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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the Fiscal Year Ended December 31, 1995
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the Transition Period from to
Commission File No. 0-12177
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DNA PLANT TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 22-2395856
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6701 San Pablo Avenue, Oakland, CA 94608
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code: (510) 547-2395
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Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
$2.25 Convertible Exchangeable Preferred Stock, par value $.01 per share
(Title of Class)
--------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 505 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[X]
Aggregate market value of voting stock held by non-affiliates of the
registrant as of March 12, 1996: $26,770,105.
Number of shares outstanding of the registrant's common stock, as of
March 12, 1996: 42,846,832 shares of common stock, par value $.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement pursuant to
Regulation 14A, which statement will be filed
not later than 120 days after the end of the fiscal year covered by this Report,
are incorporated by reference in Part III hereof.
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DNA PLANT TECHNOLOGY CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Item
No. Page
- ---- ----
Part I
1. Business........................................................... 3
2. Properties......................................................... 16
3. Legal Proceedings.................................................. 17
4. Submission of Matters to a Vote of Security Holders................ 17
Part II
5. Market for Registrant's Common Equity and Related Stockholder
Matters....................................................... 18
6. Selected Consolidated Financial Data............................... 19
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 20
8. Financial Statements and Supplementary Data........................ 24
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.......................................... 24
Part III
10. Directors and Executive Officers of the Registrant.................. 24
11. Executive Compensation.............................................. 24
12. Security Ownership of Certain Beneficial Owners and Management...... 24
13. Certain Relationships and Related Transactions...................... 24
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 25
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PART I
Item 1. Business
Summary
DNA Plant Technology Corporation (the "Company") is a leading agribusiness
biotechnology company focused on the development and marketing of premium, fresh
and processed, branded fruits and vegetables developed through advanced
breeding, genetic engineering, and other biotechniques. The Company uses these
technologies to achieve improvements in the taste, texture, product form, color,
and shelf life of produce and to improve production characteristics, such as
disease resistance and production or processing yields. The Company, through its
subsidiary FreshWorld Farms, Inc. ("FreshWorld"), is engaged in the production
and marketing of branded, premium fruits and vegetables. It currently is
marketing its first generation of products developed through advanced
biotechnological techniques to supermarkets and institutions. The Company is
developing its second generation products using genetic engineering.
The Company's business strategy is to use its technology to develop and
market what it believes are superior, differentiated products. In the near term,
the Company intends to focus its financial, technological, and marketing
resources on fresh fruits and vegetables. Over the longer term, the Company
believes that its technology will also have important applications in processed
and frozen fruits and vegetables.
The Company's strategy in the fresh produce area is to focus its research
and development efforts on products which meet identified consumer needs not
satisfied by existing products. The Company will seek to deliver consistently
superior products, thereby building brand name awareness, which the Company
believes will enable it to sell its products at premium prices. Because it
perceives public dissatisfaction with the quality of tomatoes generally
available in supermarkets, the Company is initially concentrating on marketing
its FreshWorld Farms(R) tomato. The Company believes that the success of this
product will help to establish consumer awareness of, and demand for, its other
products.
In bringing its products to market, the Company intends to utilize the
existing fresh produce infrastructure, including growers, packers, repackers,
and established sales and distribution channels, thereby minimizing the
Company's capital needs and enabling the Company to benefit from the business
relationships, experience and expertise of the participants in this industry.
The Company was incorporated in Delaware in 1981 and has its current
headquarters at 6701 San Pablo Avenue, Oakland, CA 94608 (telephone number (510)
547-2395). During the second quarter of 1994 the Company moved its corporate
headquarters from Cinnaminson, New Jersey to its current headquarters in
Oakland, California.
FreshWorld Farms(R), VegiSnax(R), Endless Summer(TM), and Transwitch(R) are
trademarks of the Company or FreshWorld.
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Agreement and Plan of Merger and Related Transactions
On January 26, 1996, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Empressas La Moderna, S.A. de C.V., a
corporation under the laws of the United Mexican States ("ELM"), Bionova, S.A.
de C.V., a corporation organized under the laws of the United Mexican States
("Bionova"), Bionova U.S. Inc., a Delaware corporation ("Bionova U.S." ), and
Bionova Acquisition, Inc., a Delaware corporation ("Merger Sub"), pursuant to
which, among other things: (i) Merger Sub will be merged with and into the
Company (the "Merger"); (ii) the Company will become a wholly-owned subsidiary
of Bionova U.S.; (iii) each share of common stock, par value $.01 per share
("Common Stock"), of the Company issued and outstanding at the time of the
Merger (the "Effective Time") will be converted into and represent the right to
receive one share of Bionova U.S.'s common stock, each share of the Company's
$2.25 Convertible Exchangeable Preferred Stock, par value $.01 ("$2.25
Convertible Preferred Stock"), issued and outstanding at the Effective Time will
be assumed by Bionova U.S. and will become a corresponding right to receive
6.8375 shares of Bionova U.S.'s common stock, and each share of the Company's
Series A Preferred Stock ("Series A Preferred Stock"), par value $.01 issued and
outstanding at the Effective Time will be converted into and represent the right
to receive 1,000 shares of Bionova U.S.'s common stock, except for any shares of
the Company's securities held in the treasury of the Company or held by any
subsidiary of the Company, which will be cancelled and (iv) each option or
warrant to purchase shares of Common Stock outstanding at the Effective Time
will be converted into a corresponding right to acquire shares of Bionova U.S.'s
common stock. Assuming no exercise of dissenter's rights of appraisal in
connection with the Merger, the holders of the Company's capital stock, as a
group, will own approximately 30% of the outstanding shares of Bionova U.S.'s
common stock after the Merger. It is expected that Bionova U.S. will change its
name to DNAP Holding Corporation as of the Effective Time.
At the Effective Time, ELM will cause to be transferred to Bionova U.S. its
controlling interests in the companies constituting The Bionova Group, other
than the stock of Bionova, which serves as the holding company through which ELM
owns such interests. The Bionova Group is a group of affiliated companies
engaged in the businesses of growing fresh produce in Mexico and marketing and
distribution in Mexico, the United States and Canada.
Pursuant to the Merger Agreement, ELM has agreed to provide when requested
by Bionova U.S. a guarantee for three years following the Effective Time Bionova
U.S.'s indebtedness to a financial institution under a loan or line of credit,
provided that: (i) ELM's maximum liability under such guarantee will not exceed
$20,000,000 and (ii) the documents evidencing such loan or line of credit will
provide that the aggregate amount loaned to Bionova U.S. thereunder will not
exceed the sum of (x) 80% of the accounts receivable of Bionova U.S. and its
consolidated subsidiaries and (y) 50% of the inventories of Bionova U.S. and its
consolidated subsidiaries and such loan is secured by such accounts receivables
and inventories.
In connection with the Merger Agreement, Bionova U.S. and the Company
entered into a Loan Agreement, dated January 26, 1996 (the "Loan Agreement").
Pursuant to the Loan Agreement, Bionova U.S. loaned $5,000,000 to the Company on
January 26, 1996 and will loan an additional $5,000,000 to the Company on July
1, 1996 if the closing of the Merger has not been effected by such date, subject
to the Company not then being in default under the Loan Agreement (collectively,
the "Loan"). The outstanding principal balance of the Loan bears interest at the
rate of 10.25% per annum and, together with all accrued interest thereon, will
become due and payable on the earlier of (i) January 26, 1999 or (ii) the date
on which the Company consummates an Alternative Transaction, as defined in the
Loan Agreement. Subject to the consummation by the Company of an Alternative
Transaction,
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the Loan Agreement will survive the termination of the Merger Agreement. The
Loan may be accelerated by Bionova U.S. at any time during the continuance of
certain events of default specified in the Loan Agreement and may be prepaid by
the Company at any time without premium or penalty. Certain royalty fees to be
received by the Company must be used to pay down the Loan. ELM will cause the
principal amount of the Loan provided by Bionova U.S. to the Company prior to
the Effective Time to be treated as a capital contribution to Bionova U.S.
pursuant to the Merger Agreement. The Loan is secured by the assignment to
Bionova U.S. of the Company's right, title and interest in the patents relating
to the Company's Transwitch(R) gene suppression technology (the "Transwitch(R)
Patents"), and Bionova U.S. may require additional security under certain
circumstances. Prior to the repayment in full of the loan, the Company may not
pay any dividends on, or make other distributions in respect of, any class of
its capital stock, or take certain other actions, without the written consent of
Bionova U.S.
Bionova U.S. and the Company have entered into the Sole Patent License
Agreement, dated as of January 26, 1996 (the "Sole License Agreement"), pursuant
to which Bionova U.S. granted back to the Company a royalty-free sole license to
use the Transwitch(R) Patents to develop and market products using the products
or processes covered by such patents and to satisfy the Company's obligations
under existing licenses of the Transwitch(R) Patents. Under the Loan Agreement,
Bionova U.S. is obligated to assign the Transwitch(R) Patents back to the
Company upon the repayment in full of the Loan. If Bionova U.S. accelerates the
maturity of the Loan as a result of an event of default under the Loan
Agreement, the Company's right to have the Transwitch(R) Patents reassigned to
it will terminate and the license to use the Transwitch(R) Patents granted by
Bionova U.S. to the Company under the Sole License Agreement will convert to a
non-exclusive, royalty-free license to use the Transwitch(R) Patents. If the
merger is not consummated, any such termination of the Company's right to
reacquire the Transwitch(R) Patents and loss of the sole rights to use the
Transwitch(R) Patents would have a material adverse effect on the Company's
business and prospects.
The Sole License Agreement provides that Bionova U.S. may not make any use
of the Transwitch(R) Patents on its own behalf prior to the termination of the
Company's right to have the Transwitch(R) Patents reassigned to it, subject to
the Non-Exclusive License Agreement (see below). The Company may enter into
sublicenses of the Transwitch(R) Patents only to entities which fund at least
$350,000 of research by the Company in any three-year period, and only if the
sublicense is non-exclusive, relates solely to the development and
commercialization of products or processes resulting from the funded research,
bears commercially reasonable royalties and 50% of the royalties received by the
Company are paid by it to Bionova U.S. to reduce the outstanding balance of the
Loan. The Company may also enter into sublicenses of the Transwitch(R) Patents
with other entities upon approval of Bionova U.S., which approval has been
obtained in certain respects. The Company and Bionova U.S. have also entered
into a non-exclusive patent license agreement (the "Non-Exclusive License
Agreement") under which Bionova U.S. was granted a non-exclusive,
royalty-bearing license to use the Transwitch(R) Patents with an option, upon
making certain payments, to convert the license to a fully paid license.
Payments under the Non-Exclusive License Agreement may be credited against the
outstanding balance of the Loan.
At the Effective Time, ELM and the Company will enter into a Long Term
Funded Research Agreement (the "Long Term Funded Research Agreement") pursuant
to which they will use their best efforts to agree on research projects to be
conducted by the Company for ELM or its affiliates which will result in payments
to the Company of $30,000,000 over a 10-year period, with minimum funding
(subject to carryforwards) of $9,000,000 in any three-year period. Intellectual
property developed by the Company in connection with a project will belong to
ELM, ELM will retain the exclusive rights to commercialization of such
intellectual property in the project's intended market and the
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Company will have royalty-free sole license rights to such intellectual property
outside the project's intended market. There can be no assurance, however, that
ELM and the Company will agree on any specific projects to be conducted by the
Company or that any project begun by the Company will not be terminated by ELM.
At the Effective Time, ELM and Bionova U.S. will enter into a Governance
Agreement which, among other things, will provide for certain arrangements with
respect to the composition of Bionova U.S.'s Board of Directors prior to the
1999 annual meeting of stockholders of Bionova U.S. and will restrict ELM's
ability to acquire or dispose of shares of Bionova U.S.'s Common Stock prior to
the third anniversary of the Effective Time. Under the Governance Agreement, the
approval of a majority of the "DNAP Independent Directors" (as defined in the
Governance Agreement) will be required to approve certain transactions between
ELM and its affiliates and Bionova U.S. or certain acquisitions of Bionova
U.S.'s Common Stock by ELM or its affiliates.
The consummation of the Merger is subject to a number of conditions,
including the approval of the common stockholders of the Company.
Products
The Company is currently marketing products it developed through advanced
biotechnological techniques to supermarkets, and food service outlets. The
products, which are marketed under the FreshWorld Farms(R) or VegiSnax(R) brand
name, are:
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Plant Premium Branded Product Current Customers
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Tomato FreshWorld Farms(R) Tomatoes Distributors and supermarket chains in
the mid-Atlantic, Northeast and Midwest
regions and Canada
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Cherry FreshWorld Farms(R) Distributors and supermarket chains in
Tomato Cherry Tomatoes the mid-Atlantic, Northeast and Midwest
regions and Canada
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Carrot FreshWorld Farms(R) Carrots, Select supermarkets in numerous states
Carrot Bites and Cello Carrots
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Pepper FreshWorld Farms(R) Distributors in several states
Mini-Peppers
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The FreshWorld Farms(R) tomato developed by the Company is a full-size tomato
with a deep red color, hearty texture, and a shelf life of 10 to 14 days. This
compares to a three to seven day shelf life for most vine-ripened tomatoes.
The FreshWorld Farms(R) cherry tomato is a proprietary hybrid with a deep
red color, sweet flavor and an extended shelf life of up to fifteen days.
FreshWorld is currently selling carrot bites and cello carrots under its
label which are sourced through a co-packing arrangement with an industry leader
in the carrot business.
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Another product on the market is the FreshWorld Farms(R) sweet mini-pepper,
which has a novel sweet taste, deep red color, and a low number of seeds. This
new variety of pepper was developed through anther culture, an advanced breeding
technique that captures and genetically stabilizes preferred characteristics
such as taste, texture, and low seed count.
The Company is using genetic engineering to develop its second generation
of products. Plant genetic engineering involves either the suppression of
specific genes, for example those that control ripening, or the over-expression
of certain genes controlling characteristics such as sweetness. One of the
Company's most significant technological developments in this area is its
Transwitch(R) gene suppression technology. The Company has received three issued
United States patents and has made additional pending filings directed to
Transwitch(R) technology. See the discussion above under "Agreement and Plan of
Merger and Related Transactions" regarding ownership of and rights to the
Transwitch(R) patents and patent applications. Using Transwitch(R) technology,
the Company has grown tomatoes with a shelf life of up to 90 days in the
laboratory while preserving desirable characteristics such as taste, color, and
texture. The Company has received approval from the U.S. Department of
Agriculture (the "USDA") and the Food and Drug Administration (the "FDA") to
grow and ship initial varieties of its second generation tomatoes anywhere in
the United States and the requisite government approvals in Canada. In the first
half of 1995, the Company conducted a test market of delayed ripening tomatoes
developed by using the Transwitch(R) gene suppression technology to switch off
the ACC synthase gene. These tomatoes were sold under the Endless Summer(TM)
tomato brand name and labeled as "farm grown from genetically modified seed".
The market test demonstrated that there was consumer acceptance of these
genetically modified fresh market tomatoes and validated the use of this
technology for extending tomato shelf life both on the vine and after harvest.
After the test market was completed, sales of Endless Summer(TM) tomatoes were
suspended according to the terms of a settlement agreement with Monsanto Company
(the "Monsanto Settlement") which related to patents covering a particular
promoter and a particular marker gene. The Company has developed alternative
genetic engineering approaches, based on proprietary promoters and licensed
marker genes, for the suppression of ACC synthase in tomatoes. Current plans
call for this second generation ACC synthase suppressed tomato to be marketed
under the Endless Summer(TM) brand name. Other second generation products being
developed by the Company through plant genetic engineering include cherry
tomatoes, snap peas, peppers, bananas, pineapples, and strawberries.
Other products under development using plant genetic engineering are
described below:
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Plant Technology Targeted Benefit
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Cherry Tomato Transwitch(R) technology to Extended shelf life of up to
suppress a gene responsible three months; facilitates
for ripening harvesting.
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Snap Pea Transwitch(R) technology to Improved taste compared to
suppress a gene responsible existing types; pea remains
for the conversion of sugar to sweeter for a longer time.
starch Increased yield.
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Pepper Transwitch(R) technology to Extended shelf life compared
suppress a gene responsible to existing types; peppers
for softening remain firmer for a longer
time after harvest.
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Banana and Transwitch(R) technology to Extended shelf life compared
Pineapple suppress a gene responsible to existing types.
for rotting
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Strawberry Addition of genes to regulate Improved texture compared
freezing tolerance to existing types; fruit remains
firm after freeze-thaw cycle.
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Some of the Company's work in fruit crops is being supported by corporate and
government grants, including contracts with Alida Marine, Inc. ("Alida") for
pineapple and Zeneca PLC for bananas.
Research and Technology
The Company believes that it is a leader in the application of plant
biotechnology to develop new and improved fruit and vegetable varieties designed
to appeal to the consumer. The research team of 37 scientists (including 17 with
Ph.D. degrees) and support staff includes renowned scientists in the fields of
cell biology, plant genetic engineering, plant genetics, biochemistry, plant
breeding, agronomy, plant pathology, and food science (the science of processing
and packaging food). The Company's scientists have published over 300 articles
in peer-reviewed scientific literature and are named inventors on more than
forty United States patents owned by the Company or FreshWorld.
The Company's research and product development system involves a two-track
strategy employing advanced breeding methods to develop first generation
products, and genetic engineering coupled with breeding methods to develop
second generation products (which build on the varieties developed from the
first generation). The primary goal of the research effort is to develop fruit
and vegetable varieties which are differentiated in taste, appearance, texture,
and retention of freshness, attributes which are attractive to the consumer. The
Company's secondary goal is to improve production characteristics such as higher
yield, disease resistance, and more efficient harvesting characteristics.
Additionally, the Company is working to develop improved processing attributes
for fruits and vegetables.
Advanced Biotechnological Breeding
The Company's scientists have pioneered the use of advanced
biotechnological breeding methods in commercial agriculture. These methods take
advantage of the Company's ability to regenerate plants from single cells in
culture. Through a process known as somaclonal variation, regenerated plants
incorporate multiple variations that would not typically be generated by
traditional breeding methods. Somaclonal variation allows more rapid development
of characteristics such as improved taste, texture, appearance and yield. These
improved characteristics are passed on to future generations via the seed.
Somaclonal variation was used in the creation of the FreshWorld Farms(R) tomato.
Another advanced breeding method used by the Company's scientists is anther
culture, which captures and stabilizes preferred characteristics from two
separate varieties in a single step. Traditionally, this process takes multiple
generations of crossing between the two parental lines and their progeny. Anther
culture, in combination with plant breeding techniques, was used to develop the
small size and low seed trait of the Company's sweet mini-pepper. Anther culture
has been used to reduce the development time for a new pepper variety from six
years to three years and to reduce
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the development time for a new carrot variety from 13 years to six years.
Plant Genetic Engineering
The Company believes that it is a leader in plant genetic engineering which
it is using to develop its second generation of products. Genetic engineering
involves the modification of a plant's chromosomes, which are made up of DNA
segments including genes encoding plant characteristics. Genetic engineering
enables the development of new varieties by promoting specific traits in plants
such as extended freshness, enhanced sweetness, and disease resistance. The
genetic engineering process requires identification of genes responsible for
certain characteristics; the expression or suppression of such genes in plant
cells using transformation technology, vector systems and gene expression
technology; the selection of successfully engineered plant cells; and the
regeneration of whole plants from the engineered plant cells. The insertion of
desired genes into plant cells can either add a desired characteristic, such as
sweetness, to the plant or, if inserted using the Company's proprietary
Transwitch(R) gene suppression technology, suppress an undesirable
characteristic or process, such as rotting. These technologies are described
below:
Gene identification technologies are procedures for the identification and
characterization of genes. Genes are specific sequences of DNA that control
specific plant characteristics, through the expression of certain proteins which
in turn initiate certain biological processes. For example, there are genes that
cause the expression of a certain protein that controls the ripening process in
tomatoes.
The Company's scientists have extensive experience in chemically-based
methods for gene identification and have pioneered a method for gene
identification in plants called heterologous transposon technology. A United
States patent has been granted to the Company for the use of certain aspects of
transposon technology to isolate genes. Transposons are genetic elements capable
of moving from one location on a plant's chromosome to another. The points at
which transposons insert themselves in the chromosome can be determined. When a
transposon inserts itself into a gene encoding a specific characteristic, it
alters the function of the host gene, causing detectable changes in the
characteristic. Tracing the location of the transposon leads to the location of
the host gene controlling the characteristic. The advantage of this proprietary
gene identification technique is that it allows scientists to associate ultimate
plant characteristics with specific genes without the need for first developing
an understanding of the intermediate operative proteins and biological processes
involved. The Company's scientists were the first to successfully use this
method and have used it to isolate genes affecting acidity in plants. Acidity is
one of the major determinants of flavor in fruits. Isolated acidity genes are
the subject of a United States patent application under notice of allowance
filed by the Company. The Company's scientists have also used this method to
isolate genes which influence sugar production in plants and have applied this
proprietary technology to identify and isolate additional genes which are
responsible for traits such as freezing and dehydration tolerance, and sweetness
and flavor regulation.
Transformation/regeneration technology is a tissue culture-based method by
which new genes are stably incorporated into selected plant cells, which are
subsequently regenerated into whole plants. The Company believes it is a leader
in the development and use of this technology and has used it to develop
efficient systems in commercially important varieties of tomatoes, peppers,
melons, peas, strawberries, carrots, potatoes, and lettuce. FreshWorld was
granted United States patents for certain transformation/regeneration methods in
peppers and peas developed by the Company. The Company and Du Pont were jointly
granted a United States patent for certain transformation methods in corn
developed by the Company.
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Vector Systems are means for inserting genes into plant cells. The
principal vector system is based on Agrobacterium tumefaciens, a soil bacterium,
which as part of its natural life cycle delivers DNA to plants. The Company has
licenses from the Max Planck Institute and others providing certain rights to
this vector system. See "Proprietary Protection."
Gene expression technology is the manipulation of gene systems to ensure
successful, timely, and specific expression of introduced genes in plant cells.
The Company has developed promoter systems for enhancing gene expression in
plants and has been issued a United States patent for certain of those promoter
systems. Other promoter systems are the subject of pending United States patent
applications filed by the Company.
Engineered plant cell selection technologies are techniques for
distinguishing plant cells which have been successfully engineered to
incorporate the desired genetic material from cells not so engineered. The
technique involves using a marker gene conferring resistance to a phytotoxic
compound, such as an antibiotic, which is inserted into cells along with the
gene encoding the desired plant characteristic. Cells are then treated with the
phytotoxic compound, and only successfully engineered cells survive. These cells
can then be used for plant regeneration.
The Company's scientists have developed proprietary cell selection systems
for the selection of engineered plant cells. The Company was issued two United
States patents directed to the use of certain marker genes which confer
resistance to the antibiotic spectinomycin. The Company also has royalty-free
license rights to a sulfonylurea-resistance gene for use as a marker gene in
developing new plants.
Transwitch(R) gene suppression technology, one of the Company's most
significant technological developments, is a method for switching off gene
expression in plants. The Company has received three United States patents and a
European patent directed to methods of using this technology for suppressing
plant genes. See the discussion above under "Agreement and Plan of Merger and
Related Transactions" regarding ownership of and rights to the Transwitch(R)
patents and patent applications. This technology is an effective alternative to
antisense technology for gene suppression.
As more fully described herein, the Company's scientists are using plant
genetic engineering, including its proprietary Transwitch(R) gene suppression
technology, to enhance the Company's existing product line of fresh fruits and
vegetables and to develop new products. For example, the shelf life of the
Company's FreshWorld Farms(R) tomato has been extended from 10 to 14 days to up
to 90 days under laboratory conditions by using Transwitch(R) technology to
switch off the ACC synthase gene. This gene is responsible for the biosynthesis
of ethylene, which triggers the ripening process in tomatoes. On the basis of
its experience with the ACC synthase suppressed Endless Summer(TM) tomatoes test
marketed in 1995, the Company believes that an ACC synthase suppressed tomato
will offer considerable cost savings in production and distribution.
Transwitch(R) technology has also been used to turn off ethylene biosynthesis
and extend shelf-life to 8 to 9 weeks in the Company's cherry tomato varieties.
The texture of the Company's mini-pepper is being further enhanced through
the use of Transwitch(R) technology to inhibit the gene responsible for
hemicellulase. Hemicellulase causes the breakdown of the cell walls in peppers,
a process which triggers softening when peppers reach their maximum sweetness.
The Company has also used Transwitch(R) technology to enhance and maintain the
sweetness of snap peas and thereby extend their shelf life by inhibiting the
biosynthesis of ADPG pyrophosphorylase, an enzyme which causes the conversion of
sugar to starch. By inhibiting this
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process, the pea's natural sweetness can be preserved for up to 15 days after
harvest as compared with one to two days for current varieties. FreshWorld has
an issued United States patent directed to the use of the ADPG pyrophosphorylase
gene in peas for sweetness control.
The Company is also developing tools to apply plant genetic engineering
technology to a range of additional crops, including tropical crops such as
bananas and pineapples. The Company believes the application of its
Transwitch(R) technology and its ripening control technology may have
significant commercial applications in controlling spoilage of these fruits
during transportation. For example, by inhibiting the production of ethylene in
bananas, rotting can be delayed so that fruits being shipped long distances will
arrive in better condition with less spoilage.
In other areas of plant genetic engineering, the Company's scientists were
the first to demonstrate the ability to control fungal diseases affecting plants
by inserting a chitinase gene into plants. Chitinase is a naturally occurring
enzyme with anti-fungal activity. The Company has been issued two United States
patents directed to plants transformed with chitinase genes.
Proprietary Protection
In order to develop and maintain its competitive position, the Company
seeks to protect its intellectual property through patent filings in the United
States and abroad, maintenance of trade secrets, and ongoing technological
innovation. The Company and FreshWorld have over forty issued patents in the
United States. The Company and FreshWorld have pursued proprietary protection
across the spectrum of their activities, including protection for basic tools of
plant genetic engineering and the protection of specific products.
The Company has obtained United States patent protection for key plant
genetic engineering technologies in the areas of gene isolation through
transposon tagging; transformation / regeneration methods for pepper, pea and
corn; promoter systems; and selectable marker systems. The Company has also
established a patent position for important gene systems developed by the
Company including two issued United States patents directed to plants
transformed with the anti-fungal chitinase gene, and pending United States
patent applications for genes involving control of sweetness, color and acidity.
One of the Company's most significant technological developments in the
area of plant genetic engineering is its proprietary Transwitch(R) gene
suppression technology. The Company has received three United States patents and
one European patent directed to methods of using this technology for suppressing
plant genes. The European patent is in opposition. The Company has made
additional pending filings in the United States and abroad directed to
Transwitch(R) technology. See the discussion above under "Agreement and the Plan
of Merger and Related Transactions" regarding ownership of and rights to the
Transwitch(R) patents and patent applications. Transwitch(R) technology has the
same goal (i.e., gene suppression) as antisense technology, but uses a different
methodology.
The Company has pursued patents and plant variety protection ("PVP")
certificates specific to certain Company products. The Company has filed patent
applications in the United States claiming certain FreshWorld parent and hybrid
tomato lines, resulting in two issued U.S. patents. In addition, the Company has
pending patent applications directed to ripening controlled tomato lines and
cherry tomato lines. The Company also has a granted United States patent
directed to the method of somaclonal variation in tomato which was used to
create the FreshWorld Farms(R) tomato. The Company has been granted a United
States patent covering a broad class of low seed peppers,
11
<PAGE>
including the FreshWorld Farms(R) sweet mini-pepper. The Company additionally
has four issued United States patents directed to the method of processing its
VegiSnax(R) carrots. PVP certificates, which are issued by the USDA, have also
been pursued for specific fruit and vegetable varieties. The Company was issued
two PVP certificates for tomato varieties and two for pepper varieties.
FreshWorld has two pending PVP applications for watermelon varieties developed
by the Company.
The Company has strengthened its proprietary position by obtaining license
rights from third parties, either to secure freedom to operate via non-exclusive
licenses or to create additional areas of exclusivity through exclusive
licenses. The Company has obtained license rights from several third parties
under patent filings related to plant molecular biology methods. These license
rights include non-exclusive rights from Stanford University under the basic
recombinant-DNA patent filings, from the Max Planck Institute under patent
filings directed to certain methods of plant transformation using Agrobacterium,
and from Mogen International N.V. under filings also directed to certain methods
of plant transformation using Agrobacterium. The Company also has license rights
from the USDA under patent filings directed to the ACC synthase gene.
Suppression of this gene, e.g. with Transwitch(R) technology, has been shown by
the Company to permit control of the ripening process. The Company's license
from the USDA is co-exclusive for tomato, and exclusive for 25 other crops
including peppers, bananas, peas, strawberries, and watermelons.
The Company uses trade secret protection for certain innovations and
technical know-how on which new products may be based. The Company also uses
trade secret protection for inbred parent lines of its hybrid plants. The
Company believes that the use of hybrid seed (from which hybrid plants are
grown) provides additional protection for the FreshWorld Farms(R) tomato, since
seeds from the tomatoes sold to consumers will not breed true. In addition, a
hybrid seed generally produces a heartier plant. In-house procedures are in
place to protect trade secrets, know-how and inbred parent plant lines.
The Company has ongoing programs to develop patentable processes, plant
varieties, and products, and these programs are monitored by the Company's
patent counsel to insure that timely and appropriate action is taken to seek
patent rights or to maintain trade secret protection. To gain further value from
its technology, the Company may from time to time license its technology to
others, particularly in connection with corporate collaborations or instances in
which a financial or technology return may be earned without competitive
disadvantage.
Governmental Regulation
The agribusiness industry saw rapid acceleration of U.S. government
approvals for genetically engineered plant products in 1995. In the past year,
the FDA concluded consultations on seven genetically engineered foods bringing
the total number of such foods cleared for marketing to fifteen. In 1995, USDA
deregulated twelve genetically engineered crop varieties and received petitions
to deregulate seven additional crops. The Environmental Protection Agency
("EPA") registered four genetically engineered plant-pesticides for commercial
sale and distribution and received applications to register another four
products. The Company believes these events signal maturation of the regulatory
approval processes in the U.S. and growing demand for agricultural biotechnology
products.
