Exhibit 2.2
GOVERNANCE AGREEMENT
THIS GOVERNANCE AGREEMENT, dated as of _______________, 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
(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, and shares as to
which appraisal rights have been perfected) 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. Of those eleven directors, four directors shall (subject to the
adjustment pursuant to Section 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 Part III Section 6(c) of Schedule D
to the By-Laws of the National Association of Securities Dealers, Inc.
"Affiliate" means, with respect to any person, any 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 Section 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 Section 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 Section 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 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 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
Section 1.01 and subject to the adjustment in Section 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 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
Section 1.09. For purposes of this Section 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 Section 2.01 (Purchase Limitation);
(f) the amendment or the waiver by the Company of a provision of this
Agreement, as provided in Section 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
(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 System 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 Section 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 Section 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
the successor and assigns of such Indemnifying Parties assume the obligations
set forth in this Section 1.10.
(d) The provisions of this Section 1.10 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or he
heirs and representatives, and may not be amended, altered or repealed without
the written consent of any affected Indemnified Party.
(e) Other than to cause the Company to carry out the terms of this
Section 1.10, ELM shall have no liability or obligation under this
Section 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 Section 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 Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act").
2.02 "Top Up" Rights. Notwithstanding the restrictions in Section 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
Section 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 Section 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 to ELM in compliance
with the provisions of Section 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 Section 2.02 ("Top-Up" Rights) and the Subscription Right
pursuant to Section 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
Section 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
Section 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 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 Section 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 Section 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
Section 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 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 jurisdiction as
ELM reasonably requests and of any and all other acts and things 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;
(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 the effective
date of the registration, which earnings statement shall satisfy the
provisions of Section 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 Section 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
Section 4.01 (Registration) within the immediately preceding twelve months and
if such earlier offering was completed or is continuing.
(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 Section 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 Section 4.02(d) hereof.
4.04 Additional Conditions. The Company's obligations pursuant to
Section 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 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 Section 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 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 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 Section 4.07(a)
or Section 4.07(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 Section 4.07(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 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
Section 4.07 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 Section 4.07, 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 Section 4.07(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 Section 4.07(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 Section 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 Section 4.07, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section Section 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 Section 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.
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 Section 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
Section 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.
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, Chairman and Chief Executive
Officer
Telefax: _______________________
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.
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 Section 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 V, the
provisions of Section 1.07 pertaining to Xxxxxx Xxxxxxxxx and the provisions
of Section 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.
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:
Name:
Title:
DNAP HOLDING CORPORATION
By:
Name: Xxxxxx Xxxxxxx
Title: Chairman and Chief Executive
Officer
