Execution Copy
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INVESTOR AGREEMENT
by and among
THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
A&P LUXEMBOURG S.a.r.l
and
METRO INC.
Dated as of August 15, 2005
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The term "Confidential" indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
INVESTOR AGREEMENT
THIS INVESTOR AGREEMENT is made and entered into and effective as of the 15th day of August, 2005, by and among The Great Atlantic & Pacific Tea Company, Inc., a
Maryland corporation ("A&P"), A&P Luxembourg S.a.r.l., a Luxembourg societe a responsabilite limitee (the "Investor" and, together with A&P, the "A&P Parties"), and Metro Inc., a Quebec corporation (the "Company").
RECITALS
WHEREAS, pursuant to a stock purchase agreement dated as of July 19, 2005 by and among A&P, the Investor, the Company and 4296711 Canada Inc., a Canadian corporation and a wholly owned subsidiary of the Company, (the "Stock Purchase Agreement"), the Company has purchased all of the issued and outstanding shares of The Great Atlantic and Pacific Tea Company, a Nova Scotia unlimited liability Company from the Investor;
WHEREAS, pursuant to the Stock Purchase Agreement, the Company has issued to the Investor 18,076,645 Class A Subordinate Shares of the Company (the "Consideration Shares");
WHEREAS, the Parties wish to enter into this Agreement to provide for certain mutual rights and obligations in respect of the Investor's investment in the Company; and
WHEREAS, as a significant shareholder of the Company, the A&P Parties will have certain rights under this Agreement to participate on the Board of Directors and the committees thereof, and the Company will value the significant expertise and management experience that the Investor Designees of the A&P Parties will bring to these roles.
NOW, THEREFORE, in consideration of the foregoing, the representations, warranties, covenants and agreements set forth in this Agreement, and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions
Capitalized terms used in this Agreement shall have the meanings set forth in this Agreement. In addition, for purposes of this Agreement, the following terms, when used in this Agreement, shall have the meanings assigned to them in this Section 1.1.
"1933 Act" means the United States Securities Act 1933, as amended.
"1934 Act" means the Unites States Securities Exchange Act of 1934, as amended.
"A&P" shall have the meaning set forth in the first paragraph of this Agreement.
"A&P Parties" shall have the meaning set forth in the first paragraph of this Agreement.
"A&P Indemnified Parties" shall have the meaning set forth in Section 7.5.
"Action" mans any action, cause of action, demand, claim, charge, prosecution, complaint, investigation, suit, litigation, assessment, reassessment, grievance, arbitration, hearing or other proceeding, whether civil, criminal or administrative, at Law or in equity, by or before any Governmental Entity.
"Affiliate" means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person. A Person shall be deemed to control another Person if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Investor Agreement, as the same may be amended or supplemented.
"Alternative Sale" shall have the meaning set forth in Section 4.18.
"Asserted Liability" shall have the meaning set forth in Section 7.8.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day other than a Saturday, a Sunday or a day on which banks are required to be closed in New York, New York or Toronto, Ontario or Montreal, Quebec.
"Canadian Securities Authorities" means the British Columbia Securities Commission, Alberta Securities Commission, Saskatchewan Financial Services Commission, Securities Division, The Manitoba Securities Commission, Ontario Securities Commission, Autorite des marches financiers (Quebec), Justice Securities Administration (New Brunswick), Nova Scotia Securities Commission, Registrar of Securities (Prince Edward Island), Securities Commission of Newfoundland and Labrador, and any of their successors.
"Canadian Securities Laws" means the securities legislation of each of the provinces and territories of Canada, as amended from time to time, and the rules, regulations, blanket orders and orders having application to the Company and forms made or promulgated under such legislation and the policies and instruments of one or more of the Canadian Securities Authorities.
"Claim Notice" shall have the meaning set forth in Section 7.8.
"Company" shall have the meaning set forth in the first paragraph of this Agreement.
"Company Indemnified Parties" shall have the meaning set forth in Section 7.6.
