<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or Section
240.14a-12
DNAP HOLDING CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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<PAGE>
DNAP HOLDING CORPORATION
6701 SAN PABLO AVENUE
OAKLAND, CALIFORNIA 94608
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1998
To the Stockholders of
DNAP HOLDING CORPORATION:
You are cordially invited to attend the annual meeting of the stockholders
of DNAP Holding Corporation, a Delaware corporation (the "Company") to be held
at 9:00 a.m., local time, on Thursday, May 28, 1998, at the Radisson Hotel
Berkeley Marina, 200 Marina Blvd., Berkeley, California 94710 (the "Annual
Meeting") for the following purposes:
1. To elect the Board of Directors for the ensuing year;
2. To approve the DNAP Holding Corporation 1998 Long-Term Incentive
Plan; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 16, 1998 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
A record of the Company's activities during 1997 and the Company's audited
financial statements for the fiscal year ended December 31, 1997 are contained
in the accompanying Annual Report on Form 10-K for the year ended December 31,
1997. The Annual Report does not form any part of the material for solicitation
of proxies.
All stockholders are cordially invited to attend the meeting. STOCKHOLDERS
ARE URGED, WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING, TO COMPLETE, DATE AND
SIGN THE ACCOMPANYING PROXY AND TO RETURN IT PROMPTLY IN THE POSTAGE-PAID RETURN
ENVELOPE PROVIDED. If a stockholder who has returned a proxy attends the meeting
in person, such stockholder may revoke the proxy and vote in person on all
matters submitted at the meeting.
By Order of the Board of Directors
JOE A. RUDBERG
SECRETARY
April 30, 1998
<PAGE>
DNAP HOLDING CORPORATION
6701 SAN PABLO AVENUE
OAKLAND, CALIFORNIA 94608
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of DNAP Holding Corporation,
a Delaware corporation (the "Company"), for use at the annual meeting of
stockholders of the Company to be held on May 28, 1998 at 9:00 a.m., local time,
at the Radisson Hotel Berkeley Marina, 200 Marina Blvd., Berkeley, California
94710, and at any adjournment or postponement thereof.
Shares represented by a validly executed proxy will be voted at the meeting
in accordance with the directions given. If no direction is indicated, the
shares will be voted (i) for the election of the nominees for director named
under the caption "Nominees of Director" in this Proxy Statement, and (ii) for
approval of the DNAP Holding Corporation 1998 Long-Term Incentive Program. Any
stockholder of the Company returning a proxy has the right to revoke the proxy
at any time before it is voted by communicating such revocation in writing to
Bernardo Jimenez, Chief Executive Officer, DNAP Holding Corporation, 6701 San
Pablo Avenue, Oakland, California 94608, or by executing and delivering a proxy
bearing a later date. No revocation by written notice or by delivery of another
proxy shall be effective until such notice of revocation or other proxy, as the
case may be, has been received by the Company at or prior to the meeting.
The approximate date on which this proxy statement and the accompanying
proxy were first sent to stockholders of the Company is April 30, 1998.
VOTING SECURITIES
Only holders of record of common stock of the Company, par value $.01 per
share (the "Common Stock"), at the close of business on April 16, 1998, the
record date for the meeting, are entitled to notice of and to vote at the
meeting. On the record date for the meeting, there were issued and outstanding
18,370,640 shares of Common Stock. A majority of the shares of Common Stock
entitled to vote, present in person or represented by proxy, is necessary to
constitute a quorum. Each share of Common Stock is entitled to one vote.
REQUIRED AFFIRMATIVE VOTE AND VOTING PROCEDURES
With respect to the election of directors, votes may be cast in favor of or
withheld from each nominee. The nominees who receive a plurality of the votes
cast by stockholders present or represented by proxy at the annual meeting and
entitled to vote on the election of directors will be elected as directors of
the Company. Consequently, any abstentions, broker non-votes or other limited
proxies will have no effect on the election of directors, provided a quorum is
present at the meeting.
Action with respect to the DNAP Holding Corporation 1998 Long-Term Incentive
Plan and any other matter that may properly come before the annual meeting will
require the affirmative vote of the holders of a majority of the shares of
Common Stock represented at the meeting in person or by proxy and entitled to
vote on the matter. Abstentions will be counted in determining the total number
of shares present and entitled to vote on any such proposal. Accordingly,
although not counted as a vote "for" or "against" a proposal, an abstention on
any such proposal will have the same effect as a vote "against" that proposal.
Broker non-votes will not be counted in determining the number of shares present
and entitled to vote on any such proposal, and will have no effect on the
outcome.
<PAGE>
The Company will appoint one inspector of election to act at the meeting and
to make a written report thereof. The inspector will ascertain the number of
shares outstanding and the voting power of each, determine the shares
represented at the meeting and the validity of proxies and ballots, count all
votes and ballots, and perform certain other duties as required by law.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of March 31, 1998 information with respect
to the only person who was known to the Company to be the beneficial owner of
more than five percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
- ------------------------------------------------------------------------------------------ ------------ -------------
<S> <C> <C>
Bionova International, Inc.(1)............................................................ 12,859,448 70%
6701 San Pablo Avenue
Oakland, California 94608
</TABLE>
- ------------------------
(1) Bionova International, Inc., a Delaware corporation, is a wholly-owned
subsidiary of Bionova, S.A. de C.V., a corporation organized under the laws
of the United Mexican States ("Bionova Mexico"). Bionova Mexico is a
wholly-owned subsidiary of Empresas La Moderna, S.A. de C.V., a corporation
organized under the laws of the United Mexican States ("ELM").
ELECTION OF DIRECTORS
Nine directors, constituting the entire Board of Directors, are to be
elected at the meeting to serve until the next annual meeting of stockholders
and until their successors have been elected and qualified. The composition of
the Board of Directors is governed in part by the terms of a Governance
Agreement dated September 26, 1996 between ELM and the Company (the "Governance
Agreement"), which was entered into in connection with the merger on that date
of DNA Plant Technology Corporation, a Delaware Corporation ("DNAP"), with a
wholly-owned subsidiary of the Company (the "Merger"). Pursuant to the terms of
the Governance Agreement, the Board of Directors consists of nine members,
including one independent director designated by ELM and two independent
directors who were designated by DNAP prior to the Merger (the "DNAP Independent
Directors"). Among the nominees for director listed below, the DNAP Independent
Directors are Evelyn Berezin and Dr. Gerald Laubach. The independent director
designated by ELM is Dr. Christopher R. Somerville. The provisions of the
Governance Agreement relating to independent directors remain in effect until
the day prior to the 1999 annual meeting of stockholders of the Company.
The Board of Directors has nominated Evelyn Berezin, Dr. Peter Davis, Carlos
Herrera, Bernardo Jimenez, Erik C. Jurgensen, and Dr. Gerald Laubach to continue
serving as directors of the Company. Each of these nominees has served as a
director of the Company since 1996. The Board of Directors also has nominated
Eugenio Najera, Alejandro Perez, and Dr. Christopher R. Somerville to join the
Board of Directors beginning in 1998. Each of the nominees has consented to
serve as a director if elected. If any nominee should become unavailable for
election for any reason, the persons designated as proxies will have full
discretion to cast votes for another person designated by the Board.
Certain background information regarding the current directors and the
nominees to serve as directors is set forth below.
EVELYN BEREZIN -- Ms. Berezin has been a venture capital consultant since
1987 and was President of Greenhouse Management Corporation, the general partner
of a venture capital firm, from 1981 until 1987.
2
<PAGE>
Ms. Berezin is a director of Standard Microsystems Corporation and served as a
director of CIGNA Corp. until 1995.
DR. NAM-HAI CHUA -- Dr. Chua has served since 1988 as the Andrew W. Mellon
Professor and Head of the Laboratory of Plant Molecular Biology at the
Rockefeller University in New York City. He serves on numerous advisory and
editorial boards in the United States and other countries relating to plant
biotechnology. He is a director of Delta and Pine Land Company.
DR. PETER DAVIS -- Dr. Davis is a member of the Executive Committee of
Pulsar Internacional, S.A. de C.V., an affiliate of ELM ("Pulsar"). Dr. Davis
was previously a professor at the Wharton School, where he also served as
Director of the Wharton Applied Research Center and Director of Executive
Education.
FRANCISCO GONZALEZ -- Mr. Gonzalez is an advisor to ELM. From October 1995
to February 1997, he was the Chief Executive Officer of Seminis, Inc., a
vegetable seed company that is a majority-owned subsidiary of ELM. From January
1994 to October 1995, he served as the Chief Executive Officer of ELM's
agrobiotechnology division, and prior to that time served as the Chief Executive
Officer of Cigarrera La Moderna, S.A. de C.V., a tobacco company that was then
owned by ELM. Mr. Gonzalez is a director of ELM.
CARLOS HERRERA -- Mr. Herrera is the Director of Business Development of
Agromod, S.A. de C.V. He served as the Chief Executive Officer of the Company
from July 1996 through September 1997. Mr. Herrera has served as the Managing
Director (Chief Executive Officer) of Bionova Mexico since 1993. He is an
alternate director of ELM.
BERNARDO JIMENEZ -- Mr. Jimenez became the Chief Executive Officer of the
Company in October 1997. He is also the Chief Operating Officer of the
agrobiotechnology division of ELM. From 1993 to 1996, he served as the head of
the Industrial Banking Division at the Vector Group, a financial services
company in Mexico which is affiliated with ELM ("Vector Group"), the Vice
President of New Business Development for Pulsar, and the Chief Financial
Officer of ELM. From 1975 to 1993, he held various positions in finance and
management at Grupo Industrial Alfa, S.A. de C.V.
ERIK C. JURGENSEN -- Mr. Jurgensen has been the Director of Planning and
Corporate Development at Pulsar since 1994. He is also the President of the DUXX
Graduate School of Business Leadership. From 1992 to 1994, Mr. Jurgensen was the
Chief Executive Officer of Vector Group.
DR. GERALD D. LAUBACH -- Dr. Laubach was the President of Pfizer, Inc., a
pharmaceutical company, from 1972 to 1991. He served as a director of Cigna
Corp. and Millipore Corp. until 1996.
EUGENIO NAJERA -- Mr. Najera has been in charge of new business development
at ELM since August 1997. Prior to that time, he was the Chief Executive Officer
of Cigarrera La Moderna, S.A. de C.V. He is a director of ELM.
ALEJANDRO PEREZ -- Mr. Perez has been the Vice President of Diversification
of Pulsar since 1991. He is a director of PageMart Wireless, Inc. and Ionica
Group PLC, as well as several privately-held technology-based companies
affiliated with Pulsar.
ROBERT SERENBETZ -- Mr. Serenbetz was the Chief Operating Officer of the
Company from September 1996 until his retirement in January 1998. He was the
President of DNAP from 1992 until January 1998. Mr. Serenbetz was Chairman of
DNAP from 1994 to 1996.
DR. CHRISTOPHER R. SOMERVILLE -- Dr. Somerville is a member of the faculty
in the Department of Biological Sciences at Stanford University and the Director
of the Department of Plant Biology at the Carnegie Institution of Washington, a
private research institute located on the Stanford University campus. Prior to
moving to Stanford in 1994, Dr. Somerville held faculty positions at the
University of Alberta and Michigan State University. Dr. Somerville is a
co-founder and member of the Scientific Advisory Board of Mendel
Biotechnologies, Inc., an agriculturally-oriented biotechnology company founded
in 1997.
3
<PAGE>
Dr. Somerville serves on numerous advisory and editorial boards in the United
States and other countries relating to plant biotechnology.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors held three meetings in 1997. Each director attended
at least 75% of the meetings of the Board of Directors and the committees of
which he was a member except Mr. Gonzalez, who did not attend any of the
meetings.
COMMITTEES OF THE BOARD
The Board has an Audit Committee and a Compensation Committee. The Board
does not have a Nominating Committee. The current members and the primary
functions of the Audit and Compensation Committees are as follows:
AUDIT COMMITTEE -- Dr. Gerald D. Laubach (Chairman), Evelyn Berezin and
Erik C. Jurgensen. The primary responsibilities of the Audit Committee are
(i) to recommend the particular persons or firms to be employed by the
Company as its independent auditors, (ii) to review with the Company's
independent auditors the scope of the audit procedures to be applied in
conducting the annual audit, the results of the annual audit and the
accompanying management letter, if any, (iii) to consult with the Company's
independent auditors (periodically, as appropriate, and out of the presence
of management) with regards to the adequacy of internal controls and
accounting practices and, if need be, to consult also with the Company's
internal auditors, and (iv) to carry out any other duties delegated to the
Audit Committee by the Board from time to time. The Audit Committee met four
times during 1997.
