time to time. However, deferred payments
of contract fees will bear additional contract fees at a rate per year equal to
% (compounding quarterly) until paid. You will have no right to
receive contract fees, including deferred contract fees, if the purchase
contracts are terminated. The purchase contracts will terminate if Seagram
experiences certain events of bankruptcy, insolvency, or reorganization.
If we exercise our right to defer payments of interest or contract fees,
the market price of the units is likely to decrease. In addition, the mere
existence of the right to defer payments may cause the market price of the units
to be more volatile than the market prices of other securities that are not
subject to such deferrals.
MASTER UNIT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF UNIT AGENT
Although the notes included in the units will be issued pursuant to an
indenture qualified under the Trust Indenture Act, the master unit agreement
relating to the units will not be qualified under the Trust Indenture Act. The
unit agent under the master unit agreement, who will act as the agent and the
attorney-in-fact for the holders of the units, will not be qualified as a
trustee under the Trust Indenture Act. Accordingly, holders of the units will
not have the benefits of the protections of the Trust Indenture Act. Under the
terms of the master unit agreement, the unit agent will
7
<PAGE> 12
have only limited obligations to the holders of the units.
YOU WILL HAVE OID INCOME
For U.S. federal income tax purposes, the notes will be classified as
contingent payment debt instruments. As a result, they will be considered to be
issued with original issue discount or OID, which each holder will be required
to include in income during the holder's period of ownership of the notes,
subject to certain adjustments. Additionally, holders will be required to
recognize ordinary income on all or a portion of any gain realized on a sale of
notes or any gain attributable to notes on a sale of units before maturity.
8
<PAGE> 13
DESCRIPTION OF SEAGRAM
We operate in two global business segments: entertainment and spirits and
wine. The entertainment segment produces and distributes recorded music and
motion picture, television and home video products throughout the world. It also
operates theme parks and retail stores. The spirits and wine segment produces
and markets distilled spirits, wines, coolers, beers and mixers in more than 190
countries and territories.
ENTERTAINMENT
Our entertainment business is conducted through two units:
- - Universal Music Group which produces and distributes recorded music throughout
the world in all major genres including Hip-Hop, R&B, rock, country, jazz and
classical, and
- - Universal Studios Group which consists of our filmed entertainment (including
international television) and recreation and other businesses.
Matsushita Electric Industrial Co., Ltd. has an approximate 8.1% ownership
interest in the entities which own Universal Music Group and Universal Studios
Group.
MUSIC ENTERTAINMENT
Universal Music Group is the largest recorded music company in the world.
Universal Music Group was formed in December 1998 when we completed the
acquisition of PolyGram and includes the music business of both Universal and
PolyGram.
Universal Music Group develops, markets and sells recorded music through a
network of subsidiaries, joint ventures and licensees in 59 countries around the
world. Universal Music Group also manufactures recorded music and manufactures,
sells and distributes videos in the United States and internationally and
publishes music.
Universal Music Group's record companies create and market all genres of
recorded music, principally on compact discs and cassettes. Universal Music
Group's music appears on such labels as:
- - MCA, Universal Records, MCA Nashville, Blue Thumb, Geffen, DGC, GRP, Impulse!,
Rising Tide, DreamWorks Records and Interscope (50% owned) and its family of
labels including Almo Sounds and Outpost Records,
- - former PolyGram popular labels such as A&M, Def Jam (60% owned), Island,
Mercury, Mercury Nashville, Verve, Motown and Polydor, and
- - leading classical labels Decca Record Company, Deutsche Grammophon and
Philips.
Our subsidiaries and affiliates manufacture and distribute recorded music
for all of the labels in the Universal Music Group, affiliated label ventures,
and third party labels such as ZMM, Hollywood, Thump and others, and distribute
video product for Universal Music Group and others. We administer the release,
marketing and sale of recorded music in all major markets outside the United
States. We also release soundtrack albums for motion pictures and license music
for a wide variety of uses including recorded music, compilations,
videocassettes, videodiscs, video games, radio, television and motion pictures.
A music record company depends to a significant degree on its ability to
sign and retain artists who will appeal to popular taste over a period of time.
We believe that the scope and diversity of our popular music labels, repertoire
and catalogs allows us to respond to shifts in audience tastes. The United
States and the United Kingdom continue to be the source of approximately 60% of
international popular repertoire. From time to time certain national acts, such
as Andrea Bocelli from Italy, Aqua from Denmark, and Bjork from Iceland, appeal
to a wider international market. If
9
<PAGE> 14
you include, however, the United States and the United Kingdom, sales of
locally-signed artists in their home territories, still represent 70% of
worldwide recorded music sales. Our leading local market position in almost
every major region provides a critical competitive advantage in this growing
segment.
Artists who are currently, directly or through third parties, under
contract with Universal Music Group for one or more important territories
include:
<TABLE>
<S> <C>
Bryan Adams Elton John
All Saints Melissa Etheridge
Aqua Hanson
Erykah Badu LL Cool J
Beastie Boys Reba McEntire
Beck Metallica
The Bee Gees Nine Inch Nails
Bjork Luciano Pavarotti
Mary J. Blige Sting
Blues Traveller Shania Twain
Andrea Bocelli Texas
Bon Jovi U2
Boyz II Men Stevie Wonder
The Cranberries Trisha Yearwood
Sheryl Crow
</TABLE>
We also own the largest catalog of recorded music in the world, with
legendary performers from the United States, the United Kingdom and around the
world, including:
<TABLE>
<S> <C>
ABBA Buddy Holly
Louis Armstrong Bob Marley and the
Jimmy Buffet Wailers
Patsy Cline Nirvana
John Coltrane 2 Pac
Ella Fitzgerald Diana Ross and the
Marvin Gaye Supremes
Jimi Hendrix Andrew Lloyd Webber
Billie Holliday The Who
</TABLE>
Sales from this catalog account for approximately 25% of our total recorded
music revenues each year.
Top selling albums in 1998 were recorded by:
<TABLE>
<S> <C>
All Saints Lighthouse Family
Andrea Bocelli Method Man
Boyzone Padre Marcelo Rossi
The Bee Gees (Brazil)
Chumbawamba Terra Samba (Brazil)
Sheryl Crow Shania Twain
DMX 2 Pac
Glay U2
Jay-Z Rob Zombie
</TABLE>
Universal Music Group had a total of 48 albums which each sold over one
million units in 1998.
We also own the Verve Group, including GRP and Impulse!, the world's
leading jazz labels whose artists include:
<TABLE>
<S> <C>
Herbie Hancock Diana Krall
Joe Henderson Wayne Shorter
Charlie Haden McCoy Tyner
</TABLE>
We estimate that the worldwide market for classical music represented
approximately 4% in retail value of the total music market in 1998. Universal
Music Group holds the leading position in the classical music market, accounting
for approximately 40% of worldwide sales, through its ownership of three major
classical label companies: Decca/London (based in the United Kingdom), Deutsche
Grammophon (based in Germany), and the Philips Music Group (based in The
Netherlands).
Top selling classical albums in 1998 were:
Andrea Bocelli
John Tesh
Braveheart Soundtrack
RELATED ACTIVITIES
MUSIC PUBLISHING. Music publishing involves the acquisition of rights to,
and exploitation of, musical compositions (as compared with recordings).
Principal sources of revenue are mechanical reproduction royalties from the
reproduction of musical works on sound carriers and license fees from radio and
television
10
<PAGE> 15
broadcasting and public performance of musical works.
We enter into agreements with composers and authors of musical compositions
for the purpose of exploiting the compositions through licensing for use in
sound recordings, films, videos and by way of live performances and
broadcasting. In addition, we license compositions for use in printed sheet
music and song folios. We also license and acquire catalogues of musical
compositions from third parties such as other music publishers and composers and
authors who have retained or re-acquired rights.
Our publishing catalog includes more than 660,000 titles that are owned or
controlled by it, making Universal Music Group the world's third largest music
publisher. Of these titles, approximately 35% are currently generating revenues.
Writers represented include:
<TABLE>
<S> <C>
Jerome Kern Glen Ballard
Leonard Bernstein Members of the
Andrew Lloyd Webber Cranberries
Tim Rice Bon Jovi
U2
</TABLE>
OTHER MUSIC RELATED ACTIVITIES. Universal Music Group is at the forefront
of the development of music distribution through e-commerce and electronic
delivery. Universal Music Group recently announced a long-term agreement with
InterTrust Technologies Corporation for a digital rights management platform for
e-commerce and electronic delivery, and is actively participating in the SDMI
Forum, an extensive group of content, consumer electronics, hardware, software
and internet companies who have joined to develop and define worldwide standards
for the protection of music and other digitizeable intellectual property. In
April 1999, Universal Music Group and BMG formed GetMusic, an on-line music
alliance, to create internet sites to promote and sell music. GetMusic will have
access to a combined database of 50 million customers worldwide, and will offer
exclusive artist information, exclusive interviews, and the ability to chat
on-line with artists and their fans.
FILMED ENTERTAINMENT
Universal Studios' filmed entertainment business:
- produces and distributes films worldwide in the theatrical, home video
and television markets,
- produces and distributes television episodic and made for television
programming in the international market,
- operates and has ownership interests in a number of international
channels including:
The Sci-Fi Channel Europe,
USA Latin America and Brazil,
13th Street, action and suspense
channels in France, Germany and Spain (launch date June 1999),
and
Studio Universal, a movie channel
in Italy,
- engages in the licensing of merchandising rights and film property
publishing rights, and
- engages in certain other activities through its ownership of the joint
venture and equity interests described below.
Universal Studios produces feature length films for initial theatrical
exhibition and television programming for international television markets.
Major motion pictures produced by us over the past several years include Nutty
Professor and Liar, Liar, and more recently such box office hits as Patch Adams
with Robin Williams, Life starring Eddie Murphy and Martin Lawrence and The
Mummy starring Brendan Fraser. Current upcoming important releases include
Bowfinger starring Eddie Murphy and Steve Martin, Notting Hill with Julia
Roberts and Hugh Grant, Mystery Men starring Ben Stiller and American Pie. In
addition, we produce animated and live
11
<PAGE> 16
action children's and family programming for networks, basic cable and local
television stations as well as home video.
The arrangements under which we produce, distribute and own theatrical
films, vary widely. Other parties may participate in varying degrees in revenues
or other contractually defined amounts. We control worldwide distribution of our
theatrical product, except where we act as a subdistributor in specified
territories or contracts for specified territories or for specifically defined
distribution rights.
Generally, we distribute theatrical films in the theatrical, pay television
and home video markets. Subsequently, we make theatrical films available for
broadcast on basic cable distribution throughout the world. The theatrical
license agreements with theater operators are on an individual picture basis,
and rentals under these agreements are generally a percentage of the theater's
receipts with, in some instances, a minimum guaranteed amount.
We distribute our theatrical product in the United States and Canada to
motion picture theaters. Theatrical distribution throughout the rest of the
world is primarily conducted by United International Pictures, which is equally
owned by Universal Studios, Metro-Goldwyn-Mayer Inc. and an affiliate of Viacom
Inc. We distribute product to all forms of the television medium in the United
States, Canada and other major international markets. Television distribution of
our 24,000 episode library in the United States is handled by USANi LLC
(approximately 50% owned by Universal) and throughout the rest of the world
primarily by Universal Studios. Universal Studios distributes television product
produced by USANi LLC and Universal Studios' own current library of television
programming in international markets. We market videocassettes and digital
videodiscs in the United States and internationally.
At March 31, 1999, Universal Studios owned a 45% effective interest in USA
Networks and an approximate 26% interest in Loews Cineplex Entertainment
Corporation, which exhibits theatrical films principally in the United States
and Canada, and a 49% interest in United Cinemas International Multiplex B.V.,
which operates motion picture theaters outside of the United States and Canada.
RECREATION AND OTHER
Universal Studios owns and operates Universal Studios Hollywood, a theme
park based on Universal Studios' filmed entertainment businesses and located at
Universal City, California. Adjacent to Universal Studios Hollywood is Universal
CityWalk, an integrated retail/entertainment zone which offers shopping, dining,
cinemas and entertainment. Universal Studios CityWalk is currently being
expanded from 300,000 to 400,000 square feet. We have a 50% interest in
Universal City Florida Partners, a joint venture which owns Universal Studios
Florida, a theme park on approximately 440 acres owned by the joint venture in
Orlando, Florida. Universal City Development Partners, a partnership in which we
have a 50% interest, is developing an additional theme park, Universal Studios
Islands of Adventure, and Universal Studios CityWalk, a nighttime entertainment
complex, on approximately 385 acres of land owned by the partnership and
adjacent to Universal Studios Florida. Universal Studios Islands of Adventure's
grand opening celebration is scheduled for May 28 through Memorial Day, May 31,
1999. Additionally, we have a 25% interest in a joint venture which is currently
developing three hotels adjacent to the Orlando theme parks. The first hotel,
The Portofino Bay Hotel, is scheduled to open in September 1999. The theme
parks, Universal Studios CityWalk and hotels together comprise the newest
Orlando multi-day entertainment resort, Universal Studios Escape. In 1998, we
purchased Wet 'n Wild Orlando, the highest attended
12
<PAGE> 17
water park in the United States adjacent to Universal Studios Escape. Since
October 1998, construction has been underway for Universal Studios Japan in
Osaka, Universal Studios's first theme park venture outside the United States.
Opening is scheduled for 2001. We also own a 37% interest in, and manage,
Universal's Port Aventura, S.A., a theme park located on 2000 acres on the
Mediterranean coast of Spain near Barcelona.
In addition, we are involved in other businesses including the operation of
retail gift stores and the development of entertainment software. We own Spencer
Gifts which operates approximately 640 retail gift stores throughout North
America through three groups of stores: the Spencer, DAPY and Glow gift shops.
Spencer, DAPY and Glow sell novelties, electronics, accessories, books and trend
driven products. Universal Studios also develops entertainment software
including the Crash Bandicoot and Spyro game series and owns an approximate 26%
interest (at March 31, 1999) in Interplay Entertainment, an entertainment
software developer.
SPIRITS AND WINE
Our spirits and wine business, directly and through affiliates and joint
ventures in more than 40 countries and territories, produces, markets and
distributes more than 225 brands of distilled spirits, more than 180 brands of
wines, Champagnes, Ports and Sherries, and more than 48 brands of coolers,
beers, mixers and other low-alcohol adult beverages, which are sold in over 190
countries and territories. Some of these products are sold worldwide and others
only in the geographic area where they are produced. In addition to marketing
our own brands, we also distribute distilled spirit, wine and beer brands owned
by others.
Some of our best-known brand names include:
- Crown Royal and Seagram's V.O. Canadian whiskies
- Seagram's 7 Crown blended whiskey
- Four Roses Bourbon
- Chivas Regal, Royal Salute and Passport Scotch Whiskies
- The Glenlivet and Glen Grant single malt Scotch Whiskies
- Martell Cognacs
- Seagram's Extra Dry Gin
- Captain Morgan and Myers's rums
- Mumm and Perrier-Jouet Champagnes
- Sterling Vineyards California Wines
We also distribute ABSOLUT VODKA, owned by V&S Vin & Sprit, in the United States
and in most major international markets.
We import into the United States fine wines, principally French wines and
Champagnes, and produce and market premium California and other wines. Among the
wines we produce and market are:
- Mumm and Perrier-Jouet Champagnes
- Sterling Vineyards California Wines
- Tessera California Wines
- Mumm Cuvee Napa California Sparkling Wine
- Sandeman Ports and Sherries
- Matheus Muller
- Mumm German sekt
The Monterey Vineyard California wines and Barton & Guestier (B&G) French wines
are produced for us.
We also market low-alcohol and non-alcohol adult beverages. Seagram's
Coolers are sold in a variety of fruit and mixed drink flavors. Its mixer line
includes ginger ale, club soda, tonic water and
13
<PAGE> 18
seltzer. We are the exclusive U.S. importer of Grolsch Beer, owned by Royal
Grolsch N.V., and of Steinlager Beer, owned by Lion Nathan Limited.
USE OF PROCEEDS
JES estimates (assuming a unit offering price of $54) that the net proceeds
to it from the units offering will be approximately $968 million. Seagram also
plans to sell common shares in a separate offering. Assuming completion of the
common share offering by Seagram, Seagram estimates (assuming a common share
offering price of $54) that it will receive net proceeds of approximately $1,525
million from the common share offering. The net proceeds of the offerings will
be used:
- to repay borrowings under our bank credit facilities of approximately
$1.3 billion (in U.S. dollar equivalents) with maturities ranging up to
three years,
- to repay commercial paper borrowings of approximately $1.1 billion with
maturities ranging up to 350 days, and
- for general corporate purposes.
The borrowings under the bank credit facilities were incurred in connection
with the acquisition of PolyGram and bear interest at floating rates (currently
at equivalent U.S. dollar interest rates ranging from 5.5% to 6.0% per annum).
The commercial paper bears interest at a floating rate (currently 5.5% per
annum).
PRICE RANGE OF COMMON SHARES
The common shares are traded on the New York Stock Exchange under the
symbol "VO". The following table sets forth, for the periods indicated, the high
and low sales prices reported by the New York Stock Exchange, and the dividends
per common share.
<TABLE>
<CAPTION>
SCL COMMON SHARES
-----------------------------
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
FISCAL 1997
First Quarter.................................. $38.38 $30.88 $0.150
Second Quarter................................. $41.88 $35.25 $0.165
Third Quarter.................................. $42.75 $38.00 $0.165
Fourth Quarter................................. $41.88 $35.75 $0.165
FISCAL 1998
First Quarter.................................. $41.13 $33.94 $0.165
Second Quarter................................. $37.63 $30.25 $0.165
Third Quarter.................................. $39.75 $31.44 $0.165
Fourth Quarter................................. $46.69 $36.81 $0.165
FISCAL 1999
First Quarter.................................. $41.94 $28.69 $0.165
Second Quarter................................. $38.38 $25.13 $0.165
Third Quarter.................................. $51.25 $37.81 $0.165
Fourth Quarter (through May 21, 1999).......... $65.00 $49.81 $0.165
</TABLE>
14
<PAGE> 19
CAPITALIZATION
The following table sets forth as of March 31, 1999 (1) the historical
capitalization of Seagram, (2) the pro forma adjustments for this offering and
the common share offering (assuming a unit and common share offering price of
$54 per unit or common share) and (3) the capitalization of Seagram giving pro
forma effect to the offerings and the application of the estimated net proceeds
as described in "Use of Proceeds." The table should be read in conjunction with
Seagram's financial statements, the notes thereto and the other financial data
and statistical information included or incorporated by reference in this
prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
--------------------------------------
PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS AS ADJUSTED
------- ----------- --------------
(U.S. $ IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C>
Net debt......................................... $ 8,450 $(1,494)(a) $ 6,956
Minority interest................................ 1,878 1,878
Shareholder's equity............................. 12,057 1,494(a) 13,551
------- ------- -------
Total capitalization............................. $22,385 -- $22,385
======= =======
</TABLE>
- ---------------
(a) Reflects issuance of 18,500,000 % adjustable conversion-rate equity
security units and 29,000,000 common shares, the estimated net proceeds of
which will be used to repay existing borrowings.
15
<PAGE> 20
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FIVE-MONTH
TRANSITION NINE MONTHS
FISCAL YEARS ENDED PERIOD FISCAL FISCAL ENDED
JANUARY 31, ENDED YEAR ENDED YEAR ENDED MARCH 31,
------------------ JUNE 30, JUNE 30, JUNE 30, -----------
1994 1995 1996 1996 1997 1998 1998 1999
---- ---- ---- ---------- ---------- ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEAGRAM
Ratio of earnings to fixed charges...... 1.93 1.69 1.73 1.21 3.21 5.10 5.88 (a)
Pro forma ratio of earnings to fixed
charges............................... -- -- -- -- -- 2.28 -- (c)
JES
Ratio of earnings to fixed charges...... 2.03 1.94 1.52 (b) 1.71 1.10 1.34 1.09
</TABLE>
- -------------------------
(a) Fixed charges exceeded earnings by $430 million for the nine month period
ended March 31, 1999.
(b) Fixed charges exceeded earnings by $37 million for the transition period
ended June 30, 1996.
(c) Pro forma fixed charges exceeded pro forma earnings by $124 million for the
nine month period ended March 31, 1999.
For these ratios, "earnings" was determined by adding "fixed charges"
(excluding capitalized interest) and minority interest in net income to income
from continuing operations after eliminating equity in undistributed earnings.
"Fixed charges" consists of interest on all indebtedness (including capitalized
interest), amortization of debt discount and expenses and an interest factor
attributable to rentals.
16
<PAGE> 21
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Seagram's selected historical consolidated financial data presented below
as of June 30, 1997 and 1998 and for the fiscal years then ended were derived
from the Seagram's historical consolidated financial statements and the notes
thereto contained in Seagram's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, as amended, which is incorporated herein by reference, and
have been audited by PricewaterhouseCoopers LLP, independent accountants. In
addition, Seagram's selected historical consolidated financial data presented
below for the fiscal years ended January 31, 1994, 1995 and 1996 and the
five-month transition period ended June 30, 1996 were derived from Seagram's
historical consolidated financial statements for the fiscal years ended January
31, 1995 and 1996 and the five-month transition period ended June 30, 1996 which
have been audited by PricewaterhouseCoopers LLP. The data presented as of March
31, 1998 and 1999 and for the nine months ended March 31, 1998 and March 31,
1999 are derived from Seagram's unaudited consolidated financial statements
contained in Seagram's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999, which is incorporated herein by reference. As a result of Seagram's
sale of Tropicana Products, Inc. and Seagram's global juice business, Seagram's
Consolidated Financial Statements report the results of Tropicana as
discontinued operations. The data presented below should be read in conjunction
with Seagram's consolidated financial statements.
Seagram's consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles which conform in
all material respects to Canadian generally accepted accounting principles.
Except as otherwise noted, figures are in millions of U.S. dollars.
17
<PAGE> 22
THE SEAGRAM COMPANY LTD.
(US$ IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIVE-
MONTH
TRANSITION UNAUDITED
FISCAL YEARS ENDED PERIOD FISCAL YEARS NINE MONTHS ENDED
JANUARY 31, ENDED ENDED JUNE 30, MARCH 31,
--------------------------- JUNE 30, ----------------- -----------------
1994 1995 1996 1996 1997 1998 1998 1999
------- ------- ------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues............................. $ 4,724 $ 4,994 $ 7,787 $ 4,112 $10,354 $ 9,474 $ 7,372 $ 8,789
Operating income (loss).............. $ 622 $ 614 $ 435 $ 93 $ 719 $ 553 $ 538 $ (203)
Interest, net and other.............. $ 275 $ 317 $ 195 $ 99 $ 147 $ 228 $ 183 $ 301
Gain on sale of Time Warner shares... $ -- $ -- $ -- $ -- $ 154 $ 926 $ 433 $ --
Gain on USAi transaction............. $ -- $ -- $ -- $ -- $ -- $ 360 $ 360 $ --
Equity earnings (losses) from
unconsolidated companies........... $ 18 $ 14 $ 47 $ 35 $ 62 $ (45) $ (40) $ 129
Income (loss) from continuing
operations before the cumulative
effect of accounting change........ $ 249 $ 170 $ 144 $ 67 $ 445 $ 880 $ 571 $ (330)
Income (loss) from discontinued
Tropicana operations, after tax.... 34 24 30 18 57 66 51 (3)
Gain on sale of discontinued
Tropicana operations, after tax.... -- -- -- -- -- -- -- 1,072
Discontinued DuPont activities, after
tax................................ 96 617 3,232 -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Income before cumulative effect of
accounting change.................. 379 811 3,406 85 502 946 622 739
Cumulative effect of accounting
change, after tax.................. -- (75) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net income........................... $ 379 $ 736 $ 3,406 $ 85 $ 502 $ 946 $ 622 $ 739
======= ======= ======= ======= ======= ======= ======= =======
FINANCIAL POSITION DATA
(AT END OF PERIOD)
Current assets....................... $ 3,532 $ 3,938 $ 6,194 $ 6,307 $ 6,131 $ 6,971 $ 7,001 $ 8,786
Common stock of DuPont............... 3,154 3,670 631 651 1,034 1,228 1,118 955
Common stock of Time Warner.......... 1,769 2,043 2,356 2,228 1,291 -- 847 --
Other noncurrent assets.............. 1,754 1,773 10,230 10,328 10,257 12,246 11,696 25,958
Net assets of discontinued Tropicana
operations......................... 1,220 1,270 1,549 1,693 1,734 1,734 1,672 --
------- ------- ------- ------- ------- ------- ------- -------
Total assets................ $11,429 $12,694 $20,960 $21,207 $20,447 $22,179 $22,334 $35,699
======= ======= ======= ======= ======= ======= ======= =======
Current liabilities.................. $ 2,776 $ 3,865 $ 3,557 $ 4,383 $ 3,087 $ 4,709 $ 5,092 $ 8,796
Long term indebtedness............... $ 3,051 $ 2,838 $ 2,889 $ 2,562 $ 2,478 $ 2,225 $ 2,152 $ 7,073
Total liabilities.................... $ 6,428 $ 7,174 $ 9,788 $10,163 $ 9,174 $10,948 $11,210 $21,764
Minority interest.................... -- 11 1,844 1,839 1,851 1,915 1,902 1,878
Shareholders' equity................. 5,001 5,509 9,328 9,205 9,422 9,316 9,222 12,057
------- ------- ------- ------- ------- ------- ------- -------
Total liabilities and
shareholders' equity...... $11,429 $12,694 $20,960 $21,207 $20,447 $22,179 $22,334 $35,699
======= ======= ======= ======= ======= ======= ======= =======
CASH FLOW DATA
Cash flow from operating
activities....................... $ 370 $ 370 $ 222 $ 315 $ 664 $ (241) $ 18 $ 387
Capital expenditures............... $ (118) $ (124) $ (349) $ (245) $ (393) $ (410) $ (257) $ (314)
Other investing activities, net.... $(1,556) $ (341) $ 2,260 $ (346) $ 2,101 $ 1,109 $ 596 $(5,356)
Dividends paid..................... $ (209) $ (216) $ (224) $ (112) $ (239) $ (231) $ (173) $ (181)
</TABLE>
18
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA AND SUPPLEMENTAL FINANCIAL INFORMATION
The discussion and analysis which follows is derived from the management's
discussion and analysis of financial condition and results of operations
included in our Form 10-Q for the fiscal quarter ended March 31, 1999, which is
incorporated herein by reference. The discussion presented below should be read
in conjunction with the Form 10-Q.
RESULTS OF OPERATIONS
This discussion includes revenues and operating income for the three lines
of business within the entertainment segment: music, filmed entertainment and
recreation and other. This discussion also includes information about our share
of the results of investments in companies which are not consolidated with the
results of Seagram. Investments in these companies are reported as "Equity
earnings from unconsolidated companies". We believe this information will help
you to better understand Seagram's business results.
This information also includes earnings before interest, taxes,
depreciation and amortization from consolidated companies, referred to as
"EBITDA." Because of the significant goodwill associated with our acquisitions,
we believe EBITDA is an appropriate measure of operating performance. However,
you should note that EBITDA is not a substitute for operating income, net
income, cash flows and other measures of financial performance as defined by
U.S. generally accepted accounting principals.
Seagram acquired PolyGram on December 10, 1998. The results for the nine
months ended March 31, 1999 include the PolyGram results from the date of
acquisition. The discussion also includes pro forma financial information which
shows the effect of the PolyGram acquisition and the USA transactions as if they
had occurred at July 1, 1997. The USA transactions are:
- the acquisition on October 21, 1997 of an incremental 50% interest in the
USA Networks partnership for $1.7 billion,
- the sale on February 12, 1998 of a 50% interest in USA Networks to USA
Networks, Inc., and
- the contribution of the remaining 50% in USA Networks, the majority of
the televisions assets of Universal Studios, Inc. and 50% of the
international operations of USA Networks to USANi LLC.
In exchange for the contribution, Universal Studios, Inc. received a 10.7%
interest in USAi and a 45.8% exchangeable interest in USANi LLC.
19
<PAGE> 24
THE SEAGRAM COMPANY LTD.
(US$ IN MILLIONS EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL PROFORMA
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------ ------------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
Entertainment
Music.................................................. $ 1,096 $ 2,409 $ 4,661 $ 4,994
Filmed entertainment................................... 2,333 2,141 2,739 2,588
Recreation & other..................................... 544 618 544 618
------- ------- ------- -------
Entertainment............................................. 3,973 5,168 7,944 8,200
Spirits & wine............................................ 3,399 3,621 3,399 3,621
------- ------- ------- -------
Total revenues.............................................. $ 7,372 $ 8,789 $11,343 $11,821
======= ======= ======= =======
Operating income (loss)
Entertainment
Music.................................................. $ (23) $ (80) $ (32) $ 121
Filmed entertainment................................... 217 (119) 71 (194)
Recreation & other..................................... 29 31 29 31
------- ------- ------- -------
Entertainment............................................. 223 (168) 68 (42)
Spirits & wine............................................ 374 438 374 438
Restructuring charge...................................... -- (405) -- --
Corporate................................................. (59) (68) (59) (68)
------- ------- ------- -------
Total operating income (loss)............................... 538 (203) 383 328
Interest, net & other....................................... 183 301 457 526
Gain on sale of Time Warner shares.......................... 433 -- 433 --
Gain on USAi transaction.................................... 360 -- 360 --
Provision (benefit) for income taxes........................ 489 (18) 399 76
Minority interest........................................... 48 (27) 22 3
Equity earnings (losses) from unconsolidated companies...... (40) 129 4 122
------- ------- ------- -------
NET INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS............ $ 571 $ (330) $ 302 $ (155)
======= =======
Income (loss) from discontinued operations.................. 51 (3)
Gain on sale of discontinued operations..................... -- 1,072
------- -------
NET INCOME.................................................. $ 622 $ 739
======= =======
EARNINGS PER SHARE -- Basic
Income (loss) from continuing operations.................. $ 1.63 $ (0.90) $ 0.76 $ (0.39)
Income (loss) from discontinued operations................ 0.14 (0.01)
Gain on sale of discontinued operations................... -- 2.91
------- -------
$ 1.77 $ 2.00
======= =======
EARNINGS PER SHARE -- Diluted
Income (loss) from continuing operations.................. $ 1.62 $ (0.90) $ 0.75 $ (0.39)
Income (loss) from discontinued operations................ 0.14 (0.01)
Gain on sale of discontinued operations................... -- 2.91
------- -------
$ 1.76 $ 2.00
======= =======
Net cash provided by operating activities................... $ 18 $ 387
Net cash provided by (used for) investing activities........ $ 339 $(5,670)
Net cash provided by financing activities................... $ 471 $ 5,082
</TABLE>
20
<PAGE> 25
SUPPLEMENTAL FINANCIAL INFORMATION
ACTUAL REVENUES AND EBITDA
(US$ IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
REVENUES EBITDA
------------------- ------------------
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------- ------------------
1998 1999 1998 1999
------ ------- ------ ------
<S> <C> <C> <C> <C>
Entertainment
Music
Consolidated companies........................... $1,096 $ 2,409 $ 72 $ 208
Unconsolidated companies......................... 56 49 5 4
------ ------- ------ ------
Total............................................ 1,152 2,458 77 212
Filmed entertainment
Consolidated companies........................... 2,333 2,141 293 (67)
Unconsolidated companies......................... 775 1,287 93 278
------ ------- ------ ------
Total............................................ 3,108 3,428 386 211
Recreation & other
Consolidated companies........................... 544 618 83 92
Unconsolidated companies......................... 217 192 41 62
------ ------- ------ ------
Total............................................ 761 810 124 154
Entertainment
Consolidated companies........................... 3,973 5,168 448 233
Unconsolidated companies......................... 1,048 1,528 139 344
------ ------- ------ ------
Total entertainment.............................. 5,021 6,696 587 577
------ ------- ------ ------
Spirits & wine
Consolidated companies........................... 3,399 3,621 525 536
Unconsolidated companies......................... 175 115 2 5
Charge for Asia.................................. (60) --
------ ------- ------ ------
Total spirits & wine............................. 3,574 3,736 467 541
------ ------- ------ ------
Total company
Consolidated companies........................... 7,372 8,789 973 769
Unconsolidated companies......................... 1,223 1,643 141 349
Charge for Asia.................................. (60) --
------ ------- ------ ------
Total............................................ $8,595 $10,432 $1,054 $1,118
Unconsolidated companies adjustment................... (141) (349)
Depreciation expense.................................. (174) (212)
Amortization of intangibles & step-up of assets....... (147) (294)
Restructuring charge -- entertainment................. -- (405)
Corporate expenses.................................... (54) (61)
------ ------
Operating income (loss)............................... $ 538 $ (203)
====== ======
</TABLE>
21
<PAGE> 26
SUPPLEMENTAL FINANCIAL INFORMATION
PRO FORMA REVENUES AND EBITDA
(US$ IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
REVENUES EBITDA
-------------------------- --------------------------
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------------- --------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Entertainment
Music
Consolidated companies........................ $ 4,661 $ 4,994 $ 593 $ 722
Unconsolidated companies...................... 56 49 5 4
------- ------- ------ ------
Total......................................... 4,717 5,043 598 726
Filmed entertainment
Consolidated companies........................ 2,739 2,588 133 (131)
Unconsolidated companies...................... 1,134 1,287 199 278
------- ------- ------ ------
Total......................................... 3,873 3,875 332 147
Recreation & other
Consolidated companies........................ 544 618 83 92
Unconsolidated companies...................... 217 192 41 62
------- ------- ------ ------
Total......................................... 761 810 124 154
Entertainment
Consolidated companies........................ 7,944 8,200 809 683
Unconsolidated companies...................... 1,407 1,528 245 344
------- ------- ------ ------
Total entertainment........................... 9,351 9,728 1,054 1,027
------- ------- ------ ------
Spirits & wine
Consolidated companies........................ 3,399 3,621 525 536
Unconsolidated companies...................... 175 115 2 5
Charge for Asia............................... (60) --
------- ------- ------ ------
Total spirits & wine.......................... 3,574 3,736 467 541
------- ------- ------ ------
Total company
Consolidated companies........................ 11,343 11,821 1,334 1,219
Unconsolidated companies...................... 1,582 1,643 247 349
Charge for Asia............................... -- -- (60) --
------- ------- ------ ------
Total......................................... $12,925 $13,464 1,521 1,568
Unconsolidated companies adjustment............................................ (247) (349)
Depreciation expense........................................................... (228) (238)
Amortization of goodwill & step-up of assets................................... (609) (592)
Corporate expenses............................................................. (54) (61)
------ ------
Operating income............................................................... $ 383 $ 328
====== ======
</TABLE>
22
<PAGE> 27
Revenues increased 19 percent in the nine months ended March 31, 1999
compared to the same period in 1998. This was primarily due to the PolyGram
acquisition and improved spirits and wine results. The nine month results
include a $405 million pre-tax restructuring charge for the integration of
PolyGram into the existing music and film operations. Operating income of $538
million in the nine months of the prior year also included a $60 million charge
for Asia Pacific spirits and wine operations. Excluding those charges, operating
income declined 66 percent in the nine month period. The decrease reflects the
higher amortization and depreciation expense associated with the PolyGram
acquisition. Disappointing box office releases of several motion pictures also
contributed to the decline.
For the nine months ended March 31, 1999, EBITDA from consolidated and
unconsolidated companies increased six percent to $1,118 million on total
revenues of $10.4 billion. Excluding the $60 million charge for Asia Pacific
spirits and wine operations from last year's results, EBITDA from consolidated
and unconsolidated companies was flat for the nine months ended March 31, 1999.
On a pro forma basis for consolidated companies, revenues increased four
percent in the nine months ended March 31, 1999 to $11.8 billion. Operating
income was $328 million for the nine months ended March 31, 1999 compared with
$383 million for the same period in 1998. Excluding the $60 million charge for
Asia Pacific spirits and wine operations in the prior year, pro forma operating
income was down 26 percent for the nine months. For the nine months, pro forma
EBITDA decreased four percent. Excluding the $60 million charge for Asia Pacific
spirits and wine operations in the prior year, pro forma EBITDA declined nine
percent. The decline in pro forma operating income and EBITDA in the nine month
period is primarily due to the poor performance of the filmed entertainment
business, which more than offset improvements in all other businesses.
