<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only
(as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CALGENE, INC.
--------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii),
14a-6(i)(1), or 14a-6(i)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3)
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
CALGENE, INC.
October 3, 1996
To the Stockholders of Calgene, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Calgene, Inc. (the "Company") on Thursday, October 31, 1996 at 10:00 a.m. local
time. The Annual Meeting will be held at the Varsity Theatre, 616 Second
Street, Davis, California.
A description of business to be conducted at the Annual Meeting is set
forth in the attached Notice of Annual Meeting and Proxy Statement. Also
enclosed is a copy of our Annual Report to Stockholders for the fiscal year
ended June 30, 1996.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return the enclosed proxy card promptly in the accompanying envelope.
By returning the proxy, you can help the Company avoid the expense of duplicate
proxy solicitations and possibly having to reschedule the Annual Meeting if a
quorum of the outstanding shares is not present or represented by proxy. If you
attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.
Lloyd M. Kunimoto
President
<PAGE>
CALGENE, INC.
1920 Fifth Street
Davis, California 95616
__________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 31, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Calgene, Inc. (the "Company") will be held on Thursday, October 31, 1996 at
10:00 a.m., local time, at the Varsity Theatre, 616 Second Street, Davis,
California for the following purposes:
1. To elect directors of the Company.
2. To approve the Stock Purchase Agreement dated_____________, 1996
("Stock Purchase Agreement") between Calgene and Monsanto Company, a Delaware
Company ("Monsanto") pursuant to which (i) Calgene would issue 6,250,000 shares
of Common Stock to Monsanto for $8.00 per share for an aggregate purchase price
of $50 million, thereby increasing Monsanto's ownership interest in shares of
Calgene Common Stock from 49.9% to approximately 54.6% (without giving effect
to the exercise of outstanding options and warrants), (ii) Monsanto and Calgene
would enter into a Restated Stockholders Agreement ("Restated Stockholders
Agreement") amending and restating the Stockholders Agreement dated March 31,
1996 ("Stockholders Agreement") as more fully described in the Proxy Statement,
and (iii) the Company's Restated Certificate of Incorporation would be amended
to reflect the amendments to the Stockholders Agreement contemplated by the
Restated Stockholders Agreement (the foregoing transactions are hereinafter
collectively referred to as the "Monsanto Transaction").
3. To increase the authorized number of shares of Common Stock
from 80,000,000 to 100,000,000 shares.
4. To confirm the appointment of Ernst & Young LLP as the independent
auditors of the Company through the fiscal year ending December 31, 1997.
5. To transact such other business as may properly come before the
meeting.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice.
Holders of Common Stock of record at the close of business on
September 23, 1996 are entitled to vote at the Annual Meeting.
FOR THE BOARD OF DIRECTORS
MICHAEL J. MOTRONI
Secretary
Davis, California
October 3, 1996
IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-
PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY
VOTE IN PERSON EVEN IF YOU RETURN A PROXY.
<PAGE>
CALGENE, INC.
____________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 31, 1996
INFORMATION CONCERNING
VOTING AND PROXY SOLICITATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Calgene, Inc. ("Calgene" or the "Company") for use at the Annual Meeting of
Stockholders to be held on Thursday, October 31, 1996 at 10:00 a.m., local time,
or at any adjournment of the Annual Meeting. The Annual Meeting will be held at
the Varsity Theatre, 616 Second Street, Davis, California.
The Company's principal executive offices are located at 1920 Fifth
Street, Davis, California 95616. This Proxy Statement is being mailed to
stockholders on or about October 3, 1996.
Only holders of Common Stock of record at the close of business on
September 23, 1996 (the "Record Date") are entitled to vote at the meeting. On
the Record Date, __________ shares of the Company's Common Stock were issued and
outstanding. The affirmative vote of the holders of a plurality of the shares
of Common Stock present or represented at the Annual Meeting is required for the
election of directors. Each share is entitled to one vote for each of the nine
nominees, unless a stockholder notifies the Secretary of the Company prior to
the commencement of voting of the stockholder's intention to cumulate votes. In
that event, each share will be entitled to nine votes, which a stockholder may
cast for a single candidate or distribute among up to nine candidates, but such
cumulative voting will only apply to candidates who have been properly nominated
prior to the commencement of voting. The affirmative vote of the holders of a
majority of the shares of Common Stock present or represented at the Annual
Meeting, other than broker non-votes (as defined below) and other than those
held by Monsanto, is required for the approval of the Monsanto Transaction. The
affirmative vote of the holders of a majority of the shares of Common Stock
outstanding on the Record Date is required for the approval of the proposed
amendment to the Certificate of Incorporation to increase the authorized number
of shares of Common Stock from 80,000,000 to 100,000,000 shares, and the
approval of the holders of a majority of the shares of Common Stock present or
represented at the Annual Meeting is required for the ratification of the
selection of Ernst & Young LLP as the Company's independent auditors through the
fiscal year ending December 31, 1997. A majority of the shares entitled to
vote, present in person or represented by proxy (including those held by
Monsanto), will constitute a quorum at the Annual Meeting. For purposes of
determining a quorum, shares represented by all valid proxies received will be
counted, including proxies that contain instructions to abstain as to certain
votes and proxies filed by brokers or others indicating that their voting
authority does not extend to all agenda items ("broker non-votes").
A proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date, or by attending the meeting and voting in person.
The cost of soliciting proxies will be borne by the Company. If the
Company decides to retain the services of a proxy solicitor, the Company
estimates that it would pay a fee not to exceed $6,000. In addition, the
Company expects to reimburse brokerage firms and other persons representing
beneficial owners of shares for their expense in forwarding solicitation
material to such beneficial owners. Proxies
<PAGE>
may be solicited by certain of the Company's directors, officers and regular
employees, without additional compensation, in person or by telephone or
facsimile.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common
Stock of the Company as of July 31, 1996 by each director, by each executive
officer shown in the Summary Compensation Table (see "Executive Compensation"),
by all directors and executive officers as a group and by each person known by
the Company to be a beneficial owner of more than 5% of the shares outstanding.
<TABLE>
<CAPTION>
Shares Beneficially Approximate Percent
Owned(1) Owned (2)
____________________ ___________________
<S> <C> <C>
Roger H. Salquist......................... 239,940 *
Robert E. Baker........................... 15,000 *
Andrew Baum............................... 49,817 --
Patrick J. Fortune........................ -- --
Robert T. Fraley.......................... -- --
Jeffrey D. Gargiulo....................... 6,667 *
Michael R. Hogan.......................... -- --
Thomas F. Hughes.......................... 28,618 *
Lloyd Kunimoto............................ 38,263 *
Danilo Lopez.............................. -- --
Michael J. Motroni........................ 37,040 *
Howard D. Palefsky........................ 14,500 *
John E. Robson............................ 19,167 *
Roderick N. Stacey........................ 107,830 *
Allen J. Vangelos......................... 14,600 *
Hendrik A. Verfaillie..................... -- --
All executive officers and
directors as a group (16 persons)......... 587,692 *
Monsanto Company.......................... 30,146,114 49.9%
800 North Lindbergh
Boulevard,St. Louis, MO 63137(3)
- - - ----------------------------
</TABLE>
* Less than 1%.
(1) The Company believes that all beneficial owners named in the table
have sole voting and investment power with respect to the shares they
beneficially own. The shares shown in the table to be beneficially
owned include any shares that the person has the right to acquire
within 60 days of July 31, 1996 by exercise of any stock option for
which the Company has knowledge. The shares subject to such options
are as follows: Mr. Salquist: 209,762; Mr. Baker: 14,500; Mr. Baum:
41,116; Mr. Gargiulo: 6,667; Mr. Hughes: 26,544; Mr. Kunimoto: 31,366;
Mr. Motroni: 37,040; Mr. Palefsky: 13,500; Mr. Robson: 4,167; Mr.
Stacey: 107,830; Mr. Vangelos: 14,500; and all executive officers and
directors as a group: 513,242.
-2-
<PAGE>
(2) Percent of the 60,443,115 outstanding shares of Common Stock,
counting as outstanding for each named person all shares issuable to
such person on exercise of options that are included in the first
column.
(3) Does not include the 6,250,000 shares of Calgene Common Stock
("Additional Shares") which would be issued if the Monsanto
Transaction is consummated, which would increase Monsanto's holdings
to approximately 54.6% (without giving effect to the exercise of
outstanding options and warrants).
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A board of nine directors will be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the nine nominees of the Board of Directors named below. Except for
Messrs. Fortune and Hogan, all of the nominees are presently directors of the
Company. If any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any nominee who shall
be designated by the current Board of Directors to fill the vacancy in
accordance with the Stockholders Agreement. It is not expected that any nominee
will be unable or will decline to serve as a director. If stockholders nominate
persons other than the Board's nominees for election as directors, the proxy
holders will vote all proxies received by them in accordance with cumulative
voting to assure the election of as many of the Board's nominees as possible.
Directors are elected by a plurality of the votes cast. Proxies
marked to withhold authority to vote for one or more nominees, and broker non-
votes, will not be counted as votes cast. Each share is entitled to one vote
for each of the nine nominees, unless a stockholder notifies the Secretary of
the Company prior to the commencement of voting of the stockholder's intention
to cumulate votes. In that event, each share will be entitled to nine votes,
which a stockholder may cast for a single candidate or distribute among up to
nine candidates, but such cumulative voting will only apply to candidates who
have been properly nominated prior to the commencement of voting.
Messrs. Verfaillie, Fraley, Robson, Hogan and Fortune have been
designated by Monsanto in accordance with the Stock Purchase Agreement and the
Restated Stockholders Agreement between Calgene and Monsanto. The election of
Messrs. Verfaillie, Fraley, Robson, Hogan and Fortune is a condition precedent
to Monsanto's purchase of the Additional Shares. See "Approval of Transaction
with Monsanto."
The Board of Directors recommends a vote FOR the nominees listed
below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- - - --------------- --- -------------------- -----
<S> <C> <C> <C>
Patrick J. Fortune......... 49 Chief Information Officer of __
Monsanto Company
Robert T. Fraley........... 43 President of Ceregen (a 1996
business unit of Monsanto
Company)
Michael R. Hogan........... 43 Vice President and Corporate __
Controller of Monsanto Company
Lloyd Kunimoto............. 43 President and Acting Chief 1996
Executive Officer of the
Company
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Howard D. Palefsky........ 49 Chairman and Chief Executive 1986
Officer of Collagen
Corporation
John E. Robson............. 66 Senior Advisor of Robertson, 1996
Stephens & Company
Roger H. Salquist.......... 55 Consultant; Former Chairman 1981
and Chief Executive Officer
of the Company
Allen J. Vangelos.......... 64 President and Chief Executive 1994
Officer of Calavo Growers of
California
Hendrik A. Verfaillie...... 51 Executive Vice President of 1996
Monsanto Company
</TABLE>
The term of office of each person elected as a director will continue until
the next Annual Meeting of Stockholders or until his or her successor has been
elected. The terms of the Stockholders Agreement and Restated Stockholders
Agreement set forth the rights of Calgene and Monsanto to designate nominees to
the Board of Directors. See "Approval of Transaction with Monsanto -- Summary of
Stockholder Agreement and Restated Stockholder Agreement." There is no family
relationship between any director and any other director or executive officer of
the Company.
