<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 6, 1996
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
CALGENE II, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0161 68-0369863
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
1920 FIFTH STREET
DAVIS, CALIFORNIA 95616
(916) 753-6313
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
ROGER H. SALQUIST
CHIEF EXECUTIVE OFFICER
CALGENE II, INC.
1920 FIFTH STREET
DAVIS, CALIFORNIA 95616
(916) 753-6313
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
MARK G. BORDEN, ESQ. CRAIG A. ADOOR, ESQ.
HALE AND DORR PEPER, MARTIN, JENSEN, MAICHEL AND HETLAGE
60 STATE STREET 720 OLIVE
BOSTON, MASSACHUSETTS STREET ST. LOUIS, MISSOURI
02109 (617) 526-6000 63101 (314) 421-3850
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and certain other conditions under the Reorganization Agreement (as
described herein) are satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
Common Stock, $0.001
par value
per share.......... 31,290,445 $5.6875 $177,964,406 $61,368.00
================================================================================
</TABLE>
(1) Monsanto Company ("Monsanto") and Calgene, Inc. ("Calgene") have entered
into an Agreement and Plan of Reorganization which provides for a series
of transactions (collectively, the "Reorganization") pursuant to which,
among other things, (i) a wholly-owned subsidiary of the Registrant will
be merged with and into Calgene and all outstanding shares of Calgene's
Common Stock will be converted into the Registrant's Common Stock and (ii)
Monsanto will contribute certain assets to the Registrant in exchange for
shares of the Registrant's Common Stock. This Registration Statement
covers the maximum number of shares of the Registrant's common stock which
are expected to be issued to Calgene stockholders in connection with the
Reorganization plus the maximum number of shares of the Registrant's
Common Stock which are reserved for issuance pursuant to the exercise of
outstanding options under Calgene's stock option plans that will be
assumed by the Registrant upon consummation of the Reorganization and will
be exercisable prior to April 15, 1996.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the
"Securities Act"), and based upon the high and low sale prices of Calgene
Common Stock as quoted on the Nasdaq National Market on January 30, 1996.
(3) A fee of $39,696.00 was previously paid by Calgene pursuant to Rules 14a-6
promulgated under the Securities Exchange Act of 1934, as amended, in
connection with the filing of the preliminary Proxy Statement/Prospectus
on November 7, 1995. Pursuant to Rule 457(b) under the Securities Act,
such fee is being credited against the registration fee, and accordingly,
an additional fee of $21,672 is being paid upon filing of this
Registration Statement.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
CALGENE II, INC.
CROSS-REFERENCE SHEET SHOWING LOCATIONS IN THE PROXY STATEMENT/PROSPECTUS OF
THE RESPONSES TO THE ITEMS OF FORM S-4 (PURSUANT TO ITEM 501(B) OF REGULATION
S-K)
<TABLE>
<CAPTION>
FORM S-4 LOCATION IN
ITEM NUMBER AND CAPTION PROXY STATEMENT/PROSPECTUS
----------------------- --------------------------
<C> <S> <C>
INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus........ Facing Page; Cross Reference Sheet;
Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus....... Inside Front Cover Page of Proxy
Statement/Prospectus; Available
Information; Table of Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information..................... Summary; Risk Factors; Calgene, Inc.
Selected Consolidated Financial Data;
Gargiulo L.P. Selected
Consolidated/Combined Financial Data;
Tomato Investment Associates, Inc. and
Produce Related Technology of Monsanto
Company Selected Combined Financial
Data; Collier Farms Selected Combined
Financial Data; Unaudited Selected Pro
Forma Combined Financial Data;
Unaudited Pro Forma Combined Condensed
Financial Statements
4. Terms of the Transaction......... Summary; Approval of the Merger; The
Reorganization Agreement and Related
Agreements; Description of Newco
Capital Stock; Comparison of
Stockholder Rights
5. Pro Forma Financial Information.. Unaudited Pro Forma Combined Condensed
Financial Statements
6. Material Contacts with the
Company Being Acquired.......... Summary; Approval of the Merger; The
Reorganization Agreement and Related
Agreements; Related Party Transactions
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters.................... Not Applicable
8. Interests of Named Experts and
Counsel......................... Legal Matters; Experts
9. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities...... Not Applicable
INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants..................... Not Applicable
11. Incorporation of Certain
Information by Reference........ Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 LOCATION IN
ITEM NUMBER AND CAPTION PROXY STATEMENT/PROSPECTUS
----------------------- --------------------------
<C> <S> <C>
12. Information with Respect to S-2 or
S-3 Registrants.................. Not Applicable
13. Incorporation of Certain
Information by Reference......... Not Applicable
14. Information with Respect to
Registrants Other Than
S-3 or S-2 Registrants........... Outside Front Cover Page of Proxy
Statement/Prospectus; Available
Information; Summary; Calgene II, Inc.
INFORMATION ABOUT THE COMPANIES BEING
ACQUIRED
15. Information with Respect to S-3
Companies........................ Available Information; Incorporation
of Certain Documents by Reference;
Summary; Calgene, Inc. Selected
Consolidated Financial Data; Calgene,
Inc.
16. Information with Respect to S-2 or
S-3 Companies.................... Not Applicable
17. Information with Respect to
Companies Other Than
S-2 or S-3 Companies............. Available Information; Summary;
Gargiulo L.P. Selected
Consolidated/Combined Financial Data;
Tomato Investment Associates, Inc. and
Produce Related Technology of Monsanto
Company Selected Combined Financial
Data; Collier Farms Selected Combined
Financial Data; Tomato Investments
Associates, Inc.
VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents
or Authorizations are to be
Solicited........................ Outside Front Cover Page of Proxy
Statement/Prospectus; Incorporation of
Certain Documents by Reference;
Summary; The Special Meeting; Approval
of the Merger; Newco, Inc.; Calgene,
Inc.; Comparison of Stockholder
Rights; No Appraisal Rights;
Stockholder Proposals
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange
Offer............................ Not Applicable
</TABLE>
<PAGE>
CALGENE, INC.
1920 FIFTH STREET
DAVIS, CALIFORNIA 95616
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
February 6, 1996
To the Stockholders of Calgene, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Calgene, Inc., a Delaware corporation ("Calgene"), will be held
on Monday, March 25, 1996, at the Varsity Theatre, 616 2nd Street, Davis,
California, commencing at 9:00 a.m., local time, for the following purposes:
1. To approve the Agreement and Plan of Reorganization dated as of
October 13, 1995 (the "Reorganization Agreement"), between Calgene and
Monsanto Company, a Delaware corporation ("Monsanto"), and the related Plan
of Merger, under which Calgene and Tomato Investment Associates, Inc., a
Delaware corporation and a wholly-owned subsidiary of Monsanto ("TIA"),
which will, upon the Effective Time (as defined in the Reorganization
Agreement), own the entire equity interest in Gargiulo, L.P., a Delaware
limited partnership, will become wholly-owned subsidiaries of a newly-
formed holding company, Calgene II, Inc., a Delaware corporation ("Newco"),
pursuant to: (i) a merger of a wholly-owned subsidiary of Newco with and
into Calgene and the conversion of each outstanding share of Calgene Common
Stock, par value $0.001 per share (the "Calgene Common Stock"), into the
right to receive one share of Common Stock, par value $0.001 per share, of
Newco (the "Newco Common Stock"), followed immediately by (ii) the exchange
by Monsanto of all of the outstanding shares of capital stock of TIA and
certain other assets for that number of shares of Newco Common Stock
representing 49.9% of the outstanding shares of Newco Common Stock upon the
Effective Time (the "Merger Proposal"). Upon the Effective Time, Newco will
be renamed "Calgene, Inc." A vote in favor of the Merger Proposal shall be
deemed to be ratification of (i) the assumption by Newco of Calgene's 1991
Stock Option Plan, (ii) the assumption by Newco of Calgene's 1990 Employee
Stock Purchase Plan, (iii) the adoption of the Newco 1996 Stock Option Plan
and (iv) the election of the eight directors of Newco specified in the
accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any postponements or adjournments thereof.
The Board of Directors of Calgene has fixed the close of business on January
25, 1996, as the record date for the determination of stockholders entitled to
notice of and to vote at the Special Meeting and any adjournment or
postponement thereof. A list of stockholders entitled to vote at the Special
Meeting will be available for examination by any stockholder, at the
headquarters of Calgene, not less than ten days prior to the Special Meeting.
The affirmative vote of the holders of a majority of the outstanding shares
of Calgene Common Stock is necessary to approve the Merger Proposal. Holders
of Calgene Common Stock are not entitled to dissenters' appraisal rights in
connection with the Merger Proposal.
All stockholders are cordially invited to attend the Special Meeting in
person. However, to ensure your representation at the Special Meeting, you are
urged to sign and return the enclosed proxy card as promptly as possible in
the enclosed postage prepaid envelope. If you attend the meeting and desire to
revoke your proxy and vote in person, you may do so. In any event, a proxy may
be revoked at any time before its exercise in the manner specified herein.
Sincerely,
Michael J. Motroni, Secretary
Davis, California
February 6, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN
AND DATE YOUR PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY, IF YOU WISH,
REVOKE YOUR PROXY AND VOTE IN PERSON. THE PROXY MAY BE REVOKED AT ANY TIME
PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS.
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE ENCLOSED ENVELOPE
<PAGE>
PROXY STATEMENT/PROSPECTUS
FEBRUARY 6, 1996
<TABLE>
<S> <C>
CALGENE, INC. CALGENE II, INC.
1920 FIFTH STREET 1920 FIFTH STREET
DAVIS, CA 95616 DAVIS, CA 95616
TEL: (916) 753-6313 TEL: (916) 753-6313
PROXY STATEMENT FOR THE AND PROSPECTUS FOR THE ISSUANCE OF
SPECIAL MEETING OF STOCKHOLDERS OF 31,290,445 SHARES OF CALGENE II, INC.
CALGENE, INC. TO BE HELD ON MARCH 25, 1996 COMMON STOCK, $0.001 PAR VALUE
</TABLE>
----------------
This Proxy Statement/Prospectus is being furnished to holders of Common
Stock, par value $0.001 per share (the "Calgene Common Stock"), of Calgene,
Inc., a Delaware corporation ("Calgene"), in connection with the solicitation
of proxies by the Board of Directors of Calgene (the "Calgene Board") for use
at the Special Meeting of Stockholders of Calgene (the "Special Meeting") to
be held on Monday, March 25, 1996, at the Varsity Theatre, 616 2nd Street,
Davis, California, commencing at 9:00 a.m., local time, and at any
adjournments or postponements thereof.
This Proxy Statement/Prospectus also constitutes a prospectus of Calgene II,
Inc., a Delaware corporation ("Newco"), which is a newly-formed holding
company that has been established by Monsanto Company, a Delaware corporation
("Monsanto"), and Calgene to effect the transactions contemplated by the
Reorganization Agreement (as defined herein) (collectively, the
"Reorganization"), with respect to approximately 31,290,445 shares of Common
Stock, par value $0.001 per share (the "Newco Common Stock"), of Newco to be
issued to holders of Calgene Common Stock in connection with the merger of
Calgene Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of Newco ("Sub"), with and into Calgene (the "Merger").
Prior to the Reorganization, there will have been no public market for Newco
Common Stock. Upon consummation of the Reorganization, Monsanto will own 49.9%
of the then outstanding shares of Newco Common Stock and the holders of
Calgene Common Stock outstanding immediately prior to the Reorganization will
own 50.1% of the then outstanding shares of Newco Common Stock. See "The
Reorganization Agreement and Related Agreements--The Reorganization
Agreement--Ownership of Newco After the Reorganization."
The Newco Common Stock has been approved for inclusion on the Nasdaq
National Market under the symbol "CGNE."
THE SHARES OF NEWCO COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 21.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to the stockholders of Calgene on or about February 9, 1996.
The date of this Proxy Statement/Prospectus is February 6, 1996.
<PAGE>
AVAILABLE INFORMATION
Calgene is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Calgene with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60601. Copies of such material also can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Calgene Common Stock is traded on
the Nasdaq National Market. Reports and other information concerning Calgene
can also be inspected at the offices of the National Association of Securities
Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
Newco has filed with the Commission a Registration Statement on Form S-4
(together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Newco Common Stock to be issued to the
stockholders of Calgene pursuant to the Reorganization Agreement. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained in this
Proxy Statement/Prospectus or in any document incorporated by reference in
this Proxy Statement/Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, each
such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following Calgene documents, heretofore filed by Calgene with the
Commission, are incorporated by reference in this Proxy Statement/Prospectus:
1. Calgene's Annual Report on Form 10-K for the fiscal year ended June
30, 1995, as filed with the Commission on September 28, 1995, as amended by
Calgene's Report on Form 10-K/A, as filed with the Commission on October
30, 1995;
2. Calgene's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1995, as filed with the Commission on November 14, 1995; and
3. The description of Calgene's capital stock contained in Calgene's
Registration Statement on Form 8-A, as filed with the Commission on July
16, 1986.
All documents and reports subsequently filed by Calgene pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Proxy Statement/Prospectus and
to be part hereof from the date of filing of such documents or reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE RELATING
TO CALGENE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER OF CALGENE COMMON STOCK, TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, AND WILL BE SENT WITHIN ONE BUSINESS DAY OF
WRITTEN OR ORAL REQUEST THEREFOR, WITHOUT CHARGE, DIRECTED TO CALGENE, INC.,
1920 FIFTH STREET, DAVIS, CALIFORNIA 95616, ATTENTION: INVESTOR RELATIONS
(TELEPHONE NUMBER
2
<PAGE>
(916) 753-6313). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY MARCH 18, 1996.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATION OF PROXIES MADE HEREBY AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY NEWCO, CALGENE, TIA, GARGIULO L.P. OR COLLIER FARMS (EACH
AS DEFINED HEREIN) OR ANY OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITY, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS SHALL NOT UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF NEWCO, CALGENE, TIA, GARGIULO L.P. OR COLLIER FARMS SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
All information contained in this Proxy Statement/Prospectus relating to
Calgene has been supplied by Calgene, all information relating to TIA and
Gargiulo L.P. has been supplied by Monsanto and all information relating to
Collier Farms has been supplied by Collier Enterprises.
----------------
The logo on the cover of this Proxy Statement/Prospectus, Calgene(R),
Calgene Fresh, Stoneville(R), FLAVR SAVR, MacGregor's(R), BXN(TM) Cotton and
Laurical(TM) Canola are trademarks of Calgene or its subsidiaries. Gargiulo
L.P. has applications pending for the names Gargiulo and Gargiulo Farms.
Trademarks of other corporations and entities are also used in this Proxy
Statement/Prospectus.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION.................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 2
SUMMARY.................................................................. 7
Introduction............................................................ 7
The Companies........................................................... 7
Recent Developments..................................................... 8
The Special Meeting..................................................... 10
The Reorganization Agreement............................................ 11
Related Agreements...................................................... 12
Certain Federal Income Tax Consequences................................. 14
Accounting Treatment.................................................... 14
Regulatory Approvals.................................................... 14
Comparison of Stockholder Rights........................................ 15
No Appraisal Rights..................................................... 15
Exchange of Certificates for Calgene Common Stock....................... 15
Risk Factors............................................................ 15
CALGENE, INC. SELECTED CONSOLIDATED FINANCIAL DATA....................... 16
GARGIULO L.P. SELECTED CONSOLIDATED/COMBINED FINANCIAL DATA.............. 17
TOMATO INVESTMENT ASSOCIATES, INC. AND PRODUCE RELATED TECHNOLOGY OF
MONSANTO COMPANY SELECTED COMBINED FINANCIAL DATA....................... 18
COLLIER FARMS SELECTED COMBINED FINANCIAL DATA........................... 19
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA..................... 20
RISK FACTORS............................................................. 21
Risks Relating to Newco................................................. 21
Additional Risks Relating to Calgene.................................... 27
Additional Risks Relating to Gargiulo L.P............................... 29
MARKET PRICE INFORMATION AND DIVIDEND POLICY............................. 30
THE SPECIAL MEETING...................................................... 31
General................................................................. 31
Date, Time and Place.................................................... 31
Matters to be Considered at the Special Meeting......................... 31
Voting at the Special Meeting; Record Date.............................. 31
Proxies................................................................. 32
APPROVAL OF THE MERGER................................................... 33
Background of the Reorganization........................................ 33
Calgene's Reasons for the Reorganization; Recommendation of the Calgene
Board of Directors..................................................... 34
Benefits and Detriments of the Reorganization to Calgene................ 34
Opinion of Calgene's Financial Advisor.................................. 35
Monsanto's Reasons for the Reorganization............................... 38
Interests of Certain Persons in the Reorganization...................... 39
Accounting Treatment.................................................... 39
Certain Federal Income Tax Consequences................................. 39
Federal Securities Law Consequences..................................... 40
Nasdaq National Market Quotation........................................ 41
No Appraisal Rights..................................................... 41
Regulatory Approvals.................................................... 41
THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS...................... 42
The Reorganization Agreement............................................ 42
The Merger............................................................. 42
Conversion of Securities............................................... 42
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Ownership of Newco After the Reorganization............................. 42
Treatment of Calgene Stock Option Plans................................. 42
Related Matters After the Merger........................................ 43
Representation on the Newco Board....................................... 43
Representations and Warranties.......................................... 43
Certain Covenants....................................................... 44
No Solicitation......................................................... 45
Non-Competition......................................................... 46
Indemnification......................................................... 46
Conditions.............................................................. 47
Termination; Termination Fees........................................... 48
Joinder Agreement........................................................ 48
Calgene Subordinated Promissory Note..................................... 48
The Stockholders Agreement............................................... 50
Registration Rights..................................................... 50
Anti-Dilution Rights.................................................... 51
Limitations on Monsanto's Ownership of Newco Securities................. 51
Limitations on Monsanto's Resale of Newco Securities.................... 51
Composition of the Newco Board and Calgene Board........................ 52
Solicitation and Voting of Shares....................................... 53
Committees of the Newco Board........................................... 53
Approval Required for Certain Actions................................... 53
Board of Directors and Management of TIA................................ 55
Newco Credit Facility Agreement.......................................... 55
Gargiulo Credit Facility Agreement....................................... 57
License Agreements....................................................... 58
Insect Protected Cotton Direct Grower Licensing Agreement............... 59
Gargiulo Reorganization Agreement........................................ 60
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS............... 63
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS...... 68
CALGENE II, INC........................................................... 71
Directors and Executive Officers......................................... 71
Principal Stockholders................................................... 73
TOMATO INVESTMENT ASSOCIATES, INC. ....................................... 74
Introduction............................................................. 74
Gargiulo L.P. ........................................................... 74
Overview................................................................ 74
Acquisition of Collier Farms............................................ 75
Products................................................................ 75
Marketing, Sales and Distribution....................................... 77
Competition............................................................. 78
Trademarks and Licenses................................................. 79
Research and Development................................................ 79
Patents and Trade Secrets............................................... 79
Government Regulations.................................................. 80
Employees............................................................... 80
Properties.............................................................. 80
Internal Control Systems................................................ 81
Legal Proceedings....................................................... 81
Certain Relationships and Related Transactions.......................... 81
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 81
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Collier Farms............................................................ 86
Business, Products and Distribution..................................... 86
Research and Development................................................ 86
Government Regulations.................................................. 86
Employees............................................................... 87
Properties.............................................................. 87
Legal Proceedings....................................................... 87
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 87
CALGENE, INC. ............................................................ 92
Business of Calgene...................................................... 92
Executive Compensation................................................... 93
Board Compensation Committee Report on Executive Compensation............ 97
Stock Performance Graph.................................................. 100
Principal Stockholders................................................... 101
Preferred Stock.......................................................... 101
RELATED PARTY TRANSACTIONS................................................ 102
Calgene.................................................................. 102
Calgene and Monsanto..................................................... 102
Gargiulo L.P. ........................................................... 103
Gargiulo L.P. and Monsanto............................................... 105
DESCRIPTION OF NEWCO STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN.. 106
DESCRIPTION OF NEWCO CAPITAL STOCK........................................ 110
General.................................................................. 110
Common Stock............................................................. 110
Preferred Stock.......................................................... 110
Delaware Anti-Takeover Law............................................... 110
Certain Charter and By-law Provisions.................................... 111
Transfer Agent and Registrar............................................. 111
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 111
NO APPRAISAL RIGHTS....................................................... 111
LEGAL MATTERS............................................................. 111
EXPERTS................................................................... 111
STOCKHOLDERS PROPOSALS.................................................... 112
ACCOMPANYING CALGENE REPORTS.............................................. 112
INDEX TO FINANCIAL STATEMENTS............................................. F-1
ANNEX AAGREEMENT AND PLAN OF REORGANIZATION............................... A-1
ANNEX BSTOCKHOLDERS AGREEMENT............................................. B-1
ANNEX CFAIRNESS OPINION OF MONTGOMERY SECURITIES.......................... C-1
</TABLE>
6
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SUMMARY
The following is a summary (the "Summary") of certain information contained
elsewhere in this Proxy Statement/Prospectus. Reference is made to, and this
Summary is qualified in its entirety by, the more detailed information
contained, or incorporated by reference, in this Proxy Statement/Prospectus
and the Annexes hereto. Unless otherwise defined herein, capitalized terms
used in this Summary have the respective meanings ascribed to them elsewhere
in this Proxy Statement/Prospectus. Unless the context otherwise requires, all
references to Newco, Calgene, TIA, Gargiulo L.P. and Collier Farms include
their respective consolidated or unconsolidated, if any, subsidiaries.
Stockholders of Calgene are urged to read this Proxy Statement/Prospectus and
the Annexes hereto in their entirety.
INTRODUCTION
On October 13, 1995, Calgene entered into an Agreement and Plan of
Reorganization with Monsanto, pursuant to which Calgene and Monsanto agreed,
subject to the approval of Calgene stockholders and the fulfillment of certain
other conditions, to a series of transactions referred to herein as the
"Reorganization." See "Approval of the Merger."
The first step of the Reorganization involves the merger (the "Merger") of
Calgene Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of Newco, with and into Calgene. Calgene will be the surviving corporation in
the Merger and will become a wholly-owned subsidiary of Newco. Upon the
Effective Time (as defined herein), Newco will change its name to "Calgene,
Inc." and Calgene will change its name to "Calgene Technology Corporation."
The senior management of Calgene immediately prior to the Effective Time,
other than Roderick N. Stacey, will become the senior management of Newco
following the Effective Time. See "Approval of the Merger" and "Calgene II,
Inc."
In connection with the Merger, each stockholder of Calgene will be entitled
to receive one share of Newco Common Stock for each share of Calgene Common
Stock held by such stockholder immediately prior to the Effective Time. The
shares of Newco Common Stock to be received by Calgene stockholders in the
Merger are registered under the Securities Act and will be listed on the
Nasdaq National Market under the symbol "CGNE." See "Approval of the Merger."
The second step of the Reorganization involves the exchange by Monsanto of
(i) all outstanding shares of capital stock of Tomato Investment Associates,
Inc., a Delaware corporation and wholly-owned subsidiary of Monsanto ("TIA"),
whose principal asset is the entire equity interest in Gargiulo, L.P., a
Delaware limited partnership ("Gargiulo L.P."), (ii) $30 million in cash (less
amounts previously advanced to Calgene under an existing subordinated
promissory note, under which $18 million was outstanding at December 31, 1995)
and (iii) certain technology licenses, for that number of shares of Newco
Common Stock representing 49.9% of the outstanding shares of Newco Common
Stock upon the Effective Time. See "Tomato Investment Associates, Inc." The
shares of Newco Common Stock to be received by Monsanto in the Reorganization
initially will not be registered under the Securities Act. However, upon the
occurrence of certain events, Monsanto will have certain registration rights
with respect to its shares of Newco Common Stock. Monsanto will also have
certain rights with respect to the election of directors of Newco. See "The
Reorganization Agreement and Related Agreements--The Stockholders Agreement."
THE COMPANIES
Newco
Newco is a newly-formed holding company which has been established by
Calgene and Monsanto for the initial purpose of effecting the Reorganization.
Upon the Effective Time, Newco will own (i) all of the outstanding shares of
capital stock of Calgene, which shall be renamed "Calgene Technology
Corporation," and (ii) all of the outstanding shares of capital stock of TIA,
which owns the entire equity interest in Gargiulo
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L.P. Upon the Effective Time, Newco will be renamed "Calgene, Inc." and the
outstanding shares of Newco Common Stock will be owned 50.1% by the holders of
outstanding shares of Calgene Common Stock immediately prior to the Effective
Time and 49.9% by Monsanto. See "Calgene II, Inc."
Newco was incorporated in Delaware in November 1995, and its principal
executive offices are located at 1920 Fifth Street, Davis, California 95616.
Its telephone number is (916) 753-6313.
TIA
Upon the Effective Time, TIA will own and operate the businesses, and
interests in businesses, currently owned and operated by Gargiulo L.P.
Gargiulo L.P. engages in the growing, packaging, marketing and distribution of
tomatoes and strawberries and, to a lesser extent, other fresh fruits and
vegetables. Gargiulo L.P. also engages in breeding research with respect to
tomatoes and, to a lesser extent, strawberries. Gargiulo L.P.'s tomato
producing operations are conducted principally in southwest and northern
Florida, north central California, Virginia, Puerto Rico and Mexico. Gargiulo
L.P.'s berry production operations are conducted principally in northern
California. Tree fruits are grown in Chile and potatoes are grown in southwest
Florida. Upon the Effective Time, TIA's name will be changed to include the
name Gargiulo, although the precise name has not been determined at this time.
See "Tomato Investment Associates, Inc.--Gargiulo L.P."
TIA was incorporated in Delaware in November 1992 and its principal
executive offices are located at 800 North Lindbergh Boulevard, St. Louis,
Missouri. Its telephone number is (314) 694-1000.
Acquisition of Collier Farms
Gargiulo L.P. has entered into an asset purchase agreement dated as of
December 29, 1995 (the "Collier Purchase Agreement"), to acquire substantially
all of the assets (the "Collier Transaction"), subject to the assumption of
certain specified liabilities, of the produce business conducted by certain
affiliates of Collier Enterprises under the trade name of "Collier Farms"
("Collier Farms"). Collier Farms is an agricultural producer of tomatoes and
other vegetables in southwest Florida, and engages in the packaging, marketing
and distribution of those products in the commodity markets. See "Tomato
Investment Associates, Inc.--Gargiulo L.P.--Acquisition of Collier Farms" and
"--Collier Farms."
Calgene
Calgene is a biotechnology company that is developing a portfolio of
genetically engineered plants and plant products for the food, seed and
oleochemical industries. Calgene's research and business efforts are focused
in three core crop areas--fresh market tomatoes, edible and industrial plant
oils (canola) and cotton--where Calgene believes biotechnology can provide
substantial added commercial value in consumer, industrial and seed markets.
See "Calgene, Inc."
Calgene was incorporated in California in November 1980 and Delaware in
November 1986. Calgene's principal executive offices are located at 1920 Fifth
Street, Davis, California 95616. Its telephone number is (916) 753-6313.
RECENT DEVELOPMENTS
Calgene
On February 6, 1996, Calgene reported estimated revenues of $12.0 million
and an estimated loss of $5.7 million for its second fiscal quarter ended
December 31, 1995, compared to revenues of $13.3 million and a loss
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of $5.6 million for the quarter ended December 31, 1994. The results for the
second quarter ended December 31, 1995 reflect a non-recurring technology
license sale of $3.8 million.
In January 1995, Calgene determined to terminate its joint venture for
potatoes with Kirin Brewery, and expects to incur a charge of approximately
$1.0 million in the third quarter ending March 31, 1996 in connection with
such termination.
Gargiulo L.P.
Gargiulo L.P. had estimated revenues of $19.7 million and an estimated net
loss of approximately $3.2 million in the fiscal quarter ended December 31,
1995. The major contributors to the net loss were a loss in the California
tomato operations of approximately $1.3 million and expenses related to the
upcoming launch of the branded tomato program of approximately $1.2 million.
The loss from the California tomato operations reflected very low yields at
the end of the season and low prices. The low yields were primarily due to a
virus, but also reflected pricing which made it uneconomical to harvest at
times.
Results for the quarter were also affected by lower than normal volume in
Gargiulo L.P.'s Naples operations due to cooler than normal weather, which
delayed harvest.
In 1994 and 1995 the market experienced a state of oversupply in the months
of February, March and April, as a result of increased Mexican exports. Prices
during these periods were depressed as a result of the oversupply. It is
highly possible that a recurrence of such oversupply will take place in
February, March and April of 1996. Furthermore, Gargiulo L.P.'s financial
position will be even riskier than it has been in past years if its
acquisition of Collier Farms is completed. Under the terms of its agreement
with Collier Farms, Gargiulo L.P. will assume all expenses incurred by Collier
Farms since July 1, 1995 which relate to the production of Collier Farms'
1995-96 crop. Depressed pricing might result in a loss on the Collier Farms
crops for the season, with proceeds from the sales of such crops insufficient
to pay Collier Farms' related expenses.
Gargiulo L.P. had estimated working capital of negative $3.3 million at
December 31, 1995. This represents a decrease of $15.9 million from September
30, 1995, when working capital was $12.6 million. This decrease resulted from
the combination of the reclassification of its line of credit from long-term
to current liabilities, the loss incurred during the period and capital
expenditures.
Gargiulo L.P. conducts its California tomato operations through a
partnership in which it has a two-thirds interest and its partner, Dresick
Farms, Inc. ("Dresick Farms"), has a one-third interest. Dresick Farms has
indicated it intends to withdraw from the partnership in 1996. Gargiulo L.P.
intends to continue to run the California tomato operation as a wholly-owned
division of Gargiulo L.P. after Dresick Farms withdraws.
Collier Farms
Based on a preliminary analysis, Collier Farms estimates it incurred a loss
of between $1.0 million and $2.0 million for the fiscal quarter ended December
31, 1995. The estimate is based on ultimate total yields which will be
determined only after the acreage is completely harvested. Typically, Collier
Farms harvests the same acreage two or three times through the end of the
fiscal year, dependent upon the pricing at the time harvest decisions are
made.
The estimated loss includes related party management fees of $300,000 and
interest expense of $308,000.
The loss is primarily a result of reduced volume caused by unfavorable
weather conditions. Additionally, for the crop that has been sold, selling
prices averaged below normal expectations. As is standard for Collier Farms,
over 70% of the entire crop is expected to be harvested in the months of
January through May.
9
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THE SPECIAL MEETING
Date and Place of the Special Meeting
The Special Meeting will be held on Monday, March 25, 1996, at the Varsity
Theatre, 616 2nd Street, Davis, California, commencing at 9:00 a.m., local
time. See "The Special Meeting."
Stockholders Entitled to Vote
Holders of record of shares of Calgene Common Stock at the close of business
on January 25, 1996 (the "Record Date") are entitled to notice of and to vote
at the Special Meeting. On the Record Date, there were 30,264,257 shares of
Calgene Common Stock outstanding, each of which will entitle the holder
thereof to one vote on each matter to be acted upon or which may properly come
before the Special Meeting and all adjournments thereof.
Matters to be Considered at the Special Meeting
The purpose of the Special Meeting is to approve the Agreement and Plan of
Reorganization dated as of October 13, 1995 (the "Reorganization Agreement"),
between Calgene and Monsanto, and the related Plan of Merger, under which
Calgene and TIA will become wholly-owned subsidiaries of Newco, pursuant to:
(i) a merger of a wholly-owned subsidiary of Newco with and into Calgene and
the conversion of each outstanding share of Calgene Common Stock immediately
prior to the Effective Time into the right to receive one share of Newco
Common Stock, followed immediately by (ii) the exchange by Monsanto of all of
the outstanding shares of capital stock of TIA, $30 million in cash (less
amounts previously advanced to Calgene under an existing subordinated
promissory note, under which $18 million was outstanding at December 31,
1995), and certain technology licenses, for that number of shares representing
49.9% of the outstanding shares of Newco Common Stock upon the Effective Time
(collectively, the "Merger Proposal"). Upon the Effective Time, Newco will be
renamed "Calgene, Inc." A vote in favor of the Merger Proposal shall be deemed
to be ratification of (i) the assumption by Newco of Calgene's 1991 Stock
Option Plan, (ii) the assumption by Newco of Calgene's 1990 Employee Stock
Purchase Plan, (iii) the adoption of the Newco 1996 Stock Option Plan and (iv)
the election of the eight directors of Newco specified in this Proxy
Statement/Prospectus. See "The Special Meeting--Matters to be Considered at
the Special Meeting" and "Calgene II, Inc.--Directors and Executive Officers."
Vote Required
The approval of the Merger Proposal will require the affirmative vote of the
holders of a majority of the outstanding shares of Calgene Common Stock. See
"The Special Meeting--Voting at the Special Meeting; Record Date." As of
September 30, 1995, directors and executive officers of Calgene and their
affiliates may be deemed to beneficially own approximately 1.9% of the
outstanding shares of Calgene Common Stock. Each director and executive
officer of Calgene has advised Calgene that he intends to vote or direct the
vote of all shares of Calgene Common Stock over which he has voting control
FOR approval of the Merger Proposal.
Effects of Abstentions and "Broker Non-Votes"
Shares of Calgene Common Stock held by stockholders who abstain from voting
will be counted for determining the presence or absence of a quorum for the
transaction of business at the Special Meeting but will not be counted as
votes for or against the Merger Proposal. With respect to broker non-votes,
there is case law to the effect that such shares may be counted for
determining the presence or absence of a quorum, but should not be counted for
purposes of determining the number of shares voting with respect to any
proposal on which the broker has expressly not voted. Accordingly, broker non-
votes will not be counted as voting shares of Calgene Common Stock with
respect to the Merger Proposal at the Special Meeting. Since the Merger
Proposal requires the affirmative vote of a majority of the outstanding shares
of Calgene Common Stock, an abstention or broker non-vote will have the same
effect as a vote against the Merger Proposal.
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THE REORGANIZATION AGREEMENT
Effect of the Reorganization
Upon the consummation of the Reorganization, Calgene and TIA will each
become a wholly-owned subsidiary of Newco, holders of Calgene Common Stock
immediately prior to the Effective Time will have the right to receive, in the
aggregate, 50.1% of the then outstanding shares of Newco Common Stock and
Monsanto will receive 49.9% of the then outstanding shares of Newco Common
Stock. Upon the Effective Time, Monsanto will also contribute to Newco $30
million in cash (less amounts previously advanced to Calgene under an existing
subordinated promissory note, under which $18 million was outstanding at
December 31, 1995) and certain licenses of technology relating to fatty acid
composition, fruit ripening control, virus and insect resistance, carbohydrate
partitioning and gene expression. Immediately following the Reorganization,
Gargiulo L.P. will be liquidated and TIA will succeed to all of the assets and
liabilities of Gargiulo L.P. See "The Reorganization Agreement and Related
Agreements--Gargiulo Reorganization Agreement."
Effective Time of the Reorganization
It is anticipated that the Reorganization will become effective as promptly
as practicable after the holders of Calgene Common Stock approve the Merger
Proposal and all other conditions to the Reorganization have been satisfied or
waived (the "Effective Time"). It is anticipated that, assuming all conditions
are met, the Reorganization will close shortly after the Special Meeting.
Recommendations; Fairness Opinion
The Calgene Board has unanimously approved the Reorganization Agreement and
the Reorganization and unanimously recommends that holders of Calgene Common
Stock vote FOR the Merger Proposal. In making its recommendation with respect
to the Merger Proposal, the Calgene Board considered, among other things, the
oral opinion of Montgomery Securities ("Montgomery"), Calgene's financial
advisor, delivered to the Calgene Board on October 5, 1995, and subsequently
confirmed in writing as of such date, to the effect that the consideration to
be received by Newco in exchange for 49.9% of the Newco Common Stock pursuant
to the Reorganization Agreement, consisting of all of the capital stock of
TIA, plus certain intellectual property and research and development assets
and a combination of cash and forgiveness of indebtedness in the aggregate
amount of $30 million was fair to Calgene, from a financial point of view, as
of such date.
A copy of the opinion of Montgomery (the "Montgomery Opinion"), which sets
forth the assumptions made, matters considered and scope of Montgomery's
review, is attached to this Proxy Statement/Prospectus as Annex C and should
be read in its entirety. See "Approval of the Merger--Opinion of Calgene's
Financial Advisor," which also contains a description of the fees to be paid
to Montgomery.
For a discussion of the factors considered by the Calgene Board in reaching
its decisions, see "Approval of the Merger--Calgene's Reasons for the
Reorganization; Recommendation of the Calgene Board of Directors."
Interests of Certain Parties
As of September 30, 1995, directors and executive officers of Calgene and
their affiliates may be deemed to beneficially own approximately 1.9% of the
outstanding shares of Calgene Common Stock. Each director and executive
officer of Calgene has advised Calgene that he intends to vote or direct the
vote of all the shares of Calgene Common Stock over which he has voting
control FOR approval of the Merger Proposal. See "Calgene, Inc.--Executive
Compensation" and "Related Party Transactions" for a description of the terms
of employment agreements between Calgene and TIA and certain of their
respective executive officers.
Directors and Executive Officers of Newco After the Reorganization
Pursuant to the Stockholders Agreement (as defined herein), the Board of
Directors of Newco (the "Newco Board") at the Effective Time shall consist of
nine directors, of which two shall be executive officers (Roger H. Salquist
and another executive officer to be designated), three shall be designated by
Calgene (Howard D. Palefsky, Carl V. Stinnett and Allen J. Vangelos) and four
shall be designated by Monsanto (Hendrik A. Verfaillie, Robert T. Fraley,
Jeffrey D. Gargiulo and John E. Robson). See "The Reorganization Agreement and
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Related Agreements--The Reorganization Agreement--Representation on the Newco
Board" and "Calgene II, Inc.--Directors and Executive Officers."
Upon the Effective Time, the executive officers of Calgene immediately prior
to the Effective Time, together with Jeffrey D. Gargiulo, the Chairman and
Chief Executive Officer of Gargiulo L.P., will be the principal executive
officers of Newco, except that Roderick N. Stacey, the President and Chief
Operating Officer of Calgene, has indicated that he intends to resign
following the Effective Time. See "Calgene II--Directors and Executive
Officers."
Termination; Termination Payment
The Reorganization Agreement is subject to termination: (i) by mutual
consent of the Calgene Board and the Monsanto Board of Directors (the
"Monsanto Board"); (ii) by either the Calgene Board or the Monsanto Board if
the Merger is not consummated before March 31, 1996, unless such failure to
consummate shall be due to the failure of the party seeking to terminate the
Reorganization Agreement to perform in all material respects each of its
obligations under the Reorganization Agreement; (iii) by the Calgene Board or
the Monsanto Board in the event that the Calgene Board shall withdraw or
change its recommendation to its stockholders to adopt and approve the
Reorganization Agreement or authorize the Merger or if the approval of
Calgene's stockholders is not obtained; and (iv) upon the occurrence of
certain other events. If the Reorganization Agreement is terminated under
certain circumstances and Calgene consummates a similar transaction with a
party other than Monsanto within 12 months thereafter, Calgene must pay
Monsanto a termination fee in cash equal to $7.5 million. See "The
Reorganization Agreement and Related Agreements--The Reorganization
Agreement--Termination; Termination Fees."
RELATED AGREEMENTS
Calgene Subordinated Promissory Note
Pursuant to the terms of a subordinated promissory note of Calgene in favor
of Monsanto, Calgene borrowed $10 million from Monsanto on June 29, 1995. The
original promissory note was amended and restated on September 27, 1995 (as
amended and restated, the "Amended Note") to permit Calgene to borrow an
additional $8 million. As of December 31, 1995, all $18 million of principal
was outstanding under the Amended Note.
The Amended Note is due on June 30, 1997; provided, however, that if the
Reorganization is not consummated because (i) Calgene's stockholders fail to
approve the Merger Proposal or (ii) any of Monsanto's other conditions to
closing set forth in the Reorganization Agreement, to the extent such
conditions are within the control of Calgene, are not satisfied at or prior to
Closing, then the maturity date of the Amended Note shall be June 30, 1996. If
the Reorganization Agreement is terminated for any reason, the outstanding
principal and interest due under the Amended Note can be converted, subject to
certain limitations, at the option of Monsanto from and after 60 days
following such termination, into shares of Calgene Common Stock at a
conversion price equal to 85% of the average of the closing market prices of
Calgene Common Stock on the Nasdaq National Market during a specified period
prior to conversion. Based upon the last reported sales price of Calgene
Common Stock on the Nasdaq National Market on December 15, 1995 ($4.875 per
share), the conversion of the Amended Note in such an event, assuming no
portion of the Amended Note is repaid before such conversion, would result in
the issuance of approximately 4,343,891 shares of Calgene Common Stock to
Monsanto, or approximately 14% of the total number of shares of Calgene Common
Stock currently outstanding. Upon the Effective Time, the outstanding
principal amount due under the Amended Note shall be credited against the $30
million cash contribution to be made by Monsanto in connection with the
Reorganization. Interest on the Amended Note will cease accruing at the
Effective Time and all interest accrued prior to such time shall be waived by
Monsanto. See "The Reorganization Agreement and Related Agreements--Calgene
Subordinated Promissory Note."
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The Stockholders Agreement
The Reorganization Agreement provides that, at the Effective Time, Monsanto
and Newco shall enter into a Stockholders Agreement (the "Stockholders
Agreement"), containing provisions relating to: (a) the composition of the
Boards of Directors of Newco, Calgene and TIA; (b) restrictions upon the
purchase of additional shares of Newco Common Stock by Monsanto; (c)
restrictions upon sales of shares of Newco Common Stock by Monsanto; (d)
rights of Monsanto to require the registration of shares of Newco Common Stock
under the Securities Act; (e) rights of Monsanto to participate in future
equity financings of Newco; and (f) requirements that certain actions of Newco
be approved by at least one Calgene designee and one Monsanto designee on the
Newco Board. See "The Reorganization Agreement and Related Agreements--The
Stockholders Agreement."
Newco Credit Facility Agreement
Upon the Effective Time, Newco and Monsanto shall enter into a revolving
credit facility agreement (the "Newco Credit Facility Agreement") pursuant to
which Monsanto, subject to certain terms and conditions, shall make, at the
request of Newco, three consecutive one-year subordinated loans of up to $15
million each to Newco for general corporate purposes, provided that not more
than $15 million may be outstanding at any time. Under certain circumstances,
the principal and interest due under such loans may be converted into shares
of Newco Common Stock. The agreement also contains a number of restrictions on
Newco and its subsidiaries. See "The Reorganization Agreement and Related
Agreements--Newco Credit Facility Agreement."
Gargiulo Credit Facility Agreement
Upon the Effective Time, Newco and Monsanto shall enter into a revolving
credit facility agreement (the "Gargiulo Credit Facility Agreement") pursuant
to which Monsanto, subject to certain terms and conditions, shall make a loan
of up to $40 million to Newco, the proceeds of which are to be used solely by
TIA. Gargiulo L.P. expects to borrow up to $40 million from Monsanto pursuant
to an amendment of an existing credit facility to acquire Collier Farms, to
support Gargiulo L.P.'s branded tomato strategy and to allow Gargiulo L.P. to
make an approximately $2 million payment to Monsanto pursuant to the
Development License Agreement dated December 23, 1992 (the "Development
Agreement"), which amounts will be converted into a loan under the Gargiulo
Credit Facility Agreement at the Effective Time. The balance of any future
borrowings under the Gargiulo Credit Facility Agreement shall be used by TIA
to implement the branded tomato strategy described below. The loan is
repayable out of a specified portion of the Cumulative Free Cash Flow (as
defined in the Gargiulo Credit Facility Agreement) of TIA or, if not repaid
within eight years, may be converted by Monsanto under certain circumstances
into shares of Newco Common Stock. Based solely upon the last reported sales
price of Calgene Common Stock on the Nasdaq National Market on December 15,
1995 ($4.875 per share), the conversion of the maximum principal amount
available to Newco under the Gargiulo Credit Facility ($40,000,000) would
result in the issuance of approximately 8 million shares of Newco Common Stock
to Monsanto, or approximately 13% of the total number of shares of Newco
Common Stock which will be outstanding immediately after the Effective Time.
See "Risk Factors--Significant Influence by Monsanto and
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Possible Conflicts of Interest" and "--Possible Need for Additional
Financing." The agreement also contains a number of restrictions on Newco and
its subsidiaries. The final terms of the Gargiulo Credit Facility Agreement
are subject to the approval of Gargiulo L.P.'s principal lender. See "The
Reorganization Agreement and Related Agreements--Gargiulo Credit Facility
Agreement."
License Agreements
As part of the Reorganization, Monsanto will license to Newco certain
technology pursuant to various license agreements and letter agreements
(collectively, the "License Agreements"). See "The Reorganization Agreement
and Related Agreements--License Agreements."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
As discussed in more detail below under "Approval of the Merger--Certain
Federal Income Tax Consequences," Calgene has received an opinion of its legal
counsel that the exchange of Calgene Common Stock for Newco Common Stock in
the Merger will qualify as tax-free pursuant to Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code").
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles, whereby the purchase
price will be allocated based on the fair value of the assets acquired and
liabilities assumed. Such allocation will be made based upon valuations that
have not been finalized. It is anticipated that a significant portion of the
purchase price will be allocated to in-process research and technology which
will result in a charge to Newco's statement of operations of approximately
$59.2 million in the fiscal quarter in which the Reorganization closes. The
amount of the estimated charge is based on a preliminary valuation and the
actual amount could vary significantly upon completion of the final valuation.
In addition, Newco plans to consolidate certain of the personnel, facilities
and other assets of Calgene, currently operating as its CalFresh division
("CalFresh"), with those of Gargiulo L.P. and, if the Collier Transaction is
consummated, to integrate the tomato operations of Collier Farms. In
connection with such consolidation activities, Newco expects to close certain
duplicative facilities and to incur restructuring charges, including the
write-off of redundant intangibles, of approximately $8.5 million, which will
be recorded in the fiscal quarter in which the Reorganization closes.
A significant effect of the purchase accounting will be to record a
significant amount of goodwill and other intangible assets which will result
in substantial amortization charges to the consolidated income of Newco over
the useful lives of such assets. The amount of such charges are estimated at
approximately $6.5 million per fiscal year for approximately 12 years;
however, actual charges could vary significantly in the event the underlying
assets are impaired or the related useful lives are less than currently
estimated. See "Unaudited Selected Pro Forma Combined Financial Data."
REGULATORY APPROVALS
No state or federal regulatory approvals are required relating to the
Reorganization, other than (i) the pre-transaction filing and waiting period
requirements applicable to the Reorganization under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
effectiveness of the Registration Statement of which this Proxy
Statement/Prospectus is a part and (iii) compliance with applicable state
securities laws. See "Approval of the Merger--Regulatory Approvals."
The Reorganization is subject to the requirements of the HSR Act, and the
rules and regulations thereunder, which provide that certain transactions may
not be consummated until certain required information and materials have been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the Federal Trade Commission (the "FTC") and certain
waiting periods have expired or been terminated. Monsanto
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filed its notification pursuant to the HSR Act in October 1995. (Calgene was
not obligated to submit an HSR notification). In November 1995, the Antitrust
Division extended the HSR waiting period on the proposed transactions by
issuance of a request for additional information to Monsanto pursuant to the
HSR Act. The Antitrust Division has also requested information from Calgene
pursuant to the Antitrust Civil Process Act. Both Monsanto and Calgene have
provided significant documentary and other information to the Antitrust
Division in response to these requests and continue to do so. Both companies
expect to be in substantial compliance with the requests they received in the
near future. The parties are continuing to work with the Antitrust Division to
resolve any remaining issues and believe that they will ultimately be able to
resolve the Antitrust Division's questions, if any, in a manner which will
permit the Reorganization to proceed. See "Approval of the Merger--Regulatory
Approvals."
COMPARISON OF STOCKHOLDER RIGHTS
The rights of holders of Calgene Common Stock are substantially similar to
the rights of holders of Newco Common Stock, provided, however, that Monsanto
will have certain additional rights as a stockholder of Newco pursuant to the
Stockholders Agreement. See "Comparison of Stockholder Rights" and "The
Reorganization Agreement and Related Agreements--The Stockholders Agreement."
NO APPRAISAL RIGHTS
Holders of Calgene Common Stock do not have rights of appraisal under the
Delaware General Corporation Law (the "Delaware Law") in connection with the
Reorganization. See "No Appraisal Rights."
EXCHANGE OF CERTIFICATES FOR CALGENE COMMON STOCK
From and after the Effective Time, certificates evidencing shares of Calgene
Common Stock will be deemed for all purposes to represent an equivalent number
of shares of Newco Common Stock. CALGENE STOCKHOLDERS WILL NOT BE REQUIRED TO
SUBMIT THEIR CERTIFICATES IN CONNECTION WITH THE REORGANIZATION.
RISK FACTORS
In considering the Merger Proposal, holders of Calgene Common Stock should
consider the risks set forth under "Risk Factors."
15
<PAGE>
CALGENE, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data at June 30, 1994 and 1995 and for
the years ended June 30, 1993, 1994 and 1995 have been derived from the
audited consolidated financial statements of Calgene and should be read in
conjunction with such consolidated financial statements and notes thereto,
which are incorporated by reference herein. The consolidated balance sheet
data at June 30, 1991, 1992 and 1993 and the consolidated statement of
operations data for the years ended June 30, 1991 and 1992 have been derived
from audited consolidated financial statements not included or incorporated by
reference herein. The consolidated financial data at September 30, 1995 and
for the three months ended September 30, 1995 and 1994 have been derived from
unaudited consolidated financial statements which are incorporated by
reference herein. Consolidated financial data at September 30, 1994 have been
derived from unaudited consolidated financial statements not included or
incorporated by reference herein. In the opinion of management, the unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
statement of the results for the unaudited interim periods. Results of
operations for interim periods are not necessarily indicative of results for
the entire fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------------ -----------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA(1):
Revenues:
Product sales, net..... $ 20,810 $ 18,211 $ 24,675 $ 35,408 $ 48,972 $ 6,263 $ 8,812
Product development.... 5,294 3,666 2,562 3,025 6,459 267 300
Interest/other......... 1,601 2,322 2,089 964 1,233 320 376
-------- -------- -------- -------- -------- ------- --------
Total revenues....... 27,705 24,199 29,326 39,397 56,664 6,850 9,488
Costs and expenses:
Costs of goods sold.... 19,727 16,150 21,918 43,982 53,678 8,719 12,141
Research and
development(2)........ 11,151 15,422 14,975 15,568 15,373 3,806 3,223
Selling, general and
administrative........ 10,161 11,318 16,494 21,279 16,081 3,640 3,892
Interest expense....... 898 816 673 729 924 184 513
-------- -------- -------- -------- -------- ------- --------
Total costs and
expenses............ 41,937 43,706 54,060 81,558 86,056 16,349 19,769
Minority interest share
of net loss........... 603 961 50 46 116 30 22
Equity in net losses of
affiliates............ (692) (39) (583) (583) (213) (54) (4)
Gain (loss) from
disposition of
assets................ 3 30 88 (38) (1,098) 1 (96)
-------- -------- -------- -------- -------- ------- --------
Loss from continuing
operations before
income taxes.......... (14,318) (18,555) (25,179) (42,736) (30,587) (9,522) (10,359)
Provision for income
taxes................. 61 61 44 65 15 16 15
-------- -------- -------- -------- -------- ------- --------
Loss from continuing
operations............ (14,379) (18,616) (25,223) (42,801) (30,602) (9,538) (10,374)
Loss from discontinued
operations............ (12,600) (1,300) (400) -- -- -- --
-------- -------- -------- -------- -------- ------- --------
Net loss............... (26,979) (19,916) (25,623) (42,801) (30,602) (9,538) (10,374)
Preferred stock
dividends............. 1,970 2,799 -- -- -- -- --
-------- -------- -------- -------- -------- ------- --------
Net loss applicable to
common shareholders... $(28,949) $(22,715) $(25,623) $(42,801) $(30,602) $(9,538) $(10,374)
======== ======== ======== ======== ======== ======= ========
Net loss per share(3):
Loss from continuing
operations............ $ (1.43) $ (1.34) $ (1.11) $ (1.71) $ (1.04) $ (0.35) $ (0.34)
Loss from discontinued
operations............ (1.11) (0.08) (0.02) -- -- -- --
-------- -------- -------- -------- -------- ------- --------
Net loss............. $ (2.54) $ (1.42) $ (1.13) $ (1.71) $ (1.04) $ (0.35) $ (0.34)
======== ======== ======== ======== ======== ======= ========
Shares used in per
share calculations.... 11,390 15,966 22,786 24,988 29,439 27,616 30,250
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
--------------------------------------- ---------------
1991 1992 1993 1994 1995 1994 1995
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash, equivalents and
available-for-sale
securities(4)......... $36,180 $41,259 $39,782 $20,743 $22,036 $16,534 $10,235
Working capital(4)..... 32,877 38,302 34,307 4,696 10,821 9,757 2,655
Total assets........... 83,136 85,223 88,401 78,312 89,231 73,204 76,331
Short-term debt(5)..... 7,566 10,120 8,838 10,378 9,255 7,009 8,161
Long-term debt......... 5,065 4,378 3,694 5,704 15,421 4,793 17,454
Shareholders'
equity(6)............. 57,765 62,511 65,769 44,423 46,051 49,997 35,784
</TABLE>
- - -------
(1) Acquisitions during the periods reported affect the year-to-year
comparability of the selected consolidated financial data.
(2) Includes $2 million paid for a technology license in fiscal 1992.
(3) Applicable to holders of Calgene Common Stock after payment of Preferred
Stock dividends.
(4) Excludes pledged marketable securities which equalled $1.2 million at June
30, 1995.
(5) Includes current portion of long-term debt.
(6) No dividends have been paid on the Calgene Common Stock.
16
<PAGE>
GARGIULO L.P.
SELECTED CONSOLIDATED/COMBINED FINANCIAL DATA
The selected consolidated/combined financial data at June 30, 1994 and 1995
and for the period from July 1, 1992 to December 22, 1992, and for the period
from December 23, 1992 to June 30, 1993, and for the years ended June 30, 1994
and 1995 have been derived from the audited consolidated/combined financial
statements of Gargiulo L.P. and should be read in conjunction with such
consolidated/combined financial statements and notes thereto, which are
included herein. The consolidated/combined financial data at June 30, 1991,
1992 and 1993 and the years ended June 30, 1991 and 1992 have been derived
from audited consolidated/combined financial statements of Gargiulo L.P. not
included or incorporated by reference herein. The consolidated/combined
financial data at September 30, 1995 and for the three months ended September
30, 1994 and 1995 have been derived from unaudited consolidated financial
statements which are also included and incorporated by reference herein. In
the opinion of management, the unaudited consolidated financial statements
have been prepared on the same basis as the audited consolidated financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim periods. Results of operations for interim periods are not necessarily
indicative of results for the entire fiscal year.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY PARTNERSHIP
-------------------------- ---------------------------
THREE
MONTHS
YEAR ENDED YEAR ENDED ENDED
JUNE 30, 7/1/92 12/23/92 JUNE 30, SEPTEMBER 30,
---------------- TO TO ----------------- ----------------
1991 1992 12/22/92 6/30/93 1994 1995 1994 1995
------- ------- -------- -------- ------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED/COMBINED
STATEMENT OF OPERATIONS
DATA:
Revenues.............. $52,965 $73,223 $28,890 $52,336 $99,513 $114,052 $27,504 $28,609
Cost of revenues...... 34,270 45,717 18,245 40,032 81,995 97,744 23,528 29,667
------- ------- ------- ------- ------- -------- ------- -------
Gross profit.......... 18,695 27,506 10,645 12,304 17,518 16,308 3,976 (1,058)
Selling, general and
administrative
expenses............. 13,631 13,507 7,428 8,956 15,381 18,096 3,682 5,082
------- ------- ------- ------- ------- -------- ------- -------
Operating income
(loss)............... 5,064 13,999 3,217 3,348 2,137 (1,788) 294 (6,140)
Other income
(expense)............ 2,498 (631) (532) (841) (1,860) (331) (418) 862
Equity in net income
(loss) of
affiliates........... 731 (336) (18) 4 20 416 -- (125)
------- ------- ------- ------- ------- -------- ------- -------
Income (loss) before
(provision) benefit
from income taxes.... 8,293 13,032 2,667 2,511 297 (1,703) (124) (5,403)
(Provision) benefit
from income
taxes(1)............. (536) (692) -- 181 114 -- --
------- ------- ------- ------- ------- -------- ------- -------
Net income (loss)(1).. $ 7,757 $12,340 $ 2,667 $ 2,692 $ 411 $ (1,703) $ (124) $(5,403)
======= ======= ======= ======= ======= ======== ======= =======
</TABLE>
- - -------
(1) Included in the consolidated/combined financial statements are several
entities where federal taxable income and expenses flow directly to the
stockholders/partners and are not taxed at the corporate level. Had such
entities been taxed at the corporate level, the pro forma (provisions)
benefit for income taxes, computed at statutory rates, would have been
($2,820), ($4,431), ($907), ($854), ($99), $579, $42 and $1,837 for the
years ended June 30, 1991, 1992, the period from June 1, 1992 to December
22, 1992, the period from December 23, 1992 to June 30, 1993, for the
years ended June 30, 1994 and 1995 and for the three months ended
September 30, 1994 and 1995, respectively, and, accordingly, the pro forma
net income (loss) would have been $5,473, $8,601, $1,760, $1,657, $198,
($1,124), ($82) and ($3,566) for the years ended June 30, 1991, 1992, the
period from June 1, 1992 to December 22, 1992, the period from December
23, 1992 to June 30, 1993, for the years ended June 30, 1994 and 1995 and
for the three months ended September 30, 1994 and 1995, respectively.
<TABLE>
<CAPTION>
PREDECESSOR SEPTEMBER 30,
COMPANY PARTNERSHIP 1995
--------------- ----------------------- -------------
JUNE 30,
---------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and equivalents.. $ 8,259 $15,258 $15,569 $ 615 $ 1,556 $ 528
Working capital....... 11,198 18,066 21,227 14,783 20,551 12,622
Total assets.......... 48,399 55,372 78,448 81,264 87,819 79,289
Short-term debt....... 5,520 2,996 7,827 11,414 3,103 3,704
Long-term debt........ 4,992 6,026 11,817 14,246 26,706 26,609
Shareholders'
equity(1)............ 20,913 30,574
Partner's capital..... 44,862 42,104 40,503 35,100
</TABLE>
- - -------
(1) The Predecessor Company paid dividends of $6,965 and $3,847 for the years
ended June 30, 1991 and 1992, respectively.
17
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC.
AND PRODUCE RELATED TECHNOLOGY OF MONSANTO COMPANY
SELECTED COMBINED FINANCIAL DATA
The selected combined financial data at June 30, 1994 and 1995 and for the
three years ended June 30, 1995 have been derived from the audited combined
financial statements of TIA and should be read in conjunction with such
combined financial statements and notes thereto, which are included herein.
The combined financial data at June 30, 1993 has been derived from unaudited
combined financial statements not included or incorporated by reference
herein. In the opinion of management, the unaudited consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
unaudited interim periods. The selected combined financial data at September
30, 1994 and 1995 and for the three months then ended have been derived from
the unaudited combined financial statements which are included herein.
<TABLE>
<CAPTION>
THREE MONTH
PERIOD ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------- ----------------
1993 1994 1995 1994 1995
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS
DATA:
Operating expenses.............. $ 6,816 $ 5,547 $ 6,644 $ 1,609 $ 1,827
Equity share of net income
(loss) of affiliates........... 592 90 (941) (153) (2,696)
------- ------- ------- ------- -------
Loss before benefit from income
taxes.......................... 6,224 5,457 7,585 1,762 4,523
Benefit from income taxes....... 2,300 2,045 2,300 669 1,719
------- ------- ------- ------- -------
Net loss........................ $(3,924) $(3,412) $(5,285) $(1,093) $(2,804)
======= ======= ======= ======= =======
COMBINED BALANCE SHEET DATA:
Cash and equivalents............ $ -- $ -- $ -- $ -- $ --
Working capital................. (2,752) (2,396) (4,375) (1,333) (2,185)
Total assets.................... 26,905 25,411 56,582 54,378 53,442
Short-term debt................. -- -- -- -- --
Long-term debt.................. -- -- -- -- --
Shareholder's equity............ 24,116 21,760 50,903 51,790 49,953
</TABLE>
18
<PAGE>
COLLIER FARMS
SELECTED COMBINED FINANCIAL DATA
The selected combined financial data at June 30, 1993, 1994 and 1995 and for
the years then ended have been derived from the audited combined financial
statements of Collier Farms and should be read in conjunction with such
combined financial statements and notes thereto which are included herein. The
selected combined financial data at June 30, 1991 and 1992 and for the years
then ended have been derived from the unaudited combined financial statements
of Collier Farms not included or incorporated by reference herein. The
selected combined financial data at September 30, 1994 and 1995 and for the
three months then ended have been derived from the unaudited combined
financial statements of Collier Farms and should be read in conjunction with
such combined financial statements and notes thereto, which are included
herein. In the opinion of management, the unaudited consolidated financial
statements have been prepared on the same basis as the audited combined
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
unaudited interim periods. Results of operations for interim periods are not
necessarily indicative of results for the entire fiscal year.
<TABLE>
<CAPTION>
UNAUDITED AUDITED
---------------- ------------------------
YEAR ENDED JUNE 30,
-----------------------------------------
UNAUDITED UNAUDITED
THREE THREE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
1991 1992 1993 1994 1995 30, 1994 30, 1995
------- ------- ------- ------- ------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF
OPERATIONS DATA:
Revenues.............. $29,407 $37,841 $31,262 $22,009 $25,440 $ 495 $ 350
Cost of revenues...... 19,628 22,490 23,297 21,082 20,276 805 802
------- ------- ------- ------- ------- ------- --------
Gross profit.......... 9,779 15,351 7,965 927 5,164 (310) (452)
Selling, general and
administrative
expenses............. 6,573 6,433 6,399 6,001 6,596 1,224 1,329
------- ------- ------- ------- ------- ------- --------
Operating income
(loss)............... 3,206 8,918 1,566 (5,074) (1,432) (1,534) (1,781)
Other income.......... 221 207 1,795 2,428 1,091 139 130
------- ------- ------- ------- ------- ------- --------
Net income (loss)..... $ 3,427 $ 9,125 $ 3,361 $(2,646) $ (341) $(1,395) $(1,651 )
======= ======= ======= ======= ======= ======= ========
COMBINED BALANCE SHEET
DATA:
Cash and equivalents.. $ 48 $ 55 $ 77 $ 62 $ 122 $ 47 $ 110
Working capital....... (5,861) 1,849 3,198 3,467 (401) 2,060 2,545
Total assets.......... 20,089 21,752 22,520 21,037 20,977 24,453 24,520
Short-term debt....... 5,375 390 317 269 5,558 5,569 5,594
Long-term debt........ 12,781 12,391 12,112 11,843 6,285 6,475 6,300
Owners' equity........ (989) 5,501 6,767 6,871 7,540 10,041 10,247
</TABLE>
19
<PAGE>
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA AND COMPARATIVE PER SHARE
DATA
The unaudited selected pro forma financial data is derived from the
unaudited pro forma combined condensed financial statements of Newco, assuming
the consummation of the Reorganization, and should be read in conjunction with
such pro forma combined condensed financial statements and notes thereto,
which are included elsewhere in this Proxy Statement/Prospectus. For a
description of the various periods combined for pro forma purposes and for
other information regarding the pro forma data, see "Unaudited Pro Forma
Combined Condensed Financial Statements." (In thousands, except per share
data)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED SEPTEMBER
JUNE 30, 1995 30, 1995
------------- ---------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:(1)
Revenues........................................ $194,923 $ 38,071
Net loss(2)..................................... $(52,254) $(20,788)
Net loss per share(2)........................... $ (0.94) $ (0.37)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER
30, 1995
---------
<S> <C> <C>
BALANCE SHEET DATA:(3)
Total assets.................................................... $272,729
Long-term debt.................................................. $ 49,143
Book value per share............................................ $ 2.97
</TABLE>
- - --------
(1) The pro forma combined statement of operations data gives effect to the
Reorganization, on a purchase basis of accounting, as if it had occurred
on July 1, 1994.
(2) Pursuant to Regulation S-X, excludes $59.2 million allocated to in-process
research and technology and write-offs/reserves of approximately $8.5
million for intangibles, leases and related assets that will become
redundant upon the consummation of the Reorganization, which are non-
recurring charges related to the Reorganization.
(3) The pro forma combined balance sheet data gives effect to the
Reorganization, on a purchase basis, as if it had occurred as of September
30, 1995.
COMPARATIVE PER SHARE DATA(1)
<TABLE>
<CAPTION>
CALGENE
--------------------
PRO FORMA
TIA/GARGIULO EQUIVALENT FOR
PRO FORMA PRO FORMA ONE TIA/GARGIULO
HISTORICAL COMBINED COMBINED(2) SHARE(3)
---------- --------- ------------ ----------------
<S> <C> <C> <C> <C>
NET LOSS PER SHARE:
Three months ended Septem-
ber 30, 1995............. ($0.34) ($0.37) ($7,887) ($11,153)
Year ended June 30, 1995.. ($1.04) ($0.81) ($9,257) ($24,416)
BOOK VALUE PER SHARE:
September 30, 1995........ $1.18 $2.97 $100,054 $89,525
June 30, 1995............. $1.52 $3.15 $101,003 $94,950
</TABLE>
- - --------
(1)No cash dividends have been paid by either company for the periods
presented.
(2) Data includes the pro forma combined balance sheets and statements of
operations of TIA, Gargiulo and Collier Farms
(3) Equivalent of 30,143 shares of Calgene common stock, which is the
estimated exchange ratio.
20
<PAGE>
RISK FACTORS
The following risk factors should be considered by stockholders of Calgene
in evaluating whether to approve the Merger Proposal and thereby become
holders of Newco Common Stock. These factors should be considered in
conjunction with the other information included and incorporated by reference
in this Proxy Statement/Prospectus.
RISKS RELATING TO NEWCO
Management and Coordination of Operations. The achievement of the
anticipated benefits of the Reorganization will depend in part upon whether
the businesses of Calgene and Gargiulo L.P. can be managed and coordinated in
an efficient and effective manner after the Effective Time, and there can be
no assurance that this will occur. The difficulties of managing and
coordinating the businesses of Calgene and Gargiulo L.P. may be increased by
the geographic separation of the organizations and their decentralized
managements. The coordination of the businesses of Calgene and Gargiulo L.P.
following the Reorganization may require the dedication of management
resources which may temporarily distract attention from the day-to-day
business of the combined companies. In addition, if the Collier Transaction is
consummated, Gargiulo L.P. will need to integrate the operations of Collier
Farms into its own operations, which may further distract the management of
Gargiulo L.P. from day-to-day operations. In connection with the Collier
Transaction, Gargiulo L.P. expects to incur approximately $20 million of
indebtedness in the form of a $10 million loan from Monsanto under an existing
credit facility and a $10 million purchase money note payable to Collier
Enterprises (the "Seller Note"), subject to reduction in the event Gargiulo
L.P. assumes certain obligations of Collier Enterprises. Gargiulo L.P.'s
ability to repay such indebtedness will depend, in part, on the successful
integration of the operations of Collier Farms into the operations of Gargiulo
L.P. and the success of the Collier Farms operations which are subject to the
same agribusiness risks as apply to Newco as described below.
Accounting Treatment of Certain Reorganization Costs. It is anticipated that
a significant portion of the purchase price for Calgene will be allocated to
in-process research and technology, which will result in a charge to Newco's
statement of operations of approximately $59.2 million in the fiscal quarter
in which the Reorganization closes. The amount of the estimated charge is
based on a preliminary valuation and the actual amount could vary
significantly upon completion of the final valuation. In addition, Newco plans
to consolidate CalFresh with Gargiulo L.P. and, if acquired, the tomato
operations of Collier Farms. In connection with such consolidation activities,
Newco expects to close certain duplicative facilities and to incur
restructuring charges, including the write-off of redundant intangibles, of
approximately $8.5 million, which will be recorded in the fiscal quarter in
which the Reorganization closes.
A significant effect of the purchase accounting will be to record a
significant amount of goodwill and other intangible assets which will result
in substantial amortization charges to the consolidated income of Newco over
the useful lives of such assets. The amount of such charges are estimated at
approximately $6.5 million per year for approximately 12 years; however actual
charges could vary significantly in the event the underlying assets are
impaired or the related useful lives are less than currently estimated. See
"Unaudited Selected Pro Forma Combined Financial Data."
Separate Board of Directors and Management of TIA. Pursuant to the
Stockholders Agreement, the Board of Directors of TIA shall consist of Jeffrey
D. Gargiulo and his brother, John R. Gargiulo (who are both officers of
Gargiulo L.P.), Hendrik A. Verfaillie and Robert T. Fraley (who are senior
executives of Monsanto), Roger H. Salquist and Roderick N. Stacey (who are
presently officers of Calgene), and an additional director designated by Newco
and reasonably acceptable to both Monsanto and Jeffrey D. Gargiulo (as long as
he is a director). The Chairman of the Board and Chief Executive Officer of
TIA shall be Jeffrey D. Gargiulo as long as he is employed by TIA. See
"Related Party Transactions--Gargiulo Employment Agreement." The Board of
Directors of TIA shall appoint the other officers of TIA. The TIA Board of
Directors shall have the authority to operate the business of Gargiulo L.P.
within the confines of the annual operating plan and strategic plan approved
by the Newco Board. See "The Reorganization Agreement and Related Agreements--
The Stockholders Agreement."
21
<PAGE>
The separate Boards of Directors and management of TIA and Newco could
present possible conflicts of interest and managerial difficulties to the
extent that there are differences between actions proposed to be taken (or not
taken) by the TIA Board of Directors or management and the Newco Board of
Directors or management. Such conflicts of interest and managerial
difficulties could adversely affect the business and operations of Newco.
Combination of Calgene and Gargiulo L.P. Tomato Businesses. After the
Effective Time, Newco plans to consolidate CalFresh with Gargiulo L.P. under
the management of TIA, and to close certain duplicative facilities. In
addition, if the Collier Transaction is consummated, Gargiulo L.P. will
acquire the right to lease up to 11,000 acres of farmland in southwest
Florida. In such event, certain of the farmland owned by Gargiulo L.P. in
Florida would no longer be necessary and it is likely TIA would attempt to
sell such farmland. At December 31, 1995, such farmland secured approximately
$4.0 million of mortgage indebtedness. If the Collier Transaction is
consummated, such farmland would also be used as security for the Seller Note.
There can be no assurance that TIA will be able to sell such farmland for an
amount that is sufficient to repay the indebtedness secured by such farmland,
if at all. Newco anticipates further consolidations, the financial impact of
which cannot be estimated at this time. There can be no assurance that Newco
will not encounter difficulties in integrating the businesses of CalFresh and
Gargiulo L.P. See "--Risks Applicable to the Branded Tomato Strategy" and
"Calgene, Inc.--Business of Calgene--Fresh Market Tomato."
Significant Influence by Monsanto and Possible Conflicts of Interest. After
the Effective Time, Monsanto will own 49.9% of the outstanding shares of Newco
Common Stock and will have the right to designate four of the nine members of
the Newco Board. Monsanto shall have the right to designate additional
directors if and when its percentage ownership of Newco Common Stock
increases. In addition, certain actions may not be taken by Newco without the
approval of Monsanto. See "The Reorganization Agreement and Related
Agreements--The Stockholders Agreement." Also, Monsanto is obligated, subject
to certain terms and conditions, to lend up to $40 million to Newco to effect
the Collier Transaction, make an approximately $2 million payment to Monsanto
pursuant to the Development Agreement and fund the branded tomato strategy
described below, and up to $15 million annually for a period of three years to
Newco for general corporate purposes, although not more than $15 million may
be outstanding thereunder at any one time. The Gargiulo Credit Facility
Agreement and the Newco Credit Facility Agreement each contain various
covenants precluding Newco and its subsidiaries from taking certain actions
without the approval of Monsanto. Also, in the event of a default by Newco
under the Newco Credit Facility Agreement or the Gargiulo Credit Facility
Agreement, Monsanto has certain rights to convert the outstanding principal
and interest under such agreements into additional shares of Newco Common
Stock at the then market value of the Newco Common Stock, and any such
conversion could substantially dilute the ownership interest of other Newco
stockholders. It is possible that Monsanto's interest as a stockholder of
Newco may differ from its interest as a lender, and there can be no assurance
that actions taken by Monsanto pursuant to the exercise of its various rights
under the Stockholders Agreement, the Gargiulo Credit Facility Agreement and
the Newco Credit Facility Agreement will be in the best interests of all other
stockholders of Newco.
Possible Need for Additional Financing. Newco expects that the cash
contribution to be made by Monsanto pursuant to the Reorganization Agreement,
together with the proceeds of the Newco Credit Facility Agreement, the
Gargiulo Credit Facility Agreement and other bank lines of credit expected to
be available to Newco after the Effective Time, will be sufficient to fund its
operations through at least the end of calendar 1996. However, such
expectation is based in part on the achievement of the operating plans of
Calgene and Gargiulo L.P. for the year ended June 30, 1996 ("Fiscal 1996"),
and there can be no assurance such operating plans will be achieved. If such
plans are not achieved, additional funds might be required by Newco within the
next 12 months. Also, there can be no assurance that all of Newco's expected
sources of funds will be available. Calgene currently has a $13.0 million line
of credit with Harris Bank (the "Harris Credit Facility"), and Gargiulo L.P.
currently has a $17.5 million line of credit with NationsBank. The Harris
Credit Facility, which was scheduled to expire on January 31, 1996, has been
extended until March 31, 1996. Either of these banks may require changes in
the terms of the Newco Credit Facility Agreement and/or the Gargiulo Credit
Facility Agreement, and, if the required changes cannot be accommodated, there
can be no assurance that such banks will continue to make these lines of
credit available after the Effective Time or, if such lines are not available,
that Newco will
22
<PAGE>
be able to obtain alternative bank financing on favorable terms, if at all. As
of October 31, 1995, Calgene was not in compliance with certain financial
covenants under its credit agreement with Harris Bank. While Calgene has
obtained waivers of such defaults through March 31, 1996, there can be no
assurance that it will be in compliance with such covenants in the future or,
in the event it is not in compliance, that it will be able to obtain waivers
of any such covenants. At June 30, 1995, Gargiulo L.P. was not in compliance
with certain financial covenants in its credit agreement with NationsBank.
Gargiulo L.P. has received waivers under such covenants until June 30, 1996.
There can be no assurance that Gargiulo L.P. will be in compliance with such
covenants or other covenants in its credit agreement in the future or that, in
the event it is not in compliance, that it will be able to obtain waivers of
any such covenants. While Monsanto has agreed, pursuant to the Gargiulo Credit
Facility Agreement, to make a $40 million loan available to Newco, advances
under such loan are subject to the achievement of certain milestones, and are
to be used solely to fund the branded tomato strategy described below (other
than amounts used to finance any borrowings made by Gargiulo L.P. to finance
the Collier Transaction and to allow Gargiulo L.P. to make an approximately $2
million payment to Monsanto pursuant to the Development Agreement) and are
repayable out of specified portions of the cumulative free cash flow of TIA.
While Monsanto has agreed, pursuant to the Newco Credit Facility Agreement, to
advance up to $15 million annually to Newco for three consecutive years, not
more than $15 million may be outstanding thereunder at any one time and if
Newco were to elect to convert any portion thereof into shares of Newco Common
Stock in order to gain access to additional borrowings under the Newco Credit
Facility Agreement, the issuance of such additional shares will trigger
Monsanto's right under the Stockholders Agreement to designate two additional
directors of Newco and thus control the Newco Board of Directors. See
"Reorganization Agreement and Related Agreements--The Stockholders Agreement."
Except as described above, Monsanto has no obligation to loan or otherwise
contribute additional cash to Newco. For all the foregoing reasons, there can
be no assurance that Newco will be able to obtain any future required
financing on favorable terms, if at all.
History of Losses; Uncertainty of Future Financial Results. Calgene has
incurred aggregate net losses of approximately $188 million from inception in
1981 through September 30, 1995, including research and development expenses
in excess of $129 million. The net loss for Calgene in the year ended June 30,
1995 ("Fiscal 1995") was $30.6 million and was $10.4 million in the fiscal
quarter ended September 30, 1995. Calgene expects to incur a substantial net
loss in Fiscal 1996. Gargiulo L.P. experienced a net loss in the amount of
$1.7 million for Fiscal 1995, and incured a net loss of approximately $5.4
million for the fiscal quarter ended September 30, 1995. In addition, Collier
Farms incurred a net loss of approximately $341,000 during Fiscal 1995 and a
net loss of $1.7 million in the first quarter of Fiscal 1996. There is no
assurance that some or all of the factors which caused these historical losses
will not be present in future periods or that Calgene or Gargiulo L.P. will be
able to overcome these or other problems and achieve profitability in the
highly unpredictable and volatile fresh produce business. Newco's ability in
future years to reduce losses and operate at a profit will depend on, among
other things, (i) the successful integration and profitability of the fresh
produce operations of CalFresh, Gargiulo L.P. and, if acquired, Collier Farms,
(ii) the successful development by Calgene of its genetically engineered
products and (iii) the success of the branded tomato strategy described below.
There can be no assurance that Newco will achieve profitability in the future.
Risks Associated with the Branded Tomato Strategy. Newco intends to combine
the premium quality branded tomato development program of Calgene, which
operates under the MacGregor brand name, and Gargiulo L.P., which operates
under the Gargiulo brand name, as part of its branded tomato strategy. This
strategy involves a number of risks to Newco, including, without limitation,
the following:
Potential Inability to Successfully Produce or Market the Branded Tomato. A
branded tomato program requires year-round production of a tomato which
consistently and uniformly combines the characteristics and attributes retail
consumers generally look for in the tomatoes they purchase, such as pleasing
flavor, tempting color, and good size, shape and firmness. Newco believes that
such tomatoes, if successfully produced and marketed, would gain brand
recognition and that a sufficient number of retail consumers would be willing
to pay a premium price for such tomatoes.
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<PAGE>
To date, no grower or shipper has successfully produced and supplied a
branded tomato on a nationwide and year-round basis. While Newco believes the
development of a successful branded tomato program is achievable, it
recognizes that such development will take a significant amount of time,
effort and capital.
The difficulties in producing a branded tomato, whether or not genetically
engineered, include variability of weather conditions during any particular
growing season and the non-uniformity of other factors affecting tomatoes,
such as various crop diseases and pestilence. To supply a branded tomato year
round, tomatoes must be grown in different geographic locations. The
difference in locations also makes it difficult to produce tomatoes that
consistently taste, look and feel alike.
Funding of Branded Tomato Strategy. Upon the terms and conditions of the
Gargiulo Credit Facility Agreement, Monsanto will make available to Newco a
revolving credit facility of up to $40 million. The proceeds of loans under
the Gargiulo Credit Facility Agreement are to be used solely to support the
branded tomato strategy (other than amounts used to finance up to $10 million
of borrowings made by Gargiulo L.P. to finance the Collier Transaction and to
allow Gargiulo L.P. to make an approximately $2 million payment to Monsanto
pursuant to the Development Agreement). In order to obtain an advance from
Monsanto under the Gargiulo Credit Facility Agreement, Newco must provide
reasonably acceptable documentation to Monsanto verifying that certain
milestones have been reached and certain goals have been achieved, all as set
forth in the Gargiulo Credit Facility Agreement. In the event such milestones
and goals are not achieved, Monsanto will have no obligation to make advances
under the Gargiulo Credit Facility Agreement and Newco will likely be unable
to obtain sufficient capital to support the implementation or expansion of the
branded tomato program.
Significant Costs Associated with the Development of the Branded Tomato. In
order to implement the branded tomato strategy, Newco may be compelled to
expand current farming operations, as well as incur significant marketing
costs to achieve brand recognition. Gargiulo L.P. has already spent
significant amounts on marketing, including the hiring of a number of
marketing personnel and the performance of marketing surveys. Expenses for
other items such as advertising will be required to implement the branded
tomato program.
Possible Unwillingness of Consumers to Pay Premium Prices for Branded
Tomatoes. Even if Newco is able to produce tomatoes suitable for a branded
program, there can be no assurance that retail consumers will be willing to
consistently pay premium prices for such tomatoes.
Little Consumer Marketing Experience. Because Gargiulo L.P. has been
principally engaged in the commodity tomato business, and Calgene has little
experience in the fresh tomato business, Newco will have little or no
marketing experience of the type required for a branded tomato program.
Although Gargiulo L.P. has hired, and Newco intends to hire, employees with
such marketing experience, there can be no assurance that Newco's marketing
efforts will be successful. See "Tomato Investment Associates, Inc.--Gargiulo
L.P.--Marketing, Sales and Distribution."
Risks Associated with Production of Genetically-Engineered Tomatoes. Calgene
has experienced difficulties in scaling-up production of its genetically-
engineered tomatoes and plans to temporarily curtail its tomato growing
operations in the Spring of 1996 until it is able to complete its development
of varieties with suitable agronomic characteristics. See "Calgene, Inc.--
Business of Calgene." There can be no assurance that Newco will be able to
accomplish such development or production scale-up of genetically-engineered
tomatoes. Unless and until such time as Newco develops genetically-engineered
tomatoes with agronomic characteristics which it deems sufficient for cost-
effective commercial production, it will be dependent upon the sale of
tomatoes into the commodity markets.
Agribusiness Risks. A variety of agribusiness risks affect all of the fresh
produce sold by Calgene, Gargiulo L.P and Collier Farms, including, without
limitation, the following:
Supply and Demand. The fresh produce business is particularly sensitive to
fluctuations in supply and demand. When the supply of tomatoes and berries in
the market exceeds the demand for such products, the market price for fresh
produce may be driven down significantly, in some instances below the cost of
harvesting and packing. In such situations it may be uneconomical to harvest a
crop, resulting in a total loss of the costs
24
<PAGE>
incurred in growing such crop. Even when market prices are sufficient to
permit recovery of direct harvesting and packing costs, prices may not be high
enough to permit recovery of growing costs and/or overhead and other indirect
costs. In addition, oversupply can also affect the prices obtained for premium
quality produce. See "--Risks Associated with the Branded Tomato Strategy."
Limited Barriers to Entry. The relatively low capital requirements for
farming permit relatively easy entrance into the fresh produce business, which
in turn can result in over-supply.
Weather. Weather conditions greatly affect the amount of fresh produce that
is brought to market, and, accordingly, the prices received for such produce.
Storms, frosts, droughts, and particularly floods, can destroy a crop and less
severe weather conditions, such as excess precipitation, cold weather and
heat, can kill or damage significant portions of a crop, rendering much of it
unpackable and unsalable.
Crop Disease and Pestilence. Crop disease and pestilence can be
unpredictable and can have a devastating effect on crops, rendering them
unsalable and resulting in the loss of all or a major portion of the crop for
that harvest season. Even when only a portion of the crop is damaged, the
profits a grower could have made on the crop will be severely disrupted
because the costs to plant and cultivate the entire crop will have been
incurred although only a portion of it can be sold. While some crop diseases
and pestilence are preventable or treatable, the costs of prevention or
treatment may be high. Both Calgene and Gargiulo L.P. are attempting to
develop insect and disease resistant strains of tomatoes, other produce and
cotton. However, there can be no assurance that these efforts will be
successful.
Labor Shortages and Union Activity. The production of fresh produce is
heavily dependent upon the availability of a large migrant labor force in
order to harvest crops. The turnover rate among the migrant labor force is
high due to the strenuous work, long hours, necessary relocation and
relatively low pay. Further, the pool of such workers willing and able to do
such unskilled manual labor is shrinking. To the extent it becomes necessary
to pay more to attract unskilled labor to migrant farm work, labor costs can
be expected to increase. In addition, compliance with more stringent
immigration laws has increased and is likely to continue to increase migrant
labor costs.
The migrant worker work force has not been unionized for the most part,
though significant efforts to form collective bargaining units or to have
existing ones recognized has occurred in the past, particularly in California
and, to a lesser extent, Southwest Florida. There can be no assurance that
such union organizing activities will not occur in the future. If such
organizing efforts were to occur and be successful on a large scale, labor
costs would likely increase and there could be work stoppages, which would be
particularly damaging in an industry where harvesting crops at peak times and
getting them to market on a timely basis is critical. The majority of fresh
produce is shipped by truck and is therefore susceptible to labor disturbances
in the trucking industry. Labor disturbances in the trucking industry can
limit the ability to get fresh produce to market before it spoils. Although
Gargiulo L.P. has never been affected by a nationwide truckers strike, it has
been affected by regional strikes and there can be no assurance that Newco
will not be affected by national or regional labor disruptions in the trucking
industry in the future.
Availability of Farmland in Florida and California. Newco intends to lease
the majority of the land on which it grows its crops, particularly tomatoes.
These leases are generally short term, and as a result, Newco will likely be
required to renegotiate many of its leases on an annual basis, thereby
subjecting itself to the possibility of increased rental payments. In
addition, a significant amount of the available land in Florida is classified
as "wetlands" and subject to significant restrictions on use. While Newco
believes that the acquisition of Collier Farms by Gargiulo L.P. will reduce
this risk in part, there can be no assurance that the Collier Transaction will
be consummated or that Newco will enjoy the benefits it anticipates as a
result of the Collier Transaction. See "Tomato Investment Associates, Inc.--
Collier Farms."
Risks similar to those set forth above are associated with the continued
leasing of farmland for the growing of strawberries in California.
Additionally, farmland along the California coast is subject to the problem of
salt water intrusion which would be adverse to the growing of strawberries.
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<PAGE>
Seed Sales. Seed sales are affected by U.S. government agricultural policy,
which imposes varying limitations on planting acreage as a criterion for
farmers' eligibility to receive government subsidy payments and other
benefits. There is no assurance that current or future U.S. government
agricultural policies will not have a material adverse effect on Newco's
financial results.
Technological Change. The application of recombinant DNA and related
technologies to plants is complex and subject to rapid change. A number of
companies are engaged in research related to plant biotechnology, including
companies that rely on the use of recombinant DNA as a principal scientific
strategy and companies that rely on other technologies. Technological advances
by others could render Newco's products less competitive. Many of these
companies, as well as competitors that supply non-genetically engineered
products, have substantially greater resources than Newco.
Other companies are developing and seeking to commercialize premium quality,
fresh market tomatoes developed with recombinant DNA or other technologies.
One of Newco's competitors, a biotechnology company, has developed a vine-
ripened tomato using one such other technology, somoclonal variation, which it
is currently selling and it is also test-marketing a tomato developed using
recombinant DNA technology.
Competition.
Vegetables and Berries. The tomato and berry markets in which Newco intends
to compete are highly competitive. In addition to competition from other
domestic growers, many of whom have greater resources and are able to produce
at lower costs than Newco, there is increasing competition from foreign
producers, particularly Mexican growers who are able to compete both on the
basis of quality and price. The more arid climates in which the Mexican
tomatoes are grown are conducive to vine ripening. By contrast, the wetter
climates in which tomatoes are grown in the southeastern United States require
that they be picked while still green and exposed to ethylene gas to promote
ripening. Many retail consumers perceive vine ripened tomatoes to have better
flavor than standard "gas green" tomatoes. Accordingly, vine ripened tomatoes
produced in Mexico may be able to compete effectively against gas green
tomatoes which are the predominant product of Gargiulo L.P. and Collier Farms.
Although Gargiulo L.P. produces vine ripened tomatoes in Mexico and Puerto
Rico, such tomatoes represented only approximately 10% of Gargiulo L.P.'s
total tomatoes produced during Fiscal 1995. In addition, Gargiulo L.P.
believes that certain provisions in the North American Free Trade Agreement,
coupled with the sharp devaluation of the Mexican peso, are primarily
responsible for the below-production-cost prices that Florida tomato growers
received for their tomatoes last winter in the United States. Although
Gargiulo L.P. is not able to predict the financial effect which the surge of
Mexican tomatoes into the U.S. will have on its revenues, it expects that the
large supply, combined with the vine-ripening characteristics that some
consumers find more attractive than gas-green tomatoes, will continue to have
a significant adverse impact on the revenues of Florida tomato growers,
including Gargiulo L.P. Furthermore, in the event the branded tomato strategy
is successful, there can be no assurance that Newco's competitors, many of
whom have greater resources, will not be able to duplicate such strategy and
produce branded tomatoes for sale at premium prices. In such event, the
success of Newco's branded tomato strategy may be adversely affected. See "--
Risks Associated with the Branded Tomato Strategy."
Cotton and other products. One competitor in the cotton seed market in which
Calgene competes, Delta and Pine Land Company, has a market share of
approximately 70%, compared with Calgene's market share of approximately 15%.
Monsanto has licensed its B.t. technology to Calgene and such other
competitor. However, B.t. technology must compete in a marketplace with the
competing technology of other established companies. See "The Reorganization
and Related Agreements--License Agreements." Competition is also intense in
the oleochemicals market, where Calgene competes with numerous companies.
Dependence on Key Personnel. The success of Newco's business operations will
be materially dependent upon the continued services of certain key personnel
of Calgene, including Roger H. Salquist, and certain key personnel of Gargiulo
L.P., including Jeffrey D. Gargiulo and Robert Shulman. The loss of any key
personnel due to death, disability or termination of employment could have a
material adverse impact on the operations or financial condition of Newco.
Newco does not have key person life insurance covering its senior management
personnel.
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Dependence on Certain Corporate Relationships. Calgene and Gargiulo L.P. each
enjoy relationships with other companies which have contributed, and in some
cases continue to contribute, to their respective success. Newco's future
success will depend, in part, on developing new relationships and continuing
the existing relationships with these companies following the Reorganization,
their continued strategic interest in the development of certain of Calgene's
products and, eventually, their success in marketing such products or
increasing the willingness of consumers to purchase such products from Newco.
ADDITIONAL RISKS RELATING TO CALGENE
Product Development Uncertainties. Although Calgene has completed the
genetic engineering of BXN(TM) cotton and laurate canola, Calgene's other
genetically engineered products are at various stages of development. There
are difficult scientific objectives to be achieved in certain product
development programs before the technological feasibility of such products can
be demonstrated. Even the more advanced programs could encounter technological
problems that could significantly delay or prevent product development or
product introduction.
Patents and Trade Secrets. Since 1992, Calgene has been engaged in
litigation with Enzo Biochem, Inc. ("Enzo") a company licensed under three
related U.S. patents and counterpart foreign patents (the "Enzo Patents")
which purport to cover the use of antisense technology in all cells, including
plant cells. Some of Calgene's products, including the FLAVR SAVR tomato, use
antisense technology. Enzo claimed that Calgene infringed the Enzo Patents.
Calgene denied infringement and challenged the validity of the Enzo Patents.
On February 2, 1996, the District Court ruled that the Enzo Patents are
invalid. In addition, the validity of a patent owned by Calgene directed to
the use of antisense in plant cells was upheld by the District Court. Enzo has
indicated that it intends to appeal the decision. If on appeal a court were to
determine that one or more of the Enzo Patents validly covers plant cells and
that such patents are infringed by Calgene's sales of products incorporating
such antisense technology, Calgene could be held liable for significant
damages and could be precluded from producing and selling the FLAVR SAVR
tomato, as well as other products currently under development. There is no
assurance that a license, if necessary, could be obtained by Calgene on
commercially acceptable terms, if at all.
