<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
March 31, 1996
-----------------------------------------------
Date of Report (Date of Earliest Event Reported)
CALGENE, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
--------------------------------------------
(State or other jurisdiction of incorporation)
0-20641 68-0369863
---------------------- ----------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
1920 Fifth Street, Davis, California 95616
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(916) 753-6313
--------------------------------------------------
(Registrant's telephone number, including area code)
CALGENE II, INC.
-------------------------------------------
(Former name or former address)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ------ ------------------------------------
On March 31, 1996, Calgene II, Inc., a Delaware corporation (the
"Company"), acquired all outstanding shares of capital stock of Calgene, Inc., a
Delaware corporation ("Calgene") pursuant to a merger of a wholly-owned
subsidiary of the Company with and into Calgene (the "Merger"). As a result of
the Merger, each outstanding share of Common Stock of Calgene, $.001 par value
per share, was converted into the right to receive one share of the Company's
Common Stock, $.001 par value per share. Based upon the last reported sale price
of the Common Stock of Calgene on the Nasdaq National Market on Friday, March
29, 1996 ($5.75)(the "Closing Price"), the value of the shares of the Company's
Common Stock issued in connection with the Merger was $174 million.
Immediately following the Merger, the Company acquired all outstanding
shares of Tomato Investment Associates, Inc., a Delaware corporation ("TIA"),
together with certain other assets (the "Acquisition"), from Monsanto Company, a
Delaware corporation ("Monsanto"). The Company issued 30,143,441 shares of its
Common Stock to Monsanto in connection with the Acquisition. Based upon the
Closing Price, the value of the shares of the Company's Common Stock issued to
Monsanto in connection with the Acquisition was $173.3 million.
Item 7. Financial Statements and Exhibits.
- ------ ---------------------------------
(a) Financial statements of business acquired.
Pursuant to General Instruction B.3, this information has been
omitted because it has previously been reported as part of the Registrant's
Registration Statement on Form S-4, as filed with the Securities and Exchange
Commission on February 6, 1996.
(b) Pro Forma financial information.
Pursuant to General Instruction B.3, this information has been
omitted because it has previously been reported as part of the Registrant's
Registration Statement on Form S-4, as filed with the Securities and Exchange
Commission on February 6, 1996.
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(c) Exhibits.
Exhibit No. Exhibit
- ----------- -------
2.1 Agreement and Plan of Reorganization dated as of
October 13, 1995, by and between Calgene, Inc. and
Monsanto Company. (1)
2.2 Stockholders Agreement dated as of March 31, 1996
between the Registrant and Monsanto Company.
99.1 Press Release, dated April 1, 1996, announcing the
consummation of the transactions described herein.
_____________________
(1) Incorporated by reference to Annex A to the Prospectus included in the
Registrant's Registration Statement on Form S-4, as filed with the Commission on
February 6, 1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 15, 1996
/s/ Roger H. Salquist
_____________________________________
By: Roger H. Salquist
Title: Chief Executive Officer
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<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
2.1 Agreement and Plan of Reorganization dated
as of October 13, 1995, by and between
Calgene, Inc. and Monsanto Company. (1)
2.2 Stockholders Agreement dated as of March 31,
1996 between the Registrant and Monsanto
Company.
99.1 Press Release, dated April 1, 1996,
announcing the consummation of the
transactions described herein.
____________________
(1) Incorporated by reference to Annex A to the Prospectus included in the
Registrant's Registration Statement on Form S-4, as filed with the Commission on
February 6, 1996.
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<PAGE>
Exhibit 2.2
CALGENE II, INC.
AND
MONSANTO COMPANY
STOCKHOLDERS AGREEMENT
as of March 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 Effect of this Agreement.......................... 1
1.1 Effect of this Agreement.......................... 1
ARTICLE 2 Compliance with Securities Act.................... 2
2.1 Certain Definitions............................... 2
2.2 Requested Registration............................ 7
2.3 Company Registration.............................. 10
2.4 Expenses of Registration.......................... 12
2.5 Registration Procedures........................... 12
2.6 Indemnification................................... 14
2.7 Information by Holder............................. 16
2.8 Rule 144 Reporting................................ 17
2.9 Transfer of Registration Rights................... 17
2.10 Limitations on Subsequent Registration Rights..... 17
2.11 Termination of Registration Rights................ 18
2.12 Market Stand-off" Agreement....................... 18
ARTICLE 3 Anti-Dilution Rights and Limitations on Owner..... 18
3.1 Anti-Dilution Rights.............................. 18
3.2 Private Offering.................................. 19
3.3 Public Offering................................... 19
3.4 Limitations....................................... 20
3.5 Open Market Purchases to Maintain Ownership
Percentage........................................ 20
3.6 Limitations on Holder's Ownership................. 20
3.7 Limitations on Holder's Resale of Company
Securities........................................ 22
ARTICLE 4 Company and Calgene Corporate Governance.......... 23
4.1 Composition of the Board of Directors and
Calgene Board..................................... 23
4.2 Solicitation and Voting of Shares................. 26
4.3 Committees........................................ 27
4.4 Approval Required for Certain Actions............. 29
4.5 Enforcement of this Agreement..................... 32
4.6 Certificate of Incorporation and By-laws.......... 32
4.7 Advisors.......................................... 32
4.8 Injunctive Relief................................. 33
ARTICLE 5 Governance of Gargiulo............................ 33
5.1 Board of Tomato Associates........................ 33
5.2 Operating and Strategic Plans..................... 33
<PAGE>
5.3 Compensation; Etc................................. 34
5.4 Certificate of Incorporation and By-Laws.......... 34
5.5 Effective Period.................................. 34
5.6 Injunctive Relief................................. 34
ARTICLE 6 Miscellaneous..................................... 35
6.1 Governing Law..................................... 35
6.2 Successors and Assigns............................ 35
6.3 Entire Agreement; Amendment....................... 35
6.4 Notices........................................... 35
6.5 Delays or Omissions............................... 36
6.6 Counterparts...................................... 36
6.7 Severability...................................... 36
6.8 Stock Legends..................................... 36
6.9 Sale of Assets of Tomato Associates............... 37
6.10 Audits, Consultants and Inspections............... 37
6.11 No Third Party Beneficiaries...................... 37
6.12 Sections and Articles............................. 38
6.13 Headings.......................................... 38
<PAGE>
STOCKHOLDERS AGREEMENT
----------------------
AGREEMENT made as of the 31st day of March, 1996, by and between
Calgene II, Inc., a Delaware corporation, having its principal
place of business at 1920 Fifth Street, Davis, California 95616
(the "Company"), and Monsanto Company, a Delaware corporation,
having its principal place of business at 800 North Lindbergh
Boulevard, St. Louis, Missouri 63167 ("Monsanto").
WHEREAS, Calgene, Inc., a Delaware corporation ("Calgene"), and
Monsanto have entered into an Agreement and Plan of
Reorganization, dated as of October 13, 1995 (the "Reorganization
Agreement"), and certain other Transaction Agreements (as defined
in the Reorganization Agreement) whereby Monsanto has acquired
shares of the Company's common stock, par value $.001 per share
("Common Stock") and may acquire additional shares of Common
Stock;
WHEREAS, the Company and Monsanto have agreed that the Company
shall, at the request of a Holder (as hereafter defined), register
under the Securities Act of 1933, as amended (the "Securities
Act"), and register or qualify under any applicable state
securities or blue sky laws the Common Stock of the Company
acquired or to be acquired by Holder so as to permit a Holder to
sell such Common Stock in the public markets; and
WHEREAS, the Company and Monsanto have agreed on certain
restrictions and obligations with respect to the management and
operation of the Company, Calgene and Tomato Investment
Associates, Inc., a Delaware corporation ("Tomato Associates").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the Company and
Monsanto hereby agree as follows:
ARTICLE 1
Effect of this Agreement
------------------------
1.1 Effect of this Agreement. Effective upon the date hereof,
------------------------
and subject only to the conditions set forth herein, all
provisions relating to the granting of registration rights
and covenants related thereto made by the Company and
Monsanto shall be contained in this Agreement. The
registration rights and covenants provided herein set forth
the sole and entire agreement between the Company and
Monsanto on the subject matter of registration rights.
<PAGE>
ARTICLE 2
Compliance with Securities Act
------------------------------
2.1 Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following respective meanings
(all terms defined in this Article 2 or in other provisions
of this Agreement in the singular shall have the same meaning
when used in the plural and vice versa):
----------
"Affiliate" has the same meaning as in Rule 12b-2 promulgated
---------
under the Exchange Act.
"Associate" has the same meaning as in Rule 12b-2 promulgated
---------
under the Exchange Act.
"Board" or "Board of Directors" means the Board of Directors
----- ------------------
of the Company except where the context otherwise requires.
"Calgene" has the meaning set forth in the recitals herein.
-------
"Calgene Board" means the Board of Directors of Calgene.
-------------
"Calgene Director" means a member of the Calgene Board.
----------------
"Commission" means the Securities and Exchange Commission or
----------
any other federal agency at the time administering the
Securities Act.
"Common Stock" means the Common Stock, $.001 par value, of
------------
the Company.
"Company" has the meaning set forth in the first paragraph
-------
hereof.
"Company Credit Facility" means the Holding Company Credit
-----------------------
Facility Agreement made as of even date herewith between the
Company and Monsanto.
"Company Director" means an Independent Director who is
----------------
designated for such position by the Company in accordance
with Section 4.1 hereof.
"Company Management Director" means a Director who is either
---------------------------
the Chief Executive Officer or Chief Operating Officer of the
Company (or, if the Chief Executive Officer is the Chief
Operating Officer or if there is no Chief Operating Officer,
then the next most highly ranking executive officer of the
Company).
"Company Securities" has the meaning set forth in Section 3.1
------------------
hereof.
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"Control Securities" means securities of the Company, other
------------------
than Restricted Securities, owned by a Holder at the time
such Holder would be deemed to be an Affiliate of the
Company.
"Credit Facilities" means the Company Credit Facility and the
-----------------
Gargiulo Credit Facility.