COMPENSATION COMMITTEE -- Erik C. Jurgensen (Chairman), Evelyn Berezin
and Dr. Nam-Hai Chua. The primary responsibilities of the Compensation
Committee are (i) to administer the Company's stock option and stock
incentive plans, (ii) to recommend to the Board matters pertaining to
employment agreements, salaries and bonuses for the Company's executive
officers and contributions to any of the Company's or its subsidiaries'
401(k) Investment Plans, and (iii) to carry out any other duties delegated
to the Compensation Committee by the Board from time to time. The
Compensation Committee met one time during 1997.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company or any of its affiliates
receive an annual retainer of $6,000, a fee of $1,000 for each Board meeting
attended and a fee of $500 for each committee or telephone meeting in which the
director participates. The Company also reimburses directors for travel, lodging
and related expenses they incur in attending Board and committee meetings.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth as of March 31, 1998, the shares of Common Stock
beneficially owned by each director, each nominee to serve as a director, each
named executive officer listed in the Summary
4
<PAGE>
Compensation Table included elsewhere in this Proxy Statement and by all
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
COMPANY OR BENEFICIAL OWNERSHIP OF
OTHER OFFICES COMMON STOCK AS OF PERCENT OF
NAME AGE HELD DECEMBER 31, 1997 CLASS
- ----------------------------------- --- ------------------------------ ----------------------- ---------------
<S> <C> <C> <C> <C>
Bernardo Jimenez................... 45 Chief Executive Officer and 0 *
Director
Dr. John R. Bedbrook............... 48 Executive Vice President 5,519(1) *
Dr. David A. Evans................. 46 Executive Vice President 20,595 *
Arthur H. Finnel................... 47 Executive Vice President, 0 *
Treasurer and Chief Financial
Officer
Raul Batiz E....................... 73 President of International 0 *
Produce Holding Company
Evelyn Berezin..................... 73 Director 10,526(2)(3) *
Dr. Nam-Hai Chua................... 54 Director 0 *
Dr. Peter Davis.................... 53 Director 0 *
Francisco Gonzalez................. 66 Director 0 *
Carlos Herrera..................... 57 Director 0 *
Erik C. Jurgensen.................. 56 Director 0 *
Dr. Gerald D. Laubach.............. 72 Director 4,700(2) *
Eugenio Najera..................... 50 Director Nominee 0 *
Alejandro Perez.................... 49 Director Nominee 0 *
Dr. Christopher R. Somerville...... 50 Director Nominee 0 *
Robert Serenbetz................... 54 Director 2,893 *
All directors and executive (4) *
officers of the Company as a
group (consisting of 15
persons)......................... 44,233
</TABLE>
- ------------------------
* Represents less than 1% of Common Stock outstanding on March 31, 1998.
(1) Includes 121 shares and currently exercisable options to purchase an
additional 2,820 shares of Common Stock held by Dr. Bedbrook's wife, who is
an employee of DNAP, as to which shares Dr. Bedbrook disclaims beneficial
ownership.
(2) Includes currently exercisable options to purchase shares of Common Stock as
follows: Ms. Berezin -- 4,900 shares; Dr. Laubach -- 4,700 shares.
(3) Includes 5,626 shares of Common Stock owned jointly by Ms. Berezin and her
husband.
(4) Gives effect to the above footnotes.
Except as noted in the footnotes above, (i) none of such shares is known by
the Company to be shares with respect to which such person has the right to
acquire beneficial ownership, and (ii) the Company believes the beneficial
holders listed above have sole voting and investment power regarding the shares
shown as being beneficially owned by them.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to annual
and long-term compensation paid or awarded to the Company's current and former
chief executive officers, each of the other four most highly-paid executive
officers of the Company and a former executive officer of the Company (together,
the "Named Executive Officers") for or with respect to the fiscal year ended
December 31, 1997 and December 31, 1996, the Company's first year of operations.
In addition, information is provided with respect to the compensation paid by
DNAP to Mr. Serenbetz, Dr. Bedbrook and Dr. Evans for or with respect to the
fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------------
NAME AND --------------------------------------------- RESTRICTED SECURITIES
PRINCIPAL BASE OTHER ANNUAL STOCK UNDERLYING
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) AWARDS ($) OPTIONS (#)
- -------------------------- --------- ----------- ----------- ------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernardo Jimenez,......... 1997 51,000 0 0 0 0
Chief Executive Officer
(1)
Carlos Herrera,........... 1997 221,673(2) 58,910(3) 20,068 0 0
Chief Executive Officer 1996 169,932(2) 54,122(3) 27,357 0 0
Arthur H. Finnel,......... 1997 271,813 75,814(3) 0 0 0
Executive Vice 1996 270,000(4) 0 0 0 0
President, Treasurer and
Chief Financial Officer
Robert Serenbetz,......... 1997 261,999 0 0 0 0
Chief Operating 1996 261,289 48,143 477(7) 0 0(9)
Officer(5) 1995 225,000 0 23,076 25,000(8) 18,000
Dr. John R. Bedbrook,..... 1997 209,100 0 0 0 0
Executive Vice President 1996 188,711 20,837 0 0 0
1995 174,000 0 10,931 0 0
Dr. David A. Evans,....... 1997 199,903 0 0 0 0
Executive Vice President 1996 188,711 20,837 0 0 0
1995 165,680 0 21,176(7) 9,270(8) 0
Raul Batiz E.,............ 1997 308,981 0 0 0 0
President of 1996 408,468 0 0 0 0
International Produce
Holding Company(10)
<CAPTION>
OTHER
NAME AND -------------------
PRINCIPAL ALL OTHER
POSITION COMPENSATION ($)
- -------------------------- -------------------
<S> <C>
Bernardo Jimenez,......... 0
Chief Executive Officer
(1)
Carlos Herrera,........... 0
Chief Executive Officer 0
Arthur H. Finnel,......... 2,050(6)
Executive Vice 0
President, Treasurer and
Chief Financial Officer
Robert Serenbetz,......... 4,750(6)
Chief Operating 4,273(6)
Officer(5) 4,623(6)
Dr. John R. Bedbrook,..... 4,750(6)
Executive Vice President 4,270(6)
1,705(6)
Dr. David A. Evans,....... 4,072(6)
Executive Vice President 4,270(6)
4,100(6)
Raul Batiz E.,............ 75,245(11)
President of 327
International Produce
Holding Company(10)
</TABLE>
- ------------------------
(1) Mr. Jimenez became Chief Executive Officer of the Company as of October 1,
1997. Only the portion of his compensation related to his services on behalf
of the Company and its subsidiaries has been included here.
(2) Mr. Herrera served as the Chief Executive Officer of the Company on a
full-time basis from July 1, 1996 through September 30, 1997. From January
12, 1996 through June 30, 1996, he performed services on behalf of the
Company as well as certain other entities. Only the portion of his
compensation during that period related to services on behalf of the Company
and its subsidiaries has been included here.
(3) For Mr. Herrera, the amounts shown for 1997 and 1996 reflect bonus earned
for 1996 and 1995, respectively, though the bonus was paid during the
following year. For Mr. Finnel, this amount reflects bonus earned for 1997,
though this bonus was paid during the first quarter of 1998.
(4) This amount includes compensation paid to Mr. Finnel in the form of fees for
consulting services. Mr. Finnel became a full-time employee of the Company
as of January 1, 1997.
(5) Mr. Serenbetz retired from the Company effective January 3, 1998.
(6) Represents contributions made by DNAP to its 401(k) Retirement and Savings
Plan.
(7) DNAP paid certain expenses, including tax equalization on non-deductible
reimbursements, for the relocation of Mr. Serenbetz and Dr. Evans from New
Jersey to California.
(8) Represents the value at date of grant of restricted stock awarded in lieu of
cash for the 1995 salary increase.
6
<PAGE>
(9) After adjustment to reflect the conversion in connection with the Merger of
every ten shares of common stock of DNAP into one share of Common Stock of
the Company.
(10) Mr. Batiz resigned as President of International Produce Holding Company as
of October 7, 1997 and is no longer an executive officer of the Company.
(11) Includes $75,000 paid to Mr. Batiz for consulting services rendered after
his resignation on October 7, 1997.
In connection with the retirement of Robert Serenbetz as Chief Operating
Officer of the Company effective January 3, 1998, the Company has made severance
payments to Mr. Serenbetz totaling $310,534. The Company also agreed to continue
to provide certain medical, dental and life insurance benefits to Mr. Serenbetz
through January 3, 1999.
Following his resignation on October 7, 1997, Raul Batiz E. was retained by
International Produce Holding Company to provide consulting services. He was
paid $75,000 for consulting services rendered through December 31, 1997, and is
being paid $12,000 per month for consulting services rendered from January 1,
1998 until the consulting arrangement is terminated by either party.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Erik C. Jurgensen, Evelyn
Berezin, and Dr. Nam-Hai Chua, all of whom are non-employee directors. As
mentioned above, Mr. Jurgensen is the Vice President of Planning and Corporate
Development at Pulsar. The Company's Chief Executive Officer, Bernardo Jimenez,
is a director of Pulsar.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the following report of the Compensation Committee of the Board
of Directors and the information herein under "Performance Graph" shall not be
deemed to be "soliciting material" or to be "filed" with the Commission, and
such information shall not be deemed to be incorporated by reference into any
statements or reports filed by the Company with the Commission that do not
specifically incorporate such information by reference, notwithstanding the
incorporation by reference of this Proxy Statement into any such statements or
reports.
REPORT OF COMPENSATION COMMITTEE ON ANNUAL COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors of
the Company is responsible for (i) administering the Company's stock option and
stock incentive plans, (ii) recommending to the Board matters pertaining to
employment agreements, salaries and bonuses for the Company's executive officers
and contributions to any of the Company's or its subsidiaries' 401(k) Investment
Plans, and (iii) carrying out any other duties delegated to the Committee by the
Board from time to time. The goal of the Company's executive compensation policy
is to ensure that an appropriate relationship exists between executive pay and
performance against the Company's objectives and that the Company can attract,
motivate and retain key executives.
The Company's executive compensation philosophy is as follows: that (i)
executive compensation packages should be designed in a manner whereby the
Company can attract and retain high quality executive talent needed to ensure
the short-term and long-term success of both its fresh produce agricultural and
distribution business as well as its technology development and research
activities and businesses, (ii) significant incentives, both short-term and
long-term, should become an increasing portion of executive compensation and
awarded based on both company and individual performance, and (iii) an alignment
of interests between executives and shareholders will be created through
compensation structures that share the rewards and risks of strategic
decision-making and performance.
7
<PAGE>
As the Company was first formed on January 26, 1996, several of the
executives moved into the Company with policies and practices that carried over
from their positions in the companies that became a part of DNAP Holding during
1996, including DNAP. In 1997, two new executives, Jorge Fenyvesi and Abelardo
Sanchez, were recruited into the Company, and their compensation packages were
set in accordance with arrangements they had with their prior companies.
In March 1998, the Committee reviewed all of the compensation arrangements
of the current group of executive officers. The Committee determined from this
review, the specifics of which are clarified below, that the current
compensation of these individuals fell within an acceptable range to be market
competitive. The Committee recommended to management that equity-based
incentives should be developed and utilized as one of the components of
compensation in the future. In response to this recommendation, the DNAP Holding
Corporation 1998 Long-Term Incentive Plan was developed and approved by the
Board of Directors, and is presented as a part of this proxy for approval by the
Company's stockholders at the annual meeting.
The key components of executive compensation are discussed below.
BASE SALARY. The Company has determined that it will annually set base
salary targets for its executive officers at levels competitive with persons
holding comparable positions at other companies in the Company's comparison set.
In reviewing the base salaries for executive officers of the Company against
this objective, the Committee reviewed executive compensation surveys with
companies in its major fields of business, which included fresh produce and
biotechnology companies, and in its geographic area of operations. It also took
into account the decision-making responsibilities, experience, work performance
and the prior base salaries of its executives. The Committee determined from
this review that the current base salaries of its executives fall within the
acceptable range of its base salary targets.
ANNUAL INCENTIVE BONUS. The compensation policy of the Company is that a
significant part of the annual compensation of each executive will be related to
and contingent upon the overall performance of the Company, the performance of
the subsidiaries or division for which the executive is responsible, and
individual objectives established by the executive with the CEO at the beginning
of the year. These bonus targets range from 30% to 45% of base salary. The
Committee reviewed competitive data and determined that these bonuses were
slightly higher than the average for the market-competitive set, but were
reasonable and consistent with the philosophy of having a significant portion of
executive compensation contingent on performance.
LONG-TERM INCENTIVES. As stated above, the Committee recommended that
management undertake the development of a plan that will provide equity-based
incentive awards that are designed to attract and retain executives who can make
significant contributions to the Company's success, reward executives for such
significant contributions, and give executives a longer-term incentive to
increase shareholder value. The DNAP Holding Corporation 1998 Long-Term
Incentive Plan was designed to meet these objectives. Pursuant to this plan, the
Committee will have the authority to grant a variety of long-term incentive
awards based on the Common Stock of the Company, including stock options (both
incentive options and non-qualified options), stock appreciation rights,
restricted stock, dividend equivalents, and other types of incentive awards.
Under the plan, the Committee will have full authority to determine the
provisions associated with the awards and administer the plan.
OTHER COMPENSATION. The Company provides executives, officers and
management with health, retirement and other benefits under plans generally
available to the Company's employees.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Jimenez became the Chief
Executive Officer of the Company on October 1, 1997. His compensation during the
fourth quarter of 1997 was a carryover of his arrangement as Chief Operating
Officer of the agrobiotechnology division of ELM. Mr. Herrera's base salary and
bonus target had been established based on his position, experience, and prior
base salary. His
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bonus in 1997 was reflective of the fact that the Company did not achieve
several of its objectives, including its shortfall against profit objectives.
BY THE MEMBERS OF THE COMPENSATION COMMITTEE.