Regulation by federal, state, and local government authorities in the
United States and foreign countries will be a factor in the future production
and marketing of the Company's genetically engineered plants and plant products.
The process of obtaining government approvals can be costly
12
<PAGE>
and time consuming, and there can be no assurance that necessary approvals will
be granted in a timely manner, if at all. The extent of government regulation of
biotechnology that might arise from future legislative or administrative actions
and the potential consequences to the Company are not known and cannot be
predicted with certainty.
The U.S. federal government has implemented a coordinated policy for
regulating biotechnology research and products in the United States. The USDA
has jurisdiction over specific research and pre-commercial activities involving
genetically engineered plants, in particular the growing and interstate shipment
of genetically engineered plants and plant products. The FDA has jurisdiction
over plant products that are used for human or animal food. The EPA has
jurisdiction over the field testing and commercial use of plants genetically
engineered to resist pests and diseases, so-called plant-pesticides, as well as
administering various federal environmental quality statutes. Failure to comply
with applicable regulatory requirements could result in enforcement action,
including withdrawal of marketing approval, seizure or recall of product,
injunction, or criminal prosecution.
In January 1995, the Company received USDA approval for unrestricted
production and distribution of the initial varieties of its genetically
engineered Endless Summer(TM) tomato. That approval closely followed successful
completion in October 1994 of consultations with the FDA concerning the safety,
nutrition and composition of Endless Summer(TM) tomatoes. In 1995, the Company
also received clearances from Agriculture and Agri-Food Canada and Health Canada
to import and sell Endless Summer(TM) tomatoes in Canada. Together, these
approvals allowed the Company to grow and ship initial varieties of Endless
Summer(TM) tomatoes anywhere in the U.S. and Canada in the same manner as
conventionally developed tomatoes. As described above, the initial varieties of
Endless Summer(TM) tomatoes cannot be sold due to the terms of the Monsanto
Settlement, however, the experience the Company gained from satisfying
regulatory requirements for the initial ACC synthase suppressed tomato will be
helpful in obtaining regulatory approval for future tomato varieties.
The Company is continuing consultations with the FDA, begun in 1994, on
additional products including delayed-ripening tomatoes containing a plant-based
selectable marker gene, sweetness-enhanced peas and peppers with improved
texture. The Company has recently received permission from the USDA to field
test genetically engineered grape plants.
To date, the Company, to the best of its knowledge, has successfully
functioned within the scope of applicable laws and regulations, including rules
administered by the FDA, the USDA and the EPA. The Company believes it is in
compliance with all applicable laws and regulations pertaining to the
development and commercialization of its products. The Company believes that its
current research and development activities and products will not be subject to
delays other than the ordinary delays associated with government review and
approvals for traditional products, when and if such review and approvals are
required. The Company further believes that its experience in this area enables
it to deal effectively with the applicable regulatory processes.
Production, Marketing, and Distribution
The current product line of the Company consists of bulk and packaged
tomatoes, cherry tomatoes, carrot bites, cello carrots, sweet mini-peppers,
precut pineapples and clementines. The Company plans to expand its product line
to include additional fruits and vegetables.
13
<PAGE>
Tomato. The United States fresh tomato market is approximately $2 billion
at wholesale. Tomatoes picked before they are ripe currently represent more than
80% of the volume of tomatoes sold in the United States. Growers harvest
tomatoes while they are unripe for several reasons: (i) immature tomatoes are
firmer, enabling them to withstand shipping and handling more successfully; (ii)
harvesting immature tomatoes is less labor-intensive and less costly than a vine
ripened harvest; and (iii) the less time the fruit stays in the field, the less
the risk of loss from weather or pests. After harvest, either the packer or the
repacker exposes green tomatoes to ethylene gas.
Consumer research has indicated that 85% of United States households
consume fresh market tomatoes during the year. Despite such widespread
penetration, consumers in a survey conducted by the USDA cite the tomato as the
most consistently disappointing vegetable. The Company believes that a large
percentage of tomato consumers drop out of the market in the winter due to
dissatisfaction with taste and texture of available product. The Company's
market research indicates that these consumers would be willing to pay a premium
for better-tasting tomatoes, ranging from 50% to 250% of the price of the
generic product, which currently averages about $1.00 per pound at retail. To
reach these consumers, retailers now are stocking their produce departments with
a variety of tomatoes, including cherries, Romas, hydroponically produced,
imported, and yellows.
The Company believes it can achieve market acceptance for its tomato by
providing consumers with improved quality throughout the year while maintaining
premium pricing. FreshWorld is dedicated to providing a premium tomato which
offers good taste, color, and texture. These tomatoes will be sourced year-round
in established growing areas, and handled by the existing distribution
infrastructure. In order to reduce financial volatility and exposure, FreshWorld
has shifted its sourcing strategy from vertically integrated contract growing to
marketing arrangements with independent growers. FreshWorld will be selling
tomato varieties developed by the Company as well as leading commercial
varieties.
The Company's FreshWorld Farms(R) tomatoes are sold by FreshWorld's sales
force. The tomatoes are currently sold in the mid-Atlantic, Northeast, and
Midwest regions. The Company supports its tomato sales with in-store
merchandising programs and a calendar of promotional events to build consumer
awareness of the FreshWorld Farms(R) tomato.
Cherry Tomatoes. The Company began commercial rollout of a cherry tomato in
1994. They are now being sold through distributors and supermarket chains in the
mid-Atlantic, Northeast and Midwest regions. Using its advanced breeding
techniques, the Company has developed an improved cherry tomato variety with
superior taste, longer shelf life, and year-round availability compared to
existing varieties.
Carrot. The carrot products are sold by FreshWorld's sales force. As with
tomatoes, FreshWorld works with the existing produce business infrastructure to
capitalize on its expertise. FreshWorld Farms(R) carrot bites and cello carrots
are available in select supermarkets in the Pacific Northwest and mid-Atlantic
states.
Pepper. Applying its expertise in advanced plant breeding, the Company has
developed a proprietary sweet red mini-pepper variety as FreshWorld's first
product offering in the United States fresh pepper market. In this case, the
Company's scientists have combined the red color and convenient size of a
jalapeno pepper with the sweet juicy taste of a bell pepper into a new low-seed
variety which is sold under the FreshWorld Farms(R) brand. FreshWorld market
tested this product in 1992 and 1993, and in the U.S. has principally sold this
product to the food service industry.
14
<PAGE>
Competition
The fresh and processed fruit and vegetable product markets are highly
competitive, and the Company will continue to be faced with intense competition
from many established fruit and vegetable growing, processing, and marketing
companies with far greater financial, marketing, and other resources than the
Company. The Company believes that it can compete successfully with companies in
this market by developing products that offer what the Company believes are
unique and desirable attributes with superior quality. The Company believes that
the proprietary protection of such products will create important competitive
advantages for the Company.
There are also many companies engaged in research and product development
activities based on agricultural biotechnology. Competitors include specialized
biotechnology firms, as well as major food and chemical companies which have
biotechnology divisions, many of which have considerably greater financial,
technical, and marketing resources than the Company. Competition may intensify
as technological developments occur at a rapid rate in the agricultural
biotechnology industry. In competing with such companies, the Company relies
primarily on the experience of its sales, marketing and production staff at
FreshWorld, the reputations and qualifications of its scientific staff, and its
technological capabilities.
Employees and Consultants
At March 1, 1996, the Company employed 83 persons. The Company also
maintains relationships with, and from time to time engages the services of,
university professors and other consultants to assist in market, product, and
technological research. None of the Company's employees are covered by a
collective bargaining agreement. All of the Company's management and research
employees have signed confidentiality agreements and the Company believes its
relations with its employees are excellent.
Executive Officers
The following table sets forth information regarding the key policy-making
executive officers of the Company:
Year
Current Positions and Employment
Name Age Offices With the Company Commenced
Robert Serenbetz........ 51 Chairman and Chief Executive Officer 1991
John R. Bedbrook, PhD... 46 Executive Vice President and Director 1988
of Science
Willem F.O. Spiegel..... 52 Chief Financial Officer, Vice President 1995
Finance, Treasurer and Assistant
Secretary
David A. Evans, PhD..... 43 Executive Vice President Business 1981
Development
15
<PAGE>
Robert Igleheart........ 55 Chief Operating Officer and 1994
President FreshWorld
Stephen M. Prichard..... 46 Vice President Human Resources and 1987
Administration
Robert Serenbetz has been Chairman of the Company since May 1994 and Chief
Executive Officer since May of 1993. He joined the Company as President in 1991.
From 1989 to 1991, he was Group President of the American Chicle Division of
Warner Lambert Company.
John R. Bedbrook, PhD has been Executive Vice President and Director of
Science of the Company since November 1988. He was the Vice President, Director
of Research, and a director of Advanced Genetic Sciences, Inc. from 1982 to
November 1988.
Willem F.O. Spiegel joined the Company in November 1995 as Vice President
and Chief Financial Officer. He was previously Chief Financial Officer of
AgriDyne Technology an agricultural bio-pesticide company from March 1993 to
November 1995.
David A. Evans, PhD was promoted to Executive Vice President Business
Development in January 1995 and previously had been the Vice President Business
Development of the Company since 1990. From November 1988 to March 1990, he was
the Vice President Technology and Product Development and from 1981 to November
1988, he was the Vice President Corporate Research of the Company.
Robert Igleheart has been President of FreshWorld since he joined the
Company in April 1994. From 1993 to April 1994 he was President of Robert Mann
Packaging, Inc., from March 1992 to April 1993 he was President of SunWorld,
Inc. and from 1986 to 1992 he was President of Salyer American Fresh Foods, Inc.
Stephen M. Prichard has been Vice President Human Resources and
Administration of the Company since 1993 and was Director of Human Resources of
the Company from 1987 to 1993.
Item 2. Properties
During the second quarter of 1994, the Company relocated its corporate
headquarters and its product development activities from Cinnaminson, New Jersey
to its California facilities, which include offices, laboratories and greenhouse
space in Oakland and an experimental farm in Brentwood. The Company completed
the sale of the Cinnaminson property in March 1996. The proceeds from the sale
will be paid to Du Pont as part of the "Du Pont Transaction". During the fourth
quarter, the Company cancelled its vegetable processing facility lease in Arvin,
California. The early termination of the lease resulted in the Company recording
a charge to operations. See Note 5 to the Consolidated Financial Statements for
more details.
16
<PAGE>
<TABLE>
These properties are more fully described below:
<CAPTION>
Acres of Lease
Location Ownership Facilities Land Expiration
<S> <C> <C> <C> <C>
Oakland, Leased 41,000 square feet of ----- 05/31/99
California laboratory and office space
7,500 square feet of
greenhouse space
Brentwood, Leased 12,700 square feet of 61 leased (1) 10/31/96
California and greenhouse and warehouse 10 owned (1)
Owned space
Cinnaminson, Owned 35,000 square feet of 36 (2)
New Jersey laboratory and office space
32,000 square feet of
greenhouse space
EddyStone, Leased 2,300 square feet of office ------ 06/30/2000
Pennsylvania space
Salinas, Leased 1,500 square feet of office ------ 02/28/96
California space
Bonita Springs, Leased 1,000 square feet of office ------ 11/14/96
Florida space
- ---------------
<FN>
(1) Includes farm land for field trials
(2) The Company sold this property in March 1996.
</FN>
</TABLE>
---------------------------
The Company also has arrangements in various locations throughout the
United States for field evaluations of improved plant varieties which the
Company is developing. The Company's current facilities are not adequate for
large scale growing, processing operations or distribution. Depending on the
needs for its products, the Company contracts for the requisite facilities with
third parties.
Item 3. Legal Proceedings
There is no material pending litigation to which the Company is a party.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders since the
Annual Meeting of Stockholders on May 18, 1995.
17
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Common Stock is traded in the over-the-counter market and is quoted on
the NASDAQ National Market under the symbol "DNAP". The following table sets
forth for each period indicated the high and low last sale prices for the Common
Stock as reported on the NASDAQ National Market.
Calendar Period High Low
1995:
4th Quarter............................... $ 1-3/8 $ 5/8
3rd Quarter............................... 2-1/16 1-1/4
2nd Quarter............................... 2-7/8 1-11/16
1st Quarter............................... 3-7/16 2-7/16
1994:
4th Quarter............................... $ 4-3/8 $ 2-9/16
3rd Quarter............................... 4-3/8 2-3/8
2nd Quarter............................... 4-7/8 3-1/8
1st Quarter............................... 5-5/8 4-1/2
There were approximately 3,200 holders of record of the Common Stock as of
December 31, 1995. The Company has not paid any dividends on the Common Stock
since its inception and does not intend to pay dividends in the foreseeable
future. The terms of the $2.25 Convertible Preferred Stock, restrict the payment
of dividends on the Common Stock and the terms of the Series A Preferred Stock
requires that any payment of dividends on the Common Stock must be paid on the
Series A Preferred Stock. The Company has ceased paying dividends on the $2.25
Convertible Preferred Stock and as of the date of these financial statements the
total arrearage with respect to such class of stock is $1,552,500.
18
<PAGE>
<TABLE>
Item 6. Selected Consolidated Financial Data
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Data:
Revenues
Produce sales (1) $ 10,074 $ 12,673 $ 1,330 $ --- $ ---
Product development 1,720 2,143 5,823 7,578 8,876
Investment and royalty income 2,555 1,515 1,874 2,925 2,026
- -----------------------------------------------------------------------------------------------------------------------
Total Revenues 14,349 16,331 9,027 10,503 10,902
- -----------------------------------------------------------------------------------------------------------------------
Operating Expenses
Cost of produce sales (1) 15,284 21,868 1,662 --- ---
Exit carrot processing 1,647 3,210 --- --- ---
Research and product development 5,880 6,769 11,999 11,922 12,137
Selling, general and administrative 5,753 7,031 2,610 3,034 2,964
Consolidation and relocation costs 70 2,048 --- 2,265 ---
Purchased in-process research and
product development (2) --- --- 15,238 --- ---
- -----------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 28,634 40,926 31,509 17,221 15,101
- -----------------------------------------------------------------------------------------------------------------------
Loss from Operations (14,285) (24,595) (22,482) (6,718) (4,199)
Gains on sale of assets 239 225 60 3,703 ---
- -----------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before
equity in loss of joint ventures (14,046) (24,370) (22,422) (3,015) (4,199)
Equity in operating loss of joint
ventures (1) --- --- (9,026) (10,615) (9,470)
- -----------------------------------------------------------------------------------------------------------------------
Loss from Continuing Operations (14,046) (24,370) (31,448) (13,630) (13,669)
Loss from Discontinued Operations --- (1,913) (2,494) (4,531) (1,272)
- -----------------------------------------------------------------------------------------------------------------------
Net Loss (14,046) (26,283) (33,942) (18,161) (14,941)
Preferred Stock Dividends (2,343) (3,105) (3,105) (3,105) (776)
- -----------------------------------------------------------------------------------------------------------------------
Net loss applicable to common
stockholders $ (16,389) $(29,388) $(37,047) $(21,266) $(15,717)
=======================================================================================================================
Net loss per common share:
Continuing Operations $ (.47) $ (.95) $(1.56) $ (.78) $ (.69)
Discontinued Operations --- (.07) (.11) (.21) (.06)
- -----------------------------------------------------------------------------------------------------------------------
Net loss per common share $ (.47) $ (1.02) $(1.67) $ (.99) $ (.75)
=======================================================================================================================
Weighted average common shares
outstanding 34,823 28,868 22,156 21,572 20,818
=======================================================================================================================
Produce Sales (1)
FreshWorld $ 10,074 $ 12,673 $ 5,059 $ 1,773 $ 1,451
DNAP --- --- 1,330 --- ---
- -----------------------------------------------------------------------------------------------------------------------
Total $ 10,074 $ 12,673 $ 6,389 $ 1,773 $ 1,451
Balance sheet data at December 31:
Cash and temporary investments $ 1,742 $ 4,489 $ 7,695 $ 27,364 $ 40,228
Working capital 260 2,446 2,586 24,055 39,752
Total assets 11,821 16,550 22,625 36,170 49,153
Total stockholders' equity $ 5,049 $ 8,692 $ 12,304 $ 30,561 $ 46,298
</TABLE>
19
<PAGE>
(1) FreshWorld's produce sales and cost of produce sales are excluded from the
Company's total revenues and operating expenses for the years prior to
1994, since the operations of FreshWorld were accounted for under the
equity method. As a result of the Du Pont Transaction, the Company now owns
100% of FreshWorld and, accordingly, FreshWorld's produce sales and other
operating results are fully consolidated with the Company's operating
results in 1995 and 1994. See Notes 2 and 4 to the Consolidated Financial
Statements for further details.
(2) Represents a non-recurring, non-cash charge reflecting the allocation of a
portion of the Company's purchase price for FreshWorld to in-process
research and product development which amount is charged to operations in
accordance with purchase accounting practices.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion and analysis below contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results could differ materially from those projected in the forward-looking
statements as a result of the risk factors set forth below and elsewhere in this
report.
General
The Company is a leading agribusiness biotechnology company focused on the
development and marketing of premium, fresh and processed, branded fruits and
vegetables developed through advanced breeding, genetic engineering, and other
biotechniques.
Although the Company reduced its losses from continuing operations from
$24.4 million in 1994 to $14.0 million in 1995, its capital resources and
liquidity situation continued to worsen. During 1995, these losses and the
Company's continuing operations were funded by the proceeds from the private
placement of an aggregate of 8,969,725 shares of the Company's Common Stock,
1,500 shares of preferred stock of the Company and warrants to purchase
4,070,182 shares of the Company's Common Stock. In the view of the Company's
management, its capital resources at year end of $1.7 million in cash and
temporary investments were inadequate to fund existing operations during 1996
without significant new capital or major restructuring of the Company.
In January 1996, the Company entered into an Agreement and Plan of Merger
with Empressas La Moderna, S.A. de C.V. and related entities (see the discussion
above under "Agreement and Plan of Merger and Related Transactions" for more
details concerning the Merger), pursuant to which the Company received a loan of
$5,000,000 and subject to certain conditions, will receive an additional
$5,000,000 on July 1, 1996 if the Merger has not been consummated by that date.
In November 1995, the Company issued 1,557,377 shares of its common stock
in exchange for 1,364,118 shares of common stock of United Agricorp, Inc.
("UAC") which represents approximately 13% of the outstanding shares of UAC. UAC
is an agribusiness biotechnology company focused on the improvement of
strawberries, raspberries, and grapes.
20
<PAGE>
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
For the year ended December 31, 1995, the Company's loss from continuing
operations decreased to $14.0 million from $24.4 million for the prior year.
Included in the $14.0 million loss in 1995 was a non-recurring charge of $1.6
million for costs associated with the shutdown of the carrot processing plant
and $.8 million of costs incurred as a result of the announced merger (see Note
21 to the Company's Consolidated Financial Statements). The 1995 loss
represented a decrease from the loss incurred in 1994 partially as a result of
the decrease in the gross margin loss due to a change in the Company's sales mix
from carrots to the higher margin tomatoes. Included in 1994 results was a $3.2
million non-recurring charge for costs associated with the shutdown of the
carrot processing plant and the cello carrot product line and $2.0 million in
consolidation and relocation costs.
For the year ended December 31, 1995, produce sales decreased 20% to $10.1
million from $12.7 million in 1994. This $2.6 million decrease in revenues was a
result of the Company exiting the processing of its own carrots in the fourth
quarter of 1994 which resulted in substantially lower sales of carrots in 1995
as compared to 1994, partially offset by substantially higher tomato sales in
1995 due to expansion into new and existing geographic areas. In addition, the
1994 results include $1.4 million of revenues associated with a marketing joint
venture that was dissolved in the fourth quarter of 1994.
Revenues from product development agreements decreased 19% to $1.7 million
in 1995 from $2.1 million in 1994, principally due to fewer government grants.
Investment and royalty income increased to $2.6 million in 1995 from $1.5
million in 1994 as a result of recording $1.1 million of net revenue from the
sale of Frost Technology Corporation, a wholly-owned subsidiary and recognizing
revenue on an option to purchase licensed technology.
Cost of produce sales decreased 30% to $15.3 million in 1995 from $21.9
million in 1994. This decrease was primarily a result of the Company
discontinuing the processing of its own carrots in the fourth quarter of 1994
and the change in its product mix toward the higher margin tomato product. In
addition, the 1994 cost of produce sales included $1.3 million associated with
the marketing joint venture dissolved in the fourth quarter of 1994.
Research and product development expenses decreased to $5.6 million in 1995
from $6.8 million in 1994, primarily due to the Company's decision to further
sharpen the focus of its research efforts and concentrate those efforts
principally in the area of fruits and vegetables.
Selling, general and administrative expenses decreased to $6.0 million from
$7.0 million. This decrease was due to the Company's effort to consolidate its
operation, eliminate duplication of administrative staff and facilities, and
focus its marketing efforts on tomatoes.
The impact of inflation on revenues and results of operations has not been
significant.
21
<PAGE>
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
For the year ended December 31, 1994, the Company's loss from continuing
operations decreased to $24.4 million from $31.4 million for the prior year.
Included in the $24.4 million loss in 1994 was a non-recurring charge of $3.2
million for costs associated with the shutdown of the carrot processing plant
and the cello carrot product line, a non-recurring charge of $2.0 million
related to the Company's relocation of its headquarters to California and 100%
of the losses of FreshWorld as compared to 50% in 1993, reflecting the Company's
increased ownership in FreshWorld, effective December 31, 1993. The 1994 loss
also reflects an increased gross margin loss due to a higher level of produce
sales. Included in 1993 results was a $15.2 million non-recurring charge for
purchased in-process research and product development relating to the Company's
acquisition of Du Pont's 50% interest in FreshWorld.
For the year ended December 31, 1994, produce sales nearly doubled to $12.7
million as compared to the combined Company and FreshWorld produce sales of $6.4
million in 1993. In 1993, FreshWorld's $5.1 million of produce sales were
accounted for under the equity method and accordingly were not reflected in the
Company's consolidated statement of operations. The $6.3 million increase in
produce revenues is a result of increased sales of tomatoes and carrots in
existing and new geographic areas, the addition of new products, including
carrot bites, which were only produced in small quantities and sold through test
markets beginning in the third quarter of 1993, and $1.4 million of revenues
from the partnership established with Fresh Choice which was terminated in the
fourth quarter of 1994 (see Note 2 to the Company's Consolidated Financial
Statements).
Revenues from product development agreements decreased to $2.1 million in
1994 from $5.8 million in 1993 principally because in 1994 the operating results
of FreshWorld were fully consolidated with those of the Company's and all
intercompany transactions were eliminated. In 1993 FreshWorld results were
accounted for using the equity method, therefore the Company's 1993 revenues
from product development agreements included $3.2 million from FreshWorld.
Investment and royalty income decreased to $1.5 million in 1994 from $1.9
million in 1993 as a result of lower invested funds and lower effective yields
on invested funds.
Cost of produce sales increased 45% to $21.9 million in 1994, from combined
Company and FreshWorld cost of produce sales of $15.1 million in 1993. In 1993,
the $13.5 million of FreshWorld's cost of produce sales were accounted for under
the equity method and accordingly were not reflected in the Company's operating
expenses in the consolidated statement of operations. The $6.8 million increase
reflected growing, harvesting and other costs relating to a higher volume of
production and $1.3 million of costs related to the Fresh Choice partnership
revenues.
Research and product development expenses decreased to $6.8 million in 1994
from $12.0 million in 1993, primarily due to the Company's decision to
concentrate its efforts principally in the area of fruits and vegetables.
Selling, general and administrative expenses increased to $7.0 million from
$2.6 million principally due to the consolidation in 1994 of FreshWorld's
operating results with those of the Company. However, these expenses actually
decreased approximately $1.0 million compared to the combined 1993 pro forma
results of the Company and FreshWorld.
The impact of inflation on revenues and results of operations has not been
significant.
22
<PAGE>
Liquidity and Capital Resources
At December 31, 1995, the Company had $1.7 million in cash and temporary
investments, a $2.8 million net decrease from $4.5 million at December 31, 1994.
This decrease was primarily the net result of $10.8 million in net proceeds
received from the sale of common and preferred stock discussed below offset by
the funding of operating activities of $12.0 million and the payment of $2.3
million of dividends on the Company's $2.25 Convertible Preferred Stock. At
December 31, 1995, working capital was $.3 million and stockholders' equity was
$5.0 million.
During 1995, the Company received cash proceeds of $1.3 million from the
sale of Frost Technology Corporation, a wholly-owned subsidiary. The assets of
this subsidiary consisted primarily of technology rights.
During 1995, the Company privately placed an aggregate of 8,969,725 shares
of Common Stock and warrants to purchase 4,070,182 shares of Common Stock and
received net proceeds, after commissions and expenses, of $9.5 million (see Note
12 to the Company's Consolidated Financial Statements). In addition, the Company
privately placed 750 shares of its Convertible Series B and 750 shares of
Convertible Series C preferred stock and received net proceeds, after
commissions and expenses, of $1.3 million. These preferred shares were converted
into Common Stock during the third quarter (see Note 13 to the Company's
Consolidated Financial Statements).
At December 31, 1995, the Company had commitments of $192,000 for grower
fees related to the future harvest of crops.
In October 1995, the Company entered into an agreement to lease to a third
party certain carrot processing equipment with a net book value of $1.7 million
in return for the payment to the Company of $15,935 per month for sixty months.
Concurrent with the leasing of the equipment, the Company terminated its carrot
processing facility lease and agreed to make payments totaling $945,000
consisting of a termination penalty under the terms of the lease agreement,
monthly lease payments through December 1995 and the cost to restore the
facility to its prelease condition (see Note 5 to the Company's Consolidated
Financial Statements).
Subsequent to December 31, 1995, the Company received in January 1996, $5.0
million from Bionova U.S. in connection with the Merger Agreement and Loan
Agreement (see the discussion above under "Agreement and Plan of Merger and
Related Transactions" for more details concerning the Merger).
Based on its current business plans including consummation of the pending
Merger (see the discussion above under "Agreement and Plan of Merger and Related
Transactions" for more details concerning the Merger), the Company believes that
its current cash resources, including the $5.0 million received from Bionova
U.S. in January 1996, and $5.0 million to be received on July 1, 1996 if the
closing of the Merger has not been effected by such date, its revenues from
prospective and existing research, product development and licensing
arrangements, revenues from produce sales, accompanied by projected improvements
in the gross margin on such produce sales and reduction of fixed overhead and
administrative costs will be sufficient to fund its cash requirements into 1997,
although there can be no assurance with respect thereto.
23
<PAGE>
Item 8. Financial Statements and Supplementary Data
See Item 14 of Part IV for this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements with the Company's auditors on accounting
principles or financial statement disclosures.
PART III
Item 10. Directors and Executive Officers of the Registrant
This information is incorporated by reference to the Company's definitive
proxy statement or will be provided as an amendment to the Form 10-K. Reference
is also made to Item 1 hereof.
Item 11. Executive Compensation
This information is incorporated by reference to the Company's definitive
proxy statement or will be provided as an amendment to the Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is incorporated by reference to the Company's definitive
proxy statement or will be provided as an amendment to the Form 10-K.
Item 13. Certain Relationships and Related Transactions
This information is incorporated by reference to the Company's definitive
proxy statement or will be provided as an amendment to the Form 10-K.