Mr. Fortune was appointed Corporate Vice President, Information Technology
and Chief Information Officer of Monsanto Company in October 1995. From August
1994 to August 1995 Mr. Fortune was President and Chief Operating Officer of
Coram-Healthcare Corporation, whose business is home infusion therapy for cancer
and AIDS patients. From 1991 to 1994 Mr. Fortune was Corporate Vice President
Information Management for Bristol-Meyers Squibb. From 1989 to 1991 Mr. Fortune
was Senior Vice President and General Manager of Packaging Corporation of
America prior to which he served as Vice President, Information Services and
Corporate Vice President of the Parenterals Group of Baxter International. He is
also a member of Board of Directors of Parexel Corporation (a clinical research
organization) and serves on the Board of Visitors of the School of Physical
Sciences at the University of Chicago.
Mr. Fraley was named President of Ceregen, a business unit of Monsanto, in
1995. From 1993 to 1995, Mr. Fraley was Vice President, New Products Division,
of the Monsanto Agricultural Products Group. From 1990 to 1993, Mr. Fraley was
Vice President, Research and Development, New Products Division, of the Monsanto
Agricultural Products Group.
Mr. Hogan was appointed Corporate Vice President and Corporate Controller
of Monsanto Company in January 1996. From 1986 to 1995, Mr. Hogan was Executive
Vice President of General American Life and while holding such position also
served as President and director of Gencore Health Systems, Inc. and its
predecessor organization from 1990 through 1994..
Mr. Kunimoto has been the President and Acting Chief Executive Officer
since July 1996. From June 1995 to July 1996 Mr. Kunimoto served as Vice
President of Strategic Planning and Business Development. From November 1983 to
June 1995 , Mr. Kunimoto served in several senior management positions with the
Company.
-4-
<PAGE>
Mr. Palefsky has been the Chairman and Chief Executive Officer of Collagen
Corporation, a medical products company, since 1995. He served as President and
Chief Executive Officer of Collagen Corporation from 1978 to 1995. He is also a
director of Collagen Corporation, Target Therapeutics, Inc., and Innovasive
Devices, Inc., all medical products companies.
Mr. Robson has been a Senior Advisor of Robertson, Stephens & Company since
1993. From 1989 to 1992 Mr. Robson was Deputy Secretary of the United States
Treasury. Mr. Robson is also a director of Northrop Grumman Corporation, an
aerospace and defense company and Security Capital Industrial Trust, a real
estate investment trust.
Mr. Salquist has been a consultant to the Company since August 1996. Mr.
Salquist had previously served as an executive officer of the Company since
September 1983 and its Chief Executive Officer since November 1985. Mr. Salquist
is a director of Collagen Corporation , a medical products company.
Mr. Vangelos has been the President and Chief Executive Officer of Calavo
Growers of California since September 1986, prior to which he held management
positions at Castle & Cooke, including Vice President and General Manager of
Processed Products and President of International Diversified Business and Fresh
Marketing. From 1980 to 1984, he was the Chief Executive Officer of Impact
Corporate Group, a food brokerage company. Mr. Vangelos was the 1993 Chairman of
the Board of Directors of the Agricultural Council of California and a past
Chairman of the United Fresh Fruit and Vegetable Association.
Mr. Verfaillie was appointed an Executive Vice President of Monsanto
Company in July 1995. Prior to this he served as President of The Agricultural
Group, Vice President and Advisory Director-Monsanto Company from 1993 to 1995,
Vice President and General Manager, Roundup Division-The Agricultural Group from
1990 to 1993, and Vice President-Commercial Development-Monsanto Agricultural
Company from 1986 to 1990.
BOARD MEETINGS, COMMITTEES AND DIRECTOR COMPENSATION
The Board of Directors of the Company (the "Board") held four meetings
during the fiscal year ended June 30, 1996. No nominee attended fewer than 75%
of the meetings of the Board of Directors and of the committee of the Board on
which he served that were held during the period of the director's service
except for Mr. Stinnett who passed away in January 1996.
The Board has an Audit Committee, a Human Resources Committee and a
Replacement/Retention Committee. From time to time, the Board has created
various ad hoc committees for special purposes.
The Audit Committee consists of Messrs. Palefsky, Robson and Fraley. The
Audit Committee held three meetings in the last fiscal year. The Audit Committee
recommends engagement of the Company's independent auditors and is primarily
responsible for approving the services performed by the Company's independent
auditors and for reviewing and evaluating the Company's accounting principles
and its system of internal accounting controls.
The Human Resources Committee consists of Messrs. Vangelos, Verfaillie and
Baker. The Human Resources Committee held two meetings during the last fiscal
year. The Human Resources Committee considers and makes recommendations to the
Calgene Board of Directors concerning general compensation policies and employee
benefit plans and specifically recommends salary levels and bonus awards for
certain senior executive officers, including the Chief Executive Officer. The
Human Resources Committee also administers Calgene's stock option plan and has
sole authority to grant options to officers. The Human Resources Committee's
executive salary and bonus recommendations for fiscal 1996 were approved by the
Calgene Board of Directors without modifications.
-5-
<PAGE>
The Retention/Replacement Committee consists of Messrs. Palefsky,
Verfaillie and Robson. The Retention/Replacement Committee held no meetings
during the last fiscal year. The Retention/Replacement Committee is responsible
for the retention and/or replacement of all of the executive officers of the
Company. Under the terms of the Restated Stockholders Agreement the
Retention/Replacement Committee would be eliminated, thus leaving the Calgene
Board of Directors thereafter responsible for the retention and/or replacement
of all of the executive officers of the Company.
Directors who are not also employees of the Company or its subsidiaries
receive a fee of $1,000 per meeting ($250 per telephone meeting) attended, $500
per Board committee meeting attended (unless held on the same day as a Board
meeting) and a monthly retainer of $1,000, plus out-of-pocket travel expenses.
Prior to April 1, 1996, directors received an annual retainer of $3,000
(accruing and payable $250 per month). Under the 1991 Stock Option Plan, non-
employee directors receive an option to purchase 10,000 shares of Common Stock
at the time of their initial election to the Board, and receive annually
thereafter options to purchase 3,000 shares of Common Stock. These automatically
granted options have terms of five years (subject to continued service on the
Board), become exercisable in equal monthly increments over the twelve months
following the respective grant dates and have exercise prices equal to the fair
market value of the Common Stock on their respective dates of grant. On March
25, 1996, annual options were automatically granted to each of the nonemployee
directors then serving at an exercise price of $6.00 per share.
There were no consulting fees paid to directors in fiscal 1996.
In addition to the fees listed above, Monsanto Company transferred to Mr.
Robson 15,000 shares of Common Stock of the Company pursuant to the terms of a
letter agreement dated May 6, 1996 between John E. Robson and Monsanto Company.
Such shares are subject to a three-year vesting period, under which 33 1/3% of
the total number of shares originally granted become non-forfeitable on each
March 31 commencing March 31, 1997.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table provides certain summary information concerning
compensation earned during the last three fiscal years by the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company who were serving at the end of fiscal 1996 (the "named
executive officers"). The table also includes such information for two former
executive officers who at the end of fiscal 1996 were no longer employed by the
Company or a subsidiary of the Company.
-6-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation(1) Awards
------------------------------------------- ---------
Other Annual Securities All Other
Name ans Principal Fiscal Salary Bonus Compensation Underlying Compensation
Position Year ($) ($) ($) Options (#) $(2)
- - - ------------ ---- ----- ---- -- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist (3)(4) 1996 $275,577 $ -- ---- -- $3,596
Chairman of the Board and 1995 242,404 -- ---- 100,000 1,212
Chief Executive Officer 1994 225,865 -- ---- 104,762 --
Andrew Baum 1996 160,046 10,000 ---- 40,000 3,280
Vice President 1995 162,600 10,000 ---- 25,000 840
1994 154,592 -- ---- -- --
Thomas Hughes 1996 125,261 25,000 ---- 55,175 3,002
Division President, 1995 106,731 25,000 ---- 22,825 1,142
Stoneville Pedigreed Seed 1994 89,462 -- ---- 10,000 977
Company
Lloyd Kunimoto(5) 1996 140,000 60,000 ---- 50,000 2,800
Vice President 1995 140,538 -- ---- 25,000 754
1994 135,519 4,808 ---- -- --
Michael J. Motroni 1996 140,230 -- 100,000 20,000 2,962
Vice President of Finance 1995 120,461 -- ---- 15,000 647
and Secretary 1994 107,135 3,654 ---- -- --
Roderick N. Stacey 1996 198,462 -- 695,000 -- 6,524
Former President and Chief 1995 233,558 -- ---- -- 1,077
Operating Officer 1994 200,673 -- 6,679 100,000 --
Danilo Lopez 1996 148,077 -- 131,250 -- 2,558
Former President, Calgene 1995 171,635 -- ---- 100,000 815
Fresh
</TABLE>
____________________
(1) Includes amounts earned in the fiscal year even if paid in the subsequent
fiscal year or deferred pursuant to the Company's 401(k) savings plan.
Excludes amounts paid during the fiscal year that were earned in a prior
year.
(2) Amounts reported as "All Other Compensation" represent the Company's
matching contributions under its 401(k) savings plan.
(3) The options shown in the table as granted to Mr. Salquist in fiscal 1994
were originally granted in 1987 for a six-year term and extended for four
additional years in fiscal 1994.
(4) In August 1996 Mr. Salquist resigned as Chairman of the Board and Chief
Executive Officer. Mr. Salquist remains as a member of the Board and has
also become a consultant to the Company. See "Executive Compensation -
Change of Control Employment Agreements."
(5) Since the resignation of Mr. Salquist, Mr. Kunimoto has served as Acting
Chief Executive Officer.
-7-
<PAGE>
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
Messrs. Salquist, Stacey and Motroni entered into Change of Control
Employment Agreements, dated as of July 19, 1995, with the Company. Each
agreement becomes effective only upon a Change of Control (as defined) of the
Company and provides that, if the employment of the officer is terminated by the
Company without Cause (as defined) or by the officer for Good Reason (as
defined) within the three-year term of the agreement or if (in the case of Mr.