RESTRUCTURING CHARGE
Seagram recorded a restructuring charge in the second quarter of $405
million. This charge relates to our efforts to streamline entertainment
operations after the acquisition of PolyGram. The charge related entirely to
Seagram's global music and film production, financial, marketing and
distribution operations. It included:
- severance,
- rationalization of facilities and labels,
- termination of artists and distribution contracts, and
- costs related to exiting film production arrangements and properties in
development.
Music operations account for the majority of the charge. We exclude this
restructuring charge when discussing EBITDA and pro forma results.
The components of the $405 million charge are:
- $126 million for severance and other employee related costs,
- $128 million for facility and label rationalization, and
- $151 million of contract termination and other costs.
The severance and other employee-related costs provide for a reduction of
approximately 1,200 employees worldwide. This reduction is due to facility
closures, elimination of duplicate positions and streamlining of operations in
order to obtain cost reductions. The facility rationalization costs provide for
domestic and international lease terminations and the write-off of the net book
value of furniture, fixtures and equipment and leasehold improvements for
23
<PAGE> 28
vacated properties. The costs of contract terminations are comprised primarily
of:
- artists' contracts,
- distribution contracts,
- story property commitments, and
- term deals.
The cash element of the charge is approximately $318 million. The noncash
element of the charge is approximately $87 million. As of March 31, 1999, cash
payments of approximately $47 million have been made against the charge. As of
that date, approximately $11 million of non-cash elements were used. We
anticipate these activities will be substantially completed by December 31,
1999.
ENTERTAINMENT
The entertainment segment contributed $5.2 billion to revenues in the nine
months ended March 31, 1999, an increase of 30 percent compared to the same
period in 1998. The increase was primarily due to the acquisition of PolyGram,
partially offset by lower filmed entertainment revenues. There was an operating
loss of $168 million for the nine months ended March 31, 1999 versus income of
$223 million for the same period in 1998. The decline in operating income was
primarily due to increased amortization and depreciation expense from the
PolyGram acquisition and disappointing motion picture results.
The prior year consolidated results include USA Networks from October 21,
1997 until February 12, 1998, during which time our interest was 100 percent. In
the current year, following the USA transactions, our interest is approximately
50 percent of USANi LLC. The results of USANi LLC are included in equity
earnings in unconsolidated companies. Equity in earnings from unconsolidated
companies increased to $129 million in the nine months ended March 31, 1999
versus losses last year of $37 million. The increase in equity earnings reflects
the improved operating results in the businesses of USANi LLC and the impact of
the USA transactions. In addition, we benefited from improved operating results
at Loews Cineplex Entertainment Corporation ("Loews Cineplex") in the nine month
period ended March 31, 1999 compared to Cineplex Odeon Corporation (owned in the
prior year).
On a pro forma basis, revenues increased three percent in the nine months
ended March 31, 1999 to $8.2 billion. There was an operating loss of $42 million
for the nine months ended March 31, 1999 versus income of $68 million in the
same period in 1998.
MUSIC
Consolidated Operations
Actual revenues more than doubled in the nine month period ended March 31,
1999. There was an operating loss of $80 million for the nine month period,
compared to a loss of $23 million for the same period in 1998. EBITDA almost
tripled in the nine month period ended March 31, 1999 compared to the prior
year. The significant increases in revenues and EBITDA are largely due to the
PolyGram acquisition. The decline in operating income is primarily due to higher
amortization and depreciation expenses from the PolyGram acquisition.
On a pro forma basis, revenues increased seven percent in the nine months
ended March 31, 1999. This increase was due to improved sales of higher priced
units. Pro forma operating income was $121 million for the nine months ended
March 31, 1999 compared to a loss of $32 million for the same period in 1998.
Pro forma EBITDA increased 22 percent in the nine months ended March 31, 1999
compared to the same period in 1998. These improvements are due to Seagram's
progress in integrating PolyGram and Universal Music and eliminating costs.
24
<PAGE> 29
Unconsolidated Operations
The equity in earnings from unconsolidated companies was income of $4
million for the nine months ended March 31, 1999, and was unchanged compared to
the same period in 1998. Unconsolidated companies include Universal Concerts
Canada and Universal/PACE Amphitheaters Group, L.P. Both companies are concert
joint ventures and are not material to Universal Music Group.
FILMED ENTERTAINMENT
Consolidated Operations
Filmed Entertainment revenues declined eight percent in the nine month
period ended March 31, 1999 compared to the same period in 1998. Operating
income decreased on a nine-month basis from income of $217 million in the prior
year to a loss of $119 million in the current year. The prior year nine-month
results included operating income of $76 million for USA Networks from October
21, 1997 until February 12, 1998. In the current year the contribution of USANi
LLC is included in equity from unconsolidated companies and not in consolidated
operations. The Motion Picture Group results declined because of the
disappointing box office performance of current year releases such as Virus,
edTV, Meet Joe Black and Babe: Pig in the City. Also, comparisons with last
year's results are difficult since those results benefited from the carryover of
The Lost World: Jurassic Park and Liar, Liar. International Television and
Library results declined year-on-year due to start-up costs relating to the new
international channels and lower television library sales. On a nine-month
basis, EBITDA from consolidated companies declined from $293 million in the
prior year to a loss of $67 million in the current year. The prior year results
included $97 million of EBITDA related to USA Networks, which was consolidated
from October 21, 1997 until February 12, 1998. There is no contribution from USA
Networks in consolidated EBITDA in the current year.
On a pro forma basis, Filmed Entertainment includes the results of PolyGram
Filmed Entertainment in the motion picture group and the prior year results
reflect the USA Transactions as though they had both occurred at July 1, 1997.
On a pro forma basis, revenues declined six percent in the nine month period
ended March 31, 1999 to $2.6 billion. EBITDA was a loss of $131 million for the
nine months ended March 31, 1999 compared to income of $133 million in the prior
year. Operating income on a nine-month basis decreased from income of $71
million in the prior year to a loss of $194 million in the current year.
The poor response to edTV materially diminished Filmed Entertainment's
outlook for the year. However, with the success of Life and a promising slate
for the remainder of this calendar year -- including The Mummy, Notting Hill and
American Pie -- the Motion Picture Group expects to improve its box office
performance. Even though we expect to improve box office results, we anticipate
a loss in the fourth quarter in line with the loss for the third quarter, and it
will be several quarters before our film business returns to profitability.
Unconsolidated Operations
The equity in earnings from unconsolidated companies increased from a loss
of $26 million for the nine month period in the prior year to income of $127
million in the current year. Revenues from unconsolidated companies increased 66
percent over the prior nine months. EBITDA tripled in the nine month period. The
significant improvement is due primarily to improved operating results in the
businesses of USANi LLC. It is also due to the impact of including USANi's
results in equity in earnings from unconsolidated companies for all of the
current year. In the prior year, Seagram owned 100 percent of USA Networks for
the period from October 21, 1997 to February 12, 1998. During that period, the
results were included in consolidated oper-
25
<PAGE> 30
ations, not in equity in earnings from unconsolidated companies. In addition,
Seagram benefited from improved operating results at Loews Cineplex in the nine-
month period compared to Cineplex Odeon Corporation (owned in the prior year).
In addition to USANi LLC and Loews Cineplex, the unconsolidated companies
principally include United Cinemas International Multiplex B.V., Cinema
International Corporation N.V., Cinema International B.V. and Brillstein Grey
Entertainment.
RECREATION AND OTHER
Consolidated Operations
Revenues for recreation and other increased 14 percent in the nine month
period ended March 31, 1999. Operating income increased seven percent to $31
million on a nine-month basis. EBITDA increased 11 percent in the nine month
period. These increases reflect the success of the Crash Bandicoot and Spyro
video games and improved sales by Spencer Gifts. This was partially offset by
the weakness of Universal Studios Hollywood. Attendance at the theme park in
Hollywood declined 10 percent for the nine months ended March 31, 1999, largely
due to the impact of the Asian economic and currency crisis on tourism. There
was essentially no change in per capita spending at the park year-on-year.
Unconsolidated Operations
In the nine months ended March 31, 1999, the equity in earnings from
unconsolidated companies improved from a loss of $15 million in the prior year
to a loss of $2 million in the current year. Revenues from unconsolidated
companies decreased 12 percent while EBITDA increased 51 percent. The
improvement in the nine month results is largely due to a gain recognized by
Sega GameWorks L.L.C., on the sale of its game sales operation to Sega in the
first quarter. In addition to Sega GameWorks, the unconsolidated companies
include Universal Studios Florida, Port Aventura, Interplay Entertainment Corp
as well as other smaller Investments. At Universal Studios Florida, paid
attendance declined one percent year-to-date, while per capita spending
increased one percent year-to-date, principally driven by a higher admission
price.
SPIRITS AND WINE
Consolidated Operations
Revenues increased seven percent in the nine months while operating income
increased 17 percent in the nine months. Operating income in the prior year
included a $60 million charge related to operations in Asia. Excluding the
impact of this charge, operating income increased one percent for the nine
months.
Asia Pacific's revenues increased 65 percent for the nine months and
operating income increased 33 percent, as the region continues to recover from
the difficult economic conditions experienced there after the first quarter last
year. Revenues in North America were five percent higher for the nine months.
Operating income in North America was six percent higher for the nine months.
These improvements reflect higher volumes and pricing, partially offset by
increased marketing investment. Europe's revenues increased five percent in the
nine months while operating income increased two percent in the nine months. In
Latin America, the nine months revenues declined two percent and operating
income decreased 10 percent. These declines are due to the difficult economic
conditions in the region, particularly in Brazil.
In the nine months ended March 31, 1999, cost of goods sold as a percentage
of revenues increased to 53.2 percent from 52.1 percent the prior year. Selling,
general and administrative expenses as a percentage of revenues decreased to
34.2 percent from 35.4 percent due to slight reductions in both brand spending
and overhead expenses coupled with improved revenues. Total brand spending
declined one percent at constant exchange rates in
26
<PAGE> 31
the nine-month period. Brand equity spending increased three percent for the
nine months at constant exchange rates.
Spirits and wine case volumes, including unconsolidated companies,
increased two percent in the nine months.
EBITDA from consolidated companies increased 15 percent in the nine months.
Excluding the impact of the $60 million charge for Asia Pacific from the prior
year results, EBITDA would have increased two percent in the nine months.
Unconsolidated Operations
The equity in earnings of unconsolidated companies was breakeven in the
nine months compared to a loss of $3 million in the prior year period. Revenues
from unconsolidated companies declined by 34 percent in the nine months. EBITDA
more than doubled in the nine months. The year-on-year variances are primarily
due to changes in the entities that are included in unconsolidated companies. In
the current year they are Kirin-Seagram Limited in Japan and Seagram (Thailand)
Limited. In the nine months ended March 31, 1998 they also included Doosan
Seagram Co., Ltd. in Korea. As a result of an additional investment in Doosan
Seagram Co., Ltd. at the end of June 1998, that affiliate's results are now
consolidated.
CORPORATE EXPENSES AND INTEREST, NET AND OTHER
Corporate expenses were $68 million in the current year nine months as
compared to $59 million in the prior year. The year-on-year variance is
primarily due to increased costs associated with certain stock-based
compensation resulting from the change in the market value of Seagram's shares
during the period. Interest, net and other was $301 million in the current nine
months and $183 million in the prior year nine months. The increase reflects the
funding of the PolyGram acquisition.
NET INCOME/(LOSS)
In the nine months, which includes the $1.1 billion after-tax gain on the
sale of Tropicana, net income was $739 million or $2.00 per basic share and per
diluted share. In the nine months, net income from continuing operations was a
loss of $86 million or $0.23 per share, compared with income of $153 million or
$0.44 per share in the prior year. Income from continuing operations excludes:
- the entertainment restructuring charge,
- the prior year charge for Asia Pacific spirits and wine operations,
- the gains on the sale of Time Warner shares and USAi transaction, and
- discontinued Tropicana operations.
The net income decline primarily reflects the operating income shortfall and
higher interest expense associated with funding the PolyGram acquisition, which
are partially offset by high equity earnings from unconsolidated companies.
27
<PAGE> 32
DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION
This prospectus contains or incorporates by reference statements which
constitute "forward-looking statements," in that they include statements
regarding the intent, belief or current expectations of our directors and
officers with respect to our future operating performance, both before and after
the consummation of the offerings. Such statements include any forecasts,
projections and descriptions of anticipated cost savings or other synergies. You
should be aware that any such forward-looking statements are not guarantees of
future performance and may involve risks and uncertainties, and that actual
results may differ from those set forth in the forward-looking statements as a
result of various factors (including, without limitations, the actions of
competitors, future global economic conditions, market conditions, foreign
exchange rates, and operating and financial risks related to managing growth and
integrating acquired businesses), many of which are beyond our control. The
occurrence of any such factors not currently expected by us would significantly
alter the results set forth in these statements.
ACCOUNTING TREATMENT
The purchase contracts are forward transactions in the common shares. Upon
settlement of a purchase contract, Seagram will receive $ per purchase
contract and will issue the requisite number of common shares. The amount
received by Seagram will be credited to common shares without nominal or par
value within shareholders' equity.
Prior to the issuance of common shares upon settlement of the purchase
contracts, it is anticipated that the units will be reflected in Seagram's
earnings per share calculations using the treasury stock method. Under this
method, the number of common shares used in calculating earnings per share is
deemed to be increased by the excess, if any, of the number of shares issuable
upon settlement of the purchase contracts over the number of shares that could
be purchased by Seagram in the market (at the average market price during the
period) using the proceeds receivable upon settlement. Consequently, it is
anticipated there will be no dilutive effect on our earnings per share except
during periods when the average market price of common shares is above the
$ .
28
<PAGE> 33
DESCRIPTION OF UNITS
The summaries of documents described below are not necessarily complete.
Copies of those documents are on file with the SEC as part of our registration
statement. See "Where You Can Find More Information" on page 55 for information
on how to obtain copies. Because this section is a summary, it does not describe
every aspect of the units. This summary is subject to and qualified in its
entirety by reference to all the provisions of each of the underlying
agreements.
Each unit will have a stated amount of $ . Each unit will initially
consist of:
(1) a purchase contract under which
- the holder will purchase from Seagram on the stock purchase date of June
, 2002, for cash in an amount equal to the stated amount, between
0. of a share and one common share of Seagram (depending on the
average trading price of the common shares on the stock purchase date, as
described below), and
- Seagram will pay the holders of units contract fees at the contract fee
rate of 0. % of the stated amount per year as described below
(2) a note of JES, guaranteed on a subordinated basis by Seagram,
- having a principal amount equal to the stated amount,
- bearing interest at a rate of % until March , 2002, and at the
reset rate thereafter, and
- maturing on June , 2004.
As long as a purchase contract remains in effect, the purchase contract and the
related note cannot be separated and you may transfer them only as an integrated
unit, except in limited circumstances.
Between the date of issuance of the units and the stock purchase date, you
will be entitled to receive cash payments, contract fees and interest totalling
% of the stated amount per year, payable in arrears on March , June ,
September and December of each year (unless deferred as described herein).
If you do not provide cash or treasury securities as substitute collateral to
settle the underlying purchase contract, in the manner described below, the
treasury consideration received from the remarketing will be applied on the
stock purchase date to the purchase of common shares pursuant to the purchase
contract.
You will pledge the notes underlying a unit to the collateral agent to
secure your obligations to Seagram.
Each holder, by accepting the units, will be deemed to have
- irrevocably agreed to be bound by the terms of the master unit agreement,
pledge agreement, and the purchase contracts for so long as holder
remains a holder of such units, and
- appointed the unit agent under the master unit agreement as the holder's
agent to enter into and perform the purchase contracts on behalf of the
holder.
FORMATION OF THE UNITS
At the closing of the offering of the units, the underwriters will (1)
enter into purchase contracts with Seagram and (2) purchase notes from JES for
cash. The underwriters will fund that cash payment by the sale of the units to
the initial investors. The notes will then be pledged to the collateral agent to
secure the obligations owed to Seagram under the purchase contracts. The rights
to purchase common shares under a purchase contract, together with the notes or
other pledged securities, subject to the obligations owed to Seagram under such
purchase contract, and the
29
<PAGE> 34
pledge arrangements securing the foregoing obligations, are collectively
referred to in this prospectus as a "unit".
Seagram will enter into:
- - a master unit agreement with The Bank of New York, as unit agent, governing
the appointment of the unit agent as the agent and attorney-in-fact for the
holders of the units, the purchase contracts, the transfer, exchange or
replacement of certificates representing the units and certain other matters
relating to the units and
- - a pledge agreement between Seagram and Citibank, N.A. as collateral agent
creating a pledge and security interest for the benefit of Seagram to secure
the obligations of holders of units under the purchase contracts.
DESCRIPTION OF THE PURCHASE CONTRACTS
Each purchase contract underlying a unit will require the holder of that
unit to purchase, and Seagram to sell, on the stock purchase date, for cash in
an amount equal to $ , a number of common shares equal to the settlement
rate. The settlement rate will be calculated as follows (subject to adjustment
as described below under "-- Anti-Dilution Adjustments"):
(1) if the average trading price is greater than or equal to the threshold
appreciation price of $ (that is, % higher than the stated
amount), the settlement rate will be 0. ;
(2) if the average trading price is between the threshold appreciation
price and the stated amount, the settlement rate will equal the stated
amount divided by the average trading price (that is, the shares
deliverable under the contract will have a value, based on the average
trading price of the common stock, equal to the stated amount); and
(3) if the average trading price is less than or equal to the stated
amount, the settlement rate will be one.
"average trading price" means the average of the closing prices per common
share on each of the twenty consecutive trading days ending on the last trading
day before the stock purchase date.
"closing price" of a common share on any date of determination means the
closing sale price (or, if no closing price is reported, the last reported sale
price) of the common shares on the NYSE on such date, or if the common shares
are not listed for trading on the NYSE on any such date, as reported in the
composite transactions for the principal U.S. securities exchange on which the
common shares are so listed, or if the common shares are not so listed on a U.S.
national or regional securities exchange, as reported by The Nasdaq Stock
Market, or if the common shares are not so reported, the last quoted bid price
of the common shares in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if such bid price is not available,
the market value of the common shares on such date as determined by a nationally
recognized investment banking firm retained for this purpose by Seagram.
"trading day" means a day on which the common shares (1) are not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (2) have traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of the common
shares.
Seagram will not issue any fractional shares pursuant to the purchase
contracts. In lieu of a fraction of a share otherwise issuable in respect of
purchase contracts being settled by a holder of units, the holder will be
entitled to receive an amount
30
<PAGE> 35
of cash equal to such fraction times the average closing price.
Cash payments on the units will accrue at a rate per year that is greater
than the current dividend yield on the common shares. However, since the number
of common shares issuable upon settlement of each purchase contract may decline
by up to approximately % as the average closing price increases, the
opportunity for equity appreciation afforded by an investment in the units is
less than that afforded by a direct investment in the common shares.
Prior to the stock purchase date, the common shares purchasable on
settlement of purchase contracts will not be deemed to be outstanding for any
purpose and you will not have any voting rights, rights to dividends or other
distributions or other rights or privileges of a shareholder of Seagram by
virtue of holding units.
SETTLEMENT
Remarketing
Unless a holder delivers the treasury consideration as described below or
cash in early settlement of the purchase contracts, the notes will be remarketed
on the remarketing date which will be the third business day preceding the last
quarterly payment date before the stock purchase date. Seagram will enter into a
remarketing agreement with a nationally recognized investment banking firm,
pursuant to which that firm will agree to use its commercially reasonable best
efforts to remarket the notes on the remarketing date at a price equal to
100.25% of the value of the treasury consideration. The remarketing agent will
retain 0.25% of the proceeds as a remarketing fee.
The "treasury consideration" in respect of any notes will consist of
treasury securities in an amount sufficient to:
- generate for the quarterly payment date falling on the stock purchase
date, an amount of cash equal to the aggregate interest that is scheduled
to be payable on those notes being remarketed on that quarterly payment
date, assuming for this purpose, even if not true, that (a) no interest
payment will then have been deferred and (b) the interest rate on the
notes remains at the initial rate;
- an amount of cash equal to the stated amount of the units which include
those notes; and
- if JES is then deferring interest payments, an amount equal to the
aggregate unpaid interest payments on those notes being remarketed
accrued to March , 2002.
The remarketing agent will use the proceeds from a successful remarketing
to purchase the treasury consideration which it will deliver to the unit agent
and the collateral agent by noon, New York City time, on the last quarterly
payment date before the stock purchase date.
Alternatively, a holder of units may elect not to participate in the
remarketing and retain the notes underlying those units by delivering treasury
securities as substitute collateral. Those treasury securities must be in
amounts sufficient to generate, on the stock purchase date, cash equal to the
stated amount of the units covered by the election. The substitute collateral
must be delivered to the unit agent not later than 10:00 a.m. on the seventh
business day prior to March , 2002.
On the stock purchase date the unit agent will apply the proceeds of the
treasury consideration to pay the purchase price under the purchase contract.
If the remarketing agent cannot remarket the notes on the remarketing date,
the remarketing agent will continue to attempt to remarket the notes until the
stock purchase date. If the remarketing agent fails to remarket the notes prior
to the stock purchase date, Seagram will be entitled to exercise its rights as a
secured
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party on the stock purchase date and, subject to applicable law, retain the
notes pledged as collateral or sell them in one or more private sales.
Early Settlement
At any time not later than 10:00 a.m. on the seventh business day prior to
March , 2002, a holder of units may settle the related purchase contracts by
delivering to the unit agent immediately available funds in an amount equal to
$ multiplied by the number of purchase contracts being settled.
Upon early settlement, Seagram will issue, and the holder will be entitled
to receive, common shares for each unit (regardless of the market price of
the common shares on the date of early settlement), subject to adjustment under
the circumstances described under "-- Anti-Dilution Adjustments" below. The
holder will also receive the notes underlying those units. The holder's right to
receive future contract fee payments will terminate.
Early Settlement Upon Merger
Prior to the stock purchase date, if Seagram is involved in a merger in
which at least 30% of the consideration for the common shares consists of cash
or cash equivalents ("cash merger"), on or after the date of the cash merger
each holder of the units has the right to accelerate and settle the underlying
purchase contracts. We refer to this right as the "early settlement right."
Seagram will provide each of the holders with a notice of the completion of a
cash merger. The notice will specify a date on which the optional early
settlement will occur and a date by which each holder's early settlement right
must be exercised. The notice will set forth, among other things, the applicable
settlement rate and the amount of the cash, securities and other consideration
receivable by the holder upon settlement. To exercise the early settlement
right, you must deliver to the unit agent, on or before the early settlement
date, the certificate evidencing your units and payment of the applicable
purchase price in the form of a certified or cashier's check. If you exercise
the early settlement right, Seagram will deliver to you the cash, securities and
other property as set forth in the notice.
CONTRACT FEES
Seagram will be required to pay contract fees to the holders of units, as
specified above.
So long as no default in Seagram's obligations under the master unit
agreement or the pledge agreement has occurred and is continuing, Seagram will
have the right to defer the payment of contract fees at any time or from time to
time for a period not extending beyond the stock purchase date. To exercise this
right, Seagram must give the holders and the unit agent notice at least five
business days before the earlier of
(1) the date that payment would otherwise have been payable,
(2) the date Seagram is required to give notice to any securities exchange
or to holders of units of the record date or the date such payment is payable
and
(3) that record date.
During any such deferral period, Seagram may not take any of the actions that it
would be prohibited from taking during an extension period as described under
"-- Description of the Notes and Guarantees -- Option to Defer Interest Payment
Date" below.
Any deferred contract fees will bear additional contract fees at % (the
"deferral rate") (compounding on each succeeding quarterly payment date) until
paid. Contract fees payable for any period will be computed on the basis of a
360-day year consisting of twelve 30-day months. Contract fees will accrue from
the date of issuance of the units to the stock purchase date and will be payable
in arrears on the
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quarterly payment dates (unless deferred as described above). If the purchase
contracts are terminated, your right to receive contract fees (including any
deferred contract fees) will also terminate.
ANTI-DILUTION ADJUSTMENTS
The formula for determining the settlement rate may be adjusted if certain
events occur, including:
(1) the payment of a stock dividend or other distributions on common
shares;
(2) the issuance to all holders of common shares of rights or warrants
entitling them to subscribe for or purchase common shares at less than the
current market price (as defined below);
(3) subdivisions of common shares (including an effective subdivision of
the common shares through reclassification of the common shares);
(4) distributions to all holders of common shares of evidences of
indebtedness of Seagram, securities, cash or other assets (excluding any
dividend or distribution covered by clause (1) or (2) above and any dividend or
distribution paid exclusively in cash);
(5) distributions consisting exclusively of cash to all holders of common
shares in an aggregate amount that, when combined with (a) other all-cash
distributions made within the preceding 12 months and (b) the cash and the fair
market value, as of the date of expiration of the tender or exchange offer
referred to below, of the consideration paid in respect of any tender or
exchange offer by Seagram or a subsidiary for the common shares concluded within
the preceding 12 months, exceeds 15% of Seagram's aggregate market
capitalization (such aggregate market capitalization being the product of the
current market price of the common shares multiplied by the number of common
shares then outstanding) on the date fixed for the determination of shareholders
entitled to receive such distribution; and
(6) the successful completion of a tender or exchange offer made by Seagram
or any subsidiary for the common shares which involves an aggregate
consideration that, when combined with (a) any cash and the fair market value of
other consideration payable in respect of any other tender or exchange offer by
Seagram or a subsidiary for the common shares concluded within the preceding 12
months and (b) the aggregate amount of any all-cash distributions to all holders
of the common shares made within the preceding 12 months, exceeds 15% of
Seagram's aggregate market capitalization on the date of expiration of such
tender or exchange offer.
The "current market price" per common share on any day means the average of
the daily closing prices for the five consecutive trading days selected by
Seagram commencing not more than 20 trading days before, and ending not later
than, the earlier of the day in question and the day before the "ex date" with
respect to the issuance or distribution requiring such computation. For purposes
of this paragraph, the term "ex date", when used with respect to any issuance or
distribution, means the first date on which the common shares trade without the
right to receive the issuance or distribution.
Certain reclassifications, consolidations, mergers, sales or transfers of
assets or other transactions may cause the common shares to be converted into
the right to receive other securities, cash or property. If this happens, each
purchase contract would, without the consent of the holders of units, become a
contract to purchase only the kind and amount of securities, cash or other
property that the holder would be entitled to receive if the holder had settled
its purchase contract immediately before the transaction.
If at any time Seagram makes a distribution of property to its shareholders
which
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would be taxable to the shareholders as a dividend for U.S. federal income tax
purposes (that is, distributions, evidences of indebtedness or assets of
Seagram, but generally not stock dividends or rights to subscribe to capital
stock) and, pursuant to the settlement rate adjustment provisions of the master
unit agreement, the settlement rate is increased, that increase may be deemed to
be the receipt of taxable income to holders of Units. See "U.S. Federal Income
Tax Consequences -- Adjustment to Settlement Rate".
In addition, Seagram may increase the settlement rate if our Board of
Directors deems it advisable to avoid or diminish any income tax to holders of
common shares resulting from any dividend or distribution of shares (or rights
to acquire shares) or from any event treated as a dividend or distribution for
income tax purposes or for any other reasons.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the settlement rate will be required
unless the adjustment would require an increase or decrease of at least one
percent in the settlement rate. If any adjustment is not required to be made
because it would not change the settlement rate by at least one percent, then
the adjustment will be carried forward and taken into account in any subsequent
adjustment.
Seagram will be required, as soon as practicable, following the occurrence
of an event that requires or permits an adjustment in the settlement rate, to
provide written notice to the holders of units of the occurrence of that event.
Seagram will also be required to deliver a statement in reasonable detail
setting forth the method by which the adjustment to the settlement rate was
determined and setting forth the revised settlement rate.
TERMINATION
The purchase contracts, and the rights and obligations of Seagram and of
the holders of the units under the purchase contracts (including the right to
receive contract fees or deferred contract fees and the right and obligation of
the holders to purchase and Seagram to sell common shares), will automatically
terminate if Seagram becomes subject to certain events of bankruptcy, insolvency
or reorganization. Upon any termination, the pledged securities will be
distributed in the manner described below.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
Under the pledge agreement, the pledged securities will be pledged to the
collateral agent, for the benefit of Seagram, to secure the obligations of
holders of units to purchase common shares under the purchase contracts. The
pledged securities will initially consist of the notes. If treasury securities
are exchanged for pledged securities upon a successful remarketing, the treasury
securities will automatically be substituted as pledged securities and the
former pledged securities will automatically be released from the pledge and
security interest created by the pledge agreement.
The rights of the holders of the units to the underlying pledged securities
will be subject to the pledge and security interest created by the pledge
agreement. No holder of units will be permitted to withdraw the pledged
securities underlying those units from the pledge arrangement except upon the
settlement or termination of the purchase contracts or as described under
"-- Description of the Purchase Contracts -- Settlement" above. Subject to the
pledge and security interest, however, each holder of units will have full
beneficial ownership of the underlying pledged securities and will be entitled
(directly or through the collateral agent) to all of the rights provided by the
pledged securities, and we
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will have no rights in pledged securities other than our security interest.
QUARTERLY PAYMENTS ON PLEDGED SECURITIES
The collateral agent, upon receipt of interest payments on the pledged
securities, will distribute those payments to the unit agent, which will, in
turn, distribute that amount together with the contract fees to the holders of
units on the record date. As long as the units remain in book-entry only form,
the record date for any payment will be one business day before the payment
date.
SETTLEMENT OF PURCHASE CONTRACTS
On the stock purchase date, the amount paid on such treasury securities at
maturity will be released from the pledge and security interest created by the
pledge agreement and will be used to satisfy the purchase contract as specified
under "-- Description of the Purchase Contracts -- Settlement".
TERMINATION OF PURCHASE CONTRACTS
Upon termination of the purchase contracts (see "-- Description of the
Purchase Contracts -- Termination"), the collateral agent will release the
pledged securities underlying the units to the unit agent for distribution to
the holders of the units, upon presentation and surrender of the certificates
evidencing such units. If upon such termination any holder would otherwise be
entitled to receive a principal amount of treasury securities of any series that
is not an integral multiple of $1,000, the unit agent will distribute to that
holder treasury securities of that series in a principal amount equal to the
next lower integral multiple of $1,000. The unit agent will sell the treasury
securities not otherwise distributed to the holder (together with the treasury
securities of that series not otherwise distributed to other holders) and will
distribute the net proceeds to all the holders (in accordance with their
respective interests therein).
THE MASTER UNIT AGREEMENT
GENERAL
Distributions on the units will be payable, purchase contracts will be
settled and transfers of the units will be registrable at the office of the unit
agent in the Borough of Manhattan, The City of New York. In addition, if the
units do not remain in book-entry form, payment of distributions on the units
may be made, at the option of Seagram, by check mailed to the address of the
persons shown on the unit register.
If any quarterly payment date or the stock purchase date is not a business
day, then any payment required to be made on that date must be made on the next
business day (and so long as the payment is made on the next business day,
without any interest or other payment on account of any such delay), except that
if the next business day is in the next calendar year, the payment or settlement
will be made on the prior business day with the same force and effect as if made
on the payment date. A "business day" means any day other than Saturday, Sunday
or any other day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to be closed.
If you fail to surrender the certificate evidencing your Units to the unit
agent on the stock purchase date, the common shares issuable in settlement of
the related purchase contracts will be registered in the name of the unit agent.
These common shares, together with any distributions on them, will be held by
the unit agent as agent for your benefit, until the certificate is presented and
surrendered or you provide satisfactory evidence that the certificate has been
destroyed, lost or stolen, together with any indemnity that may be required by
the unit agent and Seagram.
If the purchase contracts have terminated prior to the stock purchase date,
the related pledged securities have been transferred to the unit agent for
distribution to the holders and you fail to surrender the
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certificate evidencing your units to the unit agent, the pledged securities that
would otherwise be delivered to you and any related payments will be held by the
unit agent as agent for your benefit, until you present and surrender the
certificate or provide the evidence and indemnity described above.
The unit agent will not be required to invest or to pay interest on any
amounts held by it before distribution.
No service charge will be made for any registration of transfer or exchange
of the units, except for any applicable tax or other governmental charge.
MODIFICATION
The master unit agreement, the pledge agreement and the purchase contracts
may be amended with the consent of the holders of a majority of the units at the
time outstanding. However, no modification may, without the consent of the
holder of each outstanding unit affected by the modification,
(1) change any payment date,
(2) change the amount or type of pledged securities required to be pledged
to secure obligations under the units, impair the right of the holder of any
units to receive distributions on the pledged securities underlying such units
or otherwise adversely affect the holder's rights in or to pledged securities,
(3) change the place or currency of payment for any amounts payable in
respect of the units, increase any amounts payable by holders in respect of
units or decrease any other amounts receivable by holders in respect of units,
(4) impair the right to institute suit for the enforcement of any purchase
contract,
(5) reduce the number of common shares purchasable under any purchase
contract, increase the price to purchase common shares on settlement of any
purchase contract, change the stock purchase date or otherwise adversely affect
the holder's rights under any purchase contract or,
(6) reduce the above stated percentage of outstanding units the consent of
whose holders is required for the modification or amendment of the provisions of
the master unit agreement, the pledge agreement or the purchase contracts.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Seagram will agree in the master unit agreement that it will not merge with
or into or consolidate with any other entity or sell, assign, transfer, lease or
convey all or substantially all of its properties and assets to any person, firm
or corporation unless
(1) Seagram is the continuing corporation or the successor corporation is a
corporation organized under the laws of Canada or the United States of America
or a province or state thereof;
(2) The successor entity expressly assumes the obligations of Seagram under
the master unit agreement, the pledge agreement and the purchase contracts; and
(3) Seagram or such corporation is not, immediately after such merger,
consolidation, sale, assignment, transfer, lease or conveyance, in default in
the performance of any of its obligations under the master unit agreement, the
pledge agreement or the purchase contracts.
TITLE
Seagram, the unit agent and the collateral agent may treat the registered
holder of any units as the absolute owner of those units for the purpose of
making payment and settling the related purchase contracts and for all other
purposes.
REPLACEMENT OF UNITS CERTIFICATES
If physical certificates are issued, we will replace any mutilated
certificate at your expense upon surrender of that certificate to the unit
agent. We will replace certifi
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cates that become destroyed, lost or stolen at your expense upon delivery to us
and the unit agent of satisfactory evidence that the certificate has been
destroyed, lost or stolen, together with any indemnity that may be required by
the unit agent and us.
We, however, are not required to issue any certificates representing units
on or after the stock purchase date or after the purchase contracts have
terminated. In place of the delivery of a replacement certificate following the
stock purchase date, the unit agent, upon delivery of the evidence and indemnity
described above, will deliver the common shares issuable pursuant to the
purchase contracts included in the units evidenced by the certificate, or, if
the purchase contracts have terminated prior to the stock purchase date,
transfer the pledged securities related to the units evidenced by the
certificate.
GOVERNING LAW
The master unit agreement, the pledge agreement and the purchase contracts
will be governed by, and construed in accordance with, the laws of the State of
New York.
INFORMATION CONCERNING THE UNIT AGENT
The Bank of New York will initially act as unit agent. The unit agent will
act as the agent for the holders of units from time to time. The master unit
agreement will not obligate the unit agent to exercise any discretionary
authority in connection with a default under the terms of the master unit
agreement, the pledge agreement and the purchase contracts, or the pledged
securities.
The master unit agreement will contain provisions limiting the liability of
the unit agent. The master unit agreement will contain provisions under which
the unit agent may resign or be replaced. Resignation or replacement of the unit
agent will be effective upon appointment of a successor.
The unit agent is one of a number of banks with which Seagram and its
subsidiaries maintain ordinary banking and trust relationships.
