<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
SEPTEMBER 26, 1996
DNAP HOLDING CORPORATION
(Exact name of Registrant as specified in is charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 0-12177 75-2632242
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
</TABLE>
6701 San Pablo Avenue, Oakland, California 94608
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(510) 547-2395
<PAGE>
Item 2. Acquisition or Disposition of Assets.
------------------------------------
On September 26, 1996, Bionova Acquisition, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Registrant ("Sub"), merged with and into
DNA Plant Technology Corporation, a Delaware corporation ("DNAP"). This merger
(the "Merger") was effected pursuant to an Agreement and Plan of Merger dated as
of January 26, 1996, as amended by that certain Amendment No. 1 to Agreement and
Plan of Merger dated as of May 16, 1996, and by that certain Amendment No. 2 to
Agreement and Plan of Merger dated as of July 30, 1996 (as amended, the "Merger
Agreement"), by and among Empresas La Moderna, S.A. de C.V., a corporation
organized under the laws of the United Mexican States ("ELM"), Bionova, S.A. de
C.V., a corporation organized under the laws of the United Mexican States, the
Registrant, Sub and DNAP.
Upon consummation of the Merger, (i) DNAP became a wholly-owned subsidiary
of the Registrant, (ii) each outstanding share of DNAP's common stock, par value
$0.01 per share ("DNAP Common Stock"), was converted into 0.10 shares of common
stock, par value $0.01 per share, of the Registrant ("DHC Common Stock"), (iii)
each outstanding share of DNAP's $2.25 Convertible Exchangeable Preferred Stock,
par value $0.01 per share ("DNAP Preferred Stock"), was converted into 0.68375
shares of DHC Common Stock, and (iv) each outstanding warrant or option to
purchase DNAP Common Stock was assumed by the Registrant and became a
corresponding option or warrant to purchase shares of DHC Common Stock (adjusted
in accordance with the exchange ratio set forth above). Under the Merger
Agreement, cash payments will be made to the former holders of DNAP Common Stock
and DNAP Preferred Stock in lieu of issuing fractional shares of DHC Common
Stock.
The DHC Common Stock to be issued to the former holders of DNAP Common
Stock and DNAP Preferred Stock represents 30% of the outstanding shares of DHC
Common Stock as of September 26, 1996. The remaining outstanding shares of DHC
Common Stock are owned of record by Bionova International, Inc., a Delaware
corporation, which is an indirect wholly-owned subsidiary of ELM.
On September 26, 1996, ELM and the Registrant entered into a Governance
Agreement (the "Governance Agreement") which, among other things, provides for
certain arrangements with respect to the composition of the Registrant's Board
of Directors prior to the 1999 annual meeting of stockholders of the Registrant
and restricts the ability of ELM and its affiliates to acquire or dispose of
shares of DHC Common Stock prior to the third anniversary of the consummation of
the Merger. In addition, under the Governance Agreement, the approval of a
majority of the DNAP Independent Directors (as defined in the Governance
Agreement) is required to approve (i) certain transactions between ELM and its
affiliates, on the one hand, and the Registrant, on the other, and (ii) certain
acquisitions of the DHC Common Stock by ELM or its affiliates. The Governance
Agreement is an exhibit hereto and the description of the Governance Agreement
in this paragraph is qualified in its entirety by reference to the Governance
Agreement.
On September 26, 1996, ELM and DNAP entered into a Long Term Funded
Research Agreement (the "Long Term Funded Research Agreement") pursuant to which
they will use their best efforts to agree on research projects to be conducted
by DNAP for ELM or its affiliates. In order to fund any such research project,
the Long Term Funded Research Agreement provides that DNAP will be paid $30
million over a 10-year period, with minimum funding (subject to
-2-
<PAGE>
carryforwards) of $9 million in any three-year period and at least $625,000 due
each quarter until such $30 million has been paid. Unless the parties agree
otherwise, intellectual property developed by DNAP in connection with a project
will belong to ELM and/or its affiliates, and such entities will retain the
exclusive rights to commercialization of such intellectual property in the
project's intended field. Unless the parties agree otherwise, DNAP will have a
perpetual, royalty-free (i) non-exclusive license to use such intellectual
property for research purposes in the project's intended market and (ii) sole
license to use and commercialize such intellectual property in all other fields.
The Long Term Funded Research Agreement is an exhibit hereto and the description
of the Long Term Funded Research Agreement in this paragraph is qualified in its
entirety by reference to the Long Term Funded Research Agreement.
Pursuant to Rule 12g-3(a) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as a result of the Registrant's filing of
this report, the DHC Common Stock is deemed to be registered as a class of
equity securities pursuant to Section 12(g) of the Exchange Act. The shares of
DHC Common Stock being issued to the former holders of DNAP Common Stock and
DNAP Preferred Stock are listed for trading on the Nasdaq National Market.
As of the date hereof, the officers and directors of the Registrant are as
follows: Bernardo Jimenez (Chairman of the Board and Director), Carlos Herrera
(Chief Executive Officer and Director), Robert Serenbetz (Chief Operating
Officer and Director), Arthur H. Finnel (Treasurer and Chief Financial Officer),
Joe A. Rudberg (Secretary), Evelyn Berezin (Director), Dr. Nam-Hai Chua
(Director), Dr. Peter Davis (Director), Francisco Gonzalez (Director), Erik C.
Jurgensen (Director), Dr. Gerald Laubach (Director), Douglas Luke (Director) and
Alejandro Rodriguez (Director).
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements of Businesses Acquired.