"Director" means a member of the Board of Directors of the
--------
Company.
"Effective Date" means March 31, 1996.
--------------
"Employment Agreements" has the meaning set forth in Section
---------------------
6.9 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
"Equity Security" means (i) any Common Stock or other Voting
---------------
Stock, (ii) any securities of the Company convertible into or
exchangeable for Common Stock or other Voting Stock or (iii)
any options, rights or warrants (or any similar securities)
issued by the Company to acquire Common Stock or other Voting
Stock.
"Financial Purchaser" means a Person (i) purchasing Company
-------------------
Securities from Monsanto for investment purposes or otherwise
in the ordinary course of business and not for the purpose
nor with the effect of changing or influencing the control of
the Company and (ii) which Person is not already primarily in
the same lines of business as the Company.
"Gargiulo" means Gargiulo, G.P. and Gargiulo, L.P. as such
--------
entities existed prior to the Effective Date.
"Gargiulo Business" means the business transacted by Tomato
-----------------
Associates after the Effective Date, which business was
transacted by Gargiulo prior to the Effective Date.
"Gargiulo Credit Facility" means the Gargiulo Credit Facility
------------------------
Agreement made as of even date herewith between the Company
and Monsanto.
"Gargiulo, G.P." means Gargiulo G.P., Inc., a Delaware
--------------
corporation.
"Gargiulo, L.P." means Gargiulo, L.P., a Delaware limited
--------------
partnership.
"hereto", "hereunder", "herein", "hereof" and the like mean
------ --------- ------ ------
and refer to this Agreement as a whole and not merely to the
specific article, section, paragraph or clause in which the
respective word appears.
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<PAGE>
"Holder" means Monsanto and, subject to Section 2.9 hereof
------
and except for purposes of Article 3 hereof, any subsequent
holder of outstanding Registrable Securities.
"Indemnified Party" has the meaning set forth in
-----------------
Section 2.6(c) hereof.
"Indemnifying Party" has the meaning set forth in
------------------
Section 2.6(c) hereof.
"Independent Director" means a Director or Calgene Director
--------------------
(i) who is not and has never been an officer or employee of
Calgene, the Company, any Affiliate or Associate of Calgene
or the Company or of a Person that derived five percent (5%)
or more of its revenues or earnings in its most recent fiscal
year from transactions involving Calgene, the Company or any
Affiliate or Associate of Calgene or the Company, (ii) who is
not and has never been an officer or employee of Monsanto,
any Affiliate or Associate of Monsanto or of a Person that
derived more than five percent (5%) of its revenues or
earnings in its most recent fiscal year from transactions
involving Monsanto or any Affiliate or Associate of Monsanto,
(iii) who is not and never has been an officer or employee of
Gargiulo, any Affiliate or Associate of Gargiulo or of a
Person that derived more than five percent (5%) of its
revenues or earnings in its most recent fiscal year from
transactions involving Gargiulo or any Affiliate or Associate
of Gargiulo, (iv) who has no affiliation, compensation,
consulting or contracting arrangement with Calgene, the
Company, Monsanto, Gargiulo or their respective Affiliates or
Associates or any other Person such that a reasonable person
would regard such Director as likely to be unduly influenced
by management of Calgene, the Company or Monsanto,
respectively (provided, however, that no Person shall be
regarded as being unduly influenced by the management of
Monsanto merely because such Person serves or previously
served as a director of Monsanto or any Affiliate or
Associate of Monsanto), and (v) who has an outstanding
reputation for personal integrity and distinguished
achievement in areas relevant to the Company.
Notwithstanding the foregoing, no member of the immediate
family of any Person who does not qualify to be an
Independent Director by reason of clause (i), (ii), (iii) or
(iv) above shall be considered an Independent Director. For
purposes of the preceding sentence, the term "immediate
family" shall have the same meaning as set forth in Item
404(a) of Regulation S-K.
"Monsanto" has the meaning set forth in the first paragraph
--------
hereof.
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<PAGE>
"Monsanto Management Director" means a Director or Calgene
----------------------------
Director who is designated for such position by Monsanto in
accordance with Section 4.1 hereof and who is or was an
employee of Monsanto.
"Monsanto Director" means a Director or Calgene Director,
-----------------
including any Monsanto Management Director, who is designated
for such position by Monsanto in accordance with Section 4.1
hereof.
"New Percentage Ownership" has the meaning set forth in
------------------------
Section 3.6(d) hereof.
"Non-Financial Purchaser" means a Person, other than a
-----------------------
Financial Purchaser, purchasing Company Securities from
Monsanto.
"Operating Plan" has the meaning set forth in Section
--------------
4.4(a)(ix) hereof.
"Other Selling Stockholders" has the meaning set forth in
--------------------------
Section 2.2(c) hereof.
"Percentage Interest" means the percentage of outstanding
-------------------
Voting Stock that is controlled directly or directly by
Monsanto and its Affiliates.
"Person" means a corporation, association, partnership, joint
------
venture, limited liability company, individual, trust,
unincorporated organization, a government agency or political
subdivision thereof and any other entity.
"Preliminary Prospectus" means a preliminary prospectus as
----------------------
contemplated by Rule 430 or 430A under the Securities Act
included at any time in the Registration Statement.
"Pre-Offering Percentage" has the meaning set forth in
-----------------------
Section 3.1 hereof.
"Prospectus" means (i) the prospectus as first filed with the
----------
Commission pursuant to Rule 424(b) under the Securities Act
or, (ii) if no such filing is required, the form of final
prospectus included in the Registration Statement at the
effective date thereof or (iii) if a Term Sheet or
Abbreviated Term Sheet (as such terms are defined in Rule
434(b) and 434(c), respectively, under the Securities Act) is
filed with the Commission pursuant to Rule 424(b)(7) under
the Securities Act, the Term Sheet or Abbreviated Term Sheet
and the last Preliminary Prospectus filed with the Commission
prior to the time the Registration Statement became
effective, taken together (including, in each case, the
documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Securities Act), together with any
supplement to any of the foregoing.
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<PAGE>
"Registration Statement" means any registration statement of
----------------------
the Company filed under the Securities Act which covers any
of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus relating thereto and
all amendments and supplements to such registration
statement, including post-effective amendments, all exhibits
and all material incorporated or deemed to be incorporated by
reference in such registration statement.
"Registrable Securities" means shares of Common Stock issued
----------------------
or issuable pursuant to the Transaction Agreements and all
such other securities of the Company acquired by a Holder.
"Register", "Registered" and "Registration", whether or not
-------- ---------- ------------
capitalized, mean and refer to a registration effected by
preparing and filing a Registration Statement in compliance
with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the
effectiveness of such Registration Statement.
"Registration Expenses" means all expenses incurred by the
---------------------
Company in compliance with this Article 2, including, without
limitation, all registration fees, qualification fees, filing
fees, advertising and road show expenses (excluding
advertising and road show expenses incurred by a Holder),
printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the
expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by
the Company).
"Reorganization Agreement" has the meaning set forth in the
------------------------
recitals herein.
"Requesting Holder" means a Holder requesting any
-----------------
registration pursuant to Section 2.2 hereof.
"Restricted Securities" means the securities of the Company
---------------------
acquired by a Holder from the Company or an Affiliate of the
Company otherwise than pursuant to a public offering.
"Section 16 Officers" has the meaning set forth in Section
-------------------
4.3(b)(iii) hereof.
"Securities Act" means the Securities Act of 1933, as
--------------
amended.
"Selling Expenses" means all underwriting discounts and
----------------
selling commissions applicable to the sale of Registrable
Securities.
"Strategic Plan" has the meaning set forth in Section
--------------
4.4(a)(ix) hereof.
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<PAGE>
"Subsidiary" has the same meaning as in Rule 12b-2
----------
promulgated under the Exchange Act.
"Substantial Part" means more than ten percent (10%) of the
----------------
total consolidated assets of the Company as shown on the
Company's consolidated balance sheet as of the end of the
most recent fiscal quarter ending prior to the time the
determination is made.
"Tomato Associates" has the meaning set forth in the recitals
-----------------
herein.
"Transaction Agreements" has the meaning set forth in the
----------------------
Reorganization Agreement.
"Trigger Event" means the earlier of any time that (i)
-------------
Monsanto's Percentage Interest is at least fifty-five percent
(55%) or (ii) the Company elects to convert borrowings made
from Monsanto into Equity Securities and Monsanto's
Percentage Interest is at least fifty percent (50%) after
such conversion.
"Two Senior Gargiulo Officers" has the meaning set forth in
----------------------------
Section 5.3 hereof.
"Unaffiliated Equity Holders" means holders of Equity
---------------------------
Securities other than Monsanto or any of its Affiliates.
"Voting Stock" means securities having the right to vote
------------
generally in any election of Directors of the Company (other
than solely by reason of the occurrence of an event).
2.2 Requested Registration.
----------------------
(a) Request for Registration. Holders of Registrable
------------------------
Securities shall have the right to request (with such
requests in writing and stating the number of shares of
Registrable Securities to be disposed of and the
intended method of disposition of shares by such
Holders) up to two (2) registrations on Form S-3 (and up
to two (2) additional registrations on Form S-3 for each
conversion of outstanding principal or interest into
shares of Common Stock upon the occurrence of an "Event
of Default" under the Company Credit Facility or the
Gargiulo Credit Facility (as defined in each such Credit
Facility, respectively)) at the Company's expense and an
unlimited number of additional registrations on Form S-3
at the selling Holder's expense, provided that the
requests for additional registrations are made by
Holders of at least ten percent (10%) of the Registrable
Securities, subject only to the following:
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<PAGE>
(i) The Company shall not be required to effect a
registration pursuant to this Section 2.2 prior to
September 30, 1998, unless an Event of Default has
occurred and is continuing under the Company Credit
Facility or under the Gargiulo Credit Facility, in
which event the Company shall be required to effect
a registration pursuant to this Section 2.2 at any
time upon the request of a Holder with respect to
any shares of Common Stock issued to a Holder upon
conversion of outstanding principal or accrued
interest under either the Company Credit Facility
or the Gargiulo Credit Facility after the
occurrence of an Event of Default under either of
such agreements.