Salquist) he resigns upon the six-month or three-year anniversaries of the
effective date of the agreement, the officer shall receive severance benefits
that include a payment equal to 2.99 times his base salary and average bonus for
the prior three fiscal years. For purposes of such agreements, a Change of
Control included the closing of the transaction on March 31, 1996 pursuant to
which Monsanto Company acquired a 49.9% equity interest in the combined business
of the Company and Gargiulo, L.P. (the "Initial Monsanto Transaction"). See
"Certain Transaction -Reorganization Agreement".
In connection with his resignation following the closing of the Initial
Monsanto Transaction, Mr. Stacey and the Company entered into an amendment to
his Change of Control Employment Agreement pursuant to which Mr. Stacey agreed
that payments required to be made to him under such agreement would be paid over
a one-year period rather than in a lump sum. The amended agreement provided for
the payment of $347,500 upon Mr. Stacey's resignation and monthly payments of
$9,000 during a 12 month consulting period and an additional payment of $239,500
at the end of the 12 month period.
In connection with his resignation in August 1996, Mr. Salquist and the
Company entered into an amendment to his Change of Control Employment Agreement
pursuant to which Mr. Salquist agreed that payments required to be made to him
under such agreement would be paid over a 13 month period rather than in a lump
sum. The amended agreement provided for the payment of $315,000 upon Mr.
Salquist's resignation and monthly payments of $25,000 during a 12 month
consulting period and an additional payment of $290,000 at the end of the 12
month period.
-8-
<PAGE>
Stock Option Tables
The following table provides information regarding stock options granted in
fiscal 1996 to the named executive officers in the Summary Compensation Table.
In accordance with rules of the Commission, the table shows the hypothetical
gains that would be produced by the respective options based on assumed 5% and
10% rates of annual compound stock price appreciation from the date the options
were granted until the end of the ten-year option terms. The actual value an
executive may realize will depend on the spread between the market price and the
exercise price on the date the option is exercised.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
Individual Grants Potential
-------------------------------------------- Realized Value
Percent of at Assumed
Total Annual Rates of
Number Options Stock Price
of Shares Granted Appreciation for
Underlying to Option Term
Options Employees ($)(3)
granted in Fiscal Exercise Expiration -------------------
(#)(1) Year (%) Price ($)(2) Date 5% 10%
----- ------ ----------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist --- --- --- --- --- ---
Andrew Baum 40,000 2.00 5.75 4/22/06 144,646 366,561
Thomas Hughes 175 -- 6.75 7/27/05 743 1,883
25,000 1.25 5.688 3/22/06 89,429 226,630
30,000 1.51 5.75 4/22/06 108,484 274,921
Lloyd Kunimoto 50,000 2.51 5.75 4/22/06 180,807 458,201
Michael J. Motroni 5,000 .25 4.75 12/18/05 14,936 37,851
15,000 .75 5.75 4/22/06 54,242 137,460
Roderick N. Stacey --- --- --- --- --- ---
Danilo Lopez --- --- --- --- --- ---
</TABLE>
_______________________
(1) Newly granted options have terms of ten years and become exercisable
incrementally in equal monthly amounts over a period of five years from the
date of grant. The committee that administers the stock option plan may,
with the consent of the option holder, modify the terms (including price)
of outstanding options.
(2) The exercise price may be paid in cash or by delivery of already-owned
shares, subject to certain conditions.
(3) At assumed rates of appreciation of 5% and 10%, compounded annually, the
Common Stock would appreciate in value 63% and 159%, respectively, over a
ten-year period. These mandated computations do not represent the
Company's estimate or projection of future Common Stock prices.
-9-
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows stock options exercised by the named executive
officers in the Summary Compensation Table during fiscal 1996, the aggregate
value of gains on the dates of exercise, the number of shares covered by both
exercisable and non-exercisable stock options as of fiscal year-end, and the
year-end values for such options.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Shares
Underlying Unexercised Value of Unexercised In-the-
Options at Fiscal Money Options at Fiscal
Shares Year-End(#) Year-End($)(1)
Acquired ---------------------------- ---------------------------
on Value
Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist -- -- 202,262 92,500 144,048 --
Andrew Baum -- -- 37,134 62,866 1,166 33,834
Thomas Hughes -- -- 20,610 79,390 2,046 47,629
Lloyd Kunimoto -- -- 26,884 73,116 1,459 42,291
Michael J. Motroni -- -- 33,085 41,915 2,782 19,718
Roderick N. Stacey -- -- 107,830 160,170 10,500 --
Danilo Lopez -- -- -- -- -- --
</TABLE>
_______________________
(1) Value is based on market value of the Common Stock at exercise date (for
value realized), or at year end (for value of unexercised options), minus
the option exercise price.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
COMPOSITION AND FUNCTIONS OF THE COMMITTEE
The Human Resources Committee (referred to in this report as the
"Committee") consists of three non-employee directors: Messrs. Allen J.
Vangelos, Hendrik A. Verfaillie and Robert E. Baker.
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<PAGE>
The Committee performs the functions of a compensation committee. The
Committee considers and makes recommendations to the Calgene Board of Directors
concerning general compensation policies and employee benefit plans and
specifically recommends salary levels and bonus awards for certain senior
executive officers, including the Chief Executive Officer. The Committee also
administers Calgene's stock option plan and has sole authority to grant options
to officers. The Committee's executive salary and bonus recommendations for
fiscal 1996 were approved by the Calgene Board of Directors without
modifications.
OBJECTIVES OF EXECUTIVE COMPENSATION POLICY
The objectives of Calgene's executive compensation policy are to:
* set executive compensation at levels sufficient to attract, retain and
motivate highly qualified executive personnel;
* align the interests of management and the stockholders by making a
substantial portion of executive compensation dependent on the
success of Calgene, as measured by long-term appreciation in the
market price of Calgene's Common Stock; and
* balance considerations of individual achievements each year with
Calgene's financial and non-financial performance.
In furtherance of these objectives, Calgene's executive compensation policy
provides for a combination of base salary, cash incentive bonus awards and long-
term stock options. Calgene also makes matching contributions under its 401(k)
savings plan for all employees that participate, including its executive
officers. Calgene does not provide its executives with significant perquisites.
SALARY
In determining its recommendation to the Calgene Board of Directors
concerning the salary of senior executive officers, the Committee considers
published data from annual surveys of executive compensation at other companies
in its field. With the survey data as a reference point, the Committee makes
adjustments based on its evaluation of Calgene executives' individual levels of
experience, responsibility and past performance. The Committee also takes into
consideration each executive's comparability with other Calgene executives. The
Committee typically gives considerable weight to the views of the Chief
Executive Officer with respect to executive salaries other than his own. Annual
salary adjustments normally become effective in the month of July.
INCENTIVE BONUSES
The Committee each year sets target maximum cash bonus levels for certain
senior executives and delegates to the Chief Executive Officer the
responsibility to do so for more junior executives. Fiscal 1996 bonus award
target amounts for senior executives ranged from 33% to 16% of their salaries.
The Committee has formulated five performance categories: (1) individual
contribution toward achieving annual corporate objectives, and the degree to
which Calgene achieves the objectives; (2) achievement of divisional
nonfinancial objectives; (3) achievement of financial objectives; (4)
contribution to building the organization of Calgene's tomato, oils and cotton
business units; and (5) corporate leadership. These categories include
performance criteria that can be measured against objective standards, and also
criteria that involve subjective determinations. Each of these categories is
assigned a weight for a particular executive based upon that executive's role
and responsibilities in Calgene. Each senior executive's performance under
those categories provides a guideline for the Committee's fiscal year-end
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<PAGE>
recommendation to the Calgene Board as to what portion, if any, of the target
maximum bonus will be awarded to a particular executive. The Committee takes
into account the overall corporate financial results and cash position of
Calgene in determining the total bonuses to be awarded.
STOCK OPTIONS
The granting of stock options is the principal method available to the
Committee to align the interests of the executive officers with those of the
stockholders. The option will reward the executive only if the market price of
the Common Stock appreciates over the option term and the executive remains
employed by Calgene over the vesting period. Options granted to executive
officers generally have a ten-year term, vest over a period of five years and
may be exercised at a price per share equal to the market price on the date of
grant. Stock options are granted to at least some executive officers each year,
as well as to numerous other employees. The number of shares in an option grant
reflects the executive's position at Calgene, stock options granted to the
executive in the past and the executive's potential contribution to the success
of Calgene. In granting stock options to senior executive officers, the
Committee has not followed any set of fixed guidelines.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee increased the salary of Mr. Salquist from $225,000 in fiscal
1995 to $275,000 in fiscal 1996, reflecting his contributions to the Company and
the consummation of the Initial Monsanto Transaction.
OTHER MATTERS
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code, which disallows a tax deduction to any publicly-held
corporation for compensation (including non-cash compensation) exceeding $1
million in any year paid to any of the five most highly compensated executive
officers, unless such compensation meets certain requirements. The cash
compensation of each of Calgene's executive officers is well below $1 million.
The principal non-cash compensation of Calgene executives is from stock options.
Calgene is generally entitled to a tax deduction if an executive exercises a
nonqualified stock option or disposes of shares acquired from the exercise of an
incentive stock option before the required holding period has ended. The
Committee believes that Calgene stock options either will meet the requirements
of Section 162(M) or will not result in the loss of significant tax deductions.
Taking this into account, as well as Calgene's large tax loss carryover and the
reduced flexibility from a change to the stock option plan to conform to the
requirements of Section 162(m), the Committee has not recommended any change to
the stock option plan. However, the Committee may consider imposing annual
exercise limitations in some future option grants to executives if Calgene would
otherwise be deprived of significant tax benefits.
The Calgene Board of Directors approved Change of Control Agreements for
Roger H. Salquist, Roderick N. Stacey and Michael J. Motroni. These agreements
provide for the payment of severance compensation in the event of termination of
their employment in connection with any Change of Control of Calgene.
This report is submitted by the following directors, who constituted all
the members of the Committee during fiscal 1996.
Robert E. Baker
Allen J. Vangelos
Hendrik A Verfaillie
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1996, the members of the Human
Resources Committee were Messrs. Baker, Vangelos and Verfaillie. None of the
members has ever been an officer or employee of the Company or any of its
subsidiaries. During fiscal 1996, there were no Committee "interlocks" within
the meaning of the SEC rules, and there continue to be no such "interlocks."
Mr. Salquist, former Chairman of the Board and Chief Executive Officer,
participated in portions of meetings of the Committee at the invitation of the
Committee and made various proposals to the Committee at its request. In
addition, at the Committee's direction, Mr. Salquist set the cash compensation
of certain other executives.
STOCK PERFORMANCE GRAPH
The graph below compares the five-year cumulative total returns for Calgene
Common Stock, the Nasdaq Composite Index and a select Peer Group Index of
Companies identified by Calgene. The graph assumes a $100 investment on June
30, 1991 in Calgene Common Stock and in each of the two indices, and assumes the
reinvestment of all dividends paid by companies represented in the two indices.