-------------------------------------------
Audited consolidated financial statements and schedule of DNA Plant
Technology Corporation and Subsidiaries filed as a part of this report:
The following financial statements required by this item of Form 8-K
have been previously reported (within the meaning thereof as defined
in Rule 12b-2) by the Registrant in the Prospectus forming a part of
the Registrant's Registration Statement on Form S-4 (No. 333-09975),
and are accordingly not included herein in reliance on General
Instruction B.3 to Form 8-K:
Consolidated balance sheets at December 31, 1995 and 1994
Consolidated statements of operations for the years ended December 31,
1995, 1994 and 1993
Consolidated statements of cash flows for the years ended December 31,
1995, 1994 and 1993
Consolidated statements of stockholders' equity for the years ended
December 31, 1995, 1994 and 1993
-3-
<PAGE>
Notes to consolidated financial statements
Schedule II: Valuation and qualifying account for the years ended
December 31, 1995, 1994 and 1993
Unaudited consolidated financial statements of DNA Plant Technology
Corporation and Subsidiaries filed as a part of this report:
Unaudited consolidated balance sheets at June 30, 1996 and December
31, 1995.
Unaudited consolidated statements of operations for the three and six
months ended June 30, 1996 and 1995.
Unaudited consolidated statements of cash flows for the six months
ended June 30, 1996 and 1995.
Notes to unaudited consolidated financial statements.
-4-
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,328 $ 1,742
Accounts receivable, net of allowance for bad debts
of $47 in 1996 and $106 in 1995 1,716 1,922
Inventory 246 380
Other current assets 444 425
Assets held for sale 97 1,038
- ---------------------------------------------------------------------------------------------------------
Total current assets 3,831 5,507
- ---------------------------------------------------------------------------------------------------------
Fixed assets, net of accumulated depreciation of $6,703 in
1996 and $6,612 in 1995 2,225 2,345
Patents and other assets, net of accumulated amortization of $405 in 1996
and $354 in 1995 486 503
Non-marketable equity investment 1,946 1,946
Excess of purchase price over net assets acquired, net of
amortization of $475 in 1996 and $380 in 1995 1,425 1,520
- ---------------------------------------------------------------------------------------------------------
Total assets $ 9,913 $ 11,821
=========================================================================================================
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 927 $ 1,384
Accrued liabilities 1,057 1,539
Accrued compensation 813 361
Dividend payable 2,329 776
Amount payable to DuPont -- 983
Current portion of note payable 214 204
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 5,340 5,247
- ---------------------------------------------------------------------------------------------------------
Deferred revenue 362 584
Deferred compensation 232 232
Note payable less current portion 5,598 709
- ---------------------------------------------------------------------------------------------------------
Total long-term liabilities 6,192 1,525
- ---------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, par value $.01 per share; authorized 5,000 shares;
$2.25 convertible preferred stock; issued and outstanding - 1,380 share
in 1996 and 1995 (aggregate liquidation preference of $34,500) 14 14
Series A convertible preferred stock par value $.01 per share;
authorized 3 shares; issued - and outstanding no shares in 1996, and
3 shares in 1995 (aggregate liquidation preference of $16,500) -- --
Series B convertible preferred stock, par value $.01 per share;
authorized 1 share; issued and outstanding no shares in 1996 and 1995 -- --
Series C convertible preferred stock, par value $.01 per share;
authorized 1 share; issued and outstanding no shares in 1996 and 1995 -- --
Common stock, par value $.01 per share; authorized 60,000 shares; issued
45,676 shares in 1996 and 42,829 shares in 1995 457 428
Additional paid in capital 158,945 160,405
Accumulated deficit (161,035) (155,798)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity (1,619) 5,049
- ---------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 9,913 $ 11,821
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Produce sales $ 3,206 $ 2,992 $ 6,715 $ 6,063
Product development agreements 492 534 987 874
Investment and royalty income 295 32 549 1,510
- ------------------------------------------------------------------------------------
Total revenues 3,993 3,558 8,251 8,447
- ------------------------------------------------------------------------------------
Operating expenses:
Cost of produce sales 3,380 4,981 6,994 8,601
Exit carrot processing - - - 380
Research and product development 1,160 1,455 2,504 3,090
Selling, general and administrative 1,900 1,144 3,821 2,534
- ------------------------------------------------------------------------------------
Total operating expenses 6,440 7,580 13,319 14,605
- ------------------------------------------------------------------------------------
Loss from operations (2,447) (4,022) (5,068) (6,158)
Interest Expense 128 - 218 -
Gain (Loss) on sale of assets (15) 41 49 65
- ------------------------------------------------------------------------------------
Net loss (2,590) (3,981) (5,237) (6,093)
Preferred stock dividend (776) (791) (1,552) (1,567)
- ------------------------------------------------------------------------------------
Net loss applicable to common
stockholders (3,366) (4,772) (6,789) (7,660)
====================================================================================
Net loss per common share $(.08) $(.15) $(.16) $(.25)
Weighted average common shares
outstanding 43,586 31,520 43,264 31,203
====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,237) $(6,093)
Reconciliation of net loss to net
cash used in operating activities:
Depreciation and amortization 283 230
Provision for uncollectible accounts (59) (200)
Compensation and expenses paid in common stock 120 54
Net (gain) loss from disposal of fixed assets (48) (66)
Net changes in:
Accounts receivable 265 752
Inventory 134 436
Other current assets (19) (238)
Other assets (34) (50)
Accounts payable and accrued liabilities (475) 197
Deferred revenue and compensation (222) (18)
- -----------------------------------------------------------------------------------
Net cash used in operating activities (5,292) (4,996)
- -----------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (19) (95)
Sales and maturities of temporary investments -- 3,009
Proceeds from sale of assets 8 66
- -----------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (11) 2,980
- -----------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from sale of common and preferred stock -- 3,494
Proceeds from issuance of note payable 5,000 --
Preferred stock dividends -- (1,567)
Payment of principal on notes payable (111) --
- -----------------------------------------------------------------------------------
Net cash provided by financing activities 4,889 1,927
- -----------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (414) (89)
Cash and cash equivalents, beginning of period 1,742 1,202
- -----------------------------------------------------------------------------------
Cash and cash equivalents, end of period $1,328 $ 1,113
- -----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
DNA Plant Technology Corporation (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1995 Annual
Report on Form 10-K, as amended.