(ii) The Company shall not be required to effect a
registration pursuant to this Section 2.2 within
one hundred eighty (180) days after the effective
date of the last such registration pursuant to this
Section 2.2.
(iii) The Company shall not be required to effect a
Registration Statement in any particular
jurisdiction in which the Company would be required
to execute a general consent to service of process
in effecting such registration, qualification or
compliance, unless the Company is already subject
to service in such jurisdiction and except as may
be required by the Securities Act or applicable
rules or regulations thereunder.
(iv) The Company shall not be required to effect a
Registration Statement for a period of not more
than ninety (90) days immediately following the
delivery of a certificate signed by the President
of the Company to the Requesting Holders stating
that, in the good-faith judgment of the Board of
Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for
such Registration Statement to be filed on or
before the date filing would otherwise be required
hereunder; provided, however, that the Company may
not utilize this right more than once in any twelve
(12) month period and the Company may not exercise
this right based on the fact that the Company has
recently registered any of its securities for the
account of a security holder or holders exercising
their respective demand registration rights.
If the Company cannot qualify for registration on Form
S-3, then the Company shall effect any registration
required or requested by the Holder on Form S-1, or such
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<PAGE>
other appropriate form, in which event this Section 2.2
shall apply in all respects as if the words "Form S-3"
were replaced by the words "Form S-1" or the appropriate
designation for such other form.
(b) Notice of Inclusion. The Company shall give written
-------------------
notice to all Holders of Registrable Securities of the
receipt of a request for registration pursuant to this
Section 2.2 and shall provide a reasonable opportunity
for other Holders to participate in the registration;
provided, however, that, if the registration is for an
underwritten offering, then the terms of Section 2.2(c)
hereof shall apply to all participants in such offering.
Subject to the foregoing, the Company shall use its best
efforts to effect promptly the registration of all
shares of Registrable Securities on Form S-3 to the
extent requested by the Holder or Holders thereof for
purposes of disposition.
(c) Underwriting. If the Requesting Holders intend to
------------
distribute the Registrable Securities covered by their
request by means of an underwriting, then they shall so
advise the Company as a part of their request made
pursuant to this Section 2.2, and the Company shall
include such information in the written notice referred
to in Section 2.2(b) hereof. The right of any Holder to
registration pursuant to this Section 2.2 shall be
conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent
requested and to the extent provided herein.
The Company shall (together with all Holders proposing
to distribute their securities through such
underwriting) enter into an underwriting agreement in
customary form with the representative of the
underwriter or underwriters of recognized national
standing, selected for such underwriting by a majority
in interest of the Requesting Holders and reasonably
acceptable to the Company. Notwithstanding any other
provision of this Section 2.2, if the representative
advises the Requesting Holders in writing that marketing
factors require a limitation on the number of shares to
be underwritten, then the Requesting Holders shall so
advise all Holders, and the number of shares of
Registrable Securities that may be included in the
registration and underwriting shall be allocated first
among all Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing
the Registration Statement. No Registrable Securities
excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in
such registration.
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<PAGE>
If any Holder of Registrable Securities disapproves of
the terms of the underwriting, then such person may
elect to withdraw therefrom by written notice to the
Company, the underwriter and the Requesting Holders.
The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from registration;
provided, however, that, if, by the withdrawal of such
Registrable Securities, a greater number of Registrable
Securities held by other Holders may be included in such
registration (up to the maximum of any limitation
imposed by the underwriters), then the Company shall
offer to all Holders who have included Registrable
Securities in the registration the right to include
additional Registrable Securities in the same proportion
used to determine the underwriter limitation in this
Section 2.2(c).
If the underwriter has not limited the number of
Registrable Securities to be underwritten, then the
Company and its executive officers, and such other
Persons as are determined by the Board of Directors,
their successors, and their assigns ("Other Selling
Stockholders"), may include securities for their own
account in such registration if the underwriter so
agrees and if the number of Registrable Securities held
by the Holders that would otherwise have been included
in such registration and underwriting will not thereby
be limited for any reason, including but not limited to
the price for which the Registrable Securities will be
sold. To the extent that the underwriter wishes to
limit the number of shares to be included in the
registration on behalf of the Company and the Other
Selling Stockholders, the shares of Common Stock to be
registered held by the Other Selling Stockholders shall
be excluded from such offering prior to excluding any
shares held by the Company and those held by the Company
shall be excluded prior to excluding any Registrable
Securities held by the Holders.
2.3 Company Registration.
--------------------
(a) Notice and Inclusion. If, at any time after
--------------------
September 30, 1998, the Company shall determine to
register any of its securities for its own account,
other than a registration relating solely to employee
benefit plans, or a registration relating solely to a
Commission Rule 145 transaction, the Company shall:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify
such securities under the applicable blue sky or
other state securities laws); and
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<PAGE>
(ii) include in such registration (and any related
qualification under blue sky laws or other
compliance), and in any underwriting involved
therein, all Registrable Securities specified in a
written request or requests, within twenty (20)
days after receipt of the written notice from the
Company, by any Holder or Holders.
(b) Underwriting. If the registration of which the Company
------------
gives notice is for a registered public offering by the
Company of its securities through an underwriting, then
the Company shall so advise the Holders as a part of the
written notice given pursuant to Section 2.3(a)(i)
hereof. In such event, the right of any Holder to
registration pursuant to this Section 2.3 shall be
conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute
their securities through such underwriting shall
(together with the Company, and all the Other Selling
Stockholders distributing their securities through such
underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters
selected for underwriting by the Company.
Notwithstanding any other provision of this Section 2.3,
if the underwriter determines that marketing factors
require a limitation on the number of shares to be
underwritten, then the underwriter may exclude from such
registration and underwriting some or all of the
Registrable Securities held by the Holders or the stock
held by Other Selling Stockholders in accordance with
this Section 2.3(b). The Company shall so advise all
Holders and all Other Selling Stockholders distributing
their securities through such underwriting, and (i) as
to the first registration in which Holders are entitled
to participate pursuant to this Section 2.3, the number
of Registrable Securities and other securities that may
be included in the registration and underwriting shall
be allocated among all Holders thereof on the basis that
shares held by all the Other Selling Stockholders who
are not Holders shall first be excluded to the extent
required and, if further exclusion is necessary, shares
held by the selling Holders shall then be excluded;
provided, however, that, as among the respective Other
Selling Stockholders as a group on the one hand and the
Holders as a group on the other hand suffering such
exclusion, the exclusion shall be in proportion, as
nearly as practicable, to the amount of securities
entitled to inclusion in such registration held by each
of the Other Selling Stockholders as a group and each of
the Holders at the time of filing the Registration
Statement; and (ii) as to all subsequent registrations,
the number of shares of Registrable Securities and other
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<PAGE>
securities that may be included in the registration and
underwriting shall be allocated among all Other Selling
Stockholders and the Holders in proportion, as nearly as
practicable, to the respective amounts of securities
entitled to inclusion in such registration held by all
such Other Selling Stockholders and Holders at the time
of filing the Registration Statement. For purposes of
the apportionment provisions in clause (i) above, for
any selling Holder that is a partnership or corporation,
the partners, retired partners, and shareholders of such
Holder, the estate and family members of such partners
and retired partners, and any trusts for the benefit of
any of the foregoing persons shall be deemed to be a
single "selling Holder," and any pro rata reduction with
respect to such selling Holder shall be based upon the
aggregate number of shares carrying registration rights
owned by all entities and individuals included in such
"selling Holder," as defined in this sentence. If any
Other Selling Stockholder or Holder disapproves of the
terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the
underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such
registration.
2.4 Expenses of Registration. All Registration Expenses incurred
------------------------
in connection with any registration, qualification or
compliance pursuant to this Article 2 shall be borne by the
Company; provided, however, that the Registration Expenses
for the fifth and all subsequent registrations under Section
2.2(a) hereof requested by the Holders shall be borne by the
requesting Holders pro rata on the basis of the number of
their shares so registered. All Selling Expenses relating to
the securities registered by Holders and, if applicable,
Other Selling Stockholders, and fees and disbursements of
counsel, shall be borne by the Holders or the Other Selling
Stockholders, as the case may be, of such securities pro rata
on the basis of the number of their shares so registered.
2.5 Registration Procedures.
-----------------------
(a) Company shall use its best efforts to register or
qualify the Registrable Securities covered by such
Registration Statement under such other securities or
blue sky laws of such United States jurisdictions as
Holder shall reasonably request and do any and all acts
and things which may be necessary or desirable to enable
Holder to consummate the public sale or other
disposition in such jurisdictions; provided, however,
that Company shall not be required in connection
therewith or as a condition thereto to qualify to do
business or file a general consent to service of process
in any such jurisdictions.
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<PAGE>
(b) The Company represents and warrants that, on the date of
its effectiveness, the Registration Statement will
comply in all material respects with the applicable
requirements of the Securities Act and the rules
thereunder, including without limitation Rule 415; on
the date of its effectiveness, the Registration
Statement will not contain any untrue statement of a
material fact or omit to state any material fact
required to be stated therein or necessary in order to
make the statements made therein not misleading;
provided, however, that no representation is made by
Company with respect to information relative to any
Holder; and the Prospectus will not include any untrue
statement of a material fact or omit to state a material
fact necessary in order to make the statements therein,
in light of the circumstances under which they were
made, not misleading; provided, however, that no
representation is made by Company with respect to
information relative to any Holder.
(c) If, at any time or times while the Registration
Statement is effective, Company notifies Holder that a
development has occurred or is pending which, based upon
consultation with Company's legal counsel, Company
reasonably believes may cause the then current
Prospectus not to be in compliance with applicable
securities laws, then Holder shall refrain from
delivering the Prospectus and from making any offers or
sales of Registrable Securities requiring the delivery
of the Prospectus until such time as Company either
notifies Holder that the Prospectus complies with such
laws or delivers an amended Prospectus in replacement of
the deficient Prospectus. Company shall use its
reasonable best efforts to minimize the time during
which Holder must so refrain, and no more than one (1)
such period of refrain shall be imposed during any
period of one hundred eighty (180) days.