The representation of the component companies in the indices is weighted
according to their respective market capitalizations at the end of each period
for which cumulative returns are shown in the graph. The selected peer group
index consists of the following agricultural biotechnology companies known by
the Company to have their shares traded on the Nasdaq National Market: Mycogen
Corporation, Ecogen Inc., DNA Plant Technology Corporation and Biosys Inc. The
graph is in this Proxy in accordance with the rules of the SEC and is not
necessarily indicative of future performance.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96
------- ------- ------- ------- ------- -------
Calgene, Inc. 100 120.63 148.51 149.96 95.13 89.88
Nasdaq Composite 100 158.23 186.2 154.69 199.47 249.51
Peer Group Index 100 120.85 124.61 118.34 68.42 71.18
</TABLE>
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's officers and directors are required to file with the
Securities and Exchange Commission reports of their acquisitions and
dispositions of equity securities of the Company. Based on the Company's review
of copies of such reports received by it, or written representations from
reporting persons, the Company believes that during the fiscal year ended June
30, 1996, its officers and directors filed all required reports on a timely
basis.
PROPOSAL NO. 2
APPROVAL OF TRANSACTION WITH MONSANTO
On September __, 1996, the Company entered into a Stock Purchase Agreement
with Monsanto (the "Stock Purchase Agreement"), pursuant to which (i) the
Company agreed to sell and issue to Monsanto, and Monsanto agreed to purchase,
6,250,000 shares of Common Stock of the Company (the "Additional Shares"), at
$8.00 per share, for an aggregate purchase price of $50 million, thereby
increasing Monsanto's ownership interest in shares of Calgene Common Stock from
49.9% to approximately 54.6% (without giving effect to the exercise of
outstanding options and warrants), (ii) Monsanto and Calgene agreed to enter
into a Restated Stockholders Agreement ("Restated Stockholders Agreement")
amending and restating the Stockholders Agreement dated March 31, 1996
("Stockholders Agreement"), and (iii) the Restated Certificate of Incorporation
shall be amended to reflect the amendments to the Stockholders Agreement
contemplated by the Restated Stockholders Agreement (the foregoing transactions
are herein collectively referred to as the "Monsanto Transaction"). On July
30, 1996, the last reported sale price of the Calgene Common Stock on the Nasdaq
National Market was $4.875 per share. Upon the closing of such purchase,
Monsanto will own approximately 36,396,114 shares of Common Stock of the
Company, representing approximately 54.6% of the issued and outstanding shares
of Common Stock of the Company. The affirmative vote of the holders of a
majority of the shares of Common Stock present or represented at the Annual
Meeting, other than broker non-votes and shares held by Monsanto, is required
for the approval of the Monsanto Transaction. The affirmative vote of the
holders of a majority of the shares of Common Stock outstanding on the Record
Date is required for the approval of the proposed amendment to the Certificate
of Incorporation and Monsanto has agreed to vote all of its shares of Common
Stock in favor of such amendment.
REASONS FOR THE TRANSACTION
In the year ended June 30, 1996, the Company incurred substantial losses
primarily in connection with the operation of its tomato business. As of June
30, 1996, the Company had available cash and cash equivalents of $_________ and
working capital of $_________________.
The Company believes that significant additional funds are required to pay
down debt, fund its tomato operations, to support the market introduction of new
cotton products and to finance continued oils research and development. The
Board of Directors of Calgene believes that the proposed transaction with
Monsanto is on terms no less favorable to the Company than could be obtained
from an independent third party. The Board determined to seek stockholder
approval for the Monsanto Transaction because the transaction will enable
Monsanto to nominate a majority of the members of the Board of Directors of
Calgene. If the proposed transaction with Monsanto is not approved at the
Annual Meeting, Calgene is unable to predict whether it will be able to obtain
required financing on favorable terms, if at all.
The Board of Directors recommends a vote FOR the Monsanto Transaction.
-14-
<PAGE>
SUMMARY OF STOCK PURCHASE AGREEMENT
Consummation of the purchase of the Additional Shares by Monsanto pursuant
to the Stock Purchase Agreement is subject to various conditions, including:
(i) expiration of the applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HRS Act"), (ii) election of the
five (5) Monsanto designated directors of the Company by the stockholders of
Calgene, (iii) approval of the Monsanto Transaction, which includes the issuance
of the Additional Shares to Monsanto, by the holders of a majority of the shares
of Calgene Common Stock present or represented at the Annual Meeting, other than
Monsanto, (iv) Calgene shall have executed the Restated Stockholders Agreement,
(v) the Additional Shares shall have been authorized for listing on the Nasdaq
National Market, subject to official notice of issuance, and (vi) between the
date of the Stock Purchase Agreement and the Closing Date there shall have been
no Material Adverse Change (as defined in the Stock Purchase Agreement) in the
position, financial or otherwise, or the operations, assets, liabilities or
results of operations of Calgene or its subsidiaries.
The Stock Purchase Agreement provides that the closing of the transactions
contemplated thereunder shall occur on the first date after the conditions set
forth therein are satisfied or waived. Absent a request for additional
information by the United States Department of Justice ("DOJ") or the Federal
Trade Commission ("FTC") under the HSR Act and assuming the requisite
stockholder approval at the Annual Meeting with respect to the Monsanto
Transaction, Calgene and Monsanto presently anticipate closing on or about
November __, 1996. If a request for additional information is issued by the DOJ
or FTC the waiting period under the HSR Act is extended until 20 days after all
the information requested is furnished to the DOJ or FTC. The Stock Purchase
Agreement provides that either Monsanto or Calgene may terminate the Stock
Purchase Agreement if the conditions for each's benefit as set forth therein are
not satisfied or waived by January 31, 1997.
SUMMARY OF THE STOCKHOLDERS AGREEMENT AND THE RESTATED STOCKHOLDERS AGREEMENT
As part of the Monsanto Transaction, the Stock Purchase Agreement provides
that, simultaneously with the issuance of the Additional Shares to Monsanto,
Calgene and Monsanto shall enter into the Restated Stockholders Agreement which
amends and restates the existing Stockholders Agreement. A copy of the proposed
Restated Stockholders Agreement is appended to this Proxy Statement as Exhibit
A.
The following is a summary of both the existing Stockholders Agreement
which became effective on March 31, 1996 and the proposed Restated Stockholders
Agreement which will become effective upon the consummation of the transactions
contemplated by the Stock Purchase Agreement.
Composition of the Calgene Board. The existing Stockholders Agreement
provides that the composition of the Calgene Board and the manner of selecting
members thereof shall be as follows:
(a) After March 31, 1996, the Calgene Board shall be comprised of
nine directors;
(b) Until the earlier of any time that (i) Monsanto's percentage
ownership of the outstanding Calgene securities ("Percentage
Interest") is at least 55% or (ii) Calgene elects to convert
borrowings made from Monsanto into equity securities of Calgene and
Monsanto's Percentage Interest is at least 50% after such conversion
(a "Trigger Event"), the Calgene Board shall consist of two directors
who include the Chief Executive Officer and a second director
nominated by a majority of the Company Directors (as hereinafter
defined) ("Company Management Directors"), three Independent
Directors (as defined in the Stockholders Agreement) nominated by
Calgene ("Company Directors")
-15-
<PAGE>
and four directors nominated by Monsanto (each a "Monsanto
Director"), at least one of which shall be an Independent Director.
(c) At and after the occurrence of a Trigger Event, the Calgene Board
shall be comprised of 11 Directors and Monsanto shall have the right
to designate two additional directors to the Board; and
(d) At any time that Monsanto's Percentage Interest is at least 70%,
(i) Monsanto shall have the right to designate eight Calgene
Directors, to consist of two Company Management Directors and six
other directors designated by Monsanto (including at least one
Independent Director) and (ii) Calgene shall have the right to
designate three Independent Directors to the Board. At such time as
Monsanto's Percentage Interest is at least 99%, Monsanto shall have
the right to designate all of the Calgene Directors.
The proposed Restated Stockholders Agreement provides that the
composition of the Calgene Board and the manner of selecting members thereof
shall be as follows:
(a) Until otherwise changed in accordance with the Restated
Stockholders Agreement, the Board of Directors of Calgene shall be
comprised of nine Directors consisting of one Company Management
Director, three Independent Directors and five Directors designated
by Monsanto, at least one of which shall be an Independent Director.
With respect to the nominees for election at the Annual Meeting, Mr.
Kunimoto is the Company Management Director, Messrs. Salquist,
Vangelos and Palefsky are the Company Directors and Messrs.
Verfaillie, Fraley, Robson, Hogan and Fortune have been designated by
Monsanto with Mr. Robson being the Independent Director designated by
Monsanto.
(b) The provision in the existing Stockholders Agreement set forth in
clause (c) above, increasing the Calgene Board to 11 upon the
occurrence of a Trigger Event and granting to Monsanto the right to
designate two additional directors was deleted.
(c) At any time that Monsanto's Percentage Interest is at least
seventy percent (70%), Calgene shall nominate (i) six directors
designated by Monsanto which shall consist of one Company Management
Director and five Monsanto directors (including at least one
Independent Director) and (ii) three Independent Directors. At such
time as Monsanto's Percentage Interest is at least ninety-nine
percent (99%), Calgene shall nominate nine directors designated by
Monsanto.
Under the terms of the existing Stockholders Agreement, and unchanged
by the Restated Stockholders Agreement, Calgene shall nominate the following
number of Monsanto designees when the Monsanto Percentage Interest is as set
forth below:
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<PAGE>
Monsanto
Designees for Nomination
Monsanto Percentage Interest to the Calgene Board
---------------------------- ------------------------
less than 40% but at least 20% 3 directors
less than 20% but at least 10% 2 directors
less than 10% but at least 5% 1 director
less than 5% none
In addition, the Restated Stockholders Agreement has changed the
definition of "Trigger Event" so that upon the purchase by Monsanto of the
Additional Shares pursuant to the Stock Purchase Agreement a "Trigger Event"
occurs.
Under the terms of the Restated Stockholders Agreement the
Retention/Replacement Committee would be eliminated, leaving the Calgene Board
of Directors thereafter responsible for the retention and/or replacement of all
of the executive officers of the Company.
Registration Rights. The Stockholders Agreement provides Monsanto and
certain assignees may subject to certain conditions and limitations, require
Calgene, whether or not Calgene proposes to register its Common Stock for sale,
to register with the Securities and Exchange Commission all or part of the
shares held by Monsanto. The Restated Stockholders Agreement provides that the
Additional Shares acquired by Monsanto pursuant to the Stock Purchase Agreement
shall also be entitled to these registration rights. Calgene is not required to
effect such a registration prior to September 30, 1998, unless an event of
default has occurred and is continuing under the Credit Agreements. See
"Certain Transactions - Credit Agreements."