24
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
1 (a). Consolidated Financial Statements and Schedules of DNA Plant Technology
Corporation and Subsidiaries
Page
----
Independent Auditors' Report F-1
Consolidated Balance Sheets at December 31, 1995 and 1994 F-2
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 F-3
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-5
Notes to Consolidated Financial Statements. F-6
Schedules:
II Valuation and Qualifying Account for the Years Ended
December 31, 1995, 1994, and 1993 F-23
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
DNA Plant Technology Corporation:
We have audited the consolidated financial statements of DNA Plant Technology
Corporation and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of DNA Plant Technology
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
San Francisco, California
February 14, 1996
F-1
<PAGE>
<TABLE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(In thousands, except per share amounts)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,742 $ 1,202
Temporary investments -- 3,287
Accounts receivable, net of allowance for bad
debts of $106 in 1995 and $346 in 1994 1,922 2,344
Inventory 380 1,168
Prepaids 156 302
Other current assets 269 298
Assets held for sale 1,038 900
- --------------------------------------------------------------------------------------------------------------------
Total Current Assets 5,507 9,501
- --------------------------------------------------------------------------------------------------------------------
Fixed assets, net of accumulated depreciation of
$6,612 and $8,024 in 1995 and 1994, respectively 2,345 4,639
Notes receivable -- 250
Patents and other assets, net of amortization of
$354 in 1995 and $256 in 1994 503 450
Non-marketable equity investment 1,946 --
Excess of purchase price over net assets acquired, net of
accumulated amortization of $380 in 1995 and $190 in 1994 1,520 1,710
- --------------------------------------------------------------------------------------------------------------------
Total Assets $ 11,821 $ 16,550
====================================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,384 $ 1,537
Accrued liabilities 1,452 1,189
Accrued compensation 361 462
Accrued restructuring and consolidation costs 87 2,108
Dividends payable 776 776
Amount payable to Du Pont 983 983
Current portion of note payable 204 --
- --------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 5,247 7,055
- --------------------------------------------------------------------------------------------------------------------
Deferred revenue 584 518
Deferred compensation 232 285
Note payable less current portion 709 --
- --------------------------------------------------------------------------------------------------------------------
Total Long Term Liabilities 1,525 803
- --------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, par value $.01 per share; authorized 5,000 shares; $2.25 convertible
preferred stock; issued and outstanding 1,380 shares in 1995 and 1994 14 14
Series A convertible preferred stock, par value $.01 per share; authorized 3 shares;
issued and outstanding 3 shares in 1995 and 1994 -- --
Series B convertible preferred stock, par value $.01 per share; authorized 1 share;
issued and outstanding no shares in 1995 and 1994 -- --
Series C convertible preferred stock, par value $.01 per share; authorized 1 share;
issued and outstanding no shares in 1995 and 1994 -- --
Common stock, par value of $.01 per share; authorized 60,000
shares; issued 42,829 shares in 1995 and 30,713 in 1994 428 307
Common stock to be issued, par value of $.01 per share,
no shares in 1995, 100 shares in 1994 -- 1
Additional paid-in capital 160,405 149,918
Accumulated deficit (155,798) (141,752)
Unrealized holding gain --- 204
- --------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 5,049 8,692
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 11,821 $ 16,550
====================================================================================================================
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-2
<PAGE>
<TABLE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993
(In thousands, except per share amounts)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Produce sales $ 10,074 $ 12,673 $ 1,330
Product development 1,720 2,143 5,823
Investment and royalty income 2,555 1,515 1,874
- --------------------------------------------------------------------------------------------------------------------
Total Revenues 14,349 16,331 9,027
- --------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Cost of produce sales 15,284 21,868 1,662
Exit carrot processing 1,647 3,210 --
Research and product development 5,880 6,769 11,999
Selling, general and administrative 5,753 7,031 2,610
Consolidation and relocation costs 70 2,048 --
Purchased in-process research and product development -- --- 15,238
- --------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 28,634 40,926 31,509
- --------------------------------------------------------------------------------------------------------------------
Loss from Operations (14,285) (24,595) (22,482)
Gains on sales of assets 239 225 60
- --------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before equity in loss of joint ventures (14,046) (24,370) (22,422)
Equity in operating loss of joint ventures -- --- (9,026)
- --------------------------------------------------------------------------------------------------------------------
Loss from Continuing Operations (14,046) (24,370) (31,448)
Discontinued Operations:
Loss from operations -- (640) (2,494)
Loss on disposition -- (1,273) --
- --------------------------------------------------------------------------------------------------------------------
Total Discontinued Operations -- (1,913) (2,494)
- --------------------------------------------------------------------------------------------------------------------
Net Loss (14,046) (26,283) (33,942)
Preferred stock dividends (2,343) (3,105) (3,105)
- --------------------------------------------------------------------------------------------------------------------
Net Loss Applicable to Common Stockholders $ (16,389) $ (29,388) $ (37,047)
====================================================================================================================
Net Loss Per Common Share:
Continuing operations $ (.47) $ (.95) $ (1.56)
Discontinued operations -- (.07) (.11)
Net Loss per Common Share $ (.47) $ (1.02) $ (1.67)
====================================================================================================================
Weighted Average Common Shares Outstanding 34,823 28,868 22,156
====================================================================================================================
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
(In thousands)
<CAPTION>
Preferred Stock Common Stock
------------------------------- -------------------------------
Issued To be issued Issued To be issued Unreal-
------------- --------------- ------------- --------------- Addi- ized
Number Number Number Number tional hold- Accum-
of of of of paid-in ing ulated
shares Amount shares Amount shares Amount shares Amount capital gain deficit
------ ------ ------ ------ ------ ------ ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 1,380 $ 14 --- $ --- 21,915 $219 --- $ --- $111,855 $ --- $ (81,527)
Exercise of options & warrants --- --- --- --- 143 1 --- --- 645 --- ---
Issuance of common stock --- --- --- --- 70 1 --- --- 331 --- ---
Stock to be issued --- --- 3 10,312 --- --- 2,000 7,500 --- --- ---
Net loss --- --- --- --- --- --- --- --- --- --- (33,942)
Preferred dividends --- --- --- --- --- --- --- --- (3,105) --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 1,380 $ 14 3 $10,312 22,128 $221 2,000 $7,500 $109,726 $ --- $(115,469)
- ------------------------------------------------------------------------------------------------------------------------------------
Exercise of options & warrants --- --- --- --- 35 --- --- --- 112 --- ---
Issuance of common stock --- --- --- --- 8,550 86 (2,000) (7,500) 32,873 --- ---
Issuance of preferred stock 3 --- (3) (10,312) --- --- --- --- 10,312 --- ---
Stock to be issued --- --- --- --- --- --- 100 1 --- --- ---
Unrealized holding gain --- --- --- --- --- --- --- --- --- 204 ---
Net loss --- --- --- --- --- --- --- --- --- --- (26,283)
Preferred dividends --- --- --- --- --- --- --- --- (3,105) --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,383 $ 14 --- $ --- 30,713 $307 100 $ 1 $149,918 $ 204 $(141,752)
- ------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock
and warrants --- --- --- --- 10,797 108 (100) (1) 11,493 --- ---
Issuance of preferred stock 2 --- --- --- --- --- --- --- 1,350 --- ---
Conversion of preferred stock (2) --- --- --- 1,319 13 --- --- (13) --- ---
Unrealized holding gain --- --- --- --- --- --- --- --- --- (204) ---
Net loss --- --- --- --- --- --- --- --- --- --- (14,046)
Preferred dividends --- --- --- --- --- --- --- --- (2,343) --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 1,383 $14 --- $ --- 42,829 $428 --- $ --- $160,405 $ --- $(155,798)
====================================================================================================================================
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
(In thousands)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $(14,046) $(24,370) $(31,448)
Reconciliation of net loss to net cash used in
operating activities:
Depreciation and amortization 578 1,293 829
Provision for uncollectible accounts (450) 166 12
Loss from disposal of carrot processing assets 1,268 2,303 ---
Loss on purchase commitments --- --- 738
Loss (gains) on disposal of assets (239) 398 (259)
Loss from discontinued operations --- (1,913) (2,494)
Equity in loss of joint ventures --- --- 9,026
Purchased in-process product development --- --- 15,238
Compensation and expenses paid in common stock 142 217 ---
Net changes (exclusive of changes due to
business acquired) in:
Accounts receivable 873 (92) (206)
Inventory 517 (572) 35
Other current assets 174 470 218
Accounts payable and accrued liabilities (885) (3,630) (116)
Other assets and liabilities 121 169 (594)
- -------------------------------------------------------------------------------------------------------
Net cash used in operating activities (11,947) (25,561) (9,021)
- -------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Investments in joint ventures --- --- (8,109)
Capital expenditures (171) (554) (331)
Purchases of temporary investments --- (18,185) (12,891)
Sales and maturities of temporary investments 3,287 19,544 32,795
Proceeds from sales of assets 919 435 401
Business acquired --- --- (150)
- -------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 4,035 1,240 11,715
- -------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of stock 10,827 25,374 646
Preferred stock dividends (2,343) (3,105) (3,105)
Payment of principal on note payable (32) --- ---
- -------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 8,452 22,269 (2,459)
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 540 (2,052) 235
Cash and cash equivalents, beginning of year 1,202 3,254 3,019
- -------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 1,742 $ 1,202 $ 3,254
=======================================================================================================
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-5
<PAGE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements
December 31, 1995
(1) Summary of Significant Accounting Policies
Basis of Presentation:
The consolidated financial statements of the Company include the
accounts of DNA Plant Technology Corporation, and its wholly-owned and
majority-owned subsidiaries. The results of operations for Quantix Systems, L.P.
("Quantix") have been accounted for as discontinued operations (see Note 3 for
further information related to discontinued operations). All significant
intercompany balances and transactions have been eliminated.
Investments in and advances to the branded produce and edible oils
joint ventures, in which the Company had a 50% or less ownership, were accounted
for by the equity method through December 31, 1993. Under such method, the
Company's share of net earnings (losses) is included as a separate item in the
Consolidated Statement of Operations.
The Company accounts for its non-marketable equity investment at cost
(see Note 15).
Business:
The Company is an agribusiness biotechnology company focused on the
development and marketing of premium fresh and processed branded fruits and
vegetables developed through advanced biotechnological breeding, genetic
engineering and other technologies.
In January 1994, the Company completed a transaction (the "Du Pont
Transaction") with E.I. Du Pont de Nemours and Company ("Du Pont") whereby the
Company became the sole owner of FreshWorld ("FreshWorld"), a partnership
engaged in the development and marketing of branded, premium fresh fruits and
vegetables. The Company acquired Du Pont's ownership interest in FreshWorld in
exchange for the Company's approximately 28% interest in InterMountain Canola
Company L.P. ("InterMountain"), another partnership between the Company and Du
Pont, which was engaged in developing and marketing edible oils; 2,000,000
shares of common stock of the Company; 2,750 shares of a new issue of Series A
preferred stock of the Company which is convertible into 2,750,000 shares of
common stock; nonexclusive rights to certain Company technology; and future cash
payments upon the sale of the Company's New Jersey facility. The terms of the Du
Pont Transaction further provided that the Company was to become sole owner of
FreshWorld as of December 31, 1993. Accordingly, the Company's consolidated
financial statements reflect the purchase of FreshWorld and the effect of the
stock to be issued effective on December 31, 1993.
As described in Note 21, on January 26, 1996 the Company entered into
an Agreement and Plan of Merger with Empressas La Moderna, S.A. de C.V. and
related entities.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts
F-6
<PAGE>
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
Reclassification:
Certain reclassifications have been made to prior years' amounts to be
consistent with the 1995 presentation.
Revenue:
Revenue from produce sales is recognized at time of shipment to
customers.
Revenue from product development activities is recognized during the
period the Company performs the development efforts in accordance with the terms
of the agreements and activities undertaken. The revenue is recognized ratably
over the term of the agreement, which generally approximates the performance
effort. Revenue that is related to future performance under such agreements is
deferred and recognized as revenue when earned.
Temporary Investments:
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standard Statement No.115, "Accounting for Certain Investments in
Debt and Equity Securities". The Company's temporary investments consisted of
short and intermediate-term notes and bonds and marketable equity securities
which are classified as available for sale and stated at fair value as
determined by quoted market values. Changes in the net unrealized holding gains
and losses are included as a separate component of stockholders' equity. For the
purpose of determining gross realized gains and losses, the cost of temporary
investments sold is based upon specific identification. Adoption of Statement
No. 115 did not have a material impact on the Company's consolidated financial
statements.
Inventory:
Inventories are stated at the lower of cost, determined on the
first-in, first-out method, or market and are primarily comprised of prepaid
grower fees, raw material seed and finished goods produce.
Fixed Assets:
Fixed assets are stated at cost. Depreciation and amortization of
buildings, improvements and equipment are provided on a straight-line basis over
the estimated useful lives of the respective assets, generally five to twenty
years for buildings and improvements and three to ten years for equipment and
furniture.
Excess of Purchase Price Over Net Assets Acquired:
The excess purchase price over the fair value of identifiable net
assets acquired is capitalized and amortized on a straight-line basis over its
estimated useful life (ten years). Amortization charged to continuing operations
amounted to $190,000 in each of the years ended December 31, 1995 and 1994. The
Company periodically evaluates the recoverability of its recorded asset based
upon projected, undiscounted cash flows and operating income of the related
business unit.
F-7
<PAGE>
Patents:
The costs of obtaining patents are capitalized. Costs relating to
successful patent efforts are amortized on a straight-line basis over the
estimated useful lives of the patents, generally five years. Costs relating to
unsuccessful or terminated patent efforts are expensed in the period management
believes such efforts may not result in an approved patent or when a patent
application is denied.
Research and Product Development Costs:
All research and product development costs incurred or acquired are
expensed.
Stock Based Compensation:
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, Accounting for Stock-Based Compensation. Statement No. 123
applies to all transactions in which an entity acquires goods or services by
issuing equity instruments such as common stock, except for employee stock
ownership plans. Statement No. 123 establishes a new method of accounting for
stock-based compensation arrangements with employees which is fair value based.
The statement encourages (but does not require) employers to adopt the new
method in place of the provisions of Accounting Principles Board Opinion (APB)
No. 25, Accounting for Stock Issued to Employees. Companies may continue to
apply the accounting provisions of APB No. 25 in determining net income,
however, they must apply the disclosure requirements of Statement No. 123. If
the Company adopts the fair value based method of Statement No. 123, a higher
compensation cost would result for fixed stock option plans and a different
compensation cost will result for the Company's contingent or variable stock
option plans. The recognition provisions and disclosure requirements of
Statement No. 123 are effective January 1, 1996. The Company plans to continue
to use its current accounting practice under APB No. 25.
Income Taxes:
Effective January 1, 1993, the Company adopted Statement No. 109. The
cumulative effect of that change in the method of accounting for income taxes
had no impact on the 1993 Consolidated Statement of Operations.
Statement No. 109 requires a change from the deferred method of
accounting for income taxes under APB Opinion 11 to the asset and liability
method of accounting for income taxes.
Net Loss Per Common Share:
Net loss per common share applicable to common stockholders has been
computed by dividing the net loss, including preferred stock dividends, by the
weighted average number of common shares outstanding during each period.
Common shares issuable upon the exercise of stock options and warrants or
conversion of preferred shares have been excluded from the computation of net
loss per common share since their inclusion was antidilutive.
Statements of Cash Flows:
For purposes of the consolidated statements of cash flows, the Company
considers all highly-liquid investments with maturities at time of purchase of
three months or less as cash equivalents.
F-8
<PAGE>
Supplemental Cash Flow Information:
In 1993 the Company issued common stock in accordance with the terms of a
severance agreement resulting from its strategic consolidation and as partial
payment under its management incentive program in the amounts of $120,000 and
$91,000, respectively.
In January 1994 the Company completed the Du Pont Transaction (see Note
4) which, in accordance with the terms of the agreement, has been accounted for
as if the acquisition was completed on December 31, 1993. The following are the
elements of the transaction (in thousands):
Assets acquired
Trade receivables $ 877
Fixed assets 4,761
Intangibles 1,900
All other assets 1,478
In-process research and product development 15,238
Liabilities assumed (3,098)
Estimated liability to Du Pont (1,500)
Preferred stock to be issued to Du Pont (10,312)
Common stock to be issued to Du Pont (7,500)
Common stock issued to financial advisor (121)
Company's interest in net assets (1,573)
Cash payments made $ 150
In 1993 the Company sold a parcel of land for an aggregate purchase price
of $550,000. The Company received $100,000 in cash and a note receivable in the
amount of $450,000 payable semi-annually over a three year period. A gain on the
sale of the land of $261,000 was deferred and included in deferred revenue at
December 31, 1993. During 1994, the Company wrote down the note $41,000,
received the remaining balance and recognized the resulting gain of $220,000.
In 1995 the Company issued 1,557,377 shares of its common stock in
exchange for 1,364,118 shares of common stock of United Agricorp, Inc. ("UAC")
(see Note 15).
(2) Investments in Joint Ventures
In September 1994 the Company entered into a partnership agreement with
Fresh Choice Produce, Inc. ("Fresh Choice") to market both Fresh Choice's and
FreshWorld's fruits and vegetables. The agreement outlined written provisions
whereby for a limited period of time Fresh Choice could terminate the agreement
for any reason. In the fourth quarter of 1994 Fresh Choice exercised this option
and terminated the partnership. Amounts included in the Company's Consolidated
Statement of Operations for the fiscal year ended December 31, 1994 as a result
of this partnership consisted of produce sales, cost of produce sales, and other
costs of $1,369,000, $1,301,000 and $68,000, respectively. In addition, the
Company recognized $140,000 of income for its investment interest in selected
Fresh Choice crops.
As a result of the Du Pont Transaction (see Note 4), the Company's
investment in joint ventures at December 31, 1993 was zero. Prior to December
31, 1993, the Company's investment in joint ventures related principally to its
two joint venture partnerships with Du Pont, a principal stockholder
F-9
<PAGE>
of the Company. The two joint ventures were FreshWorld, a 50% owned limited
partnership and InterMountain, an approximately 28% owned limited partnership.
Summarized financial information for these joint ventures is as follows for
1993:
1993
----
(In thousands)
Operating Data:
Revenues $ 10,160
Expenses * 38,143
- ------------------------------------------------------------------------
Net loss * $ (27,983)
========================================================================
Company's equity in net loss $ (9,026)
========================================================================
* Excludes purchased in-process research and product development of $15,238.
Included in revenues and expenses in the above table are $5,101,000 and
$16,111,000, respectively, which relate to InterMountain. These amounts are
unaudited.
(3) Disposal of Quantix
Effective May 1994, the Company completed the sale of substantially all
of the assets of Quantix to Idetek, Inc. ("Idetek"), a privately held
biotechnology company, for a $250,000 convertible promissory note bearing
interest at 10% per annum due July 11, 1996 and 2,900,000 shares of Idetek
common stock. After completion of the transaction, the Company held less than
10% of the voting interest of Idetek. The note has been recorded at its
estimated net realizable value and is shown as an other current asset in the
accompanying Consolidated Balance Sheets. No value has been assigned to the
Idetek common stock as there is no established market value. A $1.3 million
charge was recorded during 1994 for the loss on disposal of Quantix consisting
of employee severance and termination costs of $.5 million, operating losses
through the anticipated date of disposition of $.4 million, and a $.4 million
write-down to net realizable value of assets sold. Revenue related to the
operations of Quantix was approximately $.3 million and $1.3 million for 1994
and 1993, respectively.
(4) Du Pont Transaction and FreshWorld Acquisition
In January 1994, the Company completed the Du Pont Transaction whereby
2,000,000 shares of common stock; 2,750 shares of a new series of preferred
stock (convertible into 2,750,000 shares of common stock); future cash payments
from the sale of the Company's New Jersey facility which is classified as assets
held for sale at December 31, 1995 and 1994; nonexclusive licenses to certain
F-10
<PAGE>
Company technology; and the Company's approximately 28% interest in
InterMountain were exchanged for Du Pont's 50% interest in FreshWorld resulting
in the Company becoming the sole owner of FreshWorld. The Du Pont Transaction
has been accounted for as a purchase business combination in accordance with
generally accepted accounting principles and, in accordance with the terms of
the related agreement, as if the Du Pont Transaction had been completed on
December 31, 1993. The stock issued to Du Pont in the transaction has been
valued on the basis of $3.75 per share of common stock, which along with the
other items, represents an aggregate purchase price of $19,880,000. The per
share price represents the fair market value of the Company's common stock on
the date the Du Pont Transaction closed, less a discount as determined by an
investment banker to reflect restrictions on Du Pont's ability to sell such
stock in the public markets.
Under purchase accounting, the assets and liabilities of the acquired
entity are required to be adjusted to their estimated fair value. The cost in
excess of the fair value of net assets acquired represents goodwill and other
intangibles of $1,900,000 which has been capitalized, and $15,238,000 of
in-process research and product development, which is not capitalized under
generally accepted accounting principles and accordingly, has been charged to
operations in December 1993. The Company's investment in InterMountain was zero,
and no value was assigned to the Company's 28% interest in InterMountain;
accordingly, there was no gain or loss on the transfer of such interest.
In connection with the Du Pont Transaction, the common stock and
preferred stock were issued in January 1994.
The following unaudited pro forma summary consolidated statements of
operations presents the Company's results of operations as if the increase in
ownership of FreshWorld had occurred on January 1, 1993. These pro forma results
have been prepared for comparative purposes only and are not necessarily
indicative of actual financial results if the Du Pont Transaction had been
consummated on January 1, 1993, or of future results of operations.
Year ended
December 31,
1993
--------------
(Unaudited)
(in thousands)
Revenues:
Produce sales $ 6,389
Product development 2,810
Investment, royalty and other income 1,934
- ---------------------------------------------------------------------------
Total Revenues $ 11,133
===========================================================================
Net Loss $ (26,820)
===========================================================================
Net loss applicable to common shareholders $ (29,925)
===========================================================================
Net loss per common share $ (1.24)
===========================================================================
Excludes non-recurring charge of $15,238,000 relating to purchased
in-process research and product development.
F-11
<PAGE>
(5) Exit Carrot Processing
During 1994, the Company discontinued processing its own carrots and shut
down its carrot processing plant. The Company recorded charges related to the
exiting of carrot processing of $1.6 million and $3.2 million for the years
ended December 31, 1995 and 1994, respectively. The 1994 charge consisted of a
$1.6 million charge to write down the equipment to its then estimated net
realizable value, a $.5 million charge to write down packaging material and seed
inventory, a $.2 million charge for lease payments, net of estimated sublease
payments, and $.1 million for severance and termination benefits. The 1995
charge consisted of an additional $1.3 million for termination and other costs
related to the Company's leased facility and $.3 million related to an
additional writedown of carrot processing equipment, seed and packaging
inventory.
As part of the exit plan, during 1995 the Company entered into an
agreement to lease carrot processing equipment with a net book value of
$1,725,000 to a third party. The lease is an operating lease with a term of
sixty months beginning November 1, 1995, and terminating October 31, 2000. Lease
payments are $15,935 per month. The lessee has an option to purchase the
equipment at the end of the lease term at its then fair market value. Carrot
processing equipment not leased, with an estimated net realizable value of
$138,000 as of December 31, 1995, is recorded in the Consolidated Balance Sheets
as assets held for sale.
Concurrent with the leasing of its carrot processing equipment, the
Company terminated its carrot processing facility lease. In accordance with the
terms of the termination agreement, the Company delivered a note payable to the
lessor in the principal amount of $945,000 payable over 48 months and bearing
interest at a rate of 10% per annum. The future principle payments under this
note are 1996, $204,000; 1997, $225,000; 1998, $249,000; and 1999, $235,000.
(6) Income Taxes
As discussed in Note 1, the Company adopted Statement No. 109 as of
January 1, 1993. Income tax expense differed from the amounts computed by
applying the statutory U.S. Federal income tax rate to pretax income from
continuing operations as a result of the following (in thousands):
Year Ended December 31,
-----------------------------
1995 1994 1993
---- ---- ----
Computed "expected" tax benefit $ 4,776 $ 8,936 $ 11,540
Reduction in income tax benefit resulting from:
Losses for which no benefit was recognized (5,021) (8,748) (11,351)
Other 245 (188) (189)
- --------------------------------------------------------------------------------
$ --- $ --- $ ---
================================================================================
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $134,935,000 and $97,189,000 for Federal and States, respectively.
Because of prior transactions involving the issuance of equity securities by the
Company, certain annual limitations apply to the Company's future use of these
carryforwards. The Company also had Federal and State research and development
and Federal investment tax credit carryforwards at December 31, 1995 of
approximately
F-12
<PAGE>
$4,217,000, $200,000 and $332,000, respectively. The tax operating loss and tax
credit carryforwards expire as follows (in thousands):
Federal State
Federal States Tax Tax
Year NOL NOL Credits Credits
- ------------------- -------- ------- ------- -------
1996 $ --- $ 41 $ 13 $ --
1997 --- 10,257 85 --
1998 3,617 15,088 109 --
1999 7,230 20,263 174 --
2000 6,479 18,905 111 --
2001 and thereafter 117,609 32,635 4,057 200
- --------------------------------------------------------------------------------
Total $134,935 $97,189 $4,549 $200
================================================================================
Significant components of the Company's deferred tax liabilities and assets as
of December 31, 1995 and 1994 are shown below (in thousands):
December 31,
1995 1994
---- ----
Deferred tax assets (in thousands):
Net operating loss carryforwards $ 51,836 $ 46,160
Investment and research and development tax credits 4,743 4,549
In-process research and product development 4,927 5,689
Other 2,304 1,677
- --------------------------------------------------------------------------------
Total deferred tax assets 63,810 58,075
Valuation allowance (63,530) (57,794)
- --------------------------------------------------------------------------------
Net deferred tax assets 280 281
Deferred tax liabilities:
Fixed assets, principally depreciation 280 281
- --------------------------------------------------------------------------------
Net deferred tax $ --- $ ---
===============================================================================
A valuation allowance of $63,530,000 has been recognized to offset the
deferred tax assets, as realization of such assets is uncertain. The valuation
allowance for deferred tax assets increase $5,736,000, $9,067,000 and
$13,784,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Under the provisions of the Internal Revenue Code, should certain
substantial changes in the Company's ownership occur, the amount of net
operating loss carryforwards and credit carryforwards may be limited. The
closing of the contemplated Merger, discussed in Note 21, would cause a
substantial change in the Company's ownership. The result of this change in
ownership would be a material limitation in the Company's ability to utilize the
net operating loss and credit carryovers.
F-13
<PAGE>
(7) Inventories
Inventories consisted of the following (in thousands):
December 31,
--------------------------
1995 1994
---- ----
Prepaid grower fees $119 $ 581
Raw materials and seed 192 407
Finished goods 69 180
- ---------------------------------------------------------------------------
Total Inventory $380 $1,168
===========================================================================
Prepaid grower fees were written down $585,000 at December 31, 1995, to their
net realizable value to recognize the estimated loss to complete certain tomato
contracts in progress and to terminate certain tomato growing agreements that
had been entered into for which harvesting had yet to begin. The loss of
$585,000 was recorded to cost of produce sales during the fourth quarter 1995.
(8) Fixed Assets
Fixed assets consisted of the following (in thousands):
December 31,
--------------------------
1995 1994
---- ----
Buildings and improvements $ 3,875 $ 3,899
Equipment and furniture 5,082 8,764
- ---------------------------------------------------------------------------
Total Fixed Assets 8,957 12,663
Less accumulated depreciation (6,612) (8,024)
- ---------------------------------------------------------------------------
Net Fixed Assets $ 2,345 $ 4,639
===========================================================================
Included in fixed assets is equipment with a net book value of $1,695,000 at
December 31, 1995, which has been leased to a third party under an operating
lease (see Note 5).
F-14
<PAGE>
(9) Research and Product Development
The Company has commitments to perform research and product development
work for customers.
The Company and Campbell Soup Company ("Campbell") formerly held joint
rights to certain tomato lines including certain of the lines used to make the
hybrid seed from which the FreshWorld Farms(R) tomato is grown. In 1993, the
Company and Campbell entered into an agreement under which Campbell gave up its
rights to commercialize the jointly owned tomato lines with the result that the
Company has worldwide exclusive rights to such jointly-owned tomato lines. The
Company paid Campbell $1,000,000 in cash in January 1994, which was charged to
operations in 1993, and will be required to pay royalties on certain tomato
sales commencing in 1997.
Research and product development revenues from FreshWorld and
InterMountain amounted to 48% and 5%, respectively in 1993 of the Company's
total research and product development revenues.
Research and product development expenses include the direct costs of
services performed under agreements of $1,111,000 in 1995, $1,196,000 in 1994
and $2,826,000 in 1993, and the direct costs of Company-sponsored programs plus
the indirect costs of all research and product development activities totaling
$4,769,000 in 1995, $5,573,000 in 1994 and $9,173,000 in 1993.
(10) Stock Options and Warrants
The Company maintained three stock option plans at December 31, 1995, the
1986 Stock Option Plan (the "1986 Plan"), the 1994 Stock Option Plan (the "1994
Plan"), and the Non-Employee Directors Stock Option Plan (the "Directors'
Plan"), under which a maximum of 1,600,000 shares, 3,000,000 shares and 800,000
shares of common stock, respectively, are available for issuance. The Company
previously maintained three other stock option plans under which approximately
520,720 options are currently outstanding and no further grants will be awarded.
The 1986 Plan and the 1994 Plan provide for the granting of incentive
stock options, as defined under the Internal Revenue Code, nonqualified stock
options, restricted stock and stock appreciation rights to officers and
employees of and consultants and advisors to the Company at prices which
generally have not been less than the fair market value of the Company's common
stock on the date of grant and expiring ten years from the date of grant.
The Directors' Plan currently provides for initial and annual grants of
nonqualified stock options to each non-employee director at prices which are
equal to 90% and 100% respectively of the fair market value of the Company's
common stock on the date of grant and expiring ten years from the date of grant.
An initial director's option becomes exercisable in five equal annual
installments, beginning one year from the date of grant and the annual awards
become fully exercisable within one year from the date of grant.
F-15
<PAGE>
A summary of the activity under all of the Company's stock option plans is as
follows:
1995 1994 1993
---- ---- ----
(Number of shares, in thousands)
Outstanding, beginning of period 3,623 2,418 2,471
Granted 1,329 1,875 235
Exercised --- (35) (143)
Expired or Cancelled (466) (635) (145)
- --------------------------------------------------------------------------------
Outstanding, end of period 4,486 3,623 2,418
===============================================================================
Available for grant at December 31 1,228 1,736 358
===============================================================================
Exercisable at December 31 2,244 1,864 1,773
===============================================================================
Option prices per share:
Granted $0.88-3.00 $3.00 - 5.38 $4.39 - 5.00
Exercised none $3.00 - 5.00 $2.81 - 5.50
Expired or Cancelled $2.47-10.38 $3.00-16.26 $2.81-17.00
In addition to the above, at December 31, 1995 the Company had warrants
and options outstanding that provide for the purchase of 200,000 shares of
common stock at $10.00 per share that expire in November 1996; 400,000 shares of
common stock at $6.65 per share that expire in January 1999; 4,070,182 shares of
common stock at $2.50 per share that expire during the third and fourth quarters
of 2000; 725,000 shares of common stock at $1.75 per share that expire in
September 1997 and 362,500 shares of common stock at $1.75 per share that expire
no later than September 1998 or one year from the exercise of the Unit Purchase
Options as described in Note 12.
(11) Preferred Stock
The Company has 1,380,000 shares of $2.25 Convertible Exchangeable
Preferred Stock outstanding at December 31, 1995. The liquidation value of each
preferred share is $25 plus unpaid dividends. The preferred shares are
convertible at any time at the option of the holder into common stock at an
initial conversion price of $6.15 (equivalent to a conversion rate of 4.065
shares of common stock for each preferred share subject to adjustment under
certain circumstances). The preferred shares are exchangeable at the option of
the Company in whole, but not in part, on any dividend payment date beginning
August 1, 1993, for 9% convertible subordinated debentures due 2016 at the rate
of $25 principal amount of debentures for each preferred share. The preferred
shares
F-16
<PAGE>
are redeemable for cash at the option of the Company on or after August 2, 1994,
in whole or in part, at prices declining to $25 per share on August 1, 2002,
together with unpaid dividends to the redemption date. If the preferred shares
are called for redemption, the preferred stockholder may elect to tender the
preferred shares or convert such shares into the Company's common stock.
Dividends on the preferred stock at an annual rate of $2.25 per share are
cumulative and payable quarterly when and as declared by the Company's Board of
Directors. Holders of the preferred stock are not entitled to vote except as
required by law and under certain circumstances. The Company did not declare or
pay the regular quarterly dividend ($.5625 per share) due on November 1, 1995.