(d) At least two (2) business days prior to the initial
filing of the Registration Statement or Prospectus and
no fewer than two (2) business days prior to the filing
of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be
incorporated therein by reference), Company shall
furnish Holder, its legal counsel and the managing
underwriter, if any, copies of all such documents
proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference)
shall be subject to review of Holder, its legal counsel
and such underwriters, if any, and Company shall cause
its officers and directors and the independent certified
public accountants to Company to respond to such
inquiries as shall be necessary, in the opinion of
respective counsel to Company and any such underwriters,
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<PAGE>
to conduct a reasonable investigation within the meaning
of the Securities Act. Company shall not file any such
Registration Statement or Prospectus or any amendments
or supplements thereto to which Holder, its legal
counsel, or the managing underwriters, if any, shall
reasonably object on a timely basis (i.e., within two
(2) business days of receipt thereof).
(e) Company shall promptly notify Holder when the
Registration Statement is declared effective; notify
Holder of any stop-order or similar proceeding by the
Commission or any state securities authority; and
furnish such number of Prospectuses, Prospectus
supplements and other documents incident thereto as
Holder from time to time may reasonably request.
(f) In the event of any breach by Company of the provisions
of Section 2.2, 2.3, 2.4 or 2.5, the parties agree that
Holder will suffer irreparable harm. Accordingly, the
parties agree that the provisions of Sections 2.2, 2.3,
2.4 and 2.5 are specifically enforceable by Holder and
that Holder shall be entitled to temporary and permanent
injunctive relief against Company and the other rights
and remedies to which Holder may be entitled to at law,
in equity or under this Agreement for any such breach.
2.6 Indemnification.
---------------
(a) Indemnification by the Company. The Company shall
------------------------------
indemnify each Holder with respect to which
registration, qualification or compliance has been
effected pursuant to this Article 2, each of its
officers, directors, employees, agents and partners,
each Person controlling such Holder within the meaning
of Section 15 of the Securities Act, each underwriter,
if any, and each Person who controls any underwriter
within the meaning of Section 15 of the Securities Act,
against all expenses, claims, losses, damages and
liabilities (or actions in respect thereof), including
any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or
based on any untrue statement (or alleged untrue
statement) of a material fact contained in any
Prospectus, offering circular or other document
(including any related Registration Statement,
notification or the like) incident to any such
registration, qualification or compliance, or based on
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 any
violation by the Company of the Securities Act or any
rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the
Company in connection with any such registration,
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<PAGE>
qualification or compliance. The Company shall
reimburse each such Holder, each of its officers,
directors, employees, agents and partners, and each
Person controlling such Holder, each such underwriter
and each Person who controls any such underwriter for
any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending
any such expense, claim, loss, damage, liability or
action; provided, however, that the Company shall not be
liable in any such case to the extent that any such
claim, loss, damage, liability, action or expense arises
out of or is based on any untrue statement or omission
or alleged untrue statement or omission made in reliance
upon and in conformity with written information
furnished to the Company by an instrument duly executed
by such Holder or underwriter and stated to be
specifically for use therein.
(b) Indemnification by the Holders. To the extent set forth
------------------------------
in the second sentence of this Section 2.6(b), each
Holder shall, if Registrable Securities or other securi-
ties held by such Holder are included in the securities
as to which such registration, qualification or
compliance is being effected, indemnify the Company,
each of its directors, officers, employees and agents,
each underwriter, if any, of the Company's securities
covered by such a Registration Statement, each Person
who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, each other
such Holder, each of such other Holder's officers,
directors, employees, agents and partners, and each
Person controlling such Holder within the meaning of
Section 15 of the Securities Act against all expenses,
claims, losses, damages and liabilities (or actions in
respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material
fact made by the Holder and contained in any such
Registration Statement, Prospectus, offering circular or
other document, or any amendment or supplement thereto
or incident to any such registration, qualification or
compliance or based on any omission (or alleged
omission) to state therein a material fact required to
be made by the Holder and stated therein or necessary to
make the statements therein not misleading or any
violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the
Company in connection with such registration,
qualification or compliance as a result of any statement
(or based on any omission to state or alleged omission)
required to be made by such Holder. Each such Holder
shall reimburse the Company, such other Holders,
directors, officers, employees, agents, partners,
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<PAGE>
Persons, underwriters and control persons for any legal
or any other expenses reasonably incurred in connection
with investigating, preparing or defending any such
expense, claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such
Registration Statement, Prospectus, offering circular or
other document or any amendment or supplement thereto in
reliance upon and in conformity with written information
furnished by the Holder to the Company by an instrument
duly executed by such Holder and stated to be
specifically for use therein; provided, however, that
the obligations of such Holders hereunder shall be
limited to an amount equal to the proceeds to each such
Holder of Registrable Securities sold as contemplated
herein in connection with the particular registration,
qualification or compliance involved.
(c) Notice. Each party entitled to indemnification under
------
this Section 2.6 (the "Indemnified Party") shall give
notice to the party required to provide indemnification
(the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as
to which indemnity may be sought and shall permit the
Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom; provided,
however, that counsel for the Indemnifying Party, who
shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably
be withheld), and that the Indemnified Party may
participate in such defense at its own expense; and
provided further that the failure of any Indemnified
Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under
this Section 2.6 unless such failure resulted in
detriment to the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into
any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.7 Information by Holder. Each Holder or Holders of Registrable
---------------------
Securities in any registration shall furnish to the Company
such information regarding such Holder or Holders and the
distribution proposed by such Holder or Holders as the
Company may reasonably request in writing but only to the
extent as shall be required in connection with any
registration, qualification or compliance referred to in this
Article 2.
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<PAGE>
2.8 Rule 144 Reporting. With a view to making available the
------------------
benefits of certain rules and regulations of the Commission
which may permit the sale of the Restricted Securities or
Control Securities to the public without registration, the
Company agrees to:
(a) Use its best efforts to make and keep public information
available as those terms are understood and defined in
Rule 144 under the Securities Act;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange
Act (at any time after it has become subject to such
reporting requirements);
(c) For so long as a Holder owns any Restricted Securities
or Control Securities, furnish to the Holder forthwith
upon request (i) a written statement by the Company as
to its compliance with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly
report of the Company, and (iii) such other reports and
documents so filed as such Holder may reasonably request
in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities
without registration; and
(d) When any Holder qualifies under Rule 144 for the
unrestricted right of sale under Rule 144, the Company
shall, upon written request of such Holder (such request
to include sufficient detail as to establish how the
Holder so qualifies under Rule 144), promptly remove any
restrictive legend that may have been placed on any
Restricted or Control Securities and issue Common Stock
of the Company free of such restrictive or other
legends.
2.9 Transfer of Registration Rights. The rights to cause the
-------------------------------
Company to register the Registrable Securities granted to
each Holder by the Company under Sections 2.2 and 2.3 hereof
may be transferred or assigned to a transferee or assignee in
connection with the transfer or assignment of not less than
one million (1,000,000) shares of the Registrable Securities;
provided, however, that the Company shall be entitled to
notice of any such transfer of registration rights within
thirty (30) days of the date such transfer is effected.
2.10 Limitations on Subsequent Registration Rights. No owner or
---------------------------------------------
prospective owner of securities of the Company shall have any
registration rights other than as set forth in this
Agreement. The Company shall not, without the prior written
consent of the Holders (which consent shall not be
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<PAGE>
unreasonably withheld) of not less than sixty-six and two-
thirds percent (66-2/3%) of the Registrable Securities then
held by Holders, enter into any agreement with any owner or
prospective owner of any securities of the Company that would
allow such owner or prospective owner to include such
securities in any registration filed under this Article 2 if
such inclusion would adversely affect the rights of any
Holder.
2.11 Termination of Registration Rights. The registration rights
----------------------------------
granted pursuant to this Article 2 shall terminate as to each
Holder at such time as (a) all Registrable Securities can be
sold within a given three (3) month period without compliance
with the registration requirements of the Securities Act
pursuant to Rule 144 supported by a written opinion of legal
counsel for the Company, which opinion shall be reasonably
satisfactory in form and substance to legal counsel for such
Holders, and (b) all accrued interest and principal under the
Company Credit Facility and the Gargiulo Credit Facility has
been repaid in full or converted into Common Stock of the
Company (and such Common Stock can be sold as provided in (a)
above).
2.12 "Market Stand-off" Agreement. Each Holder hereby agrees
----------------------------
that, to the extent requested by the Company and an
underwriter of a sale of Common Stock (or other securities)
of the Company for the account of the Company and not for the
account of a security holder or holders exercising their
respective demand registration rights, it shall not sell or
otherwise transfer or dispose of (other than to transferees
who agree to be similarly bound) any Registrable Securities
during the ninety (90) day period following the effective
date of a registration statement of the Company filed under
the Securities Act; provided, however, that all officers and
directors of the Company, all Other Selling Stockholders and
all other Persons with registration rights (whether or not
pursuant to this Agreement) shall enter into similar
agreements. To enforce the foregoing covenant, the Company
may impose stop-transfer instructions with respect to the
Registrable Securities of each Holder (and the shares or
securities of every other Person subject to the foregoing
restriction) until the end of such ninety (90) day period.
ARTICLE 3
Anti-Dilution Rights and Limitations on Owner
---------------------------------------------
3.1 Anti-Dilution Rights. If, at any time after the Effective
--------------------
Date, Company agrees to sell shares of its Common Stock or
other Voting Stock ("Company Securities") in a private or
public offering (other than Company Securities issued
pursuant to the Company's stock option plans), Holder shall
have the right, but not the obligation, to acquire all or any
portion of the Company Securities sufficient for Holder to
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<PAGE>
maintain, after the offering, the same percentage of
ownership of issued and outstanding Company Securities that
Holder possessed immediately prior to the offering (the "Pre-
Offering Percentage"). With respect to the issuance of
Company Securities pursuant to the Company's stock option
plans, Holder shall have a right to maintain its percentage
ownership of issued and outstanding Company Securities by
making open market purchases as provided in Section 3.5
hereof.