In the opinion of the Company's management, the accompanying unaudited,
consolidated financial statements contain adjustments, all of which are of a
normal recurring nature, necessary to present fairly the Company's financial
position as of June 30, 1996 and the results of its operations for the three and
six months ended June 30, 1996 and 1995 and its cash flows for the six months
ended June 30, 1996 and 1995.
Certain reclassifications have been made to prior period amounts to be
consistent with the current period presentation.
Interim results are not necessarily indicative of results for the full fiscal
year.
NOTE 2 - AGREEMENT AND PLAN OF MERGER
The Company is party to an Agreement and Plan of Merger, dated as of January
26, 1996, as amended (the "Merger Agreement"), with Empresas La Moderna, S.A. de
C.V., a corporation organized under the laws of the United Mexican States
("ELM"), Bionova, S.A. de C.V., a corporation organized under the laws of
the United Mexican States ("Bionova Mexico"), Bionova U.S. Inc., a Delaware
corporation ("Bionova U.S."), and Bionova Acquisition, Inc., a Delaware
corporation ("Merger Sub"), pursuant to which, among other things: (i) Merger
Sub will be merged with and into the Company (the "Merger"); (ii) the Company
will become a wholly-owned subsidiary of Bionova U.S.; (iii) each share of
common stock, par value $.01 per share ("Common Stock"), of the Company, issued
and outstanding at the time of the Merger (the "Effective Time"), will be
converted into and represent the right to receive 0.10 shares of Bionova U.S.'s
common stock, and each share of the Company's $2.25 Convertible Exchangeable
Preferred Stock, par value $0.01 per share ("Convertible Exchangeable Preferred
Stock"), issued and outstanding at the Effective Time will be converted into and
represent the right to receive .68375 shares of Bionova U.S.'s common stock,
except for any shares of the Company's securities held in the treasury of the
Company or held by any subsidiary of the Company, which will be cancelled and
(iv) each option or warrant to purchase shares of Common Stock outstanding at
the Effective Time will be assumed by Bionova U.S. and will become a
corresponding right to acquire shares of Bionova U.S.'s common stock (adjusted
in accordance with the exchange ratio applicable to the Merger). The holders of
the Company's capital stock, as a group, will own approximately 30% of the
outstanding shares of Bionova U.S.'s common stock after the Merger.
8
<PAGE>
On July 30, 1996, the Merger Agreement was amended to provide, among other
things, for the contribution by ELM to Bionova U.S. prior to the Merger of
additional capital in the amount of $8.0 million and a revised Merger exchange
ratio for the Common Stock and Convertible Exchangeable Preferred Stock. With
respect to the Merger exchange ratio, the Merger Agreement had previously
provided that each share of the Company's Common Stock outstanding at the
Effective Time would be converted into the right to receive one share of Bionova
U.S.'s Common Stock and each share of Convertible Exchangeable Preferred Stock
outstanding at the Effective Time would be converted into the right to receive
6.8375 shares of Bionova U.S.'s Common Stock. The amendment did not affect the
proportion of Bionova U.S.'s Common Stock to be owned by the former holders of
the Company's capital stock as a group immediately following the Merger. Under
the Merger Agreement, prior to and after such amendment, the outstanding capital
stock of the Company will be converted in the Merger into the right to receive
Bionova U.S. Common Stock representing in the aggregate 30% of the shares of
Bionova U.S.'s Common Stock outstanding immediately after the Effective Time.
The remaining shares of Bionova U.S.'s Common Stock will be held by an affiliate
of ELM. For additional information regarding the Merger Agreement and the
Merger, see the Company's Annual Report on Form 10-K for the year ended December
31, 1995, as amended.
NOTE 3 - INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Prepaid grower fees $ - $ 119
Raw materials and seed 197 192
Finished goods 49 69
- ------------------------------------------------------
Total Inventory $ 246 $ 380
======================================================
</TABLE>
NOTE 4 - C.O.O. RESIGNATION
The Chief Operating Officer ("COO") of the Company resigned from the Company
on May 10, 1996. Pursuant to the terms of the COO's employment agreement, the
Company is obligated to pay the COO $312,000 over a twelve month period
commencing May 11, 1996, and ending April 30, 1997. All of this expense is
reflected in the financial statements as of and for the period ended June 30,
1996.
9
<PAGE>
NOTE 5 - LEGAL PROCEEDINGS
By letters dated May 3, 1996 and July 16, 1996, the Company has been advised
by a holder of the Company's Convertible Exchangeable Preferred Stock that such
holder believes that the Merger will result in the occurrence of a "corporate
change" with respect to the Company pursuant to Section 9 of the Certificate of
Designation for the Company's Convertible Exchangeable Preferred Stock, thereby
resulting in special conversion privileges. Under such holder's theory, as a
result of the Merger each share of the Company's Convertible Exchangeable
Preferred Stock will be converted into the right to receive approximately 4.6
shares of Bionova U.S.'s Common Stock instead of the .68375 shares of Bionova
U.S.'s Common Stock as provided in the Merger Agreement. Such holder has further
advised the Company that such holder has reserved any rights which it may have
as a holder of the Company's Convertible Exchangeable Preferred Stock, whether
or not the Merger is consummated.
It is the Company's position that the special conversion privilege specified
in Section 9 of the Certificate of Designation with respect to the Company's
Convertible Exchangeable Preferred Stock will not be triggered as a result of
the Merger. However, if this holder were to institute litigation with respect to
such issue and were to prevail therein and if Bionova U.S. were thereupon
required to issue additional shares of Bionova U.S.'s Common Stock to the former
holders of the Company's Convertible Exchangeable Preferred Stock, such issuance
of additional shares of Bionova U.S.'s Common Stock would substantially dilute
the interest of the other holders of Bionova U.S.'s Common Stock. If such holder
or another holder of the Company's Convertible Exchangeable Preferred Stock were
successful in such litigation, if any, a court could require other remedies,
including a cash judgment, which could materially adversely affect Bionova U.S.