In addition, the Company did not declare or pay the regular quarterly dividend
($.5625 per share) due on February 1, 1996 and as of the date of these
consolidated financial statements, the total arrearage with respect to such
class of stock is $1,552,500. As part of the proposed Merger Agreement (see Note
21), each share of $2.25 Convertible Exchangeable Preferred Stock will be
converted into 6.8375 shares of common stock of Bionova U.S.
In January 1994, the Company, as part of the Du Pont Transaction, issued
2,750 shares of Series A convertible preferred stock to Du Pont. The liquidation
value of each share of Series A preferred stock is $6,000. Each share of Series
A preferred stock is convertible at any time at the option of the holder into
common stock of the Company at a conversion rate of 1,000 shares of common stock
for each share of Series A preferred stock. The Series A preferred stock is
redeemable for cash at the option of the Company after January 1995 at a price
of $6,000 per share, subject to certain limitations. If the Company's Board of
Directors declares and pays a dividend on its common stock, the holders of
Series A preferred stock are entitled to receive cash dividends at the rate per
share of Series A preferred stock based upon the number of shares of common
stock to which the holders of Series A preferred stock would be entitled if they
had converted such shares into shares of common stock. Du Pont has been granted
certain demand and "piggyback" registration rights with respect to the 2,000,000
shares of common stock issued to Du Pont and the 2,750,000 shares of common
stock issuable upon the conversion of the Series A convertible preferred stock.
(12) Common Stock Issuance
During 1995, the Company privately placed 7,714,725 shares of common
stock of the Company together with warrants that expire during the third and
fourth quarters of 2000 which entitles the holders to purchase an additional
4,070,182 shares of common stock at $2.50 per share, for net proceeds, after
commissions and expenses, of $7.3 million. The holders of these shares have
agreed not to publicly trade such shares prior to April 1996. The shares of
common stock issuable upon the exercise of the warrants are subject to
shareholder approval if additional shares must be authorized before the common
stock can be issued; if shareholder approval is not obtained on or prior to June
30, 1996 and the Company does not have a sufficient number of authorized but not
yet issued shares, then the Company will be obligated to redeem the warrants at
$.25 per warrant ($1,017,546 in the aggregate). As part of the compensation to
the consultant who assisted the Company in placing these securities, the Company
granted the consultant unit purchase options (the "Unit Purchase Options")
entitling the consultant to purchase for $1.75, 725,000 units ("Placement
Units") that expire in September, 1997. Each Placement Unit consists of one
share of common stock and a warrant entitling the holder to purchase, during the
one year period following the date of exercise of the Unit Purchase Options, one
half share of common stock (362,500 in total if all Unit Purchase Options are
exercised) for $1.75. The issuance of the Placement Units is also subject to
shareholders approval
F-17
<PAGE>
if an increase in the authorized number of shares of the Company's common stock
is required. In addition, during 1995 through two other separate transactions
the Company privately placed 1,255,000 shares of the Company's common stock for
net proceeds, after commissions and expenses, of $2.2 million.
In accordance with the terms of the stock purchase agreement entered into
with Alida Marine, Inc. ("Alida") in 1994, the Company issued in 1995, at no
further cost to Alida, an additional 100,000 shares of common stock. These
shares were recorded at December 31, 1994 as common stock to be issued in the
accompanying Consolidated Balance Sheets. In addition, during 1995 the Company
issued 169,784 shares of common stock for its 401(k) plan matching contribution
and for merit increases and bonuses resulting in compensation expense of
$142,000.
(13) Sale and Conversion of Series B and Series C Preferred Stock
During 1995, the Company sold 750 shares of Convertible Series B and 750
shares of Convertible Series C preferred stock for $1,000 per share for net
proceeds to the Company of $1.3 million. These preferred shares were
subsequently converted into 1,318,839 shares of the Company's common stock at an
average conversion price of $1.14.
(14) Sale of Frost Technology Corporation
In February 1995, the Company sold the stock of Frost Technology
Corporation, a wholly-owned subsidiary, to a third party for $1,300,000 of
consideration. The assets of this subsidiary consisted primarily of technology
rights. This transaction resulted in a gain of $1,070,000, which was recorded by
the Company as licensing revenue. The Company received the entire $1,300,000
during 1995 as a result of this sale.
(15) Non-Marketable Equity Investment
During the fourth quarter of 1995, the Company issued 1,557,377 shares of
its common stock valued at $1.25 per share in exchange for 1,364,118 shares of
common stock of UAC, which represents approximately 13% of the outstanding
shares of UAC. This investment is accounted for on the cost basis since the
Company owns less than 20% of UAC and does not have the ability to exercise
significant influence over UAC. UAC is an agribusiness biotechnology company
focused on the improvement of strawberries, raspberries and grapes.
(16) Consolidation and Relocation of Facilities
During 1994, the Company relocated its headquarters and consolidated its
research operations from its New Jersey facility to its research facility in
Oakland, California. This consolidation and relocation was a further step in the
Company's efforts to consolidate its operations, eliminate duplication of staff
and facilities, and focus primarily on the development and marketing of fresh
and processed fruits and vegetables. In 1994, the Company incurred $2.0 million
of non-recurring costs
F-18
<PAGE>
to accomplish this relocation and consolidation. These costs are comprised of
$1.0 million for severance and termination benefits for employees whose jobs in
New Jersey were eliminated; $.7 million for relocation costs and a $.3 million
non-cash charge to write down excess furniture and equipment to net realizable
value. An additional $70,000 was incurred in 1995 related to relocation costs.
(17) Liquidity
Based on its current business plans, including the pending Merger (see Note 21)
, the Company believes that its current cash resources, inclusive of the $5.0
million received from Bionova U.S. in January 1996 and the $5.0 million to be
received on July 1, 1996 if the closing of the Merger has not been effected by
such date, its revenues from prospective and existing research, product
development and licensing arrangements, revenues from produce sales, accompanied
by projected improvements in the gross margin on such produce sales and
reduction of fixed overhead and administrative costs will be sufficient to fund
its cash requirements into 1997.
(18) Commitments
The Company occupies offices and other facilities and leases farm
equipment under operating leases expiring at various dates. At December 31, 1995
future minimum rental payments applicable to operating leases are 1996,
$666,000; 1997, $675,000; 1998, $686,000; 1999, $298,000; and 2000, $9,000.
The Company has contractual agreements with various produce growers.
These agreements provide that the Company is responsible for full payment of
grower service on approved ground and in approved quantities unless acreage is
lost due to the grower's negligence in any aspect of the growing process. At
December 31, 1995, the Company had future commitments requiring the Company to
pay an aggregate of $192,000 upon harvest of crops during the first half of
1996.
(19) Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Generally, the Company's credit risk concentration in its trade receivables is
limited due to the geographic dispersion of its customers. The Company does not
require collateral or other security to support customer receivables.
(20) Employee Benefit Plans
The Company has a deferred compensation plan (the "401(k) Plan") under
section 401(k) of the Internal Revenue Code. For 1995, the Company matched up to
3% of each contributing member employee's compensation in the Company's common
stock. Prior to 1995, the Company matched up to 1% of each contributing member
employee's compensation in cash. Company contributions to
F-19
<PAGE>
the 401(k) Plan in 1995, 1994 and 1993 were approximately $116,000, $70,000 and
$60,000, respectively.
(21) Agreement and Plan of Merger and Related Transactions
On January 26, 1996, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Empressas La Moderna, S.A. de C.V., a
corporation under the laws of the United Mexican States ("ELM"), Bionova, S.A.
de C.V., a corporation organized under the laws of the United Mexican States
("Bionova"), Bionova U.S. Inc., a Delaware corporation ("Bionova U.S." ), and
Bionova Acquisition, Inc., a Delaware corporation ("Merger Sub"), pursuant to
which, among other things: (i) Merger Sub will be merged with and into the
Company (the "Merger"); (ii) the Company will become a wholly-owned subsidiary
of Bionova U.S.; (iii) each share of common stock, par value $.01 per share
("Common Stock"), of the Company issued and outstanding at the time of the
Merger (the "Effective Time") will be converted into and represent the right to
receive one share of Bionova U.S.'s common stock, each share of the Company's
$2.25 Convertible Exchangeable Preferred Stock, par value $.01 ("$2.25
Convertible Preferred Stock"), issued and outstanding at the Effective Time will
be assumed by Bionova U.S. and will become a corresponding right to receive
6.8375 shares of Bionova U.S.'s common stock, and each share of the Company's
Series A Preferred Stock ("Series A Preferred Stock"), par value $.01 issued and
outstanding at the Effective Time will be converted into and represent the right
to receive 1,000 shares of Bionova U.S.'s common stock, except for any shares of
the Company's securities held in the treasury of the Company or held by any
subsidiary of the Company, which will be cancelled and (iv) each option or
warrant to purchase shares of Common Stock outstanding at the Effective Time
will be converted into a corresponding right to acquire shares of Bionova U.S.'s
common stock. Assuming no exercise of dissenter's rights of appraisal in
connection with the Merger, the holders of the Company's capital stock, as a
group, will own approximately 30% of the outstanding shares of Bionova U.S.'s
common stock after the Merger. It is expected that Bionova U.S. will change its
name to DNAP Holding Corporation as of the Effective Time.
At the Effective Time, ELM will cause to be transferred to Bionova U.S. its
controlling interests in the companies constituting The Bionova Group, other
than the stock of Bionova, which serves as the holding company through which ELM
owns such interests. The Bionova Group is a group of affiliated companies
engaged in the businesses of growing fresh produce in Mexico and marketing and
distribution in Mexico, the United States and Canada.
Pursuant to the Merger Agreement, ELM has agreed to provide when
requested by Bionova U.S. a guarantee for three years following the Effective
Time Bionova U.S.'s indebtedness to a financial institution under a loan or line
of credit, provided that: (i) ELM's maximum liability under such guarantee will
not exceed $20,000,000 and (ii) the documents evidencing such loan or line of
credit will provide that the aggregate amount loaned to Bionova U.S. thereunder
will not exceed the sum of (x) 80% of the accounts receivable of Bionova U.S.
and its consolidated subsidiaries and (y) 50% of the inventories of Bionova U.S.
and its consolidated subsidiaries and such loan is secured by such accounts
receivables and inventories.
F-20
<PAGE>
In connection with the Merger Agreement, Bionova U.S. and the Company
entered into a Loan Agreement, dated January 26, 1996 (the "Loan Agreement").
Pursuant to the Loan Agreement, Bionova U.S. loaned $5,000,000 to the Company on
January 26, 1996 and will loan an additional $5,000,000 to the Company on July
1, 1996 if the closing of the Merger has not been effected by such date, subject
to the Company not then being in default under the Loan Agreement (collectively,
the "Loan"). The outstanding principal balance of the Loan bears interest at the
rate of 10.25% per annum and, together with all accrued interest thereon, will
become due and payable on the earlier of (i) January 26, 1999 or (ii) the date
on which the Company consummates an Alternative Transaction, as defined in the
Loan Agreement. Subject to the consummation by the Company of an Alternative
Transaction, the Loan Agreement will survive the termination of the Merger
Agreement. The Loan may be accelerated by Bionova U.S. at any time during the
continuance of certain events of default specified in the Loan Agreement and may
be prepaid by the Company at any time without premium or penalty. Certain
royalty fees to be received by the Company must be used to pay down the Loan.
ELM will cause the principal amount of the Loan provided by Bionova U.S. to the
Company prior to the Effective Time to be treated as a capital contribution to
Bionova U.S. pursuant to the Merger Agreement. The Loan is secured by the
assignment to Bionova U.S. of the Company's right, title and interest in the
patents relating to the Company's Transwitch(R) gene suppression technology (the
"Transwitch(R) Patents"), and Bionova U.S. may require additional security under
certain circumstances. Prior to the repayment in full of the loan, the Company
may not pay any dividends on, or make other distributions in respect of, any
class of its capital stock, or take certain other actions, without the written
consent of Bionova U.S.
Bionova U.S. and the Company have entered into the Sole Patent License
Agreement, dated as of January 26, 1996 (the "Sole License Agreement"), pursuant
to which Bionova U.S. granted back to the Company a royalty-free sole license to
use the Transwitch(R) Patents to develop and market products using the products
or processes covered by such patents and to satisfy the Company's obligations
under existing licenses of the Transwitch(R) Patents. Under the Loan Agreement,
Bionova U.S. is obligated to assign the Transwitch(R) Patents back to the
Company upon the repayment in full of the Loan. If Bionova U.S. accelerates the
maturity of the Loan as a result of an event of default under the Loan
Agreement, the Company's right to have the Transwitch(R) Patents reassigned to
it will terminate and the license to use the Transwitch(R) Patents granted by
Bionova U.S. to the Company under the Sole License Agreement will convert to a
non-exclusive, royalty-free license to use the Transwitch(R) Patents. If the
merger is not consummated, any such termination of the Company's right to
reacquire the Transwitch(R) Patents and loss of the sole rights to use the
Transwitch(R) Patents would have a material adverse effect on the Company's
business and prospects.
The Sole License Agreement provides that Bionova U.S. may not make any
use of the Transwitch(R) Patents on its own behalf prior to the termination of
the Company's right to have the Transwitch(R)Patents reassigned to it, subject
to the Non-Exclusive License Agreement (see below). The Company may enter into
sublicenses of the Transwitch(R) Patents only to entities which fund at least
$350,000 of research by the Company in any three-year period, and only if the
sublicense is non-exclusive, relates solely to the development and
commercialization of products or processes resulting from the funded research,
bears commercially reasonable royalties and 50% of the royalties received by the
Company are paid by it to Bionova U.S. to reduce the outstanding balance of the
Loan. The Company may also enter into sublicenses of the Transwitch(R) Patents
with other entities
F-21
<PAGE>
upon approval of Bionova U.S., which approval has been obtained in certain
respects. The Company and Bionova U.S. have also entered into a non-exclusive
patent license agreement (the "Non-Exclusive License Agreement") under which
Bionova U.S. was granted a non-exclusive, royalty-bearing license to use the
Transwitch(R) Patents with an option, upon making certain payments, to convert
the license to a fully paid license. Payments under the Non-Exclusive License
Agreement may be credited against the outstanding balance of the Loan.
At the Effective Time, ELM and the Company will enter into a Long Term
Funded Research Agreement (the "Long Term Funded Research Agreement") pursuant
to which they will use their best efforts to agree on research projects to be
conducted by the Company for ELM or its affiliates which will result in payments
to the Company of $30,000,000 over a 10-year period, with minimum funding
(subject to carryforwards) of $9,000,000 in any three-year period. Intellectual
property developed by the Company in connection with a project will belong to
ELM, ELM will retain the exclusive rights to commercialization of such
intellectual property in the project's intended market and the Company will have
royalty-free sole license rights to such intellectual property outside the
project's intended market. There can be no assurance, however, that ELM and the
Company will agree on any specific projects to be conducted by the Company or
that any project begun by the Company will not be terminated by ELM.
At the Effective Time, ELM and Bionova U.S. will enter into a Governance
Agreement which, among other things, will provide for certain arrangements with
respect to the composition of Bionova U.S.'s Board of Directors prior to the
1999 annual meeting of stockholders of Bionova U.S. and will restrict ELM's
ability to acquire or dispose of shares of Bionova U.S.'s Common Stock prior to
the third anniversary of the Effective Time. Under the Governance Agreement, the
approval of a majority of the "DNAP Independent Directors" (as defined in the
Governance Agreement) will be required to approve certain transactions between
ELM and its affiliates and Bionova U.S. or certain acquisitions of Bionova
U.S.'s Common Stock by ELM or its affiliates.
The consummation of the Merger is subject to a number of conditions,
including the approval of the common stockholders of the Company.
During 1995, the Company incurred approximately $800,000 in expenses
associated with this proposed merger included in selling, general and
administrative expenses in the accompanying Consolidated Statements of
Operations.
F-22
<PAGE>
SCHEDULE II
<TABLE>
DNA PLANT TECHNOLOGY CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNT
Years ended December 31, 1995, 1994, and 1993
(in thousands)
<CAPTION>
Reserves
Balance at Charged to Charged acquired Balance
beginning cost and to Other from Balances at end
Classification of period expenses Accounts FreshWorld written off of period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1995
Allowance for doubtful accounts $346 $450 $--- $--- $(690) $106
- -----------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1994
Allowance for doubtful accounts $236 $166 $180 $--- $(236) $346
=============================================================================================================================
For the year ended December 31, 1993
Allowance for doubtful accounts $118 $ 12 $ 3 $103 $ --- $236
=============================================================================================================================
</TABLE>
F-23
<PAGE>
(b) No reports on Form 8-K were filed by the Company during the period
October 1, 1995 to December 31, 1995.
(c) Exhibits
2.1 -- Agreement and Plan of Merger among Empresas La Moderna, S.A. de C.V.;
Bionova, S.A. de C.V.; Bionova, U.S., Inc.; Bionova Acquisition, Inc.;
and the Company, dated January 26, 1996 (incorporated by reference to
Exhibit 2.1 on Form 8-K dated February 2, 1996),
2.2 -- Form of Governance Agreement between Empresas La Moderna S.A. de C.V.
and Bionova U.S. Inc. (incorporated by reference to Exhibit 2.2 on
Form 8-K dated February 2, 1996),
3.1 -- Certificate of Incorporation of the Company (incorporated by reference
to Exhibit 3.1 to the Company's Registration Statement on Form S-2
(No. 33-41178),
3.2 -- By-Laws of the Company (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-2 (No. 33-41178),
3.3 -- Certificate of Amendment to the Certificate of Incorporation as filed
with the Secretary of State of the State of Delaware on September 5,
1991, (incorporated by reference to exhibit 3.3 to the Company's
Registration Statement on Form S-2 (No. 33-41178),
3.4 -- Certificate of Amendment of Certificate of Incorporation as filed with
the Secretary of State of the State of Delaware on June 22, 1994,
4.3 -- Certificate of Designation of $2.25 Convertible Exchangeable Preferred
Stock (incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-2 (Registration No. 33-41178),
4.4 -- Indenture with respect to the Company's 9% Convertible Subordinated
Debentures due August 1, 2016, between the Company and the Bank of New
York, as trustee, including form of Debenture (incorporated by
reference to Exhibit 4.4 to the Company's Registration Statement on
Form S-2 (Registration No. 33-41178),
4.5 -- Form of Certificate representing the Common Stock (incorporated by
reference to Exhibit 4.5 to the Company's Registration Statement on
Form S-2 (Registration No. 33-41178),
4.6 -- Form of Certificate representing Convertible Preferred Stock,
(incorporated by reference to Exhibit 4.6 to the Company's
Registration Statement on Form S-2 (Registration No. 33-41178),
4.7 -- Form of Certificate of Designation of the Series A Convertible
Preferred Stock (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-3 (No. 33-73086),
4.8 -- Form of Certificate representing the Series A. Convertible Preferred
Stock (incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (No. 33-73086),
4.9 -- Form of Underwriter's Purchase Options (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-3 (No.
33-73086),
10.1 -- Incentive and Non-Qualified Stock Option Plan of the Company
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-2 (Registration No. 33-41178),
10.2 -- 1986 Stock Option Plan of the Company (incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on Form S-2
(Registration No. 33-41178),
10.3 -- Stock Purchase Agreement, dated December 9, 1988, between E. I. Du
Pont de Nemours and Company with the Company (incorporated by
reference to Exhibit 10.7 to the Annual Report on Form 10-K of the
Company for the year ended December 31, 1988),
10.4 -- Form of Indemnification Agreement between the Company and its
directors and officers (incorporated by reference to Annex A to the
Company's definitive proxy statement, dated April 6, 1987),
10.5 -- DNA Plant Technologies, Inc. 1987 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-2 (Registration No. 33-41178),
26
<PAGE>
10.6 -- DNA Plant Technologies, Inc. 1987 Non-Qualified Stock Option Plan
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-2 (Registration No. 33-41178),
10.7 -- 1994 Stock Option Plan (incorporated by reference to Exhibit A and the
Company's definitive proxy statement, dated April 7, 1994),
10.8 -- Non-Employee Directors Stock Option Plan (incorporated by reference to
Exhibit A to the Company's definitive proxy statement, dated March 22,
1991),
10.9 -- Warrant, November 22, 1988, between Shearson Lehman Hutton Inc. and
the Company (incorporated by reference to Exhibit 10.15 to the
Company's Registration Statement on Form S-2 (Registration No.
33-41178),
10.10 -- Agreement, dated as of January 17, 1994 between the Company and E.I.
Du Pont de Nemours and Company (incorporated by reference to Exhibit
2.1 on Form S-3 (Registration No. 33-73086),
10.11 -- Stock Purchase Agreement, dated as August 5, 1994, between the Company
and Alida Marine, Inc., (incorporated by reference to Exhibit 10.11 to
the Annual Report on Form 10-K of the Company for the year ended
December 31, 1994),
10.12 -- Stock Purchase Agreement, dated as of September 25, 1995, between the
Company and Alida Marine, Inc.,
10.13 -- Consent Judgment, dated as of August 15, 1995 between the Company and
Monsanto Company,
10.14 -- Employment Agreement, dated April 20, 1994 between the Company and
Robert V. Igleheart,
10.15 -- Agreement, dated September 28, 1995 between the Company and United
Agricorp, Inc.,
10.16 -- Loan Agreement between Bionova U.S. Inc. and the Company dated January
26, 1996 (incorporated by reference to Exhibit 10.1 on Form 8-K dated
February 2, 1996),
10.17 -- Promissory Note issued to Bionova U.S. Inc. by the Company dated
January 26, 1996 (incorporated by reference to Exhibit 10.2 on Form
8-K dated February 2, 1996),
10.18 -- Assignment of Interest in Patents between the Company by Bionova U.S.
Inc. dated January 26, 1996 (incorporated by reference to Exhibit 10.3
on Form 8-K dated February 2, 1996),
10.19 -- Sole Patent License between Bionova U.S. Inc. and the Company dated
January 26, 1996 (incorporated by reference to Exhibit 10.4 on Form
8-K dated February 2, 1996),
10.20 -- Form of Long-Term Funded Research Agreement between Empresas La
Moderna, S.A. de C.V. and the Company (incorporated by reference to
Exhibit 10.5 on Form 8-K dated February 2, 1996),
10.21 -- Non-Exclusive Patent License between Bionova U.S. Inc. and the Company
dated January 26, 1996 (incorporated by reference to Exhibit 10.6
on Form 8-K dated February 2, 1996),
21.1 -- Subsidiaries of the Company (incorporated by reference to Exhibit 21.1
to the Annual Report on Form 10-K of the Company for the year ended
December 31, 1994),
23.1 -- Consent of KPMG Peat Marwick LLP.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DNA PLANT TECHNOLOGY CORPORATION
March 27, 1996 By....../s/.........Robert Serenbetz.............
Robert Serenbetz
Chairman and Chief Executive Officer
<TABLE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the date indicated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C> <C>
../s/........Robert Serenbetz........... Chairman and Chief Executive Officer March 27, 1996
Robert Serenbetz (Principal Executive Officer)
../s/........Evelyn Berezin............. Director March 27, 1996
Evelyn Berezin
../s/........James L. Ferguson.......... Director March 27, 1996
James L. Ferguson
../s/........Gerald D. Laubach.......... Director March 27, 1996
Gerald D. Laubach
../s/........Douglas S. Luke............ Director March 27, 1996
Douglas S. Luke
../s/........Somchit Sertthin........... Director March 27, 1996
Somcthit Sertthin
../s/........Willem F.O. Spiegel........ Chief Financial Officer March 27, 1996
Willem F.O. Spiegel (Principal Financial Officer and
Principal Accounting Officer)
<FN>
The foregoing constitute a majority of the directors.
</FN>
</TABLE>
Exhibit 10.12
UNIT PURCHASE AGREEMENT
AGREEMENT, dated as of September 25, 1995, between DNA Plant Technology
Corporation (the "Company"), a Delaware corporation with offices at 6701 San
Pablo Avenue, Oakland, California 94608-1239, and the person whose name and
address is set forth on Exhibit A hereto (the "Purchaser").
For and in consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale of the Shares
1.01 AGREEMENT TO PURCHASE AND SELL. Subject to and in accordance with
the terms and conditions of this Agreement, on the Closing Date (as hereinafter
defined), the Company shall sell to the Purchaser, and the Purchaser shall
purchase from the Company, 464,725 shares (the "Shares") of Common Stock, par
value $.01 per share (the "Common Stock"), of the Company and a warrant (the
"Warrant"), substantially in the form of Exhibit B hereto, entitling the holder
thereof to purchase 245,182 shares (the "Warrant Shares") of Common Stock.
1.02 THE CLOSING. The closing (the "Closing") of the purchase and sale
of the Shares and the Warrant (collectively, the "Unit") shall take place at the
offices of Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York, New
York on or before the fifth day after the last of the conditions set forth in
Article IV shall have been satisfied or, if permissible, waived, or if such day
is not a Business Day (as hereinafter defined), the next succeeding day which is
a Business Day (the time and date of the Closing being herein referred to as the
"Closing Date"). On the Closing Date, there will be delivered to the Purchaser a
certificate for the Shares and for the Warrant against delivery by the Purchaser
of a check in the amount of $464,725 (the "Purchase Price") payable to the order
of the Company or (at the Company's election) by wire transfer of the Purchase
Price into the account of the Company. As used herein, "Business Day" shall mean
any day other than Saturday, Sunday, or any other day when banks in New York
City are required or permitted to be closed.
ARTICLE II
Representations, Warranties, and Agreements of the Company
The Company represents and warrants to, and agrees with, the Purchaser
as follows:
<PAGE>
2.01 CORPORATE ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, and is qualified to transact business
and is in good standing as a foreign corporation in every jurisdiction in which
its ownership, leasing, licensing, or use of its property or assets or the
conduct of its business makes such qualification necessary, except in such
jurisdictions where the failure to be so qualified or in good standing would not
have a material adverse effect on the business, results of operations, or
financial condition of the Company and its subsidiaries taken as a whole.
2.02 VALIDITY OF TRANSACTION. The Company has all requisite power and
authority to execute, deliver, and perform this Agreement and to issue and sell
to the Purchaser the Shares and, subject to obtaining the approval of the
stockholders of the Company and taking other requisite corporate action as
described in Section 5.07 to authorize the Warrant Shares (collectively,
"Stockholder Approval") the Warrant. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery, and
performance of this Agreement and to authorize the issuance and sale to the
Purchaser of the Shares and (subject to Stockholder Approval) the Warrant and
the Warrant Shares. This Agreement has been duly authorized, executed, and
delivered by the Company, is the legal, valid, and binding obligation of the
Company, and is enforceable as to the Company in accordance with its terms
except insofar as Stockholder Approval is required in connection with the
Warrant. No consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any Federal, state, local, or
other governmental authority or of any court or other tribunal is required by
the Company for the execution, delivery, or performance of this Agreement by the
Company except insofar as Stockholder Approval is required in connection with
the Warrant Shares. No consent of any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding to which the Company
is a party, or by which any of its properties or assets is bound, is required
for the execution, delivery, or performance by the Company of this Agreement,
except for such consents as have been obtained at or prior to the date of this
Agreement and except insofar as Stockholder Approval is required in connection
with the Warrant; and except insofar as Stockholder Approval is required in
connection with the Warrant, the execution, delivery, and performance of this
Agreement by the Company will not violate, result in a breach of, conflict with,
or (with or without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement, or understanding, or violate or result
in a breach of any term of the Certificate of Incorporation or by-laws of the
Company, or violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on the Company or to which any of
its operations, business, properties, or assets is subject. The Shares have been
duly authorized and, following receipt by the Company of the Purchase Price
therefor and delivery to the Purchaser of the stock certificates representing
the Shares in accordance herewith, will be validly issued, fully paid, and
nonassessable, will not have been issued in violation of any preemptive right of
stockholders or rights of first refusal, and the Purchaser will have good title
to the Shares, free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders agreements, and voting trusts (other than
any created by the Purchaser). The Warrant and the Warrant Shares have been duly
authorized and reserved for issuance, subject to Stockholder Approval, and, upon
exercise of the Warrant in accordance with its terms (subject to
<PAGE>
Stockholder Approval), including receipt by the Company of the exercise price
and delivery of the stock certificates representing the Warrant Shares, the
Warrant Shares will be validly issued, fully paid, and nonassessable, will not
have been issued in violation of any preemptive right of stockholders or rights
of first refusal, and the person exercising the Warrant will have good title to
the Warrant Shares, free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders agreements, and voting trusts (other than
any created by the person exercising the Warrant).
2.03 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
60,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par
value $.01 per share ("Preferred Stock"). As of the date hereof, (i) 40,655,241
shares of Common Stock are issued and outstanding, (ii) 5,856,189 shares of
Common Stock have been duly reserved for issuance to officers, employees, or
directors of, or consultants to, the Company or its subsidiaries, (iii)
5,609,700 shares of Common Stock have been duly reserved for issuance upon the
conversion of the Company's $2.25 Convertible Exchangeable Preferred Stock, par
value $.01 per share (the $2.25 Convertible Preferred Stock"), (iv) 1,200,000
shares of Common Stock have been duly reserved for issuance upon the exercise of
outstanding warrants, (v) 2,750,000 shares of Common Stock have been duly
reserved for issuance upon the conversion of the Company's Series A Convertible
Preferred Stock, par value $.01 per share ("Series A Convertible Preferred
Stock"), and (vi) 4,932,500 shares of Common Stock have been duly reserved for
issuance upon the exercise of warrants (excluding the Warrant), subject to
Stockholder Approval. As of the date hereof, 1,380,000 shares of $2.25
Convertible Preferred Stock and 2,750 shares of Series A Convertible Preferred
Stock are issued and outstanding.
(b) Except as set forth on Exhibit C annexed hereto or as
contemplated hereby, (i) as of the date hereof there are, and immediately upon
consummation at the Closing of the transactions contemplated hereby there will
be, no preemptive or similar rights to purchase or otherwise acquire shares of
capital stock of the Company pursuant to any provisions of law or the
certificate of incorporation or by-laws of the Company, in each case as amended
to the date hereof, or any agreement to which the Company is a party, or
otherwise and (ii) there is, and immediately upon consummation at the Closing of
the transactions contemplated hereby there will be, no agreement, restriction,
or encumbrance (such as a right of first refusal, right of first offer, voting
agreement, voting trust, or proxy) with respect to the sale or voting of any
shares of capital stock of the Company (whether outstanding or issuable upon
conversion or exercise of outstanding securities).