3.2 Private Offering. With respect to a private offering, other
----------------
than pursuant to a Company stock option plan, Company shall,
within five (5) business days after the execution of any
agreement entered into in connection with such private
offering, notify Holder in writing of the proposed offering
and provide Holder with copies of all related documentation,
including, for example, any letter of intent and the final
contract. Holder shall have twenty (20) business days from
the date of receipt of Company's notice in which to advise
Company whether Holder elects to exercise its rights under
Section 3.1 hereof. If Holder does not respond, or if Holder
indicates that it will not exercise its rights, Holder shall
be considered irrevocably to have waived its rights under
Section 3.1 hereof with respect to such specific private
offering. If Holder timely advises Company that Holder will
exercise its rights under Section 3.1 hereof, Holder shall
have the right to acquire all or any portion of the necessary
amount of the Company Securities to maintain Holder's Pre-
Offering Percentage at the price or value of the
consideration specified in the private offering agreement
entered into between Company and the purchaser. Closing shall
be in accordance with the terms of the private offering
agreement, and Holder shall make such investment
representations to Company and shall provide Company with
such other documentation at closing as is reasonably required
by Company to comply with applicable securities laws.
3.3 Public Offering. With respect to a public offering, Company
---------------
shall notify Holder no later than five (5) business days
after Company has entered into a letter of intent with its
underwriters, and shall provide Holder with a copy of the
letter of intent. Holder shall have twenty (20) business
days from the date of receipt of Company's notice in which to
advise Company whether Holder elects to exercise its rights
under Section 3.1 hereof. If Holder does not respond or if
Holder indicates that it will not exercise its rights, Holder
shall be considered irrevocably to have waived its rights
under Section 3.1 hereof with respect to the public offering.
If Holder timely advises Company that Holder desires to
retain its rights under Section 3.1 hereof, then, when
Company files a Registration Statement containing a
Preliminary Prospectus with the Commission, Company shall
provide Holder with copies of the Preliminary Prospectus and
all subsequent amendments. Holder shall have twenty (20)
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<PAGE>
business days from its receipt of the Preliminary Prospectus
in which to exercise its rights under Section 3.1 hereof by
making an offer to acquire all or any portion of the
necessary amount of Company Securities to maintain Holder's
Pre-Offering Percentage based on the price, less all Selling
Expenses, and the other terms contained in the final
Prospectus. No such offer to buy shall be accepted prior to
the time that the Registration Statement becomes effective.
The Registration Statement shall indicate that Holder has
anti-dilution rights to purchase Company Securities on the
terms offered to the public.
3.4 Limitations. Notwithstanding the preceding provisions of
-----------
this Article 3, Company shall not be required to issue any
fractional shares as a result of Holder's exercise of its
rights under Section 3.1 hereof. Company shall not be
required to transfer any Company Securities to Holder under
this Article 3 if to do so would result in the violation of
any applicable law, rule or regulation.
3.5 Open Market Purchases to Maintain Ownership Percentage.
------------------------------------------------------
Notwithstanding any other provision hereof, at any time after
the Effective Date, Holder may make such open market
purchases of Company Securities as are necessary to maintain
Holder's percentage of ownership of issued and outstanding
Company Securities at forty-nine and nine-tenths percent
(49.9%) (or such higher percentage as may be permitted under
Section 3.6 hereof) or to increase its percentage of
ownership of issued and outstanding Company Securities to
forty-nine and nine-tenths percent (49.9%) (or such higher
percentage as may be permitted under Section 3.6 hereof).
With respect to the issuance of Company Securities pursuant
to a Company stock option plan or any warrant, conversion
right or other option, Company shall notify Holder no later
than ten (10) calendar days after the end of each calendar
quarter and within ten (10) calendar days of the record date
for a shareholder meeting and for dividend payments for
Company Securities of the number of shares and issuance price
of Company Securities issued pursuant to Company's stock
option plans or any warrant, conversion right or other option
subsequent to the last notice given pursuant to this Section
3.5 so as to enable Holder to make open market purchases of
Company Securities as permitted under this Section 3.5.
3.6 Limitations on Holder's Ownership. Except for purchases of
---------------------------------
Company Securities made in accordance with this Article 3,
during the term of this Agreement, Holder shall not directly
or indirectly acquire any Company Securities except as
follows:
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<PAGE>
(a) Prior to the first anniversary of the Effective Date,
Holder shall not increase its percentage of ownership of
issued and outstanding Company Securities above forty-
nine and nine-tenths percent (49.9%) except through one
(1) or more of the following:
(i) Conversion of principal and/or interest under the
Company Credit Facility or the Gargiulo Credit
Facility into shares of Common Stock;
(ii) Issuance of Company Securities in an asset sale by
Holder to Company; and
(iii) A tender offer by Holder for no less than one
hundred percent (100%) of the publicly-traded
Company Securities at a price approved by the
disinterested Directors of Company and based upon a
fairness opinion delivered to the Board of
Directors of the Company by an investment banking
firm.
(b) On and after the first anniversary of the Effective Date
until the earlier of September 30, 1998, or the third
anniversary of the Effective Date, Holder shall not
increase or further increase its ownership of issued and
outstanding Company Securities above forty-nine and
nine-tenths percent (49.9%) except through one (1) or
more of the following:
(i) Conversion of principal and/or interest under the
Company Credit Facility or the Gargiulo Credit
Facility into shares of Common Stock;
(ii) Issuance of Company Securities in an asset sale by
Holder to Company; and
(iii) A tender offer by Holder to increase its ownership
to seventy percent (70%) or more of the issued and
outstanding Company Securities at a price approved
by the disinterested Directors of Company and based
upon a fairness opinion delivered to the Board of
Directors of the Company by an investment banking
firm; provided, however, that, if Holder makes a
tender offer to increase its ownership to more than
eighty percent (80%) of the issued and outstanding
Company Securities, such tender offer must be for
one hundred percent (100%) of the publicly traded
Company Securities.
(c) After the earlier of September 30, 1998, or the third
anniversary of the Effective Date, Holder may increase
its ownership of Company Securities through open market
purchases or otherwise.
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<PAGE>
(d) If, at any time after the Effective Date, Holder shall
elect to increase its percentage of ownership of issued
and outstanding Company Securities above forty-nine and
nine-tenths percent (49.9%) as provided in paragraphs
(a) and/or (b) above (such increased percentage
hereafter being the "New Percentage Ownership"), then
thereafter Holder may make such open market purchases of
Company Securities as are necessary to maintain such New
Percentage Ownership or to increase its percentage of
ownership of issued and outstanding Company Securities
to such New Percentage Ownership.
(e) Holder shall not be required to dispose of any Company
Securities if Holder's percentage ownership of Company
Securities is increased as a result of any
recapitalization by Company or any other action taken by
Company.
3.7 Limitations on Holder's Resale of Company Securities. Holder
----------------------------------------------------
shall not directly or indirectly sell any Company Securities
(other than to an Affiliate of Holder) except as follows:
(a) On and after the first anniversary of the Effective Date
until the earlier of September 30, 1998, or the third
anniversary of the Effective Date, Holder may sell
Company Securities (i) as part of a joint venture,
merger or sale of all or substantially all of its
current Crop Protection business unit, as such business
may be subsequently renamed or reorganized, or (ii)
pursuant to a tender offer by a third party to the
shareholders of Company.
(b) After the earlier of September 30, 1998, or the third
anniversary of the Effective Date, in addition to the
rights to sell Company Securities set forth in paragraph
(a) above, Holder may sell Company Securities (i) in a
registered public offering pursuant to the registration
rights granted to Holder under this Agreement, (ii)
through sales pursuant to Rule 144 under the Securities
Act, (iii) through sales of not more than ten percent
(10%) of the total issued and outstanding Company
Securities to a Non-Financial Purchaser, or (iv) through
sales to a Financial Purchaser.
(c) After the earlier of September 30, 1999, or the fourth
anniversary of the Effective Date, in addition to the
rights to sell Company Securities as set forth in
paragraphs (a) and (b) above, Holder may sell Company
Securities through a private sale of thirty-five percent
(35%) or more of the total issued and outstanding
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<PAGE>
Company Securities to a Non-Financial Purchaser under
circumstances where such third party assumes the
applicable and proportionate rights and obligations of
Holder under this Agreement and the other Transaction
Agreements.
(d) Notwithstanding the foregoing, at any time after the
Effective Date, Holder may sell Company Securities
issued to Holder upon conversion by Holder of principal
or accrued interest under either of the Credit
Facilities after the occurrence of an Event of Default
under either of such Credit Facilities.
ARTICLE 4
Company and Calgene Corporate Governance
----------------------------------------
4.1 Composition of the Board of Directors and Calgene Board. The
-------------------------------------------------------
number of Directors comprising both the Board of Directors
and the Calgene Board and the manner of nominating the
members thereof shall be as follows:
(a) The number of Directors comprising the Board of
Directors shall initially be fixed at nine (9)
Directors. The number of such Directors may be
increased only in accordance with Section 4.1(c) or
Section 4.4(a)(xii) hereof. The parties agree that the
manner of nominating, and the governance provisions
relating to, the Board of Directors and the Calgene
Board shall be identical, and that the provisions of
this Section 4.1 set forth below and of Sections 4.3(c)
and 4.3(d) hereof shall be deemed to apply equally to
the Calgene Board and Calgene Directors. Accordingly,
when applied to the Calgene Board, the term "Director"
shall be deemed to mean "Calgene Director", the term
"Company", whether used alone or as a modifier, shall be
deemed to mean "Calgene", and the term "Board of
Directors" shall be deemed to mean "Calgene Board".
(b) Until the occurrence of a Trigger Event, the Corporation
shall nominate for election as Directors: (i) two (2)
Corporation Management Directors, (ii) three (3)
Corporation Directors, and (iii) four (4) Directors
designated by Monsanto, at least one (1) of which shall
be an Independent Director.
