EXHIBIT 99.1
GOVERNANCE AGREEMENT
THIS GOVERNANCE AGREEMENT, dated as of September 26, 1996 (the
"AGREEMENT"), is entered into by and among Empresas La Moderna, S.A. de C.V., a
corporation organized under the laws of the United Mexican States ("ELM"), and
DNAP Holding Corporation (formerly known as Bionova U.S. Inc.), a Delaware
corporation (the "COMPANY").
BACKGROUND
----------
WHEREAS, the Company, a subsidiary of the Company (the "SUBSIDIARY"), ELM,
Bionova, S.A. de C.V. and DNA Plant Technology Corporation ("DNAP") have entered
into an Agreement and Plan of Merger, dated as of January 26, 1996, as amended
(the "MERGER AGREEMENT"), pursuant to which (i) the Subsidiary is being merged
with and into DNAP on the date of this Agreement (the "MERGER"), and (ii) the
issued and outstanding shares of capital stock of DNAP (except for shares held
by DNAP in its treasury, which shares shall be cancelled) are being converted in
the Merger into shares of common stock, $.01 par value, of the Company (the
"COMMON STOCK") at various rates provided in the Merger Agreement;
WHEREAS, the parties to this Agreement recognize the need to protect the
public shareholders (because of their status as minority shareholders) of the
Company subsequent to the Merger and intend that such shareholders as a group be
deemed third-party beneficiaries of this Agreement whose rights will be
protected by certain independent directors of the Company;
WHEREAS, the parties to this Agreement desire to establish certain terms
and conditions concerning the corporate governance of the Company including the
composition of the board of the Company (the "BOARD"); and
WHEREAS, the parties to this Agreement also desire to establish certain
terms and conditions concerning the acquisition and disposition of securities of
the Company by ELM and its affiliates;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I - BOARD OF DIRECTORS
1.01 Independent Directors. From and after the effective time of the
Merger ("Effective Time") and until this Agreement is terminated in accordance
with its terms, the number of directors comprising the Board shall be not less
than eleven (subject to the adjustment described below). Of those eleven
directors, four directors shall (subject to the adjustment pursuant to (S)1.02
hereof) be independent directors, each of whom shall be deemed independent (each
of these four directors being an "INDEPENDENT DIRECTOR") if: (i) other than
acting as a director of DNAP at any time or of the Company or a subsidiary of
the Company after the date of this Agreement, such director is not an employee
or an Affiliate (as defined below) of the Company, ELM or any Affiliate of ELM,
and (ii) such director is an "independent director" for purposes of Rule 4460 of
the Rules of the Nasdaq Stock Market. "AFFILIATE" means, with respect to any
person, any
-1-
other person controlling, controlled by or under direct or indirect common
control with such person. For the purposes of this definition, "control," when
used with respect to any specified person, shall mean the power to direct the
management and policies of such person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise. Three of the initial
Independent Directors shall be current DNAP Independent Directors (the "DNAP
INDEPENDENT DIRECTORS") designated by the DNAP board of directors prior to the
Merger and one shall be designated by ELM (the "ELM INDEPENDENT DIRECTOR"), with
the consent of DNAP, which consent shall not be unreasonably withheld or
delayed, prior to the Merger. Notwithstanding the foregoing and any other
provision of this Agreement, upon the occurrence of the first DNAP Independent
Director to resign or die after the date of this Agreement, the number of
Company directors shall be reduced to not less than nine. Of those nine
directors, three directors (subject to adjustment pursuant to (S)1.02 hereof)
shall be Independent Directors. Under such circumstances, two of such
Independent Directors shall be DNAP Independent Directors and one such
Independent Director shall be an ELM Independent Director. The reduction from
eleven to nine directors as hereinabove provided shall not have the effect of
shortening the term of any director in office at the time of such reduction, but
such reduction will be effected in connection with the next succeeding annual
meeting of Company stockholders.
1.02 ELM Directors. The other seven (six in the event of a reduction of
the type contemplated in (S)1.01) directors shall be designated by ELM and may
be Affiliates or employees of either the Company or ELM, but shall not be
considered "Independent Directors" for purposes of this Agreement. If the
Common Stock beneficially owned, directly or indirectly, by ELM and its
Affiliates is 80% or more, ELM may designate nine (seven in the event of a
reduction of the type contemplated in (S)1.01) directors, and the number of DNAP
Independent Directors shall be reduced to two. All such adjustments are
intended to be made at the next annual meeting of the Company after a change in
stock ownership.