2.05 FINDER OR BROKER. Neither the Company nor any person acting on
behalf of the Company has negotiated with any finder, broker, intermediary, or
similar person in connection with the transactions contemplated hereby.
2.06 FULL DISCLOSURE. All documents filed by the Company pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), since
December 31, 1994 (i) were prepared in all material respects in accordance with
the requirements of the Exchange Act and the rules and regulations thereunder,
(ii) did not at the time they were filed contain any untrue statement of a
material fact, and (iii) did not at the time they were filed omit to state a
material fact necessary to make the statements therein, in
<PAGE>
light of the circumstances under which they were made, not misleading. From the
date as of which information is given in the most recent report filed by the
Company under the Exchange Act to the date of this Agreement, except as
contemplated or described in such report or in this Agreement (including the
risk factors and recent developments set forth in Exhibit D hereto), there has
not been any material change in, or any development which materially and
adversely affects, the business, results of operations, or financial condition
of the Company and its subsidiaries taken as a whole.
2.06 REDEMPTION OF WARRANT. If Stockholder Approval is not obtained
prior to June 30, 1996, the Purchaser shall have the right to cause the Company
after such date to redeem the Warrant at a price of $.25 per Warrant Share
($61,295.50 for the Warrant). If the Purchaser elects to cause the Company so to
redeem the Warrant, the Purchaser shall give notice thereof after June 30, 1996
but prior to September 20, 1996, and the Purchaser shall deliver the Warrant to
the Company at its principal place of business against payment of the redemption
price therefor on the tenth day after the date of the notice or, if such day is
not a Business Day, on the next succeeding day which is a Business Day. The
remedy herein provided for the failure of the Company to obtain Stockholder
Approval shall be the exclusive remedy of the Purchaser.
ARTICLE III
Representations, Warranties, and Agreements of the Purchaser
The Purchaser represents and warrants to, and agrees with, the Company
as follows:
3.01 ACCREDITED INVESTOR. The Purchaser is an "accredited investor," as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act. The Purchaser has completed, executed, and delivered to the
Company the Purchaser Questionnaire in the form annexed hereto as Exhibit E and
the answers therein are complete and accurate. The Purchaser has received all
requested documents from the Company and has had an opportunity to review
carefully such documents and to ask questions of and receive answers from the
officers of the Company concerning the Company and this offering of the Unit.
Without limiting the foregoing, such Purchaser has carefully reviewed the risk
factors and recent developments annexed hereto as Exhibit D.
3.02 INVESTMENT INTENT. The Purchaser is acquiring the Unit for his own
account for investment and not with a view to, or for sale in connection with,
any public distribution thereof in violation of the Securities Act of 1933 (the
"Securities Act"). The Purchaser understands that the Shares, the Warrant, and
the Warrant Shares have not been registered for sale under the Securities Act or
qualified under applicable state securities laws and that the Unit is being
offered and sold to the Purchaser pursuant to one or more exemptions from the
registration or qualification requirements of such securities laws and that the
representations and warranties contained in this Article III are given with the
intention that the Company may rely thereon for purposes of claiming such
exemptions. The Purchaser understands that he must bear the economic risk of his
investment in the Company for an indefinite period of time, as the Shares cannot
be sold unless subsequently registered under the Securities Act and qualified
under state securities laws, unless an exemption from such registration and
qualification is available. The
<PAGE>
Purchaser is not purchasing the Unit as a result of or pursuant to any
advertisement, article, notice, or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio.
3.03 TRANSFER OF SHARES, WARRANT, AND WARRANT SHARES. The Purchaser
will not sell or otherwise dispose of any of the Shares, the Warrant, or the
Warrant Shares unless (a) a registration statement with respect thereto has
become effective under the Securities Act and such shares have been qualified
under applicable state securities laws or (b) there is presented to the Company
notice of the proposed transfer and, if it so requests, a legal opinion
reasonably satisfactory to the Company that such registration and qualification
are not required. Such Purchaser consents that the transfer agent for the Common
Stock may be instructed not to transfer any of the Shares, the Warrant, or the
Warrant Shares unless it receives satisfactory evidence of compliance with the
foregoing provisions, and that there may be endorsed upon any certificate
representing the Shares, the Warrant, and the Warrant Shares (and any
certificates issued in substitution therefor) the following legend calling
attention to the foregoing restrictions on transfer ability of the Shares,
stating in substance:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR QUALIFIED UNDER ANY STATE SECURITIES LAW. THESE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS OR AN EXEMPTION IS AVAILABLE."
The Company shall, upon the request of any holder of a stock or warrant
certificate bearing the foregoing legend and the surrender of such certificate,
issue a new stock or warrant certificate without such legend if (i) the security
evidenced by such certificate has been effectively registered under the
Securities Act and qualified under any applicable state securities law and sold
by the holder thereof in accordance with such registration and qualification or
(ii) such holder shall have delivered to the Company a legal opinion reasonably
satisfactory to the Company to the effect that the restrictions set forth herein
are no longer required or necessary under the Securities Act or any applicable
state law.
3.04 AUTHORIZATION. All actions on the part of the Purchaser necessary
for the authorization, execution, delivery, and performance by the Purchaser of
this Agreement have been taken. This Agreement has been duly authorized,
executed, and delivered by the Purchaser, is the legal, valid, and binding
obligation of the Purchaser, and is enforceable as to the Purchaser in
accordance with its terms.
3.05 FINDER OR BROKER. Neither the Purchaser nor any person acting on
behalf of the Purchaser has negotiated with any finder, broker, intermediary, or
similar person in connection with the transactions contemplated herein.
<PAGE>
ARTICLE IV
Conditions to Closing
4.01 CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS. The obligation
of the Company to consummate the transactions contemplated hereby is subject to
the fulfillment prior to or on the Closing Date, of each of the following
conditions, any one or more of which may be waived in writing by the Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE. All of the
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing Date.
(b) LITIGATION. There shall be no injunction, restraining
order, or other order of any nature, issued by a court of competent
jurisdiction, which shall direct that this Agreement or any of the transactions
contemplated hereby not be consummated as herein provided, and no action, suit,
or proceeding (or investigation that could lead to any action, suit, or
proceeding) challenging such transactions shall have been instituted or
threatened by any person or entity.
(c) LEGAL MATTERS. All actions, proceedings, instruments, and
documents required to consummate the transactions contemplated herein and all
other related legal matters shall have been approved by counsel to the Company.
4.02 CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS. The
obligation of the Purchaser to consummate the transactions contemplated hereby
is subject to the fulfillment prior to or on the Closing Date of each of the
following conditions, any one or more of which may be waived in writing by the
Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Company contained in this Agreement shall be true and
correct in all material respects as of the Closing Date as if made on and as of
the Closing Date.
(b) LITIGATION. There shall be no injunction, restraining
order, or other order of any nature, issued by a court of competent
jurisdiction, which shall direct that this Agreement or any of the transactions
contemplated hereby not be consummated as herein provided, and no action, suit,
or proceeding (or investigation that could lead to any action, suit, or
proceeding) challenging such transactions shall have been instituted or
threatened by any person or entity.
(c) LEGAL MATTERS. All actions, proceedings, instruments, and
documents required to consummate the transactions contemplated herein and all
other related legal matters shall have been approved by counsel to the
Purchaser.
<PAGE>
ARTICLE V
Registration Under the Securities Act and Stockholder Approval
5.01 CERTAIN DEFINITIONS.
(a) As used herein, the term "Registrable Securities" means
any (i) Shares and (ii) securities issued or issuable with respect to the Shares
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation, or other reorganization.
(b) As used herein, the term "Registrable Warrant Securities"
means any (i) Warrant Shares and (ii) securities issued or issuable with respect
to the Warrant Shares by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation, or other
reorganization.
(c) As used herein, the term "Additional Registrable
Securities" means (i) all shares of Common Stock that are held by persons who
are parties to, or assignees of a party to, an agreement (a "Registration Rights
Agreement") with the Company granting registration rights to such holders with
respect to such shares (other than this Agreement), (ii) any other securities
issued or issuable with respect to the Common Stock referred to in clause (i)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation, or other
reorganization, and (iii) any securities of the Company that are convertible
into, or exchangeable for, Common Stock that are held by a party to, or an
assignee of a party to, a Registration Rights Agreement.
(d) As to any particular Registrable Securities or Registrable
Warrant Securities, such securities will cease to be Registrable Securities or
Registrable Warrant Securities, as the case may be, when they have been (i)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, or (ii) transferred pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act,
unless such securities are held at such time by a holder of Registrable
Securities or Registrable Warrant Securities who may be deemed an "underwriter"
or "affiliate" with respect to the Company (as those terms are defined under the
Securities Act). For purposes of this Agreement, a person will be deemed to be a
holder of Registrable Securities, Registrable Warrant Securities, or Additional
Registrable Securities whenever such person has the right to acquire such
Registrable Securities, Registrable Warrant Securities, or Additional
Registrable Securities, respectively, whether or not such acquisition has
actually been effected. Subject to this Section 5.01(d), Registrable Securities,
Registrable Warrant Securities, or Additional Registrable Securities, if
transferred, will remain Registrable Securities, Registrable Warrant Securities,
or Additional Registrable Securities, respectively, for the purposes of this
Agreement.
5.02 REGISTRATION PROCEDURES. Subject to the conditions and limitations
set forth herein, the Company will as expeditiously as possible subsequent to
the Closing Date (with respect to the Registrable Securities) and subsequent to
the date that Stockholder Approval is completed (with respect to the Registrable
Warrant Securities):
<PAGE>
(a) prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement with respect to such Registrable
Securities and with respect to such Registrable Warrant Securities, as the case
may be (each of which registration statements may include Additional Registrable
Securities) and use its best efforts to cause such registration statements to
become effective;
(b) prepare and file with the SEC such amendments and
supplements to each of such registration statements and each prospectus used in
connection therewith as may be necessary to keep each such registration
statement effective and current for a period of not less than 24 months and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by each of such registration statements during such
period in accordance with the intended methods of disposition by the sellers
thereof as set forth in such registration statements;
(c) furnish to each seller of Registrable Securities and
Registrable Warrant Securities such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus), and such
other documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities and Registrable Warrant Securities under the securities
or blue sky laws of such jurisdictions of the United States as any seller
reasonably requests and do any other related acts which may be reasonably
necessary to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities and Registrable Warrant Securities
owned by such seller; provided, however, that the Company will not be required
(i) to qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 5.02(d) or (ii) to consent to
general service of process in any such jurisdiction;
(e) notify each seller of such Registrable Securities and
Registrable Warrant Securities at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which, or the fact that, the prospectus included in the
applicable registration statement contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not misleading,
and, at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities or Registrable Warrant Securities, as the case
may be, such prospectus will not contain any untrue statement of a material fact
or omit to state any fact necessary to make the statements therein not
misleading;
(f) use its best efforts to cause all such Registrable
Securities and Registrable Warrant Securities to be listed or quoted on each
securities exchange or interdealer quotation system on which similar securities
issued by the Company are then listed or quoted;
(g) enter into such customary agreements (including
underwriting agreements on customary terms containing customary indemnification
and contribution provisions) and take all such other actions as the holders of a
majority of the Registrable Securities or Registrable Warrant Securities, as
<PAGE>
the case may be, being sold or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Registrable Securities
or Registrable Warrant Securities; and
(h) make available for inspection by any seller of Registrable
Securities or Registrable Warrant Securities, any underwriter participating in
any disposition pursuant to such registration statements, and any attorney,
accountant, or any other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, and employees to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant, or agent in connection with such registration statements.
5.03 REGISTRATION EXPENSES. All expenses ("Registration Expenses")
incident to the Company's performance of or compliance with this Article V will
be borne by the Company, including, without limitation, all registration and
filing fees, fees and expenses of compliance with securities or blue sky laws,
printing expenses, messenger and delivery expenses, fees and disbursements of
counsel for the Company, the expense of any audit, and the expenses and fees for
listing or quoting the securities to be registered on each securities exchange
or interdealer quotation system on which similar securities issued by the
Company are then listed or quoted. Notwithstanding the foregoing, however, the
Company shall not be obligated to pay fees and disbursements of counsel for the
holders of Registrable Securities or Registrable Warrant Securities, and all
underwriters' discounts and commissions in respect of the sale of Registrable
Securities or Registrable Warrant Securities, as the case may be, shall be paid
by the sellers, pro rata in accordance with the number of shares sold in the
offering.
5.04 INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each holder
of Registrable Securities and Registrable Warrant Securities and each of such
holder's officers, directors, employees, agents, partners, legal counsel, and
accountants, and each controlling person of each of the foregoing (within the
meaning of the Securities Act) against any losses, claims, damages, or
liabilities, joint or several (or actions in respect thereof), including any of
the foregoing incurred in the settlement of any litigation, commenced or
threatened, to which any of them may be subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement (or alleged untrue statement) of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act or in any preliminary prospectus or final
prospectus contained therein, or in any amendment or supplement thereto, (ii)
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
(iii) any other violation by the Company of the Securities Act or any state
securities law in connection with any such registration, and shall reimburse
each such person entitled to indemnification under this Section 5.04(a) for any
legal or other expenses reasonably incurred by such person in connection with
investigating or defending any such loss, claim, damage, liability, or action,
as and when such expenses are incurred; provided, however, that the Company
shall not be liable to any such person in any such case to the extent that any
such loss, claim, damage, or liability
<PAGE>
arises out of or is based upon any untrue statement or omission made in such
registration statement, preliminary prospectus, or amendment or supplement
thereto in reliance upon and in conformity with written information furnished to
the Company by such person, specifically for use therein.
(b) Each holder of Registrable Securities and Registrable
Warrant Securities shall indemnify the Company and each of its officers,
employees, agents, directors, legal counsel, and accountants, and each
controlling person of each of the foregoing (within the meaning of the
Securities Act) against any losses, claims, damages, or liabilities (or actions
in respect thereof), including any of the foregoing incurred in the settlement
of any litigation, commenced or threatened, joint or several, to which any of
them may be subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement (or alleged
untrue statement) of any material fact contained in any registration statement
under which such securities were registered under the Securities Act at the
request of such holder, any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) was made in such registration statement, preliminary
prospectus, or amendment or supplement thereto solely in reliance upon and in
conformity with written information furnished to the Company by such holder
specifically for use therein, and to reimburse such persons for any legal or
other expenses reasonably incurred in connection with investigating or defending
any such loss, claim, damage, liability, or action, as and when such expenses
are incurred.
(c) If (i) an indemnified party makes a claim for
indemnification pursuant to this Section 5.04 (subject to the limitations
hereof) but it is found in a final judicial determination, not subject to
further appeal, that such indemnification may not be enforced in such case or
(ii) an indemnified party seeks contribution under the Securities Act, the
Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any director of the Company, any officer of
the Company who signed the registration statement, and any controlling person of
the Company) as one entity and the holders of Registrable Securities or
Registrable Warrant Securities, as the case may be, in the aggregate (including
for this purpose any contribution by or on behalf of a person who would be
indemnified by the Company) as a second entity, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which any of them may
be subject, so that the holders of Registrable Securities or Registrable Warrant
Securities, as the case may be, and the Company are each responsible for the
proportion thereof which reflects as nearly as possible the relative fault of
the Company and the holders of Registrable Securities or Registrable Warrant
Securities, as the case may be, in the aggregate in connection with the facts
which resulted in such losses, liabilities, claims, damages, and expenses. The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission, or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission, or alleged omission relates
to information supplied by the Company or by the holders of Registrable
Securities or Registrable Warrant Securities, as the case may be, and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement, alleged statement, omission,
<PAGE>
or alleged omission. The Company and the Purchaser agree that it would be unjust
and inequitable if the respective obligations of the Company and the holders of
Registrable Securities or Registrable Warrant Securities, as the case may be,
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses (even if the
holders of Registrable Securities or Registrable Warrant Securities, as the case
may be, and all other indemnified parties were treated as one entity for such
purpose) or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 5.04(c). No person guilty
of a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 5.04,
each holder of Registrable Securities or Registrable Warrant Securities, as the
case may be, and each of such holder's officers, directors, employees, agents,
partners, and legal counsel and accountants, and each controlling person of each
of the foregoing (within the meaning of the Securities Act or the Exchange Act)
shall have the same rights to contribution as a holder of Registrable Securities
or Registrable Warrant Securities, as the case may be, and the Company and each
of its officers, employees, agents, directors, legal counsel, and accountants,
and each controlling person of each of the foregoing (within the meaning of the
Securities Act or the Exchange Act) shall have the same rights to contribution
as the Company, subject in each case to the provisions of this Section 5.04.
Anything in this Section 5.04 to the contrary notwithstanding, no party shall be
liable for contribution with respect to the settlement of any claim or action
effected without its written consent. This Section 5.04 is intended to supersede
any right to contribution under the Securities Act, the Exchange Act, or
otherwise.
(d) Each party entitled to indemnification under this Section
5.04 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has knowledge of the commencement of any action, proceeding,
or investigation in respect of which indemnity or reimbursement may be sought as
provided above; provided, however, that the failure of such Indemnified Party to
notify the Indemnifying Party with respect to a particular action, proceeding,
or investigation shall not relieve the Indemnifying Party from any obligation or
liability (i) which it may have pursuant to this Agreement if the Indemnifying
Party is not substantially prejudiced by the failure to notify or (ii) which it
may have otherwise than pursuant to this Agreement. The Indemnifying Party shall
promptly assume the defense of any Indemnified Party with counsel reasonably
satisfactory to such Indemnified Party, and the fees and expenses of such
counsel shall be at the sole cost and expense of the Indemnifying Party. The
Indemnified Party will cooperate with the Indemnifying Party in the defense of
any action, proceeding, or investigation for which the Indemnifying Party
assumes the defense. Notwithstanding the foregoing, any such Indemnified Party
shall have the right to employ separate counsel of its own selection in any such
action, proceeding, or investigation and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (x) the Indemnifying Party has agreed to pay such fees
and expenses, (y) the Indemnifying Party shall have failed promptly to assume
the defense of such action, proceeding, or investigation and employ counsel
reasonably satisfactory to such Indemnified Party, or (z) in the reasonable
judgment of such Indemnified Party there may be one or more defenses available
to such Indemnified Party which are not available to the Indemnifying Party in
respect
<PAGE>
of such action, proceeding, or investigation, in which case the Indemnifying
Party shall not have the right to assume the defense of such action, proceeding,
or investigation on behalf of such Indemnified Party. An Indemnifying Party who
is not entitled to, or elects not to, assume the defense of an action,
proceeding, or investigation shall not be obligated to pay the fees and expenses
of more than one counsel and appropriate local counsel for all parties
indemnified by such Indemnifying Party pursuant to this Section 5.04 with
respect to the same action, proceeding, or investigation, unless in the
reasonable judgment of any such indemnified party a conflict of interest may
exist between such indemnified party and any other such indemnified party with
respect to such action, claim, or proceeding. The Indemnifying Party shall not
be liable for the settlement by any Indemnified Party of any action, proceeding,
or investigation effected without its consent, which consent shall not be
unreasonably withheld. The Indemnifying Party shall not enter into any
settlement in any action, suit, or proceeding to which an Indemnified Party is
party unless such settlement includes a general release of the Indemnified
Party, with no payment by the Indemnified Party of consideration.
5.05 SELECTION OF UNDERWRITERS. If any registration is an underwritten
offering, the holders of a majority of the Registrable Securities or Registrable
Warrant Securities, as the case may be, included in such registration will have
the right to select the investment banker(s) and manager(s) to administer the
offering, subject to the approval of the Company, which approval will not be
unreasonably withheld.
5.06 PRECONDITIONS TO PARTICIPATION IN REGISTRATIONS. No holder of
Registrable Securities or Registrable Warrant Securities, as the case may be,
may participate in any registration hereunder unless such person (i) provides
customary information for inclusion in the registration statement concerning the
holder and the means of distribution of the Registrable Securities or
Registrable Warrant Securities, as the case may be, (ii) agrees to sell his
securities on the basis provided in any customary underwriting arrangements (if
such offering is underwritten), and (iii) completes and executes all customary
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents.
5.07 STOCKHOLDER APPROVAL. The Company shall, at the earlier of the
next annual or special meeting of the stockholders of the Company, submit a
proposal to the stockholders of the Company to amend the Company's Certificate
of Incorporation or take such other action so that the Company will have a
sufficient number of shares of authorized Common Stock in order to permit the
exercise of the Warrant and the issuance of the Warrant Shares. The Board of
Directors of the Company shall recommend that the stockholders of the Company
vote for the approval of such proposal. Subject to obtaining such stockholder
approval, the Company shall promptly thereafter amend its Certificate of
Incorporation or take such other action as is necessary in order to permit the
exercise of the Warrant and the issuance of the Warrant Shares.
<PAGE>
ARTICLE VI
Covenant of the Purchaser
From and after the Closing Date, the Purchaser covenants and agrees
with the Company that prior to April 1, 1996, he will not, in the NASDAQ
over-the-counter market (or other exchange on which the Common Stock is traded),
pursuant to an effective registration statement under the Securities Act, or
otherwise, sell any Shares, the Warrant, or any Warrant Shares.
ARTICLE VII
Miscellaneous
7.01 COMMUNICATIONS. All notices or other communications hereunder
shall be in writing and shall be given by registered or certified mail (postage
prepaid and return receipt requested), by an overnight courier service which
obtains a receipt to evidence delivery, or by telex or facsimile transmission
(provided that written confirmation of receipt is provided), addressed as set
forth below:
If to the Company:
DNA Plant Technology Corporation
6701 San Pablo Avenue
Oakland, California 94608
Attention: President
If to the Purchaser at his address set forth on Exhibit A;
or such other address as any party may designate to the other in accordance with
the aforesaid procedure. All notices and other communications sent by overnight
courier service shall be deemed to have been given as of the second Business Day
after delivery thereof to such courier service, those given by telex or
facsimile transmission shall be deemed given when sent, and all notices and
other communications sent by mail shall be deemed given as of the third Business
Day after the date of deposit in the United States mail.
7.02 SUCCESSORS AND ASSIGNS. The Company may not sell, assign,
transfer, or otherwise convey any of its rights or delegate any of its duties
under this Agreement, except to a corporation which has succeeded to
substantially all of the business and assets of the Company and has assumed in
writing its obligations under this Agreement, and this Agreement shall be
binding on the Company and such successor. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the Purchaser and his
successors and assigns.
7.03 AMENDMENTS AND WAIVERS. Neither this Agreement nor any term hereof
may be changed or waived (either generally or in a particular instance and
either retroactively or prospectively) absent the written consent of the Company
and the Purchaser.
7.04 EXPENSES. The Company and the Purchaser will be responsible for
the payment of all expenses incurred by it or him in connection with the
<PAGE>
preparation, execution, and delivery of this Agreement, any other documents
relating to the transactions contemplated by this Agreement, and the issuance
and delivery of the Shares and the Warrant to the Purchaser and the consummation
of the transactions herein described.
7.05 SURVIVAL OF REPRESENTATIONS, ETC. The representations, warranties,
covenants, and agreements made herein or in any certificate or document executed
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance and delivery of the Shares and the Warrant to the
Purchaser.
7.06 DELAYS OR OMISSIONS; WAIVER. No delay or omission to exercise any
right, power, or remedy accruing to either the Company or the Purchaser upon any
breach or default by the other under this Agreement shall impair any such right,
power, or remedy nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring.
7.07 ENTIRE AGREEMENT. This Agreement and the exhibits hereto contain
the entire understanding of the parties with respect to the subject matter
hereof and all prior negotiations, discussions, commitments, and understandings
heretofore had between them with respect thereto are merged herein and therein.
7.08 HEADINGS. All article and section headings herein are inserted for
convenience only and shall not modify or affect the construction or
interpretation of any provision of this Agreement.
7.09 COUNTERPARTS; GOVERNING LAW. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to rules governing the conflict of laws.
7.10 FURTHER ACTIONS. At any time and from time to time, each party
agrees, without further consideration, to take such actions and to execute and
deliver such documents as may be reasonably necessary to effectuate the purposes
of this Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed on
the date hereinabove set forth.
DNA PLANT TECHNOLOGY CORPORATION
By /s/ David Evans
Name: Dr. David Evans
Title: Executive Vice President
ALIDA MARINE INC.
By /s/ Anurut Tiamtan
Name: Anurut Tiamtan
Title: Vice Chairman of
Thai Pineapple Public Co., Ltd.
Exhibit A - Name and Address of Purchaser
Exhibit B - Warrant Agreement
Exhibit C - Rights with Respect to the Company's Securities
Exhibit D - Risk Factors and Recent Developments
Exhibit E - Purchaser Questionnaire
<PAGE>
EXHIBIT A
NAME, ADDRESS, AND SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER OF PURCHASER
Alida Marine Inc.
#30-11 Policentro Bldg., 30th Street
Panama City, Republic of Panama
Taxpayer I.D. Number:
<PAGE>
EXHIBIT B
TO UNIT PURCHASE
AGREEMENT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
NEITHER THIS WARRANT NOR ANY INTEREST HEREIN MAY BE SOLD, TRANSFERRED, PLEDGED,
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND THE RULES AND REGULATIONS THEREUNDER. BY THE
HOLDER'S ACCEPTANCE HEREOF, THE HOLDER OF THIS CERTIFICATE REPRESENTS THAT SUCH
HOLDER IS ACQUIRING THIS WARRANT FOR INVESTMENT AND AGREES TO COMPLY IN ALL
RESPECTS WITH ARTICLE III OF THIS WARRANT.
WARRANT
to Purchase Common Stock of
DNA PLANT TECHNOLOGY CORPORATION
Expiring September 5, 2000
THIS IS TO CERTIFY THAT, for value received, Alida Marine Inc., or
registered assigns, is entitled to purchase from the Company 245,182 shares of
Common Stock at a purchase price payable upon exercise hereof (the "Exercise
Price") of $2.50 per share subsequent to the Authorization Date until September
5, 2000 (the "Expiration Date"); provided, however, that this Warrant will not
be exercisable until and unless the Company thereafter gives the Purchaser
notice of Stockholder Approval pursuant to Section 5.07 of the Unit Purchase
Agreement. In the event of the failure of the Company to obtain Stockholder
Approval, this Warrant may not be exercised and the holder's exclusive remedy
with respect thereto is set forth in Section 2.06 of the Unit Purchase
Agreement. The Common Stock and the Exercise Price are subject to adjustment in
accordance with Article IV. Certain terms used in this Warrant are defined in
Article V.
ARTICLE I
Exercise of Warrants
1.1 METHOD OF EXERCISE. To exercise this Warrant in whole or in part,
the holder hereof shall deliver to the Company, at the Warrant Office designated
pursuant to Section 2.1, (a) a written notice, in substantially the form of the
Subscription Notice attached as an exhibit hereto, of such holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (b) payment of the Exercise Price (in the manner
described below), and (c) this Warrant. Prior to the issuance of the Warrant
Shares, the Company may require the holder hereof to provide the Company with
such representations and documentation as it may reasonably request in order to
ensure that the issuance of the Warrant Shares will be in compliance with
applicable securities laws. This Warrant shall be deemed to be exercised on the
date when delivery of such notice, such funds, and this Warrant is made, and any
such date is referred to herein as the "Exercise Date." Upon exercise, the
Company shall issue and deliver to or upon the written order of such holder a
certificate or certificates for the
<PAGE>
number of full shares of Common Stock to which such holder is entitled and a
check or cash with respect to any fractional interest in a share of Common Stock
as provided in Section 1.2. The Exercise Price shall be payable by certified or
cashiers check or wire transfer to the Company's account. The Person in whose
name the certificate or certificates for Common Stock are to be issued shall be
deemed to have become a holder of record of such Common Stock on the applicable
Exercise Date. Upon exercise of only a portion of the number of shares covered
by this Warrant, the Company shall issue and deliver to or upon the written
order of the holder of the certificate so surrendered for conversion, at the
expense of the Company, a new Warrant covering the number of shares representing
the unexercised portion of the Warrant so surrendered.
1.2 FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
shall be issued upon exercise of this Warrant. Instead of any fractional shares
of Common Stock which would otherwise be issuable upon exercise of this Warrant,
the Company shall pay a cash adjustment in respect of such fractional interest
in an amount equal to that fractional interest of the Closing Price on the
trading day immediately preceding the Exercise Date.
ARTICLE II
WARRANT OFFICE; TRANSFER,
DIVISION OR COMBINATION OF WARRANTS, REDEMPTION
2.1 WARRANT OFFICE. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's office at 6701 San Pablo Avenue, Oakland, California 94608 and
may subsequently be such other office of the Company or of any transfer agent of
the Common Stock in the continental United States as to which written notice has
previously been given to the holder hereof.
2.2 OWNERSHIP OF WARRANT. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article II.
2.3 TRANSFER OF WARRANTS. The Company agrees to maintain at the Warrant
Office books for the registration of and the registration of transfers of this
Warrant and, subject to the provisions of Article III, this Warrant and all
rights hereunder are transferable, in whole or in part, on such books, upon
surrender of this Warrant at such office, together with a written assignment of
this Warrant duly executed by the holder hereof or his duly authorized agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denominations specified in such instrument of assignment, and this
Warrant shall promptly be cancelled.
2.4 REDEMPTION. (a) This Warrant may be redeemed, at the option of the
Company, at $.01 per Warrant at any time after the Closing Price (as hereinafter
defined) for at least any 20 consecutive trading days of the Common Stock has
exceeded $3.50 per share subsequent to the date that (i) the
<PAGE>
Warrant Shares have been registered under the Securities Act as contemplated by
Article V of the Unit Purchase Agreement and (ii) Stockholder Approval has
occurred. As used herein, the "Closing Price" for each day shall be the closing
price regular way on such day as reported on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, including
for this purpose, the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") National Market System, or, if the Common Stock is
not so listed on a securities exchange or so admitted for quotation on the
NASDAQ National Market System, the average of the high bid and low asked prices
on such day as recorded by the National Association of Securities Dealers, Inc.
through NASDAQ, or if the National Association of Securities Dealers, Inc.
through NASDAQ shall not have reported any bid and asked prices for the Common
Stock on such day, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for such purpose.