In addition, Section 1.11(e) of the Merger Agreement provides that Bionova
U.S. "shall issue to Bionova Mexico or its designee, on or before the Closing
Date, such number of shares of [Bionova U.S.'s] Common Stock as shall represent
(when added to the shares of [Bionova U.S.'s] Common Stock outstanding as of the
date of . . . [the Merger] Agreement) . . . 70% of the issued and outstanding
shares thereof as of the Effective Time of the Merger." Section 2.3 of the
Merger Agreement provides that "[Bionova U.S.'s] Common Stock into which [the
Company's] Stock shall be converted pursuant to the Merger Agreement and the
Merger shall be deemed to have been issued at the Effective Time . . ."
Accordingly, if Bionova U.S. is required to issue additional shares of Bionova
U.S.'s Common Stock to the former holders of the Company's Convertible
Exchangeable Preferred Stock, as described above, and if such shares are deemed
to have been issued at the Effective Time pursuant to Section 2.3 of the Merger
Agreement, Bionova U.S. may be obligated to issue additional shares of Bionova
U.S.'s Common Stock to Bionova Mexico or its designee (including ELM), for no
additional consideration, pursuant to Section 1.11(e) of the Merger Agreement so
that, after giving effect to the issuances to the former holders of the
Company's Convertible Exchangeable Preferred Stock and to Bionova Mexico or its
designee (including ELM), Bionova Mexico and its affiliates (including ELM) will
own 70% of the outstanding shares of Bionova U.S.'s Common Stock. The foregoing
issuances of additional shares of Bionova U.S.'s Common Stock would
substantially dilute the interest in Bionova U.S. of the holders of the
Company's Common Stock receiving shares of Bionova U.S.'s Common Stock in the
Merger.
By letter dated April 22, 1996, the Company was also notified that a holder of
the Company's Common Stock intended to commence litigation against the Company.
Such holder alleged that the Company had breached its contractual obligations to
register under the Securities Act of 1933 by April 1, 1996 approximately 5.5
million shares of the Company's Common Stock obtained by such holder and certain
other holders in private placement transactions with the Company. As of the date
hereof, no such litigation has been commenced. The Company believes such
allegation is without merit and intends to vigorously defend against any such
claim which may be formally asserted in a future lawsuit.
In addition to the foregoing, from time to time, the Company is involved in
various legal actions that arise in the ordinary course of its business. Such
legal actions are not expected, individually or in the aggregate, to have a
material adverse effect on the Company's financial condition or results of
operations.
NOTE 6 - SUBSEQUENT EVENTS
During the third quarter of 1996, the Company received a $100,000 payment and
a new note receivable in the amount of $200,000 payable to the Company from
Idetek Inc. ("Idetek"), a privately held diagnostic company, on an existing note
receivable. In addition, the Company has been advised by Idetek that a merger
with IDEXX Laboratories, Inc. ("IDEXX") has been approved by the Board of
Directors of both companies and that the 145,000 shares of Idetek stock owned by
the Company will be converted into shares of IDEXX common stock. As of June 30,
1996, the Company's net recorded amount from the receivable and investment in
Idetek was $100,000. The principal amount of the note and interest thereon are
due within seven days after the closing of the merger, or in any event, by
October 10, 1996. The Company will recognize a gain from the note receivable
and investment in Idetek upon the receipt of cash and IDEXX stock.
On July, 1, 1996 in accordance with the proposed Merger (see Note 2 to the
Company's Consolidated Financial Statements), the Company issued a note payable
to Bionova U.S. and received cash in the amount of $5,000,000.
See Note 2 for information concerning amendment No. 2 to the Merger Agreement,
which was executed on July 30, 1996.
10
<PAGE>
(b) Pro Forma Financial Information.
-------------------------------
Unaudited pro forma condensed combined financial information of DNAP
Holding Corporation and Subsidiaries required by this item are not
available at this time. The Registrant will file such information as soon
as it is available, but in no event later than November 14, 1996.
<TABLE>
<CAPTION>
(c) Exhibits.
--------
<S> <C>
Exhibit 2.1 - Agreement and Plan of Merger dated January 26, 1996
among Empresas La Moderna, S.A. de C.V., Bionova,
S.A. de C.V., Bionova U.S. Inc., Bionova Acquisition,
Inc., and DNA Plant Technology Corporation (filed as Exhibit
2.1 to the Registrant's Registration Statement on Form S-4
(No. 333-09975) and incorporated herein by reference).
Exhibit 2.2 - Amendment No. 1 to Agreement and Plan of Merger
dated as of May 16, 1996 (filed as Exhibit 2.2 to the
Registrant's Registration Statement on Form S-4 (No.
333-09975) and incorporated herein by reference).
Exhibit 2.3 - Amendment No. 2 to Agreement and Plan of Merger
dated as of July 30, 1996 (filed as Exhibit 2.3 to the
Registrant's Registration Statement on Form S-4 (No.
333-09975) and incorporated herein by reference).
Exhibit 23.1 - Consent of KPMG Peat Marwick LLP.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Exhibit 99.1 - Governance Agreement dated as of September 26, 1996
by and between Empresas La Moderna, S.A. de C.V.
and DNAP Holding Corporation (formerly known as
Bionova U.S. Inc.).
Exhibit 99.2 - Long Term Funded Research Agreement dated as of
September 26, 1996 by and between Empresas La
Moderna, S.A. de C.V. and DNA Plant Technology
Corporation.