Erik C. Jurgensen (Chairman), Dr. Nam-Hai Chua and Evelyn Berezin.
PERFORMANCE GRAPH
The following graph reflects the total return, which assumes reinvestment of
dividends, of a $100 investment in the Company, the Standard & Poor's 500 Stock
Index, and a competitor group index on September 27, 1996, the date on which the
Company's Common Stock first traded on the Nasdaq National Market.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C>
DNAP Holding Corporation Peer Group(1) S&P 500 Index
9/27/96 100.00 100.00 100.00
12/31/96 50 98.84 108.34
3/31/97 60.71 108.26 111.24
6/30/97 50.00 110.16 130.66
9/30/97 71.43 122.71 140.45
12/31/97 69.42 119.16 144.48
</TABLE>
- ------------------------
1 The Peer Group is made up of the following companies: Cadiz Land Co., Inc.,
Chiquita Brands International, Inc., Cyanotech Corp., Dole Food Company,
Inc., Mycogen Corp. and Northland Cranberries A. Total return calculations
were weighted according to each company's market capitalization.
9
<PAGE>
APPROVAL OF 1997 LONG-TERM INCENTIVE PLAN
INTRODUCTION
On April 15, 1998, the Board adopted, subject to the approval of the
stockholders of the Company, the DNAP Holding Corporation 1998 Long-Term
Incentive Plan (the "Plan"). The Board believes that long-term incentive plans
provide an important means of attracting, retaining and motivating key personnel
and recommends that stockholders approve the Plan. Because directors and
executive officers of the Company are eligible to receive awards under the Plan,
each of them has a personal interest in the approval of the Plan.
SUMMARY OF THE PLAN
A copy of the Plan is attached to this Proxy Statement as Exhibit A. The
following summary of the Plan is qualified in its entirety by reference thereto.
PURPOSES. The purposes of the Plan are to attract able persons to enter the
employ of the Company, to encourage employees to remain in the employ of the
Company and to provide motivation to employees to put forth maximum efforts
toward the continued growth, profitability and success of the Company, by
providing incentives to such persons through the ownership and performance of
the Common Stock. A further purpose of the Plan is to provide a means through
which the Company may attract able persons to become directors of the Company
and to provide directors with additional incentive and reward opportunities
designed to strengthen their concern for the welfare of the Company and its
stockholders.
ADMINISTRATION. The Plan provides for administration by the Compensation
Committee of the Board (the "Committee"), provided that each member of the
Committee must be both a "non-employee director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act") and an
"outside director" within the meaning of Treasury Regulation Section
1.162-27(e)(3) interpreting Section 162(m) of the Internal Revenue Code of 1986
(the "Code"). Among the powers granted to the Committee are the authority to
interpret the Plan, establish rules and regulations for its operation, select
eligible persons to receive awards under the Plan and determine the form and
amount and other terms and conditions of such awards. Notwithstanding the
authority delegated to the Committee to administer the Plan, the Board is given
exclusive authority, subject to the express provisions of the Plan, to grant
awards under the Plan to non-employee directors of the Company and to determine
the amount, terms and conditions of such awards. However, the Board has no
authority under the Plan to select and grant awards to employees of the Company,
and such authority is vested exclusively in the Committee, provided that all
awards to employees authorized by the Committee shall be ratified by the Board.
The Plan authorizes the Committee to delegate its authority under the Plan in
certain circumstances; provided, however, that only the Committee may select and
grant awards to employees who are subject to Section 16 of the Exchange Act or
who are "covered employees", as defined in Section 162(m) of the Code.
ELIGIBILITY FOR PARTICIPATION. All employees of the Company and its
subsidiaries (other than persons employed on a temporary or seasonal basis while
in a temporary or seasonal status) and all non-employee directors of the Company
are eligible to be selected to participate in the Plan. The selection of
employees is within the discretion of the Committee, and the selection of
non-employee directors is within the discretion of the Board. In making this
selection, the Committee and the Board may give consideration to the functions
and responsibilities of the participant, his or her past, present and potential
contributions to the growth and success of the Company and such other factors
deemed relevant by the Committee or the Board. No employee is entitled to
receive an award unless selected by the Committee, and no non-employee director
is entitled to receive an award unless selected by the Board. As of March 31,
1998, the Company and its subsidiaries had a total of 589 employees.
TYPES OF AWARDS. The Plan provides for the grant of any or all of the
following types of awards: (i) stock options, including incentive stock options;
(ii) stock appreciation rights ("SARs"); (iii) restricted
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stock; (iv) dividend equivalents; and (v) other incentive awards. Such awards
may be granted singly, in combination or in tandem as determined by the
Committee or the Board. All awards shall be subject to the terms, conditions,
restrictions and limitations of the Plan, except that the Committee or the Board
may, in its sole judgment, subject any award to such other terms, conditions,
restrictions and limitations as it deems appropriate, provided they are not
inconsistent with the terms of the Plan.
AVAILABLE SHARES. The maximum number of shares of Common Stock that shall
be available for grant of awards under the Plan shall not exceed 2,000,000,
subject to adjustment in accordance with the provisions of the Plan. Shares of
Common Stock issued pursuant to the Plan may be shares of original issuance or
treasury shares or a combination thereof.
The Committee shall have full discretion to determine the manner in which
shares of Common Stock available for grant of awards under the Plan are counted.
In the absence of Committee action, the Plan sets forth certain rules applicable
for this purpose. For example, in general, unless otherwise determined by the
Committee, shares of Common Stock related to awards which terminate by
expiration, forfeiture or cancellation without the issuance of shares shall
again be available for grant under the Plan. In addition, if shares of Common
Stock are delivered or withheld to pay the exercise price of an award or to pay
withholding taxes payable upon exercise, vesting or payment of an award, the
number of shares available for grant of awards other than incentive stock
options under the Plan shall be increased by the number of shares delivered or
withheld as payment of such exercise price or withholding taxes.
If the Company shall effect a subdivision or a consolidation of shares of
Common Stock or the payment of a stock dividend on Common Stock without receipt
of consideration by the Company, the number of shares of Common Stock with
respect to which outstanding awards granted under the Plan may thereafter be
exercised or satisfied, and the exercise prices thereof, shall be
proportionately adjusted. In the event of changes in the outstanding Common
Stock by reason of recapitalizations, reorganizations, mergers, consolidations,
combinations, separations (including a spin-off or other distribution of stock
or property), exchanges or other relevant changes in capitalization, outstanding
awards under the Plan shall be subject to adjustment by the Committee at its
discretion as to the number, price and kind of shares or other consideration
subject to, and other terms of, such awards to reflect such changes in the
outstanding Common Stock. Also, in the event of any such changes in the
outstanding Common Stock, the aggregate number of shares available for grant of
awards under the Plan may be equitably adjusted by the Committee.
The maximum number of shares of Common Stock for which stock options and
SARs may be granted under the Plan to any one employee during a calendar year is
200,000.
As of April 17, 1998, the closing sales price of the Common Stock as
reported on the Nasdaq National Market was $4.00 per share.
STOCK OPTIONS. Awards may be granted under the Plan in the form of options
to purchase shares of Common Stock. These options may be nonqualified stock
options or incentive stock options, or a combination of both; provided, however,
that no incentive stock options shall be granted later than ten years (five
years if the participant is a more than 10% stockholder) from the date of
adoption of the Plan by the Board and only employees shall be eligible to
receive incentive stock options. The Committee or the Board will, with regard to
each stock option, determine the number of shares subject to the option, the
manner and time of the option's exercise and the exercise price per share of
Common Stock subject to the option. In no event, however, may the exercise price
of a stock option be less than 100% (110% if the participant is a more than 10%
stockholder) of the fair market value of the Common Stock on the effective date
of the option's grant. The term of each option shall be as specified by the
Committee or the Board, provided that, unless otherwise designated by the
Committee or the Board, no option shall be exercisable later than ten years from
the effective date of the option's grant. Options granted in the form of
incentive stock options are designed to comply with Section 422(b) of the Code.
Upon exercise of an option, the exercise price may be paid by a participant in
cash or an equivalent acceptable to the Committee or by
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<PAGE>
delivering previously acquired shares of Common Stock or, in the case of
nonqualified stock options, by withholding shares which otherwise would be
acquired on exercise. In addition, any grant of a nonqualified stock option
under the Plan may provide that payment of the exercise price of such option may
also be made in whole or in part in the form of shares of Common Stock subject
to risk of forfeiture or other restrictions on transfer.
STOCK APPRECIATION RIGHTS. SARs may be granted under the Plan to any
participant who is granted a stock option under the Plan. SARs may be exercised
only when the fair market value of the Common Stock (determined as of the date
of exercise of the SAR) exceeds the exercise price of the related option. Upon
the exercise of an SAR, the holder shall receive in cash an amount equal to the
excess of the fair market value of a share of Common Stock on the date of
exercise of the SAR over the exercise price of the related option, multiplied by
the number of shares of Common Stock with respect to which the SAR is exercised.
Each SAR shall be exercisable only to the same extent that the related option is
exercisable, and in no event after termination of the related option. Upon the
exercise of SARs, the related option shall be deemed to have terminated to the
extent of the number of shares of Common Stock with respect to which such SARs
are exercised. Upon the exercise or termination of the related option, the SARs
with respect to such related option shall be deemed to have terminated to the
extent of the number of shares of Common Stock with respect to which the related
option was exercised or terminated.
RESTRICTED STOCK. Awards may be granted under the Plan in the form of
shares of restricted stock. The Committee or the Board will determine the nature
and extent of the restrictions on such shares, the duration of such restrictions
and any circumstances under which such shares will be forfeited. Subject to the
Committee's or the Board's discretion, during any such period of restriction,
holders of shares of restricted stock will have the right to receive dividends
on and to vote such shares. At the time of an award of restricted stock, the
Committee or the Board will determine the effect on such restricted stock of any
termination of employment or service of the holder of such restricted stock
prior to the lapse of the applicable restrictions.
DIVIDEND EQUIVALENTS. Dividend equivalents may be granted to participants
under the Plan, either as a component of another award or as a separate award.
In general, and subject to such terms, conditions, restrictions and limitations
as the Committee or the Board may establish, an award of dividend equivalents
shall confer upon the participant a right to receive, in the event of a cash or
stock dividend or other distribution paid or made on the Common Stock, an amount
equal to the dividend or other distribution that would have been received by the
participant had the shares of Common Stock covered by the award been issued and
outstanding on the record date established for such dividend or other
distribution. Dividend equivalents may be paid in cash, shares of Common Stock,
other awards under the Plan or other property, or a combination thereof, in a
single payment or in installments, and at such time or times as the Committee or
the Board shall determine.
OTHER INCENTIVE AWARDS. The Committee or the Board may grant other
incentive awards under the Plan based upon, payable in or otherwise related to,
in whole or in part, shares of Common Stock if the Committee or the Board
determines that such other incentive awards are consistent with the purposes of
this Plan. Payment of other incentive awards shall be made at such times and in
such forms, which may be cash, shares of Common Stock or other property, as
established by the Committee or the Board.
CORPORATE CHANGE. The Plan provides that, in the event of a corporate
change (defined in the Plan to include the dissolution or liquidation of the
Company, certain reorganizations, mergers or consolidations of the Company, the
sale of all or substantially all the assets of the Company or the occurrence of
a change in control of the Company), unless otherwise provided in the related
award agreement, (i) each option then outstanding under the Plan shall become
exercisable in full, (ii) all restrictions (other than restrictions imposed by
law) and conditions of all restricted stock, dividend equivalents and other
incentive awards then outstanding under the Plan shall be deemed satisfied, and
(iii) all other criteria and objectives the attainment of which are a
pre-condition to exercise, vesting, payment or settlement of all dividend
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<PAGE>
equivalents and other incentive awards then outstanding under the Plan shall be
deemed fully satisfied at the maximum criteria levels.
AMENDMENT. The Board may at any time suspend, terminate, amend or modify
the Plan, provided that no amendment or modification shall become effective
without the approval of such amendment or modification by the stockholders of
the Company if the Company determines that such stockholder approval is
necessary or desirable. No suspension, termination, amendment or modification of
the Plan shall adversely affect in any material way any award previously granted
under the Plan, without the consent of the participant holding such award
(except that such consent shall not be required in the case of an amendment or
modification required following a change in law or interpretation thereof to
cause options and SARs under the Plan to continue to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code).
EFFECTIVENESS. The Plan will become effective on the date it is approved by
the stockholders of the Company. The Plan has no fixed expiration date.
FEDERAL INCOME TAX CONSEQUENCES
The following summary is based upon an analysis of the Code, existing laws,
judicial decisions, administrative rulings, regulations and proposed
regulations, all of which are subject to change. Moreover, the following is only
a summary of federal income tax consequences and the federal income tax
consequences to participants may be either more or less favorable than those
described below depending on their particular circumstances.
INCENTIVE STOCK OPTIONS. No income will be recognized by an optionee for
federal income tax purposes upon the grant or exercise of an incentive stock
option. The basis of shares transferred to an optionee pursuant to the exercise
of an incentive stock option is the price paid for the shares. If the optionee
holds the shares for at least one year after transfer of the shares to the
optionee and two years after the grant of the option, the optionee will
recognize capital gain or loss upon sale of the shares received upon the
exercise equal to the difference between the amount realized on the sale and the
basis of the stock. Generally, if the shares are not held for that period, the
optionee will recognize ordinary income upon disposition in an amount equal to
the excess of the fair market value of the shares on the date of exercise over
the amount paid for such shares, or if less (and if the disposition is a
transaction in which loss, if any, will be recognized), the gain on disposition.