The European Patent Office (the "EPO") has granted a patent to Enzo with
respect to claims which are intended to cover the use of antisense in all
cells, including plant cells. The EPO has also granted a patent to Agracetus,
Inc., a plant biotechnology company ("Agracetus"), with claims which are
intended to cover the use of antisense technology in all plants. A preliminary
decision from the EPO indicates that Calgene's opposition to Enzo's patent
should be rejected. Calgene has filed supplemental arguments with the EPO
responding to the EPO's reasoning and providing additional grounds for
invalidation based upon evidence which surfaced during the course of the U.S.
litigation and intends to supplement its opposition in the near future against
such Agracetus patent. If these proceedings are not successful in limiting the
scope of the claims of these patents and if Calgene is unable to obtain
licenses from the respective patent holders to use such antisense technology,
Calgene could be prevented from expanding some of Calgene's genetically
engineered products, including tomatoes engineered with the FLAVR SAVR gene,
into Europe. There is no assurance that licenses could be obtained on
commercially reasonable terms, if at all.
Other companies have applied for patents covering B.t. technology. If
patents were to be issued to other companies, Calgene would be required to
obtain a license to employ the B.t. gene in commercial products. There is no
assurance that such licenses could be obtained on commercially reasonable
terms, if at all. Calgene has rights to obtain certain licenses to Monsanto's
B.t. technology and has licensed Plant Genetics Systems' issued B.t. patent.
U.S. patents have been issued to Agracetus for the transformation of cotton.
Calgene has obtained a license from Agracetus for non-fiber uses. The patents
are now in reexamination before the U.S. Patent Office and some claims have
been indicated as allowable by the Examiner. Once the reexamination is
completed, Calgene may determine that a license under these patents is needed
for its genetically engineered cotton fiber products. There is no assurance
that such a license could be obtained on commercially reasonable terms, if at
all.
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<PAGE>
A U.S. patent has been issued to a competitor for a genetic component which
is currently used in Calgene's FLAVR SAVR tomato. Although alternatives are
available, in the event Calgene would be prevented from utilizing this genetic
element, it would cause disruption in the production of FLAVR SAVR tomatoes.
Analysis of this patent is currently underway. In the event that it is
determined that a license is necessary, there is no assurance that a license
can be obtained on commercially reasonable terms, if at all.
Patent applications filed in the United States are not publicly available
for examination. Patent applications filed outside of the United States may be
available for examination, but may not accurately reflect the applications
filed in the United States on the same claimed inventions. Patent applications
filed or to be filed in the future by Calgene's competitors or others could,
if patents are issued, preclude Calgene from using, in the patent issuing
countries, technology and techniques basic to genetic engineering and to areas
of particular importance to Calgene. If Calgene is unable to obtain licenses
to use such technology, there could be a delay in the introduction of some of
Calgene's genetically engineered products in those countries. Whether such
patents will be issued, the extent to which Calgene would be required to
license such patents and the availability and cost of such licenses are
currently unknown.
Calgene has received U.S. and foreign utility patents and has filed and will
continue to file patent applications in order to obtain proprietary protection
of certain genes, gene constructs, uses of genes in specific applications and
methods for genetic engineering of plants. There is no assurance that future
patents can be obtained in a timely fashion or, if issued, will afford Calgene
significant protection. In addition to patents, Calgene seeks to protect its
proprietary know-how as trade secrets. Although Calgene takes precautionary
measures to maintain the confidentiality of its trade secrets, there is no
assurance that competitors will not gain access to Calgene's know-how or
independently develop substantially equivalent know-how.
Public Acceptance of Genetically Engineered Products. The commercial success
of Calgene's genetically engineered products will depend in part on public
acceptance of the cultivation and consumption of genetically engineered plants
and plant products. Public attitudes may be influenced by claims that
genetically engineered plant products are unsafe for consumption or pose a
danger to the environment. There is no assurance that Calgene's genetically
engineered products, such as fresh market tomatoes and herbicide resistant
cotton, will gain public acceptance.
Government Regulation. The field testing, production and marketing of
genetically engineered plants and plant products by Calgene is subject to
federal, state, local and foreign governmental regulation. There is no
assurance that regulatory agencies administering existing or future
regulations or legislation will allow Calgene to produce and market its
genetically engineered products in a timely manner or under technically or
commercially feasible conditions. In addition, regulatory action or private
litigation could result in expenses, delays or other impediments to Calgene's
product development programs or the commercialization of resulting products.
Although the U.S. Food and Drug Administration (the "FDA") has announced in
a policy statement that it will apply the same regulatory standards to foods
developed through genetic engineering as applied to foods developed through
traditional plant breeding, genetically engineered food products will be
subject to premarket review if they raise safety questions or are deemed to be
food additives. In May 1994, the FDA announced its determination that the
FLAVR SAVR tomato has not been significantly altered with respect to safety or
nutritive value when compared to conventional tomatoes and also published a
food additive regulation allowing the use of the kanr marker gene in the
development of new varieties of tomato, cotton and canola. Calgene has
subsequently completed the safety assessment of its BXN(TM) cotton and laurate
canola products in accordance with the FDA policy. There is no assurance that
future Calgene products will not be subject to lengthy FDA reviews and
unfavorable FDA determinations if they raise safety questions or are deemed to
be food additives.
The FDA has announced in a policy statement that it will not require that
genetically engineered products be labeled as such, provided that such
products are as safe, and have the same nutritional characteristics as
conventionally developed products. There can be no assurance that the FDA will
not reconsider its position, or
28
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that local and state authorities will not enact labeling requirements, either
of which could have a material adverse effect on Calgene. In addition, the
Mexican health and agriculture authorities and Health Canada could reconsider
their respective positions regarding the marketing of the FLAVR SAVR tomato.
The United States Department of Agriculture (the "USDA") prohibits
genetically engineered plants from being grown and transported except pursuant
to a deregulation, or under controls so burdensome as to render
commercialization impracticable. The only Calgene plants currently exempted by
the USDA are Calgene's initial tomato varieties engineered with the FLAVR SAVR
gene, the BXN(TM) cotton varieties and laurate canola. No assurance can be
given that additional Calgene products will be exempted by the USDA.
ADDITIONAL RISKS RELATING TO GARGIULO L.P.
Ability to Continue to Lease Land from Affiliates. Much of the land leased
in southwest Florida to Gargiulo L.P. is owned by persons or entities which
possess or have possessed significant ownership interests in Gargiulo L.P. or
companies affiliated with Gargiulo L.P. Such persons and entities have been
motivated to lease such crop lands to Gargiulo L.P. to allow Gargiulo L.P. to
use it to produce crops and provide a return on their investments in Gargiulo
L.P. Upon consummation of the Reorganization, these individuals and entities
will no longer have a financial interest in Gargiulo L.P. and may be motivated
to lease lands owned by them to third parties willing to pay higher rental
payments or to sell such land to third parties who may not lease it to
Gargiulo L.P. While Gargiulo L.P. believes that the acquisition of Collier
Farms will reduce this risk, there can be no assurance that Collier Farms will
be acquired. See "Related Party Transactions."
Early Stage and Uncertainty of Development of Gargiulo Genetically Altered
Produce. Gargiulo L.P. entered into a Development/License Agreement with
Monsanto dated as of December 23, 1992, for the purpose of developing
transgenic tomatoes with a longer shelf life for commercial application. The
research and development to date relating to transgenic tomatoes has not
yielded a tomato with a longer shelf life which can be produced on a
commercially feasible basis. Accordingly, Gargiulo L.P. believes that its
future earnings will be dependent on the success of its commodity tomato
business and its branded tomato program. There can be no assurance that
Gargiulo L.P. will develop any genetically altered fruit or vegetable products
for commercial applications at any time in the future.
Repack Operations. Gargiulo L.P. operates a tomato repack operation in
Palmetto, Florida. The tomato repack business is highly competitive and
requires different operational skills than those needed to be a successful
grower and shipper. Many of Gargiulo L.P.'s competitors in the repack business
are more experienced and have long standing relationships with customers.
Gargiulo L.P.'s inability to operate the repack operation profitably
contributed to the loss Gargiulo L.P. experienced during Fiscal 1995. Gargiulo
L.P. intends to relocate its repack operation to Immokalee, Florida into a
facility it will lease from Calgene. Gargiulo L.P. will close and put up for
sale its Palmetto, Florida facility where its repack operation is currently
located. There can be no assurance that Gargiulo L.P. will be able to operate
a repack operation profitably in the future.
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MARKET PRICE INFORMATION AND DIVIDEND POLICY
Calgene Common Stock is quoted on the Nasdaq National Market under the
symbol "CGNE." There is no public market for any class or series of Newco
capital stock or the equity securities of TIA, Gargiulo L.P. or Collier Farms.
The table below sets forth, for the fiscal quarters indicated, the reported
high and low sales prices of the Calgene Common Stock on the Nasdaq National
Market, in each case based on published financial sources.
<TABLE>
<CAPTION>
CALGENE COMMON STOCK
---------------------
HIGH LOW
---------- ----------
<S> <C> <C>
FISCAL 1994
Quarter Ended September 30, 1993....................... $14.50 $11.00
Quarter Ended December 31, 1993........................ 17.625 12.75
Quarter Ended March 31, 1994........................... 14.50 10.25
Quarter Ended June 30, 1994............................ 15.375 10.00
FISCAL 1995
Quarter Ended September 30, 1994....................... 12.375 8.625
Quarter Ended December 31, 1994........................ 9.875 6.375
Quarter Ended March 31, 1995........................... 8.875 5.75
Quarter Ended June 30, 1995............................ 9.625 5.375
FISCAL 1996
Quarter Ended September 30, 1995....................... 8.125 6.25
Quarter Ended December 31, 1995........................ 7.25 4.25
Quarter Ending March 31, 1996 (through January 30,
1996)................................................. 6.50 4.50
</TABLE>
The last reported sales price of Calgene Common Stock on the Nasdaq National
Market on June 26, 1995, the day before Calgene issued a press release with
respect to the Reorganization, was $7.50 per share. The last reported sales
price of Calgene Common Stock on the Nasdaq National Market on January 30,
1996, was $5.625 per share. On the Record Date there were approximately 3,394
holders of record of Calgene Common Stock. Calgene believes that the number of
beneficial owners of Calgene Common Stock is in excess of 37,000.
ALL STOCKHOLDERS OF CALGENE ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE CALGENE COMMON STOCK.
Newco and Calgene have never declared or paid cash dividends and Newco does
not intend to pay cash dividends in the foreseeable future. Future cash
dividends, if any, will be determined by the Newco Board and will be based
upon Newco's future earnings, capital requirements, financial condition and
other factors deemed relevant by the Newco Board. In addition, the ability of
Newco to pay dividends would be restricted by the terms of certain
indebtedness of Calgene and Gargiulo L.P. which Newco intends to assume as of
the Effective Time, as well as the terms of the Newco Credit Facility
Agreement and the Gargiulo Credit Facility Agreement. See "The Reorganization
Agreement and Related Agreements--Newco Credit Facility Agreement" and "--
Gargiulo Credit Facility Agreement."
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THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Calgene
Common Stock in connection with the solicitation of proxies by the Calgene
Board for use at the Special Meeting and at any adjournment or postponement
thereof. Each copy of this Proxy Statement/Prospectus mailed to holders of
Calgene Common Stock is accompanied by a form of proxy for use at the Special
Meeting. This Proxy Statement/Prospectus and the accompanying form of proxy
(the "Calgene Proxy") are first being mailed on or about February 9, 1996.
CALGENE STOCKHOLDERS ARE REQUESTED TO COMPLETE, SIGN AND DATE THE CALGENE
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
DATE, TIME AND PLACE
The Special Meeting is scheduled to be held on Monday, March 25, 1996, at
the Varsity Theatre, 616 2nd Street, Davis, California, commencing at 9:00
a.m., local time.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The purpose of the Special Meeting is to approve the Reorganization
Agreement, and the related Plan of Merger, under which Calgene and TIA will
each become a wholly-owned subsidiary of Newco, pursuant to: (i) a merger of a
wholly-owned subsidiary of Newco with and into Calgene and the conversion of
each outstanding share of Calgene Common Stock upon the Effective Time into
the right to receive one share of Newco Common Stock, followed immediately by
(ii) the exchange by Monsanto of all the outstanding shares of capital stock
of TIA, $30 million in cash (less amounts previously advanced to Calgene under
an existing subordinated promissory note, under which $18 million was
outstanding at December 31, 1995), and certain technology licenses, for that
number of shares of Common Stock representing 49.9% of the outstanding shares
of Newco Common Stock upon the Effective Time. Upon the Effective Time, Newco
will be renamed "Calgene, Inc." A vote in favor of the Merger Proposal shall
be deemed to be ratification of (i) the assumption by Newco of Calgene's 1991
Stock Option Plan, (ii) the assumption by Newco of Calgene's 1990 Employee
Stock Purchase Plan, (iii) the adoption of the Newco 1996 Stock Option Plan
and (iv) the election of the eight directors of Newco specified in this Proxy
Statement/Prospectus. See "Approval of the Merger--Interests of Certain
Persons in the Reorganization" and "Newco, Inc.--Directors and Executive
Officers."
Calgene Board Recommendation
The Calgene Board has unanimously approved the Reorganization Agreement and
the Merger Proposal and recommends a vote FOR approval of the Merger Proposal.
VOTING AT THE SPECIAL MEETING; RECORD DATE
The Calgene Board has fixed January 25, 1996, as the record date for the
determination of Calgene stockholders entitled to notice of and to vote at the
Special Meeting. Accordingly, only holders of record of Calgene Common Stock
on the Record Date will be entitled to notice of and to vote at the Special
Meeting. As of the Record Date there were 30,264,257 shares of Calgene Common
Stock outstanding. Each holder of record of shares of Calgene Common Stock on
the Record Date is entitled to cast one vote per share, exercisable in person
or by properly executed proxy, at the Special Meeting. The presence, in person
or by properly executed proxy, of the holders of a majority of the outstanding
shares of Calgene Common Stock entitled to vote at the Special Meeting is
necessary to constitute a quorum at the Special Meeting.
The approval of the Merger Proposal will require the affirmative vote of the
holders of a majority of the outstanding shares of Calgene Common Stock on the
Record Date.
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As of September 30, 1995, directors and executive officers of Calgene and
their affiliates may be deemed to beneficially own approximately 1.9% of the
outstanding shares of Calgene Common Stock. Each director and executive
officer of Calgene has advised Calgene that he intends to vote or direct the
vote of all shares of Calgene Common Stock over which he has voting control
FOR approval of the Merger Proposal.
PROXIES
This Proxy Statement/Prospectus is being furnished to the holders of Calgene
Common Stock in connection with the solicitation of proxies on behalf of the
Calgene Board for use at the Special Meeting.
All shares of Calgene Common Stock which are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting, and not revoked, will be voted at such meeting
in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such proxies will be voted:
FOR approval of the Merger Proposal.
If any other matters are properly presented at the Special Meeting for
consideration, the persons named in the enclosed form of proxy and acting
thereunder will have discretion to vote on such matters in accordance with
their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Calgene, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later-dated proxy relating to the same shares and
delivering it to the Secretary of Calgene, before the taking of the vote at
the Special Meeting, or (iii) attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Calgene, Inc., 1920
Fifth Street, Davis, California 95616, Attention: Secretary, prior to the
commencement of the Special Meeting.
All expenses of Calgene's solicitation of proxies, including the cost of
preparing and mailing this Proxy Statement/Prospectus, will be borne by
Calgene. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of Calgene in person or by
telephone, telegram or other means of communication. Such directors, officers
and employees soliciting proxies will not be additionally compensated, but may
be reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. Calgene intends to retain a proxy solicitation firm for
assistance in connection with the Special Meeting at an estimated expense of
approximately $5,000, plus reasonable out-of-pocket expenses. Arrangements
will also be made with custodians, nominees and fiduciaries for forwarding of
proxy solicitation materials to beneficial owners of shares held of record by
such custodians, nominees and fiduciaries, and Calgene will reimburse such
persons for reasonable expenses incurred in connection therewith.
CALGENE STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXIES.
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APPROVAL OF THE MERGER
BACKGROUND OF THE REORGANIZATION
Calgene has from time to time had discussions with other companies in an
effort to gain access to new markets for its biotechnology products and to
license new technologies. In the course of such discussions, Calgene has
considered possible alliances, combinations and other transactions with
various companies, including companies both smaller and larger than Calgene.
In October 1994, Roger H. Salquist, Calgene's Chief Executive Officer,
contacted Hendrik A. Verfaillie, an Executive Vice President of Monsanto, and
inquired as to Monsanto's interest in exploring a strategic alliance with
Calgene. At a subsequent meeting, Messrs. Salquist and Verfaillie, and their
respective financial advisors, discussed the possibility of a strategic
alliance pursuant to which, among other things, Monsanto would acquire more
than a majority interest in a new joint venture that would be formed to own
and operate the businesses of Calgene and Gargiulo L.P., as well as certain
other Monsanto operations. From October 1994 through January 1995, there were
continued discussions between representatives of Calgene and Monsanto with
respect to the structure and terms of such an alliance. In addition,
representatives of Monsanto conducted diligence with respect to the operations
of Calgene, and representatives of Calgene conducted diligence with respect to
the operations of Gargiulo L.P. Monsanto and Calgene were ultimately unable to
reach agreement as to the terms and structure of the proposed strategic
alliance, and in early February 1995 the parties determined to terminate all
discussions with respect to a possible strategic alliance.
In May 1995, Messrs. Salquist and Verfaillie had discussions concerning a
possible strategic alliance pursuant to which Monsanto would contribute
certain cash, technology and the equity interests in Gargiulo L.P. to Calgene
in exchange for an ownership interest in Calgene. The parties determined that
Monsanto would acquire an approximately 49% interest in Calgene after
negotiations that involved consideration of the specific businesses and
technologies and the amount of cash that would be contributed by Monsanto. In
view of the parties' previous inability in late 1994 to agree on the value of
certain non-tomato operations that Monsanto had proposed to contribute to the
alliance, it was agreed that such non-tomato operations would not be part of
the transaction.
At a special meeting of the Calgene Board on May 22, 1995, Mr. Salquist
reviewed the status of discussions regarding the potential strategic alliance
with Monsanto. The Calgene Board authorized Mr. Salquist to proceed with
negotiations concerning such a possible strategic alliance.
Representatives of Calgene and Monsanto then began discussions concerning
the terms and structure of the proposed alliance. In June 1995, there were
several meetings between various members of management of Calgene, Monsanto
and Gargiulo L.P. to discuss various management and integration issues.
On June 26, 1995, at a meeting of the Calgene Board, the directors of
Calgene reviewed the status of discussions and the principal terms of the
proposed transaction. The Calgene Board authorized Calgene to enter into a
letter of intent with respect to the proposed transaction.
On June 27, 1995, Calgene and Monsanto entered into a letter of intent, and
a press release was issued with respect to such letter of intent.
From July 27 through October 4, 1995, Calgene and Monsanto, and their
respective legal counsel, negotiated the terms of the Reorganization Agreement
and related agreements. Calgene continued its diligence review of Gargiulo
L.P., and Monsanto continued its diligence review of Calgene.
On October 5, 1995, a meeting of the Calgene Board was held to consider the
Reorganization Agreement. Representatives of Montgomery attended and presented
their oral opinion which was subsequently confirmed in writing as of such
date, as to the fairness of the consideration to be received by Newco in
exchange for 49.9% of the Newco Common Stock, from a financial point of view
as of such date. The Calgene Board, acting on the recommendation of Calgene's
management and in view of the fairness opinion of Montgomery, approved the
Reorganization Agreement and the transactions contemplated thereby.
33
<PAGE>
On October 13, 1995, Calgene and Monsanto executed the Reorganization
Agreement. Prior to Closing, Newco, Sub, Calgene and Monsanto will execute a
joinder agreement, the primary purpose and effect of which will be to bind
Newco and Sub, which were not incorporated at the time the Reorganization
Agreement was executed, to the Reorganization Agreement. See "The
Reorganization Agreement and Related Agreements --Joinder Agreement."
CALGENE'S REASONS FOR THE REORGANIZATION; RECOMMENDATION OF THE CALGENE BOARD
OF DIRECTORS
The Calgene Board recommends that the holders of Calgene Common Stock
approve the Merger Proposal and the Reorganization Agreement and vote FOR the
approval of the Merger Proposal for the reasons set forth below.
Gargiulo L.P. provides Newco with a diversified base for the production and
marketing of large volumes of high-quality fresh market tomatoes. Calgene has
incurred considerable losses due primarily to the difficulty in scaling up
production of its MacGregor brand tomato. It is expected that Gargiulo L.P.'s
production and marketing infrastructure will enable Newco to significantly
reduce its unit costs and expand sales volumes of high-quality, premium-priced
branded tomatoes. Gargiulo L.P. also provides Newco with a platform upon which
to build a diversified branded produce business, including strawberries and
other fresh produce.
Gargiulo L.P. also provides Newco with superior tomato germplasm into which
the FLAVR SAVR gene and other genetically engineered traits can be
incorporated. BHN, Gargiulo L.P.'s tomato breeding subsidiary, has developed
proprietary, high-yielding, flavorful tomato hybrid varieties that can be
engineered with the FLAVR SAVR gene, if Newco determines that such gene can
enhance the value of its branded tomatoes.
Calgene believes that the technology licenses to be contributed by Monsanto
may enable Newco to develop a portfolio of genetically engineered products.
Monsanto and Calgene have developed complementary technologies in the areas of
ripening control, virus and insect resistance, fungal disease resistance and
carbohydrate metabolism that may be applied to Gargiulo L.P.'s core tomato and
strawberry product lines in order that Newco may evaluate the market potential
and commercial feasibility of such products. In addition, Monsanto's plant
oils-related technology is expected to improve the stability and decrease the
unit cost of several of Calgene's genetically modified oil products. Calgene
recognizes, however, that any commercially valuable exploitation of such
technology will only be realized over the long term and there can be no
assurance that any commercially valuable exploitation will ever be realized.
The significant operating losses incurred by Calgene in developing and
producing its genetically-engineered tomatoes have created the need for
significant amounts of capital, and there can be no assurance that Calgene
would have been able, absent the transaction with Monsanto, to obtain the
financing needed to fund its operations through the end of calendar 1995. As
part of the Reorganization, Monsanto has provided, and will provide, Calgene
with substantial financial resources. Monsanto will contribute $30 million to
Newco upon the Effective Date ($18 million of which will have been previously
provided to Calgene in the form of a convertible note), a $40 million
subordinated revolving credit facility which will primarily be used to fund
the branded tomato strategy, and a three-year $15 million subordinated
revolving credit facility that can be used for general corporate purposes,
although not more than $15 million may be outstanding thereunder at any time.
BENEFITS AND DETRIMENTS OF THE REORGANIZATION TO CALGENE
Possible benefits and detriments of the Reorganization to Newco and Calgene
and to the stockholders of Newco (other than Monsanto) include the following:
BENEFITS
. Gargiulo L.P. provides Newco and Calgene with a diversified base and a
strong infrastructure for the production and marketing of large volumes
of high-quality fresh market tomatoes.
. Gargiulo L.P. provides Newco with superior tomato germplasm.
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<PAGE>
. The technology to be licensed by Monsanto may enable Newco to develop a
portfolio of new genetically engineered products and to improve Calgene's
genetically modified oil products.
. The cash to be invested and loaned by Monsanto is expected to enable
Calgene to continue to fund its operations through the end of 1996.
Absent the initial advance of $18 million by Monsanto and its commitment
for additional funds, it is uncertain whether Calgene would have been
able to fund its operations through the end of 1995 or to obtain the
waivers that it has obtained from its bank for certain covenant defaults
under its bank credit agreement. See "Risk Factors--Risks Relating to
Newco--Possible Need for Additional Financing."
DETRIMENTS
. There can be no assurance that the expected benefits of the combination
of the Calgene and Gargiulo L.P. tomato businesses will be realized or
that the tomato operations of Gargiulo L.P., which are significantly
larger than those of Calgene, will not expose Newco to greater financial
risks if such operations encounter difficulties.
. Monsanto will be able to exert significant influence over Newco and
Calgene by virtue of its rights, among other things, to designate certain
members of the Newco Board. See "The Reorganization Agreement and Related
Agreement--The Stockholders Agreement."
. The separate Boards of Directors and management of TIA and Newco could
present possible conflicts of interest and managerial difficulties. See
"Risk Factors--Risks Relating to Newco--Separate Board of Directors and
Management of TIA."
OPINION OF CALGENE'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated January 18, 1995 (the "Engagement
Letter"), Calgene retained Montgomery as its financial advisor in connection
with the consideration by the Calgene Board of a possible transaction with
Monsanto or an affiliated entity. Montgomery is a nationally recognized firm
and, as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Calgene selected Montgomery
as its financial adviser on the basis of its experience and expertise in
transactions similar to the Reorganization and its reputation in the
biotechnology and investment communities.
At the October 5, 1995, meeting of the Calgene Board, Montgomery delivered
its oral opinion, subsequently confirmed in writing as of such date, that the
consideration to be received by Newco in exchange for 49.9% of the Newco
Common Stock pursuant to the Reorganization Agreement, consisting of all of
the capital stock of TIA, plus certain intellectual property and research and
development assets (the "R&D Assets") and a combination of cash and
forgiveness of debt in the aggregate amount of $30 million (the "Cash"), was
fair to Calgene, from a financial point of view, as of such date. No
limitations were imposed by Calgene on Montgomery with respect to the
investigations made or procedures followed in rendering its opinion.
THE FULL TEXT OF MONTGOMERY'S WRITTEN OPINION TO THE CALGENE BOARD IS
ATTACHED HERETO AS ANNEX C AND IS INCORPORATED HEREIN BY REFERENCE, AND SHOULD
BE READ CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH THIS PROXY
STATEMENT/PROSPECTUS. THE FOLLOWING SUMMARY OF THE MONTGOMERY OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MONTGOMERY
OPINION. THE MONTGOMERY OPINION IS ADDRESSED TO THE CALGENE BOARD ONLY AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY CALGENE STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. IN FURNISHING ITS OPINION,
MONTGOMERY DID NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF THE TERM
"EXPERT" AS USED IN THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER, OR THAT ITS OPINION CONSTITUTES A REPORT OR VALUATION
WITHIN THE MEANING OF SECTION 11 OF THE SECURITIES ACT AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER, AND STATEMENTS TO SUCH EFFECT ARE INCLUDED
IN THE TEXT OF THE MONTGOMERY OPINION.
35
<PAGE>
In connection with its opinion, Montgomery, among other things: (i) reviewed
certain publicly available financial and other data with respect to Calgene,
including Calgene's consolidated financial statements for recent years and
interim periods to June 30, 1995 and certain other relevant financial and
operating data relating to Calgene and Gargiulo L.P. made available to
Montgomery from published sources and from the internal records of Calgene,
Gargiulo L.P. and Monsanto, including Gargiulo L.P.'s consolidated financial
statements for recent years and interim periods to June 30, 1995; (ii)
reviewed the September 29, 1995 draft of the Reorganization Agreement provided
to Montgomery by Calgene; (iii) reviewed certain historical market prices and
trading volumes of Calgene Common Stock on the Nasdaq National Market; (iv)
analyzed the financial impact that the transactions contemplated by the
Reorganization Agreement are expected to have on the projected results of
Calgene; (v) reviewed and discussed with representatives of the management of
Calgene, Gargiulo L.P. and Monsanto certain information of a business and
financial nature regarding Calgene and Gargiulo L.P., furnished to Montgomery
by them, including financial forecasts and related assumptions of Calgene and
Gargiulo L.P.; (vi) made inquiries regarding and discussed the Reorganization
Agreement and other matters related thereto with Calgene's legal counsel; and
(vii) performed such other analyses and examinations as Montgomery deemed
appropriate.
In connection with its review, Montgomery relied upon the accuracy and
completeness of the foregoing information and did not assume any
responsibility independently to verify such information. With respect to the
financial projections for Calgene and Gargiulo L.P. provided to Montgomery by
the management of Calgene and Monsanto, respectively, Montgomery assumed for
purposes of its opinion that they were reasonably prepared on bases reflecting
the best available estimates and judgments of their respective managements at
the time of preparation as to the future financial performance of Calgene and
Gargiulo L.P. and that they provided a reasonable basis upon which Montgomery
could form its opinion. Neither Calgene nor Monsanto publicly discloses
internal management projections of the type provided to Montgomery in
connection with Montgomery's review of the transactions contemplated by the
Reorganization Agreement. Such projections were not prepared with a view
toward public disclosure. In addition, such projections were based upon
numerous variables and assumptions that are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions. Accordingly, actual results could vary significantly from those
set forth in such projections. Montgomery has assumed no liability for such
projections. Montgomery also assumed that there were no material changes in
Calgene's, Gargiulo L.P.'s or TIA's assets, financial condition, results of
operations, business or prospects since the respective dates of the last
financial statements made available to Montgomery, except for Gargiulo L.P.'s
proposed acquisition of Collier Farms. Montgomery relied on advice of counsel
and independent accountants to Calgene as to all legal and financial reporting
matters with respect to Calgene and the Reorganization Agreement. Montgomery
assumed that the parties will consummate the transactions contemplated by the
Reorganization Agreement in a manner that complies in all respects with the
applicable provisions of the Securities Act and the Exchange Act and all other
applicable federal and state statutes, rules and regulations. Montgomery
further assumed, with Calgene's consent, that the transactions contemplated by
the Reorganization Agreement will be consummated in accordance with the terms
described in the Reorganization Agreement, without any amendments thereto, and
without waiver by Calgene or Monsanto of any of the conditions to their
respective obligations thereunder. In addition, Montgomery did not assume
responsibility for making an independent evaluation, appraisal or physical
inspection of the assets or liabilities (contingent or otherwise) of Calgene,
Gargiulo L.P. or TIA, nor was Montgomery furnished with any such appraisals.
Further, the Montgomery Opinion was based on economic, monetary and market
conditions existing as of October 5, 1995.
Montgomery provided financial advice to the management of Calgene in
connection with the structuring and negotiation of the Reorganization but made
no recommendation as to the form or amount of the consideration to be paid by
Monsanto in the Reorganization.
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<PAGE>
Set forth below is a brief summary of the report presented by Montgomery to
the Calgene Board on October 5, 1995, in connection with its opinion.
Discounted Cash Flow Analysis--Operations. Montgomery performed a discounted
cash flow analysis of the projected cash flow of Calgene on a stand-alone
basis and pro forma to reflect the acquisition of Gargiulo L.P. and receipt of
the cash from Monsanto, but not the acquisition of the R&D Assets (analyzed
separately below), through calendar year 2000. Key assumptions in the
discounted cash flow analysis included discount rates of 20% to 25% for
Calgene as a stand-alone entity and 17.5% to 22.5% for the pro forma entity,
terminal multiples of projected earnings before interest and taxes ("EBIT") of
9.0x to 12.0x, and, in the stand-alone-analysis, the sale by Calgene of
4,000,000 shares of Calgene Common Stock to raise $20,000,000 to fund expected
operating losses. Utilizing these projections and assumptions, Montgomery
determined that the implied Calgene pro forma valuation was accretive to the
Calgene stand-alone valuation by a range of $1.36 to $2.42 per share. The
above analysis assumed the acquisition of Collier Farms by Gargiulo L.P.
Montgomery also performed a discounted cash flow analysis of the projected
incremental cash flow derived from the acquisition of Collier Farms. Key
assumptions in the analysis included discount rates of 15% to 20% and terminal
multiples of EBIT of 6.0x to 9.0x. Utilizing these projections and
assumptions, Montgomery determined that the incremental Collier Farms value
ranged from a low of $0.16 per share on a pro forma basis (based upon a
terminal multiple of 2000 EBIT of 6.0x and a discount rate of 20%) to a high
of $0.37 per share on a pro forma basis (based upon a terminal multiple of
2000 EBIT of 9.0x and a discount rate of 15%).
Discounted Cash Flow Analysis--R&D Assets. Montgomery also performed a
discounted cash flow analysis of the projected cash flow of the R&D Assets
through calendar year 2006, applying discount rates for various R&D Asset
categories ranging from 20% to 50%. Utilizing these projections and
assumptions, Montgomery determined that the implied valuation for the R&D
Assets was $28.8 million, or $0.48 per share on a pro forma basis.
Dilution Analysis. Using estimates prepared by Calgene and Gargiulo L.P.
management, Montgomery compared the estimated fiscal year 1996, 1997 and 1998
earnings (loss) per share of Calgene Common Stock on a stand-alone basis to
the estimated fiscal year 1996, 1997 and 1998 earnings (loss) per share of the
common stock of the pro forma combined companies, including for this purpose
Gargiulo L.P. and the receipt of the Cash from Monsanto but not the R&D
Assets. Based on such analysis, the proposed transaction would be accretive to
Calgene's estimated loss per share by $0.11 per share in 1996, and accretive
to Calgene's estimated earnings per share by $0.10 per share in 1997 and $0.11
per share in 1998. Montgomery performed the same analysis assuming no
acquisition of Collier Farms, which resulted in accretion to estimated
loss/earnings per share of $0.06, $0.05 and $0.05, respectively.
Contribution Analysis. Montgomery analyzed the contribution of each of
Calgene and Gargiulo L.P. to the projected revenues and EBIT of the pro forma
combined companies for fiscal years 1996, 1997 and 1998. This analysis showed,
among other things, that based on pro forma combined income statements for the
combined companies, Calgene would have contributed 32.9%, 37.6% and 43.2% of
the total revenues and (not material), 16.0% and 39.7% of the EBIT,
respectively, of the combined companies in the periods described above.
Pursuant to the terms of the Reorganization Agreement, at the closing, Calgene
stockholders will own 50.1% of Newco. Montgomery also performed the above
analysis assuming no acquisition of Collier Farms. In that scenario, Calgene
would have contributed 37.0%, 41.1% and 46.3% of the total revenues and (not
material), 23.2% and 47.9% of the EBIT, respectively, of the combined
companies in the periods described above.
Calgene Financial Issues. Montgomery discussed the significant losses
incurred by Calgene in recent periods as a result of difficulties in tomato
production, Calgene's weak cash position in relation to its ongoing losses,
Calgene's depressed stock price and the difficulties faced by Calgene in
accessing the financial markets on acceptable terms.
The summary set forth above does not purport to be a complete description of
the presentation by Montgomery to the Calgene Board or the analyses performed
by Montgomery. The preparation of a fairness opinion is not necessarily
susceptible to partial analysis or summary description. Montgomery believes
that its
37
<PAGE>
analyses and the summary set forth above must be considered as a whole and
that selecting portions of its analyses and of the factors considered, without
considering all analyses and factors, would create an incomplete view of the
process underlying the analyses set forth in its presentation to the Calgene
Board. In addition, Montgomery may have given various analyses more or less
weight than other analyses, and may have deemed various assumptions more or
less probable than other assumptions, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to
be Montgomery's view of the actual value of Calgene or the combined companies.
The fact that any specific analysis has been referred to in the summary above
is not meant to indicate that such analysis was given greater weight than any
other analysis.
In performing its analyses, Montgomery made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Calgene, Gargiulo L.P.
or Monsanto. The analyses performed by Montgomery are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Montgomery's analysis of the fairness
of the transactions contemplated by the Reorganization Agreement to Calgene
and were provided to the Calgene Board in connection with the delivery of the
Montgomery Opinion. The analyses do not purport to be appraisals or to reflect
the prices at which a company might actually be sold or the prices at which
any securities may trade at the present time or at any time in the future.
Montgomery used in its analyses various projections of future performance
prepared by the managements of Calgene and Gargiulo L.P. The projections are
based on numerous variables and assumptions which are inherently unpredictable
and must be considered not certain of occurrence as projected. Accordingly,
actual results could vary significantly from those set forth in such
projections.
As described above, the Montgomery Opinion and the presentation to the
Calgene Board were among the many factors taken into consideration by the
Calgene Board in making its determination to approve the transactions
contemplated by the Reorganization Agreement.
Pursuant to the Engagement Letter, Calgene engaged Montgomery to act as its
financial advisor in connection with a possible transaction with Monsanto or
an affiliated entity. Calgene has agreed to pay Montgomery a fee equal to
0.85% of the total consideration contributed by Monsanto pursuant to the
Reorganization Agreement. Pursuant to the Engagement Letter, Calgene has
previously paid Montgomery $100,000, and will be obligated to pay Montgomery
the remainder of its fee upon the closing of the transactions contemplated by
the Reorganization Agreement. Montgomery also received $250,000 from Calgene
in February 1995 for investment banking services rendered in connection with a
potential transaction with Monsanto. Calgene has also agreed to reimburse
Montgomery for its reasonable out-of-pocket expenses. Pursuant to a separate
letter agreement, Calgene has agreed to indemnify Montgomery, its affiliates,
and their respective partners, directors, officers, agents, consultants,
employees and controlling persons against certain liabilities, including
liabilities under the federal securities laws.
In the ordinary course of its business, Montgomery actively trades equity
securities of Calgene and Monsanto for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Montgomery has also performed certain investment banking
services for Calgene, including acting as co-manager of an underwritten public
offering of Calgene Common Stock in January 1993 and lead manager of an
underwritten public offering of Calgene Common Stock in October 1994. Certain
partners of Montgomery also own shares of Calgene's and Monsanto's common
stock.
MONSANTO'S REASONS FOR THE REORGANIZATION
Monsanto's principal reasons for entering into the Reorganization are set
forth below:
Monsanto believes that Calgene has established a leadership position in the
genetic engineering of plant oils for the food and chemical industries and
that plant oils represent a significant commercial opportunity. Monsanto
anticipates that its indirect investment in Calgene, through ownership of
Newco Common Stock, will enable Monsanto to participate in that opportunity.
Monsanto recognizes, however, that any commercial opportunity will only be
realized over the long term and there can be no assurance that such
opportunities will ever be realized.
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Monsanto believes that combining the produce-related biotechnology and
business assets of Gargiulo L.P. and Calgene will result in an enterprise that
is better positioned to develop, produce and market a family of high-value
produce products on a nationwide basis. There can be no assurance, however,
that the combination will produce the result Monsanto anticipates.
Finally, Monsanto believes that Calgene is a leader in the development of
novel plant genetic engineering technologies, and that an indirect investment
in Calgene will provide a vehicle for Monsanto to gain access to such
technologies. Monsanto recognizes, however, that any commercially valuable
exploitation of such technology will only be realized over the long term and
there can be no assurance that any commercially valuable exploitation will
ever be realized.
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
As of September 30, 1995, directors and executive officers of Calgene and
their affiliates may be deemed to beneficially own approximately 1.9% of the
outstanding shares of Calgene Common Stock. Each director and executive
officer of Calgene has advised Calgene that he intends to vote or direct the
vote of all shares of Calgene Common Stock over which he has voting control
FOR approval of the Merger Proposal. See "Calgene, Inc.--Executive
Compensation" and "Related Party Transactions" for a description of the terms
of employment agreements between Calgene and TIA and certain of their
respective executive officers.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles, whereby the purchase
price will be allocated based on the fair value of the assets acquired and
liabilities assumed. Such allocations will be made based upon valuations that
have not been finalized. It is anticipated that a significant portion of the
purchase price will be allocated to in-process research and technology which
will result in a one-time charge to Newco's statement of operations of
approximately $59.2 million in the fiscal quarter in which the Reorganization
closes. The amount of the estimated one-time charge is based on a preliminary
valuation and the actual amount could vary significantly upon completion of
the final valuation.
In addition, Newco plans to consolidate CalFresh with Gargiulo L.P. and, if
the Collier Transaction is consummated, to integrate the tomato operations of
Collier Farms. In connection with such consolidation activities, Newco expects
to close certain duplicative facilities and to incur restructuring charges,
including the write-off of redundant intangibles, of approximately $8.5
million which will be recorded in the fiscal quarter in which the
Reorganization closes.
A significant effect of the purchase accounting will be to record a
significant amount of goodwill and other intangible assets, which will result
in substantial amortization charges to the consolidated income of Newco over
the useful lives of such assets. The amount of such charges are estimated at
approximately $6.5 million per year for a period of 12 years; however, actual
charges could vary significantly in the event the underlying assets are
impaired or the related useful lives are less than currently estimated. See
"Unaudited Selected Pro Forma Combined Financial Data."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
to stockholders of Calgene upon the exchange of their Calgene Common Stock for
shares of Newco Common Stock pursuant to the Merger. This discussion reflects
the opinion of counsel attached as Exhibit 8.1 to the Registration Statement
of which this Proxy Statement/Prospectus is a part (the "Exhibit Opinion").
The Exhibit Opinion includes an opinion that the exchange of Calgene Common
Stock in the Merger for Newco Common Stock will qualify under Section 351 of
the Code as a tax-free exchange. The Exhibit Opinion, which is based upon
certain assumptions and subject to certain limitations and qualifications as
noted therein, was delivered by Hale and Dorr. This summary does not address
specific tax consequences that may be relevant to persons in special
circumstances (including, for example, persons who are employed by Calgene,
certain financial institutions, broker-dealers, insurance companies and tax-
exempt institutions). In addition, this summary does not address the tax
consequences of the Merger under the laws of any state, local or foreign
jurisdictions.
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STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE SPECIFIC TO THEM, AS WELL AS
WITH RESPECT TO ANY STATE, LOCAL OR FOREIGN TAX CONSIDERATIONS THAT RELATE TO
THE MERGER OR THE HOLDING OF SHARES OF NEWCO.
The following discussion is based on Hale and Dorr's interpretation of the
Code, applicable United States Treasury Regulations, judicial authority and
administrative rulings and practice as in effect on the date hereof. The
Internal Revenue Service (the "IRS") is not precluded from adopting a contrary
position. In addition, there can be no assurance that future legislative,
judicial or administrative changes or interpretations will not adversely
affect the accuracy of the statements and conclusions set forth herein. Any
such changes or interpretations could be applied retroactively and could
affect the tax consequences of the Merger to Calgene or its stockholders. In
addition, if the factual assumptions and representations underlying the
Exhibit Opinion should prove to be incorrect, the exchange of Calgene Common
Stock in the Merger may not qualify under Section 351 of the Code.
Subject to the limitations and qualifications referred to herein, and as a
result of the exchange of Calgene Common Stock for Newco Common Stock in the
Merger qualifying under Section 351 of the Code, Hale and Dorr is of the
opinion that:
1. No gain or loss for federal income tax purposes will be recognized by
Calgene, Newco or Sub upon consummation of the Merger.
2. A holder of Calgene Common Stock will recognize no gain or loss for
federal income tax purposes upon the exchange of such stockholder's Calgene
Common Stock for Newco Common Stock pursuant to the Merger.
3. The aggregate tax basis in the shares of Newco Common Stock received
by a holder of Calgene Common Stock in the Merger will equal such
stockholder's aggregate adjusted basis in the shares of Calgene Common
Stock surrendered in the Merger.
4. The holding period for the shares of Newco Common Stock received by a
holder of Calgene Common Stock in the Merger will include the holding
period for the shares of Calgene Common Stock surrendered by the
stockholder in the Merger provided that the shares of Calgene Common Stock
were held as capital assets prior to the Merger.
Calgene has not requested a ruling from the IRS in connection with the
Merger. However, it is a condition of the obligation of Calgene to consummate
the Merger that it receive a confirming tax opinion from its legal counsel to
the effect that the exchange of Calgene Common Stock for Newco Common Stock in
the Merger will qualify under Section 351 of the Code. The Exhibit Opinion is
not intended to satisfy this closing condition. The closing opinion does not
bind the IRS and does not preclude the IRS from adopting a contrary position.
As with the Exhibit Opinion, the closing opinion will be subject to certain
assumptions and qualifications and will be based on the truth and accuracy of
certain representations of Calgene and Monsanto, including representations in
certain certificates of the respective management of Calgene and Monsanto
dated on or prior to the date of this Proxy Statement/Prospectus.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Newco Common Stock received by the stockholders of Calgene in
the Merger will be freely transferable, except that shares of Newco Common
Stock received by persons who are deemed to be "affiliates" (as such term is
defined under the Securities Act) of Calgene prior to the Merger may be resold
by them only in transactions permitted by the resale provisions of Rule 145
promulgated under the Securities Act (or Rule 144 promulgated under the
Securities Act in the case of such persons who become affiliates of Newco),
pursuant to an effective Registration Statement under the Securities Act or as
otherwise permitted under the Securities Act.
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NASDAQ NATIONAL MARKET QUOTATION
The shares of Newco Common Stock to be issued in the Merger have been
approved for quotation on the Nasdaq National Market under the symbol "CGNE."
NO APPRAISAL RIGHTS
Holders of Calgene Common Stock do not have rights of appraisal under the
Delaware Law in connection with the Merger. See "No Appraisal Rights."
REGULATORY APPROVALS
No state or federal regulatory approvals are required relating to the
Reorganization, the Reorganization Agreement or the transactions contemplated
thereby other than (i) compliance with the HSR Act as described below, (ii)
the effectiveness of the Registration Statement of which this Proxy
Statement/Prospectus is a part, and (iii) compliance with applicable state
securities laws.
The Reorganization is subject to the requirements of the HSR Act, and the
rules and regulations thereunder, which provide that certain transactions may
not be consummated until certain required information and materials have been
furnished to the Antitrust Division and the FTC and certain waiting periods
have expired or been terminated. Monsanto filed its notification pursuant to
the HSR Act in October 1995. (Calgene was not obligated to submit an HSR
notification). In November 1995, the Antitrust Division extended the HSR
waiting period on the proposed transactions by issuance of a request for
additional information to Monsanto pursuant to the HSR Act. The Antitrust
Division has also requested information from Calgene pursuant to the Antitrust
Civil Process Act. Both Monsanto and Calgene have provided significant
documentary and other information to the Antitrust Division in response to
these requests and continue to do so. Both companies expect to be in
substantial compliance with the requests they received in the near future. The
parties are continuing to work with the Antitrust Division to resolve any
remaining issues and believe that they will ultimately be able to resolve the
Antitrust Division's questions, if any, in a manner which will permit the
Reorganization to proceed.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Reorganization. The termination
of the HSR Act waiting periods does not preclude the Antitrust Division or the
FTC from challenging the Reorganization (or any part thereof) on antitrust
grounds. Accordingly, at any time before or after the Effective Time, either
the Antitrust Division or the FTC could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, or certain
other persons, including the attorney general of one or more states or private
parties, could take action under the antitrust laws, including seeking to
enjoin the Reorganization (or any part thereof).
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THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS
The following is a brief summary of certain provisions of the Reorganization
Agreement, the Joinder Agreement, the Calgene Subordinated Promissory Note,
the Stockholders Agreement, the Newco Credit Facility Agreement, the Gargiulo
Credit Facility Agreement, the License Agreements and the Gargiulo
Reorganization Agreement. Such summary is qualified in its entirety by
reference to the Reorganization Agreement and the Stockholders Agreement which
are attached hereto as Annex A and Annex B and incorporated herein by
reference, and to the other agreements which have been filed as exhibits to
the Registration Statement of which this Proxy Statement/Prospectus is a part.
THE REORGANIZATION AGREEMENT
The Merger
The Reorganization Agreement provides that, following the approval of the
Merger Proposal by the requisite number of stockholders of Calgene, and the
satisfaction or waiver of the other conditions to the Merger, Sub will be
merged with and into Calgene, which will be the surviving corporation and a
wholly-owned subsidiary of Newco.
If all such conditions to the Merger are satisfied or waived, the Merger
will become effective upon the filing by Newco, Calgene and Sub of a duly
executed Certificate of Merger with the Secretary of State of the State of
Delaware or at such time thereafter as is provided in such Certificate of
Merger.
Conversion of Securities
Upon consummation of the Merger each issued and outstanding share of Calgene
Common Stock (other than shares owned by Calgene as treasury stock, if any,
which will be cancelled) will be converted into the right to receive one share
of Newco Common Stock (the "Exchange Ratio"). Based on the number of Shares of
Calgene Common Stock outstanding on the Record Date, stockholders of Calgene
will receive an aggregate of approximately 30,264,257 shares of Newco Common
Stock in the Merger.
If any person would be entitled to receive a fractional share of Newco
Common Stock in the Merger, then, in lieu of such fractional share, cash will
be paid in an amount equal to such fractional part of a share of Newco Common
Stock multiplied by the market value of Newco Common Stock. The market value
of one share of Newco Common Stock at the Effective Time shall be the last
sale price of such Newco Common Stock on the Nasdaq National Market (as
reported by The Wall Street Journal or other authoritative source) on the last
business day preceding such time or date if such stock is then being traded,
including, without limitation, trading on a "when issued" basis, and otherwise
shall be such price on the first business day that such stock is so traded. No
such holder shall be entitled to dividends, voting rights or any other
stockholder right in respect of any fractional share.
Ownership of Newco after the Reorganization
The ownership of Newco Common Stock immediately following consummation of
the Reorganization will be as follows:
<TABLE>
<CAPTION>
HOLDERS PERCENTAGE
------- ----------
<S> <C>
Existing Calgene Stockholders................................. 50.1
Monsanto...................................................... 49.9
-----
Total....................................................... 100.0%
=====
</TABLE>
Treatment of Calgene Stock Option Plans
Upon the Effective Time, Newco will assume all options outstanding under
Calgene's stock option plans and such options may be exercised solely for
shares of Newco Common Stock. Each such option shall be
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converted into the right to purchase a number of shares of Newco Common stock
equal to the number of shares of Calgene Common Stock subject to such option
multiplied by the Exchange Ratio, and the per share exercise price of each
such option shall be adjusted by dividing such exercise price by the Exchange
Ratio.
Related Matters After the Merger
At the Effective Time, Sub will be merged with and into Calgene, and Calgene
will be the surviving corporation (the "Continuing Corporation") and a wholly-
owned subsidiary of Newco. Each share of Sub Common Stock issued and
outstanding immediately prior to the Effective Time will be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock of the Continuing Corporation.
At the Effective Time, the Certificate of Incorporation and By-laws of
Calgene, as in effect immediately prior to the Effective Time, will continue
to be the Certificate of Incorporation and By-laws of the Continuing
Corporation.
After the Effective Time, all shares of Calgene Common Stock will cease to
be quoted on The Nasdaq National Market, and the Continuing Corporation will
undertake to terminate registration of the Calgene Common Stock under the
Exchange Act.
Representation on the Newco Board
The Stockholders Agreement provides that, at the Effective Time, the Newco
Board shall consist of the Chief Executive Officer and Chief Operating Officer
of Newco, three directors to be designated by Newco and four directors to be
designated by Monsanto (one of which shall be an independent director). The
Stockholders Agreement also provides certain rights to Monsanto to designate
additional directors under certain circumstances. See "The Reorganization
Agreement and Related Agreements--The Stockholders Agreement" and "Calgene II,
Inc.--Directors and Executive Officers."
Representations and Warranties
Representations and Warranties of Monsanto
The Reorganization Agreement contains certain representations and warranties
of Monsanto relating to, among other things, (a) the due organization, valid
existence and good standing of Monsanto and TIA and certain similar corporate
matters; (b) the authorization, execution, delivery and enforceability of the
Reorganization Agreement, Stockholders Agreement, Holding Company Credit
Facility Agreement, Gargiulo Credit Facility Agreement and License Agreements
(collectively, the "Transaction Agreements"), and related matters;
(c) conflicts under (i) material contracts or similar agreements to which
Monsanto or TIA is a party, (ii) Monsanto or TIA's charters or by-laws, or
(iii) any court injunction or decree, or any valid or enforceable order of a
governmental agency having jurisdiction over Monsanto or TIA; (d) litigation;
(e) title to the Assets (as defined in the Reorganization Agreement); (f)
Monsanto's investment intent with respect to the shares of Newco Common Stock
to be acquired by Monsanto; (g) taxes and tax returns; (h) the accuracy and
completeness of the certificate of incorporation, by-laws, minute books and
certain financial statements of TIA; (i) the absence of any conflict or
default on the part of TIA with applicable laws and material agreements of TIA
which would have a Material Adverse Effect (as defined below) on TIA; (j)
documents supplied by Monsanto to Newco for incorporation into the
Registration Statement and Proxy Statement/Prospectus for filing with the
Commission and the accuracy of information contained therein; and (k) with
respect to Gargiulo G.P., Inc. (the "General Partner") and Gargiulo L.P., (i)
the due organization, valid existence and good standing of the General Partner
and Gargiulo L.P. and certain similar corporate matters; (ii) litigation
involving the General Partner or Gargiulo L.P.; (iii) certain Gargiulo L.P.
financial statements; (iv) the accuracy and completeness of certain
environmental reports; (v) compliance with certain employment laws; (vi) the
ownership interest of the General Partner and Gargiulo L.P. in certain
subsidiaries and other entities and the due organization, valid
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existence and good standing of such subsidiaries and other entities; (vii)
real properties held by Gargiulo L.P.; and (viii) certain agreements,
contracts and commitments of the General Partner and Gargiulo L.P.
"Material Adverse Effect" means a condition or conditions as to which it may
be reasonably assumed that, if such condition had been known to a reasonable
person prior to signing the relevant agreement, such reasonable person would
not have entered into the proposed Reorganization on the terms of the
Transaction Agreements; provided that no change in customers, pricing or sales
volume of products of a person shall be deemed to be a Material Adverse Effect
and, in the case of Calgene, the outcome of the litigation between Calgene and
Enzo Biochem, Inc. shall not be deemed to be a Material Adverse Effect with
respect to Calgene.
Representations and Warranties of Calgene
The Reorganization Agreement contains certain representations and warranties
of Calgene relating to, among other things, (a) the due organization, valid
existence and good standing of Calgene and its subsidiaries and certain
similar corporate matters; (b) the authorization, execution, delivery and
enforceability of the Transaction Agreements, and related matters; (c)
conflicts under (i) material contracts or similar agreements to which Calgene
or its subsidiaries is a party, (ii) Calgene or the subsidiaries' charters or
by-laws, or (iii) any court injunction or decree, or any valid or enforceable
order of a governmental agency having jurisdiction over Calgene or any of its
subsidiaries; (d) the capitalization of Calgene; (e) compliance of the
Registration Statement and Proxy/Prospectus with applicable federal securities
laws and the accuracy of the information contained therein; (f) no occurrence
of a Material Adverse Effect on the business, financial condition or results
of operations of Calgene since June 30, 1994 except as disclosed in Calgene's
filings under the Exchange Act; (g) litigation; (h) the absence of
registration rights on the part of any third party; (i) the accuracy and
completeness of certain reports filed under the Exchange Act; (j) the accuracy
and completeness of the certificates of incorporation, by-laws and minute
books of Calgene and its subsidiaries; (k) disclosure of material agreements;
(l) compliance with certain employment laws; (m) taxes and tax returns for
both Calgene and its subsidiaries; (n) the absence of any conflict or default
on the part of Calgene and its subsidiaries with applicable laws and material
agreements; (o) employee benefit plans; (p) outstanding options to acquire
Calgene Common Stock; and (q) undisclosed tax liabilities.
Certain Covenants
Conduct of Business Prior to Closing
Prior to the Closing, Calgene has agreed to operate its business in the
ordinary course. Without the prior written consent of Monsanto, which consent
shall not be unreasonably or untimely withheld, Calgene and its subsidiaries
shall not: (i) engage in any commercial practice that is not in the ordinary
course of business; (ii) sell, lease or otherwise dispose of any of their
respective assets except for intangible property and sales of inventory in the
ordinary course of business and consistent with past practice; (iii) sell or
license any intangible property for consideration (other than royalties
contingent on future sales) exceeding $1 million in the aggregate per
transaction or series of transactions; (iv) subject to certain exceptions,
create or suffer to be created any mortgage, lien, pledge or encumbrance of
any kind or other exceptions to title upon their respective assets;
(v) subject to certain exceptions and except for grower contracts and
agreements or commitments requiring financial obligations of less than
$100,000 in the aggregate, enter into any agreement or commitment having a
term in excess of one year; (vi) enter into any agreement or commitment that
restricts Calgene or any of its subsidiaries from carrying on their
businesses; (vii) violate any of the negative covenants set forth in the
Amended Note (as described below); (viii) change the number of shares of its
authorized or issued capital stock (other than the issuance of additional
shares of Calgene Common Stock upon the exercise of employee stock options
outstanding at the time the Reorganization Agreement was executed and the
designation and issuance of $1,000 of Calgene Preferred Stock, which shall be
non-voting and non-convertible and shall otherwise have such terms as shall
have been approved by Monsanto) or grant or issue any option, warrant, call,
right, commitment or agreement of any character relating to its authorized or
issued capital stock, or issue, grant or sell any preferred stock or any
securities or obligations convertible into or exchangeable for shares of its
capital stock other than the issuance and sale of shares of Calgene Common
Stock with aggregate proceeds to Calgene not in excess of
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$10 million; (ix) make any amendment to or changes in its certificate of
incorporation or by-laws, except only for the designation of the Calgene
Preferred Stock permitted in clause (viii) above; (x) take or fail to take any
action that would require the approval of any Monsanto Director or the consent
of a supermajority of Directors (each as defined in the Stockholders
Agreement) under Section 4.4(a)(i), (ii), (iv), (vii), (viii), (ix), (x),
(xii), (xiii), (xv) or (xvii) of the Stockholders Agreement if the
Stockholders Agreement was in effect beginning on the date of the
Reorganization Agreement; or (xi) except as expressly permitted by the
Reorganization Agreement, take any action that would or is reasonably likely
to result in any of the representations and warranties of Calgene set forth in
the Reorganization Agreement being untrue in any material respect, or in any
of the conditions to Closing specified in Article 8 of the Reorganization
Agreement not being satisfied.
Prior to the Closing, TIA has agreed to maintain the Assets in accordance
with TIA's usual and past practices. Without the prior consent of Calgene,
which consent shall not be unreasonably or untimely withheld, TIA shall not do
any of the following with respect to the Assets during such period: (i) sell,
lease or otherwise dispose of any Assets; (ii) issue any shares of capital
stock or any options, warrants or rights for anyone to acquire such shares;
(iii) create or suffer to be created any mortgage, lien, pledge or encumbrance
of any kind or other exceptions to title upon such Assets or borrow money or
incur any indebtedness; (iv) engage in any commercial practice that is not in
the ordinary course of business; (v) enter into any agreement or commitment
that restricts TIA from carrying on its business; (vi) make any amendment to
its certificate of incorporation or by-laws; or (vii) take or fail to take any
action described in Section 4.4(a)(i), (iv), (vii), (x) or (xv) of the
Stockholders Agreement (except that each such provision shall be deemed to
refer to TIA for this purpose).
No Solicitation
Calgene
The Reorganization Agreement provides that Calgene shall not, directly or
indirectly, through any officer, director, employee, agent, representative,
consultant, financial institution or otherwise, solicit, initiate or encourage
the submission of any proposal or offer from any person relating to (i) any
acquisition or purchase of all or substantially all of the assets or business
of Calgene or any of its subsidiaries or (ii) any business combination with
Calgene or any of its subsidiaries (all such transactions in clause (i) and
(ii) being referred to as "Calgene Acquisition Transactions") or, except to
the extent required by fiduciary obligations under applicable law as advised
by counsel (in which case, Calgene shall promptly advise Monsanto of its
intention to invoke this exception), participate in any negotiations
regarding, or furnish to any other person or entity any non-public information
with respect to, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The Reorganization Agreement
required Calgene to immediately cease and cause to be terminated all existing
discussions or negotiations with any parties conducted prior to the execution
of the Reorganization Agreement with respect to any of the foregoing. Calgene
is required to promptly notify Monsanto if any such proposal or offer, or any
inquiry or contact with any person or entity with respect thereto, is made and
shall, in any such notice to Monsanto, indicate in reasonable detail the
identity of the person or entity making such proposal, offer, inquiry or
contact. Calgene further agreed not to release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which Calgene
is a party.
Monsanto and TIA
The Reorganization Agreement provides that Monsanto shall not, directly or
indirectly, through any officer, director, employee, agent, representative,
consultant, financial institution or otherwise, solicit, initiate or encourage
the submission of any proposal or offer from any person relating to (i) any
acquisition or purchase of all or substantially all of the assets or business
of TIA or (ii) any business combination with TIA (all such transactions in
clause (i) and (ii) being referred to as "Monsanto Acquisition Transactions")
or, except to the extent required by fiduciary obligations under applicable
law as advised by counsel (in which case Monsanto shall promptly advise
Calgene of its intention to invoke this exception), participate in any
negotiations regarding, or furnish to any other person any non-public
information with respect to, or otherwise cooperate in any way
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with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other person to do or seek any of the foregoing. The
Reorganization Agreement required Monsanto to immediately cease and cause to
be terminated all existing discussion or negotiations with any parties
conducted prior to the execution of the Reorganization Agreement with respect
to any of the foregoing. Monsanto is required to promptly notify Calgene if
any such proposal or offer, or any inquiry or contact with any person or
entity with respect thereto, is made and shall, in any such notice to Calgene,
indicate in reasonable detail the identity of the person or entity making such
proposal, offer, inquiry or contact. Monsanto further agreed not to release
any third party from, or waive any provision of, any confidentiality or
standstill agreement to which Monsanto is a party.
Non-Competition
Monsanto has agreed that, upon the Effective Time and for as long as
Monsanto's ownership in Newco exceeds 25% and is less than 100% of the
outstanding shares of Newco Common Stock, Monsanto shall not engage in any
"Directly Competitive Activity" with Calgene. "Directly Competitive Activity"
is defined in the Reorganization Agreement to mean and refer only to the
commercialization by Monsanto (or one of its affiliates, other than Newco and
any of its affiliates) of any genetically engineered fresh or processed
tomatoes, berries, mangoes, cucurbits or peppers or the commercialization of
any genetically engineered canola, oil seed rape or sunflower where the
canola, oil seed rape or sunflower has been genetically engineered to produce
a specialty oil product. "Directly Competitive Activity" excludes the
licensing of patent rights or know-how for the commercialization of such
genetically engineered crops or the commercialization of canola, oil seed rape
or sunflower where the canola, oil seed rape or sunflower has been genetically
engineered for a purpose other than to produce a specialty oil product.
Indemnification
Monsanto
The Reorganization Agreement provides that, except as otherwise specifically
provided therein or in the other Transaction Agreements, Monsanto shall
indemnify and hold harmless, in the manner specified in the Reorganization
Agreement, Newco and its directors, officers, employees and agents, from and
against any and all Liabilities, Actions and Damages (as defined in the
Reorganization Agreement) suffered or incurred by said indemnified parties
with respect to: (i) any inaccuracy of representations and warranties made in
the Reorganization Agreement or pursuant to Article 6 thereof by Monsanto,
(ii) breaches on or prior to the Closing Date of certain covenants made in any
of the Transaction Agreements by Monsanto which breaches, if curable, are not
cured within sixty (60) days after written notice thereof from Calgene, (iii)
the failure of Monsanto to comply with any applicable bulk sales law and (iv)
any taxes actually payable by Newco, TIA or General Partner attributable to
the recapture or acceleration of any Internal Revenue Code Section 481
adjustment which arose upon formation of Gargiulo L.P., net of any reductions
to taxes actually payable by Newco, TIA or General Partner as a result of
corollary adjustments attributable to such Section 481 adjustments. No claim
for indemnification may be made against Monsanto unless, and only to the
extent that, the claim exceeds $2.5 million. The maximum amount of Monsanto's
indemnification obligation is limited to $20 million, except for matters
involving fraud.
Newco and Calgene
The Reorganization Agreement provides that, except as otherwise specifically
provided therein or in the other Transaction Agreements, Newco and Calgene
shall, jointly and severally, indemnify and hold harmless, in the manner
specified in the Reorganization Agreement, Monsanto and Monsanto's Agents (as
defined in the Reorganization Agreement), against Liabilities, Actions and
Damages (as defined in the Reorganization Agreement) arising from: (i) any
inaccuracy of representations or warranties made in the Reorganization
Agreement or pursuant to Article 6 thereof by Calgene, or (ii) breaches on or
prior to the Closing Date of covenants made in any of the Transaction
Agreements by Calgene or Newco which breaches, if curable, are not cured
within sixty (60) days after written notice thereof from Monsanto. No claim
for indemnification may be made against Newco and Calgene unless, and only to
the extent that, the claim exceeds $2.5 million.
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Conditions
Calgene
The obligations of Calgene to effect the Merger and the other transactions
contemplated by the Reorganization Agreement are subject to the following
conditions, among others: (i) the accuracy in all material respects on the
Closing Date of the representations and warranties of Monsanto set forth in
the Reorganization Agreement and the performance in all material respects on
or prior to the Closing Date of the obligations of Monsanto required to be
performed under the Reorganization Agreement; (ii) the receipt by Calgene of
certain legal opinions from counsel for Monsanto; (iii) the instruments of
transfer, assignment and assumption, and other agreements contemplated by the
Reorganization Agreement shall be in form and substance satisfactory to
Calgene and shall have been duly executed by Monsanto and ready for delivery
at Closing (except as otherwise permitted by the Reorganization Agreement);
(iv) the pre-transaction filing and waiting period requirements applicable to
the Merger under the HSR Act shall have expired or shall have been terminated,
and any necessary foreign approvals shall have been obtained, and there shall
not be pending or threatened any governmental litigation or proceeding which
restrains, prohibits or prevents or in the reasonable opinion of Calgene's
counsel presents a significant risk of restraining, prohibiting or preventing,
or changing the terms of, or obtaining material damages in connection with,
the Reorganization; (v) there shall have occurred no Material Adverse Effect
upon TIA, the Business of Gargiulo L.P. (as defined in the Reorganization
Agreement) or the Assets and which Monsanto has not remedied prior to Closing;
(vi) the execution and delivery of the Transaction Agreements; (vii) the
approval of the Merger Proposal by the stockholders of Calgene; (viii) the
authorization for quotation on the Nasdaq National Market of shares of the
Newco Common Stock to be issued in the Merger; (ix) the receipt from Hale and
Dorr, counsel to Calgene, of an opinion with respect to certain tax matters;
and (x) the receipt of all necessary consents or waivers for Calgene's
consummation of the Reorganization. Each of these conditions, except for the
approval of the Merger Proposal by the stockholders of Calgene, may be waived
by Calgene.
Monsanto
The obligations of Monsanto to effect the Reorganization and the other
transactions contemplated by the Reorganization Agreement are subject to the
following conditions, among others: (i) the accuracy in all material respects
on the Closing Date of the representations and warranties of Calgene and Newco
set forth in the Reorganization Agreement and the performance in all material
respects on or prior to the Closing Date of all obligations of Calgene and
Newco required to be performed under the Reorganization Agreement; (ii) the
receipt by Monsanto of certain legal opinions from counsel for Calgene; (iii)
the pre-transaction filing and waiting period requirements applicable to the
Reorganization under the HSR Act shall have expired or shall have been
terminated, and any necessary foreign approvals shall have been obtained, and
there shall not be pending or threatened any governmental litigation or
proceeding which restrains, prohibits or prevents or in the reasonable opinion
of Monsanto's counsel presents a significant risk of restraining, prohibiting
or preventing, or changing the terms of, or obtaining material damages in
connection with, the Reorganization; (iv) Calgene shall have obtained certain
assurance or waivers with respect to (A) Monsanto's potato assets and (B) the
rights of certain parties to designate directors on the Calgene Board; (v) the
acquisition by Monsanto of all of the partnership interests of Gargiulo L.P.
shall have been consummated; (vi) there shall have occurred no Material
Adverse Effect upon Calgene or its subsidiaries or the business or assets
thereof, and which Calgene has not remedied prior to Closing; (vii) the
execution and delivery of the Transaction Agreements; (viii) the approval of
the Merger Proposal by the stockholders of Calgene; (ix) the amendment of the
Development Agreement dated as of December 23, 1992 between Monsanto and
Gargiulo L.P. as provided in the Reorganization Agreement; (x) the receipt
from Arnold & Porter, counsel to Monsanto, of an opinion with respect to
certain tax matters; (xi) the authorization for quotation on The Nasdaq
National Market of the shares of Newco Common Stock to be issued in the
Merger; (xii) the receipt of a stock certificate representing the shares of
Newco Common Stock to be issued pursuant to Section 2.1 of the Reorganization
Agreement; and (xiii) the completion of the transactions contemplated by the
Gargiulo Reorganization Agreement shall have been completed and the receipt of
all necessary consents or waivers for Monsanto's consummation of the
Reorganization. Each of these conditions may be waived by Monsanto.
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Termination; Termination Fees
The Reorganization Agreement may be terminated and the Reorganization
(including, without limitation, the Merger) abandoned at any time prior to the
Effective Time, whether before or after approval by the stockholders of
Calgene: (i) by mutual consent of the Calgene Board and the Monsanto Board;
(ii) by either the Monsanto Board or the Calgene Board if the Merger is not
consummated on or before March 31, 1996, unless such failure to consummate
shall be due to the failure of the party seeking to terminate the
Reorganization Agreement to perform in all material respects each of its
obligations under the Reorganization Agreement; (iii) by the Calgene Board or
the Monsanto Board in the event that the Calgene Board shall withdraw or
change its recommendation to its stockholders to adopt and approve the
Reorganization Agreement and the Merger or authorize the Reorganization, as
the case may be, or if the Calgene stockholders fail to adopt and approve the
Reorganization Agreement or the Merger Proposal; (iv) by the Monsanto Board if
Calgene shall breach its obligations set forth in Section 9.9(a) of the
Reorganization Agreement not to solicit, initiate or encourage a proposal or
offer relating to a Calgene Acquisition Transaction; (v) by the Monsanto Board
if events occur that render impossible of satisfaction one or more of the
conditions set forth in Section 8.2 of the Reorganization Agreement and such
conditions are not waived (or deemed waived) by Monsanto; and (vi) by the
Calgene Board if events occur that render impossible of satisfaction one or
more of the conditions set forth in Section 8.1 of the Reorganization
Agreement and such conditions are not waived (or deemed waived) by Calgene.
In the event of either (i) a withdrawal, change in a manner adverse to
Monsanto or failure by the Calgene Board to make its recommendation to Calgene
stockholders to approve the Merger Proposal, or (ii) a breach by Calgene of
its obligations under Section 9.9(a) of the Reorganization Agreement, and
thereafter a Calgene Acquisition Transaction is consummated within 12 months
after the termination or abandonment of the Reorganization Agreement, Calgene
may be required to pay Monsanto a termination fee in cash equal to $7.5
million.
JOINDER AGREEMENT
Prior to Closing, Newco, Sub (neither of which had been incorporated at the
time the Reorganization Agreement was executed), Calgene and Monsanto will
sign a Joinder Agreement (the "Joinder Agreement") as required by the
Reorganization Agreement. The purpose and effect of the Joinder Agreement is
for each of Newco and Sub: (i) to bind themselves to the terms of the
Reorganization Agreement; (ii) to ratify and adopt certain indemnification
obligations set forth in the Reorganization Agreement; (iii) to provide for
the survival of certain representations and warranties in the Reorganization
Agreement; (iv) to make standard representations regarding their due
organization, existence and capitalization, and (v) to convenant that all
statements in the Proxy Statement/Prospectus about themselves will be in
compliance with the federal securities laws and will not omit any material
facts. Additionally, under the Joinder Agreement, each of Newco, Sub and
Calgene will guarantee the performance of each other's obligations under the
Reorganization Agreement and the Joinder Agreement and agree that they each
shall be jointly and severally responsible for the performance of the
obligations of the other and for the accuracy of the representations and
warranties of each in the Reorganization Agreement and the Joinder Agreement.
CALGENE SUBORDINATED PROMISSORY NOTE
Pursuant to the terms of a subordinated promissory note of Calgene in favor
of Monsanto, Calgene borrowed $10 million from Monsanto on June 29, 1995. The
original promissory note was amended and restated on September 27, 1995 to
permit Calgene to borrow an additional $8 million. As of December 31, 1995,
all $18 million of principal was outstanding under the Amended Note.
The Amended Note is due on June 30, 1997; provided, however, that if the
Reorganization is not consummated because (i) Calgene's stockholders fail to
approve the Merger Proposal or (ii) any of Monsanto's other conditions to
Closing set forth in the Reorganization Agreement, to the extent such
conditions are within the control of Calgene, are not satisfied at or prior to
Closing, then the maturity date of the Amended Note shall be June 30, 1996.
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The principal balance of the Amended Note from time to time outstanding
bears interest at the per annum rate equal to 2.00% above Citibank's prime
rate as published monthly. Interest is payable at maturity or on the date of
prepayment as to any principal amount prepaid. If all or a portion of
outstanding principal amount of the Amended Note is not paid when due, the
outstanding principal balance thereof shall bear interest for the period from
the applicable due date until such amount is paid in full, at the rate per
annum which is equal to 5% above the Note Rate. Calgene may prepay all or any
portion of the Amended Note at any time.
Upon consummation of the Reorganization, the outstanding principal amount
due under the Amended Note shall be credited against the $30 million cash
contribution to be made to Newco by Monsanto in connection with the
Reorganization. Interest on the Amended Note will stop accruing at the
Effective Time and all interest accrued prior to such time shall be waived by
Monsanto.
The Amended Note is subordinated in payment to certain senior indebtedness
of Calgene, as more fully described in the Amended Note. No payment on account
of principal or interest on the Amended Note 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 which has not been cured, waived or ceased to exist and which
would permit the holder thereof to accelerate the maturity thereof.
If the Transaction Agreements are terminated for any reason (a "Conversion
Event"), then, from and after 60 days following such Conversion Event, the
principal and accrued interest due under the Amended Note will be convertible,
at Monsanto's option, at any time and in any amount, into shares of Calgene
Common Stock at 85% of the average of the closing market prices for such
shares during the 10 trading days immediately preceding the Conversion Date
(as defined in the Amended Note). Based upon the last reported sales price of
Calgene Common Stock on the Nasdaq National Market on December 15, 1995
($4.875 per share), the conversion of the Amended Note in such an event would
result in the issuance of approximately 4,343,891 shares of Calgene Common
Stock to Monsanto, or approximately 14% of the total number of shares of
Calgene Common Stock currently outstanding. The Amended Note is convertible
into a maximum number of shares of Calgene Common Stock (the "Conversion
Shares") equal to (a) 7,200,000 shares (subject to adjustment in the event of
any merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, exchange of shares or otherwise) multiplied by (b) a fraction,
the numerator of which is equal to the lesser of (i) the principal and accrued
interest outstanding under the Amended Note on the Conversion Date and
(ii) $18 million, and the denominator of which is equal to $18 million. Upon
any such conversion, the amount of principal and interest so converted shall
be applied to reduce first any accrued interest and thereafter to reduce the
principal due on the Amended Note. Any portion not so converted shall be paid
in cash. If the proceeds received by Monsanto from the resale of the
Conversion Shares, net of all reasonable expenses (including brokerage or
underwriting fees, discounts and commissions and fees and expenses of legal
counsel) incurred by Monsanto in connection therewith (the "Selling
Expenses"), exceed the principal and accrued interest converted into such
Conversion Shares and any other transaction costs, fees and expenses incurred
by Monsanto and not included in the Selling Expenses (such excess being
hereafter referred to as the "Excess Cash Proceeds"), then (i) any remaining
principal amount and accrued interest on the Amended Note shall be forgiven by
Monsanto to the extent of the Excess Cash Proceeds and (ii) Monsanto shall
repay any remaining Excess Cash Proceeds (after reduction for the amount of
principal and accrued interest forgiven) to Calgene promptly after receipt
thereof.
Calgene agreed under the Amended Note to file a Registration Statement on
Form S-3 with the Commission covering resales of up to 3,600,000 Conversion
Shares which may be issued to Monsanto under the Amended Note. Subject to
certain limitations, Calgene is obligated to cooperate with Monsanto to effect
the sale of the Conversion Shares, including using its best efforts to
register or qualify the Conversion Shares under applicable securities and blue
sky laws and to maintain the effectiveness of such Form S-3 until the earlier
of (i) such time
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as all Conversion Shares issuable upon Conversion have been sold pursuant
thereto, or (ii) such time as all Conversion Shares may be sold without
registration pursuant to Rule 144(k) under the Securities Act. Not later than
60 days after a Conversion Event, Calgene shall cause the Conversion Shares
issuable upon such Conversion Event to be listed on each securities exchange
and quoted on each quotation service on which similar securities of Calgene
are then listed or quoted. All expenses incurred in connection with the
registration of the Conversion Shares shall be borne by Calgene except Calgene
shall not be required to pay (i) brokerage or underwriting fees, discounts or
commissions or (ii) the fees and expenses of Monsanto's counsel.
The Amended Note includes certain covenants of Calgene, including covenants
concerning: (i) the use of proceeds; (ii) delivery of certain financial
information; (iii) insurance; (iv) obtaining any required governmental
authorization or approvals and the filing of required notices; (v) maintenance
of business; (vi) limitations on mergers, acquisitions or sales of assets;
(vii) incurrence of additional debt; (viii) extending credit;
(ix) investments; (x) incurrence of liens; and (xi) payment of dividends.
THE STOCKHOLDERS AGREEMENT
The Reorganization Agreement provides that Monsanto and Newco shall enter
into a Stockholders Agreement at the Effective Time providing for the
following:
Registration Rights
The Stockholders Agreement provides that Monsanto and certain assignees may,
subject to certain conditions and limitations, require Newco, whether or not
Newco proposes to register its Common Stock for sale, to register all or part
of the shares of Newco Common Stock acquired by Monsanto in connection with
the Reorganization or upon the later conversion of outstanding principal or
interest under the Newco Credit Facility Agreement or the Gargiulo Credit
Facility Agreement (collectively, the "Registrable Shares") under the
Securities Act and to register or qualify such Registrable Shares under any
applicable state securities or blue sky laws so as to permit Monsanto to sell
such Registrable Shares in the public markets. Newco 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 Newco Credit Facility Agreement or
the Gargiulo Credit Facility Agreement, in which event Newco is required to
effect a registration of the Registrable Shares received in such conversion at
the request of Monsanto or its assignee. Newco is required to pay all of the
expenses (other than certain expenses of Monsanto, such as
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underwriting discounts and selling commissions) with respect to up to four (4)
such registrations. In the event Newco proposes to register any of its
securities under the Securities Act at any time after September 30, 1998, for
its own account (other than a registration relating to employee benefit plans
or a Commission Rule 145 transaction), Monsanto is entitled to notice of such
registration and to include Registrable Shares, subject to certain conditions
and limitations. The registration rights granted pursuant to the Stockholders
Agreement shall terminate at such time as (a) all Registrable Shares can be
sold within a given three month period without registration under the
Securities Act pursuant to Rule 144 of the Securities Act and (b) all accrued
interest and principal under the Newco Credit Facility Agreement and the
Gargiulo Credit Facility Agreement have been repaid in full or converted into
Newco Common Stock (and such Newco Common Stock can be sold as provided in
clause (a) above).
Anti-Dilution Rights
If at any time after the Effective Time Newco agrees to sell shares of Newco
Common Stock or other securities having the right to vote generally in any
election of directors of Newco (collectively, "Newco Securities") in a private
or public offering (other than pursuant to Newco's 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 Newco Securities to
be offered for sale sufficient for Monsanto to maintain, after the
consummation of the proposed offering, the same percentage of ownership of
Newco Securities as Monsanto possessed immediately prior to such offering.
With respect to shares of Newco Securities issued pursuant to Newco's stock
option plans, Monsanto shall have the right to maintain its percentage
ownership of issued and outstanding Newco Securities by making open market
purchases in accordance with the Stockholders Agreement.
Limitations on Monsanto's Ownership of Newco Securities
Except for purchases of Newco Securities made in accordance with the
Stockholders Agreement, during the term of the Stockholders Agreement,
Monsanto shall not, directly or indirectly, acquire any Newco Securities
except as follows: (a) prior to the first anniversary of the Effective Time,
Monsanto shall not increase its percentage of ownership of issued and
outstanding Newco Securities (the "Percentage Interest") above 49.9% except
through one or more of the following: (i) conversion of principal and/or
interest under the Newco Credit Facility Agreement or the Gargiulo Credit
Facility Agreement into shares of Newco Common Stock; (ii) issuance of Newco
Securities in an asset sale by Monsanto to Newco; and (iii) a tender offer by
Monsanto for no less than 100% of all publicly-traded Newco Securities at a
price approved by the disinterested directors of Newco and based upon a
fairness opinion delivered to the Newco Board by an investment banking firm;
(b) on and after the first anniversary of the Effective Time until the earlier
of September 30, 1998, or the third anniversary of the Effective Time,
Monsanto shall not increase or further increase its ownership of issued and
outstanding Newco Securities above 49.9% except through one or more of the
following: (i) conversion of principal and/or interest under the Newco Credit
Facility Agreement or the Gargiulo Credit Facility Agreement into shares of
Newco Common Stock; (ii) issuance of Newco Securities in an asset sale by
Monsanto to Newco; and (iii) a tender offer by Monsanto to increase its
ownership to 70% or more of the issued and outstanding Newco Securities at a
price approved by the disinterested directors of Newco and based upon a
fairness opinion delivered to the Newco Board by an investment banking firm;
provided, however, that if Monsanto makes a tender offer to increase its
ownership to more than 80% of the issued and outstanding Newco Securities,
such tender offer must be for at least 100% of all publicly traded Newco
Securities; and (c) after the earlier of September 30, 1998, or the third
anniversary of the Effective Time, Monsanto may increase its ownership of
Newco Securities through open market purchases or otherwise.
Limitations on Monsanto's Resale of Newco Securities
The Stockholders Agreement provides that Monsanto shall not, directly or
indirectly, sell any Newco Securities (other than to an Affiliate) except as
follows: (a) on and after the first anniversary of the Effective Time until
the earlier of September 30, 1998, or the third anniversary of the Effective
Time, Monsanto may sell Newco Securities (i) as part of a joint venture,
merger or sale of all or substantially all of its current Crop
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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 Newco; (b) after the earlier of September 30, 1998, or the
third anniversary of the Effective Time, in addition to the rights set forth
in (a) above, Monsanto may sell Newco Securities (i) 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; (iii) through sales of not more than 10% of the total issued
and outstanding Newco 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 the earlier of September
30, 1999, or the fourth anniversary of the Effective Time, in addition to the
rights set forth in (a) and (b) above, Monsanto may sell Newco Securities
through a private sale of 35% or more of the total issued and outstanding
Newco 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 after the
Effective Time, Monsanto may sell Newco Securities issued to Monsanto upon
conversion by Monsanto of principal or interest under the Newco Credit
Facility Agreement or the Gargiulo Credit Facility Agreement after the
occurrence of an Event of Default (as defined therein).
Composition of the Newco Board and Calgene Board
The Stockholders Agreement provides that the composition of the Newco Board
and the Calgene Board and the manner of selecting members thereof shall be as
follows:
(a) at and after the Effective Time, each of the Newco Board and the
Calgene Board shall be comprised of nine directors. The number of Newco
Directors and Calgene Directors may be increased only in accordance with
the terms of the Stockholders Agreement;
(b) at the Effective Time and until the earlier of any time that (i)
Monsanto's percentage ownership of the outstanding Newco Securities
("Percentage Interest") is at least 55% or (ii) Newco elects to convert
borrowings made from Monsanto into equity securities of Newco and
Monsanto's Percentage Interest is at least 50% after such conversion (a
"Trigger Event"), each of the Newco Board and the Calgene Board shall
consist of two directors who are either the Chief Executive Officer or
Chief Operating Officer of Newco (or the next most highly ranking executive
officers of Newco) ("Company Management Directors"), three Independent
Directors (as defined in the Stockholders Agreement) designated by Newco
("Company Directors"), and four directors designated by Monsanto (each a
"Monsanto Director"), at least one of which shall be an Independent
Director (as defined in the Stockholders Agreement);
(c) at and after the occurrence of a Trigger Event, each of the Newco
Board and the Calgene Board shall be comprised of eleven Directors and
Monsanto shall have the right to designate two additional directors to each
Board; and
(d) at any time that Monsanto's Percentage Interest is at least 70%, (i)
Monsanto shall have the right to designate eight Newco Directors and eight
Calgene Directors, to consist of the two Company Management Directors and
six other directors designated by Monsanto (including at least one
Independent Director) and (ii) Newco shall have the right to designate
three (3) Independent Directors to each board. At such time as Monsanto's
Percentage Interest is at least 99%, Monsanto shall have the right to
designate all of the Newco Directors and Calgene Directors.
The initial Company Management Directors will be Roger H. Salquist, the
Chief Executive Officer of Calgene, and another executive officer to be
designated; the initial Company Directors will be Howard D. Palefsky, Carl V.
Stinnett and Allen J. Vangelos, who are currently directors of Calgene; and
the four Monsanto Directors will be Hendrik A. Verfaillie and Robert T.
Fraley, who currently are Executive Vice President of Monsanto and President
of Ceregen, a strategic business unit of Monsanto, respectively, Jeffrey D.
Gargiulo, who is currently Chairman and Chief Executive Officer of Gargiulo
L.P., and John E. Robson, a senior advisor of Robertson, Stephens & Company.
Notwithstanding anything in the foregoing to the contrary, (i) at any time
Monsanto's Percentage Interest is less than 40% but at least twenty percent
(20%), Monsanto shall have the right to designate three Newco
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Directors and three Calgene Directors, (ii) at any time Monsanto's Percentage
Interest is less than 20% but at least 10%, Monsanto shall have the right to
designate two Newco Directors and two Calgene Directors, and (iii) at any time
Monsanto's Percentage Interest is less than 10% but at least 5%, Monsanto
shall have the right to designate one Newco Director and one Calgene Director.
If, at any time, Monsanto's Percentage Interest is less than 5%, Monsanto
shall not have the right to designate any Newco Director or Calgene Director.
At any such time, all other Newco Directors and Calgene Directors, other than
Newco Management Directors, shall be designated by Newco.
The Independent Directors to be designated by Newco from time to time shall
be designated by action of a majority of Company Directors then in office. In
the event that no Company Directors are in office at such time, such
Independent Directors shall be designated 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 (as defined
in the Stockholders Agreement) shall be entitled to nominate and elect
Independent Directors in lieu of any individuals so designated to be such
Independent Directors by a majority of the Independent Directors.
Solicitation and Voting of Shares
Newco is obligated to use its best efforts to solicit from the stockholders
of Newco proxies in favor of all directors nominated in accordance with the
Stockholders Agreement. Newco and Monsanto shall also cooperate with each
other with respect to the election, removal and replacement of all directors
designated in accordance with the Stockholders Agreement.
Committees of the Newco Board
The Stockholders Agreement provides that Newco shall establish, empower and
maintain the following committees of the Newco Board: (i) an Audit Committee,
consisting of at least three Independent Directors; (ii) until the occurrence
of a Trigger Event, a Retention/Replacement Committee, consisting of the
Independent Directors then serving on the Newco Board, responsible for
retention and/or replacement of all of the executive officers of Newco; (iii)
a Compensation Committee; and (iv) such other committees as the Newco Board
deems necessary or desirable. Except as otherwise provided in the Stockholders
Agreement or as agreed by a majority of the Monsanto Management Directors (as
defined in the Stockholders Agreement), the number of Monsanto Directors on
each committee of the Newco Board shall be the same proportion (but not less
than one) of the total membership of such committee as the number of Monsanto
Directors, as the case may be, is of the entire Newco Board.
No action by any committee of the Newco Board shall be valid unless taken by
a unanimous written consent as provided in Newco'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 other business. Any committee
member unable to participate in person at any meeting shall be given the
opportunity to participate by telephone. The Newco Board 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.
Approval Required for Certain Actions
(a) On and after the Effective Time until the earlier of a Trigger Event or
such date on which Monsanto's Percentage Interest is less than 25%, a majority
of the Newco 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 Newco or any of its Affiliates into any merger or consolidation
or the acquisition by Newco or any of its
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Affiliates of any business or assets that would constitute more than 10% of
Newco'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 Newco, 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 Newco or TIA (other
than such distributions by TIA to Newco as are necessary for Newco to timely
perform its obligations under the Gargiulo Credit Facility Agreement); (iv)
any incurrence or assumption, in the aggregate, by Newco, 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 (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 Newco Credit Facility Agreement, or
(B) the amounts set forth in Newco's 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 Newco Securities, other than from employees upon
termination of employment or service; (vi) the establishment of any new
committees of the Newco Board (or the Calgene Board) or new or revised
delegation(s) of Newco Board (or Calgene Board) authority to any Newco 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 Newco 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
Newco and Calgene and their successors and the establishment of their 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 Newco and a controller reporting to
the Chief Financial Officer of Newco; (ix) approval of the Operating Plan and
Strategic Plan (each as defined in the Stockholders Agreement) of Newco and
its Affiliates, as well as the annual operating plan and long term strategic
plan for the Gargiulo business, to be submitted to the Newco Board annually
for approval, and any material changes thereto; (x) any transaction between
Newco (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 Newco, Calgene or TIA; (xiii)
the issuance of additional Newco Securities (other than warrants for the
purchase of Newco Securities) in excess of 4,000,000 shares of Newco 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 Newco Securities; (xiv) the sale or licensing by Newco 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 Newco 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 L.P. covered in Article 5 of the Stockholders Agreement, including,
without limitation, any changes in the composition of the TIA Board of
Directors (other than with respect to Messrs. Salquist and Stacey); (xvii) any
press release which mentions or directly or indirectly refers to Monsanto,
except as required by law and where Newco 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 Newco or any of its
Affiliates; or (xix) the removal or election of the directors, subject to the
terms of the Stockholders Agreement, of TIA.
(b) After a Trigger Event and until the earlier of (i) the third anniversary
of the Effective Time or (ii) such time as Monsanto's Percentage Interest is
at least seventy percent (70%), a majority of the Newco Board, including at
least two Company Directors, shall be required to approve any of the
following: (i) except as
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provided in the Stockholders Agreement, the matters set forth in clauses (ii),
(vi), (viii), (ix) and (xi) of paragraph (a) above; or (ii) any transaction
between Newco (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 Time, and until Monsanto's Percentage
Interest is at least 99%, neither Monsanto nor any of its Affiliates shall
enter into any transaction with Newco or any of its Affiliates without the
approval of at least two Company Directors.
Board of Directors and Management of TIA
Upon the Effective Time, the TIA Board shall consist of Jeffrey D. Gargiulo,
John R. Gargiulo, Hendrik A. Verfaillie, Robert T. Fraley, Roger H. Salquist,
Roderick N. Stacey and an additional director who shall be (and whose
successor shall be) designated by Newco who shall need to be reasonably
acceptable to Monsanto and Jeffrey D. Gargiulo (as long as he serves as a
director). In addition, the TIA Board shall include two (2) advisory, non-
voting directors designated by Monsanto from members of the senior management
of TIA. Upon request by Monsanto, Newco shall remove and replace Messrs.
Verfaillie and Fraley, and their respective successors, and replace them with
persons designated by Monsanto. The other directors, other than Messrs.
Salquist and Stacey, may not be changed without the approval of Monsanto
pursuant to the exercise of its rights described above under "Approval
Required for Certain Actions."
The Chief Executive Officer and Chairman of the Board of TIA shall be
Jeffrey D. Gargiulo as long as he is employed by TIA. See "Related Party
Transactions."
The Board of Directors of TIA shall have authority to operate the business
of Gargiulo L.P. within the confines of the annual operating plan and
strategic plan approved by the Board of Directors of Newco and other
delegations of authority from the Newco Board which shall be similar in scope
to the delegations of the Newco Board to the Chief Executive Officer of Newco.
NEWCO CREDIT FACILITY AGREEMENT
The Reorganization Agreement provides that, upon the Effective Time,
Monsanto and Newco shall enter into the Newco 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 Newco, three consecutive one-year loans of up to $15 million
each (each a "Newco Loan" and together the "Newco Loans"), collectively
totalling not more than $45,000,000. At no time shall the outstanding
principal of all Newco Loans exceed $15 million. Prior to the occurrence of an
Event of Default (as defined in the Newco Credit Facility Agreement), Newco
may borrow, repay and reborrow under each Newco Loan, each such borrowing or
reborrowing being an "Advance." The "Commitment Period" begins the date of the
Effective Time and ends on the earlier of September 30, 1998, the third
anniversary of the Effective Time or such earlier time that Monsanto
terminates its obligations to make further Advances under the Newco Credit
Facility Agreement. The Newco Loans made pursuant to the Newco Credit Facility
Agreement are to be secured by the joint and several guaranty of the
subsidiaries of Newco.