"Consideration Shares" shall have the meaning set forth in the Recitals to this Agreement.
"Contract" means any contract, agreement, commitment, franchise, indenture, lease, purchase order or license, including amendments thereto.
"Demand Qualification" means the qualification of Qualifiable Securities by the Company pursuant to Section 4.1.
"GAAP" means generally accepted accounting principles in Canada, as in effect from time to time.
"Governmental Entity" means any Canadian federal, provincial, municipal or local government, or any other governmental, regulatory or administrative authority, or any agency, board, department, commission, court, tribunal or instrumentality thereof.
"Indemnified Party" shall have the meaning set forth in Section 7.8.
"Indemnifying Party" shall have the meaning set forth in Section 7.8.
"Investor" shall have the meaning set forth in the first paragraph of this Agreement.
"Investor Designees" shall have the meaning set forth in Section 2.1.
"Law" means any statute, code, rule, regulation, order, ordinance, judgment, decree or other pronouncement of any Governmental Entity having the effect of law.
"Losses" shall have the meaning set forth in Section 7.1.
"Material Adverse Effect" means any change or event that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on the business or results of operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, other than any change or event relating to or arising out of: (i) general economic conditions (including changes or events in the financial, banking, currency and capital markets) in the Province of Quebec, Canada; (ii) conditions generally affecting the industries in which any of the Company and its Subsidiaries operate, other than any such conditions that have a materially disproportionate adverse effect on the Company and its Subsidiaries, taken as a whole; (iii) changes in Law or in GAAP; (iv) any actions taken, or failures to take action, or such other changes or events, in each case, to which the Investor has consented in writing; (v) the commencement or material worsening of a war or armed hostilities or other national or international calamity involving Canada or the United States whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon Canada or the United States, or any of their respective territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of Canada or the United States or (vi) the announcement of, or the taking of any action contemplated by, the Share Purchase Agreement and the transactions contemplated thereby, including by reason of the identity of the A&P Parties.
"Non-Canadian Opportunities" shall have the meaning set forth in Section 2.6.
"Notice Period" shall have the meaning set forth in Section 7.8.
"Offer" shall have the meaning set forth in Section .
"Offer Period" shall have the meaning set forth in Section 3.2.
"Offered Shares" shall have the meaning set forth in Section 3.2.
"Other Holders" means any party, other than the A&P Parties, to which the Company grants registration rights or qualification rights.
"Percentage Ownership of the Investor" means, at any applicable time, the percentage of the issued and outstanding Shares represented by the number of Shares beneficially held by A&P and its Affiliates (other than any Affiliate that is directly or indirectly a shareholder of A&P), including the Investor, in each case on an undiluted basis. The Percentage Ownership of the Investor will be calculated in accordance with the following:
(a) Subject to clauses (b) and (c), no effect will be given to any changes
in the number of issued and outstanding Shares after the date of this
Agreement that would have the effect of reducing the Percentage
Ownership of the Investor.
(b) If the Percentage Ownership of the Investor would, but for the
application of clause (a), be reduced below ten percent (10%) or five
percent (5%), as the case may be, clause (a) will, subject to clause
(c), continue to have application to such calculation for a period of
five (5) years from the date of such reduction, following which clause
(a) will cease to have such application unless, prior to the
expiration of such five (5) year period, A&P and its Affiliates (other
than any Affiliate that is directly or indirectly a shareholder of
A&P) increase the Percentage Ownership of the Investor (calculated
without the application of clause (a)) to such applicable percentage,
in which case clause (a) will again have application as if it had
never ceased to have application.
(c) If A&P and its Affiliates (other than any Affiliate that is directly
or indirectly a shareholder of A&P) during the five (5) year period
referred to in clause (b) sell more than twenty-five percent (25%) of
the Shares they held at the beginning of that period, clause (a) will
cease to have application.
"Person" means an association, a corporation, an individual, a partnership, a limited partnership, a limited liability company, an unlimited liability company, a trust or any other entity or organization, including a Governmental Entity.