Any additional gain realized by the optionee upon such disposition will be a
capital gain.
The excess of the fair market value of shares received upon the exercise of
an incentive stock option over the option price for the shares is an item of
adjustment for the optionee for purposes of the alternative minimum tax.
The Company is not entitled to a deduction upon the exercise of an incentive
stock option by an optionee. If the optionee disposes of the shares received
pursuant to such exercise prior to the expiration of one year following transfer
of the shares to the optionee or two years after grant of the option, however,
the Company may, subject to the deduction limitations described below, deduct an
amount equal to the ordinary income recognized by the optionee upon disposition
of the shares at the time such income is recognized by the optionee.
If an optionee uses already owned shares of Common Stock to pay the exercise
price for shares under an incentive stock option, the resulting tax consequences
will depend upon whether the already owned shares of Common Stock are "statutory
option stock", and, if so, whether such statutory option stock has been held by
the optionee for the applicable holding period referred to in Section
424(c)(3)(A) of the Code. In general, "statutory option stock" (as defined in
Section 424(c)(3)(B) of the Code) is any stock acquired through the exercise of
an incentive stock option or an option granted pursuant to an employee stock
purchase plan, but not stock acquired through the exercise of a non-statutory
option. If the stock is
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<PAGE>
statutory option stock with respect to which the applicable holding period has
been satisfied, no income will be recognized by the optionee upon the transfer
of such stock in payment of the exercise price of an incentive stock option. If
the stock is not statutory option stock, no income will be recognized by the
optionee upon the transfer of the stock unless the stock is not substantially
vested within the meaning of the regulations under Section 83 of the Code (in
which event it appears that the optionee will recognize ordinary income upon the
transfer equal to the amount by which the fair market value of the transferred
shares exceeds their basis). If the stock used to pay the exercise price of an
incentive stock option is statutory option stock with respect to which the
applicable holding period has not been satisfied, the transfer of such stock
will be a disqualifying disposition described in Section 421(b) of the Code
which will result in the recognition of ordinary income by the optionee in an
amount equal to the excess of the fair market value of the statutory stock
option at the time the incentive stock option covering such stock was exercised
over the amount paid for such stock. Under the present provisions of the Code,
it is not clear whether all shares received upon the exercise of an incentive
stock option with already-owned shares will be statutory option stock or how the
optionee's basis will be allocated among such shares.
NONQUALIFIED STOCK OPTIONS. No income will be recognized by an optionee for
federal income tax purposes upon the grant of a nonqualified stock option. Upon
exercise of a nonqualified stock option, the optionee will recognize ordinary
income in an amount equal to the excess of the fair market value of the shares
on the date of exercise over the amount paid for such shares. Income recognized
upon the exercise of nonqualified stock options will be considered compensation
subject to withholding at the time the income is recognized, and, therefore, the
Company must make the necessary arrangements with the optionee to ensure that
the amount of the tax required to be withheld is available for payment.
Nonqualified stock options are designed to provide the Company with a deduction
equal to the amount of ordinary income recognized by the optionee at the time of
such recognition by the optionee, subject to the deduction limitations described
below.
The basis of shares transferred to an optionee pursuant to exercise of a
nonqualified stock option is the price paid for such shares plus an amount equal
to any income recognized by the optionee as a result of the exercise of the
option. If an optionee thereafter sells shares acquired upon exercise of a
nonqualified stock option, the difference between the amount realized and the
basis of the shares will constitute capital gain or loss to the optionee for
federal income tax purposes.
If an optionee uses already owned shares of Common Stock to pay the exercise
price for shares under a nonqualified stock option, the number of shares
received pursuant to the nonqualified stock option which is equal to the number
of shares delivered in payment of the exercise price will be considered received
in a nontaxable exchange, and the fair market value of the remaining shares
received by the optionee upon the exercise will be taxable to the optionee as
ordinary income. If the already owned shares of Common Stock are not "statutory
option stock" or are statutory option stock with respect to which the applicable
holding period referred to in Section 424(c)(3)(A) of the Code has been
satisfied, the shares received pursuant to the exercise of the nonqualified
stock option will not be statutory option stock and the optionee's basis in the
number of shares received in exchange for the stock delivered in payment of the
exercise price will be equal to the basis of the shares delivered in payment.
The basis of the remaining shares received upon the exercise will be equal to
the fair market value of the shares. However, if the already owned shares of
Common Stock are statutory option stock with respect to which the applicable
holding period has not been satisfied, it is not presently clear whether the
exercise will be considered a disqualifying disposition of the statutory option
stock, whether the shares received upon such exercise will be statutory option
stock, or how the optionee's basis will be allocated among the shares received.
SARS. There will be no federal income tax consequences to either the
participant or the Company upon the grant of SARs. Generally, the participant
will recognize ordinary income subject to withholding upon the receipt of
payment pursuant to SARs in an amount equal to the aggregate amount of cash
received. Subject to the deduction limitations described below, the Company
generally will be entitled to a corresponding tax deduction equal to the amount
includable in the participant's income.
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RESTRICTED STOCK. If the restrictions on an award of restricted stock are
of a nature that such shares are both subject to a substantial risk of
forfeiture and are not freely transferrable within the meaning of Section 83 of
the Code, the participant will not recognize income for federal income tax
purposes at the time of the award unless such participant affirmatively elects
to include the fair market value of the shares of restricted stock on the date
of the award, less any amount paid therefor, in gross income for the year of the
award pursuant to Section 83(b) of the Code. In the absence of such an election,
the participant will be required to include income for federal income tax
purposes in the year in which occurs the date the shares either become freely
transferable or are no longer subject to a substantial risk of forfeiture within
the meaning of Section 83 of the Code, the fair market value of the shares of
restricted stock on such date, less any amount paid therefor. The Company will
be entitled to a deduction at the time of income recognition to the participant
in an amount equal to the amount the participant is required to include in
income with respect to the shares, subject to the deduction limitations
described below. If a Section 83(b) election is made within 30 days after the
date the restricted stock is received, the participant will recognize ordinary
income at the time of the receipt of the restricted stock and the Company will
be entitled to a corresponding deduction equal to the fair market value
(determined without regard to applicable restrictions) of the shares at such
time less the amount paid, if any, by the participant for the restricted stock.
If a Section 83(b) election is made, no additional income will be recognized by
the participant upon the lapse of restrictions on the restricted stock, but, if
the restricted stock is subsequently forfeited the participant may not deduct
the income that was recognized pursuant to Section 83(b) election at the time of
the receipt of the restricted stock. Dividends paid to a participant holding
restricted stock before the expiration of the restriction period will be
additional compensation taxable as ordinary income to the participant, unless
the participant made an election under Section 83(b). Subject to the deduction
limitations described below, the Company generally will be entitled to a
corresponding tax deduction equal to the dividends includable in the
participant's income as compensation. If the participant has made a Section
83(b) election, the dividends will be dividend income, rather than additional
compensation, to the participant.
If the restrictions on an award of restricted stock are not of a nature that
such shares are both subject to a substantial risk of forfeiture and not freely
transferable, within the meaning of Section 83 of the Code, the participant will
recognize ordinary income for federal income tax purposes at the time of the
award in an amount equal to the fair market value of the shares of restricted
stock on the date of the award, less any amount paid therefor. The Company will
be entitled to a deduction at such time in an amount equal to the amount the
participant is required to include in income with respect to the shares, subject
to the deduction limitations described below.
DIVIDEND EQUIVALENTS. There will be no federal income tax consequences to
either the participant or the Company upon the grant of dividend equivalents.
Generally, unless dividend equivalents are restricted in a manner that they are
both subject to a substantial risk of forfeiture and are not freely
transferable, the participant will recognize ordinary income upon the receipt of
payment pursuant to dividend equivalents in an amount equal to the fair market
value of the Common Stock and the aggregate amount of cash received. Subject to
the deduction limitations described below, the Company generally will be
entitled to a corresponding tax deduction equal to the amount includable in the
participant's income. If dividend equivalents are restricted in a manner that
they are both subject to a substantial risk of forfeiture and are not freely
transferable, the participant's and the Company's tax consequences will be
similar to the rules described above for restricted stock.
LIMITATIONS ON THE COMPANY'S COMPENSATION DEDUCTION. Section 162(m) of the
Code limits the deduction which the Company may take for otherwise deductible
compensation payable to certain executive officers of the Company to the extent
that compensation paid to such officers for such year exceeds $1 million, unless
such compensation is performance-based, is approved by the Company's
stockholders, and meets certain other criteria. Compensation attributable to a
stock option or a stock appreciation right is deemed to satisfy the requirements
for performance-based compensation if (i) the
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<PAGE>
grant or award is made by the compensation committee; (ii) the plan under which
the option or right is granted states the maximum number of shares with respect
to which options or rights may be granted during a specified period to any
employee; and (iii) under the terms of the option or right, the amount of
compensation the employee could receive is based solely on an increase in the
value of the stock after the date of the grant or award. The Plan has been
designed to enable awards of options and SARs granted by the compensation
committee to qualify as performance-based compensation for purposes of Section
162(m) of the Code.
In addition, Section 280G of the Code limits the deduction which the Company
may take for otherwise deductible compensation payable to certain individuals if
such compensation constitutes an "excess parachute payment". Very generally,
excess parachute payments arise from certain payments made to disqualified
individuals which are in the nature of compensation and are contingent on
certain changes in ownership or control of the Company. Disqualified individuals
for this purpose include certain employees and independent contractors who are
officers, shareholders or highly-compensated individuals. Accelerated vesting or
payment of awards under the Plan upon a change in ownership or control of the
Company could result in excess parachute payments. In addition to the deduction
limitation applicable the Company, a disqualified individual receiving an excess
parachute payment is subject to a 20 percent excise tax on the amount thereof.
TAX WITHHOLDING. To satisfy applicable withholding tax requirements, the
Committee may require payment from an employee, may withhold from payments made
under the Plan, or may withhold from other compensation payable to the employee.
RECOMMENDATION
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE PLAN.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE MERGER AGREEMENT AND RELATED AGREEMENTS
The Company acquired DNAP on September 26, 1996, pursuant to that certain
Agreement and Plan of Merger dated January 26, 1996, as amended (the "Merger
Agreement"), among ELM, Bionova Mexico, the Company, Bionova Acquisition, Inc.
and DNAP. From the date of the Merger, Bionova International, Inc. has been the
owner of 70% of the outstanding shares of the Company's Common Stock. As
described above under the caption "Security Ownership of Beneficial Owners,"
Bionova International, Inc. is a wholly-owned subsidiary of Bionova Mexico,
which is a wholly-owned subsidiary of ELM.
Under the terms of the Merger Agreement, during the three-year period
immediately following the Merger, ELM agreed to provide when requested by the
Company a guarantee of the Company's indebtedness to a financial institution
under a loan or line of credit, provided that (i) ELM's maximum exposure under
such guarantee is limited to $20 million and (ii) the documents evidencing such
loan or line of credit provide that the aggregate amount loaned to the Company
thereunder will not exceed at any time the sum of (x) 80% of the accounts
receivable of the Company and its consolidated subsidiaries and (y) 50% of the
inventories of the Company and its consolidated subsidiaries and such loan is
secured by such accounts receivable and inventories. At December 31, 1997, ELM
guaranteed approximately $49.8 million of the Company's bank debt.
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As provided in the Merger Agreement, ELM and DNAP entered into that certain
Long Term Funded Research Agreement dated September 26, 1996, which provides
that ELM, directly or through its affiliates, and DNAP will use their best
efforts to agree on research projects to be conducted by DNAP for ELM or its
affiliates which will result in payments to DNAP of $30 million over a ten-year
period, with minimum funding (subject to carry forwards) of $9 million in any
three-year period. Unless otherwise agreed by the parties, payments of at least
$625,000 in respect of ELM's obligation to fund research projects are to be paid
to DNAP at the beginning of each calendar quarter during the term of the Long
Term Funded Research Agreement. During 1997 Seminis Vegetable Seeds, Inc., a
majority-owned subsidiary of ELM ("Seminis"), paid DNAP $2,500,000 with respect
to work under this agreement.
Also as provided in the Merger Agreement, ELM and the Company entered into
the Governance Agreement on September 26, 1996. In addition to the provisions
described above under the caption "Election of Directors," the Governance
Agreement provides that ELM (together with its affiliates) may, subject to
applicable law, acquire or dispose of shares of Common Stock so long as their
aggregate beneficial ownership of the Common Stock does not fall below 51% or
exceed 80.1%, subject to certain conditions and exceptions.
OTHER TRANSACTIONS WITH ELM AND ITS AFFILIATES
On July 1, 1996, the Company and Bionova Mexico entered into an
Administrative Services Agreement. This agreement provides that Bionova Mexico
will render certain administrative and clerical services to the Company and its
subsidiaries in return of payment equivalent to the compensation, benefits, and
other overhead attributable to the employees of Bionova Mexico performing these
services, all of which will be performed in Mexico. The initial term of the
agreement was extended to December 31, 1996 and will continue thereafter for
successive one-year terms unless either the Company or Bionova Mexico elects to
terminate the agreement. In 1997, the amount billed by Bionova under this
agreement was $1,000,000.