INFORMATION CONCERNING THE COLLATERAL AGENT
Citibank, N.A. will initially act as collateral agent. The collateral agent
will act solely as our agent and will not assume any obligation or relationship
of agency or trust for or with any of the holders of the units except for the
obligations owed by a pledgee of property to the owner thereof under the pledge
agreement and applicable law.
The pledge agreement will contain provisions limiting the liability of the
collateral agent. The pledge agreement will contain provisions under which the
collateral agent may resign or be replaced. Such resignation or replacement
would be effective upon the appointment of a successor.
The collateral agent is one of a number of banks with which Seagram and its
subsidiaries maintain ordinary banking and trust relationships.
DESCRIPTION OF THE NOTES AND THE GUARANTEES
The notes are to be issued under the indenture. The Bank of New York will
initially act as trustee under the indenture. The indenture is qualified under
the Trust Indenture Act.
The notes will be subordinated to senior indebtedness of JES.
The notes will mature on June , 2004. The notes will not be redeemable at
the option of JES prior to the maturity date.
INTEREST
Interest on the notes will accrue from the first date of issuance of the
notes at an initial rate of % prior to March , 2002, and at the reset
rate thereafter. Interest will be payable quarterly in arrears on each
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quarterly payment date (each, an "interest payment date"), subject to the
deferral provisions described below. Interest will be payable to the holders of
the notes on each record date, which will be one business day before the
interest payment date. The amount of interest payable for any period will be
computed on the basis of a 360-day year consisting of twelve 30-day months. If
any date on which interest is payable is not a business day, then payment of the
interest will be made on the next business day (and if payment is made on the
next business day, without any interest or other payment as a result of such
delay), except that if the next business day is in the next succeeding calendar
year, the payment will be made on the prior business day, in each case with the
same force and effect as if made on the date such payment was originally
payable.
MARKET RATE INCREASE
By 9:30 a.m., New York City time, on the remarketing date, the remarketing
agent will determine the interest rate that will be sufficient to cause the then
current aggregate market value of the notes to be at least equal to 100.25% of
the cash equivalent of the treasury consideration. The notes will thereafter
bear interest at that increased rate.
If the remarketing agent is unable to remarket all the notes tendered or
deemed tendered for purchase, a failed remarketing will be deemed to have
occurred.
The "cash equivalent of the treasury consideration" means the cash value on
the remarketing date of the treasury consideration, assuming for this purpose,
even if not true, that (1) the treasury securities included in the treasury
consideration are highly liquid treasury securities maturing on or within 35
days prior to the stock purchase date (as determined in good faith by the
remarketing agent in a manner intended to minimize the cash equivalent of the
treasury consideration) and (2) those treasury securities are valued based on
the ask-side price of the treasury securities at 9:00 a.m., New York City time,
on the remarketing date (as determined on a same day settlement basis by a
reasonable and customary means selected in good faith by the remarketing agent)
plus accrued interest to that date.
OPTION TO DEFER INTEREST PAYMENTS
So long as no event of default has occurred and is continuing, JES will
have the right under the indenture at any time during the term of the notes to
defer the payment of interest for a period not extending beyond the maturity
date. We refer to any such period of deferral as an "extension period". At the
end of an extension period, JES must pay all interest then accrued and unpaid
(together with accrued interest at the deferral rate compounded on each
succeeding Interest payment date).
During any extension period, Seagram and JES may not take any of the
prohibited actions described under "-- Certain Covenants of JES and Seagram".
Prior to the expiration of any extension period, JES may further extend the
extension period, but not beyond the maturity date. Upon the termination of any
extension period and the payment of all amounts then due on any interest payment
date, JES may elect to begin a new extension period, subject to the same
requirements as described above. No interest will be due and payable during an
extension period. JES must give the trustee written notice of its election of
any extension period (or its further extension) at least five business days
prior to the earliest of:
(1) the date the interest on the notes would have been payable except for
the election to begin or extend the extension period;
(2) the date the trustee is required to give notice to any securities
exchange or to holders of notes of the record date or the date the interest is
payable; and
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(3) the record date.
The Trustee must give notice of JES' election to begin or extend a new extension
period to the holders of the notes. There is no limitation on the number of
times that JES may elect to begin an extension period.
CERTAIN COVENANTS OF SEAGRAM AND JES
JES will covenant that during an extension period or during the continuance of
an event of default, JES will not:
(1) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of JES that rank pari passu to
or junior in right of payment to the notes, or
(2) make any guarantee payments with respect to any guarantee by JES of any
securities of any of its subsidiaries if such guarantee ranks pari passu or
junior in right of payment to the notes.
Seagram will also covenant that, during an extension period or during the
continuance of an event of default, it will not:
(1) make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of Seagram that rank pari passu
or junior in right of payment to the guarantees of the notes, or
(2) make any guarantee payments with respect to any guarantee by Seagram if
such guarantee ranks pari passu or junior in right of payment to the notes.
Seagram will also covenant that, during an extension period or during the
continuance of an event of default, it will not declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of Seagram's capital stock, other than:
(1) dividends or distributions in, or options, warrants or rights to
subscribe for or purchase, common shares of Seagram,
(2) any declaration of a dividend in connection with the implementation of
a stockholder's rights plan, or the issuance of shares under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(3) as a result of a reclassification of Seagram capital stock solely into
shares of one or more classes or series of Seagram capital stock or the exchange
or conversion of one class or series of Seagram capital stock for another class
or series of Seagram capital stock,
(4) the purchase of fractional interests in shares of Seagram capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged and
(5) purchases of common shares in connection with Seagram's normal course
issuer bid-purchases or the satisfaction by Seagram of its obligations under any
benefit plans for its and its subsidiaries' directors, officers or employees or
any of Seagram's dividend reinvestment plans.
GUARANTEES
Seagram will unconditionally guarantee, on a subordinated basis, the due
and punctual payment of principal of and interest on the notes, when and as the
same shall become due and payable, whether at the maturity date, by declaration
of acceleration or otherwise. Interest and additional amounts paid by Seagram
may be subject to Canadian withholding taxes. The withholding tax rate in
respect of payments made to residents of the United States within the meaning of
the Canada-United States Income Tax Convention (1980) would be 10% by virtue of
such Convention. Seagram will further agree, however, that any amounts to be
paid by Seagram under the guarantees will be paid without deduction or
withholding for or on account of any and all present or future tax, duty,
assessment or governmental charge imposed upon or as a result of such
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payment by the Government of Canada, or any province or other political
subdivision or taxing authority thereof or therein, or if deduction or
withholding of any such tax, duty, assessment or charge shall at any time be
required by or on behalf of the Government of Canada or any such province,
political subdivision or taxing authority, Seagram will pay such additional
amount in respect of principal and interest as may be necessary in order that
the net amounts paid to the holders of the notes or the Trustee, as the case may
be, pursuant to the guarantees after such deduction or withholding shall not be
less than the amount provided for in the notes to be then due and payable;
except that no such additional amount shall be payable in respect of any notes
to any holder (1) who is subject to such tax, duty, assessment or governmental
charge in respect of the notes by reason of his being connected with Canada
otherwise than merely by the holding or ownership of the notes, or (2) who is
not dealing at arm's length with Seagram (within the meaning of the Income Tax
Act (Canada) as reenacted or amended from time to time), or (3) with respect to
any estate, inheritance, gift, sales, transfer, personal property or any other
similar tax, duty, assessment or governmental charge, or (4) with respect to any
tax, duty, assessment or governmental charge payable otherwise than by
withholding payments in respect of the notes, or (5) with respect to any
combination of the above.
SUBORDINATION
If JES distributes assets as part of its dissolution, winding up,
liquidation or reorganization, payments on the notes will be subordinated in
right of payment to the prior payment in full of all senior indebtedness. No
payment on the notes may be made at any time when:
- JES is in default under any payment obligation with respect to senior
indebtedness beyond any applicable grace period,
- JES is otherwise in default with respect to any senior indebtedness
permitting the holders of the senior indebtedness to accelerate the
maturity of the senior indebtedness, or
- any judicial proceeding is pending with respect to any default with
respect to senior indebtedness.
Seagram's guarantees of the notes will be subordinated to present and
future senior indebtedness of Seagram in the same manner.
Neither the indenture nor the master unit agreement, which governs the
terms of the units, places any limitation on the amount of additional secured or
unsecured debt, including senior indebtedness, that may be incurred by Seagram
or JES or any of their subsidiaries.
Holders of notes will be subrogated to the rights of holders of senior
indebtedness to the extent JES makes payments on senior indebtedness upon any
distribution of assets in any such proceedings out of the distributive share of
the notes. Due to this subordination, certain creditors may recover more,
ratably, than holders of the notes in a distribution of assets upon insolvency.
The guarantees will be subordinated in right of payment to senior
indebtedness of Seagram, on terms comparable to the subordination of the notes.
"Senior indebtedness" means:
(a) indebtedness for money borrowed;
(b) indebtedness evidenced by a note, debenture, bond or other security or
instrument and indebtedness incurred, created or assumed in connection with the
acquisition of any property, other than trade accounts payable;
(c) obligations as lessee under capitalized leases, including without
limitation,
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leases of property made as part of any sale and lease-back transaction; and
(d) indebtedness, obligations and liabilities of others which Seagram or
JES, as applicable, has guaranteed, endorsed or otherwise agreed to be liable
for or acquire;
except that "senior indebtedness" will not include any such indebtedness,
obligation or liability which expressly states that it is junior or subordinate
to or ranks pari passu in right of payment to the notes or guarantees.
Substantially all of the indebtedness set forth under "Capitalization", other
than the Liquid Yield Option Notes, constitutes senior indebtedness. The
indenture, notes and guarantees do not limit our ability to issue additional
senior indebtedness.
CONSOLIDATION, MERGERS AND SALES OF ASSETS. Neither Seagram nor JES will
consolidate, amalgamate or merge with, or convey, transfer or lease all or
substantially all its assets to any person, unless:
- the successor corporation, in the case of JES, is a U.S. corporation or,
in the case of Seagram, is a Canadian or U.S. corporation, and assumes
the obligations evidenced by the securities or guarantees;
- immediately after the transaction, no event of default, and no event
which, after notice or lapse of time or both, would become an event of
default, has occurred and is continuing; and
- certain other conditions are met.
MODIFICATION OF THE INDENTURE
Seagram, JES and the trustee may, with the consent of the holders of at
least 50% in aggregate principal amount of the notes, modify the indenture or
the rights of the holders of the notes.
However, no modification may, without the consent of the holder of each
note:
- change the stated maturity of the notes;
- reduce the rate of payment of interest on the notes;
- reduce the principal amount of the notes or the premium, if any, on the
notes;
- change any obligation of JES to pay additional amounts;
- change the place of payment where principal and interest are payable;
- change the currency or currency unit in which the notes are payable;
- impair the right to sue for the enforcement of any such payment on or
after the maturity of the notes;
- reduce the percentage of the notes referred to above whose holders need
to consent to the modification or a waiver; or
- adversely modify the terms and conditions of the guarantees.
EVENTS OF DEFAULTS
The indenture provides that the events of default for the notes will be:
- failure to pay principal on any notes when due;
- failure to pay any interest within 30 days of the date when due;
- failure to perform for 90 days after notice any other covenant in the
indenture; and
- certain events of bankruptcy, insolvency or reorganization.
If an event of default occurs and is continuing, either the trustee or the
holders of 25% in principal amount of outstanding notes of that series may
declare the notes of that series due and payable. Seagram and JES are each
required to annually certify to the trustee that JES has fulfilled its
obligations under the indenture during the preceding year.
Holders of a majority in principal amount of the notes will be entitled to
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control certain actions of the trustee under the indenture and to waive past
defaults regarding the notes. The trustee generally will not be required to act
at the request of holders, unless the holders offer the trustee reasonable
security or indemnity.
If an event of default occurs and is continuing, the trustee may use any
sums that it holds under the indenture for compensation due, as agreed by JES
and the trustee, and for reasonable expenses incurred, prior to paying the
holders of the notes.
Before any holder of notes may sue JES for an event of default, other than
for payment on that holder's note when due, the holders of not less than 25% in
principal amount of the notes outstanding must have requested the trustee to
take action and waited 60 days for the trustee to act. If the trustee sues,
holders may not do so.
CONCERNING THE TRUSTEE
Seagram and JES have had and may continue to have banking relationships
with the trustee in the ordinary course of business.
BOOK-ENTRY SYSTEM
The Depository Trust Company (the "depositary") will act as securities
depositary for the units. The units will be issued only as fully-registered
securities registered in the name of Cede & Co. or another nominee of the
depositary. Fully-registered global security certificates, representing the
total aggregate number of units, will be issued, will be deposited with the
depositary and will bear a legend regarding restrictions on their exchanges and
registration of transfer as described below.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the units so long as
such units are represented by global security certificates.
The depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The depositary holds securities that its
participants deposit with it. The depositary also facilitates the settlement
among participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("direct participants"). The depositary is owned by a number of
its direct participants and by the NYSE, the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the depositary
system is also available to others, such as securities brokers and dealers,
banks and trust companies that clear transactions through or maintain a direct
or indirect custodial relationship with a direct participant either directly or
indirectly ("indirect participants"). The rules applicable to the depositary and
its participants are on file with the commission.
No transfer of global security certificates in whole or in part may be
registered in the name of any person other than the depositary or a nominee of
the depositary unless the depositary has notified Seagram that it is unwilling
or unable to continue as depositary for such global security certificates or has
ceased to be qualified to act as depositary under the master unit agreement or
if there occurs and continues a default by Seagram under one or more principal
agreements. All units and portions
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<PAGE> 47
of units represented by global security certificates will be registered in such
names as the depositary may direct.
As long as the depositary or its nominee is the registered owner of the
global security certificates, such depositary or such nominee, as the case may
be, will be considered the sole owner and holder of the global security
certificates and all units represented thereby for all purposes under the units,
purchase contracts, master unit agreement and pledge agreement. Except in the
limited circumstances referred to in the paragraph above, owners of beneficial
interests in global security certificates will not be entitled to have such
global security certificates or the underlying units registered in their names,
will not receive or be entitled to receive physical delivery of certificates and
will not be considered to be owners or holders of such global security
certificates or any underlying units for any purpose under the units, purchase
contracts and principal agreements. All payments on the units represented by the
global security certificates and all deliveries of pledged securities or common
shares to the holders thereof will be made to the depositary or its nominee, as
the case may be, as the holder thereof.
Ownership of beneficial interests in the global security certificates will
be limited to participants or persons that may hold beneficial interests through
institutions that have accounts with the depositary. Ownership of beneficial
interests in global security certificates will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by the depositary or its nominee (with respect to participants'
interests) or any such participant (with respect to interests of persons held by
such participants on their behalf). Procedures for settlement of purchase
contracts on the stock purchase date will be governed by arrangements among the
depositary, participants and persons that may hold beneficial interests through
participants designed to permit such settlement without the physical movement of
certificates. Payments, transfers, deliveries, exchanges and other matters
relating to beneficial interests in global security certificates may be subject
to various policies and procedures adopted by the depositary from time to time.
The depositary has advised Seagram that it will not take any action permitted to
be taken by a holder of units unless directed to do so by one or more
participants to whose account the depositary interests in the global security
certificates are credited and only for the number of units as to which such
participant or participants has or have given such direction. None of Seagram,
the Unit Agent nor any of their agents will have any responsibility or liability
to any aspect of the depositary's or any participant's records relating to, or
for payment made on account of, beneficial interests in global security
certificates, or for maintaining, supervising or reviewing any of the
depositary's records or any participant's records relating to such beneficial
ownership interests.
The information in this section concerning the depositary and its book-
entry system has been obtained from sources that we believe to be reliable, but
we do not take responsibility for its accuracy.
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DESCRIPTION OF SHARE CAPITAL
The following brief summary of our share capital is not complete and is
qualified in its entirety by reference to all the provisions of our articles of
amalgamation and our by-laws.
Our authorized capital currently consists of an unlimited number of common
shares, of which 403,046,179 common shares were outstanding at April 30, 1999,
and an unlimited number of preferred shares, none of which are outstanding.
COMMON SHARES
A holder of common shares receives one vote per share at shareholder
meetings, except at meetings where only the holders of a different class or
series of shares may vote. Subject to the rights of another class or series of
shares that rank ahead of the common shares:
- - holders of common shares receive dividends when declared and paid by the board
of directors, and
- - if Seagram is liquidated, holders of common shares are entitled to the
remaining property of Seagram, after all prior claims are satisfied.
Shares that rank ahead of the common shares include our first preferred
shares and second preferred shares. Holders of common shares are not entitled to
any preemptive rights to acquire any other securities.
At March 31, 1999, JES, had outstanding Liquid Yield Option Notes
("LYONs"). The LYONs:
- - are guaranteed by Seagram on a subordinated basis,
- - are convertible into common shares at a conversion rate of 18.44 common shares
for each $1,000 face amount LYON (297,256 shares at March 31, 1999), and
- - mature on March 5, 2006.
At March 31, 1999, 37,550,310 common shares were potentially issuable upon
the conversion of the LYONs and the exercise of outstanding employee stock
options.
We send holders of common shares annual reports containing audited
financial statements. In addition, we send holders of common shares quarterly
reports containing unaudited financial information if they make an annual
election to receive that information.
The transfer agents and registrars for the common shares are CIBC Mellon
Trust Company and ChaseMellon Shareholder Services L.L.C.
Under Canadian income tax law, payment of dividends by us to holders of
common shares who are not Canadian residents is subject to Canadian withholding
tax. For holders who are U.S. residents, 15% of the dividends must generally be
withheld under treaty arrangements between the United States and Canada. For
holders resident in other countries, the withholding rate varies. For a U.S.
shareholder, the amount of tax withheld in Canada will generally:
- - be deductible from gross income, or
- - at the election of the taxpayer (subject to various conditions) the amount
withheld in Canada may be credited against U.S. income tax.
Dividends received by a U.S. shareholder will not qualify for the partial
dividends received deduction allowable to corporations.
This discussion is provided for purposes of general information only. You
should refer to the additional information in "U.S. Federal Income Tax
Consequences" and "Canadian Income Tax Consequences."
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PREFERRED SHARES
Preferred shares are divided into two classes, first preferred shares and
second preferred shares. For payment of dividends and the distribution of assets
in the event of the liquidation, dissolution or winding-up of Seagram:
- - first preferred shares rank in priority to common shares and second preferred
shares, and
- - second preferred shares rank in priority to common shares.
First preferred shares and second preferred shares are issuable in series.
The board of directors can determine the number, designation, rights,
privileges, restrictions and conditions to be attached to the preferred shares
of each series, including:
- - dividend rights,
- - voting rights,
- - conversion rights,
- - redemption and purchase provisions, and
- - restrictions on payment of dividends on common shares or any other shares
ranking junior to the shares of the series.
U.S. FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Simpson Thacher & Bartlett, the following is an accurate
summary of the material United States federal income tax consequences of the
purchase, ownership and disposition of units, notes and common shares acquired
under a purchase contract. Unless otherwise stated, this summary applies only to
holders who purchase units in the initial offering at the issue price and who
are United States holders. In addition, this summary applies only to holders (1)
who are residents of the United States for purposes of the current Canada-United
States Income Tax Treaty (the "Treaty"), (2) whose units, notes and common
shares are not, for purposes of the Treaty, effectively connected with a
permanent establishment in Canada, (3) who otherwise qualify for the full
benefits of the Treaty, and (4) whose units, notes and common shares will not be
considered taxable Canadian property as discussed under "Canadian Income Tax
Consequences". United States holders include the following:
- - a person who is a citizen or resident of the United States,
- - a corporation or partnership created or organized in or under the laws of the
United States or any state thereof or the District of Columbia,
- - an estate the income of which is subject to United States federal income
taxation, regardless of its source, or
- - a trust
- that is subject to the supervision of a court within the United States
and the control of one or more United States persons, or
- that has a valid election in effect under applicable Treasury regulations
to be treated as a United States person.
The tax treatment of a holder may vary depending on the holder's particular
situation. This summary does not deal with special classes of holders. For
example, this summary does not address:
- - tax consequences to holders who may be subject to special tax treatment, such
as banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, or
tax-exempt investors,
- - tax consequences to persons that will hold units, notes or common shares
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acquired under a purchase contract as a position in a "straddle," "synthetic
security", "hedge", "integrated transaction", "conversion transaction" or
"constructive sale",
- - tax consequences to holders of units, notes or common shares acquired pursuant
to a purchase contract whose functional currency is not the U.S. dollar,
- - tax consequences to shareholders, partners or beneficiaries of a holder of
units, notes or common shares acquired under a purchase contract,
- - alternative minimum tax consequences, if any, or
- - any state, local or foreign tax consequences.
IF YOU ARE NOT A UNITED STATES PERSON, YOU ARE URGED TO CONSULT YOUR OWN
TAX ADVISORS REGARDING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF AN
INVESTMENT IN UNITS, INCLUDING THE POTENTIAL APPLICATION OF UNITED STATES
WITHHOLDING TAXES.
This summary is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations (including proposed Treasury regulations) issued
thereunder, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. Any such changes may be applied retroactively in a manner
that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting you.
No statutory, administrative or judicial authority directly addresses the
treatment of units or instruments similar to units for United States federal
income tax purposes. As a result, no assurance can be given that the Internal
Revenue Service will agree with the tax consequences described herein. YOU ARE
URGED TO CONSULT YOUR OWN TAX ADVISORS WITH RESPECT TO YOUR TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE UNITS, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
UNITS
ALLOCATION OF PURCHASE PRICE. Your acquisition will be treated as an
acquisition of the note and the purchase contract constituting the unit. The
purchase price of each unit will be allocated between the note and the purchase
contract in proportion to their respective fair market values at the time of
purchase. Such allocation will establish your initial tax basis in the note and
the purchase contract. We will report the fair market value of each note as
$ and the fair market value of each purchase contract as $0. This
position will be binding on you (but not on the Internal Revenue Service) unless
you explicitly disclose a contrary position on a statement attached to your
timely filed United States federal income tax return for the taxable year in
which a unit is acquired. Thus, absent such disclosure, you should allocate the
purchase price for a unit in accordance with the foregoing. The remainder of
this discussion assumes that this allocation of the purchase price will be
respected for United States federal income tax purposes.
NOTES
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT. Because of the manner in
which the interest rate on the notes is reset, the notes will be classified as
contingent payment debt instruments. As discussed more fully below, the effect
of such method will be (i) to require you, regardless of your usual method of
tax accounting, to use an accrual method with respect to the notes, (ii)
possibly to result in the accrual of interest income by you in excess of
interest payments actually received, and (iii) generally to result in ordinary
rather than capital treatment of any gain or loss on the sale, exchange or
redemption of the
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notes. See "-- Sale or Disposition of Units".
You will accrue original issue discount each year based on the "comparable
yield" of the notes. The comparable yield of the notes will generally be the
rate at which JES would issue a fixed rate debt instrument with terms and
conditions similar to the notes. JES is required to provide the comparable yield
to you, and, solely for tax purposes, is also required to provide a projected
payment schedule that includes the actual interest payments on the notes and
estimates the amount and timing of contingent payments on the notes. JES has
determined that the comparable yield is % and the projected payment
schedule for the notes, per $ of stated amount, is $ (which is
the stated interest payment) for each quarter ending on or prior to the
remarketing date and $ for each quarter ending after the remarketing date.
The projected payment, per $ of stated amount, at the maturity date is
$ (which includes the stated principal of the notes as well as the
final interest payment).
The amount of original issue discount on a note for each accrual period is
determined by multiplying the comparable yield of the note (adjusted for the
length of the accrual period) by the note's adjusted issue price at the
beginning of the accrual period (determined in accordance with the rules set
forth in the original issue discount regulations relating to contingent payment
debt instruments). The amount of original issue discount so determined will then
be allocated on a ratable basis to each day in the accrual period that you hold
the note.
If the actual contingent payments made on the note in a taxable year differ
from the projected contingent payments, adjustments will be made for such
differences. A positive adjustment, for the amount by which an actual contingent
payment exceeds a projected contingent payment, will be treated as additional
interest. A negative adjustment will:
- - first, reduce the amount of interest required to be accrued in the current
year,
- - second, any negative adjustments that exceed the amount of interest accrued in
the current year will be treated as ordinary loss to the extent that your
total interest inclusions exceed the total amount of net negative adjustments
treated as ordinary loss in prior taxable years, and
- - third, any excess negative adjustments will be carried forward to offset
future income or amount realized on disposition.
You are generally bound by the comparable yield and projected payment
schedule provided by JES. However, if you believe that JES' projected payment
schedule is unreasonable, you may set your own projected payment schedule so
long as you explicitly disclose the use of such schedule and the reason
therefor. Unless otherwise prescribed by the Commissioner of the Internal
Revenue Service, such disclosure must be made in a statement attached to your
timely filed federal income tax return for the taxable year in which the note is
acquired.
ADJUSTMENT TO TAX BASIS IN NOTES. The tax basis of a note will be increased
by the amount of any interest recognized under the noncontingent bond method and
reduced by payments of interest (or principal) received with respect to the
notes.
PURCHASE CONTRACTS
INCOME FROM CONTRACT FEES AND DEFERRED CONTRACT FEES. There is no direct
authority addressing the treatment of the contract fees and deferred contract
fees under current law, and such treatment is unclear. Contract fees and
deferred contract fees may constitute taxable income to you when received or
accrued, in accor-
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dance with your method of tax accounting. To the extent Seagram is required to
file information returns with respect to contract fees or deferred contract
fees, it intends to report such payments as taxable income to you. You should
consult your own tax advisor concerning the treatment of contract fees and
deferred contract fees, including the possibility that any such payment may be
treated as a loan, purchase price adjustment, or rebate rather than being
includible in income on a current basis. The treatment of contract fees and
deferred contract fees could affect your tax basis in a purchase contract or
common shares received under a purchase contract or your amount realized upon
the sale or disposition of a unit or the termination of a purchase contract. To
the extent Canada imposes withholding taxes on the additional contract fees,
your ability to claim foreign tax credits for the withholding taxes will depend
upon the characterization of the contract fees for United States federal income
tax purposes. Please consult your own tax advisor. See "-- Acquisition of Common
Shares under a Purchase Contract," "-- Sale or Disposition of Units" and
"-- Termination of Purchase Contract."
ACQUISITION OF COMMON SHARES UNDER A PURCHASE CONTRACT. You generally will
not recognize gain or loss on the purchase of common shares under a purchase
contract, except with respect to any cash paid in lieu of a fractional share of
common shares. Subject to the following discussion, your aggregate initial tax
basis in the common shares received under a purchase contract generally should
equal (a) the purchase price paid for such common shares, plus (b) your tax
basis in the purchase contract (if any), less (c) the portion of such purchase
price and tax basis allocable to the fractional share. Payments of contract fees
or deferred contract fees that have been received in cash by you but were not
includible in your income should reduce your tax basis in the purchase contract
or the common shares to be received thereunder (see "-- Income from Contract
Fees and Deferred Contract Fees" above). For tax purposes, the holding period
for common shares received under a purchase contract will commence on the day
acquired.
EARLY SETTLEMENT OF PURCHASE CONTRACT. You will not recognize gain or loss
on the receipt of your proportionate share of notes upon early settlement of a
purchase contract and you will have the same tax basis in such notes as before
such early settlement.
TERMINATION OF PURCHASE CONTRACT. If a purchase contract terminates, you
will recognize gain or loss equal to the difference between your amount realized
(if any) upon such termination and your adjusted tax basis (if any) in the
purchase contract at the time of such termination. Payments of contract fees or
deferred contract fees, if any, received by you but not includible in your
income should either reduce your tax basis in the purchase contract or result in
an amount realized on the termination of the purchase contract. Any contract
fees or deferred contract fees includible in your income but not paid should
increase your tax basis in the purchase contract (see "-- Income from Contract
Fees and Deferred Contract Fees" above). Any such gain or loss may be capital
gain or loss. Capital gains of individuals derived in respect of capital assets
held for more than one year are taxed at a maximum rate of 20%. The
deductibility of capital losses is subject to limitations. You will not
recognize gain or loss on the receipt of your proportionate share of the notes
or treasury securities upon termination of the purchase contract and you will
have the same tax basis in such notes or treasury securities as before such
termination.
ADJUSTMENT TO SETTLEMENT RATE. You might be treated as receiving a
constructive distribution from Seagram if (i) the settlement rate is adjusted
and as a result of such adjustment your proportionate interest in the assets or
earnings and profits of
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Seagram is increased and (ii) the adjustment is not made pursuant to a bona
fide, reasonable anti-dilution formula. An adjustment in the settlement rate
would not be considered made pursuant to such a formula if the adjustment were
made to compensate you for certain taxable distributions with respect to the
common shares. Thus, under certain circumstances, an increase in the settlement
rate might give rise to a taxable dividend to you even though you would not
receive any cash related thereto.
OWNERSHIP OF COMMON SHARES ACQUIRED UNDER THE PURCHASE CONTRACT.
TAXATION OF DIVIDENDS. The gross amount of dividends paid to you on common
shares (including amounts withheld to reflect Canadian withholding taxes) will
be treated as dividend income to you, to the extent paid out of current or
accumulated earnings and profits, as determined under United States federal
income tax principles. You will be required to include any such dividend in your
gross income as ordinary income on the day received by you. Such dividends will
not be eligible for the dividends received deduction allowed to corporations.
The amount of any dividend paid in Canadian dollars will equal the United
States dollar value of the Canadian received calculated by reference to the
exchange rate in effect on the date the dividend is received regardless of
whether the Canadian dollars are converted into United States dollars. If you do
not convert the Canadian dollars you receive into United States dollars on the
date of receipt, you will have a basis in the Canadian dollars equal to its
United States dollar value on the date of receipt. Any gain or loss realized on
a subsequent conversion or other disposition of the Canadian dollars will be
treated as ordinary income or loss.
The maximum rate of withholding tax on dividends paid to you pursuant to
the Treaty is 15 percent. Subject to certain conditions and limitations,
Canadian withholding taxes on dividends may be treated as foreign taxes eligible
for credit against your United States federal income tax liability. For purposes
of calculating the foreign tax credit, dividends paid on the common shares will
be treated as income from sources outside the United States and will generally
constitute "passive income" or, in the case of certain holders, "financial
services income". Special rules apply to certain individuals whose foreign
source income during the taxable year consists entirely of "qualified passive
income" and whose creditable foreign taxes paid or accrued during the taxable
year do not exceed $300 ($600 in the case of a joint return). Further, in
certain circumstances, if you (i) have held common shares for less than a
specified minimum period for each dividend payment during which it is not
protected from risk of loss, (ii) are obligated to make payments related to the
dividends or (iii) hold the common shares in arrangements in which your expected
economic profit, after non-U.S. taxes, is insubstantial, you will not be allowed
a foreign tax credit for foreign taxes imposed on dividends paid on common
shares. The rules governing the foreign tax credit are complex. You are urged to
consult your tax advisor regarding the availability of the foreign tax credit
under your particular circumstances including the possible adverse impact on
creditability to the extent you are entitled to a refund of any Canadian tax
withheld or a reduced rate of withholding.
To the extent that the amount of any distribution exceeds our current and
accumulated earnings and profits for a taxable year, the distribution will first
be treated as a tax-free return of capital, causing a reduction in the adjusted
basis of the common shares (thereby increasing the amount of gain, or decreasing
the amount of loss, to be recognized by you on a subsequent disposition of the
common shares), and the balance in excess of adjusted basis will be taxed as
capital gain
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recognized on a sale or exchange. Consequently, such distributions in excess of
our current and accumulated earnings and profits would not give rise to foreign
source income and you would not be able to use the foreign tax credit arising
from any Canadian withholding tax imposed on such distribution unless such
credit can be applied (subject to applicable limitations) against U.S. tax due
on other foreign source income in the appropriate category for foreign tax
purposes.
TAXATION OF CAPITAL GAINS
You will recognize taxable gain or loss on any sale or exchange of a common
share in an amount equal to the difference between your amount realized for the
common share and your tax basis in the common share. Such gain or loss will be
capital gain or loss. Capital gains of individuals derived with respect to
capital assets held for more than one year are taxed at a maximum rate of 20%.
The deductibility of capital losses is subject to limitations. Any gain or loss
recognized by a U.S. Holder will generally be treated as United States source
gain or loss.
SALE OR DISPOSITION OF UNITS
Upon a disposition of a unit, you will be treated as having sold, exchanged
or disposed of the purchase contract and the notes or treasury securities, as
the case may be, that constitute such unit. You generally will have gain or loss
equal to the difference between the portion of your proceeds allocable to the
purchase contract and the notes or treasury securities, as the case may be, and
your respective adjusted tax bases in the purchase contract and the notes or
treasury securities. In the case of the purchase contracts and the treasury
securities, such gain or loss generally will be capital gain or loss, except to
the extent that you are treated as having received an amount with respect to
accrued and unpaid interest on the treasury securities not previously included
in income, which will be treated as ordinary interest income, or to the extent
your are treated as having received an amount with respect to accrued contract
fees or deferred contract fees, which may be treated as ordinary income, in each
case to the extent not previously included in income. Capital gains of
individuals derived in respect of capital assets held for more than one year are
taxed at a maximum rate of 20%.The deductibility of capital losses is subject to
limitations.
Gain on the sale, exchange or retirement of a note generally will be
treated as ordinary income. Loss from the disposition of a note will be treated
as ordinary loss to the extent of your prior net interest inclusions (reduced by
the total net negative adjustments previously allowed as an ordinary loss). Any
loss in excess of such amount will be treated as capital loss.
If the disposition of a unit occurs when the purchase contract has a
negative value, you should be considered to have received additional
consideration for the notes or treasury securities in an amount equal to such
negative value, and to have paid such amount to be released from your obligation
under the purchase contract. You should consult your tax advisor regarding a
disposition of a unit at a time when the purchase contract has a negative value.
Payments of contract fees or deferred contract fees that have not
previously been included in your income should either reduce your tax basis in
the purchase contract or result in an increase in the amount realized on the
disposition of the purchase contract. Any contract fees or deferred contract
fees included in your income but not paid should increase your tax basis in the
purchase contract (see "-- Income from Contract Fees and Deferred Contract Fees"
above).
NON-UNITED STATES HOLDERS
The following summary discusses the tax consequences to Non-United States
holders. You are a "Non-United States
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holder" if you are not a United States holder.
U.S. FEDERAL WITHHOLDING TAX
The 30% U.S. federal withholding tax will not apply to any payments of
principal or interest on the notes or treasury securities provided that:
- - you do not actually or constructively own 10% or more of the total combined
voting power of all classes of our voting stock within the meaning of the Code
and Treasury regulations,
- - you are not a controlled foreign corporation that is related to us through
stock ownership,
- - you are not a bank whose receipt of interest on the notes is described in
Section 881(c)(3)(A) of the Code, and
- - either (a) you provide your name and address on an IRS Form W-8, and certify,
under penalty of perjury, that you are not a U.S. person or (b) a financial
institution holding the notes or treasury securities on your behalf certifies,
under penalty of perjury, that it has received an IRS Form W-8 from you as the
beneficial owner and provides us with a copy.
If you cannot satisfy the requirements described above, payments of
interest made to you will be subject to the 30% U.S. federal withholding tax,
unless you provide us with a properly executed (1) IRS Form 1001 claiming an
exemption from, or reduction in, withholding under the benefit of a tax treaty
or (2) IRS Form 4224 stating that interest paid on the notes and treasury
securities is not subject to withholding tax because it is effectively connected
with your conduct of a trade or business in the United States.
Except as discussed below, the 30% U.S. federal withholding tax will not
apply to any gain or income that you realize on the sale, exchange, retirement
or other disposition of the units, notes or treasury securities.
U.S. FEDERAL ESTATE TAX
Your estate will not be subject to U.S. federal estate tax on the units,
notes or treasury securities beneficially owned by you at the time of your
death, provided that (1) you do not own 10% or more of the total combined voting
power of all classes of our voting stock, within the meaning of the Code and
Treasury regulations, and (2) interest on those notes and treasury securities
would not have been, if received at the time of your death, effectively
connected with the conduct by you of a trade or business in the United States.