1.03 Initial Nomination. In accordance with this Agreement, ELM and DNAP
shall designate the eleven director nominees prior to the mailing of the Proxy
Statement (as defined in the Merger Agreement), to serve from the Effective Time
until the next annual meeting of stockholders of the Company.
1.04 Continued Independent Director Representation. Each year the proxy
statement for the Company's annual meeting as approved by the Board (each an
"ANNUAL PROXY STATEMENT") shall include as nominees for election to the Board
the Independent Directors who then currently sit on the Board. If any of the
DNAP Independent Directors resigns from, or otherwise leaves, the Board, the
remaining DNAP Independent Directors shall by majority vote select a replacement
Independent Director for the departing DNAP Independent Director, subject to the
consent of ELM which shall not be unreasonably withheld or delayed, and upon the
receipt of such consent such individual shall immediately assume the remaining
term of the departing Independent Director. If the ELM Independent Director
resigns, or otherwise leaves, the Board, ELM shall select a replacement
Independent Director for the departing ELM Independent Director, subject to the
consent of a majority of the DNAP Independent Directors which consent shall not
be unreasonably withheld or delayed, and upon the receipt of such consent such
individual shall immediately assume the remaining term of the departing ELM
Independent Director. To the extent permitted by the certificate of
incorporation and the bylaws of the Company, the Board
-2-
shall elect each person so designated or nominated, and shall include such
individual in the next Annual Proxy Statement as a nominee for election to the
Board. Notwithstanding the foregoing, the Company shall not be required in the
Annual Proxy Statement for the Company's 1999 annual meeting of stockholders to
include as nominees for election as directors at such meeting any DNAP
Independent Directors then in office, which annual meeting shall be held no
earlier than May 1, 1999.
1.05 ELM Vote. Whenever an election of the directors of the Company is
held, ELM shall vote, or cause to be voted, all shares of the Common Stock that
it directly or indirectly beneficially owns for the incumbent DNAP Independent
Directors (and any replacement Independent Director(s) nominated by the
Independent Directors). In addition, ELM shall not vote its shares in a manner
that contravenes the terms and intentions of this Agreement.
1.06 Removal of Independent Directors. A DNAP Independent Director may be
removed from office only with the unanimous vote of the other DNAP Independent
Directors. An ELM Independent Director may be removed from office only with the
consent of ELM.
1.07 Non-Independent Directors. Other than Xxxxxx Xxxxxxxxx whom ELM
shall cause to continue as a director so long as he remains an employee of the
Company or any of its Affiliates, ELM (subject to the requirements of (S)1.01
and subject to the adjustment in (S)1.02 (ELM Directors)) and any nominating or
proxy committee of the Company shall have the right to designate or nominate any
replacement director who is not a DNAP Independent Director at the termination
of such director's term or upon death, resignation, retirement,
disqualification, removal from office or other cause. To the extent permitted
by the certificate of incorporation or bylaws of the Company, the Board shall
elect each person so designated or nominated.
1.08 Committees. Each committee which may be established by the Board
(other than a committee of Independent Directors constituted for the purposes of
making any determination under the terms of this Agreement or otherwise) shall
at all times include at least one DNAP Independent Director (in each case
designated by a majority of the Independent Directors), and no action by any
such committee shall be valid unless taken at a meeting for which adequate
notice has been duly given to or waived by the members of such committee. Any
committee member unable to participate in person at any meeting shall be given
the opportunity to participate by telephone. Any DNAP Independent Director
designated by the Independent Directors to serve on any committee may designate
as his or her alternate another DNAP Independent Director.
