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-, DNAP 1984 ANNUAL STOCKHOLDERS' MEETING Cinnaminson, New Jersey June 7, 1984 Remarks of Richard Laster President and Chief Executive Officer and Dr. William R. Sharp Executive Vice President and Scientific Director It is a great pleasure for me to welcome you to our first annual meeting as a public company. It is gratifying to us that you v. took the time to come to Cinnaminson and we will do all that can be done to make this a very worthwhile and exciting day for you. The program for today calls for a presentation on the progress that DtlA Plant Technology Corporation has made during 1983 followed by a question and answer period, a light lunch, and then a tour of our facilities. Last week, as you know, one of our Presidential candidates toured these facilities. This clearly demonstrates the importance of agricultural biotechnology to the future of our country and also underscores the leadership position that DNAP enjoys in this particular field.

- 2 - ~r Agricultural biotechnology has created tremendously exciting new opportunities. And the best news is that this new technology allows the development and the commercialization of new benefits in plants within the normal corporate planning horizon. Traditional plant breeding required a time span o£ at least 8 years and sometimes much longer. Biotechnology cuts this time in half as it speeds up the development of new varieties that combine the best characteristics in plant "A" with the best in plant "B" or takes advantage of the natural reshuffling o£ genes in the plant cell. Significantly, results can be achieved less expensively than in pharmaceutical biotechnology as well as with a shorter fuse because clinical studies are not required. As a result of the advances in agricultural biotechnology, corporate leadership is paying unprecedented attention to how the adding of new values to agricultural raw materials can enhance a company's growth and profitability. You know that,~agribusiness is the world's largest industry -- it generates sales of over $500 billion annually and offers vast market opportunities for technical innovation. But it is important for us to select carefully the targets we ~¢ant to pursue and then channel the necessary resources to achieve the desired results. O O Ol

- 3 - DNAP's focus will be on the development of added-value plant products which will benefit either the producer or the a consumer. We're interested in developing breeding lines of vegetables, for instance, that may have improved nutrition, better flavor, texture, color, size, shape, shelf life or any other aspect that will enhance their acceptance by the processor or consumer, i~e also have an interest in the field of agricultural diagnostics as well as in the area of biotechnology which aims at plant produced chemicals such as flavors and fragrances. q, Succinctly put, DNAP's mission is to bring the benefits of value-added biotechnology developed products to the industrial processor and retail consumer. With this as a basic mission, DNAP's business plan calls for developing profits: by research contracts during the initial phase of tlle business plan, followed by royalties and license fees from th~use of our technology, and then by the marketing of proprietary products either through joint ventures or independently. Ne will now briefly review the excellent progress that we have made during this past year against each one of these business

e L - 4 - building blocks. First, with respect to research contracts, we entered 1984 wiLh research contract revenues at S times the level we enjoyed at the beginning of 1983. I'm pleased to say that by the end of Hay of this year, this increased an additional 50% so that today we have research contract revenues of over $1.6 million annually. These contracts, importantly, have been signed with some of the major corporations in this country and in the world. Currently, we have contracts with Campbell Soup, General Foods, Hershey, Koppers, British American Tobacco and also are enjoying joint collaborative agreements with Arthur D. Little and Archer Daniels ~|idland. A~ our breeding programs expand, we are increasing our greenhouse capacity by building a new half-acre unit. Last week we received zoning board approval for this project, which will be our sixth greenhouse. What is truly exciting is that we're presently in negotiations with several large multi-national companies and are optimistic that by the end of this year our level of research contracts will be increased to an annual rate well in exce~ of $2 million. Huch of the work that we're doing is focused on the food industry, where we have tremendous expertise both in the technical and business areas. We also have a leadership position in the tobacco field, heavily based on research done by