"Piggy-Back Qualification" means the qualification of Qualifiable Securities by the Company pursuant to Section 4.2.
"Qualifiable Securities" means (i) the Shares held by A&P and its Affiliates, including the Investor, (ii) any Shares or other securities issued or issuable pursuant to or with respect to the Shares held by A&P and its Affiliates, including the Investor, upon any stock split, subdivision, redivision, reduction, consolidation, stock dividend, recapitalization or other change, and (iii) any securities issued in reclassification or replacement of or exchange for any of the securities referred to in clauses (i) or (ii) above.
"Qualifying Jurisdictions" means each of the provinces and territories of Canada.
"Receipt Date" means the date on which a final receipt or an equivalent document is issued in respect of a prospectus by or on behalf of one of the securities authorities in the Qualifying Jurisdictions.
"Sale Period" shall have the meaning set forth in Section 3.2.
"Shares" means the Class A Subordinate Shares in the capital of the Company.
"Stock Purchase Agreement" shall have the meaning set forth in the Recitals to this Agreement.
"Underwriter's Cutback" means the right of the underwriters to exclude Qualifiable Securities in an underwritten offering pursuant to Section 4.9.
"Violation" shall have the meaning set forth in Section 7.1.
ARTICLE 2
GOVERNANCE
2.1 Investor Designees to Board of Directors and Committees
The Investor shall be entitled to designate candidates for election or appointment to the Board of Directors and for appointment to committees of the Board of Directors (the "Investor Designees") as follows:
(a) if the Percentage Ownership of the Investor is ten percent (10%) or
more, the Investor shall be entitled to two (2) Investor Designees on
the Board of Directors and one (1) of such Investor Designees shall,
at the discretion of the Investor, serve on each committee of the
Board of Directors.
(b) if the Percentage Ownership of the Investor is less than ten percent
(10%), the Investor shall be entitled to one (1) Investor Designee on
the Board of Directors and such Investor Designee shall, at the
discretion of the Investor, serve on each of two (2) committees of the
Board of Directors selected by the Investor.
2.2 Qualifications of Investor Designees
Each Investor Designee shall be an individual who:
(a) is qualified to act as a director under the Companies Act (Quebec) and
under Canadian Securities Laws;
(b) meets the reasonable competencies and expectations of directors
established from time to time by the Corporate Governance Committee of
the Company; and
(c) with respect to each Investor Designee who will serve on any committee
of the Board of Directors, is considered to be independent under
Canadian Securities Laws where such independence is required under
Canadian Securities Laws.
2.3 Election or Appointment of Investor Designees
The Company shall solicit proxies from its shareholders to vote in favour of, and shall otherwise use its best efforts to achieve, the election and re-election from time to time of each of the Investor Designees to the position of director on the Board of Directors. The initial Investor Designees shall be appointed or elected to the Board of Directors as soon as possible, provided that the Company shall not be required to call a special meeting of shareholders for such purpose, but may first solicit proxies to vote in favour of the election of such initial Investor Designees at the next annual general meeting of the Company (to be held in January 2006) or any special meeting of shareholders otherwise called by the Company prior to the next annual general meeting. Until such initial Investor Designees are elected to the Board:
(a) such initial Investor Designees shall have the right to attend, as
observers, all in person and telephonic meetings of the Board of
Directors (and participate in all conference calls or informal
meetings of the Board of Directors) and all in person and telephonic
meetings of committees of the Board of Directors, and to receive
copies of all materials distributed to members of the Board of
Directors and such committees, as applicable, provided that such
Investor Designees agree to be subject to the same confidentiality,
loyalty, fiduciary and other similar duties to which members of the
Board of Directors are subject under applicable Law (subject to
Section 2.6) to the extent that they so participate prior to their
election or appointment to the Board of Directors; and
(b) to the extent any vacancies arise on the Board of Directors, the Board
of Directors will appoint up to two (2) Investor Designees to fill
such vacancies.