Anti-Dilution Rights. If at any time Calgene agrees to sell shares of
Calgene Common Stock or other securities having the right to vote generally in
any election of directors of Calgene (collectively, "Calgene Securities") in a
private or public offering (other than pursuant to Calgene stock option plans),
Monsanto is entitled to notice of such proposed sale and has the right, but not
the obligation, to acquire all or any portion of the Calgene Securities to be
offered for sale sufficient for Monsanto to maintain, after the consummation of
the proposed offering, the same percentage of ownership of Calgene Securities as
Monsanto possessed immediately prior to such offering. With respect to shares
of Calgene Securities issued pursuant to Calgene's stock option plans, Monsanto
shall have the right to maintain its percentage ownership of issued and
outstanding Calgene Securities by making open market purchases in accordance
with the Stockholders Agreement. This provision is unchanged by the Restated
Stockholders Agreement.
Limitations on Monsanto's Ownership of Calgene Securities.
The existing Stockholders Agreement provides that until September 30,
1998 Monsanto may not increase its Percentage Interest above 49.9% except in
limited circumstances such as:
(a) conversion of principal and/or interest under the Credit
Agreements;
(b) issuance of Calgene Securities in an asset sale by Monsanto
to Calgene;
(c) prior to March 31, 1997 a tender offer for 100% of the
publicly held shares; or
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<PAGE>
(d) on or after March 31, 1997, a tender offer to increase its
Percentage Interest to 70%, provided if Monsanto increases its
Percentage Interest to more than 80%, then it has to tender for
100% of the publicly held shares;
In both (c) and (d) above, the price must be approved by disinterested
directors and supported by a fairness opinion by an investment banking firm.
The Restated Stockholders Agreement increases the Percentage Interest
which Monsanto may hold prior to September 30, 1998 to ____% to reflect the
purchase of the Additional Shares pursuant to the Stock Purchase Agreement and
deletes clause (c) above.
Limitations on Monsanto's Resale of Calgene Securities. The existing
Stockholders Agreement provides that Monsanto shall not, directly or indirectly,
sell any Calgene securities (other than to an affiliate) except as follows: (a)
on and after March 31, 1997, Monsanto may sell Calgene 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
stockholders of Calgene; (b) after September 30, 1998, in addition to the rights
set forth in (a) above, Monsanto may sell Calgene securities (ii) in a
registered public offering pursuant to the registration rights granted to
Monsanto under the Stockholders Agreement; (ii) through sales pursuant to Rule
144 under the Securities Act of 1933 (the "Securities Act"); (iii) through sales
of not more than 10% of the total issued and outstanding Calgene securities to a
Non-Financial Purchaser (as defined in the Stockholders Agreement); or (iv)
through sales to a Financial Purchaser (as defined in the Stockholders
Agreement); (c) after September 30, 1999, in addition to the rights set forth in
(a) and (b) above, Monsanto may sell Calgene securities through a private sale
of 35% or more of the total issued and outstanding Calgene securities to a Non-
Financial Purchaser under circumstances where such third party assumes the
applicable and proportionate rights and obligations of Monsanto under the
Stockholders Agreement and the other transaction agreements; and (d)
notwithstanding the foregoing, at any time, Monsanto may sell Calgene securities
issued to Monsanto upon conversion by Monsanto of principal or accrued interest
under the Credit Agreements after the occurrence of an event of default (see
"Certain Transactions - Credit Agreements").
This provision will not be changed by the Restated Stockholders
Agreement.
Approval Required for Certain Actions. The existing Stockholder
Agreement provides as follows:
(a) On and after March 31, 1996 until the earlier of a Trigger
Event or such date on which Monsanto's Percentage Interest is
less than 25%, a majority of the Calgene Board, including at
least one Company Director and one Monsanto Management Director,
shall be required to approve any of the following: (i) the entry
by Calgene or any of its Affiliates into any merger or
consolidation or the acquisition by Calgene or any of its
Affiliates of any business or assets that would constitute more
than 10% of Calgene's total assets determined on a consolidated
basis (a "Substantial Part"); (ii) the sale, pledge, grant of
security interest in, transfer, retirement or other disposal of a
Substantial Part of Calgene, except pursuant to a security
interest granted in connection with borrowings permitted under
subsection (iv) below or the pledge or granting of a security
interest in certain intangible property as further described in
the Stockholders Agreement; (iii) any dividend by or return of
capital by Calgene or Gargiulo, Inc. (formerly Tomato Investment
Associates, Inc.) (other than such distributions by Gargiulo,
Inc. to Calgene as are necessary for Calgene to timely perform
its obligations under the Gargiulo Credit Facility Agreement);
(iv) any incurrence or assumption, in the aggregate, by Calgene,
any of its
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<PAGE>
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 (A) $15 million, increasing by $5 million 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 Calgene
Credit Facility Agreement, or (B) the amounts set forth in the
Calgene Operating Plan (as defined in the Stockholders
Agreement), provided that loans under the Gargiulo Credit
Facility Agreement shall not be counted in this limitation; (v)
the repurchase or redemption of any Calgene securities, other
than from employees upon termination of employment or service;
(vi) the establishment of any new committees of the Calgene Board
or new or revised delegations of Calgene Board authority to any
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 Calgene 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 Calgene and
its successors and the establishment of its annual or long-term
compensation level and benefits (other than agreements in effect
at the Effective Time); provided, however, that Monsanto shall
have the right to select the Chief Technical Officer of Calgene
and a controller reporting to the Chief Financial Officer of
Calgene; (ix) approval of the Operating Plan and Strategic Plan
(each as defined in the Stockholders Agreement) of Calgene and
its Affiliates, as well as the annual operating plan and long-
term strategic plan for the Gargiulo business, to be submitted to
the Calgene Board annually for approval, and any material changes
thereto; (x) any transaction between Calgene (and its
Affiliates), on the one hand, and its 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
Calgene or Gargiulo, Inc.; (xiii) the issuance of additional Calgene
securities (other than warrants for the purchase of Calgene
securities) in excess of 4,000,000 shares of Calgene Common Stock in
any two-year period to a third party, other than pursuant to plans
referred to in subsection (vii) above or the issuance of any warrants
for the purchase of Calgene securities; (xiv) the sale or licensing
by Calgene or any of its Affiliates of certain intangible property,
as further described in the Stockholders Agreement, or any other
intangible property for consideration (other than royalties
contingent on future sales) exceeding $5 million 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 Calgene 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 relating to Gargiulo, Inc. covered in
Article 5 of the Stockholders Agreement, including, without
limitation, any changes in the composition of the Gargiulo Board of
Directors; (xvii) any press release which mentions or directly or
indirectly refers to Monsanto, except as required by law and where
Calgene Board approval cannot be obtained in a timely manner; (xviii)
the initiation, settlement or termination of any suit or proceeding
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<PAGE>
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 Calgene or any
of its Affiliates; or (xix) the removal or election of the directors,
subject to the terms of the Stockholders Agreement, of Gargiulo, Inc.
(b) After a Trigger Event and until the earlier of (i) March 31,
1999 or (ii) such time as Monsanto's Percentage Interest is at
least seventy percent (70%), a majority of the Calgene Board,
including at least two Company Directors, shall be required to
approve any of the following: except as provided in the
Stockholders Agreement, the matters set forth in clauses (i),
(ii), (vi), (viii), (ix) and (xi) of paragraph (a) above; or (ii)
any transaction between Calgene (and its Affiliates) and Monsanto
or any Affiliate of Monsanto.
(c) From and after the occurrence of both (i) a Trigger Event and
(ii) March 31, 1999, and until Monsanto's Percentage Interest is
at least 99%, neither Monsanto nor any of Affiliates shall enter
into any transaction with Calgene or any of its Affiliates
without the approval of at least two Company Directors.
The Restated Stockholders Agreement will delete clause (a)(xvi) above
because Article 5 of the Stockholders Agreement referred to therein, which
contained several provisions relating to the operations of Gargiulo, Inc.
(formerly Tomato Investment Associates, Inc.) a wholly owned subsidiary of
Calgene, will also be deleted.
Further, the amendment to the Stockholders Agreement changes the
definition of "Trigger Event" so that upon the purchase by Monsanto of the
Additional Shares a "Trigger Event" occurs. Accordingly, after the purchase by
Monsanto of the Additional Shares, clause (b) above, not clause (a), will be
applicable.
CERTIFICATE OF AMENDMENT
The amendments to Calgene's Certificate of Incorporation reflected in
the proposed Certificate of Amendment are to (i) reflect the amendments to the
provisions in the Stockholders Agreement as reflected in the Restated
Stockholders Agreement and described in the "Composition of the Calgene Board"
and "Approval Required for Certain Actions," and (ii) increase the authorized
shares of Calgene from 80,000,000 shares to 100,000,000 shares. A copy of the
Certificate of Amendment is appended to this Proxy Statement as Exhibit B.
THE FOREGOING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE STOCK
PURCHASE AGREEMENT, THE RESTATED STOCKHOLDERS AGREEMENT AND CERTIFICATE OF
AMENDMENT. THE RESTATED STOCKHOLDERS AGREEMENT AND CERTIFICATE OF AMENDMENT ARE
ATTACHED HERETO AS EXHIBITS A AND B, RESPECTIVELY, AND INCORPORATED BY REFERENCE
HEREIN.
CERTAIN TRANSACTIONS
SUMMARY OF EXISTING AGREEMENTS WITH MONSANTO
Reorganization Agreement. On October 13, 1995, the Company and
------------------------
Monsanto entered into an Agreement and Plan of Reorganization ("Reorganization
Agreement") and certain other agreements whereby Monsanto contributed all of the
outstanding shares of capital stock of Tomato Investment Associates, Inc., a
wholly-owned subsidiary of Monsanto ("TIA"), whose principal asset was the
entire
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equity interest in Gargiulo, L.P., $30 million in cash and certain technology
licenses in exchange for a 49.9% equity interest in the Company. In connection
with the Reorganization Agreement, a total of 30,146,114 shares of Common Stock
of the Company were issued to Monsanto. The Reorganization Agreement was
approved by the stockholders of the Company on March 25, 1996. On March 31, 1996
(the "Effective Time"), the Company and Monsanto consummated the transactions
contemplated by the Reorganization Agreement which included entering into the
agreements discussed below. Subsequent to the Effective Date, Gargiulo L.P. was
merged into TIA and TIA changed its name to "Gargiulo, Inc."
Stockholders Agreement. On March 31, 1996, the Company and Monsanto
----------------------
entered into a Stockholders Agreement (the "Stockholders Agreement"). The
Stockholders Agreement and the proposed amendments thereto are summarized herein
under "Proposal No. 2 - Approval of Transaction with Monsanto - Summary of
Existing Stockholders Agreement and Proposed Amendments."