(b) In case the Company shall exercise its right to redeem
this Warrant, it shall give notice thereof to the holder of this Warrant, at
least 31 days prior to the date fixed for redemption.
(c) The notice of redemption shall specify the date fixed for
redemption and the place where this Warrant shall be delivered, and the
redemption price shall be paid, and the right to exercise the Warrant shall
terminate at 5:00 P.M., New York City time, on the Business Day immediately
preceding the date fixed for redemption.
(d) Any right to exercise a Warrant shall terminate at 5:00
P.M., New York City Time, on the Business Day immediately preceding the date
fixed for redemption, and, thereafter, the holder of this Warrant shall only be
entitled to receive the redemption price for this Warrant.
ARTICLE III
Restrictions on Transfer; Covenants
3.1 RESTRICTIONS ON TRANSFER. Neither this Warrant, the Warrant Shares,
nor any interest herein or therein shall be transferable except upon the
conditions specified in this Article III, which conditions are intended to
ensure compliance with the provisions of the Securities Act in respect of the
transfer of this Warrant, the Warrant Shares, or any interest herein or therein.
The holder hereof will cause any transferee or this Warrant, the Warrant Shares,
or any interest herein or therein held by it to agree to take and hold this
Warrant, the Warrant Shares, or an interest herein or therein subject to the
provisions and upon the conditions specified in this Article.
3.2 RESTRICTIVE LEGEND. This Warrant, any replacement Warrant, and each
Warrant Share shall (unless otherwise permitted by the provisions of Section
3.3) include a legend in substantially the following form, referring to this
Warrant or Warrant Shares, as appropriate:
[THIS WARRANT] [THESE SHARES] [HAS] [HAVE] NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND NEITHER [THIS WARRANT]
[THESE SHARES] NOR ANY INTEREST THEREIN MAY BE SOLD,
TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT
AND THE
<PAGE>
RULES AND REGULATIONS THEREUNDER. BY ITS ACCEPTANCE HEREOF,
THE HOLDER OF THIS CERTIFICATE REPRESENTS THAT IT IS ACQUIRING
[THIS WARRANT] [THESE SHARES] FOR INVESTMENT AND AGREES TO
COMPLY IN ALL RESPECTS WITH ARTICLE III OF [THIS WARRANT] [THE
WARRANT PURSUANT TO THE EXERCISE OF WHICH THESE SHARES WERE
ISSUED].
3.3 NOTICE OF PROPOSED TRANSFERS. The holder of this Warrant and any
Warrant Share by acceptance hereof or thereof agrees to comply in all respects
with the provisions of this Section 3.3. Prior to any proposed transfer of this
Warrant or any Warrant Share, the holder hereof or thereof shall give written
notice to the Company of such holder's intention to effect such transfer. Each
such notice shall describe the manner and circumstance of the proposed transfer
in reasonable detail and shall be accompanied by (a) a written opinion of
counsel reasonably satisfactory to the Company, addressed to the Company, to the
effect that the proposed transfer may be effected without registration under the
Act or (b) written assurance from the staff of the SEC that it will not
recommend that any action be taken by the SEC if such transfer is effected
without registration under the Securities Act. Such proposed transfer may be
effected only if the Company shall have received such notice and such opinion of
counsel or written assurance, whereupon the holder of this Warrant or Warrant
Shares shall be entitled to transfer this Warrant or Warrant Shares in
accordance with the terms of the notice delivered by the holder to the Company.
Each certificate evidencing this Warrant or Warrant Shares transferred as above
provided shall bear the legend set forth in Section 3.2, except that such
certificate shall not bear such legend if the opinion of counsel or written
assurance referred to above is to the further effect that neither such legend
nor the restriction on transfer in this Article are required to ensure
compliance with the Securities Act.
3.4 TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions precedent
imposed by this Article III upon the transferability of the Warrant Shares shall
terminate as to any particular Warrant Shares when such shares shall have been
effectively registered under the Securities Act and sold or otherwise disposed
of in accordance with the intended method of disposition by the seller or
sellers thereof set forth in the registration statement covering such shares or
at such time as an opinion of counsel as specified in Section 3.3 shall have
been rendered to the effect set forth in Section 3.3.
3.5 COVENANTS OF THE HOLDERS OF WARRANT SHARES. Each holder of Warrant
Shares covenants and agrees with the Company that prior to April 1, 1996, he
will not, in the NASDAQ over-the-counter market (or other exchange on which the
Common Stock is traded), pursuant to an effective registration statement under
the Securities Act, or otherwise, sell any Warrant Shares.
ARTICLE IV
Antidilution Provisions
4.1 ADJUSTMENTS. (a) The Exercise Price and the number of Warrant
Shares issuable upon exercise of this Warrant shall be subject to adjustment
from time to time as follows:
(i) STOCK DIVIDENDS. If the number of shares of Common Stock
outstanding at any time after the date of issuance of this Warrant is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then immediately
<PAGE>
after the record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend or the effective date of
such subdivision or split-up, as the case may be, the Exercise Price
shall be appropriately reduced and the number of shares of Common Stock
to be acquired on exercise of this Warrant shall be appropriately
increased so that the holder of this Warrant, upon exercise thereafter,
shall be entitled to receive the number of shares of Common Stock which
he would have owned immediately following such action had this Warrant
been exercised immediately prior thereto at the aggregate Exercise
Price effective prior thereto.
(ii) COMBINATION OF STOCK. If the number of shares of Common
Stock outstanding at any time after the date of issuance of this
Warrant is decreased by a combination of the outstanding shares of
Common Stock, then, immediately after the effective date of such
combination, the Exercise Price shall be appropriately increased and
the number of shares of Common Stock to be acquired on exercise of this
Warrant shall be appropriately decreased so that the holder of this
Warrant, upon exercise thereafter, shall be entitled to receive the
number of shares of Common Stock which he would have owned immediately
following such action had this Warrant been exercised immediately prior
thereto.
(iii) REORGANIZATION, ETC. In case of any capital
reorganization of the Company, or any reclassification of the Common
Stock, or in case of the consolidation of the Company with or the
merger of the Company with or into any other Person or in case of the
sale, lease, or other transfer of all or substantially all of the
assets of the Company to any other Person, this Warrant shall, after
such capital reorganization, reclassification, consolidation, merger,
sale, lease, or other transfer, be convertible into the number of
shares of stock or other securities or property to which the Common
Stock issuable (at the time of such capital reorganization,
reclassification, consolidation, merger, sale, lease, or other
transfer) upon exercise of this Warrant would have been entitled upon
such capital reorganization, reclassification, consolidation, merger,
sale, lease, or other transfer; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interests
thereafter of the holder of this Warrant shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to any
shares of stock or other securities or property thereafter deliverable
on the exercise of this Warrant. The subdivision or combination of
shares of Common Stock issuable upon exercise of this Warrant at any
time outstanding into a greater or lesser number of shares of Common
Stock of the Company (whether with or without par value) shall not be
deemed to be a reclassification of the Common Stock of the Company for
the purposes of this clause (iii).
(iv) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All
calculations under this Article IV shall be made to the nearest cent or
to the nearest one-hundredth of a share, as the case may be. Any
provision of this Article IV to the contrary notwithstanding, no
adjustment to the Exercise Price shall be made if the amount of such
adjustment would be less than $.01, but any such amount shall be
carried forward and an adjustment with respect thereto shall be made at
the time of and together with any subsequent adjustment which, together
with such amount and any other amount or amounts so carried forward,
shall aggregate $.01 or more.
<PAGE>
(b) STATEMENT REGARDING ADJUSTMENTS. Whenever any adjustments
shall be required as provided in Section 4.1(a), the Company shall forthwith
file, at the Warrant Office and at the principal office of the Company, a
statement showing in detail such adjustments and the facts requiring such
adjustment, which statement shall also be sent by mail, first class, postage
prepaid, to the holder of this Warrant at such holder's address appearing on the
Company's records. Where appropriate, such copy may be given in advance and may
be included as part of a notice required to be mailed under the provisions of
Section 4.1(c).
(c) NOTICE TO HOLDERS. If the Company shall propose to take
any action of the type described in clause (i), (ii), or (iii) of Section
4.1(a), the Company shall give notice to the holder of this Warrant, which
notice shall specify the record date, if any, with respect to any such action
and the approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Exercise Price and the number, kind
of class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon exercise of
this Warrant. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 20 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 30
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action.
(d) COSTS. The Company shall pay all documentary, stamp,
transfer, or other transactional taxes attributable to the issuance or delivery
of shares of Common Stock upon exercise of this Warrant; provided, however, that
the Company shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of this Warrant in
respect of which such shares are being issued.
(e) RESERVATION OF SHARES. Subject to Stockholder Approval,
the Company shall reserve at all times so long as this Warrant remains
outstanding, free from preemptive rights, out of its treasury stock or its
authorized but unissued shares of Common Stock, or both, solely for the purpose
of effecting the exercise of this Warrant, sufficient shares of Common Stock to
provide for the exercise of this Warrant.
(f) APPROVALS. If any shares of Common Stock to be reserved
for the purpose of exercise of this Warrant require registration with or
approval of any governmental authority under any Federal or state law before
such shares may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as possible endeavor to secure
such registration or approval, as the case may be. Subject to Stockholder
Approval, if, and so long as, any Common Stock issuable upon exercise of
Warrants is listed on any national securities exchange, the Company will, if
permitted by the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all shares of Common Stock issuable upon such
exercise.
(g) VALID ISSUANCE. Subject to Stockholder Approval, all
shares of Common Stock which may be issued upon exercise of this Warrant will
upon
<PAGE>
issuance by the Company be duly and validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issuance thereof and the Company shall take no action which will cause a
contrary result (including, without limitation, any action which would cause the
Exercise Price to be less than the par value of the Common Stock).
ARTICLE V
Terms Defined
As used in this Warrant, unless the context otherwise requires, the
following terms have the respective meanings set forth below or in the Section
indicated:
AUTHORIZATION DATE--the date that the Company has obtained approval of
its stockholders and taken other requite corporate action to authorize and
reserve for issuance the Warrant Shares as contemplated by Section 5.07 of the
Unit Purchase Agreement.
BUSINESS DAY--any day other than Saturday, Sunday, or any other day
when banks in New York City are required or permitted to be closed.
CLOSING PRICE--Section 2.4.
COMMON STOCK--the Company's authorized Common Stock, par value $.01 per
share, as such class existed on the date hereof, and any other securities as to
which this Warrant becomes exercisable pursuant to Article IV.
COMPANY--DNA Plant Technology Corporation, a Delaware corporation, and
any other corporation assuming or required to assume the obligations undertaken
in connection with this Warrant.
EXCHANGE ACT--the Securities Exchange Act of 1934, as amended, or any
similar Federal statute, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect at that time.
EXERCISE PRICE--Preamble.
EXERCISE DATE--Section 1.1.
EXPIRATION DATE--Preamble.
OUTSTANDING--when used with reference to Common Stock at any date, all
issued shares of Common Stock at such date, except shares then held in the
treasury of the Company.
PERSON--any individual, corporation, partnership, trust, unincorporated
organization and any government and any political subdivision, instrumentality
or agency thereof.
PURCHASER--as defined in the Purchase Agreement.
SEC--the Securities and Exchange Commission, or any other Federal
agency then administering the Securities Act.
<PAGE>
SECURITIES ACT--the Securities Act of 1933, as amended, or any similar
Federal statute, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect at the time.
STOCKHOLDER APPROVAL--the authorization and actions required to be
taken by the Company in order to authorize the Warrant Shares, as contemplated
by Section 5.07 of the Unit Purchase Agreement.
UNIT PURCHASE AGREEMENT--that certain unit purchase agreement pursuant
to which the Company initially issued and sold this Warrant.
WARRANT OFFICE--Section 2.1.
WARRANT SHARES--the shares of Common Stock purchasable or purchased by
the holder hereof upon the exercise of this Warrant.
ARTICLE VI
Miscellaneous
6.1 ENTIRE AGREEMENT. This Warrant and the Unit Purchase Agreement
contain the entire agreement between the holder hereof and the Company with
respect to the purchase of the Warrant Shares and the related transactions and
supersede all prior arrangements or understandings with respect thereto.
6.2 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to rules
governing the conflict of laws.
6.3 WAIVER AND AMENDMENT. At any time, any term or provision of this
Warrant may be waived, amended, or supplemented in a writing signed by the
holder and the Company. A waiver by the Company or the holder of a breach of any
provision of this Warrant shall not operate as or be construed to be a waiver of
any other breach of such provision or of any other provision of this Warrant.
The failure of the holder or the Company to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist on strict adherence to
that term of any other term of this Agreement.
6.4 ASSIGNMENT BY THE COMPANY. The Company may not sell, assign,
transfer, or otherwise convey any of its rights or delegate any of its duties
under this Warrant except to a corporation succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all of the Company's
assets, and this Warrant shall be binding on and inure to the benefit of such
successor.
6.5 SEPARABILITY. If any provision in this Warrant shall be determined
to be invalid, illegal, or unenforceable in any respect for any reason, the
validity, legality, and enforceability of the remaining provisions of this
Warrant shall not, at the election of the party for whom the benefit of the
provision exists, be in any way impaired.
6.6 NOTICE. Any notice or other communication required or permitted to
be given or delivered hereunder shall be in writing and, if to the holder
hereof, shall be delivered, or sent by certified or registered mail, to such
<PAGE>
holder at the last address shown on the books of the Company maintained at the
Warrant Office for the registration of transfers of this Warrant or at any more
recent address of which any holder hereof shall have notified the Company in
writing. Any notice or other communication required to be delivered hereunder
shall be in writing and, if to the Warrant Office, shall be delivered, or sent
by certified or registered mail, to the office of the Company at 6701 San Pablo
Avenue, Oakland, California 94608, or such other address within the United
States of America as shall have been furnished by the Company to the holder of
this Warrant and the holders of record of Warrant Shares. Any notice or other
communication given by certified or registered mail shall be deemed given at the
time of certification or registration, except for a notice changing a party's
address, which shall be deemed given at the time of receipt thereof.
6.7 LIMITATION OF LIABILITY; HOLDER NOT A STOCK-HOLDER. No provisions
of this Warrant shall be construed as conferring upon the holder hereof the
right to vote, consent, receive dividends, or receive notice (other than as
herein expressly provided) in respect of meetings of stockholders for the
election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the purchase price of any Warrant
Shares or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
6.8 LOSS, DESTRUCTION, ETC. OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation, or destruction of
this Warrant, and in the case of any loss, theft, or destruction upon delivery
of a bond indemnity in such form and amount as shall be reasonably satisfactory
to the Company, or in the event of such mutilation upon surrender and
cancellation of this Warrant, the Company will make and deliver a new Warrant,
of like tenor, in lieu of such lost, stolen, destroyed, or mutilated Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
Dated: February 13, 1996
DNA PLANT TECHNOLOGY
CORPORATION
By /s/ Robert Serenbetz
Name: Robert Serenbetz
Title: Chairman & Chief Executive Officer
<PAGE>
EXHIBIT A
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise the purchase rights represented by said Warrant for, and to purchase
thereunder, ____________ shares of the Common Stock covered by such Warrant and
herewith makes payment in full therefor pursuant to Section 1.1 of such Warrant,
and requests (a) that certificates for such shares (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_______________________ whose address is ______________________ and (b) if such
shares shall not include all of the shares issuable as provided in such Warrant,
that a new Warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned. The undersigned covenants and agrees
with the Company as set forth in Article III of the Warrant.
----------------------
Dated:
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto __________________ the rights to purchase __________________
shares of Common Stock, par value $.01 per share, of DNA Plant Technology
Corporation represented by the foregoing Warrant ____________________ and hereby
appoints ________________________________ attorney to transfer said rights on
the books of said corporation, with full power of substitution in the premises.
-------------------------
Dated:
<PAGE>
EXHIBIT C
Rights with respect to the Company's Securities
(Section 2.03)
1. The Company's $2.25 Convertible Preferred Stock.
2. The Company's Series A Convertible Preferred Stock.
3. Existing stock options and warrants.
4. Rights granted or to be granted to United Agricorp, Inc., entitling
United Agricorp, Inc. to purchase shares of Common Stock and to receive
additional shares of Common Stock under certain circumstances.
<PAGE>
EXHIBIT D
TO
UNIT PURCHASE
AGREEMENT
RISK FACTORS AND RECENT DEVELOPMENTS
THE SHARES AND THE WARRANT BEING OFFERED HEREBY ARE SPECULATIVE AND
INVOLVE A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER,
AMONG OTHER THINGS, THE FOLLOWING FACTORS CONCERNING THE BUSINESS OF DNA PLANT
TECHNOLOGY CORPORATION (THE "COMPANY") AND THE TERMS OF THE OFFERING. TERMS
DEFINED IN THE UNIT PURCHASE AGREEMENT (TO WHICH THIS IS ATTACHED AS EXHIBIT D)
SHALL HAVE THEIR DEFINED MEANINGS HEREIN, UNLESS OTHERWISE DEFINED HEREIN.
CASH REQUIREMENTS
As of June 30, 1995, the Company had cash and temporary investments of
$1.3 million. In view of the Company's continuing losses, the Company will have
to generate sufficient funds to meet its cash requirements through operations,
the sale of assets or securities, or other financing arrangements, or it will be
required to curtail certain of its activities.
HISTORICAL LOSSES AND ACCUMULATED DEFICITS
The Company has sustained losses in each year since its incorporation
in 1981. It is likely that such losses will continue until the Company's
products are successfully established and profitability is achieved through
increased sales, economies of scale, and reduction in costs, of which there can
be no assurance.
UNIT NOT REGISTERED UNDER THE SECURITIES ACT
The Shares, the Warrant, and the Warrant Shares have not been
registered under the Securities Act. The Shares, the Warrant, and the Warrant
Shares may not be offered or sold, unless they are registered under the
Securities Act or an exemption from such registration requirements of the
Securities Act is available.
WARRANT SHARES NOT AUTHORIZED
The Company does not currently have a sufficient number of authorized
shares of Common Stock in order to permit the exercise of the Warrant and the
issuance of the Warrant Shares. Accordingly, the Warrant by its terms cannot be
exercised until the Company has taken all appropriate action (including
Stockholder Approval) to authorize the issuance of the Warrant Shares. There can
be no assurance that the Company will be able to obtain approval of its
stockholders in order to permit the issuance of the Warrant Shares, which would
materially adversely affect any value that the Warrant may have.
REDEMPTION FEATURES OF THE WARRANT
The terms of the Warrant provide that it may be redeemed, at the option
of the Company on 30 days' notice, at $.01 per Warrant at any time after (i) the
closing price for at least any 20 consecutive trading days of the Common
<PAGE>
Stock exceeds $3.50 per share, (ii) the Warrant Shares have been registered
under the Securities Act, and (iii) the stockholders of the Company shall have
approved an amendment to the Company's Certificate of Incorporation and the
Company shall have taken all requisite action in order to authorize the Warrant
Shares. The Warrant will remain exercisable until the Business Day preceding the
redemption date.
STAGE OF PRODUCT DEVELOPMENT AND MARKETING
Marketing of several products developed by the Company is in the
relatively early stages, and there can be no assurance that any of these
products will be successful or will produce significant revenues or profits for
the Company. In addition, a number of the Company's product development projects
are in the early stages, and there can be no assurance that these projects will
be successful or that any resulting products will be well received or
profitable. In particular, although the Company has produced and sold a limited
amount of its branded produce, there can be no assurance that it will be able to
produce or market such products on a larger scale. The production, distribution,
and sale of branded, premium quality, fresh market tomatoes and other fruits and
vegetables which the Company is currently marketing or proposes to market in the
future involve many variables and uncertainties, including consumers'
willingness to pay higher prices for such fruits and vegetables and retailers'
willingness to carry such fruits and vegetables. Even if consumer acceptance is
achieved for the Company's fresh fruits and vegetables, the Company's fresh
market fruit and vegetable business will not achieve profitability until the
Company increases sales, establishes economies of scale, and realizes reductions
in the unit costs currently being incurred in certain of its product lines, of
which there can be no assurance.
PUBLIC ACCEPTANCE OF GENETICALLY ENGINEERED PRODUCTS
The Company's second generation products are being developed through
genetic engineering. The commercial success of these products will depend in
part on public acceptance of the cultivation and consumption of genetically
engineered products. There is no assurance that such products will gain public
acceptance, even if such products obtain the required regulatory approvals.
AGRIBUSINESS RISKS
Certain of the Company's present and future products may be subject to
various hazards including disease, frost, drought, flood, hail, and other causes
of crop failure. Although the Company contracts with growers in different
regions of the United States, there can be no assurance that these growers will
be able to produce sufficient crops of suitable quality or in sufficient
quantity to satisfy the Company's requirements.
Certain of the Company's present and future products may be affected by
changes in United States government agricultural policy. There can be no
assurance that changes in United States government agricultural policy will not
have a material adverse effect on the Company.
NO ASSURANCE OF PROPRIETARY PROTECTION
<PAGE>
The Company's success will depend, in part, on its ability to obtain
patents, maintain trade secret protection, and conduct its business without
infringing the proprietary rights of others. Although the Company possesses
certain patents and has filed patent applications with respect to certain of its
products and technologies, there can be no assurance that others will not
develop and market competing technologies and products or that the Company will
be able to enforce the patents which it currently possesses or will be able
otherwise to obtain or enforce any patents for which it has filed an
application. The Company also relies upon unpatented proprietary and trade
secret technology. There can be no assurance that others have not developed or
will not independently develop such proprietary technology or otherwise obtain
access to the Company's proprietary technology. The extent to which the Company
in the future may be required or may desire to obtain licenses with respect to
patents obtained by others and the availability and cost of any such licenses
are currently unknown. If the Company does not obtain necessary licenses, the
development, production, use, or sale of the Company's products could be delayed
or prevented. In addition, the Company could incur substantial costs in
defending any patent infringement suits or in asserting any patent rights,
including those granted by third parties. The United States Patent and Trademark
Office could institute interference proceedings involving the Company in
connection with one or more of the Company's patents or patent applications, and
such proceedings could result in an adverse decision as to priority of
invention. Reexamination proceedings could be instituted against the Company in
connection with one or more of the Company's patents, and such proceedings could
result in an adverse decision as to the validity or scope of the patents.
COMPETITION
The segments of the agricultural biotechnology industry and industrial
and consumer product industries in which the Company participates are highly
competitive. Competitors include specialized biotechnology firms, as well as
major food and chemical companies, some of which have biotechnology divisions,
and many of which have considerably greater financial, technical, and marketing
resources than the Company. The agricultural biotechnology industry is
undergoing, and is expected to continue to undergo, rapid and significant
technological change, and the Company expects competition to intensify as
technical advances in the field are made and become more widely known.
GOVERNMENTAL REGULATION
The present and future activities of the Company are, or may be,
subject to extensive regulation by the United States Food and Drug
Administration (the "FDA"), the United States Department of Agriculture (the
"USDA"), the United States Environmental Protection Agency, and other United
States and state regulatory agencies. In addition, the Company's products may
also be subject to regulation by agencies of foreign countries in which the
products are tested, used, or sold.
The Company's first generation products are currently being marketed.
The Company's second generation tomato has received clearance from the FDA and
from the USDA. The Company's other second generation products may require
regulatory approval or notification. The regulatory process may delay research,
development, production, or marketing and require costly and time consuming
procedures, and there can be no assurance that requisite regulatory approvals or
registration of certain of the Company's products will be granted
<PAGE>
on a timely basis. Delays in obtaining, or the failure to obtain, any necessary
regulatory approvals could have a material adverse effect on the Company's
ability to develop, produce, and sell such products.
PRODUCT LIABILITY
Certain of the products being marketed and developed by the Company
entail a risk of product liability. While the Company has taken and will
continue to take what it believes are adequate precautions, there can be no
assurance that it will avoid significant product liability exposure. The Company
maintains limited product liability insurance. If the Company seeks to maintain
or expand such coverage in the future, there can be no assurance that adequate
coverage would be available at acceptable costs. The obligation to pay any
product liability claim may have a material adverse effect on the business or
financial condition of the Company.
KEY PERSONNEL
The success of the Company will depend, in large part, on its ability
to continue to attract and retain qualified scientific and management personnel.
Competition for such personnel is intense and there can be no assurance that the
Company will be able to attract and retain such persons. The loss of the
Company's key management or scientific personnel could have a material adverse
effect on the Company.
SHARES AVAILABLE FOR FUTURE SALE
E. I. du Pont de Nemours and Company ("Du Pont") owns 5,750,000 shares
of Common Stock currently representing approximately 16.8% of the outstanding
shares (after giving effect to the assumed conversion of the Company's Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A Convertible
Preferred Stock"), owned by Du Pont into 2,750,000 shares of Common Stock). Du
Pont has agreed, in general, that prior to March 1996, it will not sell publicly
any of the shares which it owns and that, subsequent to March 1996 and prior to
March 1997, it will not sell publicly more than 1,000,000 shares of Common
Stock. The sale by Du Pont of a significant number of shares of Common Stock may
adversely affect the market price of the Common Stock.
RECENT ISSUANCES OF SECURITIES BY THE COMPANY
On April 20, 1995, the Company sold in a private placement to one
investor 750,000 shares of Common Stock. After giving effect to this private
placement, the Company had outstanding 39,925,538 shares of Common Stock
(including 8,359,700 shares of Common Stock issuable upon conversion of
outstanding convertible preferred stock).
In late June 1995, the Company sold in private placements to a limited
number of foreign investors 505,000 shares of Common Stock and newly issued
shares of its preferred stock. These shares of preferred stock were subsequently
converted into 1,318,839 shares of Common Stock. After giving effect to these
private placements and such conversion, the Company had outstanding 41,749,377
shares of Common Stock (including 8,359,700 shares of Common Stock issuable upon
conversion of outstanding convertible preferred stock).
<PAGE>
In July and August 1995, the Company sold in private placements an
aggregate of 7,250,000 shares of Common Stock and warrants to purchase an
aggregate of 3,825,000 shares of Common Stock. In connection with such private
placements, the Company retained a consultant who received a cash payment equal
to six percent of the gross proceeds received by the Company, plus a unit
purchase option entitling the holder to purchase, at a price equal to 110% of
the closing price of the Common Stock on the date of the last closing of the
private placements described in this paragraph, 725,000 units, each unit
consisting of one share of Common Stock and a warrant entitling the holder to
buy one-half of a share of Common Stock at 110% of such closing price.
<PAGE>
EXHIBIT E
PURCHASER QUESTIONNAIRE
DNA Plant Technology Corporation
6701 San Pablo Avenue
Oakland, California 94608
Gentlemen:
In connection with the proposed purchase by the undersigned
(the "Purchaser") of shares (the "Shares") of common stock, par value $.01 per
share ("Common Stock"), of DNA Plant Technology Corporation, a Delaware
corporation (the "Company"), and a warrant (the "Warrant") to purchase shares of
Common Stock pursuant to a Unit Purchase Agreement between the Company and the
undersigned (the "Unit Purchase Agreement") and in addition to the
representations and warranties of the Purchaser contained in the Unit Purchase
Agreement, the Purchaser hereby acknowledges, represents, and warrants to, and
agrees with, the Company as follows:
(a) The Purchaser has such knowledge and experience in financial, tax,
and business matters so as to enable him to utilize the information made
available to him in connection with the Company and the offering of the Shares
and the Warrant, to evaluate the merits and risks of an investment in the Shares
and the Warrant, and to make an informed investment decision with respect
thereto.
(b) The Purchaser is an "accredited investor" as that term is defined
in Regulation D under the Securities Act and the following accurately describes
the Purchaser (check the appropriate description):
__ an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act;
__ a bank as defined in Section 3(a)(2) of the Securities Act, or
any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act, whether
acting in its individual or fiduciary capacity.
__ an insurance company as defined in Section 2(13) of the
Securities Act;
__ a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees,
if such plan has total assets in excess of $5,000,000;
__ an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 if the investment
decision is made by a plan fiduciary, as defined in Section
3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment
adviser; or if the employee benefit plan has total assets in
excess of $5,000,000;
<PAGE>
or, if the plan is self-directed, with investment decisions
made solely by persons that are accredited investors;
__ a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
__ an organization described in section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, with total assets in excess
of $5,000,000;
__ a corporation, limited liability company, Massachusetts or
similar business trust, or partnership, which has total assets
in excess of $5,000,000, and is not formed for the specific
purpose of investing in the Shares;
__ a natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
of the Shares exceeds $1,000,000;
__ a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year;
__ a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of investing in the Shares, and whose
investment in the Shares is directed by a sophisticated
investor who has such knowledge and experience in financial
and business matters that he is capable of evaluating the
merits and risks of an investment in the Shares;
__ a broker dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;
__ a small business investment company licensed by the United
States Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958; or
__ any entity in which all of the equity owners are accredited
investors.
Very truly yours,
-----------------------------------
By
--------------------------------
Name:
Title:
Address:
---------------------------
-----------------------------------
-----------------------------------
Exhibit 10.13
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
Monsanto Company, )
)
Plaintiff, )
) CIVIC ACTION NO. 95-278 LON
v. )
)
DNA Plant Technology )
Corporation, )
)
Defendant. )
CONSENT JUDGMENT
The Court, having been advised that the parties have entered into a
settlement agreement, and the parties having submitted this consent judgement
and injunction to the Court for its consideration, and the Court having
concluded that the provisions of this consent judgment and injunction are
appropriate to the settlement and disposition of this action:
It is hereby ORDERED, ADJUDGED, and DECREED that:
1. This Court has jurisdiction over the parties and the subject matter
of this action.
2. Plaintiff is now and has been at all times since the dates of
issuance the owner of United States Patent No. 5,352,605, issued October 4,
1994, entitled "Chimeric Genes for Transforming Plant Cells Using Viral
Promoters"; and United States Patent No. 5,034,322, issued July 23, 1991,
entitled "Chimeric Genes Suitable for Expression in Plant Cells."