</TABLE>
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 11, 1996 DNAP HOLDING CORPORATION
By: /S/ Arthur H. Finnel
-------------------------------------
Arthur H. Finnel
Chief Financial Officer
13
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Exhibit Numbered Page
- --------- ------------------------------------- ------------------
<S> <C> <C>
2.1 - Agreement and Plan of Merger dated
January 26, 1996 among Empresas La
Moderna, S.A. de C.V., Bionova, S.A.
de C.V., Bionova U.S. Inc., Bionova
Acquisition, Inc., and DNA Plant
Technology Corporation (filed as
Exhibit 2.1 to the Registrant's
Registration Statement on Form S-4
(No. 333-09975) and incorporated
herein by reference).
2.2 - Amendment No. 1 to Agreement and
Plan of Merger dated as of May 16,
1996 (filed as Exhibit 2.2 to the
Registrant's Registration Statement on
Form S-4 (No. 333-09975) and
incorporated herein by reference).
2.3 - Amendment No. 2 to Agreement and
Plan of Merger dated as of July 30,
1996 (filed as Exhibit 2.3 to the
Registrant's Registration Statement on
Form S-4 (No. 333-09975) and
incorporated herein by reference).
23.1 - Consent of KPMG Peat Marwick LLP.
99.1 - Governance Agreement dated as of
September 26, 1996 by and between
Empresas La Moderna, S.A. de C.V.
and DNAP Holding Corporation
(formerly known as Bionova U.S.
Inc.).
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
99.2 - Long Term Funded Research
Agreement dated as of September 26,
1996 by and between Empresas La
Moderna, S.A. de C.V. and DNA Plant
Technology Corporation
</TABLE>
15
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
DNA Plant Technology Corporation
We consent to the incorporation by reference in the Form 8-K of DNAP Holding
Corporation (formerly, Bionova U.S. Inc.) of our report dated February 14, 1996
with respect to the consolidated balance sheets of DNA Plant Technology
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995 and the
related schedule, which report appears in the Registration Statement on Form S-4
(No. 333-09975) of Bionova U.S. Inc.
KPMG Peat Marwick LLP
San Francisco, California
October 10, 1996
<PAGE>
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-
<PAGE>
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-
<PAGE>
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 Robert Serenbetz 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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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 1933 Act.
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-
<PAGE>
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 1934
Act) 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-
<PAGE>
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 1934 Act)
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-
<PAGE>
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 1933 Act) 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-
<PAGE>
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-
<PAGE>
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. Roble 300 Mezzanine
66265 Garza Garcia, N.L.
Mexico
Attention: Lic. Alejandro Sanchez
Telefax: 011-528-335-6993
if to the Company:
DNAP Holding Corporation
6701 San Pablo Avenue
Oakland, California 94608
Attention: Carlos Herrera, Chief Executive Officer
Telefax: (510) 450-9395
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-
<PAGE>
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 Robert Serenbetz 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-
<PAGE>
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/ FRANCISCO GONZALEZ
----------------------------------
Name: Francisco Gonzalez
--------------------------------
Title: Attorney-in-Fact
-------------------------------
DNAP HOLDING CORPORATION
By: /s/ CARLOS HERRERA
----------------------------------
Name: Carlos Herrera
--------------------------------
Title: Chief Executive Officer
-------------------------------
-17-
<PAGE>
EXHIBIT 99.2
LONG TERM FUNDED RESEARCH AGREEMENT
-----------------------------------
This LONG TERM FUNDED RESEARCH AGREEMENT ("Agreement") is effective as
of the 26th day of September, 1996, and is by and between DNA PLANT TECHNOLOGY
CORPORATION ("DNAP"), a corporation duly organized and existing under the laws
of the State of Delaware, and EMPRESAS LA MODERNA, S.A. DE C.V., a corporation
organized under the laws of the United Mexican States, directly or through its
subsidiaries and/or its affiliates (collectively, "ELM").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, DNAP has expertise, personnel, facilities, equipment,
technology and intellectual property useful in the development of improved
plants using biotechnological techniques; and
WHEREAS, ELM is, among other things, a leading developer and marketer
of improved varieties of fruits, vegetables and agronomic crops; and
WHEREAS, the parties desire to enter a long term relationship whereby
the parties will consult with each other regarding utilization of biotechnology
in the seed industry and ELM will fund research and development projects to be
conducted by DNAP;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
For the purposes of this Agreement, the following terms shall
have the following meanings:
1.1 "DNAP" means DNA Plant Technology Corporation, a Delaware
corporation, and its Affiliates.
1.2 "ELM", means EMPRESAS LA MODERNA, S.A. de C.V., a
corporation organized under the laws of the United Mexican States, and its
subsidiaries and/or its Affiliates including Agroindustrias Moderna, S.A. de
C.V., a corporation organized under the laws of the United Mexican States,
Bionova, S.A. de C.V., a corporation organized under the laws of the United
Mexican States, Seminis, Inc., an Illinois corporation and its Affiliates, which
as of the date of this Agreement include PetoSeed Company, Inc., Asgrow Seed
Company, and Royal Sluis.
1.3 "AFFILIATES" means, with respect to a particular party,
persons or entities controlling, controlled by or under common control with the
party, as well as any majority owned entities of the party and of its other
affiliates. "Control" of an entity means either the power, directly or
indirectly, to direct or cause the direction of the management and policies of
the entity, whether by contract or otherwise, or the right to receive at least
50% of the profits from such entity.
-1-
<PAGE>
1.4 "RESEARCH PROGRAM" means the research and development
program described in Article II to this Agreement, and includes Projects.
1.5 "PROJECT" means a particular research or development project
to be carried out by DNAP for ELM as approved and accepted by the parties
pursuant to paragraph 2.2.
1.6 "DEVELOPED INTELLECTUAL PROPERTY" or "DEVELOPED IP" means
inventions, discoveries, know-how, trade secrets, confidential information,
biomaterials, patents, plant variety protection act rights, breeders' rights, or
other intellectual or industrial property on a worldwide basis arising out of or
developed in the course of the Research Program or any Project.