Prior to the occurrence of an Event of Default, the Newco Loans shall bear
interest at the per annum rate equal to 2.00% above Citibank's published prime
rate (the "Newco Base Rate"), and following an Event of Default at the per
annum rate equal to 3.00% above the Newco Base Rate. During the continuance of
an Event of Default, Newco shall have no right to obtain any new Advances
under this Agreement. The Newco 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
Newco Loan, Newco, subject to Monsanto's right to require Newco 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 Newco Loan (the
"Conversion Amount") into shares of Newco 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 Newco Loan.
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Monsanto may, in its sole discretion and within five business days after its
receipt of notice from Newco that Newco intends to exercise Newco's rights to
convert the Conversion Amount, give written notice to Newco stating that (i)
all or any part of the Conversion Amount shall be payable in cash (the
"Alternative Conversion Amount"), (ii) Newco 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 Newco to
Monsanto in full payment and satisfaction of such Alternative Conversion
Amount.
Upon any such conversion, the Conversion Amount shall first be applied to
reduce the accrued interest due on the applicable Newco 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 Newco Loan. In any event,
on each annual Maturity Date (as defined in the Newco Credit Facility
Agreement), all outstanding principal and accrued interest not converted by
Newco into shares of Newco 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,
Newco, subject to Monsanto's right to require Newco 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 Newco Loan into
shares of Newco Common Stock. If Newco does not elect to exercise its
conversions 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 Newco Loan into shares of Newco
Common Stock at the average of the closing market prices for such shares
during he 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 Newco Common Stock (as such number is adjusted for stock
dividends, stock splits and similar event affecting holders of Newco'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 Newco and its subsidiaries; (ii)
the compliance with all covenants contained in the Newco 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 Newco 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 Newco and its
subsidiaries, taken as a whole, or (B) the ability of the Company and its
subsidiaries to perform their obligations under the Newco Credit Facility
Agreement.
The covenants contained in the Newco Credit Facility Agreement require Newco
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 Newco
Credit Facility Agreement also requires that Newco 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 Newco Credit
Facility Agreement imposes a number of limitations on Newco 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
Newco'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 Newco'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 Newco to
satisfy these covenants would cause an Event of Default which could have a
material adverse effect on its business and results of operations.
All of the Newco Loans shall be subordinated and subject in right of payment
to the prior payment in full of a certain senior indebtedness of Newco as more
fully described in the Newco Credit Facility Agreement. No payment on account
of principal or interest on the Newco 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 default (other than a default in
the payment of amounts due thereon) with respect to any such senior
indebtedness.
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GARGIULO CREDIT FACILITY AGREEMENT
The Reorganization Agreement provides that, upon the Effective Time,
Monsanto and Newco shall enter 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 Newco a revolving credit facility of up to $40 million (the
"Gargiulo Loan"). Gargiulo L.P. expects to borrow up to $40 million from
Monsanto pursuant to an amendment to an existing credit facility to acquire
Collier Farms, to support the branded tomato strategy and to allow Gargiulo
L.P. to make an approximately $2 million payment to Monsanto pursuant to the
Development Agreement, which amounts will be converted into a loan under the
Gargiulo Credit Facility Agreement at the Effective Time.
The balance of the Gargiulo Loan shall be used solely to support the branded
tomato strategy of TIA as determined by the TIA 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, Newco must provide documentation
reasonably acceptable to Monsanto verifying that TIA 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" begins the date of the Effective Time and
ends on the earlier of the fourth anniversary of the Effective Time or such
earlier time that Monsanto terminates its obligations to make further
Advances. The Gargiulo Loan is to be secured by the joint and several guaranty
of the subsidiaries of Newco.
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, Newco 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 TIA 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, Newco shall pay Monsanto such lesser
amount and the maturity date with respect to the unpaid amount of outstanding
principal and interest shall again be extended to the eighth anniversary of
the Effective Time (the "Final Maturity Date"). If the Repayment Portion of
the Cumulative Cash Flow (less amounts previously paid) is not sufficient to
pay the then outstanding principal and accrued interest at the Final Maturity
Date, then Newco shall pay to 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 Newco 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 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 Newco to sell publicly that number
of shares of Newco Common Stock as 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.
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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 Newco 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 Newco Common Stock (as such number is adjusted for stock dividends,
stock splits and similar event affecting holders of Newco'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 Newco 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 Newco 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
Newco 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 Newco 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 Newco
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 Newco'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
Newco'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 Newco to satisfy these covenants would cause an
Event of Default which could have a material adverse effect on its business
and results of operations.
The Gargiulo Loan is to be subordinated and subject in right of payment to
the prior payment in full of certain senior indebtedness of Newco 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.
LICENSE AGREEMENTS
As part of the Reorganization, Monsanto will contribute certain technology
licenses to Newco 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 Newco to improve the
efficiency of its tomato production operations. Newco 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.
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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. Newco will be 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. Newco will be 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. Newco believes that
reducing the expression of the FAD 3 gene in engineered canola plants may
result in an oil with reduced linoleic and linolenic acid content and
increased oleic 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. Newco will be 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.") that encode proteins that
are toxic to certain insects. Use of insecticides to control insects is a
major cost in the production of tomatoes. Newco will be 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 many
improve the flavor or sweetness of produce crops such as tomatoes or
strawberries. Newco will be 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. Newco will be 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
Calgene has entered into an agreement with Monsanto under which Newco 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 Newco's
cottonseed product development program, Newco 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 Newco 29% of the net license fees received from
licensed growers who subsequently purchase Newco's cottonseed products
containing Monsanto's B.t. gene.
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Newco's obligation to participate in the direct licensing program would
survive the termination of the Reorganization Agreement. Furthermore, the
material terms of Newco'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.
GARGIULO REORGANIZATION AGREEMENT
Monsanto, TIA, NTGargiulo, Inc. ("NTGCo"), Gargiulo L.P., the General
Partner and certain stockholders of NTGCo entered into an Option and Retained
Interests Agreement, dated as of July 29, 1994 (the "Option and Retained
Interests Agreement"), pursuant to which TIA acquired an option (the "Option")
to acquire from NTGCo all of the outstanding shares of capital stock of the
General Partner that TIA did not then own and such partnership interests in
Gargiulo L.P. as would result, after the exercise of such option, in TIA and
the General Partner owning an aggregate of 82% of the partnership interests in
Gargiulo L.P. Under the Option and Retained Interests Agreement, the exercise
price for such option was $32.1 million. Pursuant to the Gargiulo
Reorganization Agreement, TIA agreed to exercise the Option on the earlier of
January 31, 1996 or immediately prior to the Effective Time (the "Closing
Date"). Upon the exercise of such Option, (i) TIA would own all of the issued
and outstanding shares of capital stock of the General Partner, (ii) TIA would
own interests in Gargiulo L.P., directly or indirectly through the General
Partner, equal to 82% of such partnership interests and NTGCo would own
partnership interests in Gargiulo L.P. equal to 18% of such partnership
interests.
On January 31, 1996, TIA exercised the Option for $32.1 million and acquired
the remaining 18% partnership interest in Gargiulo L.P. for an additional $18
million, less the total amount of certain loans by Gargiulo L.P. to its
limited partners. As of February 1, 1996, TIA owned, directly or indirectly
through the General Partner, all of the equity interests in Gargiulo L.P.
Immediately after the Effective Time, the General Partner will be dissolved
and liquidated, and its assets transferred to and liabilities assumed by TIA.
TIA will succeed to all the assets and liabilities of the General Partner,
including its partnership interests in Gargiulo L.P. Gargiulo L.P. will then
be dissolved by operation of law and TIA will succeed to all of its assets and
liabilities.
The Gargiulo Reorganization Agreement provides that, immediately after the
acquisition by TIA from NTGCo of all of the partnership interests in Gargiulo
L.P. then held by NTGCo: (i) the Option and Retained Interests Agreement shall
be terminated; (ii) the Development Agreement between Gargiulo L.P. and
Monsanto shall be amended to, among other things, convert the licenses granted
pursuant to the Development Agreement to fully paid-up licenses; and (iii) the
Amended and Restated Credit Agreement dated as of July 29, 1994 between MAP
Investment Company, an operating unit of Monsanto, and Gargiulo L.P. shall
either (x) if the Effective Time shall have occurred, be terminated and any
loans outstanding thereunder shall be repaid by Gargiulo L.P. in full;
provided, that if borrowings are outstanding thereunder to finance the
proposed acquisition of Collier Farms, such borrowings shall be refinanced
pursuant to the Gargiulo Credit Facility Agreement; or (y) if the Effective
Time shall not have occurred, be extended to the earlier of the eighth
anniversary of the Closing Date and the date the Effective Time shall occur
and be amended to provide that the amount that may be borrowed by Gargiulo
L.P. thereunder shall be increased to $40 million; provided, however, that $30
million of the proceeds may be used only to support and implement the branded
tomato strategy and the remaining $10 million may be used in connection with
Gargiulo L.P.'s proposed acquisition of Collier Farms or, if such acquisition
does not occur, then such $10 million shall be used to support and implement
the branded tomato strategy.
Representations and Warranties of NTGCo
The Gargiulo Reorganization Agreement contains certain representations and
warranties of NTGCo relating to, among other things, (a) the due organization,
valid existence and good standing of NTGCo, the General Partner and Gargiulo
L.P. and certain similar corporate matters; (b) the authorization, execution,
delivery and enforceability of the Gargiulo Reorganization Agreement, and
related matters; (c) conflicts under (i) material
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contracts or similar agreements to which the General Partner or Gargiulo is a
party, (ii) the charters or by-laws of NTGCo or the General Partner, (iii) the
limited partnership agreement, as amended, of Gargiulo L.P., (iv) any order,
decree, statute, law, ordinance, rule or regulation applicable to NTGCo, the
General Partner or Gargiulo L.P.; (d) certain Gargiulo L.P. financial
statements; (e) litigation; (f) environmental notices; (g) real properties
held by the General Partner and Gargiulo L.P.; (h) certain agreements,
contracts and commitments of the General Partner and Gargiulo L.P.; (i) the
conduct of business by the General Partner and Gargiulo L.P.; (j) the
corporate and partnership structure of the General Partner and Gargiulo L.P;
(k) the capitalization of NTGCo and the General Partner; (l) NTGCo's ownership
of partnership interests in Gargiulo L.P.; and (m) certain environmental
matters.
Representations and Warranties of Stockholders
The Gargiulo Reorganization Agreement contains certain representations and
warranties of each of the stockholders of NTGCo relating to, among other
things, (a) the due execution, delivery and enforceability of the Gargiulo
Reorganization Agreement and related matters; (b) conflicts with agreements to
which such stockholder is a party or under any order, decree, statute, law,
ordinance, rule or regulation applicable to such stockholder; and (c)
ownership of such stockholder's share of NTGCo stock.
Representations and Warranties of Monsanto and TIA
The Gargiulo Reorganization Agreement contains certain representations and
warranties of each of Monsanto and TIA relating to, among other things, (a)
the due organization, valid existence and good standing of Monsanto and TIA
and certain similar corporate matters; (b) the authorization, execution,
delivery and enforceability of the Gargiulo Reorganization Agreement, and
related matters; (c) conflicts under (i) the charters or by-laws of Monsanto
and TIA, and (ii) any order, decree, statute, law, ordinance, rule or
regulation applicable to Monsanto or TIA; and (d) TIA's ownership of
partnership interests in Gargiulo L.P.
Representations and Warranties of Calgene
The Gargiulo Reorganization Agreement contains certain representations and
warranties of Calgene relating to, among other things, (a) the due
organization, valid existence and good standing of Calgene; (b) the
authorization, execution, delivery and enforceability of the Gargiulo
Reorganization Agreement, and related matters; (c) conflicts under (i) the
charter or by-laws of Calgene, and (ii) any order, decree, statute, law,
ordinance, rule or regulation applicable to Calgene.
Conduct of Business Prior to Dissolution
Prior to the dissolution of Gargiulo L.P., Gargiulo L.P. has agreed to
operate its business in the ordinary course. Without the prior written consent
of Monsanto and Calgene, which consent shall not be unreasonably or untimely
withheld, neither the General Partner nor Gargiulo L.P. shall: (a) engage in
any commercial practice that is not in the ordinary course of business; (b)
sell, lease, license or otherwise dispose of any assets of the General Partner
or Gargiulo L.P., except for sales of produce inventory in the ordinary course
and consistent with past practice, replacement or retirement of machinery and
equipment in the ordinary course or additions of machinery and equipment in an
aggregate amount not to exceed $1 million; (c) subject to certain exceptions,
create or suffer to be created any mortgage, lien, pledge or encumbrance of
any kind or other exceptions to title upon the assets of Gargiulo L.P.'s
business; (d) subject to certain exceptions and except for agreements relating
to Gargiulo L.P.'s branded tomato strategy which do not exceed $1 million in
the aggregate, enter into any agreement or commitment having a term in excess
of one year; (e) enter into any agreement or commitment that materially
restricts Gargiulo L.P. from carrying on its business as it is presently being
carried on; (f) merge or consolidate with, or acquire for cash a substantial
part of the assets or capital stock of, any other company or entity; (g) incur
any additional indebtedness for money borrowed, except for amounts secured by
inventory or receivables for working capital, indebtedness incurred to acquire
property, plant or equipment and secured by the acquired asset, and an
increase in Gargiulo L.P.'s working capital loan from $17.5 million to $20.0
million;
61
<PAGE>
(h) with certain exceptions, make loans or otherwise extend credit, including
by way of guaranty, to any other person; (i) declare or pay any dividend or
make any other distribution to its shareholders or partners, except for
distributions in respect of taxes required by the Gargiulo L.P. limited
partnership agreement, as amended, or redeem any partnership interests from
its partners or any stock from its shareholders, as the case may be;
(j) except for certain permitted employment agreements, engage in any
transaction between Gargiulo L.P. or the General Partner, on the one hand, and
the officers or employees of Gargiulo L.P. or the General Partner, on the
other hand, which is not in the ordinary course of business; (k) amend the
limited partnership agreement of Gargiulo L.P., as amended to date or amend
the certificate of incorporation or by-laws of the General Partner; (l) make
any new fixed capital investments, capital leases or noncancellable operating
leases having annual payments in the aggregate exceeding the amount projected
to be spent therefor under Gargiulo L.P.'s annual plan for the fiscal year
ended June 30, 1996; and (m) except for certain employment agreements, enter
into any contract, agreement, plan or arrangement covering a director, officer
or employee of Gargiulo L.P. or the General Partner that provides for the
making of a payment, the acceleration or vesting of any benefits or right or
any other entitlement contingent upon (i) the transactions contemplated by the
Gargiulo Reorganization Agreement or (ii) the termination of employment after
the occurrence of any such contingency if such payment, acceleration or
entitlement would not have been provided but for such contingency, or amend an
existing contract, agreement, plan or arrangement to so provide.
62
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited Pro Forma Combined Condensed Balance Sheet as of
September 30, 1995 and the unaudited Pro Forma Combined Condensed Statements
of Operations for the three months ended September 30, 1995 and the year ended
June 30, 1995, give effect to the business combinations involving Calgene II,
Inc. ("Newco"), Tomato Investment Associates, Inc. and Produce Related
Technology of Monsanto Company; Gargiulo L.P. and subsidiaries; Collier Farms;
and Calgene, Inc. accounted for using the purchase method of accounting. The
Pro Forma Combined Condensed Balance Sheet is presented as if the business
combinations had occurred on September 30, 1995, and the Pro Forma Combined
Condensed Statements of Operations are presented as if the business
combination had occurred as of July 1, 1994. The pro forma information is
presented for illustrative purposes only and may not be indicative of the
results that would have been obtained had the transactions actually occurred
on the dates assumed nor is it necessarily indicative of the future combined
results of operations. Calgene has retained independent valuation
professionals to assist in the final determination of the value to be assigned
to the individual assets acquired including the intangibles and in-process
research and technology. The valuation and the determination of the final
purchase price will depend on the number of shares to be issued as well as the
market price of Newco Common Stock. However, the results of the preliminary
valuation have been included in the pro forma adjustments to the condensed
balance sheet.
The pro forma combined condensed financial statements should be read in
conjunction with the historical financial statements and the related notes
thereto of Calgene II, Inc., Tomato Investment Associates, Inc. and Produce
Related Technology of Monsanto Company; Gargiulo L.P. and subsidiaries;
Collier Farms; and Calgene, Inc.
63
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
----------------------- -----------------------
NEWCO TIA GARGIULO COLLIER ADJUSTMENTS COMBINED CALGENE ADJUSTMENTS COMBINED
----- ------- -------- ------- ----------- -------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents... $ 1 $ -- $ 528 $ 110 $ -- $ 639 $ 2,313 $ 17,000 (c) $ 19,952
Short-term invest-
ments................. -- -- -- -- -- -- 7,922 -- 7,922
Accounts receivable,
net of allowances..... -- -- 16,109 482 -- 16,591 5,047 -- 21,638
Related party receiv-
ables................. -- -- -- 4,304 (4,304)(e) -- -- -- --
Inventories............ -- -- 10,989 5,622 -- 16,611 8,580 -- 25,191
Other current assets... -- -- 2,145 -- (1,252)(b) 893 1,886 -- 2,779
--- ------- ------- ------- -------- -------- ------- -------- --------
Total current assets... 1 -- 29,771 10,518 (5,556) 34,734 25,748 17,000 77,482
Property, plant and
equipment, net......... -- -- 46,019 13,938 -- 59,957 22,625 -- 82,582
Investment in affili-
ate.................... -- 53,073 1,118 -- (53,073)(a) 1,118 -- -- 1,118
Product rights, patents
and other intangible
assets, net............ -- -- -- -- -- 16,250 21,680 (c) 32,930
(5,000)(c)
Costs in excess of fair
values assigned to net
assets acquired, less
accumulated
amortization........... -- -- -- -- 68,073 (a) 74,966 9,850 57,571 (c) 74,314
6,893 (f) (68,073)(c)
Other non-current as-
sets................... 369 2,381 64 -- 2,814 1,858 (369)(c) 4,303
--- ------- ------- ------- -------- -------- ------- -------- --------
$ 1 $53,442 $79,289 $24,520 $ 16,337 $173,589 $76,331 $ 22,809 $272,729
=== ======= ======= ======= ======== ======== ======= ======== ========
</TABLE>
See accompanying notes.
64
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET, (CONTINUED)
SEPTEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
----------------------- ------------------------
NEWCO TIA GARGIULO COLLIER ADJUSTMENTS COMBINED CALGENE ADJUSTMENTS COMBINED
----- -------- -------- ------- ----------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS'/OWNERS'
EQUITY AND PARTNERS'
CAPITAL
Current liabilities:
Notes payable and
current portion of
long-term debt........ $-- $ -- $ 3,704 $ 5,594 $ 2,000 (d) $ 10,382 $ 8,161 $ -- $ 18,543
(916)(e)
Accounts payable....... -- -- 7,641 944 150 (f) 8,735 3,556 2,300 (c) 14,591
Amounts due
customers/growers..... -- -- 2,108 -- -- 2,108 3,803 -- 5,911
Accrued expenses and
other current
liabilities........... -- 2,185 3,696 1,435 (1,252)(b) 5,886 7,573 2,567 (c) 16,026
(178)(e)
---- -------- ------- ------- -------- -------- --------- --------- ---------
Total current
liabilities........... -- 2,185 17,149 7,973 (196) 27,111 23,093 4,867 55,071
Long-term debt......... -- -- 26,609 80 18,000 (d) 44,689 17,454 (13,000)(c) 49,143
Long-term debt, related
party................. -- -- -- 6,220 (6,220)(e) -- -- -- --
Other long term
liabilities........... -- 1,304 -- -- -- 1,304 -- (1,304)(c) --
Minority interest...... -- -- 431 -- -- 431 -- -- 431
SHAREHOLDERS'/OWNERS'
EQUITY AND PARTNERS'
CAPITAL
Partners' capital...... -- -- 35,100 -- (35,100)(a) -- -- -- --
Owners' equity......... -- -- -- 10,247 (20,000)(d) -- -- -- --
3,010 (e)
6,743 (f)
Common stock........... -- -- -- -- -- 30 30 (c) 60
Additional paid-in-
capital............... 1 65,378 -- -- 50,100 (a) 115,479 223,268 199,970 (c) 423,238
(115,479)(c)
Accumulated deficit.... -- (15,425) -- -- -- (15,425) (187,514) (67,700)(c) (255,214)
15,425 (c)
---- -------- ------- ------- -------- -------- --------- --------- ---------
Total
shareholders'/owners'
equity................ 1 49,953 35,100 10,247 4,753 100,054 35,784 32,246 168,084
---- -------- ------- ------- -------- -------- --------- --------- ---------
$ 1 $ 53,442 $79,289 $24,520 $ 16,337 $173,589 $ 76,331 $ 22,809 $ 272,729
==== ======== ======= ======= ======== ======== ========= ========= =========
</TABLE>
See accompanying notes.
65
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
---------------------- ----------------------
TIA GARGIULO COLLIER ADJUSTMENTS COMBINED CALGENE ADJUSTMENTS COMBINED
------- -------- ------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Product sales.......... $ -- $ 28,609 $ 350 $ -- $ 28,959 $ 8,812 $ -- $ 37,771
Product development.... -- -- -- -- -- 300 -- 300
------- -------- ------- ------ -------- -------- ------- --------
Total revenues......... -- 28,609 350 -- 28,959 9,112 -- 38,071
COSTS AND EXPENSES:
Costs of sales......... -- 29,667 802 -- 30,469 12,141 -- 42,610
Research and
development........... 1,383 -- -- -- 1,383 3,223 -- 4,606
Selling, general and
administrative........ 444 5,082 1,083 373 (g) 6,982 3,892 1,625 (j) 11,682
(817)(i)
------- -------- ------- ------ -------- -------- ------- --------
Total costs and
expenses.............. 1,827 34,749 1,885 373 38,834 19,256 808 58,898
------- -------- ------- ------ -------- -------- ------- --------
OTHER INCOME (EXPENSE)
Interest, net.......... -- (516) (246) (515)(k) (1,114) (262) -- (1,376)
163 (l)
Minority interest...... -- 1,295 -- -- 1,295 22 -- 1,317
Equity share in net
income (loss) of
affiliate............. (2,696) (125) -- 2,696 (h) (125) (4) -- (129)
Other.................. -- 83 130 -- 213 29 -- 242
------- -------- ------- ------ -------- -------- ------- --------
Total other income
(expense)............. (2,696) 737 (116) 2,344 269 (215) -- 54
------- -------- ------- ------ -------- -------- ------- --------
Loss before income
taxes................. (4,523) (5,403) (1,651) 1,971 (9,606) (10,359) (808) (20,773)
Provision (benefit) for
income taxes.......... (1,719) -- -- -- (1,719) 15 1,719 (m) 15
------- -------- ------- ------ -------- -------- ------- --------
Net loss............... $(2,804) $ (5,403) $(1,651) $1,971 $ (7,887) $(10,374) $(2,527) $(20,788)
======= ======== ======= ====== ======== ======== ======= ========
Net loss per share..... $(2,804) $ (7,887) $ (0.34) $ (0.37)
======= ======== ======== ========
Shares used in the
calculation of net
loss per share........ 1 1 30,250 26,400 (n) 56,650
</TABLE>
See accompanying notes.
66
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
---------------------- -----------------------
TIA GARGIULO COLLIER ADJUSTMENTS COMBINED CALGENE ADJUSTMENTS COMBINED
------- -------- ------- ----------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Product sales.......... $ -- $114,052 $25,440 $ -- $139,492 $ 48,972 $ -- $188,464
Product development.... -- -- -- -- -- 6,459 -- 6,459
------- -------- ------- ------- -------- -------- ------- ---------
Total revenues......... -- 114,052 25,440 -- 139,492 55,431 -- 194,923
Costs and expenses:
Cost of sales.......... -- 97,744 20,276 -- 118,020 53,678 -- 171,698
Research and develop-
ment.................. 4,729 -- -- -- 4,729 15,373 -- 20,102
Selling, general and
administrative........ 1,915 18,096 5,140 1,490 (g) 26,641 16,081 6,500 (j) 45,817
(3,405)(i)
------- -------- ------- ------- -------- -------- ------- ---------
Total costs and
expenses.............. 6,644 115,840 25,416 1,490 149,390 85,132 3,095 237,617
Other income (expense)
Interest, net.......... -- (1,720) (1,456) (2,061)(k) (4,555) 155 -- (4,400)
682 (l)
Minority interest...... -- 471 -- -- 471 116 -- 587
Equity share in net
income (loss) of
affiliate............. (941) 416 -- 941 (h) 416 (213) -- 203
Other.................. -- 918 1,091 -- 2,009 (944) -- 1,065
------- -------- ------- ------- -------- -------- ------- ---------
Total other income
(expense)............. (941) 85 (365) (438) (1,659) (886) -- (2,545)
------- -------- ------- ------- -------- -------- ------- ---------
Loss before income tax-
es..................... (7,585) (1,703) (341) (1,928) (11,557) (30,587) (3,095) (45,239)
Provision (benefit) for
income taxes........... (2,300) -- -- -- (2,300) 15 2,300 (m) 15
------- -------- ------- ------- -------- -------- ------- ---------
Net loss............... $(5,285) $ (1,703) $ (341) $(1,928) $ (9,257) $(30,602) $(5,395) $ (45,254)
======= ======== ======= ======= ======== ======== ======= =========
Net loss per share...... $(5,285) $(9,257) $ (1.04) $ (0.81)
======= ======== ======== =========
Shares used in the
calculation of net loss
per share.............. 1 1 29,439 26,400 (n) 55,839
</TABLE>
See accompanying notes.
67
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINEDCONDENSED FINANCIAL STATEMENTS
1. REORGANIZATION AND MERGER. As of September 30, 1995, Tomato Investment
Associates, Inc., a wholly-owned subsidiary of Monsanto Company, owns certain
produce related technology and a 49.9% interest in Gargiulo L.P. and
Subsidiaries. In connection with the Reorganization described in the following
paragraph, TIA will acquire the remaining equity interest in Gargiulo L.P.
(collectively "TIA/Gargiulo").
In the Reorganization and related Merger, Calgene and TIA will become
wholly-owned subsidiaries of Calgene II, Inc. ("Newco") Simultaneously, Newco
will be renamed Calgene, Inc., at which time Monsanto will own common stock
representing a 49.9% equity interest in Newco (assumed for purposes hereof to
have an approximate fair market value of $200 million). Prior to the
completion of the Reorganization, Gargiulo L.P. intends to acquire Collier
Farms. The acquisitions of TIA, Gargiulo L.P. and Collier Farms will be
accounted for using the purchase method of accounting.
2. TIA ACQUISITION OF GARGIULO L.P. As of September 30, 1995, TIA owns a
49.9% equity interest in Gargiulo L.P. and will acquire the remaining equity
interest of Gargiulo L.P. for approximately $50.1 million. The purchase price
of $50.1 million is based on an option acquired in 1992 from Garguilo L.P. by
TIA at which time TIA purchased an initial 23% equity interest. The difference
in Newco's cost to acquire Garguilo L.P. and the price paid by TIA
approximates $34 million. A separate purchase price allocation has not been
performed for the TIA/Gargiulo L.P. pro forma adjustments because a complete
purchase price allocation, including TIA's acquisition of the remaining
outside equity interest of Gargiulo, will be presented based on the Calgene
acquisition of TIA/Gargiulo L.P. For purposes of the TIA/Gargiulo L.P. pro
forma financial information, the excess purchase price has temporarily been
shown entirely as costs in excess of fair values assigned to net assets
acquired. Costs in excess of fair values assigned to net assets acquired of
$68.073 million is determined as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
TIA's current investment in Garguilo L.P. .................... $ 53,073
Purchase of remaining 50.1% equity interest................... 50,100
Less Garguilo L.P. net equity................................. (35,100)
--------
$ 68,073
========
</TABLE>
3. PROPOSED PURCHASE OF COLLIER FARMS. Prior to the completion of the
Reorganization, Gargiulo L.P. intends to acquire substantially all the assets
excluding related party receivables, subject to certain liabilities of Collier
Farms for $10 million in cash and a $10 million promissory note, plus an earn-
out payment based upon certain earnings of the combined operations of the
Partnership in southwest Florida and those being purchased from the Seller.
The Partnership will also acquire the seller's investment in the 1995-1996
crop to be calculated at closing and assume liabilities related thereto. The
acquisition of Collier Farms will be accounted for as a purchase.
The estimated purchase price consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash (from proceeds under an existing Monsanto credit
facility).................................................. $10,000
Promissory note............................................. 10,000
Investment in 1995-1996 crop................................ 5,622
Estimated acquisition costs, consisting primarily of
financial advisory, legal and accounting fees.............. 150
-------
$25,772
=======
</TABLE>
68
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Certain items affecting the purchase price and the allocation thereof remain
unresolved at this time. A summary of the preliminary purchase price
allocation is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net assets acquired........................................... $ 20,003
Excess purchase price over net assets acquired................ 5,769
--------
$25,772
========
</TABLE>
4. ACQUISITION OF TIA/GARGIULO L.P. As described in Note 1, Monsanto will
acquire a 49.9% equity interest in Newco with an assumed approximate fair
value of $200 million in exchange for $30 million in cash (of which $13
million has been previously advanced at September 30, 1995 pursuant to a
subordinated promissory note), and 100% ownership in TIA/Gargiulo L.P. and
certain technology licenses. The acquisition of TIA/Gargiulo L.P. by Newco
will be accounted for as a purchase.
The estimated purchase price consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
30,143,000 shares of Newco common stock..................... $200,000
Estimated acquisition costs, consisting primarily of
financial advisory, legal and accounting fees.............. 2,300
Less cash received.......................................... (30,000)
--------
$172,300
========
</TABLE>
Certain items affecting the purchase price and the allocation thereof,
including the outcome of certain litigation, the number of Newco shares to be
issued and the market value of such shares, remain unresolved at this time. A
summary of the preliminary purchase price allocation is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net assets acquired........................................... $ 33,849
Identified intangible assets.................................. 21,680
Excess purchase price over net assets acquired................ 57,571
In-process research and technology............................ 59,200
--------
$172,300
========
</TABLE>
As of September 30, 1995, Calgene has received $13 million in advances
toward the $30 million proceeds for Newco Common Stock in the form of a
subordinated promissory note.
5. INTANGIBLE ASSETS. Intangible assets include completed technology,
assembled workforce and costs in excess of fair values assigned to net assets
acquired. The estimated useful lives are expected to range from 3 to 15 years.
For presentation purposes, purchased intangibles have been amortized using an
average 12-year period. Calgene management does not believe that technological
feasibility of the acquired in-process technology has been established.
Further, Calgene management believes the acquired technology has no
alternative future uses. Therefore, the $59.2 million allocated to in-process
research and technology is required to be immediately expensed under generally
accepted accounting principles. Such amount is a non-recurring charge related
to the Reorganization and as such is not reflected in the Pro Forma Statement
of Operations pursuant to Regulation S-X.
6. PRO FORMA ADJUSTMENTS. Adjustments to the Pro Forma Condensed Combined
Balance Sheet were made:
(a) To record TIA's acquisition of the remaining 50.1% equity interest in
Gargiulo L.P. and eliminate the investment in affiliate and Gargiulo L.P.
equity accounts.
69
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS--(CONCLUDED)
(b) To eliminate certain intercompany assets and liabilities that will
not be acquired/assumed.
(c) To eliminate the costs in excess of fair values assigned to net
assets recorded by TIA (see (a) above) and record the acquisition and
allocate the purchase price (based on preliminary appraised values) of
TIA/Gargiulo L.P. and the receipt of $30 million in cash (less the $13
million advance) in exchange for Newco Common Stock assumed to have an
approximate fair market value of $200 million. The accumulated deficit has
been adjusted for the effect of expensing the in-process research and
technology. Also, to write-off or reserve for $8.5 million of intangibles,
leases and related assets that became redundant upon the acquisition of
TIA/Gargiulo. Such amount is a non-recurring charge related to the
Reorganization and as such is not reflected in the Pro Forma Statement of
Operations pursuant to Regulation S-X.
(d) To record the $10 million, five year promissory note issued and a $10
million advance under an existing credit facility with an affiliate of
which will be converted into a loan under the Gargiulo Credit Facility
Agreement upon the Effective Time from Monsanto for the acquisition of
Collier Farms. The promissory note is payable in 20 equal quarterly
installments following the closing of the Reorganization. The advance is
payable in one payment at the end of four years but may be extended to
eight years based on defined events.
(e) To eliminate assets and liabilities of Collier Farms that will not be
acquired/assumed as part of the acquisition.
(f) To allocate the purchase price of the acquisition of Collier Farms.
ADJUSTMENTS TO THE PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
WERE MADE TO:
(g) To record the amortization of the additional costs in excess of fair
values assigned to net assets acquired in TIA's acquisition of Gargiulo
L.P.
(h) To eliminate TIA's share of net loss in affiliate.
(i) To eliminate the amortization related to (g) above and the
amortization of the costs in excess of fair values assigned to net assets
recorded by TIA during the fiscal year ended June 30, 1995.
(j) To record the amortization of the purchased intangibles.
(k) To record interest expense on the $10 million promissory note issued
to Collier Enterprises which bears interest at the prime rate (8.75% at
September 30, 1995), and the $10 million advance from Monsanto which bears
interest at the prime rate plus 2% (10.75% at September 30, 1995) at the
Effective Time.
(l) To eliminate interest expense related to debt of Collier Farms that
will not be assumed as part of the acquisition.
(m) To eliminate the tax benefit recorded by TIA since the pro forma
combined net deferred tax asset will be fully offset by a valuation
allowance.
(n) To adjust the shares used in the loss per share calculation for the
effects of the common stock issued to Monsanto by Newco.
70
<PAGE>
CALGENE II, INC.
DIRECTORS AND EXECUTIVE OFFICERS
Directors
A total of nine directors will be elected to the Newco Board at the
Effective Time. The one year term of each director is subject in all cases to
the election and qualification of his successor and to his earlier death,
resignation or removal. Director compensation has not been determined at this
time. See "The Reorganization Agreement and Related Agreements--The
Stockholders Agreement" for a description of the rights of Monsanto to
designate directors of Newco under certain circumstances.
The following table sets forth for each director of Newco that has been
designated, his name, age, the positions and offices held by him, principal
occupation, business experience and other directorships. Mr. Stinnett was
recently involved in a serious automobile accident. If Mr. Stinnett or any
other director is unable to serve as a director of Newco at the Effective
Time, a substitute will be designated and elected in accordance with the
provisions of the Stockholders Agreement. Upon or immediately following the
Effective Time, pursuant to the Stockholders Agreement, there shall be added
to the Newco Board a ninth director, who shall be an executive officer of
Newco.
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION
- - ---------------- --- --------------------
<S> <C> <C>
Robert T. Fraley........ 42 President of Ceregen
Jeffrey D. Gargiulo..... 43 Chairman and Chief Executive Officer of Gargiulo L.P.
Howard D. Palefsky...... 48 President and Chief Executive Officer, Collagen Corporation
Roger H. Salquist....... 54 Chairman and Chief Executive Officer of Calgene
Carl V. Stinnett........ 61 Principal, The Northern Group
Allen J. Vangelos....... 63 President and Chief Executive Officer of Calavo Growers of California
Hendrik A. Verfaillie... 50 Executive Vice President of Monsanto
John E. Robson.......... 65 Senior Advisor, Robertson, Stephens & Company
</TABLE>
Mr. Fraley was named President of Ceregen, a strategic 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. Gargiulo has been Chairman and Chief Executive Officer of Gargiulo L.P.
since 1981 and will be Chairman and Chief Executive Officer of TIA upon the
Effective Time. Mr. Gargiulo is Chairman of the Produce Marketing Association
and a Director of NationsBank of Florida, N.A.
Mr. Palefsky has been the President and Chief Executive Officer of Collagen
Corporation, a medical products company, since 1978. He is also a director of
Collagen Corporation and Target Therapeutics, Inc., both medical product
companies.
Mr. Salquist has been an executive officer of Calgene since September 1983
and its Chief Executive Officer since November 1985. Mr. Salquist is a
director of Collagen Corporation and Chairman of the Board of Directors of
Celtrix Pharmaceuticals, Inc., both medical products companies.
71
<PAGE>
Mr. Stinnett has been a Principal of the Northern Group, a financial
partnership which acquires and operates food companies, since July 1990. Mr.
Stinnett was President of the Campbell Enterprises Division of Campbell Soup
Company from November 1985 to July 1990.
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 in July
1995. Prior to this he served as President of The Agricultural Group, Vice
President and Advisory Director-Monsanto Company, Vice President and General
Manager, Roundup Division-The Agricultural Group, and Vice President-
Commercial Development-Monsanto Agricultural Company.
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 and
Security Capital Industrial Trust, a real estate investment trust.
The Mingly Corporation Limited ("Mingly"), a stockholder of Calgene, has the
contractual right to designate a director of Calgene, which designee shall be
reasonably satisfactory to the Calgene Board in terms of qualifications and
the absence of any conflict of interest with Calgene. Such right has not been
exercised to date. If Mingly determines to designate a director, such director
would serve as a Company Director. See "The Reorganization Agreement and
Related Agreements--Stockholders Agreement--Composition of Newco Board."
Executive Officers
Executive officers are to be elected by the Newco Board annually at its
meeting of stockholders and hold office until the next annual meeting unless
they sooner resign or are removed from office.
The following table lists the name, age and position of the executive
officers of Newco immediately following the Effective Time.
<TABLE>
<CAPTION>
NAME OF EXECUTIVE OFFICER AGE POSITION
- - ------------------------- --- --------
<S> <C> <C>
Roger H. Salquist.............. 53 Chairman and Chief Executive Officer
Jeffrey D. Gargiulo............ 43 Chairman and Chief Executive Officer of TIA
Michael J. Motroni............. 40 Vice President of Finance & Secretary
</TABLE>
For biographies of Messrs. Salquist and Gargiulo, see "Calgene II, Inc.--
Directors and Executive Officers--Directors."
Mr. Motroni joined Calgene in August 1983 and became Controller in July
1986. He was elected Vice President of Finance and Secretary in May 1992.
See "The Stockholders Agreement--Composition of the Newco Board and Calgene
Board" for a description relating to arrangements regarding Newco, Monsanto
and Calgene and the election of certain directors to the Newco Board and the
appointment of certain executive officers.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the pro
forma beneficial ownership of Common Stock of Newco as of the Effective Time,
by (i) each person known by Newco to be a beneficial owner of more than 5% of
the outstanding shares of Calgene Common Stock on September 30, 1995; (ii)
each director and each executive officer of Newco; and (iii) all directors and
executive officers of Newco as a group:
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY APPROXIMATE
OF 5% BENEFICIAL OWNER OWNED(1) PERCENT OWNED(2)
- - ---------------------- ------------ ----------------
<S> <C> <C>
Monsanto Company
800 North Lindbergh Blvd.
St. Louis, MO 63167.............................. 31,133,966 49.9
Travelers Group Inc.
and Affiliates 388 Greenwich Street
New York, NY 10013(3)............................ 3,179,179 5.1
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
- - --------------------------------
<S> <C> <C>
Roger H. Salquist................................. 219,190 *
Hendrik A. Verfaillie............................. --
Robert T. Fraley.................................. --
Jeffrey D. Gargiulo............................... --
John E. Robson.................................... --
Howard D. Palefsky................................ 12,000 *
Carl V. Stinnett.................................. 25,000 *
Allen J. Vangelos................................. 13,000 *
Michael J. Motroni................................ 38,728 *
All Directors and Executive Officers
as a group (9 persons)........................... 307,918 *
</TABLE>
- - --------
* Less than 1%
(1) Calgene 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
September 30, 1995, by exercise of any stock option for which Calgene has
knowledge. The shares subject to such options are as follows:
Mr. Salquist: 184,762; Mr. Palefsky: 12,000; Mr. Stinnett: 24,000; Mr.
Vangelos: 13,000; Mr. Motroni: 30,317; all executive officers and
directors as a group: 338,813.
(2) Assuming that there are outstanding 62,267,933 shares of Newco Common
Stock immediately after the Effective Time.
(3) Based on a Form 13G filed on October 10, 1995 with respect to holdings on
September 30, 1995. Includes 1,650,509 shares owned by Smith Barney, Inc.
and 1,528,670 shares owned by Smith Barney Holdings, Inc. Based on a Form
13G received by Calgene on January 23, 1996, Calgene believes that
Travelers Group Inc. and Affiliates held an aggregate of 3,386,072 shares
as of December 31, 1995.
73
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC.
INTRODUCTION
In December 1992, Monsanto, through its wholly-owned subsidiary, TIA,
contributed cash totalling approximately $24.6 million and certain technology
and know-how related to tomatoes to Gargiulo L.P. in exchange for an
approximately 22% partnership interest in Gargiulo L.P.
In July 1994, TIA increased its percentage ownership of Gargiulo L.P. to
49.9% by paying approximately $27.9 million to the other partners of Gargiulo
L.P. At the same time, TIA and the other partners of Gargiulo L.P. entered
into an Option and Retained Interests Agreement pursuant to which (i) TIA
obtained, for a payment of $5.2 million, the Option to increase its ownership
interest in Gargiulo L.P. to 82% at a specified price at any time prior to
January 31, 1996 and (ii) if such Option were exercised, TIA obtained certain
call rights, and granted certain put rights, exercisable after December 31,
1999, for TIA to acquire the remaining partnership interests of Gargiulo L.P.
at a formula price.
In connection with the Reorganization, Monsanto, TIA and the partners of
Gargiulo L.P. entered into the Gargiulo Reorganization Agreement pursuant to
which (i) TIA agreed to exercise its Option to increase its ownership interest
in Gargiulo L.P. to 82% by paying the option price of $32.1 million to NTGCo,
which is the other limited partner of Gargiulo L.P., and (ii) TIA agreed to
purchase the remaining 18% partnership interest in Gargiulo L.P. for a
purchase price of $18 million. See "The Reorganization Agreement and Related
Agreements--Gargiulo Reorganization Agreement." On January 31, 1996, TIA
exercised the Option and acquired the remaining 18% partnership interest in
Gargiulo L.P. NTGCo is owned 50% by Joseph Procacci and 16.66% each by Dewey
Gargiulo and his sons, Jeffrey D. Gargiulo and John R. Gargiulo.
GARGIULO L.P.
Overview
Gargiulo L.P. engages in the growing, packaging, marketing and distribution
of tomatoes and strawberries and, to a lesser extent, other fresh fruits and
vegetables. Gargiulo L.P. also engages in breeding research with respect to
tomatoes and, to a lesser extent, strawberries. Gargiulo L.P.'s tomato
producing operations are conducted principally in southwest and northern
Florida, north central California, Virginia, Puerto Rico and Mexico. Gargiulo
L.P.'s berry production operations are conducted principally in northern
California. Tree fruits are grown in Chile, and potatoes, which Gargiulo L.P.
began producing, packing and distributing for the first time in January 1995,
are grown in southwest Florida. Gargiulo L.P.'s corporate headquarters are
located in Naples, Florida.
Gargiulo L.P.'s predecessor companies (the "Predecessors") began brokering
tomatoes in southwest Florida in the early 1950's. Operations were
subsequently expanded to include the production of tomatoes in southwest
Florida and over the years the Predecessors and later Gargiulo L.P. commenced
tomato growing operations in northern Florida, northern California, and, in
order to be able to supply tomatoes in the winter in the event of a freeze in
Florida, in Puerto Rico. More recently, Gargiulo L.P. entered into a joint
venture with a company located in Mexico for the production and distribution
of tomatoes and peppers. In order to be able to supply tomatoes throughout the
United States and Canada on a year round basis, which will be integral to
Newco's branded tomato strategy, in 1994, Gargiulo L.P. began the production
of tomatoes in Virginia.
In order to diversify the product line, in the early 1980's the Predecessors
commenced an operation to grow, cool, market and distribute strawberries in
northern California. Gargiulo L.P. acquired interests in companies in Chile in
1987 for the production, sale and importation into the United States of
various winter fruits, including nectarines and grapes. Through a relationship
with a Chilean grower, during the winter months in the United States, Gargiulo
L.P. also imports and markets raspberries and asparagus.
Gargiulo L.P. believes it has managed to achieve recognition among the
wholesalers, retailers, brokers and food service entities which it serves, as
a reputable and reliable supplier of tomatoes and berries. Gargiulo L.P.
74
<PAGE>
intends to continue to concentrate its efforts in this business and to
capitalize, whenever possible, on the opportunities to profit in the commodity
fruit and vegetable business. With its vertically integrated structure,
management, marketing and research capabilities and its established
distribution channels, Gargiulo L.P. believes it is well positioned to take
advantage of opportunities in the commodity fruit and vegetable markets.
Acquisition of Collier Farms
Pursuant to the Collier Purchase Agreement, Gargiulo L.P. has agreed to
acquire substantially all of the assets, subject to the assumption of certain
specified liabilities, of the produce business conducted by certain affiliates
of Collier Enterprises (the "Seller") under the trade name of "Collier Farms."
Collier Farms is an agricultural producer of tomatoes and other vegetables in
southwest Florida, and engages in the packaging, marketing and distribution of
those products into the commodity markets. See "--Collier Farms." If the
Collier Transaction is consummated, the purchase price to be paid by Gargiulo
L.P. for Collier Farms would be approximately $20 million, payable $10 million
in cash and $10 million in the form of a purchase money note payable to the
Seller, maturing on June 30, 2000, subject to reduction in the event Gargiulo
L.P. assumes certain obligations of the Seller to Prudential Life Insurance
Company in the approximate amount of $5 million (as adjusted, the "Seller
Note"), plus the assumption of all expenses incurred by Collier Farms since
July 1, 1995, which expenses relate to the production of Collier Farms' 1995-
1996 crop. In addition, Gargiulo L.P. would make an earn-out payment to the
Seller after the fiscal year ended June 30, 2000, based upon the future
earnings of the combined southwest Florida operations of Collier Farms and
Gargiulo L.P. (calculated as if Gargiulo L.P. had not implemented the branded
tomato strategy). The Seller Note and earn-out payment would be secured by the
Collier Farms assets being purchased and the Seller Note would be additionally
secured by certain farmland owned by Gargiulo L.P., all of which is located in
Collier County, Florida.
The Collier Purchase Agreement also provides that Gargiulo L.P. will enter
into a long-term lease with affiliates of the Seller (the "Collier Lease") for
a minimum of 6,000 acres of farmland in southwest Florida, with the right to
lease up to an additional 5,000 acres of farmland. The initial term of the
Collier Lease would be five years and Gargiulo L.P. would be granted three
options of five years each to extend such lease. The rent to be paid by
Gargiulo L.P. under the Collier Lease will be a market rate less a small
discount, which discount increases as more land is leased. The Collier
Purchase Agreement provides for a closing of the Collier Transaction subject
to the terms and conditions contained therein by January 31, 1996, which may
be extended until February 28, 1996. See "--Collier Farms."
Products
Tomatoes. Gargiulo L.P.'s principal product is fresh tomatoes. For Fiscal
1995, Gargiulo L.P. packed and shipped approximately 270 million pounds of
fresh tomatoes, which it produced through its own farming operations, through
joint ventures or partnerships with other growers or pursuant to contractual
arrangements with other growers. For Gargiulo L.P.'s and its Predecessors'
fiscal years ended June 30, 1993, 1994 and 1995, product revenues from
Gargiulo L.P.'s tomato operations were approximately $44.1 million, $50.3
million and $60.1 million, representing 54.3%, 50.6% and 52.7%, respectively,
of Gargiulo L.P.'s total revenues for those fiscal years.
Gargiulo L.P.'s tomato operations are vertically integrated with seed
research, production, packing, repacking, distribution, marketing, and sales
capabilities. With production available year round from its various locations,
Gargiulo L.P. believes it is well positioned for consistent year round supply
of tomatoes to customers throughout the United States and Canada.
Gas Green Tomatoes. Approximately 90% of the tomatoes produced by Gargiulo
L.P. during Fiscal 1995 were harvested and processed as green tomatoes. Green
tomatoes are sorted by grade and size according to specifications promulgated
by the USDA and are typically packed into 25 pound boxes. The tomatoes are
then stored at 65(degrees)F in the presence of ethylene gas for one to four
days. This process allows the tomato to achieve a deep red color acceptable to
the retail consumer and results in a sufficient shelf-life so that the tomato
reaches the retail consumer in an acceptable condition. The vast majority of
tomatoes produced in the United States are harvested green and processed in
this manner.
75
<PAGE>
Vine Ripened Tomatoes. Gargiulo L.P., through its participation in a joint
venture with a Mexican partner, has the capability to produce tomatoes which
are ripened on the vine, packed and then shipped. The relatively arid climate
in which the Mexican tomatoes are produced, contrasted with the wetter climate
in which tomatoes are grown in the United States, allows for vine ripening
which many retail consumers believe results in a better tasting tomato than
tomatoes which are picked green and ripened off the vine.
Branded Tomatoes. In 1993, Gargiulo L.P. commenced market research to
determine the interests of consumers in a "branded tomato." To be sold as
branded, a tomato must consistently and uniformly combine all of the
characteristics and attributes retail consumers generally look for in
tomatoes, such as pleasing flavor, tempting color, and good size, shape and
firmness. Gargiulo L.P. is embarking upon a branded tomato program to produce
and market a premium tomato under the Gargiulo name.
The success of the branded tomato strategy will depend in large measure on
Gargiulo L.P.'s ability (i) to induce customers to identify Gargiulo L.P.'s
premium tomato with the Gargiulo name, (ii) to induce consumers to pay a
premium price for that superior tomato, and (iii) to be able to produce and
deliver that tomato to customers on a consistent, year round basis. Based on
market research performed by Gargiulo L.P. to date, Gargiulo L.P. believes
that there is a sufficient customer base willing to pay a premium price for a
superior tomato to justify the significant amount of money that will be
required for marketing and advertising necessary to promote the branded
tomato. Gargiulo L.P. intends to begin the marketing and advertising of its
branded tomato in the northeast and midwest regions of the United States in
February 1996. A successful branded tomato program would allow Gargiulo L.P.
to move a portion of its sales activities from the commodity fruit and
vegetable business directly to the retail markets. Ultimately, Gargiulo L.P.'s
strategy is to provide advertising, marketing and promotional services
directly to the major retail grocery chains, including setting up displays in
the stores, assisting store management in attractively positioning the
tomatoes in the produce area, and engaging in related activities pertaining to
the marketing of fresh tomatoes in the retail sector. Gargiulo L.P. believes
that retailers would embrace this service because it would contribute to their
profit. It would benefit Gargiulo L.P. by providing a consistent source of
sales for Gargiulo L.P.'s tomatoes and by reducing Gargiulo L.P.'s reliance on
the commodity markets. As one of the few vertically integrated commercial
fruit and vegetable growers in the industry, Gargiulo L.P. intends to use its
plant research capabilities, year round supply capabilities, geographic and
product line diversification, operational skill and professional management to
enable it to produce tomatoes suitable for sale directly to the retail market.
There can be no assurance that Gargiulo L.P.'s efforts with the branded tomato
will be successful. See "Risk Factors--Risks Associated with the Branded
Tomato Strategy."
Tomato Production and Packing Locations. Gargiulo L.P. maintains growing
operations in and around Naples, Florida, Quincy, Florida, Mappsville,
Virginia, Santa Isabel, Puerto Rico, Firebaugh, California, and Sinaloa State,
Mexico. Each of these locations has the capability to pack the tomatoes for
shipment to repackers who put the tomatoes in the various types of packaging
demanded by the wholesalers, retailers, brokers and food service customers.
Gargiulo L.P. operates a repacking facility in Palmetto, Florida, in which it
repacks its own tomatoes, as well as tomatoes grown by other growers. If the
Collier Transaction is consummated, Gargiulo L.P. will acquire a repack
operation in Immokalee, Florida. In such event, Gargiulo L.P. intends to
discontinue its repack operations in Palmetto, Florida. Gargiulo L.P.,
together with its Mexican joint venture partner, maintains a distribution
center in Nogales, Arizona for the distribution of tomatoes grown in Mexico by
the joint venture.
Set forth below is a table which illustrates Gargiulo L.P.'s ability, by
location, to produce tomatoes on a year round basis. The table also indicates,
for the last growing season at each location, the approximate net acres farmed
by Gargiulo L.P. by location, the approximate number of pounds of tomatoes
produced by Gargiulo L.P. and those produced by contract growers. The figures
set forth below may not be indicative of future results.
<TABLE>
<CAPTION>
COMPANY CONTRACT
LAST COMPANY FARMED FARMED
MONTHS IN GROWING FARMED PRODUCTION PRODUCTION
LOCATION PRODUCTION SEASON NET ACRES (POUNDS) (POUNDS)
- - -------- ---------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Quincy, Florida.... July-Nov 1995 282 11,887,150 10,491,075
Naples, Florida.... Aug-May 1994/95 1,557 65,808,821 39,777,325
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
COMPANY CONTRACT
LAST COMPANY FARMED FARMED
MONTHS IN GROWING FARMED PRODUCTION PRODUCTION
LOCATION PRODUCTION SEASON NET ACRES (POUNDS) (POUNDS)
- - -------- ---------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Sinaloa State, Mexico... Sept-Apr 1994/95 338 15,415,156 --
Puerto Rico............. Oct-Mar 1994/95 420 17,212,650 --
Quincy, Florida......... Mar-June 1995 255 11,175,025 10,554,425
Firebaugh, California... Apr-Oct 1995 2,959 57,594,160 3,145,015
Mappsville, Virginia.... Apr-Oct 1995 393 19,848,300 --
</TABLE>
Berries. During Fiscal 1995, Gargiulo L.P. grew approximately 3.8 million
flats of fresh strawberries and cooled approximately 7.7 million flats of
fresh strawberries through its own farming operations and pursuant to
relationships with contract growers. On a smaller scale, Gargiulo L.P. also
cools and markets raspberries, grown by itself and others, and blackberries
and blueberries grown by others.
For the fiscal years ended June 30, 1993, 1994 and 1995, product revenues
from Gargiulo L.P.'s berry operations were approximately $9.5 million, $20.8
million, and $23.4 million, respectively, representing approximately 11.7%,
20.9% and 20.5%, respectively, of Gargiulo L.P.'s total revenues for those
fiscal years.
Berry Production, Cooling and Warehousing Locations. Set forth below is a
table which illustrates Gargiulo L.P.'s ability, by location, to produce
berries. The table also indicates, for the last growing season at each
location, the approximate net acres farmed by Gargiulo L.P. by location, the
approximate number of flats of berries produced by Gargiulo L.P. and those
produced by contract growers. The figures set forth below may not be
indicative of future results.
<TABLE>
<CAPTION>
LAST COMPANY COMPANY CONTRACT
MONTHS IN GROWING FARMED FARMED FARMED
LOCATION PRODUCTION SEASON NET ACRES PRODUCTION PRODUCTION
- - -------- ---------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Naples, Florida............. Aug-May 1994/95 64 63,750 --
Oxnard, California.......... Feb-Apr 1995 103 369,937 313,161
Santa Maria, California..... Feb-Apr 1995 90 325,465 --
Watsonville, California..... May-Nov 1995 661 3,087,101 2,081,576
</TABLE>
Other Products
Potatoes. In Fiscal 1995, Gargiulo L.P. grew and cultivated its first crop
of red potatoes in southwest Florida. The potatoes were subsequently harvested
during the winter months of Fiscal 1995. Gargiulo L.P.'s strategy is to
position itself to produce and market high quality fresh red potatoes during
the winter to take advantage of market timing and potentially stronger prices
in competition with potatoes obtained from storage by other producers.
Peppers. During Fiscal 1995, Gargiulo L.P., as part of its joint venture
with a Mexican grower, produced and distributed red, yellow and green peppers
from Mexico from January through May. This represented Gargiulo L.P.'s initial
attempt to produce and distribute peppers.
Chilean Winter Fruits. Since the mid 1980's, Gargiulo L.P. and the
Predecessors have imported and sold during the winter in the United States,
apricots, asparagus, grapes, nectarines, pears, plums and raspberries from
Chile and other South and Central American countries. Gargiulo L.P., through
its Chilean subsidiary, has interests, together with its Chilean partners, in
grape vineyards and nectarine orchards located in Chile. Gargiulo L.P.'s focus
is on importing and distributing high quality fruit during the winter months
in the United States and Canada.
Marketing, Sales and Distribution
Organization. Gargiulo L.P.'s marketing and sales efforts are principally
focused on the sale of tomatoes in the commodity markets. Marketing and sales
efforts are principally conducted by a telemarketing group.
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<PAGE>
Pricing is typically based on factors such as USDA grade designation and fruit
size. The appearance of blemishes and other visual defects on the fruit
influences the USDA grade designation. In general, a greater number of defects
results in a lower grade and a lower price. Also, larger fruit commands a
higher price. Gargiulo L.P. generally makes weekly commitments for price,
though it sometimes enters into longer term fixed price contracts with respect
to berries.
The sales group is currently focused on two principal products: (i) tomatoes
and vegetables; and (ii) berries and Chilean winter fruit. The principal
tomato customers for Gargiulo L.P.'s products are wholesalers, repackers and
brokers. A relatively small portion of tomatoes are sold directly to retailers
and food service accounts. The berry and fruit sales are somewhat more skewed
towards retail supermarkets and larger food service distributors and to a
lesser extent to wholesalers.
Gargiulo L.P. has created a new marketing and sales group for the consumer
branded tomato program. The focus of this group is initially to conduct market
research to determine the viability and the direction of the branded program.
Upon implementation of the branded tomato strategy, this group will be
involved with the advertising program for the branded tomatoes, as well as
with the direct marketing of branded tomatoes to retailers and food service
accounts.
Customers. During Fiscal 1995, no customer comprised more than 3% of
Gargiulo L.P.'s sales in any product area except for potatoes, which is
described in more detail below.
The geographical distribution of Gargiulo L.P.'s sales is weighted to the
southeast and northeast portions of the United States. In Fiscal 1995,
Gargiulo L.P.'s top twenty customers accounted for approximately 20% of its
total sales revenue. Thirteen of such customers were wholesalers/repackers,
five were retail supermarkets and two were food service accounts.
Gargiulo L.P. believes that during Fiscal 1995 approximately 30% of its
sales of berries were made to retail chain supermarkets, approximately 20%
were made to wholesale grocers, 10% were made to food service distributors,
approximately 30% are made to receivers and jobbers and 10% were sold to
others.
In Fiscal 1995, Gargiulo L.P. entered into an arrangement to supply red
potatoes to Green Giant, a unit of Pillsbury, Inc. In the fiscal year ending
June 30, 1996, Gargiulo L.P. intends to market red potatoes through its own
marketing group.
Virtually all of the produce sold or otherwise distributed by Gargiulo L.P.
is shipped by truck. The tomatoes produced in Puerto Rico and sold in the
continental United States and/or Canada are shipped by boat to the United
States, and then distributed by truck. Berries and asparagus produced in South
and Central America are air freighted to the United States. Other products
from Chile are shipped by boat to the United States. Tomatoes and berries are
generally sold in the open market free-on-board (F.O.B.) packing house.
Competition
Tomatoes. The tomato industry is characterized by numerous competitors.
Gargiulo L.P. believes that a small group of participants produces over one-
third of the tomatoes sold in the United States. Of these major producers,
only Gargiulo L.P. has a presence in each of Florida, Virginia, Puerto Rico,
California and Mexico. Gargiulo L.P. believes that because of the ease of
entry into and exit from the fresh tomato market, there are a large number of
competitors, and their identity may change from one growing season to the
next. In addition, Gargiulo L.P. believes it will face increasing competition
from Mexico due to the favorable climate and low labor costs. See "Risk
Factors--Competition."
Berries. The berry industry is also characterized by a small number of
significant producers, including Gargiulo L.P., and numerous smaller
competitors. The principal product in the berry industry is strawberries,
followed by raspberries and blackberries.
78
<PAGE>
Trademarks and Licenses
Gargiulo L.P. has federally registered the trademark NTGargiulo and is in
the process of registering the trademark "Gargiulo" and "Gargiulo Farms."
Applications for these trademarks are also pending in Canada, Mexico and
Puerto Rico. Gargiulo L.P. may also seek registration of other trademarks in
connection with its branded tomatoes. Gargiulo L.P. also maintains state
trademark registrations in Florida for the names "Beefstake" and "Neapolitan
Brand." Gargiulo L.P. maintains a state trademark registration for "Sunpic" in
Virginia.
Research and Development
Gargiulo L.P. began investing in research and development in the early
1980's through its affiliate, BHN Joint Venture ("BHN"). At its inception, the
primary focus of the research and development effort was the seed development
program, designed to increase tomato yield and increase fruit size. The seed
development program was the precursor to Gargiulo L.P.'s current research with
respect to developing a tomato with the sufficient attributes to qualify for
the branded tomato program. Research efforts remain concentrated on obtaining
better yield per acre, and producing a tomato with attributes such as better
taste, texture and color. Other tomato research goals include the development
of tomatoes which are resistant to insects, fungal and bacterial disease,
which have high temperature fruit set and which have improved flavor, firmness
and color, and the development of seeds designed to grow best in the diverse
climatic areas in which Gargiulo L.P. operates. The research program has
produced varieties that are grown by Gargiulo L.P. and which Gargiulo L.P.
believes have resulted in higher yields per acre than varieties available from
competing seed companies. This is accomplished through cross breeding and
selection of various trait combinations to produce parent seeds which can be
used to produce hybrid plants which have the desired characteristics. Gargiulo
L.P. entered into a Development/License Agreement with Monsanto dated as of
December 23, 1992, for the purpose of developing transgenic tomatoes for
commercial application. To date research relating to the transgenic tomato has
not yielded a tomato with a longer shelf life which can be produced on a
commercially feasible basis.
Gargiulo L.P. believes that one of the competitive strengths of its tomato
research effort lies in the ownership of its own seed production facility in
Chile and its tight linkage to its commercial operations. This affords
Gargiulo L.P. the opportunity to screen large numbers of potential commercial
varieties in commercial field trials with direct feedback from the market.
Gargiulo L.P. also conducts research on strawberries, although to a
significantly lesser extent than its research on tomatoes. Current strawberry
research efforts are concentrated in attempting to develop a proprietary
variety with improved taste and yield. Gargiulo L.P. currently estimates that
it is at least two years from developing a commercially marketable variety and
there can be no assurance that such a variety can actually be developed.
For the fiscal years ended June 30, 1993, 1994 and 1995, Gargiulo L.P.
incurred research and development expenses of approximately $2.2 million, $3.5
million, and $3.9 million, respectively, which included approximately $1.6
million in each such year, except $800,000 in 1993, related to the Development
Agreement with Monsanto. While Gargiulo L.P. believes its research program has
yielded important benefits, the future success of the research is unknown and
is subject to substantial risk. See "Risk Factors--Risks Relating to Newco."
Patents and Trade Secrets
Gargiulo L.P. considers its tomato germplasm technology, which is needed in
the production of its proprietary hybrid tomato seed, to be trade secrets.
Gargiulo L.P. attempts to protect such trade secrets by use of security
measures with its key research employees. There is no assurance that Gargiulo
L.P. will be successful in protecting these valuable trade secrets or that
others will not develop tomato seeds having equal or superior characteristics.
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Government Regulations
The federal regulatory agencies most involved in the predominant business of
Gargiulo L.P.--the production and marketing of fresh fruit and vegetables--are
the USDA and the FDA. The USDA sets standards for raw produce and governs its
inspection and certification. Under the Perishable Agricultural and
Commodities Act ("PACA"), the USDA exercises broad control over the marketing
of produce in domestic and foreign commerce, sets standards of fair conduct as
to representations, sales, delivery, shipment and payment for goods and
regulates the licensing of produce merchants and brokers. Gargiulo L.P.'s
growing operations are also subject to substantial oversight by the
Environmental Protection Agency (the "EPA") in matters ranging from the use of
fertilizers and pesticides to the condition of farmland and wetlands
protection. Of particular concern in this regard is the current investigation
by the EPA and other environmental regulators into the possible harmful
effects on the ozone layer of methyl bromide, a chemical widely used by
Gargiulo L.P. and other agricultural producers.
In its more specialized research operations (primarily through BHN),
Gargiulo L.P. is subject to the coordinated oversight of the USDA, the FDA and
the EPA. These agencies have joint authority over all phases of the
development of certain genetically engineered plants, from research and
commercial applications through growing and transportation. The USDA also has
specific authority, under the Federal Seed Act, to oversee the quality and
labelling of commercial seed products, such as those developed by BHN.
Through its extensive use of farm labor in its growing operations, Gargiulo
L.P. is subject to supervision by the United States Department of Labor, under
both the Fair Labor Standards Act and the Occupational Safety and Health Act;
and the prevalence of foreign workers in this sector of Gargiulo L.P.'s work
force necessarily involves oversight by the Immigration and Naturalization
Service.
Almost every aspect of federal regulation is accompanied by regulation on
the state level, in each jurisdiction where Gargiulo L.P. has growing and/or
research operations. In particular in Florida, the South Florida Water
Management District regulates surface water management and irrigation water
withdrawals. Gargiulo L.P. must also, in its Mexican operation, comply with
the requirements of Mexican law, most importantly Mexico's environmental
protection law.
Employees
As of June 30, 1995, Gargiulo L.P. employed approximately 2,200 people, of
whom 200 were salaried full-time employees, 217 were full-time hourly farm and
packing house personnel, 8 were part-time employees, and approximately 1,775
were seasonal workers. Gargiulo L.P. believes relations with its employees are
good. None of Gargiulo L.P.'s work force is presently unionized, although
there is no assurance that unions, especially for farm workers, may not
attempt to unionize Gargiulo L.P.'s workers in the future.
Properties
Gargiulo L.P.'s principal properties presently consist of its executive
offices and sales offices and related packing facility located in Naples,
Florida; the BHN research facility in Bonita Springs, Florida; tomato packing
facilities in Palmetto, Florida; Quincy, Florida; Mappsville, Virginia; Santa
Isabela, Puerto Rico; and Firebaugh, California; administrative offices in
Watsonville, California; a sales office in Nogales, Arizona; and various owned
and leased farmland. Gargiulo L.P. owns or leases farmland in and around
Naples and Quincy, Florida; Watsonville, Oxnard, Santa Maria and Firebaugh,
California; Mappsville, Virginia; Santa Isabela, Puerto Rico; and Sinaloa
State, Mexico. See the tables included in "--Products" above for additional
information concerning the properties of Gargiulo L.P.
Gargiulo L.P. primarily grows tomatoes and potatoes in and around the
Naples, Florida area and primarily grows tomatoes on its properties in and
around Mappsville, Virginia; Santa Isabela, Puerto Rico; Firebaugh,
California; and Sinaloa State, Mexico, although peppers and other vegetables
are also grown in Sinaloa State,
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Mexico. Gargiulo L.P. primarily grows strawberries and raspberries on its
properties in Watsonville, Santa Maria and Oxnard, California.
The majority of Gargiulo L.P.'s farmland is leased pursuant to relatively
short-term leases. Thus, the amount of farmland leased in any of the
geographic areas in which Gargiulo L.P. operates can vary from growing season
to growing season.
In the event the Collier Transaction is successfully completed, Gargiulo
L.P. believes it will be in a position to sell certain property owned by
Gargiulo L.P. located in Collier County, Florida.
Internal Control Systems
Gargiulo L.P. and its predecessors were for many years private companies
controlled by the Gargiulo family and related parties. Internal control
systems of Gargiulo L.P. are considered adequate to identify material
misstatements in reporting financial statements. However, such systems could
be strengthened in several areas, including the segregation of duties in key
processes, such as procurement, payroll and cash, control over farm spending
as well as inadequate separation of Gargiulo L.P. business activities from
other Gargiulo family interests. While management of Gargiulo L.P. exercises a
high level of control, management is taking steps to improve such controls.
Legal Proceedings
Gargiulo L.P. is a defendant in two pending cases which involve personal
injury claims relating to a vehicle accident in which numerous migrant labor
workers being transported to the farm of Gargiulo & Dresick Associates (which
was being farmed under contract by Dresick Farms, Inc.) were killed or
injured. The two cases, Alvertano Alberto Jiminez; et. al. v. Gargiulo &
Associates; Pat Kreger, Inc., Manuel Vega; Robles Rios; Jesus Loza and Samuel
Santiago Vazquez, and Jose Vasquez; et. al. v. Gargiulo & Associates; Pat
Kreger, Inc., Manuel Vega; Robles Rios; Jesus Loza and Samuel Santiago
Vazquez, were both filed on October 18, 1995, in the United States District
Court for the Eastern District of California. The company hiring and
transporting such farm workers was Pat Kreger, Inc., an independent contractor
engaged by Dresick Farms, Inc. to arrange for migrant farm labor for the farm.
The plaintiffs allege that the vehicle in question was in violation of one or
more federal and state safety regulations governing farm labor vehicles. The
plaintiffs are seeking general damages, including compensation for pain and
suffering; special damages, including past, present and future medical
expenses; compensation for the loss of past and future income; and punitive
damages in an unspecified amount. Gargiulo L.P.'s insurance carriers have been
contacted regarding these lawsuits. It has not yet been determined whether
Gargiulo L.P.'s insurance will be sufficient to cover these claims, if any.
Gargiulo L.P. intends to vigorously defend itself against these claims.
Otherwise, Gargiulo L.P. currently is not a party to any pending legal
proceedings, other than ordinary routine litigation incidental to its
business.
Certain Relationships and Related Transactions
Gargiulo L.P. has numerous business relationships with affiliates. See
"Related Party Transactions."
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Gargiulo L.P. evolved from the consolidation, on December 23, 1992, of
several ventures held by four individuals and Tomato Investment Associates,
Inc., a wholly-owned subsidiary of Monsanto. Prior to the formation of
Gargiulo L.P., the financial statements of the entities owned by the four
principals (collectively, the "Predecessor Company") were combined because
they were under common control and management.
Gargiulo L.P. is an agricultural producer, primarily of tomatoes and
strawberries, and is also engaged in various business activities related to
the packing, marketing, brokering, warehousing, distribution and breeding
research of fresh market vegetables and fruit.
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Results of Operations
The following table sets forth, for the periods indicated, certain items in
Gargiulo L.P.'s consolidated/combined statements of operations expressed as a
percentage of sales:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED SEPTEMBER
JUNE 30, 30,
12 MONTHS ENDED ------------ -------------
JUNE 30, 1993 1994 1995 1995 1994
--------------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Product Revenues:
Tomatoes..................... 54.3% 50.6% 52.7% 37.1% 45.3%
Strawberries................. 11.7 20.9 20.5 35.3 28.4
Other........................ 7.5 7.3 7.7 7.1 6.5
Service Revenues: 26.5 21.2 19.1 20.5 19.8
----- ----- ----- ----- -----
Total Revenues............. 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== =====
Cost of Revenues:
Product Costs:
Tomatoes..................... 41.3 45.1 48.3 52.0 40.9
Strawberries................. 10.3 19.4 21.9 36.7 29.2
Other........................ 7.7 6.6 6.6 6.9 5.4
Service Costs................. 12.4 11.3 8.9 8.1 10.1
----- ----- ----- ----- -----
Total Cost of Revenues..... 71.7 82.4 85.7 103.7 85.6
----- ----- ----- ----- -----
Gross profit (loss)............ 28.3 17.6 14.3 (3.7) 14.4
Selling, general and
administrative expenses....... 20.2 15.5 15.9 17.7 13.4
----- ----- ----- ----- -----
Operating Income (loss)........ 8.1 2.1 (1.6) (21.4) 1.0
Other income (expense), net.... (1.7) (1.8) (0.3) 3.0 (1.5)
Equity share of net income
(loss) of unconsolidated
affiliates.................... 0.0 0.0 0.4 (0.5) 0.0
Benefit from income taxes...... 0.2 0.1 0.0
----- ----- ----- ----- -----
Net income (loss).......... 6.6% 0.4% (1.5%) (18.9%) (0.5%)
===== ===== ===== ===== =====
</TABLE>
Fiscal Quarter Ended September 30, 1995 Compared to the Fiscal Quarter Ended
September 30, 1994
Revenues
Revenues for the first quarter of the 1996 fiscal year (the three month
period ending September 30, 1995) were $28.6 million, a 4.0% increase from the
corresponding quarter in the previous fiscal year. Tomato sales decreased 15%
to $10.6 million from $12.5 million, as lower prices were only partially
offset by increased volumes in both Virginia and California. The higher
volumes resulted primarily from an increase in acres harvested for the three
months ended September 30, 1995 compared with those for the comparable period
in 1994.
Berry revenues increased 29.5% to $10.1 million from $7.8 million due to an
increase in flats harvested of approximately 300,000, or 21%, as a result of
increased acreage in the quarter ended September 30, 1995.
Service revenues increased 7.5% to approximately $5.9 million due to the
increased tomato volumes in California and Virginia, partially offset by lower
berry volumes from outside growers.
Cost of Revenues
Cost of revenues in the quarter ending September 30, 1995 increased by 26.1%
to $29.7 million from $23.5 million. The increase in cost of revenues resulted
from increased volume and acreage of tomatoes in Virginia and California, and
increased berry farming acreage in California. Yields in California for both
tomatoes and berries were lower than in the prior year's quarter, increasing
costs per unit. Gross profit decreased by $5.0 million, falling to a negative
(3.7%) from 14.4% in the corresponding quarter of fiscal year 1995. $4.6
million of this decrease occurred in Gargiulo L.P.'s California tomato
operations, with the remainder occurring in Virginia.
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Selling, General & Administrative Expenses
Selling, General & Administrative expenses for the quarter ending September
30, 1995 were $5.1 million, or 17.7% of revenues, up from $3.7 million, or
13.4% of revenues in the comparable prior period. This increase resulted from
expenditures related to the initial stages of the Gargiulo L.P.'s branded
tomato strategy.
Interest Expense
Interest expense increased to $605,000 from $383,000 in the prior year
quarter. This increase was due both to increased borrowings and higher
interest rates.
Minority Interest Income (Expense)
Income from minority interests was $1.3 million during the quarter ended
September 30, 1995, versus expense of $0.3 million in the prior year period.
The income from minority interests in the current period resulted primarily
from a $3.6 million loss incurred by Gargiulo L.P.'s tomato operation in
California. Expense from minority interests in the quarter ending September
30, 1994 primarily resulted from income earned during the period from the same
California tomato operation.
Liquidity & Capital Resources
Net cash provided from operations in the three month period ending September
30, 1995 was $2.3 million. Contributing to this amount were reductions in
receivables of $8.0 million and inventories of $1.5 million, as well as
depreciation and amortization expense of $1.2 million. These were partially
offset by the net loss for the period of $5.4 million and a reduction in
accounts payable, accrued expenses and amounts due to growers of $2.3 million.
Capital expenditures in the period totalled $4.3 million.
$0.5 million of cash was generated from financing activities. $3.6 million
of cash was raised through a financing, in the form of a lease obligation,
related to an aircraft acquisition. This was offset by repayments of term-
notes and capital lease obligations, and a reduction in the outstanding line
of credit balance, which collectively totalled $3.1 million.
Fiscal 1995 Compared to Fiscal 1994
Revenues
Revenues in Fiscal 1995 increased 14.6% to $114.1 million from $99.5 million
in the year ended June 30, 1994 ("Fiscal 1994"). Tomato sales increased 19.5%
to $60.1 million from $50.3 million, primarily due to production gains in
Quincy, Florida and Puerto Rico, coupled with improved fresh tomato prices in
Quincy and Puerto Rico, and first time production in Virginia and Mexico. The
increase in production in Quincy and Puerto Rico was in response to a loss of
third party tomato volume and the need to maintain packing house efficiency.
New production in Virginia reflected Gargiulo L.P.'s desire to supply existing
East Coast customers with product during the summer months. The addition of a
Mexican operation afforded Gargiulo L.P. an opportunity to supply West Coast
markets and to insure supply when Florida production is down. A decrease in
Naples fresh tomato production was offset by a slight improvement in price
when comparing Fiscal 1995 to Fiscal 1994. The increase in tomato production
in Fiscal 1995 was slightly offset by a 17.7% decrease to $12.6 million from
$15.4 million in repack operations.
Sales of fresh strawberries increased 12.1% to $23.4 million from $20.8
million due to an increase in strawberry production of approximately 400,000
flats. The increase in flat production was due primarily to an increase in
acreage farmed in California.
Other product revenues increased 20.3% to $8.8 million from $7.3 million due
to the addition of potato and pepper product lines in Fiscal 1995.
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Service revenues remained relatively flat, increasing only $700,000 to $21.7
million in Fiscal 1995 from $21.0 million in Fiscal 1994. This modest increase
reflects the net result of an increase in strawberry cooling charges per flat,
off-set by a reduction in tomato packing charges resulting from fewer boxes
packed for third party growers.
Cost of Revenues
Cost of revenues in Fiscal 1995 increased 19.2% to $97.7 million from $82.0
million in Fiscal 1994. Gargiulo L.P.'s gross profit in Fiscal 1995 was 14.3%,
compared to 17.6% in Fiscal 1994. This increase in cost was primarily due to
costs associated with the increase in Gargiulo L.P.'s production of fresh
tomatoes and strawberries. While production levels did increase from Fiscal
1994 to Fiscal 1995, the decline in Gargiulo L.P.'s gross profit percentage
was attributable to start-up operations in Virginia during 1995, with lower
than normal margins, operating problems in the repack operations during 1995
and tomato production shortfalls in California because of weather, virus and
operating problems.
Selling, General and Administrative Expense
Selling, general and administrative expenses were $18.1 million in Fiscal
1995, a 17.7% increase from $15.4 million in Fiscal 1994. This increase was
principally due to Gargiulo L.P.'s increased level of operations. As a
percentage of total revenue, selling, general and administrative expenses were
15.9% and 15.5% in Fiscal 1995 and 1994, respectively. Selling, general and
administrative expenses as a percentage of sales increased slightly due to an
increase in general and administrative expenses necessary to support Gargiulo
L.P.'s expansion. Gargiulo L.P. is planning to enter into a branded tomato
market in Fiscal 1996 which is likely to result in significant initial
marketing, promotion, distribution and selling expenses.
Interest (Expense) Income, Net
Fiscal 1995 interest expense, net of interest income, was $1.7 million, a
97.9% increase over Fiscal 1994 interest expense, net of interest income, of
$0.9 million. The increase was due to an increase of $8.5 million in the
average borrowings outstanding during Fiscal 1995 as compared to Fiscal 1994
and an increase in the weighted average interest rate charged on such
borrowings from 6.1% to 7.8%.
Fiscal 1994 Compared to Fiscal 1993
Revenues
Revenues in Fiscal 1994 increased 22.5% to $99.5 million from $81.2 million
for the 12 months ended June 30, 1993 ("Fiscal 1993"). Tomato sales increased
14.1% to $50.3 million from $44.1 million, primarily due to new operations in
California and an aggregate increase of 9.5 million pounds from the Naples and
Puerto Rico operations. Offsetting the increase in tomato production were
significant decreases in the market price of tomato crops from Naples and
Quincy. In addition, repack operations in Fiscal 1994 increased 22.7% to $15.4
million from $12.5 million for Fiscal 1993. This increase was primarily due to
a 5.9 million pound increase in repack operations in Fiscal 1994 versus Fiscal
1993.
Fresh strawberry sales increased 118.9% to $20.8 million in Fiscal 1994 from
$9.5 million in Fiscal 1993 due to an increase in fresh strawberry production
of 1.6 million flats and an increase in market prices.
Other product revenues increased 20.7% from $6.0 million in Fiscal 1993 to
$7.3 million in Fiscal 1994. This increase was principally due to additional
seed sales by BHN to a new customer in California.
Service revenues remained relatively constant, decreasing $500,000 to $21.0
million in Fiscal 1994 from $21.5 million in Fiscal 1993. The reduction in
service revenues was the net result of a 1.2 million decrease in boxes packed
for third party tomato growers, which was partially off-set by a 4.5 million
increase in flats processed for third party strawberry growers.
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Cost of Revenues
Cost of revenues in Fiscal 1994 increased 40.7% to $82.0 million from $58.3
million in Fiscal 1993. Gargiulo L.P.'s gross profit in Fiscal 1994 was 17.6%,
compared to 28.3% in Fiscal 1993. This increase in cost was primarily due to
costs associated with the increase in Gargiulo L.P.'s production of fresh
tomatoes and strawberries. Additionally, the decline in gross profit in Fiscal
1994 to 17.6% from 28.3% in Fiscal 1993 is attributable to a decline in the
market price for fresh tomatoes.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $15.4 million in Fiscal
1994, a 6.1% decrease from $16.4 million in Fiscal 1993. A significant portion
of the decrease resulted from various non-capitalizable expenses incurred in
Fiscal 1993 in connection with the formation of Gargiulo L.P. As a percentage
of total revenue, selling, general and administrative expenses were 15.5% and
20.2% in Fiscal 1994 and Fiscal 1993, respectively. As a percentage of
revenues, selling, general and administrative expenses decreased principally
due to the allocation of fixed overhead costs over a larger revenues base.
Interest (Expense) Income, Net
Fiscal 1994 interest expense, net of interest income, was $0.9 million, a
12.5% increase over interest expense, net of interest income, for Fiscal 1993
of $0.8 million. Interest expense for Fiscal 1994 and for Fiscal 1993 was $1.2
million in each period. Although no period to period fluctuation in expense
occurred, there was an increase of $2.4 million in the weighted average
borrowings outstanding during Fiscal 1994 as compared to Fiscal 1993, which
was offset by a decrease in the weighted average interest rate charged from
7.1% to 6.1%.
Liquidity and Capital Resources
During Fiscal 1995, Gargiulo L.P. financed its growth in sales and related
capital expenditures and other working capital requirements principally from
operating cash flow and from net proceeds from long term notes payable.
Gargiulo L.P. has a $17.5 million line of credit facility with a financial
institution and, subject to certain limitations, a $10 million credit
agreement with Monsanto. As of June 30, 1995, Gargiulo L.P.'s borrowings under
the line of credit facility with the financial institution were $12.9 million.
No amounts were outstanding under the credit agreement with Monsanto. As of
June 30, 1995, Gargiulo L.P. had $4.6 million available for working capital
purposes under the line of credit facility with the financial institution and
the credit agreement with Monsanto.
The line of credit facility with the financial institution bears interest at
the financial institution's LIBOR, as defined, plus 1.35% and expires on
November 15, 1996. The facility contains various restrictive covenants which
include minimum working capital requirements, a specified current maturity
coverage ratio and the maintenance of a specified ratio of total liabilities
to tangible net worth. The specified ratios of current maturity coverage and
of total liabilities to tangible net worth covenants had not been met as June
30, 1995; however, the lender has waived the requirements to maintain such
ratios through June 30, 1996. Gargiulo L.P. anticipates entering into a new or
modified credit facility arrangement before June 30, 1996.
The credit facility with Monsanto will terminate upon the Effective Time and
all outstanding amounts due thereunder, including any amounts borrowed in
connection with the Collier Transaction, will be converted into loans under
the Gargiulo Credit Facility Agreement.
Gargiulo L.P. has various long-term notes payable and certain capitalized
lease obligations with certain financial institutions and other third parties.
Many of these obligations contain various restrictive covenants. As of June
30, 1995 Gargiulo L.P. had not maintained certain ratios specified by a $2.3
million mortgage loan; however, the lender has waived the requirements to
maintain such ratios through June 30, 1996.
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Net cash provided by operating activities was $3.5 million in Fiscal 1995.
Contributing to cash provided by operating activities are $3.8 million of
depreciation and amortization, a decrease of $2.0 million in accounts
receivable and an increase of $4.5 million in accounts payable, accrued
expenses and amounts due to growers. Partially offsetting these amounts was
the net loss for Fiscal 1995 of $1.7 million, an increase in inventories of
$2.4 million and an increase in other operating assets of $1.8 million.
Capital expenditures were approximately $6.5 million in Fiscal 1995. Major
items included in such total related to an expansion of the BHN research
program, an investment in the repack business, investment in a raspberry
program in California and expenditures in Virginia. The remainder was related
to investments and improvements.
Gargiulo L.P.'s working capital increased from $14.8 million as of June 30,
1994 to $20.6 million as of June 30, 1995. Gargiulo L.P.'s line of credit
facility with a financial institution was renewed in December 1994. The
increase in working capital resulted from the extension of the due date of the
line of credit facility to November 15, 1996 and the related classification of
this facility as a long-term liability. The increase in working capital
resulting from the classification of the line of credit was partially offset
by reductions in working capital resulting primarily from capital expenditures
and long-term debt payments. Outstanding indebtedness of $26.7 million is
classified as long-term debt and therefore is not included for purposes of
calculating working capital.
COLLIER FARMS
Business, Products and Distribution
Collier Farms is a vertically integrated grower/shipper of fresh market
tomatoes and other vegetables based in southwest Florida. Business activities
include farming, packing and marketing fresh tomatoes and other vegetables, as
well as growing vegetable transplants. Collier Farms produces tomatoes during
the fall, winter and spring months and sells its product to repackers, brokers
and other intermediaries. Collier Farms' tomatoes are packed under the
"Collier Classic" label.
Commodity produce sales are the primary source of revenues, comprising
approximately 85% of Collier Farms revenues over the past 5 fiscal years. The
majority of sales are to repackers and wholesale brokers who service retail
and food service customers in the U.S. and Canada.
Collier Farms has a broad customer base with no single customer representing
more than 5% of sales. Approximately 30% of production occurs during the
months of October through December, 20% occurs during January and February,
and 50% during March through May. Vegetable transplant customers are primarily
located in central and south Florida, with only a small percentage of its
production shipped out of state.
Virtually all of Collier Farms' fresh produce is shipped by truck.
Typically, it is the customer's responsibility to arrange for delivery,
although in a few cases Collier Farms will arrange for transportation for an
additional fee.
Research and Development
Research and development investments have been limited to less than $250,000
per year over the past five fiscal years. The three primary areas of focus
have been (i) variety evaluation, (ii) refinement of production practices, and
(iii) improved control of insects/pests, plant diseases and weeds. In
addition, considerable emphasis has been devoted to premium product
development during the past three years. Most research projects have been
entirely in-house and on-farm. However, cooperative research efforts with the
USDA, university scientists and private sector companies have been increasing.
Some of these latter projects are contractual in nature and involve longer
term impacts on farm activities.
Government Regulations
Collier Farms' operations include activities regulated under federal, state,
and local authorities in the same manner as Gargiulo L.P. See "Tomato
Investment Associates, Inc.--Garguilo L.P.--Government Regulations."
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Employees
Collier Farms employs 200 full-time managers, supervisors, professional,
clerical and hourly production employees. There are currently no employees
working on a part-time basis.
Seasonal harvesting labor averages 450 employees. These employees are
recruited by Collier Farms employed crew leaders. The I-9 processing is
contracted through Immokalee Ag Workers, Inc., a local company owned and
operated by area agribusiness companies, including Collier Farms. Immokalee Ag
Workers, Inc. has been in operation since 1987. Seasonal harvest employees are
paid by Collier Farms and are covered under Collier Farms' workers'
compensation policy.
Seasonal employees for packing house operations average 230 workers. These
employees are recruited through Collier Farms' employment office. The I-9
processing is done through the State Job Service. Seasonal packing house
employees are paid by Collier Farms and are covered under Collier Farms'
workers' compensation policy.
Properties
The Collier Farms assets include four properties located in southwest
Florida. These properties are the sites of the two packing houses, proposed
seasonal labor housing and transplant nursery.
Leased properties include areas which are used in the growing operations.
Leased properties are primarily comprised of lands owned by Collier
Enterprises and its affiliates. These areas have historically been used for
vegetable production and total approximately 11,000 acres. These properties
will be subject to a master lease agreement which will give Gargiulo L.P.
certain rights to utilize these properties. See "Tomato Investment Associates,
Inc.--Gargiulo L.P.--Acquisition of Collier Farms."
Collier Farms leases two additional properties in central Florida. These
farms are used for early fall and late spring production of tomatoes and other
vegetables. Each location is approximately 200 net acres and is equipped with
low volume irrigation systems.
The tomato and vegetable packing houses are located in Immokalee, Florida.
Product is transported from the field to the packing houses for packing and
cooling prior to shipment.
Legal Proceedings
Collier Farms is not a party to any pending legal proceedings, other than
ordinary routine litigation incidental to its business.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Collier Farms is a vertically integrated grower/shipper of fresh market
tomatoes and other vegetables based in southwest Florida. Business activities
include farming, packing and marketing fresh tomatoes and other vegetables, as
well as growing and marketing vegetable transplants. Collier Farms produces
tomatoes during the fall, winter and spring months and sells its fresh produce
to repackers, brokers and other intermediaries. Collier Farms' tomatoes are
packed under the "Collier Classic" label.
Product Revenues
The principal product of Collier Farms is fresh tomatoes. Collier Farms
produced, packed and shipped approximately 60.2, 48.0 and 53.9 million pounds
of fresh tomatoes during the Fiscal years 1993, 1994 and 1995, respectively.
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<PAGE>
The second largest product of Collier Farms is fresh peppers, including
bell, cubanelle and other specialty varieties. During the Fiscal years 1993,
1994 and 1995, Collier Farms produced, packed and shipped approximately 0.5,
0.6 and 0.4 million boxes of peppers, respectively.
Other Revenues
In connection with the production of fresh tomatoes, vegetables and
vegetable transplants, Collier Farms also provides packing, palletizing,
cooling, degreening, handling and sales services to third parties. Vegetable
transplants' sales and fees for packing, handling and sales services are
charged to outside growers. Palletizing, packing and degreening fees are
collected from produce customers, primarily repackers, brokers and other
intermediaries.
Results of Operations
The following table sets forth certain items in Collier Farms' combined
statements of operations expressed as a percentage of total revenues for the
Fiscal 1993, 1994 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
----------------------------- ---------------------
1993 1994 1995 1994 1995
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Tomatoes.............. 64.1% 64.8% 68.0% -- --
Peppers............... 17.0 23.1 18.3 -- --
Other................. 18.9 12.1 13.7 100.0% 100.0%
-------- -------- -------- --------- ---------
Total Revenues.......... 100.0 100.0 100.0 100.0 100.0
-------- -------- -------- --------- ---------
Cost of Revenues
Tomatoes.............. 46.1 57.5 51.4 -- --
Peppers............... 14.3 24.6 14.0 -- --
Other................. 14.1 13.7 14.3 162.6 229.1
-------- -------- -------- --------- ---------
Total Cost of Revenues.. 74.5 95.8 79.7 162.6 229.1
-------- -------- -------- --------- ---------
Gross profit............ 25.5 4.2 20.3 (62.6) (129.1)
Selling, general and ad-
ministrative expenses.. 20.5 27.3 25.9 (247.3) (379.8)
-------- -------- -------- --------- ---------
Operating income
(loss)................. 5.0 (23.1) (5.6) (309.9) (508.9)
Other income, net....... 5.8 11.0 4.3 28.1 37.2
-------- -------- -------- --------- ---------
Net income (loss)....... 10.8% (12.1)% (1.3)% (281.8)% (471.7)%
======== ======== ======== ========= =========
</TABLE>
Fiscal Quarter Ended September 30, 1995 Compared to Fiscal Quarter Ended
September 30, 1994
Revenues
Revenues in the quarter ended September 30, 1995 decreased 29.3% from
$495,000 in 1994 to $350,000. This variance is due to decreased volume of
transplant sales which has been caused by disease pressures during the current
fiscal year.