U.S. FEDERAL INCOME TAX
If you are engaged in a trade or business in the United States and interest
on the notes and treasury securities is effectively connected with the conduct
of that trade or business, you will be subject to U.S. federal income tax on
that interest and original issue discount on a net income basis (although exempt
from the 30% withholding tax) in the same manner as if you were a U.S. person as
defined under the Code. In addition, if you are a foreign corporation, you may
be subject to a branch profits tax equal to 30% (or lower applicable treaty
rate) of your earnings and profits for the taxable year, subject to adjustments
that are effectively connected with the conduct by you of a trade or business in
the United States. For this purpose, interest on the notes and treasury
securities will be included in earnings and profits.
Any gain or income realized by you on the disposition of a unit, note or
treasury security will generally not be subject to U.S. federal income or
withholding tax unless:
(1) that gain or income is effectively connected with the conduct of a trade or
business in the United States by you,
(2) you are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition,
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<PAGE> 56
and certain other conditions are met; or
(3) to the extent the gain is considered accrued but unpaid interest on the note
or treasury security, the requirements described above are not satisfied.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Unless you are an exempt recipient, such as a corporation, payments under
the units, notes or common shares, the proceeds received with respect to a
fractional share of common shares upon the settlement of a purchase contract,
and the proceeds received from the units, notes, treasury securities or common
shares may be subject to information reporting and may also be subject to United
States federal backup withholding tax at the rate of 31% if you fail to supply
an accurate taxpayer identification number or otherwise fail to comply with
applicable United States information reporting or certification requirements.
Any amounts so withheld will be allowed as a credit against your United States
federal income tax liability.
If you are a Non-United States holder, no information reporting or backup
withholding will be required with respect to payments made by us if a statement
described above under "Non-United States Holders" has been received and the
payor does not have actual knowledge that you are a United States holder.
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<PAGE> 57
CANADIAN INCOME TAX CONSEQUENCES
In the opinion of Goodman Phillips & Vineberg, the following is an accurate
summary of certain Canadian federal income tax considerations under the Income
Tax Act (Canada) (the "Act") generally applicable to holders of units, notes and
common shares who are residents of the United States for purposes of the
Canada-United States Income Tax Convention, 1980 (the "Convention") who have not
been and will not be resident or deemed to be resident in Canada at any time
while they have held or will hold any such units, notes, and common shares.
Furthermore, this summary is only applicable to such holders to whom such units,
notes and common shares are not "taxable Canadian property", as defined in the
Act, and who do not use or hold or are not deemed to use or hold such units,
notes and common shares in connection with carrying on a business in Canada.
Generally, the units, notes and common shares will not be taxable Canadian
property provided that the common shares of Seagram are listed on a prescribed
stock exchange (which currently includes the Toronto Stock Exchange and the New
York Stock Exchange), you do not use or hold, and are not deemed to use or hold,
the common shares in connection with carrying on a business in Canada and you,
persons with whom you do not deal at arm's length or you and such persons, have
not owned (taking into account any interest in or option in respect of the
shares of Seagram) 25% or more of the issued shares of any class or series of
the capital stock of Seagram at any time within the five (5) years immediately
preceding the date of disposition.
This summary is not applicable to you if you carry on an insurance business
in Canada and elsewhere, in respect of the units, notes and common shares that
are effectively connected with your Canadian insurance business or that are
"designated insurance property" as defined in the Act.
This summary is based on the Act, the regulations thereunder and counsel's
understanding of the administrative policies and assessing practices published
by Revenue Canada, in effect as of the date of this Prospectus. This summary
takes into account all proposed amendments to the Act and the regulations
thereunder announced by the Minister of Finance of Canada, prior to the date
hereof (the "Tax Proposals"), although no assurances can be given that the Tax
Proposals will be enacted in the form proposed, or at all. This summary does not
take into account or anticipate any other changes in law, administrative policy
or assessing practice, whether by judicial, governmental or legislative action
or decision, nor does it take into account provincial, territorial or foreign
income tax legislation or considerations, which may differ from the Canadian
federal income tax considerations described herein. No advance income tax ruling
has been sought or obtained from Revenue Canada to confirm the tax consequences
of any of the transactions described herein.
This summary is of a general nature only and is not intended to be, and
should not be construed to be legal, business or tax advice to you. You should
consult your own tax advisor for advice with respect to your particular
circumstances.
For the purposes of the Act, all amounts, including dividends, must be
expressed in Canadian dollars; amounts denominated in United States dollars must
be converted into Canadian dollars based on the United States dollar exchange
rate generally prevailing at the time such amounts arise.
CONTRACT FEES
There is no specific authority addressing the Canadian tax treatment of the
contract fees under current law. This summary assumes that the contract fees,
excluding the additional contract fees
53
<PAGE> 58
payable in the event that payment of the contract fees is deferred, are
commensurate with the undertaking made by such holder in agreeing to subscribe
for common shares and that such contract fees are in no way attributable to the
notes, whether on account of principal, interest or otherwise.
You will not be subject to tax under the Act in respect of the contract
fees (excluding the additional contract fees), or upon the sale or other
disposition of the units, notes and common shares (except to the extent that
proceeds of disposition payable by a resident or deemed resident of Canada
include an amount of accrued and unpaid additional contract fees).
Where you (either directly from Seagram or indirectly upon a disposition to
a resident or deemed resident of Canada where part of the proceeds of
disposition may be allocable to accrued and unpaid additional contract fees),
receive a payment of additional contract fees, the payment will be regarded as a
payment, as, on account or in lieu of payment of, or in satisfaction of interest
for Canadian tax purposes and will be subject to Canadian withholding tax under
the Convention at the rate of 10% of the gross amount of such payment, provided
such holder is the beneficial owner of such payment.
DIVIDENDS
Where such a holder of common shares receives or is deemed to receive a
dividend, such amount will generally be subject to Canadian withholding tax
under the Convention at the rate of 15% of the gross amount of such payment,
provided you are the beneficial owner of such payment.
SALE OF COMMON SHARES
You will not be subject to tax under the Act upon the sale or other disposition
of the common shares.
GUARANTEE PAYMENTS
Certain payment in respect of the Debentures made to you by Seagram
pursuant to the Guarantees may be subject to Canadian withholding tax under the
Convention at a rate of 10% of the gross amount of such payments, provided such
holder is the beneficial owner of such payments. In this connection, see
"Guarantees" at page 39.
LEGAL MATTERS
Simpson Thacher & Bartlett, our U.S. counsel, and Goodman Phillips &
Vineberg S.E.N.C., Seagram's Canadian counsel, will provide opinions for us
regarding the validity of the securities. Barnes & Thornburg, Indiana counsel of
JES, will opine on the validity of the securities on behalf of JES. Sullivan &
Cromwell, U.S. counsel to the underwriters, and Ogilvy Renault S.E.N.C.,
Canadian counsel to the underwriters, will pass upon the validity of the
securities for the underwriters.
EXPERTS
The consolidated financial statements of Seagram as of June 30, 1997 and
1998 and for the year ended January 31, 1996, the five-month period ended June
30, 1996 and the years ended June 30, 1997 and 1998, incorporated in this
prospectus by reference to Seagram's Annual Report on Form 10-K for the fiscal
year ended June 30, 1998, as amended, have been incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The consolidated financial statements of PolyGram as of December 31, 1996
and
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<PAGE> 59
1997 and for each of the years in the three year period ended December 31, 1997
incorporated in this prospectus by reference to Seagram's Form 8-K, dated August
25, 1998, as amended, have been audited by KPMG Accountants N.V., as stated in
their report, and have been so incorporated in reliance upon the report of that
firm given on the authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Seagram files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, proxy
statements and other information filed by Seagram at the SEC's Public Reference
Rooms at:
- 450 Fifth Street, NW, Washington, D.C. 20549,
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and
- Seven World Trade Center, New York, New York 10048.
You may also request copies of these documents, upon payment of a
duplicating fee, by writing to the Public Reference Section of the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the SEC's Public
Reference Rooms. Seagram's SEC filings are also available on the SEC's Internet
site (http://www.sec.gov).
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933, covering the securities described in this prospectus.
For further information with respect to us and those securities, you should
refer to our registration statement and its exhibits. We have summarized certain
key provisions of contracts and other documents that we refer to in this
prospectus. Because a summary may not contain all the information that is
important to you, you should review the full text of the document. We have
included copies of these documents as exhibits to our registration statement.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to another document that Seagram filed with the SEC. The
information incorporated by reference is an important part of this prospectus,
and information that Seagram files later with the SEC will automatically update
and supersede this information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until we sell all of the
securities.
- Seagram's Annual Report on Form 10-K for the fiscal year ended June 30,
1998, as amended,
- Seagram's Quarterly Reports on Form 10-Q for the quarterly periods ended
September 30, 1998, December 31, 1998 and March 31, 1999,
- Seagram's Current Reports on Form 8-K dated July 20, 1998, August 4,
1998, August 25, 1998, as amended, September 1, 1998, as amended,
November 10, 1998, November 16, 1998, November 24, 1998, December 6,
1998, December 9, 1998, December 10, 1998, as amended, December 14, 1998,
April 7, 1999 and May 13, 1999.
You may request a copy of Seagram's filings (other than exhibits) at no
cost, by writing or telephoning Seagram at 1430 Peel Street, Montreal, Quebec
H3A 1S9, telephone (514) 849-5271, attention: Shareholder Services.
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<PAGE> 60
JURISDICTION OVER SEAGRAM
Seagram is a Canadian corporation and certain of its directors and officers
and the experts referred to above are citizens or residents of countries other
than the United States. A substantial portion of the assets of Seagram and of
those persons are located outside the United States. Accordingly, it may be
difficult for investors:
- to obtain jurisdiction over Seagram and those directors and officers and
experts in courts in the United States in actions predicated on the civil
liability provisions of the U.S. federal securities laws,
- to enforce against Seagram or such persons judgments obtained in such
actions,
- to obtain judgments against Seagram or those persons in original actions
in Canadian or other foreign courts predicated solely upon the U.S.
federal securities laws, or
- to enforce against Seagram or those persons in Canadian or other foreign
courts judgments of courts in the United States predicated upon the civil
liability provisions of the U.S. federal securities laws.
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<PAGE> 61
UNDERWRITING
Seagram and JES and the underwriters for the offering named below have
entered into an underwriting agreement with respect to the units being offered.
Subject to certain conditions, (1) Seagram has agreed to enter into the purchase
contracts with each of the underwriters named below underlying the respective
number of units indicated opposite its name below, (2) JES has agreed to sell to
each of the underwriters the notes underlying the respective number of units
indicated opposite its name below, and (3) each of the underwriters has
severally agreed to enter into the purchase contracts with Seagram, purchase the
notes from JES and pledge such notes under the pledge agreement.
<TABLE>
<CAPTION>
Underwriters Number of Units
------------ ---------------
<S> <C>
Goldman, Sachs & Co.........................................
Bear, Stearns & Co. Inc.....................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
Morgan Stanley & Co. Incorporated...........................
----------
Total............................................. 18,500,000
==========
</TABLE>
-------------------------
If the underwriters sell more units than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
2,775,000 units to cover such sales. They may exercise that option for 30 days.
If any units are purchased pursuant to this option, the underwriters will
severally purchase units in approximately the same proportion as set forth in
the table above.
The following table shows the per unit and total underwriting discounts and
commissions to be paid to the underwriters by JES. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase 2,775,000 additional units.
<TABLE>
<CAPTION>
Paid by JES
-------------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Unit............. $ $
Total................ $ $
</TABLE>
Units sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
units sold by the underwriters to securities dealers may be sold at a discount
of up to % per unit from the initial public offering price. Any such
securities dealers may resell any units purchased from the underwriters to
certain other brokers or dealers at a discount of up to % per unit from the
initial public offering price. If all the units are not sold at the initial
public offering price, the underwriters may change the offering price and the
other selling terms.
JES and Seagram have agreed with the underwriters not to dispose of or
hedge any of its units, notes or common shares (other than the concurrent common
share offerings) or any securities of Seagram which are substantially similar to
the common shares, or securities convertible into or exchangeable for common
shares (other than the units offered in this offering) during the period from
the date of this prospectus continuing through the date which is 90 days after
the date of this prospectus, except with the prior written consent of Goldman,
Sachs & Co. This agreement does not apply to any existing employee benefit
plans.
The units will be a new issue of securities with no established trading
U-1
<PAGE> 62
market. Seagram has applied to list the units on the NYSE. The underwriters have
advised Seagram and JES that they intend to make a market in the units, but they
are not obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the units.
In connection with the offering, the underwriters may purchase and sell the
units or common shares in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of units than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the units or the common
shares while the offering pursuant to this prospectus is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased units sold by
or for the account of that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the units or the common shares. As a result, the
price of the units or the common shares may be higher than the price that
otherwise might exist in the open market. If these activities are commenced,
they may be discontinued by the underwriters at any time. These transactions may
be effected on the NYSE, in the over-the-counter market or otherwise.
Seagram and JES estimate that their share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $1.3 million.
Seagram and JES have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
Certain of the underwriters have acted as financial advisors to JES and
Seagram and have received customary compensation for such services. John S.
Weinberg, a Managing Director of Goldman, Sachs & Co., is also a director of
Seagram.
U-2
<PAGE> 63
------------------------------------------------------
------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 6
Description of Seagram............... 9
Use of Proceeds...................... 14
Price Range of Common Shares......... 14
Capitalization....................... 15
Ratio of Earnings to Fixed Charges... 16
Selected Historical Consolidated
Financial Data..................... 17
Management's Discussion and Analysis
of Selected Historical Consolidated
Financial Data and Supplemental
Financial Information.............. 19
Disclosure Regarding Forward-Looking
Information........................ 28
Accounting Treatment................. 28
Description of Units................. 29
Description of Share Capital......... 44
U.S. Federal Income Tax
Consequences....................... 45
Canadian Income Tax Consequences..... 53
Legal Matters........................ 54
Experts.............................. 54
Where You Can Find More Information.. 55
Jurisdiction Over Seagram............ 56
Underwriting......................... U-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
18,500,000 Units
THE SEAGRAM COMPANY LTD.
% Adjustable
Conversion-rate
Equity Securities
------------------------
[SEAGRAM LOGO]
------------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
------------------------------------------------------
------------------------------------------------------
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The amount of expenses in connection with the issuance and distribution of
the securities which are being newly registered hereby, other than underwriting
discounts and commissions, is estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $ 319,700
Costs of printing and engraving............................. 300,000
Legal fees and expenses..................................... 350,000
Blue Sky fees and expenses.................................. 10,000
Accounting fees and expenses................................ 40,000
Trustee's fee............................................... 25,000
Rating agencies' fees....................................... 215,000
Miscellaneous............................................... 40,300
----------
Total.................................................. $1,300,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 124, Subsections (1) through (4), of the Canada Business
Corporations Act (the "Act") provides as follows:
"124. (1) Indemnification.--Except in respect of an action by or on
behalf of the corporation or body corporate to procure a judgment in its
favour, a corporation may indemnify a director or officer of the
corporation, a former director or officer of the corporation or a person
who acts or acted at the corporation's request as a director or officer of
a body corporate of which the corporation is or was a shareholder or
creditor, and his heirs and legal representatives, against all costs,
charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil,
criminal or administrative action or proceeding to which he is made a party
by reason of being or having been a director or officer of such corporation
or body corporate, if
(a) he acted honestly and in good faith with a view to the best
interests of the corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds
for believing that his conduct was lawful.
(2) Indemnification in derivative actions.--A corporation may with the
approval of a court indemnify a person referred to in subsection (1) in
respect of an action by or on behalf of the corporation or body corporate
to procure a judgment in its favour, to which he is made a party by reason
of being or having been a director or an officer of the corporation or body
corporate, against all costs, charges and expenses reasonably incurred by
him in connection with such action if he fulfils the conditions set out in
paragraphs (1)(a) and (b).
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<PAGE> 65
(3) Indemnity as of right.--Notwithstanding anything in this section,
a person referred to in subsection (1) is entitled to indemnity from the
corporation in respect of all costs, charges and expenses reasonably
incurred by him in connection with the defense of any civil, criminal or
administrative action or proceeding to which he is made a party by reason
of being or having been a director or officer of the corporation or body
corporate, if the person seeking indemnity
(a) was substantially successful on the merits in his defense of the
action or proceeding, and
(b) fulfills the conditions set out in paragraphs (1)(a) and (b).
(4) Directors' and officers' insurance.--A corporation may purchase
and maintain insurance for the benefit of any person referred to in
subsection (1) against any liability incurred by him
(a) in his capacity as a director or officer of the corporation, except
where the liability relates to his failure to act honestly and in
good faith with a view to the best interests of the corporation; or
(b) in his capacity as a director or officer of another body corporate
where he acts or acted in that capacity at the corporation's
request, except where the liability relates to his failure to act
honestly and in good faith with a view to the best interests of the
body corporate."
Sections 7.02 and 7.03 of the General By-Laws of The Seagram Company Ltd.
provide as follows:
"Section 7.02--Indemnity. Without in any manner derogating from or
limiting the mandatory provisions of the Act but subject to the conditions
contained therein, the Corporation shall indemnify a director or officer of
the Corporation, a former director or officer of the Corporation, or a
person who acts or acted at the Corporation's request as a director or
officer of a body corporate of which the Corporation is or was a
shareholder or creditor, and his heirs and legal representatives, against
all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by him in respect of any
civil, criminal or administrative action or proceeding to which he is made
a party by reason of being or having been a director or officer of the
Corporation or such body corporate, if
(a) he acted honestly and in good faith with a view to the best
interests of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he has reasonable grounds
for believing that his conduct was lawful.
Section 7.03--Insurance. Subject to the limitations contained in the
Act, the Corporation may purchase and maintain such insurance for the
benefit of the persons mentioned in Section 7.02, as the board may from
time to time determine."
Chapter 37 of the Business Corporation Law of Indiana, the state of
incorporation of Joseph E. Seagram & Sons, Inc., provides that, effective August
1, 1987, (i) unless limited by its articles of incorporation, a corporation
shall indemnify a director or officer (and may indemnify an employee or agent of
the corporation) who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which such person was a party because such person
is or was a director, officer, employee or agent of the corporation, as
II-2
<PAGE> 66
the case may be, against reasonable expenses incurred by such person in
connection with the proceeding and (ii) a corporation may indemnify an
individual made a party to a proceeding because the individual is or was a
director, officer, employee or agent of the corporation against liability
incurred in the proceeding if (1) the individual's conduct was in good faith;
and (2) the individual reasonably believed (A) in the case of conduct in the
individual's official capacity with the corporation, that the individual's
conduct was in its best interests; and (B) in all other cases, that the
individual's conduct was at least not opposed to its best interests; and (3) in
the case of any criminal proceeding, the individual either (A) had reasonable
cause to believe the individual's conduct was lawful; or (B) had no reasonable
cause to believe the individual's conduct was unlawful. Such indemnification
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any provision of the articles of incorporation, by-laws,
resolution, or other authorization adopted, after notice, by a majority vote of
all the voting shares then issued and outstanding.
Sections 43 through 50 of the By-Laws of Joseph E. Seagram & Sons, Inc.
provide as follows:
"43. The corporation (1) shall indemnify any person who is or was a
director, officer, or employee of the corporation or is or was serving at
the request of the corporation as a director, officer or employee of
another corporation, and (2) may indemnify any person who is or was an
agent of the corporation or is or was serving at the request of the
corporation as an agent of or participant in another corporation or as
director, officer, employee or agent of or participant in a partnership,
joint venture, trust or other enterprise, and who by reason of such fact is
or was a witness or a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, against any and all judgments,
liabilities, assessments, fines, amounts paid in settlement, costs, charges
and expenses (including attorneys' fees) of every kind and nature which
such person may actually and reasonably incur in connection with such
action, suit or proceeding (or any appeal therein). Notwithstanding the
foregoing, (a) in the event of an action, suit or proceeding brought by or
in the right of the corporation to procure a judgment in its favor, no
indemnification shall be made with respect to any claim, issue or matter as
to which the person seeking to be indemnified shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to
the corporation, unless and only to the extent that the court in which such
action or suit was brought or to which it was appealed shall determine upon
application that, despite the adjudication of liability, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for any such expenses which the court shall deem proper, and (b)
no indemnification shall be made with respect to any claim, issue or matter
as to which the person seeking to be indemnified shall have (i) been
adjudged by a court or administrative agency to have acted illegally or
improperly or (ii) made or agreed to make any payment in settlement unless
it is determined in accordance with Section 44 of these by-laws, that such
person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The final disposition of any action, suit or
proceeding by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not of itself create a presumption
that a person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best
II-3
<PAGE> 67
interests of the corporation, nor, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
44. Any determination contemplated by clause (b) of Section 43 of
these by-laws shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the shareholders.
45. The indemnification provided herein shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled
under any agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in any official capacity and as to action in
another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, agent or
participant and shall inure to the benefit of the heirs, executors and
administrators of such a person.
46. The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of or participant in another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of these by-laws, Section 25-202 of the General
Corporation Act of the State of Indiana or otherwise.
47. For purposes of Sections 43 through 46 of these by-laws, (1) Any
person who, while a director, officer or employee of the corporation or
while serving at the request of the corporation as a director, officer or
employee of a 'subsidiary' as hereinafter defined, acts or acted as a
fiduciary with respect to an employee benefit plan sponsored by the
corporation or by one or more subsidiaries, or with respect to a
multi-employer employee benefit plan contributed to by the corporation or
by one or more subsidiaries, shall be conclusively deemed to occupy such
fiduciary position by reason of the fact that such person is or was such
director, officer or employee. As used herein the term 'subsidiary' means a
corporation of which a majority of the shares of capital stock have the
power ordinarily and generally in the absence of contingencies to elect a
majority of the directors thereof is held by the corporation and/or one or
more subsidiaries.
(2) Any person who is or was a director, officer or employee of a
'wholly-owned subsidiary' as hereinafter defined shall be conclusively
deemed to occupy such position at the request of the corporation. As used
herein the term 'wholly-owned subsidiary' means any corporation of which
all shares of capital stock having the power ordinarily and generally in
the absence of contingencies to vote for the election of directors,
exclusive of director's qualifying shares, are held by the corporation
and/or one or more wholly-owned subsidiaries.
48. For the purposes of Sections 43 through 48 of these by-laws,
references to 'the corporation' include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer, employee
or agent of or participant in such a constituent corporation or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise shall stand in the
same position under the provisions of such
II-4
<PAGE> 68
Sections with respect to the resulting or surviving corporation as he would
if he had served the resulting or surviving corporation in the same
capacity.
49. The corporation may pay expenses incurred in appearing as a
witness in or defending any action, suit or proceeding (whether civil,
criminal, administrative or investigative) before the final disposition
thereof upon receipt of an undertaking, by or on behalf of the person for
whose benefit such payment is to be made, to repay to the corporation any
excess of such payment over the indemnification from the corporation to
which such person ultimately shall be determined to be entitled under these
by-laws.
50. The invalidity or unenforceability of any provision of Sections 43
through 48 of these by-laws shall not affect the validity or enforceability
of the remaining provisions of such Sections."
The directors and officers of the Registrants are covered by insurance
policies indemnifying against certain liabilities, including certain liabilities
arising under the Securities Act, which might be incurred by them in such
capacities and against which they cannot be indemnified by the Registrants.
ITEM 16. LIST OF EXHIBITS.
Reference is made to information contained in the Exhibit Index filed as a
part of this Registration Statement.
ITEM 17. UNDERTAKINGS.
Each of the undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in
the opinion of the SEC such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public
II-5
<PAGE> 69
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(4) It will reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
II-6
<PAGE> 70
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, JOSEPH E.
SEAGRAM & SONS, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF NEW YORK AND THE STATE OF NEW YORK, ON MAY 24,
1999.
JOSEPH E. SEAGRAM & SONS, INC.
(Registrant)
By /s/ JOHN R. PRESTON
------------------------------------
John R. Preston
Vice President and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 24, 1999 BY THE FOLLOWING PERSONS
IN THE CAPACITIES AT JOSEPH SEAGRAM & SONS, INC. INDICATED.
Principal Executive Officer:
<TABLE>
<C> <S>
* Director, President and Chief Executive
- --------------------------------------------------- Officer
(Edgar Bronfman, Jr.)
</TABLE>
Principal Financial Officer and Agent
for Service:
<TABLE>
<C> <S>
* Director, Vice Chairman and Chief Financial
- --------------------------------------------------- Officer
(Robert W. Matschullat)
</TABLE>
Principal Accounting Officer:
<TABLE>
<C> <S>
* Vice President and Controller
- ---------------------------------------------------
(Frank Merganthaler)
</TABLE>
II-7
<PAGE> 71
Directors:
<TABLE>
<C> <S>
* Director
- ---------------------------------------------------
(Edgar M. Bronfman)
* Director
- ---------------------------------------------------
(Charles R. Bronfman)
* Director
- ---------------------------------------------------
(Daniel R. Paladino)
</TABLE>
- -------------------------
* By signing his name hereto, John R. Preston signs this Registration Statement
on behalf of each of the persons indicated above pursuant to a power of
attorney duly executed by such persons and filed with the Securities and
Exchange Commission.
By /s/ JOHN R. PRESTON
-----------------------------------
(John R. Preston, Attorney-in-fact)
II-8
<PAGE> 72
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE SEAGRAM
COMPANY LTD. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF MONTREAL, PROVINCE OF QUEBEC, CANADA, ON MAY 24,
1999.
THE SEAGRAM COMPANY LTD.
(Registrant)
By /s/ JOHN R. PRESTON
------------------------------------
John R. Preston
Vice President and Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON MAY 24, 1999 BY THE FOLLOWING PERSONS
IN THE CAPACITIES AT THE SEAGRAM COMPANY LTD. INDICATED.
Principal Executive Officer:
<TABLE>
<C> <S>
* Director, President and Chief Executive
- --------------------------------------------------- Officer
(Edgar Bronfman, Jr.)
</TABLE>
Principal Financial Officer and Agent
for Service:
<TABLE>
<C> <S>
* Director, Vice Chairman and Chief Financial
- --------------------------------------------------- Officer
(Robert W. Matschullat)
</TABLE>
Principal Accounting Officer:
<TABLE>
<C> <S>
* Director, Vice Chairman and Chief Financial
- --------------------------------------------------- Officer
(Robert W. Matschullat)
</TABLE>
II-9
<PAGE> 73
Directors:
EDGAR M. BRONFMAN*
CHARLES R. BRONFMAN*
SAMUEL BRONFMAN II*
MATTHEW W. BARRETT*
LAURENT BEAUDOIN*
CORNELIS BOONSTRA*
RICHARD H. BROWN*
WILLIAM G. DAVIS*
ANDRE DESMARAIS*
BARRY DILLER *
MICHELE J. HOOPER*
DAVID L. JOHNSTON*
E. LEO KOLBER*
MARIE-JOSEE KRAVIS*
SAMUEL MINZBERG*
JOHN S. WEINBERG*
- -------------------------
* By signing his name hereto, John R. Preston signs this Registration Statement
on behalf of each of the persons indicated above pursuant to a power of
attorney duly executed by such persons and filed with the Securities and
Exchange Commission.
By /s/ JOHN R. PRESTON
-----------------------------------
(John R. Preston, Attorney-in-fact)
II-10
<PAGE> 74
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
1*** -- Form of Underwriting Agreement
3(a) -- Restated Articles of Incorporation of Joseph E. Seagram &
Sons, Inc. (incorporated by reference to Exhibit 4(a) to
Registration Statement on Form S-3 (No. 333-4136) of The
Seagram Company Ltd. and Joseph E. Seagram & Sons, Inc.).
(b) -- By-Laws of Joseph E. Seagram & Sons, Inc., as amended
(incorporated by reference to Exhibit 4(b) to Registration
Statement on Form S-3 (No. 333-4136) of The Seagram Company
Ltd. and Joseph E. Seagram & Sons, Inc.).
(c) -- Articles of Amalgamation dated February 1, 1995 between The
Seagram Company Ltd. and Centenary Distillers Ltd.
(incorporated by reference to Exhibit 3(a) of The Seagram
Company Ltd.'s Annual Report on Form 10-K for the fiscal
year ended January 31, 1995), as amended by Certificate and
Articles of Amendment dated May 31, 1995 (incorporated by
reference to Exhibit 3(a) of The Seagram Company Ltd.'s
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1995).
(d) -- General By-Laws of The Seagram Company Ltd., as amended
(incorporated by reference to Exhibit 3(b) to The Seagram
Company Ltd.'s Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 1996).
4(a) -- Indenture dated as of September 15, 1991, among Joseph E.
Seagram & Sons, Inc., The Seagram Company Ltd. and The Bank
of New York, as Trustee (incorporated by reference to
Exhibit 4(g) of the Current Report on Form 8-K of The
Seagram Company Ltd. dated November 8, 1991, as amended).
(b)* -- Form of Master Unit Agreement, between The Seagram Company
Ltd. and The Bank of New York as agent.
(c)* -- Pledge Agreement, between The Seagram Company Ltd. and
Citibank, N.A., as Collateral Agent.
(d)* -- Form of Unit (Included in Exhibit 4(b)).
(e)* -- Form of Note (Included in Exhibit 4(a)).
5(a)* -- Opinion and Consent of Simpson Thacher & Bartlett.
(b)* -- Opinion and Consent of Goodman Phillips & Vineberg S.E.N.C.
(c)* -- Opinion and Consent of Barnes & Thornburg.
12(a)** -- Computation of ratio of earnings to fixed charges -- The
Seagram Company Ltd.
(b)** -- Computation of ratio of earnings to fixed charges -- Joseph
E. Seagram & Sons, Inc.
23(a)* -- Consent of PricewaterhouseCoopers LLP, independent
accountants, with respect to the financial statements of The
Seagram Company Ltd.
(b)* -- Consent of KPMG Accountants N.V., independent accountants,
with respect to the financial statements of PolyGram N.V.
(c)* -- Consents of Simpson Thacher & Bartlett, Goodman Phillips &
Vineberg S.E.N.C. and Barnes & Thornburg are included in
their opinions filed as Exhibits 5(a), 5(b) and 5(c),
respectively.
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C> <C>
24(a)** -- Power of Attorney -- The Seagram Company Ltd.
(b)** -- Power of Attorney -- Joseph E. Seagram & Sons, Inc.
25 ** -- Statement of Eligibility of Trustee.
</TABLE>
- -------------------------
* Filed herewith.
** Previously filed.
*** To be filed by amendment.
<PAGE> 1
Exhibit 4(b)
THE SEAGRAM COMPANY LTD.
AND
THE BANK OF NEW YORK,
as Unit Agent
FORM OF MASTER UNIT AGREEMENT
Dated as of May -, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
RECITALS................................................................. 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions................................................ 1
SECTION 102. Form of Documents Delivered to Unit Agent.................. 8
SECTION 103. Acts of Holders; Record Dates.............................. 9
SECTION 104. Notices, etc. to Unit Agent and the Company................ 10
SECTION 105. Notice to Holders; Waiver.................................. 11
SECTION 106. Effect of Headings and Table of Contents................... 11
SECTION 107. Successors and Assigns..................................... 11
SECTION 108. Separability Clause........................................ 12
SECTION 109. Benefits of Agreement...................................... 12
SECTION 110. Governing Law.............................................. 12
SECTION 111. Legal Holidays............................................. 12
SECTION 112. Counterparts............................................... 13
SECTION 113. Inspection of Agreement.................................... 13
ARTICLE TWO
UNIT CERTIFICATE FORMS
SECTION 201. Forms of Unit Certificates Generally....................... 13
SECTION 202. Form of Unit Agent's Certificate of Authentication......... 14
ARTICLE THREE
THE UNITS
SECTION 301. Title and Terms; Denominations............................. 14
SECTION 302. Rights and Obligations Evidenced by the Unit Certificates.. 14
SECTION 303. Execution, Authentication, Delivery and Dating............. 14
SECTION 304. Temporary Unit Certificates................................ 15
SECTION 305. Registration; Registration of Transfer and Exchange........ 16
SECTION 306. Mutilated, Destroyed, Lost and Stolen Unit Certificates.... 18
SECTION 307. Persons Deemed Owners...................................... 19
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<PAGE> 3
SECTION 308. Cancellation............................................... 20
SECTION 309. Units Not Separable........................................ 20
SECTION 310. Payments on the Units...................................... 21
ARTICLE FOUR
THE PLEDGED SECURITIES
SECTION 401. Payments on the Pledged Securities......................... 21
SECTION 402. Transfer of Pledged Securities Upon Occurrence of
Termination Event.................................... 22
ARTICLE FIVE
THE PURCHASE CONTRACTS
SECTION 501. Purchase of Common Shares.................................. 23
SECTION 502. Contract Fees.............................................. 24
SECTION 503. Deferral of Payment Dates For Contract Fee................. 25
SECTION 504. Payment of Purchase Price.................................. 26
SECTION 505. Issuance of Common Shares.................................. 28
SECTION 506. Adjustment of Settlement Rate.............................. 28
SECTION 507. Notice of Adjustments and Certain Other Events............. 34
SECTION 508. No Fractional Shares....................................... 34
SECTION 509. Charges and Taxes.......................................... 35
SECTION 510. Termination Event; Notice.................................. 35
SECTION 511. Early Settlement........................................... 35
ARTICLE SIX
REMEDIES
SECTION 601. Unconditional Rights of Holders............................ 37
SECTION 602. Restoration of Rights and Remedies......................... 38
SECTION 603. Rights and Remedies Cumulative............................. 38
SECTION 604. Delay or Omission Not Waiver............................... 38
SECTION 605. Undertaking for Costs...................................... 38
SECTION 606. Waiver of Stay or Extension Laws........................... 39
ARTICLE SEVEN
THE UNIT AGENT
SECTION 701. Certain Duties and Responsibilities........................ 39
-ii-
<PAGE> 4
SECTION 702. Notice of Default.......................................... 40
SECTION 703. Certain Rights of Unit Agent............................... 40
SECTION 704. Not Responsible for Recitals or Issuance of Units.......... 41
SECTION 705. May Hold Units............................................. 41
SECTION 706. Money Held in Trust........................................ 42
SECTION 707. Compensation and Reimbursement............................. 42
SECTION 708. Unit Agent Required; Eligibility........................... 43
SECTION 709. Resignation and Removal; Appointment of Successor.......... 43
SECTION 710. Acceptance of Appointment by Successor..................... 44
SECTION 711. Merger, Conversion, Consolidation or Succession to
Business............................................. 45
SECTION 712. Preservation of Information; Communications to Holders..... 45
SECTION 713. No Obligations of Unit Agent............................... 46
SECTION 714. Tax Compliance............................................. 46
ARTICLE EIGHT
SUPPLEMENTAL AGREEMENTS
SECTION 801. Supplemental Agreements Without Consent of Holders......... 47
SECTION 802. Supplemental Agreements with Consent of Holders............ 47
SECTION 803. Execution of Supplemental Agreements....................... 49
SECTION 804. Effect of Supplemental Agreements.......................... 49
SECTION 805. Reference to Supplemental Agreements....................... 49
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 901. Covenant Not to Merge, Consolidate, Sell or Convey
Property Except Under Certain Conditions............. 50
SECTION 902. Rights and Duties of Successor Corporation................. 50
SECTION 903. Opinion of Counsel to Unit Agent........................... 51
ARTICLE TEN
COVENANTS
SECTION 1001. Performance Under Purchase Contracts...................... 51
SECTION 1002. Maintenance of Office or Agency........................... 51
SECTION 1003. Company to Reserve Common Shares.......................... 52
SECTION 1004. Covenants as to Common Shares............................. 52
SECTION 1005. Statements of Officers of the Company as to Default....... 52
-iii-
<PAGE> 5
TESTIMONIUM.............................................................. 52
SIGNATURES............................................................... 52
EXHIBIT A Form of Unit Certificate
EXHIBIT B Form of Pledge Agreement
-iv-
<PAGE> 6
MASTER UNIT AGREEMENT, dated as of May -, 1999, between THE SEAGRAM
COMPANY LTD., a Canadian corporation (the "Company"), and THE BANK OF NEW YORK,
a New York corporation, acting as unit agent for the Holders of Units from time
to time (the "Unit Agent").