1.7 "DNAP INTELLECTUAL PROPERTY" or "DNAP IP" shall mean the
intellectual property (including know how, trade secrets, confidential
information, biomaterials, patents, plant variety protection rights, breeders'
rights, and rights under licenses) owned in whole or in part, controlled or
licensable by DNAP from time to time. A listing of DNAP's patent portfolio of
issued patents, which is part of DNAP IP, as of the date of this Agreement is
set forth in Appendix A.
1.8 "ELM INTELLECTUAL PROPERTY" or "ELM IP" means the
intellectual property (including know how, trade secrets, confidential
information, biomaterials, patents, plant variety protection rights, breeders'
rights, and rights under licenses) owned in whole or in part, controlled or
licensable by ELM from time to time.
1.9 "PRODUCT" means any product or process which incorporates
DNAP IP.
ARTICLE II. RESEARCH PROGRAM
2.1 THE RESEARCH PROGRAM
On the terms and conditions set forth in this Agreement,
DNAP shall conduct research and development on approved Projects for ELM and
shall consult with ELM regarding the application of biotechnology to products
manufactured and distributed by ELM from time to time, including, without
limitation, products of the agricultural seed industry. The Research Program
shall have a ten-year (10) term, commencing with the date of this Agreement.
2.2 RESEARCH PROJECTS
a. PROJECTS. During the term of the Agreement, the
parties will discuss potential Projects. Either party may propose such Projects.
ELM will decide which particular Projects to undertake. The parties shall use
their best efforts to agree on reasonable terms for all Projects proposed, and
DNAP shall not unreasonably refuse to agree to the terms of any project proposed
by ELM, including any confidentiality restrictions regarding the subject matter
and scope of a Project.
-2-
<PAGE>
b. PROJECT PLAN. Each such agreed Project shall have a
Project Plan, which shall include at least: (i) the goals of the Project, (ii)
research plan, including benchmarks to be used in judging the Project's progress
and timelines therefor, (iii) a budget and payment schedule, (iv) a listing
prepared by DNAP of the DNAP IP to be used in the Project, (v) a listing
prepared by ELM if the ELM IP is to be used in the Project, and (vi) a
definition of the "Field" for such project. For purposes of this Agreement,
"Field" means the intended market for commercialization of the Developed IP at
the time a Project is initiated but in no event shall the Field include a market
(which may be defined broadly to include, for example, all vegetables or
narrowly, to refer, for example, to a specific vegetable, depending on the
circumstances) that the entity proposing the Project does not actively
participate in or intend to participate in at the time the Project is initiated.
c. PROJECT TERMINATION. ELM may terminate any Project at
any time for any reason, upon payment of Project costs to date of termination
and reimbursement to DNAP of actual loss on account of commitments made (but no
consequential damages).
2.3 REPORTS
DNAP shall provide ELM with written reports on the progress
of each Project, on a quarterly basis or more often if requested by ELM.
2.4 OVERSIGHT
ELM shall have the right to oversee each Project, including
reasonable access to the DNAP employees and facilities being utilized in the
Project.
2.5 LICENSE TO EXISTING IP
a. LICENSE. ELM shall have a worldwide royalty bearing
non-exclusive license under this Agreement with respect to DNAP IP solely to the
extent necessary or reasonably appropriate for ELM to commercialize the
Developed IP, including the right to make, have made, use and sell any Product
or technology resulting from a Project.
b. ROYALTY.
(i) ELM shall pay a royalty to DNAP for the use of
DNAP IP which royalty shall be at standard industry rates, with the specific
amount to be negotiated as Projects are identified; provided that the royalty
rate shall be equitably adjusted to the extent that the Non-Exclusive Patent
License between DNAP and Bionova U.S. Inc. remains in full force and effect.
(ii) With each royalty payment, ELM will provide to
DNAP a written royalty statement verified by the President or Chief Financial
Officer of ELM, setting forth the total sales identified by Product designation
or other basis upon which royalties are calculated during the period covered by
the statement. DNAP shall have the right once per year to designate an
independent certified public accountant to inspect ELM's books and records
relating to the basis upon which royalties are calculated.
-3-
<PAGE>
c. EXCLUSIVITY. DNAP agrees that it will not undertake to
perform substantially the same research and development program as any Project
without the prior written consent of ELM.
2.6 LICENSE TO ELM IP
a. LICENSE. If ELM IP is utilized in a Project and
incorporated in Developed IP, unless otherwise agreed in a Project Plan, DNAP
shall have a royalty bearing non-exclusive license under this Agreement with
respect to ELM IP solely to the extent necessary or reasonably appropriate for
DNAP to exercise its rights with respect to the Developed IP pursuant to Section
4.2.
b. ROYALTY.
(i) DNAP shall pay a royalty to ELM for the use of
ELM IP which royalty shall be at standard industry rates, with the specific
amount to be negotiated as Projects are identified.
(ii) With each royalty payment, DNAP will provide to
ELM a written royalty statement verified by the President or Chief Financial
Officer of DNAP, setting forth the total sales identified by Product designation
or other basis upon which royalties are calculated during the period covered by
the statement. ELM shall have the right once per year to designate an
independent certified public accountant to inspect DNAP's books and records
relating to the basis upon which royalties are calculated.
2.7 CONSULTATION. The parties specifically understand that the
modification of phenotypic traits through biotechnology and genetic engineering
is of potential significant competitive importance to the industry. The parties
need to work closely together to create and define appropriate Projects. DNAP
will use its reasonable best efforts to continually apprise ELM of scientific
developments relating to ELM's products, and ELM will apprise DNAP of those
aspects of its competitive strategy and development plans for its products which
are necessary or useful to DNAP with respect to its obligations hereunder.
ARTICLE III. RESEARCH PROGRAM FUNDING
3.1 PAYMENT BY ELM
ELM shall pay DNAP in accordance with the payment schedule
established for each Project in the Project Plan, provided that if DNAP fails to
provide the resources it is committed to provide to a Project, then, in addition
to its other remedies provided for herein, such payments shall be equitably
adjusted.