(c) At and after the occurrence of a Trigger Event, the
Board of Directors shall be comprised of eleven (11)
Directors and the Corporation shall nominate, subject to
paragraph (d) below, two (2) additional Directors
designated by Monsanto for a total of six (6) nominees
to be designated by Monsanto.
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(d) At any time that Monsanto's Percentage Interest is at
least seventy percent (70%), (i) the Corporation shall
nominate: (i) eight (8) Directors designated by
Monsanto, which shall consist of the two (2) Corporation
Management Directors and six (6) other Monsanto
Directors (including at least one (1) Independent
Director) and (ii) three (3) Independent Directors. At
such time as Monsanto's Percentage Interest is at least
ninety-nine percent (99%), the Corporation shall
nominate eleven (11) Directors designated by Monsanto.
(e) Notwithstanding anything in the foregoing paragraphs
(b), (c) and (d) to the contrary, (i) at any time
Monsanto's Percentage Interest is less than forty
percent (40%) but at least twenty percent (20%), The
Corporation shall nominate three (3) Directors
designated by Monsanto, (ii) at any time Monsanto's
Percentage Interest is less than twenty percent (20%)
but at least ten percent (10%), the Corporation shall
nominate two (2) Directors designated by Monsanto and
(iii) at any time Monsanto's Percentage Interest is less
than ten percent (10%) but at least five percent (5%),
the Corporation shall nominate one (1) Director
designated by Monsanto. If, at any time, Monsanto's
Percentage Interest is less than five percent (5%), the
Corporation shall not be obligated to nominate any
Director designated by Monsanto. At any such time, all
other Directors, other than the Corporation Management
Directors, shall be nominated by the Corporation.
(f) The Independent Directors to be nominated by the
Corporation from time to time shall be nominated by
action of a majority of the Corporation Directors then
in office. In the event that no Corporation Directors
are in office at such time, such Independent Directors
shall be nominated by a majority of the Independent
Directors then in office; provided, however, that the
-------- -------
holders of a majority of the outstanding Voting Stock
held by Unaffiliated Equity Holders shall be entitled to
nominate and elect Corporation Directors in lieu of any
individuals so nominated to be such Corporation
Directors by a majority of the Corporation Directors.
(g) The Corporation and Monsanto, respectively, shall have
the right to nominate any replacement for a Director
nominated in accordance with this Section 4.1 by the
Corporation or Monsanto, respectively, upon the death,
resignation, retirement, disqualification or removal
from office for cause of such Director. Such
replacement for any Independent Director shall also be
an Independent Director unless, in the case of a
replacement of a Monsanto Director, the Monsanto
Directors include more than the required number of
Independent Directors. The Board of Directors shall
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<PAGE>
elect each person so nominated by Monsanto or the
Corporation pursuant to this paragraph (g). In
addition, the Board of Directors shall nominate the
Corporation's Chief Executive Officer to replace such
officer's predecessor in office as a Corporation
Management Director.
(h) In the event that the number of Monsanto Directors on
the Board of Directors differs from the number that
Monsanto has the right (and wishes) to designate for
nomination pursuant to this Section 4.1, (i) if the
number of Monsanto Directors exceeds such number,
Monsanto shall promptly take all appropriate action to
cause to resign that number of Monsanto Directors as is
required to make the remaining number of such Monsanto
Directors conform to this Section 4.1 or (ii) if the
number of Monsanto Directors otherwise is less than such
number, the Corporation shall promptly take all
necessary action to create sufficient vacancies on the
Board of Directors to permit Monsanto to designate the
full number of Monsanto Directors which it is entitled
(and wishes) to nominate pursuant to this Section 4.1
(such action to include seeking the resignation or
removal of Directors or, at the request of Monsanto,
calling a special meeting of the stockholders of the
Corporation for the purpose of removing Directors to
create such vacancies to the extent permitted by
applicable law). Upon the creation of any vacancy
pursuant to the preceding sentence, Monsanto shall
nominate the person to fill such vacancy in accordance
with this Section 4.1 and the Board of Directors shall
elect each person so nominated. Notwithstanding the
foregoing, at each annual meeting of the stockholders of
the Corporation, the Corporation shall nominate such
number of Directors as Monsanto is otherwise entitled to
designate under this Section 4.1.
(i) Notwithstanding anything herein to the contrary, no
individual who is an officer, director, employee, agent,
partner or principal stockholder of any competitor of
the Corporation or any of its Affiliates (other than
Monsanto and its Affiliates) or any competitor of
Monsanto or any of its Affiliates (other than the
Corporation) shall serve as a Director without the
unanimous consent of the Board of Directors.
(j) In the event that Monsanto desires to remove any
Monsanto Director with or without cause and Monsanto is
unable to procure the resignation of such Monsanto
Director, then, upon the request of Monsanto, the Board
of Directors shall promptly call a special meeting of
stockholders of the Corporation for purposes of removing
such Monsanto Director. In the event that the
Corporation desires to remove any Corporation Director
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<PAGE>
with or without cause and the Corporation is unable to
procure the resignation of such Corporation Director,
then, upon the request of a majority of the Corporation
Directors then in office (or, in the event no
Corporation Directors are then in office, upon the
request of a majority of the Independent Directors then
in office), the Board of Directors shall promptly call a
special meeting of stockholders of the Corporation for
purposes of removing such Corporation Director. In the
event that the Chief Executive Officer's employment with
the Corporation is terminated for any reason, then upon
the request of either Monsanto or a majority of the
Corporation Directors then in office (or, in the event
no Corporation Directors are then in office, upon the
request of a majority of the Independent Directors then
in office), the Board of Directors shall promptly call a
special meeting of stockholders of the Corporation for
the purpose of removing such person as a Corporation
Management Director.
4.2 Solicitation and Voting of Shares.
---------------------------------
(a) The Company shall use its best efforts to solicit from
the stockholders of the Company eligible to vote for the
election of Directors proxies in favor of the Company
Management Directors and the nominees designated in
accordance with Section 4.1 hereof or the removal of any
Director pursuant to Section 4.1(h) or 4.1(j) hereof.
(b) In any election of Directors or any meeting of the
stockholders of the Company called expressly for the
removal of Directors, so long as the Board of Directors
includes (and will include after any such removal) the
number of Monsanto Directors contemplated by Section 4.1
hereof and so long as such meeting is properly called
and Monsanto is properly notified in accordance with the
Company's by-laws and certificate of incorporation,
Monsanto and its Affiliates shall attend such meeting
for purposes of establishing a quorum and shall vote all
their shares of Voting Stock (i) in favor of any nominee
or Director designated in accordance with Section 4.1
hereof, (ii) in favor of removal of any Director as
contemplated by Section 4.1(h) or 4.1(j) hereof, and
(iii) otherwise against the removal of any Director
designated in accordance with Section 4.1 hereof (other
than in cases of removal of a Director for cause);
provided, however, that, if Monsanto and its Affiliates
elect to cumulate their votes in accordance with the
Company's by-laws and certificate of incorporation,
then, in any vote electing Monsanto Directors, Monsanto
and its Affiliates may cast all of their votes in favor
of one (1) or more of the Monsanto Directors designated
by Monsanto and in any vote with respect to the removal
of a Monsanto Director, Monsanto and its Affiliates may
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<PAGE>
cast all or any portion of their votes either in favor
or against the removal of any Monsanto Director unless a
Monsanto Director is otherwise required to be removed in
accordance with Section 4.1(h) hereof. In any other
matter submitted to a vote of the stockholders of the
Company, Monsanto and its Affiliates may vote any or all
of their shares in their sole discretion.
(c) Monsanto agrees that it will, and will cause any of its
Subsidiaries (other than the Company and its
Subsidiaries) to, take all action as a stockholder of
the Company or as is otherwise reasonably within its
control, as necessary to effect the provisions of this
Agreement, including, without limitation, voting all
shares of Voting Stock in favor of all persons nominated
in accordance with Section 4.1 hereof; provided,
however, that, if Monsanto cannot so take actions to
give effect to all of the provisions of this Agreement,
it may first take actions to ensure that it receives all
of its benefits hereunder and then, to the extent
possible, to give effect to the provisions in favor of
the Company.
4.3 Committees.
----------
(a) The Board of Directors shall establish, empower and
maintain the committees of the Board of Directors
contemplated by this Section 4.3.
(b) The following committees shall be established, empowered
and maintained by the Board of Directors at all times
during the term of this Agreement:
(i) an Audit Committee, consisting of at least three
(3) of the Company's Independent Directors, which
committee shall be authorized and empowered to
cause an audit to be performed of the Company and
each of its Subsidiaries;
(ii) until the occurrence of a Trigger Event, a
Retention/Replacement Committee, consisting of the
Independent Directors then serving on the Board,
responsible for the retention and/or replacement of
all of the executive officers of the Company, to be
based on the financial and behavioral criteria
established by the Retention/Replacement Committee;
in the event that such committee decides to replace
any executive officer, Monsanto shall have the
right to nominate a replacement for such executive
officer for consideration by the committee along
with any other candidates identified by such
committee; the rights of the Retention/Replacement
Committee shall be subject to the provisions set
forth in Section 4.4(a)(viii) hereof;
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<PAGE>
(iii) a Compensation Committee, responsible, among other
things, for recommending to the Board of Directors,
for approval by a majority of the Board of
Directors, (a) the adoption and amendment of all
employee benefit plans and arrangements, (b) the
engagement of, terms of any employment agreements
and arrangements with, and termination of, all
persons designated by the Company as "officers" for
purposes of Section 16 of the Exchange Act
("Section 16 Officers"), (c) the policies,
limitations and procedures under which the Stock
Option Plan Administration Committee shall operate
and (d) the granting under the Company's employee
benefit plans of stock options and other equity
rights to Section 16 Officers, and consisting
solely of the Independent Directors then serving on
the Board provided each such Independent Director
is (A) a disinterested person (as such term is
defined in Rule 16b-3(d) under the Exchange Act)
and (B) an "independent director" for purposes of
Section 162(m) of the Internal Revenue Code of
1986, as amended; and
(iv) such other committees as the Board of Directors
deems necessary or desirable; provided, however,
that such committees are established in compliance
with Section 4.4(a)(vi) hereof.