Prior to the date of the Administrative Services Agreement, Bionova Mexico
rendered certain administrative and clerical services to the Company's
subsidiaries for which certain of the Company's subsidiaries were indebted to
Bionova Mexico in the amount $3,001,000 at December 31, 1997.
The Company contracts for insurance and factoring services with a company
that is an affiliate of ELM. During 1997, the Company incurred insurance expense
of $289,000 to this company. At December 31, 1997, the amount due under the
factoring arrangement was $868,000.
ELM makes available to its affiliates a long-term credit line that bears
interest at variable rates comparable to those prevailing in the marketplace. At
December 31, 1997, the Company owed ELM $15,429,000 under this credit line.
AGREEMENTS WITH MEMBERS OF THE BATIZ FAMILY
On October 6, 1997, the Company acquired all of the minority interests in
International Produce Holding Company, a Delaware corporation ("IPHC"), and
increased its ownership interest in Agricola Batiz, S.A. de C.V., a corporation
organized under the laws of the United Mexican States ("ABSA"), to 80% (the
"Acquisition"). Prior to the Acquisition, the Company owned 57.7% of IPHC and
50.004% of ABSA. The remaining 42.3% of IPHC was owned by Raul Batiz E. and his
sons Pedro Batiz G., J. Guillermo Batiz G., and Raul Batiz G. The remaining
49.996% of ABSA was owned by relatives of Raul Batiz E., including Raul Batiz G.
and J. Guillermo Batiz G. Raul Batiz E., by virtue of his former positions as
President of IPHC and its subsidiary, R. B. Packing, Inc., was deemed to be an
executive officer of the Company until October 1997. Raul Batiz G. and J.
Guillermo Batiz G., by virtue of their respective former position as Director of
Operations and Director of Administration of ABSA, were also deemed to be
executive officers of the Company until October 1997.
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Pursuant to the terms of the Acquisition, the Company purchased all of the
shares of IPHC for an aggregate purchase price of $8,598,000, which was paid by
delivery of $5,330,000 in cash and promissory notes totaling $3,268,000 (subject
to certain offsets) payable over three years. The minority interest in IPHC was
divided approximately as follows: Raul Batiz E.--37.0%, Pedro Batiz G.--26.4%,
J. Guillermo Batiz G.--18.3%, and Raul Batiz G.--18.3%. The increase in the
Company's interest in ABSA resulted in part from the withdrawal by all of the
minority stockholders of all of their variable capital in ABSA in exchange for
$10,385,271, which was paid by delivery of $6,433,271 in cash and promissory
notes totaling 3,952,000 payable over three years. Raul Batiz G. owned
approximately 16.3%, and J. Guillermo Batiz G. owned approximately 19.4%, of the
minority interest in ABSA. The consideration paid in the Acquisition was
determined as a result of arms-length negotiations between management of the
Company and members of the Batiz family.
In connection with the Acquisition, Pedro Batiz G. agreed to continue as an
executive of IPHC's operating subsidiaries for at least three years. Also, Raul
Batiz G. and J. Guillermo Batiz G. agreed to remain with ABSA in consulting
roles for at least three months. Pedro Batiz G. received $269,263 in total
compensation from R.B. Packing, Inc. in 1997. Raul Batiz G. and J. Guillermo
Batiz G. each received $90,140 in total compensation (including consulting fees)
from ABSA in 1997.
Prior to the Acquisition, ABSA was a party to a contractual arrangement with
Copropiedad Agricola Batiz Hermanos, a Mexican entity that is controlled by
members of the Batiz family but was not a subsidiary of the Company ("CABH"),
pursuant to which CABH provided labor and administrative services to ABSA and
ABSA paid a fee to CABH based on CABH's costs incurred in connection with
providing such services. Both Raul Batiz E. and J. Guillermo Batiz G. owned in
excess of 10% of CABH. In 1997, ABSA paid a total of approximately $14,094,000
to CABH under this arrangement.
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
To assist DNAP to satisfy certain contractual obligations, on June 21, 1996,
Mr. Serenbetz, Dr. Bedbrook, and Dr. Evans surrendered certain options to
purchase shares of common stock of DNAP previously granted to them. The Company
has agreed to grant to each of such persons options to purchase shares of Common
Stock of the Company which would be for the same number of shares (adjusted in
accordance with the exchange ratio applicable to the Merger) and exercisable on
the same terms as the surrendered options. Accordingly, each of such persons is
entitled to receive the following options: Mr. Serenbetz--94,500 options at
exercise prices ranging from $24.69 to $56.25 and expiration dates ranging from
November 2001 to March 2005; Dr. Bedbrook--33,500 options at exercise prices
ranging from $24.69 to $81.25 and expiration dates ranging from November 1998 to
March 2005; and Dr. Evans-- 37,500 options at exercise prices ranging from
$24.69 to $81.25 and expiration dates ranging from November 2000 to March 2005.
In 1997, the Company hired Abelardo Sanchez to serve as an Executive Vice
President of the Company and to manage certain of the Company's subsidiaries. In
connection with his new position, Mr. Sanchez was required by the Company to
relocate to California. To assist him in his relocation, the Company loaned Mr.
Sanchez $750,000 to be used to purchase and make improvements to his new
principal residence. The loan is interest-free and is secured by the property.
The loan must be repaid at such time as Mr. Sanchez ceases to be employed by the
Company, sells the property, or establishes a different principal residence.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and officers of the
Company, and persons who beneficially own more than 10 percent of the Common
Stock, to file with the SEC initial reports of ownership and reports of changes
in ownership of the Common Stock. Directors, officers and more than 10 percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section
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16(a) forms they file. To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, during the year ended December 31, 1997,
all Section 16(a) filing requirements applicable to its directors, officers and
more than 10 percent beneficial owners were complied with.
INDEPENDENT ACCOUNTANTS
The appointment of the accounting firm selected to audit the Company's
financial statements is subject to ratification by the Board of Directors and
will not be submitted to stockholders for ratification or approval. It is the
present intention of the Company's management to recommend to the Board of
Directors the re-appointment of Price Waterhouse LLP, which has audited the
financial statements of the Company and certain of its subsidiaries since 1996,
to audit the financial statements of the Company for 1998. Representatives of
Price Waterhouse LLP are expected to be present at the meeting to respond to
appropriate questions from stockholders and will be given the opportunity to
make a statement at the meeting should they desire to do so.
STOCKHOLDER PROPOSALS AND OTHER MATTERS
Stockholder proposals intended to be included in the Company's proxy
statement relating to the 1999 annual meeting of stockholders must be received
by the Company's Secretary, Joe A. Rudberg, 1700 Pacific Avenue, Suite 3300,
Dallas, Texas 75201, no later than November 30, 1998.
The cost of solicitation of proxies will be borne by the Company.
Solicitation may be made by mail, personal interview or telephone by officers
and regular employees of the Company, who will receive no additional
compensation therefor.
The Board of Directors does not intend to present any other matter at the
meeting and knows of no other matters that will be presented. However, if any
other matter comes before the meeting, the persons named in the enclosed proxy
intend to vote thereon in accordance with their best judgment.
ANNUAL REPORT ON FORM 10-K
AN ADDITIONAL COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1997, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS OF THE
COMPANY BUT EXCLUDING EXHIBITS TO SUCH REPORT, WILL BE PROVIDED TO EACH PERSON
TO WHOM A COPY OF THIS PROXY STATEMENT HAS BEEN SENT BY THE COMPANY AND TO EACH
OTHER BENEFICIAL OWNER OF SHARES OF COMMON STOCK AS OF THE RECORD DATE, WITHOUT
CHARGE, UPON WRITTEN REQUEST OF SUCH PERSON. ANY SUCH REQUEST SHOULD BE DIRECTED
TO MICHAEL VERNETTI, DIRECTOR OF INVESTOR RELATIONS, 6701 SAN PABLO AVENUE,
OAKLAND, CALIFORNIA, 94608, AND EACH SUCH BENEFICIAL OWNER MUST INCLUDE IN SUCH
REQUEST A GOOD FAITH REPRESENTATION THAT AS OF THE RECORD DATE THE PERSON MAKING
THE REQUEST BENEFICIALLY OWNED ONE OR MORE SHARES OF COMMON STOCK. A LIST OF THE
EXHIBITS TO SUCH ANNUAL REPORT IS INCLUDED IN THE REPORT; A COPY OF ANY SUCH
EXHIBIT WILL BE FURNISHED UPON REQUEST AND PAYMENT OF A MINIMAL FEE EQUAL TO THE
COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH COPY.
<TABLE>
<S> <C>
Oakland, California BY ORDER OF THE BOARD OF DIRECTORS
April 30, 1998
JOE A. RUDBERG
SECRETARY
</TABLE>
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EXHIBIT A
DNAP HOLDING CORPORATION
1998 LONG-TERM INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. DNAP Holding Corporation, a Delaware corporation,
hereby establishes the DNAP Holding Corporation 1998 Long-Term Incentive Plan,
as set forth in this document.
1.2 PURPOSE. The purposes of the Plan are to attract able persons to enter
the employ of the Company, to encourage Employees to remain in the employ of the
Company and to provide motivation to Employees to put forth maximum efforts
toward the continued growth, profitability and success of the Company, by
providing incentives to such persons through the ownership and performance of
the Common Stock of DNAP. A further purpose of the Plan is to provide a means
through which DNAP may attract able persons to become directors of DNAP and to
provide directors of DNAP with additional incentive and reward opportunities
designed to strengthen their concern for the welfare of DNAP and its
stockholders. Toward these objectives, Awards may be granted under the Plan to
Employees and Outside Directors on the terms and subject to the conditions set
forth in the Plan.
1.3 EFFECTIVENESS. The Plan shall become effective as of the date of its
approval by the stockholders of DNAP at the 1998 Annual Meeting of Stockholders.
No Awards shall be made before the Plan becomes effective.
ARTICLE 2. DEFINITIONS
2.1 AWARD. "Award" means any Option, SAR, Restricted Stock, Dividend
Equivalent or Other Incentive Award granted under the Plan, whether singly, in
combination or in tandem, to a Participant by the Committee or the Board.
2.2 AWARD AGREEMENT. "Award Agreement" means a written agreement between
DNAP and a Participant that sets forth the terms, conditions, restrictions
and/or limitations applicable to an Award.
2.3 BOARD. "Board" means the Board of Directors of DNAP.
2.4 CODE. "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
2.5 COMMITTEE. "Committee" means the Compensation Committee of the Board,
or such other committee of the Board as may be designated by the Board to
administer the Plan; provided that the Committee shall consist of two or more
directors of DNAP, all of whom are both a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Exchange Act and an "outside director" within
the meaning of the definition of such term as contained in Treasury Regulation
Section 1.162-27(e)(3) interpreting Section 162(m) of the Code, or any successor
definitions adopted. The members of the Committee shall be appointed from time
to time by, and shall serve at the discretion of, the Board.
2.6 COMMON STOCK. "Common Stock" means the Common Stock, $.01 par value
per share, of DNAP, or any stock or other securities of DNAP hereafter issued or
issuable in substitution or exchange for the Common Stock.
2.7 COMPANY. "Company" means DNAP and its Subsidiaries.
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2.8 CORPORATE CHANGE. A "Corporate Change" shall be deemed to have
occurred for purposes of the Plan upon (a) the dissolution or liquidation of
DNAP; (b) a reorganization, merger or consolidation of DNAP with one or more
corporations (other than a merger or consolidation effecting a reincorporation
of DNAP in another state or any other merger or consolidation in which the
shareholders of the surviving corporation and their proportionate interests
therein immediately after the merger or consolidation are substantially
identical to the shareholders of DNAP and their proportionate interests therein
immediately prior to the merger or consolidation); (c) the sale of all or
substantially all of the assets of DNAP; or (d) the occurrence of a Change in
Control. A "Change in Control" shall be deemed to have occurred for purposes of
the Plan if (a) individuals who were directors of DNAP immediately prior to a
Control Transaction shall cease, within two years of such Control Transaction,
to constitute a majority of the Board (or of the Board of Directors of any
successor to DNAP or to a company which has acquired all or substantially all
its assets) or (b) any entity, person or Group acquires shares of DNAP in a
transaction or series of transactions that result in such entity, person or
Group directly or indirectly owning beneficially 50% or more of the outstanding
shares of Common Stock. As used herein, "Control Transaction" means (a) any
tender offer for or acquisition of capital stock of DNAP, (b) any merger or
consolidation of DNAP, (c) any contested election of directors of DNAP or (d)
any combination of the foregoing, any one of which results in a change in voting
power sufficient to elect a majority of the Board. As used herein, "Group" means
persons who act "in concert" as described in Sections 13(d)(3) and/or 14(d)(2)
of the Exchange Act.
2.9 DIVIDEND EQUIVALENTS. "Dividend Equivalents" means an Award granted to
a Participant pursuant to Article 10.
2.10 DNAP. "DNAP" means DNAP Holding Corporation, a Delaware corporation,
and any successor thereto.
2.11 EFFECTIVE DATE. "Effective Date" means the date an Award is
determined to be effective by the Committee or the Board upon its grant of such
Award.