3.2 MINIMUM PROJECT FUNDING
ELM and DNAP shall undertake Projects with payment schedules
that will generate payments to DNAP of at least $9,000,000 each three years, up
to a maximum of $30,000,000 during the ten-year period beginning on the
effective date hereof, with the
-4-
<PAGE>
understanding that if the minimum payments in any year exceed the amounts
payable for research services provided by DNAP hereunder, then such excess shall
be available as a credit towards future services but shall not reduce ELM's
obligation to continue minimum funding. Unless otherwise agreed by the parties,
minimum funding of $625,000 shall be paid to DNAP at the beginning of each
calendar quarter during the term of this Agreement until the maximum of
$30,000,000 has been reached.
The payment obligations of ELM shall be reduced by payments
by ELM to DNAP, if any, under other agreements (e.g., calling for joint
development of seed or crops) whereby DNAP provides research or development
services for ELM. Similarly, in such event, DNAP's corresponding duty to provide
services hereunder shall be reduced.
3.3 PAYMENT LEVEL
Unless otherwise agreed in the Project Plan, ELM shall pay
DNAP all of DNAP's direct costs (including direct R&D overhead) plus an industry
standard operating margin, but in no event more than 200% of DNAP's modified
direct costs, as customarily computed by DNAP to include only salaries,
benefits, supplies and travel with respect to Project personnel.
ARTICLE IV. RIGHTS TO RESULTS OF RESEARCH PROGRAM
4.1 OWNERSHIP RIGHTS
Subject to paragraph 4.2, ELM will own the entire right,
title and interest in all Developed IP, as well as all other inventions,
discoveries, improvements or other technology, arising out of each Project and
the Research Program, whether or not patentable, together with all patent
applications or patents based thereon, regardless of whether the Developed IP
are made by employees of ELM or employees of DNAP. ELM will have the right to
file, prosecute and maintain patent applications for all Developed IP (at ELM's
expense if outside a Project Plan). DNAP will promptly disclose to ELM both the
conception and the reduction to practice of Developed IP. DNAP hereby represents
and agrees that all employees and other persons acting on its behalf in
performing its obligations under this Agreement will be obligated under a
binding written agreement or applicable law to assign to DNAP or ELM, as
directed, all Developed IP made or developed by such employee or other person.
DNAP will make available to ELM or to ELM's authorized attorneys, agents or
representatives, (at ELM's expense if outside a Project Plan) DNAP employees as
necessary or appropriate to enable ELM to file, prosecute and maintain patent
applications and resulting patents with respect to all Developed IP, for a
period of time sufficient for ELM to obtain the assistance it needs from such
personnel. If DNAP requests that ELM take any action in a proceeding incident to
the Developed IP and ELM refuses or fails to take such action, DNAP shall then
have the right, but not the obligation, in the name of ELM, to prosecute or
defend any action or proceeding incident to the Developed IP. Any such action
shall be at the sole expense of DNAP. DNAP shall have no obligation to undertake
any such action, and if DNAP should do so, it shall have no liability to ELM for
the sufficiency or adequacy of any such actions taken by DNAP.
-5-
<PAGE>
4.2 LICENSE RIGHTS TO DEVELOPED IP
Unless otherwise agreed in a Project Plan, ELM hereby grants
to DNAP a perpetual, royalty-free (except as provided in Section 2.6 hereof) (a)
non-exclusive license, to use the Developed IP for research purposes only within
the Field, and (b) sole license to use the Developed IP outside the Field (which
sole license is subject to ELM's retained rights to use the Developed IP outside
the Field). Such retained rights to use the Developed IP outside the Field shall
include, but not be limited to, the right to make products and otherwise
commercialize the Developed IP. ELM will promptly, on request, execute any
further document or license with respect to DNAP's rights under this Section
4.2.
4.3 NOTICE OF PATENTS AFFECTING COMMERCIALIZATION RIGHTS
During the term of the Research Program, DNAP shall use all
reasonable efforts to inform ELM of:
(a) any patent owned by or patent application filed by
a third party of which DNAP is aware which claims a technology that DNAP is
considering for use in a Project, and that requires or may require one or both
of the parties to license rights thereunder in order to commercialize the
results of the Project; and
(b) any possible alternative to such a patented
technology of which DNAP is aware. In each such instance where DNAP is aware of
an alternative technology, the parties shall consider and discuss the
feasibility of using the alternative technology in place of the patented
technology.
ARTICLE V. CONFIDENTIALITY
5.1 DUTIES
Each party shall: (i) keep confidential and not disclose to
any third person or entity, (ii) restrict access to only those of its employees
and consultants who have reason to know for the purposes of this Agreement, and
(iii) use solely for purposes of this Agreement, any and all information and
biomaterials received from the other party under this Agreement, and all
Developed IP of which it obtains knowledge, except as provided in paragraph 5.2
below. Notwithstanding the foregoing each party shall be free to use such
information, biomaterials and Developed IP for purposes of exercising its rights
and fulfilling its duties under this Agreement.
5.2 EXCEPTIONS
The duties of confidentiality, access restrictions and non-
use provided by paragraph 5.1(a) above shall not apply to information received
by one party ("Receiving Party") from the other party ("Disclosing Party") if
the information:
(a) is public information at the time of disclosure by
the Disclosing Party to the Receiving Party;
-6-
<PAGE>
(b) subsequently becomes public information other than
by act or omission of the Receiving Party;
(c) is already in the lawful possession of the
Receiving Party, as can reasonably be demonstrated by documentary evidence from
the Receiving Party, at the time of first disclosure by the Disclosing Party to
the Receiving Party; or
(d) is independently developed by employees of the
Receiving Party who did not have access to the information.
ARTICLE VI. EVENT OF DEFAULT/REMEDIES/OTHER TERMINATION RIGHTS
6.1 EVENT OF DEFAULT
It shall be an Event of Default hereunder if either party
(i) fails to pay any sums payable pursuant to this Agreement as and when they
are due; or (ii) materially breaches this Agreement.