3. United States Patent Nos. 5,352,605 and 5,034,322 were each duly and
legally issued, are each valid and enforceable, and have each been enforceable
at all times since their respective issuance dates.
4. Defendant acknowledges its intent to be bound by the acknowledgement
of validity and enforceability of U.S. Patent Nos. 5,352,605 and 5,034,322.
5. United States Patent No. 5,352,605 has been infringed by Defendant's
making, use or sale in the United States of Defendant's hybrid tomatoes derived
from its Delayed Ripening Tomato Line 1345-4 and by Defendant's making and using
certain other plants, plant products, seeds, cells, cultures, or DNA molecules
containing a chimeric gene expressible in plants and including a CaMV 35S
promoter.
6. United States Patent No. 5,034,322 has been infringed by Defendant's
making, use or sale in the United States of Defendant's hybrid tomatoes derived
from its Delayed Ripening Tomato Line 1345-4 and by Defendant's making and using
certain other plants, plant products, seeds, cells, cultures or DNA molecules
containing a chimeric gene expressible in plants and including a kanamycin
resistance marker combined with a promoter
<PAGE>
region from either an opine synthase gene or a ribulose-1.5-bisphosphate
carboxylase small subunit gene.
7. Except as authorized by valid license rights or in Paragraph 5 of
the confidential Settlement Agreement entered into between the parties,
Defendant and its officers, agents, servants, and employees and those in active
concert and participation with them are permanently enjoined from infringing, or
contributing to or inducing the infringement of, any claim of United States
Patent No. 5,352,605 by making, using or selling or offering for sale a plant,
seed, cell, culture or DNA molecule containing a chimeric gene expressible in
plant and including a CaMV 35S promoter for the life of the '605 patent or until
such time as the patent is declared invalid or unenforceable by a court of
competent jurisdiction.
8. Except as authorized by valid license rights or in Paragraph 5 of
the confidential Settlement Agreement entered into between the parties,
Defendant and its officers, agents, servants, and employees and those in active
concert and participation with them are permanently enjoined from infringing, or
contributing to or inducing the infringement of, any claim of United States
Patent No. 5,034,322 by making, using or selling or offering for sale a plant,
seed, cell, culture or DNA molecule continuing a chimeric gene expressible in
plants and including a kanamycin resistance marker combined with a promoter
region from either an opine synthase gene or a ribulose-1.5-bisphosphate
carboxylase small subunit gene for the life of the '322 patent or until such
time as the patent is declared invalid or unenforceable by a court of competent
jurisdiction.
9. Plaintiff and Defendant have entered into a confidential Settlement
Agreement that makes agreed provision for compensating Plaintiff for the
acknowledged infringement, which Agreement shall be maintained as confidential
in accordance with its terms.
10. Inasmuch as this Consent Judgment has been agreed without any
discovery respecting the activities of Defendant, Plaintiff and Defendant agree
and understand that this order shall not operate to preclude Monsanto from
recovering for any acts either before or after the date hereof which may
constitute an infringement of either U.S. Patent Nos. 5,352,605 and 5,034,322 or
any other patent of Monsanto which acts are not within the scope of the
injunctions set forth in Paragraphs 7 or 8 above of this Consent Judgment.
11. Each party shall bear its own attorneys' fees and costs.
12. The Court retains jurisdiction to enforce this Consent Judgment and
the underlying Settlement Agreement.
13. This Consent Judgment, insofar as it applies to U.S. Patent No.
5,352,605, is effective between the parties as a final adjudication of patent
infringement, validity, and enforceability unless and until the patent-in-suit
is declared invalid or unenforceable by a court of competition jurisdiction.
14. This Consent Judgment, insofar as it applies to U.S. Patent No.
5,034,322, is effective between the parties as a final adjudication of patent
infringement, validity, and enforceability unless and until the patent-in-suit
is declared invalid or unenforceable by a court of competition jurisdiction.
Entered this 15th day of August, 1995, at Wilmington, Delaware.
Exhibit 10.14
EMPLOYMENT AGREEMENT
The EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into as
of April 20, 1994 by and between DNA PLANT TECHNOLOGY CORPORATION ("DNAP"), a
Delaware Corporation, including its subsidiary FreshWorld, Inc. (together called
"Employer"), with its principal offices to be located in California, and Robert
Igleheart, an individual ("Employee"), residing at 14075 Mountain Quail Road,
Salinas, California 93908.
1. EMPLOYMENT. Employer hereby agrees to employ Employee as President
of FreshWorld, Inc. and Chief Operating Officer of DNAP. In those capacities,
Employee shall perform such duties as are typical or appropriate of a President
and a Chief Operating Officer, subject to and under the direction of Employer.
In addition, Employee shall perform such other duties for Employer as Employer
may reasonably request, or as may be necessary or desirable in performing or
carrying out the intention of this Agreement. Employee's principal place of work
will be the Employer's place of business in Salinas, California.
2. EMPLOYMENT TERM. The term of this Agreement shall be for three years
commencing May 1, 1994 (or such earlier date as the parties may agree), unless
earlier terminated in accordance with Section 10 hereof (the "Employment Term").
3. EXTENT OF SERVICE. Employee shall use his best efforts to fulfill
his duties in the course of his employment and to further the business of
Employer while devoting his full time, attention and energy during regular
business hours to the business and affairs, and to promoting the interests and
welfare, of Employer and its affiliates (any person or entity now or hereafter
controlling, controlled by, or under common control with Employer being herein
referred to as an "affiliate"). Employee shall report directly to the President
and Chief Executive Officer of DNAP and shall be subject to the direction and
control of the Board of Directors of Employer. Employee shall not work, on a
part-time, full-time or independent contracting basis, for any other business or
enterprise during the Employment Term without Employer's prior written consent.
4. COMPENSATION.
(a) BASE SALARY. For the services rendered by Employee
hereunder, Employer shall pay Employee a base salary at the monthly rate of
$16,666.67 pro-rated for any period of less than a full month, less withholding
required by law or agreed to by Employer and Employee. Such salary shall be
reviewed annually beginning October 1, 1994. Employee understands and agrees
that Employer is under no obligation to increase Employee's monthly base salary
as a result of such review. Employer understands and agrees that it may not
reduce such salary as a result of such review without the agreement of Employee.
Such salary shall be payable in installments at such times as Employer
customarily pays its other employees
<PAGE>
holding comparable positions (but in any event not less often than monthly). The
monthly amount payable to Employee pursuant to the provisions of this Section
4(a) shall sometimes hereinafter be referred to as "Base Salary".
(b) SHORT-TERM INCENTIVE. In addition to the compensation
payable to Employee under Section 4(a) hereof and subject to Section 4(f) (iii)
hereof, Employee shall be a participant in the DNA Plant Technology 1994
Short-Term Incentive Plan (the "Plan") and, pursuant to the terms of that Plan,
eligible for an annual cash and restricted stock incentive award.
Notwithstanding any provision of the Plan, Employer will pay Employee for fiscal
year 1994 (year ended December 31, 1994) with respect to the Business Goals
portion of the Plan not less than the equivalent of $50,000 (50% in cash and 50%
in restricted DNAP stock). The first such payment of the guaranteed amount will
be made not less than 90 nor more than 120 days after the date this Agreement is
entered and thereafter will be made quarterly. Employer and Employee will
negotiate in good faith to reach agreement on Employee's individual goals for
the individual goals portion of the Plan within 30 days after the date this
Agreement is entered. For the purpose of determining the amount of any award
under the Plan with respect to fiscal year 1994, Employee's Base Salary as
defined in this Agreement will be multiplied by 12 and will not be pro-rated.
(c) FRINGE BENEFITS. In addition to the other benefits
provided for hereunder, Employee shall be entitled to the following benefits,
such benefits to be provided by Employer:
(i) four weeks paid vacation per year during
Employee's first five years of credited service, five weeks paid vacation per
year during Employee's next five years of credited service, and six weeks paid
vacation per year during each year of service after ten years of credited
service, subject to the terms of Employer's vacation policy for employees as now
exists and as changed from time-to-time; provided that the number of weeks of
vacation may not be reduced without Employee's consent; and
(ii) participation in Employer's medical, dental,
prescription drug, vision, health care spending account, dependent care spending
account, 401(k) saving and retirement, employee assistance, education
assistance, holiday, short-term disability insurance, long-term disability
insurance, bereavement leave, business travel insurance, and jury and compulsory
witness leave plans as they now exist and as changed from time-to-time, to the
same extent that other senior officers participate in same, subject to
Employee's fulfilling all applicable eligibility requirements of each such plan.
(d) SIGN-ON BONUS PAYMENT. Employer grants Employee 15,000
shares of fully and freely tradeable (subject to any applicable restrictions
under Section 16(b) of the Securities Exchange Act of 1934, as amended) stock of
DNAP which will vest no later than 30 days after this Agreement is entered.
(e) STOCK OPTIONS. Employee will participate in DNAP's 1994
Stock Option Plan provided that such Stock Option Plan is approved by the
shareholders of DNAP at the next annual meeting. Upon approval of the 1994 Stock
Option Plan, Employee will receive options to purchase up to 500,000 shares of
DNAP common stock at an exercise price equal to the stock's fair market value on
the date of grant. To the maximum extent permitted by Section
<PAGE>
422(d) of the Internal Revenue Code the options to be granted to Employee shall
be Incentive Stock Options; the remaining options to be granted to Employee
shall be Non-Qualified Options. These options will expire no later than 10 years
after the date of the grant. The ability to exercise these options will vest as
follows:
(i) 40,000 shares on the date of grant;
(ii) 40,000 shares on each of March 1, 1995, March 1,
1996, March 1, 1997, and March 1, 1998;
(iii) 100,000 shares when FreshWorld product revenue
is at least $30,000,000 in a fiscal year;
(iv) 100,000 shares when FreshWorld product revenue
is at least $75,000,000 in a fiscal year; and
(v) 100,000 shares when FreshWorld product revenue is
at least $150,000,000 in a fiscal year.
The options provide in subsections (iii), (iv), and (v) of Section 4(e) may vest
in the same fiscal year or in two or more fiscal years, depending on whether the
requisite product revenue in achieved in one fiscal year or seriatim in
different fiscal years.
For purposes of this section, "FreshWorld product revenue" shall be calculated
on an accrual basis, in accordance with generally accepted accounting principles
consistently applied in the accounting records of Employer.
(f) EFFECT OF TERMINATION.
(i) Upon Employee's voluntary termination or
termination under Section 10 hereof, Employee's rights under Sections 4(a) and
(e) shall immediately cease. This provision shall not apply to salary or
payments accrued prior to such termination or to vested options.
(ii) Upon Employee's voluntary termination or
termination under Section 10 hereof, Employee's right to any and all fringe
benefits described in Section 4(c) shall immediately cease. This provision shall
not apply to any accrued and vested vacation pay. Notwithstanding the foregoing,
Employer will fulfill all of its obligations under law with respect to the
continuation of health benefits. Further, upon any such termination, Employee
will retain his rights to obtain reimbursement for business expenses previously
incurred, as provided in Section 5.
(iii) If, before the date of award under the Plan,
this Agreement is terminated for cause by Employer under Section 10(b) (other
than subsection (i)) or is terminated under Section 10(c), Employee shall not be
entitled to receive any Short-Term Incentive under Section 4(b). If this
Agreement is terminated as a result of any of the events enumerated in Sections
10(a), (b)(i), or (d), then Short-Term Incentive under Section 4(b) will be
paid, if earned, on the pro-rated portion of Base Salary earned prior to such
termination. Such payment shall be made in such time as Employer would have
customarily paid Employee had the Employment Term continued.
<PAGE>
5. BUSINESS EXPENSES. Employer will reimburse Employee for all ordinary
and reasonable out-of-pocket business expenses incurred by Employee in
connection with his performance of services hereunder during the Employment Term
in accordance with Employer's expense approval procedures then in effect,
including lease payments (not to exceed $650 per month), insurance, fuel and
maintenance of one vehicle for business use.
6. INVENTIONS, DESIGNS AND PRODUCT DEVELOPMENTS. All inventions,
innovations, designs, processes, programs, techniques, assemblies of
information, ideas, research results, and product developments (including
biomaterials) developed or conceived by Employee, solely or jointly with others,
whether or not patentable or copyrightable, at any time during the Employment
Term and that relate to the actual or planned business activities of Employer or
its affiliates or to similar business activities (collectively, the
"Developments") and all of Employee's right, title and interest therein, shall
be the exclusive property of Employer. Employee hereby assigns, transfers and
conveys to Employer all of his right, title and interest in and to any and all
such Developments. Employee shall disclose fully, as soon as practicable and in
writing, all Developments to the Board of Directors of Employer. Employee agrees
to preserve as confidential full particulars of any matters referred to herein
and to maintain at all times adequate current written records of all such
matters which records shall be and shall remain the property of Employer. At any
time and from time-to-time, upon the request of Employer, Employee shall execute
and deliver to Employer any and all instruments, documents and papers, give
evidence and do any and all other acts that, in the opinion of counsel for
Employer, are or may be necessary or desirable to document such transfer or to
enable Employer to file and prosecute applications for and to acquire, maintain
and enforce any and all patents, trademark registrations or copyrights under
United States or foreign law with respect to any Developments or to obtain any
extension, validation, reissue, continuance or renewal of any such patent,
trademark or copyright. Employer will be responsible for the preparation of any
such instruments, documents and papers and for the prosecution of any such
proceedings and will reimburse Employee for all reasonable expenses incurred by
him in compliance with the provisions of this Section 6. By his signature
hereon, Employee acknowledges that he has been notified and understands that
this provision shall not apply to any of the foregoing for which no equipment,
supplies, facility or trade secret information of Employer was used and which
was developed entirely on Employee's own time, and (a) which does not relate to
the business of Employer or to Employer's actual or demonstrably anticipated
research or development, or (b) which does not result from any work performed by
Employee for Employer. Employee acknowledges that he has read California Labor
Code Section 2870, a copy of which is attached to and part of this Agreement.
7. CONFIDENTIAL INFORMATION.
(a) EMPLOYER'S CONFIDENTIAL INFORMATION. Employee acknowledges
that, by reason of his employment by and service to Employer, he will have
access to confidential information of Employer (and its affiliates) including,
without limitation, information and knowledge pertaining to research products
(including biomaterials), present and future developments, techniques, programs,
trade secrets, services, research plans, marketing strategies, processes,
inventions (patentable and otherwise) patents, copyrights, trademarks, policies,
contracts, personnel information, improvements, methods
<PAGE>
of operation, sales and profit figures, customer and client list, relationships
between Employer and those persons, entities and affiliates with which Employer
has contracted and others who have business dealings with it and other
confidential property and information of Employer and its customers
(collectively, the "Confidential Information"). Employee acknowledges that the
Confidential Information is a valuable and unique asset of Employer and
covenants that, both during and after the Employment Term, he will not disclose
any Confidential Information to any person, firm or corporation (except as his
duties as an employee of Employer may require)without the prior written
authorization of the Board of Directors of Employer and that all such matters
and properties shall be and shall remain the property of Employer and/or its
customers. The obligation of confidentiality imposed by this Section 7 shall not
apply to information that appears in issued patents that is required by
governmental authorities to be disclosed or that otherwise becomes generally
known in the industry through no act of Employee in breach of this Agreement.
(b) "BIOMATERIALS". As used in this Agreement, the term
"biomaterials" includes but is not limited to plants, plant parts,
microorganisms, cell cultures, organelles or other subcellular components,
viruses, DNA or DNA-containing material, RNA or RNA-containing material,
oligonucleotides, proteins, peptides, subparts of any of the foregoing, and
products made from any of the foregoing.
(c) OTHER CONFIDENTIAL INFORMATION. Employee has not disclosed
and will not disclose to Employer information, if any, which Employee is bound
by prior agreement with any former employer or other third party not to so
disclose.
8. NONCOMPETITION.
(a) COVENANT OF EMPLOYEE. Employee acknowledges that he has
specialized knowledge and experience in Employer's business, that his reputation
and contacts within the industry are considered of great value to Employer and
that if his knowledge, experience, reputation or contacts are used to compete
with Employer, serious harm to Employer may result. Employee accordingly agrees
that during Employee's employment by Employer (whether pursuant to this
Agreement or otherwise), and with respect to (ii) below for a period of two
years thereafter, Employee shall not (except as his duties as an employee of
Employer may require), without the prior written consent of the Board of
Directors of Employer, directly or indirectly:
(i) contact or solicit for the purpose of engaging in
the business of the same general character as then engaged in by
Employer, or divert or take away from Employer, or divulge to any
person, firm or corporation the name, address or requirements of, or
perform services of the same general character as those performed by
Employer for, any person, form, corporation or other entity who is or
at any time during the six months preceding the date of this Agreement
had been, a customer of Employer or who, as a result of active
negotiations between the customer and Employer, is likely to become a
customer of Employer;
(ii) solicit for employment any of the employees,
agents, or representatives of Employer.
<PAGE>
(b) REFORMATION. If the provisions of this Section 8 should
ever be adjudicated to exceed the time, geographic, service or product
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, service or product limitations permitted by applicable. law.
(c) NOTICE TO OTHERS. Employee agrees that until the
expiration of the covenants contained in this Section 8, he will provide, and
that Employer may similarly provide, a copy of such covenants to any business or
enterprise.
(i) that he may directly or indirectly own, manage,
operate, finance, join, control or participate in the ownership,
management, operation, financing or control of; or
(ii) with which he may be connected as an officer,
director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he may use his
name or permit his name to be used.
9. EQUITABLE RELIEF. Employee acknowledges that the restrictions
contained in Sections 6, 7 and 8 are, in view of the nature of the business of
Employer, reasonable and necessary to protect the legitimate interest of
Employer, that Employer would not have entered into this Agreement in the
absence of such restrictions, and that any violation of any provisions of those
Sections will result in irreparable injury to Employer. Employee also
acknowledges that the remedy at law for any violation of these restrictions will
be inadequate and that Employer shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damages for breach
thereof, which rights shall be cumulative of and in addition to any other rights
or remedies to which Employer may be entitled. In the event of any such
violation, Employer shall be entitled to commence an action for temporary and
permanent injunctive relief and other equitable relief in any court of competent
jurisdiction and Employee further irrevocably submits to the jurisdiction of any
federal or state court in the geographical jurisdiction of the United States
District Court for the Northern District of California over any suit, action or
proceeding arising out of or relating to this Agreement. Employee hereby waives,
to the fullest extent permitted by law, any objection that he may now or
hereafter have to the jurisdiction of any federal or state court in the
geographical jurisdiction of the United States District Court for the Central
District of California or to the venue of any such suit, action or proceeding
brought in such a court and any claim that such suit, action or proceeding has
been brought in an inconvenient forum. Effective service of process may be made
upon Employee by mail under the notice provisions contained in Section 12.
10. TERMINATION.
(a) DEATH. If Employee dies during the Employment Term, this
Agreement shall terminate and thereafter Employer shall have no liability or
obligation to Employee, his heirs, personal representatives, assigns or any
other person claiming under or through him except for unpaid salary, ShortTerm
Incentives as provided by the Plan, unreimbursed business expenses and benefits
accrued to the date of his death. The right to exercise Employee's stock options
which have vested pursuant to the terms of this Agreement as of
<PAGE>
the date of Employee's death will expire one year after the date of Employee's
death; provided that as of the date of death, any stock options due to vest
within one year after the date thereof will be deemed vested as of the date of
death.
(b) CAUSE. Upon the occurrence of any of the following events,
this Agreement may be terminated for cause by Employer giving written notice of
termination to Employee, such termination to be effective upon the date
specified in such notice:
(i) Employee's inability by reason of mental or
physical condition to perform the essential duties of his positions at all or
without reasonable accommodation that would produce undue hardship to Employer's
operation for a period of 180 consecutive days.
(ii) Employee's conviction of, or plea of NOLO
CONTENDERE or its equivalent with respect to, a felony involving fraud or
dishonesty or any other crime for which a term of imprisonment in excess of
sixty days is imposed.
(iii) Employee's misappropriation of funds from
Employer.
(iv) If not cured within 45 days after written notice
from Employer to Employee,
(A) Employee's material breach of any of the terms or
conditions of this Agreement;
(B) Employee's willful breach of duty in the course
of his employment; or
(C) Employee's material neglect of Employer's
business.
(c) VOLUNTARY TERMINATION BY EMPLOYEE. Employee may terminate
this Agreement for any reason after the end of the first year of the Employment
Term by giving Employer at least 30 days' written notice of termination.
(d) TERMINATION OTHER THAN FOR CAUSE BY EMPLOYER. Employer may
terminate this Agreement without cause at any time during the Employment term by
giving Employee written notice of termination. If Employee is terminated by
Employer pursuant to the provisions of this paragraph (d), Employer will pay to
Employee through April 30, 1997 (or the earlier death of Employee) a monthly
payment equal to 150% of his monthly Base Salary. Further, on the date of such
termination, all remaining invested stock options to which Employee may become
entitled pursuant to Section 4(e) will be granted and vest and all shares of
restricted stock held by Employee under the Plan will vest. Employee's
resignation from Employer by reason of having been forced out of Employer
(defined to be mean termination by Employee by reason of Employer's material
breach of the terms hereof or Employer having caused to exist intolerable
working conditions (specifically not to include a good faith disagreement over a
business issue between Employee and the Board of Directors of Employer) for
Employee, in each case if not cured, within 45 days after written notice from
Employee to Employer) will be treated as a termination pursuant to this Section
10(d), rather than Section 10(c).
<PAGE>
(e) CHANGE OF CONTROL. In the event that a Change of Control
has occurred within three years after this Agreement is entered, Employee will
have the right, for a period of 90 days after the occurrence of such Change of
Control (the "Change of Control Termination Right"), to terminate this Agreement
upon written notice thereof to Employer (the "Change of Control Termination
Notice"). In the event that (i) Employee exercises the Change of Control
Termination Right or (ii) Employee's employment pursuant to this Agreement is
terminated by Employer within 90 days after, as a result of or in anticipation
of such Change of Control other than for the reasons described in Section 10(a)
or (b):
(i) Employer will make a lump sum payment to Employee
in an amount equal to his monthly Base Salary at the time of the Change of
Control times 36, less withholding required by law;
(ii) all remaining invested stock options to which
Employee may become entitled pursuant to Section 4(e) will be granted and vest,
and all shares of restricted stock held by Employee under the Plan will vest, on
the date of receipt of the Change or Control Termination Notice; and
(iii) no payment pursuant to Section 10(d) will be
made or required.
For the purpose of this section, "Change of Control" means (i) any sale,
transfer or other conveyance (other than to DNAP or a wholly owned subsidiary of
DNAP) whether direct or indirect, of all or substantially all of the assets of
DNAP, on a consolidated basis, or FreshWorld, Inc., in one transaction or a
series of related transactions, if, immediately after such transaction, any
"person" or "group" is or becomes the "beneficial owner", directly or
indirectly, of more than 30% of the total voting power entitled to vote in the
election of directors of the transferee or (ii) any "person" or "group" is or
becomes the "beneficial owner", directly or indirectly, of more than 30% of the
total voting power entitled to vote in the election of directors of DNAP or
FreshWorld, Inc. or any successor (by way of merger, or otherwise) to all or
substantially all of the assets of DNAP, on a consolidated basis or to all or
substantially all of the assets of FreshWorld, Inc.
For purpose of this definition, (i) the terms "person" and "group"
shall have the meaning used for purposes of Rules 13d-3 and 13d-5 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
applicable, and (ii) the term "beneficial owner" shall have the meaning used in
Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable.
Employer agrees to reasonably consider and negotiate an amendment
hereto to be prepared by Employee to address the possibility that Employee may
be subject to an excise tax pursuant toe Section 4999 of the Internal Revenue
Code as a result of the operation of this section 10(e).
11. SURVIVAL. Notwithstanding the termination of the this Agreement
pursuant to Section 10 or the expiration of the Employment Term, the obligations
of Employee under Sections 6, 7 and 8 shall survive and remain in full force and
effect and Employer shall be entitled to equitable relief against Employee
pursuant to the provisions of Section 9, and the obligations of Employer under
Sections 4 and 5 shall survive and remain in full force and effect to the extent
provided therein..
<PAGE>
12. NOTICE. All notice and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when delivered by hand, sent by
recognized overnight delivery service such as Federal Express or mailed by
registered or certified mail, return receipt requested, and shall be deemed to
be effective on the date delivered by hand, one business day after being sent by
recognized overnight delivery service such as Federal Express or three business
days after being mailed by first class mail, as follows (provided that notice of
change of address shall be deemed given only when received): If to Employer, at
Employer's address provided on the first page of this Agreement; if to Employee,
at Employee's address provided on the first page of this Agreement; or to such
other names or addresses as Employer or Employee, as the case may be, shall
designate by notice to the other party in the manner specified in this Section.
13. GOVERNING LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the substantive laws of the State of California
without reference to the principles governing the conflicts of laws applicable
in that or any other jurisdiction.
14. CONTENTS OF AGREEMENT; AMENDMENT AND ASSIGNMENT. This Agreement
sets forth the entire understanding between the parties hereto with respect to
the subject matter hereof and cannot be changed, modified or terminated except
upon written amendment duly executed by the parties hereto. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, personal representatives, successor
and assigns of the parties hereto, except that (a) the duties and
responsibilities of Employee hereunder are of a personal nature and shall not be
assignable in whole or in part by Employee and (b) the rights and interests of
Employee hereunder shall not be assignable in whole or in part by Employee. In
particular, and without limitation, this Agreement shall be assignable by
Employer to any of its subsidiaries or affiliates so long as such assignment
does not change the nature or scope of Employee's responsibilities and does not
otherwise modify the terms hereof.
15. SEVERABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement that can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision in any other jurisdiction
or under any other circumstance.
16. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon Employer
by this Agreement is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity. No
delay or omission by Employer in exercising any right, remedy or power hereunder
or existing at law or in equity shall be construed as a waiver thereof, and any
such right, remedy or power may be exercised by Employer from time to time and
as often as may be deemed expedient or necessary by Employer in its sole
discretion.
17. ARBITRATION. Except as provided in Section 9 hereof, any dispute
or controversy arising from or relating to this agreement shall be decided by
<PAGE>
conclusive and binding arbitration in the County of San Francisco, State of
California, or the County of Monterey, in accordance with the Rules for
Resolution of Employment Disputes of the American Arbitration Association. At
the request of either Employer or Employee, arbitration proceedings shall be
conducted in the utmost secrecy, and in such case, all documents, testimony and
records shall be received, heard and maintained by the arbitrator in secrecy,
available for inspection only by Employer or by Employee and their respective
attorneys and experts who shall agree, in advance and in writing, to receive all
such information confidentially and to maintain the secrecy of such information
until such information shall become generally known.
18. ATTORNEYS' FEES. Employer will reimburse Employee for its
reasonable legal fees and costs in connection with the drafting, negotiation and
execution of this Agreement. In connection with any action or proceeding under
this Agreement, the prevailing party will be entitled to receive its reasonable
attorneys' fees and costs.
IN WITNESS WHEREOF, the undersigned have each duly executed this
Agreement as of the date first above written.
EMPLOYER:
DNA PLANT TECHNOLOGY CORPORATION
By: /s/ Doug Luke
Name: Doug Luke
Title: Chairman of the Compensation and
` Nominating Committee of the
Board of Directors
FRESHWORLD, INC.
By: /s/ Robert Serenbetz
Name: Robert Serenbetz
Title: President
EMPLOYEE:
/s/ Robert Igleheart
Exhibit 10.15
AGREEMENT
AGREEMENT, dated as of September 28, 1995, between DNA Plant Technology
Corporation ("DNAP"), a Delaware corporation with offices at 6701 San Pablo
Avenue, Oakland, California 94608-1239, and United Agricorp, Inc. ("UAC"), a
Delaware corporation with offices at 1117 Perimeter Center, West, Suite E401,
Atlanta, Georgia 30338.
For and in consideration of the mutual promises and covenants herein contained,
the parties hereto agree as follows:
ARTICLE 1
Issuance of the DNAP Shares, the
Additional DNAP Shares,
and the UAC shares
1.01 AGREEMENT TO ISSUE THE DNAP SHARES. Subject to and in accordance
with the terms and conditions of this Agreement, DNAP shall issue to UAC on the
Closing Date (as hereinafter defined) a number of shares (the "DNAP Shares") of
Common Stock, par value $.01 per share (the "DNAP Common Stock"), of DNAP
determined by dividing (a) $1,946,722 by (b) the Average Closing Market Price
(as hereinafter defined); provided, however, that DNAP shall not be obligated to
deliver more than 1,557,377 DNAP Shares. As used herein, the "Average Closing
Market Price" shall be the Closing Price of DNAP Common Stock on September 11,
1995. "Closing Price" on any day is (i) the last reported sales price regular
way or, in case no such reported sale takes place on any such day, the average
of the closing bid and asked prices regular way, in either case on the principal
national securities exchange (including, for purposes hereof, the NASDAQ
National market system) on which the DNAP Common Stock is listed or admitted to
trading, (ii) if on any such date the DNAP Common Stock is not listed or
admitted to trading on any national securities exchange, the average of the
highest reported bid price and the lowest reported asked price for the DNAP
Common Stock as furnished by the National Association of Securities Dealers,
Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting
such information, or (iii) if the Closing Price cannot be determined by the
methods set forth in clause (i) or (ii), the Closing Price shall be the fair
market value of one share of DNAP Common Stock as determined conclusively by the
Board of Directors of DNAP in good faith.