Costs of Revenues
Costs of revenues decreased to $802,000 from $805,000 from the three months
ended September 30, 1994 to the three months ended September 30, 1995. The
increase of costs of revenues as a percentage of revenues is a result in the
decrease in revenues discussed above.
Selling, General and Administrative Expenses (including Interest Expense)
Selling, general, and administrative expenses for fiscal 1995 increased by
8.6% ($105,000) from the three months ended September 30, 1994 to September
30, 1995 due to increases in staffing at the transplant nursery.
88
<PAGE>
Other Income
Other income decreased $9,000 (6.5%) from the three months ended September
30, 1994 to September 30, 1995. The increase of other income as a percentage
of revenues is a result in the decrease in revenues discussed above.
Net Income (Loss)
As a result of the foregoing, net loss for the three months ended September
30, 1995 was $1.7 million, a $256,000 unfavorable variance over the three
months ended September 30, 1994.
Liquidity and Capital Resources
Collier Farms is part of a group of affiliated companies operating in
various industries. As part of the overall cash management system, excess cash
is distributed and cash deficiencies are funded on a daily basis and are
recorded as capital distributions and contributions, respectively.
Accordingly, capital distributions and contributions have been netted in the
accompanying combined statements of owners' equity.
Collier Farms has two long-term notes payable. Both contain various
restrictive covenants. A mortgage note with a financial institution secured by
land and equipment (the "Land and Equipment Note") had a balance of $5.3
million at September 30, 1995. This note is currently the subject of a
forebearance agreement.
During fiscal 1990, Collier Farms purchased a building and certain land
improvements using amounts borrowed from an affiliate (the "Affiliate"). In
connection with this purchase, the Affiliate executed a mortgage note payable
with a financial institution under which the building and land improvements
are pledged as collateral. Collier Farms' portion of the balance of the note
at September 30, 1995 was $6.5 million.
Net cash used in operating activities was $4.7 million during the three
months ended September 30, 1995. Net cash used in investing activities totaled
$259,000 during the same period, and included $260,000 of capital expenditures
(discussed below). Net capital contributions of $4.4 million, advances from
related parties of $541,000, and proceeds from long-term debt of $116,000,
offset by $65,000 of payments on the related party notes payable resulted in
$5.0 million of net cash provided by financing activities.
Capital expenditures in fiscal 1995 totaled $260,000 and were primarily made
for normal replacement of equipment such as tractors and plant trays, as well
as for the reconfigurations of the vegetable packing line and nursery
improvements. Collier's only significant commitments to incur capital
expenditures is a commitment to related parties to purchase certain assets
under specified conditions for approximately $425,000.
Collier Farms' working capital increased $485,000 (23.5%) from September 30,
1994 to September 30, 1995, primarily because of $1.2 million increase in
inventories (due to increased acreage) offset by a $372,000 decrease in trade
receivables and a $397,000 decrease in related party receivables.
Fiscal 1995 Compared to Fiscal 1994
Revenues
Revenues increased 15.5% from $22.0 million in Fiscal 1994 to $25.4 million
in Fiscal 1995. Tomato sales increased 21.0% from $14.3 million in Fiscal 1994
to $17.3 million in Fiscal 1995, primarily due to favorable market prices.
Approximately $1.0 million of the $3.0 million increase was due to price
increases. The remaining variance was due to an increase in production of 5.9
million pounds of tomatoes, the harvesting of which was made economically
viable due to the higher market prices.
Total revenues for peppers decreased 7.8% from $5.1 million in Fiscal 1994
to $4.7 million in Fiscal 1995. Acreage in Fiscal 1995 was reduced by 50.5%
from Fiscal 1994; however, volume decreased by only 32.1% during the same
period as a result of improved yields from disease resistant varieties and
improved operating procedures. Market prices in Fiscal 1995 generally exceeded
Fiscal 1994 prices.
89
<PAGE>
Other revenues increased 29.6% from $2.7 million in Fiscal 1994 to $3.5
million, primarily as a result of increased packing and related services
provided to third party producers of tomatoes, squash and eggplant.
Cost of Revenues
Cost of revenues decreased in Fiscal 1995 from $21.1 million to $20.3
million, or a 3.8% decline. Collier Farm's gross profit was 20.3% in Fiscal
1995, compared to 4.2% in Fiscal 1994. The decrease in cost was primarily due
to a reduction in farmed acreage. The cost reduction was partially offset by
costs associated with heavy rains and higher repairs and maintenance expense
at the transplant nursery due to windstorm damage.
Selling, General and Administrative Expenses (including Interest Expense and
Management Fees)
Selling, general and administrative expenses for Fiscal 1995 decreased as a
percentage of sales due to stronger tomato markets. Actual expenses increased
$0.6 million, or 9.9% over Fiscal 1994's expenses. The increase was the result
of additional staffing and a 2.1% increase in average short term interest
rates on Collier Farms' variable rate debt.
Other Income
Other income decreased $1.3 million, or 55.1% from Fiscal 1994 to Fiscal
1995. Substantially all other income is generated through the sale of crops
produced under an annual agreement with an unrelated party.
Liquidity and Capital Resources
Collier Farms is part of a group of affiliated companies operating in
various industries. As part of the overall cash management system, excess cash
is distributed and cash deficiencies are funded on a daily basis and are
recorded as capital distributions and contributions, respectively.
Accordingly, capital distributions and contributions have been netted in the
accompanying combined statements of owners' equity.
Collier Farms has two long-term mortgage notes payable which contains
various restrictive covenants. This mortgage note is with a financial
institution, secured by land and equipment (the "Land and Equipment Note") and
had an outstanding balance of $5.3 million at June 30, 1995. This note is
currently the subject of a forbearance agreement.
During the fiscal year ended June 30, 1990, Collier Farms purchased a
building and certain land improvements using amounts borrowed from an
affiliate (the "Affiliate"). In connection with this purchase, the Affiliate
executed a mortgage note payable with a financial institution under which the
building and land improvements are pledged as collateral. Collier Farms'
portion of the balance of the note at June 30, 1995 was $6.5 million.
Net cash provided by operating activities was $568,000 in Fiscal 1995. Net
cash used in investing activities totaled $1.2 million in Fiscal 1995, and
included $710,000 of capital expenditures (discussed below) and $609,000 of
advances to related parties. Net capital contributions of $1.0 million, offset
by $269,000 of payments on the related party notes payable resulted in
$741,000 of net cash provided by financing activities.
Capital expenditures in Fiscal 1995 totaled $710,000 and were primarily made
for improvements to the vegetable transplant nursery, including relocation of
six greenhouses and construction of a new office facility. Collier Farms' only
significant commitment to incur capital expenditures is a commitment to
related parties to purchase certain assets under specified conditions for
approximately $425,000.
Collier Farms' working capital decreased $3.9 million from June 30, 1994 to
June 30, 1995, primarily because the $5.3 million Land and Equipment Note was
classified as current at June 30, 1995.
Fiscal 1994 Compared to Fiscal 1993
Revenues
Total revenues for Fiscal 1994 were $22.0 million, $9.3 million, or 29.6%,
less than total revenues for Fiscal 1993. Tomato revenues decreased 28.8% from
$20.1 million in Fiscal 1993 to $14.3 million in Fiscal 1994. Collier Farms
elected not to harvest some tomatoes when market prices fell below the cost of
harvesting, hauling and packing.
90
<PAGE>
Revenues from the sale of peppers for Fiscal 1994 were $5.1 million, $0.2
million, or 3.8%, below such revenues for Fiscal 1993. Although acreage
increased 49.2% from 630 to 940 net acres, volume increased by only 20.0% from
0.5 million to 0.6 million boxes.
Other revenue for Fiscal 1994 was $2.7 million, $3.2 million, or 54.2%,
below other revenues for Fiscal 1993. Approximately 56% of the variance was
due to a decline in service revenues from outside growers and fresh produce
buyers. Declines in revenues from miscellaneous crops (e.g. watermelon and
squash, which were discontinued after Fiscal 1993) and vegetable transplants
also contributed to the variance.
Cost of Revenues
Cost of revenues for Fiscal 1994 decreased 9.5% to $21.1 million from $23.3
million in Fiscal 1993. Gross profit in Fiscal 1994 was 4.2% of total
revenues, compared to 25.5% in Fiscal 1993.
Costs for tomato production decreased 12.3% during fiscal 1994, accounting
for 79.8% of the total decrease in cost of revenues. Although planted acreage
increased, resulting in increased variable farming costs, the reduction in
pounds of tomatoes harvested resulted in a significant reduction in harvest,
hauling and packing costs.
Other costs of revenues decreased to $3.0 million from $4.4 million in
fiscal 1993. This was due primarily to discontinued miscellaneous crops (i.e.,
watermelon and squash) and the elimination of related incremental costs. The
remainder of the decline was due to reduced expenses at the vegetable
transplant nursery.
Selling, General, and Administrative Expenses (including Interest Expense)
Selling, general and administrative expenses were $6.0 million in Fiscal
1994, a 6.3% decrease from $6.4 million in Fiscal 1993. As a percentage of
total revenue, these expenses were 27.3% and 20.5% in Fiscal 1994 and Fiscal
1993, respectively. As a percentage of total revenue, selling, general and
administrative expense increased due to decreased revenues.
Other Income
Other income increased $0.6 million from $1.8 million in Fiscal 1993 to $2.4
million in Fiscal 1994. The increase was due primarily to an increase in
market prices for crops produced and sold under an annual agreement with an
unrelated party.
Liquidity and Capital Resources
Collier Farms is part of a group of affiliated companies operating in
various industries. As part of the overall cash management system, excess cash
is distributed and cash deficiencies are funded on a daily basis and are
recorded as capital distributions and contributions, respectively.
Accordingly, capital distributions and contributions have been netted in the
accompanying combined statements of owners' equity.
Collier Farms has one long-term mortgage notes payable which contains
various restrictive covenants. This mortgage note is with a financial
institution, secured by land and equipment (the "Land and Equipment Note") and
had an outstanding balance of $5.3 million at June 30, 1994.
During the fiscal year ended June 30, 1990, Collier Farms purchased a
building and certain land improvements using amounts borrowed from an
affiliate (the "Affiliate"). In connection with this purchase, the Affiliate
executed a mortgage note payable with a financial institution under which the
building and land improvements are pledged as collateral. Collier Farms'
portion of the balance of the note at June 30, 1994 was $6.8 million.
Net cash used in operating activities was $858,000 in Fiscal 1994. Net cash
used in investing activities totaled $1.6 million in Fiscal 1994, and included
$1,100,000 of capital expenditures (discussed below) and $542,000 of advances
to related parties. Net capital contributions of $2.8 million, offset by
$279,000 of payments on the related party notes payable resulted in $2,433,000
of net cash provided by financing activities.
Capital expenditures in Fiscal 1994 totaled $1,100,000 and were primarily
made for improvements to the vegetable transplant nursery, including
relocation of six greenhouses and construction of a new office facility.
91
<PAGE>
CALGENE, INC.
BUSINESS OF CALGENE
Calgene is a biotechnology company that is developing a portfolio of
genetically engineered plants and plant products for the food, seed and
oleochemical industries. Calgene's research and business efforts are focused
in three core crop areas--fresh market tomato, edible and industrial plant
oils (canola) and cotton--where Calgene believes biotechnology can provide
substantial added commercial value in consumer, industrial and seed markets.
Fresh Market Tomatoes. Calgene scientists have genetically engineered tomato
varieties with the FLAVR SAVR gene which delays softening and reduces spoilage
in order to enable Calgene to provide vine-ripened tomatoes with improved
taste to the $4 billion U.S. fresh tomato market throughout the year. Most
fresh market tomatoes are bred for durability and harvested before they have
begun to ripen, which reduces spoilage and handling damage, but at the expense
of taste and texture. In contrast, tomato varieties bred for premium flavor
and texture have been genetically engineered by Calgene scientists with the
FLAVR SAVR gene which delays softening and thereby reduces spoilage, even when
harvested vine-ripened. In May 1994, in response to Calgene's request, the FDA
announced its determination that the FLAVR SAVR tomato has not been
significantly altered with respect to safety or nutritive value when compared
to conventional tomatoes. This action by the FDA allowed Calgene to begin
commercialization of the FLAVR SAVR tomato, the world's first genetically
engineered whole food product. Calgene has also recently received regulatory
clearance to commercialize the FLAVR SAVR tomato in Canada and Mexico. Calgene
currently has 500 acres under contract located near its California packing and
distribution facility and 250 acres under contract in Mexico. Calgene is
currently selling premium quality, vine-ripened tomatoes with the FLAVR SAVR
gene under its MacGregor's brand.
In view of the production scale-up difficulties that it has encountered,
Calgene plans to temporarily curtail its tomato growing operations in the
Spring of 1996 until it is able to complete the development of varieties of
FLAVR SAVR tomatoes that have enhanced commercial agronomic qualities. Calgene
intends to focus its tomato operations on the plant breeding activities
necessary to develop such enhanced varieties of its genetically-engineered
tomatoes, but there can be no assurance that such efforts will be successful
or will not be discontinued by Newco.
After the Effective Time, Newco plans to consolidate CalFresh with the
Gargiulo tomato business under the management of TIA. Newco plans to market a
full line of tomatoes nationwide, including the premium MacGregor branded
tomato line of Calgene (if and when enhanced varieties are developed) and the
Gargiulo L.P. branded tomato line proposed to be marketed by Gargiulo L.P.
There can be no assurance that Newco will sell genetically engineered tomatoes
or will not encounter difficulties in integrating the businesses of CalFresh
and Gargiulo L.P. or that it will be successful in marketing either branded
tomato line. See "Risk Factors--Risks Applicable to the Branded Tomato
Strategy" and "Risk Factors--Risks Associated with Production of Genetically
Engineered Tomatoes."
Plant Oils. Calgene is developing genetically engineered rapeseed oils with
a broad range of food and industrial applications. Rapeseed is an efficient
oil producing plant, has certain biological characteristics that make it a
good candidate for genetic engineering, and is adaptable to a broad range of
growing regions. Calgene scientists have genetically engineered canola
varieties that produce substantial quantities of laurate, an important
ingredient in detergents that is not naturally present in canola or other non-
tropical oil plants. In July 1995 Calgene sold one million pounds of Laurical
canola oil and is currently contracting for 10,000 to 15,000 acres of
commercial production for October 1995. Calgene is also currently conducting
its eighth season of field trials with canola plants that have been
genetically engineered to produce oil with increased stearate levels, creating
a potential substitute for hydrogenated oils in margarine, shortening and
confectionery products. Calgene's subsidiary, Calgene Chemical, manufactures
and distributes plant oil-based chemicals, and supplies Mobil Oil with plant
oil-based biodegradable fluids. Calgene has also established strategic
relationships with Procter & Gamble, Unilever and Pfizer to address potential
commercial opportunities for plant oil products.
92
<PAGE>
Cotton. Calgene's cotton genetic engineering program focuses on reducing
farmers' growing costs through the development of cotton varieties that
require less pesticides, and cotton varieties that produce natural colors.
U.S. cotton farmers spend annually over $200 million on herbicides and $225 to
$400 million on insecticides. Herbicide resistant and insect resistant cotton
varieties have the potential to enable cotton farmers to significantly reduce
the total volume of herbicides and insecticides applied, resulting in
substantial savings in production costs, improved yields and benefits to the
environment. Calgene believes that the cost savings to farmers will enable
Calgene to price genetically engineered seed varieties at a premium to current
cotton seed prices. In 1995 Calgene introduced two genetically engineered
cotton varieties ("BXN(TM) cotton"), which are resistant to the herbicide
bromoxynil. Bromoxynil is produced and sold by Calgene's strategic cotton
partner, Rhone-Poulenc Agrochimie ("Rhone-Poulenc"), a leading agrichemical
company. The BXN(TM) cotton seed was sold at a 45% price premium over
Calgene's non-genetically engineered cotton seed. Calgene has also conducted
field trials since 1991 with BXN(TM) cotton varieties that are genetically
engineered for resistance to Heliothis, the principal cotton insect pest.
Calgene scientists are in the early stages of developing cotton varieties
having natural colors which will reduce or eliminate the need for dyeing and
provide unique color-fastness. Calgene intends to produce identity-preserved
genetically engineered cotton and sell premium-priced colored cotton fiber to
fabric, apparel and houseware manufacturers. Calgene is currently selling
genetically engineered BXN (TM) cotton seed through its subsidiary Stoneville
Pedigreed Seed Company.
Calgene's business strategy is to build operating businesses in its core
crop areas to facilitate the market introduction of genetically engineered
proprietary products and to maximize the long-term financial return from such
products. Implementation of this strategy will provide Calgene with direct
access to markets where it intends to sell seed that has been engineered with
value-added agronomic traits, and to markets where it intends to sell fresh
and processed plant products having improved quality traits or cost of
production advantages, or both.
EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended June 30, 1995, the members of the Human
Resources Committee (the "Committee") were Messrs. Baker, Baeder, Helinski and
Stinnett, John Vohs was a director and member of the Committee until his
resignation on November 17, 1994. None of the members has ever been an officer
or employee of Calgene or any of its subsidiaries. During Fiscal 1995, there
were no Committee "interlocks" within the meaning of the SEC rules, and there
continue to be no such "interlocks."
Mr. Salquist, 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 has set the cash
compensation of certain other executives.
93
<PAGE>
Summary of Cash and Other Compensation
The following table provides certain summary information concerning
compensation earned during the last three fiscal years by Calgene's Chief
Executive Officer and each of the four other most highly compensated executive
officers of Calgene who were serving at the end of Fiscal 1995 (the "named
executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION AWARDS
------------------ -------------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(2)
------------------ ---- --------- -------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Roger H. Salquist(3).... 1995 242,404 -- 100,000 1,212
Chairman of the Board 1994 225,865 -- 104,762 --
and Chief Executive Of-
ficer 1993 220,673 60,000 40,000 --
Roderick N. Stacey(4)... 1995 233,558 -- -- 1,077
President and Chief 1994 200,673 -- 100,000 --
Operating Officer 1993 125,250 40,000 153,000 --
Danilo S. Lopez......... 1995 171,635 -- 100,000 815
President, Calgene
Fresh
Andrew M. Baum.......... 1995 162,600 10,000 25,000 840
Vice President; 1994 154,592 -- -- --
President, Oils
Division 1993 149,538 20,000 -- --
Vic C. Knauf............ 1995 138,210 5,000 -- 642
Vice President 1994 131,403 -- -- 1,177
of Research 1993 127,125 4,904 -- 2,247
</TABLE>
- - --------
(1) Includes amounts earned in the fiscal year even if paid in the subsequent
fiscal year or deferred pursuant to Calgene'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 Calgene'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) Mr. Stacey became an executive officer in December 1992. Salary for Fiscal
1993 includes director fees received prior to December 1992.
Change of Control Employment Agreements
Messrs. Salquist, Stacey and Motroni have entered into Change of Control
Employment Agreements, dated as of July 19, 1995, with Calgene. Each Agreement
becomes effective only upon a Change of Control (as defined) of Calgene and
provides that, if the employment of the officer is terminated by Calgene
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. Such severance benefits are subject to
reduction to the extent necessary to prevent the recipient from incurring
liability for excise taxes and Calgene from incurring nondeductible
compensation expense. For purposes of such agreements, a Change of Control
would include the closing of the proposed transaction pursuant to which
Monsanto would acquire a 49.9% equity interest in the combined business of
Calgene and Gargiulo L.P.
Option Grants in Last Fiscal Year
The following tables provides information regarding stock options granted in
Fiscal 1995 to the named executive officers in the Summary Compensation Table.
In accordance with rules of the Commission, the table
94
<PAGE>
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.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(3)
----------------------------------------------------- -----------------------
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR (%) ($)(2) DATE 5%($) 10%($)
---- -------------- --------------- ----------- ---------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist....... 100,000 13.0 7.50 8/18/04 471,670 1,195,310
Roderick N. Stacey...... -- -- -- -- -- --
Danilo S. Lopez......... 100,000 13.0 7.50 10/11/04 471,670 1,195,310
Andrew M. Baum.......... 10,000 1.3 7.50 11/16/04 47,167 119,531
15,000 2.0 7.50 6/26/05 70,751 179,297
Vic C. Knauf............ -- -- -- -- -- --
</TABLE>
- - --------
(1) Newly granted options have terms of ten years and become exercisable
incrementally in equal monthly amounts over a period of five years from
the date of grant. The committee that administers the stock option plan
may, with the consent of the option holder, modify the terms (including
price) of outstanding options.
(2) The exercise price may be paid in cash or by delivery of already-owned
shares, subject to certain conditions.
(3) At assumed rates of appreciate of 5% and 10%, compounded annually, the
Calgene Common Stock would appreciate in value 63% and 159%, respectively,
over a ten-year period. These mandated computations do not represent
Calgene's estimate or projection of future Calgene Common Stock prices.
Option Exercises and Fiscal Year-End Values
The following table shows stock options exercised by the named executive
officers in the Summary Compensation Table during Fiscal 1995, the aggregate
value of gains on the dates of exercise, the number of shares covered by both
exercisable and non-exercisable stock options as of fiscal year-end, and the
year-end values for such options.
AGGREGATED OPTION EXERCISES IN LASTFISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
END (#) AT FISCAL YEAR-END ($)(1)
------------------------- -------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist....... 10,000 28,750 172,262 122,500 176,786 --
Roderick N. Stacey...... -- -- 48,595 219,405 14,250 --
Danilo S. Lopez......... -- -- 11,667 88,333 -- --
Andrew M. Baum.......... 10,000 26,250 27,874 32,126 1,563 --
Vic C. Knauf............ -- -- 37,448 38,831 938 --
</TABLE>
- - --------
(1) Value is based on market value of Calgene Common Stock at exercise date
(for value realized), or at year-end (for value of unexercised options),
minus the option exercise price.
95
<PAGE>
Repricing of Options
The following table provides information regarding stock options held by the
named executive officers which were repriced during Fiscal 1995.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET EXERCISE
SECURITIES PRICE OF PRICE OF LENGTH OF
UNDERLYING STOCK AT STOCK AT ORIGINAL TERM
OPTIONS/SARS TIME OF TIME OF REMAINING AT
REPRICED OR REPRICING OR REPRICING OR EXERCISE NEW DATE OF
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT(1)
---- -------- ------------ ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist...... 11/16/94 100,000 7.50 10.63 7.50 58
Chairman of the Board 11/16/94 40,000 7.50 14.13 7.50 36
and Chief Executive
Officer
Roderick N. Stacey..... 11/16/94 3,000 7.50 10.00 7.50 0(2)
President and Chief 11/16/94 3,000 7.50 14.13 7.50 0(2)
Operating Officer 11/16/94 150,000 7.50 15.75 7.50 37
11/16/94 100,000 7.50 12.25 7.50 53
Danilo Lopez...........
President, Calgene
Fresh 11/16/94 100,000 7.50 9.00 7.50 57
Andrew M. Baum......... 11/16/94 10,000 7.50 11.13 7.50 29
Vice President;
President, Oils
Division
Vic C. Knauf........... 11/16/94 16,279 7.50 8.38 7.50 7
Vice President of
Research 11/16/94 20,000 7.50 9.75 7.50 24
11/16/94 15,000 7.50 11.13 7.50 29
</TABLE>
- - --------
(1) Data is presented in terms of months.
(2) Term is extended by the length of the new 12-month vesting schedule.
Report on Repricing of Options
On November 16, 1994, the Committee approved a stock option exchange program
(the "Exchange Program"), pursuant to which officers, employees and certain
other holders holding incentive stock options and non-statutory options under
Calgene's 1981 Stock Option Plan and 1991 Stock Option Plan, (collectively,
the "Stock Plans") were given the opportunity, on November 16, 1994, to
exchange such options for new options.
Because of significant declines in the market value of Calgene's Common
Stock, most outstanding options in November 1994 were exercisable at prices
which substantially exceeded the market value of the Common Stock. In view of
such declines in market value and in keeping with Calgene's philosophy of
utilizing equity incentives to motivate and retain qualified employees, the
Committee felt it was important to regain the incentive intended to be
provided by options to purchase shares of Calgene's Common Stock. The need for
such incentives was particularly acute in light of Calgene's difficult
financial position at the time and the significant workforce reductions that
had been implemented.
Under the Exchange Program, holders of stock options on November 16, 1994
(excluding options granted on October 31, 1994), which were granted under the
Stock Plans and which have an exercise price greater than $7.50 per share (the
"Existing Options") were offered the opportunity to request that Calgene issue
new options ("New Options") having an exercise price equal to $7.50 (the "Base
Exercise Price"). New Options granted with respect to Existing Options which
were vested as of November 16, 1994 were subject to an additional vesting
period of between 2 and 30 months.
96
<PAGE>
A total of 150 option holders (constituting 93% of eligible option holders),
holding options to purchase an aggregate of 1,268,081 shares of Common Stock
under Existing Options (which would be options to purchase the same aggregate
number of shares of Common Stock under the New Options), elected to
participate in the Exchange Program.
The New Options modify the exercise price and, for some optionees, the term
(since the new vesting schedule was extended beyond the original expiration
date) of the Existing Options to which each relates and will be issued under
and governed by the respective Stock Plan under which such options are
originally granted. Therefore, other than the different exercise price and the
extended term, the option agreements relating to the New Options will be
substantially the same as the option agreements for the Existing Options that
they replace.
The Committee
Robert Baker
Donald Baeder
Donald Helinski
Carl Stinnett
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Composition and Functions of the Committee
The Human Resources Committee (referred to in this report as the
"Committee") consists of four non-employee directors: Robert Baker, Donald
Baeder, Donald Helinski and Carl Stinnett.
The Committee performs the functions of a compensation committee. The
Committee considers and makes recommendations to the Calgene Board 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 1995 were approved by the Calgene Board 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 concerning the salary
of senior executive officers, the Committee considers published data from
annual surveys of executive compensation at other biotechnology companies.
With the survey data as a reference point, the Committee makes adjustments
based on its evaluation
97
<PAGE>
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 and the Chief
Operating Officer with respect to executive salaries other than their own.
Annual salary adjustments normally become effective in the month of July.
For Fiscal 1996, the Committee recommended and the Board of Directors
approved an increase in Mr. Salquist's salary to $275,000 effective July 1,
1995.
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 1995 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 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.
For Fiscal 1995, bonuses were granted to Messrs. Baum and Knauf.
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.
For Fiscal 1995, the Committee recommended and the Board of Directors
approved the grant of an option to Mr. Salquist to purchase 100,000 shares.
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
98
<PAGE>
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 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 future Change of Control of Calgene.
This report is submitted by the following directors, who constituted all the
members of the Committee during Fiscal 1995, with the exception of John Vohs,
who resigned as a Calgene Board and Committee member during Fiscal 1995.
Robert E. Baker
Donald L. Baeder
Donald Helinski
Carl V. Stinnett
99
<PAGE>
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, 1990, 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. Calgene has selected a different index from the
Piper-Jaffray Agri-Biotechnology Index (the "Piper-Jaffray Index"), which the
Company used for the immediately preceding fiscal year, because the Piper-
Jaffray Index has been discontinued. As a result, Calgene is unable to compare
its total return with that of the Piper-Jaffray Index. The graph is in this
Proxy/Prospectus in accordance with the rules of the SEC and is not
necessarily indicative of future performance.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
6/30/90 6/30/91 6/30/92 6/30/93 6/30/94 6/30/95
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Calgene, Inc.................... 100 101.72 158.62 194.83 160.34 95.7
Nasdaq Composite................ 100 102.95 121.91 152.27 160.82 201.92
Peer Group Index................ 100 155.02 186.25 197.17 185.07 100.24
</TABLE>
100
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock of Calgene as of August 31, 1995, by (i)
each person known by Calgene to be a beneficial owner of more than 5% of the
outstanding shares of Calgene Common Stock; (ii) each director and each
executive officer of Calgene; and (iii) all directors and executive officers
of Calgene as a group:
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY APPROXIMATE
OF 5% BENEFICIAL OWNER OWNED(1) PERCENT OWNED(2)
- - ---------------------- ------------ ----------------
<S> <C> <C>
Travelers Group Inc.
and Affiliates 388 Greenwich Street
New York, NY 10013(3)............................ 3,179,179 10.5
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
- - --------------------------------
<S> <C> <C>
Roger H. Salquist................................. 216,691 *
Roderick N. Stacey................................ 69,507 *
Donald L. Baeder.................................. 15,750 *
Robert E. Baker................................... 13,250 *
Warren R. Haug.................................... -- --
Donald Helinski................................... 41,750 *
Howard D. Palefsky................................ 11,750 *
Carl V. Stinnett.................................. 24,750 *
Allen J. Vangelos................................. 12,750 *
Andrew M. Baum.................................... 61,017 *
Danilo S. Lopez................................... 18,334 *
Vic C. Knauf...................................... 47,067 *
All Directors and Executive Officers
as a group (13 persons).......................... 570,067 1.9
</TABLE>
- - --------
* Less than 1%
(1) Calgene 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 August
31, 1995, by exercise of any stock option for which Calgene has knowledge.
The shares subject to such options are as follows: Mr. Salquist: 182,263;
Mr. Stacey: 69,507; Mr. Baker: 12,750; Mr. Baeder: 15,750; Dr. Helinski:
13,750; Mr. Lopez: 18,334; Mr. Palefsky: 11,750; Mr. Stinnett: 23,750; Mr.
Vangelos: 12,750; Mr. Baum: 30,516; Dr. Knauf: 35,810; all executive
officers and directors as a group: 455,970.
(2) Percent of the 31,133,967 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) Based on a Form 13G filed on October 10, 1995 with respect to holdings on
September 30, 1995. Includes 1,650,509 shares owned by Smith Barney, Inc.
and 1,528,670 shares owned by Smith Barney Holdings, Inc. Based on a Form
13G received by Calgene on January 23, 1996, Calgene believes that
Travelers Group Inc. and Affiliates held an aggregate of 3,386,072 shares
as of December 31, 1995.
PREFERRED STOCK
The Board of Directors of Calgene has, pursuant to the terms of the
Reorganization Agreement, authorized a series of Preferred Stock designated as
the Series A Redeemable, Non-Voting Preferred Stock (the "Calgene Series A
Preferred Stock"), which shall consist of 1,000 shares. The Calgene Series A
Preferred Stock was established solely in connection with the intended tax
treatment of the Reorganization for federal income tax purposes. The 1,000
authorized shares of Calgene Series A Preferred Stock will be issued by
Calgene prior to the Effective Time to Monsanto and Warren R. Haug, and will
be exchanged at the Effective Time, pursuant to the Merger, for 1,000
equivalent shares of Series A Preferred Stock of Newco. See "Description of
Newco Capital Stock--Preferred Stock."
101
<PAGE>
RELATED PARTY TRANSACTIONS
CALGENE
During the fiscal year ended June 30, 1995, Calgene recognized revenues of
approximately $600,000 from product development projects under contracts with
The Procter & Gamble Company. Warren R. Haug, a director of Calgene, is a Vice
President of Procter & Gamble.
Under the terms of indemnification agreements with each of Calgene's
directors and executive officers, Calgene is obligated to indemnify them
against certain claims and expenses for which they might be held liable in
connection with past or future service to Calgene. In addition, Calgene's
Certificate of Incorporation provides that, to the extent permitted by the
Delaware General Corporation Law, its directors shall not be liable for
monetary damages for breach of fiduciary duty as a director.
CALGENE AND MONSANTO
Monsanto and Calgene entered into an Interference Settlement and License
Agreement dated as of April 22, 1993 involving an invention relating to the
use of promoters from cauliflower mosaic virus in transgenic plants. Under the
terms of such agreement, Calgene assigned certain patent rights to Monsanto
and Monsanto granted Calgene a limited, royalty-free, non-exclusive license
under its U.S. patent rights and a royalty-bearing, non-exclusive license
under its foreign patent rights. Royalties paid by Calgene to Monsanto
totalled $48,701 in fiscal 1995. No royalties were paid in fiscal 1993 or
1994.
Monsanto and Calgene entered into an agreement dated as of April 22, 1993,
pursuant to which Monsanto granted Calgene a worldwide, non-exclusive,
royalty-bearing license under its patent rights relating to Agrobacterium-
mediated plant transformation. No royalties were paid by Calgene to Monsanto
in fiscal 1993, 1994 or 1995.
Monsanto and Calgene entered into a license agreement dated as of April 22,
1993 pursuant to which Monsanto granted Calgene a worldwide, non-exclusive,
royalty-bearing license under its patent rights relating to antibiotic marker
genes. Calgene paid Monsanto $12,175 in fiscal 1995 with respect to such
license. No amounts were paid in fiscal 1993 or 1994.
Monsanto and Calgene entered into a license agreement dated as of April 22,
1993, under which Monsanto granted Calgene a worldwide, non-exclusive,
royalty-bearing license under its U.S. patent rights relating to an
Agrobacterium-based method for soybean transformation. Calgene did not pay any
amounts in fiscal 1993, 1994 or 1995, with respect to such license.
Monsanto and Calgene entered into a license agreement dated as of April 22,
1993, under which Calgene granted Monsanto a world-wide, non-exclusive,
royalty-bearing license under its patent rights relating to certain methods
for transformation of Brassica and tomatoes. Monsanto did not pay any
royalties in fiscal 1993, 1994 or 1995.
Monsanto and Calgene entered into a license agreement dated as of April 23,
1993, under which Calgene granted Monsanto a non-exclusive, royalty-bearing
license under its U.S. Agrobacterium-related patent rights. Monsanto did not
pay any royalties to Calgene in fiscal 1993, 1994 or 1995.
Monsanto and Calgene entered into a license agreement dated as of April 22,
1993, under which Calgene granted Monsanto a world-wide, non-exclusive,
royalty bearing license under its patent rights relating to the use of
negative-strand RNA to control indigenous gene expression in plants. Monsanto
did not pay any royalties in fiscal 1993, 1994 or 1995.
Monsanto and Calgene entered into an agreement dated as of April 22, 1993
pursuant to which each party granted the other a world-wide, non-exclusive,
royalty-bearing license under its respective patent rights relating
102
<PAGE>
to the use of ACC-deaminase in plants to control ethylene production in
certain fruits. Neither Monsanto nor Calgene paid any royalties pursuant to
such agreement in fiscal 1993, 1994 or 1995.
Monsanto and Calgene entered into an Insect-Protected Cotton License and
Seed Services Agreement dated as of September 26, 1995, pursuant to which
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 Newco's cottonseed product development program, Newco 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 and Calgene, together with certain unrelated third parties, entered
into a settlement agreement regarding Calgene's patent rights relating to
glyphosate resistant gene technology. Pursuant to the terms of such settlement
agreement, Calgene granted Monsanto an exclusive world-wide, paid-up license
under its patent rights with respect to such technology.
Monsanto and Calgene executed an agreement effective as of September 26,
1995 pursuant to which Monsanto is to provide certain B.t. genes to Calgene
for evaluation purposes only. Monsanto and Calgene are under no obligation to
enter into a license agreement for commercial terms.
GARGIULO L.P.
Gargiulo L.P. is a partner in the BHN Joint Venture, a joint venture
organized to operate a research facility for purposes of discovering and
developing new plant varieties having commercial applications. The other
venturer in the BHN Joint Venture is Harllee-Gargiulo, Inc. ("Harllee-
Gargiulo"), a corporation which is partially owned by Dewey Gargiulo (10%) and
Joseph Procacci (10%). Gargiulo L.P. has made an offer to purchase Harllee-
Gargiulo's interest in the BHN Joint Venture for approximately $900,000 which
offer has not been accepted.
Gargiulo L.P. is party to a Marketing Agreement with Harllee-Gargiulo dated
as of September 1, 1988. The term of such Marketing Agreement is one year,
renewing automatically for successive one year periods unless terminated by
either of the parties thereto. Pursuant to such Marketing Agreement, Harllee-
Gargiulo appointed NTGCo as its exclusive sales agent for tomatoes grown by
Harllee-Gargiulo. Gargiulo L.P. receives commissions based on the number of
boxes of tomatoes sold by Gargiulo Inc. on behalf of Harllee-Gargiulo.
Commissions received by Gargiulo L.P. totalled $317,051, $281,557 and $354,033
in fiscal 1993, 1994 and 1995, respectively. Pursuant to the terms of the
Marketing Agreement, upon termination of such Agreement, Gargiulo L.P. is
entitled to purchase the interest of Harllee-Gargiulo in the BHN Joint Venture
for an amount equal to the cumulative investment of Harllee-Gargiulo in the
BHN Joint Venture.
103
<PAGE>
The following table sets forth certain information regarding farmland leased
by Gargiulo L.P. from related parties:
<TABLE>
<CAPTION>
APPROXIMATE
INDIVIDUAL OR ENTITY FISCAL APPROXIMATE AGGREGATE RENTAL
LEASING FARMLAND YEAR NO. OF ACRES PAYMENTS
-------------------- ------ ------------ ----------------
<S> <C> <C> <C>
Coastal Tomato 1995 75(2) 15,250
Growers(1) 1994 23,183
1993 18,000
Michael Procacci(3) 1995 320 96,000
1994 80,000
1993 -0-
Procacci, Procacci, 1995 96 73,995
Gargiulo I(4) 1994 -0-
1993 44,580
Procacci, Procacci, 1995 247 74,000
Gargiulo II(5) 1994 71,630
1993 56,560
Procacci, Procacci, 1995 213 53,900
Gargiulo III(6) 1994 61,770
1993 55,120
Gargiulo Pension 1995 233 69,840
Trust(7) 1994 67,512
1993 -0-
Jeffrey D. Gargiulo 1995 400 120,000
Trust(8) 1994 116,000
1993 65,496
Desoto Realty 1995 515 154,500
Associates, Inc.(9) 1994 120,850
1993 114,600
</TABLE>
- - --------
(1) A general partnership in which Jeffrey Gargiulo has a 25% equity interest
and the remainder is held by third parties.
(2) Includes a house.
(3) Michael Procacci is the brother of Joseph Procacci, a shareholder of
NTGCo, one of the limited partners of Gargiulo L.P.
(4) A general partnership in which Dewey Gargiulo has a 24.672% equity
interest; John R. Gargiulo has a 2.25% equity interest; Joseph Procacci
has a 30.175% equity interest; Jeffrey D. Gargiulo has a 2.26% equity
interest; Michael Procacci has a 28.186 equity interest; Procacci Brothers
Sales Corp. has an 8.218% equity interest; and the balance is held by
various Procacci family members.
(5) A general partnership in which the equity interests are held as described
in Note 4 above.
(6) A general partnership in which Dewey Gargiulo has approximately a 26.2%
equity interest; each of Joseph Procacci and Michael Procacci have a
33.33% equity interest; and each of Jeffrey D. Gargiulo and John R.
Gargiulo have a 2.39% equity interest.
(7) A pension trust for a frozen pension plan for certain employees of
Gargiulo L.P. The beneficiaries are 12 individuals who were employees of
the Gargiulo L.P.'s predecessor in 1989 and include Dewey Gargiulo, John
R. Gargiulo and Jeffrey D. Gargiulo.
(8) A trust in which Jeffrey D. Gargiulo is the sole trustee and Dewey
Gargiulo has a 16.66% interest; John R. Gargiulo has a 16.66% interest;
Jeffrey D. Gargiulo has a 16.66% interest; and the remaining beneficial
interest is held by a third party.
(9) A Florida corporation in which Jeffrey Gargiulo has 16.66% equity
ownership; John R. Gargiulo has 16.67% equity ownership; John Gargiulo has
16.66% equity ownership; Joseph Procacci has 25% equity interest; and
Michael Procacci has 25% equity ownership.
Gargiulo L.P. made tax shortfall loans totalling $98,507, $98,507, $98,509
and $295,525 to John R. Gargiulo, Jeffrey D. Gargiulo, Dewey Gargiulo and
Joseph Procacci during fiscal 1995.
104
<PAGE>
From time to time Gargiulo L.P. engages in purchases and sales of produce
and storage of Chilean fruit with Procacci Bros. Sales Corp. and other
affiliated companies owned by Joseph Procacci or his affiliates, on the one
hand, and Gargiulo L.P. or its affiliates on the other. All of these
transactions are conducted on terms and at prices which would have been
achieved through arms length negotiations between unrelated parties.
Gargiulo L.P. has provided certain office space and administrative services
to Gargiulo Landco, Inc. Gargiulo Landco, Inc. is owned by members of the
Gargiulo family. Gargiulo L.P. has charged Gargiulo Landco, Inc. $24,628,
$29,462 and $16,331 for such space and services in Fiscal 1993, 1994 and 1995,
respectively.
As of June 30, 1995, NTGCo was indebted to Gargiulo L.P. in the amount of
$312,526. The amount is payable on demand and will be paid on or prior to the
Effective Time.
Gargiulo L.P. expects to borrow up to $40 million pursuant to an amendment
to a line of credit with MAP Investment Company, a subsidiary of Monsanto. As
of January 31, 1996, $10 million was outstanding under this line of credit.
Such amount will be converted to a loan under the Gargiulo Credit Facility as
of the Effective Time.
On October 16, 1995, Gargiulo L.P. entered into an Amended Employment
Contract ("Employment Agreement") with Mr. Jeffrey D. Gargiulo, under which
Mr. Gargiulo will serve as the Chief Executive Officer of Gargiulo L.P. and
any successor entity. The Employment Agreement extends through December 31,
2001 and will automatically renew for successive one-year terms thereafter,
unless it is not renewed. It may also be terminated by Gargiulo L.P. if
certain earnings and capital employed targets are not met by December 31,
1998, and a revised agreement cannot be negotiated. Under the Employment
Agreement, commencing January 1, 1996, Mr. Gargiulo's base pay will be
$350,000 per year and will be subject to 4% annual increases. The Employment
Agreement provides for Annual and Long-Term Incentive Awards if certain
earnings and capital employed targets are achieved. The maximum annual bonus
payable in any fiscal year is two times the Executive's annual base pay.
Amounts otherwise payable under the bonus formula in excess of this limit can
be carried back and carried forward one year if the maximum annual bonus for
those years has not already been paid. The Long-Term Incentive Award is
payable only if specified earnings and capital employed targets are met
throughout the term of the Employment Agreement through December 31, 2001. The
Long-Term Incentive Award payable at 100% of target is $5.8 million. If Newco
realizes a specified return on its investment in Gargiulo L.P. or successor
entity through the sale of an equity interest in Gargiulo L.P., a sale of its
assets or through a public offering, Mr. Gargiulo is entitled to receive a
percentage of the amount realized, with this amount credited against the
amount of any long-term bonus that is paid under the Employment Agreement. The
Employment Agreement provides for severance benefits in accordance with a
formula set forth in the Employment Agreement, in the event that Mr.
Gargiulo's employment is terminated by Gargiulo L.P. or any successor entity
without cause, if Mr. Gargiulo terminates his employment for good reason (as
defined in the Employment Agreement), or if the Employment Agreement is not
renewed. Benefits are also provided in the event of his death or disability.
The Employment Agreement contains a covenant not to compete and a provision to
protect against improper disclosure of confidential information.
GARGIULO L.P. AND MONSANTO
Gargiulo L.P. and Monsanto entered into the Development Agreement for the
purpose of developing transgenic tomatoes for commercial application in the
production and sale of fresh market and processing tomatoes. Pursuant to the
terms of the Development Agreement, Gargiulo L.P. accrued payments totalling
approximately $1.6 million to Monsanto in each of Fiscal 1994 and 1995 and
$800,000 in Fiscal 1993. Gargiulo L.P. expects to borrow approximately $2
million from Monsanto under an existing line of credit in order to make a
payment to Monsanto which was due December 31, 1995, pursuant to the
Development Agreement. Such amount will be converted to a loan under the
Gargiulo Credit Facility as of the Effective Time.
The Reorganization Agreement provides that, effective January 1, 1996, the
Development Agreement will be amended to: (i) terminate Monsanto's obligations
to carry out the Development Plan (as defined therein) and indemnify Gargiulo
L.P. against infringement claims will be terminated; and (ii) terminate
Gargiulo L.P.'s obligations to make royalty payments and certain of the
licenses granted under the Development/License Agreement will be considered to
be fully paid up.
105
<PAGE>
DESCRIPTION OF NEWCO STOCK OPTION PLANSAND EMPLOYEE STOCK PURCHASE PLAN
In December 1995, the Board of Directors of Newco adopted, and the
stockholders subsequently approved, the Newco 1996 Stock Option Plan covering
5,000,000 shares of Newco Common Stock. Newco will assume, upon the Effective
Time, Calgene's 1991 Stock Option Plan (the "1991 Option Plan") and 1990
Employee Stock Purchase Plan (the "Calgene Stock Purchase Plan"). As of
December 31, 1995, only 365,943 shares were available under the 1991 Option
Plan.
Summary of the 1996 Stock Option Plan
The principal features of Newco's 1996 Stock Option Plan (the "Option Plan")
are summarized below.
Purpose
The purpose of the Option Plan is to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, officers and directors of Newco and to promote the
success of Newco's business.
Administration
The Option Plan is administered by a committee of Newco's Board of Directors
consisting solely of non-employee directors (references hereinafter to the
Board of Directors shall include such committee). The interpretation and
construction of any provision of the Option Plan is within the sole discretion
of the Board, whose determination is final and conclusive. Members of the
Board receive no additional compensation for their services in connection with
the administration of the Option Plan.
Eligibility
The Option Plan provides that options may be granted to employees, officers,
directors and consultants of Newco and its subsidiaries, provided that
incentive stock options may be granted only to employees (including officers
and directors who are also employees). The Board of Directors or the Chief
Executive Officer, as authorized by the Board and within specified limits,
selects the optionees and determines the number of shares to be subject to
each option. In making such determination, there is taken into account the
duties and responsibilities of the employee, the value of the employee's
services, the employee's present and potential contribution to the success of
Newco, the anticipated number of years of future service of the employee and
other relevant factors.
Option grants under the Option Plan to directors who are not employees of
Newco are automatic and non-discretionary in accordance with the provisions of
the Option Plan. Each non-employee director is automatically granted an option
to purchase 10,000 shares at the time of his or her first election to the
Board of Directors. On the date of the Annual Meeting in each calendar year,
each non-employee director who is elected at such meeting is automatically
granted an option to purchase 3,000 shares (except for an eligible director
who is first elected to the Board of Directors at or within three months prior
to that meeting).
The Option Plan does not provide for a maximum or minimum number of shares
of Common Stock which may be granted under options to any employee.
Terms of Options
Each option granted under the Option Plan is evidenced by a written stock
option agreement between Newco and the optionee. The Board of Directors
determines when options may be exercisable. In general, an option becomes
exercisable in increments during its term. Options may have a maximum term of
ten years from the date of grant. The current form of option agreement
provides for a ten-year term. No option may be exercised after the expiration
of its term.
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The exercise price of options granted under the Option Plan is determined by
the Board of Directors and, in the case of incentive stock options or options
granted to directors who are not employees, may not be less than 100% of the
fair market value of the Common Stock on the date the option is granted.
Depending on the terms of the particular option, payment for shares issued
upon exercise may consist of cash, check, personal promissory note, surrender
of shares owned by the optionee or such other consideration as determined by
the Board of Directors and permissible under Delaware law.
If an optionee's employment with Newco is terminated for any reason, the
option shall be exercisable within such period of time as is determined by the
Board of Directors (generally, thirty days, under the proposed form of option
agreement) to the extent that such option rights were exercisable on the date
of termination, and thereafter the option shall terminate. Longer periods are
permitted in the event of termination of employment due to death or
disability. An option is not transferable by the optionee, other than by will
or the laws of descent and distribution.
The option agreement may contain such other terms, provisions and conditions
not inconsistent with the Option Plan as may be determined by the Board of
Directors. The Board of Directors may, with the consent of any optionee,
cancel or amend the terms (including price) of any outstanding option.
Changes in Capitalization
In the event of changes in the Common Stock by reason of a stock dividend,
split-up or combination of shares, reclassification, recapitalization, merger,
consolidation, reorganization or liquidation, the Newco Board shall make such
adjustments in the option price and the number and class of shares subject to
the option under the Option as it shall deem appropriate. In the event of any
merger of Newco or any acquisition of all or substantially all of its assets
or stock, or any liquidation of Newco, the Newco Board shall have the power to
make arrangements for the substitution of new options for any options then
outstanding under the Option Plan or for the assumption by Newco's successor
of any such options or for the acceleration of the expiration date of options.
Amendment and Termination
The Board of Directors may at any time amend or terminate the Option Plan.
To the extent necessary to comply with rules promulgated under Section 16 of
the Exchange Act or to comply with Sections 421 and 422 of the Internal
Revenue Code and any regulations thereunder, any amendment made to the Option
Plan will require approval of the stockholders of Newco. The Option Plan will
terminate in any event in 2005. Termination will not impair any option
previously granted without the optionee's consent.
Federal Income Tax Consequences
Incentive Stock Options. No taxable income will be recognized by an optionee
upon the grant or exercise of an incentive stock option (provided that the
difference between the option exercise price and the fair market value of the
stock on the date of exercise must be included in the optionee's "alternative
minimum taxable income"), and no corresponding expense deduction will be
available to Newco. Generally, if an optionee holds shares acquired upon the
exercise of incentive stock options until the later of (i) two years from the
grant of the option and (ii) one year from the date of transfer of the
purchased shares to him or her (the "Statutory Holding Period), any gain to
the optionee upon a sale of such shares will be treated as capital gain. The
gain recognized upon the sale of the stock is the difference between the
option price and the sale price of the stock. The net federal income tax
effect on the holder of incentive stock options is to defer, until the stock
is sold, taxation of any increase in the stock's value from the time of grant
to the time of exercise, and to cause all such increase to be treated as
capital gain.
If the optionee sells the shares prior to the expiration of the Statutory
Holding Period, he or she will realize taxable income at ordinary income tax
rates in an amount equal to the lesser of (i) the fair market value of the
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shares on the date of exercise less the option price, or (ii) the amount
realized on the sale less the option price, and Newco will receive a
corresponding business expense deduction. Any additional gain will be treated
as long-term capital gain if the shares are held for more than one year prior
to the sale and as short-term capital gain if the shares are held for a
shorter period. If the optionee sells the stock for less than the option
price, he or she will recognize a capital loss equal to the difference between
the sale price and the option price. The loss will be a long-term capital loss
if the shares are held for more than one year prior to the sale and a short-
term capital loss if the shares are held for a shorter period.
Nonstatutory Stock Options. No taxable income is recognized by the optionee
upon the grant of a nonstatutory option. The optionee must recognize as
ordinary income in the year in which the option is exercised the amount by
which the fair market value of the purchased shares on the date of exercise
exceeds the option price (and Newco may be required to withhold an appropriate
amount for tax purposes). If the optionee is a person who is required to file
reports pursuant to Section 16(a) of the Exchange Act, then upon the exercise
of an option within six months from the date of grant no income will be
recognized by the optionee until six months have expired from the date the
option was granted, and the income then recognized will include any
appreciation in the value of the shares during the period between the date of
exercise and the date six months after the date of grant (unless the optionee
makes an election under Section 83(b) of the Code to have the difference
between the exercise price and fair market value on the date of exercise
recognized as ordinary income as of the time of exercise). Newco will be
entitled to a business expense deduction equal to the amount or ordinary
income recognized by the optionee, subject to the limitations of Section
162(m) of the Code. Any additional gain or any loss recognized upon the
subsequent disposition of the purchased shares will be a capital gain or loss,
and will be a long-term gain or loss if the shares are held for more than one
year.
Summary of 1991 Stock Option Plan
The 1991 Option Plan was adopted by the Calgene Board in 1991 and approved
by the stockholders of Calgene 1991. The 1991 Option Plan was amended by the
Calgene Board and the stockholders of Calgene in 1994 to increase the number
of shares authorized for issuance thereunder by 1,250,000 shares to an
aggregate of 2,500,000 shares.
As of December 31, 1995, options to purchase 1,996,697 shares of Calgene
Common Stock were outstanding under the 1991 Option Plan, 137,360 shares had
been issued upon exercise of options granted under the 1991 Option Plan and
365,943 shares were available for future grants under the 1991 Option Plan.
The 1991 Option Plan is substantially similar in all respects to the 1996
Option Plan described above.
Summary of 1990 Employee Stock Purchase Plan
The 1990 Employee Stock Purchase Plan (the "Purchase Plan") authorizes the
issuance of up to an aggregate of 500,000 shares of Common Stock to
participating employees. As of December 31, 1995, 383,912 shares were
available under the Purchase Plan.
The Purchase Plan will be administered by the Newco Board, which will be
authorized to decide questions of eligibility and to make rules and
regulations for the administration and interpretation of the Purchase Plan.
With certain exceptions, all employees, including officers, employed by Newco
or its subsidiaries are eligible to participate in the Purchase Plan. Non-
employee directors are not eligible to purchase shares under the Purchase
Plan.
The Purchase Plan provides for consecutive offerings to employees to
purchase Common Stock under the Purchase Plan as determined by the Board of
Directors from time to time ("Offerings"). An employee may elect to have a
minimum of 2% and a maximum of 10% deducted from his or her regular salary for
this purpose but in no event may an employee purchase more than 5,000 shares
or invest more than $25,000 in any one Offering. The price at which an
employee's option is exercised is the lower of (i) 85% of the last reported
price of the
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Common Stock on the Nasdaq National Market on the day that the Offering
commences or (ii) 85% of the last reported price on the day that the Offering
terminates.
The Newco Board may at any time terminate or amend the Purchase Plan.
However, if approval of an amendment is required by Section 423 of the Code or
Rule 16b-3 of the Exchange Act, such amendment may not be effected without
such approval. The Purchase Plan requires that all amounts in the accounts of
participating employees be promptly refunded upon termination of the Purchase
Plan.
Because participation in the Purchase Plan is voluntary, it is not possible
to determine the number of shares of Newco Common Stock to be purchased by any
particular current executive officer, by all current executive officers as a
group or by non-executive employees as a group. Based solely upon the last
reported sales price of Calgene Common Stock on the Nasdaq National Market on
December 15, 1995 ($4.875 per share), the fair market value of the Common
Stock available under the Purchase Plan as of December 31, 1995 was $1.87
million.
Federal Income Tax Consequences
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" as defined in Section 423 of the Code, which provides that an employee
will not realize any federal tax consequences when such employee joins the
Purchase Plan, or when an Offering ends and such employee receives shares of
Newco Common Stock. An employee must, however, recognize income or loss on the
difference, if any, between the price at which he or she sells the shares and
the price he or she paid for them. If an employee has owned shares purchased
under the plan for more than one year, disposes of them at least two years
after the date an Offering commenced, and the market price of the shares on
the date of sale is equal to or less than the purchase price under the
Purchase Plan, he or she will recognize a long-term capital loss in the amount
equal to the price paid over the sale price. If an employee has owned shares
for more than one year, more than two years has lapsed from the date the
Offering commenced, and the market price of the shares on the date of sale is
higher than the purchase price under the Purchase Plan, the employee must
recognize ordinary income in an amount equal to the lesser of (a) the fair
market value of the shares on the day the Offering commenced over the price
paid, or (b) the excess of the amount actually received for the shares over
the purchase price. Any further gain would be treated as long-term capital
gain.
If an employee sells shares purchased under the plan prior to holding them
for more than one year or prior to two years from the date the Offering
commenced, he or she must recognize ordinary income in the amount of the
difference between the price he or she paid and the market price of the shares
on the date of purchase and Newco will receive an expense deduction for the
same amount, subject to the limitation of Section 162(m) of the Code. The
employee will recognize a capital gain or loss on the difference between the
sale price and the market price on the date of purchase. Newco will not be
entitled to a tax deduction upon either the purchase or sale of shares under
the Purchase Plan if the holding period requirements set forth above are met.
The Purchase Plan is not qualified under Section 401(a) of the Code.
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DESCRIPTION OF NEWCO CAPITAL STOCK
GENERAL
The authorized capital stock of Newco presently consists of 80 million
shares of Newco Common Stock and 10 million shares of Preferred Stock.
The following are summaries of the terms of the Newco Common Stock and Newco
Preferred Stock. Such summaries do not purport to be complete.
COMMON STOCK
Newco is authorized to issue up to 80 million shares of Common Stock, $0.001
par value per share. Holders of Newco Common Stock are entitled to one vote
for each share held on all matters submitted to a vote of stockholders, except
that under certain circumstances stockholders may cumulate their votes in the
election of directors. Holders of Newco Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Newco Board out of
funds legally available therefor, subject to any preferential dividend rights
of any outstanding Preferred Stock. Upon the liquidation, dissolution or
winding up of Newco, the holders of Newco Common Stock are entitled to receive
ratably the net assets of Newco available after the payment of all debts and
other liabilities and subject to the prior rights of any outstanding Preferred
Stock. Holders of Newco Common Stock have no preemptive or conversion rights.
The outstanding shares of Newco Common Stock are, and the shares to be issued
in connection with the Merger will be, when issued and paid for, fully paid
and nonassessable. The rights, preferences and privileges of holders of Newco
Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of Preferred Stock which Newco may
designate and issue in the future.
PREFERRED STOCK
The Newco Board is authorized, subject to any limitations prescribed by law,
from time to time to issue up to an aggregate of 10 million shares of
Preferred Stock, $.001 par value per share, in one or more series, each of
such series to have such rights and preferences, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be determined by the Newco Board. The rights of the
holders of Newco Common Stock will be subject to, and may be adversely
affected by, the rights of holders of any Preferred Stock that may be issued
in the future. Issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, a
majority of the outstanding voting stock of Newco. Except as described below,
Newco has no present plans to issue any shares of Preferred Stock.
The Newco Board has authorized a series of Preferred Stock designated as the
Series A Redeemable, Non-Voting Preferred Stock (the "Newco Series A Preferred
Stock"). The Newco Series A Preferred Stock will have no voting rights, except
as otherwise required by law; will not be convertible into common stock; will
have a liquidation preference of $1.00 per share; and will be redeemable by
Newco at any time up to December 31, 1999 for $1.00 per share. At Closing,
Monsanto and Warren R. Haug will exchange 499 shares and 501 shares,
respectively, of Calgene Series A Preferred Stock for the same number of
shares of Newco Series A Preferred Stock.
DELAWARE ANTI-TAKEOVER LAW
Newco is subject to the provisions of Section 203 of the Delaware Law.
Section 203 prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
"interested stockholder," unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the "interested
stockholder." Subject
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to certain exceptions, an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years did own) 15% or
more of the corporation's voting stock.
CERTAIN CHARTER AND BY-LAW PROVISIONS
Newco has included in its Certificate of Incorporation provisions to
indemnify its directors and officers to the fullest extent permitted by
Section 145 of the Delaware Law. Newco's Certificate of Incorporation also
includes provisions to eliminate the personal monetary liability of its
directors to Newco or its stockholders for breaches of fiduciary duty, except
as specifically provided under Delaware Law. Newco believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Newco's Common Stock is The First
National Bank of Boston, Post Office Box 644, Boston, Massachusetts 02102.
Telephone number: (617) 575-2537.
COMPARISON OF STOCKHOLDER RIGHTS
The rights of holders of Calgene Common Stock are substantially identical to
the rights of holders of Newco Common Stock, subject to the right of Monsanto
to designate certain Directors of Newco and approve certain actions. Certain
provisions of the Stockholders Agreement have been incorporated into Newco's
Certificate of Incorporation. See "The Reorganization Agreement and Related
Agreements--The Stockholders Agreement."
NO APPRAISAL RIGHTS
Holders of Calgene Common Stock do not have rights of appraisal under the
Delaware Law in connection with the Reorganization.
LEGAL MATTERS
The validity of the shares of Newco Common Stock to be issued in connection
with the Merger will be passed upon for Newco by Hale and Dorr.
EXPERTS
The consolidated financial statements of Calgene at June 30, 1994 and 1995
and for each of the three years in the period ended June 30, 1995,
incorporated by reference in this Proxy Statement/Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon incorporated by reference in this Proxy
Statement/Prospectus and Registration Statement. Such financial statements
have been incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The consolidated balance sheet of Calgene II, Inc. ("Newco") at December 15,
1995 appearing in this Proxy Statement/Prospectus and Registration Statement
has been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and is included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Gargiulo L.P. and Subsidiaries at
June 30, 1995 and 1994 and for the years then ended and for the period from
December 23, 1992 to June 30, 1993 and the combined financial statements of
NTGargiulo, Inc. and Affiliates for the period from July 1, 1992 to December
22, 1992, except
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Gargiulo P.R., Inc. (formerly known as NTGargiulo P.R., Inc. and as South
Coast Fruit and Vegetable Company, Inc.) and subsidiary, included in this
proxy statement have been audited by Deloitte & Touche LLP as stated in their
reports appearing herein. The financial statements of Gargiulo P.R., Inc. and
subsidiary (consolidated with those of Gargiulo L.P. and combined with those
of NTGargiulo, Inc.) have been audited by Landa, Umpierre and Company as
stated in their reports included herein. Such consolidated financial
statements of Gargiulo L.P. and Subsidiaries and combined financial statements
of NTGargiulo, Inc. and Affiliates are included herein in reliance upon the
reports of such firms given upon their authority as experts in accounting and
auditing. Both the foregoing firms are independent auditors.
The combined financial statements of Tomato Investment Associates, Inc. and
Produce Related Technology of Monsanto Company at June 30, 1995 and 1994 and
for the years then ended included in this proxy statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein (which reports express an unqualified opinion and include an
explanatory paragraph referring to pending litigation against Gargiulo L.P.),
and have been so included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The audited financial statements of Collier Farms included in this proxy
have been audited by Arthur Andersen LLP, independent certified public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, in the event the
Reorganization is not consummated, stockholders of Calgene may present
proposals for inclusion in Calgene's proxy statement for consideration at the
next annual meeting of Calgene's stockholders by submitting their proposals to
Calgene in a timely manner. In order to be considered for inclusion in the
proxy statement for Calgene's annual meeting of stockholders to be held after
the fiscal year ending June 30, 1996, stockholder proposals must be received
by Calgene no later than June 12, 1996.
ACCOMPANYING CALGENE REPORTS
Copies of Calgene's Annual Report to Stockholders for the fiscal year ended
June 30, 1995 are being delivered to Calgene's stockholders with this Proxy
Statement/Prospectus.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
CALGENE II, INC.:
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheet at December 15, 1995.......................... F-3
Note to Consolidated Balance Sheet....................................... F-4
TOMATO INVESTMENT ASSOCIATES, INC. AND PRODUCE RELATED TECHNOLOGY OF
MONSANTO COMPANY:
Independent Auditors' Report............................................. F-5
Balance Sheets at June 30, 1995 and 1994................................. F-6
Statements of Operations for the Years Ended June 30, 1995, 1994 and
1993.................................................................... F-7
Statements of Shareholder's Equity for the Years Ended June 30, 1995,
1994 and 1993........................................................... F-8
Statements of Cash Flows for the Years Ended June 30, 1995, 1994 and
1993.................................................................... F-9
Notes to Financial Statements............................................ F-10
Combined Balance Sheet--Unaudited at September 30, 1995.................. F-15
Combined Statement of Operations--Unaudited for the Three Months Ended
September 30, 1995 and 1994............................................. F-16
Notes to Combined Financial Statements--Unaudited........................ F-17
GARGIULO, L.P. AND SUBSIDIARIES:
Independent Auditors' Report............................................. F-18
Independent Auditors' Report............................................. F-19
Consolidated Balance Sheets at June 30, 1995 and 1994.................... F-20
Consolidated Statements of Operations for the Years Ended June 30, 1995
and 1994 and for the Period From December 23, 1992 (Date of Commence-
ment) to June 30, 1993, and NTGargiulo, Inc. and Affiliates (The "Prede-
cessor Company") Combined Statement of Operations for the Period From
July 1, 1992 to December 22, 1992....................................... F-21
NTGargiulo, Inc. and Affiliates (The "Predecessor Company") Combined
Statement of Stockholders' Equity for the Period from July 1, 1992 to
December 22, 1992, and Gargiulo, L.P. and Subsidiaries (The "Partner-
ship") Consolidated Statements of Partners' Capital for the Years Ended
June 30, 1995 and 1994 and for the Period From December 23, 1992 (Date
of Commencement) to June 30, 1993....................................... F-22
Consolidated Statements of Cash Flows for the Years Ended June 30, 1995
and 1994 and for the Period From December 23, 1992 (Date of Commence-
ment) to June 30, 1993, and NTGargiulo, Inc. and Affiliates (The "Prede-
cessor Company") Combined Statement of Cash Flows for the Period From
July 1, 1992 to December 22, 1992....................................... F-23
Notes to Consolidated/Combined Financial Statements...................... F-24
Independent Auditors' Report............................................. F-36
Independent Auditors' Report............................................. F-37
Consolidated Condensed Balance Sheet--Unaudited at September 30, 1995.... F-38
Consolidated Condensed Statements of Operations--Unaudited for the Three
Months Ended September 30, 1995 and 1994................................ F-39
Consolidated Condensed Statements of Cash Flows--Unaudited for the Three
Months Ended September 30, 1995 and 1994................................ F-40
Notes to Consolidated Condensed Financial Statements--Unaudited.......... F-41
COLLIER FARMS:
Report of Independent Certified Public Accountants....................... F-42
Combined Balance Sheets at June 30, 1995, 1994 and 1993.................. F-43
Combined Statements of Operations and Owners' Equity for the Years Ended
June 30, 1995, 1994 and 1993............................................ F-44
Combined Statements of Cash Flows for the Years Ended June 30, 1995, 1994
and 1993................................................................ F-45
Notes to Combined Financial Statements................................... F-46
Combined Balance Sheets--Unaudited at September 30, 1995 and 1994........ F-50
Combined Statements of Operations and Owners' Equity--Unaudited for the
Three Months Ended September 30, 1995 and 1994.......................... F-51
Combined Statements of Cash Flows--Unaudited for the Three Months Ended
September 30, 1995 and 1994............................................. F-52
Notes to Combined Financial Statements--Unaudited........................ F-53
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Calgene II, Inc.
We have audited the accompanying consolidated balance sheet of Calgene II,
Inc. as of December 15, 1995. This balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the consolidated financial position of Calgene II, Inc. at
December 15, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Sacramento, California
December 18, 1995
F-2
<PAGE>
CALGENE II, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 15, 1995
<TABLE>
<S> <C>
ASSETS
Current assets--cash.................................................. $1,010
======
SHAREHOLDERS' EQUITY:
Common Stock, $0.001 par value; 1,000 shares authorized, issued and
outstanding.......................................................... $ 1
Additional paid-in capital............................................ 1,009
------
$1,010
======
</TABLE>
F-3
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CALGENE II, INC.
NOTE TO CONSOLIDATED BALANCE SHEET
DECEMBER 15, 1995
1. DESCRIPTION OF CALGENE II, INC.
Calgene II, Inc. ("Newco"), a Delaware corporation, was incorporated on
November 21, 1995. Newco is a holding company that was established by Monsanto
Company ("Monsanto") and Calgene, Inc. ("Calgene") to effect the transactions
contemplated by the Reorganization Agreement dated October 13, 1995 between
Monsanto and Calgene (collectively, the "Reorganization"). Upon consummation
of the Reorganization, Newco will own (i) all of the outstanding shares of
capital stock of Calgene, which shall be renamed "Calgene Technology
Corporation," and (ii) all of the outstanding shares of capital stock of
Tomato Investment Associates, Inc. and Produce Related Technology of Monsanto
Company ("TIA"), a wholly-owned subsidiary of Monsanto, which upon
consummation of the Reorganization will own the entire equity interest in
Gargiulo L.P. Consummation of the Reorganization is subject to the approval of
Calgene shareholders, the pre-transaction filing and waiting period
requirements applicable to the Reorganization under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, the effectiveness of the Newco
Registration Statement described below, compliance with applicable state
securities laws, and other customary closing conditions. Newco has not engaged
in any operating activities since its inception.
Upon consummation of the Reorganization, Newco will be renamed "Calgene,
Inc." and Monsanto will own 49.9% of the then outstanding shares of Newco
Common Stock and the holders of Calgene Common Stock outstanding immediately
prior to the Reorganization will own 50.1% of the then outstanding shares of
Newco Common Stock.
Newco will file with the Securities and Exchange Commission a Registration
Statement on Form S-4 under the Securities Act of 1933, as amended, with
respect to the shares of Newco's Common Stock to be issued to the shareholders
of Calgene pursuant to the Reorganization Agreement.
The consolidated balance sheet includes the accounts of Calgene II, Inc. and
its wholly-owned subsidiary, Calgene Acquisition Corp. All intercompany
accounts and transactions have been eliminated in consolidation.
F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To Tomato Investment Associates, Inc.
and Produce Related Technology of
Monsanto Company:
We have audited the accompanying combined balance sheets of Tomato
Investment Associates, Inc. ("TIA") (a wholly-owned subsidiary of Monsanto
Company) and Produce Related Technology of Monsanto Company (See Note 1) as of
June 30, 1995 and 1994, and the related statements of operations,
shareholder's equity, and cash flows for each of the three years in the period
ended June 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Company as of June 30, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years in the period ended June 30, 1995 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
October 2, 1995
F-5
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC. AND PRODUCE RELATED TECHNOLOGY OF MONSANTO
COMPANY
BALANCE SHEETS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------- -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
------
INVESTMENT IN EQUITY AFFILIATE.............................. $ 56,213 $25,161
DEFERRED TAX ASSET.......................................... 369 250
-------- -------
TOTAL....................................................... $ 56,582 $25,411
======== =======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES--Due to Monsanto Company................ $ 2,652 $ 986
ADVANCE PAYMENT ON DEVELOPMENT AGREEMENT.................... 1,723 1,410
DEFERRED TAX LIABILITY...................................... 1,304 1,255
SHAREHOLDER'S EQUITY:
Capital stock ($.01 par value, 1,000 shares authorized and
issued)
Additional paid-in capital................................ 63,524 29,096
Accumulated deficit....................................... (12,621) (7,336)
-------- -------
Total shareholder's equity.............................. 50,903 21,760
-------- -------
TOTAL....................................................... $ 56,582 $25,411
======== =======
</TABLE>
See notes to financial statements.
F-6
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC. AND PRODUCE RELATED TECHNOLOGY OF MONSANTO
COMPANY
STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING EXPENSES:
Technological............. $ 4,729 $ 4,559 $ 6,317
Amortization.............. 1,915 988 499
------- ------- -------
Total Operating
Expenses............... 6,644 5,547 6,816
EQUITY SHARE OF NET INCOME
(LOSS) OF AFFILIATE........ (941) 90 592
------- ------- -------
NET LOSS BEFORE INCOME
TAXES...................... 7,585 5,457 6,224
INCOME TAX (BENEFIT)........ (2,300) (2,045) (2,300)
------- ------- -------
NET LOSS.................... $(5,285) $(3,412) $(3,924)
======= ======= =======
</TABLE>
See notes to financial statements.
F-7
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC. AND PRODUCE RELATED TECHNOLOGY OF MONSANTO
COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
INITIAL CAPITAL CONTRIBUTION ON DECEMBER 23, 1992................ $24,980
Additional capital contribution, June 30, 1993................. 5,220
Tax benefit of loss on consolidated tax return................. (2,160)
Net loss for the year ended June 30, 1993...................... (3,924)
-------
BALANCE, JUNE 30, 1993........................................... 24,116
Additional capital contribution, June 30, 1994................. 4,246
Tax benefit of loss on consolidated tax return................. (3,190)
Net loss for the year ended June 30, 1994...................... (3,412)
-------
BALANCE, JUNE 30, 1994........................................... 21,760
Additional capital contribution, July 29, 1994................. 4,416
Tax benefit of loss on consolidated tax return................. (2,230)
Additional capital contribution, June 30, 1995................. 32,242
Net loss for the year ended June 30, 1995...................... (5,285)
-------
BALANCE, JUNE 30, 1995........................................... $50,903
=======
</TABLE>
See notes to financial statements.
F-8
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC. AND PRODUCE RELATED TECHNOLOGY OF MONSANTO
COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $ (5,285) $ (3,412) $ (3,924)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization................................... 1,915 988 499
Equity share of net (income) loss of
affiliate..................................... 941 (90) (592)
Increase (decrease) in due to Monsanto......... 1,666 (669) 1,655
Increase in advance payment on development
agreement..................................... 313 313 1,097
(Increase) decrease in deferred taxes.......... (70) 1,145 (140)
-------- -------- --------
Net cash (used in) operating activities...... (520) (1,725) (1,405)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES--
Net investment in equity affiliates............ (33,908) 669 (26,635)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions.......................... 36,658 4,246 30,200
Distribution related to tax benefit of loss on
consolidated tax return....................... (2,230) (3,190) (2,160)
-------- -------- --------
Net cash provided by financial activities.... 34,428 1,056 28,040
-------- -------- --------
INCREASE (DECREASE) IN CASH...................... -- -- --
CASH, BEGINNING OF YEAR.......................... -- -- --
-------- -------- --------
CASH, END OF PERIOD.............................. $ -- $ -- $ --
======== ======== ========
</TABLE>
See notes to financial statements.
F-9
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC. AND PRODUCE RELATED TECHNOLOGY OF MONSANTO
COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying combined financial statements represent the financial
statements of Tomato Investment Associates, Inc. ("TIA") and Produce Related
Technology of Monsanto Company ("Technology"). These business entities will be
collectively known as the "Company".
Tomato Investment Associates, Inc.
TIA, a Delaware corporation and wholly-owned subsidiary of Monsanto Company
("Monsanto"), was incorporated on November 17, 1992.
TIA was formed to enter into a partnership agreement on December 23, 1992
with Gargiulo, L.P. (formerly known as NTGargiulo, L.P.), a Delaware limited
partnership and subsidiaries (the "Partnership"). The Partnership is an
agriculture producer, primarily of tomatoes and berries, and is engaged in
various related business activities.
TIA contributed cash to the Partnership and cumulatively owns 49.9% of the
Partnership.
TIA has the right (the "Existing Option") currently to acquire the balance
of the capital stock of Gargiulo, L.P., that it does not own, as well as
further Partnership interests for $32.1 million, so that, after exercise of
the Existing Option, TIA will own 100% of the general partner and interest in
the Partnership equal to 82%.
In addition, under the Gargiulo, L.P. Agreement of Reorganization, upon
exercising the Existing Option, TIA has the further option to acquire the
additional Partnership interest equal to the remaining 18% ownership interest
for $18 million.
Produce Related Technology of Monsanto Company
This technology represents intellectual property relating to certain produce
and oils research and development. Such technology is applied to produce
plants defined as fresh and processed tomatoes, berries, mangoes, cucurbits,
peppers and sweetcorn and related intellectual property. Such applications are
listed as follows:
. Ripening control using ACC-deaminase license in tomato
. Ripening control using antisense-ACC synthase
. Starch modification using ADPGPP
. Cucumber Mosaic Virus resistance using CMV protein gene and generic coat
protein patent rights
. Geminivirus resistance using variant AL1 gene from target virus
. Insect resistance using genes encoding insect control proteins from
Bacillus thuringiensis
. Tomato Fruit-Specific Promoters
Oil defined as Canola, oil seed rape and sunflower and related intellectual
property are listed as follows:
. Canola, oil seed rape and sunflower transformation methods
. Altered linolenic acid content using the FAD3 gene
. Expression of sucrose phosphorylase expression in plants
. Calgene, Inc. oilseed crop plants with altered oil compositions achieved
through insertion of Antisense cytochrome b5 and PEP carboxylase genes
F-10
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC.
AND PRODUCE RELATED TECHNOLOGY OF MONSANTO COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Technology is a carve-out of Monsanto technology costs and include all
direct and indirect costs associated with developing the technology listed
above.
The combined financial statements of the Company have been presented to be
considered as a part of a proposed transaction between Monsanto and Calgene,
Inc., a Delaware corporation ("Calgene"). Calgene is a biotechnology company
that is developing genetically engineered plants and plant products for the
seed, food, and oleochemical industries. The proposed acquisition agreement
involves Monsanto contributing cash, its equity interest in the Partnership,
and Technology in exchange for a 49.9% interest in a new company ("Newco").
Newco will be comprised of the Monsanto assets defined above (after its
exercise of its options to acquire 100% Gargiulo, L.P.) and 100% of Calgene.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment in Equity Affiliate--The Company's investment in the Partnership
is accounted for under the equity method of accounting for investments.
Goodwill--Goodwill which is included in the Investment in Equity Affiliate
line of the balance sheet totaled $25.6 million and $12.8 million net
accumulated amortization of $2.4 million and $1.1 million at June 30, 1995 and
1994, respectively and is amortized on a straight-line basis over its
estimated useful life, 20 years. TIA evaluates the periods of amortization
continually and has determined there are no later events or circumstances
which would warrant revision to its original estimate of useful life.
Research and Development--Research and development costs are expensed as
incurred.
Income Taxes--The Company is a "C" Corporation. Income taxes have been
provided for in accordance with the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
Related Party--All employee costs of Technology have been funded by
Monsanto. TIA has no employees and, therefore, no direct or indirect employee
salary or benefit costs have been incurred.
3. INVESTMENT IN EQUITY AFFILIATE
TIA's equity investment in the Partnership represents substantially all of
TIA's existing assets.
F-11
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC.
AND PRODUCE RELATED TECHNOLOGY OF MONSANTO COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Summary Historical Financial Data--The following summary historical
financial data of the Partnership for June 30, 1995 and 1994 and for the years
ended 1995 and 1994 and the period from December 23, 1992 to June 30, 1993,
have been derived from their respective historical audited financial
statements. The financial data should be read in conjunction with the separate
audited financial statements and the notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, DECEMBER 23, 1992
--------------------- TO
1995 1994 JUNE 30, 1993
---------- --------- -----------------
<S> <C> <C> <C>
CONDENSED STATEMENT OF OPERATIONS
INFORMATION
Revenues............................. $ 114,052 $ 99,513 $52,335
Costs and expenses:
Cost of revenues................... 97,744 81,995 40,032
General and administrative......... 18,096 15,381 8,956
---------- --------- -------
Total expenses................... 115,840 97,376 48,988
---------- --------- -------
Income from operations............... (1,788) 2,137 3,347
Other income (expense)............... 85 (1,726) (656)
---------- --------- -------
Net (loss) income.................... $ (1,703) $ 411 $ 2,691
========== ========= =======
CONDENSED BALANCE SHEET INFORMATION
Current assets....................... $ 40,552 $ 38,617
Other assets......................... 47,267 42,647
---------- ---------
Total assets..................... $ 87,819 $ 81,264
========== =========
Current liabilities.................. $ 20,001 $ 23,834
Other liabilities.................... 27,315 15,326
---------- ---------
Total liabilities................ 47,316 39,160
Partners' capital.................... 40,503 42,104
---------- ---------
Total liabilities and partners'
capital......................... $ 87,819 $ 81,264
========== =========
</TABLE>
4. INCOME TAXES
The Company's operations are included in the consolidated U.S. Federal and
certain combined and separate state income tax returns of Monsanto. The
balance of refundable income taxes and deferred income taxes are due from/to
Monsanto, since Monsanto pays all taxes on the Company's behalf. Deferred
income taxes have been determined for temporary differences between the
financial reporting basis and tax basis of the assets and liabilities.
Temporary differences primarily result from depreciation, equity income from
an unconsolidated affiliate, and differences in recognition of assets written-
off.
The components of income tax benefit (expense) charged are:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- ------
<S> <C> <C> <C>
Current............................................... $2,230 $ 3,190 $2,160
Deferred.............................................. 70 (1,145) 140
------ ------- ------
$2,300 $ 2,045 $2,300
====== ======= ======
</TABLE>
F-12
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC.
AND PRODUCE RELATED TECHNOLOGY OF MONSANTO COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Factors causing the Company's effective tax rate of the income tax benefit
to differ from the U.S. federal statutory rate are:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory rate................................... 34% 34% 34%
State income taxes............................................ 5 5 5
Nondeductible goodwill........................................ (9) (1) (2)
--- --- ---
Effective income tax rate of income tax benefit............... 30% 38% 37%
=== === ===
</TABLE>
Deferred income tax balances are related to:
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
ASSET LIABILITY ASSET LIABILITY
<S> <C> <C> <C> <C>
Property..................................... $ -- $ 90 $-- $ 139
Investment in equity affiliate............... 220 1,165 322 1,165
Other........................................ 30 47
----- ------ ---- ------
$ 250 $1,255 $369 $1,304
===== ====== ==== ======
</TABLE>
5. DEVELOPMENT AGREEMENT
As part of the partnership agreement dated December 23, 1992 between TIA and
the Partnership, TIA entered into a development agreement for the primary
purpose of developing transgenic tomatoes for commercial application in the
production and sale of fresh market and processing tomatoes. The development
agreement requires TIA to carry out, at its expense, its portion of the
development plan through December 31, 1998. The development agreement further
requires that the Partnership pay TIA in five annual payments of $1,880
beginning on December 31, 1992 and ending on December 31, 1996. An additional
payment of $1,410 shall be received upon the latter of the development of a
tomato germplasm which exhibits certain attributes (defined in the development
agreement as "Commercial Level Performance") or December 31, 1995. Upon the
marketing and sale of the development tomato, the TIA will receive an
additional payment to be determined based on the date that both Commercial
Level Performance is achieved and the necessary regulatory approvals are
obtained:
. If on or before December 31, 1996, TIA will receive an additional payment
of $4,230.
. If after December 31, 1996, but on or before December 31, 1997, Monsanto
will receive an additional payment of $2,115.
. If after December 31, 1997, but on or before December 31, 1998, Monsanto
will receive an additional payment of $1,410.
Advance payment on development agreement was $1,723 and $1,410 at June 30,
1995 and 1994, respectively. Additionally, recognition of the advance payments
against technology expense was $1,567, $1,567, and $783 for the years ended
1995, 1994, and 1993, respectively.
6. SUBSEQUENT EVENTS
Monsanto and Calgene, Inc. entered into an Agreement and Plan of
Reorganization on October 13, 1995. The Agreement is subject to approval by
the Calgene, Inc. shareholders. Among other commitments, if approved by the
Calgene shareholders, TIA is required to exercise its options to acquire the
remaining interest in the Partnership and to contribute its interest in the
Partnership to Calgene (Note 1).
F-13
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC.
AND PRODUCE RELATED TECHNOLOGY OF MONSANTO COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Agreement and Plan of Reorganization further requires that prior to the
formation of Calgene, the Development Agreement (Note 5) will be amended to
eliminate the TIA obligation to carry out its commitments defined in the
development plan and the Partnership is relieved of its obligation to make
payments to TIA. Calgene will receive a fully paid-up license to the
technology under the Development Agreement. The accompanying financial
statements have not been adjusted for any changes in amounts or classification
of assets or liabilities which may be required once the transaction is
consummated.
On October 18, 1995, the Partnership became a defendant in two pending
lawsuits which involve personal injury claims by the families of three migrant
labor workers who were killed and by seven migrant labor workers who were
injured in a vehicle accident. The company hiring and transporting such farm
workers was an independent contractor engaged to arrange for migrant farm
labor for a Partnership farm. The plaintiffs allege that the vehicle in
question was in violation of one or more federal and state safety regulations
governing farm labor vehicles. The Partnership's insurance carriers have been
contacted regarding these lawsuits, but it has not yet been determined whether
the Partnership's insurance will be sufficient to cover these claims, if any.
Accordingly, the outcome of this litigation and the amount of damages, if any,
that may ultimately be incurred cannot be determined and no provisions for any
liability has been made in the accompanying combined financial statements.
F-14
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC
AND PRODUCE RELATED TECHNOLOGY OF MONSANTO COMPANY
COMBINED BALANCE SHEET--UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
-------------
<S> <C>
ASSETS
------
INVESTMENTS IN EQUITY AFFILIATES................................. $ 53,073
DEFERRED TAX ASSETS.............................................. 369
--------
TOTAL............................................................ $ 53,442
========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES--Due to Monsanto Company..................... $ 933
ADVANCE PAYMENT ON DEVELOPMENT AGREEMENT......................... 1,252
DEFERRED TAX LIABILITY........................................... 1,304
SHAREHOLDER'S EQUITY:
Capital stock ($.01 par value, 1,000 shares authorized and is-
sued)
Additional paid-in capital..................................... 65,378
Accumulated deficit............................................ (15,425)
--------
Total shareholder's equity................................... 49,953
--------
TOTAL............................................................ $ 53,442
========
</TABLE>
See notes to combined financial statements.
F-15
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC AND PRODUCE RELATED TECHNOLOGY OF MONSANTO
COMPANY
COMBINED STATEMENT OF OPERATIONS--UNAUDITED
THREE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
OPERATING EXPENSES:
Technology................................................. $ 1,383 $ 1,182
Amortization............................................... 444 427
------- -------
Total Operating Expenses................................. 1,827 1,609
EQUITY SHARE OF NET LOSS OF AFFILIATE........................ 2,696 153
------- -------
NET LOSS BEFORE INCOME TAXES................................. (4,523) (1,762)
INCOME TAX BENEFIT........................................... 1,719 669
------- -------
NET LOSS..................................................... $(2,804) $(1,093)
======= =======
</TABLE>
See notes to combined financial statements.
F-16
<PAGE>
TOMATO INVESTMENT ASSOCIATES, INC.
AND PRODUCE RELATED TECHNOLOGY OF MONSANTO COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1. BASIS OF PRESENTATION OF INTERIM FINANCIAL INFORMATION (UNAUDITED)
The accompanying unaudited combined financial statements as of September 30,
1995 and for the three month periods ended September 30, 1995 and 1994,
included in this Registration Statement, have been prepared by management of
Tomato Investment Associates, Inc. (the "Company") which is responsible for
their integrity and objectivity.
The accounting policies followed for interim financial reporting are set in
the Notes to the Company's audited combined financial statements, which are
included in this Registration Statement as filed with the Securities and
Exchange Commission.
To the best of management's knowledge and belief, the statements and related
information were prepared in conformity with generally accepted accounting
principles and are based on recorded transactions and management's best
estimates and judgments. The interim results of operations are not necessarily
indicative of the results which may be expected for the full year.
The financial statements for the three months periods ended September 30,
1995 and 1994 herein include, in the opinion of management, all adjustments
(which are normal recurring adjustments) necessary for a fair presentation of
the financial condition and results of operations of the Company for the
period indicated.
2. INVESTMENT IN EQUITY AFFILIATE
The Company's equity investment in Gargiulo, L.P. and Subsidiaries (the
"Partnership") represents substantially all of the Company's existing assets.
Summary Financial Data--The following summary financial data of the
Partnership as of September 30, 1995 and for the three month periods ended
September 30, 1995 and 1994 should be read in conjunction with the separate
interim financial information and notes of the Partnership thereto.
CONDENSED STATEMENT OF OPERATING INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER
30,
----------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................. $28,609 $27,504
Costs and expenses:
Cost of Revenues......................................... 29,667 23,528
General and administrative............................... 5,082 3,682
------- -------
Total expenses........................................ 34,749 27,210
Income (Loss) from operations............................. (6,140) 294
Other income (expense).................................... 737 418
------- -------
Net loss.................................................. $(5,403) $ (124)
------- -------
CONDENSED BALANCE SHEET INFORMATION AS OF SEPTEMBER 30, 1995
Current assets............................................ $30,773
Other assets.............................................. 49,518
-------
Total assets.......................................... 80,291
-------
Current liabilities....................................... 17,917
Other liabilities......................................... 27,040
-------
Total liabilities..................................... 44,957
Partners' capital......................................... 35,334
-------
Total liabilities and partners' capital............... $80,291
-------
</TABLE>
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
Gargiulo, L.P. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Gargiulo,
L.P. (formerly known as NTGargiulo, L.P.) and Subsidiaries (collectively
referred to as the "Partnership") as of June 30, 1995 and 1994 and the related
consolidated statements of operations, partners' capital, and cash flows for
the years then ended and for the period from December 23, 1992 (Date of
Commencement) to June 30, 1993. These consolidated financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. We did not audit the consolidated financial statements of Gargiulo
P.R., Inc. (formerly known as NTGargiulo P.R., Inc. and as South Coast Fruit
and Vegetable Company, Inc.), a subsidiary consolidated herein, which
statements reflect total assets constituting approximately 15% and 17% of
total consolidated assets as of June 30, 1995 and 1994, respectively, and
total revenues constituting approximately 5%, 6% and 8% of total consolidated
revenues for the years ended June 30, 1995 and 1994 and for the period from
December 23, 1992 (Date of Commencement) to June 30, 1993, respectively. Those
statements were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for
Gargiulo P.R., Inc., is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits and the
reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the reports of the other auditors,
such consolidated financial statements present fairly, in all material
respects, the financial position of the Partnership as of June 30, 1995 and
1994 and the results of its operations and its cash flows for the years then
ended and for the period from December 23, 1992 (Date of Commencement) to June
30, 1993 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
September 22, 1995, except for Note 9,
as to which the date is
December 29, 1995
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
NTGargiulo, Inc. and Affiliates:
We have audited the accompanying combined statements of operations,
stockholders' equity and cash flows of NTGargiulo, Inc. and Affiliates
(collectively referred to as the "Predecessor Company"), all of which are
under common ownership and management, for the period from July 1, 1992 to
December 22, 1992. These combined financial statements are the responsibility
of the Predecessor Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit. We did not
audit the consolidated financial statements of Gargiulo P.R., Inc. (formerly
known as NTGargiulo P.R., Inc. and as South Coast Fruit and Vegetable Company,
Inc.), an affiliate combined herein, which statements reflect total revenues
constituting 3% of total combined revenues for the period from July 1, 1992 to
December 22, 1992. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Gargiulo P.R., Inc., is based solely on the report of
such other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit and the
report of other auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audit and the report of the other auditors,
such combined financial statements present fairly, in all material respects,
the results of operations and cash flows of the Predecessor Company for the
period from July 1, 1992 to December 22, 1992, in conformity with generally
accepted accounting principles.
As discussed in the notes to the consolidated/combined financial statements,
on December 23, 1992 the Predecessor Company contributed substantially all of
its net assets and operations to Gargiulo, L.P. (formerly known as NTGargiulo,
L.P.), a Delaware limited partnership.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
October 29, 1993
F-19
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
ASSETS ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................ $ 1,555,523 $ 614,619
Receivables, net (includes $1,703,659 and $2,296,222,
respectively, due from related parties)............. 24,103,895 26,109,089
Inventories.......................................... 12,492,609 10,058,327
Other, principally prepaid expenses.................. 2,400,149 1,834,967
----------- -----------
Total current assets............................... 40,552,176 38,617,002
PROPERTY AND EQUIPMENT, net............................ 42,909,947 40,207,056
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED
AFFILIATES............................................ 1,669,365 507,526
OTHER ASSETS........................................... 2,687,269 1,932,084
----------- -----------
TOTAL.................................................. $87,818,757 $81,263,668
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable (includes $3,319,957 and $1,372,994,
respectively, due to related parties)............... $10,892,212 $ 6,904,640
Accrued expenses (includes $872,115 and $1,166,375,
respectively, due to related parties)............... 3,866,006 3,492,061
Due to growers....................................... 2,139,836 2,022,347
Borrowings under line of credit...................... 8,853,136
Current portion of credit agreement.................. 720,000
Current portion of long-term notes payable........... 2,767,516 1,591,806
Current portion of capitalized lease obligations..... 335,271 249,547
----------- -----------
Total current liabilities.......................... 20,000,841 23,833,537
----------- -----------
LONG-TERM DEBT:
Borrowings under line of credit...................... 12,878,942
Credit agreement..................................... 2,580,000
Long-term notes payable.............................. 12,266,661 10,168,270
Capitalized lease obligations........................ 1,560,500 1,498,086
----------- -----------
Total long-term debt............................... 26,706,103 14,246,356
----------- -----------
MINORITY INTEREST...................................... 608,710 1,080,020
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL:
General Partners' capital............................ 1,741,518 1,693,524
Limited Partners' capital............................ 38,761,585 40,410,231
----------- -----------
Total partners' capital............................ 40,503,103 42,103,755
----------- -----------
TOTAL.................................................. $87,818,757 $81,263,668
=========== ===========
</TABLE>
See notes to consolidated/combined financial statements.