2.12 EMPLOYEE. "Employee" means any person treated as an employee by DNAP
or a Subsidiary. "Employee" shall not include any person treated by DNAP or a
Subsidiary as an independent contractor.
2.13 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
2.14 FAIR MARKET VALUE. "Fair Market Value" means the fair market value of
the Common Stock, as determined by the Committee or, (i) if the Common Stock is
traded in the over-the-counter market, the average of the representative closing
bid and asked prices as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") for the date the option is granted
(or if there was no quoted price for such date of grant, then for the last
preceding business day on which there was a quoted price), or (ii) if the Common
Stock is traded in the NASDAQ National Market System, the last sale price as
reported by the NASDAQ National Market System for the date the option is granted
(or if there are no sales for such date of grant, then for the last preceding
business day on which there were sales), or (iii) if the Common Stock is listed
on any national stock exchange, the average of the highest and lowest selling
prices for such stock as quoted on such exchange for the date the option is
granted (or if there are no sales for such date of grant, then for the last
preceding business day on which there were sales).
2.15 INCENTIVE STOCK OPTION. "Incentive Stock Option" means an option to
purchase shares of Common Stock that is intended to meet the requirements of
Section 422(b) of the Code.
2.16 NONQUALIFIED STOCK OPTION. "Nonqualified Stock Option" means an
option to purchase shares of Common Stock that is not intended to meet the
requirements of Section 422(b) of the Code.
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2.17 OPTION. "Option" means an option to purchase shares of Common Stock
granted to a Participant pursuant to Article 7, and includes both Incentive
Stock Options and Nonqualified Stock Options.
2.18 OTHER INCENTIVE AWARD. "Other Incentive Award" means an Award granted
to a Participant pursuant to Article 11.
2.19 OUTSIDE DIRECTOR. "Outside Director" means an individual duly elected
or chosen as a director of DNAP who is not also an Employee.
2.20 PARTICIPANT. "Participant" means any Employee or Outside Director to
whom an Award has been granted under the Plan.
2.21 PLAN. "Plan" means this DNAP Holding Corporation 1998 Long-Term
Incentive Plan.
2.22 RESTRICTED STOCK. "Restricted Stock" means an Award of shares of
Common Stock granted to a Participant pursuant to, and with such restrictions as
are imposed under, Article 9. Restricted Stock shall constitute issued and
outstanding shares of Common Stock for all corporate purposes.
2.23 SARS. "SARs" means an Award of stock appreciation rights granted to a
Participant pursuant to Article 8.
2.24 SUBSIDIARY. "Subsidiary" means a "subsidiary corporation" of DNAP, as
that term is defined in Section 424(f) of the Code.
ARTICLE 3. PLAN ADMINISTRATION
3.1 RESPONSIBILITY OF COMMITTEE. Subject to the terms and provisions of
the Plan, including, without limitation, Section 3.6, the Committee shall have
total and exclusive responsibility to control, operate, manage and administer
the Plan in accordance with its terms.
3.2 AUTHORITY OF COMMITTEE. The Committee shall have all the authority
that may be necessary or helpful to enable it to discharge its responsibilities
with respect to the Plan. Without limiting the generality of the preceding
sentence, the Committee shall have the exclusive right, subject to the
provisions of Section 3.6, to: (a) interpret the Plan and the Award Agreements
executed hereunder; (b) determine eligibility for participation in the Plan; (c)
decide all questions concerning eligibility for, and the amount of, Awards
payable under the Plan; (d) construe any ambiguous provision of the Plan or any
Award Agreement; (e) prescribe the form of the Award Agreements embodying Awards
granted under the Plan; (f) correct any defect, supply any omission or reconcile
any inconsistency in the Plan or any Award Agreement; (g) issue administrative
guidelines as an aid to administer the Plan and make changes in such guidelines
as it from time to time deems proper; (h) make regulations for carrying out the
Plan and make changes in such regulations as it from time to time deems proper;
(i) determine whether Awards should be granted singly, in combination or in
tandem; (j) to the extent permitted under the Plan, grant waivers of Plan terms,
conditions, restrictions and limitations; (k) accelerate the exercise, vesting
or payment of an Award when such action or actions would be in the best
interests of the Company; (l) grant Awards in replacement of Awards previously
granted under the Plan or any other employee benefit plan of the Company; and
(m) take any and all other actions it deems necessary or advisable for the
proper operation or administration of the Plan.
3.3 DISCRETIONARY AUTHORITY. Subject to the provisions of Section 3.6, (i)
the Committee shall have full discretionary authority in all matters related to
the discharge of its responsibilities and the exercise of its authority under
the Plan, including, without limitation, its construction of the terms of the
Plan and its determination of eligibility for participation and Awards under the
Plan, and (ii) the decisions of the Committee and its actions with respect to
the Plan shall be final, conclusive and binding on all persons
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having or claiming to have any right or interest in or under the Plan, including
Participants and their respective estates, beneficiaries and legal
representatives.
3.4 ACTION BY THE COMMITTEE. The Committee may act only by a majority of
its members. Any determination of the Committee may be made, without a meeting,
by a writing or writings signed by all of the members of the Committee. In
addition, the Committee may authorize any one or more of its members to execute
and deliver documents on behalf of the Committee.
3.5 DELEGATION OF AUTHORITY. Notwithstanding anything contained in the
Plan to the contrary, the Committee may, in its discretion, delegate some or all
of its authority under the Plan to any person or persons; provided, however,
that any such delegation shall be in writing; and provided further that only the
Committee may select and grant Awards to Employees who are subject to Section 16
of the Exchange Act or who are "covered employees" within the meaning of Section
162(m) of the Code.
3.6 BOARD AUTHORITY. Notwithstanding the authority hereby delegated to the
Committee to administer the Plan, the Board shall have sole and exclusive
authority, subject to the express provisions of the Plan, to grant Awards to
Outside Directors under the Plan, to determine the terms, conditions,
restrictions and/ or limitations applicable to such Awards and to make all other
determinations and take any and all other actions it deems necessary or
advisable with respect to such Awards. The Board shall have no authority under
the Plan to select and grant Awards to Employees, and such authority is vested
exclusively in the Committee; provided, however, that all Awards to Employees
authorized by the Committee shall be ratified by the Board.
3.7 LIABILITY; INDEMNIFICATION. No member of the Committee or the Board
nor any person to whom authority has been delegated by the Committee, shall be
personally liable for any action, interpretation or determination made in good
faith with respect to the Plan or Awards granted hereunder, and each member of
the Committee and the Board shall be fully indemnified and protected by DNAP
with respect to any liability he or she may incur with respect to any such
action, interpretation or determination, to the extent permitted by applicable
law and to the extent provided in the Certificate of Incorporation and Bylaws of
DNAP, as amended from time to time, or under any agreement between any such
member and DNAP.
ARTICLE 4. ELIGIBILITY
All Employees and Outside Directors are eligible to participate in the Plan.
The Committee shall select, from time to time, Participants from those
Employees, and the Board shall select, from time to time, Participants from
those Outside Directors, who, in the opinion of the Committee or the Board, can
further the Plan's purposes. In making this selection, the Committee and the
Board may give consideration to the functions and responsibilities of the
Participant, his or her past, present and potential contributions to the growth
and success of the Company and such other factors deemed relevant by the
Committee or the Board. Once a Participant is so selected, the Committee or the
Board shall determine the type and size of Award to be granted to the
Participant and shall establish in the related Award Agreement the terms,
conditions, restrictions and/or limitations applicable to the Award, in addition
to those set forth in the Plan and the administrative rules and regulations, if
any, established by the Committee. No Employee is entitled to receive an Award
unless selected by the Committee, and no Outside Director is entitled to receive
an Award unless selected by the Board.
ARTICLE 5. FORM OF AWARDS
Awards may, at the Committee's or the Board's sole discretion, be granted
under the Plan in the form of Options pursuant to Article 7, SARs pursuant to
Article 8, Restricted Stock pursuant to Article 9, Dividend Equivalents pursuant
to Article 10, Other Incentive Awards pursuant to Article 11 or a combination
thereof. All Awards shall be subject to the terms, conditions, restrictions and
limitations of
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the Plan. The Committee or the Board may, in its sole judgment, subject any
Award to such other terms, conditions, restrictions and/or limitations
(including, but not limited to, the time and conditions of exercise, vesting or
payment of an Award and restrictions on transferability of any shares of Common
Stock issued or delivered pursuant to an Award), provided they are not
inconsistent with the terms of the Plan. Awards under a particular Article of
the Plan need not be uniform, and Awards under two or more Articles of the Plan
may be combined into a single Award Agreement. Any combination of Awards may be
granted at one time and on more than one occasion to the same Participant.
ARTICLE 6. SHARES SUBJECT TO THE PLAN
6.1 AVAILABLE SHARES. The maximum number of shares of Common Stock that
shall be available for grant of Awards under the Plan shall not exceed
2,000,000, subject to adjustment as provided in Sections 6.2 and 6.3. Shares of
Common Stock issued pursuant to the Plan may be shares of original issuance or
treasury shares or a combination of the foregoing, as the Board, in its
discretion, shall from time to time determine.
6.2 ADJUSTMENTS FOR RECAPITALIZATIONS AND REORGANIZATIONS.
(a) The shares with respect to which Awards may be granted under the Plan
are shares of Common Stock as presently constituted, but if, and whenever, prior
to the expiration or satisfaction of an Award theretofore granted, DNAP shall
effect a subdivision or consolidation of shares of Common Stock or the payment
of a stock dividend on Common Stock without receipt of consideration by DNAP,
the number of shares of Common Stock with respect to which such Award may
thereafter be exercised or satisfied, as applicable, (i) in the event of an
increase in the number of outstanding shares shall be proportionately increased,
and the exercise price per share shall be proportionately reduced, and (ii) in
the event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the exercise price per share shall be
proportionately increased.
(b) If DNAP recapitalizes or otherwise changes its capital structure,
thereafter upon any exercise or satisfaction, as applicable, of an Award
theretofore granted the Participant shall be entitled to (or entitled to
purchase, if applicable) under such Award, in lieu of the number of shares of
Common Stock then covered by such Award, the number and class of shares of stock
or other securities to which the Participant would have been entitled pursuant
to the terms of the recapitalization if, immediately prior to such
recapitalization, the Participant had been the holder of record of the number of
shares of Common Stock then covered by such Award.
(c) In the event of changes in the outstanding Common Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
separations (including a spin-off or other distribution of stock or property),
exchanges or other relevant changes in capitalization occurring after the date
of grant of any Award and not otherwise provided for by this Section 6.2, any
outstanding Awards and any Award Agreements evidencing such Awards shall be
subject to adjustment by the Committee at its discretion as to the number, price
and kind of shares or other consideration subject to, and other terms of, such
Awards to reflect such changes in the outstanding Common Stock.
(d) In the event of any changes in the outstanding Common Stock provided for
in this Section 6.2, the aggregate number of shares available for grant of
Awards under the Plan may be equitably adjusted by the Committee, whose
determination shall be conclusive. Any adjustment provided for in this Section
6.2 shall be subject to any required stockholder action.
6.3 ADJUSTMENTS FOR AWARDS. The Committee shall have full discretion to
determine the manner in which shares of Common Stock available for grant of
Awards under the Plan are counted. Without limiting the discretion of the
Committee under this Section 6.3, unless otherwise determined by the Committee,
the following rules shall apply for the purpose of determining the number of
shares of Common Stock available for grant of Awards under the Plan:
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(a) OPTIONS AND RESTRICTED STOCK. The grant of an Option or Restricted
Stock shall reduce the number of shares available for grant of Awards under
the Plan by the number of shares subject to such Award.
(b) SARS. The grant of SARs shall not affect the number of shares
available for grant of Awards under the Plan.
(c) DIVIDEND EQUIVALENTS. The grant of Dividend Equivalents shall not
affect the number of shares available for grant of Awards under the Plan,
but such number of shares shall be reduced by any shares issued in payment
or settlement of Dividend Equivalents.
(d) OTHER INCENTIVE AWARDS. The grant of an Other Incentive Award in the
form of Common Stock or that may be paid or settled only in Common Stock
shall reduce the number of shares available for grant of Awards under the
Plan by the number of shares subject to such Award. The grant of an Other
Incentive Award that may be paid or settled only for cash shall not affect
the number of shares available for grant of Awards under the Plan. The grant
of an Other Incentive Award that may be paid or settled in either Common
Stock or cash shall reduce the number of shares available for grant of
Awards under the Plan by the number of shares subject to such Award.
(e) TERMINATION. If any Award referred to in paragraphs (a) and (d)
above (other than an Other Incentive Award that may be paid or settled only
for cash) is canceled or forfeited, or terminates, expires or lapses, for
any reason (other than the termination of a Related Option (as defined in
Section 8.1) upon exercise of its corresponding SARs), the shares then
subject to such Award shall again be available for grant of Awards under the
Plan.