V - 5 - Dr. David Evans, our vice president and associate director of research. About a month ago, I had the opportunity to address about 200 of the top executives in the flavor industry at the 7Sth Annual Meeting of the Flavor and Extract ~tanufacturers' Association of the United States. This talk, along with some earlier conversations, has stimulated considerable interest by the flavor and fragrance industry in the use of biotechnology to enhance the sourcing or the production of plant produced flavor or fragrance chemicals. I'm optimistic that our company will, by the end of this year, have developed an important position in this exciting large industry. .- Importantly, all but the first of the research contracts provide for us to participate in the benefits of the research once it is commercialized. This will be mostly in the form of royalties or licensing arrangements. In this regard, we are furthest along in a program that has led to the development of a higher solids processing tomato. The processing tomato market is $500 million in the IJnit~crd States. These are tomatoes that end up in soups, ketchup and sauces, where the processor is mainly interested in the solids of the tomato that contain flavor, texture, color and aroma, and less interested in the water that makes up about 959 of the ueight of a tomato. We have been able to increase the solids content of a commonly grown variety of processing tomato O1 O1

° - 6 - by 20~ and have tested this successfully under our supervision for at least 3 generations. Seed from this particular~variety is now being tested by the Campbell Soup Company to see if they can duplicate our findings prior to negotiating a business arrangement with us. In the meantime, we're busily working and making excellent progress on the next generation of processing tomatoes to build further improvements into the product and provide additional benefits to that industry. As our technical work on the other research contracts progresses towards commercialization, significant new business opportunities will v, open up to us since, with each of our contracts, we are working in huge markets. Coffee, for instance, is an $8-$10 billion crop. The third and perhaps the most important building block in our business pIan is the pursuit of proprietary products, which, as you recalI, would be marketed either through joint ventures or independently by us. ttere we have made very significant strides in this past year by estabIishing a joint venture with Koppers on the development and commercialization of plant disease diagnostic kits. Plant disease is a serious problem in agribusiness worldwide. For instance, in the United States alone, citrus crop loss due to 01 O1

- 7 - disease totals $300 million annually and money spent on turfgrass disease control in the United States is approximately $1.5 billion. Agri-Diagnostics, our joint venture with Koppers in which we have a 40t position, aims initially to develop and commercialize kits for turfgrass disease diagnosis as well as citrus crop disease diagnosis. Our research and development plans call for limited field tests of these kits by the end of this calendar year. In the consumer market we have long felt that there are v, significant opportunities for biotechnology to bring new values to various food or related products. One such product is VegiSnax, which has now been trademarked by us. The product consists of 100% natural, ready-to-eat carrots, celery and other vegetables which have been grown specifically to enhance snacking characteristics marketed in single serving pacEages. Salty snacks alone represent a $5 billion market at retail in the United States -- a market that continues to grow. At the same time, all of us are becoming more health conscious and more understanding of the relationship between nutrition and physical well-being so there is a need for "a good-for-you snack" -- no fat -- no salt. is designed to fill this need. We aim to move VegiSnax into broad scale consumer tests by the end of this year to allow us VegiSnax - low in calories, high in vitamins -- fdl Ol tO

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- 9 - the lead in monoclonal antibodies as they apply to agricultural disease, as well as in the field of biosynthesis of plant- produced chemicaIs. LastIy, we need to stay current on developments in the area of recombinant DNA to be ready for down-the-road application to our programs. I would now like to ask our executive vice president, Dr. Rod Sharp, to say a few words about the key accomplishments in science and technoIogy over this past 12 months. Dr. Sharp ..... v° (Dr. Rod Sharp) D,~IAP is using three technologies to speed up the process of plant breeding for rapid development of new pIant varieties with improved processing or consumer benefits• D~IAP has been a pioneer in the development and application of these three key plant breeding technologies: somaclonal variation, gamet~ocIonaI variation, and protoplast fusion. f Somaclonal and gametoclonal variation refer to the exploitation of the natural genetic reslmffling or sorting ~hich occurs in the plant's body (somatic) cells, e.g., root, leaf and stem cells, or the reprod~lctive (ganete) cells. These ceils are ~rown for a short period of time in the test tube and reeenerated into plants which are subsequently introduced into O1 Ol