F-20
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994 AND FOR THE PERIOD
FROM DECEMBER 23, 1992 (DATE OF COMMENCEMENT) TO JUNE 30, 1993
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 1, 1992 TO DECEMBER 22, 1992
<TABLE>
<CAPTION>
PREDECESSOR
PARTNERSHIP COMPANY
---------------------------------------------- -----------------
DECEMBER 23, 1992 JULY 1, 1992
YEAR ENDED YEAR ENDED TO TO
JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 DECEMBER 22, 1992
------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES (includes
$3,714,958, $2,726,535,
$1,845,662 and
$971,337, respectively,
derived from related
parties):
Product revenues:
Tomatoes............... $ 60,141,706 $50,325,427 $26,473,853 $17,639,910
Strawberries........... 23,358,592 20,836,344 8,131,012 1,402,980
Other.................. 8,784,443 7,301,204 4,053,077 1,995,925
Service revenues....... 21,766,812 21,049,710 13,677,585 7,850,706
------------ ----------- ----------- -----------
Total revenues....... 114,051,553 99,512,685 52,335,527 28,889,521
------------ ----------- ----------- -----------
COST OF REVENUES:
Product costs:
Tomatoes............... 55,137,325 44,920,325 21,796,055 11,748,258
Strawberries........... 24,926,459 19,323,619 6,657,077 1,704,156
Other.................. 7,495,547 6,545,005 4,729,840 1,539,330
Service costs.......... 10,184,568 11,205,658 6,848,803 3,253,298
------------ ----------- ----------- -----------
Total cost of
revenues............ 97,743,899 81,994,607 40,031,775 18,245,042
------------ ----------- ----------- -----------
GROSS PROFIT............ 16,307,654 17,518,078 12,303,752 10,644,479
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 18,096,042 15,381,026 8,956,235 7,427,671
------------ ----------- ----------- -----------
OPERATING (LOSS)
INCOME................. (1,788,388) 2,137,052 3,347,517 3,216,808
------------ ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income........ 448,239 317,257 257,234 172,287
Interest expense....... (2,168,720) (1,186,165) (666,266) (547,210)
Minority interest,
net................... 471,310 (314,099) 224,404 (144,323)
Other, net............. 918,323 (676,962) (655,897) (12,781)
------------ ----------- ----------- -----------
Total other income
(expense), net...... (330,848) (1,859,969) (840,525) (532,027)
------------ ----------- ----------- -----------
(LOSS) INCOME BEFORE
EQUITY SHARE OF NET
INCOME (LOSS) OF
UNCONSOLIDATED
AFFILIATES AND BENEFIT
FROM INCOME TAXES...... (2,119,236) 277,083 2,506,992 2,684,781
EQUITY SHARE OF NET
INCOME (LOSS) OF
UNCONSOLIDATED
AFFILIATES............. 416,222 19,912 3,501 (18,383)
------------ ----------- ----------- -----------
(LOSS) INCOME BEFORE
BENEFIT FROM INCOME
TAXES.................. (1,703,014) 296,995 2,510,493 2,666,398
BENEFIT FROM INCOME
TAXES.................. 114,000 181,000
------------ ----------- ----------- -----------
NET (LOSS) INCOME....... $ (1,703,014) $ 410,995 $ 2,691,493 $ 2,666,398
============ =========== =========== ===========
</TABLE>
See notes to consolidated/combined financial statements.
F-21
<PAGE>
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM JULY 1, 1992 TO
DECEMBER 22, 1992
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED JUNE 30, 1995
AND 1994 AND FOR THE PERIOD FROM DECEMBER 23, 1992 (DATE OF COMMENCEMENT) TO
JUNE 30, 1993
<TABLE>
<CAPTION>
ADDITIONAL
CAPITAL PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
PREDECESSOR COMPANY:
BALANCE, JUNE 30, 1992....... $ 379,266 $2,240,124 $ 27,954,112 $ 30,573,502
Distributions............... (13,986,842) (13,986,842)
Adjustment resulting from
the merger of NFV (a
taxable corporation) into
NTGI (a non-taxable
corporation) recorded as a
capital contribution....... 1,026,838 1,026,838
Net income for the period
from July 1, 1992 to
December 22, 1992.......... 2,666,398 2,666,398
---------- ---------- ------------ ------------
BALANCE, DECEMBER 22, 1992... $1,406,104 $2,240,124 $ 16,633,668 $ 20,279,896
========== ========== ============ ============
</TABLE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITED PARTNERS
GENERAL --------------------------------------------------
PARTNER NTGI CBC TIA TOTAL
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PARTNERSHIP:
Initial contributions on
December 23, 1992:
Predecessor Company,
excluding net assets
aggregating $417,584
related to MIRACLE,
OLD and DUROY
(at carryover basis).. $1,295,922 $16,667,907 $ 1,898,483 $18,566,390
TIA cash contribution.. $24,614,483 24,614,483
Other (at carryover
basis)................ 365,517 47,401 47,401
Distributions,
principally for pre-
formation
expenditures........... (2,480,000) (114,000) (125,000) (2,719,000)
Net income for the
period from December
23, 1992 to June 30,
1993................... 53,830 1,672,224 385,153 580,286 2,637,663
---------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1993.. 1,715,269 15,907,532 2,169,636 25,069,769 43,146,937
Distributions........... (29,965) (1,994,753) (507,860) (636,868) (3,139,481)
Net income for the year
ended June 30, 1994.... 8,220 255,351 58,813 88,611 402,775
---------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1994.. 1,693,524 14,168,130 1,720,589 24,521,512 40,410,231
Net income for the
period from July 1,
1994 to July 28, 1994.. 6,556 203,653 46,906 70,671 321,230
GP additional
contribution on July
29, 1994............... 102,362
Net loss for the period
from July 29, 1994 to
June 30, 1995.......... (60,924) (802,166) (184,803) (982,907) (1,969,876)
Merger of CBC into NTGI
effective June 30,
1995................... 1,582,692 (1,582,692)
---------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1995.. $1,741,518 $15,152,309 $ -0- $23,609,276 $38,761,585
========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated/combined financial statements.
F-22
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994 AND FOR THE PERIOD
FROM DECEMBER 23, 1992 (DATE OF COMMENCEMENT) TO JUNE 30, 1993
NTGARGIULO, INC. AND AFFILIATES ("THE PREDECESSOR COMPANY")
COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 1, 1992 TO DECEMBER 22, 1992
<TABLE>
<CAPTION>
PREDECESSOR
PARTNERSHIP COMPANY
-------------------------------------------- -----------------
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, DECEMBER 23, 1992 JULY 1, 1992 TO
1995 1994 TO JUNE 30, 1993 DECEMBER 22, 1992
----------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net (loss) income..... $(1,703,014) $ 410,995 $ 2,691,493 $ 2,666,398
Adjustments to
reconcile net (loss)
income to net cash
provided (used) by
operating activities:
Depreciation and
amortization......... 3,841,970 3,343,011 1,453,206 1,300,606
Equity share of net
(income) loss of
unconsolidated
affiliates........... (416,222) (19,912) (3,501) 18,383
Minority interest,
net.................. (471,310) 314,099 (224,404) 144,323
Decrease (increase)
in operating
receivables, net..... 2,005,194 (5,769,387) (4,568,549) 2,202,163
(Increase) decrease
in inventories....... (2,434,282) (5,390,966) 2,876,600 (5,390,284)
(Increase) decrease
in other operating
assets............... (1,761,727) (451,739) (104,696) (328,120)
Increase (decrease)
in accounts payable,
accrued expenses,
and due to growers... 4,479,006 (757,218) (3,687,667) 2,739,204
Increase (decrease)
in deferred income
taxes................ 331 (120,293)
----------- ------------ ----------- ------------
Net cash provided
(used) by operating
activities......... 3,539,615 (8,321,117) (1,567,187) 3,232,380
----------- ------------ ----------- ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property
and equipment........ (5,200,677) (8,260,667) (2,939,362) (6,374,907)
Net investments in and
advances to
unconsolidated
affiliates........... (745,617) (57,718) (342,458)
Proceeds from the sale
of land and
building............. 546,105
----------- ------------ ----------- ------------
Net cash used by
investing
activities......... (5,400,189) (8,318,385) (3,281,820) (6,374,907)
----------- ------------ ----------- ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Cash transferred from
Predecessor Company.. 4,080,107
Net borrowings
(repayments) under
lines of credit...... 4,025,806 2,703,765 (2,482,714) 6,379,262
Decrease in
stockholders' loans
payable, net......... (34,408) (215,592)
Advances under credit
agreement............ 3,300,000
Repayments under
credit agreement..... (3,300,000)
Proceeds from long-
term notes payable... 5,800,000 500,000
Repayment of long-term
notes payable........ (3,275,899) (1,415,943) (3,822,211) (211,776)
Repayment of
capitalized lease
obligations.......... (448,429) (233,589)
Capital
contributions........ 24,984,080
Minority interest
shareholder
contributions........ 412,487
Distributions......... (3,169,446) (2,719,000) (13,986,842)
----------- ------------ ----------- ------------
Net cash provided
(used) by financing
activities......... 2,801,478 1,684,787 20,418,341 (8,034,948)
----------- ------------ ----------- ------------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS........... 940,904 (14,954,715) 15,569,334 (11,177,475)
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD............. 614,619 15,569,334 15,257,582
----------- ------------ ----------- ------------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD................ $ 1,555,523 $ 614,619 $15,569,334 $ 4,080,107
=========== ============ =========== ============
</TABLE>
See notes to consolidated/combined financial statements.
F-23
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994 AND FOR THE PERIOD
FROM DECEMBER 23, 1992 (DATE OF COMMENCEMENT) TO JUNE 30, 1993
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 1, 1992 TO DECEMBER 22, 1992
1. GENERAL, ORGANIZATION, BASIC OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
General--Gargiulo, L.P. (formerly known as NTGargiulo, L.P.), a Delaware
limited partnership, and Subsidiaries (collectively referred to as the
"Partnership") is an agricultural producer, primarily of tomatoes and berries,
and is engaged in various business activities related to the packaging,
marketing, brokering, warehousing, distribution and breeding research of fresh
market fruit and vegetables. Operations are principally in Florida,
California, Puerto Rico, and Mexico and the corporate headquarters are in
Naples, Florida. Although not significant, the Partnership also has operations
in Chile, Arizona and Virginia. Successful operations are highly dependent
upon climatic conditions, not only in the Partnership's farming areas, but in
other international agribusiness locations. Additionally, because the
Partnership has foreign operations, it is susceptible to economic and
political events which may occur in those foreign countries.
The following information is provided to understand the evolution of the
organization and the basis of presentation of the consolidated/combined
financial statements:
Predecessor Company Organization--As of June 30, 1992, the Predecessor
Company consists of the following affiliates, all of which have common
ownership and management:
.NTGargiulo, Inc. ("NTGI")
.Coastal Berry Corporation ("CBC")
.Gulf Coast Packaging Corporation ("GULF")
.Home Grown Farms, Inc. ("HGF")
.Naples Fruit and Vegetable Company ("NFV")
.Miracle Farms, Inc. ("MIRACLE")
.Old Fort Tomato Growers, Inc. ("OLD")
.Gargiulo P.R., Inc. ("GPR") (formerly known as NTGargiulo P.R., Inc. and
as South Coast Fruit and Vegetable Company, Inc.)
.Duroy, Inc. ("DUROY")
Additionally, as of June 30, 1992, the following affiliates have been
consolidated herein with one or more of the above entities, and applicable
minority interest liability recorded, because they are majority-owned by the
Predecessor Company:
.BHN Joint Venture ("BHN") is a partnership in which NTGI acquired an
additional 20% interest during 1992. The transaction, which brings
NTGI's interest in BHN to 80% as of June 30, 1992, was accounted for as
a purchase and the excess cost over fair market value of the net assets
acquired of $624,475 is being amortized over 5 years.
.Gulf Coast Farms Joint Venture ("GCFJV") is a partnership wholly owned by
HGF and NFV.
.Superior Plant Company ("SUPERIOR") is a partnership in which NTGI owns a
75% interest.
Also, as of June 30, 1992, the following unconsolidated affiliates are not
majority-owned by the Predecessor Company and therefore are accounted for
under the equity method:
.NTHG Joint Venture--50% owned by NTGI (during the year ended June 30,
1994, the Partnership acquired the remaining 50% interest in NTHG Joint
Venture)
.Hortifruit, Inc.--50% owned by NTGI
F-24
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Transitional Period--Subsequent to June 30, 1992, but prior to December 23,
1992, the transactions and events described below occurred. Each of the
mergers were among entities under common control and management, and
therefore, were accounted for similar to a pooling of interests, whereby the
accounts were recorded at historical carrying values by the surviving entities
and adjustments to the equity accounts were recorded retroactively:
.GULF, HGF, NFV and GCFJV merged with and into NTGI.
. DUROY merged with and into a newly-formed entity, Gargiulo, G.P., Inc.
(formerly known as NTGargiulo, G.P., Inc.) ("GP"). The GP was capitalized
substantially by assets contributed to the GP by the Predecessor Company.
Such contributed assets were recorded by the GP at carryover basis, and a
significant portion was later contributed to the Partnership as described
below.
. MIRACLE and OLD's net assets were not contributed to the Partnership.
. GPR formed a wholly-owned subsidiary, South Coast Vegetable Realty
Company, Inc. ("SCVRC"), and acquired a 33.33% interest in TGL
Enterprises.
Partnership Organization--The Partnership was formed on December 23, 1992 by
NTGI, CBC, GP and an unrelated third party, Tomato Investment Associates, Inc.
("TIA"). GP is the general partner and the other entities are limited
partners. In forming the Partnership, NTGI, CBC and GP contributed
substantially all of their net assets, including NTGI's ownership interest in
its subsidiaries, to the Partnership. In addition, certain stockholders of
NTGI and CBC contributed, on behalf of NTGI and CBC, their ownership interests
in GPR and their interests in certain entities discussed below. NTGI, CBC, and
GP are under common control and management and collectively control the
operations of the Partnership. As a result of this common control and
management, the Partnership recorded the net assets and ownership interests
contributed by, or on behalf of, NTGI, CBC, and GP at their historical
carrying values. TIA contributed cash. The Partnership's operations are
allocated to each partner based on their respective ownership interests. On
July 29, 1994, GP's ownership percentage increased from 2% to 3% and the other
entities became 97% limited partners. Effective June 30, 1995, CBC merged into
NTGI.
On December 23, 1992, ownership in the following entities were contributed
to the Partnership by the stockholders of NTGI on behalf of NTGI. The
Partnership controls these entities:
. Agricola Purutun, Limitada ("PURUTUN"), a 99.9% owned Chilean limited
liability entity. By agreement, the Partnership shares in 90% of the
profits and losses of PURUTUN.
. GPM, S.A., a Chilean corporation. During the year ended June 30, 1995,
GPM, S.A. changed its name to NTGargiulo S.A. ("NTGSA") and in a related
transaction, the Partnership's ownership interest in NTGSA increased from
75% to 99.99% and NTGSA's ownership interest in the following entities
decreased from 50% to 37.5%.
. Montemayor S.A. ("MONTEMAYOR")
. Exportadora Agricola Topfrut, S.A. ("TOPFRUT") and its (a) 99.9% owned
subsidiary (Industria Hortofruticola Friofruta S.A.) and (b) 50% owned
subsidiary (Agricola La Roca, S.A.)
The above-described transaction, which did not change the Partnership's
underlying interest in the net assets of NTGSA, also included the
Partnership's acquisition of a .01% ownership interest in both Collague S.A.
and Inversiones Manley S.A. Additionally, MONTEMAYOR and TOPFRUT are
unconsolidated affiliates, because they are not majority-owned by the
Partnership, and are therefore accounted for under the equity method. As a
result of the existence of certain contingencies, as of June 30, 1994, the
Partnership's investment in NTGSA was carried at a nominal amount. As of June
30, 1995, such contingencies have been resolved and NTGSA is a consolidated
subsidiary of the Partnership.
F-25
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Subsequent to December 23, 1992, but prior to June 30, 1993, the Partnership
formed NTGargiulo and Dresick Associates ("DRESICK"), a 66.7% owned
partnership.
On January 23, 1995, the Partnership acquired for $7,000, a 99.9% interest
in Sociedad Comercial El Melon, Limitada ("SOCOMEL"), a Chilean entity, in a
transaction accounted for as a purchase. On the date acquired, SOCOMEL had no
significant assets or liabilities.
During the year ended June 30, 1995, the Partnership formed Gargiulo Mexico,
L.L.C. ("MEX"), a 99% owned limited liability company, with the remaining 1%
owned by the GP. The following entities (which are 50% owned by MEX) are
unconsolidated affiliates, because they are not majority-owned by the
Partnership, and are therefore accounted for under the equity method:
.Del Campo NTGargiulo, L.L.C. ("DCLLC")
.Del Campo NTGargiulo Mexico, S. de R.L. ("DCSRL")
Basis of Presentation--The combined financial statements of the Predecessor
Company include the accounts of NTGI and its affiliates, all of which have
common ownership and management. Subsidiaries which are majority-owned by NTGI
and its affiliates have been consolidated with NTGI and its affiliates.
Subsidiaries that are not majority-owned by NTGI and its affiliates are
accounted for under the equity method.
The consolidated financial statements of the Partnership include the
accounts of the Partnership and subsidiaries majority-owned by the
Partnership. Subsidiaries that are not majority-owned by the Partnership are
accounted for under the equity method.
All significant intercompany balances and transactions have been eliminated
in the preparation of the consolidated/combined financial statements.
Unconsolidated Affiliates--The following summary of condensed balance sheets
and statements of operations information are presented for the unconsolidated
affiliates:
<TABLE>
<CAPTION>
PREDECESSOR
PARTNERSHIP COMPANY
--------------------------------------------- -----------------
FOR THE PERIOD FOR THE PERIOD
FROM FROM
DECEMBER 23, 1992 JULY 1, 1992
YEAR ENDED YEAR ENDED TO TO
JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 DECEMBER 22, 1992
------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CONDENSED BALANCE SHEETS
INFORMATION
Current assets.......... $13,962,631 $ 555,011
Other assets............ 1,386,324 823,336
----------- ----------
Total assets......... 15,348,955 1,378,347
Total liabilities (all
current)............... 11,998,770 389,757
----------- ----------
Net stockholders equity
and partner's capital.. $ 3,350,185 $ 988,590
=========== ==========
CONDENSED STATEMENTS OF
OPERATIONS INFORMATION
Revenues................ $ 7,315,731 $ 351,412 $248,000 $ 31,826
Expenses................ 6,230,350 311,588 240,998 68,592
----------- ---------- -------- --------
Net income.............. $ 1,085,381 $ 39,824 $ 7,002 $(36,766)
=========== ========== ======== ========
</TABLE>
F-26
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of significant accounting policies:
Cash and Cash Equivalents--All highly liquid instruments with an initial
maturity of three months or less when acquired are considered cash and cash
equivalents for the purposes of preparing the statements of cash flows.
Inventories--Supplies and seeds inventories are stated at the lower of cost
(first-in, first-out method) or market. Growing crops are stated at the
lower of cost or market.
Property and Equipment--Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the assets on
the straight-line and accelerated methods. Leasehold improvements are
amortized over the term of the related lease or the estimated useful life
of the improvement, whichever is shorter.
Leases that transfer substantially all the benefits and risks of ownership
are accounted for as an acquisition of assets and incurrence of
obligations. Accordingly, capitalized leased assets are recorded as
property and equipment and the present value of the future minimum lease
payments are recorded as a liability. Amortization of such assets is
computed using the straight-line method over the estimated useful lives of
the related assets.
The estimated useful lives of the assets are as follows:
<TABLE>
<S> <C>
Buildings and leasehold improvements............................. 30 years
Machinery and equipment.......................................... 4-20 years
Capitalized lease equipment...................................... 2-5 years
</TABLE>
Organizational Costs--Organizational costs, included in other assets,
represent professional fees incurred in forming the Partnership.
Organizational costs are being amortized on the straight-line method over
five years.
Customer List--Customer list, included in other assets, represent certain
rights acquired by the Partnership in connection with the purchase of
certain assets from an unrelated third party. Customer list is being
amortized on the straight-line method over five years.
Revenue Recognition--Product revenues are recognized at the time title
transfers to the buyer and the product is delivered. Service revenues are
recognized at the time the service is performed.
Research and Development--Research and development costs are expensed as
incurred ($3,905,594, $3,456,254, $1,579,182 and $661,132 for the years
ended June 30, 1995 and 1994 and the periods from December 23, 1992 to June
30, 1993 and July 1, 1992 to December 22, 1992, respectively).
Included in the preceding amounts is development/license agreement expense
(see Note 7) which, during the years ended June 30, 1995 and 1994 and the
period from December 23, 1992 to June 30, 1993 amounted to $1,566,667,
$1,566,667 and $783,383, respectively.
Income Taxes--The Partnership's federal taxable income and expenses, with
the exception of GPR and its wholly-owned subsidiary, SCVRC, flow directly
to the partners and are not taxed at the Partnership level. Therefore, as
of June 30, 1995, the Partnership's net assets exceed the partners' equity
in the Partnership by approximately $4,500,000.
GPR is a U.S. corporation authorized to do business in Puerto Rico and,
accordingly, is subject to U.S. and Puerto Rico income taxes. For U.S.
income tax purposes, GPR has elected to be taxed under Section 936 of the
Internal Revenue Code, which allows an income tax credit equal to the
portion of U.S. income taxes attributable to the earnings derived from
sources within Puerto Rico and from qualified investment income. Under
Puerto Rico's income tax law, distributions from GPR's retained earnings
are taxable at a rate that
F-27
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
varies depending upon the business activity that generated the earnings,
generally 10%. For Puerto Rico income tax purposes, GPR's net income
derived from agricultural operation is 90% exempt from income taxes for a
period expiring on December 31, 1997. In addition, GPR has been granted,
with certain conditions, an industrial tax exemption covering 90% of the
net income derived from the undesignated service activities covered in the
grant for a period expiring on December 31, 2007. Equipment used by GPR in
the packing operation is also 90% exempt from property taxes for a period
expiring on December 31, 2007.
SCVRC is a "C" Corporation, but since formation has only incurred operating
losses.
Income taxes have been provided for in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which was adopted effective December 23, 1992. The cumulative effect
of this change in accounting for income taxes had no material impact on the
Partnership's consolidated financial statements.
Included in the combined financial statements of the Predecessor Company
are several "S" Corporations. As an "S" Corporation, all federal taxable
income and expenses, with certain exceptions, flow directly to the
stockholders and are not taxed at the corporate level. Also included is GPR
which is taxed as described above.
The income tax provision of the Predecessor Company has been provided in
accordance with Accounting Principles Board Opinion No. 11, Accounting for
Income Taxes.
Reclassifications--Certain amounts in prior years' financial statements
have been reclassified to conform with the 1995 financial statements.
2. RECEIVABLES
Receivables consist of the following as of June 30:
<TABLE>
<CAPTION>
1995 1994
TOTAL RELATED PARTY TOTAL RELATED PARTY
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Customer................ $18,035,281 $ 331,626 $23,276,478 $1,135,565
Grower advances......... 4,450,748 2,318,104
Participation
agreement.............. 1,896,365
Other................... 1,414,956 1,372,033 1,478,895 1,160,657
----------- ---------- ----------- ----------
Total............... 25,797,350 1,703,659 27,073,477 2,296,222
Less allowance for
doubtful amounts....... (1,693,455) (964,388)
----------- ---------- ----------- ----------
Total............... $24,103,895 $1,703,659 $26,109,089 $2,296,222
=========== ========== =========== ==========
</TABLE>
The activity for the allowance account is as follows:
<TABLE>
<CAPTION>
PREDECESSOR
PARTNERSHIP COMPANY
------------------------------------------- -----------------
YEAR ENDED YEAR ENDED DECEMBER 23, 1992 JULY 1, 1992
JUNE 30, JUNE 30, TO TO
1995 1994 JUNE 30, 1993 DECEMBER 22, 1992
----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Beginning balance.......................................... $ (964,388) $(1,159,189) $(1,134,189) $ (899,023)
Provision.................................................. (1,004,863) (524,593) (46,877) (235,166)
Write-offs, net of recoveries.............................. 275,796 719,394 21,877
----------- ----------- ----------- -----------
Ending balance............................................. $(1,693,455) $ (964,388) $(1,159,189) $(1,134,189)
=========== =========== =========== ===========
</TABLE>
F-28
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES
Inventories consist of the following as of June 30:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Supplies and seeds inventories..................... $ 3,262,853 $ 2,616,801
Growing crops...................................... 9,229,756 7,441,526
----------- -----------
Total............................................ $12,492,609 $10,058,327
=========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of June 30:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land.............................................. $15,139,688 $15,121,905
Buildings and leasehold improvements.............. 16,369,739 13,541,128
Machinery and equipment........................... 32,314,223 30,065,827
Capitalized lease equipment....................... 2,577,789 1,981,222
Construction in progress.......................... 1,356,837 944,693
----------- -----------
Total........................................... 67,758,276 61,654,775
Accumulated depreciation and amortization......... (24,848,329) (21,447,719)
----------- -----------
Total........................................... $42,909,947 $40,207,056
=========== ===========
</TABLE>
5. DEBT
A significant portion of the Partnership's assets have been pledged as
collateral for the following debt and lease obligations and certain debt is
personally guaranteed by certain principals of the Partnership. In addition,
certain of the following debt agreements limit the amount of distributions
that may be made and contain various restrictive covenants which include
minimum working capital requirements, a specified current maturity coverage
ratio and the maintenance of a specified ratio of total liabilities to
tangible net worth. The specified ratios of current maturity coverage and of
total liabilities to tangible net worth covenants contained in the $17.5
million line of credit facility and in the $2.3 million mortgage loan have not
been met as of June 30, 1995; however, the lender has waived the requirements
to maintain such ratios through June 30, 1996.
Borrowings Under Lines of Credit--Borrowings under lines of credit consist
of the following as of June 30:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Line of credit totaling $15,000,000 with a financial
institution, borrowings and interest are tied to
prime less 1%; the line of credit expired on Novem-
ber 15, 1994 and was replaced with a new line of
credit described below............................. $8,853,136
==========
Line of credit totaling $17,500,000 with a financial
institution, borrowings are tied to LIBOR (6.03%
for this and all other borrowings tied to LIBOR as
of June 30, 1995) plus 1.35% expiring on November
15, 1996........................................... $12,878,942
===========
</TABLE>
F-29
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Advances Under Credit Agreement--Advances under a $10,000,000 credit
agreement with a related party consist of the following as of June 30:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Term advances originally payable in quarterly
principal installments of $180,000 with a balloon
principal payment due on December 31, 1996;
interest at prime less 1%; subsequent to June 30,
1994, the outstanding balance due under this
agreement was paid in full......................... $3,300,000
Less current portion of credit agreement............ (720,000)
----------
Total........................................... $ -0- $2,580,000
========== ==========
Long-Term Notes Payable--Long-term notes payable consist of the following as
of June 30:
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Mortgage note, payable in annual principal
installments of $1,000,000 through August 1999,
with interest at prime (8.75% for this and all
other borrowings tied to prime as of June 30,
1995).............................................. $5,000,000 $6,000,000
Mortgage loan, payable in annual principal
installments of $175,000 through December 2014 with
interest at LIBOR plus 1.35%....................... 3,500,000
Mortgage loan, payable in annual principal
installments of $153,333 with a balloon payment of
$920,003 due September 14, 2004 with interest at
prime less .5%..................................... 2,300,000
Term loan, payable in September 1999, with interest
at prime........................................... 724,963
Mortgage loan, originally payable in annual
principal installments of $90,000 with a balloon
payment due on January 1, 2003 and interest at 8%;
subsequent to June 30, 1994 the outstanding balance
due under this note was paid in full............... 1,670,000
Mortgage loan, payable in annual principal
installments of $200,000 with a balloon payment of
$1,200,000 due on June 1, 1996, with interest at
prime.............................................. 1,200,000 1,400,000
Mortgage loan, originally payable in annual
principal and interest installments of $110,735,
with an adjustable interest rate (7.75% as of June
30, 1995).......................................... 1,141,211 1,162,593
Mortgage loan, originally payable in annual
principal installments of $67,000 with a balloon
payment of $732,000 due on July 1, 1995; on July
25, 1995 the Partnership renegotiated the terms of
the loan as follows: annual principal payments of
$73,200 through July 1, 2005; interest on the loan
is payable quarterly based on LIBOR plus 1.35%..... 732,000 799,000
Mortgage loan, payable in monthly principal
installments of $10,417, with interest at prime.... 270,826 395,830
</TABLE>
F-30
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Term loan payable in annual principal
installments of $74,963, with interest adjusted
monthly (interest as of June 30, 1995 was set
at 9.73%)...................................... $ 143,928 $ 218,891
Various term loans payable with interest at
rates that range from 6% to 9.75%.............. 21,249 113,762
----------- -----------
Total....................................... 15,034,177 11,760,076
Less/current portion of long-term notes
payable........................................ 2,767,516 1,591,806
----------- -----------
Long-term portion............................... $12,266,661 $10,168,270
=========== ===========
</TABLE>
Aggregate maturities of long-term notes payable are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING JUNE 30, AMOUNT
---------------------------- -----------
<S> <C>
1996............................................................. $ 2,767,516
1997............................................................. 1,645,608
1998............................................................. 1,428,493
1999............................................................. 1,430,658
2000............................................................. 2,132,922
Thereafter....................................................... 5,628,980
-----------
Total........................................................ $15,034,177
===========
</TABLE>
Capitalized Lease Obligations--The Partnership has entered into various
lease agreements which expire in the year 2000 for certain packing house
equipment. Such arrangement transfers to the Partnership substantially all of
the risks and benefits of ownership of the related assets. The assets have
been capitalized as property and equipment (see Note 4). As of June 30, 1995,
approximate future minimum lease payments under capitalized lease obligations
were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING JUNE 30, AMOUNT
---------------------------- ----------
<S> <C>
1996............................................................ $ 422,067
1997............................................................ 550,009
1998............................................................ 520,899
1999............................................................ 367,662
2000............................................................ 330,448
----------
Total minimum lease payments.................................... 2,191,085
Less amounts representing interest.............................. (295,314)
----------
Present value of net minimum lease payments..................... 1,895,771
Less current portion of capitalized lease obligations........... (335,271)
----------
Long-term portion of capitalized lease obligations.............. $1,560,500
==========
</TABLE>
6. INCOME TAXES
The deferred income tax benefit of $114,000 and $181,000 for the year ended
June 30, 1994 and the period from December 23, 1992 to June 30, 1993,
respectively, related to net operating loss carryforwards for Puerto
F-31
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Rico tax purposes which expire at various dates through 2002. A valuation
allowance was not considered necessary for this deferred tax asset.
The benefit for income taxes differs from the amount determined by applying
the statutory federal income tax rate to income before provision for income
taxes for the following reasons:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 23, 1992
JUNE 30, 1994 TO JUNE 30, 1993
------------------ ------------------
AMOUNT PERCENT AMOUNT PRECENT
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Income tax at statutory rate...... $(100,978) (34.0)% $(853,568) (34.0)%
Effect of flow-through entities... 740,686 249.4 1,541,905 61.4
Effect of Puerto Rico exemption... (525,708) (177.0) (507,337) (20.2)
--------- ------ --------- -----
Total......................... $ 114,000 38.4 % $ 181,000 7.2 %
========= ====== ========= =====
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Development/License Agreement--The Partnership entered into a
development/license agreement with a related party for the primary purpose of
developing transgenic tomatoes for commercial application in the production
and sale of fresh market and processing tomatoes. The development/license
agreement requires the Partnership to make five annual payments of $1,880,000
beginning on December 31, 1992 and ending on December 31, 1996. An additional
payment of $1,410,000 shall be made upon the latter of the development of a
tomato germplasm which exhibits certain attributes (defined in the
development/license agreement as "Commercial Level Performance") or December
31, 1995. Upon the achievement of Commercial Level Performance and the receipt
of the necessary regulatory approval for the marketing and sale of the
developed tomato, the Partnership shall be required to make an additional
payment to be determined based on the date that both Commercial Level
Performance is achieved and the necessary regulatory approvals are obtained:
If on or before December 31, 1996, an additional payment of $4,230,000.
If after December 31, 1996, but on or before December 31, 1997, an
additional payment of $2,115,000.
If after December 31, 1997, but on or before December 31, 1998, an
additional payment of $1,410,000.
Included in other current assets as of June 30, 1995 and 1994 are prepaid
development/license fees amounting to $1,566,667 and $1,410,000, respectively.
Included in other assets (noncurrent) as of June 30, 1995 is $156,666 of
prepaid development/license fees.
Employment Agreements--The Partnership has entered into various employment
and consulting agreements with certain key individuals. The aggregate fixed
commitment under these agreements are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING JUNE 30, AMOUNT
---------------------------- ----------
<S> <C>
1996............................................................... $1,167,708
1997............................................................... 1,120,666
1998............................................................... 1,108,126
1999............................................................... 1,088,251
2000............................................................... 479,291
----------
Total.......................................................... $4,964,042
==========
</TABLE>
F-32
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
In addition, two employment agreements provide for additional compensation
based on a percentage of the net profits of the Partnership and a third
agreement is based on the amount of seed sold to certain entities.
Lease Commitments--Future minimum lease payments under noncancelable
operating leases are approximately as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING JUNE 30, AMOUNT
---------------------------- ----------
<S> <C>
1996.............................................................. $3,380,324
1997.............................................................. 2,063,774
1998.............................................................. 1,483,208
1999.............................................................. 1,177,114
2000.............................................................. 890,406
Thereafter........................................................ 927,649
----------
Total......................................................... $9,922,475
==========
</TABLE>
Total rent expense was as follows for the:
<TABLE>
<CAPTION>
RENT EXPENSE
RELATED TO
TOTAL RENT LEASES WITH
EXPENSE RELATED PARTIES
---------- ---------------
<S> <C> <C>
Year ended June 30,
1995................... $3,583,629 $828,110
========== ========
Year ended June 30,
1994................... $3,424,393 $361,360
========== ========
Period from December 23,
1992 to June 30, 1993.. $1,324,125 $180,935
========== ========
Period from July 1, 1992
to December 22, 1992... $1,390,985 $180,935
========== ========
</TABLE>
Chilean Option Agreement--The shareholders of NTGI own 37.5% of Chile
Financial, a Chilean corporation, which entity owns 99.745% of Fruticola
Topfruit, Ltda., a Chilean limited liability company. The shareholders of NTGI
have granted an option to the Partnership to acquire their ownership interest
in Chile Financial for $1,000. Such option expires on December 23, 2007.
Consulting Agreements--The Partnership had entered into two consulting
agreements with two independent third parties to pay 10% and 5%, respectively,
of GPR's net income as defined to each individual. In addition, the individual
entitled to the 10% share of net income as defined was entitled to a
participation in certain of the Partnership's profits relating to its
Watsonville, California operations. During the year ended June 30, 1994 and
the period from December 23, 1992 to June 30, 1993, the Partnership purchased
these individuals' rights under these agreements for $750,000 and $550,000,
respectively. These amounts are included in other income (expense) under the
caption "other" in the accompanying statements of operations.
Guarantee--The Partnership is a guarantor under a $3 million line of credit
facility of an unconsolidated subsidiary, DCLLC. As of June 30, 1995, no
amounts were outstanding under such line of credit facility.
F-33
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. SUPPLEMENTAL INFORMATION--STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR
PARTNERSHIP COMPANY
--------------------------------------------- -----------------
YEAR ENDED YEAR ENDED DECEMBER 23, 1992 JULY 1, 1992 TO
JUNE 30, 1995 JUNE 30, 1994 TO JUNE 30, 1993 DECEMBER 22, 1992
------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest................ $2,126,460 $1,280,438 $ 466,706 $ 338,539
========== ========== =========== ==========
Cash paid during the period for income taxes............ $ 120,293
==========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
INFORMATION
Long-term debt incurred in connection with the
acquisition of property and equipment.................. $1,346,567 $1,162,593 $ 3,760,000 $7,000,000
========== ========== =========== ==========
Contribution by GP of certain property.................. $ 102,362
==========
NON-CASH NET ASSETS CONTRIBUTED BY THE PREDECESSOR
COMPANY TO THE PARTNERSHIP:
Assets:
Current assets.......................................... $24,785,262
Property and equipment, net............................. 28,293,310
Other................................................... 2,156,744
-----------
Total................................................. 55,235,316
-----------
Liabilities:
Current liabilities..................................... 25,160,958
Long-term debt.......................................... 13,714,315
Minority interest....................................... 577,838
-----------
Total................................................. 39,453,111
-----------
Net assets............................................ $15,782,205
===========
Net liabilities contributed to the Partnership related
to PURUTUN and GPM..................................... $ 211,695
===========
Land contributed to the partnership..................... $ 225,695
===========
Elimination of income taxes payable, recorded as a
capital contribution.................................... $1,026,838
==========
</TABLE>
F-34
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES (THE "PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NTGARGIULO, INC. AND AFFILIATES (THE "PREDECESSOR COMPANY")
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
9. SUBSEQUENT EVENTS
On October 13, 1995, the Partnership, the Partnership's general and limited
partners, and other related and unrelated parties entered into the Gargiulo,
L.P. Plan and Agreement of Reorganization (the "Plan of Reorganization"). The
Plan of Reorganization provides that the development/license agreement (see
Note 7) with a related party, who is also a signatory to the Plan of
Reorganization, will be amended conditioned upon TIA's parent company
consummating a transaction whereby TIA will exchange its ownership interest in
the Partnership, currently 49.9% and to be 100%, for an ownership interest in
a third party. The amendment to the development/license agreement would
eliminate the related party's obligation to carry out further development
activities and would eliminate the Partnership's obligation to make further
payments to the related party, thereby causing the licenses referred to
therein to be deemed to be fully paid up. Therefore, the prepaid
development/license fee included in the accompanying consolidated financial
statements may have become impaired.
On October 18, 1995, the Partnership became a defendant in two pending
lawsuits which involve personal injury claims by the families of three migrant
labor workers who were killed and by seven migrant labor workers who were
injured in a vehicle accident. The company hiring and transporting such farm
workers was an independent contractor engaged to arrange for migrant farm
labor for a Partnership farm. The plaintiffs allege that the vehicle in
question was in violation of one or more federal and state safety regulations
governing farm labor vehicles. The Partnership's insurance carriers have been
contacted regarding these lawsuits, but it has not yet been determined whether
the Partnership's insurance will be sufficient to cover these claims, if any.
Accordingly, the outcome of this litigation and the amount of damages, if any,
that may ultimately be incurred cannot be determined and no provisions for any
liability has been made in the accompanying consolidated financial statements.
On December 29, 1995, the Partnership entered into an asset purchase
agreement for the acquisition by the Partnership of substantially all of the
assets, subject to certain liabilities, of an unrelated producer, packer and
broker of tomatoes and, to a lesser extent, other vegetables for $10 million
in cash and a $10 million promissory note, plus an earn-out payment based upon
certain earnings of the combined operations of the Partnership in Southwest
Florida and those being purchased from the seller. The Partnership will also
acquire the seller's 1995-1996 crop and assume liabilities related thereto. At
the closing, the Partnership would also commit to lease certain farm land from
affiliates of the seller. The consummation of the acquisition is subject to
satisfactory completion of closing documents, obtaining required consents and
verification of representations and warranties.
F-35
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Gargiulo P.R., Inc.
We have audited the consolidated balance sheets of Gargiulo P.R., Inc.
(formerly known as NTGargiulo P.R., Inc and South Coast Fruit and Vegetable,
Inc.) (a wholly-owned subsidiary of Gargiulo L.P.) and its subsidiary
(collectively referred to as the "Company") as of June 30, 1995 and 1994, and
the related statements of operations and retained earnings, and cash flows for
the years then ended, (not presented separately herein). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Gargiulo
P.R., Inc. and subsidiary as of June 30, 1995 and 1994, and the consolidated
results of their operations, and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
LANDA, UMPIERRE AND COMPANY
San Juan, Puerto Rico
August 18, 1995
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
NTGargiulo P.R., Inc.
We have audited the consolidated balance sheets of NTGargiulo P.R., Inc.
(formerly known as South Coast Fruit and Vegetable, Inc.) (a wholly-owned
subsidiary of NTGargiulo L.P.) and its subsidiary (collectively referred to as
the "Company") as of June 30, 1994 and 1993, and the related statements of
operations and retained earnings, and cash flows for the years then ended,
(not presented separately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NTGargiulo P.R., Inc. and
subsidiary as of June 30, 1994 and 1993, and the consolidated results of their
operations, and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
LANDA, UMPIERRE AND COMPANY
San Juan, Puerto Rico
August 10, 1994
F-37
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES ("THE PARTNERSHIP")
CONSOLIDATED CONDENSED BALANCE SHEET--UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................... $ 527,528
Receivables, net (includes $1,321,525 due from related par-
ties)......................................................... 16,109,412
Inventories.................................................... 10,989,316
Other, principally prepaid expenses............................ 2,144,591
-----------
Total current assets......................................... 29,770,847
PROPERTY AND EQUIPMENT, net...................................... 46,019,558
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES......... 1,118,388
OTHER ASSETS..................................................... 2,380,685
-----------
TOTAL............................................................ $79,289,478
===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable (includes $2,075,333 due to related parties).. $ 7,640,445
Accrued expenses (includes $1,059,552 due to related parties).. 3,696,042
Due to growers................................................. 2,108,188
Current portion of long-term notes payable..................... 2,663,423
Current portion of capitalized lease obligations............... 1,040,717
-----------
Total current liabilities.................................... 17,148,815
-----------
LONG-TERM DEBT:
Borrowings under line of credit................................ 11,105,696
Long-term notes payable........................................ 11,158,438
Capitalized lease obligations.................................. 4,344,555
-----------
Total long-term debt......................................... 26,608,689
-----------
MINORITY INTEREST................................................ 431,695
-----------
PARTNERS' CAPITAL:
General Partners' capital...................................... 1,579,433
Limited Partners' capital...................................... 33,520,846
-----------
Total partners' capital...................................... 35,100,279
-----------
TOTAL............................................................ $79,289,478
===========
</TABLE>
See notes to consolidated condensed financial statements.
F-38
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES ("THE PARTNERSHIP")
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS--UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
REVENUES (includes $115,559 and $194,531
respectively, derived from related
parties)
Product Revenues:
Tomatoes................................ $ 10,602,255 $ 12,472,689
Berries................................. 10,100,596 7,800,804
Other................................... 2,044,766 1,778,877
Service Revenues......................... 5,861,795 5,451,287
---------------- ----------------
Total revenues........................ 28,609,412 27,503,637
---------------- ----------------
COST OF REVENUES:
Product costs:
Tomatoes................................ 14,882,704 11,231,985
Berries................................. 10,488,161 8,038,972
Other................................... 1,984,948 1,487,260
Service costs............................ 2,311,109 2,769,793
---------------- ----------------
Total cost of revenues................ 29,666,922 23,528,010
---------------- ----------------
GROSS (LOSS) PROFIT....................... (1,057,510) 3,975,627
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................. 5,082,367 3,681,920
---------------- ----------------
OPERATING (LOSS) INCOME................... (6,139,877) 293,707
---------------- ----------------
OTHER INCOME (EXPENSE):
Interest income.......................... 88,976 72,718
Interest expense......................... (604,934) (382,723)
Minority interest, net................... 1,294,854 (329,306)
Other, net............................... 83,189 221,751
---------------- ----------------
Total other income (expense), net..... 862,085 (417,560)
---------------- ----------------
LOSS BEFORE EQUITY SHARE OF NET LOSS OF
UNCONSOLIDATED AFFILIATES................ (5,277,792) (123,853)
EQUITY SHARE OF NET LOSS OF UNCONSOLIDATED
AFFILIATES............................... (125,033)
---------------- ----------------
NET (LOSS) INCOME......................... $ (5,402,825) $ (123,853)
================ ================
</TABLE>
See notes to consolidated condensed financial statements.
F-39
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES ("THE PARTNERSHIP")
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS--UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................ $(5,402,825) $ (123,853)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization...................... 1,204,032 843,888
Equity share of net loss of unconsolidated
affiliates........................................ 125,033
Minority interest, net.............................. (1,294,854) 329,306
Decrease (increase) in operating receivables, net... 7,994,483 11,458,337
Decrease (increase) in inventories.................. 1,503,293 (2,767,569)
Decrease (increase) in other operating assets....... 518,825 (281,621)
Decrease in accounts payable, accrued expenses and
due to growers..................................... (2,334,645) (3,146,348)
----------- -----------
Net cash provided by operating activities........ 2,313,342 6,312,140
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................. (4,285,283) (2,064,091)
Net distribution from (investments in and advances
to) unconsolidated affiliates...................... 440,006 (26,911)
----------- -----------
Net cash used by investing activities............ (3,845,277) (2,091,002)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under lines of credit................ (1,773,247) (2,361,948)
Proceeds from capitalized lease obligations......... 3,600,000
Proceeds from long-term notes payable............... 2,300,000
Repayments of long-term notes payable............... (1,212,314) (2,921,464)
Repayments of capitalized lease obligations......... (110,499) (81,355)
----------- -----------
Net cash provided (used) by financing
activities...................................... 503,940 (3,064,767)
----------- -----------
Net increase (decrease) in cash & cash equivalents... (1,027,995) 1,156,371
Cash at beginning of period.......................... 1,555,523 614,619
----------- -----------
Cash at end of period................................ $ 527,528 $ 1,770,990
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
F-40
<PAGE>
GARGIULO, L.P. AND SUBSIDIARIES ("THE PARTNERSHIP")
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1. BASIS OF PRESENTATION OF INTERIM FINANCIAL INFORMATION (UNAUDITED)
The accompanying unaudited consolidated condensed financial statements as of
September 30, 1995 and for each of the three month periods ended September 30,
1995 and 1994, included in this Registration Statement, have been prepared by
the Partnership which is responsible for their integrity and objectivity.
The accounting policies followed for interim financial reporting are set
forth in the Notes to the Partnership's audited consolidated financial
statements, which are included in this Registration Statement as filed with
the Securities and Exchange Commission.
To the best of management's knowledge and belief, the statements and related
information were prepared in conformity with generally accepted accounting
principles and are based on recorded transactions and management's best
estimates and judgments. The interim results of operations are not necessarily
indicative of the results which may be expected for the full year.
The financial statements for the three month periods ended September 30,
1995 and 1994 herein include, in the opinion of management, all adjustments
(which are normal recurring adjustments) necessary for a fair presentation of
the financial condition and results of operations of the Partnership for the
periods indicated.
2. INVENTORIES
Inventories consisted of the following as of September 30, 1995:
<TABLE>
<S> <C>
Supplies and seeds inventories................................... 3,098,273
Growing crops.................................................... 7,891,043
----------
Total........................................................ 10,989,316
==========
</TABLE>
3. COMMITMENTS
On September 20, 1995 the Partnership entered into a capital lease related
to aircraft financing for a total of $3.6 million. The terms of the lease call
for 60 monthly payments of $59,386, with a balloon payment of $1,080,000 due
on September 30, 2000.
4. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest during the three month periods ended September 30,
1995 and 1994 was $834,471 and $671,123, respectively.
Non-cash investing and financing activities related to purchases of property
and equipment financed by long-term debt amounted to $750,000 during the three
months ended September 30, 1994.
F-41
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Owners of Collier Farms:
We have audited the accompanying combined balance sheets of Collier Farms
(see Note 1) as of June 30, 1995, 1994 and 1993, and the related combined
statements of operations and owners' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Collier Farms as of June
30, 1995, 1994 and 1993, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
September 28, 1995, except for the
matter discussed in Note 9, as to which
the date is October 27, 1995
F-42
<PAGE>
COLLIER FARMS
COMBINED BALANCE SHEETS
JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash (Note 2)........................................ $ 122 $ 62 $ 77
Trade receivables, less allowance of $47, $42 and
$90, respectively, for doubtful accounts............ 338 460 1,250
Related party receivables............................ 4,845 4,236 3,694
Inventories (Note 3)................................. 1,446 1,032 1,180
------- ------- -------
Total current assets............................... 6,751 5,790 6,201
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT, net (Note 4)............ 14,140 15,101 16,191
DEFERRED CHARGES AND OTHER ASSETS...................... 86 146 128
------- ------- -------
$20,977 $21,037 $22,520
======= ======= =======
LIABILITIES AND OWNERS' EQUITY
</TABLE>
<TABLE>
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable.................................... $ 653 $ 385 $ 540
Employee related liabilities (Note 8)............... 491 885 1,700
Accrued litigation expenses......................... -- 627 310
Accrued interest.................................... 182 56 17
Other current liabilities........................... 268 101 119
Current portion of related party note payable (Note
7)................................................. 258 269 279
Current portion of long-term debt (Note 5).......... 5,300 -- 38
------- ------- -------
Total current liabilities......................... 7,152 2,323 3,003
------- ------- -------
RELATED PARTY NOTE PAYABLE, less current portion (Note
7)................................................... 6,285 6,543 6,812
LONG-TERM DEBT, less current portion (Note 5)......... -- 5,300 5,300
OTHER LIABILITIES..................................... -- -- 638
COMMITMENTS AND CONTINGENCIES (Note 8)................ -- -- --
------- ------- -------
Total liabilities................................. 13,437 14,166 15,753
------- ------- -------
OWNERS' EQUITY........................................ 7,540 6,871 6,767
------- ------- -------
$20,977 $21,037 $22,520
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-43
<PAGE>
COLLIER FARMS
COMBINED STATEMENTS OF OPERATIONS AND OWNERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
REVENUES (Note 2)................................... $25,440 $22,009 $31,262
COSTS OF REVENUES:
Growing expenses, including $1,147, $1,581 and
$1,379, respectively, paid to related parties.... 11,953 13,619 13,587
Harvest and haul.................................. 2,430 2,509 3,622
Packing........................................... 5,893 4,954 6,088
------- ------- -------
Gross margin.................................... 5,164 927 7,965
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES,
excluding related party management fees............ (3,619) (3,200) (3,967)
OTHER INCOME (Note 2)............................... 1,091 2,428 1,795
------- ------- -------
INCOME BEFORE RELATED PARTY MANAGEMENT FEES AND
INTEREST EXPENSE................................... 2,636 155 5,793
RELATED PARTY MANAGEMENT FEES (Note 7).............. 1,521 1,529 1,127
INTEREST EXPENSE, including related party interest
of $1,088, $1,059 and $983, respectively (Note 7).. 1,456 1,272 1,305
------- ------- -------
NET (LOSS) INCOME................................... (341) (2,646) 3,361
CONTRIBUTIONS AND DISTRIBUTIONS, net (Note 2)....... 1,010 2,750 (2,095)
OWNERS' EQUITY, beginning of year................... 6,871 6,767 5,501
------- ------- -------
OWNERS' EQUITY, end of year......................... $ 7,540 $ 6,871 $ 6,767
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-44
<PAGE>
COLLIER FARMS
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................................. $ (341) $(2,646) $ 3,361
Adjustments to reconcile net loss to net cash used
in operating activities--
Depreciation and amortization..................... 1,558 1,746 1,732
Loss on sales of property, plant and equipment.... 43 392 370
Changes in working capital--
Trade receivables................................. 122 790 (606)
Inventories....................................... (414) 148 218
Other assets...................................... 60 (18) 47
Accounts payable and accrued expenses............. 176 (16) (191)
Other liabilities................................. (636) (1,254) 45
------- ------- -------
Total adjustments............................... 909 1,788 1,615
------- ------- -------
Net cash provided by (used in) operating activi-
ties........................................... 568 (858) 4,976
------- ------- -------
INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equip-
ment............................................. 70 59 --
Capital expenditures.............................. (710) (1,107) (1,923)
Advances to related parties....................... (609) (542) (584)
------- ------- -------
Net cash used in investing activities........... (1,249) (1,590) (2,507)
------- ------- -------
FINANCING ACTIVITIES:
Payments on long-term debt........................ -- (38) (61)
Payments on related party note payable............ (269) (279) (291)
Capital contributions (distributions), net........ 1,010 2,750 (2,095)
------- ------- -------
Net cash provided by (used in) financing activi-
ties........................................... 741 2,433 (2,447)
------- ------- -------
INCREASE (DECREASE) IN CASH......................... 60 (15) 22
BALANCE, beginning of year.......................... 62 77 55
------- ------- -------
BALANCE, end of year................................ $ 122 $ 62 $ 77
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest............. $ 1,245 $ 1,340 $ 1,435
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-45
<PAGE>
COLLIER FARMS
NOTES TO COMBINED FINANCIAL STATEMENTS
JUNE 30, 1995, 1994 AND 1993
1. BASIS OF PRESENTATION AND SUMMARY OF OPERATIONS:
The accompanying combined financial statements represent the financial
statements of the following affiliated business enterprises collectively known
as Collier Farms (the Company):
Collier Farm Equipment Company (CFEC), a Florida corporation
Collier Farms, Inc. (CFI), a Florida corporation
Colliergro, a division of Colliergro, Ltd., a Florida limited partnership
CollierPac-Tomato, a division of Collier Groves & Packing, Ltd., a Florida
limited partnership
CollierPac-Vegetable, a division of Collier Groves & Packing, Ltd., a
Florida limited partnership
LDEC, a division of Collier Tec, Inc., a Florida corporation
The above entities are under common control and have been combined to
provide a more meaningful presentation of the financial position and results
of operations of these entities which operate as a single business unit. All
significant intercompany balances have been eliminated in combination.
The Company is primarily in the business of growing, packing, marketing and
shipping fresh produce.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash Management
The Company is part of a group of affiliated companies operating in various
industries. As part of the overall cash management system, excess cash is
distributed and cash deficiencies are funded on a daily basis and are recorded
as capital distributions and contributions, respectively. Accordingly, capital
distributions and contributions have been netted in the accompanying combined
statements of owners' equity.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation expense is
provided using the straight line method over the estimated lives of the assets
which range from 5 to 25 years.
Income Taxes
The corporations included in the Company have elected to file under
Subchapter S of the U.S. Internal Revenue Code. Accordingly, the revenues and
expenses of all entities flow through to the owners for tax purposes. The tax
returns and the amount of distributable income or loss are subject to
examination by federal and state taxing authorities. If such examinations
result in changes to distributable income or loss, the tax liability of the
owners would be changed accordingly.
Other Income
The Company periodically enters into agreements to produce, market and sell
crops with another unrelated party for a growing season. The Company's
proportionate share of income from these agreements is included in other
income in the accompanying combined statements of operations.
Also included in other income is income from equipment rentals and other
services provided to both related and unrelated parties, insurance proceeds
from storm damage and refunds received on damaged inventories.
Revenue Recognition
Revenues are recognized when the related products are shipped.
F-46
<PAGE>
COLLIER FARMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES:
Inventories are stated at the lower of cost, determined using the first-in
first-out method, or market. Inventories consisted of the following as of June
30, 1995, 1994 and 1993 (amounts in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Seeds.................................................. $ 497 $ 258 $ 537
Chemicals.............................................. 433 162 157
Supplies............................................... 516 612 486
------ ------ ------
$1,446 $1,032 $1,180
====== ====== ======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following as of June 30,
1995, 1994 and 1993 (amounts in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Land.............................................. $ 312 $ 312 $ 371
Land improvements................................. 1,414 1,339 1,285
Buildings and improvements........................ 9,809 10,048 10,225
Machinery and equipment........................... 10,681 10,953 11,041
Furniture, fixtures and equipment................. 1,755 2,044 1,467
Construction in progress.......................... 444 331 499
------- ------- -------
24,415 25,027 24,888
Less-Accumulated depreciation..................... (10,275) (9,926) (8,697)
------- ------- -------
$14,140 $15,101 $16,191
======= ======= =======
</TABLE>
5. DEBT:
Long-term debt consisted of the following as of June 30, 1995, 1994 and 1993
(amounts in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Mortgage note secured by land and equipment, variable
interest, 6.45% at June 30, 1995, principal and
interest due October 31, 1995........................ $5,300 $5,300 $5,300
Mortgage note on equipment repaid in full on
September 28, 1993................................... -- -- 38
</TABLE>
6. EMPLOYEE BENEFIT PLANS:
The Company is a member of an affiliated group which sponsors three defined
contribution benefit plans. One of the plans provides only for employee
contributions up to a certain percent of gross salary, with certain
limitations. The other two plans are noncontributory and provide for employer
contributions equal to a certain percent of all active participants'
compensation, with certain limitations. The Company's contributions to these
plans during the years ended June 30, 1995, 1994 and 1993, amounted to
approximately $288,000, $184,000 and $124,000, respectively.
F-47
<PAGE>
COLLIER FARMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. RELATED PARTY TRANSACTIONS:
MANAGEMENT SERVICES AND INTEREST CHARGES
Certain affiliates of the Company provide certain services to the Company
for an annual fee. Services provided primarily consist of managerial,
administrative, accounting, income tax preparation, legal, and human resources
and are classified as related party management fees in the accompanying
combined statements of operations.
The Company also received an allocation of approximately $406,000, $350,000
and $245,000 for the years ended June 30, 1995, 1994 and 1993, respectively,
for interest expense on borrowings of its affiliates which is included in
interest expense in the accompanying combined statements of operations.
LAND RENT
The Company leases the majority of its farming land from an affiliate on a
yearly basis. During fiscal 1995, 1994 and 1993, the Company paid rent of
approximately $1,119,000, $1,536,000, and $1,281,000, respectively, for the
use of this land.
OTHER TRANSACTIONS
From time to time, the Company and its affiliates provide various services
and exchange operating supplies within the affiliated group. Such amounts paid
by the Company to its affiliates were approximately $28,000, $45,000 and
$98,000 during fiscal 1995, 1994 and 1993, respectively. Such amounts received
by the Company were approximately $63,000, $41,000 and $187,000 during fiscal
1995, 1994 and 1993, respectively.
PURCHASE COMMITMENTS
The Company has entered into a commitment to purchase certain assets, under
specified conditions, from a related party for approximately $425,000.
RELATED PARTY NOTE PAYABLE
During fiscal 1990, the Company purchased a building and certain land
improvements using amounts borrowed from an affiliate (the Affiliate). In
connection with this purchase, the Affiliate executed a mortgage note payable
(the Note) with a financing company under which the building and land
improvements are pledged as collateral. The Company's management intends to
repay the related party note payable in accordance with the terms of the Note.
The Note bears interest at a rate of 9.97 percent payable quarterly. Principal
payments are due quarterly at a rate of 1 percent of the outstanding principal
balance, with the remaining balance payable in full on June 15, 1999. Interest
expense charged on this related party note payable was approximately $682,000,
$709,000 and $738,000 for the fiscal years ended June 30, 1995, 1994 and 1993,
respectively.
The maturities of the related party note payable are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
1996................................................................. $ 258
1997................................................................. 247
1998................................................................. 238
1999................................................................. 5,800
------
$6,543
======
</TABLE>
F-48
<PAGE>
COLLIER FARMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases land and office equipment under certain operating leases.
The future minimum lease payments relating to noncancellable operating leases
with lease terms in excess of one year are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
----------- ------
<S> <C>
1996............................................................... $80
1997............................................................... 22
1998............................................................... 20
1999............................................................... 20
</TABLE>
Total rent expense, including amounts paid to related parties (see Note 7)
for the years ended June 30, 1995, 1994 and 1993, was approximately
$1,508,000, $1,642,000 and $1,453,000, respectively.
RISK MANAGEMENT
The Company and its affiliates are self-insured for a portion of its
workers' compensation and group medical liability. The Company's maximum self-
insured exposures per occurrence are $250,000, $225,000 and $225,000 for
workers' compensation for the fiscal years ended June 30, 1995, 1994 and 1993,
respectively. The Company's maximum self-insured exposures per occurrence are
$25,000 for group medical for each of the fiscal years ended June 30, 1995,
1994 and 1993. As of June 30, 1995, 1994 and 1993, the Company has accrued for
the estimated losses occurring from both asserted and unasserted claims.
9. PROPOSED SALE:
On October 27, 1995, the Company signed a letter of intent to sell
substantially all of its assets for cash, a note receivable and the assumption
of certain of its liabilities.
F-49
<PAGE>
COLLIER FARMS
COMBINED BALANCE SHEETS--UNAUDITED
SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------- -------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash (Note 2)................................................ $ 110 $ 47
Trade receivables............................................ 482 854
Related party receivables.................................... 4,304 4,701
Inventories (Note 3)......................................... 5,622 4,395
------- -------
Total current assets....................................... 10,518 9,997
------- -------
PROPERTY, PLANT AND EQUIPMENT, net (Note 4).................... 13,938 14,367
DEFERRED CHARGES AND OTHER ASSETS.............................. 64 89
------- -------
$24,520 $24,453
======= =======
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................. $ 944 $ 676
Employee related liabilities (Note 8)........................ 491 885
Accrued litigation expenses.................................. -- 615
Accrued interest............................................. 178 63
Other current liabilities.................................... 766 129
Current portion of related party note payable (Note 7)....... 258 269
Current portion of long-term debt (Note 5)................... 5,336 5,300
------- -------
Total current liabilities.................................. 7,973 7,937
------- -------
RELATED PARTY NOTE PAYABLE, less current portion (Note 7)...... 6,220 6,475
LONG-TERM DEBT, less current portion (Note 5).................. 80 --
COMMITMENTS AND CONTINGENCIES (Note 8)......................... -- --
------- -------
Total liabilities.......................................... 14,273 14,412
------- -------
OWNERS' EQUITY................................................. 10,247 10,041
------- -------
$24,520 $24,453
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited combined balance
sheets.
F-50
<PAGE>
COLLIER FARMS
COMBINED STATEMENTS OF OPERATIONS AND OWNERS' EQUITY--UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------- -------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
REVENUES (Note 2)........................................... $ 350 $ 495
COSTS OF REVENUES:
Growing expenses.......................................... 802 805
------- -------
Gross Margin............................................ (452) (310)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES,
excluding related party management fees.................... (795) (714)
OTHER INCOME (Note 2)....................................... 130 139
------- -------
INCOME BEFORE RELATED PARTY MANAGEMENT FEES AND INTEREST
EXPENSE.................................................... (1,117) (885)
RELATED PARTY MANAGEMENT FEES (Note 7)...................... 288 242
INTEREST EXPENSE (Note 7)................................... 246 268
------- -------
NET LOSS.................................................... (1,651) (1,395)
CONTRIBUTIONS AND DISTRIBUTIONS, net (Note 2)............... 4,358 4,565
OWNERS' EQUITY, beginning of year........................... 7,540 6,871
------- -------
OWNERS' EQUITY, September 30................................ $10,247 $10,041
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited combined
statements.
F-51
<PAGE>
COLLIER FARMS
COMBINED STATEMENTS OF CASH FLOWS--UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................... $ (1,651) $ (1,395)
Adjustments to reconcile net loss to net cash used
in operating activities--
Depreciation and amortization.................... 439 439
Loss on sales of property, plant and equipment... 22 635
Changes in working capital--
Trade receivables................................. (144) (394)
Inventories....................................... (4,176) (3,363)
Other assets...................................... 22 57
Accounts payable and accrued expenses............. 291 291
Other liabilities................................. 494 23
----------- -----------
Total adjustments................................ (3,052) (2,312)
----------- -----------
Net cash used in operating activities............ (4,703) (3,707)
----------- -----------
INVESTING ACTIVITIES:
Proceeds from sales of property, plant and
equipment......................................... 1 38
Advances to related parties........................ -- (465)
Capital expenditures............................... (260) (378)
----------- -----------
Net cash used in investing activities............ (259) (805)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from long-term debt....................... 116 --
Advances from related parties...................... 541 --
Payments on related party note payable............. (65) (68)
Capital contributions (distributions), net......... 4,358 4,565
----------- -----------
Net cash provided by financing activities........ 4,950 4,497
----------- -----------
DECREASE IN CASH..................................... (12) (15)
BALANCE, beginning of year........................... 122 62
----------- -----------
BALANCE, September 30................................ $ 110 $ 47
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the three months ended September 30
for interest........................................ $ 231 $ 261
</TABLE>
The accompanying notes are an integral part of these unaudited combined
statements.
F-52
<PAGE>
COLLIER FARMS
NOTES TO COMBINED FINANCIAL STATEMENTS--UNAUDITED
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1. BASIS OF PRESENTATION OF INTERIM FINANCIAL INFORMATION (UNAUDITED) AND
SUMMARY OF OPERATIONS:
The accompanying unaudited combined financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the interim periods. Those financial statements should
be read in conjunction with the Company's audited combined financial
statements appearing elsewhere herein for the fiscal years ended June 30,
1995, 1994 and 1993.
In the opinion of management, the interim financial statements reflect all
adjustments necessary, consisting only of normal recurring adjustments, to
present fairly the Company's combined financial position at September 30,
1995, and 1994 and the combined results of operations and cash flows for the
three months ended September 30, 1995, and 1994. Results for the periods ended
September 30, 1995, and 1994 are not necessarily indicative of results to be
expected for the entire fiscal year.
The accompanying combined financial statements represent the financial
statements of the following affiliated business enterprises collectively known
as Collier Farms (the Company):
Collier Farm Equipment Company (CFEC), a Florida corporation
Collier Farms, Inc., (CFI), a Florida corporation
CollierGro, a division of CollierGro, Ltd., a Florida limited partnership
CollierPac Tomato, a division of Collier Groves & Packing, Ltd., a Florida
limited partnership
CollierPac Vegetable, a division of Collier Groves & Packing, Ltd., a
Florida limited partnership
LDEC, a division of Collier Tec, Inc., a Florida corporation
The above entities are under common control and have been combined to
provide a more meaningful presentation of the financial position and results
of operations of these entities which operate as a single business unit. All
significant intercompany balances have been eliminated in combination.
The Company is primarily in the business of growing, packing, marketing and
shipping fresh produce.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash Management
The Company is part of a group of affiliated companies operating in various
industries. As part of the overall cash management system, excess cash is
distributed and cash deficiencies are funded on a daily basis and are recorded
as capital distributions and contributions, respectively. Accordingly, capital
distributions and contributions have been netted in the accompanying combined
statements of owners' equity.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation expense is
provided using the straight line method over the estimated lives of the assets
which range from 5 to 25 years.
Income Taxes
The corporations included in Collier Farms have elected to file under
Subchapter S of the U.S. Internal Revenue Code. Accordingly, the revenues and
expenses of all entities flow through to the owners for tax purposes. The tax
returns and the amount of distributable income or loss are subject to
examination by federal
F-53
<PAGE>
COLLIER FARMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)--UNAUDITED
and state taxing authorities. If such examinations result in changes to
distributable income or loss, the tax liability of the owners would be changed
accordingly.
Other income
The Company periodically enters into agreements to produce, market and sell
crops with another unrelated party for a growing season. The Company's
proportionate share of income from these agreements is included in other
income in the accompanying combined statements of operations.
Also included in other income is income from equipment rental and other
services provided to both related and unrelated parties.
Revenue Recognition
Revenues are recognized when the related products are shipped.
3. INVENTORIES:
Inventories are stated at the lower of cost, determined using the first-in
first-out method, or market. Inventories consisted of the following as of
September 30, 1995, and 1994, (amounts in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Seeds......................................................... $ 197 $ 231
Chemicals..................................................... 382 292
Supplies...................................................... 781 582
Crop Cost..................................................... 4,262 3,290
------ ------
$5,622 $4,395
====== ======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following as of September 30,
1995, and 1994, (amounts in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Land...................................................... $ 312 $ 312
Land improvements......................................... 1,753 1,339
Buildings and improvements................................ 9,350 9,950
Machinery and equipment................................... 11,187 11,189
Furniture, fixtures and equipment......................... 1,193 1,223
Construction in progress.................................. 113 221
------- -------
Less: Accumulated depreciation............................ 23,908 24,234
(9,970) (9,867)
------- -------
$13,938 $14,367
======= =======
</TABLE>
F-54
<PAGE>
COLLIER FARMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)--UNAUDITED
5. DEBT:
Long-term debt consisted of the following as of September 30, 1995, and
1994, (amounts in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Mortgage note secured by land and equipment, variable
interest, 6.25% at September 30, 1995, principal and
interest due February 28, 1996. .......................... $5,300 $5,300
Note payable secured by equipment, interest fixed at 7.5%,
payable in 36 monthly installments ranging from $6,150 to
$3,199.................................................... $ 116 --
</TABLE>
6. EMPLOYEE BENEFIT PLANS:
The Company is a member of an affiliated group which sponsors three defined
contribution benefit plans. One of the plans provides only for employee
contributions up to a certain percent of gross salary, with certain
limitations. The other two plans are noncontributory and provide for employer
contributions equal to a certain percent of all active participants'
compensation, with certain limitations. The Company's contributions to these
plans during the three months ended September 30, 1995 and 1994 amounted to
approximately $106,000 and $76,000, respectively.
7. RELATED PARTY TRANSACTIONS:
Management Services and Interest Charges
Certain affiliates of the Company provide certain services to the Company
for an annual fee. Services provided primarily consist of managerial,
administrative, accounting, income tax preparation, legal, and human resources
and are classified as related party management fees in the accompanying
combined statements of operations.
Land Rent
The Company leases the majority of its farming land from an affiliate on a
yearly basis. During the three months ended September 30, 1995, and 1994, the
Company paid rent of approximately $1,048,000 and $718,000, respectively, for
the use of this land.
Other Transactions
From time to time, the Company and its affiliates provide various services
and exchange operating supplies within the affiliated group. Such amounts paid
and received by the Company were immaterial for the three months ended
September 30, 1995, and 1994.
Purchase Commitments
The Company has entered into a commitment to purchase certain assets, under
specified conditions, from a related party for approximately $425,000.
Related Party Note Payable
During fiscal 1990, the Company purchased a building and certain land
improvements using amounts borrowed from an affiliate (the Affiliate). In
connection with this purchase, the Affiliate executed a mortgage note payable
(the Note) with a financing company under which the building and land
improvements are pledged as collateral. The Company's management intends to
repay the related party note payable in accordance with the terms of the Note.
The Note bears interest at a rate of 9.97 percent payable quarterly. Principal
payments are due quarterly at a rate of one percent of the outstanding
principal balance with the remaining balance payable in full on June 15, 1999.
Interest expense charged on this related party note payable was approximately
$163,000 and $181,000 for the three months ended September 30, 1995, and 1994,
respectively.
F-55
<PAGE>
COLLIER FARMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)--UNAUDITED
The maturities of the related party note payable are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
1996 Remaining nine months.......................................... $ 193
1997 Fiscal year.................................................... 247
1998 Fiscal year.................................................... 238
1999 Fiscal year.................................................... 5,800
------
$6,478
======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES:
Leases
The company leases land and office equipment under certain operating leases.
The future minimum lease payments relating to noncancellable operating leases
with lease terms in excess of one year are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
----------- ------
<S> <C>
1996............................................................... $80
1997............................................................... 22
1998............................................................... 20
1999............................................................... 20
</TABLE>
Risk Management
The Company and its affiliates are self-insured for a portion of its
workers' compensation and group medical liability. As of September 30, 1995,
the Company's maximum self-insured exposure per occurrence is $250,000 and
$25,000, respectively for workers' compensation and group medical. As of
September 30, 1995, and 1994, the Company has accrued for the estimated losses
occurring from both asserted and unasserted claims.
9. PROPOSED SALE:
On October 27, 1995, the Company signed a letter of intent to sell
substantially all of its assets for cash, a note receivable and the assumption
of certain of its liabilities.
F-56
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
CALGENE, INC.
AND
MONSANTO COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE--TITLE PAGE
-------------- ----
<C> <S> <C>
ARTICLE 1--DEFINITIONS................................................. 1
ARTICLE 2--THE EXCHANGE; PARTNERSHIP REORGANIZATION TRANSACTIONS....... 6
2.1 The Exchange................................................... 6
2.2 Conveyance Limitation.......................................... 7
2.3 Partnership Reorganization Transactions........................ 7
2.4 Dissolution and Liquidation of General Partner................. 7
ARTICLE 3--THE MERGER.................................................. 7
3.1 The Merger..................................................... 7
ARTICLE 4--STRUCTURE OF HOLDING COMPANY AND RELATED MATTERS............ 8
4.1 Organization of Holding Company................................ 8
4.2 Board of Directors............................................. 8
4.3 Management..................................................... 9
4.4 Headquarters of Holding Company................................ 9
4.5 Indemnification................................................ 9
4.6 Merger Subsidiary Organization................................. 9
ARTICLE 5--INDEMNIFICATION............................................. 9
5.1 Release........................................................ 9
5.2 Monsanto's Indemnification Agreement........................... 10
5.3 Holding Company's and Calgene's Indemnification Agreement...... 10
5.4 Procedure...................................................... 10
5.5 Adjustment of Liability........................................ 11
5.6 Certain Limitations on Monsanto's Indemnification Agreement.... 11
Certain Limitations on Holding Company's and Calgene's
5.7 Indemnification Agreement...................................... 11
5.8 Limitations on Liability of the Parties........................ 12
ARTICLE 6--REPRESENTATIONS AND WARRANTIES.............................. 12
6.1 Monsanto's Representations and Warranties...................... 12
6.2 Calgene's Representations and Warranties....................... 17
6.3 Survival of Representations and Warranties..................... 20
ARTICLE 7--EMPLOYEES................................................... 21
7.1 Offers of Employment........................................... 21
7.2 Employee Benefits.............................................. 21
7.3 Confidentiality................................................ 21
7.4 No Third Party Beneficiary Status.............................. 22
ARTICLE 8--CONDITIONS PRECEDENT........................................ 22
8.1 Conditions Precedent to Calgene's Obligations.................. 22
8.2 Conditions Precedent to Monsanto's Obligations................. 23
ARTICLE 9--COVENANTS................................................... 24
9.1 Access to Assets and Calgene................................... 24
9.2 Confidentiality................................................ 25
9.3 Registration Statement......................................... 25
9.4 Operations of Calgene.......................................... 26
9.5 Operations of Tomato Associates................................ 26
9.6 Public Announcement............................................ 27
9.7 Certain Tax Matters............................................ 27
9.8 Calgene Financial Statements................................... 28
9.9 No Solicitation of Transactions................................ 28
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE--TITLE PAGE
-------------- ----
<C> <S> <C>
9.10 Notification of Certain Matters................................. 29
9.11 Severance Agreements............................................ 29
9.12 Registration Statement; Proxy Statement......................... 29
ARTICLE 10--CLOSING AND EFFECTIVE TIME................................... 30
10.1 Time and Place of Closing....................................... 30
10.2 Effective Time.................................................. 30
ARTICLE 11---TERMINATION................................................. 30
11.1 Termination..................................................... 30
11.2 Liabilities in Event of Termination............................. 31
11.3 Calgene Termination Payment..................................... 31
ARTICLE 12--MISCELLANEOUS................................................ 31
12.1 Notice.......................................................... 31
12.2 Recording Fees.................................................. 31
12.3 Assignability................................................... 32
12.4 Non-Competition................................................. 32
12.5 Schedules....................................................... 32
12.6 Sections and Articles........................................... 32
12.7 Entire Agreement................................................ 32
12.8 Headings........................................................ 32
12.9 Governing Law................................................... 32
12.10 Severability.................................................... 33
12.11 Expenses and Fees............................................... 33
12.12 Finders' Fees................................................... 33
12.13 Specific Performance............................................ 33
12.14 Counterparts.................................................... 33
</TABLE>
ii
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT TITLE
- - ------- -----
<S> <C>
Exhibit A......................................... Assets
Exhibit B......................................... Plan of Merger
Exhibit C......................................... Stockholders Agreement
Exhibit D......................................... Temporary Services Outline
Exhibit E......................................... Opinion of Monsanto's Counsel
Exhibit F......................................... Opinion of Calgene's Counsel
Exhibit G......................................... Other Agreements
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, made and entered into as of the 13th day of October, 1995,
between Calgene, Inc., a Delaware corporation, having its principal place of
business at 1920 Fifth Street, Davis, California 95616 ("Calgene"), and
Monsanto Company, a Delaware corporation, having its principal place of
business at 800 North Lindbergh Boulevard, St. Louis, Missouri 63167
("Monsanto").
WHEREAS:
The Boards of Directors of Monsanto and Calgene have each determined to
engage in the Transactions. This Agreement provides for the organization of a
new holding company ("Holding Company") under the laws of the State of
Delaware, which shall become the parent entity of Tomato Associates and
Calgene pursuant to (i) an exchange by Monsanto of the outstanding Tomato
Associates Common Stock and certain other assets for shares of Holding Company
Capital Stock and (ii) the conversion of the outstanding shares of Calgene
Capital Stock into shares of Holding Company Capital Stock by means of a
merger of a wholly owned subsidiary of Holding Company, organized under the
laws of the State of Delaware ("Merger Subsidiary"), into and with Calgene. At
the Closing and as of the Effective Time, (i) Merger Subsidiary shall be
merged with and into Calgene so that Calgene will be the surviving
corporation, (ii) the outstanding shares of Calgene Capital Stock shall be
converted into shares of Holding Company Capital Stock and (iii) immediately
after the Merger, the exchange of Tomato Associates Common Stock and other
assets for Holding Company Capital Stock shall be effected. As a result,
stockholders of Calgene and Tomato Associates shall become stockholders of
Holding Company, and Calgene and Tomato Associates shall continue to conduct
their businesses and operations as wholly owned subsidiaries of Holding
Company. Prior to the Effective Time, the outstanding Holding Company Capital
Stock shall consist of one thousand (1,000) shares of Holding Company Common
Stock, of which 501 shares shall be owned by Calgene and 499 shares shall be
owned by Monsanto and shall be surrendered for cancellation at the Effective
Time. The transactions described in this Agreement are subject to the approval
of the stockholders of Calgene and the sole stockholder of Merger Subsidiary,
and the satisfaction of certain other conditions described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Calgene and Monsanto agree as follows:
ARTICLE 1
Definitions
Capitalized terms used herein shall have the following meanings (all terms
defined in this Article 1 or in other provisions of this Agreement in the
singular shall have the same meaning when used in the plural and vice versa).
"Additional Interest Acquisition" shall mean the acquisition by Tomato
Associates, pursuant to the Partnership Reorganization Agreement, of the
additional Partnership Interests that it (directly or indirectly through the
General Partner) does not own after the Existing Option Exercise.
"Affiliate" shall mean with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or under common control
with such Person. For purposes of the preceding sentence, "control" shall have
the same meaning as in Rule 12b-2 promulgated under the Exchange Act.
"Agreement" shall mean this Agreement and Plan of Reorganization, as amended
or supplemented (such as provided in Section 4.1(c) hereof) from time to time.
"Amended and Restated Subordinated Promissory Note" shall mean the $18
million subordinated promissory note between Monsanto and Calgene dated June
27, 1995 and amended and restated as of September 27, 1995.
A-1
<PAGE>
"Assets" shall mean all of the assets set forth in Exhibit A hereto.
"Audited Financial Statements" shall have the meaning defined in Section
6.2(i)(v) hereof.
"Balance Sheet Date" shall mean June 30, 1995.
"Benefitted Party" shall have the meaning defined in Section 6.3 hereof.
"Business" shall mean Gargiulo's business as conducted by Gargiulo prior to
the Partnership Reorganization Transactions and by Tomato Associates after the
Partnership Reorganization Transactions and the dissolution and liquidation of
the General Partner as described in Section 2.4 hereof.
"Calgene" shall have the meaning defined in the first paragraph hereof.
"Calgene Acquisition Transaction" shall have the meaning defined in Section
9.9(a) hereof.
"Calgene Capital Stock" shall mean the Calgene Common Stock and the Calgene
Preferred Stock.
"Calgene Common Stock" shall mean the Common Stock, par value $0.001 per
share, of Calgene.
"Calgene Disclosure Memorandum" shall mean the Calgene Disclosure Memorandum
addressed to Monsanto and dated of even date herewith.
"Calgene Plans" shall have the meaning set forth in Section 6.2(o) hereof.
"Calgene Preferred Stock" shall mean the Preferred Stock, par value $0.001
per share, of Calgene, with such terms, rights, designations and privileges as
may be established by the Board of Directors of Calgene.
"Calgene Subsidiary" shall mean as of a particular date any Affiliate of
Calgene which is controlled by Calgene.
"Certificate of Merger" shall have the meaning ascribed thereto in the Plan
of Merger.
"Closing" shall mean the closing of the Transactions which, unless the
parties otherwise agree, shall take place at the Effective Time, as described
in Article 10 hereof.
"Closing Date" shall mean the date on which the Closing is consummated.
"Code" shall mean the Internal Revenue Code of 1986, as such shall be
amended from time to time.
"Commission" shall mean the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"Credit Facility Agreements" shall mean, collectively, the Holding Company
Credit Facility Agreement and the Gargiulo Credit Facility Agreement.
"Delaware GCL" shall mean the General Corporation Law of the State of
Delaware.
"Directly Competitive Activity" shall have the meaning defined in Section
12.4 hereof.
"Effective Time" shall mean the date and time at which the Exchange and the
Merger become effective as set forth in Section 10.2 hereof.
"EHBPs" shall have the meaning defined in Section 7.1 hereof.
"Employees" shall have the meaning defined in Section 7.1 hereof.
A-2
<PAGE>
"Employer" shall have the meaning defined in Section 7.1 hereof.
"Employer's Benefit Plans" shall have the meaning set forth in Section 7.2
hereof.
"ERISA" shall have the meaning defined in Section 6.2(o) hereof.
"Exchange" shall mean the exchange of the Assets for Holding Company Capital
Stock as provided in Section 2.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the
Commission issued under such act, as they each may, from time to time, be in
effect.
"Existing Option" shall mean the right of Tomato Associates to acquire the
balance of the capital stock of the General Partner that it does not own, as
well as further Partnership Interests, so that, after exercise of such
Existing Option, Tomato Associates will own 100% of the General Partner and,
together with the General Partner, will own Partnership Interests equal to 82%
of the Partnership Interests outstanding.
"Existing Option Exercise" shall mean the exercise of the Existing Option
and acquisition of Partnership Interests thereby.
"Financial Statements" shall have the meaning set forth in Section 6.2(i)(v)
hereof.
"Gargiulo" shall mean, collectively, the Partnership and the General
Partner, having their principal place of business at 1500 Old 41 North,
Naples, Florida 33963.
"Gargiulo Chilean Affiliates" shall have the meaning defined in Section
6.1(k)(xi)(A) hereof.
"Gargiulo Credit Facility Agreement" shall mean the subordinated convertible
credit facility, in the form thereof previously agreed to by the parties,
between Holding Company and Monsanto.
"Gargiulo Subsidiary" shall mean as of a particular date any Affiliate of
the General Partner or the Partnership which is controlled by the General
Partner or the Partnership.
"General Partner" shall mean Gargiulo, G.P., Inc., a Delaware corporation
and the sole general partner of the Partnership.
"hereto", "hereunder", "herein", "hereof" and the like mean and refer to
this Agreement as a whole and not merely to the specific article, section,
paragraph or clause in which the respective word appears.
"Holding Company" shall have the meaning defined in the recitals hereto.
"Holding Company Capital Stock" shall mean the Holding Company Common Stock
and the Holding Company Preferred Stock.
"Holding Company Common Stock" shall mean the common stock, par value $ .001
per share, of Holding Company.
"Holding Company Credit Facility Agreement" shall mean the subordinated
convertible credit facility, in the form thereof previously agreed to by the
parties, between Holding Company and Monsanto.
"Holding Company Indemnified Parties" shall have the meaning set forth in
Section 5.2 hereof.
A-3
<PAGE>
"Holding Company Preferred Stock" shall mean the Series A Preferred Stock,
par value $ .001 per share, of Holding Company.
"Holding Company Subsidiary" shall mean any Affiliate of Holding Company
that is controlled by Holding Company, either before or immediately after the
Effective Time.
"Holding Company's Agents" shall have the meaning set forth in Section
5.1(b) hereof.
"HSR" shall have the meaning defined in Section 8.1(d) hereof.
"Indemnified Party" shall have the meaning defined in Section 5.4 hereof.
"Indemnifying Party" shall have the meaning defined in Section 5.4 hereof.
"Internal Audit Report" shall mean the Monsanto internal audit report dated
August 11, 1995 concerning operations, financial and other matters at the
Naples, Florida, Watsonville, California, Puerto Rico and BHN facilities of
the Partnership, a true and correct copy of which has been given to Calgene by
Monsanto.
"IRCA" shall have the meaning set forth in Section 6.1(k)(v) hereof.
"IRS" shall have the meaning set forth in Section 6.2(o) hereof.
"Kirin-Japan" shall have the meaning set forth in Section 8.2(d) hereof.
"Kirin-USA" shall have the meaning set forth in Section 8.2(d) hereof.
"Letter of Intent" shall mean the letter of intent, dated June 27, 1995,
between Monsanto and Calgene.
"Liabilities, Actions and Damages" shall have the meaning defined in Section
5.1(a) hereof.
"License Agreements" shall mean those license agreements listed on Exhibit
A, copies of which were previously provided to Calgene.
"Material Adverse Effect" shall mean condition(s) as to which it may be
reasonably assumed that, if such conditions had been known to a reasonable
Person prior to signing this Agreement, such reasonable Person would not have
entered into the Transactions on the terms of the Transaction Agreements.
Notwithstanding the foregoing, any change in customers, pricing or sales
volumes of products of a Person shall not be deemed to be a Material Adverse
Effect and, in the case of Calgene, the outcome of the litigation between
Calgene and Enzo Biochem, Inc. shall not be deemed to be a Material Adverse
Effect with respect to Calgene.
"Merger" shall mean the merger of Merger Subsidiary into and with Calgene as
provided in Section 3.1 hereof.
"Monsanto" shall have the meaning defined in the first paragraph hereof.
"Merger Subsidiary" shall have the meaning defined in the recitals hereto.
"Monsanto Acquisition Transaction" shall have the meaning defined in Section
9.9(b) hereof.
"Monsanto's Agents" shall have the meaning set forth in Section 5.1(a)
hereof.
"Monsanto Disclosure Memorandum" shall mean the Monsanto Disclosure
Memorandum addressed to Calgene and dated of even date herewith.
"Monsanto Indemnified Parties" shall have the meaning set forth in Section
5.3 hereof.
A-4
<PAGE>
"Monsanto Proxy Information" shall have the meaning set forth in Section
6.1(j) hereof.
"NTGCo" shall mean NTGargiulo, Inc., a Florida corporation.
"Partnership" shall mean Gargiulo, L.P., a Delaware limited partnership
formed pursuant to the Partnership Agreement.
"Partnership Agreement" shall mean the Limited Partnership Agreement, dated
as of December 23, 1992 and subsequently amended and restated to the date
hereof, among the General Partner and Tomato Associates and NTGCo, as limited
partners.
"Partnership Financial Statements" shall mean the audited consolidated
financial statements of the Partnership as of and for the fiscal years ended
June 30, 1994 and June 30, 1995, together with the reports of Deloitte &
Touche LLP.
"Partnership Interests" shall mean partnership interests in the Partnership.
"Partnership Reorganization Agreement" shall mean the Gargiulo, L.P. Plan
and Agreement of Reorganization, dated as of the date hereof, among Calgene,
Monsanto, Tomato Associates, NTGCo, the Partnership, the General Partner and
certain individuals.
"Partnership Reorganization Transactions" shall mean the Existing Option
Exercise and the Additional Interest Acquisition.
"Person" shall mean a corporation, association, partnership, joint venture,
limited liability company, individual, trust, unincorporated organization, a
government agency or political subdivision thereof and any other entity.
"PG-K Partnership" shall have the meaning defined in Section 8.2(d) hereof.
"Plan of Merger" shall mean the Plan of Merger providing for the merger of
Merger Subsidiary into and with Calgene, substantially in the form of Exhibit
B hereto.
"Prior Years' Audited Financial Statements" shall have the meaning defined
in Section 6.2(i)(i) hereof.
"Proxy Statement" shall have the meaning defined in Section 9.3 hereof.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, filed with the Commission by Holding Company under
the Securities Act in connection with the Merger.
"Restricted Payments" shall mean dividends or other distributions in respect
of the stock of Calgene or any Calgene Subsidiary (except dividends payable to
Calgene or any wholly owned Calgene Subsidiary) and purchases, redemptions and
other acquisitions, direct or indirect, of stock of Calgene or any Calgene
Subsidiary.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
issued under such act, as they each may, from time to time, be in effect.
"Stockholders Agreement" shall mean the Stockholders Agreement, the form of
which is attached hereto as Exhibit C.
"Tax" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits tax, environmental tax, customs duty,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security,
A-5
<PAGE>
unemployment, disability, workers' compensation, employment related insurance,
real property, personal property, sales, use, transfer, value added,
alternative or add-on minimum or other tax.
"Tax Returns" shall mean all reports, returns, declarations, statements or
other information required to be supplied to a taxing authority in connection
with Taxes.
"Temporary Services Agreement" shall mean an agreement to be drafted and
agreed to between the parties before Closing so as to reflect in good faith
the terms set forth in Exhibit D attached hereto.
"Tomato Associates" shall mean Tomato Investment Associates, Inc., a
Delaware corporation.
"Tomato Associates Common Stock" shall mean the common stock, par value $1
per share, of Tomato Associates.
"Tomato Associates Financial Statements" shall mean the consolidated
financial statements of Tomato Associates as of and for the fiscal year ended
June 30, 1995.
"Tomato Associates Subsidiary" shall mean the Partnership and any other
corporation, partnership or other entity with respect to which Tomato
Associates or any other Tomato Associates Subsidiary has both (i) an equity
interest and (ii) either (A) voting control or (B) a 40% or greater interest
by value.
"Transaction Agreements" shall have the meaning defined in Section 8.1(f)
hereof.
"Transactions" shall mean, collectively, the Merger, the Exchange, the
Partnership Reorganization Transactions and the other transactions
contemplated by this Agreement.
"Treasury Regulations" shall mean the United States Treasury Regulations
promulgated under the Code, as such shall be amended from time to time.
"Unaudited Financial Statements" shall have the meaning defined in Section
6.2(i)(ii) hereof.
"Warranting Party" shall have the meaning defined in Section 6.3 hereof.
ARTICLE 2
The Exchange; Partnership Reorganization Transactions
2.1 The Exchange. Subject to the terms and conditions set forth in this
Agreement, immediately after the consummation of the Merger, Monsanto shall
contribute, assign, transfer and deliver the Assets to Holding Company, which
shall assume and perform all of Monsanto's obligations under and with respect
to such Assets accruing from and after such contribution, assignment, transfer
and delivery, in exchange for (i) such number of duly authorized, validly
issued and non-assessable shares of Holding Company Common Stock, as will
equal 49.9% of the Holding Company Common Stock issued and outstanding
immediately after the Effective Time and after giving effect to shares of
Holding Company Common Stock issued in the Merger and (ii) such number of duly
authorized, validly issued and non-assessable shares of Holding Company
Preferred Stock as will equal 49.9% of the Holding Company Preferred Stock
issued and outstanding immediately after the Effective Time and after giving
effect to shares of Holding Company Preferred Stock issued in the Merger. The
transfer of the Assets and the issuance of shares of Holding Company Common
Stock and Holding Company Preferred Stock in exchange therefor as contemplated
herein, shall become effective, and shall for all purposes be deemed to have
occurred, at and as of the Effective Time. As a result of the Assets transfer
and the share exchange contemplated hereby, Tomato Associates shall become a
wholly owned subsidiary of Holding Company. The certificates representing the
Holding Company Common Stock and the Holding Company Preferred Stock issued to
Monsanto in the Exchange shall bear a legend as required by the Stockholders
Agreement.