1.09 Independent Director Approval Required for Certain Actions. In
addition to such other approvals as may be required under applicable law, the
approval of a majority of the Independent Directors then in office shall be
required to approve any of the following:
(a) the sale, lease, license, transfer or other disposal of, including
any pledge or other grant of a security interest in all or a substantial portion
of the business or assets of the Company or any merger or consolidation of any
kind involving the Company in one or in a series of transactions. (For purposes
of this clause, a "SUBSTANTIAL PORTION OF THE BUSINESS OR ASSETS OF THE COMPANY"
shall mean either substantially all of the assets that constitute the assets of
DNAP as of the date of this Agreement or a portion of the business or assets of
the Company accounting
-3-
for 51% of the consolidated total assets, contribution to net income or revenues
of the Company and its subsidiaries taken as a whole, and shall include any
intellectual property that is material to the business of the Company and its
subsidiaries taken as a whole, and "MATERIAL INTELLECTUAL PROPERTY" shall mean
any intellectual property that is required in any process resulting in or
independently results in 51% of the revenues of the Company and its subsidiaries
taken as a whole);
(b) any material transaction or activities (including, without
limitation, any repurchase, redemption or issuance of any capital stock or
equity including any Equity Securities of the Company) by the Company or one of
its subsidiaries with or for the benefit of ELM or an ELM Affiliate (other than
any benefit that derives as a result of its or its Affiliate's ownership
interest in the Company) other than as expressly permitted by the Ancillary
Documents (as defined in the Merger Agreement), except that any amendment to the
Ancillary Documents or any waiver by the Company of any covenant or other
provision under them or the Merger Agreement requires approval under this
(S)1.09. For purposes of this (S)1.09(b) "MATERIAL" transactions and activities
shall not include the following so long as the terms thereof are commercially
reasonable and entered on terms that are no less favorable than could be
obtained in a similar transaction with an independent third party: (i) a
transaction or activity, or series of related transactions or activities not
involving the repurchase, redemption or issuance of any capital stock or equity
including any Equity Security, not reasonably anticipated to result in annual
expenditures or annual revenue in excess of $1,000,000 in any of the first five
years after such transaction occurs or activity begins; (ii) any renewal on
substantially the same terms of an existing agreement other than an Ancillary
Agreement or (iii) an inter-company transfer involving the purchase or sale of
goods or services available in the ordinary course from third party providers on
substantially the same terms. "EQUITY SECURITY" shall mean any (x) voting stock
of the Company (other than shares of voting stock not having the right to vote
generally in any election of directors of the Company), (y) securities of the
Company convertible into or exchangeable for such stock, and (z) options, rights
and warrants issued by the Company to acquire such stock;
(c) the repurchase or redemption of any Equity Securities or other
capital stock of the Company, other than redemptions required by the terms
thereof and purchases made at fair market value in connection with any deferred
compensation plan maintained by the Company;
(d) the creation of any committee of the Board with power to approve any
matter that is the subject of this Agreement;
(e) a tender offer, directly or indirectly, by ELM for Equity Securities
of the Company, as provided in (S)2.01 (Purchase Limitation);
(f) the amendment or the waiver by the Company of a provision of this
Agreement, as provided in (S)6.02 to this Agreement (Amendments; No Waivers);
(g) any amendment to the certificate of incorporation or bylaws of the
Company which would have a direct adverse effect on the rights or protections
provided to those holders of Common Stock other than ELM and its Affiliates
under this Agreement; or
-4-
(h) any attempt to effect or any action that reasonably could be
anticipated to result in the delisting or deregistering of the Company's Common
Stock from the Nasdaq National Market or from any other national securities
exchange on which such Common Stock may then be listed.
1.10 Indemnification and Insurance for Independent Directors.
(a) After the Effective Time, ELM shall cause the Company, to the full
extent permitted, but subject to the limitations of, applicable law, to
indemnify, defend and hold harmless each person who is at any time after the
date of this agreement an Independent Director (for the purposes of this
section, the "INDEMNIFIED PARTIES") against all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement with
the approval of the Company (which approval shall not be unreasonably withheld)
of or in connection with any claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact that
such person is or was after the Effective Time an Independent Director
("INDEMNIFIED LIABILITIES") including, without limitation, all losses, claims,
damages, costs, expenses, liabilities or judgments based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement or any
transaction contemplated hereby. The Company will pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified Party
to the full extent permitted by law upon receipt of any undertaking contemplated
by Section 145(e) of the Delaware General Corporation Law ("DGCL"). Without
limiting the foregoing, in the event of any such claim, action, suit, proceeding
or investigation is brought against any Indemnified Party, (i) the Indemnified
Parties may retain counsel satisfactory to them and the Company, (ii) the
Company shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received, and (iii) the
Company will use all reasonable efforts to assist in the defense of any such
matter, provided that the Company shall not be liable for any settlement or any
claim effected without such party's written consent, which consent, however,
shall not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this (S)1.10, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify the Company (but the
failure so to notify the Company shall not relieve it from any liability which
it may have under this (S)1.10 except to the extent such failure prejudices such
party), and shall deliver to the Company the undertaking contemplated by Section
145(e) of the DGCL. The Indemnified Parties as a group shall retain only one
law firm to represent them with respect to each such matter unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
(b) For a period of five years after the Effective Time, the Company shall
use its best efforts to contract and maintain in effect directors' and officers'
liability insurance covering equally all directors, including the Independent
Directors, on terms and in an amount not less than that provided to the
directors of DNAP prior to the Effective Time (which policy may take the form of
a policy covering the directors of ELM and majority owned subsidiaries thereof).