For purpose of clause (ii) above, "executive officers"
shall have the same meaning as in Rule 3b-7 promulgated
under the Exchange Act.
(c) Except as otherwise provided in Section 4.3(b) hereof or
as agreed by a majority of the Monsanto Management
Directors, the number of Monsanto Directors on each
committee of the Board of Directors shall be the same
proportion (but not less than one (1)) of the total
membership of such committee as the number of Monsanto
Directors, as the case may be, is of the entire Board of
Directors. Except as otherwise provided in Section
4.3(b) hereof, the Monsanto Directors on each committee
of the Board of Directors shall be determined by a
majority of the Monsanto Management Directors.
(d) No action by any committee of the Board of Directors
shall be valid unless taken by unanimous written consent
as provided in the Company's by-laws or taken at a
meeting for which adequate notice has been duly given or
waived by the members of such committee. Such notice
shall include a description of the general nature of the
business to be transacted at the meeting, and no other
business may be transacted at such meeting unless all
members of the committee are present and consent to the
consideration of such other business. Any committee
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<PAGE>
member unable to participate in person at any meeting
shall be given the opportunity to participate by
telephone. The Board of Directors or the remaining
committee members shall designate an Independent
Director or Company Management Director to replace any
absent or disqualified Independent Director member or
Company Management Director member, respectively, of any
committee and a majority of the Monsanto Management
Directors shall designate a Monsanto Director to replace
any absent or disqualified Monsanto Director member of
any committee. Each of the committees established by
the Board of Directors pursuant to this Section 4.3
shall establish such other rules and procedures for its
operation and governance (consistent with the terms of
this Agreement) as it shall see fit and may seek such
consultation and advice as to matters within its purview
as it shall require.
4.4 Approval Required for Certain Actions.
-------------------------------------
(a) On and after the Effective Date and until the earlier of
a Trigger Event or such date on which Monsanto's
Percentage Interest is less than twenty-five (25%), a
majority of the Board, including at least one (1)
Company Director and one (1) Monsanto Management
Director, shall be required to approve any of the
following:
(i) the entry by the Company or any of its Affiliates
into any merger or consolidation or the acquisition
by the Company or any of its Affiliates of any
business or assets that would constitute a
Substantial Part of the Company (determined on a
consolidated basis) whether such acquisition be by
merger or consolidation or the purchase of stock or
assets or otherwise;
(ii) the sale, pledge, grant of security interest in,
transfer, retirement or other disposal of (A) a
Substantial Part of the Company (determined on a
consolidated basis), except pursuant to a security
interest granted in connection with borrowings
permitted under subsection (iv) below or (B) the
pledge or granting of a security interest in any
intangible property set forth in Exhibit B attached
---------
to the disclosure letter from Monsanto to Calgene
dated June 27, 1995;
(iii) any dividend by or return of capital by the Company
or Tomato Associates (other than such distributions
by Tomato Associates to the Company as are
necessary for the Company to timely perform its
obligations under Sections 1.02 and 5.02(c) of the
Gargiulo Credit Facility);
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<PAGE>
(iv) any incurrence or assumption, in the aggregate, by
the Company, any of its Affiliates or any
combination thereof, of any indebtedness for
borrowed money at any time outstanding exceeding in
the aggregate (determined on a consolidated basis)
the greater of (i) Fifteen Million Dollars
($15,000,000), increasing by Five Million Dollars
($5,000,000) on each July 1 commencing July 1,
1996, plus amounts secured by inventory and/or
receivables for seasonal working capital lines and
indebtedness incurred to acquire property, plant or
equipment and secured by the acquired asset, minus
amounts outstanding under the Company Credit
Facility, or (ii) the amounts set forth in the
Company's Operating Plan (hereinafter defined),
provided that loans under the Gargiulo Credit
Facility shall not be counted in this limitation;
(v) the repurchase or redemption of any Equity
Securities of the Company, other than from
employees upon termination of employment or
service;
(vi) the establishment of any new committees of the
Board (or the Calgene Board) or new or revised
delegation(s) of Board (or the Calgene Board)
authority to any Board (or Calgene Board) committee
or changes or revisions to general delegations of
authority to officers or other Persons for
categories of expenditures;
(vii) the adoption of or amendment to any benefit or
incentive plans of the Company or any of its
Affiliates which would increase the annual cost
thereof by more than fifteen percent (15%) from the
prior fiscal year or any adoption of, or amendment
to, any stock option plan;
(viii) the election, appointment or removal of the Chief
Executive Officer, Chief Operating Officer or Chief
Financial Officer of the Company and Calgene and
their successors and the establishment of their
annual or long term compensation level and benefits
and basis for awards (other than agreements in
effect on the Effective Date); provided, however,
that Monsanto shall have the right to select the
Chief Technical Officer of the Company and a
controller reporting to the Chief Financial Officer
of the Company;
(ix) approval of the annual operating plan ("Operating
Plan") and long-term strategic plan ("Strategic
Plan") of the Company and its Affiliates, as well
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<PAGE>
as the annual operating plan and long-term
strategic plan for the Gargiulo Business, to be
submitted to the Board annually for approval, and
any material changes thereto;
(x) any transaction between the Company (and its
Affiliates), on the one hand, and its (their)
directors, officers or employees, on the other
hand, which is not in the normal course of
business;
(xi) any modification of the Transaction Agreements;
(xii) any amendment of the by-laws or certificate of
incorporation of the Company, Calgene or Tomato
Associates by the respective Boards of Directors
thereof;
(xiii) the issuance of any warrants for the purchase of
Equity Securities or the issuance of additional
Equity Securities (other than warrants for the
purchase of Equity Securities) in excess of four
million (4,000,000) shares of Common Stock in any
two (2) year period to a third party, other than
pursuant to plans referred to in subsection (vii)
above;
(xiv) the sale or licensing by the Company or any of its
Affiliates of (A) any intangible property set forth
in Exhibit B attached to the disclosure letter from
Monsanto to Calgene dated June 27, 1995 or (B) any
other intangible property for consideration (other
than royalties contingent on future sales)
exceeding Five Million Dollars ($5,000,000) in the
aggregate (determined on a consolidated basis) per
transaction or per series of related transactions;
(xv) new fixed capital investments, capital leases or
noncancellable operating leases by the Company and
its Affiliates having annual payments in the
aggregate (determined on a consolidated basis)
exceeding the aggregate amount set forth in the
Operating Plan;
(xvi) matters covered in Article 5 hereof, including,
without limitation, any changes in the composition
of the Tomato Associates' Board of Directors other
than with respect to Messrs. Salquist and Stacey;
(xvii) any press release which mentions or directly or
indirectly refers to Monsanto, except as required
by law and where Board approval cannot be obtained
in a timely manner;
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<PAGE>
(xviii) the initiation, settlement or termination of any
suit or proceeding concerning intellectual
property, any other matter which could have an
adverse public affairs effect upon Monsanto or the
filing of any insolvency or bankruptcy proceeding
by or on behalf of the Company or any of its
Affiliates; or
(xix) the removal or election of the directors, subject
to Section 5.1 hereof, of Tomato Associates.
(b) After a Trigger Event and until the earlier of (i) the
third anniversary of the Effective Date or (ii)
Monsanto's Percentage Interest is at least seventy
percent (70%), a majority of the Board, including at
least two (2) Company Directors, shall be required to
approve any of the following:
(i) Except as provided in Section 4.4(a)(xvi) hereof,
the matters set forth in subsections (i), (ii),
(vi), (viii), (ix) and (xi) of paragraph (a) above;
or
(ii) Any transaction between the Company (and its
Affiliates) and Monsanto or any Affiliate of
Monsanto.
(c) From and after the occurrence of both (i) a Trigger
Event and (ii) the third anniversary of the Effective
Date, and until Monsanto's Percentage Interest is at
least ninety-nine percent (99%), neither Monsanto nor
any of its Affiliates shall enter into any transaction
with the Company or any of its Affiliates without the
approval of at least two (2) Company Directors.
4.5 Enforcement of this Agreement. A majority of the Company
-----------------------------
Directors shall have full and complete authority on behalf of
the Company to enforce the terms of this Agreement.
4.6 Certificate of Incorporation and By-laws. The Company and
----------------------------------------
Monsanto shall take or cause to be taken all lawful action
necessary to ensure at all times that the Company's and
Calgene's Certificate of Incorporation and By-laws are not at
any time inconsistent with the provisions of this Agreement.
Not later than the Effective Date, the Board of Directors
shall amend the Company's By-laws and the Calgene Board shall
amend Calgene's By-laws to reflect the provisions of this
Agreement.
4.7 Advisors. The Company Directors shall be entitled to retain,
--------
at the cost and expense of the Company, the services of an
investment banking firm of national reputation of their
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<PAGE>
choice and one (1) law firm of their choice to advise them in
their capacity as Independent Directors with respect to any
matter on which the Company Directors are required or
permitted to act hereunder.
4.8 Injunctive Relief. In the event of a breach of the
-----------------
provisions of this Article 4, a party hereto entitled to
rights under this Article 4 will suffer irreparable harm and
the total amount of monetary damages will be impossible to
calculate and will therefore be an inadequate remedy.
Accordingly, in such event, such party shall be entitled to
temporary and permanent injunctive relief against the Company
and any other breaching party and to any other rights and
remedies to which such party may be entitled to at law or in
equity.
ARTICLE 5
Governance of Gargiulo
----------------------
5.1 Board of Tomato Associates.
--------------------------
(a) Upon the Effective Date, the Board of Directors of
Tomato Associates shall consist of Jeffrey D. Gargiulo,
John Gargiulo, Hendrik A. Verfaillie, Robert T. Fraley,
Roger H. Salquist, Roderick N. Stacey and an additional
director who shall be (and whose successor shall be)
designated by the Company who shall need to be
reasonably acceptable to Monsanto and Jeffrey D.
Gargiulo (as long as he serves as a director). In
addition, the Board of Directors of Tomato Associates
shall include two (2) advisory, non-voting directors
designated by Monsanto from members of the senior
management of Tomato Associates. Upon request by
Monsanto, Company shall remove and replace Messrs.