RECITALS
The Company has duly authorized the execution and delivery of this
Agreement and the Unit Certificates evidencing the Units.
All things necessary to make the Company's obligations under the Units,
when the Unit Certificates are executed by the Company and authenticated,
executed on behalf of the Holders and delivered by the Unit Agent, as in this
Agreement provided, the valid obligations of the Company, and to constitute
these presents a valid agreement of the Company, in accordance with its terms,
have been done.
WITNESSETH:
For and in consideration of the premises and the purchase of the Units
by the Holders thereof, it is mutually agreed as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular; and
(b) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 103.
<PAGE> 7
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Average Trading Price" has the meaning specified in Section 501.
"Board of Directors" means the board of directors of the Company or a
duly authorized committee of that board.
"Board Resolution" means one or more resolutions of the Board of
Directors, a copy of which has been certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification and delivered
to the Unit Agent.
"Business Day" means any day other than Saturday, Sunday or any other
day on which banking institutions in The City of New York are authorized or
obligated by law or executive order to be closed.
"Cash Merger" has the meaning specified in Section 511.
"Closing Price" has the meaning specified in Section 501.
"Collateral Agent" means -, as Collateral Agent under the Pledge
Agreement, until a successor Collateral Agent shall have become such pursuant to
the applicable provisions of the Pledge Agreement, and thereafter "Collateral
Agent" shall mean the Person who is then the Collateral Agent thereunder.
"Common Shares" means the Common Shares, without nominal or par value,
of the Company having such terms as set forth in the Company's Articles of
Amalgamation, as amended from time to time.
-2-
<PAGE> 8
"Company" means the Person designated as the "Company" in the first
paragraph of this instrument until a successor shall have become such, and
thereafter "Company" shall mean such successor.
"Contract Fee" means, with respect to each Purchase Contract, a fee
payable by the Company to the Holder of the related Unit, accruing on the Stated
Amount of such Unit from and including the date of first issuance of any Units
to but excluding the Stock Purchase Date and payable quarterly in arrears on
each Quarterly Payment Date to and including the Stock Purchase Date at a rate
per annum equal to the Contract Fee Rate (and computed on the basis of a 360-day
year of twelve 30-day months), plus any additional fees accrued thereon pursuant
to Section 503.
"Contract Fee Rate" means 0.-%.
"Corporate Trust Office" means the principal office of the Unit Agent,
at which at any particular time its corporate trust business shall be
administered, which office at the date hereof is located at 101 Barclay Street,
New York, New York 10286.
"Current Market Price" has the meaning specified in Section 506(a)(8).
"Deferral Rate" means -% per annum plus, for the period after the
Remarketing Date, the amount (if any) by which the interest rate on the Notes
shall have been increased on the Remarketing Date in accordance with the terms
of the Notes.
"Depositary" means a clearing agency registered under the Exchange Act
that is designated to act as Depositary for Global Units as contemplated by
Section 305.
"Early Settlement" has the meaning set forth in Section 511.
"Early Settlement Date" has the meaning set forth in Section 511.
"Exchange Act" means the Securities Exchange Act of 1934 or any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 103.
"Global Unit Certificate" means a Unit Certificate that evidences all
or part of the Normal Units or a Unit Certificate that evidences all or a part
of the Stripped Units and is registered in the name of the Depositary or a
nominee thereof.
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<PAGE> 9
"Guarantees" means the Company's guarantees of the Notes.
"Holder" means a Person in whose name a Unit Certificate is registered
in the Unit Register; "Holder", when used with respect to any particular Unit
Certificate (or Unit), means a Person in whose name such Unit Certificate (or
the Unit Certificate evidencing such Unit) is registered in the relevant Unit
Register.
"Indenture" means the Indenture, dated as of September 15, 1991, among
the Company, Joseph E. Seagram & Sons, Inc. and The Bank of New York, as
Trustee, as the same may be amended or supplemented from time to time with
respect to the terms of the Notes in accordance with the terms thereof.
"Issuer Order" or "Issuer Request" means a written order or request
signed in the name of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, its Chief Financial Officer, a Vice Chairman
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Controller, an Assistant Controller, its Secretary or an Assistant Secretary,
and delivered to the Unit Agent.
"JES" means Joseph E. Seagram & Sons, Inc., an Indiana corporation.
"Notes" means the -% Subordinated Deferrable Notes due -, 2004 of JES
issued under the Indenture and guaranteed, on a subordinated basis, by the
Company.
"NYSE" has the meaning specified in Section 501.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Financial
Officer, a Vice Chairman or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Controller, an Assistant Controller, the Secretary or an
Assistant Secretary of the Company and delivered to the Unit Agent.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company.
"Outstanding Unit Certificates" means, as of the date of determination,
all Unit Certificates theretofore authenticated, executed and delivered pursuant
to this Agreement, except:
(a) Unit Certificates theretofore canceled by the Unit Agent
or delivered to the Unit Agent for cancellation; and
-4-
<PAGE> 10
(b) Unit Certificates in exchange for or in lieu of which
other Unit Certificates have been authenticated and delivered pursuant
to this Agreement, other than any such Unit Certificate in respect of
which there shall have been presented to the Unit Agent proof
satisfactory to it that such Unit Certificate is held by a bona fide
purchaser in whose hands the Units evidenced by such Unit Certificate
are valid obligations of the Company.
"Outstanding Units" means, as of the date of determination, all Units
evidenced by then Outstanding Unit Certificates, except, on or after the
Termination Date or Stock Purchase Date, Units for which the underlying Pledged
Securities or the Common Stock purchasable upon settlement of the underlying
Purchase Contracts, as the case may be, have been theretofore deposited with the
Unit Agent in trust for the Holders of such Units; provided, however, that in
determining whether the Holders of the requisite number of Units have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Units owned by the Company or any Affiliate of the Company shall be disregarded
and deemed not to be outstanding, except that, in determining whether the Unit
Agent shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Units which the Unit
Agent actually knows to be so owned shall be so disregarded. Units so owned
which have been pledged in good faith may be regarded as Outstanding Units if
the pledgee establishes to the satisfaction of the Unit Agent the pledgee's
right so to act with respect to such Units and that the pledgee is not the
Company or any Affiliate of the Company.
"Paid Units" has the meaning specified in Section 504(a).
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pledge" means the pledge of the Pledged Securities under the Pledge
Agreement.
"Pledge Agreement" means the Pledge Agreement, dated as of the date
hereof, among the Company, the Collateral Agent and the Unit Agent, in its
capacity as Unit Agent and as attorney-in-fact for the Holders from time to time
of the Units, the form of which is attached hereto as Exhibit B, as the same may
be amended from time to time in accordance with the terms hereof and thereof.
"Pledged Securities" has the meaning specified in the Pledge Agreement.
-5-
<PAGE> 11
"Predecessor Unit Certificate" of any particular Unit Certificate means
every previous Unit Certificate evidencing all or a portion of the rights and
obligations of the Holder under the Units evidenced thereby; and, for the
purposes of this definition, any Unit Certificate authenticated and delivered
under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or
stolen Unit Certificate shall be deemed to evidence the same rights and
obligations of the Holder as the mutilated, destroyed, lost or stolen Unit
Certificate.
"Principal Agreements" means this Agreement (including the obligations
under the Purchase Contracts) and the Pledge Agreement.
"Purchase Contract" means the obligation of the Company to sell and the
Holder of the related Unit to purchase Common Shares on the terms and subject to
the conditions set forth in Article Five hereof.
"Purchase Contract Settlement Fund" has the meaning specified in
Section 505.
"Quarterly Payment Date" means each -, -, - and - commencing -, 1999.
"Record Date", when used with respect to any payment date, means the
Business Day next preceding such payment date.
["Remarketing Date" -]
"Reorganization Event" has the meaning specified in Section 506(b).
"Responsible Officer", when used with respect to the Unit Agent, means
any officer of the Unit Agent assigned by the Unit Agent to administer corporate
trust matters and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Senior Indebtedness" has the meaning specified in the Indenture.
"Settlement Rate" has the meaning specified in Section 501.
"Stated Amount" means $- per Unit.
"Stock Purchase Date" means -, 2002 or such earlier date on which the
Purchase Contract may be settled pursuant to Section 511.
-6-
<PAGE> 12
"Termination Date" means the date, if any, on which a Termination Event
occurs.
"Termination Event" means the occurrence of any of the following events
at any time on or prior to the Stock Purchase Date: (a) the entry by a court
having jurisdiction in the premises of (1) a decree or order for relief in
respect of the Company in an involuntary case or proceeding under any applicable
bankruptcy law or (2) a decree or order adjudging the Company a bankrupt or
insolvent, or approving as property filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under any
applicable bankruptcy law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or of
substantially all of the property of the Company, or ordering the winding up or
liquidation of the affairs of the Company, and the continuance of any decree or
order for relief or any such other decree or order unstayed and in effect for a
period of 90 consecutive days; or (b) the commencement by the Company of a
voluntary case or proceeding under any applicable bankruptcy law, or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by the Company to the entry of a decree or order for relief in respect
of the Company in an involuntary case or proceeding under any applicable
bankruptcy law, or to the commencement of any bankruptcy or insolvency case or
proceeding against the Company, or the filing by the Company of a petition or
answer or consent seeking reorganization or relief under any applicable
bankruptcy law, or the consent by the Company to the filing of such petition or
to the appointment of or the taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Company
or of substantially all or the property of the Company, or the making by the
Company of an assignment for the benefit of creditors, or the admission by the
Company in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Company in furtherance of any such
action.
"Threshold Appreciation Price" means $_______ per Common Share.
"TIA" means the Trust Indenture Act of 1939 or any statute successor
thereto, in each case as amended from time to time.
"Trading Day" has the meaning specified in Section 501.
"Treasury Securities" means United States Treasury securities.
"Underwriting Agreement" means the Underwriting Agreement dated -,
1999, among the Company, Joseph E. Seagram & Sons, Inc., and Goldman, Sachs &
Co. and _________, _________ and _________, as representatives of the
Underwriters named therein.
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"Unit" means the rights to purchase Common Stock under a Purchase
Contract, together with ownership of the Notes or other Pledged Securities
pledged to secure the obligations owed to the Company under such Purchase
Contract, and subject to the pledge arrangements securing the foregoing
obligations. The Purchase Contracts and/or Pledged Securities constituting a
part of any Units are sometimes referred to herein as "underlying" such Units
and are sometimes herein said to "underlie" such Units.
"Unit Agent" means the Person named as the "Unit Agent" in the first
paragraph of this Agreement until a successor Unit Agent shall have become such
pursuant to the applicable provisions of this Agreement, and thereafter "Unit
Agent" shall mean the Person who is then the Unit Agent hereunder.
"Unit Certificate" means a certificate evidencing the rights and
obligations of a Holder in respect of the number of Units, as the case may be,
specified on such certificate.
"Unit Register" and "Unit Registrar" have the respective meanings
specified in Section 305.
"Unpaid Units" has the meaning specified in Section 504(a).
"Vice President" means any vice president, whether or not designated by
a number or a word or words added before or after the title "vice president".
SECTION 102. Form of Documents Delivered to Unit Agent.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise
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<PAGE> 14
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
SECTION 103. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Unit Agent and, where it is hereby expressly required, to the Company.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and (subject to Section 701) conclusive in favor of the Unit Agent and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Unit Agent deems sufficient.
(c) The ownership of Units shall be proved by the Unit Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Unit shall bind every future Holder of
the same Unit and the Holder of every Unit Certificate evidencing such Unit
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Unit Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Unit Certificate.
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<PAGE> 15
(e) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Units entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Agreement to be given, made or taken by
Holders of Units. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Units on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite number of Outstanding Units on such record date. Nothing in
this paragraph shall be construed to prevent the Company from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite number of Outstanding Units on the date
such action is taken. Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Unit Agent in writing and to each Holder of Units in the manner set
forth in Section 105.
With respect to any record date set pursuant to this Section, the
Company may designate any date as the "Expiration Date" and from time to time
may change the Expiration Date to any earlier or later day; provided that no
such change shall be effective unless notice of the proposed new Expiration Date
is given to the Unit Agent in writing, and to each Holder of Units in the manner
set forth in Section 105, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the Company shall be deemed to have initially designated the
180th day after such record date as the Expiration Date with respect thereto,
subject to its right to change the Expiration Date as provided in this
paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than
the 180th day after the applicable record date.
SECTION 104. Notices, etc. to Unit Agent and the Company.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of Holders or other document provided or permitted by this
Agreement to be made upon, given or furnished to, or filed with,
(a) the Unit Agent by any Holder or by the Company shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and
personally delivered or mailed, first-class postage prepaid, to the
Unit Agent at 101 Barclay, the Corporate Trust Office,
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<PAGE> 16
Attention: -, or at any other address previously furnished in writing
by the Unit Agent to the Holders and the Company, or
(b) the Company by the Unit Agent or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and
personally delivered or mailed, first-class postage prepaid, to the
Company at 1430 Peel Street, Montreal, Quebec, Canada H3A 159,
Attention: -, or at any other address previously furnished in writing
by the Company to the Unit Agent.
SECTION 105. Notice to Holders; Waiver.
Where this Agreement provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Unit Register, not later than
the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Agreement provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Unit Agent, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Unit Agent
shall constitute a sufficient notification for every purpose hereunder.
SECTION 106. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 107. Successors and Assigns.
All covenants and agreements in this Agreement by the Company shall
bind its successors and assigns, whether so expressed or not.
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<PAGE> 17
SECTION 108. Separability Clause.
In case any provision in this Agreement or in the Units shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof and thereof shall not in any way be affected or
impaired thereby.
SECTION 109. Benefits of Agreement.
Nothing in this Agreement or in the Unit Certificates, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefits or any legal or equitable
right, remedy or claim under this Agreement. The Holders from time to time shall
be beneficiaries of this Agreement and shall be bound by all of the terms and
conditions hereof and of the Units evidenced by their Unit Certificates by their
acceptance of delivery thereof.
SECTION 110. Governing Law.
THIS AGREEMENT AND THE UNITS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
SECTION 111. Legal Holidays.
In any case where any Quarterly Payment Date or the Stock Purchase Date
shall not be a Business Day, then (notwithstanding any other provision of this
Agreement or of the Units) payment in respect of distributions or interest on or
principal of Pledged Securities or Contract Fees shall not be made, Purchase
Contracts shall not be performed and other actions described herein shall not
occur, but such payments shall be made, the Purchase Contracts shall be
performed and such other actions shall occur, as applicable, on the next
succeeding Business Day with the same force and effect as if made on such
Quarterly Payment Date or Stock Purchase Date, as the case may be; provided,
that to the extent such payment is made on the next succeeding Business Day, no
distributions or interest shall accrue or be payable by the Company or any
Holder for the period from and after any such Quarterly Payment Date or Stock
Purchase Date, as the case may be, to the date of payment or performance; except
that if such next succeeding Business Day is in the next succeeding calendar
year, such payment shall be made, the Purchase Contracts shall be performed or
such other action shall occur on the immediately preceding Business Day with the
same force and effect as if made on such Quarterly Payment Date or the Stock
Purchase Date.
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<PAGE> 18
SECTION 112. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which, when so executed, shall be deemed an original, but all such counterparts
shall together constitute one and the same instrument.
SECTION 113. Inspection of Agreement.
A copy of this Agreement shall be available at all reasonable times at
the Corporate Trust Office for inspection by any Holder.
ARTICLE TWO
UNIT CERTIFICATE FORMS
SECTION 201. Forms of Unit Certificates Generally.
Unit Certificates evidencing Normal Units shall be in substantially the
form set forth in Exhibit A hereto, with such letters, numbers or other marks of
identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as may be required by the rules of any
securities exchange on which the Units are listed or Depositary therefor, or as
may, consistently herewith, be determined by the officers of the Company
executing such Unit Certificates, as evidenced by their execution of the Unit
Certificates.
The definitive Unit Certificates shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing the Unit Certificates,
consistent with the provisions of this Agreement, as evidenced by their
execution thereof.
Every Global Unit Certificate authenticated, executed and delivered
hereunder shall bear a legend in substantially the following form:
THIS UNIT CERTIFICATE IS A GLOBAL UNIT CERTIFICATE WITHIN THE MEANING
OF THE MASTER UNIT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS UNIT CERTIFICATE
MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A UNIT CERTIFICATE
REGISTERED, AND NO TRANSFER OF THIS UNIT CERTIFICATE IN WHOLE OR IN
PART MAY BE REGISTERED, IN THE NAME OF ANY
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<PAGE> 19
PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF,
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
MASTER UNIT AGREEMENT.
SECTION 202. Form of Unit Agent's Certificate of Authentication.
The form of the Unit Agent's certificate of authentication of the Units
shall be in substantially the form set forth on the form of the Unit
Certificates.
ARTICLE THREE
THE UNITS
SECTION 301. Title and Terms; Denominations.
The aggregate number of Units evidenced by Unit Certificates
authenticated, executed on behalf of the Holders and delivered hereunder is
limited to -, except for Unit Certificates authenticated, executed and delivered
upon registration of transfer of, in exchange for, or in lieu of, other Unit
Certificates pursuant to Section 304, 305, 306 or 805.
Unit Certificates shall be issuable only in registered form and only in
denominations of a single Unit and any integral multiple thereof.
SECTION 302. Rights and Obligations Evidenced by the Unit Certificates.
Each Unit Certificate shall evidence the number of Units specified
therein. Prior to the purchase, if any, of Common Shares under the Purchase
Contracts, the Units shall not entitle the Holders to any of the rights or
privileges of a holder of Common Shares by virtue of holding such Units,
including, without limitation, the right to vote or receive any dividends or
other distributions or to consent or to receive notice as stockholders in
respect of the meetings of stockholders or for the election of directors of the
Company or for any other matter.
SECTION 303. Execution, Authentication, Delivery and Dating.
Subject to the provisions of Section 309 hereof, upon the execution and
delivery of this Agreement, and at any time and from time to time thereafter,
the Company may deliver Unit Certificates executed by the Company to the Unit
Agent for authentication, execution on behalf of the Holders and delivery,
together with its Issuer Order for authentication of such Unit Certificates, and
the Unit Agent in accordance with such Issuer Order shall
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<PAGE> 20
authenticate, execute on behalf of the Holders and make such Unit Certificates
available for delivery.
The Unit Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President, its Chief
Financial Officer or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Unit Certificates may
be manual or facsimile.
Unit Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Unit
Certificates or did not hold such offices at the date of such Unit Certificates.
Each Unit Certificate shall be dated the date of its authentication.
No Purchase Contract evidenced by a Unit Certificate shall be valid
until such Unit Certificate has been executed on behalf of the Holder by the
manual signature of an authorized signatory of the Unit Agent, as such Holder's
attorney-in-fact. Such signature by an authorized signatory of the Unit Agent
shall be conclusive evidence that the Holder of such Unit Certificate has
entered into the Purchase Contracts evidenced by such Unit Certificate.
No Unit Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on such
Unit Certificate a certificate of authentication substantially in the form
provided for herein executed by an authorized signatory of the Unit Agent by
manual signature, and such certificate upon any Unit Certificate shall be
conclusive evidence, and the only evidence, that such Unit Certificate has been
duly authenticated and delivered hereunder.
SECTION 304. Temporary Unit Certificates.
Pending the preparation of definitive Unit Certificates, the Company
shall execute and deliver (together with an Issuer Order) to the Unit Agent, and
the Unit Agent shall authenticate, execute on behalf of the Holders, and
deliver, in lieu of such definitive Unit Certificates, temporary Unit
Certificates which are in substantially the form set forth in Exhibit A hereto,
with such letters, numbers or other marks of identification or designation and
such legends or endorsements printed, lithographed or engraved thereon as may be
required by the rules of any securities exchange on which the Units are listed
or Depositary
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<PAGE> 21
therefor, or as may, consistently herewith, be determined by the officers of the
Company executing such Unit Certificates, as evidenced by their execution of the
Unit Certificates.
If temporary Unit Certificates are issued, the Company will cause
definitive Unit Certificates to be prepared without unreasonable delay. After
the preparation of definitive Unit Certificates, the temporary Unit Certificates
shall be exchangeable for definitive Unit Certificates upon surrender of the
temporary Unit Certificates at the Corporate Trust Office, at the expense of the
Company and without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Unit Certificates, the Company shall execute and deliver
to the Unit Agent, and the Unit Agent shall authenticate, execute on behalf of
the Holder, and deliver in exchange therefor, one or more definitive Unit
Certificates of authorized denominations and evidencing a like number of Units,
as the case may be, as the temporary Unit Certificate or Unit Certificates so
surrendered. Until so exchanged, the temporary Unit Certificates shall in all
respects evidence the same benefits and the same obligations with respect to the
Units evidenced thereby as definitive Unit Certificates.
SECTION 305. Registration; Registration of Transfer and Exchange.
The Unit Agent shall keep at the Corporate Trust Office registers (the
registers maintained in such office being herein referred to as the "Unit
Registers") in which, subject to such reasonable regulations as it may
prescribe, the Unit Agent shall provide for the registration of Unit
Certificates evidencing the Units and of transfers of Unit Certificates
evidencing Units (the Unit Agent, in such capacity, the "Unit Registrar"). Upon
request from any Trustee or the Company, the Unit Agent shall furnish to such
requesting party a copy of the Unit Register for the Unit Certificates
evidencing the Units as promptly as practicable.
Upon surrender for registration of transfer of any Unit Certificate at
the Corporate Trust Office, the Company shall execute and deliver to the Unit
Agent, and the Unit Agent shall authenticate, execute on behalf of the
designated transferee or transferees, and deliver, in the name of the designated
transferee or transferees, one or more new Unit Certificates evidencing a like
number of Units.
At the option of the Holder, Unit Certificates may be exchanged for
other Unit Certificates evidencing a like number of Units upon surrender of the
Unit Certificates to be exchanged at the Corporate Trust Office. Whenever any
Unit Certificates are so surrendered for exchange, the Company shall execute and
deliver to the Unit Agent, and the Unit Agent shall authenticate, execute on
behalf of the Holder, and deliver the Unit Certificates which the Holder making
the exchange is entitled to receive.
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<PAGE> 22
All Unit Certificates issued upon any registration of transfer or
exchange of a Unit Certificate shall evidence the ownership of the same number
of Units, and be entitled to the same benefits and subject to the same
obligations, under the Principal Agreements as the Units, evidenced by the Unit
Certificate surrendered upon such registration of transfer or exchange.
Every Unit Certificate presented or surrendered for registration of
transfer or for exchange shall (if so required by the Unit Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Unit Agent duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of a Unit Certificate, but the Company and the Unit Agent may require
payment from the Holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Unit Certificates (which, for these purposes, includes a
transfer of Pledged Securities as contemplated by Section 504(a)), other than
any exchanges pursuant to Sections 304, 306 and 805 not involving any transfer.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Unit Agent, and the Unit Agent shall not be obligated
to authenticate, execute on behalf of the Holder and deliver any Unit
Certificate in respect of a Unit Certificate presented or surrendered for
registration of transfer or for exchange on or after the Stock Purchase Date or
the Termination Date. In lieu of delivery of a new Unit Certificate, upon
satisfaction of the applicable conditions specified above in this Section and
receipt of appropriate registration or transfer instructions from such Holder,
the Unit Agent shall (a) if the Stock Purchase Date has occurred, deliver the
Common Shares issuable in respect of the Purchase Contracts forming a part of
the Units evidenced by such Unit Certificate, or (b) if a Termination Event
shall have occurred on or prior to the Stock Purchase Date, transfer the
liquidation or principal amount of the Pledged Securities evidenced thereby, in
each case subject to the applicable conditions and in accordance with the
applicable provisions of Article Five hereof.
The provisions of Clauses (a), (b), (c) and (d) below shall apply only
to Global Unit Certificates:
(a) Each Global Unit Certificate authenticated and executed on
behalf of the Holders under this Agreement shall be registered in the
name of the Depositary designated for such Global Unit Certificate or a
nominee thereof and delivered to such Depositary or a nominee thereof
or custodian therefor, and each such Global
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<PAGE> 23
Unit Certificate shall constitute a single Unit Certificate for all
purposes of this Agreement.
(b) Notwithstanding any other provision in this Agreement, no
Global Unit Certificate may be exchanged in whole or in part for Unit
Certificates registered, and no transfer of a Global Unit Certificate
in whole or in part may be registered, in the name of any Person other
than the Depositary for such Global Unit Certificate or a nominee
thereof unless (i) such Depositary (x) has notified the Company that it
is unwilling or unable to continue as Depositary for such Global Unit
Certificate or (y) has ceased to be a clearing agency registered under
the Exchange Act or (ii) there shall have occurred and be continuing a
default by the Company in respect of its obligations under one or more
Principal Agreements.
(c) Subject to Clause (b) above, any exchange of a Global Unit
Certificate for other Unit Certificates may be made in whole or in
part, and all Unit Certificates issued in exchange for a Global Unit
Certificate or any portion thereof shall be registered in such names as
the Depositary for such Global Unit Certificate shall direct.
(d) Every Unit Certificate authenticated and delivered upon
registration of transfer of, in exchange for or in lieu of a Global
Unit Certificate or any portion thereof, whether pursuant to this
Section, Section 304, 306 or 805 or otherwise, shall be authenticated,
executed on behalf of the Holders and delivered in the form of, and
shall be, a Global Unit Certificate, unless such Unit Certificate is
registered in the name of a Person other than the Depositary for such
Global Unit Certificate or a nominee thereof.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Unit Certificates.
If any mutilated Unit Certificate is surrendered to the Unit Agent, the
Company shall execute and deliver to the Unit Agent, and the Unit Agent shall
authenticate, execute on behalf of the Holder, and deliver in exchange therefor,
a new Unit Certificate, evidencing the same number of Units and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Unit Agent (a)
evidence to their satisfaction of the destruction, loss or theft of any Unit
Certificate, and (b) such security or indemnity as may be required by them to
save each of them and any agent of any of them harmless, then, in the absence of
notice to the Company or the Unit Agent that such Unit Certificate has been
acquired by a bona fide purchaser, the Company shall execute and deliver to the
Unit Agent, and the Unit Agent shall authenticate, execute on behalf of the
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<PAGE> 24
Holder, and deliver to the Holder, in lieu of any such destroyed, lost or stolen
Unit Certificate, a new Unit Certificate, evidencing the same number of Units
and bearing a number not contemporaneously outstanding.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Unit Agent, and the Unit Agent shall not be obligated
to authenticate, execute on behalf of the Holder, and deliver to the Holder, on
or after the Stock Purchase Date or the Termination Date, a Unit Certificate in
respect of any mutilated, destroyed, lost or stolen Unit Certificate. In lieu of
delivery of a new Unit Certificate, upon satisfaction of the applicable
conditions specified above in this Section and receipt of appropriate
registration or transfer instructions from such Holder, the Unit Agent shall (a)
if the Stock Purchase Date has occurred, deliver the Common Shares issuable in
respect of the Purchase Contracts forming a part of the Units evidenced by such
Unit Certificate, or (b) if a Termination Event shall have occurred on or prior
to the Stock Purchase Date, transfer the liquidation or principal amount of the
Pledged Securities evidenced thereby, in each case subject to the applicable
conditions and in accordance with the applicable provisions of Article Five
hereof.
Upon the issuance of any new Unit Certificate under this Section, the
Company and the Unit Agent may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Unit Agent) connected therewith.
Every new Unit Certificate issued pursuant to this Section in lieu of
any destroyed, lost or stolen Unit Certificate shall constitute an original
additional contractual obligation of the Company and of the Holder, whether or
not the destroyed, lost or stolen Unit Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits and be subject
to all the obligations of the Principal Agreements equally and proportionately
with any and all other Unit Certificates delivered hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
settlement of mutilated, destroyed, lost or stolen Unit Certificates.
SECTION 307. Persons Deemed Owners.
Prior to due presentment of a Unit Certificate for registration of
transfer, the Company and the Unit Agent, and any agent of the Company or the
Unit Agent, may treat the Person in whose name such Unit Certificate is
registered as the owner of the Units evidenced thereby, for the purpose of
receiving payments of distributions or interest on the Pledged Securities,
receiving or making payments of Contract Fees and performance of the
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<PAGE> 25
underlying Purchase Contracts and for all other purposes whatsoever, whether or
not the payment of distributions or interest on the Pledged Securities or any
Contract Fee payable in respect of the Purchase Contracts constituting a part of
the Units evidenced thereby shall be overdue and notwithstanding any notice to
the contrary, and neither the Company nor the Unit Agent, nor any agent of the
Company or the Unit Agent, shall be affected by notice to the contrary.
Notwithstanding the foregoing, with respect to any Global Unit
Certificate, nothing herein shall prevent the Company, the Unit Agent or any
agent of the Company or the Unit Agent, from giving effect to any written
certification, proxy or other authorization furnished by any Depositary (or its
nominee), as a Holder, with respect to such Global Unit Certificate or impair,
as between such Depositary and owners of beneficial interests in such Global
Unit Certificate, the operation of customary practices governing the exercise of
rights of such Depositary (or its nominee) as Holder of such Global Unit
Certificate.
SECTION 308. Cancellation.
All Unit Certificates surrendered for delivery of Common Shares on or
after the Stock Purchase Date, transfer of Pledged Securities after the
occurrence of a Termination Event or registration of transfer or exchange shall,
if surrendered to any Person other than the Unit Agent, be delivered to the Unit
Agent and, if not already canceled, shall be promptly canceled by it. The
Company may at any time deliver to the Unit Agent for cancellation any Unit
Certificates previously authenticated, executed and delivered hereunder which
the Company may have acquired in any manner whatsoever, and all Unit
Certificates so delivered shall, upon Issuer Order, be promptly canceled by the
Unit Agent. No Unit Certificates shall be authenticated, executed on behalf of
the Holder and delivered upon transfer of, in exchange for or in lieu of any
Unit Certificates canceled as provided in this Section, except as expressly
permitted by this Agreement. All canceled Unit Certificates held by the Unit
Agent shall be disposed of as directed by Issuer Order.
If the Company or any Affiliate of the Company shall acquire any Unit
Certificate, such acquisition shall not operate as a cancellation of such Unit
Certificate unless and until such Unit Certificate is delivered to the Unit
Agent canceled or for cancellation.
SECTION 309. Units Not Separable.
For so long as the Purchase Contract underlying a Unit remains in
effect such Unit shall not be separable into its constituent parts, and the
rights and obligations of the Holder of such Unit in respect of the Pledged
Securities and Purchase Contract underlying such Unit may be acquired, and may
be transferred and exchanged, only as an integrated Unit. Other
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than a Unit Certificate, no Holder of a Unit, nor any transferee thereof, shall
be entitled to receive a certificate evidencing the ownership of Pledged
Securities or any other rights or obligations underlying such Unit for so long
as the Purchase Contract underlying such Unit remains in effect.
SECTION 310. Payments on the Units.
Contract Fees payable by the Company to the Holders, and all amounts
payable to Holders as required by Section 401 or 504(b), will be payable at the
office of the Unit Agent in The City of New York maintained for that purpose or,
at the option of the Company, by check mailed to the address of the Person
entitled thereto at such address as it appears on the relevant Unit Register on
the Record Date; provided, however, that for so long as any Units are evidenced
by Global Certificates, the Unit Agent will pay each such amount payable in
respect of such Units by wire transfer in same-day funds, no later than 2:00
p.m., New York City time, on the Business Day such amount is received by the
Unit Agent from the Collateral Agent or the Company (or, if such amount is
received by the Unit Agent after 1:00 p.m., New York City time, on a Business
Day or on a day that is not a Business Day, no later than 10:00 a.m., New York
City time, on the next succeeding Business Day), to the Depositary, to the
account or accounts designated by it for such purpose.
ARTICLE FOUR
THE PLEDGED SECURITIES
SECTION 401. Payments on the Pledged Securities.
On each Quarterly Payment Date, as provided by the terms of the Pledge
Agreement, subject to receipt by the Collateral Agent of the relevant payments
in respect of the Pledged Securities underlying any Holder's Units, (a) the
Collateral Agent shall, subject to Section 504(b), remit to the Unit Agent the
amount of such payments and (b) the Unit Agent shall pay the amount referred to
in clause (a) above, subject to receipt thereof by the Unit Agent from the
Collateral Agent, to the Person in whose name the Unit Certificate (or one or
more Predecessor Unit Certificates) evidencing such Units is registered at the
close of business on the Record Date next preceding such Quarterly Payment Date.
Payments on the Pledged Securities on the Stock Purchase Date are
addressed in Section 504.
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SECTION 402. Transfer of Pledged Securities Upon Occurrence of Termination
Event.
Upon the occurrence of a Termination Event and the transfer of the
Pledged Securities underlying each Holder's Units to the Unit Agent pursuant to
the terms of the Pledge Agreement, the Unit Agent shall request transfer
instructions with respect to such Pledged Securities from such Holder by written
request mailed to such Holder at his address as it appears in the relevant Unit
Register and shall give notice of such Termination Event to the Collateral
Agent. Thereafter, upon surrender to the Unit Agent of a Unit Certificate
evidencing a Holder's Units, with transfer instructions in proper form for
transfer of the underlying Pledged Securities, the Unit Agent shall transfer the
Pledged Securities evidenced by such Unit Certificate to such Holder in
accordance with such instructions; provided, however, that if the Pledged
Securities are to be transferred to a Person other than the Person in whose name
such Unit Certificate is registered, no such transfer shall be made unless the
Person requesting the transfer has paid any transfer and other taxes required by
reason of such transfer to a Person other than the registered Holder of such
Unit Certificate or has established to the satisfaction of the Company that such
tax either has been paid or is not payable. Until the foregoing conditions to
transfer any of the Pledged Securities underlying any Units has been met, the
Unit Agent shall hold such Pledged Securities as custodian for the Holder of
such Units.
If upon a Termination Event any Holder of Units would, after satisfying
the foregoing conditions, otherwise be entitled to receive (or have transferred
to such Holder's designee) Treasury Securities of any series having a principal
amount that is not an integral multiple of $1,000, such Holder shall instead be
entitled to receive (or have transferred to such Holder's designee) Treasury
Securities of such series in a principal amount equal to the next lower integral
multiple of $1,000 plus a portion of the net proceeds from the sale of Treasury
Securities of such series contemplated by the succeeding sentence representing
such Holder's interest therein. As soon as practicable after transfer to the
Unit Agent of the Pledged Securities as provided in the Pledge Agreement, the
Unit Agent shall, on behalf of all Holders who, by virtue of the preceding
sentence, will not be entitled to a portion of the Treasury Securities of any
series to which they would otherwise be entitled, aggregate and sell the
Treasury Securities of such series representing such portion to or through one
or more U.S. government securities dealers at then prevailing prices, deduct
from the proceeds of such sales all commissions and other out-of-pocket
transaction costs incurred in connection with such sales and, until the net
proceeds therefrom have been distributed to the Holders entitled thereto or
their designees, hold such proceeds in trust for such Holders.
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ARTICLE FIVE
THE PURCHASE CONTRACTS
SECTION 501. Purchase of Common Shares.
Each Holder of a Unit Certificate, by his acceptance thereof, agrees
that it has entered into and shall be bound by the underlying Purchase Contract
the terms and conditions of which are set forth in this Article Five. Each
Purchase Contract shall obligate the Holder of such Unit to purchase, and the
Company to sell, on the Stock Purchase Date, at a price equal to the Stated
Amount, a number of shares of Common Stock equal to the Settlement Rate, unless,
on or prior to the Stock Purchase Date, there shall have occurred a Termination
Event. The "Settlement Rate" is equal to (a) if the Average Trading Price (as
defined below) is greater than or equal to the Threshold Appreciation Price, -
of a Common Share per Purchase Contract, (b) if the Average Trading Price is
less than the Threshold Appreciation Price but is greater than the Stated
Amount, a fractional share of Common Share per Purchase Contract equal to the
Stated Amount divided by the Average Trading Price (rounded upward or downward
to the nearest 1/10,000th of a share or, if there is not a nearest 1/10,000th of
a share, to the next lower 1/10,000th of a share) and (c) if the Average Trading
Price is less than or equal to the Stated Amount, one Common Share per Purchase
Contract, in each case subject to adjustment as provided in Section 506. As
provided in Section 509, no fractional Common Shares will be issued upon
settlement of Purchase Contracts.