(c) In the event that any of the Company or any of its successors and
assigns consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
transfers and conveys all or substantially all of its property and assets to any
person, then, and in each case, proper provisions shall be made so that
-5-
the successor and assigns of such Indemnifying Parties assume the obligations
set forth in this (S)1.10.
(d) The provisions of this (S)1.10 are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives, and may not be amended, altered or repealed without the written
consent of all affected Indemnified Parties.
(e) Other than to cause the Company to carry out the terms of this
(S)1.10, ELM shall have no liability or obligation under this (S)1.10,
including, without limitation, any obligation to advance funds to the Company
for the purpose of enabling the Company to pay or satisfy any obligations
arising under this (S)1.10.
ARTICLE II - FURTHER ACQUISITIONS OF COMPANY SECURITIES BY ELM
2.01 Purchase Limitation. Prior to the third anniversary of the date of
this Agreement, ELM and its Affiliates shall not, directly or indirectly,
purchase or otherwise acquire, or propose or offer to purchase or acquire, any
Equity Security of the Company, whether by tender offer, market purchase,
privately negotiated purchase, merger or otherwise. In addition, except as
specifically provided in this Agreement, ELM and its Affiliates shall not
solicit any proxies or form a "group" with any third party as such term is
defined in (S)13(d) of the Securities Exchange Act of 1934, as amended (the
"1934 ACT").
2.02 "Top Up" Rights. Notwithstanding the restrictions in (S)2.01
(Purchase Limitation), when any holder as of the Effective Time (not affiliated
with ELM) of warrants or options to purchase capital stock of DNAP which have
been assumed by the Company pursuant to Sections 2.5 and 2.6 of the Merger
Agreement exercises such warrants or options and is issued shares of the Common
Stock, ELM may make purchases in the open market or in privately negotiated
transactions of such number of shares ("TOP-UP RIGHT") required to maintain its
Voting Interest at the level held immediately prior to the exercise of the
warrants or options referred to in this sentence. ELM's "VOTING INTEREST" means
the percentage of votes for election of directors of the Company generally
controlled directly or indirectly by ELM.
2.03 Subscription Right. Notwithstanding the restrictions in (S)2.01
(Purchase Limitation), upon any issuance (except upon the exercise of warrants
or options creating a Top-Up Right) by the Company (except to a person who is an
Affiliate of ELM), by direct sale or as a result of a merger or otherwise, ELM
has a right to purchase directly from the Company such amount of shares required
to maintain its Voting Interest at the level held immediately before the
issuance referred to in this sentence.
2.04 Subscription Procedure. Any offer of securities required to be made
to ELM pursuant to (S) 2.03 (Subscription Right) shall be made by notice in
writing at least thirty (30) days prior to the date on which the Company intends
to issue and sell such securities (the "SUBSCRIPTION NOTICE"). Such
Subscription Notice shall set forth (i) the approximate number and type of
securities proposed to be issued and sold to persons other than ELM and ELM
Affiliates and the material terms of such securities, (ii) the proposed price or
range of prices at which such securities are proposed to be sold and the terms
of payment, (iii) the number of securities offered
-6-
to ELM in compliance with the provisions of (S)2.03, and (iv) the proposed date
of issuance and sale of such securities. Not later than ten (10) days after
receipt of such notice, ELM shall notify the Company in writing whether it
elects to purchase all or any portion of the securities offered to ELM pursuant
to such Subscription Notice. If ELM elects to purchase any such securities, it
shall be obligated to do so, and the securities that it shall have so elected to
purchase shall be issued and sold to ELM by the Company at the same time and on
the same terms and conditions as the securities that are issued and sold to
third parties. If, for any reason, the sale of securities to the third parties
is not consummated, ELM's election with regard solely to the issuance referenced
in the Subscription Notice shall lapse.
2.05 Termination of Top-Up and Subscription Rights. Both the Top-Up Right
pursuant to (S)2.02 ("Top-Up" Rights) and the Subscription Right pursuant to
(S)2.03 (Subscription Right) shall terminate upon the sale or any other transfer
of shares of Common Stock such that ELM in combination with its Affiliates no
longer beneficially owns more than 50% of the Common Stock on a fully diluted
basis.
2.06 Tender Offer Exception. Notwithstanding the restrictions in (S)2.01
(Purchase Limitation), ELM or an ELM Affiliate may make a tender offer for 100%
of the outstanding Common Stock; provided, however, that the majority of
Independent Directors then in office make a determination that the tender offer
is fair to the holders of the Company's Common Stock other than ELM and its
Affiliates from a financial point of view.