Credit Agreements
-----------------
Calgene Credit Facility Agreement
On March 31, 1996, Monsanto and Calgene entered into the Calgene Credit
Facility Agreement pursuant to which Monsanto shall, during the Commitment
Period (as hereinafter defined), and subject to the terms and conditions
contained therein, make, at the request of Calgene, three consecutive one-year
loans of up to $15 million each (each a "Calgene Loan" and together the "Calgene
Loans"), collectively totalling not more than $45,000,000. At no time shall the
outstanding principal of all Calgene Loans exceed $15 million. Prior to the
occurrence of an Event of Default (as defined in the Calgene Credit Facility
Agreement), Calgene may borrow, repay and reborrow under each Calgene Loan, each
such borrowing or reborrowing being an "Advance." The "Commitment Period" began
on March 31, 1996 and ends on the earlier of September 30, 1998, or such earlier
time that Monsanto terminates its obligations to make further Advances under the
Calgene Credit Facility Agreement. The Calgene Loans made pursuant to the
Calgene Credit Facility Agreement are to be secured by the joint and several
guaranty of the subsidiaries of Calgene.
Prior to the occurrence of an Event of Default, the Calgene Loans bear
interest at the per annum rate equal to 2.00% above Citibank's published prime
rate (the "Calgene Base Rate"), and following an Event of Default at the per
annum rate equal to 3.00% above the Calgene Base Rate. During the continuance
of an Event of Default, Calgene shall have no right to obtain any new Advances
under this Agreement. The Calgene Loans may be prepaid in whole or in part at
any time after giving at least three days' prior written notice to Monsanto.
In lieu of repayment of outstanding principal and accrued interest on each
Calgene Loan, Calgene, subject to Monsanto's right to require Calgene to sell
shares and pay cash, as provided below, may elect to convert all or any portion
of the principal and accrued interest due under the applicable Calgene Loan (the
"Conversion Amount") into shares of Calgene Common Stock at the average of the
closing market price for such shares during the thirty trading days immediately
preceding the applicable maturity date for such Calgene Loan.
Monsanto may, in its sole discretion and within five business days after
its receipt of notice from Calgene that Calgene intends to exercise Calgene's
rights to convert the Conversion Amount, give written notice to Calgene stating
that (i) all or any part of the Conversion Amount shall be payable in cash (the
"Alternative Conversion Amount"), (ii) Calgene shall, at its expense, sell
publicly such number of shares of its common stock as Monsanto would have
received if the Alternative Conversion Amount had been converted as described
above and (iii) the net proceeds of such sale shall be paid by Calgene to
Monsanto in full payment and satisfaction of such Alternative Conversion Amount.
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Upon any such conversion, the Conversion Amount shall first be applied to
reduce the accrued interest due on the applicable Calgene Loan as of the
applicable maturity date, and any remaining portion of the Conversion Amount
shall be applied to reduce the principal due on such Calgene Loan. In any
event, on each annual Maturity Date (as defined in the Calgene Credit Facility
Agreement), all outstanding principal and accrued interest not converted by
Calgene into shares of Calgene Common Stock shall be repaid in full to Monsanto.
Upon the occurrence and during the continuation of an Event of Default, for
a period of thirty (30) days from the occurrence of the Event of Default,
Calgene, subject to Monsanto's right to require Calgene to sell shares and pay
cash, as described above, may similarly elect to convert all or any portion of
the principal and accrued interest under any outstanding Calgene Loan into
shares of Calgene Common Stock. If Calgene does not elect to exercise its
conversion rights upon such an Event of Default, Monsanto may, in addition to
its other remedies, elect to convert all or a portion of the remaining principal
and accrued interest under such Calgene Loan into shares of Calgene Common Stock
at the average of the closing market prices for such shares during the thirty
days preceding such Event of Default. In no event, however, shall Monsanto
elect to convert principal and accrued interest into more than 3,000,000 shares
of Calgene Common Stock (as such number is adjusted for stock dividends, stock
splits and similar events affecting holders of Calgene's common stock).
The obligation of Monsanto to provide Advances is subject to the
fulfillment of certain conditions, including, among others: (i) the continued
accuracy of all representations and warranties made by Calgene and its
subsidiaries; (ii) the compliance with all covenants contained in the Calgene
Credit Facility Agreement; (iii) no event shall have occurred which would
constitute an Event of Default or Potential Event of Default (as defined in the
Calgene Credit Facility Agreement); or (iv) there shall not have occurred any
circumstance which could reasonably be expected to have a material adverse
effect on (A) the business, assets, operations or financial condition of Calgene
and its subsidiaries, taken as a whole, or (B) the ability of the Company and
its subsidiaries to perform their obligations under the Calgene Credit Facility
Agreement.
The covenants contained in the Calgene Credit Facility Agreement require
Calgene to maintain a minimum consolidated net worth of not less than $10
million and a minimum consolidated working capital of not less than $5 million.
The Calgene Credit Facility Agreement also requires that Calgene and its
subsidiaries meet certain specified financial ratios, including a ratio of total
long-term liabilities to net worth and a current ratio. In addition, the
Calgene Credit Facility Agreement imposes a number of limitations on Calgene
with respect to future acquisitions, liens, mergers and the sale of assets,
loans and investments, guaranties, capital expenditures, the payment of
dividends and the incurrence of indebtedness. The existence of these covenants
could limit Calgene's ability to finance the growth of its existing operations
if cash flows were to decrease substantially or if expenses were to increase
substantially. These covenants would also limit Calgene's ability to engage in
additional acquisitions that would significantly increase the ratio of long-term
indebtedness to net worth following such acquisitions. The failure of Calgene
to satisfy these covenants would cause an Event of Default which could have a
material adverse effect on its business and results of operations. Calgene is
not in compliance with certain financial covenants contained in the Calgene
Credit Facility Agreement. Monsanto has agreed to grant Calgene a limited
waiver with respect to such non-compliance only as to the initial Advance which
matures March 31, 1997, provided Calgene first makes all reasonable efforts to
obtain any further necessary funds from its existing senior lenders.
All of the Calgene Loans shall be subordinated and subject in right of
payment to the prior payment in full of a certain senior indebtedness of Calgene
as more fully described in the Calgene Credit Facility Agreement. No payment on
account of principal or interest on the Calgene Loans shall be made if at the
time of such payment or immediately after giving the effect thereto: (i) there
shall exist a default in any payment with respect to any such senior
indebtedness or (ii) there shall have occurred an event of
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default (other than a default in the payment of amounts due thereon) with
respect to any such senior indebtedness.
As of August 31, 1996, there was no outstanding balance of principal and
interest under the Calgene Credit Facility Agreement.
Gargiulo Credit Facility Agreement
On March 31, 1996, Monsanto and Calgene entered into the Gargiulo Credit
Facility Agreement pursuant to which Monsanto shall, during the Commitment
Period (as hereinafter defined), and subject to the terms and conditions
contained therein, make available to Calgene a revolving credit facility of up
to $40 million (the "Gargiulo Loan").
The Gargiulo Loan has been used to acquire Collier Farms and to support the
braned tomato strategy of Gargiulo as determined by the Gargiulo Board of
Directors (other than amounts used to finance the acquisition of Collier Farms).
Prior to the occurrence of an Event of Default (as defined in the Gargiulo
Credit Facility Agreement), Gargiulo may borrow, repay and reborrow, each such
borrowing or reborrowing being an "Advance." In order to obtain an Advance from
Monsanto under the Gargiulo Credit Facility Agreement, Gargiulo must provide
documentation reasonably acceptable to Monsanto verifying that Gargiulo has
reached certain milestones and achieved certain goals as set forth therein. The
maximum amount of each Advance is subject to certain limitations based upon such
milestones and goals. The "Commitment Period" began on March 31, 1996 and ends
on the earlier of the fourth anniversary or such earlier time that Monsanto
terminates its obligations to make further Advances. The Gargiulo Loan is
secured by the joint and several guaranty of the subsidiaries of Calgene.
Prior to the occurrence of an Event of Default, the Gargiulo Loan shall
bear interest at the per annum rate equal to 2.00% above Citibank's published
prime rate (the "Gargiulo Base Rate"), and following an Event of Default at the
per annum rate equal to 3.00% above the Gargiulo Base Rate. During the
continuance of an Event of Default, Calgene shall have no right to obtain any
new Advances. The Gargiulo Loan may be prepaid in whole or in part at any time
after giving at least three days' prior written notice to Monsanto.
The Gargiulo Loan is payable, unless extended as described below, in one
payment on the fourth anniversary of the Effective Time (the "Maturity Date") in
an amount equal to the lesser of (i) the Repayment Portion of the Cumulative
Free Cash Flow (as defined in the Gargiulo Credit Facility Agreement) of
Gargiulo from the Effective Time to the Maturity Date and (ii) the amount of the
outstanding principal and accrued interest on the Gargiulo Loan. "Repayment
Portion" means the sum of 20% of the first $10 million of Cumulative Free Cash
Flow, 50% of the next $10 million and 80% of the remaining balance. In the
event that the Repayment Portion is not sufficient to pay all of the then
outstanding principal and accrued interest at the Maturity Date, the maturity
date with respect to the unpaid amount of outstanding principal and interest
shall be extended to the sixth anniversary of the Effective Time (the "Extended
Maturity Date"). In the event the Repayment Portion of the Cumulative Free Cash
Flow (less amounts previously paid) is not sufficient to pay the then
outstanding principal and accrued interest at the Extended Maturity Date,
Calgene shall pay Monsanto such lesser amount and Monsanto, at its sole option,
may do any one or combination of the following: (i) convert all or any portion
of the then outstanding principal and accrued interest into shares of Calgene
Common Stock at the average of the closing market price for such shares during
the thirty trading days immediately preceding the date of such conversion, (ii)
further extend the Final Maturity Date (as defined in the Gargiulo Credit
Facility Agreement) upon the same terms as are contained in the Gargiulo Credit
Facility Agreement, or (iii) as to any unpaid amount which is not converted
under clause (i) or for which payment is not extended pursuant to clause (ii),
cause Calgene to sell publicly that number of shares of Calgene Common Stock as
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Monsanto would have received if such amount has been converted under clause (i)
above with the net proceeds of such sale being delivered to Monsanto in full
payment and satisfaction of such amount.