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2.2 Conveyance Limitation. Neither this Agreement nor any of the
Transactions shall convey or transfer legal or equitable title to any
trademarks, copyrights, trade names or trade designations owned, used or
controlled by Monsanto. Specifically, no rights are in any way conveyed to the
MONSANTO BLOCK M trademark or the trade name and trademark MONSANTO. No right,
title, or interest, express or implied, is granted to Holding Company or the
Holding Company Subsidiaries to use any trademark, copyright, trade name or
trade designation of Monsanto. Holding Company shall, and shall cause the
Holding Company Subsidiaries to, within one hundred eighty (180) days after
the Closing, obliterate or remove all such trademarks, trade names or trade
designations belonging or licensed to Monsanto which, after the Closing,
remain on any assets transferred pursuant to this Agreement. In the event said
trademarks, trade names or trade designations are not obliterated or removed
by Holding Company or the Holding Company Subsidiaries within the applicable
period specified in this Section 2.2, Monsanto is hereby granted the right, at
Holding Company's expense, to obliterate or remove said trademarks, trade
names and trade designations and the right to enter upon any premises of
Holding Company or the Holding Company Subsidiaries in order to do so.
2.3 Partnership Reorganization Transactions. Prior to the Effective Time,
the Partnership Reorganization Transactions shall have been effected pursuant
to the Partnership Reorganization Agreement and Tomato Associates shall have
become the owner of 100% of the capital stock of the General Partner, which
shall own 3% of the Partnership Interests, and 97% of the Partnership
Interests, as contemplated by the Partnership Reorganization Agreement.
2.4 Dissolution and Liquidation of General Partner. Immediately after the
Effective Time and the effectuation of the Exchange, Holding Company and
Tomato Associates shall cause the General Partner to be dissolved and
liquidated and all of its properties and assets distributed and transferred
to, and all of its obligations and liabilities assumed by, Tomato Associates
as the General Partner's sole stockholder, whereupon Tomato Associates shall
be vested with all right, title and interest in, to and under all of the
General Partner's properties and assets, including, without limitation, its
Partnership Interests, and shall succeed to, and shall be liable for, all of
the General Partner's obligations and liabilities. Such transfer and
assumption shall be evidenced by an assignment and assumption agreement
between Tomato Associates and the General Partner. Promptly upon such
dissolution, Tomato Associates, as sole stockholder of the General Partner,
shall file a certificate of dissolution of the General Partner with the
Secretary of State of the State of Delaware in accordance with the Delaware
GCL. As a result of the transfers and assumptions referred to above in this
Section 2.4, Tomato Associates shall own the entire Partnership Interests and,
as a result, the Partnership shall dissolve, by operation of law, and Tomato
Associates shall acquire all of the properties and assets of the Partnership,
and shall assume all of the obligations and liabilities of the Partnership, by
operation of law, and the Partnership and Tomato Associates shall enter into
an assignment and assumption agreement under which the Partnership shall
confirm that all of its properties and assets, subject to all existing liens
and encumbrances, have been transferred to Tomato Associates by operation of
law, and Tomato Associates shall confirm that it has assumed, by operation of
law, all of the obligations and liabilities of the Partnership. Promptly upon
such dissolution, (i) Tomato Associates, as the sole last partner of the
Partnership, shall file a certificate of cancellation of the Partnership with
the Secretary of State of the State of Delaware in accordance with the
Delaware Revised Uniform Limited Partnership Act, and (ii) Tomato Associates
shall take such actions as shall be necessary to change its name to "Gargiulo,
Inc." or another name that includes the name "Gargiulo" as part thereof.
ARTICLE 3
The Merger
3.1 The Merger. Subject to the terms and conditions of this Agreement and
the Plan of Merger, at the Effective Time, Merger Subsidiary shall be merged
into and with Calgene in accordance with the provisions of
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Section 251 of, and with the effect provided in Section 259 of, the Delaware
GCL. Calgene shall be the surviving corporation resulting from the Merger and
as a result of the Merger shall become a wholly owned subsidiary of Holding
Company and shall continue to be governed by the laws of the State of
Delaware. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved by the Board of Directors of Calgene, and
the Plan of Merger, which has been approved by the Board of Directors of
Calgene, and which shall be approved and adopted by the Board of Directors of
Merger Subsidiary upon the organization of Merger Subsidiary. The Plan of
Merger provides for the terms and conditions of the Merger, which terms are
incorporated herein and made a part of this Agreement by this reference. The
Plan of Merger may be amended, before or after approval by the stockholders of
Calgene, in accordance with the Delaware GCL.
ARTICLE 4
Structure of Holding Company and Related Matters
4.1 Organization of Holding Company.
(a) Holding Company shall be organized as a corporation under the laws of
the State of Delaware. Upon the Effective Time, Holding Company shall change
its name to "Calgene, Inc." The certificate of incorporation and bylaws of
Holding Company in effect immediately prior to the Effective Time shall be in
the form as shall be agreed upon by the parties consistent with the terms of
this Agreement and the Stockholders Agreement. Calgene and Monsanto shall
effect all steps to organize Holding Company as soon as practicable after the
date of this Agreement. Prior to the Effective Time, the Board of Directors of
Holding Company shall adopt resolutions designating the Holding Company
Preferred Stock (with the terms, designations, preferences, limitations,
privileges, and relative rights as contemplated by the Plan of Merger) and
appropriate certificates of designation shall be filed with the Secretary of
State of the State of Delaware.
(b) Prior to the Effective Time, the outstanding Holding Company Capital
Stock shall consist of one thousand (1,000) shares of Holding Company Common
Stock, of which 501 shares shall be owned by Calgene and 499 shares shall be
owned by Monsanto. At the Effective Time, each share of Holding Company Common
Stock held by either Calgene or Monsanto shall be cancelled and the
consideration paid therefor shall be returned. Prior to the Effective Time,
Holding Company shall not (i) conduct any business operations whatsoever or
(ii) enter into any contract or agreement of any kind, acquire any assets, or
incur any liability, except in connection with the organization of Merger
Subsidiary, as may be specifically contemplated by this Agreement, or as the
parties may otherwise agree. In the event this Agreement is terminated prior
to the Effective Time, Holding Company shall be dissolved.
(c) Prior to the Effective Time, the Board of Directors of Holding Company
shall approve the obligations of Holding Company under this Agreement and the
Plan of Merger, and Holding Company and Calgene shall execute a supplement to
this Agreement evidencing (i) such approval, (ii) Holding Company's
contractual obligation to abide by the terms of this Agreement and the Plan of
Merger, with joint and several representations (reasonably satisfactory to
Monsanto) with respect to Holding Company and Merger Subsidiary and such other
provisions as may be reasonably requested by Monsanto and (iii) Holding
Company's unconditional, unlimited and continuing guaranty of the performance
of all of Calgene's obligations under this Agreement, in a form reasonably
satisfactory to Monsanto.
4.2 Board of Directors.
(a) The Board of Directors of Holding Company shall consist of 9 persons
composed as provided in the Stockholders Agreement as of the Effective Time.
(b) The members of the standing committees of the Board of Directors of
Holding Company shall be determined by such Board of Directors, consistent
with the terms of the Stockholders Agreement.
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(c) The persons named as members or persons about to become members of the
Board of Directors of Holding Company shall be named in the Proxy Statement
and the Registration Statement, subject to receipt of the consent of such
individuals to be so named.
4.3 Management. The principal officers of Holding Company upon the Effective
Time shall be the same as the principal officers of Calgene prior to the
Effective Time. The principal officers of Calgene (as the surviving entity of
the Merger) upon the Effective Time shall be the same as the principal
officers of Calgene prior to the Effective Time.
4.4 Headquarters of Holding Company. The headquarters of Holding Company
shall be located in Davis, California. Following the Effective Time, the
principal corporate offices of Calgene shall be located in Davis, California,
and the principal corporate offices of Tomato Associates shall be located in
Naples, Florida.
4.5 Indemnification. Except as may be limited by applicable law, Holding
Company shall cause Calgene and Tomato Associates to maintain all rights of
indemnification existing in favor of the employees, agents, directors, and
officers of Calgene and Tomato Associates on terms no less favorable than
those provided in the certificates of incorporation or bylaws of such parties
or otherwise in effect on the date of this Agreement for a period of not less
than six (6) years from the Effective Time with respect to matters occurring
prior to the Effective Time.
4.6 Merger Subsidiary Organization. Holding Company shall organize Merger
Subsidiary under the laws of the State of Delaware. Prior to the Effective
Time, the outstanding capital stock of Merger Subsidiary shall consist of
1,000 shares of common stock, all of which shall be owned by Holding Company.
Prior to the Effective Time, Merger Subsidiary shall not (i) conduct any
business operations whatsoever or (ii) enter into any contract or agreement of
any kind, acquire any assets or incur any liability, except as may be
specifically contemplated by this Agreement. If this Agreement is terminated
prior to the Effective Time, Merger Subsidiary shall be dissolved. Holding
Company, as the sole stockholder of Merger Subsidiary, shall, prior to the
Effective Time, vote its shares of Merger Subsidiary in favor of the Plan of
Merger.
ARTICLE 5
Indemnification
5.1 Release. (a) Subject to Sections 5.2, 5.6, and 5.8 hereof and except for
obligations under the agreements set forth on Exhibit G hereto and except as
otherwise specifically provided in this Agreement or in the other Transaction
Agreements, neither Monsanto nor its directors, officers, employees or agents
(collectively "Monsanto's Agents") shall be liable to Holding Company,
Calgene, the Calgene Subsidiaries or the Holding Company Subsidiaries for, and
Holding Company and Calgene (on behalf of themselves and such Subsidiaries)
release and discharge Monsanto and Monsanto's Agents from, any and all claims,
liabilities, fines, penalties, demands, causes of action, suits, judgments,
losses, injuries, damages (including, without limitation, incidental,
consequential and punitive damages), costs and expenses (including costs of
defense, settlement and reasonable attorneys' fees) (all of the foregoing
hereinafter collectively called "Liabilities, Actions and Damages") in any way
occurring with respect to, incident to, arising out of or connected to the
condition of the Assets (including the assets of Tomato Associates and the
Tomato Associates Subsidiaries), before and after Closing, except for matters
constituting fraud.
(b) Subject to Sections 5.3, 5.7 and 5.8 hereof and except for obligations
under the agreements set forth on Exhibit G hereto and except as otherwise
specifically provided in this Agreement or in the other Transaction
Agreements, neither Holding Company, Calgene nor their respective directors,
officers, employees or agents (collectively "Holding Company's Agents") shall
be liable to Monsanto for, and Monsanto releases and discharges Holding
Company, Calgene and Holding Company's Agents from, any and all Liabilities,
Actions and Damages in any way occurring with respect to, incident to, arising
out of or connected to the condition of
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the assets of Calgene and the Calgene Subsidiaries, before and after Closing,
except for matters constituting fraud.
5.2 Monsanto's Indemnification Agreement. Subject to Sections 5.4, 5.5, 5.6
and 5.8 hereof and except as otherwise specifically provided in this Agreement
or in the other Transaction Agreements, Monsanto shall indemnify and hold
Holding Company and its directors, officers, employees and agents
(collectively, the "Holding Company Indemnified Parties") harmless from and
against any and all Liabilities, Actions and Damages suffered or incurred by
said indemnified parties with respect to (i) any inaccuracy of representations
and warranties made herein or pursuant to Article 6 hereof by Monsanto, (ii)
breaches on or prior to the Closing Date of covenants made in any of the
Transaction Agreements by Monsanto, which breaches, if curable, are not cured
within sixty (60) days after written notice thereof from Calgene, (iii) the
failure of Monsanto to comply with any applicable Bulk Sale Law or (iv) any
Taxes actually payable by Holding Company, Tomato Associates or General
Partner attributable to the recapture or acceleration of an adjustment claimed
under Code Section 481 which arose upon the Partnership formation, net of any
reductions to Taxes actually payable by Tomato Associates, Holding Company or
General Partner as a result of corollary adjustments attributable to such Code
Section 481 adjustments.
5.3 Holding Company's and Calgene's Indemnification Agreement. Subject to
Sections 5.4, 5.5, 5.7 and 5.8 hereof and except as otherwise specifically
provided in this Agreement or in the other Transaction Agreements, Holding
Company and Calgene, jointly and severally, shall indemnify and hold Monsanto
and Monsanto's Agents (collectively, the "Monsanto Indemnified Parties")
harmless from and against any and all Liabilities, Actions and Damages
suffered or incurred by said indemnified parties with respect to (i) any
inaccuracy of representations and warranties made herein or pursuant to
Article 6 hereof by Calgene, or (ii) breaches on or prior to the Closing Date
of covenants made in any of the Transaction Agreements by Calgene or Holding
Company, which breaches, if curable, are not cured within sixty (60) days
after written notice thereof from Monsanto.
5.4 Procedure. In the event that, from and after the Closing Date, a third
Person asserts any claim against any Holding Company Indemnified Party or any
Monsanto Indemnified Party with respect to any matter to which the foregoing
indemnities apply, the party against whom the claim is asserted (the
"Indemnified Party") shall give prompt written notice to the indemnifying
party (the "Indemnifying Party"), and the Indemnifying Party shall have the
right, at its election, to take over the defense or settlement of such claim
at its own expense by giving prompt written notice to the Indemnified Party;
provided, however, that, if the Indemnifying Party does not give such notice
and does not proceed diligently to defend the claim within thirty (30) days
after receipt of such notice of the claim, the Indemnifying Party shall be
bound by any defense or settlement that the Indemnified Party may make as to
such claim and shall reimburse the Indemnified Party for any and all losses
and expenses resulting therefrom. The Indemnified Party and the Indemnifying
Party shall cooperate in defending any such third Person's claim, and the
Indemnifying Party, to the extent the Indemnifying Party elects to defend such
claim, shall have reasonable access to records, information and personnel in
the possession or control of any other party hereto which are applicable to
the subject matter of any claim or which are otherwise pertinent to the
defense of such claim and the Indemnified Party shall otherwise cooperate with
the Indemnifying Party in all respects in connection therewith. The
Indemnifying Party shall reimburse the Indemnified Party for all of the
Indemnified Party's reasonable out-of-pocket costs incurred in connection with
the activities set forth in the immediately preceding sentence and in
enforcing this indemnification. Each party hereto shall have an obligation to
retain all records until the period ending on December 31 of the tenth (10th)
full calendar year following the Closing Date unless such records relate to
actions, claims or proceedings known to such party to be pending at the time
such records are scheduled not to be retained or unless such records are
required to be maintained for longer periods of time under applicable laws,
rules or regulations or unless such records relate to Taxes, in which case
each party hereto shall have an obligation to retain such records for the term
of the applicable statute of limitations, as the same may be extended or
tolled. Notwithstanding the foregoing, the Indemnifying Party shall not settle
or compromise any such claim without the prior written consent of the
Indemnified Party, such consent not to be unreasonably withheld, unless, after
consultation between such parties, the terms of such settlement or
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compromise release such Indemnified Party from any and all liability with
respect to such claim and do not in any manner adversely affect the future
operations or activities of such Indemnified Party.
5.5 Adjustment of Liability. In calculating any amount of damages to be paid
by Monsanto, Holding Company or Calgene as set forth in this Article 5, the
amount of such damages shall be reduced by all insurance reimbursements
credited to or received by the other party, relating to such damages. In
connection therewith, promptly after the Closing Date, each party hereto shall
obtain a waiver of subrogation with respect to such reimbursements from its
insurer(s).
5.6 Certain Limitations on Monsanto's Indemnification Agreement. The
indemnification obligations contained in Section 5.2 hereof (other than clause
(iv) thereof) shall not apply to Liabilities, Actions or Damages to the extent
such Liabilities, Actions or Damages relate to or arise from matters disclosed
to Calgene by Monsanto in the Monsanto Disclosure Memorandum or in other
disclosures, certificates or reports (including, without limitation, the
Internal Audit Report and the notes to the Partnership Financial Statements)
given to Calgene prior to the Closing. No claim for indemnification shall be
made under Section 5.2 hereof with respect to Liabilities, Actions or Damages
relating to any breach of Section 6.1 hereof, unless the aggregate of all such
Liabilities, Actions or Damages exceeds $2,500,000 and then only the amount of
such Liabilities, Actions or Damages in excess of the initial $2,500,000 shall
be payable to the Holding Company Indemnified Parties thereunder. No
Liabilities, Actions or Damages shall be subject to payment by Monsanto under
Section 5.2 hereof to the extent that the aggregate amount of such claimed
Liabilities, Actions or Damages exceeds $22,500,000; provided, however, that
Liabilities, Actions or Damages caused by fraud on the part of Monsanto shall
not be subject to the $22,500,000 limitation. For purposes of determining
whether claims for indemnification are within the amounts set forth above, all
claims for indemnification by the Holding Company Indemnified Parties shall be
net of any unpaid claims (including indemnification claims that are unpaid by
reason of the $2,500,000 threshold) for indemnification by the Monsanto
Indemnified Parties. Any amounts payable to a Holding Company Indemnified
Party under Section 5.2 hereof relating to a breach of Section 6.1 hereof may
be made, at Monsanto's election, either in cash (at any time) or by one of the
following methods in the order presented (i.e., Monsanto may use a method only
after fully exhausting all prior methods): first, by offset to any loans
(other than loans under the Gargiulo Credit Facility Agreement) owed by the
Holding Company Indemnified Parties to Monsanto, second, by transfer of
Holding Company Common Stock, and, third, by offset to any loans owed by the
Holding Company Indemnified Parties to Monsanto under the Gargiulo Credit
Facility Agreement. For purposes of the foregoing, Holding Company Common
Stock transferred in satisfaction of an indemnification obligation shall be
valued at the greater of (i) the value of such Holding Company Common Stock at
Closing (if trading on a "when issued" basis on such date and otherwise the
value on such date of the Calgene Common Stock that will be converted into
such Holding Company Common Stock) and (ii) the value of such Holding Company
Common Stock at the time of such transfer (in each case such value to be equal
to the last reported sale price on the Nasdaq National Market or such other
national securities exchange on which such stock may be traded).
5.7 Certain Limitations on Holding Company's and Calgene's Indemnification
Agreement. The indemnification obligations contained in Section 5.3 hereof
shall not apply to Liabilities, Actions or Damages to the extent such
Liabilities, Actions or Damages relate to or arise from matters disclosed to
Monsanto by Calgene in the Calgene Disclosure Memorandum or in other
disclosures, certificates or reports (including, without limitation, the notes
to the Financial Statements) given to Monsanto prior to the Closing. No claim
for indemnification shall be made under Section 5.3 hereof with respect to
Liabilities, Actions or Damages relating to any breach of Section 6.2 hereof,
unless the aggregate of all such Liabilities, Actions or Damages exceeds
$2,500,000 and then only the amount of such Liabilities, Actions or Damages in
excess of the initial $2,500,000 shall be payable to the Monsanto Indemnified
Parties thereunder. For purposes of determining whether claims for
indemnification are in excess of the amount set forth above, all claims for
indemnification by the Monsanto Indemnified Parties shall be net of any unpaid
claims (including indemnification claims that are unpaid by reason of the
$2,500,000 threshold) for indemnification by the Holding Company Indemnified
Parties.
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5.8 Limitations on Liability of the Parties. Notwithstanding anything to the
contrary contained in this Agreement, neither Monsanto, Calgene nor Holding
Company shall have any liability for any breach or falsity of a representation
or warranty under this Agreement (under Sections 5.2 or 5.3 hereof or
otherwise) to the extent the breach or falsity of the representation or
warranty upon which such liability would be based is disclosed:
(a) in the case of Monsanto, in the Monsanto Disclosure Memorandum
(including the schedules thereto) and in the Exhibits hereto, in the
Internal Audit Report, in the Partnership Financial Statements (including
the notes thereto), or disclosed in a written notice furnished to Calgene
prior to the Closing; provided, however, that any such breach or falsity of
a representation or warranty so disclosed to Calgene after the execution
and delivery of this Agreement and prior to the Closing shall not affect
the right of Calgene to elect not to close the Transactions as a result of
any failure to satisfy the conditions set forth in Section 8.1 hereof (it
being understood and agreed that if, despite such right of Calgene to elect
not to close by reason of the breach or falsity so disclosed, Calgene shall
nevertheless elect to close, thereby waiving such misrepresentation or
breach, then neither Calgene nor Holding Company shall thereafter have any
claim against Monsanto by reason of, in connection with or arising from any
such disclosed breach or falsity of a representation or warranty); and
(b) in the case of Calgene and Holding Company, in the Calgene Disclosure
Memorandum (including the schedules thereto), in the Exhibits hereto, in
the Financial Statements (including the notes thereto) or disclosed in a
written notice furnished to Monsanto prior to the Closing; provided,
however, that any such breach or falsity of a representation or warranty so
disclosed to Monsanto after the execution and delivery of this Agreement
and prior to the Closing shall not affect the right of Monsanto to elect
not to close the Transactions as a result of any failure to satisfy the
conditions set forth in Section 8.2 hereof (it being understood and agreed
that if, despite such right of Monsanto to elect not to close by reason of
the breach or falsity so disclosed, Monsanto shall nevertheless elect to
close, thereby waiving such misrepresentation or breach, then Monsanto
shall thereafter have no claim against Calgene or Holding Company by reason
of, in connection with or arising from any such disclosed breach or falsity
of a representation or warranty).
ARTICLE 6
Representations and Warranties
6.1 Monsanto's Representations and Warranties. Monsanto represents and
warrants as follows:
(a) Monsanto is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Tomato Associates is
a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has all necessary corporate
powers and authority to carry on its business as now conducted and to own,
lease and operate its properties. Monsanto owns all of the issued and
outstanding capital stock of Tomato Associates free and clear of all liens,
claims, security interests or encumbrances and there are no outstanding
options, warrants or other rights to acquire capital stock of Tomato
Associates. As of the date hereof, Tomato Associates is duly licensed or
qualified to do business and is in good standing in every jurisdiction in
which the nature of its business or ownership of its properties requires
such qualification except where the failure to qualify will not have a
Material Adverse Effect. As of the date hereof, except for its ownership
interest in Gargiulo (and indirect investments or other interests because
of such interest in Gargiulo), Tomato Associates has no subsidiaries and
has no direct or indirect beneficial investment or other interest in any
other Person. Tomato Associates has delivered to Calgene complete and
correct copies of its certificate of incorporation and by-laws as amended
and in effect on the date hereof.
(b) Monsanto has full corporate power and authority to execute and
deliver the Transaction Agreements to which it is a party and to carry out
the terms and obligations thereof. Monsanto has taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement and to consummate the Transactions. This Agreement constitutes,
and each of the Transaction Agreements after
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execution and delivery at the Closing shall on the Closing Date constitute,
a valid and binding obligation of Monsanto, enforceable in accordance with
their respective terms and conditions.
(c) The execution, delivery and performance of the Transaction Agreements
will not violate or constitute a default, or give rise to a violation or
default under (i) any material contract, mortgage, indenture, promissory
note or similar agreement to which Monsanto or Tomato Associates is a
party, or by which either of them is bound, (ii) their respective charter
or by-laws, or (iii) any court injunction or decree, or any valid and
enforceable order of a governmental agency having jurisdiction over
Monsanto or Tomato Associates.
(d) Except as provided in Schedule 6.1(d) to the Monsanto Disclosure
Memorandum, as of the date hereof, there are no actions, suits,
investigations or proceedings pending or, to the best of Monsanto's
knowledge and belief, threatened against Tomato Associates or against any
asset, interest or right of Tomato Associates that might have a Material
Adverse Effect. As of the date hereof, there are no actual or, to the best
of Monsanto's knowledge and belief, threatened actions, suits or
proceedings which present a claim to restrain or prohibit the Transactions.
(e) As of the Closing Date, Tomato Associates will have all right, title
and interest to the Assets, except any Assets which may be transferred to
the Holding Company.
(f) Shares of the stock of Holding Company to be received by Monsanto
pursuant to the Exchange will be acquired for investment for its own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof.
(g) All material Tax Returns relating to, or including items attributable
to the operations of, each of Tomato Associates and the Tomato Associates
Subsidiaries or relating to any Tax for which Tomato Associates or any
Tomato Associates Subsidiary may be liable that were required to be filed
have been filed and all such Tax Returns were correct and complete in all
material respects. All Taxes that are shown to be due on any such Tax
Returns have been paid. All Taxes that Tomato Associates or any Tomato
Associates Subsidiary is or was required by law to withhold or collect or
any such Taxes for which Tomato Associates or any Tomato Associates
Subsidiary may be liable have been duly withheld or collected and, to the
extent required, have been paid to the proper governmental entity. Tomato
Associates has made available to Calgene correct and complete copies of the
relevant portions of all federal income Tax Returns (and related
workpapers), examination reports and statements of deficiencies assessed
against or agreed to since January 1, 1992, relating to any Tax of Tomato
Associates or any Tomato Associates Subsidiary. Neither Tomato Associates
nor any Tomato Associates Subsidiary has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. Neither Tomato Associates nor any Tomato Associates Subsidiary is a
party to any Tax allocation or sharing agreement. Neither Tomato Associates
nor any Tomato Associates Subsidiary is a "consenting corporation" within
the meaning of Section 341(f) of the Code, and none of the assets of Tomato
Associates or the Tomato Associates Subsidiaries are subject to an election
under Section 341(f) of the Code. Adequate provision for any Tax due or to
become due for each of Tomato Associates and the Tomato Associates
Subsidiaries for the period or periods through and including June 30, 1995,
has been made and is reflected on the June 30, 1995 financial statements of
Tomato Associates and the Partnership Financial Statements. Deferred Taxes
of Tomato Associates and the Tomato Associates Subsidiaries have been
provided for in accordance with generally accepted accounting principles.
Monsanto has no present plan or intention to dispose of any of the Holding
Company Capital Stock received in the Exchange.
(h) The copies of the certificate of incorporation of Tomato Associates,
including all amendments thereto, certified by the Secretary of State of
the State of Delaware, and the by-laws of Tomato Associates, certified by
the Assistant Secretary of Tomato Associates, furnished to Calgene are
true, correct and complete copies of such certificate of incorporation and
by-laws as in effect on the date hereof. The minute books of Tomato
Associates have been made available to Calgene and its representatives, and
contain accurate records of all meetings of, and any corporate actions or
written consents by, the shareholders and the Board of Directors of Tomato
Associates and any committee thereof. The Tomato Associates Financial
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Statements have been delivered to Calgene. The Tomato Associates Financial
Statements were prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, and fairly
present, in all material respects, the financial condition of Tomato
Associates, as of the dates indicated and the results of its operations for
the periods then ended in accordance with generally accepted accounting
principles.
(i) Tomato Associates is not in conflict with, or in default or violation
of, (i) any law, rule, regulation, order, judgment or decree (including,
without limitation, any of the foregoing relating to zoning or land use)
applicable to Tomato Associates or by which any property or asset of Tomato
Associates is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Tomato Associates is a party or by which
any property or asset of Tomato Associates is bound or affected, except for
any such conflicts, defaults or violations that would not, individually or
in the aggregate, have a Material Adverse Effect.
(j) When the Registration Statement shall be filed and when it shall
become effective and when the Proxy Statement shall first be mailed to
Calgene stockholders, and at all times subsequent to such mailing date up
to and including the Closing Date, including, without limitation, the date
of the meeting of Calgene's stockholders referred to in Section 9.3 hereof,
to which the Proxy Statement relates, the information supplied by Monsanto
to Holding Company in writing for inclusion in the Registration Statement
or supplied by Monsanto to Calgene in writing for inclusion in the Proxy
Statement and all supplements and amendments thereto, including information
relating to the Partnership and the General Partner (such information being
hereafter referred to as the "Monsanto Proxy Information") shall not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, at the time and in light of the circumstances under
which they are made, not misleading. If, at any time prior to the Closing
Date, any event relating to Monsanto or any of its Affiliates, officers or
directors shall be discovered by Monsanto which causes any Monsanto Proxy
Information previously supplied by Monsanto to Holding Company or Calgene
to contain any untrue statements of a material fact or to omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, Monsanto shall promptly inform
Calgene and Holding Company.
(k) With respect to the General Partner and the Partnership and except as
disclosed in the Monsanto Disclosure Memorandum, in other written
certificates, reports or disclosures (including, without limitation, the
Internal Audit Report and the notes to the Partnership Financial
Statements) given to Calgene prior to the Closing, or herein:
(i) The General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all necessary corporate powers and authority to carry on its
business as now conducted and to own, lease and operate its properties.
Monsanto has delivered to Calgene complete and correct copies of the
General Partner's certificate of incorporation and by-laws as amended
and in effect on the date hereof. The Partnership is a limited
partnership duly formed, validly existing and in good standing under
the laws of the State of Delaware and has all requisite partnership
authority to conduct its business as now conducted and to own, lease
and operate its properties. Monsanto has delivered to Calgene a
complete and correct copy of the Partnership Agreement.
(ii) Except as set forth on Schedule 6.1(k)(ii) to the Monsanto
Disclosure Memorandum, as of the date hereof, there are no actions,
suits, investigations or proceedings instituted, pending or, to the
best of Monsanto's knowledge and belief, threatened against the General
Partner or the Partnership or any asset, interest or right of the
General Partner or the Partnership that might have a Material Adverse
Effect.
(iii) The Partnership Financial Statements have been delivered to
Calgene. The Partnership Financial Statements were prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, and fairly present, in all
material respects, the
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financial condition of the Partnership, as of the dates indicated and
the results of its operations for the periods then ended in accordance
with generally accepted accounting principles.
(iv) Monsanto has given Calgene true and correct copies of the
following environmental reports prepared for Monsanto:
(A) Original copies of the laboratory data and associated chain-
of-custody forms dated April 28, 1993 for the NTG Project, together
with supporting data and reports;
(B) Report On Soil Assessment--Old Fort Tomato Growers Packing
Facility, Tiffin, Ohio (prepared by Applied Environmental Services)
dated October 23, 1992;
(C) Phase II Site Assessment of Hall Road Ranch, Property No. 30
(prepared by Geraghty & Miller, Inc.) dated September 28, 1993;
(D) Environmental Due Diligence Phase I Report dated October 1,
1992, with Attachments A-S, on N.T.Gargiulo, Inc., 15000 Old 41
North, Naples, Florida 33963 (prepared by J. D. Chelan);
(E) Baseline Survey of NT Gargiulo Properties (prepared by
Geraghty & Miller, Inc.) dated April 23, 1993; and
(F) Baseline Survey of NT Gargiulo Properties, Executive Summary
(prepared by Geraghty & Miller, Inc.) dated April 23, 1993. Monsanto
represents and warrants that all actions listed under the caption
"Action Required" in Table 8-1 to the foregoing Executive Summary
have been completed, in all material respects.
Except as set forth on Schedule 6.1(k)(iv) to the Monsanto Disclosure
Memorandum, as of the date hereof, neither the Partnership nor the General
Partner has received any notice of violation or consent order from any U.S.
federal, state or local governmental entity with respect to the
Partnership's or the General Partner's actual or alleged failure to comply
with any material requirement of any law, regulation or ordinance relating
to the protection of the environment and health and safety, which notice of
violation or consent order remains uncorrected or unresolved.
(v) With respect to any Person directly employed by the Partnership
on or after May 1, 1987, and who actually commenced such employment on
or after November 6, 1986, (a) to the best of Monsanto's knowledge, the
Partnership hired such Person in substantial compliance with the
Immigration Reform and Control Act of 1986 and the rules and
regulations thereunder ("IRCA") and (b) the Partnership has complied in
all material respects with all recordkeeping and other requirements
under IRCA.
(vi) [intentionally omitted]
(vii) As of the date hereof, each Gargiulo Subsidiary is set forth on
Schedule 6.1(k)(vii) to the Monsanto Disclosure Memorandum. Except as
set forth in Schedule 6.1(k)(vii) to the Monsanto Disclosure Memorandum
and except for cash equivalents and marketable securities held for
investment purposes, as of the date hereof, neither the General Partner
nor the Partnership has any subsidiaries or any direct or indirect
beneficial investment or other interest (including partnership
interests) in any other Person other than indirect interests held
through Persons of which the General Partner or the Partnership owns
less than 50% of the outstanding equity. The General Partner's or
Partnership's, as applicable, investment or other interest in each
Gargiulo Subsidiary is set forth in Schedule 6.1(k)(vii) to the
Monsanto Disclosure Memorandum, which investments or other interests
are owned free and clear of all liens, claims, security interests or
encumbrances and there are no outstanding options, warrants or other
rights to acquire such investments or other interests. Each Gargiulo
Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization or formation and
has all necessary power and authority to carry on its business as now
conducted and to own, lease and operate its properties. As of the date
hereof, each Gargiulo Subsidiary is duly licensed or qualified to do
business and is in good standing in every jurisdiction in which the
nature of its business or ownership of its properties requires such
qualification except where the failure to qualify
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<PAGE>
will not have a Material Adverse Effect. Complete and correct copies of
the organizational documents of the Gargiulo Subsidiaries, as amended
and in effect on the date hereof, have been made available to Calgene.
(viii) Schedule 6.1(k)(viii) to the Monsanto Disclosure Memorandum
identifies all real property owned by the General Partner and the
Partnership as of the date hereof and all real property leased by the
General Partner and the Partnership as of the date hereof (other than
farm leases having a term of one year or less). Except as set forth on
Schedule 6.1(k)(viii) to the Monsanto Disclosure Memorandum, to the
best of Monsanto's knowledge, either the General Partner or the
Partnership has good and marketable title to each parcel of real
property owned by the General Partner or the Partnership, free and
clear of all mortgages, security interests, restrictions and other
encumbrances except for (a) current taxes or assessments due but not
yet payable, (b) easements and restrictions which do not materially
interfere with the General Partner's and the Partnership's use of the
real property for the purpose for which such real property is currently
being used, (c) other encumbrances which are not substantial in
character or amount and (d) mechanics' and materialmen's liens in an
aggregate amount not exceeding $250,000.
(ix) Except as set forth on Schedule 6.1(k)(ix) to the Monsanto
Disclosure Memorandum, as of the date hereof, neither the General
Partner nor the Partnership is a party to:
(A) Any contract or purchase offer providing for an expenditure by
the General Partner or the Partnership in excess of $100,000 per
contract or purchase offer for the purchase of any real property,
machinery, equipment or other items which are in the nature of
capital investment or for the purchase of raw materials, supplies,
or any other items or services other than purchases of raw
materials, supplies and other items or services in the ordinary
course of business and consistent with past practices.
(B) Any contract, bid or offer to sell products or property or to
provide services to third parties in an amount in excess of $100,000
per contract, bid or offer other than sales of inventory or the
providing of packing, cooling or marketing services in the ordinary
course of business and consistent with past practices.
(C) Any loan agreement, indenture, promissory note or other
agreement or instrument involving borrowings by the General Partner
or the Partnership in excess of $250,000.
(D) Any other agreement or group of agreements which involve
future payments by the General Partner or the Partnership of
$300,000 or more per annum, to a single Person, other than the
agreements described in subsections (ix)(A) and (ix)(C) above and
leases of real property (certain of which leases are described on
Schedule 6.1(k)(viii) to the Monsanto Disclosure Memorandum) and
other than obligations to make payments under its partnership or
joint venture agreements disclosed in Schedule 6.1(k)(vii) to the
Monsanto Disclosure Memorandum.
(E) Any written contract containing covenants materially limiting
the freedom of the General Partner or the Partnership to compete in
any line of business or with any Person.
(F) Any agreement, written or oral, between the Partnership or the
General Partner and any partner, stockholder or officer of the
Partnership or the General Partner, or any Affiliate thereof.
(x) Notwithstanding the provisions of this Section 6.1, Monsanto
makes no representation or warranty regarding:
(A) Gargiulo's ownership interest in any Affiliate in Chile or in
any other entity in Chile in which Gargiulo has any direct or
indirect beneficial investment or other interest (collectively, the
"Gargiulo Chilean Affiliates"); or
(B) the condition (financial or otherwise), business, results of
operations, business practices, assets, liabilities or prospects of
the Gargiulo Chilean Affiliates.
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<PAGE>
6.2 Calgene's Representations and Warranties. Calgene represents and
warrants as to itself and sometimes as to the Calgene Subsidiaries as follows:
(a) Calgene is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary
corporate power and authority to carry on its business as now conducted and
as proposed to be conducted and to own, lease and operate its properties.
Each of the Calgene Subsidiaries is a corporation or entity duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all necessary corporate power and authority to carry
on its business as now conducted and as proposed to be conducted and to
own, lease and operate its properties. Except as set forth in Schedule
6.2(a) to the Calgene Disclosure Memorandum, Calgene owns all of the issued
and outstanding capital stock of each Calgene Subsidiary free and clear of
all liens, claims, security interests or encumbrances. Calgene and each
Calgene Subsidiary are duly licensed or qualified to do business and are in
good standing in every jurisdiction in which the nature of their businesses
or the ownership of their properties requires such qualification except
where the failure to qualify will not have a Material Adverse Effect. As of
the date hereof, each Calgene Subsidiary is set forth on Schedule 6.2(a)(i)
to the Calgene Disclosure Memorandum. Except as set forth in Schedule
6.2(a)(i) to the Calgene Disclosure Memorandum and except for cash
equivalents and marketable securities held for investment purposes, as of
the date hereof, Calgene has no subsidiaries and has no direct or indirect
beneficial investment or other interest (including partnership interests)
in any other Person. Calgene and each Calgene Subsidiary have delivered to
Monsanto complete and correct copies of their respective certificates of
incorporation and by-laws as amended and in effect on the date hereof.
(b) It has full corporate power and authority to execute and deliver the
Transaction Agreements to which it is a party and to carry out the terms
and obligations thereof. Calgene has taken all corporate action necessary
to authorize the execution, delivery and, subject only to the approval of
the Calgene stockholders, performance of this Agreement and all related
documents and instruments and, subject only to the approval of the Calgene
stockholders, to consummate the Transactions. This Agreement constitutes,
and each of the other Transaction Agreements to be executed by Calgene
after execution and delivery at the Closing shall on the Closing Date
constitute, its valid and binding obligation, enforceable in accordance
with its respective terms and conditions.
(c) Except as set forth in Schedule 6.2(c) to the Calgene Disclosure
Memorandum, the execution, delivery and performance of the Transaction
Agreements will not violate or constitute a default or give rise to a
violation or default under (i) any material contract, mortgage, indenture,
promissory note or similar agreement to which Calgene or any of the Calgene
Subsidiaries is a party, or by which any of them is bound, (ii) their
respective charter or by-laws, or (iii) any court injunction or decree, or
any valid and enforceable order of a governmental agency having
jurisdiction over Calgene or any of the Calgene Subsidiaries.
(d) The authorized capital stock of Calgene consists of (i) 50,000,000
shares of Calgene Common Stock and (ii) 5,000,000 shares of Calgene
Preferred Stock. As of September 25, 1995, 30,250,408 shares of Calgene
Common Stock were issued and outstanding, no shares were held in treasury
and no shares of Calgene Preferred Stock were issued or outstanding. As of
September 25, 1995, options to purchase 2,188,860 shares of Calgene Common
Stock granted under the Calgene Plans and no warrants to purchase shares of
Calgene Common Stock were issued and outstanding, as set forth by holder,
amount and date in Schedule 6.2(d) to the Calgene Disclosure Memorandum.
All of the shares of Calgene Common Stock outstanding as of the date hereof
are, and all such shares issued upon exercise of the options will, upon
such issuance, be, duly authorized and validly issued and are, or will be,
fully paid and nonassessable. The Calgene Preferred Stock issued and
outstanding as of the Closing Date (but before giving effect to the
Transactions) shall be duly authorized, validly issued, fully paid and
nonassessable shares of Calgene Preferred Stock. Except as set forth in
Schedule 6.2(d) to the Calgene Disclosure Memorandum, there are no options,
warrants, rights, calls, subscriptions, stock appreciation rights,
commitments, understandings or agreements of any character obligating
Calgene or any of the Calgene Subsidiaries to issue any shares of capital
stock or any security representing the right to purchase or otherwise
receive any such shares, except for the outstanding options referred to
above in this Section 6.2(d), and the rights of Monsanto and Holding
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<PAGE>
Company under this Agreement. Except for restrictions on transfer arising
under the federal securities laws or as described in Schedule 6.2(d) to the
Calgene Disclosure Memorandum, there are no existing restrictions on
transfer, voting trusts, stockholder agreements or registration covenants
known to Calgene relating to any outstanding shares of capital stock of
Calgene or any Calgene Subsidiary. None of the outstanding shares of the
Calgene Common Stock was issued in violation of the preemptive rights of
any present or former stockholder and Calgene's stockholders are not
entitled to preemptive rights. Since the Balance Sheet Date, there have
been no Restricted Payments declared or paid in respect of the shares of
any capital stock of Calgene or any Calgene Subsidiary.
(e) When the Registration Statement shall be filed and when it shall
become effective and when the Proxy Statement shall first be mailed to
Calgene stockholders, and at all times subsequent to such mailing date up
to and including the Closing Date, including, without limitation, the date
of the meeting of Calgene's stockholders referred to in Section 9.3 hereof,
to which the Proxy Statement relates, the Proxy Statement and the
Registration Statement and all supplements and amendments thereto (i) shall
comply in all material respects with the provisions of the Exchange Act and
the Securities Act, and all applicable rules and regulations of the
Commission thereunder, and (ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, at the time
and in light of the circumstances under which they are made, not misleading
(except that no representation is made as to information provided by
Monsanto, the General Partner, the Partnership or any Affiliate thereof).
(f) Except as disclosed in Calgene's Form 10-K for the years ended June
30, 1994 and June 30, 1995 or in Calgene's September 30, 1994, December 31,
1994, or March 31, 1995, Form 10-Q or in the Form 8-K filed by Calgene on
June 29, 1995, Calgene and the Calgene Subsidiaries have not suffered any
Material Adverse Effect in their businesses, financial condition or results
of operations since June 30, 1994.
(g) Except as set forth in Schedule 6.2(g) to the Calgene Disclosure
Memorandum, as of the date hereof, there are no actions, suits or
proceedings instituted, pending or, to the best of Calgene's knowledge and
belief, threatened against Calgene or the Calgene Subsidiaries or against
any asset, interest or right of Calgene or the Calgene Subsidiaries that
might have a Material Adverse Effect. As of the date hereof, there are no
actual or, to the best of Calgene's knowledge and belief, threatened
actions, suits or proceedings which present a claim to restrain or prohibit
the Transactions.
(h) Except as provided for in the Transaction Agreements and the Amended
and Restated Subordinated Promissory Note, Calgene is not under any
obligation to register under the Securities Act any of its presently
outstanding securities or any of its securities that may subsequently be
issued.
(i) Calgene has previously delivered to Monsanto true, accurate and
complete copies of the following documents, including the exhibits and
schedules thereto:
(i) Annual Report on Form 10-K for each of the years ended June 30,
1992, 1993 and 1994 as filed with the Commission, which contains the
audited consolidated balance sheets of Calgene as of each year end, and
audited consolidated statements of operations, cash flows and
shareholders' equity for each of the years then ended (together the
"Prior Years' Audited Financial Statements"), certified by Ernst &
Young LLP;
(ii) Quarterly Reports on Form 10-Q for the three months ended
September 30, 1994, December 31, 1994, and March 31, 1995, as filed
with the Commission, which contain unaudited condensed consolidated
balance sheets of Calgene as of September 30, 1994, December 31, 1994,
and March 31, 1995, and unaudited condensed consolidated statements of
operations and cash flows for the quarter and fiscal year-to-date
periods ended September 30, 1993 and 1994, December 31, 1993 and 1994
and March 31, 1994 and 1995 (the "Unaudited Financial Statements");
(iii) Current Report on Form 8-K filed with the Commission on June
29, 1995;
(iv) Proxy statements in definitive form for its 1992, 1993 and 1994
annual meetings of stockholders as filed with the Commission; and
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(v) Annual Report on Form 10-K for the fiscal year ended June 30,
1995, as filed with the Commission, which contains the audited
consolidated balance sheet of Calgene as of such year end, and audited
consolidated statements of operations, cash flows and shareholders'
equity for the year then ended, certified by Ernst & Young, LLP (the
"Audited Financial Statements" and, together with the Prior Years'
Audited Financial Statements and the Unaudited Financial Statements,
the "Financial Statements").
Except for a Current Report filed on Form 8-K on June 29, 1995 and Annual
Report on Form 10-K for the fiscal year ended June 30, 1995, Calgene has to
date filed no other reports or registration statements with the Commission
since May 1, 1995. Calgene has timely filed all reports and other documents
required to be filed by it under the Exchange Act, the Securities Act, and
any applicable state securities or corporation statutes and regulations.
The documents provided pursuant to this Section 6.2(i) included (or
incorporated by reference) all required exhibits and did not contain at the
time of filing thereof any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Financial Statements were prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved, and fairly present, in all material
respects, the financial condition of Calgene, as of the dates indicated and
the results of its operations for the periods then ended in accordance with
generally accepted accounting principles.
(j) The copies of the certificates of incorporation of Calgene and the
Calgene Subsidiaries, including all amendments thereto, certified by the
Secretary of State of the State of Delaware, and the by-laws of Calgene and
the Calgene Subsidiaries, certified by the applicable Secretary of Calgene
and the Calgene Subsidiaries, furnished to Monsanto are true, correct and
complete copies of such certificates of incorporation and by-laws as
currently in effect. The minute books of Calgene and the Calgene
Subsidiaries have been made available to Monsanto and its representatives,
and contain accurate records of all meetings of, and any corporate actions
or written consents by, the shareholders and the Boards of Directors of
Calgene and the Calgene Subsidiaries and any committee thereof.
(k) Except as disclosed in the Audited Financial Statements or in
Calgene's June 30, 1995, Form 10-K, or as set forth in Schedule 6.2(k) to
the Calgene Disclosure Memorandum, there are no material agreements,
contracts or commitments, written or oral, to which Calgene or any Calgene
Subsidiary is a party or by which it or any of their property is bound as
of the date hereof which are required to be disclosed in or attached as an
exhibit to a Form 10-K or a Form 10-Q. All contracts between Calgene and
its executive officers and between each Calgene Subsidiary and their
respective executive officers shall be deemed to be material agreements or
contracts.
(l) With respect to any Person employed by Calgene or any Calgene
Subsidiary on or after May 1, 1987, and who actually commenced such
employment on or after November 6, 1986, (a) to the best of Calgene's
knowledge, Calgene and/or such Calgene Subsidiary hired such Person in
substantial compliance with IRCA and (b) Calgene and each Calgene
Subsidiary have complied in all material respects with all recordkeeping
and other requirements under IRCA.
(m) Calgene and the Calgene Subsidiaries have filed or will file all Tax
Returns required to be filed by them and have paid (or have accrued or will
accrue, prior to the Closing Date) amounts for the payment of all Taxes due
in respect of those Tax Returns. As of June 30, 1994, Calgene's and the
Calgene Subsidiaries' federal and state income Tax carryforwards
(including, without limitation, net operating loss carryforwards, foreign
Tax credit carryforwards, minimum Tax credit carryforwards), are set forth
on Schedule 6.2(m) to the Calgene Disclosure Memorandum; provided, however,
that such Tax carryforwards are subject to limitation under Section 382 of
the Code. Adequate provision for any Tax due or to become due for each of
Calgene and the Calgene Subsidiaries for the period or periods through and
including June 30, 1995 has been made and is reflected on the Financial
Statements. Deferred Taxes of Calgene and the Calgene Subsidiaries have
been provided for in accordance with generally accepted accounting
principles, consistently applied.
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(n) None of Calgene or any Calgene Subsidiary is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree (including, without limitation, any of the foregoing relating to
zoning or land use) applicable to Calgene or any Calgene Subsidiary or by
which any property or asset of Calgene or any Calgene Subsidiary is bound
or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Calgene or any Calgene Subsidiary is a party or by
which any property or asset of Calgene or any Calgene Subsidiary is bound
or affected, except for any such conflicts, defaults or violations that
would not, individually or in the aggregate, have a Material Adverse
Effect.
(o) Schedule 6.2(o) to the Calgene Disclosure Memorandum contains a true
and correct list of all employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, severance or compensation agreements
maintained, or contributed to, by Calgene or any Calgene Subsidiary or with
respect to which any such entity is a party or has incurred any current
obligation, or could incur any obligation under Section 4069 or Section
4212(c) of ERISA (collectively, the "Calgene Plans"). Except as disclosed
on Schedule 6.2(o) to the Calgene Disclosure Memorandum, each Calgene Plan
is in writing and Calgene has furnished Monsanto with a complete and
accurate copy of each Calgene Plan document and, as applicable, (i) each
trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the most recently filed Internal
Revenue Service ("IRS") Form 5500 and (iv) the most recently received IRS
determination letter for each such Calgene Plan.
(p) None of the Calgene Plans is subject to Title IV of ERISA. Neither
Calgene nor any Calgene Subsidiary has incurred any material liability nor
reasonably expects to incur any material liability under, arising out of or
by operation of Title IV of ERISA. Except as set forth in Schedule 6.2(p)
to the Calgene Disclosure Memorandum, no Calgene Plan provides for the
payment of compensation or benefits which would be contingent upon a
"change in control", within the meaning of such term under Section 280G of
the Code.
(q) Each Calgene Plan is being operated in all material respects in
accordance with its terms and the requirements of applicable law. No legal
action, suit or claim is pending or threatened with respect to any Calgene
Plan (other than claims for benefits in the ordinary course) and no fact or
event exists that could give rise to any such action, suit or claim, in
each case, where such action, suit or claim could result in any material
liability. Each Calgene Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has received a favorable
determination letter from the IRS that it is so qualified and no fact or
event has occurred since the date of such determination letter from the IRS
to adversely affect the qualified status of any such Calgene Plan.
(r) The list of outstanding stock options granted to any current or
former employee or independent contractor that is set forth in Schedule
6.2(r) to the Calgene Disclosure Memorandum is a list of all outstanding
options and related exercise prices with respect to shares of Calgene
Common Stock granted to such persons on or prior to the date indicated
therein.
(s) Neither the IRS nor any other taxing authority or agency, domestic or
foreign, is now asserting or, to the best knowledge of Calgene, threatening
to assert against Calgene or any Calgene Subsidiary any deficiency or claim
for additional Taxes or interest thereon or penalties in connection
therewith. None of Calgene or any Calgene Subsidiary has granted any waiver
of any statute of limitations with respect to, or any extension of a period
for the assessment of, any federal, state, county, municipal or foreign
income Tax. Neither Calgene nor any Calgene Subsidiary has made an election
under Section 341(f) of the Code.
6.3 Survival of Representations and Warranties. No party (the "Warranting
Party") shall have any obligation or liability to another party (the
"Benefitted Party") on account of the breach by the Warranting Party of any
representation or warranty set forth in this Article 6 unless the Benefitted
Party shall have notified the Warranting Party of such breach within two (2)
years after the Closing Date. Notwithstanding the foregoing,
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(a) the representations and warranties set forth in Sections 6.2(c), 6.2(d)
and 6.2(e) hereof, to the extent applicable to the shares of Holding Company
Capital stock to be issued in the Merger and the Exchange, shall survive the
Closing indefinitely; (b) for purposes of the Credit Facility Agreements, the
representations and warranties of Calgene set forth in Section 6.2 hereof
shall survive until the later of (i) the termination of both of the commitment
periods set forth in the Credit Facility Agreements and (ii) the date that all
outstanding principal and accrued interest under such Credit Facility
Agreements has been repaid in full or converted into Holding Company Common
Stock; and (c) the representations and warranties provided in Sections 6.1(g)
and 6.2(m) hereof shall survive the Closing indefinitely.
ARTICLE 7
Employees
7.1 Offers of Employment. Calgene or Holding Company ("Employer") shall
offer employment to all of the Monsanto employees whose names are listed on
Schedule 7.1 to the Monsanto Disclosure Memorandum (hereinafter referred to as
"Employees"), in each case with salaries or wages which are not less than
their current salaries or wages with Monsanto and with comparable working
conditions to those enjoyed by similarly situated Employer employees. Employer
and Monsanto shall cooperate to effect orderly presentations and discussions
with the Employees of the various aspects of their prospective employment with
Employer and their disengagement from employment with Monsanto. Those
Employees who accept employment with Employer shall hereinafter be referred to
as "Employees Hired by the Purchaser" or "EHBPs."
7.2 Employee Benefits. Employer shall provide the EHBPs with all of the
compensation, incentive compensation, retirement and employee benefit plans,
programs and arrangements generally available to the other similarly situated
employees of Employer ("Employer's Benefit Plans"), and the EHBPs shall be
eligible to participate in Employer's Benefit Plans on the same basis and
under the same terms as the other similarly situated employees of Employer.
From and after the Closing Date, Employer shall grant to all EHBPs credit
under the Employer's Benefit Plans for all service with Monsanto, and any
Monsanto Affiliate, for all purposes for which said service was recognized by
Monsanto, including without limitation, disability, vacation, severance plans
or policies, eligibility for participation and vesting in Employer's Section
401(k) plans, and any seniority-based plan, practice or policy. To the extent
that any medical plan maintained by Employer contains restrictions or
limitations on pre-existing medical conditions, Employer shall waive those
restrictions. Employer shall recognize all covered medical expenses incurred
by EHBPs and their eligible dependents during calendar year 1995 prior to the
Closing Date for purposes of satisfying the existing calendar year deductibles
and co-payment limitations, if any, under its medical plans.
On the Closing Date, Monsanto shall take such action as may be necessary to
provide each EHBP with the right to effect (to the extent permitted by law) a
tax-free rollover of the EHBP's account balance in the Monsanto defined
contribution plan into Employer's Section 401(k) plan (or other individual
account plan maintained by Employer) or into an individual retirement account.
If any EHBP is involuntarily terminated by Employer for reasons not
involving cause within 12 months of Closing, Employer shall pay the EHBP in a
single sum as soon as practicable after the EHBP's involuntary termination a
severance benefit equal in amount to the greater of: 2 weeks' base pay per
year of service or 4 months' base pay. The aforementioned severance payment
shall be in lieu of and supersede Employer's obligation to pay additional
severance under its regular severance plan.
7.3 Confidentiality. Nothing contained in this Agreement shall constitute a
waiver or modification of, or an amendment to, the obligations of the EHBPs
respecting confidential information of Monsanto or third parties under
employment or confidentiality agreements, or otherwise as provided by law, it
being agreed that said
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obligations and all other terms of such agreements shall continue in
accordance with the terms of such agreements or as otherwise provided by law.
The EHBPs may disclose confidential Monsanto information to Employer but only
to the extent that such information specifically relates to the operations of
Employer and the Business required by each such EHBP to perform his or her
duties and provided that the EHBP has entered into a confidentiality agreement
with Employer. Such information shall remain confidential information of
Monsanto and shall be maintained as confidential in accordance with Section
9.2 hereof.
7.4 No Third Party Beneficiary Status. Nothing contained in this Article 7,
either express or implied, is intended or shall be construed to confer upon
any Person other than Monsanto, Calgene or Holding Company any rights or
remedies hereunder.
ARTICLE 8
Conditions Precedent
8.1 Conditions Precedent to Calgene's Obligations. All obligations of
Calgene under this Agreement are subject to the fulfillment, on or prior to
the Closing Date, of each of the following conditions or their waiver by
Calgene:
(a) All representations and warranties of Monsanto contained in this
Agreement shall be true in all material respects at and as of the Closing
Date as though such representations and warranties had been made or given
on such date (except to the extent such representations and warranties
speak as of an earlier date), except (i) for changes contemplated by this
Agreement and (ii) where the failure to be true and correct does not have a
Material Adverse Effect on Monsanto or a Material Adverse Effect on the
Transactions. Monsanto shall have performed and complied with, in all
material respects, its obligations under the Transaction Agreements which
are to be performed or complied with by it prior to or on the Closing Date.
Monsanto shall have delivered a certificate signed by an officer of
Monsanto certifying as to the fulfillment of this condition.
(b) Calgene shall have received from counsel for Monsanto a written
opinion dated as of the Closing Date addressed to Calgene substantially in
the form attached hereto as Exhibit E. In rendering such opinion, counsel
may rely to the extent deemed appropriate on the certificates of officers
or employees of Monsanto and of public officials as to matters of fact and
authenticity of documents and on opinions of counsel in other states as to
questions under the laws of such states.
(c) The instruments of transfer, assignments and assumptions, and other
agreements and documents to be executed and/or delivered by Monsanto to
Calgene or Holding Company at the Closing shall be in form and substance
reasonably satisfactory to Calgene and shall have been duly executed by
Monsanto and be ready for delivery at the Closing (except as otherwise
permitted herein).
(d) The pre-transaction filing and waiting period requirements applicable
to the Transactions under the Hart-Scott-Rodino Antitrust Improvement Act
of 1976, as amended ("HSR"), shall have expired or shall have been
terminated, and any necessary foreign approvals shall have been obtained,
and there shall not be pending or threatened any governmental litigation or
proceeding which restrains, prohibits or prevents or in the reasonable
opinion of counsel presents a significant risk of restraining, prohibiting
or preventing, or changing the terms of, or obtaining material damages in
connection with, the Transactions.
(e) There shall have occurred no Material Adverse Effect upon Tomato
Associates, the Business or the Assets and which Monsanto has not remedied
prior to Closing.
(f) The following agreements (together with this Agreement, collectively
the "Transaction Agreements") shall be executed and delivered by all of the
other parties thereto:
(i) Stockholders Agreement;
(ii) Holding Company Credit Facility Agreement;
(iii) Gargiulo Credit Facility Agreement;
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(iv) License Agreements; and
(v) Temporary Services Agreement.
(g) The Merger shall have been approved by the stockholders of Calgene.
(h) The shares of Holding Company Common Stock to be issued pursuant to
this Agreement shall have been authorized for quotation on the National
Market System of Nasdaq.
(i) Calgene shall have received an opinion of Hale and Dorr, reasonably
acceptable to Calgene, to the effect that the Transactions, including the
Merger and the Exchange, will constitute transfers to a corporation
controlled by Monsanto and the stockholders of Calgene within the meaning
of Section 351(a) of the Code and that such transfers will not give rise to
income, gain or loss to Holding Company or the stockholders of Calgene. In
connection with such opinion, Calgene shall have received from Monsanto a
certificate, dated as of the Closing Date and signed by one of its vice
presidents, to the effect that, to the best knowledge and belief of such
officer, the statement of facts and representations made on behalf of
Monsanto's management, presented to such counsel delivering such opinion,
were at the date of such presentation, true, correct and complete and are
on the date of such certificate, to the extent contemplated by the
presentation, true, correct and complete, as though such presentation had
been made on the date of such certificate. Calgene shall have received a
copy of the opinion delivered to Monsanto pursuant to Section 8.2(k)
hereof.
(j) All consents or waivers for Calgene's consummation of the
Transactions, as set forth on Schedule 8.1(j) to the Calgene Disclosure
Memorandum, shall have been received.
8.2 Conditions Precedent to Monsanto's Obligations. All obligations of
Monsanto under this Agreement to consummate the Transactions are subject to
the fulfillment and satisfaction, on or prior to the Closing Date, of each of
the following conditions or their waiver by Monsanto:
(a) All representations and warranties of Calgene and Holding Company
contained in this Agreement shall be true in all material respects at and
as of the Closing Date as though such representations and warranties had
been made or given on such date (except to the extent such representations
and warranties speak as of an earlier date), except (i) for changes
contemplated by this Agreement and (ii) where the failure to be true and
correct does not have a Material Adverse Effect on Calgene and the Calgene
Subsidiaries taken as a whole or a Material Adverse Effect on the
Transactions. Holding Company shall have adopted this Agreement as provided
in Section 4.1(c) hereof and complied with, in all material respects, all
other provisions of this Agreement that are applicable to it. Calgene and
Holding Company shall have performed and complied with, in all material
respects, their obligations under the Transaction Agreements which are to
be performed or complied with by either or both of them prior to or on the
Closing Date, including, without limitation, the adoption (and filing where
appropriate) of amended and restated certificates of incorporation and by-
laws for Holding Company, Calgene and Tomato Associates reasonably
acceptable to Monsanto to reflect the provisions of this Agreement and the
other Transaction Agreements. Calgene and Holding Company shall each
deliver certificates signed by one of their officers certifying as to the
fulfillment of this condition.
(b) Monsanto shall have received from counsel for Calgene a written
opinion dated as of the Closing Date addressed to Monsanto substantially in
the form attached hereto as Exhibit F. In rendering such opinion, counsel
may rely to the extent deemed appropriate on the certificates of officers
or employees of Calgene and of public officials as to matters of fact and
authenticity of documents and on opinions of counsel in other states as to
questions under the laws of such states.
(c) The pre-transaction filing and waiting period requirements applicable
to the Transactions under HSR shall have expired or shall have been
terminated, and any necessary foreign approvals shall have been obtained,
and there shall not be pending or threatened any governmental litigation or
proceeding which restrains, prohibits or prevents or in the reasonable
opinion of counsel presents a significant risk of restraining, prohibiting
or preventing, or changing the terms of, or obtaining material damages in
connection with, the Transactions.
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(d) Calgene shall have (i) (A) obtained assurances or waivers from Kirin
Brewery Co., Ltd. ("Kirin-Japan"), Kirin Agribio USA, Inc. ("Kirin USA")
and the Plant Genetics-Kirin Partnership (the "PG-K Partnership") deemed
adequate by Monsanto that Monsanto's potato assets would be unaffected by
Calgene's ownership (through Calgene Subsidiaries) of an interest in the
PG-K Partnership even if Monsanto subsequently acquired any or all of the
outstanding securities of Holding Company, or (B) furnished evidence deemed
adequate by Monsanto that either Kirin-Japan or Kirin USA would buy out
Calgene's interest (owned by Calgene Subsidiaries) in the PG-K Partnership,
on terms reasonably acceptable to Monsanto, such that Monsanto's potato
assets would be unaffected by Calgene's past ownership (through Calgene
Subsidiaries) of an interest in the PG-K Partnership even if Monsanto
subsequently acquired any or all of the outstanding securities of Holding
Company, and (ii) provided written assurances satisfactory to Monsanto that
neither The Mingly Corporation Limited nor any affiliate thereof has any
right (or that such parties have waived any right) to designate one or more
directors on Calgene's or Holding Company's Board of Directors.
(e) The Existing Option Exercise and the Additional Interest Acquisition
shall have been effected.
(f) There shall have occurred no Material Adverse Effect upon Calgene or
the Calgene Subsidiaries or the business or assets thereof, and which
Calgene has not remedied prior to Closing.
(g) The Transaction Agreements shall be executed and delivered by all of
the other parties thereto.
(h) The Merger has been previously approved by the stockholders of
Calgene.
(i) [Intentionally omitted]
(j) The Development/License Agreement, dated as of December 23, 1992,
between Monsanto and the Partnership, shall have been amended as set forth
in Exhibit B to the Partnership Reorganization Agreement.
(k) Monsanto shall have received an opinion of Arnold & Porter, special
tax counsel to Monsanto, reasonably acceptable to Monsanto, to the effect
that the Transactions, including the Merger and the Exchange, will
constitute transfers to a corporation controlled by Monsanto and the
stockholders of Calgene within the meaning of Section 351(a) of the Code
and that such transfers will not give rise to income, gain or loss to
Monsanto or Holding Company. In connection with such opinion, Monsanto
shall have received from Calgene a certificate, dated as of the Closing
Date and signed by its chief executive officer and chief financial officer,
to the effect that, to the best knowledge and belief of such officers, the
statement of facts and representations made on behalf of Calgene's
management, presented to such counsel delivering such opinion, were at the
date of such presentation, true, correct and complete and are on the date
of such certificate, to the extent contemplated by the presentation, true,
correct and complete, as though such presentation had been made on the date
of such certificate. Monsanto shall have received a copy of the opinion
delivered to Calgene pursuant to Section 8.1(i) hereof.
(l) The shares of Holding Company Common Stock to be issued pursuant to
this Agreement shall have been authorized for quotation on the National
Market System of Nasdaq.
(m) Certificate(s) representing the shares of Holding Company Capital
Stock to be issued to Monsanto pursuant to Section 2.1 hereof shall have
been delivered to Monsanto.
(n) The Transactions contemplated by the Partnership Reorganization
Agreement shall have been completed and all consents or waivers for
Monsanto's consummation of the Transactions, as set forth on Schedule
8.2(n) to the Monsanto Disclosure Memorandum, shall have been received.
ARTICLE 9
Covenants
9.1 Access to Assets and Calgene. Prior to the Closing, a reasonable number
of authorized representatives of Calgene, reasonably approved by Monsanto,
shall have full access, during reasonable Monsanto business hours, to the
Assets and books and records relating to the Business for the purpose of
examining and inspecting
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the same. Also prior to the Closing, a reasonable number of authorized
representatives of Monsanto, reasonably approved by Calgene, shall have full
access, during reasonable Calgene business hours, to all the assets,
facilities and books and records of Calgene and the Calgene Subsidiaries for
the purpose of examining and inspecting the same.
9.2 Confidentiality. Between the date of this Agreement and the Closing Date
and for a period of ten (10) years after the Closing Date (or, if this
Agreement is terminated prior to Closing, for a period of ten (10) years after
the date hereof), each party hereto shall treat, and shall cause its
respective directors, officers, employees, agents, representatives,
consultants and financial institutions to treat, as the other party's
confidential property and not use or disclose to others or permit its
directors, officers, employees, agents, representatives, consultants and
financial institutions to use or disclose to others, without the prior written
consent of such other party, any non-publicly available information or data of
such other party (including, but not limited to, any technical information or
data provided by such other party) which may have heretofore or hereafter been
provided or disclosed by such other party in connection with this Agreement,
any negotiations pertaining thereto or any of the Transactions. This Section
9.2 shall not prevent any party hereto from using or disclosing to others
information: which such party can show has become part of the public domain
other than by acts or omissions of such party, its directors, officers,
employees, agents, representatives, consultants and financial institutions;
which has been furnished to such party by third parties as a matter of right,
without restriction on disclosure or use known to such party; which was
lawfully in such party's possession prior to the time Monsanto and Calgene
first entered into discussions related to the subject matter of this Agreement
and which was not acquired by such party, its directors, officers, employees,
agents, representatives, consultants and financial institutions directly or
indirectly from the other party, its directors, officers, employees, agents,
consultants and financial institutions; which a party can prove was developed
by it independent of any information received from such other party, its
directors, officers, employees, agents, representatives, consultants and
financial institutions, either directly or indirectly; or which such party is
required to disclose by applicable law or regulation, in which case the party
so required to disclose shall give the other party prompt notice of such
requirement in all cases with sufficient time for such other party to seek a
protective order or other limit on disclosure (unless the party subject to the
disclosure requirement would suffer penalties or sanctions for failure to
immediately disclose such information). It is further understood and agreed
that specific information shall not be deemed available to the public or in
any party's prior possession merely because it is embraced by more general
information available to the public or in such party's prior possession. In
the event that this Agreement or the Transactions are not consummated, any and
all notes, memoranda, records, drawings, tracings, specifications, sketches,
reports or other documents, including, without implied limitation, all copies,
excerpts or reproductions thereof, furnished or made available by Monsanto to
Calgene, or Calgene to Monsanto as the case may be, their respective
directors, officers, employees, agents, representatives, consultants and
financial institutions or developed thereby shall be promptly destroyed by
such party at such other party's request and such party shall advise such
other party in writing that such destruction has been completed. This Section
9.2 shall survive any termination of this Agreement.
9.3 Registration Statement. Calgene shall cause Holding Company to file the
Registration Statement with the Commission, and Calgene shall use its
reasonable best efforts to cause the Registration Statement to become
effective under the Securities Act and to cause Holding Company to take any
action required to be taken under the applicable state Blue Sky or securities
laws in connection with the issuance of the shares of Holding Company Common
Stock upon consummation of the Merger. Monsanto shall furnish, or cause to be
furnished, such information concerning Gargiulo and Tomato Associates and
itself as Calgene may reasonably request in connection with such action. As
promptly as practicable following the execution and delivery of this
Agreement, unless this Agreement shall have been previously terminated in
accordance with Article 11 hereof, Calgene shall submit the Merger to its
stockholders for approval and adoption at a meeting of its stockholders called
by Calgene for such purpose. Unless this Agreement shall have been previously
terminated in accordance with Article 11 hereof, Calgene's Board of Directors
shall recommend that Calgene's stockholders vote to approve and adopt the
Merger and the other matters to be submitted to Calgene's stockholders in
connection therewith and shall use its best efforts to solicit and secure from
its stockholders their approval and adoption of the Merger (unless, in either
case, in the discharge of its fiduciary duties, after receiving advice of
counsel, Calgene's Board
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of Directors shall determine not to make, or to change, such recommendation or
not so to solicit and secure such stockholders' approval). In connection with
the stockholders meeting, Calgene shall prepare and file with the Commission,
as soon as reasonably practicable, a proxy statement of Calgene with respect
to this Agreement and the Transactions and use all reasonable efforts to have
such proxy statement cleared by the Commission under the Exchange Act. The
Calgene proxy statement, in the form first sent to Calgene stockholders, is
herein called the "Proxy Statement".
9.4 Operations of Calgene. Between the date of this Agreement and the
Closing, Calgene shall continue to operate its business and shall cause the
Calgene Subsidiaries to operate their respective businesses in the ordinary
course. Without the prior written consent of Monsanto, which consent shall not
be unreasonably or untimely withheld, Calgene and the Calgene Subsidiaries
shall not do any of the following with respect to their respective businesses:
(i) engage in any commercial practice that is not in the ordinary course
of business;
(ii) sell, lease or otherwise dispose of any of their respective assets
except for intangible property and sales of inventory in the ordinary
course of business and consistent with past practice;
(iii) sell or license any intangible property for consideration (other
than royalties contingent on future sales) exceeding $1,000,000 in the
aggregate per transaction or series of transactions;
(iv) except as set forth on Schedule 9.4(iv) to the Calgene Disclosure
Memorandum, create or suffer to be created any mortgage, lien, pledge or
encumbrance of any kind or other exceptions to title upon their respective
assets;
(v) except as set forth on Schedule 9.4(v) to the Calgene Disclosure
Memorandum and except for grower contracts and agreements or commitments
requiring financial obligations of less than $100,000 in the aggregate,
enter into any agreement or commitment having a term in excess of one year;
(vi) enter into any agreement or commitment that restricts Calgene or any
of the Calgene Subsidiaries from carrying on their businesses;
(vii) violate any of the negative covenants set forth in the Amended and
Restated Subordinated Promissory Note;
(viii) change the number of shares of its authorized or issued capital
stock (other than the issuance of additional shares of Calgene Common Stock
upon the exercise of employee stock options outstanding on the date hereof
and the designation and issuance of $1,000 of Calgene Preferred Stock,
which shall be non-voting and non-convertible and shall otherwise have such
terms as shall have been approved by Monsanto) or grant or issue any
option, warrant, call, right, commitment or agreement of any character
relating to its authorized or issued capital stock, or issue, grant or sell
any preferred stock or any securities or obligations convertible into or
exchangeable for shares of its capital stock other than the issuance and
sale of shares of Calgene Common Stock with aggregate proceeds to Calgene
not in excess of Ten Million Dollars ($10,000,000.00);
(ix) make any amendment to or changes in its certificate of incorporation
or by-laws, except only for the designation of the Calgene Preferred Stock
to the extent permitted in clause (viii) of this Section 9.4;
(x) take or fail to take any action that would require the approval of
any Monsanto Director or the consent of a supermajority of Directors (each
as defined in the Stockholder Agreement) under Sections 4.4(a)(i), (ii),
(iv), (vii), (viii), (ix), (x), (xii), (xiii), (xv) or (xvii) of the
Stockholders Agreement if the Stockholders Agreement was in effect
beginning on the date hereof; or
(xi) except as expressly permitted by this Agreement, take any action
that would or is reasonably likely to result in any of the representations
and warranties of Calgene set forth in this Agreement being untrue in any
material respect, or in any of the conditions to the Closing specified in
Article 8 not being satisfied.
9.5 Operations of Tomato Associates. Between the date of this Agreement and
the Closing, Monsanto shall cause Tomato Associates to continue to maintain
the Assets in accordance with Tomato Associates' usual
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and past practices. Without the prior written consent of Calgene, which
consent shall not be unreasonably or untimely withheld, Monsanto shall cause
Tomato Associates not to do any of the following with respect to such Assets
during such period:
(i) sell, lease or otherwise dispose of any of such Assets;
(ii) issue any shares of capital stock or any options, warrants or rights
for anyone to acquire any such shares;
(iii) create or suffer to be created any mortgage, lien, pledge or
encumbrance of any kind or other exceptions to title upon such Assets or
borrow money or incur any indebtedness;
(iv) engage in any commercial practice that is not in the ordinary course
of business;
(v) enter into any agreement or commitment that restricts Tomato
Associates from carrying on its business;
(vi) make any amendment to its Certificate of Incorporation or By-laws;
or
(vii) take or fail to take any action of the type described in Sections
4.4(a)(i), (iv), (vii), (x) or (xv) of the Stockholders Agreement (except
that "Company" shall mean "Tomato Associates" for this purpose).
9.6 Public Announcement. No press release, public announcement, confirmation
or other information regarding this Agreement or the other Transaction
Agreements or the contents hereof or thereof shall be made by any party
without the prior written approval of the other parties, except as may be
necessary, after consultation between the parties, if practicable, to meet the
requirements or regulations of any applicable law, governmental unit or agency
or any stock exchange on which the securities of such party may be listed. All
press releases shall be joint to the extent practicable.
9.7 Certain Tax Matters.
(a) Notwithstanding anything to the contrary contained herein, each of
Monsanto and Calgene shall, for Tax reporting purposes, reflect the
Transactions as transfers of Calgene Capital Stock and the Assets to Holding
Company in exchange for Holding Company Capital Stock in transactions
qualifying as tax-free exchanges under Section 351 of the Code and shall
reflect the Merger as a reverse acquisition within the meaning of Treasury
Regulation Section 1.1502-75(d)(3).
(b) Monsanto, on behalf of Tomato Associates, shall file or cause to be
filed, on the due date (as it may be extended), all Tax Returns in respect of
Tomato Associates, which are due to be filed, on or before the Effective Time.
(c) Holding Company shall cause the General Partner, the Partnership and any
subsidiaries of the Partnership to file all Tax Returns required to be filed
by the General Partner, the Partnership and such subsidiaries, for all periods
for which a Tax Return is due on or after the Effective Time; provided,
however, that, with respect to all such Tax Returns covering periods beginning
on or before the Effective Time, a draft of each such Tax Return shall be
provided to Monsanto at least 30 days prior to the due date thereof and each
such Tax Return shall be subject to Monsanto's review and approval.
(d) Neither Holding Company, the General Partner, the Partnership nor any
subsidiaries of the Partnership shall, without Monsanto's consent, agree to
any Tax adjustment or otherwise compromise or settle any matters with respect
to Taxes attributable to the General Partner, the Partnership or any
subsidiaries of the Partnership, if such adjustment or matter is attributable
to a period ending on or before the Effective Time.
(e) It is recognized that either party may need Tax, financial or other data
after the Closing Date with respect to the Business and the Assets covering
several fiscal periods prior to the Closing Date in order to facilitate the
preparation of Tax Returns or in connection with any audit, investigation,
litigation, amended Tax Return, claim for refund or any proceeding in
connection therewith or to comply with the rules and regulations
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of the IRS, the Commission or any other governmental organization or agency.
The parties shall render reasonable cooperation and shall afford access during
normal business hours to all books, records, data and personnel concerning use
and ownership of the Assets and the operation and conduct of the Business with
respect to periods prior to and including the Closing Date to each other and
their auditors, accountants, counsel or other authorized representatives for
such purpose. The parties shall also each execute such documents as the others
may reasonably request in order to file any required reports or Tax Returns
and provide the others with prompt written notice upon receipt of any written
claim, notice of deficiency or proposed or actual assessment pertaining to the
Business which could affect the Tax liability of the other. The party
requesting assistance from the other parties shall bear all reasonable out-of-
pocket costs and expenses incurred by such assisting parties (excluding
salaries or wages of its employees).
(f) Monsanto and Calgene agree to utilize the "Standard Procedure" provided
in Section 4 of Revenue Procedure 84-77, 1984-2 Cumulative Bulletin, with
respect to filing and furnishing IRS Forms W-2, W-3 and 941.
9.8 Calgene Financial Statements. As soon as practicable but in any event
within 45 days after the end of each calendar month commencing with August,
1995, through the Closing Date or earlier termination of this Agreement in
accordance with Article 11 hereof, Calgene shall deliver to Monsanto unaudited
consolidated balance sheets of Calgene and its consolidated subsidiaries as at
the end of such calendar month and as at the end of the comparative month of
the preceding year, together with unaudited summaries of consolidated earnings
of Calgene and its consolidated subsidiaries for such calendar month and the
comparative calendar month of the preceding year. As soon as practicable but
in any event within 45 days after the end of each fiscal quarter of Calgene
commencing with September 30, 1995 and within 90 days after the end of the
fiscal year ending June 30, 1995, as the case may be, through the Closing Date
or earlier termination of this Agreement in accordance with Article 11 hereof,
Calgene shall deliver to Monsanto unaudited consolidated balance sheets of
Calgene and its consolidated subsidiaries as at the end of such fiscal quarter
and as at the end of the comparative fiscal quarter of the preceding year,
together with the related unaudited statements of consolidated income and cash
flows for the fiscal quarters then ended. All such financial statements (i)
shall present fairly, in all material respects, the financial position,
results of operations and cash flows of Calgene and its consolidated
subsidiaries as at or for the periods indicated and shall be prepared in
accordance with generally accepted accounting principles (other than to omit
footnotes which might be required thereby, and subject, in the case of interim
financial statements, to normal year-end adjustments) consistent with the past
practice, except as otherwise indicated in such statements, and (ii) shall be
certified, on behalf of Calgene, by the President and the Chief Financial
Officer of Calgene.
9.9 No Solicitation of Transactions.
(a) Neither Calgene nor any Calgene Subsidiary shall, directly or
indirectly, through any officer, director, employee, agent, representative,
consultant, financial institution or otherwise, solicit, initiate or encourage
the submission of any proposal or offer from any Person relating to (i) any
acquisition or purchase of all or substantially all of the assets or business
of Calgene or any Calgene Subsidiary or (ii) any business combination with
Calgene or any Calgene Subsidiary (all such transactions described in clause
(i) or (ii) being referred to as "Calgene Acquisition Transactions") or,
except to the extent required by fiduciary obligations under applicable law as
advised by counsel (in which case, Calgene shall promptly advise Monsanto of
its intention to invoke this exception) participate in any negotiations
regarding, or furnish to any other Person any non-public information with
respect to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other Person to do
or seek any of the foregoing. Calgene immediately shall cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Calgene shall notify Monsanto
promptly if any such proposal or offer, or any inquiry or contact with any
Person with respect thereto, is made and shall, in any such notice to
Monsanto, indicate in reasonable detail the identity of the Person making such
proposal, offer, inquiry or contact. Calgene agrees not to release any third
party from, or waive any provision of, any confidentiality or standstill
agreement to which Calgene is a party which relates to the foregoing.
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(b) Monsanto shall not, directly or indirectly, through any officer,
director, employee, agent, representative, consultant, financial institution
or otherwise, solicit, initiate or encourage the submission of any proposal or
offer from any Person relating to (i) any acquisition or purchase of all or
substantially all of the assets or business of Tomato Associates or (ii) any
business combination with Tomato Associates (all such transactions described
in clause (i) or (ii) being referred to as "Monsanto Acquisition
Transactions") or, except to the extent required by fiduciary obligations
under applicable law as advised by counsel (in which case, Monsanto shall
promptly advise Calgene of its intention to invoke this exception) participate
in any negotiations regarding, or furnish to any other Person any non-public
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing. Monsanto immediately shall cease
and cause to be terminated all existing discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. Monsanto
shall notify Calgene promptly if any such proposal or offer, or any inquiry or
contact with any Person with respect thereto, is made and shall, in any such
notice to Calgene, indicate in reasonable detail the identity of the Person
making such proposal, offer, inquiry or contact. Monsanto agrees not to
release any third party from, or waive any provision of, any confidentiality
or standstill agreement to which Monsanto is a party which relates to the
foregoing.
9.10 Notification of Certain Matters.
(a) Calgene shall give prompt notice to Monsanto of (i) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which would
be likely to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate and (ii) any failure of Calgene or Holding Company
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 9.10(a) shall not limit or otherwise affect
the remedies available hereunder to Monsanto.
(b) Monsanto shall give prompt notice to Calgene of (i) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which would
be likely to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate and (ii) any failure of Monsanto to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant
to this Section 9.10(b) shall not limit or otherwise affect the remedies
available hereunder to Calgene.
9.11 Severance Agreements. Calgene shall not and shall not permit any of the
Calgene Subsidiaries or the Holding Company to, (a) enter into any contract,
agreement, plan or arrangement covering any director, officer or employee of
Calgene, Holding Company or any Calgene Subsidiary that provides for the
making of any payments, the acceleration of vesting of any benefit or right or
any other entitlement contingent upon (i) the Transactions or the exercise by
Monsanto of any of its rights under the Stockholders Agreement to
representation on the Board of Directors (and its committees) or any
acquisition by Monsanto of securities of Calgene or Holding Company (whether
by merger, tender offer, private or market purchases or otherwise) not
prohibited by the Stockholders Agreement or (ii) the termination of employment
after the occurrence of any such contingency if such payment, acceleration or
entitlement would not have been provided but for such contingency or (b) amend
any existing contract, agreement, plan or arrangement to so provide.
9.12 Registration Statement; Proxy Statement. Monsanto shall cooperate with
and promptly provide all information reasonably requested by Calgene in order
that the Registration Statement, the Proxy Statement and all supplements and
amendments thereto shall comply in all material respects with the provisions
of the Securities Act and the Exchange Act, and all applicable rules and
regulations of the Commission thereunder. Calgene shall notify Monsanto
promptly of the receipt by it or Holding Company of any comments from the
Commission or its staff and of any request by the Commission for amendments or
supplements to the Registration Statement or the Proxy Statement or for
additional information and shall supply Monsanto with copies of all
correspondence between it (or the Holding Company) and its representatives, on
the one hand, or the Commission or the members of its staff or any other
governmental official, on the other hand, with respect to the Registration
Statement or the Proxy Statement. Each of Calgene and Monsanto agrees to use
its reasonable
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<PAGE>
best efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the Commission or any other
governmental official and to cause the Registration Statement to become
effective and to cause the Proxy Statement and all required amendments and
supplements thereto to be mailed to the holders of shares of Calgene Common
Stock entitled to vote at the Calgene Stockholders' Meeting at the earliest
practicable time.
ARTICLE 10
Closing and Effective Time
10.1 Time and Place of Closing. The Closing shall take place at 11:00 A.M.
(local time) on the date that the Effective Time occurs (or the immediately
preceding day if the Effective Time is earlier than 11:00 A.M.), or at such
other time as the parties may mutually agree. The place of Closing shall be at
such place as may be mutually agreed upon by the parties.
10.2 Effective Time. The Transactions, including the transfer of Assets and
the exchange of shares contemplated by Article 2 hereof and the Merger
contemplated by Article 3 hereof, and the Plan of Merger shall become
effective on the date the Secretary of State of the State of Delaware accepts
for filing a Certificate of Merger reflecting the Merger. Unless otherwise
mutually agreed upon in writing by Calgene and Monsanto, the parties shall
cause the Effective Time to occur on the first business day following the last
to occur of (i) the effective date (including expiration of any applicable
waiting period) of the order of any other federal or state regulatory agency
approving the Transactions, if such approval is required, or the expiration of
any required waiting period after the filing of any required notice to any
federal or state regulatory agency required for consummation of the
Transactions, and (ii) the date on which the stockholders of Calgene approve
this Agreement and the Plan of Merger to the extent such approval is required
by applicable law; or such later date within sixty (60) days of such date as
may be agreed upon by the parties. Notwithstanding any other provision of this
Agreement, neither the transactions contemplated by Article 2 hereof nor the
Merger shall be permitted to become effective unless both the transactions
contemplated by Article 2 hereof and the Merger are consummated and made
effective on the same date and at approximately the same time.
ARTICLE 11
Termination
11.1. Termination. Notwithstanding anything herein or elsewhere to the
contrary, this Agreement may be terminated and the Transactions (including,
without limitation, the Merger) abandoned at any time prior to the Closing
Date, whether before or after approval by the stockholders of Calgene:
(a) by mutual consent of the Monsanto Board of Directors and the Calgene
Board of Directors;
(b) by either the Monsanto Board of Directors or the Calgene Board of
Directors, if the Transactions shall not have been consummated on or before
March 31, 1996, unless such failure so to consummate shall be due to the
failure of the party seeking to terminate this Agreement to perform in all
material respects each of its obligations under this Agreement required to
be performed by it on or prior to the Closing Date pursuant to the terms
hereof;
(c) by the Monsanto Board of Directors or the Calgene Board of Directors,
if the Calgene Board of Directors shall withdraw or change its respective
recommendation to its stockholders to adopt and approve this Agreement and
the Merger or authorize the Transactions, as the case may be, or if the
Calgene stockholders fail to adopt and approve this Agreement or the
Merger;
(d) by the Monsanto Board of Directors, if Calgene shall breach its
obligations set forth in Section 9.9(a) hereof;
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<PAGE>
(e) by the Monsanto Board of Directors, if events shall occur that render
impossible the satisfaction of one or more of the conditions set forth in
Section 8.2 hereof and shall not be waived (or deemed waived) by Monsanto;
and
(f) by the Calgene Board of Directors, if events shall occur that render
impossible the satisfaction of one or more of the conditions set forth in
Section 8.1 hereof and shall not be waived (or deemed waived) by Calgene.
11.2. Liabilities in Event of Termination. In the event of the termination
and abandonment of this Agreement and the Transactions (including the Merger),
this Agreement shall become void and have no effect and Calgene and Monsanto
and their respective directors, officers, employees and stockholders shall
have no obligation or liability to each other hereunder, except as provided in
Sections 9.2, 11.3 and 12.12 hereof and except that nothing herein shall
relieve any party from liability for any willful breach of this Agreement.
11.3 Calgene Termination Payment. If this Agreement is terminated or the
Transactions abandoned for any of the following reasons:
(a) the Calgene Board of Directors shall withdraw, change in a manner
adverse to Monsanto or fail to make its recommendations to stockholders to
approve the Merger; or
(b) Calgene shall breach its obligations set forth in Section 9.9(a)
hereof,
and a Calgene Acquisition Transaction is consummated within 12 months after
the date of termination or abandonment of this Agreement, then Calgene shall
promptly (and in any event within 10 days of receipt of a written notice from
Monsanto) pay to Monsanto a fee in cash equal to $7,500,000.
ARTICLE 12
Miscellaneous
12.1 Notice. Any notice required or permitted to be given under this
Agreement shall be in writing, and shall be deemed sufficiently given when
delivered in person or transmitted by telegram or telecopier (confirmed by
mail), addressed as follows:
If to Monsanto:
Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Senior Vice President and General Counsel
Telecopy Number: 314-694-3011
If to Calgene:
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. Both parties agree to acknowledge in writing the receipt
of any such notice delivered in person.
12.2 Recording Fees. Monsanto shall be responsible for paying the cost of
recordation of instruments of transfer or assignments which are necessary or
desirable to effect any of the Transactions. All such costs shall be
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<PAGE>
shared equally by Monsanto and Calgene and Calgene shall promptly reimburse
Monsanto for its share of such costs after receiving an invoice from Monsanto.
12.3 Assignability. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that no party shall (by operation of law or otherwise)
transfer or assign its rights or delegate its performance hereunder without
the prior written consent of the other parties. Any transfer, assignment or
delegation made or attempted in violation of this Section 12.3 shall be void
and of no effect. Nothing contained in this Agreement, either express or
implied, is intended or shall be construed to confer upon any Person other
than Monsanto, Calgene and Holding Company (and, under Article 5 hereof, the
Monsanto Indemnified Parties and the Holding Company Indemnified Parties) any
rights or remedies hereunder.
12.4 Non-Competition. Provided that Closing occurs hereunder, Monsanto
agrees, for as long as Monsanto's ownership in Holding Company exceeds twenty-
five percent (25%) and is less than one hundred percent (100%), not to engage
in any Directly Competitive Activity (hereinafter defined). As used herein,
"Directly Competitive Activity" shall mean and refer only to the
commercialization by Monsanto (or one of its Affiliates, other than Holding
Company and any of its Affiliates) of any genetically engineered fresh or
processed tomatoes, berries, mangoes, cucurbits or peppers or the
commercialization of any genetically engineered canola, oil seed rape or
sunflower where the canola, oil seed rape or sunflower has been genetically
engineered to produce a specialty oil product. "Directly Competitive Activity"
shall not include the licensing of patent rights or know how for the
commercialization of such genetically engineered crops or the
commercialization of canola, oil seed rape or sunflower where the canola, oil
seed rape or sunflower has been genetically engineered for a purpose other
than to produce a specialty oil product.
12.5 Schedules. The Schedules referenced herein are Schedules to be provided
separately at the time of the execution and delivery of this Agreement, but
are nonetheless incorporated herein and made a part hereof.
12.6 Sections and Articles. All sections and articles referred to herein are
sections and articles of this Agreement and all exhibits referred to herein
are exhibits attached to this Agreement.
12.7 Entire Agreement. Except as set forth in Exhibit G hereto, this
Agreement, the Amended and Restated Subordinated Promissory Note and all other
Transaction Agreements constitute the full understanding of the parties, a
complete allocation of risks between them and a complete and exclusive
statement of the terms and conditions of their agreement relating to the
subject matter hereof and supersede any and all prior agreements, whether
written or oral, that may exist between the parties with respect thereto.
Except as otherwise specifically provided in this Agreement and the other
Transaction Agreements, no conditions, usage of trade, course of dealing or
performance, understanding or agreement purporting to modify, vary, explain or
supplement the terms or conditions of this Agreement or the other Transaction
Agreements shall be binding unless hereafter made in writing and signed by the
party to be bound, and no modification shall be effected by the acknowledgment
or acceptance of documents containing terms or conditions at variance with or
in addition to those set forth in this Agreement and the other Transaction
Agreements. No waiver by any party with respect to any breach or default or of
any right or remedy and no course of dealing or performance, shall be deemed
to constitute a continuing waiver of any other breach or default or of any
other right or remedy, unless such waiver be expressed in writing signed by
the party to be bound. Failure of a party to exercise any right shall not be
deemed a waiver of such right or rights in the future.
12.8 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 the other Transaction Agreements or as a limitation of the
scope of the particular articles or sections to which they refer.
12.9 Governing Law. The validity, interpretation and performance of this
Agreement and the other Transaction Agreements and any dispute connected with
this Agreement or the other Transaction Agreements shall be governed by and
determined in accordance with the statutory, regulatory and decisional law of
the State
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of Delaware (exclusive of such state's choice of laws rules) and, to the
extent applicable, the federal statutory, regulatory and decisional law of the
U. S.
12.10 Severability. All provisions of this Agreement and the other
Transaction Agreements are severable and any provision which may be prohibited
by law shall be ineffective to the extent of such prohibition without
invalidating the remaining provisions.