2.4 Vacancies
In the event of a vacancy among the Investor Designees resulting from the death, incapacity, resignation or removal of such individual, such vacancy shall be filled by another Investor Designee as directed by the Investor.
2.5 A&P Obligation to Support Election
Subject to compliance by the Company with its obligations in Section 2.3, A&P and its Affiliates (other than any Affiliate that is directly or indirectly a shareholder of A&P), including the Investor, shall from time to time recommend to shareholders that they vote in favour of, and vote all of the Shares they own in favour of, the election of the nominees to the Board of Directors listed in each of the Company's proxy circulars.
2.6 Corporate Opportunities
The Company acknowledges that the Investor Designees may be directors or officers of A&P and its Affiliates who will owe fiduciary duties to A&P and its Affiliates. The Company also acknowledges and agrees that any corporate opportunities that come to the attention of any of the Investor Designees from time to time shall not be considered corporate opportunities belonging to the Company, and such Investor Designees shall have no fiduciary or other obligations to provide or make available such corporate opportunities to or for the benefit of the Company, to the extent that such corporate opportunities relate to any geographic area outside of Canada ("Non-Canadian Opportunities"). The A&P Parties acknowledge that the Investor Designees may be asked to be absent from any portion of a meeting of the Board of Directors or any committee to the extent that Non-Canadian Opportunities are to be discussed during such portion of the meeting, and that information relating to Non-Canadian Opportunities may be omitted from Board of Directors and committee materials distributed to the Investor Designees.
2.7 Equity Accounting by A&P
The Company will cooperate with A&P and its Affiliates and at the reasonable request of A&P do such other things and make such further assurances as will assist A&P and its Affiliates to account for their investment in the Company using the equity accounting method under United States generally accepted accounting principles, provided that such requested cooperation would not impair in any material respect the management of the Company, and it is not the intention of the parties that such requested cooperation would impair the powers of the Board of Directors or the rights of other stakeholders of the Company.
2.8 GAAP Reconciliation
The Company will support the reasonable accounting requirements of the A&P Parties, including by providing to the A&P Parties audited consolidated financial information of the Company prepared in a manner consistent with generally accepted accounting principles in the United States and in Germany, as in effect from time to time. A&P will reimburse the Company for its reasonable out-of-pocket costs in complying with this Section 2.8 to the extent that the Company cannot reasonably carry out the necessary work using its own personnel.
ARTICLE 3
ACQUISITIONS AND TRANSFERS OF SHARES
3.1 Standstill
For a period of five (5) years from the date of this Agreement, without the prior written approval of the Company, A&P and its Affiliates (other than any Affiliate that is directly or indirectly a shareholder of A&P) will not, acting alone or in concert with each other, increase, directly or indirectly, the aggregate ownership interest of A&P and such Affiliates in the Shares to twenty percent (20%) or more of all issued and outstanding Shares. A&P and its Affiliates shall be deemed not to contravene this Section to the extent that any increase in such aggregate percentage ownership interest results from or is affected by any reduction in the number of issued and outstanding Shares. Without limiting the generality of the preceding sentence and for the avoidance of doubt, A&P and its Affiliates will contravene this Section only to the extent that any increase in such aggregate percentage ownership interest results from A&P and its Affiliates (other than any Affiliate that is directly or indirectly a shareholder of A&P) acquiring additional Shares other than from the Company.
3.2 Right of First Opportunity
(a) Except as provided in Section 3.2(h), A&P will not, and will cause the
Investor and its other Affiliates (other than any Affiliate that is
directly or indirectly a shareholder of A&P) not to, transfer,
directly or indirectly, in a single transaction or series of related
transactions, twenty-five percent (25%) or more of the Shares held by
them without first offering to sell to the Company or a third party
designated by the Company, by notice in writing given to the Company,
a specified number of such Shares (the "Offered Shares") at a
specified price and on specified terms and conditions (the "Offer") in
accordance with the procedures set forth in this Section 3.2.