Upon the occurrence and during the continuation of an Event of Default,
Monsanto may, in addition to its other remedies, similarly elect to convert all
or any portion of the principal and accrued interest under the Gargiulo Loan
(the "Gargiulo Conversion Amount") into shares of Calgene Common Stock at the
average of the closing market prices for such shares during the thirty days
preceding such Event of Default. In no event, however, shall Monsanto elect to
convert principal and accrued interest into more than 8,000,000 shares of
Calgene Common Stock (as such number is adjusted for stock dividends, stock
splits and similar events affecting holders of Calgene's common stock). Upon
any such conversion, the Gargiulo Conversion Amount shall first be applied to
reduce the accrued interest due on the Gargiulo Loan, and any remaining portion
of the Gargiulo Conversion Amount shall be applied to reduce the principal due
on such Gargiulo Loan.
The obligation of Monsanto to provide Advances is subject to the
fulfillment of certain conditions, including, among others: (i) the continued
accuracy of all representations and warranties made by Calgene and its
subsidiaries; (ii) the compliance with all covenants contained in the Gargiulo
Credit Facility Agreement; (iii) no event shall have occurred which would
constitute an Event of Default or Potential Event of Default (as defined in the
Gargiulo Credit Facility Agreement); or (iv) there shall not have occurred any
circumstance which could reasonably be expected to have a material adverse
effect on (A) the business, assets, operations or financial condition of Calgene
and its subsidiaries, taken as a whole or (B) the ability of the Company and its
subsidiaries to perform their obligations under the Gargiulo Credit Facility
Agreement.
The covenants contained in the Gargiulo Credit Facility Agreement require
Calgene to maintain a minimum consolidated net worth of not less than $10
million and a minimum consolidated working capital of not less than $5 million.
The Gargiulo Credit Facility Agreement also requires that Calgene and its
subsidiaries meet certain specified financial ratios, including a ratio of total
long-term liabilities to net worth and a current ratio. In addition, the
Gargiulo Credit Facility Agreement imposes a number of limitations on Calgene
and each of its subsidiaries with respect to future acquisitions, liens, mergers
and the sale of assets, loans and investments, guaranties, capital expenditures,
the payment of dividends and the incurrence of indebtedness. The existence of
these covenants could limit Calgene's ability to finance the growth of its
existing operations if cash flows were to decrease substantially or if expenses
were to increase substantially. These covenants would also limit Calgene's
ability to engage in additional acquisitions that would significantly increase
the ratio of long-term indebtedness to net worth following such acquisitions.
The failure of Calgene to satisfy these covenants would cause an Event of
Default which could have a material adverse effect on its business and results
of operations. Calgene is not in compliance with certain financial covenants
contained in the Gargiulo Credit Facility Agreement. Calgene intends to seek a
waiver from Monsanto with respect to such non-compliance.
The Gargiulo Loan is to be subordinated and subject in right of payment to
the prior payment in full of certain senior indebtedness of Calgene as more
fully described in the Gargiulo Credit Facility Agreement. No payment on
account of principal or interest on the Gargiulo Loan shall be made if at the
time of such payment or immediately after giving the effect thereto, (i) there
shall exist a default in any payment with respect to any such senior
indebtedness or (ii) there shall have occurred an event of default (other than a
default in the payment of amounts due thereon) with respect to any such senior
indebtedness.
As of August 31, 1996, the outstanding balance of principal and interest
under the Gargiulo Credit Facility Agreement was $______________.
License Agreements
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As part of the Initial Monsanto Transaction in March 1996, Monsanto
contributed certain technology licenses to Calgene pursuant to various license
agreements and letter agreements. The technologies underlying the License
Agreements are summarized below.
ACC Synthase and ACC Deaminase. ACC is a precursor of ethylene, a plant
growth regulator that induces ripening in certain fruits. By reducing the
amount of ACC available for conversion into ethylene, the ripening process can
be delayed. Control of the ripening process may enable Calgene to improve the
efficiency of its tomato production operations. Calgene will be granted non-
exclusive, perpetual, royalty-free rights to the ACC synthase and ACC deaminase
genes for use in certain produce crops and shall be able to practice under
Monsanto's ACC Synthase license from the USDA.
Fruit-specific Promoters. Promoters control the expression of genes in
each plant cell. In order for certain genes to function in a beneficial manner,
expression of these genes must be restricted to certain parts of the plant.
Fruit-specific promoters provide a means of limiting gene expression to the
fruit. For example, these promoters may be useful in regulating carbohydrate
metabolism (e.g., sugar content) in ripening fruits such as tomatoes and
strawberries. Calgene has been granted non-exclusive, perpetual, royalty-free
rights to certain fruit-specific promoters for use in certain produce crops.
Virus Resistance Genes. Virus infection is known to significantly reduce
the yields of certain crops, including tomatoes. Monsanto has developed methods
of interfering with viral replication in engineered plants, which slows the rate
and degree of infection, and reduces the yield loss resulting from the
infection. Calgene has been granted non-exclusive, perpetual, royalty-free or
royalty-bearing rights to certain aspects of Monsanto's patent estate related to
the engineering of virus resistance into certain produce crops.
FAD 3 Gene. The FAD 3 gene controls the relative amount of polyunsaturated
fatty acids found in plant oils, including canola oil. Calgene believes that
reducing the expression of the FAD 3 gene in engineered canola plans may result
in an oil with reduced linoleic and linolenic acid content. Such an oil would
be a superior cooking oil, as well as a superior raw material for the production
of margarine and shortening. Calgene has been granted exclusive, perpetual,
royalty-bearing rights to the FAD 3 gene for use in certain oilseed crops.
Insect Resistance Gene. Monsanto has modified genes from a soil
microorganism called Bacillus thurengiensis ("B.t.") the encode proteins that
are toxic to certain insects. Use of insecticides to control insects is a major
cost in the production of tomatoes. Calgene has been granted non-exclusive,
perpetual, royalty-free rights to Monsanto's B.t. patent estate for use in
certain produce crops.
ADP Glucose Pyrophosphorylase ("ADPGPP") Gene. The ADPGPP gene is a
bacterial gene involved in starch biosynthesis. By expression of this gene in
plants, the starch and/or sugar content of plants can be increased. This may
improve the flavor or sweetness of produce crops such as tomatoes or
strawberries. Calgene has been granted non-exclusive, perpetual, royalty-free
rights to Monsanto's patent estate related to ADPGPP for use in certain produce
crops. Monsanto and Calgene are parties to an interference at the United States
Patent and Trademark Office relating to the ADPGPP gene.
Oil Modification Technology. Monsanto has certain patent rights and know-
how related to the production of plants with altered oil compositions. By
modifying oil composition it may be possible to provide temperate sources of
certain tropical oils and the production of novel oil compositions. The
Monsanto oil modification genes include sucrose phosphorylase, cytochrome b5 and
PEP carboxylase. Calgene has been granted non-exclusive, perpetual, royalty-free
rights under Monsanto's patents and know-how for use in certain oilseed crops.
Insect Protected Cotton Direct Grower Licensing Agreement
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<PAGE>
Calgene has entered into an agreement with Monsanto under which Calgene
will participate in the direct licensing of Monsanto's B.t. technology to cotton
growers. Under the terms of this agreement, Monsanto has granted to Calgene a
non-exclusive, royalty-free U.S. license to use Monsanto's B.t. technology in
Calgene's cottonseed products. Subject to the issuance of a Monsanto patent
that covers the B.t. gene that is currently being utilized in Calgene's
cottonseed product development program, Calgene would be obligated under
applicable patent law to end use of its current B.t. gene and is permitted under
such agreement to incorporate Monsanto's B.t. gene into its product development
program over a four-year period.
Monsanto intends to enter into license agreements directly with cotton
growers. Under the terms of these agreements, cotton growers would obtain a
one-time right to purchase a specified number of units of cottonseed containing
Monsanto's B.t. gene in return for the payment of a license fee. Monsanto has
agreed to pay to Calgene a specified percentage of the net license fees received
from licensed growers who subsequently purchase Calgene's cottonseed products
containing Monsanto's B.t. gene. The material terms of Calgene's agreement
shall be modified to reflect any more favorable terms that may be granted to any
other cottonseed company that may participate in the direct licensing program.
PROPOSAL NO. 3
INCREASE IN AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Company currently has authorized 80,000,000 shares of Common Stock. As
of August 31, 1996, there were 60,443,115 shares of Common Stock outstanding and
3,673,996 additional shares of Common Stock reserved for issuance upon exercise
of outstanding stock options. After giving effect to the purchase of the
Additional Shares by Monsanto, only 9,632,889 shares will be available for
further issuance. Accordingly, the Board has adopted an amendment to the
Certificate of Incorporation, subject to stockholder approval, to increase its
authorized Common Stock to 100,000,000 shares. The affirmative vote of the
holders of a majority of the shares of Calgene Common Stock outstanding on the
Record Date is required for approval of this amendment to the Certificate of
Incorporation.
The Board of Directors recommends a vote FOR the proposed increase in
authorized Common Stock.
PROPOSAL NO. 4
CONFIRMATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On May 21, 1996, the Company announced that it was changing its fiscal year
end from June 30 to December 31. The Board of Directors has selected Ernst &
Young LLP as the Company's independent public accountants for the transition
period of July 1, 1996 through December 31, 1996 and for the fiscal year ending
December 31, 1997 and recommends that the stockholders confirm such selection.
Confirmation will require the affirmative vote by holders of a majority of
shares present or represented by proxy and entitled to vote on the matter. In
the event that confirmation fails to receive the required majority vote, the
Board of Directors will reconsider its selection.
Ernst & Young LLP has audited the Company's annual financial statements
since the fiscal year ended September 30, 1982. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting with the opportunity
to make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
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Proposals that are intended to be presented by stockholders of the Company
at the 1997 Annual Meeting must be received by the Company no later than
_______________ in order that they may be potentially eligible to be included in
the Company's proxy statement and from of proxy relating to that meeting.
INCORPORATION BY REFERENCE
The Company hereby incorporates by reference into this Proxy Statement its
Annual Report on Form 10-K for the fiscal year ended June 30, 1996 and all
reports filed by the Company with the Securities and Exchange Commission
pursuant to Section 13(a) of the Securities Exchange Act of 1934 after the date
hereof and prior to the date of the Annual Meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the shares they
represent as the Board of Directors may recommend.
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<PAGE>
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST A
COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO THE CORPORATE
SECRETARY, CALGENE, INC., 1920 FIFTH STREET, DAVIS, CALIFORNIA 95616.
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<PAGE>
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CALGENE, INC.
1996 ANNUAL MEETING OF STOCKHOLDERS
To be held on October 31, 1996
The undersigned stockholder of Calgene, Inc. ("Calgene") hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement for the 1996 Annual Meeting of Stockholders of Calgene, Inc.
to be held on October 31, 1996, and hereby appoints Lloyd M. Kunimoto and
Michael J. Motroni, and each of them, proxy and attorney-in-fact, with full
power of substitution, on behalf and in the name of the undersigned to
represent the undersigned at such meeting and at any continuations or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present,
on the matters set forth on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
1. To elect directors of the Company.
NOMINEES: Patrick J. Fortune, Robert T. Fraley, Michael R. Hogan, Lloyd
Kunimoto, Howard D. Palefsky, John E. Robson, Roger H. Salquist, Allen J.