2.07 Acquisitions of 80.1%. Notwithstanding the restrictions in (S)2.01
(Purchase Limitation), ELM or an ELM Affiliate can acquire additional shares of
the outstanding Common Stock so long as their aggregate beneficial ownership of
Common Stock shall not exceed 80.1%.
ARTICLE III - RESTRICTIONS ON TRANSFER OF COMMON STOCK
3.01 Restrictions on Transfer of Common Stock. Until the third
anniversary of the date of this Agreement, ELM agrees that it will not sell or
otherwise transfer (for the purposes of this section, "TRANSFER" is intended in
the broadest sense and specifically includes, without limitation, a pledge of
such shares (other than a pledge of shares to secure ordinary course loan(s)
from unaffiliated commercial lender(s) or other unaffiliated financing
source(s)) and any assignment by operation of law, but shall not include a
change-in-control of ELM) any shares of Common Stock except (i) a transfer to
any entity that is directly or indirectly 51% or more owned and controlled by
ELM, provided that such entity agrees in writing to assume all of ELM's
obligations under this Agreement and performs such obligations, (ii) if it shall
have become illegal for ELM to own its shares of Common Stock directly or
indirectly or exercise fully its rights of ownership with respect to its shares
of Common Stock, ELM may sell such shares as applicable law requires, (iii)
pursuant to an unsolicited tender offer by a non-Affiliate of ELM, (iv) any sale
or other transfer of Common Stock by ELM or an Affiliate of ELM which results in
ELM together with its Affiliates beneficially owning less than 51% of the
outstanding Common Stock (on a fully diluted basis) and all holders of Common
Stock (other than ELM and its Affiliates) are given the opportunity to sell all
of their Common Stock in the transaction on substantially the same terms per
share as ELM (provided, that such holders have the opportunity to receive all of
their consideration in cash), and (v) any sale so long as, after giving effect
to such sale, ELM and its
-7-
Affiliates shall beneficially own 51% or more of the outstanding Common Stock on
a fully diluted basis.
ARTICLE IV - REGISTRATION RIGHTS
4.01 Registration. (a) The Company agrees that, at any time after the
third anniversary of the date of this Agreement (or such earlier date as it
shall have become illegal for ELM to own Common Stock directly or indirectly or
to exercise fully all rights of ownership with respect to its shares) and until
the tenth anniversary of the date of this Agreement, upon the request of ELM,
the Company will file a registration statement (a "REGISTRATION STATEMENT")
under the 1933 Act as to the number of shares specified in such request (the
"REGISTERED SHARES"); provided that, subject to (S)4.04 of this Agreement
(Additional Conditions), the Company shall not be required to file more than two
Registration Statements that become effective and remain effective for the
period referred to in (S)4.01(b).
(b) The Company agrees to use its best efforts (i) to have any
registration of the Registered Shares declared effective as promptly as
practicable after the filing thereof, and (ii) to keep such registration
statement effective for a period (up to three months) sufficient to complete the
distribution of the Registered Shares. The Company further agrees to supplement
or make amendments to the Registration Statement, if required (w) to respond to
the comments of the Securities and Exchange Commission, (x) by the registration
form utilized by the Company for such registration or by the instructions
applicable to such registration form, (y) by the 1933 Act or the rules and
regulations thereunder, or (z) by ELM (or any underwriter for ELM) with respect
to information concerning ELM or such underwriter or the plan of distribution to
be utilized with respect to the Registered Shares. The Company agrees to furnish
to ELM copies of any such supplement or amendment prior to its being used or
filed with the Securities and Exchange Commission (the "SEC").