1.02 THE ADDITIONAL DNAP SHARES. If the Average Additional Market Price
(as hereinafter defined) of the DNAP Common Stock is not at least equal to the
Average Closing Market Price, DNAP agrees that it will issue and deliver to UAC,
for no additional consideration from UAC, a number of shares (the "Additional
DNAP Shares") of DNAP Common Stock determined by (a) multiplying (i) the
difference between the Average Closing Market Price and the Average Additional
Market Price times (ii) the number of DNAP Shares issued pursuant to Section
1.01 and delivered pursuant to Section 1.04 and
<PAGE>
(b) dividing the product so obtained by the Average Additional Market Price;
provided, however, that DNAP shall not be obligated to deliver more than 542,473
Additional DNAP Shares. If DNAP is required to issue the Additional DNAP Shares
to UAC pursuant to this section 1.02, DNAP will do so as soon as practicable
after the second anniversary of the Closing Date, provided that DNAP's
obligation hereunder shall be subject to the prior receipt by DNAP of a
certificate executed by the President or a Vice President of UAC to the effect
that UAC's; representations and warranties contained in Sections 3.07 and 3.08
of this Agreement remain true and correct in all material respects as of the
second anniversary of the Closing Date (or such later date of issuance of the
Additional DNAP Shares). As used herein, the "Average Additional Market Price"
shall be the average of the Closing Price of the DNAP Common Stock on each of
the 20 trading days ending on and including the second anniversary of the
Closing Date.
1.03 AGREEMENT TO ISSUE THE UAC SHARES. Subject to and in accordance
with the terms and conditions of this Agreement, UAC shall issue and deliver to
DNAP on the Closing Date 13% of shares which is 1,364,118 shares (the "UAC
Shares") of Common Stock, par value $.001 per share (the "UAC Common Stock"), of
UAC.
1.04 THE CLOSING. The closing of the issuance and delivery of the DNAP
Shares and the UAC Shares (the "Closing") shall take place at the offices of
Proskauer Rose Goetz & Mendelsohn, 1585 Broadway, New York, New York on the
fifth day after the last of the conditions set forth in Article IV shall have
been satisfied or, if permissible, waived, or if such day is not a Business Day
(as hereinafter defined) the next succeeding day which is a Business Day (the
time and date of the Closing being herein referred to as the "Closing Date"). On
the Closing Date, there will be delivered to UAC the DNAP Shares against
delivery by UAC to DNAP of the UAC shares. As used herein, "Business Day" shall
mean any day other than Saturday, Sunday, or any other day when banks in New
York City are required or permitted to be closed.
1.05 DEMAND REGISTRATION. On or after January 1, 1996, UAC may request
registration under the Securities Act of all or part of the DNAP Shares. Subject
to the priority provisions set forth at closing, will include the DNAP Shares in
such registration.
ARTICLE II
Representations, Warrants, and Agreements of DNAP
DNAP represents and warrants to, and agrees with, UAC as follows:
2.01 CORPORATE ORGANIZATION AND QUALIFICATION. DNAP is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, and is qualified to transact business and is in
good standing as a foreign corporation in every jurisdiction in which its
ownership, leasing, licensing, or use of property or assets or the conduct of
its business makes such qualifications necessary, except in such jurisdictions
where the failure to be so qualified or in good standing would not have a
material adverse effect on the business, results of operations, or financial
condition of DNAP and its subsidiaries taken as a whole.
<PAGE>
2.02 VALIDITY OF TRANSACTION. DNAP has all requisite power and
authority to execute, deliver, and perform this Agreement and to issue and
deliver the DNAP Shares, the Additional DNAP Shares, and the Further DNAP Shares
to UAC. All necessary corporate proceedings of DNAP have been duly taken to
authorize the execution, delivery, and performance of this Agreement and to
authorize the issuance and delivery of the DNAP Shares, the Additional DNAP
Shares, and the Further DNAP Shares to UAC. This Agreement has been duly
authorized, executed, and delivered by DNAP, is the legal, valid, and binding
obligation of DNAP, and is enforceable as to DNAP in accordance with its terms.
No consent, authorization, approval, order, license, certificate, or permit of
or from, or declaration or filing with, any Federal, state, local, or other
governmental authority or of any court or other tribunal is required by DNAP for
the execution, delivery, or performance of this Agreement by DNAP. No consent of
any party to any contract, agreement, instrument, lease, license, arrangement,
or understanding to which DNAP is a party, or by which any of its properties or
assets is bound, is required for the execution, delivery, or performance by DNAP
of this Agreement, except for such consents as have been obtained at or prior to
the date of this Agreement; and the execution, delivery, and performance of this
Agreement by DNAP will not violate result in a breach of, conflict with, or
(with or without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement, or understanding, or violate or result
in a breach of any term of the Certificate of Incorporation or bylaws of DNAP,
or violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment, or decree binding on DNAP or to which any of its operations,
business, properties, or assets is subject. The DNAP Shares, the Additional DNAP
Shares, and the Further DNAP Shares have been duly authorized and, upon delivery
of the stock certificates representing the DNAP Shares (and, if applicable, the
Additional DNAP Shares and the Further DNAP Shares) to UAC, will be validly
issued, fully paid, and nonassessable, will not have been issued in violation of
any preemptive right of stockholders or rights of first refusal, and UAC will
have good title to the DNAP Shares (and, if applicable, the Additional DNAP
Shares and the Further DNAP Shares), free and clear of all liens, security
interests, pledges, charges, encumbrances, stockholders agreements, and voting
trusts (other than any created by UAC).
2.03 CAPITALIZATION.
(a) The authorized capital stock of DNAP consists of
60,000,000 shares of DNAP Common Stock and 5,000,000 shares of preferred stock,
par value $.01 per share ("DNAP Preferred Stock"). As of the date hereof,
(i) __________________shares of DNAP Common Stock are issued and outstanding,
(ii) ______________ shares of DNAP Common Stock have been duly reserved for
issuance to officers, employees or directors of, or consultants to, DNAP or its
subsidiaries, (iii) 5,609,700 shares of DNAP Common Stock have been duly
reserved for issuance upon the conversion of DNAP's $2.25 convertible
Exchangeable Preferred Stock, par value $.01 per share (the "2.25 Convertible
Preferred Stock"); and (iv) 2,750,000 shares of DNAP Common Stock have been duly
reserved for issuance upon the conversion of DNAP's series A Convertible
Preferred Stock, par value $.01 per share (the "Series A Convertible Preferred
Stock"). As of the date hereof, 1,380,000 shares of $2.25 Convertible Preferred
Stock and 2,750 shares of Series A Convertible Preferred Stock are issued and
outstanding.
<PAGE>
(b) Except as set forth on Exhibit A annexed hereto or as
contemplated hereby, (i) as of the date hereof there are, and immediately upon
consummation at the Closing of the transaction contemplated hereby there will
be, no preemptive or similar rights to purchase or otherwise acquire shares of
capital stock of DNAP pursuant to any provisions of law, the certificate of
incorporation or by-laws of DNAP, in each case as amended to the date hereof, or
any agreement to which DNAP is a party, or otherwise and (ii) there is, and
immediately upon consummation at the Closing of the transactions contemplated
hereby there will be, no agreement, restriction, or encumbrance (such as a right
of first refusal, right of first offer, voting agreement, voting trust, or
proxy) with respect to the sale or voting of any shares of capital stock of DNAP
(whether outstanding or issuable upon conversion or exercise of outstanding
securities).
2.04 SECURITIES LAWS COMPLIANCE. Subject to the accuracy of the
representations and warranties of UAC set forth in Article III hereof, the offer
and sale of the DNAP Shares (and, if applicable, the Additional DNAP Shares) to
UAC complies with all applicable Federal and state securities laws.
2.05 FINDER OR BROKER. Neither DNAP nor any person acting on behalf of
DNA has negotiated with any finder, broker, intermediary, or similar person in
connection with the transactions contemplated hereby.
2.06 ACCREDITED INVESTOR. DNAP is an "accredited investor," as that
term is defined in Rule 501 of Regulation D promulgated under the Securities Act
of 1933 (the "Securities Act"). DNAP has received all requested documents from
UAC and has had an opportunity to ask questions of and receive answers from the
officers of UAC.
2.07 INVESTMENT INTENT. DNAP is acquiring the UAC Shares for its own
account for investment and not with a view to, or for sale in connection with,
any public distribution thereof in violation of the Securities Act. DNAP
understands that the UAC Shares and the Further UAC Shares have not been
registered for sale under the Securities Act or qualified under applicable state
securities laws and that the UAC Shares are being offered and sold to DNAP
pursuant to one or more exemptions from the registration or qualification
requirements of such securities laws and that the representations and warranties
contained in Sections 2.06, 2.07, and 2.08 are given with the intention that UAC
may rely thereon for purposes of claiming such exemptions. DNAP understands that
it must bear the economic risk of its investment in UAC for an indefinite period
of time, as the UAC Shares cannot be sold unless subsequently registered under
the Securities Act and qualified under state securities laws, unless an
exemption from such registration and qualification is available.
2.08 TRANSFER OF THE UAC SHARES. DNAP will not sell or otherwise
dispose of any UAC Shares unless (a) a registration statement with respect
thereto has become effective under the Securities Act and such shares have been
qualified under applicable state securities laws or (b) there is presented to
UAC notice of the proposed transfer and, if it so requests, a legal opinion
reasonably satisfactory to UAC that such registration and qualifications are not
required. DNAP will not sell or otherwise dispose of any UAC Share unless it
first offers to sale these shares to UAC. UAC will have 15 days to agree to
purchase the UAC Shares from DNAP. At the end of the 15 day period, if UAC has
not agreed to purchase the UAC Shares from DNAP,
<PAGE>
DNAP is free to sell or otherwise dispose of the UAC Shares (on the same or more
favorable terms) at the same price or higher price than offered to UAC. DNAP
consents that any transfer agent for the UAC Common Stock may be instructed not
to transfer any UAC Shares unless it receives satisfactory evidence of
compliance with the foregoing provisions, and that there may be endorsed upon
any certificate representing the UAC Shares (and any certificates issued in
substitution therefor) the following legend calling attention to the foregoing
restrictions on transferability of the UAC Shares, stating in substance:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR QUALIFIED UNDER ANY STATE SECURITIES
LAW. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION IS AVAILABLE."
UAC shall, upon the request of any holder of a stock certificate
bearing the foregoing legend and the surrender of such certificate, issue a new
stock certificate without such legend if (i) the stock evidenced by such
certificate has been effectively registered under the Securities Act and
qualified under any applicable state securities law and sold by the holder
thereof in accordance with such registration and qualification or (ii) such
holder shall have delivered to UAC a legal opinion reasonably satisfactory to
UAC to the effect that the restrictions set forth herein are no longer required
or necessary under the Securities Act or any applicable state law.
<PAGE>
ARTICLE III
Representations, Warranties, and Agreements of UAC
UAC represents and warrants to, and agrees with, DNAP as follows:
3.01 CORPORATE ORGANIZATION AND QUALIFICATION. UAC is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, and is qualified to transact business and is in
good standing as a foreign corporation every jurisdiction in which its
ownership, leasing, licensing, or use of property or assets or the conduct of
its business makes such qualifications necessary, except in such jurisdictions
where the failure to be so qualified or in good standing would not have a
material adverse effect on the business, results of operations, or financial
condition of UAC.
3.02 VALIDITY OF TRANSACTION. UAC has all requisite power and authority
to execute, deliver, and perform this Agreement and to issue and deliver the UAC
Shares to DNAP. All necessary corporate proceedings of UAC have been duly taken
to authorize the execution, delivery, and performance of this Agreement and to
authorize the issuance and delivery of the UAC Shares to DNAP. This Agreement
has been duly authorized, executed, and delivered by UAC, is the legal, valid,
and binding obligation of UAC, and is enforceable as to UAC in accordance with
its terms. No consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any Federal, state, local, or
other governmental authority or of any court or other tribunal is required by
UAC for the execution, delivery, or performance of this Agreement by UAC. No
consent of any party to any contract, agreement, instrument, lease, license
arrangement, or understanding to which UAC is a party, or by which any of its
properties or assets is bound, is required for the execution, delivery, or
performance by UAC of this Agreement, except for such consents as have been
obtained at or prior to the date of this agreement; and the execution, delivery,
and performance of this Agreement by UAC will not violate, result in a breach of
conflict with, or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement, or understanding,
or violate or result in a breach of any term of the Certificate of Incorporation
of by-laws of UAC, or violate, result in a breach of, or conflict with any law,
rule, regulation, order, judgment, or decree binding on UAC or to which any of
its operations, business, properties, of assets is subject. The UAC Shares have
been duly authorized and, upon delivery of the stock certificates representing
the UAC Shares to DNAP, will be validly issued, fully paid, and nonassessable,
will not have been issued in violation of any preemptive right of stockholders
or right of first refusal, and DNAP will have good title to the UAC Shares, free
and clear of all liens, security interests, pledges, charges, encumbrances,
stockholders agreements, and voting trusts (other than any created by DNAP).
3.03 CAPITALIZATION.
(a) the authorized capital stock of UAC consists of 25,000,000
shares of UAC Common Stock and 10,000,000 shares of preferred stock, par value
$.001 per share ("UAC Preferred Stock"). As of the date hereof, (i) 4,590,729
<PAGE>
shares of UAC Common Stock are issued and outstanding, (ii) 3,645,000 shares of
UAC Common Stock have been duly reserved for issuance to officers, employees or
directors of, or consultants to, UAC, (iii) 4,538,366 shares of UAC Common Stock
have been duly reserved for issuance upon the conversion of UAC's Series A
Preferred Stock, par value $.001 per share (the "UAC Series A Preferred Stock"),
and (iv) 500,000 shares of UAC Common Stock have been duly reserved for issuance
upon the conversion of UAC's Series B Preferred Stock, par value $.001 per share
(the "UAC Series B Preferred Stock"). As of the date hereof, 4,038,366 shares of
UAC Series A Preferred Stock and 500,000 shares of UAC Series B Preferred Stock
are issued and outstanding.
(b) Except as set forth on Exhibit B annexed hereto or as
contemplated hereby, (i) as of the date hereof there are, and immediately upon
consummation at the Closing of the transactions contemplated hereby there will
be, no preemptive or similar rights to purchase or otherwise acquire shares of
capital stock of UAC pursuant to any provisions of law, the certificate of
incorporation of by-laws of UAC, in each case as amended to the date hereof, or
any agreement to which UAC is a party or otherwise and (ii) there is, and
immediately upon consummation at the Closing of the transactions contemplated
hereby there will be, no agreement, restriction, or encumbrance (such as a right
of first refusal, right of first offer, voting agreement, voting trust, or
proxy) with respect to the sale or voting of any shares of capital stock of UAC
(whether outstanding or issuable upon conversion or exercise of outstanding
securities).
3.04 SECURITIES LAWS COMPLIANCES. Subject to the accuracy of the
representations and warranties of DNAP set forth in Article II hereof, the offer
and sale of the UAC Shares to DNAP complies with all applicable Federal and
state securities laws.
3.05 FINDER OR BROKER. Neither UAC nor any person acting on behalf of
UAC has negotiated with any finder, broker, intermediary, or similar person in
connection with the transactions contemplated herein.
3.06 UAC DUE DILIGENCE. UAC has received all requested documents from
DNAP and has had an opportunity to ask questions of and receive answers from
the officers of DNAP.
3.07 INVESTMENT INTENT. UAC is acquiring the DNAP Shares (and, if
applicable, the Additional DNAP Shares) for its own account for investment and
not with a view to, or for sale in connection with, any public distribution
thereof in violation of the Securities Act. UAC understands that the DNAP
Shares, the Additional DNAP Shares, and the Further DNAP Shares have not been
registered for sale under the Securities Act or qualified under applicable state
securities laws and the DNAP Shares (and, if applicable, the Additional DNAP
Shares) are being offered and sold to UAC pursuant to one or more exemptions
from the registration or qualification requirements of such securities laws and
that the representation and warranties contained in this Article III are given
with the intention that DNAP may rely thereon for purposes of claiming such
exemptions. UAC understands that it must bear the economic risk of its
investment in DNAP for an indefinite period of time, as the DNAP Shares (and, if
applicable, the Additional DNAP Shares) cannot be sold unless subsequently
registered under the Securities act and qualified under state securities laws,
unless an exemption from such registration and qualification is available.
<PAGE>
3.08 TRANSFER OF THE DNAP SHARES, ADDITIONAL DNAP SHARES, AND THE
FURTHER DNAP SHARES. UAC will not sell or otherwise dispose of any DNAP Shares
(or, if applicable, any Additional DNAP Shares) unless, (a) a registration
statement with respect thereto has become effective under the Securities Act and
such shares have been qualified under applicable state securities laws or (b)
there is presented to DNAP notice of the proposed transfer and, if it so
requests, a legal opinion reasonably satisfactory to DNAP that such registration
and qualification are not required. UAC consents that the transfer agent for the
DNAP Common Stock may be instructed not to transfer any DNAP Shares (and, if
applicable, the Additional DNAP Shares) unless it receives satisfactory evidence
of compliance with the foregoing provisions, and that there may be endorsed upon
any certificate representing the DNAP Shares (and, if applicable, the Additional
DNAP Shares) (and any certificate issued in substitution therefor) the following
legend calling attention to the foregoing restrictions on transferability of the
DNAP Shares (and, if applicable, the Additional DNAP Shares), stating in
substance:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR QUALIFIED UNDER ANY STATE SECURITIES
LAW. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION IS AVAILABLE."
DNAP shall, upon the request of any holder of a stock certificate bearing the
foregoing legend and the surrender of such certificate, issue a new stock
certificate without such legend if (i) the sock evidenced by such certificate
has been effectively registered under the Securities Act and qualified under any
applicable state securities law and sold by the holder thereof in accordance
with such registration and qualifications, or (ii) such holder shall have
delivered to DNAP a legal opinion reasonably satisfactory to DNAP to the effect
that the restrictions set forth herein are no longer required or necessary under
the Securities Act or any applicable state law.
<PAGE>
ARTICLE IV
Conditions to Closing
4.01 CONDITIONS PRECEDENT TO DNAP'S OBLIGATIONS. The obligation of DNAP
to consummate the transactions contemplated hereby is subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, any one or more of which may be waived in writing by DNAP;
(a) REPRESENTATIONS AND WARRANTIES TRUE. All of the
representations and warranties of UAC Contained in this Agreement shall be true
and correct in all material respects as of the Closing Date, and DNAP shall have
received a certificate, dated as of the Closing Date and executed by the
President or a Vice President of UAC, to the foregoing effect.
(b) LITIGATION. There shall be no injunction, restraining
order, or other order of any nature, issued by a court of competent
jurisdiction, which shall direct that this Agreement or any of the transactions
contemplated hereby not be consummated as herein provided, and no action, suit,
or proceeding (or investigation that could lead to any action, suit, or
proceeding) challenging such transactions shall have been instituted or
threatened by any person or entity.
(c) LEGAL MATTERS. All actions, proceedings, instruments, and
documents required to consummate the transactions contemplated herein and all
other related legal matters shall have been approved by counsel to DNAP.
(d) RESEARCH AGREEMENT. Each of DNAP and UAC shall have
executed and delivered to the other a Research Agreement in form and substance
satisfactory to the parties thereto (the "Research Agreement")
(e) DELIVERY OF UAC SHARES. A certificate for the UAC Shares,
registered in the name of DNAP, shall have been delivered to DNAP.
4.02 CONDITIONS PRECEDENT TO THE UAC'S OBLIGATIONS. The Obligation of
UAC to consummate the transactions contemplated hereby is subject to the
fulfillment prior to or on the Closing Date of each of the following conditions,
any one or more of which may be waived in writing by UAC:
(a) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of DNAP contained in this Agreement shall be true and correct in
all material respects as of the Closing Date as if made on and as of the Closing
Date, and UAC shall have received a certificate, dated as of the Closing Date
and executed by the President or a Vice President of DNAP, to the foregoing
effect.
(b) LITIGATION. There shall be no injunction, restraining
order, or other order of any nature, issued by a court of competent
jurisdiction, which shall direct that this Agreement or any of the transactions
contemplated hereby not be consummated as herein provided, and no action, suit,
or proceeding (or investigation that could lead to any action, suit, or
proceeding) challenging such transactions shall have been instituted or
threatened by any person or entity.
<PAGE>
(c) LEGAL MATTERS. All actions, proceedings, instruments, and
documents required to consummate the transactions contemplated herein and all
other related legal matters shall have been approved by counsel to UAC.
(d) RESEARCH AGREEMENT. Each of DNAP and UAC shall have
executed and delivered to the other the Research Agreement.
(e) DELIVERY OF DNAP SHARES. A certificate for the DNAP
Shares, registered in the name of UAC, shall have been delivered to UAC.
ARTICLE V
Covenants of UAC
From and after the Closing Date, UAC covenants and agrees with DNAP that until
the earlier to occur of (i) such time as DNAP owns fewer than 1,500,000 shares
of UAC common stock and (ii) such time as the total voting power of the shares
of UAC Common Stock owned by DNAP is less then 10% of the total combined voting
power of all shares of capital stock of UAC then outstanding, UAC will comply
with the following provisions:
5.01 RIGHTS WITH RESPECT TO BOARD MEMBER. DNAP shall have the right,
but not the obligation, to nominate a member to serve on UAC's Board of
Directors. If DNAP elects to designate a nominee to UAC's Board of Directors, it
shall notify UAC in writing and provide UAC with the name and credentials of its
designee. UAC shall use its best efforts to cause the designated person to be
elected to UAC's Board of Directors as promptly as practicable after receipt of
DNAP's written notice. Thereafter, UAC's Board of Directors will, subject to its
fiduciary duties, (i) nominate such designated person to be included in the
slate of nominees recommended by UAC's Board to its stockholders for election as
director at each annual or special meeting of stockholders, as the case may be.
If any such designee shall cease to serve as a director for any reason, the
vacancy resulting thereby shall be filled by another designee of DNAP according
to the procedures described in this Section 5.01.
5.03 RIGHT OF FIRST REFUSAL
(a) UAC shall not issue, sell, or exchange, agree to issue,
sell or exchange, or reserve or set aside for issuance, sale or exchange (other
than Excluded Securities (as hereinafter defined)), any (i) shares of UAC Common
Stock, (ii) any other equity security of UAC, (iii) any debt security of UAC
which by its terms is convertible into or exchangeable for any equity security
of UAC, (iv) any security of UAC that is a combination of debt and equity, or
(v) any option, warrant, or other right to subscribe for, purchase or otherwise
acquire any equity security or any such debt security of UAC, unless in each
case UAC shall have offered to sell to DNAP a Proportionate Percentage (as
hereinafter defined) of the securities offered (the "Offered Securities"). The
Offered Securities shall be offered at a price and on such terms as shall have
been specified by UAC in writing delivered to DNAP (the "Offer"), which Offer by
its terms shall remain open and irrevocable for a period of 15 days from the
date it is received by DNAP; provided, however, that as long as UAC offers the
Proportionate Percentage of the Offered Securities to DNAP in accordance with
this Section 5.03, nothing herein shall
<PAGE>
prevent UAC from concurrently offering the Offered Securities to any other
person. Notice of DNAP's intention to accept, in whole or in part, an Offer made
pursuant to this Section 5.03 shall be evidenced by a writing signed by DNAP and
delivered to UAC prior to the end of the 15-day period of such Offer, setting
forth such portion of the Proportionate Percentage of the Offered Securities as
DNAP elects to purchase (the "Notice of Acceptance").
(b) If the Notice of Acceptance is not given by DNAP in respect of all
the Proportionate Percentage of the Offered Securities, UAC shall have 60 days
from the expiration of the foregoing 15-day period to sell all or any part of
such Offered Securities (including that portion thereof as to which a Notice of
Acceptance has not been given by DNAP) to any other person or persons, but only
upon the terms and conditions in all respects, including, without limitation,
unit price and interest rates, which are no more favorable, in the aggregate, to
such other person or persons than those set forth in the Offer.
(c) In each case, any Offered Securities not purchased by DNAP or any
other person in accordance with this Section 5.03 may or may not be sold or
otherwise disposed of until they are again offered to DNAP under the procedures
specified in this Section 5.03.
(d) The rights of DNAP under Sections 5.02 and 5.03 shall not apply to
the following securities (the "Excluded Securities"):
(i) UAC Common Stock issued as a stock dividend or upon any stock split
or other subdivision or combination of shares of UAC Common Stock;
(ii) securities issued pursuant to the acquisition directly or
indirectly of some or all of another corporation or other entity by UAC
by merger, purchase, or other acquisition transaction; provided such
merger, purchase, or other transaction is on an arms'-length basis and
the other party thereto is not an affiliate of UAC;
(iii) securities issued to the Regents of the University of California
in connection with the exercise of UAC's option under that certain
agreement, dated December 1, 1992, between UAC and the Regent's of the
University of California;
(iv) securities issued to any third party (not affiliated with UAC) in
connection with an arms'-length transaction between UAC and such
unaffiliated third party relating to (x) the in-licensing,
out-licensing, or cross-licensing of technology with such unaffiliated
third party, (y) any sponsored research or similar agreement involving
UAC and such unaffiliated third party, or (z) any similar arms'-length
strategic alliance transaction with an unaffiliated third party;
(v) any issuance of options, warrants, or other rights to subscribe
for, purchase, or otherwise acquire any equity security or any
convertible debt security issued by UAC in connection with an equipment
lease or other financing or capital raising activities, to a broker,
agent, underwriter, or similar person (not previously affiliated with
UAC) or to employees, directors, officers, or consultants of UAC
pursuant to an equity incentive arrangement approved by the Board of
Directors of UAC; and
<PAGE>
(vi) securities issued by UAC pursuant to any public offering of
securities by UAC.
For the purposes of this Section 5.03, the terms "Proportionate
Percentage" shall mean that the percentage determined by dividing (x) the number
of shares of UAC by (y) the number of shares of UAC Common Stock outstanding
immediately prior to the Offer.
ARTICLE VI
Termination
Upon mutual agreement, the parties may agree to terminate this
Agreement and/or the Research Agreement if the Closing shall not have occurred
during the 180-day period commencing on the date hereof. In the event of such
termination, this Agreement will be of no further force or effect, neither party
will have any further obligations or liabilities to the other under this
Agreement, and each party will be responsible for expenses as provided in
Section 7.04.
ARTICLE VII
Miscellaneous
7.01 COMMUNICATIONS All notices or other communications hereunder shall
be in writing and shall be given by registered or certified mail (postage
prepaid and return receipt requested), by an overnight courier service which
obtains a receipt to evidence delivery, or by telex or facsimile transmission
(provided that written confirmation of receipt is provided), addressed as set
forth below:
If to DNAP:
DNA Plant Technology Corporation
6701 San Pablo Avenue
Oakland, California 94608
Attention: President
With a copy to:
Proskauer Rose Goetz and Mendelsohn
1585 Broadway
New York, New York 10036
Attention: Henry O. Smith III
If to UAC:
United Agricorp, Inc.
1117 Perimeter Center, West
Suite E401
Atlanta, Georgia 30338
<PAGE>
Attention: Morgan Pridemore III
With a copy to:
Morrison and Foerster
345 California 94104
San Francisco, California 94104
Attention: John Campbell
or such other address as any party may designate to the other in accordance with
the aforesaid procedure. All notices and other communications sent by overnight
courier service shall be deemed to have been given as of the second Business Day
after delivery thereof to such courier service, those given by telex or
facsimile transmission shall be deemed given when sent, and all notices and
other communications sent by mail shall be deemed given as of the fifth Business
Day after the date of deposit in the United States mail.
7.02 SUCCESSORS AND ASSIGNS. UAC may not sell, assign, transfer, or
otherwise convey any of its rights or delegate any of its duties under this
Agreement, except to a corporation which has succeeded to substantially all of
the business and assets of UAC and has assumed in writing its obligations under
this Agreement, and this Agreement shall be binding on UAC and such successor.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by DNAP and its successors and assigns. Without limiting the
generality of the foregoing, any transferee of more than 50% of UAC Shares (or,
if applicable, more than 50% of the aggregate of the UAC Shares) shall have the
rights set forth in Article V, and such rights shall be enforceable against UAC
by such transferees as third-party beneficiaries.
7.03 AMENDMENTS AND WAIVERS. Neither this Agreement nor any term hereof
may be changed or waived (either generally or in a particular instance and
either retroactively or prospectively) absent the written consent of UAC and
DNAP.
7.04 EXPENSES. Each of UAC and DNAP will be responsible for the payment
of all expenses incurred by it in connection with the preparation, execution,
and delivery of this Agreement, any other documents relating to the transactions
contemplated by this Agreement, and the issuance and delivery of the DNAP Shares
(and, if applicable, the Additional DNAP Shares) and the UAC Shares and the
consummation of the transactions herein described.
7.05 SURVIVAL OR REPRESENTATIONS, ETC. The representations, warranties,
covenants, and agreements made herein or in any certificate or document executed
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
7.06 DELAYS OR OMISSIONS; WAIVER. No delay or omission to exercise any
right, power, or remedy accruing to either DNAP or UAC upon any breach or
default by the other under this Agreement shall impair any such right, power, or
remedy nor shall it be construed to be a waiver of any such breach or default,
or any acquiescence therein or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be
<PAGE>
deemed a waiver of any other breach or default theretofore or thereafter
occurring.
7.07 ENTIRE AGREEMENT. This Agreement and the Research Agreement
contain the entire understanding of the parties with respect to the subject
matter hereof and all prior negotiations, discussions, commitments, and
understandings heretofore had between them with respect thereto are merged
herein and therein.
7.08 HEADINGS. All article and section headings herein are inserted for
convenience only and shall not modify or affect the construction or
interpretation of any provision of this Agreement.
7.09 COUNTERPARTS; GOVERNING LAW. This agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, without giving effect to conflict of laws.
7.10 FURTHER ACTIONS. At any time and from time to time, each party
agrees, without further consideration, to take such actions and to execute and
deliver such documents as may be reasonably necessary to effectuate the purposes
of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
hereinabove set forth.
DNA PLANT TECHNOLOGY CORPORATION
By: /s/ Robert Serenbetz
Robert Serenbetz
Chairman and CEO
UNITED AGRICORP, INC.
By: /s/ Morgan Pridemore III
Morgan Pridemore III
Chairman and CEO
Exhibit 23.1
The Board of Directors
DNA Plant Technology Corporation:
We consent to incorporation by reference in the registration statements (No.
33-84006 and No. 33-59043) on Forms S-8 of DNA Plant Technology Corporation of
our report dated February 14, 1996, relating to the consolidated balance sheets
of DNA Plant Technology Corporation and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1995, and the related schedule, which report appears in the
December 31, 1995, annual report on Form 10-K of DNA Plant Technology
Corporation.
San Francisco, California
March 27, 1996
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