The Average Trading Price means the average of the Closing Prices per
Common Share on each of the twenty consecutive Trading Days ending on the last
Trading Day immediately preceding the Stock Purchase Date. The "Closing Price"
of the Common Shares on any date of determination means the closing sale price
(or, if no closing price is reported, the last reported sale price) of the
Common Shares on the New York Stock Exchange (the "NYSE") on such date or, if
the Common Shares are not listed for trading on the NYSE on any such date, as
reported in the composite transactions for the principal United States
securities exchange on which the Common Shares are so listed, or if the Common
Shares are not so listed on a United States national or regional securities
exchange, as reported by The NASDAQ Stock Market, or, if the Common Shares are
not so reported, the last quoted bid price for the Common Shares in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of the
Common Shares on such date as determined by a nationally recognized investment
banking firm retained for this purpose by the Company. A "Trading Day" means a
day on which the Common Shares (A) are not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (B) have traded at least once on the
national or regional
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<PAGE> 29
securities exchange or association or over-the-counter market that is the
primary market for the trading of the Common Shares.
Each Holder of a Unit Certificate evidencing Units, by his acceptance
thereof, irrevocably authorizes the Unit Agent to enter into and perform the
underlying Purchase Contracts on his behalf as his attorney-in-fact, agrees to
be bound by the terms and provisions thereof, covenants and agrees to perform
his obligations under such Purchase Contracts, consents to the provisions of the
Principal Agreements, irrevocably authorizes the Unit Agent to enter into and
perform the Pledge Agreement on his behalf as his attorney-in-fact, and consents
to and agrees to be bound by the Pledge of the Pledged Securities underlying
such Units pursuant to the Pledge Agreement. Each Holder of Units, by his
acceptance thereof, further irrevocably covenants and agrees that, unless such
Holder satisfies its obligations to the Company under the Purchase Contracts
underlying such Units as provided in Section 504(a), then to the extent and in
the manner provided in Section 504(b) and the Pledge Agreement, but subject to
the terms thereof, payments in respect of all or a portion of the principal of
or proceeds from the Pledged Securities on the Stock Purchase Date shall be paid
by the Collateral Agent to the Company in satisfaction of such Holder's
obligations under such Purchase Contract and such Holder shall acquire no right,
title or interest in such payments.
Upon registration of transfer of a Unit Certificate, the transferee
shall be bound (without the necessity of any other action on the part of such
transferee) by the terms of the Purchase Contracts evidenced thereby and by the
Pledge Agreement and the transferor shall be released from all such obligations
evidenced by the Unit Certificate so transferred. The Company covenants and
agrees, and each Holder of a Unit Certificate, by his acceptance thereof,
likewise covenants and agrees, to be bound by the provisions of this paragraph.
SECTION 502. Contract Fees.
Subject to Section 503, if any Contract Fees are or will be payable by
the Company to the Holders, the Company shall pay, prior to 1:00 p.m., New York
City time, on each Quarterly Payment Date to and including the Stock Purchase
Date, the Contract Fees payable in respect of each Purchase Contract to the
Person in whose name the Unit Certificate (or one or more Predecessor Unit
Certificates) evidencing such Purchase Contract is registered at the close of
business on the Record Date next preceding such Quarterly Payment Date. The
Company's obligations with respect to such Contract Fees are hereby expressly
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness, to the extent and in the manner set forth in the Guarantees.
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Each Unit Certificate delivered under this Agreement upon registration
of transfer of, in exchange for or in lieu of any other Unit Certificate shall
carry the rights to receive and obligations to pay Contract Fees accrued and
unpaid, and to accrue, which were carried by the Purchase Contracts evidenced by
such other Unit Certificate.
SECTION 503. Deferral of Payment Dates For Contract Fee.
So long as no default in the Company's obligations under the Principal
Agreements has occurred and is continuing, the Company shall have the right, at
any time prior to the Stock Purchase Date, to defer the payment of any or all of
the Contract Fees otherwise payable by the Company on any Quarterly Payment
Date, but only if the Company shall give the Holders and the Unit Agent written
notice of its election to defer such payment (specifying the amount to be
deferred) at least five Business Days prior to the earlier of (a) the next
succeeding Quarterly Payment Date or (b) the date the Company is required to
give notice of the Record Date or Quarterly Payment Date with respect to payment
of such Contract Fee to the NYSE or other applicable self-regulatory
organization or to Holders, or (c) the Record Date for such Quarterly Payment
Date. Any Contract Fees so deferred shall bear additional Contract Fees thereon
at a rate per annum equal to the Deferral Rate (computed on the basis of a
360-day year of twelve 30-day months), compounding on each succeeding Quarterly
Payment Date, until paid in full. Deferred Contract Fees (and additional
Contract Fees accrued thereon) shall be due on the next succeeding Quarterly
Payment Date except to the extent that payment is deferred pursuant to this
Section. No Contract Fees may be deferred to a date that is after the Stock
Purchase Date.
In the event the Company exercises its option to defer the payment of
Contract Fees payable by it, then, until all deferred Contract Fees (including
additional Contract Fees accrued thereon) and all deferred interest (including
additional interest accrued thereon) have been paid in full, the Company shall
not (a) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock, (b) make any payment of principal, interest or premium, if any,
on or repay, repurchase or redeem any debt securities of the Company that rank
pari passu with or junior in right of payment to the Guarantees or (c) make any
guarantee payments with respect to any guarantee by the Company if such
guarantee ranks pari passu or junior in right of payment to the Guarantees
(other than, in the case of clause (a) (i) dividends or distributions in, or
options, warrants or rights to subscribe for or purchase, common shares of the
Company, (ii) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (iii) as a result of a reclassification of the Company's
capital stock solely into shares of one or more classes or series of the
Company's capital stock or the exchange or conversion of one class or series
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of the Company's capital stock for another class or series of the Company's
capital stock, (iv) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the securities being converted or exchanged and (v)
purchases of common stock in connection with the Company's normal course issuer
mid-purchases or satisfaction by the Company of its obligations under any
benefit plans for its and its subsidiaries' directors, officers or employees or
any of the Company's dividend reinvestment plans).
SECTION 504. Payment of Purchase Price.
(a) A Holder of Units shall, by no later than 10:00 a.m., New York City
time, on the Stock Purchase Date, deliver to the Unit Agent payment of the
purchase price for the shares of Common Stock to be purchased pursuant to the
Purchase Contracts underlying such Units, which payment shall be made in lawful
money of the United States by certified or cashier's check payable to the order
of the Company in immediately available funds in an amount equal to the
aggregate Stated Amount of such Holder's Units.
By 12:00 noon, New York City time, on the Stock Purchase Date, the Unit
Agent shall (i) transfer to the Company all of the payments the Company is
entitled to receive as contemplated by the preceding sentence, (ii) notify the
Collateral Agent and the Company as to the number of Normal Units with respect
to which payment has been received as aforesaid (such Units being collectively
referred to as "Paid Units") and the number of Units with respect to which
payment has not been received as aforesaid (such Units being collectively
referred to as "Unpaid Units"), and (iii) request the Collateral Agent (with
notice of such request to the Company) to release the Pledged Securities
underlying the Paid Units (or, in the case of Treasury Securities, the cash
payments received thereon) from the Pledge and transfer such released Pledged
Securities (or such cash) to the Unit Agent for delivery to the Holders of such
Units entitled thereto, free and clear of the Company's security interest
therein.
By 1:00 p.m., New York City time, on the Stock Purchase Date, the
Collateral Agent shall, as provided by the terms of the Pledge Agreement, comply
with the request referred to in clause (iii) of the preceding sentence (subject
to the Company's right under the Pledge Agreement to prevent the Collateral
Agent from doing so to the extent the aggregate amount the Company has received
as contemplated by clause (i) of the preceding sentence is less than the
aggregate amount payable with respect to the Units referred to in such request).
The Unit Agent shall thereupon, subject to its receipt from the Collateral Agent
of the Pledged Securities (or cash) referred to in such request and subject to
Section 305, transfer such released Pledged Securities (or cash) to the
respective Holders entitled thereto in accordance with the settlement
instructions specified in the form of Settlement Instructions appearing
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on the Unit Certificates evidencing the Paid Units; provided, however, that if
any such Unit Certificate is not surrendered to the Unit Agent with the form of
Settlement Instructions thereon duly completed and executed, the Unit Agent
shall hold such Pledged Securities (or cash), and any distributions or interest
received on such Pledged Securities, as custodian for the Holder entitled
thereto, to be delivered to such Holder (without any interest thereon and
subject to Section 305) upon surrender of such Unit Certificate to the Unit
Agent (with the form of Settlement Instructions thereon duly completed and
executed).
(b) With respect to each Holder's Unpaid Units, pursuant to the terms
of the Pledge Agreement,
(i) the Collateral Agent shall deliver to the Company, out of
the proceeds from the payment at maturity of Treasury Securities,
underlying such Unpaid Units, an amount equal to the aggregate Stated
Amount of such Unpaid Units plus the unpaid Contract Fees, if any,
payable by such Holder to the Company in respect of such Unpaid Units
to satisfy in full such Holder's obligations under such Unpaid Units;
and
(ii) the Collateral Agent shall remit to the Unit Agent, on
behalf of such Holder, the remainder of the proceeds, if any, from the
Pledged Securities underlying such Unpaid Units for distribution to
such Holder.
The amount referred to in clause (ii) above shall, subject to receipt thereof by
the Unit Agent from the Collateral Agent, be paid to the Person in whose name
the Unit Certificate (or one or more Predecessor Unit Certificates) evidencing
such Unpaid Units is registered at the close of business on the Record Date next
preceding the Stock Purchase Date.
(c) Each Holder will be entitled to apply any unpaid amounts owing by
the Company to such Holder as a set-off to reduce, dollar-for-dollar, any
amounts then owing by such Holder to the Company in respect of such Holder's
Units, and such set-off amounts will be treated for all purposes as having been
paid in full by such Holder as required hereby.
(d) The Company shall not be obligated to issue any shares of Common
Stock in respect of a Purchase Contract or deliver any certificates therefor to
the Holder of the related Unit unless the Company shall have received payment in
full of the aggregate purchase price for Common Shares to be purchased
thereunder in the manner herein set forth (either directly or by operation of
set-off as contemplated by the preceding sentence).
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SECTION 505. Issuance of Common Shares.
As promptly as practicable on or after the Stock Purchase Date, upon
receipt by the Company of payment in full of the aggregate purchase price for
the Common Shares purchased by the Holders pursuant to the foregoing provisions
of this Article, and subject to Section 506(b), the Company shall deposit with
the Unit Agent, for the benefit of the Holders of the Units, one or more
certificates representing the Common Shares registered in the name of the Unit
Agent (or its nominee) as custodian for the Holders (such certificates for
Common Shares, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Purchase Contract Settlement
Fund") to which the Holders are entitled hereunder. Subject to the foregoing,
upon surrender of a Unit Certificate to the Unit Agent on or after the Stock
Purchase Date, with the form of Settlement Instructions thereon duly completed
and executed, the Holder of such Unit Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole Common
Shares which such Holder is entitled to receive pursuant to the provisions of
this Article Five (after taking into account all Units then held by such Holder)
together with cash in lieu of fractional shares as provided in Section 509 and
any dividends or distributions with respect to such shares constituting part of
the Purchase Contract Settlement Fund, but without any interest thereon, and the
Unit Certificate so surrendered shall forthwith be cancelled. Such shares shall
be registered in the name of the Holder or the Holder's designee as specified in
the form of Settlement Instructions appearing on the surrendered Unit
Certificate.
If any Common Shares issued in respect of a Purchase Contract are to be
registered to a Person other than the Person in whose name the Unit Certificate
evidencing such Purchase Contract is registered, no such registration shall be
made unless the Person requesting such registration has paid any transfer and
other taxes required by reason of such registration in a name other than that of
the registered Holder of the Unit Certificate evidencing such Purchase Contract
or has established to the satisfaction of the Company that such tax either has
been paid or is not payable.
SECTION 506. Adjustment of Settlement Rate.
(a) Adjustments for Dividends, Distributions, Stock Splits, Etc.
(1) In case the Company shall pay or make a dividend or other
distribution on any class of common stock of the Company in Common Shares, the
Settlement Rate in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be increased by dividing such Settlement
Rate by a fraction of which the numerator shall be the number of Common Shares
outstanding at the close of business on the date fixed for such determination
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and the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such increase
to become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of this
paragraph (1), the number of Common Shares at any time outstanding shall not
include shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of Common
Shares. The Company will not pay any dividend or make any distribution on Common
Shares held in the treasury of the Company.
(2) In case the Company shall issue rights, options or warrants to all
holders of its Common Shares (not being available on an equivalent basis to
Holders of the Units upon settlement of the Purchase Contracts underlying such
Units) entitling them, for a period expiring within 45 days after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants, to subscribe for or purchase Common Shares at a price per
share less than the Current Market Price per Common Share on the date fixed for
the determination of stockholders entitled to receive such rights, options or
warrants (other than pursuant to a dividend reinvestment plan), the Settlement
Rate in effect at the opening of business on the day following the date fixed
for such determination shall be increased by dividing such Settlement Rate by a
fraction of which the numerator shall be the number of Common Shares outstanding
at the close of business on the date fixed for such determination plus the
number of Common Shares which the aggregate of the offering price of the total
number of Common Shares so offered for subscription or purchase would purchase
at such Current Market Price and the denominator shall be the number of Common
Shares outstanding at the close of business on the date fixed for such
determination plus the number of Common Shares so offered for subscription or
purchase, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this paragraph (2), the number of Common Shares at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of Common Shares. The Company shall not issue any such rights, options
or warrants in respect of Common Shares held in the treasury of the Company.
(3) In case outstanding Common Shares shall be subdivided into a
greater number of Common Shares, the Settlement Rate in effect at the opening of
business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and, conversely, in case
outstanding Common Shares shall each be combined into a smaller number of Common
Shares, the Settlement Rate in effect at the opening of business on the day
following the day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case may be, to
become effective
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immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Share evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (2) of this Section, any dividend or distribution paid exclusively in
cash and any dividend or distribution referred to in paragraph (1) of this
Section), the Settlement Rate shall be increased so that the same shall equal
the rate determined by dividing the Settlement Rate in effect immediately prior
to the close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the Current Market Price per share of the Common Shares on the date fixed for
such determination less the then fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution filed with the Unit Agent) of the portion of the assets or evidences
of indebtedness so distributed applicable to one Common Share and the
denominator shall all be such Current Market Price per Common Share, such
adjustment to become effective immediately prior to the opening of business on
the day following the date fixed for the determination of stockholders entitled
to receive such distribution. In any case in which this paragraph (4) is
applicable, paragraph (2) of this Section shall not be applicable.
(5) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Shares cash (excluding any cash that is distributed in
a Reorganization Event to which Section 506(b) applies or as part of a
distribution referred to in paragraph (4) of this Section) in an aggregate
amount that, when combined with (I) the aggregate amount of any other
distributions to all holders of its Common Shares made exclusively in cash
within the 12 months preceding the date of payment of such distribution to the
extent such amount has not already been applied in a prior adjustment pursuant
to this paragraph (5) and (II) the aggregate of the cash plus the fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the date of expiration of
such tender or exchange offer, of the consideration paid in respect of any
tender or exchange offer by the Company or any of its subsidiaries for all or
any portion of the Common Stock expiring within the 12 months preceding the date
of payment of such distribution and in respect of which no adjustment pursuant
to paragraph (6) of this Section has been made, exceeds 15% of the product of
the Current Market Price per Common Share on the date fixed for the
determination of stockholders entitled to receive such distribution times the
number of Common Shares outstanding on such date (such excess portion of such
distribution being herein referred to as the "Excess Amount"), the Settlement
Rate shall be increased so that the same shall equal the rate determined by
dividing the Settlement Rate in effect immediately prior to the close of
business on the date fixed for the determination
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of stockholders entitled to receive such distribution by a fraction of which (i)
the numerator shall be the Current Market Price per Common Share on the date
fixed for such determination less an amount equal to (x) such Excess Amount
divided by (y) the number of Common Shares outstanding at the close of business
on the date fixed for such determination and (ii) the denominator shall be the
Current Market Price per Common Share on the date fixed for such determination,
such adjustment to become effective immediately prior to the opening of business
on the day following the date fixed for the determination of stockholders
entitled to receive such distribution.
(6) In case the Company or any subsidiary of the Company shall
consummate a tender or exchange offer for all or any portion of the Common
Shares and pay an aggregate consideration in respect thereof having a fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a Board Resolution) that, when combined with (I)
the aggregate of the cash plus the fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a Board
Resolution), as of the date of expiration of such tender or exchange offer, of
the consideration paid in respect of any other tender or exchange offer by the
Company or any of its subsidiaries for all or any portion of the Common Shares
expiring within the 12 months preceding the date of expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to this paragraph
(6) has been made and (II) the aggregate amount of any distributions to all
holders of the Company's Common Shares made exclusively in cash within 12 months
preceding the date of expiration of such tender or exchange offer to the extent
such amount has not already been applied in a prior adjustment pursuant to
paragraph (5) of this Section, exceeds 15% of the product of the Current Market
Price per share of the Common Stock on the date of expiration of such tender or
exchange offer times the number of Common Shares outstanding (including any
tendered shares) at the close of business on the date of such expiration, the
Settlement Rate shall be increased so that the same shall equal the rate
determined by dividing the Settlement Rate in effect immediately prior to the
close of business on the date of such expiration by a fraction of which (i) the
numerator shall be (A) the product of (I) the Current Market Price per Common
Share on the date of such expiration and (II) the number of Common Shares
outstanding (including any tendered shares) at the close of business on the date
of such expiration less (B) the amount of cash plus the fair market value
(determined as aforesaid) of the aggregate consideration paid in respect of such
tender or exchange offer and (ii) the denominator shall be the product of (A)
the Current Market Price per share of the Common Stock on the date of such
expiration and (B) the number of Common Shares outstanding (including any
tendered shares) at the close of business on the date of such expiration less
the number of shares acquired pursuant to such tender or exchange, such
adjustment to become effective immediately prior to the opening of business on
the day following the date of such expiration.
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(7) The reclassification of Common Shares into securities including
securities other than Common Stock (other than any reclassification upon a
Reorganization Event to which Section 506(b) applies) shall be deemed to involve
(i) a distribution of such securities other than Common Stock to all holders of
Common Stock (and the effective date of such reclassification shall be deemed to
be "the date fixed for the determination of stockholders entitled to receive
such distribution" and the "date fixed for such determination" within the
meaning of paragraph (4) of this Section), and (ii) a subdivision or
combination, as the case may be, of the number of Common Shares outstanding
immediately prior to such reclassification into the number of Common Shares
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (3) of this Section).
(8) The "Current Market Price" per Common Share on any day means the
average of the daily Closing Prices for the 5 consecutive Trading Days selected
by the Company commencing not more than 20 Trading Days before, and ending not
later than, the earlier of the day in question and the day before the "ex" date
with respect to the issuance or distribution requiring such computation. For
purposes of this paragraph, the term " 'ex' date", when used with respect to any
issuance or distribution, shall mean the first date on which the Common Shares
trade regular way on such exchange or in such market without the right to
receive such issuance or distribution.
(9) All adjustments to the Settlement Rate shall be calculated to the
nearest 1/10,000th of a Common Share (or, if there is not a nearest 1/10,000th
of a share, to the next lower 1/10,000th of a share). No adjustment in the
Settlement Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of this subparagraph are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
If an adjustment is made to the Settlement Rate pursuant to paragraph (1), (2),
(3), (4), (5), (6), (7) or (10) of this Section 506(a), an adjustment shall also
be made to the Average Trading Price solely to determine which of clauses (a),
(b) or (c) of the definition of Settlement Rate in Section 501 will apply on the
Stock Purchase Date. Such adjustment shall be made by multiplying the Average
Trading Price by a fraction of which the numerator shall be the Settlement Rate
immediately after such adjustment pursuant to paragraph (1), (2), (3), (4), (5),
(6), (7) or (10) of this Section 506(a) and the denominator shall be the
Settlement Rate immediately before such adjustment.
(10) The Company may make such increases in the Settlement Rate, in
addition to those required by this Section, as it considers to be advisable in
order to avoid or diminish
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any income tax to any holders of Common Shares resulting from any dividend or
distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock or from any event treated as such for income tax purposes or for any
other reasons.
(b) Adjustment for Consolidation, Merger or Other Reorganization Event.
In the event of (i) any consolidation or merger of the Company with or into
another Person (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Common Shares outstanding immediately
prior to the merger or consolidation is not exchanged for cash, securities or
other property of the Company or another corporation), (ii) any sale, transfer,
lease or conveyance to another Person of the property of the Company as an
entirety or substantially as an entirety, (iii) any statutory exchange of
securities of the Company with another Person (other than in connection with a
merger or acquisition) or (iv) any liquidation, dissolution or winding up of the
Company (any such event, a "Reorganization Event"), each Holder of Units will
thereafter be entitled to receive on the Stock Purchase Date with respect to
each Purchase Contract forming a part thereof, the kind and amount of
securities, cash and other property receivable upon such Reorganization Event by
a Holder of the number of Common Shares issuable on account of such Purchase
Contract if the Stock Purchase Date had occurred immediately prior to such
Reorganization Event, assuming such Holder of Common Shares is not a Person with
which the Company consolidated or into which the Company merged or which merged
into the Company or to which such sale or transfer was made, as the case may be
("constituent Person"), or an Affiliate of a constituent Person, and failed to
exercise his rights of election, if any, as to the kind or amount of securities,
cash and other property receivable upon such Reorganization Event (provided that
if the kind or amount of securities, cash and other property receivable upon
such Reorganization Event is not the same for each Common Share held immediately
prior to such Reorganization Event by other than a constituent Person or an
Affiliate thereof and in respect of which such rights of election shall not have
been exercised ("non-electing share"), then for the purpose of this Section the
kind and amount of securities, cash and other property receivable upon such
Reorganization Event by each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the non-electing shares).
In the event of such a Reorganization Event, the Person formed by such
consolidation, merger or exchange or the Person which acquires the assets of the
Company or, in the event of a liquidation or dissolution of the Company, the
Company or a liquidating trust created in connection therewith, shall execute
and deliver to the Unit Agent an agreement supplemental hereto providing that
the Holders of Outstanding Units shall have the rights provided by this Section
506. Such supplemental agreement shall provide for adjustments which, for events
subsequent to the effective date of such supplemental agreement, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section. The above provisions of this Section shall similarly apply to
successive Reorganization Events.
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SECTION 507. Notice of Adjustments and Certain Other Events.
(a) Whenever the Settlement Rate is adjusted as herein provided, the
Company shall:
(i) forthwith compute the adjusted Settlement Rate in
accordance with Section 506 and prepare and transmit to the Unit Agent
an Officers' Certificate setting forth the Settlement Rate, the method
of calculation thereof in reasonable detail, and the facts requiring
such adjustment and upon which such adjustment is based; and
(ii) within 10 Business Days following the occurrence of an
event that permits or requires an adjustment to the Settlement Rate
pursuant to Section 506 (or if the Company is not aware of such
occurrence, as soon as practicable after becoming so aware), provide a
written notice to the Holders of the Units of the occurrence of such
event and a statement in reasonable detail setting forth the method by
which the adjustment to the Settlement Rate was determined and setting
forth the adjusted Settlement Rate.
(b) The Unit Agent shall not at any time be under any duty or
responsibility to any holder of Units to determine whether any facts exist which
may require any adjustment of the Settlement Rate, or with respect to the nature
or extent or calculation of any such adjustment when made, or with respect to
the method employed in making the same. The Unit Agent shall not be accountable
with respect to the validity or value (or the kind or amount) of any Common
Shares, or of any securities or property, which may at the time be issued or
delivered with respect to any Purchase Contract; and the Unit Agent makes no
representation with respect thereto. The Unit Agent shall not be responsible for
any failure of the Company to issue, transfer or deliver any Common Shares
pursuant to a Purchase Contract or to comply with any of the duties,
responsibilities or covenants of the Company contained in this Article.
SECTION 508. No Fractional Shares.
No fractional shares or scrip representing fractional Common Shares
shall be issued or delivered upon settlement on the Stock Purchase Date. If Unit
Certificates evidencing more than one Purchase Contract shall be surrendered for
settlement at one time by the same Holder, the number of full Common Shares
which shall be delivered upon settlement shall be computed on the basis of the
aggregate number of Purchase Contracts evidenced by the Unit Certificates so
surrendered. Instead of any fractional Common Share which would otherwise be
deliverable upon settlement of any Purchase Contracts on the Stock Purchase
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Date, the Company, through the Unit Agent, shall make a cash payment in respect
of such fractional interest in an amount equal to such fraction times the
Average Trading Price. The Company shall provide the Unit Agent from time to
time with sufficient funds to permit the Unit Agent to make all cash payments
required by this Section 508 in a timely manner.
SECTION 509. Charges and Taxes.
The Company will pay all stock transfer and similar taxes attributable
to the initial issuance and delivery of the Common Shares pursuant to the
Purchase Contracts; provided, however, that the Company shall not be required to
pay any such tax or taxes which may be payable in respect of any exchange of or
substitution for a Unit Certificate evidencing a Purchase Contract or any
issuance of a Common Share in a name other than that of the registered Holder of
a Unit Certificate surrendered in respect of the Purchase Contracts evidenced
thereby, other than in the name of the Unit Agent, as custodian for such Holder,
and the Company shall not be required to issue or deliver such share
certificates or Unit Certificates unless or until the Person or Persons
requesting the transfer or issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
SECTION 510. Termination Event; Notice.
The Purchase Contracts and the obligations and rights of the Company
and the Holders thereunder, including, without limitation, all obligations and
rights to pay or receive any accrued or deferred Contract Fees or to settle such
Purchase Contracts pursuant to this Article Five, shall immediately and
automatically terminate, without the necessity of any notice or action by any
Holder, the Unit Agent or the Company, if, on or prior to the Stock Purchase
Date, a Termination Event shall have occurred. Upon the occurrence of a
Termination Event, the Company shall give written notice to the Unit Agent and
the Collateral Agent, at their addresses as they appear in the Unit Registers.
Upon and after the occurrence of a Termination Event, the provisions of this
Article Five (other than this Section 510) shall automatically terminate and be
of no further force or effect, and the Unit Certificates shall thereafter
represent only the right to receive the Pledged Securities forming a part of the
Units theretofore evidenced thereby in accordance with the provisions of Section
402 and the Pledge Agreement.
SECTION 511. Early Settlement.
(a) In the event of a merger or consolidation of the Company of the
type described in clause (i) of Section 506(b) in which the Common Shares
outstanding immediately prior to such merger or consolidation are exchanged for
consideration
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consisting of at least 30% cash or cash equivalents (any such event a "Cash
Merger"), then the Company (or the successor to the Company hereunder) shall be
required to offer the Holder of each Unit the right to settle the Purchase
Contract underlying such Unit prior to the Stock Purchase Date ("Early
Settlement") as provided herein. On or before the fifth Business Day after the
consummation of a Cash Merger the Company or, at the request and expense of the
Company, the Unit Agent shall give all Holders notice, in the manner provided in
Section 105, of the occurrence of the Cash Merger and of the right of Early
Settlement arising as a result thereof. The Company shall also deliver a copy of
such notice to the Unit Agent and the Collateral Agent.
Each such notice shall contain:
(i) the date, which shall be not less than 20 nor more than 30
days after the date of such notice, on which the Early Settlement will
be effected (the "Early Settlement Date");
(ii) the date, which shall be three Business Days prior to the
Early Settlement Date, by which the Early Settlement right must be
exercised;
(iii) the Settlement Rate in effect as a result of such Cash
Merger and the kind and amount of securities, cash and other property
receivable by the Holder upon settlement of each Purchase Contract
pursuant to Section 506(b);
(iv) a statement to the effect that all or a portion of the
Stated Amount payable by the Holder to settle the Purchase Contract
will be offset against the amount of cash so receivable upon exercise
of Early Settlement, as applicable;
(v) the instructions a Holder must follow to exercise the
Early Settlement right; and
(vi) a statement to the effect that accrued and unpaid
Contract Fees in respect of the Purchase Contracts for which Early
Settlement shall have been effected shall be payable on the Early
Settlement Date and that upon such payment Contract Fees on such
Purchase Contracts shall cease to accrue.
(b) To exercise an Early Settlement right, a Holder shall deliver to
the Unit Agent on or before 5:00 p.m., New York City time on the date specified
in the notice the Unit Certificate(s) with respect to which the Early Settlement
right is being exercised with the form of "Election to Settle Early" on the
reverse thereof duly completed accompanied by payment of the purchase price for
the property to be purchased pursuant to the Purchase
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Contracts underlying such Units, which payment shall be made in lawful money of
the United States by certified or cashier's check payable to the order of the
Company in immediately available funds in an amount equal to the aggregate
Stated Amount of the Units in respect of which the Early Settlement is being
effected less the amount of cash that otherwise would be deliverable by the
Company or its successor upon settlement of the Purchase Contract in lieu of
Common Shares pursuant to Section 506(b) and as described in the notice to
Holders.
(c) In the event an Early Settlement right shall be exercised by a
Holder in accordance with the terms hereof, (i) on the Early Settlement Date the
Company shall deliver or cause to be delivered by the Unit Agent to each such
exercising Holder the net cash, securities and other property to be received, as
provided herein, by such exercising Holder in respect of the number of Purchase
Contracts for which such Early Settlement right was exercised, together with all
accrued and unpaid Contract Fees to the Early Settlement Date payable on such
Purchase Contracts, in accordance with the settlement instructions provided by
such Holder and (ii) all references herein to Stock Purchase Date shall be
deemed to refer to such Early Settlement Date and all references to the form of
Settlement Instruction shall be deemed to refer to the form of Election to
Settle Early, as applicable.
(d) In the event that Early Settlement is effected with respect to less
than all of the Purchase Contracts underlying the Units evidenced by a Unit
Certificate, upon such Early Settlement the Company shall execute and the Unit
Agent shall authenticate, execute on behalf of the Holders and deliver to the
Holder thereof, at the expense of the Company, a Unit Certificate evidencing the
Units as to which Early Settlement was not effected.
ARTICLE SIX
REMEDIES
SECTION 601. Unconditional Rights of Holders.
Notwithstanding any other provision in this Agreement, the Holder of
any Unit shall have the right, which is absolute and unconditional but which is
subject to Section 510, to purchase Common Shares pursuant to the Purchase
Contract underlying such Unit and to receive payment of Contract Fees payable by
the Company to such Holder with respect to such Purchase Contract and, in each
such case, to institute suit for the enforcement of any such right, and such
rights shall not be impaired without the consent of such Holder.
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SECTION 602. Restoration of Rights and Remedies.
If any Holder of Units has instituted any proceeding to enforce any
right or remedy under this Agreement and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to such Holder,
then and in every such case, subject to any determination in such proceeding,
the Company and such Holder shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of such
Holder shall continue as though no such proceeding had been instituted.
SECTION 603. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement of
mutilated, destroyed, lost or stolen Unit Certificates in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Holders
of Units is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 604. Delay or Omission Not Waiver.
No delay or omission of any Holder to exercise any right or remedy
shall impair any such right or remedy or constitute a waiver of any such right.
Every right and remedy given by this Article or by law to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by such
Holders.
SECTION 605. Undertaking for Costs.
All parties to this Agreement agree, and each Holder of any Unit by his
acceptance of the Unit Certificate evidencing such Unit shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Agreement, or in any suit against
the Unit Agent for any action taken, suffered or omitted by it as Unit Agent,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided that the provisions of this Section shall not
apply to any suit instituted by the Company, to any suit instituted by the Unit
Agent, to any suit instituted by any Holder of Units, or group of Holders,
holding in the aggregate more than 10% of the number of Outstanding Units, or
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to any suit instituted by any Holder of Units for the enforcement of payments
due in respect of Pledged Securities or Contract Fees on Purchase Contracts
underlying such Units on or after the respective due dates therefor, or for
enforcement of the right to purchase Common Shares under the Purchase Contracts
constituting a part of such Units.
SECTION 606. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Unit Agent or the Holders, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE SEVEN
THE UNIT AGENT
SECTION 701. Certain Duties and Responsibilities.
(a)(i) The Unit Agent undertakes to perform, with respect to
the Units, such duties and only such duties as are specifically set
forth in this Agreement, and no implied covenants or obligations shall
be read into this Agreement against the Unit Agent; and
(ii) in the absence of bad faith or negligence on its part,
the Unit Agent may, with respect to the Units, conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Unit
Agent and conforming to the requirements of this Agreement, but in the
case of any certificates or opinions which by any provision hereof are
specifically required to be furnished to the Unit Agent, the Unit Agent
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Agreement but shall have no
duty to confirm or investigate the accuracy or mathematical
calculations or other facts stated therein.
(b) No provision of this Agreement shall be construed to relieve the
Unit Agent from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that
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(i) this Subsection shall not be construed to limit the effect
of Subsection (a) of this Section;
(ii) the Unit Agent shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Unit Agent was negligent in ascertaining the
pertinent facts; and
(iii) no provision of this Agreement shall require the Unit
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(c) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Unit Agent shall be subject to the provisions of
this Section.
SECTION 702. Notice of Default.
Within 90 days after the occurrence of any default by the Company
hereunder, of which a Responsible Officer of the Unit Agent has actual
knowledge, the Unit Agent shall transmit by mail to all Holders of Units, as
their names and addresses appear in the Unit Registers, notice of such default
hereunder, unless such default shall have been cured or waived.
SECTION 703. Certain Rights of Unit Agent.
Subject to the provisions of Section 701:
(a) the Unit Agent may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate, Issuer
Order or Issuer Request, and any resolution of the Board of Directors
of the Company may be sufficiently evidenced by a Board Resolution;
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(c) whenever in the administration of this Agreement the Unit
Agent shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Unit
Agent (unless other evidence be herein specifically prescribed) may, in
the absence of bad faith on its part, rely upon an Officers'
Certificate of the Company;
(d) the Unit Agent may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Unit Agent shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Unit Agent, in its
discretion, may make reasonable further inquiry or investigation into
such facts or matters related to the issuance of the Units and the
execution, delivery and performance of the Purchase Contracts as it may
see fit, and, if the Unit Agent shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney; and
(f) the Unit Agent may execute any of its powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Unit Agent shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
SECTION 704. Not Responsible for Recitals or Issuance of Units.
The recitals contained herein and in the Unit Certificates shall be
taken as the statements of the Company and the Unit Agent assumes no
responsibility for their correctness. The Unit Agent makes no representations as
to the validity or sufficiency of this Agreement or of the Units. The Unit Agent
shall not be accountable for the use or application by the Company of the
proceeds in respect of the Notes or Purchase Contracts.
SECTION 705. May Hold Units.
Any Unit Registrar or any other agent of the Company, or the Unit
Agent, in its individual or any other capacity, may become the owner or pledgee
of Units and may
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otherwise deal with the Company with the same rights it would have if it were
not Unit Registrar or such other agent, or the Unit Agent.
SECTION 706. Money Held in Trust.
Money held by the Unit Agent hereunder need not be segregated from
other funds except to the extent required by law. The Unit Agent shall be under
no obligation to invest or pay interest on any money received by it hereunder
except as otherwise agreed with the Company.
SECTION 707. Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Unit Agent from time to time reasonable
compensation for all services rendered by it hereunder as the Company
and the Unit Agent shall from time to time agree in writing;
(b) except as otherwise expressly provided herein, to
reimburse the Unit Agent upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Unit Agent in
accordance with any provision of this Agreement (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(c) to indemnify the Unit Agent and any predecessor Unit Agent
and their agents for, and to hold each of them harmless against, any
and all loss, damage, claim, liability or expense, including taxes
(other than taxes based upon, measured by or determined by the income
of the Unit Agent), incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of its duties hereunder, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
The provision of this Section 707 shall survive the termination of this
Agreement and the resignation or removal of the Unit Agent.