12.11 Expenses and Fees. Except as otherwise specifically provided in this
Agreement, each party shall pay and bear its own expenses and fees (including
attorneys', accountants' and consultants' fees) in connection with this
Agreement or the other Transaction Agreements or any of the Transactions,
including without limitation, any governmental investigations, proceedings or
litigation relating thereto.
12.12 Finders' Fees. Each party shall be responsible for compensating any
broker, investment banker, finder or other third party engaged, consented to
or authorized to act on its behalf, directly or indirectly, as a broker or
finder in connection with the Transactions. Each party shall indemnify and
hold harmless the other parties from any claim or liability by or on behalf of
such broker, investment banker, finder or other third party.
12.13 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
law or equity.
12.14 Counterparts. This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first above written.
Monsanto Company
ATTEST:
/s/ Karl R. Barnickol /s/ Hendrik A. Verfaillie
By: _________________________________ By __________________________________
Assistant Secretary Hendrik A. Verfaillie
Executive Vice President
Calgene, Inc.
ATTEST:
/s/ Michael J. Motroni /s/ Roger H. Salquist
By: _________________________________ By:__________________________________
Assistant Secretary Roger H. Salquist
Chairman and
Chief Executive Officer
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<PAGE>
ANNEX B
CALGENE II, INC.
AND
MONSANTO COMPANY
STOCKHOLDERS AGREEMENT
AS OF , 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 1 Effect of this Agreement....................................... 1
1.1 Effect of this Agreement......................................... 1
ARTICLE 2 Compliance with Securities Act................................. 1
2.1 Certain Definitions.............................................. 1
2.2 Requested Registration........................................... 5
2.3 Company Registration............................................. 6
2.4 Expenses of Registration......................................... 7
2.5 Registration Procedures.......................................... 7
2.6 Indemnification.................................................. 8
2.7 Information by Holder............................................ 9
2.8 Rule 144 Reporting............................................... 10
2.9 Transfer of Registration Rights.................................. 10
2.10 Limitations on Subsequent Registration Rights.................... 10
2.11 Termination of Registration Rights............................... 10
2.12 "Market Stand-off" Agreement..................................... 10
ARTICLE 3 Anti-Dilution Rights and Limitations on Owner.................. 11
3.1 Anti-Dilution Rights............................................. 11
3.2 Private Offering................................................. 11
3.3 Public Offering.................................................. 11
3.4 Limitations...................................................... 11
3.5 Open Market Purchases to Maintain Ownership Percentage........... 12
3.6 Limitations on Holder's Ownership................................ 12
3.7 Limitations on Holder's Resale of Company Securities............. 13
ARTICLE 4 Company and Calgene Corporate Governance....................... 13
4.1 Composition of the Board of Directors and Calgene Board.......... 13
4.2. Solicitation and Voting of Shares................................ 15
4.3. Committees....................................................... 16
4.4. Approval Required for Certain Actions............................ 17
4.5 Enforcement of this Agreement.................................... 18
4.6. Certificate of Incorporation and By-laws......................... 19
4.7. Advisors......................................................... 19
4.8. Injunctive Relief................................................ 19
ARTICLE 5 Governance of Gargiulo......................................... 19
5.1. Board of Tomato Associates....................................... 19
5.2. Operating and Strategic Plans.................................... 19
5.3. Compensation; Etc................................................ 20
5.4 Certificate of Incorporation and By-Laws......................... 20
5.5 Effective Period................................................. 20
5.6. Injunctive Relief................................................ 20
ARTICLE 6 Miscellaneous.................................................. 20
6.1 Governing Law.................................................... 20
6.2 Successors and Assigns........................................... 20
6.3 Entire Agreement; Amendment...................................... 20
6.4 Notices.......................................................... 20
6.5 Delays or Omissions.............................................. 21
6.6 Counterparts..................................................... 21
6.7 Severability..................................................... 21
6.8 Stock Legends.................................................... 21
6.9 Sale of Assets of Tomato Associates.............................. 21
6.10 Audits, Consultants and Inspections.............................. 21
6.11 No Third Party Beneficiaries..................................... 22
6.12 Sections and Articles............................................ 22
6.13 Headings......................................................... 22
</TABLE>
i
<PAGE>
STOCKHOLDERS AGREEMENT
AGREEMENT made as of the day of , 1996, by and between Calgene II,
Inc., a Delaware corporation, having its principal place of business at 1920
Fifth Street, Davis, California 95616 (the "Company"), and Monsanto Company, a
Delaware corporation, having its principal place of business at 800 North
Lindbergh Boulevard, St. Louis, Missouri 63167 ("Monsanto").
WHEREAS, Calgene, Inc., a Delaware corporation ("Calgene"), and Monsanto
have entered into an Agreement and Plan of Reorganization, dated as of October
13, 1995 (the "Reorganization Agreement"), and certain other Transaction
Agreements (as defined in the Reorganization Agreement) whereby Monsanto has
acquired shares of the Company's common stock, par value $.001 per share
("Common Stock") and may acquire additional shares of Common Stock;
WHEREAS, the Company and Monsanto have agreed that the Company shall, at the
request of a Holder (as hereafter defined), register under the Securities Act
of 1933, as amended ("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.
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.
B-1
<PAGE>
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, $.001 par value, of the Company.
"Company" has the meaning set forth in the first paragraph hereof.
"Company Credit Facility" means the Holding Company Credit Facility
Agreement made as of even date herewith between the Company and Monsanto.
"Company Director" means an Independent Director who is designated for such
position by the Company in accordance with Section 4.1 hereof.
"Company Management Director" means a Director who is either the Chief
Executive Officer or Chief Operating Officer of the Company (or, if the Chief
Executive Officer is the Chief Operating Officer or if there is no Chief
Operating Officer, then the next most highly ranking executive officer of the
Company).
"Company Securities" has the meaning set forth in Section 3.1 hereof.
"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 the Closing Date as defined in the Reorganization
Agreement.
"Employment Agreements" has the meaning set forth in Section 6.9 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Equity Security" means (i) any Common Stock or other Voting Stock, (ii) any
securities of the Company convertible into or exchangeable for Common Stock or
other Voting Stock or (iii) any options, rights or warrants (or any similar
securities) issued by the Company to acquire Common Stock or other Voting
Stock.
"Financial Purchaser" means a Person (i) purchasing Company Securities from
Monsanto for investment purposes or otherwise in the ordinary course of
business and not for the purpose nor with the effect of changing or
influencing the control of the Company and (ii) which Person is not already
primarily in the same lines of business as the Company.
"Gargiulo" means Gargiulo, G.P. and Gargiulo, L.P. as such entities existed
prior to the Effective Date.
"Gargiulo Business" means the business transacted by Tomato Associates after
the Effective Date, which business was transacted by Gargiulo prior to the
Effective Date.
"Gargiulo Credit Facility" means the Gargiulo Credit Facility Agreement made
as of even date herewith between the Company and Monsanto.
"Gargiulo, G.P." means Gargiulo G.P., Inc., a Delaware corporation.
"Gargiulo, L.P." means Gargiulo, L.P., a Delaware limited partnership.
"hereto", "hereunder", "herein", "hereof" and the like mean and refer to
this Agreement as a whole and not merely to the specific article, section,
paragraph or clause in which the respective word appears.
"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.
B-2
<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.
"Monsanto" has the meaning set forth in the first paragraph hereof.
"Monsanto Management Director" means a Director or Calgene Director who is
designated for such position by Monsanto in accordance with Section 4.1 hereof
and who is or was an employee of Monsanto.
"Monsanto Director" means a Director or Calgene Director, including any
Monsanto Management Director, who is designated for such position by Monsanto
in accordance with Section 4.1 hereof.
"New Percentage Ownership" has the meaning set forth in Section 3.6(d)
hereof.
"Non-Financial Purchaser" means a Person, other than a Financial Purchaser,
purchasing Company Securities from Monsanto.
"Operating Plan" has the meaning set forth in Section 4.4(a)(ix) hereof.
"Other Selling Stockholders" has the meaning set forth in Section 2.2(c)
hereof.
"Percentage Interest" means the percentage of outstanding Voting Stock that
is controlled directly or directly by Monsanto and its Affiliates.
"Person" means a corporation, association, partnership, joint venture,
limited liability company, individual, trust, unincorporated organization, a
government agency or political subdivision thereof and any other entity.
"Preliminary Prospectus" means a preliminary prospectus as contemplated by
Rule 430 or 430A under the Securities Act included at any time in the
Registration Statement.
"Pre-Offering Percentage" has the meaning set forth in Section 3.1 hereof.
"Prospectus" means (i) the prospectus as first filed with the Commission
pursuant to Rule 424(b) under the Securities Act or, (ii) if no such filing is
required, the form of final prospectus included in the Registration Statement
at the effective date thereof or (iii) if a Term Sheet or Abbreviated Term
Sheet (as such terms are defined in Rule 434(b) and 434(c), respectively,
under the Securities Act) is filed with the Commission pursuant to Rule
424(b)(7) under the Securities Act, the Term Sheet or Abbreviated Term Sheet
and the last Preliminary Prospectus filed with the Commission prior to the
time the Registration Statement became effective, taken together (including,
in each case, the documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Securities Act), together with any supplement to any
of the foregoing.
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<PAGE>
"Registration Statement" means any registration statement of the Company
filed under the Securities Act which covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the Prospectus
relating thereto and all amendments and supplements to such registration
statement, including post-effective amendments, all exhibits and all material
incorporated or deemed to be incorporated by reference in such registration
statement.
"Registrable Securities" means shares of Common Stock issued or issuable
pursuant to the Transaction Agreements and all such other securities of the
Company acquired by a Holder.
"Register", "Registered" and "Registration", whether or not capitalized,
mean and refer to a registration effected by preparing and filing a
Registration Statement in compliance with the Securities Act and applicable
rules and regulations thereunder, and the declaration or ordering of the
effectiveness of such Registration Statement.
"Registration Expenses" means all expenses incurred by the Company in
compliance with this Article 2, including, without limitation, all
registration fees, qualification fees, filing fees, advertising and road show
expenses (excluding advertising and road show expenses incurred by a Holder),
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Reorganization Agreement" has the meaning set forth in the recitals herein.
"Requesting Holder" means a Holder requesting any registration pursuant to
Section 2.2 hereof.
"Restricted Securities" means the securities of the Company acquired by a
Holder from the Company or an Affiliate of the Company otherwise than pursuant
to a public offering.
"Section 16 Officers" has the meaning set forth in Section 4.3(b)(iii)
hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" means all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities.
"Strategic Plan" has the meaning set forth in Section 4.4(a)(ix) hereof.
"Subsidiary" has the same meaning as in Rule 12b-2 promulgated under the
Exchange Act.
"Substantial Part" means more than ten percent (10%) of the total
consolidated assets of the Company as shown on the Company's consolidated
balance sheet as of the end of the most recent fiscal quarter ending prior to
the time the determination is made.
"Tomato Associates" has the meaning set forth in the recitals herein.
"Transaction Agreements" has the meaning set forth in the Reorganization
Agreement.
"Trigger Event" means the earlier of any time that (i) Monsanto's Percentage
Interest is at least fifty-five percent (55%) or (ii) the Company elects to
convert borrowings made from Monsanto into Equity Securities and Monsanto's
Percentage Interest is at least fifty percent (50%) after such conversion.
"Two Senior Gargiulo Officers" has the meaning set forth in Section 5.3
hereof.
"Unaffiliated Equity Holders" means holders of Equity Securities other than
Monsanto or any of its Affiliates.
"Voting Stock" means securities having the right to vote generally in any
election of Directors of the Company (other than solely by reason of the
occurrence of an event).
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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:
(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 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
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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 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 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
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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
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 be
stated therein or necessary in order to make the statements made therein not
misleading; provided, however, that no
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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 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
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officers, directors, employees, agents and partners, and each Person
controlling such Holder, each such underwriter and each Person who controls
any such underwriter for any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such expense,
claim, loss, damage, liability or action; provided, however, that the Company
shall not be liable in any such case to the extent that any such claim, loss,
damage, liability, action or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder or underwriter and stated to be
specifically for use therein.
(b) Indemnification by the Holders. To the extent set forth in the second
sentence of this Section 2.6(b), each Holder shall, if Registrable Securities
or other 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 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
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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
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 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
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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 "Pre-Offering
Percentage"). With respect to the issuance of Company Securities pursuant to
the Company's stock option plans, Holder shall have a right to maintain its
percentage ownership of issued and outstanding Company Securities by making
open market purchases as provided in Section 3.5 hereof.
3.2 Private Offering. With respect to a private offering, other than
pursuant to a Company stock option plan, Company shall, within five (5)
business days after the execution of any agreement entered into in connection
with such private offering, notify Holder in writing of the proposed offering
and provide Holder with copies of all related documentation, including, for
example, any letter of intent and the final contract. Holder shall have twenty
(20) business days from the date of receipt of Company's notice in which to
advise Company whether Holder elects to exercise its rights under Section 3.1
hereof. If Holder does not respond, or if Holder indicates that it will not
exercise its rights, Holder shall be considered irrevocably to have waived its
rights under Section 3.1 hereof with respect to such specific private
offering. If Holder timely advises Company that Holder will exercise its
rights under Section 3.1 hereof, Holder shall have the right to acquire all or
any portion of the necessary amount of the Company Securities to maintain
Holder's Pre-Offering Percentage at the price or value of the consideration
specified in the private offering agreement entered into between Company and
the purchaser. Closing shall be in accordance with the terms of the private
offering agreement, and Holder shall make such investment representations to
Company and shall provide Company with such other documentation at closing as
is reasonably required by Company to comply with applicable securities laws.
3.3 Public Offering. With respect to a public offering, Company shall notify
Holder no later than five (5) business days after Company has entered into a
letter of intent with its underwriters, and shall provide Holder with a copy
of the letter of intent. Holder shall have twenty (20) business days from the
date of receipt of Company's notice in which to advise Company whether Holder
elects to exercise its rights under Section 3.1 hereof. If Holder does not
respond or if Holder indicates that it will not exercise its rights, Holder
shall be considered irrevocably to have waived its rights under Section 3.1
hereof with respect to the public offering. If Holder timely advises Company
that Holder desires to retain its rights under Section 3.1 hereof, then, when
Company files a Registration Statement containing a Preliminary Prospectus
with the Commission, Company shall provide Holder with copies of the
Preliminary Prospectus and all subsequent amendments. Holder shall have twenty
(20) 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.
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Company shall not be required to transfer any Company Securities to Holder
under this Article 3 if to do so would result in the violation of any
applicable law, rule or regulation.
3.5 Open Market Purchases to Maintain Ownership Percentage. Notwithstanding
any other provision hereof, at any time after the Effective Date, Holder may
make such open market purchases of Company Securities as are necessary to
maintain Holder's percentage of ownership of issued and outstanding Company
Securities at forty-nine and nine-tenths percent (49.9%) (or such higher
percentage as may be permitted under Section 3.6 hereof) or to increase its
percentage of ownership of issued and outstanding Company Securities to forty-
nine and nine-tenths percent (49.9%) (or such higher percentage as may be
permitted under Section 3.6 hereof). With respect to the issuance of Company
Securities pursuant to a Company stock option plan or any warrant, conversion
right or other option, Company shall notify Holder no later than ten (10)
calendar days after the end of each calendar quarter and within ten (10)
calendar days of the record date for a shareholder meeting and for dividend
payments for Company Securities of the number of shares and issuance price of
Company Securities issued pursuant to Company's stock option plans or any
warrant, conversion right or other option subsequent to the last notice given
pursuant to this Section 3.5 so as to enable Holder to make open market
purchases of Company Securities as permitted under this Section 3.5.
3.6 Limitations on Holder's Ownership. Except for purchases of Company
Securities made in accordance with this Article 3, during the term of this
Agreement, Holder shall not directly or indirectly acquire any Company
Securities except as follows:
(a) Prior to the first anniversary of the Effective Date, Holder shall
not increase its percentage of ownership of issued and outstanding Company
Securities above forty-nine and nine-tenths percent (49.9%) except through
one (1) or more of the following:
(i) Conversion of principal and/or interest under the Company Credit
Facility or the Gargiulo Credit Facility into shares of Common Stock;
(ii) Issuance of Company Securities in an asset sale by Holder to
Company; and
(iii) A tender offer by Holder for no less than one hundred percent
(100%) of the publicly-traded Company Securities at a price approved by
the disinterested Directors of Company and based upon a fairness
opinion delivered to the Board of Directors of the Company by an
investment banking firm.
(b) On and after the first anniversary of the Effective Date until the
earlier of September 30, 1998, or the third anniversary of the Effective
Date, Holder shall not increase or further increase its ownership of issued
and outstanding Company Securities above forty-nine and nine-tenths percent
(49.9%) except through one (1) or more of the following:
(i) Conversion of principal and/or interest under the Company Credit
Facility or the Gargiulo Credit Facility into shares of Common Stock;
(ii) Issuance of Company Securities in an asset sale by Holder to
Company; and
(iii) A tender offer by Holder to increase its ownership to seventy
percent (70%) or more of the issued and outstanding Company Securities
at a price approved by the disinterested Directors of Company and based
upon a fairness opinion delivered to the Board of Directors of the
Company by an investment banking firm; provided, however, that, if
Holder makes a tender offer to increase its ownership to more than
eighty percent (80%) of the issued and outstanding Company Securities,
such tender offer must be for one hundred percent (100%) of the
publicly traded Company Securities.
(c) After the earlier of September 30, 1998, or the third anniversary of
the Effective Date, Holder may increase its ownership of Company Securities
through open market purchases or otherwise.
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(d) If, at any time after the Effective Date, Holder shall elect to
increase its percentage of ownership of issued and outstanding Company
Securities above forty-nine and nine-tenths percent (49.9%) as provided in
paragraphs (a) and/or (b) above (such increased percentage hereafter being
the "New Percentage Ownership"), then thereafter Holder may make such open
market purchases of Company Securities as are necessary to maintain such
New Percentage Ownership or to increase its percentage of ownership of
issued and outstanding Company Securities to such New Percentage Ownership.
(e) Holder shall not be required to dispose of any Company Securities if
Holder's percentage ownership of Company Securities is increased as a
result of any recapitalization by Company or any other action taken by
Company.
3.7 Limitations on Holder's Resale of Company Securities. Holder shall not
directly or indirectly sell any Company Securities (other than to an Affiliate
of Holder) except as follows:
(a) On and after the first anniversary of the Effective Date until the
earlier of September 30, 1998, or the third anniversary of the Effective
Date, Holder may sell Company Securities (i) as part of a joint venture,
merger or sale of all or substantially all of its current Crop Protection
business unit, as such business may be subsequently renamed or reorganized,
or (ii) pursuant to a tender offer by a third party to the shareholders of
Company.
(b) After the earlier of September 30, 1998, or the third anniversary of
the Effective Date, in addition to the rights to sell Company Securities
set forth in paragraph (a) above, Holder may sell Company Securities (i) in
a registered public offering pursuant to the registration rights granted to
Holder under this Agreement, (ii) through sales pursuant to Rule 144 under
the Securities Act, (iii) through sales of not more than ten percent (10%)
of the total issued and outstanding Company Securities to a Non-Financial
Purchaser, or (iii) through sales to a Financial Purchaser.
(c) After the earlier of September 30, 1999, or the fourth anniversary of
the Effective Date, in addition to the rights to sell Company Securities as
set forth in paragraphs (a) and (b) above, Holder may sell Company
Securities through a private sale of thirty-five percent (35%) or more of
the total issued and outstanding 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 composition
of the Board of Directors and of the Calgene Board and manner of selecting
members thereof shall be as follows:
(a) At and after the Effective Date, each of the Board of Directors and
the Calgene Board shall be comprised of nine (9) directors. The number of
such Directors and Calgene Directors may be increased only in accordance
with Section 4.1(c) or Section 4.4(a)(xii) hereof. The parties agree that
the composition of, 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".
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(b) At the Effective Date and until the occurrence of a Trigger Event,
the Board of Directors shall consist of two (2) Company Management
Directors, three (3) Company Directors designated by the Company, and four
(4) Directors designated by Monsanto, at least one (1) of which is an
Independent Director (consistent with Monsanto's current intent, the
Directors to be designated by Monsanto (other than the Independent
Director) will initially be Hendrik A. Verfaillie, Robert T. Fraley and
Jeffrey D. Gargiulo).
(c) At and after the occurrence of a Trigger Event, the Board of
Directors shall be comprised of eleven (11) Directors and Monsanto shall,
subject to paragraph (d) below, have the right to designate two (2)
additional Directors for a total of six (6) Directors.
(d) At any time that Monsanto's Percentage Interest is at least seventy
percent (70%), (i) Monsanto shall have the right to designate eight (8)
Directors, to consist of the two (2) Company Management Directors and six
(6) other Monsanto Directors (including at least one (1) Independent
Director) and (ii) the Company shall have the right to designate three (3)
Independent Directors. At such time as Monsanto's Percentage Interest is at
least ninety-nine percent (99%), Monsanto shall have the right to designate
all of the Directors.
(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%), Monsanto shall
have the right to designate three (3) Directors, (ii) at any time
Monsanto's Percentage Interest is less than twenty percent (20%) but at
least ten percent (10%), Monsanto shall have the right to designate two (2)
Directors and (iii) at any time Monsanto's Percentage Interest is less than
ten percent (10%) but at least five percent (5%), Monsanto shall have the
right to designate one (1) Director. If, at any time, Monsanto's Percentage
Interest is less than five percent (5%), Monsanto shall not have the right
to designate any Director. At any such time, all other Directors, other
than the Company Management Directors, shall be designated by the Company.
(f) The Independent Directors to be designated by the Company from time
to time shall be designated by action of a majority of the Company
Directors then in office. In the event that no Company Directors are in
office at such time, such Independent Directors shall be designated 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 designated to be such Company
Directors by a majority of the Company Directors.
(g) The Company and Monsanto, respectively, shall have the right to
designate any replacement for a Director designated 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 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 designated by Monsanto or the Company pursuant to this paragraph
(g). In addition, the Board of Directors shall elect the Company's Chief
Executive Officer or Chief Operating Officer to replace such officer's
predecessor in office as a Company Management Director.
(h) In the event that, at any time after the Effective Date, the number
of Monsanto Directors on the Board of Directors differs from the number
that Monsanto has the right (and wishes) to designate 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 designate 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
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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
designate the person to fill such vacancy in accordance with this Section
4.1 and the Board of Directors shall elect each person so designated.
Notwithstanding the foregoing, at each annual meeting of the stockholders
of the Company, Monsanto shall be entitled to designate such number of
Directors as Monsanto is otherwise entitled 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.
(j) In the event that, at any time after the Effective Date, 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 Company for purposes of removing
such Monsanto Director. In the event that, at any time after the Effective
Date, the Company desires to remove 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 the Company Directors
then in office (or, in the event no Company Directors are then in office,
upon the request of a majority of the Independent Directors then in
office), the Board of Directors shall promptly call a special meeting of
stockholders of the Company for purposes of removing such Company Director.
In the event that, at any time after the Effective Date, the Chief
Executive Officer's or Chief Operating Officer's employment with the
Company is terminated for any reason, then upon the request of either
Monsanto or a majority of the Company Directors then in office (or, in the
event no Company Directors are then in office, upon the request of a
majority of the Independent Directors then in office), the Board of
Directors shall promptly call a special meeting of stockholders of the
Company for 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, 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,
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as necessary to effect the provisions of this Agreement; provided, however,
that, if Monsanto cannot so take actions to give effect to all of the
provisions of this Agreement, it may first take actions to ensure that it
receives all of its benefits hereunder and then, to the extent possible, to
give effect to the provisions in favor of the Company.
4.3. Committees.
(a) The Board of Directors shall establish, empower and maintain the
committees of the Board of Directors contemplated by this Section 4.3.
(b) The following committees shall be established, empowered and maintained
by the Board of Directors at all times during the term of this Agreement:
(i) an Audit Committee, consisting of at least three (3) of the Company's
Independent Directors, which committee shall be authorized and empowered to
cause an audit to be performed of the Company and each of its Subsidiaries;
(ii) until the occurrence of a Trigger Event, a Retention/Replacement
Committee, consisting of the Independent Directors then serving on the
Board, responsible for the retention and/or replacement of all of the
executive officers of the Company, to be based on the financial and
behavioral criteria established by the Retention/Replacement Committee; in
the event that such committee decides to replace any executive officer,
Monsanto shall have the right to nominate a replacement for such executive
officer for consideration by the committee along with any other candidates
identified by such committee; the rights of the Retention/Replacement
Committee shall be subject to the provisions set forth in Section
4.4(a)(viii) hereof;
(iii) a Compensation Committee, responsible, among other things, for
recommending to the Board of Directors, for approval by a majority of the
Board of Directors, (a) the adoption and amendment of all employee benefit
plans and arrangements, (b) the engagement of, terms of any employment
agreements and arrangements with, and termination of, all persons
designated by the Company as "officers" for purposes of Section 16 of the
Exchange Act ("Section 16 Officers"), (c) the policies, limitations and
procedures under which the Stock Option Plan Administration Committee shall
operate and (d) the granting under the Company's employee benefit plans of
stock options and other equity rights to Section 16 Officers, and
consisting solely of the Independent Directors then serving on the Board
provided each such Independent Director is (A) a disinterested person (as
such term is defined in rule 16b-3(d) under the Exchange Act) and (B) an
"independent director" for purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended; and
(iv) such other committees as the Board of Directors deems necessary or
desirable; provided, however, that such committees are established in
compliance with Section 4.4(a)(vi) hereof.
For purpose of clause (ii) above, "executive officers" shall have the same
meaning as in Rule 3b-7 promulgated under the Exchange Act.
(c) Except as otherwise provided in Section 4.3(b) hereof or as agreed by a
majority of the Monsanto Management Directors, the number of Monsanto
Directors on each committee of the Board of Directors shall be the same
proportion (but not less than one (1)) of the total membership of such
committee as the number of Monsanto Directors, as the case may be, is of the
entire Board of Directors. Except as otherwise provided in Section 4.3(b)
hereof, the Monsanto Directors on each committee of the Board of Directors
shall be determined by a majority of the Monsanto Management Directors.
(d) No action by any committee of the Board of Directors shall be valid
unless taken by unanimous written consent as provided in the Company's by-laws
or taken at a meeting for which adequate notice has been duly given or waived
by the members of such committee. Such notice shall include a description of
the general nature of the business to be transacted at the meeting, and no
other business may be transacted at such meeting unless all members of the
committee are present and consent to the consideration of such other business.
Any committee
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member unable to participate in person at any meeting shall be given the
opportunity to participate by telephone. The Board of Directors or the
remaining committee members shall designate an Independent Director or Company
Management Director to replace any absent or disqualified Independent Director
member or Company Management Director member, respectively, of any committee
and a majority of the Monsanto Management Directors shall designate a Monsanto
Director to replace any absent or disqualified Monsanto Director member of any
committee. Each of the committees established by the Board of Directors
pursuant to this Section 4.3 shall establish such other rules and procedures
for its operation and governance (consistent with the terms of this Agreement)
as it shall see fit and may seek such consultation and advice as to matters
within its purview as it shall require.
4.4. Approval Required for Certain Actions.
(a) On and after the Effective Date and until the earlier of a Trigger Event
or such date on which Monsanto's Percentage Interest is less than twenty-five
(25%), a majority of the Board, including at least one (1) Company Director
and one (1) Monsanto Management Director, shall be required to approve any of
the following:
(i) the entry by the Company or any of its Affiliates into any merger or
consolidation or the acquisition by the Company or any of its Affiliates of
any business or assets that would constitute a Substantial Part of the
Company (determined on a consolidated basis) whether such acquisition be by
merger or consolidation or the purchase of stock or assets or otherwise;
(ii) the sale, pledge, grant of security interest in, transfer,
retirement or other disposal of (A) a Substantial Part of the Company
(determined on a consolidated basis), except pursuant to a security
interest granted in connection with borrowings permitted under subsection
(iv) below or (B) the pledge or granting of a security interest in any
intangible property set forth in Exhibit B attached to the disclosure
letter from Monsanto to Calgene dated June 27, 1995;
(iii) any dividend by or return of capital by the Company or Tomato
Associates (other than such distributions by Tomato Associates to the
Company as are necessary for the Company to timely perform its obligations
under Sections 1.02 and 5.02(c) of the Gargiulo Credit Facility);
(iv) any incurrence or assumption, in the aggregate, by the Company, any
of its Affiliates or any combination thereof, of any indebtedness for
borrowed money at any time outstanding exceeding in the aggregate
(determined on a consolidated basis) the greater of (i) Fifteen Million
Dollars ($15,000,000), increasing by Five Million Dollars ($5,000,000) on
each July 1 commencing July 1, 1996, plus amounts secured by inventory
and/or receivables for seasonal working capital lines and indebtedness
incurred to acquire property, plant or equipment and secured by the
acquired asset, minus amounts outstanding under the Company Credit
Facility, or (ii) the amounts set forth in the Company's Operating Plan
(hereinafter defined), provided that loans under the Gargiulo Credit
Facility shall not be counted in this limitation;
(v) the repurchase or redemption of any Equity Securities of the Company,
other than from employees upon termination of employment or service;
(vi) the establishment of any new committees of the Board (or the Calgene
Board) or new or revised delegation(s) of Board (or the Calgene Board)
authority to any Board (or Calgene Board) committee or changes or revisions
to general delegations of authority to officers or other Persons for
categories of expenditures;
(vii) the adoption of or amendment to any benefit or incentive plans of
the Company or any of its Affiliates which would increase the annual cost
thereof by more than fifteen percent (15%) from the prior fiscal year or
any adoption of, or amendment to, any stock option plan;
(viii) the election, appointment or removal of the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of the Company
and Calgene and their successors and the establishment of their annual or
long term compensation level and benefits and basis for awards (other than
agreements in effect on the Effective Date); provided, however, that
Monsanto shall have the right to select the Chief Technical Officer of the
Company and a controller reporting to the Chief Financial Officer of the
Company;
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(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;
(xiii) the issuance of any warrants for the purchase of Equity Securities
or the issuance of additional Equity Securities (other than warrants for
the purchase of Equity Securities) in excess of four million (4,000,000)
shares of Common Stock in any two (2) year period to a third party, other
than pursuant to plans referred to in subsection (vii) above;
(xiv) the sale or licensing by the Company or any of its Affiliates of
(A) any intangible property set forth in Exhibit B attached to the
disclosure letter from Monsanto to Calgene dated June 27, 1995 or (B) any
other intangible property for consideration (other than royalties
contingent on future sales) exceeding Five Million Dollars ($5,000,000) in
the aggregate (determined on a consolidated basis) per transaction or per
series of related transactions;
(xv) new fixed capital investments, capital leases or noncancellable
operating leases by the Company and its Affiliates having annual payments
in the aggregate (determined on a consolidated basis) exceeding the
aggregate amount set forth in the Operating Plan;
(xvi) matters covered in Article 5 hereof, including, without limitation,
any changes in the composition of the Tomato Associates Board of Directors
other than with respect to Messrs. Salquist and Stacey;
(xvii) any press release which mentions or directly or indirectly refers
to Monsanto, except as required by law and where Board approval cannot be
obtained in a timely manner;
(xviii) the initiation, settlement or termination of any suit or
proceeding concerning intellectual property, any other matter which could
have an adverse public affairs effect upon Monsanto or the filing of any
insolvency or bankruptcy proceeding by or on behalf of the Company or any
of its Affiliates; or
(xix) the removal or election of the directors, subject to Section 5.1
hereof, of Tomato Associates.
(b) After a Trigger Event and until the earlier of (i) the third anniversary
of the Effective Date or (ii) Monsanto's Percentage Interest is at least
seventy percent (70%), a majority of the Board, including at least two (2)
Company Directors, shall be required to approve any of the following:
(i) Except as provided in Section 4.4(a)(xvi) hereof, the matters set
forth in subsections (i), (ii), (vi), (viii), (ix) and (xi) of paragraph
(a) above; or
(ii) Any transaction between the Company (and its Affiliates) and
Monsanto or any Affiliate of Monsanto.
(c) From and after the occurrence of both (i) a Trigger Event and (ii) the
third anniversary of the Effective Date, and until Monsanto's Percentage
Interest is at least ninety-nine percent (99%), neither Monsanto nor any of
its Affiliates shall enter into any transaction with the Company or any of its
Affiliates without the approval of at least two (2) Company Directors.
4.5 Enforcement of this Agreement. A majority of the Company Directors shall
have full and complete authority on behalf of the Company to enforce the terms
of this Agreement.
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4.6. Certificate of Incorporation and By-laws. The Company and Monsanto
shall take or cause to be taken all lawful action necessary to ensure at all
times that the Company's and Calgene's Certificate of Incorporation and By-
laws are not at any time inconsistent with the provisions of this Agreement.
Not later than the Effective Date, the Board of Directors shall amend the
Company's By-laws and the Calgene Board shall amend Calgene's By-laws to
reflect the provisions of this Agreement.
4.7. Advisors. The Company Directors shall be entitled to retain, at the
cost and expense of the Company, the services of an investment banking firm of
national reputation of their choice and one (1) law firm of their choice to
advise them in their capacity as Independent Directors with respect to any
matter on which the Company Directors are required or permitted to act
hereunder.
4.8. Injunctive Relief. In the event of a breach of the provisions of this
Article 4, a party hereto entitled to rights under this Article 4 will suffer
irreparable harm and the total amount of monetary damages will be impossible
to calculate and will therefore be an inadequate remedy. Accordingly, in such
event, such party shall be entitled to temporary and permanent injunctive
relief against the Company and any other breaching party and to any other
rights and remedies to which such party may be entitled to at law or in
equity.
ARTICLE 5
Governance of Gargiulo
5.1. Board of Tomato Associates.
(a) Upon the Effective Date, the Board of Directors of Tomato Associates
shall consist of Jeffrey D. Gargiulo, John Gargiulo, Hendrik A. Verfaillie,
Robert T. Fraley, Roger H. Salquist, Roderick N. Stacey and an additional
director who shall be (and whose successor shall be) designated by the Company
who shall need to be reasonably acceptable to Monsanto and Jeffrey D. Gargiulo
(as long as he serves as a director). In addition, the Board of Directors of
Tomato Associates shall include two (2) advisory, non-voting directors
designated by Monsanto from members of the senior management of Tomato
Associates. Upon request by Monsanto, Company shall remove and replace Messrs.
Verfaillie and Fraley, and their respective successors, and replace them with
Persons designated by Monsanto.
(b) The Chief Executive Officer and Chairman of the Board of Tomato
Associates shall be Jeffrey D. Gargiulo as long as he is employed by Tomato
Associates. The Board of Directors of Tomato Associates shall appoint a Vice
Chairman of the Board, Chief Operating Officer, Senior Vice President and such
other positions as they may designate.
5.2. Operating and Strategic Plans. The annual operating plan and long-term
strategic plan for the Gargiulo Business shall be subject to approval by the
Board of Directors in accordance with Section 4.4 hereof. The annual operating
plan shall include, among other things: (i) capital expenditure budget, (ii)
borrowing forecast, (iii) monthly profit and loss, cash flow and balance sheet
forecasts, (iv) hiring and compensation plans, (v) profit and loss forecasts
by crop production area, (vi) material asset acquisition plans and (vii)
account level details for each cost center. From and after the approval of
each annual operating plan for a fiscal year (or portion thereof), the Board
of Directors of Tomato Associates shall have authority to operate the Gargiulo
Business during such year in the ordinary cause of business and within the
confines of such annual operating plan and the strategic plan then in effect
(as it may be modified by the Board of Directors of Tomato Associates, subject
to approval of the Board of Directors in accordance with Section 4.4 hereof)
and other delegations of authority from the Board of Directors which shall be
similar in scope to the delegation of such Board to the Chief Executive
Officer of the Company (except that such delegations shall apply solely to the
Gargiulo Business). As of the Effective Date, the Board of Directors shall
approve, as part of the strategic plan for the Gargiulo Business, the branded
tomato strategy plan previously approved by Monsanto.
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5.3. Compensation; Etc. The initial compensation for the Chief Executive
Officer and the Chief Operating Officer of Tomato Associates (the "Two Senior
Gargiulo Officers") shall be determined by agreement of Monsanto and the
Company prior to the Effective Date. Thereafter, the compensation of the Two
Senior Gargiulo Officers shall not be reduced without the approval of
Monsanto. The initial employment agreements for the Two Senior Gargiulo
Officers shall be upon terms agreed to by Monsanto and the Company prior to
the Effective Date. The employment of any of the Two Senior Gargiulo Officers
with Tomato Associates shall not be terminated without the approval of the
Board of Directors of Tomato Associates.
5.4 Certificate of Incorporation and By-Laws. The Company shall take or
cause to be taken all lawful action necessary to ensure at all times that
Tomato Associates' Certificate of Incorporation and By-Laws are not at any
time inconsistent with the provisions of this Agreement. Not later than the
Effective Date, the Board of Directors shall cause Tomato Associates to amend
Tomato Associates' By-Laws to reflect the provisions of this Agreement.
5.5 Effective Period. The provisions of Sections 5.1, 5.2, 5.3 and 5.4 shall
be effective from the Effective Date until the earlier of (a) a Trigger Event
or (b) such time as Monsanto's Percentage Interest is less than forty percent
(40%).
5.6. Injunctive Relief. In the event of a breach of the provisions of this
Article 5, a party hereto entitled to rights under this Article 5 will suffer
irreparable harm and the total amount of monetary damages will be impossible
to calculate and will therefore be an inadequate remedy. Accordingly, in such
event, such party shall be entitled to temporary and permanent injunctive
relief against the Company and any other breaching party and to any other
rights and remedies to which such party may be entitled to at law or in
equity.
ARTICLE 6
Miscellaneous
6.1 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Delaware (exclusive of such state's choice of laws
rules).
6.2 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties
hereto.
6.3 Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the complete, exclusive and final
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Except as specifically set forth herein, any term of
Section 2 or 3 hereof may be waived only with the prior written consent of the
Company and the Holders of at least sixty-six and two-thirds percent (66 2/3%)
of the outstanding shares of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 6.3 shall be binding upon each
Holder of the Registrable Securities (including securities into which such
Registrable Securities have been converted) outstanding at the time, each
future Holder of all such securities, and the Company.
6.4 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing, and shall be deemed sufficiently given when
delivered in person or transmitted by telegram or telecopier (confirmed by
mail), addressed as follows:
If to Monsanto: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Senior Vice President and General Counsel
Telecopy Number: 314-694-3011
If to any other Holder, at such address and telecopy number as such Holder
shall have furnished the Company in writing.
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<PAGE>
If to Company: Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Attention: Chairman and Chief Executive Officer
Telecopy Number: 916-753-1510
or to such other address as may be specified from time to time in a notice
given by such party. The parties agree to acknowledge in writing the receipt
of any such notice delivered in person.
6.5 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any Holder of any Registrable Securities, upon any
breach or default of the Company under this Agreement, shall impair any such
right, power or remedy of such Holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party or any waiver on
the part of any party of any provisions or conditions of this Agreement must
be made in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement, at law, in
equity or otherwise afforded to any party, shall be cumulative and not
alternative.
6.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.7 Severability. In the event that any provision of this Agreement becomes
or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, however, that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
any party.
6.8 Stock Legends. Subject to Section 2.8(d) hereof, certificates
representing Restricted Securities (other than Restricted Securities issued to
Monsanto in connection with the conversion of principal and/or accrued
interest under the Company Credit Facility or the Gargiulo Credit Facility
upon the occurrence of an Event of Default under either such Credit Facility)
issued to Monsanto pursuant to the Transaction Agreements shall bear the
following legend:
"The securities represented by this certificate are subject to
certain resale restrictions and entitled to the benefits set
forth in a Stockholders Agreement dated , 1995, between
Calgene II, Inc., a Delaware corporation, and Monsanto
Company, a Delaware corporation (the "Agreement"). A copy of
the Agreement and all amendments thereto is on file in the
office of the Secretary of the Company."
6.9 Sale of Assets of Tomato Associates. For so long as Jeffrey Gargiulo or
Robert Shulman are employed by Tomato Associates under employment agreements
with Tomato Associates (the "Employment Agreements"), Holding Company shall
cause Tomato Associates not to sell or otherwise dispose of (by merger,
consolidation or otherwise) all or substantially all of its assets unless the
acquiring entity assumes all of Tomato Associates' obligations under each of
the Employment Agreements then in effect.
6.10 Audits, Consultants and Inspections. Monsanto (using Monsanto's
internal and/or external auditors or any other Person appointed by Monsanto to
whom the Company does not reasonably object) shall have the right (i) to audit
the books and records, other financial information and business practices and
operations of the Company and its Affiliates, and (ii) to discuss the business
practices and operations, affairs, finances and accounts of the Company and
its Affiliates with the officers of the Company and its Affiliates and the
independent public accountants who review or audit the Company's financial
statements, all at such reasonable times and as often as may reasonably be
requested. The Company shall also permit inspection of its (and its
Affiliates') properties, books and records by Monsanto (using the Persons
identified above) during normal business hours or at other reasonable times.
The scope of all such audits, discussions and inspections shall be determined
by Monsanto in
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<PAGE>
its sole discretion. Any authorized representative of Monsanto who or which is
not employed by Monsanto (i) shall be required to execute a confidentiality
agreement in a form approved by the Board of Directors (which approval shall
not be unreasonably withheld or delayed) and (ii) may not be employed by or
affiliated with a competitor of the Company, as reasonably determined by the
Board of Directors; provided, however, that an independent certified public
accounting firm shall not be deemed to be employed by or affiliated with a
competitor of the Company even if such firm provides services to a competitor
of the Company.
6.11 No Third Party Beneficiaries. Nothing contained in this Agreement,
express or implied, is intended to or shall confer upon anyone other than the
parties hereto (and their successors and assigns, including, without
limitation, subsequent Holders and purchasers under Section 3.7(c)) any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
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:
----------------------------------
President
MONSANTO COMPANY
By:
----------------------------------
Hendrik A. Verfaille
Executive Vice President
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<PAGE>
ANNEX C
[LOGO]
October 5, 1995
Members of the Board of Directors
Calgene, Inc.
1920 Fifth Street
Davis, CA 95616
Gentlemen:
We understand that Calgene, Inc., a Delaware corporation (the "Company"),
and Monsanto Company, a Delaware corporation ("Monsanto"), expect to enter
into an Agreement and Plan of Reorganization to be dated on or about October
13, 1995 (the "Agreement"). Pursuant to the terms of the Agreement, a new
holding company ("Newco") will be created by the Company and Monsanto.
Immediately prior to the closing, Tomato Investment Associates, Inc. ("TIA"),
which is a subsidiary of Monsanto, will acquire all of the partnership
interests of NT Gargiulo L.P. ("Gargiulo"). At the closing, (i) a wholly-owned
subsidiary of Newco will merge with the Company, the Company will become a
wholly-owned subsidiary of Newco, each outstanding share of the common stock,
par value $.001 per share, of the Company (the "Calgene Common Stock") will be
exchanged for one share of Newco Common Stock (constituting in the aggregate
50.1% of the outstanding shares of Newco Common Stock after the closing), and
each outstanding share of the Preferred Stock, Series A, par value $.001 per
share, of the Company will be exchanged for one share of Preferred Stock,
Series A, par value $.001 per share of Newco; (ii) Monsanto will exchange all
of the capital stock of TIA, plus certain intellectual property and research
and development assets (the "R&D Assets") and a combination of cash and
forgiveness of debt in the aggregate amount of $30,000,000 (the "Cash")
(collectively, the "Monsanto Consideration"), for shares of the common stock,
par value $.001 per share, of Newco (the "Newco Common Stock") constituting
49.9% of the outstanding shares of Newco Common Stock after the closing; and
(iii) Newco will change its name to "Calgene, Inc." Immediately following the
closing under the Agreement, Gargiulo will be liquidated into TIA. In
connection with the closing, Monsanto and Newco will enter into a
stockholders' agreement which gives Monsanto certain rights regarding
corporate governance, registration of shares of Newco Common Stock held by
Monsanto and other matters. Monsanto will also enter into separate lending
agreements with Newco and Gargiulo pursuant to which outstanding loan amounts
may, under certain circumstances, be converted into shares of Newco Common
Stock.
You have asked us for our opinion as investments bankers as to whether the
Monsanto Consideration to be received by Newco in exchange for 49.9% of the
Newco Common Stock pursuant to the Agreement is fair to the Company from a
financial point of view, as of the date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to the
Company, including the Company's consolidated financial statements for recent
years and interim periods to June 30, 1995, and certain other relevant
financial and operating data relating to the Company and Gargiulo made
available to us from published sources and from the internal records of the
Company, Gargiulo and Monsanto, including Gargiulo's consolidated financial
statements for recent years and interim periods to June 30, 1995; (ii)
reviewed the September 29, 1995 draft of the Agreement provided to us by the
Company; (iii) reviewed certain historical market prices and trading volumes
of the Company Common Stock on the NASDAQ National Market; (iv) analyzed the
financial impact the transactions contemplated by the Agreement are expected
to have on the projected results of the Company; (v) reviewed and discussed
with representatives of the management of the Company, Gargiulo and Monsanto
certain information of a business
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<PAGE>
and financial nature regarding the Company and Gargiulo, furnished to us by
them, including financial forecasts and related assumptions of the Company and
Gargiulo; (vi) made inquiries regarding and discussed the Agreement and other
matters related thereto with the Company's counsel; and (vii) performed such
other analyses and examinations as we have deemed appropriate.
In connection with our review, we have relied upon the accuracy and
completeness of the foregoing information and we have not assumed any
responsibility independently to verify such information. With respect to the
financial forecasts for the Company and Gargiulo provided to us by the
management of the Company and Monsanto, respectively, we have assumed for
purposes of our opinion that the forecasts have been reasonably prepared on
bases reflecting the best available estimates and judgments of the respective
managements at the time of preparation as to the future financial performance
of the Company and Gargiulo, and that they provide a reasonable basis upon
which we can form our opinion. We have also assumed that there have been no
material changes in the Company's, Gargiulo's or TIA's assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements made available to us, except for
Gargiulo's pending acquisition of Collier Farms. We have relied on advice of
counsel and independent accountants to the Company as to all legal and
financial reporting matters with respect to the Company and the Agreement. We
have assumed that you will consummate the transactions contemplated by the
Agreement in a manner that complies in all respects with the applicable
provisions of the Securities Act of 1933, as amended (the "Securities Act")
and the Securities Exchange Act of 1934, as amended and all other applicable
federal and state statutes, rules and regulations. In addition, we have not
assumed responsibility for making an independent evaluation, appraisal or
physical inspection of the assets or liabilities (contingent or otherwise) of
the Company, Gargiulo or TIA, nor have we been furnished with any such
appraisals. Finally, our opinion is based on economic, monetary and market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
We have further assumed, with your consent, that the transactions
contemplated by the Agreement will be consummated in accordance with the terms
described in the Agreement without any amendments thereto, and without waiver
by the Company or Monsanto of any of the conditions to their respective
obligations thereunder.
In the ordinary course of our business, we actively trade the equity
securities of the Company and Monsanto for our own account and for the account
of our customers and, accordingly, may at any time hold a long or short
position in such securities. We have also performed various investment banking
services for the Company, including acting as co-manager of an underwritten
public offering of Calgene Common Stock in January 1993 and lead manager of an
underwritten public offering of Calgene Common Stock in October 1994. Certain
partners of Montgomery also own shares of the Company's and Monsanto's common
stock.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Monsanto Consideration to be received by Newco in
exchange for 49.9% of the Newco Common Stock pursuant to the Agreement is fair
to the Company from a financial point of view, as of the date hereof.
This opinion is furnished pursuant to our engagement letter, dated January
18, 1995. This opinion is addressed to the Board of Directors of the Company
only and is not intended to be and shall not be deemed to be a recommendation
to any shareholder as to how such shareholder should vote with respect to the
transactions contemplated by the Agreement. Except as provided in such
engagement letter, this opinion may not be used or referred to by the Company,
or quoted or disclosed to any person in any manner, without our prior written
consent. In furnishing this opinion, we do not admit that we are experts
within the meaning of the term "experts" as used in the Securities Act and the
rules and regulations promulgated thereunder, nor do we admit that this
opinion constitutes a report or valuation within the meaning of Section 11 of
the Securities Act.
Very truly yours,
Montgomery Securities
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article EIGHTH of the Registrant's Amended and Restated Certificate of
Incorporation sets forth the extent to which officers and directors of the
Registrant may be indemnified against any liabilities which they may incur in
their capacities as directors or officers of the Registrant. The Registrant's
Amended and Restated Certificate of Incorporation provides that the Registrant
shall, to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware, indemnify any director or officer
against any expenses, liabilities or other matters referred to in or covered
by that Section. The indemnification is not exclusive of any other rights to
which the officers or directors may be entitled under any by-law, agreement or
vote of stockholders or disinterested directors or otherwise, continues after
such person has ceased to be a director or officer and inures to the benefit
of such person's heirs, executors and administrators. The indemnification
provided by the Registrant's Amended and Restated Certificate of Incorporation
specifically includes indemnification of all officers and directors who are
deemed fiduciaries under any employee benefit plan and any action taken or
omitted by such officer or director with respect to an employee benefit plan
reasonably believed by such person to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<C> <S>
+2.1 Agreement and Plan of Reorganization Between Calgene, Inc. and
Monsanto Company dated as of October 13, 1995.
3.1 Certificate of Incorporation of the Registrant.
3.2 Form of Amended and Restated Certificate of Incorporation of the
Registrant.
3.3 By-Laws of the Registrant.
4.1 Specimen Common Stock Certificate of the Registrant.
5.1 Opinion of Hale and Dorr.
8.1 Opinion of Hale and Dorr with respect to Tax Matters.
+10.0 Form of Stockholders Agreement between the Registrant and Monsanto
Company.
10.1 Form of Credit Facility Agreement between the Registrant and Monsanto
Company.
10.2 Form of Gargiulo Credit Facility Agreement between the Registrant and
Monsanto Company.
10.3 Form of ACC Deaminase License Agreement between the Registrant and
Monsanto Company.
10.4 Form of ADPGPP License Agreement between the Registrant and Monsanto
Company.
10.5 Form of CMV License Agreement between the Registrant and Monsanto
Company.
*10.6 Form of FAD 3 License Agreement between the Registrant and Monsanto
Company.
10.7 Form of Fruit Specific Promoter License Agreement between the
Registrant and Monsanto Company.
10.8 Form of Gemini Virus License Agreement between the Registrant and
Monsanto Company.
10.9 Form of Insect Resistance License Agreement between the Registrant
and Monsanto Company.
10.10 Form of Oil License Agreement between the Registrant and Monsanto
Company.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.11 Form of Letter Agreement between Calgene, Inc. and Monsanto Company
with respect to license of Recombinant ACC Synthase.
10.12 Form of Insect-Protected Cotton License and Seed Services Agreement
between Calgene, Inc. and Monsanto Company.
10.13 Second Amended and Restated Employment Agreement dated October 16,
1995 between Gargiulo, L.P. and Jeffrey D. Gargiulo.
10.14 Joint Venture Agreement dated as of December 15, 1992 between
Gargiulo, L.P. and Dresick Farms, as amended June 1, 1993.
10.15 Joint Venture Agreement dated as of January 1, 1981 between Gargiulo
L.P. and Harllee-Gargiulo, Inc., as amended October 31, 1989 and
October 31, 1994.
10.16 Joint Venture Agreement dated as of October 31, 1994 between
GargiuloMexico, L.L.C. and Hermanos Ley.
10.17 Marketing Agreement dated as of September 1, 1988 between Gargiulo,
Inc. and
Harllee-Gargiulo, Inc.
10.18 The Registrant's 1996 Stock Option Plan.
10.19 Calgene, Inc. 1981 Stock Option Plan, as amended. (B)
10.20 Calgene, Inc. 1991 Stock Option Plan. (J)
10.20A Calgene, Inc. 1991 Stock Option Plan, as amended. (I)
*10.21 Partnership Agreement dated January 31, 1986 between Calgene, Inc.
and Rhone-Poulenc Agrochimie, together with Research Agreement dated
March 15, 1984 and Amended thereto dated January 31, 1985. (A)
*10.22 Amendment One to the Partnership Agreement dated January 31, 1986
between Calgene, Inc. and Rhone-Poulenc Agrochimie dated September
30, 1989. (B)
*10.23 License Agreement between Calgene, Inc. and Rhone-Poulenc Agrochimie
dated
October 1, 1989. (B)
10.24 Commercial Lease dated August 17, 1987, as amended, covering
property located at 1910 and 1920 Fifth Street, Davis, California.
(C)
10.25 Form of Calgene, Inc. Directors and Officers Indemnification
Agreement. (C)
10.26 Calgene, Inc. 401(k) Tax Deferred Investment Plan. (D)
10.27 1989 Calgene, Inc. Employee Stock Purchase Plan. (G)
10.28 Secured Revolving Credit Agreement Among Calgene, Inc. and Harris
Trust and Savings Bank and Caisse Nationale De Credit Agricole dated
April 26, 1990. (G)
10.29 First Amendment to Secured Revolving Credit Agreement and Secured
Revolving Credit Note among Calgene, Inc. and Harris Trust and
Savings Bank dated January 31, 1992. (E)
10.30 Second Amendment to Secured Revolving Credit Agreement and Secured
Revolving Credit Note among Calgene, Inc. and Harris Trust and
Savings Bank dated January 31, 1993. (I)
10.31 Third Amendment to Secured Revolving Credit Agreement among Calgene,
Inc. and Harris Trust and Savings Bank dated August 26, 1993. (M)
10.32 Fourth Amendment to Secured Revolving Credit Agreement and Secured
Revolving Credit Note among Calgene, Inc. and Harris Trust and
Savings Bank dated February 25, 1994. (M)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.33 Fifth Amendment to Secured Revolving Credit Agreement and Secured
Revolving Credit Note Among Calgene, Inc. and Harris Trust and
Savings Bank dated March 15, 1995. (M)
10.34 Sixth Amendment to Secured Revolving Credit Agreement and Waiver
Among Calgene, Inc. and Harris Trust and Savings Bank dated August
8, 1995. (M)
*10.35 License Agreement between Calgene, Inc. and Campbell Soup Company
dated August 9, 1991. (J)
10.36 Change of Control Employment Agreement dated as of July 19, 1995
between Calgene, Inc. and Roger H. Salquist.
10.37 Change of Control Employment Agreement dated as of July 19, 1995
between Calgene, Inc. and Roderick N. Stacey.
10.38 Change of Control Employment Agreement dated as of July 19, 1995
between Calgene, Inc. and Michael J. Motroni.
10.39 Asset Purchase Agreement dated as of December 29, 1995 between
Gargiulo, L.P. and Collier Enterprises.
21.1 List of Registrant's Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2.1 Consent of Deloitte & Touche LLP with respect to financial
statements of TIA.
23.2.2 Consent of Deloitte & Touche LLP with respect to financial
statements of Gargiulo L.P.
23.3 Consent of Landa, Umpierre and Company.
23.4 Consent of Arthur Andersen.
23.5 Consent of Hale and Dorr (included in Exhibit 5.1).
23.6 Consent of Montgomery Securities.
24.1 Power of Attorney (See page II-6).
27 Financial Data Schedule.
+99.1 Opinion of Montgomery Securities.
99.2 Form of Proxy Card of Calgene, Inc.
99.3 Consent of Robert T. Fraley.
99.4 Consent of Jeffrey D. Gargiulo.
99.5 Consent of Howard D. Palefsky.
99.6 Consent of John E. Robson.
99.7 Consent of Carl V. Stinnett.
99.8 Consent of Allen J. Vangelos.
99.9 Consent of Hendrik A. Verfaillie.
</TABLE>
- - --------
(A) Incorporated by reference to Calgene's Form S-1 Registration No. 33-5921
(B) Incorporated by reference to Calgene's Form 10-K dated September 30, 1989
(C) Incorporated by reference to Calgene's Form 10-K dated September 30, 1987
(D) Incorporated by reference to Calgene's Form 10-K dated September 30, 1988
(E) Incorporated by reference to Calgene's Form 10-K dated June 30, 1992
(F) Incorporated by reference to Calgene's Form S-1 Registration No. 33-29822
(G) Incorporated by reference to Calgene's Form 10-K dated June 30, 1990
(H) Incorporated by reference to Calgene's Form 10-Q dated March 31, 1994
(I) Incorporated by reference to Calgene's Form 10-K dated June 30, 1993, as
amended
(J) Incorporated by reference to Calgene's Form 10-K dated June 30, 1991
(K) Agreement intentionally omitted in reliance upon 5 U.S.C. (S) 552(b)(3) and
35 U.S.C. (S) 135(c)
(L) Incorporated by reference to Calgene's Form 8-K dated June 28, 1995
(M) Incorporated by reference to Calgene's Form 10-K/A dated October 30, 1995
* Confidential treatment of certain portions of these documents has been
granted
+ Filed as an Annex to the Proxy Statement/Prospectus constituting part of
this Registration Statement and incorporated herein by reference.
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<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES. Filed as part of the Proxy
Statement/Prospectus constituting part of this Registration Statement and
incorporated herein by reference.
(C) REPORTS. Filed as an Annex to the Proxy Statement/Prospectus
constituting part of this Registration Statement and incorporated herein by
reference.
ITEM 22. UNDERTAKINGS.
A. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
B. The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
C. The Registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
D. The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the
date of responding to the request.
E. The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in this
Registration Statement when it became effective.
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<PAGE>
F. The Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information set forth in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE
STATE OF CALIFORNIA, ON THIS 5TH DAY OF FEBRUARY, 1996.
Calgene II, Inc.
/s/ Roger H. Salquist
By: _________________________________
ROGER H. SALQUIST, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW THIS REGISTRATION STATEMENT HEREBY
SEVERALLY CONSTITUTES AND APPOINTS ROGER H. SALQUIST, MICHAEL J. MOTRONI AND
MARK G. BORDEN, AND EACH OF THEM ACTING SINGLY, OUR TRUE AND LAWFUL ATTORNEYS-
IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, TO SIGN
FOR HIM AND IN HIS NAME, PLACE AND STEAD IN ANY AND ALL CAPACITIES INDICATED
BELOW, THE REGISTRATION STATEMENT ON FORM S-4 FILED HEREWITH AND ANY AND ALL
PRE-EFFECTIVE AND POST-EFFECTIVE AMENDMENTS TO SAID REGISTRATION STATEMENT,
AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO AND OTHER DOCUMENTS IN
CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING
UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND
NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON
THEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR
ANY OF THEM, OR THEIR OR HIS SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE DONE
BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT OR AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Roger H. Salquist President and Director February 5,
- - ----------------------------------- (Principal Executive 1996
ROGER H. SALQUIST Officer)
/s/ Roderick N. Stacey Vice President, February 5,
- - ----------------------------------- Secretary and 1996
RODERICK N. STACEY Director
/s/ Michael J. Motroni Treasurer and Director February 5,
- - ----------------------------------- (Principal Financial 1996
MICHAEL J. MOTRONI Officer and Principal
Accounting Officer)
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT INDEX PAGE
------- ------------- ----
<C> <S> <C>
+2.1 Agreement and Plan of Reorganization Between Calgene, Inc. and
Monsanto Company dated as of October 13, 1995.
3.1 Certificate of Incorporation of the Registrant.
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant.
3.3 By-Laws of the Registrant.
4.1 Specimen Common Stock Certificate of the Registrant.
5.1 Opinion of Hale and Dorr.
8.1 Opinion of Hale and Dorr with respect to Tax Matters.
+10.0 Form of Stockholders Agreement between the Registrant and
Monsanto Company.
10.1 Form of Credit Facility Agreement between the Registrant and
Monsanto Company.
10.2 Form of Gargiulo Credit Facility Agreement between the
Registrant and Monsanto Company.
10.3 Form of ACC Deaminase License Agreement between the Registrant
and Monsanto Company.
10.4 Form of ADPGPP License Agreement between the Registrant and
Monsanto Company.
10.5 Form of CMV License Agreement between the Registrant and
Monsanto Company.
*10.6 Form of FAD 3 License Agreement between the Registrant and
Monsanto Company.
10.7 Form of Fruit Specific Promoter License Agreement between the
Registrant and Monsanto Company.
10.8 Form of Gemini Virus License Agreement between the Registrant
and Monsanto Company.
10.9 Form of Insect Resistance License Agreement between the
Registrant and Monsanto Company.
10.10 Form of Oil License Agreement between the Registrant and
Monsanto Company.
10.11 Form of Letter Agreement between Calgene, Inc. and Monsanto
Company with respect to license of Recombinant ACC Synthase.
10.12 Form of Insect-Protected Cotton License and Seed Services
Agreement between Calgene, Inc. and Monsanto Company.
10.13 Second Amended and Restated Employment Agreement dated October
16, 1995 between Gargiulo, L.P. and Jeffrey D. Gargiulo.
10.14 Joint Venture Agreement dated as of December 15, 1992 between
Gargiulo, L.P. and Dresick Farms, as amended June 1, 1993.
10.15 Joint Venture Agreement dated as of January 1, 1981 between
Gargiulo L.P. and Harllee-Gargiulo, Inc., as amended October
31, 1989 and October 31, 1994.
10.16 Joint Venture Agreement dated as of October 31, 1994 between
GargiuloMexico, L.L.C. and Hermanos Ley.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT INDEX PAGE
------- ------------- ----
<C> <S> <C>
10.17 Marketing Agreement dated as of September 1, 1988 between
Gargiulo, Inc. and
Harllee-Gargiulo, Inc.
10.18 The Registrant's 1996 Stock Option Plan.
10.19 Calgene, Inc. 1981 Stock Option Plan, as amended. (B)
10.20 Calgene, Inc. 1991 Stock Option Plan. (J)
10.20A Calgene, Inc. 1991 Stock Option Plan, as amended. (I)
*10.21 Partnership Agreement dated January 31, 1986 between Calgene,
Inc. and Rhone-Poulenc Agrochimie, together with Research
Agreement dated March 15, 1984 and Amended thereto dated
January 31, 1985. (A)
*10.22 Amendment One to the Partnership Agreement dated January 31,
1986 between Calgene, Inc. and Rhone-Poulenc Agrochimie dated
September 30, 1989. (B)
*10.23 License Agreement between Calgene, Inc. and Rhone-Poulenc
Agrochimie dated
October 1, 1989. (B)
10.24 Commercial Lease dated August 17, 1987, as amended, covering
property located at 1910 and 1920 Fifth Street, Davis,
California. (C)
10.25 Form of Calgene, Inc. Directors and Officers Indemnification
Agreement. (C)
10.26 Calgene, Inc. 401(k) Tax Deferred Investment Plan. (D)
10.27 1989 Calgene, Inc. Employee Stock Purchase Plan. (G)
10.28 Secured Revolving Credit Agreement Among Calgene, Inc. and
Harris Trust and Savings Bank and Caisse Nationale De Credit
Agricole dated April 26, 1990. (G)
10.29 First Amendment to Secured Revolving Credit Agreement and
Secured Revolving Credit Note among Calgene, Inc. and Harris
Trust and Savings Bank dated January 31, 1992. (E)
10.30 Second Amendment to Secured Revolving Credit Agreement and
Secured Revolving Credit Note among Calgene, Inc. and Harris
Trust and Savings Bank dated January 31, 1993. (I)
10.31 Third Amendment to Secured Revolving Credit Agreement among
Calgene, Inc. and Harris Trust and Savings Bank dated August
26, 1993. (M)
10.32 Fourth Amendment to Secured Revolving Credit Agreement and
Secured Revolving Credit Note among Calgene, Inc. and Harris
Trust and Savings Bank dated February 25, 1994. (M)
10.33 Fifth Amendment to Secured Revolving Credit Agreement and
Secured Revolving Credit Note Among Calgene, Inc. and Harris
Trust and Savings Bank dated March 15, 1995. (M)
10.34 Sixth Amendment to Secured Revolving Credit Agreement and
Waiver Among Calgene, Inc. and Harris Trust and Savings Bank
dated August 8, 1995. (M)
*10.35 License Agreement between Calgene, Inc. and Campbell Soup
Company dated August 9, 1991. (J)
10.36 Change of Control Employment Agreement dated as of July 19,
1995 between Calgene, Inc. and Roger H. Salquist.
10.37 Change of Control Employment Agreement dated as of July 19,
1995 between Calgene, Inc. and Roderick N. Stacey.
10.38 Change of Control Employment Agreement dated as of July 19,
1995 between Calgene, Inc. and Michael J. Motroni.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT INDEX PAGE
------- ------------- ----
<C> <S> <C>
10.39 Asset Purchase Agreement dated as of December 29, 1995 between
Gargiulo, L.P. and Collier Enterprises.
21.1 List of Registrant's Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2.1 Consent of Deloitte & Touche LLP with respect to financial
statements of TIA.
23.2.2 Consent of Deloitte & Touche LLP with respect to financial
statements of Gargiulo L.P.
23.3 Consent of Landa, Umpierre and Company.
23.4 Consent of Arthur Andersen.
23.5 Consent of Hale and Dorr (included in Exhibit 5.1).
23.6 Consent of Montgomery Securities.
24.1 Power of Attorney (See page II-6).
27 Financial Data Schedule.
+99.1 Opinion of Montgomery Securities.
99.2 Form of Proxy Card of Calgene, Inc.
99.3 Consent of Robert T. Fraley.
99.4 Consent of Jeffrey D. Gargiulo.
99.5 Consent of Howard D. Palefsky.
99.6 Consent of John E. Robson.
99.7 Consent of Carl V. Stinnett.
99.8 Consent of Allen J. Vangelos.
99.9 Consent of Hendrik A. Verfaillie.
</TABLE>
- - --------
(A) Incorporated by reference to Calgene's Form S-1 Registration No. 33-5921
(B) Incorporated by reference to Calgene's Form 10-K dated September 30, 1989
(C) Incorporated by reference to Calgene's Form 10-K dated September 30, 1987
(D) Incorporated by reference to Calgene's Form 10-K dated September 30, 1988
(E) Incorporated by reference to Calgene's Form 10-K dated June 30, 1992
(F) Incorporated by reference to Calgene's Form S-1 Registration No. 33-29822
(G) Incorporated by reference to Calgene's Form 10-K dated June 30, 1990
(H) Incorporated by reference to Calgene's Form 10-Q dated March 31, 1994
(I) Incorporated by reference to Calgene's Form 10-K dated June 30, 1993, as
amended
(J) Incorporated by reference to Calgene's Form 10-K dated June 30, 1991
(K) Agreement intentionally omitted in reliance upon 5 U.S.C. (S) 552(b)(3) and
35 U.S.C. (S) 135(c)
(L) Incorporated by reference to Calgene's Form 8-K dated June 28, 1995
(M) Incorporated by reference to Calgene's Form 10-K/A dated October 30, 1995
* Confidential treatment of certain portions of these documents has been
granted
+ Filed as an Annex to the Proxy Statement/Prospectus constituting part of
this Registration Statement and incorporated herein by reference.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CALGENE II, INC.
FIRST. The name of the Corporation is: Calgene II, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted by
the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall have
authority to issue is 1,000 shares of Common Stock, $0.0001 par value per share.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
FIFTH. The name and mailing address of the sole incorporator are as follows:
<TABLE>
<CAPTION>
<S> <C>
NAME MAILING ADDRESS
---- ---------------
Joseph E. Mullaney III Hale and Dorr
60 State Street
Boston, MA 02109
</TABLE>
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
<PAGE>
SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
NINTH. The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan) (all such persons
-2-
<PAGE>
being referred to hereafter as an "Indemnitee'), or by reason of any action
alleged to have been taken or omitted in such capacity, against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by or on behalf of an Indemnitee in connection
with such action, suit or proceeding and any appeal therefrom.
As a condition precedent to his right to be indemnified, the Indemnitee
must notify the Corporation in writing as soon as practicable of any action,
suit, proceeding or investigation involving him for which indemnity will or
could be sought. With respect to any action, suit, proceeding or investigation
of which the Corporation is so notified, the Corporation will be entitled to
participate therein at its own expense and/or to assume the defense thereof at
its own expense, with legal counsel reasonably acceptable to the Indemnitee.
In the event that the Corporation does not assume the defense of any
action, suit, proceeding or investigation of which the Corporation receives
notice under this Article, the Corporation shall pay in advance of the final
disposition of such matter any expenses (including attorneys' fees) incurred by
an Indemnitee in defending a civil or criminal action, suit, proceeding or
investigation or any appeal therefrom; provided, however, that the payment of
-------- -------
such expenses incurred by an Indemnitee in advance of the final disposition of
such matter shall be made only upon receipt of an undertaking by or on behalf of
the Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Corporation as authorized in this Article, which undertaking shall be
accepted without reference to the financial ability of the Indemnitee to make
such repayment; and further provided that no such advancement of expenses shall
------- --------
be made if it is determined that the Indemnitee did not act in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
The Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by such Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation. In addition, the Corporation shall not indemnify an Indemnitee to
the extent such Indemnitee is reimbursed from the proceeds of insurance, and in
the event the Corporation makes any indemnification payments to an Indemnitee
and such Indemnitee is subsequently reimbursed from the proceeds of insurance,
such Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
-3-
<PAGE>
All determinations hereunder as to the entitlement of an Indemnitee to
indemnification or advancement of expenses shall be made in each instance by (a)
a majority vote of the directors of the Corporation consisting of persons who
are not at that time parties to the action, suit or proceeding in question
("disinterested directors"), whether or not a quorum, (b) a majority vote of a
quorum of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or proceeding in question,
(c) independent legal counsel (who may, to the extent permitted by law, be
regular legal counsel to the Corporation), or (d) a court of competent
jurisdiction.
The indemnification rights provided in this Article (i) shall not be deemed
exclusive of any other rights to which an Indemnitee may be entitled under any
law, agreement or vote of stockholders or disinterested directors or otherwise,
and (ii) shall inure to the benefit of the heirs, executors, and administrators
of the Indemnitees. The Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
TENTH. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute and this Certificate of Incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
EXECUTED on November 21, 1995.
/s/ Joseph E. Mullaney III
--------------------------
Incorporator
-4-
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CALGENE II, INC.
(Originally incorporated on November 21, 1995)
FIRST. The name of the Corporation is Calgene, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 90,000,000 shares, consisting of
80,000,000 shares of Common Stock, $.001 par value per share (the "Common
Stock"), and 10,000,000 shares of Preferred Stock, $.001 par value per share
(the "Preferred Stock").
The following is a statement of the designations and the powers, privileges
and rights, and the qualifications, limitations or restrictions thereof in
respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the holders of
-------
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. Except as otherwise provided in Article FIFTH, the holders of
------
the Common Stock are entitled to one vote for each share held at all meetings of
stockholders (and written actions in lieu of meetings).
-1-
<PAGE>
3. Dividends. Dividends may be declared and paid on the Common Stock from
---------
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided in this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the designation or issuance of any shares of any
series of the
-2-
<PAGE>
Preferred Stock authorized by and complying with the conditions of this
Certificate of Incorporation, the right to have such vote being expressly waived
by all present and future holders of the capital stock of the Corporation.
Part A. SERIES A REDEEMABLE, NON-VOTING PREFERRED STOCK
--------------------------------------------------------
A.1 Designation and Amount. The designation of this series of capital
----------------------
stock shall be Series A Redeemable, Non-Voting Preferred Stock (the "Series A
Stock"). The number of shares, powers, terms, conditions, designations,
preferences and privileges, relative, participating, optional and other special
rights and qualifications, limitations and restrictions, if any, of the Series A
Stock shall be as set forth herein. The number of authorized shares of Series A
Stock is 1,000.
A.2 Voting Rights. The Series A Stock shall have no voting rights, except
-------------
as otherwise required by law.
A.3 Redemption. The Series A Stock may be redeemed by the Corporation at
----------
any time on or prior to December 31, 1999 for $1.00 per share. In the event of
any redemption of only a part of the then outstanding Series A Stock, the
Corporation shall effect such redemption pro rata among the holders thereof
based on the number of shares of Series A Stock held by such holders on the date
that notice of redemption is given by the Corporation. At least 30 days prior to
the date fixed for any redemption of Series A Preferred Stock (a "Redemption
Date"), written notice shall be mailed, by first class or registered mail,
postage prepaid, to each holder of record of Series A Stock to be redeemed, at
his or its address last shown on the records of the Corporation, notifying such
holder of the election of the Corporation to redeem such shares and specifying
the Redemption Date. On or prior to the Redemption Date, each holder of Series A
Stock to be redeemed shall surrender his or its certificate or certificates
representing such shares to the Corporation in the manner and at the place
designated in the notice of redemption, and thereupon the redemption price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owners thereof, and each surrendered
certificate shall be cancelled. From and after the Redemption Date, all rights
of the holders of Series A Stock designated for redemption in the notice of
redemption as holders of Series A Stock of the Corporation (except to receive
the redemption price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter deem to be outstanding for any purpose whatsoever.
-3-
<PAGE>
A.4 Conversion. The Series A Stock may not be converted into shares of
----------
Common Stock or any other class or series of capital stock of the Corporation.
A.5 Liquidation. In the event of any liquidation, dissolution or
-----------
winding-up of the Corporation (collectively, a "Liquidation"), the holders of
shares of Series A Stock shall be entitled to receive out of the assets of the
Corporation legally available for distribution to stockholders, whether from
capital, earnings or surplus, before payment shall be made to the holders of
Common Stock or any class or series of stock ranking on Liquidation junior to
such Series A Stock, $1.00 per share.
A.6 Dividends. Dividends may be declared and paid on the Common Stock from
---------
funds lawfully available therefor, as and when determined by the Board of
Directors.
FIFTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
A. DIRECTOR ELECTIONS; BY-LAWS; BOOKS AND RECORDS
----------------------------------------------
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend or repeal
the By-Laws of the Corporation.
3. The books of the Corporation may be kept at such place within or without
the State of Delaware as the By-laws of the Corporation may provide or as may be
designated by the Board of Directors.
4. At all elections of directors of the Corporation, each holder of stock
or of any class or classes or of a series thereof shall be entitled to as many
votes as shall equal the number of votes which (except for this provision as to
cumulative voting) he would be entitled to cast for the election of directors
with respect to the shares of stock multiplied by the number of directors to be
elected, and he may cast all of such votes for a single candidate or may
distribute them among such number to be elected, or for any two or more of them
as he may see fit.
-4-
<PAGE>
B. COMPOSITION OF THE BOARD OF DIRECTORS; COMMITTEES
-------------------------------------------------
During the term of the Stockholders Agreement dated as of March __, 1996
(the "Governance Agreement"), between the Corporation and Monsanto Company
("Monsanto"), (i) the composition of the Corporation's Board of Directors, the
number of directors and the manner of selecting and removing members thereof
shall be as set forth in Section 4.1 of the Governance Agreement, and (ii) the
Board of Directors shall establish, empower and maintain committees in
accordance with Section 4.3 of the Governance Agreement. Any inconsistency
between other provisions of this Certificate of Incorporation or the By-laws of
the Corporation and the provisions of the Governance Agreement relating to the
composition of the Board of Directors, the selection of directors or the
establishment of such committees and any other matters set forth therein shall
be resolved in favor of the Governance Agreement.
C. APPROVAL REQUIRED FOR CERTAIN ACTIONS
-------------------------------------
During the term of the Governance Agreement and until the earlier of such
time as (i)(A) the percentage of securities having the right to vote generally
in any election of directors of the Corporation (other than solely by reason of
the occurrence of an event)("Voting Stock") that is controlled, directly or
indirectly, by Monsanto and its Affiliates (as defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended)(the "Percentage
Interest") is at least fifty-five percent (55%) or (B) the Corporation elects to
convert borrowings made from Monsanto into the Corporation's Common Stock or
other Voting Stock, any securities of the Corporation convertible into or
exchangeable for Common Stock or other Voting Stock or options, rights or
warrants (or any similar securities) issued by the Corporation to acquire Common
Stock or other Voting Stock and Monsanto's Percentage Interest is at least fifty
percent (50%) after such conversion (in either case, a "Trigger Event") or (ii)
such date as Monsanto's Percentage Interest is less than twenty-five percent
(25%), the actions described in Section 4.4(a) of the Governance Agreement shall
require for approval the vote of the directors as set forth in Section 4.4(a) of
the Governance Agreement.
During the term of the Governance Agreement and at all times following the
occurrence of a Trigger Event and until the earlier of (i) March __, 1999, or
(ii) such time as Monsanto's Percentage
-5-
<PAGE>
Interest is at least seventy percent (70%), the actions described in Section
4.4(b) of the Governance Agreement shall require for approval the vote of the
directors as set forth in Section 4.4(b) of the Governance Agreement.
During the term of the Governance Agreement and at all times following both
(i) the occurrence of a Trigger Event and (ii) March __, 1999, and until
Monsanto's Percentage Interest is at least ninety-nine percent (99%), the
actions described in Section 4.4(c) of the Governance Agreement shall require
for approval the vote of the directors as set forth in Section 4.4(c) of the
Governance Agreement.
Any inconsistency between other provisions of this Certificate of
Incorporation or the By-laws of the Corporation and the provisions of the
Governance Agreement relating to the such approvals shall be resolved in favor
of the Governance Agreement.
D. ANTI-DILUTION RIGHTS
--------------------
During the term of the Governance Agreement, if at any time the Corporation
agrees to sell shares of its Common Stock or other Voting Stock (collectively,
"Additional Securities") in a private or public offering (other than Additional
Securities issued pursuant to the Corporation's option or stock purchase plans)
Monsanto shall have the right, but not the obligation, to acquire all or any
portion of the Additional Securities as set forth in Article 3 of the Governance
Agreement.
SIXTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the
-6-
<PAGE>
case may be, agree to any compromise or arrangement and to any reorganization of
this corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
SEVENTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
EIGHTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
---------------------------------------------------------------
the Corporation. The Corporation shall indemnify each person who was or is a
- - ---------------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the
-7-
<PAGE>
person did not act in good faith and in a manner which he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful. Notwithstanding anything to the contrary in this
Article, except as set forth in Section 7 below, the Corporation shall not
indemnify an Indemnitee seeking indemnification in connection with a proceeding
(or part thereof) initiated by the Indemnitee unless the initiation thereof was
approved by the Board of Directors of the Corporation. Notwithstanding anything
to the contrary in this Article, the Corporation shall not indemnify an
Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of
insurance, and in the event the Corporation makes any indemnification payments
to an Indemnitee and such Indemnitee is subsequently reimbursed from the
proceeds of insurance, such Indemnitee shall promptly refund such
indemnification payments to the Corporation to the extent of such insurance
reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The Corporation
------------------------------------------------------
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees) and, to the extent permitted by law, amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of Delaware shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
(including attorneys' fees) which the Court of Chancery of Delaware shall deem
proper.
-8-
<PAGE>
3. Indemnification for Expenses of Successful Party. Notwithstanding the
------------------------------------------------
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---- ----------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have
-9-
<PAGE>
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of counsel for the Indemnitee shall be at the expense of
the Corporation, except as otherwise expressly provided by this Article. The
Corporation shall not be entitled, without the consent of the Indemnitee, to
assume the defense of any claim brought by or in the right of the Corporation or
as to which counsel for the Indemnitee shall have reasonably made the conclusion
provided for in clause (ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in
-------------------
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter; provided,
--------
however, that the payment of such expenses incurred by an Indemnitee in advance
- - -------
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
-----------------------------
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority vote
of the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a quorum of the
outstanding shares of stock of
-10-
<PAGE>
all classes entitled to vote for directors, voting as a single class, which
quorum shall consist of stockholders who are not at that time parties to the
action, suit or proceeding in question, (c) independent legal counsel (who may,
to the extent permitted by law, be regular legal counsel to the Corporation), or
(d) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
--------
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses provided
------------
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit
-11-
<PAGE>
of the estate, heirs, executors and administrators of the Indemnitee. Nothing
contained in this Article shall be deemed to prohibit, and the Corporation is
specifically authorized to enter into, agreements with officers and directors
providing indemnification rights and procedures different from those set forth
in this Article. In addition, the Corporation may, to the extent authorized from
time to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees),
-12-
<PAGE>
judgments, fines and amounts paid in settlement in connection with any action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including an action by or in the right of the Corporation, to the fullest extent
permitted by any applicable portion of this Article that shall not have been
invalidated and to the fullest extent permitted by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware
----------------------
is amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
NINTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
which restates, integrates and amends the provisions of the Certificate of
Incorporation of the Corporation, and which has been duly adopted in accordance
with the provisions of Sections 242 and 245 of the Delaware General Corporation
Law, has been signed by its President this __ day of _______, 1996.
CALGENE, INC.
By:
---------------------------------
President
-13-
<PAGE>
Exhibit 3.3
BY-LAWS
OF
CALGENE II, INC.
<PAGE>
BY-LAWS
TABLE OF CONTENTS
Page
ARTICLE 1 - Stockholders................................... 1
Section 1.1 Place of Meetings...................... 1
Section 1.2 Annual Meeting......................... 1
Section 1.3 Special Meetings....................... 1
Section 1.4 Notice of Meetings..................... 1
Section 1.5 Voting List............................ 2
Section 1.6 Quorum................................. 2
Section 1.7 Adjournments........................... 2
Section 1.8 Voting and Proxies..................... 2
Section 1.9 Action at Meeting...................... 3
Section 1.10 Action without Meeting................. 3
ARTICLE 2 - Directors...................................... 3
Section 2.1 General Powers......................... 3
Section 2.2 Number; Election and Qualification..... 4
Section 2.3 Enlargement of the Board............... 4
Section 2.4 Tenure................................. 4
Section 2.5 Vacancies.............................. 4
Section 2.6 Resignation............................ 4
Section 2.7 Regular Meetings....................... 4
Section 2.8 Special Meetings....................... 5
Section 2.9 Notice of Special Meetings............. 5
Section 2.10 Meetings by Telephone Conference
Calls................................ 5
Section 2.11 Quorum................................. 5
Section 2.12 Action at Meeting...................... 5
Section 2.13 Action by Consent...................... 5
Section 2.14 Removal................................ 6
Section 2.15 Committees............................. 6
Section 2.16 Compensation of Directors.............. 6
ARTICLE 3 - Officers....................................... 7
Section 3.1 Enumeration............................ 7
Section 3.2 Election............................... 7
Section 3.3 Qualification.......................... 7
Section 3.4 Tenure................................. 7
<PAGE>
Section 3.5 Resignation and Removal................ 7
Section 3.6 Vacancies.............................. 8
Section 3.7 Chairman of the Board and Vice-
Chairman of the Board................ 8
Section 3.8 President.............................. 8
Section 3.9 Vice Presidents........................ 8
Section 3.10 Secretary and Assistant Secretaries.... 8
Section 3.11 Treasurer and Assistant Treasurers..... 9
Section 3.12 Salaries............................... 9
ARTICLE 4 - Capital Stock.................................. 10
Section 4.1 Issuance of Stock...................... 10
Section 4.2 Certificates of Stock.................. 10
Section 4.3 Transfers.............................. 11
Section 4.4 Lost, Stolen or Destroyed
Certificates......................... 11
Section 4.5 Record Date............................ 11
ARTICLE 5 - General Provisions............................. 12
Section 5.1 Fiscal Year............................ 12
Section 5.2 Corporate Seal......................... 12
Section 5.3 Waiver of Notice....................... 12
Section 5.4 Voting of Securities................... 12
Section 5.5 Evidence of Authority.................. 12
Section 5.6 Certificate of Incorporation........... 13
Section 5.7 Transactions with Interested Parties... 13
Section 5.8 Severability........................... 13
Section 5.9 Pronouns............................... 14
ARTICLE 6 - Amendments..................................... 14
Section 6.1 By the Board of Directors.............. 14
Section 6.2 By the Stockholders.................... 14
ii
<PAGE>
BY-LAWS
OF
CALGENE II, INC.
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall
-----------------
be held at such place within or without the State of Delaware as
may be designated from time to time by the Board of Directors or
the President or, if not so designated, at the registered office
of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for
--------------
the election of directors and for the transaction of such other
business as may properly be brought before the meeting shall be
held on a date to be fixed by the Board of Directors or the
President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed
by the Board of Directors or the President and stated in the
notice of the meeting. If no annual meeting is held in accordance
with the foregoing provisions, the Board of Directors shall cause
the meeting to be held as soon thereafter as convenient. If no
annual meeting is held in accordance with the foregoing
provisions, a special meeting may be held in lieu of the annual
meeting, and any action taken at that special meeting shall have
the same effect as if it had been taken at the annual meeting, and
in such case all references in these By-laws to the annual meeting
of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may
----------------
be called at any time by the President or by the Board of
Directors. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose
or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by
------------------
law, written notice of each meeting of stockholders, whether
annual or special, shall be given not less than 10 nor more than
60 days before the date of the meeting to each stockholder
entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice
<PAGE>
of a special meeting shall state, in addition, the purpose or
purposes for which the meeting is called. If mailed, notice is
given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the
records of the corporation.
1.5 Voting List. The officer who has charge of the stock
-----------
ledger of the corporation shall prepare, at least 10 days before
every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours,
for a period of at least 10 days prior to the meeting, at a place
within the city where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting
during the whole time of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the
------
Certificate of Incorporation or these By-laws, the holders of a
majority of the shares of the capital stock of the corporation
issued and outstanding and entitled to vote at the meeting,
present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be
------------
adjourned to any other time and to any other place at which a
meeting of stockholders may be held under these By-laws by the
stockholders present or represented at the meeting and entitled to
vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as
Secretary of such meeting. It shall not be necessary to notify
any stockholder of any adjournment of less than 30 days if the
time and place of the adjourned meeting are announced at the
meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting.
At the adjourned meeting, the corporation may transact any
business which might have been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one
------------------
vote for each share of stock entitled to vote held of record by
such stockholder and a proportionate vote for each fractional
share so held, unless otherwise provided in the Certificate of
Incorporation. Each stockholder of record entitled to vote at a
meeting of stockholders, or to express consent or dissent to
corporate action in writing without a meeting, may vote or express
-2-
<PAGE>
such consent or dissent in person or may authorize another person
or persons to vote or act for him by written proxy executed by the
stockholder or his authorized agent and delivered to the Secretary
of the corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy
expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any
-----------------
meeting, the holders of shares of stock representing a majority of
the votes cast on a matter (or if there are two or more classes of
stock entitled to vote as separate classes, then in the case of
each such class, the holders of shares of stock of that class
representing a majority of the votes cast on a matter) shall
decide any matter to be voted upon by the stockholders at such
meeting, except when a different vote is required by express
provision of law, the Certificate of Incorporation or these
By-Laws. When a quorum is present at any meeting, any election by
stockholders shall be determined by a plurality of the votes cast
on the election.
1.10 Action without Meeting. Any action required or
----------------------
permitted to be taken at any annual or special meeting of
stockholders of the corporation may be taken without a meeting,
without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote on such action were
present and voted. Prompt notice of the taking of corporate
action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in
writing.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the
--------------
corporation shall be managed by or under the direction of a Board
of Directors, who may exercise all of the powers of the
corporation except as otherwise provided by law or the Certificate
of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided
by law, may exercise the powers of the full Board until the
vacancy is filled.
-3-
<PAGE>
2.2 Number; Election and Qualification. The number of
----------------------------------
directors which shall constitute the whole Board of Directors
shall be determined by resolution of the stockholders or the Board
of Directors, but in no event shall be less than one. The number
of directors may be decreased at any time and from time to time
either by the stockholders or by a majority of the directors then
in office, but only to eliminate vacancies existing by reason of
the death, resignation, removal or expiration of the term of one
or more directors. The directors shall be elected at the annual
meeting of stockholders by such stockholders as have the right to
vote on such election. Directors need not be stockholders of the
corporation.
2.3 Enlargement of the Board. The number of directors may
------------------------
be increased at any time and from time to time by the stockholders
or by a majority of the directors then in office.
2.4 Tenure. Each director shall hold office until the next
------
annual meeting and until his successor is elected and qualified,
or until his earlier death, resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders,
---------
any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board,
may be filled by vote of a majority of the directors then in
office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office, and a
director chosen to fill a position resulting from an increase in
the number of directors shall hold office until the next annual
meeting of stockholders and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his
-----------
written resignation to the corporation at its principal office or
to the President or Secretary. Such resignation shall be
effective upon receipt unless it is specified to be effective at
some other time or upon the happening of some other event.
2.7 Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice at such time and place,
either within or without the State of Delaware, as shall be
determined from time to time by the Board of Directors; provided
that any director who is absent when such a determination is made
shall be given notice of the determination. A regular meeting of
the Board of Directors may be held without notice immediately
after and at the same place as the annual meeting of stockholders.
-4-
<PAGE>
2.8 Special Meetings. Special meetings of the Board of
----------------
Directors may be held at any time and place, within or without the
State of Delaware, designated in a call by the Chairman of the
Board, President, two or more directors, or by one director in the
event that there is only a single director in office.
2.9 Notice of Special Meetings. Notice of any special
--------------------------
meeting of directors shall be given to each director by the
Secretary or by the officer or one of the directors calling the
meeting. Notice shall be duly given to each director (i) by
giving notice to such director in person or by telephone at least
48 hours in advance of the meeting, (ii) by sending a telegram or
telex, or delivering written notice by hand, to his last known
business or home address at least 48 hours in advance of the
meeting, or (iii) by mailing written notice to his last known
business or home address at least 72 hours in advance of the
meeting. A notice or waiver of notice of a meeting of the Board
of Directors need not specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or
--------------------------------------
any members of any committee designated by the directors may
participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and
participation by such means shall constitute presence in person at
such meeting.
2.11 Quorum. A majority of the total number of the whole
------
Board of Directors shall constitute a quorum at all meetings of
the Board of Directors. In the event one or more of the directors
shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each such director so
disqualified; provided, however, that in no case shall less than
one-third (1/3) of the number so fixed constitute a quorum. In
the absence of a quorum at any such meeting, a majority of the
directors present may adjourn the meeting from time to time
without further notice other than announcement at the meeting,
until a quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board of
-----------------
Directors at which a quorum is present, the vote of a majority of
those present shall be sufficient to take any action, unless a
different vote is specified by law, the Certificate of
Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to
-----------------
be taken at any meeting of the Board of Directors or of any
-5-
<PAGE>
committee of the Board of Directors may be taken without a
meeting, if all members of the Board or committee, as the case may
be, consent to the action in writing, and the written consents are
filed with the minutes of proceedings of the Board or committee.
2.14 Removal. Except as otherwise provided by the General
-------
Corporation Law of Delaware, any one or more or all of the
directors may be removed, with or without cause, by the holders of
a majority of the shares then entitled to vote at an election of
directors, except that the directors elected by the holders of a
particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding
shares of such class or series.
2.15 Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the
directors of the corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided
in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and
affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it.
Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as
the Board of Directors may otherwise determine, any committee may
make rules for the conduct of its business, but unless otherwise
provided by the directors or in such rules, its business shall be
conducted as nearly as possible in the same manner as is provided
in these By-laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such
-------------------------
compensation for their services and such reimbursement for
expenses of attendance at meetings as the Board of Directors may
from time to time determine. No such payment shall preclude any
director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving
compensation for such service.
-6-
<PAGE>
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the corporation shall
-----------
consist of a President, a Secretary, a Treasurer and such other
officers with such other titles as the Board of Directors shall
determine, including a Chairman of the Board, a Vice-Chairman of
the Board, and one or more Vice Presidents, Assistant Treasurers,
and Assistant Secretaries. The Board of Directors may appoint
such other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall
--------
be elected annually by the Board of Directors at its first meeting
following the annual meeting of stockholders. Other officers may
be appointed by the Board of Directors at such meeting or at any
other meeting.