(b) The Offer shall be sent to the Company and shall be open for
acceptance by the Company or a third party designated by the Company
for ten (10) Business Days (the "Offer Period") from the receipt of
the Offer by the Company.
(c) The Company or a third party designated by the Company, as the case
may be, shall be obliged at its sole option to either:
(i) accept the Offer; or
(ii) reject the Offer;
by delivering notice to the Investor within, but not after the
expiration of, the Offer Period. If the Company or a third party
designated by the Company does not accept the Offer, the Company and
such third party shall be deemed to have rejected the Offer.
Notwithstanding the time allowed by the Offer Period, the Company
shall use it reasonable best efforts to deliver such notice to the
Investor as soon as possible.
(d) If the Company or a third party designated by the Company accepts the
Offer prior to the expiration of the Offer Period, the Investor shall
sell to the Company or a third party designated by the Company, as the
case may be, and the Company shall purchase from the Investor, or
cause a third party designated by the Company, as the case may be, to
purchase from the Investor all of the Offered Shares in accordance
with the Offer and this Agreement.
(e) If the Company or a third party designated by the Company, as the case
may be, rejects or is deemed to reject the Offer, the Investor shall
be free for a period of three (3) months from the end of the Offer
Period ( the "Sale Period") to sell all or any portion of the Offered
Shares to any Person or Persons, in one or more transactions, on terms
and conditions no more favourable to the Investor than as provided in
the Offer and at a price that is no less than ninety percent (90%) of
the price specified in the Offer.
(f) Subject to the following sentence, if the Company, or a third party
designated by the Company which deals at non-arm's length with the
Company for the purposes of the Income Tax Act (Canada), is the
purchaser of the Offered Shares, the Company or such third party will
gross up the proceeds of sale so that the Company or such third party,
and not the Investor, bears the burden of any withholding tax, and
otherwise will fully indemnify the Investor to the extent the
after-tax proceeds of such sale to the Investor are less than they
would have been on a notional sale to a third party, dealing at arm's
length with the Investor and the Company, on equivalent terms. The
Investor will provide the Company at least four (4) days prior to the
end of the Offer Period with information sufficient to allow the
Company to evaluate the scope of its potential liability pursuant to
this Section 3.2(f), failing which the Company and any third party
will be relieved of the obligations pursuant to this Section 3.2(f) to
the extent that the Company or such third party is materially
prejudiced by such failure and could not reasonably have been expected
to be aware of the tax that would be covered by the gross-up and
indemnity provided by this Section 3.2(f).
(g) To the extent the Offered Shares remain unsold at the end of the Sale
Period, their transfer will once again become subject to this Section
3.2.
(h) Notwithstanding anything to the contrary in this Section 3.2, A&P and
its Affiliates, including the Investor, may sell, assign, transfer,
encumber, pledge or hypothecate Shares:
(i) to an Affiliate of A&P, provided that such Affiliate agrees
in writing to be bound by the terms and conditions of this
Agreement;
(ii) *[CONFIDENTIAL]*
(iii) as a dividend or other distribution to shareholders of A&P,
provided that such dividend or other distribution will not
subject the Company to any obligations under the 1933 Act or
the 1934 Act; and
(iv) pursuant to any financing agreements or facilities of A&P or
its Affiliates, provided that the creditor(s) under such
agreements or facilities agree(s) in writing to be bound by
the terms and conditions of this Agreement to the extent that
such creditor(s) realize upon their security in such Shares;
provided that, in each case, any such sale, assignment,
transfer, encumbrance, pledge or hypothecation is in
compliance with all applicable securities Laws.
3.3 Covenant of the Company to Maintain Reporting Issuer Status
The Company shall maintain its status as a reporting issuer in good standing and not in default of any requirement under the Canadian Securities Laws in each Qualifying Jurisdiction other than the Yukon Territories, the Northwest Territories and Nunavut.
The term "Confidential" indicates material that has been omitted and for which confidential treatment has been requested. All such omitted material has been filed with the Securities and Exchange Commissio ...