4.02 Registration Procedures. Subject to the provisions of (S)4.01 of
this Agreement (Registration) in connection with the registration of shares
hereunder, the Company will as expeditiously as possible:
(a) furnish to ELM, prior to filing of a Registration Statement, copies
of such Registration Statement as is proposed to be filed, and thereafter such
number of copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus included
in such Registration Statement (including each preliminary prospectus) and such
other documents in such quantities as ELM may reasonably request from time to
time in order to facilitate the disposition of the Registered Shares:
(b) use all reasonable efforts to register or qualify the Registered
Shares under such other securities or Blue Sky laws of such jurisdictions as ELM
reasonably requests and take any and all other acts as may be reasonably
necessary or advisable to enable ELM to consummate the disposition in such
jurisdictions of the Shares owned by ELM; provided that the Company will not be
required to qualify but for this subsection (b), (ii) subject itself to taxation
in any such jurisdiction, or (iii) consent to general service of process in any
such jurisdiction;
-8-
(c) use all reasonable efforts to cause the Registered Shares to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable ELM to consummate the disposition of such Shares;
(d) notify ELM, at any time when a prospectus relating thereto is required
to be delivered under the 1933 Act, of the happening of any event as a result of
which the prospectus included in such Registration Statement or amendment
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of the Registered
Shares, such prospectus will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading;
(e) enter into customary agreements (including an underwriting agreement
in customary form) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of the Registered Shares;
(f) make available for inspection by ELM, any underwriter participating
in any disposition pursuant to such registration, and any attorney, accountant
or other agent retained by any ELM or any such underwriter (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any such Inspector in
connection with such registration; provided that (i) records and information
obtained hereunder shall be used by such persons only to exercise their due
diligence responsibility, and (ii) records or information which the Company
determines, in good faith, to be confidential shall not be disclosed by the
Inspectors unless (x) the disclosure of such Records or information is necessary
to avoid or correct a misstatement or omission in the Registration Statement, or
(y) the release of such Records or information is ordered pursuant to a subpoena
or other order from a court or governmental authority of competent jurisdiction.
ELM shall use reasonable efforts, prior to any such disclosure, to inform the
Company that such disclosure is necessary to avoid or correct a misstatement or
omission in the Registration Statement. ELM further agrees that it will, upon
learning that disclosure of such Records or information is sought in a court of
governmental authority, give notice to the Company and allow the Company, at the
expense of the Company, to undertake appropriate action to prevent disclosure of
the Records or information deemed confidential;
(g) use all reasonable efforts to obtain a comfort letter from the
independent public accountants for the Company in customary form and covering
such matters of the type customarily covered by comfort letters as ELM
reasonably requests;
(h) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering a
period of twelve months, beginning within three months after
-9-
the effective date of the registration, which earnings statement shall satisfy
the provisions of (S)11(a) of the 1933 Act and Rule 158 thereunder; and
(i) use all reasonable efforts to cause all Registered Shares to be
listed on each securities exchange on which similar securities issued by the
Company are listed.
4.03 Conditions to Offerings. The obligations of the Company to take the
actions contemplated by (S)4.01 (Registration) with respect to an offering of
Shares shall be subject to the following conditions:
(i) The Registered Shares shall constitute at least 10% of the
outstanding Common Stock. If Registered Shares are to be distributed in an
underwritten firm commitment offering, ELM shall have the right to select the
investment banker or bankers and lead manager or managers to administer the
offering and its or their counsel; provided that such lead manager or managers
and such counsel must be reasonably satisfactory to the Company.
(ii) There shall not have been an offering registered pursuant to (S)4.01
(Registration) within the immediately preceding twelve months.
(iii) ELM shall conform to all applicable requirements of the 1933 Act and
the 1934 Act with respect to the offering and sale of securities and advise each
underwriter, broker or dealer through which any of the Registered Shares are
offered that the Registered Shares are part of a distribution that is subject to
the prospectus delivery requirements of the 0000 Xxx.
The Company may require ELM to furnish to the Company such information
regarding ELM or the distribution of the Registered Shares as the Company may
from time to time reasonably request in writing, in each case only as required
by the 1933 Act or the rules and regulations thereunder or under state
securities or Blue Sky laws.
ELM agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in (S)4.02(d) hereof, such holder
will forthwith discontinue disposition of Registered Shares pursuant to the
registration covering such Shares until ELM's receipt of the copies of the
supplemented or amended prospectus contemplated by (S)4.02(d) hereof.
4.04 Additional Conditions. The Company's obligations pursuant to
(S)4.01 (Registration) shall be suspended if (i) the fulfillment of such
obligations would require the Company to make a disclosure that would, in the
reasonable good faith judgment of the Board, be detrimental to the Company
because it is premature, (ii) the Company has filed a registration statement
with respect to securities to be distributed in an underwritten public offering
and it is advised by its lead or managing underwriter that an offering by ELM of
the Registered Shares would materially adversely affect the distribution of such
equity securities, or (iii) the fulfillment of such obligations would require
the Company to prepare audited financial statements not required to be prepared
for the Company to comply with its obligations under the 1934 Act as of any date
not coincident with the last day of any fiscal year of the Company. Such
obligations shall be reinstated (x) in the case of clause (i) above, upon the
making of such disclosure by the Company (or, if earlier, when such disclosure
would either no longer be necessary for the fulfillment of such obligations
-10-
or no longer be detrimental, (y) in the case of clause (ii) above, upon the
conclusion of any period during which the Company would not, pursuant to the
terms of its underwriting arrangements, be permitted to sell the Registered
Securities for its own account, and (z) in the case of clause (iii) above, as
soon as it would no longer be necessary to prepare such financial statements to
comply with the 1933 Act. The period during which ELM is required to sell its
shares pursuant to (S)4.05 (Registration Expenses) shall be tolled for the
duration of any suspension pursuant to this paragraph.