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SECTION 708. Unit Agent Required; Eligibility.
There shall at all times be an Unit Agent hereunder which shall be a
corporation or banking association organized and doing business under the laws
of the United States of America, any State thereof or the District of Columbia,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, subject to supervision or
examination by Federal or State authority and having a corporate trust office in
the Borough of Manhattan, The City of New York, if there be such a corporation
in the Borough of Manhattan, The City of New York qualified and eligible under
this Article and willing to act on reasonable terms. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Unit Agent shall cease to
be eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 709. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Unit Agent and no appointment of a
successor Unit Agent pursuant to this Article shall become effective until the
acceptance of appointment by the successor Unit Agent in accordance with the
applicable requirements of Section 710.
(b) The Unit Agent may resign at any time by giving written notice
thereof to the Company 60 days prior to the effective date of such resignation.
If the instrument of acceptance by a successor Unit Agent required by Section
710 shall not have been delivered to the Unit Agent within 30 days after the
giving of such notice of resignation, the resigning Unit Agent may petition any
court of competent jurisdiction for the appointment of a successor Unit Agent.
(c) The Unit Agent may be removed at any time by Act of the Holders of
a majority in number of the Outstanding Units delivered to the Unit Agent and
the Company.
(d) If at any time
(i) the Unit Agent fails to comply with Section 310(b) of the
TIA, as if the Unit Agent were an indenture trustee under an indenture
qualified under the TIA, after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Unit for at least
six months, or
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(ii) the Unit Agent shall cease to be eligible under Section
708 and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(iii) the Unit Agent shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Unit Agent or
of its property shall be appointed or any public officer shall take
charge or control of the Unit Agent or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (x) the Company by a Board Resolution may remove the
Unit Agent, or (y) any Holder who has been a bona fide Holder of a Unit for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Unit Agent
and the appointment of a successor Unit Agent.
(e) If the Unit Agent shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Unit Agent for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor Unit
Agent and shall comply with the applicable requirements of Section 710. If no
successor Unit Agent shall have been so appointed by the Company and accepted
appointment in the manner required by Section 710, any Holder who has been a
bona fide Holder of a Unit for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Unit Agent.
(f) The Company shall give, or shall cause such successor Unit Agent to
give, notice of each resignation and each removal of the Unit Agent and each
appointment of a successor Unit Agent by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders of Units as their names and
addresses appear in the Unit Registers. Each notice shall include the name of
the successor Unit Agent and the address of its Corporate Trust Office.
SECTION 710. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Unit Agent,
every such successor Unit Agent so appointed shall execute, acknowledge and
deliver to the Company and to the retiring Unit Agent an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring Unit
Agent shall become effective and such successor Unit Agent, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
agencies and duties of the retiring Unit Agent; but, on the request of the
Company or the successor Unit Agent, such retiring Unit Agent shall, upon
payment of its
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charges, execute and deliver an instrument transferring to such successor Unit
Agent all the rights, powers and trusts of the retiring Unit Agent and shall
duly assign, transfer and deliver to such successor Unit Agent all property and
money held by such retiring Unit Agent hereunder.
(b) Upon request of any such successor Unit Agent, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Unit Agent all such rights, powers and agencies
referred to in paragraph (a) of this Section.
(c) No successor Unit Agent shall accept its appointment unless at the
time of such acceptance such successor Unit Agent shall be qualified and
eligible under this Article.
SECTION 711. Merger, Conversion, Consolidation or Succession to Business.
Any corporation or banking association into which the Unit Agent may be
merged or converted or with which it may be consolidated, or any corporation or
banking association resulting from any merger, conversion or consolidation to
which the Unit Agent shall be a party, or any corporation or banking association
succeeding to all or substantially all the corporate trust business of the Unit
Agent, shall be the successor of the Unit Agent hereunder, provided such
corporation or banking association shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Unit Certificates
shall have been authenticated and executed on behalf of the Holders, but not
delivered, by the Unit Agent then in office, any successor by merger, conversion
or consolidation to such Unit Agent may adopt such authentication and execution
and deliver the Unit Certificates so authenticated and executed with the same
effect as if such successor Unit Agent had itself authenticated and executed
such Units.
SECTION 712. Preservation of Information; Communications to Holders.
(a) The Unit Agent shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders received by the Unit
Agent in its capacity as Unit Registrar.
(b) If three or more Holders (herein referred to as "applicants") apply
in writing to the Unit Agent, and furnish to the Unit Agent reasonable proof
that each such applicant has owned a Unit for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Agreement or under the Units and is accompanied by a copy
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of the form of proxy or other communication which such applicants propose to
transmit, then the Unit Agent shall, within five Business Days after the receipt
of such application, afford such applicants access to the information preserved
at the time by the Unit Agent in accordance with Section 712(a).
(c) Every Holder of Units, by receiving and holding the Unit
Certificates evidencing the same, agrees with the Company and the Unit Agent
that none of the Company, the Unit Agent nor any agent of any of them shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders in accordance with Section 712(b), regardless
of the source from which such information was derived.
SECTION 713. No Obligations of Unit Agent.
Except to the extent otherwise provided in this Agreement, the Unit
Agent assumes no obligations and shall not be subject to any liability under
this Agreement or any Purchase Contract in respect of the obligations of the
Holder of any Unit thereunder. The Company agrees, and each Holder of a Unit
Certificate, by his acceptance thereof, shall be deemed to have agreed, that the
Unit Agent's execution of the Unit Certificates on behalf of the Holders shall
be solely as agent and attorney-in-fact for the Holders, and that the Unit Agent
shall have no obligation to perform such Purchase Contracts on behalf of the
Holders, except to the extent expressly provided in Article Five hereof.
SECTION 714. Tax Compliance.
(a) The Unit Agent, on its own behalf and on behalf of the Company,
will comply with all applicable certification, information reporting and
withholding (including "backup" withholding) requirements imposed by applicable
tax laws, regulations or administrative practice with respect to (i) any
payments made with respect to the Units or (ii) the issuance, delivery, holding,
transfer, redemption or exercise of rights under the Units. Such compliance
shall include, without limitation, the preparation and timely filing of required
returns and the timely payment of all amounts required to be withheld to the
appropriate taxing authority or its designated agent.
(b) The Unit Agent shall comply with any direction received from the
Company with respect to the application of such requirements to particular
payments or Holders or in other particular circumstances, and may for purposes
of this Agreement rely on any such direction in accordance with the provisions
of Section 701(a)(ii) hereof.
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(c) The Unit Agent shall maintain all appropriate records documenting
compliance with such requirements, and shall make such records available, on
written request, to the Company or to its authorized representative within a
reasonable period of time after receipt of such request.
ARTICLE EIGHT
SUPPLEMENTAL AGREEMENTS
SECTION 801. Supplemental Agreements Without Consent of Holders.
Without the consent of any Holders, the parties to either Principal
Agreement, at any time and from time to time, may enter into one or more
agreements supplemental hereto or thereto, in form satisfactory to such parties,
for any of the following purposes:
(1) to evidence the succession of another Person to any such
party, and the assumption by any such successor of the covenants of
such party herein or therein and under the Units; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Unit Agent; or
(4) to make provision with respect to the rights of Holders
pursuant to the requirements of Section 506(b); or
(5) to cure any ambiguity, to correct or supplement any
provisions herein or therein which may be inconsistent with any other
provisions herein or therein, or to make any other provisions with
respect to such matters or questions arising under such Principal
Agreement, provided such action shall not adversely affect the
interests of the Holders.
SECTION 802. Supplemental Agreements with Consent of Holders.
With the consent of the Holders of not less than a majority of the
Outstanding Units, by Act of said Holders delivered to the parties to either
Principal Agreement, such parties (when authorized, in the case of the Company,
by a Board Resolution) may enter into an agreement or agreements supplemental to
such Principal Agreement for the purpose of
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modifying in any manner the terms of the Units, or the provisions of such
Principal Agreement or the rights of the Holders in respect of the Units;
provided, however, that no such supplemental agreement shall, without the
consent of the Holder of each Outstanding Unit affected thereby,
(1) change any payment date;
(2) change the amount or type of Pledged Securities required
to be pledged to secure obligations under the Units, impair the right
of the Holder of any Unit to receive distributions or interest payments
on the underlying Pledged Securities or otherwise adversely affect the
Holder's rights in or to such Pledged Securities;
(3) reduce the Contract Fees or other amounts receivable by
Holders in respect of Units or increase other amounts payable by
Holders in respect of Units or change any place where, or the coin or
currency in which, any Contract Fees or other amounts receivable or
payable in respect of Units are payable;
(4) impair the right to institute suit for the enforcement of
any Purchase Contract;
(5) reduce the number of Common Shares to be purchased
pursuant to any Purchase Contract, increase the price to purchase
Common Shares upon settlement of any Purchase Contract, change the
Stock Purchase Date or otherwise adversely affect the Holder's rights
under any Purchase Contract; or
(6) reduce the percentage of the Outstanding Units the consent
of whose Holders is required for any such supplemental agreement.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental agreement, but it shall
be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any supplemental
agreement to any Principal Agreement. If a record date is fixed, the Holders on
such record date, or their duly designated proxies, and only such Persons, shall
be entitled to consent to such supplemental agreement, whether or not such
Holders remain Holders after such record date; provided, that unless such
consent shall have become effective by virtue of the requisite percentage having
been obtained prior to the date which is 90 days after such record date, any
such consent
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<PAGE> 54
previously given shall automatically and without further action by any Holder be
cancelled and of no further effect.
SECTION 803. Execution of Supplemental Agreements.
In executing, or accepting the additional agencies created by, any
supplemental agreement permitted by this Article or the modifications thereby of
the agencies created by the Principal Agreements, the Unit Agent shall be
entitled to receive and (subject to Section 701) shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this Agreement. The Unit
Agent may, but shall not be obligated to, enter into any such supplemental
agreement which affects the Unit Agent's own rights, duties or immunities under
this Agreement or otherwise.
SECTION 804. Effect of Supplemental Agreements.
Upon the execution of any supplemental agreement under this Article,
the relevant Principal Agreement shall be modified in accordance therewith, and
such supplemental agreement shall form a part of such Principal Agreement for
all purposes; and every Holder of Unit Certificates theretofore or thereafter
authenticated, executed on behalf of the Holder and delivered hereunder shall be
bound thereby.
SECTION 805. Reference to Supplemental Agreements.
Unit Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any supplemental agreement pursuant to this
Article may, and shall if required by the Unit Agent, bear a notation in form
approved by the Unit Agent as to any matter provided for in such supplemental
agreement. If the Company shall so determine, new Unit Certificates so modified
as to conform, in the opinion of the Unit Agent and the Company, to any such
supplemental agreement may be prepared and executed by the Company and
authenticated, executed on behalf of the Holders and delivered by the Unit Agent
in exchange for Outstanding Unit Certificates evidencing the same number of
Units.
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<PAGE> 55
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 901. Covenant Not to Merge, Consolidate, Sell or Convey Property
Except Under Certain Conditions.
The Company covenants that it will not merge or consolidate with any
other Person or sell, assign, transfer, lease or convey all or substantially all
of its assets to any Person, unless (a) the Company shall be the continuing
corporation, or the successor (if other than the Company) shall be a corporation
organized and existing under the laws of Canada or the United States of America
or a Province or State thereof and such corporation shall assume the obligations
of the Company under the Purchase Contracts and the Pledge Agreement by one or
more supplemental agreements in form satisfactory to the Unit Agent and, in the
case of the Pledge Agreement, the Collateral Agent, executed and delivered to
the Unit Agent, and, in the case of the Pledge Agreement, the Collateral Agent
by such corporation, and (b) the Company or such successor corporation, as the
case may be, shall not, immediately after such merger or consolidation, or such
sale, assignment, transfer, lease or conveyance, be in default in the
performance of any covenant or condition under any Principal Agreement or under
any of the Units.
SECTION 902. Rights and Duties of Successor Corporation.
In case of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance and upon any such assumption by the successor corporation,
such successor corporation shall succeed to and be substituted for the Company
with the same effect as if it had been named in the Principal Agreements as the
Company. Such successor corporation thereupon may cause to be signed, and may
issue either in its own name or in the name of The Seagram Company Ltd., any or
all of the Unit Certificates evidencing Units issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the Unit
Agent; and, upon the order of such successor corporation, instead of the
Company, and subject to all the terms, conditions and limitations in this
Agreement prescribed, the Unit Agent shall authenticate and execute on behalf of
the Holders and deliver any Unit Certificates which previously shall have been
signed and delivered by the officers of the Company to the Unit Agent for
authentication and execution, and any Unit Certificate evidencing Units which
such successor corporation thereafter shall cause to be signed and delivered to
the Unit Agent for that purpose. All the Unit Certificates so issued shall in
all respects have the same legal rank and benefit under this Agreement as the
Unit Certificates theretofore or thereafter issued in accordance with the terms
of this Agreement as though all of such Unit Certificates had been issued at the
date of the execution hereof.
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<PAGE> 56
In case of any such consolidation, merger, sale or conveyance such
change in phraseology and form (but not in substance) may be made in the Unit
Certificates evidencing Units thereafter to be issued as may be appropriate.
SECTION 903. Opinion of Counsel to Unit Agent.
The Unit Agent, subject to Sections 701 and 703, shall be provided an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, assignment, transfer, lease or conveyance, and any such assumption,
complies with the provisions of this Article.
ARTICLE TEN
COVENANTS
SECTION 1001. Performance Under Purchase Contracts.
The Company covenants and agrees for the benefit of the Holders from
time to time of the Units that it will duly and punctually perform its
obligations under the Purchase Contracts in accordance with the terms of the
Purchase Contracts and this Agreement.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York an office or agency where Unit Certificates may be presented or surrendered
for acquisition of Common Shares upon settlement and for transfer of Pledged
Securities upon occurrence of a Termination Event, where Unit Certificates may
be surrendered for registration of transfer or exchange, where payment of
Contract Fees payable by the Company to the Holders may be made and where
notices and demands to or upon the Company in respect of the Units and this
Agreement may be served. The Company will give prompt written notice to the Unit
Agent of the location, and any change in the location, of such office or agency.
If at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Unit Agent with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office, and the Company hereby appoints the Unit Agent as its
agent to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where Unit Certificates may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to
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maintain an office or agency in the Borough of Manhattan, The City of New York
for such purposes. The Company will give prompt written notice to the Unit Agent
of any such designation or rescission and of any change in the location of any
such other office or agency. The Company hereby designates as the place of
payment for the Units the Corporate Trust Office and appoints the Unit Agent at
its Corporate Trust Office as paying agent in such city.
SECTION 1003. Company to Reserve Common Shares.
The Company shall at all times prior to the Stock Purchase Date reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Shares the full number of Common Shares issuable against tender
of payment in respect of all Purchase Contracts underlying the Units.
SECTION 1004. Covenants as to Common Shares.
The Company covenants that all Common Shares which may be issued
against tender of payment in respect of the Purchase Contracts underlying the
Units will, upon issuance, be newly issued (i.e., not issued out of treasury
shares) and be duly authorized, validly issued, fully paid and nonassessable.
SECTION 1005. Statements of Officers of the Company as to Default.
The Company will deliver to the Unit Agent, on or before - in each year
(beginning the first - after the date of the original issuance of the Units
hereunder) a brief certificate from the principal executive, financial or
accounting officer of the Company stating that in the course of the performance
by the signer of his or her duties as an officer of the Company he or she would
normally have knowledge of any default or non-compliance by the Company in the
performance of any covenants or conditions contained in this Agreement, stating
whether or not he or she has knowledge of any such default or non-compliance
and, if so, specifying each such default or non-compliance of which the signer
has knowledge and the nature thereof. For purposes of this Section 1005,
non-compliance or default shall be determined without regard to any grace period
or requirement of notice.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE SEAGRAM COMPANY LTD
By:
-------------------------------
THE BANK OF NEW YORK,
as Unit Agent
By:
-------------------------------
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<PAGE> 59
EXHIBIT A
FORM OF UNIT CERTIFICATE
THE SEAGRAM COMPANY LTD.
-% ADJUSTABLE CONVERSION-RATE EQUITY SECURITY UNITS
(STATED AMOUNT $- PER UNIT)
CUSIP No. -
No. ____ ____________ Units
This Unit Certificate certifies that Cede & Co. is the
registered Holder of the number of Units set forth above. Each Unit represents
the right to purchase Common Shares under a Purchase Contract with The Seagram
Company Ltd., a Canadian corporation (the "Company"), together with ownership of
the Subordinated Deferrable Notes of Joseph E. Seagram & Sons, Inc. (the
"Notes") or other Pledged Securities pledged to secure the obligations owed to
the Company under such Purchase Contract, subject to the pledge arrangements
securing the foregoing obligations.
Each Purchase Contract evidenced hereby is governed by and set
forth in a Master Unit Agreement, dated as of May __, 1999 (the "Master Unit
Agreement"), between the Company and The Bank of New York, as unit agent (herein
called the "Unit Agent"). All terms used herein which are not defined herein and
which are defined in the Master Unit Agreement have the meanings set forth
therein. The Pledge evidenced hereby is governed by the Pledge Agreement.
Reference is hereby made to the Master Unit Agreement and the Pledge Agreement,
and any supplemental agreements thereto, for a description of the respective
rights, limitations of rights, obligations, duties and immunities thereunder of
the Unit Agent, the Company, the Collateral Agent and the Holders. The summary
contained herein is qualified in its entirety by the provisions of the Principal
Agreements, and the Principal Agreements shall govern the rights of the parties
to the extent that there is any conflict between such summary and such
provisions.
Each Purchase Contract evidenced hereby obligates the Holder
of this Unit Certificate to purchase, and the Company to sell, on -, 2002 (the
"Stock Purchase Date"), at a price equal to $- per unit (the "Stated Amount"), a
number of Common Shares, having such terms as set forth in the Company's
Articles of Amalgamation, as amended from time to time ("Common Shares"), of the
Company equal to the Settlement Rate, unless on or prior to the Stock Purchase
Date there shall have occurred a Termination Event. The "Settlement
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<PAGE> 60
Rate" is equal to (a) if the Average Trading Price (as defined in the Master
Unit Agreement) is greater than or equal to $- (the "Threshold Appreciation
Price"), - of a Common Share per Purchase Contract, (b) if the Average Trading
Price is less than the Threshold Appreciation Price but is greater than the
Stated Amount, a fractional Common Share per Purchase Contract equal to the
Stated Amount divided by the Average Trading Price (rounded to the nearest
1/10,000th of a share or, if there is no nearest 1/10,000th of a share, rounded
downward to the nearest 1/10,000th of a share) and (c) if the Average Trading
Price is less than or equal to the Stated Amount, one Common Share per Purchase
Contract, in each case subject to adjustment as provided in the Master Unit
Agreement. No fractional Common Shares will be issued upon settlement of
Purchase Contracts, but instead of issuing any fractional interest the Company
shall make a cash payment as provided in the Master Unit Agreement. The purchase
price for the Common Shares to be purchased pursuant to each Purchase Contract
evidenced hereby, if not paid by 10:00 a.m., New York City time, on the Stock
Purchase Date, shall be paid by application of payments received by the Company
on the Stock Purchase Date from the Collateral Agent pursuant to the Pledge
Agreement in respect of the Pledged Securities pledged to secure such Holder's
obligations under such Purchase Contract.
The Purchase Contracts and the obligations and rights of the
Company and the Holders thereunder, including, without limitation, the rights
and obligations to receive and pay accrued or deferred Contract Fees, shall
immediately and automatically terminate, without the necessity of any notice or
action by any Holder, the Unit Agent or the Company, if, on or prior to the
Stock Purchase Date, a Termination Event shall have occurred. Upon and after the
occurrence of a Termination Event, the Collateral Agent shall release the
Pledged Securities from the Pledge. The Units shall thereafter represent the
right to receive the Pledged Securities forming a part of such Units in
accordance with the provisions of the Master Unit Agreement and the Pledge
Agreement.
The Company shall pay, on each -, -, - and -, commencing -,
1999 (each, a "Quarterly Payment Date"), in respect of each Purchase Contract
evidenced hereby, a fee (the "Contract Fee") accruing on the Stated Amount of
such Unit from and including the date of first issuance of any Units at a rate
per annum equal to -% (the "Contract Fee Rate") (computed on the basis of a
360-day year of twelve 30-day months and subject to deferral as described in the
Master Unit Agreement), plus any additional fees accrued thereon pursuant to
Section 503 of the Master Unit Agreement. The Company's obligations with respect
to Contract Fees shall be, to the extent provided in the Master Unit Agreement,
subordinate and subject in right of payment to all Senior Indebtedness.
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<PAGE> 61
Payments due to the Holder in respect of the Units evidenced
hereby will be payable to the Person in whose name this Unit Certificate is
registered at the close of business on the Record Date next preceding the
relevant payment date.
The transfer of any Unit Certificate will be registered and
Unit Certificates may be exchanged as provided in the Master Unit Agreement. The
Unit Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents permitted by the Master Unit Agreement. No
service charge shall be required for any such registration of transfer or
exchange, but the Company and the Unit Agent may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. For so long as the Purchase Contract underlying a Unit remains in
effect, such Unit shall not be separable into its constituent parts, and the
rights and obligations of the Holder of such Unit in respect of the Pledged
Securities and Purchase Contract constituting such Unit may be transferred and
exchanged only as an integrated Unit.
Upon registration of transfer of this Unit Certificate, the
transferee shall be bound (without the necessity of any other action on the part
of such transferee) by the terms of the Purchase Contracts evidenced hereby and
by the Pledge Agreement, and the transferor shall be released from such
obligations. The Company covenants and agrees, and the Holder, by his acceptance
hereof, likewise covenants and agrees, to be bound by the provisions of this
paragraph.
The Holder of this Unit Certificate, by his acceptance hereof,
irrevocably authorizes the Unit Agent to enter into and perform the related
Purchase Contracts evidenced hereby on his behalf as his attorney-in-fact,
agrees to be bound by the terms and provisions thereof, covenants and agrees to
perform his obligations under such Purchase Contracts, consents to the
provisions of the Principal Agreements, irrevocably authorizes the Unit Agent to
enter into and perform the Pledge Agreement on his behalf as his
attorney-in-fact, and consents to and agrees to be bound by the Pledge evidenced
hereby pursuant to the Pledge Agreement.
Subject to certain exceptions, the provisions of the Principal
Agreements may be amended with the consent of the Holders of at least a majority
of the Outstanding Units.
THE PURCHASE CONTRACTS SHALL FOR ALL PURPOSES BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
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<PAGE> 62
The Company, the Unit Agent and any agent of the Company or
the Unit Agent may treat the Person in whose name this Unit Certificate is
registered as the owner of the Units evidenced hereby for the purpose of
receiving payments of distributions or interest on the Pledged Securities,
receiving the rights and performing the obligations under the Purchase Contracts
and for all other purposes whatsoever, whether or not any payments in respect
thereof be overdue and notwithstanding any notice to the contrary, and neither
the Company, the Unit Agent nor any such agent shall be affected by notice to
the contrary.
THE PURCHASE CONTRACTS SHALL NOT, PRIOR TO THE
SETTLEMENT THEREOF, ENTITLE THE HOLDER TO ANY OF THE RIGHTS OF A
HOLDER OF COMMON SHARES.
Copies of the Principal Agreements are available for
inspection at the offices of the Unit Agent.
Unless the certificate of authentication hereon has been
executed by the Unit Agent by manual signature, this Unit Certificate shall not
be entitled to any benefit under the Principal Agreements or be valid or
obligatory for any purpose.
A-4
<PAGE> 63
IN WITNESS WHEREOF, the Company and the Holder hereby agree to
their respective obligations under the Purchase Contracts evidenced by this
instrument, and the Holder hereby acknowledges that the Pledged Securities
evidenced by this instrument are subject to the Pledge under the Pledge
Agreement.
THE SEAGRAM COMPANY LTD.
By:_________________________________
Attest: ______________________
HOLDER SPECIFIED ABOVE
By: THE BANK OF NEW YORK,
as Attorney-in-Fact of such Holder
By: ________________________________
Dated:
Unit Agent's Certificate of Authentication
This is one of the Unit Certificates referred to in the within
mentioned Master Unit Agreement.
THE BANK OF NEW YORK
as Unit Agent
By: ________________________________
A-5
<PAGE> 64
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for Common
Shares deliverable upon settlement on or after the Stock Purchase Date of the
Purchase Contracts underlying the number of Units evidenced by this Unit
Certificate be registered in the name of, and delivered, together with a check
in payment for any fractional share, to the undersigned at the address indicated
below unless a different name and address have been indicated below. If shares
are to be registered in the name of a Person other than the undersigned, the
undersigned will pay any transfer tax payable incident thereto.
Dated: ________________________ ____________________________________
Signature*
If shares are to be registered in the REGISTERED HOLDER
name of and delivered to a Person
other than the Holder, please print Please print name and address of
such Person's name and address: Registered Holder:
Name Name
Address Address
Social Security or other Taxpayer
Identification Number, if any
* Signature must be guaranteed by an eligible Guarantor Institution
(banks, stockbrokers, savings and loan associations and credit unions)
with membership in an approved signature medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15 if Common Shares are to
be delivered other than to, and in the name of, the registered Holder.
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<PAGE> 65
If shares are to be registered in the name REGISTERED HOLDER
of and delivered to a Person other than the
Holder, please print such Person's name and Please print name and address
address: of Registered Holder:
Name Name
Address Address
Social Security or other Taxpayer
Identification Number, if any
A-7
<PAGE> 66
ELECTION TO SETTLE EARLY
The undersigned Holder directs that a certificate for Common
Shares deliverable upon settlement on or after the Early Settlement Date of the
Purchase Contracts underlying the number of Units evidenced by this Unit
Certificate be registered in the name of, and delivered to the undersigned at
the address indicated below unless a different name and address have been
indicated below. If shares are to be registered in the name of a Person other
than the undersigned, the undersigned will pay any transfer tax payable incident
thereto.
Dated: ________________________ ____________________________________
Signature*
If shares are to be registered in the REGISTERED HOLDER
name of and delivered to a Person
other than the Holder, please print Please print name and address of
such Person's name and address: Registered Holder:
Name Name
Address Address
Social Security or other Taxpayer
Identification Number, if any
* Signature must be guaranteed by an eligible Guarantor Institution
(banks, stockbrokers, savings and loan associations and credit unions)
with membership in an approved signature medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15 if Common Shares are to
be delivered other than to, and in the name of, the registered Holder.
A-8
<PAGE> 1
Exhibit 4(c)
THE SEAGRAM COMPANY LTD.
AND
-
as Collateral Agent and Securities Intermediary
AND
THE BANK OF NEW YORK
as Unit Agent and as Attorney-In-Fact
FORM OF PLEDGE AGREEMENT
Dated as of -, 1999
<PAGE> 2
PLEDGE AGREEMENT, dated as of May -, 1999, between THE SEAGRAM COMPANY
LTD., a Canadian corporation (the "Company", as such term is more fully defined
in the Master Unit Agreement referred to below); -, as Collateral Agent, in its
capacity as a "securities intermediary" as defined in Section 8-102(a)(14) of
the Code (as defined herein) (in such capacity, the "Securities Intermediary"),
and THE BANK OF NEW YORK as Unit Agent and as attorney-in-fact of the Holders
from time to time of the Units.
RECITALS
The Company and the Unit Agent are parties to the Master Unit
Agreement, dated as of the date hereof (as the same may be supplemented or
amended from time to time in accordance with the terms thereof, the "Master Unit
Agreement"). The Master Unit Agreement contemplates that the Notes or Treasury
Securities that from time to time underlie the Units be pledged to the
Collateral Agent to secure the obligations of the Holders of Units under the
Purchase Contracts that underlie such Units.
Pursuant to the terms of the Principal Agreements and the Unit
Certificates, the Holders from time to time of the Units irrevocably authorize
the Unit Agent, as attorney-in-fact of such Holders, to execute and deliver this
Agreement on behalf of such Holders and to grant the pledge provided hereby of
the Pledged Securities underlying such Units as provided herein and subject to
the terms hereof.
Accordingly, the Company, the Collateral Agent and the Unit Agent, in
its capacity as Unit Agent and as attorney-in-fact of the Holders from time to
time of the Units, agree as follows:
SECTION 1. Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) capitalized terms used but not defined herein are used
herein as defined in the Master Unit Agreement;
(b) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision; and
<PAGE> 3
(c) all other terms contained herein shall, unless the context
indicates otherwise, have the meanings assigned to such terms by the
Code (as defined herein) to the extent the same are defined therein.
"Agreement" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Applicable Treasury Regulations" means Part 357 of Title 31 of the
Code of Federal Regulations (31 CFR Sections 357 et seq.) and any other
regulations of the United States Treasury Department from time to time
applicable to the transfer or pledge of book-entry Treasury Securities.
"Code" has the meaning specified in Section 2 hereof.
"Collateral" has the meaning specified in Section 2 hereof.
"Collateral Account" means the trust account (number -) maintained at -
in the name of "-, as Collateral Agent".
"Date of Deemed Receipt" means, with respect to any payment received by
the Collateral Agent, the date of receipt thereof; provided, however, that if
such payment is received on a date which is not a Quarterly Payment Date and is
not a payment in respect of defaulted interest on Notes, "Date of Deemed
Receipt" means, with respect to such payment, the Quarterly Payment Date next
succeeding such date of receipt.
"Pledged Securities" means all Notes constituting a part of the Units
and any Treasury Securities delivered in exchange for Notes in accordance with
Section 5(b) and (c) hereof (or securities entitlements thereto) in each case
that have been delivered to the Collateral Agent and not released by the
Collateral Agent to the Unit Agent under the provisions of this Agreement.
"Proceeds" means all interest, dividends, cash, instruments,
securities, financial assets (as defined in Article 8 of the Code) and other
property and proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Securities.
SECTION 2. The Pledge. The Holders from time to time of the Units
acting through the Unit Agent, as their attorney-in-fact, hereby pledge to the
Collateral Agent (for the benefit of the Company), and grant to the Collateral
Agent, for the benefit of the Company a security interest in all of the right,
title and interest of such Holders in and to (i) the Pledged Securities, (ii)
the Collateral Account and all securities, financial assets and other property
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<PAGE> 4
credited thereto and all security entitlements related thereto and (iii) all
proceeds from each of the foregoing (collectively, the "Collateral"), as
collateral security to ensure the performance when due by such Holders of their
respective obligations under the Purchase Contracts underlying such Units.
Concurrently with the execution of this Agreement, the initial Holders of the
first - Units issued under the Master Unit Agreement, the Unit Agent and the
Collateral Agent are causing $- aggregate principal amount of Notes to be
delivered to, and registered in the name of, the Collateral Agent, and such
Notes will thereupon constitute Pledged Securities forming a part of such Units.
As used in this Section 2, the term "delivery" shall have the meaning ascribed
to it in the Uniform Commercial Code as in effect in the State of New York (the
"Code"). In addition, the execution hereof by the Unit Agent and the Collateral
Agent shall constitute an acknowledgment by the Collateral Agent and Securities
Intermediary of the Pledge and of the Securities Intermediary's holding of such
Notes or other Pledged Securities substituted therefor in accordance with the
provisions hereof subject to the Pledge and of the Securities Intermediary's
crediting such Notes or other Pledged Securities to the Collateral Account for
purposes of perfecting the Pledge under applicable law, including, to the extent
applicable, the Uniform Commercial Code as adopted and in effect in any
applicable jurisdiction and the Applicable Treasury Regulations. Subject to the
Pledge, the Holders from time to time of the Units shall have full beneficial
ownership of the Pledged Securities underlying such Units, and shall be entitled
(directly or through the Collateral Agent) to all of the rights provided by such
Pledged Securities, and the Company shall have no rights with respect to such
Pledged Securities other than its security interest therein.
SECTION 3. Payments in Respect of the Pledged Securities. Any payment
received by the Collateral Agent in respect of the Pledged Securities underlying
any Unit shall be paid by the Collateral Agent, by wire transfer in same day
funds no later than 1:00 p.m., New York City time, on the Date of Deemed Receipt
(or, if the Date of Deemed Receipt is not a Business Day or if such payment is
received by the Collateral Agent after noon, New York City time, on the Date of
Deemed Receipt, then such payment shall be made by the Collateral Agent no later
than 10:00 a.m., New York City time, on the next succeeding Business Day), as
follows:
(a) in the case of payments not scheduled to fall on and that
are not in respect of amounts due on the Stock Purchase Date or Early
Settlement Date, as applicable, to the Unit Agent, to the account
designated by it for payments in respect of Normal Units or the account
designated by it for payments in respect of Stripped Units; and
(b) in the case of payments scheduled to fall on or that are
in respect of amounts due on the Stock Purchase Date or Early
Settlement Date, as applicable, (i) with respect to payments received
in respect of Units which are Paid Units (as specified in the notice
from the Unit Agent referred to in Section 4), to the Unit Agent, to
the account designated by it for payments in respect of Paid Units; and
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<PAGE> 5
(ii) with respect to payments received in respect of Units which are
Unpaid Units (as specified in the notice from the Unit Agent referred
to in Section 4), (x) first, to the Company, to the account designated
by it for such purpose, in an amount equal to the aggregate amount
payable to the Company in respect of such Unpaid Units, and (y) second,
to the extent of any amount remaining after the payment (if any)
referred to in (x) above, to the Unit Agent, to the account designated
by it for payments in respect of Unpaid Units; provided, however, that
if the Company disputes the notice from the Unit Agent referred to in
Section 4 and notifies the Collateral Agent in writing, prior to noon,
New York City time, on the Stock Purchase Date or Early Settlement
Date, as applicable, that the number of Paid Units or the number of
Unpaid Units (or both) is different from that indicated in such notice,
the foregoing payments with respect to any Paid Units or Unpaid Units
subject to dispute shall not be paid until such dispute is resolved.
All payments received by the Unit Agent as provided herein
shall be applied by the Unit Agent pursuant to the provisions of the Master Unit
Agreement.
SECTION 4. Notice with Respect to Numbers of Paid Units and Unpaid
Units. By 12:00 noon, New York City time, on the Stock Purchase Date or Early
Settlement Date, as applicable, the Unit Agent shall, as provided in the Master
Unit Agreement, notify the Company and the Collateral Agent as to the number of
Units which are Paid Units and the number of Units which are Unpaid Units.
SECTION 5. Release and Substitution of Pledged Securities. (a) Upon
notice to the Collateral Agent by the Company or the Unit Agent that there has
occurred a Termination Event, the Collateral Agent shall release all Pledged
Securities from the Pledge and shall transfer, without recourse, such released
Pledged Securities, free and clear of any lien, pledge or security interest
created hereby, to the Unit Agent for delivery by the Unit Agent pursuant to the
provisions of the Master Unit Agreement.
(b) On the Stock Purchase Date or Early Settlement Date, as applicable,
the Collateral Agent shall release the Notes underlying Units which are Paid
Units (as specified in the notice from the Unit Agent referred to in Section 4)
from the Pledge and transfer, without recourse, such released Notes, free and
clear of any lien, pledge or security interest created hereby, to the Unit Agent
for delivery pursuant to the provisions of the Master Unit Agreement; provided,
however, that if the Company disputes the notice from the Unit Agent referred to
in Section 4 and notifies the Collateral Agent, prior to noon, New York City
time, on the Stock Purchase Date or Early Settlement Date, as applicable, that
the number of Paid Units is different from that indicated in such notice, the
foregoing release with respect to any Paid Units subject to dispute shall not be
made until such dispute is resolved.
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<PAGE> 6
SECTION 6. Rights and Remedies. (a) The Collateral Agent shall have all
of the rights and remedies with respect to the Collateral of a secured party
under the Code (whether or not said Code is in effect in the jurisdiction where
the rights and remedies are asserted) and, with respect to Pledged Securities
which are Treasury Securities, the Applicable Treasury Regulations, and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be asserted.
(b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, in the event the Collateral Agent is unable
to make payments due to the Company pursuant to the Purchase Contracts
underlying any Units, the Collateral Agent shall have and shall exercise, upon
the written direction of the Company, with reference to the Pledged Securities
underlying such Units and the obligations of the Holders of such Units, any and
all of the rights and remedies available to a secured party under the Code and
the Applicable Treasury Regulations after default by a debtor, and as otherwise
granted herein or under any other law.