(f) PAYMENT OF EXERCISE PRICE AND WITHHOLDING TAXES. If previously
acquired shares of Common Stock are used to pay the exercise price of an
Award, or shares of Common Stock that would be acquired upon exercise of an
Award are withheld to pay the exercise price of such Award, the number of
shares available for grant of Awards under the Plan other than Incentive
Stock Options shall be increased by the number of shares delivered or
withheld as payment of such exercise price. If previously acquired shares of
Common Stock are used to pay withholding taxes payable upon exercise,
vesting or payment of an Award, or shares of Common Stock that would be
acquired upon exercise, vesting or payment of an Award are withheld to pay
withholding taxes payable upon exercise, vesting or payment of such Award,
the number of shares available for grant of Awards under the Plan other than
Incentive Stock Options shall be increased by the number of shares delivered
or withheld as payment of such withholding taxes.
ARTICLE 7. OPTIONS
7.1 GENERAL. Awards may be granted to Employees and Outside Directors in
the form of Options. These Options may be Incentive Stock Options or
Nonqualified Stock Options, or a combination of both; provided, however, that
(i) no Incentive Stock Options shall be granted later than 10 years from the
date of adoption of the Plan by the Board and (ii) only Employees shall be
eligible to receive Incentive Stock Options.
7.2 TERMS AND CONDITIONS OF OPTIONS. An Option shall be exercisable in
whole or in such installments and at such times as may be determined by the
Committee or the Board. The price at which a share of Common Stock may be
purchased upon exercise of an Option shall be determined by the Committee or the
Board, but such exercise price shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the Effective Date of the Option's grant.
The term of each Option shall be as specified by the Committee or the Board;
provided, however, that, unless otherwise designated by the Committee or the
Board, no Options shall be exercisable later than 10 years from the Effective
Date of the Option's grant.
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7.3 RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS. Options granted in
the form of Incentive Stock Options shall, in addition to being subject to the
terms and conditions of Section 7.2, comply with Section 422(b) of the Code.
Accordingly, to the extent that the aggregate Fair Market Value (determined at
the time the respective Incentive Stock Option is granted) of Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
an individual during any calendar year under all incentive stock option plans of
DNAP and its parent corporation and Subsidiaries exceeds $100,000, such excess
Incentive Stock Options shall be treated as options which do not constitute
Incentive Stock Options. The Committee shall determine, in accordance with
applicable provisions of the Code, which of an optionee's Incentive Stock
Options will not constitute Incentive Stock Options because of such limitation
and shall notify the optionee of such determination as soon as practicable after
such determination. No Incentive Stock Option shall be granted to an Employee
under the Plan if, at the time such Option is granted, such Employee owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of DNAP or its parent corporation or a Subsidiary, within the meaning of
Section 422(b)(6) of the Code, unless (a) on the Effective Date of grant of such
Option, the exercise price of such Option is at least 110% of the Fair Market
Value of the Common Stock subject to the Option and (b) such Option by its terms
is not exercisable after the expiration of five years from the Effective Date of
the Option's grant.
7.4 ADDITIONAL TERMS AND CONDITIONS. The Committee or the Board may
subject any Award of an Option to such other terms, conditions, restrictions
and/or limitations as it determines are necessary or appropriate, provided they
are not inconsistent with the Plan.
7.5 EXERCISE OF OPTIONS. Subject to the terms and conditions of the Plan,
Options shall be exercised by the delivery of a written notice of exercise to
DNAP, setting forth the number of shares of Common Stock with respect to which
the Option is to be exercised, accompanied by full payment for such shares.
Upon exercise of an Option, the exercise price of the Option shall be
payable to DNAP in full either: (a) in cash or an equivalent acceptable to the
Committee or (b) in accordance with any applicable administrative guidelines
established by the Committee, by (i) tendering previously acquired
nonforfeitable, unrestricted shares of Common Stock having an aggregate Fair
Market Value at the time of exercise equal to the total exercise price
(including an actual or deemed multiple series of exchanges of such shares),
(ii) with respect to Nonqualified Stock Options only, withholding shares which
otherwise would be acquired on exercise having an aggregate Fair Market Value at
the time of exercise equal to the total exercise price or (iii) a combination of
the forms of payment specified in clauses (a), (b)(i) or (b)(ii) above.
In addition, any grant of a Nonqualified Stock Option under the Plan may
provide that payment of the exercise price of the Nonqualified Stock Option may
also be made in whole or in part in the form of shares of Restricted Stock or
other shares of Common Stock that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Committee or the
Board at the time of grant of such Nonqualified Stock Option, whenever the
exercise price of such Nonqualified Stock Option is paid in whole or in part by
means of the form of consideration specified in the immediately preceding
sentence, the shares of Common Stock received by the Participant upon the
exercise of such Option shall be subject to the same risk of forfeiture and
restrictions on transfer as those that applied to the consideration surrendered
by the Participant. However, the risk of forfeiture and restrictions on transfer
shall apply only to the same number of shares of Common Stock received by the
Participant upon exercise as applied to the forfeitable or restricted Common
Stock surrendered by the Participant in payment of the exercise price.
Payment of the exercise price of an Option may also be made, in the
discretion of the Committee, by delivery to DNAP or its designated agent of an
executed irrevocable option exercise form together with irrevocable instructions
to a broker-dealer to sell or margin a sufficient portion of the shares with
respect to which the Option is exercised and deliver the sale or margin loan
proceeds directly to DNAP to pay for the exercise price and any required
withholding taxes.
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As soon as reasonably practicable after receipt of written notification of
exercise of an Option and full payment of the exercise price and any required
withholding taxes, DNAP shall deliver to the Participant, in the Participant's
name, a stock certificate or certificates in an appropriate amount based upon
the number of shares of Common Stock purchased under the Option.
7.6 TERMINATION OF SERVICE. Each Award Agreement embodying the Award of an
Option shall set forth the extent to which the Participant shall have the right
to exercise the Option following termination of the Participant's employment or
service with the Company. Such provisions shall be determined in the sole
discretion of the Committee or the Board, need not be uniform among all Options
granted under the Plan and may reflect distinctions based on the reasons for
termination of employment or service. Subject to Section 6.2, Section 14.2 and
Article 12, in the event that an Employee's Award Agreement embodying the Award
of an Option does not set forth such termination provisions, the following
termination provisions shall apply with respect to such Award:
(a) DEATH OR DISABILITY. If the employment of a Participant shall
terminate by reason of death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code), outstanding Options held by the
Participant may be exercised, to the extent then vested, no more than one
year from the date of such termination of employment, unless the Options, by
their terms, expire earlier.
(b) OTHER TERMINATION. If the employment of a Participant shall
terminate for any reason other than the reasons set forth in paragraph (a)
above, whether on a voluntary or involuntary basis, outstanding Options held
by the Participant may be exercised, to the extent then vested, no more than
three months from the date of such termination of employment, unless the
Options, by their terms, expire earlier.
(c) TERMINATION FOR CAUSE. Notwithstanding paragraphs (a) and (b) above,
if the employment of a Participant shall be terminated by reason of such
Participant's fraud, dishonesty or performance of other acts detrimental to
the Company, all outstanding Options held by the Participant shall
immediately be forfeited to the Company and no additional exercise period
shall be allowed, regardless of the vested status of the Options.
7.7 MAXIMUM OPTION GRANTS. Notwithstanding any provision contained in the
Plan to the contrary, the maximum number of shares of Common Stock for which
Options and SARs may be granted under the Plan to any one Employee during a
calendar year is 200,000.
7.8 OPTIONS IN SUBSTITUTION FOR OPTIONS GRANTED BY OTHER
CORPORATIONS. Options may be granted under the Plan from time to time in
substitution for stock options held by employees of corporations who become, or
who became prior to the effective date of the Plan, Employees as a result of a
merger or consolidation of the employing corporation with DNAP or a Subsidiary,
or the acquisition by DNAP or a Subsidiary of all or a portion of the assets of
the employing corporation, or the acquisition by DNAP or a Subsidiary of stock
of the employing corporation, with the result that such employing corporation
becomes a Subsidiary.
ARTICLE 8. SARS
8.1 GENERAL. The Committee may from time to time grant SARs in conjunction
with all or any portion of any Option either (i) at the time of the initial
Option grant (not including any subsequent modification that may be treated as a
new grant of an Incentive Stock Option for purposes of Section 424(h) of the
Code) or (ii) with respect to Nonqualified Stock Options, at any time after the
initial Option grant while the Nonqualified Stock Option is still outstanding.
SARs shall not be granted other than in conjunction with an Option granted
hereunder.
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8.2 TERMS AND CONDITIONS. SARs granted hereunder shall comply with the
following conditions and also with the terms of the Award Agreement governing
the Option in conjunction with which they are granted:
(a) The SAR shall expire no later than the expiration of the underlying
Option.
(b) Upon the exercise of an SAR, the Participant shall be entitled to
receive from DNAP or the appropriate Subsidiary in cash an amount equal to
the excess of the aggregate Fair Market Value of the shares of Common Stock
with respect to which the SAR is then being exercised (determined as of the
date of such exercise) over the aggregate purchase price of such shares as
provided in the related Option.
(c) SARs shall be exercisable (i) only at such time or times and only to
the extent that the Option to which they relate shall be exercisable, (ii)
only when the Fair Market Value of the shares subject to the related Option
exceeds the purchase price of the shares as provided in the related Option,
and (iii) only upon surrender of the related Option or any portion thereof
with respect to the shares for which the SARs are then being exercised.
(d) Upon the exercise of an SAR, the related Option shall be deemed to
have been terminated to the extent of the number of shares of Common Stock
with respect to which such SARs are exercised. Upon the exercise or
termination of the related Option, the SARs with respect to such related
Option shall be deemed to have been terminated to the extent of the number
of shares of Common Stock with respect to which the related Option was so
exercised or terminated.
8.3 EXERCISE OF SARS. Each exercise of SARs, or a portion thereof, shall
be evidenced by a notice in writing to DNAP.
ARTICLE 9. RESTRICTED STOCK
9.1 GENERAL. Awards may be granted to Employees and Outside Directors in
the form of Restricted Stock. Restricted Stock shall be awarded in such numbers
and at such times as the Committee or the Board shall determine.
9.2 RESTRICTION PERIOD. At the time an Award of Restricted Stock is
granted, the Committee or the Board shall establish a period of time (the
"Restriction Period") applicable to such Restricted Stock. Each Award of
Restricted Stock may have a different Restriction Period, in the discretion of
the Committee or the Board. The Restriction Period applicable to a particular
Award of Restricted Stock shall not be changed except as permitted by Section
6.2, Section 9.3 or Article 12.
9.3 OTHER TERMS AND CONDITIONS. Restricted Stock awarded to a Participant
under the Plan shall be represented by a stock certificate registered in the
name of the Participant or, at the option of DNAP, in the name of a nominee of
DNAP. Subject to the terms and conditions of the Award Agreement, a Participant
to whom Restricted Stock has been awarded shall have the right to receive
dividends thereon during the Restriction Period, to vote the Restricted Stock
and to enjoy all other stockholder rights with respect thereto, except that (a)
the Participant shall not be entitled to possession of the stock certificate
representing the Restricted Stock until the Restriction Period shall have
expired, (b) DNAP shall retain custody of the Restricted Stock during the
Restriction Period, (c) the Participant may not sell, transfer, pledge,
exchange, hypothecate or otherwise dispose of the Restricted Stock during the
Restriction Period and (d) a breach of the terms and conditions established by
the Committee or the Board pursuant to the Award of the Restricted Stock shall
cause a forfeiture of the Restricted Stock. At the time of an Award of
Restricted Stock, the Committee or the Board may, in its sole discretion,
prescribe additional terms, conditions, restrictions and/or limitations
applicable to the Restricted Stock, including, but not limited to, rules
pertaining to the termination of employment or service (by reason of death,
permanent and total disability, or otherwise) of a Participant prior to
expiration of the Restriction Period.
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9.4 PAYMENT FOR RESTRICTED STOCK. A Participant shall not be required to
make any payment for Restricted Stock awarded to the Participant, except to the
extent otherwise required by the Committee or the Board or by applicable law.
9.5 MISCELLANEOUS. Nothing in this Article 9 shall prohibit the exchange
of shares of Restricted Stock issued under the Plan pursuant to a plan of
reorganization for stock or securities of DNAP or another corporation a party to
the reorganization, but the stock or securities so received for shares of
Restricted Stock shall, except as provided in Section 6.2 or Article 12, become
subject to the restrictions applicable to the Award of such Restricted Stock.
Any shares of stock received as a result of a stock split or stock dividend with
respect to shares of Restricted Stock shall also become subject to the
restrictions applicable to the Award of such Restricted Stock.
ARTICLE 10. DIVIDEND EQUIVALENTS
Dividend Equivalents may be granted under the Plan to Employees and Outside
Directors, either as a component of another Award or as a separate Award,
subject to such terms, conditions, restrictions and/or limitations as the
Committee or the Board may establish. In general, and subject to such terms,
conditions, restrictions and/or limitations as the Committee or the Board may
establish, an Award of Dividend Equivalents shall confer upon the Participant a
right to receive, in the event of a cash or stock dividend or other distribution
paid or made on the outstanding shares of Common Stock, an amount equal to the
dividend or other distribution that would have been received by the Participant
had the shares of Common Stock covered by the Award been issued and outstanding
on the record date established for such dividend or other distribution. Dividend
Equivalents may be paid currently or may be deemed to be reinvested in
additional shares of Common Stock (which may thereafter accrue additional
Dividend Equivalents). Any such reinvestment shall be at the Fair Market Value
of the Common Stock at the time thereof. Dividend Equivalents may be paid in
cash, shares of Common Stock, other Awards or other property, or a combination
thereof, in a single payment or in installments, and at such time or times as
the Committee or the Board shall determine. Dividend Equivalents granted as a
component of another Award may provide that such Dividend Equivalents shall be
paid upon exercise, payment or settlement of or lapse of restrictions on such
other Award, and that such Dividend Equivalents shall expire or be forfeited
under the same conditions as such other Award. Dividend Equivalents granted as a
component of another Award may also contain terms and conditions different from
such other Award.