Verfaillie and Fraley, and their respective successors,
and replace them with Persons designated by Monsanto.
(b) The Chief Executive Officer and Chairman of the Board of
Tomato Associates shall be Jeffrey D. Gargiulo as long
as he is employed by Tomato Associates. The Board of
Directors of Tomato Associates shall appoint a Vice
Chairman of the Board, Chief Operating Officer, Senior
Vice President and such other positions as they may
designate.
5.2 Operating and Strategic Plans. The annual operating plan and
-----------------------------
long-term strategic plan for the Gargiulo Business shall be
subject to approval by the Board of Directors in accordance
with Section 4.4 hereof. The annual operating plan shall
include, among other things: (i) capital expenditure budget,
(ii) borrowing forecast, (iii) monthly profit and loss, cash
flow and balance sheet forecasts, (iv) hiring and
compensation plans, (v) profit and loss forecasts by crop
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<PAGE>
production area, (vi) material asset acquisition plans and
(vi) account level details for each cost center. From and
after the approval of each annual operating plan for a fiscal
year (or portion thereof), the Board of Directors of Tomato
Associates shall have authority to operate the Gargiulo
Business during such year in the ordinary cause of business
and within the confines of such annual operating plan and the
strategic plan then in effect (as it may be modified by the
Board of Directors of Tomato Associates, subject to approval
of the Board of Directors in accordance with Section 4.4
hereof) and other delegations of authority from the Board of
Directors which shall be similar in scope to the delegation
of such Board to the Chief Executive Officer of the Company
(except that such delegations shall apply solely to the
Gargiulo Business). As of the Effective Date, the Board of
Directors shall approve, as part of the strategic plan for
the Gargiulo Business, the branded tomato strategy plan
previously approved by Monsanto.
5.3 Compensation; Etc. The initial compensation for the Chief
-----------------
Executive Officer and the Chief Operating Officer of Tomato
Associates (the "Two Senior Gargiulo Officers") shall be
determined by agreement of Monsanto and the Company prior to
the Effective Date. Thereafter, the compensation of the Two
Senior Gargiulo Officers shall not be reduced without the
approval of Monsanto. The initial employment agreements for
the Two Senior Gargiulo Officers shall be upon terms agreed
to by Monsanto and the Company prior to the Effective Date.
The employment of any of the Two Senior Gargiulo Officers
with Tomato Associates shall not be terminated without the
approval of the Board of Directors of Tomato Associates.
5.4 Certificate of Incorporation and By-Laws. The Company shall
----------------------------------------
take or cause to be taken all lawful action necessary to
ensure at all times that Tomato Associates' Certificate of
Incorporation and By-Laws are not at any time inconsistent
with the provisions of this Agreement. Not later than the
Effective Date, the Board of Directors shall cause Tomato
Associates to amend Tomato Associates' By-Laws to reflect the
provisions of this Agreement.
5.5 Effective Period. The provisions of Sections 5.1, 5.2, 5.3
----------------
and 5.4 shall be effective from the Effective Date until the
earlier of (a) a Trigger Event or (b) such time as Monsanto's
Percentage Interest is less than forty percent (40%).
5.6 Injunctive Relief. In the event of a breach of the
-----------------
provisions of this Article 5, a party hereto entitled to
rights under this Article 5 will suffer irreparable harm and
the total amount of monetary damages will be impossible to
calculate and will therefore be an inadequate remedy.
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<PAGE>
Accordingly, in such event, such party shall be entitled to
temporary and permanent injunctive relief against the Company
and any other breaching party and to any other rights and
remedies to which such party may be entitled to at law or in
equity.
ARTICLE 6
Miscellaneous
-------------
6.1 Governing Law. This Agreement shall be governed in all
-------------
respects by the laws of the State of Delaware (exclusive of
such state's choice of laws rules).
6.2 Successors and Assigns. Except as otherwise provided herein,
----------------------
the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto.
6.3 Entire Agreement; Amendment. This Agreement and the other
---------------------------
documents delivered pursuant hereto constitute the complete,
exclusive and final understanding and agreement between the
parties with regard to the subjects hereof and thereof.
Except as specifically set forth herein, any term of Section
2 or 3 hereof may be waived only with the prior written
consent of the Company and the Holders of at least sixty-six
and two-thirds percent (66-2/3%) of the outstanding shares of
the Registrable Securities. Any amendment or waiver effected
in accordance with this Section 6.3 shall be binding upon
each Holder of the Registrable Securities (including
securities into which such Registrable Securities have been
converted) outstanding at the time, each future Holder of all
such securities, and the Company.
6.4 Notices. Any notice required or permitted to be given under
-------
this Agreement shall be in writing, and shall be deemed
sufficiently given when delivered in person or transmitted by
telegram or telecopier (confirmed by mail), addressed as
follows:
If to Monsanto: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Senior Vice President and
General Counsel
Telecopy Number: 314-694-3011
If to any other Holder, at such address and telecopy number
as such Holder shall have furnished the Company in writing.
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<PAGE>
If to Company: Calgene, Inc.
1920 Fifth Street
Davis, California 95616
Attention: Chairman and Chief Executive
Officer
Telecopy Number: 916-753-1510
or to such other address as may be specified from time to
time in a notice given by such party. The parties agree to
acknowledge in writing the receipt of any such notice
delivered in person.
6.5 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to any Holder of any
Registrable Securities, upon any breach or default of the
Company under this Agreement, shall impair any such right,
power or remedy of such Holder nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter
occurring. Any waiver, permit, consent or approval of any
kind or character on the part of any party or any waiver on
the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All
remedies, either under this Agreement, at law, in equity or
otherwise afforded to any party, shall be cumulative and not
alternative.
6.6 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all
of which together shall constitute one instrument.
6.7 Severability. In the event that any provision of this
------------
Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without
said provision; provided, however, that no such severability
shall be effective if it materially changes the economic
benefit of this Agreement to any party.
6.8 Stock Legends. Subject to Section 2.8(d) hereof,
-------------
certificates representing Restricted Securities (other than
Restricted Securities issued to Monsanto in connection with
the conversion of principal and/or accrued interest under the
Company Credit Facility or the Gargiulo Credit Facility upon
the occurrence of an Event of Default under either such
Credit Facility) issued to Monsanto pursuant to the
Transaction Agreements shall bear the following legend:
"The securities represented by this certificate are
subject to certain resale restrictions and entitled to
the benefits set forth in a Stockholders Agreement dated
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<PAGE>
March 31, 1996, between Calgene II, Inc., a Delaware
corporation, and Monsanto Company, a Delaware
corporation (the "Agreement"). A copy of the Agreement
and all amendments thereto is on file in the office of
the Secretary of the Company."
6.9 Sale of Assets of Tomato Associates. For so long as Jeffrey
-----------------------------------
Gargiulo or Robert Shulman are employed by Tomato Associates
under employment agreements with Tomato Associates (the
"Employment Agreements"), the Company shall cause Tomato
Associates not to sell or otherwise dispose of (by merger,
consolidation or otherwise) all or substantially all of its
assets unless the acquiring entity assumes all of Tomato
Associates' obligations under each of the Employment
Agreements then in effect.
6.10 Audits, Consultants and Inspections. Monsanto (using
-----------------------------------
Monsanto's internal and/or external auditors or any other
Person appointed by Monsanto to whom the Company does not
reasonably object) shall have the right (i) to audit the
books and records, other financial information and business
practices and operations of the Company and its Affiliates,
and (ii) to discuss the business practices and operations,
affairs, finances and accounts of the Company and its
Affiliates with the officers of the Company and its
Affiliates and the independent public accountants who review
or audit the Company's financial statements, all at such
reasonable times and as often as may reasonably be requested.
The Company shall also permit inspection of its (and its
Affiliates') properties, books and records by Monsanto (using
the Persons identified above) during normal business hours or
at other reasonable times. The scope of all such audits,
discussions and inspections shall be determined by Monsanto
in its sole discretion. Any authorized representative of
Monsanto who or which is not employed by Monsanto (i) shall
be required to execute a confidentiality agreement in a form
approved by the Board of Directors (which approval shall not
be unreasonably withheld or delayed) and (ii) may not be
employed by or affiliated with a competitor of the Company,
as reasonably determined by the Board of Directors; provided,
however, that an independent certified public accounting firm
shall not be deemed to be employed by or affiliated with a
competitor of the Company even if such firm provides services
to a competitor of the Company.
6.11 No Third Party Beneficiaries. Nothing contained in this
----------------------------
Agreement, express or implied, is intended to or shall confer
upon anyone other than the parties hereto (and their
successors and assigns, including, without limitation,
subsequent Holders and purchasers under Section 3.7(c)) any
right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
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<PAGE>
6.12 Sections and Articles. All sections and articles referred to
---------------------
herein are sections and articles of this Agreement.
6.13 Headings. Headings as to the contents of particular articles
--------
and sections are for convenience only and are in no way to be
construed as part of this Agreement or as a limitation of the
scope of the particular articles or sections to which they
refer.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the day and year first above
written.
CALGENE II, INC.
By: /s/ Roger H. Salguist
--------------------------------
Roger H. Salguist
President
MONSANTO COMPANY
By: /s/ Hendrik A. Verfaille
--------------------------------
Hendrik A. Verfaille
Executive Vice President
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<PAGE>
Exhibit 99.1
HEADLINE: CALGENE COMPLETES STRATEGIC ALLIANCE WITH MONSANTO
BODY:
Calgene, Inc. (Nasdaq: CGNE) announced today that its alliance with Monsanto
as previously approved by the stockholders of Calgene became effective March 31,
1996. Stockholders of Calgene immediately prior to the close will hold 50.1% of
the common stock outstanding while Monsanto will hold 49.9% of the common stock
outstanding. The shares of Calgene will continue to trade over-the-counter
under the Nasdaq symbol CGNE.
DAVIS, Calif., April 1 CONTACT: Carolyn Hayworth of Calgene, Inc.,
916-753-6313