6.2 TERMINATION
The non-defaulting party shall have the right to terminate
this Agreement upon the occurrence of an Event of Default unless (i) the Event
of Default occurs under clause (i) of Section 6.1 and is cured within ten (10)
days after written notice thereof, or (ii) the Event of Default occurs under
clause (ii) of Section 6.1 and is cured within thirty (30) days after written
notice thereof, or (iii) the Event of Default occurs under clause (ii) of
Section 6.1 and is remediable but is not reasonably susceptible to cure within
such thirty (30) day period, then within such period of time as may be required
to cure the same if the defaulting party promptly commences to cure such Event
of Default within such thirty (30) day period and diligently prosecutes such
cure to completion as soon as is reasonably practicable; or (iv) if such Event
of Default is not one that can be remedied, the defaulting party shall have
taken reasonable steps within such thirty (30) day period to prevent a
recurrence of such breach; provided, however, that if such Event of Default that
-------- -------
cannot be remedied recurs in the same calendar year, the nondefaulting party
may, at its option, terminate this Agreement immediately upon the recurrency by
written notice to the other party. ELM's rights to Developed IP and DNAP IP
shall survive any termination by ELM pursuant to this Agreement. DNAP's License
rights to Developed IP shall survive any termination by DNAP pursuant to this
Agreement.
6.3 OTHER REMEDIES
In addition to all other remedies specified in Article 6,
the non-defaulting party shall have the right to pursue any and all available
legal or equitable remedies for the breach.
-7-
<PAGE>
6.4 NO CONSEQUENTIAL DAMAGES
In no event will either party be liable to the other or any
third party for any indirect, incidental or consequential damages with respect
to the performance or non-performance of this Agreement, whether arising out of
breach of warranty, breach of contract, tort (including negligence), strict
products liability or otherwise, even if advised of the possibility of such
damage or if such damage could have been reasonably foreseen, except only in
case of personal injury where applicable law requires such liability.
ARTICLE VII. MISCELLANEOUS
7.1 NOTICES
All notices, demands, requests, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been given when received by DNAP or ELM, as the case may be, at the following
addresses, or such other address as DNAP or ELM may from time to time designate
by written notice to the other as herein required:
EMPRESAS LA MODERNA, S.A. DE C.V.
Attn: Lic. Alejandro Sanchez-Mujica
Edificio Torrealta
Av. Roble 300 Mezzanine
66265 Garza Garcia, N.L.
Mexico
With a copy to: Thompson & Knight, P.C.
Attn: Joe A. Rudberg
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
DNA PLANT TECHNOLOGY CORPORATION
6701 San Pablo Avenue
Oakland, California 94608-1239
Attn: Vice President, Business Development with a
copy to DNAP Legal Department at same
address
7.2 CHOICE OF LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of California, United States of America, without giving
effect to conflict of law principles.
-8-
<PAGE>
7.3 SEVERABILITY
In the event that any provision of this Agreement is held by
a court of competent jurisdiction to be unenforceable because it is invalid or
in conflict with any law of any relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the rights and obligations of
the parties shall be construed and enforced as if the Agreement did not contain
the particular provision held to be unenforceable, and any provision that is
held not to be enforceable shall nevertheless be enforceable to the full extent
permitted by law.
7.4 AMENDMENTS
No amendment or modification of this Agreement shall be
valid or binding unless in writing signed by the parties.
7.5 ASSIGNMENT
Neither party may assign this Agreement to any other party
except to an Affiliate or to an entity acquiring the party or substantially all
of the party's business in the subject area.
7.6 ARBITRATION
(a) The parties hereby undertake to use good faith efforts
to settle all disputes arising under this Agreement. Failing settlement, all
disputes, including without limitation, claims of breach of contract, fraud in
the inducement and negligence shall be referred to binding arbitration in
Dallas, Texas, if arbitration is initiated by DNAP, or in San Francisco,
California, if the arbitration is initiated by ELM, in accordance with the
Commercial Rules of Arbitration of the American Arbitration Association.
(b) If, within seven (7) days after receipt by one party of
the other party's notice of intention to arbitrate, the parties are unable to
agree on a single arbitrator, each party shall have seven (7) days to appoint
its own arbitrator from a list selected by the American Arbitration Association,
and the arbitrators thus chosen shall together, within seven (7) days of their
appointment, appoint a third arbitrator from the list selected by the American
Arbitration Association. If either party fails to appoint its own arbitrator
within the specified period, the arbitrator appointed by the other party shall
be the sole arbitrator. If both parties fail to appoint arbitrators within the
specified period, or if the arbitrators appointed by the parties fail to appoint
a third arbitrator within the specified period, the American Arbitration
Association shall make the appointment. The parties shall use their best efforts
to appoint arbitrators who are knowledgeable in the biotechnology industry. The
decision of the arbitrator(s) shall be final and may be enforced in any court of
competent jurisdiction. The prevailing party in any proceeding shall be
reimbursed by the other party for all expenses incurred in connection with
arbitration.
-9-
<PAGE>
7.7 NO JOINT VENTURE
The parties shall perform their obligations under this
Agreement as independent contractors and each party shall be solely responsible
for its own financial obligations. Nothing contained in this Agreement shall be
construed to imply a joint venture or principal and agent relationship between
the parties and neither shall have the right to create any obligation, express
or implied, on behalf of the other.
7.8 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed an original, but all of which will constitute one
and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement in
duplicate originals as of the date first above written, as evidence by the
signature below of their authorized representatives.
DNA PLANT TECHNOLOGY EMPRESAS LA MODERNA, S.A. DE C.V.
CORPORATION
By: /s/ FRANCISCO GONZALEZ
--------------------------------
Name: Francisco Gonzalez
By: /s/ ROBERT SERENBETZ Title: Attorney-in-Fact
--------------------------------
Name: Robert Serenbetz
Title: President
-10-