ARTICLE 11. OTHER INCENTIVE AWARDS
Other Incentive Awards may be granted under the Plan to Employees and
Outside Directors based upon, payable in or otherwise related to, in whole or in
part, shares of Common Stock if the Committee or the Board, in its sole
discretion, determines that such Other Incentive Awards are consistent with the
purposes of the Plan. Subject to the terms and provisions of the Plan, Other
Incentive Awards may be granted to Employees and Outside Directors in such
amount, upon such terms and at any time and from time to time as shall be
determined by the Committee or the Board. Each grant of an Other Incentive Award
shall be evidenced by an Award Agreement that shall specify the amount of the
Other Incentive Award and the terms, conditions, restrictions and/or limitations
applicable to such Award. Payment of Other Incentive Awards shall be made at
such times and in such form, which may be cash, shares of Common Stock or other
property (or a combination thereof), as established by the Committee or the
Board, subject to the terms of the Plan.
ARTICLE 12. CORPORATE CHANGE
Notwithstanding anything contained in the Plan to the contrary, in the event
of a Corporate Change, unless otherwise provided in the related Award Agreement:
(a) each Option then outstanding shall
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become exercisable in full; (b) all restrictions (other than restrictions
imposed by law) and conditions of all Restricted Stock, Dividend Equivalents and
Other Incentive Awards then outstanding shall be deemed satisfied; and (c) all
other criteria and objectives the attainment of which are a pre-condition to
exercise, vesting, payment or settlement of all Dividend Equivalents and Other
Incentive Awards then outstanding shall be deemed fully satisfied at the maximum
criteria levels.
ARTICLE 13. AMENDMENT AND TERMINATION
The Board may at any time suspend, terminate, amend or modify the Plan, in
whole or in part; provided, however, that no amendment or modification of the
Plan shall become effective without the approval of such amendment or
modification by the stockholders of DNAP if DNAP, on the advice of counsel,
determines that such stockholder approval is necessary or desirable. Upon
termination of the Plan, the terms and provisions of the Plan shall,
notwithstanding such termination, continue to apply to Awards granted prior to
such termination. No suspension, termination, amendment or modification of the
Plan shall adversely affect in any material way any Award previously granted
under the Plan, without the consent of the Participant holding such Award
(except that such consent shall not be required in the case of an amendment or
modification required following a change in law or interpretation thereof to
cause Options and SARs under the Plan to continue to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code).
ARTICLE 14. MISCELLANEOUS
14.1 AWARD AGREEMENTS. After the Committee or the Board grants an Award
under the Plan to a Participant, DNAP and the Participant shall enter into an
Award Agreement setting forth the terms, conditions, restrictions and/or
limitations applicable to the Award and such other matters as the Committee or
the Board may determine to be appropriate. The terms and provisions of the
respective Award Agreements need not be identical. In the event of any conflict
between an Award Agreement and the Plan, the terms of the Plan shall govern.
14.2 NONASSIGNABILITY. Except as otherwise provided in a Participant's
Award Agreement, no Award granted under the Plan may be sold, transferred,
pledged, exchanged, hypothecated or otherwise disposed of, other than by will or
pursuant to the applicable laws of descent and distribution. Further, no such
Award shall be subject to execution, attachment or similar process. Any
attempted sale, transfer, pledge, exchange, hypothecation or other disposition
of an Award not specifically permitted by the Plan or the Award Agreement shall
be null and void and without effect. All Awards granted to a Participant under
the Plan shall be exercisable during his or her lifetime only by such
Participant or, in the event of the Participant's legal incapacity, by his or
her guardian or legal representative.
14.3 NO FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Award granted hereunder, and no
payment or other adjustment shall be made in respect of any such fractional
share.
14.4 WITHHOLDING TAXES. The Company shall be entitled to deduct from any
payment made under the Plan, regardless of the form of such payment, the amount
of all applicable income and employment taxes required by law to be withheld
with respect to such payment, may require the Participant to pay to the Company
such withholding taxes prior to and as a condition of the making of any payment
or the issuance or delivery of any shares of Common Stock under the Plan and
shall be entitled to deduct from any other compensation payable to the
Participant any withholding obligations with respect to Awards under the Plan.
In accordance with any applicable administrative guidelines it establishes, the
Committee may allow a Participant to pay the amount of taxes required by law to
be withheld from or with respect to an Award by (a) withholding shares of Common
Stock from any payment of Common Stock due as a result of such Award or (b)
permitting the Participant to deliver to the Company previously acquired shares
of
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<PAGE>
Common Stock, in each case having a Fair Market Value equal to the amount of
such required withholding taxes.
14.5 REGULATORY APPROVALS AND LISTINGS. Notwithstanding anything contained
in the Plan to the contrary, DNAP shall have no obligation to issue or deliver
shares of Common Stock under the Plan prior to (a) the obtaining of any approval
from any governmental agency which DNAP shall, in its sole discretion, determine
to be necessary or advisable, (b) the admission of such shares to listing on the
stock exchange or stock market on which the Common Stock may be listed and (c)
the completion of any registration or other qualification of such shares under
any Federal or state law or ruling of any governmental body which DNAP shall, in
its sole discretion, determine to be necessary or advisable.
14.6 BINDING EFFECT. The obligations of DNAP under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of DNAP, or upon any successor
corporation or organization succeeding to all or substantially all of the assets
and business of DNAP. The terms and conditions of the Plan shall be binding upon
each Participant and his or her heirs, legatees, distributees and legal
representatives.
14.7 SEVERABILITY. If any provision of the Plan or any Award Agreement is
held to be illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining provisions of the Plan or such agreement, as the case
may be, but such provision shall be fully severable and the Plan or such
agreement, as the case may be, shall be construed and enforced as if the illegal
or invalid provision had never been included herein or therein.
14.8 NO RESTRICTION OF CORPORATE ACTION. Nothing contained in the Plan
shall be construed to prevent DNAP or any Subsidiary from taking any corporate
action (including any corporate action to suspend, terminate, amend or modify
the Plan) that is deemed by DNAP or such Subsidiary to be appropriate or in its
best interest, whether or not such action would have an adverse effect on the
Plan or any Awards made or to be made under the Plan. No Participant or other
person shall have any claim against DNAP or any Subsidiary as a result of such
action.
14.9 NOTICES. All notices required or permitted to be given or made under
the Plan or any Award Agreement shall be in writing and shall be deemed to have
been duly given or made if (a) delivered personally, (b) transmitted by first
class registered or certified United States mail, postage prepaid, return
receipt requested, (c) sent by prepaid overnight courier service or (d) sent by
telecopy or facsimile transmission, answer back requested, to the person who is
to receive it at the address that such person has theretofore specified by
written notice delivered in accordance herewith. Such notices shall be effective
(a) if delivered personally or sent by courier service, upon actual receipt by
the intended recipient, (b) if mailed, upon the earlier of five days after
deposit in the mail or the date of delivery as shown by the return receipt
therefor or (c) if sent by telecopy or facsimile transmission, when the answer
back is received. DNAP or a Participant may change, at any time and from time to
time, by written notice to the other, the address that it or such Participant
had theretofore specified for receiving notices. Until such address is changed
in accordance herewith, notices hereunder or under an Award Agreement shall be
delivered or sent (a) to a Participant at his or her address as set forth in the
records of the Company or (b) to DNAP at the principal executive offices of DNAP
clearly marked "Attention: LTIP Administration".
14.10 GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Texas, except as superseded by
applicable Federal law. 14.11 No Right, Title or Interest in Company Assets. No
Participant shall have any rights as a stockholder of DNAP as a result of
participation in the Plan until the date of issuance of a stock certificate in
his or her name and, in the case of Restricted Stock, unless and until such
rights are granted to the Participant under the Plan. To the extent any person
acquires a right to receive payments from the Company under the Plan, such
rights shall be no greater than the rights of an unsecured creditor of the
Company, and such person shall not have any rights in or against any specific
assets of the Company. All of the Awards granted under the Plan shall be
unfunded.
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14.12 RISK OF PARTICIPATION. Nothing contained in the Plan shall be
construed either as a guarantee by DNAP or its Subsidiaries, or their respective
stockholders, directors, officers or employees, of the value of any assets of
the Plan or as an agreement by DNAP or its Subsidiaries, or their respective
stockholders, directors, officers or employees, to indemnify anyone for any
losses, damages, costs or expenses resulting from participation in the Plan.
14.13 NO GUARANTEE OF TAX CONSEQUENCES. No person connected with the Plan
in any capacity, including, but not limited to, DNAP and the Subsidiaries and
their respective directors, officers, agents and employees, makes any
representation, commitment or guarantee that any tax treatment, including, but
not limited to, Federal, state and local income, estate and gift tax treatment,
will be applicable with respect to any Awards or payments thereunder made to or
for the benefit of a Participant under the Plan or that such tax treatment will
apply to or be available to a Participant on account of participation in the
Plan.
14.14 OTHER BENEFITS. No Award granted under the Plan shall be considered
compensation for purposes of computing benefits or contributions under any
retirement plan of DNAP or any Subsidiary, nor affect any benefits or
compensation under any other benefit or compensation plan of DNAP or any
Subsidiary now or subsequently in effect.
14.15 CONTINUED EMPLOYMENT. Nothing contained in the Plan or in any Award
Agreement shall confer upon any Participant the right to continue in the employ
of the Company, or interfere in any way with the rights of the Company to
terminate his or her employment at any time, with or without cause
14.16 MISCELLANEOUS. Headings are given to the articles and sections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction of the Plan or
any provisions hereof. The use of the masculine gender shall also include within
its meaning the feminine. Wherever the context of the Plan dictates, the use of
the singular shall also include within its meaning the plural, and vice versa.
IN WITNESS WHEREOF, this Plan has been executed as of this 15th day of
April, 1998.
<TABLE>
<S> <C> <C>
DNAP HOLDING CORPORATION
By: /s/ BERNARDO JIMENEZ
-----------------------------------------
Bernardo Jimenez
CHIEF EXECUTIVE OFFICER
</TABLE>
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<PAGE>
DNAP HOLDING CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of DNAP HOLDING CORPORATION hereby appoints
BERNARDO JIMENEZ and ARTHUR H. FINNEL and each of them, with full power of
substitution, as proxies, and authorizes them to represent and to vote, as
designated below, all the common stock, par value $.01 per share, of DNAP
HOLDING CORPORATION that the undersigned is entitled to vote at the Annual
Meeting of Stockholders of DNAP HOLDING CORPORATION to be held on May 28, 1998
at 9:00 a.m., local time, at the Radisson Hotel Berkeley Marina, 200 Marina
Blvd., Berkeley, California 94710, and at any adjournment or postponement
thereof.
THE SHARES REPRESENTED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
IN THE MANNER SPECIFIED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S) WITH RESPECT TO
ANY MATTER TO BE VOTED UPON. IF NO SPECIFICATION IS MADE, THE PROXIES WILL VOTE
THESE SHARES FOR THE ELECTION OF THE NOMINEES NAMED BELOW AND FOR APPROVAL OF
THE DNAP HOLDING CORPORATION 1998 LONG-TERM INCENTIVE PLAN. THE PROXIES WILL
VOTE IN THEIR SOLE DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
DNAP HOLDING CORPORATION
P.O. BOX 11385
NEW YORK, N.Y. 10203-0385
I ELECTION OF DIRECTORS FOR THE TERMS OF OFFICE EXPIRING AT THE 1999 ANNUAL
MEETING OF STOCKHOLDERS
[ ] FOR all nominees listed below
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
[ ] ABSTAIN
Nominees: Evelyn Berezin, Dr. Peter Davis, Carlos Herrera, Bernardo Jimenez,
Erik C. Jurgensen, Dr. Gerald D. Laubach, Eugenio Najera, Alejandro
Perez, Dr. Christopher R. Somerville
(CONTINUED ON REVERSE SIDE)
<PAGE>
NOTE: IF YOU DESIRE TO WITHHOLD AUTHORITY FOR ONE OR MORE BUT NOT ALL
OF THE ABOVE-NAMED NOMINEES, INDICATE YOUR DESIRE TO WITHHOLD
AUTHORITY FOR SUCH NOMINEE(S) BY DRAWING A LINE THROUGH OR OTHERWISE
STRIKING OUT THE NAME(S) OF SUCH NOMINEE(S).
II. APPROVAL OF DNAP HOLDING CORPORATION 1998 LONG-TERM INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] CHANGE OF ADDRESS MARK HERE
Note: Please sign exactly as shown
at left. If stock is jointly held,
each owner should sign. Executors,
administrators, trustees,
guardians, attorneys and corporate
officers should indicate their
fiduciary capacity or full title
when signing.
Dated _______________________, 1998
___________________________________
(Signature)
___________________________________
(Signature, if held jointly)
Votes MUST be indicated [ X ] in Black or Blue Ink.
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