4.05 Registration Expenses. All expenses incident to the performance of
or compliance with this Article IV by the Company, including, without
limitation, all fees and expenses of compliance with securities or Blue Sky laws
(including reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registered Shares), rating agency fees, printing
expenses, messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing of the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed, fees and
disbursements of counsel for the Company and its independent certified public
accounts (including the expenses of any comfort letters required by or incident
to such performance), securities acts liability insurance (if the Company elects
to obtain such insurance), the reasonable fees and expenses of any special
experts retained by the Company in connection with such registration and the
fees and expenses of other persons retained by the Company (all such expenses
being herein called "REGISTRATION EXPENSES"), will be borne by the Company. The
Company will not have any responsibility for any registration or filing fees
payable under any federal or state securities or Blue Sky laws or for any of the
expenses of the holders of Registrable Securities incurred in connection with
any registration hereunder including, without limitation, underwriting fees,
discounts and commissions and transfer taxes, if any, attributable to the sale
of Registrable Securities, counsel fees of such holders and travel costs.
4.06 Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify, to
the fullest extent permitted by law, ELM, its directors and officers and each
person who controls ELM (within the meaning of either the 1933 Act or the 0000
Xxx) against any and all losses, claims, damages, liabilities and expenses
(including attorneys' fees) caused by any untrue or alleged untrue statement of
material fact contained in any Registration Statement, prospectus or preliminary
prospectus (each as amended and or supplemented, if the Company shall have
furnished any amendments or supplements thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances, under which they were made) not misleading, provided
that the Company shall not be required to indemnify ELM or its officers,
directors or controlling persons for any losses, claims, damages, liabilities or
expenses resulting from any such untrue statement or omission if such untrue
statement or omission is made in reliance on and conformity with any information
with respect to such ELM or such other parties furnished to the Company by ELM
or such other parties expressly for use therein. In connection with an
underwritten offering, the Company will indemnify each underwriter thereof, the
officers and directors of such underwriter, and each person who controls such
underwriter (within the
-11-
meaning of either the 1933 Act or 1934 Act) to the same extent as provided above
with respect to the indemnification of ELM.
(b) Indemnification by ELM. In connection with any registration in which
ELM is participating, ELM will furnish to the Company in writing such
information and affidavits with respect to ELM as the Company reasonably
requests for use in connection with any such registration, prospectus, or
preliminary prospectus and agrees to indemnify the Company, its directors, its
officers who sign the Registration Statement and each person, if any, who
controls the Company (within the meaning of either the 1933 Act or the 0000 Xxx)
to the same extent as the foregoing indemnity from the Company to such holder,
but only with respect to information relating to such holder furnished to the
Company in writing by ELM expressly for use in the Registration Statement, the
prospectus, any amendment or supplement thereto, or any preliminary prospectus.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to (S)4.06(a) or
(S)4.06(b), such person (hereinafter called the indemnified party) in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel, or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and the indemnified party shall have been advised by counsel that representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the indemnified
parties, such firm shall be designated in writing by the indemnified parties.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the third sentence of this (S)4.06(c), the indemnifying party agrees that it
shall be liable for any settlement of any proceeding affected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request, and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request or reasonably objected in writing, on the basis of the
standards set forth herein, to the propriety of such reimbursement prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is
-12-
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such proceeding.
(d) Contribution. If the indemnification provided for in this (S)4.06
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
this (S)4.06, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in (S)4.06(c), any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this (S)4.06(d) were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of (S)11(f) of
the 0000 Xxx) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
If indemnification is available under this (S)4.06, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
(S)4.06(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this (S)4.06(d).
4.07 Rule 144. The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the 1934 Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as ELM may reasonably request, all to the extent required from time to time to
enable ELM to sell Shares without registration under the 1933 Act within the
limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of ELM, the Company
will deliver to ELM a written statement as to whether it has complied with such
requirements.
4.08 No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to ELM in this Agreement.
-13-
4.09 Determination by Independent Directors. Any determination required
to be made by the Company under this Article IV shall be made by a majority of
the Independent Directors then in office.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
5.01 Representations of the Company. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and have been duly authorized by all necessary corporate action. This
Agreement constitutes a valid and binding agreement of the Company.