- l0 - the company's breeding program. Protoplast fusion technology, on the other hand, allows the combining of the best genes of plant A with plant B by fusing cells from each of these plants in the test tube and then regenerating new plants. These new plant breeding technologies speed up the process of plant breeding which dates back to 1901, when rediscovery of Mendel's laws ushered in the idea that man could recombine genes from natural sources into combinations that were desirable for agricultural production. The company's progress in this area is quiLe evident from recent major articles in the "Science Times" section of The New York Times and the cover article"in Science. Specific applications of these technologies include: the development of a tomato variety with a 20~ higher solids content; the transferring of disease resistance from a wild variety of tobacco into a commercial species; the development of new corn breeding lines for popcorn; the development o~ special varieties of celery and carrots with enhanced snacking characteristics. lqe are conductinfi research in cytoplasmic genetics geared to the development of technology for production of inexpensive proprietary hybrid seed as well as the molecular fingerprinting of new varieties. The latter could be important for patent protection ~f new varieties.

T1 The company has a leadership position in the use of hybridomas, lular factories for production of monoclonal antibody= eagents. The company is using these antibody reagents for .... " ~;,:,, development of diagnostic kits which are easy to use and enable • ~,. ~.~-~:~:, ~ : ~ r,~:~,:_....~:'-~...~.,..."~ :~: .... pld ~ Identlf~cat~on~ of plant diseases in the field . Initially, ~ ,.., ~.~.~, ~ ~ ~,¢., .... " .~. t ; ~-i~ '~ '~ :~" . . ,./,<,.~.:,,:;~ ~:;the company Is developing and testing kits for turfgrass and .... -,,~',:" citrus diseases. The company is actively filing patents and seeking proprietary protection. We are applying for processing and utility patents in the areas of plant breeding and plant disease diagnosis. ICe will also be able to protect our plant breeding lines under the Plant Variety Protection Act as well as through the development of proprietary hybrids which cannot be successfully used for !~,~::~:.:}'~2¢,~:, seed production by the grower ~:~,~.~'.~, :, , . ~ "~.~)~'~%~' ,~, ~, ~ :~. ~.~ . ~ .... ,~, .:~g:.~:';;:~'" Our company's scientific capabilities are greatly enhanced by ,.:,:.:'. : ,: /' ..:.. . . ',;~::..~--::.-i' • our d~st~nguished Scientific Advisory Board. The l~oard meets annually as a group, and certain individuals on the Board meet with the company more often to evaIuate important scientific areas. The Board is made up of key scientists in the agricuItural biotechnology area including Drs. t]orman gorlaug and Helvin Calvin, both Nobel Prize winners. Remaining in the forefront of scientific progress in agricultural biotechnology ¢dl O1

- 12 - indispensible to our growth. :assembled will keep us on top Thank yon Rod, for your exciting presentation. We believe the tean we have I It certainly has . L ~,~.~t~- :~ .~, ~'~',~ y:~:L been a good year 6or us. Great progress has been ~ade on both the technical and the business side. I don't want to lose siRht of the fact that people are what this company is all about and we have been fortunate to continue to be able to attract some of the outstanding talent we need to pursue our goals in various fields. 1983 has been a banner year for us in this regard and from everything I see it seems like DNAP is the place to be for some of the leading scientists in agricultural biot~chnology as :well as for business people who want to have a part in t~e successful growth of a ne~¢ business. Earlier this~jrear we added significantly to our financial resources by our successful public offering. ~e also made an important addition to our facilities by purchasing the !O0-acre Campbell Soup Company East Coast Breeding Station, which is just Q~ 15 ninutes from here and includes a pilot plant processing facility as well as a modern building for administrative offices. All of this is consistent with our strategy to ~ove 0 0 0 Cn Co

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