Vangelos, Hendrik A. Verfaillie.
For [_] Withheld [_]
[_] ___________________ For all nominees except vote withheld
from nominee(s) noted on line above.
2. To approve the Stock Purchase Agreement dated ______________, 1996
("Stock Purchase Agreement") between Calgene and Monsanto Company, a Delaware
Company ("Monsanto") pursuant to which (i) Calgene would issue 6,250,000
shares of Common Stock to Monsanto for $8.00 per share for an aggregate
purchase price of $50 million, thereby increasing Monsanto's ownership
interest in shares of Calgene Common Stock from 49.9% to approximately 54.6%
(without giving effect to the exercise of outstanding options and warrants),
(ii) Monsanto and Calgene would enter into a Restated Stockholders Agreement
("Restated Stockholders Agreement") amending and restating the Stockholders
Agreement dated March 31, 1996 ("Stockholders Agreement") as more fully
described in the Proxy Statement, and (iii) the Company's Restated
Certificate of Incorporation would be amended to reflect the amendments to
the Stockholders Agreement contemplated by the Restated Stockholders
Agreement (the foregoing transactions are hereinafter collectively referred
to as the "Monsanto Transaction").
For [_] Against [_] Abstain [_]
3. To increase the authorized number of shares of Common Stock from
80,000,000 to 100,000,000 shares.
For [_] Against [_] Abstain [_]
4. To confirm the appointment of Ernst & Young LLP as the independent
auditors of the Company through the fiscal year ending December 31, 1997.
For [_] Against [_] Abstain [_]
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE PROPOSALS SET FORTH ABOVE AND AS THE
---
PROXYHOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [_]
(This Proxy should be marked, dated, signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing as officers or in a fiduciary capacity should so
indicate. If shares are held by joint tenants or as community property, both
should sign.)
Signature _______________________ Date________________
Signature _______________________ Date________________
<PAGE>
EXHIBIT A
CALGENE II, INC.
AND
MONSANTO COMPANY
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
<PAGE>
TABLE OF CONTENTS
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............................................. 16
2.9 Transfer of Registration Rights................................ 17
2.10 Limitations on Subsequent Registration Rights.................. 17
2.11 Termination of Registration Rights............................. 17
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............................................... 18
3.3 Public Offering................................................ 19
3.4 Limitations.................................................... 19
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........... 21
ARTICLE 4 Company and Calgene Corporate Governance....................... 22
4.1 Composition of the Board of Directors and Calgene Board........ 22
4.2 Solicitation and Voting of Shares.............................. 25
4.3 Committees..................................................... 26
4.4 Approval Required for Certain Actions.......................... 27
4.5 Enforcement of this Agreement.................................. 30
4.6 Certificate of Incorporation and By-laws....................... 30
4.7 Advisors....................................................... 31
4.8 Injunctive Relief.............................................. 31
ARTICLE 5 Governance of Gargiulo......................................... 31
<PAGE>
ARTICLE 6 Miscellaneous................................................. 31
6.1 Governing Law................................................. 31
6.2 Successors and Assigns........................................ 31
6.3 Entire Agreement; Amendment................................... 31
6.4 Notices....................................................... 32
6.5 Delays or Omissions........................................... 32
6.6 Counterparts.................................................. 33
6.7 Severability.................................................. 33
6.8 Stock Legends................................................. 33
6.9 [This section intentionally left blank.]...................... 33
6.10 Audits Consultants and Inspections............................ 33
6.11 No Third Party Beneficiaries.................................. 34
6.12 Sections and Articles......................................... 34
6.13 Headings...................................................... 34
<PAGE>
AMENDED AND RESTATED 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"), as amended as of
______________, 1996.
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 nominated for such
----------------
position by the Company in accordance with Section 4.1 hereof.
"Company Management Director" means the Chief Executive Officer (or, if
---------------------------
there is none at any time, a Director nominated by a majority of the
Company Directors) and a second Director who shall be nominated by a
majority of the Company Directors.
"Company Securities" has the meaning set forth in Section 3.1 hereof.
------------------
<PAGE>
"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.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"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, Inc. formerly known as Tomato Investment
--------
Associates, Inc.
"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.
"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.
-----------------
<PAGE>
"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. Without limiting the foregoing, Roger H. Salquist shall
qualify as an Independent Director so long as he continues to qualify under
clauses (iv) and (v) of such definition. Roger H. Salquist shall not fail
to qualify under clause (iv) above as a result of his Change in Control
Employment Agreement dated July 19, 1995, as modified, or Consulting
Agreement dated _____________, 1996 with the Company.
"Monsanto" has the meaning set forth in the first paragraph hereof.
--------
"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.
<PAGE>
"Monsanto Management Director" means a Director or Calgene Director who is
----------------------------
nominated for such position by Monsanto in accordance with Section 4.1
hereof and who is or was an employee of Monsanto.
"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.
"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,
<PAGE>
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 to
----------------------
Monsanto pursuant to the Transaction Agreements and the Stock Purchase
Agreement whether owned by Monsanto or a permitted transferee of Monsanto
and all such other securities of the Company acquired by Monsanto or any
Affiliate of Monsanto in accordance herewith.
"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.
--------------
<PAGE>
"Subsidiary" has the same meaning as in Rule l2b-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 earliest of (i) any time that Monsanto's
-------------
Percentage Interest is at least fifty-five percent (55%), (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, or (iii) the closing of Monsanto's purchase of additional
shares of Common Stock pursuant to the Stock Purchase Agreement.
"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:
<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 other appropriate form, in which event this Section
2.2 shall apply in all respects as if the words "Form S-3" were
<PAGE>
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.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, then such person may elect to withdraw therefrom by
<PAGE>
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
(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
<PAGE>
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 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
<PAGE>
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.
(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
<PAGE>
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, 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
<PAGE>
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, 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
<PAGE>
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 securities 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, 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
<PAGE>
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.
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
<PAGE>
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
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
<PAGE>
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 maintain, after the offering, the same
percentage of ownership of issued and outstanding Company Securities that
Holder possessed immediately prior to the offering (the "Proffering
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
<PAGE>
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 Proffering 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) 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.
<PAGE>
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 fifty-three percent (53%) (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 fifty-three
percent (53%) (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:
(a) On and after March 31, 1996 until September 30, 1998, Holder shall not
increase or further increase its ownership of issued and outstanding
Company Securities above fifty-three percent (53%), 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
<PAGE>
must be for one hundred percent (100%) of the publicly traded
Company Securities.
(b) After September 30, 1998, Holder may increase its ownership of Company
Securities through open market purchases or otherwise.
(c) If, at any time after the Effective Date, Holder shall elect to
increase its percentage of ownership of issued and outstanding Company
Securities above fifty-three percent (53%) as provided in paragraph
(a) 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.
(d) 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
<PAGE>
Securities through a private sale of thirty-five percent (35%) or more
of the total issued and outstanding 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 4.4(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 changed in accordance with this Agreement, the Board of
Directors shall be comprised of nine (9) Directors, and the Company
shall nominate for election as Directors: (i) one (1) Company
Management Director, (ii) three (3) Company Directors, and (iii) five
(5) Directors designated by Monsanto, at least one (1) of which shall
be an Independent Director.
(c) [This section intentionally left blank]
(d) At any time that Monsanto's Percentage Interest is at least seventy
percent (70%), (i) the Corporation shall nominate: (i) six (6)
Directors
<PAGE>
designated by Monsanto, which shall consist of the one (1) Company
Management Director and five (5) 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 nine (9)
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
Company 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 Company 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 Company shall nominate one (1)
Director designated by Monsanto. If, at any time, Monsanto's
Percentage Interest is less than five percent (5%), the Company shall
not be obligated to nominate any Director designated by Monsanto. At
any such time, all other Directors, other than the Company Management
Directors, shall be nominated by the Company.
(f) The Independent Directors to be nominated by the Company from time to
time shall be nominated by action of a majority of Company Directors
then in office. The Company Directors shall consult with the other
Independent Directors as to the nomination of any Company Director,
and in the event a majority of the Company Directors are unable to
agree upon any Company Director nominee, then the majority of all the
Independent Directors shall nominate such nominee. In the event that
no Company Directors are in office at the time of any nomination of a
Company Director, such Company 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 Company Directors in lieu of any individuals so
nominated to be such Company Directors by a majority of the
Independent Directors.
(g) The Company and Monsanto, respectively, shall have the right to
nominate any replacement for a Director nominated in accordance with
this Section 4.1 by the Company 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
<PAGE>
replacement of a Monsanto Director, the Monsanto Directors include
more than the required number of Independent Directors. The Board of
Directors shall elect each person so nominated by Monsanto or the
Company pursuant to this paragraph (g). In addition, the Board of
Directors shall nominate the Company's Chief Executive Officer to
replace such officer's predecessor in office as a Company 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 Company 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 Company 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 Company, the Company 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 Company or any of its Affiliates
(other than Monsanto and its Affiliates) or any competitor of Monsanto
or any of its Affiliates (other than the Company) 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 Company desires to remove
<PAGE>
any Company Director with or without cause and the Company is unable
to procure the resignation of such Company Director, then, upon the
request of a majority of all of the Independent Directors then in
office, the Board of Directors shall promptly call a special meeting
of stockholders of the Company for purposes of removing such Company
Director. In the event that the Chief Executive Officer's employment
with the Company is terminated for any reason, then upon the request
of either Monsanto or a majority of all 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 Company 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 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,
<PAGE>
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) [This section intentionally left blank]
(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
<PAGE>
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
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
<PAGE>
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 Gargiulo
(other than such distributions by Gargiulo 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);
(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
<PAGE>
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 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;
<PAGE>
(xvi) [This section intentionally left blank]
(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;
(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) 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. The Independent Directors, acting by
-----------------------------
unanimous consent, 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.
<PAGE>
4.7 Advisors. The Independent 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 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 Independent 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
----------------------
[This Article intentionally left blank.]
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
<PAGE>
time, each future Holder of all such securities, and the Company. Any
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment,
by the Company and Monsanto, or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that no such
amendment or waiver shall be effective without the approval of all of the
Independent Directors.
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: Assistant Secretary
Telecopy Number: 314-694-2574
If to any other Holder, at such address and telecopy number as such Holder
shall have furnished the Company in writing.
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
<PAGE>
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 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 [This section intentionally left blank.]
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
<PAGE>
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.
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.
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:
---------------------------
MONSANTO COMPANY
By:
---------------------------
<PAGE>
EXHIBIT B
[Amendment to Restated Certificate of Incorporation]