(b) The execution, delivery and performance by the Company of this
Agreement require no action by or in respect of, or filing with, any
governmental body, agency, official or authority, other than (i) compliance with
any applicable requirements of the 1934 Act; (ii) compliance with any applicable
requirements of the 1933 Act; and (iii) compliance with any applicable foreign
or state securities or Blue Sky laws.
(c) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the certificate of
incorporation or bylaws of the Company, and (ii) assuming compliance with the
matters referred to in (S)4.01(b), contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to the company.
5.02 Representations of ELM. (a) The execution, delivery and performance
by ELM of this Agreement and the consummation by ELM of the transactions
contemplated hereby are within ELM's corporate powers and have been duly
authorized by all necessary corporate action. This Agreement constitutes a
valid and binding agreement of ELM.
(b) The execution, delivery and performance by ELM of this Agreement
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority, other than (i) compliance with any applicable
requirements of the 1934 Act; (ii) compliance with any applicable requirements
of the 1933 Act; and (iii) compliance with any applicable foreign or state
securities or Blue Sky laws.
(c) The execution, delivery and performance by ELM of this Agreement and
the consummation by ELM of the transactions contemplated hereby do not and will
not (i) contravene or conflict with the certificate of incorporation or bylaws
of ELM, and (ii) assuming compliance with the matters referred to in (S)4.01(b),
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to ELM.
-14-
ARTICLE VI - MISCELLANEOUS
6.01 Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by any party hereto shall be
in writing and shall be deemed to have been duly given or made if (i) delivered
personally, (ii) sent by prepaid overnight courier service, or (iii) sent by
telecopy or facsimile transmission, answer back requested, to the parties at the
following addresses (or at such other addresses as shall be specified by the
parties by like notice:
if to ELM:
c/o Pulsar Internacional, S.A. de C.V.
Edificio Torrealta
Av. Xxxxx 300 Mezzanine
66265 Xxxxx Xxxxxx, N.L.
Mexico
Attention: Lic. Xxxxxxxxx Xxxxxxx
Telefax: 000-000-000-0000
if to the Company:
DNAP Holding Corporation
0000 Xxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, Chief Executive Officer
Telefax: (000) 000-0000
in each case, with a copy to each Independent Director at their address as
reflected in the Company's records.
Such notices, requests, demands, and other communications shall be effective
upon actual receipt by the intended recipient.
6.02 Amendments; No Waivers. (a) Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by ELM and Company, or in the case of a
waiver, by the party against whom the waiver is to be effective; provided that
no such amendment or waiver shall be effective without the approval of a
majority of the Independent Directors.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
-15-
6.03 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party hereto except that, ELM may assign its rights to any
transferee of its shares permitted under clauses (i) and (iii) of (S)3.01
(Restrictions on Transfer of Common Stock).
6.04 Governing Law. This Agreement shall be construed in accordance with
and governed by the law of the State of Delaware.
6.05 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by the other party hereto.
6.06 Specific Performance. The Company acknowledges and agrees that ELM's
and the Company's respective remedies at law for a breach or threatened breach
of any of the provisions of this Agreement would be inadequate and, in
recognition of that fact, agrees that, in the event of a breach or threatened
breach by the Company or ELM of the provisions of this Agreement, in addition to
any remedies at law, ELM and the Company, respectively, without posting any bond
shall be entitled to obtain equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy which may then be available.
6.07 Termination. Except for the provisions of Article IV, the provisions
of (S)1.07 pertaining to Xxxxxx Xxxxxxxxx and the provisions of (S)1.10, which
provisions shall survive for the periods set forth therein, this Agreement shall
terminate upon the first to occur of (i) ELM and its Affiliates becoming the
beneficial owner of 100% of the voting stock of the Company, and (ii) the day
immediately preceding the 1999 annual meeting of Company stockholders, which
annual meeting shall be held no earlier than May 1, 1999.
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
EMPRESAS LA MODERNA, S.A. DE C.V.
By: /s/ XXXXXXXXX XXXXXXXX
----------------------------------
Name: Xxxxxxxxx Xxxxxxxx
--------------------------------
Title: Attorney-in-Fact
-------------------------------
DNAP HOLDING CORPORATION
By: /s/ XXXXXX XXXXXXX
----------------------------------
Name: Xxxxxx Xxxxxxx
--------------------------------
Title: Chief Executive Officer
-------------------------------
-17-