(c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably
authorized to receive and collect all payments of principal of or distributions
or interest on the Pledged Securities, in each case subject to the provisions
hereof.
(d) The Unit Agent and each Holder of Units agree that, from time to
time, upon the written request of the Collateral Agent, the Unit Agent or such
Holder of Units shall execute and deliver such further documents and do such
other acts and things as the Collateral Agent may reasonably request in order to
maintain the Pledge, and the perfection and priority thereof, and to confirm the
rights of the Collateral Agent hereunder.
SECTION 7. The Collateral Agent. The Collateral Agent and the Company
hereby agree among themselves as follows (it being understood and agreed that,
except as provided in Section 7.08, neither the Unit Agent nor any Holder of
Units shall have any rights or duties under this Section 7):
7.01 Appointment, Powers and Immunities. The Collateral Agent shall act
hereunder as agent for the Company, with such powers as are specifically vested
in the Collateral Agent by the terms of this Agreement, together with such other
powers as are reasonably incidental thereto. The Collateral Agent: (a) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and no implied covenants or obligations shall be inferred from this
Agreement against the Collateral Agent, nor shall the Collateral Agent be bound
by the provisions of any agreement by any party hereto beyond the specific terms
hereof; (b) shall not be responsible to the Company for any recitals contained
in this
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<PAGE> 7
Agreement, or in any certificate or other document referred to or provided for
in, or received by it under, this Agreement, the Units, the Master Unit
Agreement or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement (other than as against the Collateral Agent),
the Units, the Master Unit Agreement or any other document referred to or
provided for herein or therein or for any failure by the Company, or any other
Person (except the Collateral Agent) to perform any of its obligations hereunder
or thereunder; (c) shall not be required to initiate or conduct any litigation
or collection proceedings hereunder (except pursuant to directions furnished
under Section 7.02 hereof); (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other document or instrument
referred to or provided for herein or in connection herewith or therewith,
except for its own negligence or wilful misconduct; and (e) shall not be
required to advise any party as to selling or retaining, or taking or refraining
from taking any action with respect to, any Units or any property deposited
hereunder. Subject to the foregoing, during the term of this Agreement the
Collateral Agent shall take all reasonable action in connection with the
safekeeping and preservation of the Pledged Securities hereunder.
No provision of this Agreement shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder. In no event shall the Collateral
Agent be liable for any amount in excess of the value of the Pledged Securities.
7.02 Instructions of the Company. The Company shall have the right, by
one or more instruments in writing executed and delivered to the Collateral
Agent, to direct the time, method and place of conducting any proceeding for any
right or remedy available to the Collateral Agent, or of exercising any power
conferred on the Collateral Agent, or to direct the taking or refraining from
taking of any action authorized by this Agreement; provided, however, that (a)
such direction shall not conflict with the provisions of any law or of this
Agreement and (b) the Collateral Agent shall be adequately indemnified as
provided herein. Nothing in this Section 7.02 shall impair the right of the
Collateral Agent in its discretion to take any action or omit to take any action
which it deems proper and which is not inconsistent with such direction.
7.03 Reliance by Collateral Agent. The Collateral Agent shall be
entitled to rely upon any certification, order, judgment, opinion, notice or
other communication (including, without limitation, any thereof by telephone,
telecopy, telex, telegram or cable) believed by it to be genuine and correct and
to have been signed or sent by or on behalf of the proper Person or Persons
(without being required to determine the correctness of any fact stated
therein), and upon advice and statements of legal counsel and other experts
selected by the Collateral Agent. As to any matters not expressly provided for
by this Agreement, the Collateral Agent shall in all cases be fully protected in
acting, or in refraining from acting,
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<PAGE> 8
hereunder in accordance with instructions given by the Company in accordance
with this Agreement.
7.04 Rights in Other Capacities. The Collateral Agent and its
affiliates may (without having to account therefor to the Company) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company, the Unit Agent and
any Holder of Units as if it were not acting as the Collateral Agent, and the
Collateral Agent and its affiliates may accept fees and other consideration from
the Company, the Unit Agent and any Holder of Units without having to account
for the same to the Company, provided that the Collateral Agent covenants and
agrees with the Company that the Collateral Agent shall not accept, receive or
permit there to be created in its favor any security interest, lien or other
encumbrance of any kind in or upon the Pledged Securities, except as
contemplated by the terms hereof.
7.05 Non-Reliance on Collateral Agent. The Collateral Agent shall not
be required to keep itself informed as to the performance or observance by the
Unit Agent or any Holder of Units of this Agreement, the Master Unit Agreement,
the Units or any other document referred to or provided for herein or therein or
to inspect the properties or books of the Unit Agent or any Holder of Units. The
Collateral Agent shall not have any duty or responsibility to provide the
Company with any credit or other information concerning the affairs, financial
condition or business of the Unit Agent or any Holder of Units that may come
into the possession of the Collateral Agent or any of its affiliates.
7.06 Compensation and Indemnity. The Company agrees: (a) to pay the
Collateral Agent from time to time reasonable compensation as agreed upon for
all services rendered by it hereunder and (b) to indemnify the Collateral Agent
for, and to hold it harmless against, any loss, liability or expense including
taxes (other than taxes based upon, measured by or determined by the income of
the Collateral Agent) incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of its
powers and duties under this Agreement, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of such powers and duties. The provisions of this Section 7.06
shall survive the resignation or removal of the Collateral Agent and the
termination of this Agreement.
7.07 Failure to Act. In the event of any ambiguity in the provisions of
this Agreement or any dispute between or conflicting claims by or among the
undersigned and/or any other Person with respect to any funds or property
deposited hereunder, the Collateral Agent shall be entitled, at its sole option,
to refuse to comply with any and all claims, demands or instructions with
respect to such property or funds so long as such dispute or conflict shall
continue, and the Collateral Agent shall not be or become liable in any way to
any of the undersigned for its failure or refusal to comply with such
conflicting claims, demands or instructions. The Collateral Agent shall be
entitled to refuse to act until either
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<PAGE> 9
(a) such conflicting or adverse claims or demands shall have been finally
determined by a court of competent jurisdiction or settled by agreement between
the conflicting parties as evidenced in a writing satisfactory to the Collateral
Agent or (b) the Collateral Agent shall have received security or an indemnity
satisfactory to the Collateral Agent sufficient to save the Collateral Agent
harmless from and against any and all loss, liability or expense which the
Collateral Agent may incur by reason of its acting. The Collateral Agent may in
addition elect to commence an interpleader action or seek other judicial relief
or orders as the Collateral Agent may deem necessary. Notwithstanding anything
contained herein to the contrary, the Collateral Agent shall not be required to
take any action that is in its opinion contrary to law or to the terms of this
Agreement, or which would in its opinion subject it or any of its officers,
employees or directors to liability.
7.08 Resignation of Collateral Agent. Subject to the appointment and
acceptance of a successor Collateral Agent as provided below, (a) the Collateral
Agent may resign at any time by giving notice thereof to the Company and the
Unit Agent, (b) the Collateral Agent may be removed at any time by the Company,
and (c) if the Collateral Agent fails to perform any of its material obligations
hereunder in any material respect for a period of not less than 20 days after
receiving notice of such failure by the Unit Agent and such failure shall be
continuing, the Collateral Agent may be removed by the Unit Agent. The Unit
Agent shall promptly notify the Company of any removal of the Collateral Agent
pursuant to clause (c) of the immediately preceding sentence. Upon any such
resignation or removal, the Company shall have the right to appoint a successor
Collateral Agent. If no successor Collateral Agent shall have been so appointed
and shall have accepted such appointment within 30 days after the retiring
Collateral Agent's giving of notice of resignation or such removal, then the
retiring Collateral Agent may petition any court of competent jurisdiction for
the appointment of a successor Collateral Agent. The Collateral Agent shall be a
bank which has an office in New York, New York with a combined capital and
surplus of at least $50,000,000. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall take all appropriate action to transfer any
money and property held by it hereunder (including the Pledged Securities) to
such successor Collateral Agent. The retiring Collateral Agent shall, upon such
succession, be discharged from its duties and obligations as Collateral Agent
hereunder. After any retiring Collateral Agent's resignation hereunder as
Collateral Agent, the provisions of this Section 7 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
it was acting as the Collateral Agent.
7.09 Right to Appoint Agent or Advisor. The Collateral Agent shall have
the right to appoint agents or advisors in connection with any of its duties
hereunder, and the Collateral Agent shall not be liable for any action taken or
omitted by such agents or advisors selected in good faith.
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<PAGE> 10
7.10 Survival. The provisions of this Section 7 shall survive
termination of this Agreement and the resignation or removal of the Collateral
Agent.
SECTION 8 Miscellaneous.
8.01 Amendments. This Agreement may be amended in the manner set forth
in Section 801 of the Master Unit Agreement for supplemental agreements. In
executing any amendment permitted by this Section, the Collateral Agent shall be
entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such amendment is authorized or permitted by this Agreement and is for a purpose
set forth in Section 801 of the Master Unit Agreement, and that all conditions
precedent herein and in the Principal Agreements related to such amendment have
been satisfied.
8.02 No Waiver. No failure on the part of the Collateral Agent or any
of its agents to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral Agent
or any of its agents of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
8.03 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF. The Company, the Collateral Agent and the
Holders from time to time of the Units, acting through the Unit Agent as their
attorney-in-fact, hereby submit to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City for the purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. The Company, the Collateral Agent and the Holders from time to time
of the Units, acting through the Unit Agent as their attorney-in-fact,
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
8.04 Legal Holidays. In any case where any Quarterly Payment Date or
the Stock Purchase Date shall not be a Business Day, then (notwithstanding any
other provision of this Agreement or of the Units) the actions required by this
Agreement to occur on such date shall not occur on such date, but instead shall
occur on the next succeeding Business Day with the same force and effect as if
they had occurred on such Quarterly Payment Date or Stock Purchase Date, as the
case may be; except that if such next succeeding Business Day
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<PAGE> 11
is in the next calendar year, such actions shall occur on the immediately
preceding Business Day with the same force and effect as if made on such
Quarterly Payment Date or Stock Purchase Date.
8.05 Notices. All notices, requests, consents and other communications
provided for herein (including, without limitation, any modifications of, or
waivers or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telecopy) delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or, as to any party, at such other address as shall be designated by such
party in a notice to the other parties. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
8.06 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Company,
the Collateral Agent and the Unit Agent, and the Holders from time to time of
the Units, by their acceptance of the same, shall be deemed to have agreed to be
bound by the provisions hereof and to have ratified the agreements of, and the
grant of the Pledge hereunder by, the Unit Agent, as their attorney-in-fact.
8.07 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.08 Severability. If any provision hereof is invalid or unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible and (b) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
8.09 Expenses, etc. The Company agrees to reimburse the Collateral
Agent for: (a) all reasonable out-of-pocket costs and expenses of the Collateral
Agent (including, without limitation, the reasonable fees and expenses of
counsel to the Collateral Agent), in connection with (i) the negotiation,
preparation, execution and delivery or performance of this Agreement and (ii)
any modification, supplement or waiver of any of the terms of this Agreement;
(b) all reasonable costs and expenses of the Collateral Agent (including,
without limitation, reasonable fees and expenses of counsel) in connection with
(i) any enforcement or proceedings resulting or incurred in connection with
causing any Holder of Units to satisfy its obligations under the Purchase
Contracts forming a part of the Units and (ii) the enforcement of this Section
8.09; and (c) all transfer, stamp, documentary or other similar taxes,
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<PAGE> 12
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any other document referred to herein and all
costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated hereby.
8.10 Security Interest Absolute. All rights of the Collateral Agent and
security interests hereunder, and all obligations of the Holders from time to
time of the Units here under, shall be absolute and unconditional irrespective
of:
(a) any lack of validity or enforceability of any provision of
the Units or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
any other term of, or any increase in the amount of, all or any of the
obligations of Holders of Units under the related Purchase Contracts or
any other amendment or waiver of any term of, or any consent to any
departure from any requirement of, the Master Unit Agreement or any
Units or any other agreement or instrument relating thereto; or
(c) any other circumstance which might otherwise constitute a
defense available to, or discharge of, a borrower, a guarantor or a
pledgor.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE SEAGRAM COMPANY LTD.
By:
Name:
Title:
THE BANK OF NEW YORK,
as Unit Agent and as attorney-in-fact
of the Holders from time to time of the Units
By:
Name:
Title:
Address for Notices:
-,
as Collateral Agent
By:_________________________________
Name:
Title:
Address for Notices:
<PAGE> 1
Exhibit 5(a)
[SIMPSON THACHER & BARTLETT LETTERHEAD}
May 19, 1999
Joseph E. Seagram & Sons, Inc.
375 Park Avenue
New York, New York 10152
The Seagram Company Ltd.
1430 Peel Street
Montreal, Quebec
Canada H3A 1S9
Ladies and Gentlemen:
We have acted as counsel to Joseph E. Seagram & Sons, Inc., an
Indiana corporation (the "Company"), and The Seagram Company Ltd., a Canadian
corporation ("Seagram"), in connection with the Registration Statement on Form
S-3 (the "Registration Statement"), filed by the Company and Seagram with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act") relating to the issuance (together with any
additional securities that may be issued pursuant to Rule 462(b) (as prescribed
by the Commission pursuant to the Act) in connection with the offering described
in the Registration Statement) of (1) the Company's debt securities (the "Debt
Securities"), (2) the guarantees of Seagram which will be issued in connection
with the Debt Securities (the "Guarantees"), (3) share purchase contracts,
representing rights to
<PAGE> 2
Joseph E. Seagram & Sons, Inc.
The Seagram Company Ltd. -2- May 19, 1999
purchase common shares of Seagram (the "Stock Purchase Contracts"), (4) share
purchase units, which will be sold by Seagram and which represent ownership of
the Share Purchase Contracts, and the Debt Securities, securing the obligations
of holders under the Share Purchase Contracts and (5) common shares of Seagram,
without nominal or par value (the "Common Shares"), to be issued and sold by
Seagram.
We have examined (1) the Registration Statement, (2) the
Indenture, dated as of September 15, 1991 (the "Indenture"), among Seagram, the
Company and The Bank of New York, as trustee (the "Trustee") and (3) the form of
Master Unit Agreement to be executed by Seagram and The Bank of New York as unit
agent, which have each been filed with the Commission as exhibits to the
Registration Statement. We also have examined the originals, or duplicates or
certified or conformed copies, of such records, agreements, instruments and
other documents and have made such other and further investigations as we have
deemed relevant and necessary in connection with the opinions expressed herein.
As to questions of fact material to this opinion, we have relied upon
certificates of public officials and of officers and representatives of the
Company and Seagram.
In rendering the opinions set forth below, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as duplicates or certified
or conformed copies, and the authenticity of the originals of such latter
documents.
<PAGE> 3
Joseph E. Seagram & Sons, Inc.
The Seagram Company Ltd. -3- May 19, 1999
We have also assumed that the Indenture is the valid and legally
binding obligation of the Trustee. We have further assumed that (1) Seagram is
validly existing under the laws of Canada and has duly authorized, executed and
delivered the Indenture in accordance with its By-laws and Articles of
Amalgamation and the laws of Canada, (2) at the time of execution, issuance and
delivery of the Stock Purchase Contracts, the Master Unit Agreement will have
been duly authorized, executed and delivered by Seagram in accordance with its
By-laws and Articles of Amalgamation and the laws of Canada, (3) the execution,
delivery and performance by Seagram of the Indenture, the Master Unit Agreement,
the Stock Purchase Contracts and the Guarantees do not and will not violate the
laws of Canada or any other applicable laws (excepting the laws of the State of
New York and the federal laws of the United States) and (4) the execution,
delivery and performance by Seagram of the Indenture, the Master Unit Agreement,
the Stock Purchase Contracts and the Guarantees do not and will not constitute a
breach or violation of any agreement or instrument which is binding upon
Seagram.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. With respect to the Debt Securities to be issued under the
Indenture, assuming (a) the taking of all necessary corporate action to
approve the issuance and terms of the Debt Securities, the terms of the
offering thereof and related matters by the Board of Directors of the
Company, a duly constituted and acting committee of such Board or duly
authorized officers of the Company (such Board of Directors, committee
or authorized officers being hereinafter referred to as the "Company
Board") and (b) the due execution, authentication, issuance and
delivery of the Debt Securities, upon payment of the consideration
therefor provided for in the applicable definitive purchase,
<PAGE> 4
Joseph E. Seagram & Sons, Inc.
The Seagram Company Ltd. -4- May 19, 1999
underwriting or similar agreement approved by the Company Board and
otherwise in accordance with the provisions of the Indenture and such
agreement, the Debt Securities will constitute valid and legally
binding obligations of the Company enforceable against the Company in
accordance with their terms.
2. With respect to the Stock Purchase Contracts, assuming (a)
the taking of all necessary corporate action to approve the issuance
and terms of the Stock Purchase Contracts, the terms of the offering
thereof and related matters by the Board of Directors of Seagram, a
duly constituted and acting committee of such Board or duly authorized
officers of Seagram (such Board of Directors, committee or authorized
officers being hereinafter referred to as the "Seagram Board") and (b)
the due execution, issuance and delivery of the Stock Purchase
Contracts, upon payment of the consideration therefor provided for in
the applicable definitive purchase, underwriting or similar agreement
approved by the Seagram Board and otherwise in accordance with the
provisions of such agreement, the Stock Purchase Contracts will
constitute valid and legally binding obligations of Seagram enforceable
against Seagram in accordance with their terms.
3. With respect to the Guarantees, assuming (a) the taking of
all necessary corporate action to approve the issuance and terms of the
Guarantees and related matters by the Seagram Board, (b) the due
execution, authentication, issuance and delivery of the Debt Securities
upon payment of the consideration therefor provided for in the
applicable definitive purchase, underwriting or similar agreement
approved by the Company Board and otherwise in accordance with the
provisions of the Indenture and such agreement and (c) the due issuance
of the Guarantees, the Guarantees will constitute valid and legally
binding obligations of Seagram enforceable against Seagram in
accordance with their terms.
Our opinions set forth above are subject to the effects of (1)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, (2)
general equitable principles (whether considered in a proceeding in equity or at
law), (3) an implied covenant of good faith and fair dealing and (4) the effects
of the possible judicial application of foreign laws or foreign governmental or
judicial action affecting creditors' rights.
<PAGE> 5
Joseph E. Seagram & Sons, Inc.
The Seagram Company Ltd. -5- May 19, 1999
Insofar as the opinions expressed herein relate to or are
dependent upon matters governed by the laws of the State of Indiana (a copy of
which has been filed as Exhibit 5(c) to the Registration Statement), we have
relied upon the opinion of Barnes & Thornburg dated the date hereof.
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the federal law of the
United States, the law of the State of New York and, to the extent set forth
herein, the laws of the State of Indiana.
We hereby consent to the filing of this opinion letter as Exhibit
5(a) to the Registration Statement and to the use of our name under the caption
"Legal Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
SIMPSON THACHER & BARTLETT
<PAGE> 1
Exhibit 5(b)
[GOODMAN PHILLIPS & VINEBERG LETTERHEAD]
May 24, 1999
Joseph E. Seagram & Sons, Inc.
375 Park Avenue
New York, N.Y. 10152
U.S.A.
The Seagram Company Ltd.
1430 Peel Street
Montreal, Quebec
Canada
H3A 1S9
RE THE SEAGRAM COMPANY LTD.
JOSEPH E. SEAGRAM & SONS, INC.
ADJUSTABLE CONVERSION-RATE EQUITY SECURITY UNITS
Dear Sirs:
We are acting as Canadian counsel to The Seagram Company Ltd.
("Seagram") in connection with the Registration Statement on Form S-3 of Joseph
E. Seagram & Sons, Inc. (the "Company") and Seagram, under the Securities Act of
1933, as amended (the "Act") being filed today with the Securities and Exchange
Commission (the "Registration Statement"), relating to (a) the Company's
subordinated deferrable notes (the "Debt Securities") as well as guarantees of
Seagram (the "Guarantees"), to be issued in connection with Debt Securities and
(b) (i) stock purchase contracts (the "Stock Purchase Contracts") representing
rights to purchase equity securities of Seagram, (ii) common shares of Seagram
without nominal or par value (the "Common Shares") to be issued upon settlement
of the Stock Purchase Contracts, and (iii) stock purchase units (the "Stock
Purchase Units") each representing ownership of Stock Purchase Contracts and
Debt Securities or other debt obligations, including U.S. Treasury securities,
securing the obligations of holders under the Stock Purchase Contracts (Debt
Securities, Guarantees, Common Shares, Stock Purchase Contracts and Stock
Purchase Units being collectively referred to as the "Securities"), to be issued
and sold by the Company and Seagram under the Act for an aggregate initial
offering price not to exceed US $1,150,000,000.
We have examined (i) the Articles of Amalgamation and By-Laws of
Seagram and (ii) the Indenture, dated as of September 15, 1991, among the
Company, Seagram and The Bank of New York, as trustee (the "Indenture"),
pursuant to which Debt Securities may be issued.
<PAGE> 2
- 2 -
In addition, we have examined, and have relied as to matters of fact
upon, originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments and such certificates or comparable documents of public officials
and of officers and representatives of the Company and Seagram, and have made
such other and further investigations, as we have deemed relevant and necessary
as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
In addition, we have assumed that (i) the Registration Statement will
have become effective; (ii) a Prospectus will have been prepared and filed with
the Securities and Exchange Commission describing the Securities offered
thereby; (iii) all Securities issued will be issued and sold in compliance with
applicable United States, federal and state, and Canadian, federal and
provincial, securities laws and solely in the manner stated in the Registration
Statement and the Prospectus; (iv) a definitive purchase, underwriting or
similar agreement (the "Underwriting Agreement") with respect to the Securities
offered will have been duly authorized and validly executed and delivered by the
Company, Seagram and the other parties thereto and will constitute a valid and
legally binding obligation of the Company and Seagram under applicable United
States, federal and state, laws; (v) any Common Shares issuable upon settlement
of the Stock Purchase Contracts being offered will have been duly reserved for
issuance upon such settlement; (vi) the Indenture constitutes a valid and
legally binding obligation of the Company and Seagram under the laws of the
State of New York and the United States respectively; (vii) any Stock Purchase
Contract or Contracts and any Stock Purchase Unit or Units will have been duly
authorized and validly executed and delivered by Seagram and the other parties
thereto and will constitute a valid and legally binding obligation of Seagram
under applicable United States, federal and state, laws; (viii) the Debt
Securities will have been duly authorized, validly executed, authenticated or
countersigned, issued, registered and delivered with the Guarantees endorsed
thereon, against payment therefor, in accordance with the terms of the Indenture
and the Underwriting Agreement and in accordance with the United States, federal
and state, laws, and that the Debt Securities and the Guarantees endorsed
thereon, if so authorized, executed, authenticated, countersigned, issued,
registered, endorsed and/or delivered, as the case may be, respectively
constitute valid and legally binding obligations of the Company and/or Seagram,
as the case may be, in accordance with and subject to the respective terms
thereof, under the United States, federal and state, laws, and (ix) the
Underwriting Agreement, the Stock Purchase Contracts and the Stock Purchase
Units will be governed by the laws of the State of New York.
Based upon and subject to the foregoing, we are of the opinion that:
1. With respect to Guarantees, when (i) all necessary corporate action has
been taken by
<PAGE> 3
- 3 -
Seagram to authorize the issuance and terms of the Guarantees, the terms of
the offering thereof and related matters, (ii) the Guarantees have been
duly executed, countersigned, validly issued and delivered and endorsed by
Seagram on the Debt Securities in accordance with the laws of Canada and
the United States, federal or state, laws, the provisions of the applicable
agreement relating to the Guarantees and the Underwriting Agreement, and
(iii) the Guarantees, if so authorized, executed, countersigned, issued,
delivered and endorsed respectively, are legally issued and constitute
valid and legally binding obligations of Seagram, in accordance with and
subject to the terms thereof under the United States, federal or state,
laws, the Guarantees will be validly issued and constitute valid and
legally binding obligations of Seagram under the laws of the Province of
Quebec and the laws of Canada applicable therein in accordance with and
subject to the terms thereof;
2. With respect to Common Shares, when (i) all necessary corporate action has
been taken by Seagram to authorize the issuance and terms of the offering
of the Common Shares and related matters, and (ii) certificates
representing the Common Shares have been duly executed, countersigned,
registered and delivered upon settlement of the Stock Purchase Contracts,
in accordance with the terms thereof as approved by or on behalf of the
Board of Directors of Seagram, for the consideration approved by or on
behalf of the Board, the Common Shares will be validly issued, as fully
paid and non-assessable; and
3. With respect to Stock Purchase Contracts, when (i) all necessary corporate
action has been taken by Seagram to authorize the creation of and issuance
and terms of the Stock Purchase Contracts, the terms of the offering
thereof and related matters, and (ii) the Stock Purchase Contract or
Contracts have been duly authorized and have been validly executed and
delivered by Seagram and the other parties thereto, in accordance with the
Underwriting Agreement, upon payment of any consideration therefor provided
for therein, the Stock Purchase Contracts will be duly authorized and
validly issued.
Our opinion set forth in paragraph 1 above is subject to:
(i) the effects of applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, arrangement, moratorium and other
laws relating to or affecting the enforcement of creditors'
rights generally;
(ii) general equitable principles or principles to substantially the
same effect in civil law and a requirement to act with
reasonableness and good faith and in a manner which is not
excessive;
(iii) the discretion of a court which may pronounce the nullity of the
Guarantees, order the reduction of the obligations arising
therefrom or revise the terms and conditions of the obligations
of Seagram thereunder to the extent that a court finds that,
having regard to the risk and to all the circumstances, Seagram
has suffered
<PAGE> 4
- 4 -
lesion;
(iv) the unavailability of discretionary remedies such as an order of
specific performance and an injunction when damages are
considered an adequate remedy;
(v) the Currency Act (Canada) which precludes a court in Canada from
giving a judgment in any currency other than Canadian currency;
(vi) the Criminal Code (Canada) which prohibits the reception of
interest at an effective annual rate that exceeds 60% of the
credit advanced (taking into account all charges, fees and other
such expenses); and
(vi) the application of United States, federal and state, laws by a
court in the Province of Quebec or the recognition and
enforcement by a court in the Province of Quebec of a final and
conclusive judgment for a sum of money obtained in the United
States, with respect to the Guarantees.
We are members of the Bar of the Province of Quebec and we do not
express any opinion herein concerning any law other than the laws of the
Province of Quebec and the laws of Canada applicable therein. We understand that
you are relying, as to matters of the laws of the States of New York and Indiana
and the United States, on the opinions of Simpson Thacher & Bartlett, United
States counsel for Seagram, and Barnes & Thornburg, United States counsel for
the Company, which are being delivered to you and filed with the Securities and
Exchange Commission today as an exhibit to the Registration Statement.
This opinion letter is rendered to you in connection with the
above-described transactions. This opinion letter may not be relied upon by you
for any other purpose, or relied upon, or furnished to, any other person, firm
or corporation without our prior written consent; provided, however, that we
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to us under the caption "Legal Matters" in the
Prospectus forming a part thereof.
This opinion (including the consent set forth in the preceding
paragraph) applies to any Securities registered pursuant to Rule 462(b) under
the Act and may be incorporated by reference into any registration statement
filed pursuant to such Rule with respect to such Securities.
Yours truly,
Goodman Phillips & Vineberg
<PAGE> 1
Exhibit 5(c)
[BARNES & THORNBURG LETTERHEAD]
May 6, 1999
Joseph E. Seagram & Sons, Inc.
375 Park Avenue
New York, New York 10152
The Seagram Company Ltd.
1430 Peel Street
Montreal, Quebec
Canada H3A 1S9
Ladies and Gentleman:
We are acting as Indiana counsel to Joseph E. Seagram & Sons, Inc., an
Indiana corporation (the "Company"), in connection with the Registration
Statement on Form S-3 of the Company and The Seagram Company Ltd., a Canadian
corporation (the "Guarantor"), under the Securities Act of 1933, as amended (the
"Act"), being filed today with the Securities and Exchange Commission (the
"Registration Statement"), which Registration Statement also constitutes
post-effective amendments (the "Post-Effective Amendments") to registration
statements on Form S-3 (Registration Nos. 333-62921 and 333-4136) of the Company
and the Guarantor, relating to the Company's (i) debt securities consisting of
debentures, notes and/or other unsecured evidences of indebtedness ("Debt
Securities"), in one or more series, (ii) Class A Preferred Stock ("Preferred
Stock"), in one or more series, and (iii) warrants ("Warrants") to purchase Debt
Securities or Preferred Stock, as well as guarantees of the Guarantor
("Guarantees"), which may be issued in connection with Debt Securities,
Preferred Stock and Warrants (Debt Securities, Preferred Stock and Warrants are
collectively referred to as the "Securities"), to be issued and sold by the
Company and, if applicable, the Guarantor from time to time pursuant to Rule 415
under the Act for an aggregate initial offering price not to exceed
$2,770,000,000 (or the equivalent thereof in foreign denominated currencies or
composite currencies).
We have examined, and have relied as to matters of fact upon, originals
or copies, certified or otherwise identified to our satisfaction, of such
corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth. In such examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such latter documents.
<PAGE> 2
Joseph E. Seagram & Sons, Inc.
The Seagram Company Ltd.
May 6, 1999
Page 2
In addition, we have assumed that (i) the Registration Statement and
the Post-Effective Amendments will have become effective; (ii) a Prospectus
Supplement will have been prepared and filed with the Securities and Exchange
Commission describing the Securities offered thereby; (iii) all Securities
issued will be issued and sold in compliance with applicable federal and state
securities laws and solely in the manner stated in the Registration Statement,
the Post-Effective Amendments, and the appropriate Prospectus Supplement; (iv) a
definitive purchase, underwriting or similar agreement with respect to any
Securities offered will have been duly authorized and validly executed and
delivered by the Company, the Guarantor (when applicable) and the other parties
thereto and will be governed by the laws of the State of New York; and (v) any
securities issuable upon conversion, exchange or exercise of any Security being
offered will be duly authorized, created and, if appropriate, reserved for
issuance upon such conversion, exchange or exercise.
Based on the foregoing, we are of the opinion that, under the laws of
the State of Indiana:
(1) With respect to the Debt Securities, when (i) all
necessary corporate action has been taken by the Company to approve the
issuance and terms of such Debt Securities, the terms of the offering
thereof and related matters, and (ii) such Debt Securities shall have
been duly executed, authenticated, issued and delivered in accordance
with the laws of the State of Indiana and the State of New York, the
provisions of the Indenture dated as of September 15, 1991 (the
"Indenture"), among the Company, the Guarantor and The Bank of New
York, as Trustee, a copy of which has been incorporated by reference as
an exhibit to the Registration Statement, and the applicable definitive
purchase, underwriting, or similar agreement approved by the Board of
Directors of the Company (the "Board") or by an officer of the Company
acting pursuant to authority delegated by the Board, upon payment of
the consideration therefor provided for therein, such Debt Securities
will be validly issued and will constitute valid and legally binding
obligations of the Company, in accordance with and subject to the terms
thereof. We express no opinion as to any corporate action required to
be taken by either the Guarantor or The Bank of New York, as Trustee,
and, for purposes of this opinion, expressly assume that all required
corporate action has been duly and validly taken by each of them.
(2) With respect to Preferred Stock, when (i) all necessary
corporate action has been taken by the Company to approve the issuance
and terms of the Preferred Stock, the terms of the offering thereof and
related matters, and (ii) certificates representing the shares of
Preferred Stock have been duly executed, countersigned, registered and
delivered either (a) in accordance with the applicable definitive
purchase, underwriting or similar agreement approved by the Board or by
an executive officer of the Company acting pursuant to authority
delegated by the Board, upon payment of the consideration therefor
provided for therein, or (b) upon conversion or exercise of any other
security, in accordance with the terms of such security or the
instrument governing such security providing for such conversion or
exercise as approved by the Board or by an executive officer of the
Company
<PAGE> 3
Joseph E. Seagram & Sons, Inc.
The Seagram Company Ltd.
May 6, 1999
Page 3
acting pursuant to authority delegated by the Board, for the
consideration approved by the Board or by such an officer, the
Preferred Stock will be validly issued, fully paid and non-assessable.
We express no opinion as to any corporate action required to be taken
by the Guarantor, and, for purposes of this opinion, expressly assume
that all required corporate action has been duly and validly taken by
it.
(3) With respect to Warrants, assuming that the applicable
Warrant Agreement or Agreements are governed by the law of the State of
New York and when (i) all necessary corporate action has been taken by
the Company to approve the creation of and issuance and terms of the
Warrants, the terms of the offering thereof and related matters, (ii)
the Warrant Agreement or Agreements relating to the Warrants have been
duly authorized and validly executed and delivered by the Company and
the Warrant Agent appointed by the Company, and (iii) the Warrants or
certificates representing the Warrants have been duly executed,
countersigned, registered and delivered in accordance with the
appropriate Warrant Agreement or Agreements and the applicable
definitive purchase, underwriting or similar agreement approved by the
Board or by an executive officer of the Company acting pursuant to
authority delegated by the Board, upon payment of the consideration
therefor provided for therein, the Warrants will be duly authorized and
validly issued. We express no opinion as to any corporate action
required to be taken by the Guarantor, and, for purposes of this
opinion, expressly assume that all required corporate action has been
duly and validly taken by it.
Our opinions set forth above are subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
We are qualified to practice law in the State of Indiana. We do not
purport to be experts on any law other than the laws of the United States or the
State of Indiana. We are not expressing any opinion concerning any law other
than the laws of the State of Indiana, and, insofar as Indiana law is involved,
we are not expressing any opinion concerning either the applicability of, or
compliance with, Indiana laws relating to the distribution of securities.
This opinion letter is rendered to you in connection with the
above-described transactions, and may not be relied upon by you for any other
purpose, or relied upon, or furnished to, any other person, firm or corporation
without our prior written consent; provided, however, that we hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and the
Post-Effective Amendments and to the reference to us under the caption "Legal
Matters" in the Prospectus forming a part thereof.
<PAGE> 4
Joseph E. Seagram & Sons, Inc.
The Seagram Company Ltd.
May 6, 1999
Page 4
This opinion (including the consent set forth in the preceding
paragraph) applies to any Securities registered pursuant to Rule 462(b) under
the Act and may be incorporated by reference into any registration statement
filed pursuant to such Rule with respect to such Securities.
Very truly yours,
BARNES & THORNBURG
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
OF THE SEAGRAM COMPANY LTD.
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated August 12, 1998, except as to Note 1
which is as of August 25, 1998, relating to the financial statements, which
appears in The Seagram Company Ltd.'s Annual Report on Form 10-K for the year
ended June 30, 1998, as amended. We also consent to the incorporation by
reference of our report dated August 12, 1998 relating to the financial
statement schedule, which appears in such Annual Report on Form 10-K, as
amended. We also consent to the references to us under the headings "Experts"
and "Selected Historical Consolidated Financial Data" in such Registration
Statement.
PricewaterhouseCoopers LLP
New York, New York
May 24, 1999
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS OF POLYGRAM N.V.
We consent to incorporation by reference in the Prospectus constituting
part of the Registration Statement on Form S-3 of The Seagram Company Ltd. and
Joseph E. Seagram & Sons, Inc. of our Report dated February 11, 1998, relating
to the Consolidated Balance Sheets of PolyGram N.V. as of December 31, 1996 and
1997, and the related Consolidated Statements of Income, Consolidated Statements
of Cash Flows and Consolidated Statements of Changes in Shareholders' Equity for
each of the years in the three-year period ended December 31, 1997 of PolyGram
N.V., incorporated by reference in The Seagram Company Ltd.'s Form 8-K dated
August 25, 1998, as amended. We also consent to the reference to our firm under
the heading "Experts" in such Prospectus.
KPMG Accountants N.V.
Amsterdam, The Netherlands
May 24, 1999