3.3 Qualification. No officer need be a stockholder. Any
-------------
two or more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the
------
Certificate of Incorporation or by these By-laws, each officer
shall hold office until his successor is elected and qualified,
unless a different term is specified in the vote choosing or
appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by
-----------------------
delivering his written resignation to the corporation at its
principal office or to the President or Secretary. Such
resignation shall be effective upon receipt unless it is specified
to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without
cause, by vote of a majority of the entire number of directors
then in office.
Except as the Board of Directors may otherwise determine, no
officer who resigns or is removed shall have any right to any
compensation as an officer for any period following his
resignation or removal, or any right to damages on account of such
removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a
duly authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy
---------
occurring in any office for any reason and may, in its discretion,
-7-
<PAGE>
leave unfilled for such period as it may determine any offices
other than those of President, Treasurer and Secretary. Each such
successor shall hold office for the unexpired term of his
predecessor and until his successor is elected and qualified, or
until his earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board.
----------------------------------------------------
The Board of Directors may appoint a Chairman of the Board and may
designate the Chairman of the Board as Chief Executive Officer.
If the Board of Directors appoints a Chairman of the Board, he
shall perform such duties and possess such powers as are assigned
to him by the Board of Directors. If the Board of Directors
appoints a Vice-Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and
exercise the powers of the Chairman of the Board and shall perform
such other duties and possess such other powers as may from time
to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the
---------
direction of the Board of Directors, have general charge and
supervision of the business of the corporation. Unless otherwise
provided by the Board of Directors, he shall preside at all
meetings of the stockholders and, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors
has designated the Chairman of the Board or another officer as
Chief Executive Officer, the President shall be the Chief
Executive Officer of the corporation. The President shall perform
such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such
---------------
duties and possess such powers as the Board of Directors or the
President may from time to time prescribe. In the event of the
absence, inability or refusal to act of the President, the Vice
President (or if there shall be more than one, the Vice Presidents
in the order determined by the Board of Directors) shall perform
the duties of the President and when so performing shall have all
the powers of and be subject to all the restrictions upon the
President. The Board of Directors may assign to any Vice
President the title of Executive Vice President, Senior Vice
President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary
-----------------------------------
shall perform such duties and shall have such powers as the Board
of Directors or the President may from time to time prescribe. In
addition, the Secretary shall perform such duties and have such
powers as are incident to the office of the secretary, including
without limitation the duty and power to give notices of all
-8-
<PAGE>
meetings of stockholders and special meetings of the Board of
Directors, to attend all meetings of stockholders and the Board of
Directors and keep a record of the proceedings, to maintain a
stock ledger and prepare lists of stockholders and their addresses
as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess
such powers as the Board of Directors, the President or the
Secretary may from time to time prescribe. In the event of the
absence, inability or refusal to act of the Secretary, the
Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of
Directors) shall perform the duties and exercise the powers of the
Secretary.
In the absence of the Secretary or any Assistant Secretary at
any meeting of stockholders or directors, the person presiding at
the meeting shall designate a temporary secretary to keep a record
of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall
----------------------------------
perform such duties and shall have such powers as may from time to
time be assigned to him by the Board of Directors or the
President. In addition, the Treasurer shall perform such duties
and have such powers as are incident to the office of treasurer,
including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to
deposit funds of the corporation in depositories selected in
accordance with these By-laws, to disburse such funds as ordered
by the Board of Directors, to make proper accounts of such funds,
and to render as required by the Board of Directors statements of
all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and
possess such powers as the Board of Directors, the President or
the Treasurer may from time to time prescribe. In the event of
the absence, inability or refusal to act of the Treasurer, the
Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of
Directors) shall perform the duties and exercise the powers of the
Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled
--------
to such salaries, compensation or reimbursement as shall be fixed
or allowed from time to time by the Board of Directors.
-9-
<PAGE>
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the
-----------------
stockholders and subject to the provisions of the Certificate of
Incorporation, the whole or any part of any unissued balance of
the authorized capital stock of the corporation or the whole or
any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold,
transferred or otherwise disposed of by vote of the Board of
Directors in such manner, for such consideration and on such terms
as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the
---------------------
corporation shall be entitled to have a certificate, in such form
as may be prescribed by law and by the Board of Directors,
certifying the number and class of shares owned by him in the
corporation. Each such certificate shall be signed by, or in the
name of the corporation by, the Chairman or Vice-Chairman, if any,
of the Board of Directors, or the President or a Vice President,
and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the corporation. Any or all of the
signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of
Incorporation, the By-laws, applicable securities laws or any
agreement among any number of shareholders or among such holders
and the corporation shall have conspicuously noted on the face or
back of the certificate either the full text of the restriction or
a statement of the existence of such restriction.
If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized
on the face or back of each certificate representing shares of
such class or series of stock, provided that in lieu of the
foregoing requirements there may be set forth on the face or back
of each certificate representing shares of such class or series of
stock a statement that the corporation will furnish without charge
to each stockholder who so requests a copy of the full text of the
powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
-10-
<PAGE>
4.3 Transfers. Except as otherwise established by rules and
---------
regulations adopted by the Board of Directors, and subject to
applicable law, shares of stock may be transferred on the books of
the corporation by the surrender to the corporation or its
transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power
of attorney properly executed, and with such proof of authority or
the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required
by law, by the Certificate of Incorporation or by these By-laws,
the corporation shall be entitled to treat the record holder of
stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote
with respect to such stock, regardless of any transfer, pledge or
other disposition of such stock until the shares have been
transferred on the books of the corporation in accordance with the
requirements of these By-laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation
--------------------------------------
may issue a new certificate of stock in place of any previously
issued certificate alleged to have been lost, stolen, or
destroyed, upon such terms and conditions as the Board of
Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such
indemnity as the Board of Directors may require for the protection
of the corporation or any transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance
-----------
a date as a record date for the determination of the stockholders
entitled to notice of or to vote at any meeting of stockholders or
to express consent (or dissent) to corporate action in writing
without a meeting, or entitled to receive payment of any dividend
or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any
other lawful action. Such record date shall not be more than 60
nor less than 10 days before the date of such meeting, nor more
than 10 days after the date of adoption of a record date for a
written consent without a meeting, nor more than 60 days prior to
any other action to which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day before
the day on which notice is given, or, if notice is waived, at the
close of business on the day before the day on which the meeting
is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall
-11-
<PAGE>
be the day on which the first written consent is properly
delivered to the corporation. The record date for determining
stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the
resolution relating to such purpose.
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. Except as from time to time otherwise
-----------
designated by the Board of Directors, the fiscal year of the
corporation shall begin on the first day of January in each year
and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in such
--------------
form as shall be approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is
----------------
required to be given by law, by the Certificate of Incorporation
or by these By-laws, a waiver of such notice either in writing
signed by the person entitled to such notice or such person's duly
authorized attorney, or by telegraph, cable or any other available
method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such
meeting in person or by proxy, shall be deemed equivalent to such
notice.
5.4 Voting of Securities. Except as the directors may
--------------------
otherwise designate, the President or Treasurer may waive notice
of, and act as, or appoint any person or persons to act as, proxy
or attorney-in-fact for this corporation (with or without power of
substitution) at, any meeting of stockholders or shareholders of
any other corporation or organization, the securities of which may
be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary,
---------------------
or an Assistant Secretary, or a temporary Secretary, as to any
action taken by the stockholders, directors, a committee or any
officer or representative of the corporation shall as to all
persons who rely on the certificate in good faith be conclusive
evidence of such action.
-12-
<PAGE>
5.6 Certificate of Incorporation. All references in these
----------------------------
By-laws to the Certificate of Incorporation shall be deemed to
refer to the Certificate of Incorporation of the corporation, as
amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or
------------------------------------
transaction between the corporation and one or more of the
directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in
which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board of
Directors or a committee of the Board of Directors which
authorizes the contract or transaction or solely because his or
their votes are counted for such purpose, if:
(1) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed
or are known to the Board of Directors or the committee, and
the Board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon,
and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee of the Board
of Directors, or the stockholders.
Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
5.8 Severability. Any determination that any provision of
------------
these By-laws is for any reason inapplicable, illegal or
ineffective shall not affect or invalidate any other provision of
these By-laws.
5.9 Pronouns. All pronouns used in these By-laws shall be
--------
deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person or persons may require.
-13-
<PAGE>
ARTICLE 6 - Amendments
----------------------
6.1 By the Board of Directors. These By-laws may be
-------------------------
altered, amended or repealed or new by-laws may be adopted by the
affirmative vote of a majority of the directors present at any
regular or special meeting of the Board of Directors at which a
quorum is present.
6.2 By the Stockholders. These By-laws may be altered,
-------------------
amended or repealed or new by-laws may be adopted by the
affirmative vote of the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and
entitled to vote at any regular meeting of stockholders, or at any
special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall
have been stated in the notice of such special meeting.
-14-
<PAGE>
Exhibit 4.1
FBU
[LOGO APPEARS HERE]
<TABLE>
<CAPTION>
CALGENE
<S> <C> <C>
THIS CERTIFICATE IS TRANSFERABLE INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE REVERSE FOR STATEMENTS RELATING
IN BOSTON, MA OR NEW YORK, NY TO RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS, IF ANY
This Certifies that
CUSIP 129598108
SPECIMEN
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
------------------------------------ ------------------------------------
- - --------------------------------------------------------- CALGENE, INC. ----------------------------------------------------------
------------------------------------ ------------------------------------
Herein designated "the Corporation", transferable on the share register of the Corporation upon surrender of this Certificate
properly endorsed. By the acceptance of this certificate the holder hereof consents to and agrees to be bound by all of the
provisions of the Certificate of Incorporation and the Bylaws of the Corporation and all amendments thereto. This Certificate is
not valid until countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signature of its duly authorized officers.
Dated
/s/ SIGNATURE APPEARS HERE /s/ SIGNATURE APPEARS HERE
SPECIMEN [SEAL APPEARS HERE] SPECIMEN
Secretary CHAIRMAN AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT AND REGISTRAR
BY /s/ SIGNATURE APPEARS HERE
SPECIMEN
AUTHORIZED SIGNATURE
</TABLE>
<PAGE>
CALGENE, INC.
The Corporation is authorized to issue two classes of stock, Common and
Preferred Stock. The Board of Directors of the Corporation has authority to fix
the number of shares and the designation of any series of Preferred Stock and to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any unissued series of Preferred Stock.
A statement of the rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes or series of shares and upon the
holders thereof as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of designations, and the
number of shares constituting each class and series and the designations
thereof, may be obtained by the holder hereof upon written request and without
charge from the Transfer Agent of the Corporation at its offices in Boston, New
York, Los Angeles or Chicago.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -- ____________________ Custodian ____________________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ________________________________________________
(State)
UNIF TRF MIN ACT -- ____________________ Custodian (until age ________)
(Cust)
____________________ under Uniform Transfers
(Minor)
to Minors Act ______________________________________
(State)
Additional abbreviations may be used though not in the above list.
FOR VALUE RECEIVED, ________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- - --------------------------------------
- - --------------------------------------
- - --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________________
X _________________________________________________
X _________________________________________________
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
NOTICE: CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
By__________________________________________________
THE SIGNATURES SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBER-
SHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM). PURSUANT TO S.E.C. RULE 17A6-15
<PAGE>
Exhibit 5.1
February 6, 1996
Calgene II, Inc.
1920 Fifth Street
Davis, CA 95616
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-4 (the "Registration Statement"), filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, for the registration of 31,290,445 shares of Common Stock, $.001 par
value per share (the "Shares"), of Calgene II, Inc., a Delaware corporation (the
"Company"). The Shares are to be issued pursuant to the Agreement and Plan of
Reorganization, dated as of October 13, 1995 between Calgene, Inc., a Delaware
corporation, and Monsanto Company, a Delaware corporation (the "Reorganization
Agreement").
We have acted as counsel for the Company in connection with the issuance by
the Company of the Shares. We have examined signed copies of the Registration
Statement and all exhibits thereto, all as filed with the Commission. We have
also examined and relied upon the originals or copies of minutes of meetings of
the stockholders and Board of Directors of the Company, stock record books of
the Company, the By-laws of the Company, the Certificate of Incorporation of the
Company and the Amended and Restated Certificate of Incorporation of the Company
to be filed with the Secretary of State of the State of Delaware upon
consummation of the Reorganization (as defined in the Reorganization Agreement).
We have not made an independent review of the laws of any state or
jurisdiction other than the Commonwealth of Massachusetts and the United States,
and the General Corporation Law statute of the State of Delaware. Accordingly,
we express no opinion herein with respect to the laws of any state or
jurisdiction other than the Commonwealth of Massachusetts and the United States,
and the General Corporation Law statute of the State of Delaware.
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized and that, when issued and
<PAGE>
Calgene II, Inc.
February 6, 1996
Page 2
delivered by the Company in accordance with the terms of the Reorganization
Agreement, they will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as part of the Registration
Statement and to the use of our name therein and in the related Prospectus under
the caption "Legal Matters."
It is understood that this opinion is to be used only in connection with
the issuance of the Shares while the Registration Statement is in effect.
Very truly yours,
HALE AND DORR
<PAGE>
February 6, 1996
Exhibit 8.1
-----------
Calgene, Inc.
1920 Fifth Street
Davis, CA 95616
Attention: President
Re: Proposed Merger among Calgene II, Inc.,
Calgene Acquisition Corp. and Calgene, Inc.
-------------------------------------------
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the Agreement and
Plan of Reorganization dated October 13, 1995, (the "Agreement"), by and between
Calgene, Inc., a Delaware corporation ("Calgene") and Monsanto Company, a
Delaware corporation ("Monsanto"). Pursuant to such Agreement, Calgene and
Monsanto will establish Calgene II, Inc., a Delaware corporation ("Newco").
Newco in turn will establish Calgene Acquisition Corp., a Delaware corporation
("Sub") as a wholly-owned subsidiary and Sub will thereafter merge (the
"Merger") with and into Calgene. Pursuant to the Merger, holders of shares
Calgene Common Stock will exchange such shares for an equal number of shares of
Newco Common Stock and holders of shares of Calgene Series A Preferred Stock
will exchange such shares for an equal number of shares of Newco Series A
Preferred Stock. Except as otherwise provided, capitalized terms not defined
herein shall have the meanings set forth in the Agreement or in the letters
delivered to Hale and Dorr by Calgene and Monsanto containing certain
representations of Calgene and Monsanto relevant to this opinion (the
"Representation Letters"). All section references, unless otherwise indicated,
are to the Internal Revenue Code of 1986, as amended (the "Code").
In our capacity as counsel to Calgene in the Merger, and for purposes of
rendering this opinion, we have examined and relied upon the Agreement including
exhibits thereto, the Representation Letters, the Registration Statement of
Newco on Form S-4 dated February 6 (the "Registration Statement"), and such
other documents as we considered relevant to our analysis. We have assumed that
all parties to the Agreement (as well as Newco and
<PAGE>
Calgene, Inc.
February 6, 1996
Page 2
Sub) and to any other documents examined by us have acted, and will act, in
accordance with the terms of such Agreement or documents, and that the Merger
will be consummated at the Effective Time pursuant to the terms and conditions
set forth in the Agreement. Further, we have assumed that all representations
contained in the Agreement, as well as those representations contained in the
Representation Letters of even date herewith are true and complete in all
material respects as of the Effective Time. We have not attempted to verify
independently such representations, but in the course of our representation,
nothing has come to our attention which would cause us to question the accuracy
thereof.
In our examination of documents, we have assumed the authenticity of
original documents, the accuracy of copies, and the genuineness of signatures.
We have also assumed that there is no plan or intention on the part of Calgene's
shareholders or of Monsanto to engage in a sale, exchange, or other disposition
of shares of Newco Common Stock or Newco Series A Preferred Stock to be received
in the Merger or in the Exchange (as the case may be) that would reduce the
number of shares of either (or both) the Newco Common Stock or Newco Series A
Preferred Stock held by them in the aggregate to a number of shares of such
class of stock that is less than 80% of the number of shares of such class
received in the Merger and the Exchange combined.
The conclusions expressed herein represent our opinion as to the proper
treatment of certain aspects of the Merger under the income tax laws of the
United States based upon the Code, Treasury Regulations, case law, and rulings
and other pronouncements of the Internal Revenue Service (the "IRS") as in
effect on the date of this opinion. No assurances can be given that such laws
will not be amended or otherwise changed prior to the Effective Time of the
Merger, or at any other time, and that such changes will not affect the
conclusions expressed herein. Our opinion relates solely to the tax consequences
of the Merger under the federal laws of the United States, and we express no
opinion (and no opinion should be inferred) regarding the tax consequences of
the Merger under the laws of any other jurisdiction.
Our opinions represent our best judgment as to how a court would decide if
presented with the issues addressed herein and are not binding upon either the
IRS or any court. Thus, no assurances can be given that a position taken in
reliance on our opinions will not be challenged by the IRS or rejected by a
court.
<PAGE>
Calgene, Inc.
February 6, 1996
Page 3
On the basis of, and subject to the foregoing, and in reliance upon the
representations described above, we are of the opinion that:
1. No gain or loss for federal income tax purposes will be recognized by
Calgene, Newco or Sub upon consummation of the Merger.
2. A holder of Calgene Common Stock will recognize no gain or loss for
federal income tax purposes upon the exchange of such stockholder's Calgene
Common Stock for Newco Common Stock pursuant to the Merger.
3. The aggregate tax basis in the shares of Newco Common Stock received
by a holder of Calgene Common Stock in the Merger will equal such stockholder's
aggregate adjusted basis in the shares of Calgene Common Stock surrendered in
the Merger.
4. The holding period for the shares of Newco Common Stock received by a
holder of Calgene Common Stock in the Merger will include the holding period for
the shares of Calgene Common Stock surrendered by the stockholder in the Merger
provided that the shares of Calgene Common Stock were held as capital assets
prior to the Merger.
The foregoing opinions may not be applicable to Calgene shareholders who
are subject to special treatment under the federal income tax laws (including,
for example, persons who acquired Calgene shares pursuant to the exercise of
employee stock options or otherwise as compensation).
This opinion addresses only the specific tax opinions set forth above, and
does not address any other federal, state, local or foreign tax consequences
that may result from the Merger or any other transaction (including any
transaction undertaken in connection with the Merger). In particular, but not by
way of limitation, we express no opinion regarding (i) the tax consequences of
the conversion of outstanding options to acquire Calgene Common Stock into
options to acquire Newco Common Stock to the holders of such options and (ii)
the tax consequences of the Exchange. This opinion may not be relied upon except
with respect to the consequences specifically discussed herein.
<PAGE>
Calgene, Inc.
February 6, 1996
Page 4
We hereby consent to the reference to us under the caption "Approval of the
Merger - Certain Federal Income Tax Consequences" in the Registration Statement
and to the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
HALE AND DORR
<PAGE>
Exhibit 10.1
CALGENE II, INC. CREDIT FACILITY AGREEMENT
THIS AGREEMENT is made as of the _____ day of ____________, 1996, by and
between CALGENE II, INC., a Delaware corporation having its principal office in
Davis, California (the "Company"), and MONSANTO COMPANY, a Delaware corporation
with its main offices at 800 N. Lindbergh Boulevard, St. Louis, Missouri 63167
("Monsanto").
In consideration of the mutual benefits accruing to each of the parties,
the receipt and sufficiency of which are hereby acknowledged, and in further
consideration of the mutual performance of this Agreement, the parties hereto
agree as follows:
ARTICLE I
AMOUNT AND TERMS OF THE LOANS
Section 1.01. Loans. During the Commitment Period (hereinafter defined),
-----
Monsanto agrees, on the terms and conditions hereafter set forth, to make three
(3) one (1) year loans, totalling not more than $45,000,000, to the Company for
general corporate purposes from time to time after the date hereof, not to
exceed at any time outstanding Fifteen Million Dollars ($15,000,000), said sum
being the "Commitment." Within said limits and prior to the occurrence of an
Event of Default (hereinafter defined), the Company may borrow, repay and
reborrow under this Agreement, each such borrowing or reborrowing being referred
to herein as an "Advance." Each Advance shall be in an amount of not less than
One Hundred Thousand Dollars ($100,000) and shall be in increments of One
Hundred Thousand Dollars ($100,000). Each request for an Advance shall be made
in writing substantially in the form attached hereto as Exhibit A and
---------
incorporated herein or on such other forms acceptable to Monsanto or in any
other manner acceptable to Monsanto. Monsanto shall process each request for an
Advance as soon as reasonably practicable but no later than ten (10) working
days after receipt of the Company's request. Each of the Loans (hereinafter
defined) shall consist of no more than twelve (12) Advances. Upon fulfillment of
<PAGE>
the applicable conditions set forth in Article II hereof and subject to the
provisions of this Agreement, Monsanto shall make such Advances available to the
Company by wire transfer or otherwise as reasonably directed by the Company, but
the Company agrees to reimburse Monsanto for all such wire and other transfer
costs incurred by Monsanto, and the Company shall bear all risks of delays or
nondelivery or misdelivery of any such funds so wired or otherwise transferred
other than those caused by Monsanto's negligence or failure to transfer such
funds in accordance with the Company's directions. Any Advance under this
Agreement shall be deemed made on the day that the Advance proceeds are wired or
otherwise transferred or, if the Advance proceeds are used to repay an
outstanding Loan, on the day such proceeds are so applied. All Advances made on
or after the date of this Agreement and before the first anniversary of this
Agreement shall be considered to be part of "Loan One"; all Advances made on or
after the first anniversary of this Agreement and before the second anniversary
of this Agreement shall be considered to be part of "Loan Two"; all Advances
made on or after the second anniversary of this Agreement and before the earlier
of the third anniversary of this Agreement and September 30, 1998, shall be
considered to be part of "Loan Three." Loan One, Loan Two and Loan Three shall
hereinafter be collectively referred to as the "Loans" and individually as a
"Loan." The "Commitment Period" means the period from the date of this Agreement
to the earlier of September 30, 1998, or the third anniversary of the execution
of this Agreement or the date Monsanto terminates its obligations to make
further Advances or Loans hereunder pursuant to Section 5.02 hereof. The Loans
made pursuant to this Agreement shall be supported by the joint and several
guaranty (the "Guaranty") of the subsidiaries of the Company which are listed on
Exhibit B hereto (the "Subsidiaries" or a "Subsidiary") in the form attached
- - ---------
hereto as Exhibit C.
---------
Section 1.02. Notes. Each of the Loans shall be evidenced by a promissory
-----
note in the form of Exhibit D attached hereto (a "Note"), payable to the order
---------
of Monsanto and representing the obligation of the Company to pay the amount of
the aggregate unpaid principal amount of such Loans made by Monsanto, together
with interest on the principal amount outstanding from time to time, as provided
in this Agreement. Each Note shall provide that the Company shall pay all
outstanding principal and accrued interest to Monsanto on the first anniversary
of the date of such Note or, in the case of the Note
-2-
<PAGE>
evidencing Loan Three, on the earlier of September 30, 1998, or the first
anniversary of the date of such Note; provided, however, that the Company shall
have the option to convert the outstanding principal and accrued interest into
shares of the Company's common stock as provided in Section 1.06 hereof, subject
to Monsanto's right to require the Company to sell shares and pay cash (as
provided in such Section 1.06). The Notes evidencing Loan One, Loan Two and Loan
Three shall be dated as of the date of this Agreement, as of the first
anniversary of this Agreement and as of the second anniversary of this
Agreement, respectively.
Section 1.03. Interest Rate. The outstanding principal balance of the
-------------
Loans from time to time shall bear interest at two percent (2%) above Citibank's
published prime rate ("Note Rate"). Interest shall be compounded daily and
adjusted quarterly on each January 1, April 1, July 1 and October 1 pursuant to
calculations performed by Monsanto.
Section 1.04. Effects of Event of Default or Potential Default.
------------------------------------------------
Notwithstanding the foregoing and in addition to the remedies set forth in
Sections 5.02 and 5.03 hereof, upon an Event of Default and so long as such
Event of Default shall continue or, if Monsanto shall have accelerated the
maturity date of the then outstanding Loans pursuant to Section 5.02 hereof,
until the Loans are repaid in full, the principal amount of all Loans then
outstanding, together with all interest then accrued, shall thereafter bear
interest at the Default Rate (hereinafter defined), with interest payable upon
demand. The "Default Rate" shall be the per annum rate equal to three percent
(3%) above the Note Rate that would otherwise be applicable and thereafter until
paid in full. During the continuance of an Event of Default, the Company shall
have no right to obtain any new Advances under this Agreement.
A "Potential Default" shall be an event which, solely but for the lapse of
time or the giving of notice, or both, would constitute an Event of Default. If
a Potential Default then exists and has not been waived in writing by Monsanto
and does not itself constitute or is not declared an Event of Default, the
Company shall have no right to borrow any additional money beyond the principal
amount of Loans then outstanding.
-3-
<PAGE>
Section 1.05. Miscellaneous Provisions Regarding Loan Payments and
----------------------------------------------------
Interest. All payments on any Loan shall be made to Monsanto by wire transfer
- - --------
for deposit in Citibank, New York, New York, Account #00000502 unless Monsanto
notifies Company of a different place for payments to be made. Loan One shall be
due and payable on the first anniversary of the Note evidencing Loan One or such
earlier date as all of the outstanding Loans have been declared due and payable
pursuant to Section 5.02 hereof. Loan Two shall be due and payable on the first
anniversary of the Note evidencing Loan Two or such earlier date as all of the
outstanding Loans have been declared due and payable pursuant to Section 5.02
hereof. Loan Three shall be due and payable on the earlier of September 30,
1998, or the first anniversary of the Note evidencing Loan Three or such earlier
date as all of the outstanding Loans have been declared due and payable pursuant
to Section 5.02 hereof. The date each Loan shall be due and payable shall
hereafter from time to time be referred to as the "Maturity Date" and,
collectively, as the "Maturity Dates." If Monsanto makes a new Loan hereunder on
a day on which the Company is required to or has elected to repay all or any
part of an outstanding Loan and the Company has not elected to exercise its
conversion rights under Section 1.06 hereof, Monsanto shall apply the proceeds
of this new Loan to make such repayment, and only an amount equal to the
difference (if any) between the amount being borrowed and the amount being
repaid shall be made available by Monsanto to the Company, as provided in
Section 1.01 hereof. All interest rates respecting any Loan hereunder are stated
on a per annum basis with a year of three hundred and sixty (360) days, and
interest is calculated on the actual number of days elapsed (including the first
day, but excluding the last day of any period for any Loan under this
Agreement). All Loans outstanding after their respective Maturity Dates or such
earlier date as all of the outstanding Loans have been declared due pursuant to
Section 5.02 hereof shall thereafter bear interest at the Default Rate on all
unpaid amounts until the Loans are fully paid.
Section 1.06 Right of Conversion in Lieu of Repayment. In lieu of
----------------------------------------
repayment in cash of outstanding principal and accrued interest on each Maturity
Date, the Company, subject to Monsanto's right to require the Company 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 Loan into shares
of common stock of the Company at the average of the
-4-
<PAGE>
closing market prices for such shares during the thirty (30) trading days
immediately preceding the Maturity Date for such Loan (the "Average Market
Price"). In order to exercise its conversion rights, at least thirty (30) days
prior to the Maturity Date for a Loan, the Company shall send a written notice
(the "Conversion Notice") to Monsanto, stating that the Company intends to
exercise such conversion rights. The Conversion Notice shall specify the amount
of the principal and accrued interest that the Company intends to convert (the
"Conversion Amount").
Monsanto may, in its sole discretion and within five (5) business days
after its receipt of any Conversion Notice from the Company, give written notice
(the "Alternative Notice") to the Company, stating that all or any part of the
Conversion Amount set forth in such Conversion Notice (the "Alternative
Conversion Amount") shall be payable in cash. Upon receipt of an Alternative
Notice, (i) the Alternative Conversion Amount may no longer be converted into
shares of common stock of the Company (unless the Alternative Notice shall have
been withdrawn as provided below) and (ii) the difference, if any, between the
Conversion Amount and the Alternative Conversion Amount shall be converted into
shares of common stock of the Company in accordance with the terms of the
Conversion Notice and the applicable provisions of this Section 1.06. The
Company shall proceed promptly, using its best efforts and at its expense, to
take such actions as are necessary to effect the public sale of a number of
shares of its common stock (rounded to the next lowest full share) equal to the
Alternative Conversion Amount divided by the Average Market Price (the
"Offering"). The Alternative Conversion Amount shall be due and payable to
Monsanto in cash on the closing date for the Offering. On such closing date,
the net proceeds of such Offering shall be paid by the Company to Monsanto in
full payment and satisfaction of such Alternative Conversion Amount, even if
such net proceeds are less than or greater than such Alternative Conversion
Amount.
If the Offering has not closed within sixty (60) days after the Company's
receipt of an Alternative Notice, Monsanto may, thereafter and in its sole
discretion, withdraw its Alternative Notice at any time. If Monsanto withdraws
an Alternative Notice, then, within five (5) business days thereafter, the
Company shall issue to Monsanto a number of shares of
-5-
<PAGE>
common stock of the Company (rounded to the next lowest full share) equal to the
Alternative Conversion Amount divided by the Average Market Price.
If (i) the Company properly notifies Monsanto as provided above in this
Section 1.06 and (ii) Monsanto does not give an Alternative Notice for the full
Conversion Amount, then, within five (5) business days after the Maturity Date
for a Loan, the Company shall issue to Monsanto a number of shares of common
stock of the Company (rounded to the next lowest full share) equal to the
Conversion Amount (or the difference between the Conversion Amount and
Alternative Conversion Amount, as applicable) divided by the Average Market
Price.
Any portion of the Conversion Amount not converted as provided above (i.e.,
because such amount would require conversion into a fractional share) shall be
paid to Monsanto by wire transfer as set forth above. Upon any such conversion,
the amount converted shall first be applied to reduce the accrued interest due
on the Loan as of the Maturity Date, and any remaining portion of the amount
converted shall be applied to reduce the principal due on such Loan.
Each time the Company issues shares of its common stock (including any
shares issued pursuant to Section 5.03 hereof) to Monsanto, it shall deliver to
Monsanto an opinion from counsel to the Company in a form reasonably
satisfactory to Monsanto relating to the issuance of such shares.
Notwithstanding anything to the contrary contained in this Agreement, on
each Maturity Date, all outstanding principal and accrued interest not to be
repaid, or converted by the Company to shares of common stock of the Company, in
accordance with this Section 1.06 shall be repaid in full to Monsanto in
accordance with Section 1.05 hereof.
Section 1.07. Prepayments. The Loans may be prepaid in whole or in part
-----------
at any time after giving at least three (3) days' prior written notice to
Monsanto.
-6-
<PAGE>
Section 1.08. Approved Persons. All requests for Advances (including any
----------------
requests for continuation of Loans) shall be made by an Approved Person
(hereinafter defined). An "Approved Person" shall be any person designated in
writing from time to time by the Company who is authorized to make requests for
Advances in the name of the Company hereunder. Unless Monsanto otherwise agrees,
there shall not be more than three (3) Approved Persons at any one time nor
shall any Approved Person have his or her office located at any place other than
the Company's main office in Davis, California, but the Company shall have the
right to change the persons so designated upon written notice thereof to
Monsanto. Any such designation shall be executed by the President or the Chief
Financial Officer of the Company and shall contain a specimen signature of the
Approved Person. Monsanto shall be entitled to rely on any direction by an
Approved Person regarding the making of Advances or the transfer of funds
hereunder, or any such direction that Monsanto believes to be made by the
Approved Person, whether such direction be received by telephone, by facsimile
transmission, by TELEX, by mail or otherwise.
ARTICLE II
CONDITIONS OF LENDING
Section 2.01. Conditions Precedent to Loan One. The obligation of
--------------------------------
Monsanto to make the first Advance under Loan One is subject to the following
conditions precedent that:
(a) Acquisition Agreement Conditions. All of the conditions set forth
--------------------------------
in Section 8.2 of the Agreement and Plan of Reorganization("Acquisition
Agreement") between Monsanto and Calgene, Inc. ("Calgene"), dated October 13,
1995 must be fulfilled (or waived in writing by Monsanto) and all the documents
that Calgene or the Company is required to deliver to Monsanto pursuant to such
Section 8.2 must be delivered (or waived in writing by Monsanto).
(b) Documents. Monsanto shall receive the following, each dated the
---------
date hereof or such other date as may be specifically permitted, in form and
substance satisfactory to Monsanto:
-7-
<PAGE>
(i) Note. The Note for Loan One, duly executed by the
----
Company.
(ii) Guaranty. The Guaranty, duly executed by all the
--------
Subsidiaries.
(iii) Other Approvals. Such other approvals,
---------------
resolutions, opinions or documents, as Monsanto may reasonably request.
Section 2.02. Conditions Precedent to Each Advance. The obligation
------------------------------------
of Monsanto to make any Advances under Loan One, Loan Two or Loan Three shall be
subject to the further conditions precedent that, on the funding date, (i) all
representations and warranties of the Company and the Subsidiaries contained in
this Agreement and the Guaranty shall be true, correct, accurate and complete in
all material respects as if made on such date (except (A) to the extent such
representations speak as of an earlier date or (B) for changes arising from
events permitted by the covenants specified in this Agreement), (ii) all
covenants specified in this Agreement shall have been complied with in all
material respects, (iii) no event shall have occurred and be continuing, or
would result from such Advance, which constitutes an Event of Default or
Potential Default, (iv) there shall not be initiated against the Company or any
Subsidiary any action, suit or proceeding at law or in equity or by or before
any court or government agency or authority or arbitral tribunal and there shall
not have occurred any legal, regulatory or other development or any other
circumstances whatsoever which, in the opinion of Monsanto, could reasonably be
expected to have a material adverse effect on (a) the business, assets,
operations or financial condition of the Company and its Subsidiaries taken as a
whole, or (b) the ability of the Company and its Subsidiaries to perform any of
their respective obligations hereunder or under the documents contemplated
hereby (each of the foregoing being hereafter referred to as a "Material Adverse
Effect"); provided, however, that no Material Adverse Effect shall be deemed to
have occurred based solely on the outcome of the litigation between the Company
and Enzo Biochem, Inc. ("Enzo"), (v) the Note evidencing Loan Two and the Note
evidencing Loan Three shall have been delivered by the Company to Monsanto
before any Advance under Loan Two or Loan Three, respectively, and (vi) an
Advance request in proper form shall have been submitted or made to Monsanto by
the Company.
-8-
<PAGE>
The making of a request by the Company for an Advance or a Loan hereunder,
whether in writing, or by telephone confirmed in writing, or otherwise, shall
constitute a certification by the Company that all representations and
warranties recited or referred to in this Section 2.02 and Article III hereof
are true as of and as if made the date of such request (except as set forth
above) and that all required conditions to the making of such Loan and any
Advance thereunder have been met.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company. The
---------------------------------------------
representations and warranties of Calgene set forth in Section 6.2 of the
Acquisition Agreement are incorporated by reference herein. All such
representations and warranties shall be deemed made by the Company herein and
shall survive and be continuing so long as any principal or accrued interest is
outstanding under any of the Loans.
ARTICLE IV
COVENANTS OF THE COMPANY
Section 4.01. Affirmative Covenants. So long as any of the Loans or
---------------------
accrued interest shall remain unpaid or Monsanto shall have any Commitment
hereunder, the Company shall (and, where appropriate even if not so stated,
shall cause each of the Subsidiaries to), unless Monsanto shall otherwise
consent in writing, which consent shall not be unreasonably withheld:
(a) Preservation of Business and Corporate Existence. As to the
------------------------------------------------
Company and each Subsidiary, carry on and conduct its business affairs in
substantially the same manner as presently carried on and conducted, and
maintain in good standing its existence and its right to transact business in
those states in which it is now or may hereafter be doing business; and maintain
all licenses, permits and registrations necessary to the conduct of its
business.
-9-
<PAGE>
(b) Use of Proceeds. Use the proceeds of the Loans solely for general
---------------
corporate purposes of the Company and the Subsidiaries. Regardless of the
general corporate purposes to which the Company chooses to apply the proceeds of
the Loans (including loaning any portion of the proceeds to Tomato Investment
Associates, Inc. ("Tomato Associates") and Calgene), all outstanding principal
and accrued interest of each Loan shall be due on each respective Maturity Date.
(c) Reporting Requirements. Furnish to Monsanto:
----------------------
(i) As soon as available and in any event within sixty (60)
days after the end of each calendar quarter, one (1) copy of the
consolidated and consolidating financial statements prepared by the Company
and certified by the Chief Financial Officer of the Company, and as soon as
available and in any event within one hundred twenty (120) days after the
end of its fiscal year, one (1) copy of its financial statements audited by
an independent public accountant. The financial state ments so provided
shall include, but not be limited to, the balance sheet, income statement
and cash flow statement of the Company, as well as consolidated and
consolidating statements of all Subsidiaries (which consolidating statement
need not be audited). Such financial statements shall be accompanied by a
written certification from the Chief Financial Officer of the Company (A)
stating that the financial statements present fairly the consolidated
financial condition of the Company and that no event has since occurred
which would constitute a Material Adverse Effect on the consolidated
financial condition of the Company from that represented on the financial
statements; (B) demonstrating in detail, satisfactory to Monsanto, the
Company's compliance with the financial covenants set forth in Sections
4.01(f) and 4.01(g) hereof at and as of the end of the quarter or fiscal
year, as applicable; (C) stating that no Event of Default or Potential
Default is then existing at the date of the certification; and (D) stating
that the representations and warranties contained in this Agreement and the
Guaranty are accurate and complete in all material respects.
-10-
<PAGE>
(ii) Promptly after the sending or filing thereof, copies of
all reports which the Company sends to any of its stock or security holders
and copies of all reports and other materials (including registration
statements, if any) which the Company hereafter files with the Securities
and Exchange Commission or any national securities exchange.
(iii) Such other information respecting the condition or
operations, financial or otherwise, of the Company as Monsanto may from
time to time reasonably request.
(d) Insurance. Insure and keep insured at all times with good and
---------
responsible insurance companies reasonably acceptable to Monsanto all of its
property of an insurable nature and maintain insurance against liability on
account of damage to persons or property in such manner and to the extent that
like risks are usually insured by others conducting similar businesses in the
general areas where the Company and each of the Subsidiaries conduct their
business. Company shall, upon request of Monsanto at any time, furnish a written
summary of the amount and type of insurance carried, the names of the insurers
and the policy numbers.
(e) Government Actions. Obtain and maintain all material
-------------------
authorizations and approvals, and other actions by, and make and maintain all
notices to or filings with, any governmental authority or regulatory body now or
hereafter required for the making and performance of this Agreement and the
Notes.
(f) Net Worth. Maintain, at and as of the end of the quarter or
---------
fiscal year, as applicable, consolidated Net Worth (hereinafter defined) of not
less than Ten Million Dollars ($10,000,000) and a minimum consolidated working
capital of not less than Five Million Dollars ($5,000,000) (which consolidated
working capital shall be the excess of Current Assets (hereinafter defined) over
Current Liabilities (hereinafter defined). Further, the ratio of Total Long-Term
Liabilities (hereinafter defined) to Net Worth shall not exceed the ratio of
one-to-one.
-11-
<PAGE>
As used herein, "Net Worth" shall mean the total of common and
preferred stock, paid in surplus, retained earnings and additional stockholders'
equity of the Company and the Subsidiaries on a consolidated basis less
intangibles, determined in accordance with generally accepted accounting
principles, consistently applied.
"Total Long-Term Liabilities" shall mean the total of all long-
term liabilities of the Company and the Subsidiaries on a consolidated basis,
determined in accordance with generally accepted accounting principles,
consistently applied.
"Current Assets" shall mean the total of all current assets of
the Company and the Subsidiaries on a consolidated basis, determined in
accordance with generally accepted accounting principles, consistently applied.
"Current Liabilities" shall mean the total of all current
liabilities of the Company and its Subsidiaries on a consolidated basis,
determined in accordance with generally accepted accounting principles,
consistently applied.
For purposes of making any calculation under this Article IV, the
outstanding principal of amounts loaned by Monsanto to the Company pursuant to
this Agreement or the Gargiulo Credit Facility Agreement of even date herewith
between Monsanto and the Company (the "Gargiulo Credit Facility Agreement")
(except to the extent of the "Repayment Portion of Cumulative Free Cash Flow,"
as defined therein, which has not been paid to Monsanto), shall be deemed to be
stockholders' equity and not liabilities.
(g) Current Ratio. Maintain, on a consolidated basis, a ratio of
-------------
Current Assets to Current Liabilities of at least one-to-one.
(h) Audits, Consultants and Inspections. Permit Monsanto (using
-----------------------------------
Monsanto's internal and/or external auditors or any other person appointed by
Monsanto to whom the Company does not reasonably object) (i) to audit the books
and records, other financial information and business practices and operations
of the Company and its
-12-
<PAGE>
Subsidiaries, and (ii) to discuss the business practices and operations,
affairs, finances and accounts of the Company and its Subsidiaries with the
officers of the Company and its Subsidiaries 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 Subsidiaries') properties, books and
records by Monsanto (using the persons identified above) during normal business
hours or at other reasonable times. The scope of all such audits, discussions
and inspections shall be determined by Monsanto in its sole discretion. Any
authorized representative of Monsanto who or which is not employed by Monsanto
(i) shall be required to execute a confidentiality agreement in a form approved
by the Board of Directors of the Company (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 of the Company; 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.
(i) Payment of Taxes. Pay and discharge, before they become
----------------
delinquent, all taxes, assessments and other governmental charges imposed upon
the Company, the Subsidiaries or any of its or their properties, or any part
thereof, or upon the income or profits therefrom and all claims for labor,
materials or supplies which, if unpaid, might be or become a lien or charge upon
any of its or their property, except such items as it or they are in good faith
appropriately contesting and as to which adequate reserves have been provided.
(j) Payment of Indebtedness. Pay any and all indebtedness for
-----------------------
borrowed money payable or guaranteed by the Company (or any Subsidiary), and any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in accordance with the agreement
or instrument relating to such indebtedness or guarantee, except those being
contested in good faith and as to which adequate reserves have been provided.
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<PAGE>
(k) Notice of Subsequent Events. Immediately upon the President or
---------------------------
Chief Financial Officer of the Company obtaining knowledge of (i) any material
adverse change in the condition or operation, financial or otherwise, of the
Company and its Subsidiaries; (ii) any Event of Default or Potential Default
under this Agreement; (iii) any default or potential default by the Company or
any of the Subsidiaries under or with respect to any instrument, contract or
agreement to which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries is bound which may constitute a Material
Adverse Effect; (iv) any default or potential default by the Company or any of
the Subsidiaries under or with respect to any order, writ, injunction, decision
or decree of any court, governmental authority or arbitral body to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries is bound which may constitute a Material Adverse Effect; or (v)
any action or proceeding pending or, to the knowledge of the President or Chief
Financial Officer of the Company, threatened against the Company or any of the
Subsidiaries before any court, governmental authority or arbitral body which, if
decided adversely to the Company or such Subsidiary, would result in a Material
Adverse Effect, deliver to Monsanto a written certificate signed by such officer
specifying the nature thereof, the period of existence thereof and what action
the Company has taken and proposes to take with respect thereto.
(l) ERISA Compliance. If the Company or any of the Subsidiaries shall
----------------
have any pension plan, comply with all requirements of the Employee Retirement
Income Security Act of 1974, as amended from time to time ("ERISA") relating to
such plan. Without limiting the generality of the foregoing, the Company (and
each of the Subsidiaries) shall not:
(i) Permit any Plan maintained by it to engage in any non-
exempt "prohibited transaction" as such term is defined in Section 4975 of
the Internal Revenue Code of 1986, as amended;
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<PAGE>
(ii) Permit any Plan maintained by it to incur any
"accumulative funding deficiency," as such term is defined in Section 302
of ERISA, 29 U.S.C (S)1082, whether or not waived;
(iii) Terminate any such Plan in a manner which could result in
the imposition of a lien on the property of Company pursuant to Section
4068 of ERISA, 29 U.S.C. (S)1368; or
(iv) Take any action which would constitute a complete or
partial withdrawal from a Multiemployer Plan (hereinafter defined) within
the meaning of Sections 4203 and 4205 of Title IV of ERISA, 29 U.S.C.
(S)(S)1383 and 1385.
Notwithstanding any provision contained in this Section 4.01(l) to the
contrary, an act by the Company shall not be deemed to constitute a violation of
subparagraphs (i) through (iv) hereof unless Monsanto determines in good faith
that said action, individually or cumulatively with other acts of the Company,
does have or is likely to cause, a Material Adverse Effect.
Company shall have the affirmative obligation hereunder to report to
Monsanto any of those acts identified in subparagraphs (i) through (iv) hereof,
regardless of whether said act does or is likely to cause a Material Adverse
Effect.
(m) Compliance with Laws. Comply in all material respects with all
--------------------
applicable laws, rules, regulations and orders.
(n) Additional Subsidiaries. If the Company or any Subsidiary
-----------------------
acquires or creates any additional majority-owned subsidiary hereafter, promptly
notify Monsanto in writing. Such additional subsidiary shall also, upon
capitalization and election of officers, execute and deliver to Monsanto a
guaranty of the Loans in the form attached hereto as Exhibit C and, upon such
---------
delivery, shall become a Subsidiary under this Agreement.
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<PAGE>
(o) Reservation of Shares. Reserve adequate shares of common stock of
---------------------
the Company to be issued upon the occurrence of a conversion as described in
Sections 1.06 and 5.03 hereof.
(p) Further Assurances. From time to time, execute and deliver to
------------------
Monsanto such additional documents and provide such additional information as
Monsanto may reasonably require to carry out the terms of this Agreement and be
informed of the status and affairs of the Company and its Subsidiaries.
Section 4.02. Negative Covenants. Except as specifically provided
------------------
otherwise hereinbelow, so long as any Loan shall remain unpaid or Monsanto shall
have any Commitment hereunder, without the written consent of Monsanto, the
Company (and each of the Subsidiaries):
The following negative covenants set forth in this Section 4.02 shall be of
no force or effect during such period as the "Supermajority Requirements"
set forth in Article 4 of the Stockholders Agreement dated of even date
herewith between the Company and Monsanto are in effect. In the event such
"Supermajority Requirements" are no longer in effect, the foregoing
negative covenants shall be fully applicable to the Company (and, where
appropriate, each of the Subsidiaries).
(a) Acquisitions. Shall not enter into any merger or consolidation or
------------
acquire any business or assets that would constitute a Substantial Part
(hereinafter defined) of the Company and its Subsidiaries, taken as a whole,
whether such acquisition be by merger or consolidation or the purchase of stock
or assets or otherwise. "Substantial Part" means more than ten percent (10%) of
the total assets of the Company and its Subsidiaries, taken as a whole, 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.
(b) Liens. Shall not, and shall not permit any Subsidiary to, pledge,
-----
mortgage or otherwise encumber or subject to or permit to exist upon or be
subjected to any
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<PAGE>
lien, charge or security interest of any kind (including any conditional sale or
other title retention agreement and any lease in the nature thereof), on any of
its properties of any kind or character at any time owned by the Company or any
Subsidiary other than:
(i) liens, pledges or deposits for workmen's compensation,
unemployment insurance, old age benefits or social security obligations, taxes,
assessments, statutory obligations or other similar charges, good faith deposits
made in connection with tenders, contracts or leases to which the Company or any
Subsidiary is a party or other deposits required to be made in the ordinary
course of business, provided in each case the obligation secured is not overdue
or, if overdue, is being contested in good faith by appropriate proceedings and
adequate reserves have been provided therefor in accordance with generally
accepted accounting principles, consistently applied, and that the obligation is
not for borrowed money, customer advances, trade payables, or obligations to
agricultural producers;
(ii) the pledge of assets for the purpose of securing an appeal
or stay or discharge in the course of any legal proceedings, provided that the
aggregate amount of liabilities of the Company or any Subsidiary so secured by a
pledge of property permitted under this subsection (ii) including interest and
penalties thereon, if any, shall not be in excess of One Million Dollars
($1,000,000) at any one time outstanding;
(iii) liens, pledges, mortgages, security interests or other
charges existing on the date hereof and disclosed in Exhibit E hereto; and
---------
(iv) liens, pledges, mortgages, security interests and other
encumbrances on property which secure indebtedness permitted under Section
4.02(l) hereof.
(c) Limitations on Merger and Disposition of Assets. Shall not merge
-----------------------------------------------
into or consolidate with any other entity, or lease, sell, transfer or otherwise
dispose of all or any Substantial Part of the Company and its Subsidiaries,
taken as a whole, except (i) pursuant to security interests granted in
connection with borrowings permitted under Section 4.02(l)
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<PAGE>
hereof and (ii) in the case of a merger or consolidation of the Company, (A) the
shareholders of the Company immediately prior to the merger or consolidation
continue to hold more than fifty percent (50%) of the outstanding voting power
of the surviving entity, (B) the surviving entity (after giving effect to the
merger or consolidation) has a net worth equal to or greater than the Company's
consolidated net worth (determined immediately prior to the merger or
consolidation) and (C) the surviving entity expressly assumes all of the
obligations of the Company under this Agreement.
(d) Non-Default Under Other Agreements. Shall not default upon or
----------------------------------
fail to pay any indebtedness for money borrowed as the same matures under any
agreement or permit to occur any other event which creates a default under such
or under any other agreement to which the Company is a party or by which it is
bound, in either case in an amount in excess of One Million Dollars
($1,000,000).
(e) Conflicting Agreement. Shall not enter into any agreement, any
---------------------
term or condition of which conflicts with any term or condition of this
Agreement.
(f) Changes in Accounting Principles. Shall not make any change in
--------------------------------
its principles or methods of accounting as currently in effect, except such
changes as are required by generally accepted accounting principles, or, without
prior written notice to Monsanto, change its fiscal year.
(g) Loans and Investments. Shall not make any investment in a
---------------------
corporation, firm or business or make loans or advances to any person except:
(i) Investments in interest bearing obligations of the United
States government, certificates of deposit issued by United States banks,
commercial paper and repurchase agreements or other short-term, high grade
(A-1, P-1 or similar rating) investments;
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<PAGE>
(ii) Advances to others in the form of progress payments,
prepaid rents, security deposits, grower loans or other advances customary
in transactions made in the ordinary course of business between persons not
affiliated with each other;
(iii) Subject to the provisions of Section 4.02(a) hereof,
investments in any partially- or wholly-owned Subsidiary or any
corporation, firm or business in the same type of business as the Company,
which line of business will continue after such investment;
(iv) The loans listed and described on Exhibit F hereto and
---------
additional purchase money loans to purchasers of assets of the Company or
its Subsidiaries which at no time in the aggregate exceed One Million
Dollars ($1,000,000);
(v) Loans and travel advances to employees of the Company
which, in the aggregate (inclusive of the employee loans listed on Exhibit
------
G hereto), do not exceed One Hundred Thousand Dollars ($100,000);
-
(vi) Loans or advances to any wholly-owned Subsidiary; or
(vii) Stock, obligations or securities received in settlement of
debts (created in the ordinary course of business) owing to the Company or
any Subsidiary.
Nothing in this subsection (g) shall be construed as preventing Company or any
Subsidiary from making any acquisition permitted under subsection (a) above of
this Section 4.02.
(h) Guaranties. Shall not guarantee the obligations of any
----------
corporation, person or entity, except endorsements of negotiable instruments or
checks deposited for collection acquired in the ordinary course of business and
except guaranties by (i) the Company or any Subsidiary of the obligations of any
of the wholly-owned Subsidiaries or
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<PAGE>
any subsidiary hereinafter acquired and becoming a wholly-owned Subsidiary
hereunder or (ii) any Subsidiary of the obligations of the Company.
(i) Capital Expenditures. Shall not make capital expenditures
--------------------
(including capitalized leases but excluding fixed assets acquired in connection
with corporate acquisitions), during any fiscal year of the Company, on a
consolidated basis, in an aggregate amount in excess of Sixty Million Dollars
($60,000,000).
(j) Dividends. Shall not pay or declare any dividends (either in
---------
cash or property) or make distributions on, or redeem, repurchase, retire or
otherwise acquire for value, any shares of stock of the Company (including,
options, warrants or other rights to acquire such shares of stock), other than
repurchases or redemptions of equity securities of the Company.
(l) Limit on Indebtedness. Shall not create, assume or incur any
---------------------
indebtedness, in the aggregate, exceeding 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 working
capital lines and indebtedness incurred to acquire property, plant or equipment
and secured by the acquired asset, and any refinancing of any of the foregoing,
exclusive of (i) amounts outstanding under this Agreement or the Gargiulo Credit
Facility Agreement, and (ii) indebtedness approved by the Board of Directors of
the Company while the "Supermajority Provisions" were in effect.
ARTICLE V
EVENTS OF DEFAULT
Section 5.01. Events of Default. Any one (1) or more of the following
-----------------
events shall constitute an Event of Default under this Agreement, the Notes and
any other document or instrument pertaining to or necessary to carry out the
purposes of this Agreement:
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<PAGE>
(a) Payment Default. The Company fails to pay when due any
----------------
principal, interest or other amount which it is obligated to pay under this
Agreement and the Notes and such failure shall continue unremedied for five (5)
days after the date on which such payment was due.
(b) Representation Default. Any representation or warranty made by
-----------------------
the Company in this Agreement, the Notes, or in any certificate, notification or
report furnished hereunder, proves to have been incorrect or misleading in any
material respect when made or renewed and is material to the ability of the
Company to perform its obligations under this Agreement or the Notes.
(c) Other Provisions Default. The Company fails to perform or observe
-------------------------
any material covenant or agreement to be performed or observed by it under this
Agreement or the Notes or the Company fails to perform or observe any other
material term, covenant or condition in this Agreement or the Notes to be made
and performed by the Company and, in the case of any such default that is
curable by the Company, such default is not cured within ten (10) days after
written notice thereof by Monsanto.
(d) Authorizations Default. Any governmental filing, registration,
-----------------------
consent or approval necessary in connection with this Agreement or any document
contemplated hereby is withheld, revoked or restricted in a way which
constitutes a Material Adverse Effect, unless such revocation or restriction is
withdrawn.
(e) Cross Default. The Company or any Subsidiary (i) fails to pay
--------------
when due any indebtedness (in an amount in excess of One Million Dollars
($1,000,000)) senior to any of the Loans for which it is liable, contingently or
otherwise, and the lender declares such indebtedness to be immediately due and
payable, or (ii) commits a material breach of or defaults in the performance or
observance of any of the representations, warranties, covenants, terms or
provisions of, or a default otherwise occurs under, (a) the Acquisition
Agreement or any of the other Transaction Agreements (as defined in the
Acquisition Agreement), (b) the Insect-Protected Cotton License and Seed
Services Agreement dated as
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<PAGE>
of September 26, 1995 between Monsanto and Calgene, (c) the Gargiulo Credit
Facility Agreement, (d) the Stockholders Agreement between Monsanto and the
Company of even date herewith or (e) any other agreement or instrument between
Monsanto and the Company or any Subsidiary and, in the case of any such default
that is curable, such default is not cured within ten (10) days after the
Company or Subsidiary, as applicable, receives notice thereof.
(f) Lien Default. The holder of any lien, whether now or hereafter
-------------
existing, granted or assumed by the Company, and securing any indebtedness
exceeding One Million Dollars ($1,000,000) in the aggregate (whether or not
indebtedness of the Company) takes substantial steps to enforce the same because
of the nonpayment (whether by acceleration or otherwise) of the indebtedness
secured thereby.
(g) Judgment Default. A final judgment, order or conviction (whether
-----------------
criminal or civil) is rendered against the Company or any of its Subsidiaries or
its or its Subsidiaries' properties or assets which constitutes a Material
Adverse Effect and such judgment or order shall continue unsatisfied and the
execution thereof unstayed for a period of ninety (90) consecutive days.
(h) Bankruptcy Default. (i) the Company or any of the Subsidiaries
-------------------
shall fail to pay or shall admit in writing its inability to pay its debts as
they become due, shall become insolvent, howsoever evidenced, or shall make a
general assignment for the benefit of creditors; (ii) any proceeding shall be
instituted by or against the Company or any of the Subsidiaries under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors or any
similar law or seeking appointment of a receiver, trustee, or other similar
person for it or for any Substantial Part of its property and, if such
proceeding is not commenced by the Company or any of the Subsidiaries, it is
consented to or acquiesced in by the Company or any of the Subsidiaries or
remains undismissed for forty-five (45) days after institution; (iii) all or a
Substantial Part of the Company's or any Subsidiary's property is attached,
seized, levied upon or comes within the possession of any receiver, trustee or
similar person for the benefit of creditors; (iv) any action is taken or any
proceeding is filed
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<PAGE>
or commenced with respect to the Company's liquidation, dissolution or
termination of existence; or (v) the Company shall take any corporate action to
authorize any of the actions described in this subsection (h);
(i) Tax Lien Default. Any local, state or federal government agency
----------------
places a material lien against any asset of the Company or any Subsidiary as a
result of nonpayment of any tax obligation owed by the Company or such
Subsidiary, which lien is not removed within forty-five (45) days after
placement.
(j) ERISA Default. Any of the following events occur or exist with
-------------
respect to the Company or any Subsidiary: (a) any Prohibited Transaction
(hereinafter defined) involving any Plan; (b) any Reportable Event (hereinafter
defined) with respect to any Plan; (c) the filing under Section 4041 of ERISA
of a notice of intent to terminate any Plan or the termination of any Plan; (d)
any event or circumstance that might constitute grounds entitling the PBGC
(hereinafter defined) to institute proceedings under Section 4042 of ERISA for
the termination of, or for the appointment of a trustee to administer, any Plan,
or the institution by the PBGC of any such proceedings; (e) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency or termination of any Multiemployer Plan; and, in
each case above, such event or condition, together with all other events or
conditions, if any, could, in the opinion of Monsanto, subject the Company to
any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC,
or otherwise. For purposes of this Agreement: "Plan" means any employee benefit
or other plan established, maintained, or to which contributions have been made
by the Company or any ERISA Affiliate; "Reportable Event" means any of the
events set forth in Section 4043 of ERISA; "ERISA Affiliate" means any trade or
business (whether or not incorporated) that, together with Company, is treated
as a single employer under Section 414 of the Internal Revenue Code of 1986, as
amended; "Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Company or any ERISA Affiliate; "PBGC" means
the Pension Benefit Guaranty Corporation or any entity succeeding to any or all
of its functions under ERISA; and "Prohibited
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<PAGE>
Transaction" means any transaction set forth in Section 406 of ERISA or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time.
(k) Guaranty Default. Any Subsidiary shall fail to perform or observe
----------------
its obligations under the Guaranty and such failure (other than failure to pay
to Monsanto sums due thereunder) shall not have been remedied within thirty (30)
days after written notice thereof shall have been given by Monsanto.
Section 5.02. Rights of Monsanto. Upon the occurrence of an Event of
------------------
Default, Monsanto may, at its election, without notice of its election and
without demand, do any one (1) or more of the following (all of which are
authorized by the Company):
(a) Cease advancing money or extending credit to or for the benefit
of the Company;
(b) Subject to the provisions of Section 5.03 hereof, declare the
obligation of Monsanto to make Loans and Advances hereunder to be terminated,
whereupon the same shall forthwith terminate; and
(c) Subject to the provisions of Section 5.03 hereof, declare the
Notes, including all principal and accrued interest thereon, and all other
amounts payable under this Agreement to be forthwith due and payable, without
presentment, protest or further notice of any kind, all of which are hereby
expressly waived by the Company.
Section 5.03. Default Conversion. 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 (the "Election Period"), the Company, subject
to Monsanto's right to require the Company to sell shares and pay cash, as
provided below, may elect to convert all or any portion of the principal and
accrued interest under any outstanding Loan into shares of common stock of the
Company at the average of the closing market prices for such shares during the
thirty (30) trading days immediately preceding the Default Conversion Date
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<PAGE>
(hereinafter defined) for such Loan (the "Default Average Market Price").
Monsanto shall not take any of the actions set forth in paragraphs (b) or (c) of
Section 5.02 hereof until the end of such Election Period. If all of the
principal and accrued interest are converted into shares of common stock of the
Company or paid in cash pursuant to this Section 5.03, Monsanto shall have no
further rights under Section 5.02 hereof, arising because of the Event of
Default for which such conversion or payment was made hereunder.
If the Company does not elect to convert all of the principal and accrued
interest under any outstanding Loan into shares of common stock of the Company
during the Election Period, then, within ten (10) days after such Election
Period, Monsanto may, in addition to any other remedies set forth in this
Agreement, elect to convert all or any portion of the remaining principal and
accrued interest under such Loan into shares of common stock of the Company at
the Default Average Market Price; provided, however, that in no event shall
Monsanto elect to convert principal and accrued interest into more than three
million (3,000,000) shares of common stock of the Company (as such number is
adjusted for stock dividends, stock splits and similar events affecting holders
of the Company's common stock) for each Loan.
In order to exercise the conversion rights described above, at any time
after the occurrence and during the continuation of an Event of Default, a party
shall send a written notice (the "Default Conversion Notice") to the other
party, stating that the exercising party intends to exercise such conversion
rights; provided, however, that, in the case of the Company, the Default
Conversion Notice may only be given during the Election Period. The Default
Conversion Notice shall specify (i) the amount of the principal and accrued
interest that the exercising party intends to convert (the "Default Conversion
Amount") and (ii) the date as of which such conversion shall take place (the
"Default Conversion Date"), which date shall not be later than ten (10) days
after the date of the Default Conversion Notice.
Monsanto may, in its sole discretion and within five (5) business days
after its receipt of any Default Conversion Notice from the Company, give
written notice (the "Alternative
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<PAGE>
Default Notice") to the Company, stating that all or any part of the Default
Conversion Amount set forth in such Default Conversion Notice (the "Alternative
Default Conversion Amount") shall be payable in cash. Upon receipt of an
Alternative Default Notice, (i) the Alternative Default Conversion Amount may no
longer be converted into shares of common stock of the Company (unless the
Alternative Default Notice shall have been withdrawn as provided below) and (ii)
the difference, if any, between the Default Conversion Amount and the
Alternative Default Conversion Amount shall be converted into shares of common
stock of the Company in accordance with the terms of the Default Conversion
Notice and the applicable provisions of this Section 5.03. The Company shall
proceed promptly, using its best efforts and at its expense, to take such
actions as are necessary to effect the public sale of a number of shares of its
common stock (rounded to the next lowest full share) equal to the Alternative
Default Conversion Amount divided by the Default Average Market Price (the
"Default Offering"). The Alternative Default Conversion Amount shall be due and
payable to Monsanto in cash on the closing date for the Default Offering. On
such closing date, the net proceeds of such Default Offering shall be paid by
the Company to Monsanto in full payment and satisfaction of such Alternative
Default Conversion Amount, even if such net proceeds are less than or greater
than such Alternative Default Conversion Amount.
If the Default Offering has not closed within sixty (60) days after the
Company's receipt of an Alternative Default Notice, Monsanto may, thereafter and
in its sole discretion, withdraw its Alternative Default Notice at any time. If
Monsanto withdraws an Alternative Default Notice, then, within five (5) business
days thereafter, the Company shall issue to Monsanto a number of shares of
common stock of the Company (rounded to the next lowest full share) equal to the
Alternative Default Conversion Amount divided by the Default Average Market
Price.
If (i) either party properly gives the other party a Default Conversion
Notice and (ii) in the case of a Default Conversion Notice given by the Company,
Monsanto does not give an Alternative Default Notice for the full Default
Conversion Amount, then, within five (5) business days after the Default
Conversion Date, the Company shall issue to Monsanto a number of shares of
common stock of the Company (rounded to the next lowest full share)
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<PAGE>
equal to the Default Conversion Amount (or the difference between the Default
Conversion Amount and the Alternative Default Conversion Amount, as applicable)
divided by the Default Average Market Price.
Any portion of the Default Conversion Amount not so converted (i.e.,
because such amount would require conversion into a fractional share or, in the
case of Monsanto, because the number of shares available are not adequate to
convert all of the Default Conversion Amount) shall be paid to Monsanto in cash.
Upon any such conversion, the Default Conversion Amount (including any portion
thereof paid to Monsanto in cash) shall first be applied to reduce the accrued
interest due on the Loan as of the Default Conversion Date, and any remaining
portion of the Default Conversion Amount shall be applied to reduce the
principal due on such Loan.
Section 5.04. Company's Obligations. The Company recognizes that, if the
---------------------
Company fails to perform, observe or discharge any of its obligations under this
Agreement or the other collateral agreements hereto, a remedy at law may not
provide adequate relief to Monsanto; therefore, the Company agrees that Monsanto
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages. All of Monsanto's rights
and remedies granted under this Agreement and the collateral agreements hereto
are cumulative and nonexclusive. The Company shall pay upon demand all costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred by Monsanto in enforcing this Agreement. All such sums not
paid on demand shall be treated as outstanding principal under the Notes.
ARTICLE VI
RIGHT OF SETOFF
Section 6.01. Right of Setoff. Upon the occurrence and during the
---------------
continuance of any Event of Default, Monsanto is hereby authorized at any time
and from time to time, without notice to the Company (any such notice being
expressly waived by the Company), to set off and apply any and all funds at any
time held and other indebtedness at any time owing
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<PAGE>
by Monsanto to or for the credit or the account of the Company or any of the
Subsidiaries against any and all of the obligations of the Company now or
hereafter existing under this Agreement and the Notes, irrespective of whether
or not Monsanto shall have made any demand under this Agreement or the Notes and
although such obligations may be unmatured. Notwithstanding the preceding
sentence, Monsanto shall not apply any of such setoff amounts until the end of
the notice periods set forth in Section 5.03 hereof. The rights of Monsanto
under this Section 6.01 are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which Monsanto may have.
ARTICLE VII
SUBORDINATION
Section 7.01 Subordination.
-------------
(a) All of the obligations of the Company to Monsanto under this
Agreement and the Notes, including, without limitation, the Company's obligation
to repay any Advances (collectively, the "Subordinated Indebtedness"), shall to
the extent and in the manner hereinafter set forth, be subordinated and subject
in right of payment to the prior payment in full of a Senior Indebtedness.
"Senior Indebtedness" means (a) all indebtedness of the Company, including the
principal of and interest on such indebtedness, whether outstanding on the date
of this Agreement or thereafter created (i) arising under working capital lines
of credit secured by inventory and/or receivables, (ii) incurred to acquire
property, plant or equipment and secured by the acquired asset or (iii)
otherwise permitted under Section 4.02(l) hereof at the time such indebtedness
is incurred, and (b) any modifications, refundings, deferrals, renewals or
extensions of any such Senior Indebtedness, or securities, notes or other
evidences of indebtedness issued in exchange for such Senior Indebtedness;
provided, however, that in no event shall the obligations of the Company under
the Gargiulo Credit Facility Agreement constitute Senior Indebtedness under this
Agreement. No payment on account of principal or interest on the Subordinated
Indebtedness 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 Senior Indebtedness or (ii) there shall have occurred an event of
default (other than a default in the payment of amounts due
-28-
<PAGE>
thereon) with respect to any Senior Indebtedness, as defined in the instrument
under which the same is outstanding, permitting the holders thereof to
accelerate the maturity thereof, and such event of default shall not have been
cured or waived or shall not have ceased to exist. Notwithstanding the
foregoing or any other provision of this Section 7.01, nothing in this Section
7.01 shall restrict or otherwise limit Monsanto's or Company's rights under
Sections 1.06 or 5.03 hereof.
(b) In the event of any distribution, dividend, or application,
partial or complete, voluntary or involuntary, by operation or law or otherwise,
of all or any part of the assets of the Company or of the proceeds thereof to
the creditors of the Company or upon any indebtedness of the Company, occurring
by reason of the liquidation, dissolution, or other winding up of the Company,
or by reason of any execution sale, or bankruptcy, receivership, reorganization,
arrangement, insolvency, liquidation or foreclosure proceeding of or for the
Company or involving its property, no dividend, distribution or application
shall be made, and Monsanto shall not be entitled to receive or retain any
dividend, distribution, or application on or in respect of principal of or
interest on Subordinated Indebtedness, unless and until all principal of and any
interest on Senior Indebtedness then outstanding shall have been paid and
satisfied in full, and in any such event any dividend, distribution or
application otherwise payable in respect of Subordinated Indebtedness shall be
paid and applied on Senior Indebtedness until such Senior Indebtedness has been
fully paid and satisfied.
(c) The holders of Senior Indebtedness need not at any time give
Monsanto notice of any kind of the creation or existence of any Senior
Indebtedness, nor of the amount or terms thereof, all such notice being hereby
expressly waived. Also, the holders of Senior Indebtedness may at any time and
from time to time, without the consent of or notice to Monsanto, without
incurring responsibility to Monsanto, and without impairing or releasing the
obligation of Monsanto under this Agreement (i) renew, refund or extend the
maturity of any Senior Indebtedness, or any part thereof, or otherwise revise,
amend or alter the terms and conditions thereof, (ii) sell, exchange, release or
otherwise deal with any property by whomsoever at any time pledged, mortgaged or
otherwise hypothecated or subjected to a lien
-29-
<PAGE>
to secure any Senior Indebtedness, and (iii) exercise or refrain from exercising
any rights against the Company and others, including Monsanto.
(d) Monsanto shall not sell, assign or otherwise transfer any
Subordinated Indebtedness, or any part thereof, except (i) upon the agreement of
the transferee or assignee to abide by and be bound by the terms hereof and (ii)
when Monsanto may assign its rights under the Stockholders Agreement dated of
even date herewith between Company and Monsanto.
(e) Monsanto shall cause all Subordinated Indebtedness to be at all
times evidenced by the Notes of the Company and shall cause all such Notes to
bear thereon a legend substantially as follows:
"The indebtedness evidenced by this Note is subordinate to any
and all indebtedness, obligations and liabilities of the maker
hereof to the holders of Senior Indebtedness in the manner and to
the extent set forth in the Credit Facility Agreement (as defined
below) to which reference is hereby made for a more full
statement thereof."
(f) If, notwithstanding the provisions of this Agreement, Monsanto
shall receive any payment of principal or interest on Subordinated Indebtedness
which the Company is not entitled to make pursuant to the terms hereof, whether
or not Monsanto has knowledge that the Company is not entitled to make such
payment, Monsanto shall promptly account for such payment and upon the demand of
the holders of Senior Indebtedness pay over such payment to such holders for
application to the Senior Indebtedness owing to such holders. No payment or any
distribution received by the holders of the Senior Indebtedness in respect of
Subordinated Indebtedness pursuant to any of the terms hereof shall entitle
Monsanto to any right, whether by virtue of subrogation or otherwise, in and to
any Senior Indebtedness unless and until all Senior Indebtedness has been fully
paid and satisfied and any commitment of the holders of Senior Indebtedness to
extend Senior Indebtedness to the Company has terminated.
-30-
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Incorporation of Acquisition Agreement. The provisions
--------------------------------------
contained in Article 12 of the Acquisition Agreement are incorporated herein by
this reference and shall apply to this Agreement to the same extent as if fully
set forth herein.
Section 8.02. Reinstatement of Indebtedness. This Agreement shall
-----------------------------
continue to be effective, or be reinstated, as the case may be, if, at any time,
payment, or any part thereof, of any amount paid by or on behalf of the Company
to Monsanto with regard to any Note is rescinded or must otherwise be restored
or returned (i) upon or in connection with the insolvency, bankruptcy,
dissolution, liquidation, or reorganization of the Company, or any Subsidiary,
or (ii) upon or as a result of the appointment of a receiver, intervenor, or
conservator of, or trustee, or similar officer for the Company or any Subsidiary
or any Substantial Part of the property of such entity or (iii) as a result of
Article VII hereof, all as though such payment has not been made.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CALGENE II, INC.
By:_______________________________________________
Title:____________________________________________
MONSANTO COMPANY
By:_______________________________________________
Title:____________________________________________
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<PAGE>
Exhibit 10.2
GARGIULO CREDIT FACILITY AGREEMENT
THIS AGREEMENT is made as of the _____ day of ____________, 1996, by and
between CALGENE II, INC., a Delaware corporation having its principal office in
Davis, California (the "Company"), and MONSANTO COMPANY, a Delaware corporation
with its main offices at 800 N. Lindbergh Boulevard, St. Louis, Missouri 63167
("Monsanto").
In consideration of the mutual benefits accruing to each of the parties,
the receipt and sufficiency of which are hereby acknowledged, and in further
consideration of the mutual performance of this Agreement, the parties hereto
agree as follows:
ARTICLE I
AMOUNT AND TERMS OF THE LOAN
Section 1.01. Loan. During the Commitment Period (hereinafter defined),
----
Monsanto agrees, on the terms and conditions hereafter set forth, to make a loan
("Loan") to the Company, the proceeds of which shall be used solely to support
the branded tomato strategy ("Strategy") of Tomato Investment Associates, Inc.,
a Delaware corporation, or its successors ("Tomato Associates") (such Strategy
shall be agreed upon by the Board of Directors of Tomato Associates and
incorporated herein by reference), from time to time after the date hereof, in
an aggregate amount not to exceed at any time outstanding Forty Million Dollars
($40,000,000), said sum being the "Commitment." Amounts advanced by Monsanto to
Gargiulo, G.P., Inc., a Delaware corporation ("Gargiulo, G.P."), or Gargiulo,
L.P., a Delaware limited partnership ("Gargiulo, L.P."), (Gargiulo, G.P. and
Gargiulo, L.P. collectively, "Gargiulo") prior to the date of this Agreement
(the "Gargiulo Loan") and outstanding on the date hereof, plus any accrued
interest thereon, shall be re-financed under, and shall become subject to the
terms and conditions of, this Agreement, and the total of
<PAGE>
such prior advances and accrued interest shall be deemed, without any action, to
be an Advance (hereinafter defined) hereunder on the date hereof used to repay
such total. Within said limits and prior to the occurrence of an Event of
Default (hereinafter defined), the Company may borrow, repay and reborrow under
this Agreement, each such borrowing or reborrowing being referred to herein as
an "Advance." Each Advance shall be in an amount of not less than One Hundred
Thousand Dollars ($100,000) and shall be in increments of One Hundred Thousand
Dollars ($100,000). Each request for an Advance (except the Advance relating to
repayment of the Gargiulo Loan referred to above) shall consist of documentation
submitted to Monsanto by Tomato Associates and the Company that is reasonably
acceptable to Monsanto, verifying that Tomato Associates has reached certain
milestones and achieved certain goals as set forth on Exhibit A attached hereto
---------
and incorporated herein by reference, as it may be amended from time to time,
and shall be accompanied by a written request substantially in the form attached
hereto as Exhibit B and incorporated herein or in such other form acceptable to
---------
Monsanto. The maximum amount of each Advance shall be determined in accordance
with the schedule set forth on Exhibit A. At no time shall Monsanto be obligated
---------
to make any Advance to the Company in connection with any milestone or goal set
forth on Exhibit A until such time as Tomato Associates and the Company have
---------
provided Monsanto with documentation reasonably acceptable to Monsanto,
verifying Tomato Associates' achievement of the goal and milestone for which
Tomato Associates and the Company are seeking the Advance. Upon achievement of
the applicable goal and milestone and upon fulfillment of the applicable
conditions set forth in Article II hereof and subject to the provisions of this
Agreement, Monsanto shall make such Advances available by wire transfer directly
into Tomato Associates' bank account pursuant to wiring instructions to be
provided at the time the request for each Advance is submitted, but the Company
agrees to reimburse Monsanto for all wire and other transfer costs incurred by
Monsanto, and the Company shall bear all risks of delays or nondelivery or
misdelivery of any such funds so wired or otherwise transferred other than those
caused by Monsanto's negligence or failure to transfer such funds in accordance
with the Company's directions. Any Advance under this Agreement shall be deemed
made on the day that the Advance proceeds are wired or otherwise transferred or,
if the Advance proceeds are used to repay the
-2-
<PAGE>
Gargiulo Loan, on the date hereof. Monsanto shall process each request for an
Advance as soon as reasonably practicable but no later than ten (10) working
days after receipt of the Company's request. The "Commitment Period" means the
period from the date of this Agreement to the earlier of the fourth anniversary
of the execution of this Agreement or the date Monsanto terminates its
obligations to make further Advances hereunder pursuant to Section 5.02 hereof.
The Loan made pursuant to this Agreement shall be supported by the joint and
several guaranty (the "Guaranty") of the subsidiaries of the Company which are
listed on Exhibit C hereto (the "Subsidiaries" or a "Subsidiary") in the form
---------
attached hereto as Exhibit D.
---------
Section 1.02. Note. The Loan shall be evidenced by a promissory note in
----
the form of Exhibit E attached hereto (the "Note"), dated as of the date hereof,
---------
payable to the order of Monsanto and representing the obligation of the Company
to pay the amount of the aggregate unpaid principal amount of the Loan, together
with interest on the principal amount outstanding from time to time, as provided
in this Agreement. Subject to the other provisions of this Agreement, the Note
shall provide that the Company shall pay all outstanding principal and accrued
interest to Monsanto on the fourth anniversary of this Agreement (the "Maturity
Date"), unless extended as provided herein, in one (1) payment in an amount
equal to the lesser of the Repayment Portion (hereinafter defined) of the
Cumulative Free Cash Flow (hereinafter defined) of Tomato Associates' total
business during the period between the date of this Agreement and the Maturity
Date and the amount of outstanding principal and accrued interest on the Loan.
For purposes of this Section 1.02, "Free Cash Flow" shall mean, for any Fiscal
Year (hereinafter defined) of Tomato Associates, the Operating Income
(hereinafter defined) of Tomato Associates' total business for such Fiscal Year,
adjusted by:
(i) the addition of the amount of depreciation and amortization in
such Fiscal Year, as included in calculating such Operating Income, as
reflected in Tomato Associates' consolidated statement of operations for
such Fiscal Year;
-3-
<PAGE>
(ii) the addition of the net loss, and subtraction of the net gain,
from the following events during such Fiscal Year, in all cases as included
in calculating such Operating Income, as reflected in Tomato Associates'
consolidated statement of operations for such Fiscal Year:
- the disposition of assets outside the ordinary course of business;
- the retirement of assets; and
- write-down of assets.
(iii) the addition of the aggregate net amount of any decrease, and
subtraction of the aggregate net amount of any increase, in current assets
(excluding cash, cash equivalents and short-term investments) which
include, but are not limited to, the following items as included in Tomato
Associates' consolidated balance sheet at the end of such Fiscal Year as
compared to the corresponding items included in Tomato Associates'
consolidated balance sheet at the end of the then preceding Fiscal Year:
Receivables, net;
Inventories;
Prepaid expenses; and
Deferred charges;
(iv) the addition of the aggregate net amount of any increase, and
subtraction of the aggregate net amount of any decrease, in current
liabilities, which include, but are not limited to, the following items as
included in Tomato Associates' consolidated balance sheet at the end of
such Fiscal Year compared to the corresponding items included in Tomato
Associates' consolidated balance sheet at the end of the then next
preceding Fiscal Year:
Accounts payable;
-4-
<PAGE>
Accrued expenses;
Amounts due to growers;
Deferred compensation;
Deferred income taxes; and
Liability reserves;
(v) the subtraction of the aggregate amount of capital expenditures
and investments and expenditures for other noncurrent assets during such
Fiscal Year, as included in Tomato Associates' consolidated statement of
cash flows for such Fiscal Year;
(vi) the addition of the amount of any net decrease, and the
subtraction of the amount of any net increase, in such Operating Income due
to accounting changes for such Fiscal Year; in all cases as included in
Tomato Associates' consolidated financial statements for such Fiscal Year
prepared in accordance with generally accepted accounting principles,
consistently applied, and audited by Tomato Associates' independent
certified public accountants; and
(vii) the addition of the aggregate net amount of any increase, and
subtraction of the aggregate net amount of any decrease, in noncurrent
liabilities as reflected in Tomato Associates' consolidated balance sheet
at the end of such Fiscal Year compared to the corresponding items included
in Tomato Associates' consolidated balance sheet at the end of the then
next preceding Fiscal Year. For purposes of this calculation, changes in
any loans which are unsecured, secured by assets existing on the date
hereof or amounts due Monsanto hereunder shall be excluded from noncurrent
liabilities.
"Fiscal Year" shall mean the period commencing with July 1 and ending with
the following June 30 and "Operating Income" shall mean, for any Fiscal Year,
the consolidated net income of Tomato Associates and its consolidated
subsidiaries for such Fiscal Year as
-5-
<PAGE>
reflected in the consolidated statement of operations of Tomato Associates and
its consolidated subsidiaries for such Fiscal Year prepared in accordance with
generally accepted accounting principles, consistently applied, and audited by
Tomato Associates' independent certified public accountants. Notwithstanding
the provisions of the preceding sentence, the initial Fiscal Year under this
Agreement shall be the period commencing on the first day of the fiscal quarter
beginning after the date hereof and ending with the following June 30.
"Cumulative Free Cash Flow" shall mean the aggregate of the Free Cash Flow
of Tomato Associates during the period between the execution date of this
Agreement and the Maturity Date, during the period between the Maturity Date and
the Extended Maturity Date (hereinafter defined) and during the period between
the Extended Maturity Date and the Final Maturity Date (hereinafter defined),
respectively. At the end of each Fiscal Year, the Chief Financial Officer of
the Company shall certify the amount of Tomato Associates' Free Cash Flow for
the Fiscal Year just ended.
"Repayment Portion" shall mean the sum of (i) 20% of the first $10 million
of Cumulative Free Cash Flow or portion thereof, (ii) 50% of the next $10
million of Cumulative Free Cash Flow or portion thereof and (iii) 80% of the
remaining balance of Cumulative Free Cash Flow, if any.
All transactions between Tomato Associates and any affiliate of Tomato
Associates during the term of this Agreement shall be accounted for on an arm's-
length basis. Further, (i) dividends and returns of capital by Tomato
Associates to Company, (ii) investments by Company in Tomato Associates and
(iii) any loans between Tomato Associates and Company (or any direct or indirect
subsidiary of Company that is not a direct or indirect subsidiary of Tomato
Associates) shall not be considered when determining "Free Cash Flow."
If the Repayment Portion of Cumulative Free Cash Flow is not sufficient to
pay all the then outstanding principal and accrued interest on the Maturity
Date, then the Company shall pay to Monsanto on the Maturity Date the Repayment
Portion of the Cumulative Free
-6-
<PAGE>
Cash Flow, the Maturity Date as to the principal and accrued interest remaining
outstanding after such payment is applied, if any, shall be extended to the
sixth anniversary of this Agreement ("Extended Maturity Date"). If the
Repayment Portion of the Cumulative Free Cash Flow (less the aggregate amount of
principal and accrued interest previously paid) is not sufficient to pay all the
then outstanding principal and accrued interest on the Extended Maturity Date,
then the Company shall pay to Monsanto on the Extended Maturity Date the
Repayment Portion of the Cumulative Free Cash Flow, and the Extended Maturity
Date as to the principal and accrued interest remaining outstanding after such
payment is applied, if any, shall be extended to the eighth anniversary of this
Agreement ("Final Maturity Date"). If the Repayment Portion of the Cumulative
Free Cash Flow (less the aggregate amount of principal and accrued interest
previously paid) is not sufficient to pay all the then outstanding principal and
accrued interest on the Final Maturity Date, then (i) the Company shall pay to
Monsanto on the Final Maturity Date the Repayment Portion of the Cumulative Free
Cash Flow and (ii) Monsanto, at its sole option, may do any one or combination
of the following: (A) convert all or any remaining portion of the then
outstanding principal and accrued interest to the Company's common stock in
compliance with the terms of Section 1.06 hereof, (B) further extend the Final
Maturity Date on the same terms and conditions as are contained in this
Agreement or (C) elect, in its sole discretion, to require the Company to sell
publicly, at the Company's expense, such number of shares of its common stock as
is equal to that portion of such remaining portion of the then outstanding
principal and accrued interest for which Monsanto has not made an election to
convert under clause (A) above and/or to extend the Final Maturity Date under
clause (B) above ("Election Amount"), whereupon the Company shall proceed
promptly to use its best efforts to take such actions as are necessary to effect
a sale of such shares of its common stock, the net proceeds of which shall be
paid to Monsanto in full payment and satisfaction of the Election Amount. If
the Company has not so sold such shares within sixty (60) days after its receipt
of notice of Monsanto's election under clause (C) above, then, at any time
thereafter, Monsanto may, in its sole discretion, withdraw any such election,
whereupon the rights and obligations of the parties hereto shall be restored.
-7-
<PAGE>
Section 1.03. Interest Rate. The outstanding principal balance of the
-------------
Loan from time to time shall bear interest at two percent (2%) above Citibank's
published prime rate ("Note Rate"). Interest shall be compounded daily and
adjusted quarterly on each January 1, April 1, July 1 and October 1 pursuant to
calculations performed by Monsanto.
Section 1.04. Effects of Event of Default or Potential Default.
------------------------------------------------
Notwithstanding the foregoing and in addition to the remedies set forth in
Sections 5.02 and 5.03 hereof, upon an Event of Default and so long as such
Event of Default shall continue, the principal amount of the Loan then
outstanding, together with all interest then accrued, shall thereafter bear
interest at the Default Rate (hereinafter defined), with interest payable upon
demand. The "Default Rate" shall be the per annum rate equal to three percent
(3%) above the Note Rate that would otherwise be applicable and thereafter until
paid in full. During the continuance of an Event of Default, the Company shall
have no right to obtain any new Advances under this Agreement.
A "Potential Default" shall be an event which, solely but for the lapse of
time or the giving of notice, or both, would constitute an Event of Default. If
a Potential Default then exists and has not been waived in writing by Monsanto
and does not itself constitute or is not declared an Event of Default, the
Company shall have no right to borrow any additional money beyond the principal
amount of the Loan then outstanding.
Section 1.05. Miscellaneous Provisions Regarding Loan Payments and
----------------------------------------------------
Interest. All payments on the Loan shall be made to Monsanto by wire transfer
- - --------
for deposit in Citibank, New York, New York, Account #00000502 unless Monsanto
notifies the Company of a different place for payments to be made. All interest
rates respecting the Loan hereunder are stated on a per annum basis with a year
of three hundred and sixty (360 days), and interest is calculated on the actual
number of days elapsed (including the first day, but excluding the last day of
any period for the Loan). Any outstanding principal and accrued interest that
has been declared due pursuant to Section 5.02 hereof shall thereafter bear
interest at the Default Rate on all unpaid amounts until such amounts are fully
paid.
-8-
<PAGE>
Section 1.06 Right of Conversion in Lieu of Repayment. In addition to any
----------------------------------------
other remedies that Monsanto may have, in lieu of repayment of outstanding
principal and accrued interest on and after the Final Maturity Date, Monsanto
may elect, at any time after the Final Maturity Date, to convert all or any
portion of the principal and accrued interest due under the Loan into shares of
common stock of the Company at the average of the closing market prices for such
shares during the thirty (30) trading days immediately preceding the Conversion
Date (as hereafter defined) for such Loan. In order to exercise its conversion
rights, at any time on or after the Final Maturity Date, Monsanto may send a
written notice (the "Conversion Notice") to the Company that Monsanto intends to
exercise such conversion rights and the date as of which such conversion shall
take place (the "Conversion Date"). The Conversion Notice shall specify the
amount of the principal and accrued interest that Monsanto intends to convert
(the "Conversion Amount"). If Monsanto properly notifies the Company as provided
in the preceding sentences, then within five (5) business days after the
Conversion Date, the Company shall issue to Monsanto a number of shares (the
"Conversion Shares") of common stock of the Company (rounded to the next lowest
full share) equal to the Conversion Amount divided by the average of the closing
market prices for such shares during the thirty (30) trading days immediately
preceding the Conversion Date. Any portion of the Conversion Amount not so
converted (because such amount would require conversion into a fractional share)
shall be paid to Monsanto by wire transfer as set forth above. Upon any such
conversion, the Conversion Amount shall first be applied to reduce the accrued
interest due on the Loan as of the Conversion Date, and any remaining portion of
the Conversion Amount shall be applied to reduce the principal due on such Loan.
If Monsanto elects to receive Conversion Shares (including any Default
Conversion Shares pursuant to Section 5.03 hereof) in lieu of repayment, the
Company shall deliver to Monsanto, simultaneously with the delivery of the
Conversion Shares, an opinion from counsel to the Company in a form reasonably
satisfactory to Monsanto relating to the issuance of the Conversion Shares.
Section 1.07. Prepayments. The Loan may be prepaid in whole or in part at
-----------
any time after giving at least three (3) days' prior written notice to Monsanto.
-9-
<PAGE>
Section 1.08. Approved Persons. All requests for Advances (including any
----------------
requests for continuation of the Loan) shall be made by an Approved Person
(hereinafter defined). An "Approved Person" shall be any person designated in
writing from time to time by the Company who is authorized to make requests for
Advances in the name of the Company hereunder. Unless Monsanto otherwise
agrees, there shall not be more than three (3) Approved Persons at any one time
nor shall any Approved Person have his or her office located at any place other
than the Company's main office in Davis, California, but the Company shall have
the right to change the persons so designated upon written notice thereof to
Monsanto. Any such designation shall be executed by the President or the Chief
Financial Officer of the Company and shall contain a specimen signature of the
Approved Person. Monsanto shall be entitled to rely on any direction by an
Approved Person regarding the making of Advances or the transfer of funds
hereunder, or any such direction that Monsanto believes to be made by the
Approved Person, whether such direction be received by telephone, by facsimile
transmission, by TELEX, by mail or otherwise.
ARTICLE II
CONDITIONS OF LENDING
Section 2.01. Conditions Precedent to Loan. The obligation of Monsanto
----------------------------
to make the first Advance under the Loan is subject to the following additional
conditions precedent that:
(a) Acquisition Agreement Conditions. All of the conditions set
--------------------------------
forth in Section 8.2 of the Agreement and Plan of Reorganization ("Acquisition
Agreement") between Monsanto and Calgene, Inc., a Delaware corporation
("Calgene"), dated October 13, 1995 must be fulfilled (or waived in writing by
Monsanto) and all the documents that Calgene or the Company is required to
deliver to Monsanto pursuant to such Section 8.2 must be delivered (or waived in
writing by Monsanto).
-10-
<PAGE>
(b) Documents. Monsanto shall receive the following, each dated
---------
the date hereof or such other date as may be specifically permitted, in form and
substance satisfactory to Monsanto:
(i) Note. The Note, duly executed by the Company.
----
(ii) Guaranty. The Guaranty, duly executed by all the
--------
Subsidiaries.
(iii) Other Approvals. Such other approvals, resolutions,
---------------
opinions or documents, as Monsanto may reasonably request.
Section 2.02. Conditions Precedent to Each Advance. The obligation of
------------------------------------
Monsanto to make any Advances under the Loan shall be subject to the further
conditions precedent that, on the funding date, (i) all representations and
warranties of the Company and the Subsidiaries contained in this Agreement and
the Guaranty shall be true, correct, accurate and complete in all material
respects as if made on such date (except (A) to the extent such representations
speak as of an earlier date or (B) for changes arising from events permitted by
the covenants specified in this Agreement), (ii) all covenants specified in this
Agreement shall have been complied with in all material respects, (iii) no event
shall have occurred and be continuing, or would result from such Advance, which
constitutes an Event of Default or Potential Default, (iv) there shall not be
initiated against the Company or any Subsidiary any action, suit or proceeding
at law or in equity or by or before any court or government agency or authority
or arbitral tribunal and there shall not have occurred any legal, regulatory or
other development or any other circumstances whatsoever which, in the opinion of
Monsanto, could reasonably be expected to have a material adverse effect on (a)
the business, assets, operations or financial condition of the Company and its
Subsidiaries taken as a whole, or (b) the ability of the Company and its
Subsidiaries to perform any of their respective obligations hereunder or under
the documents contemplated hereby (each of the foregoing being hereafter
referred to as a "Material Adverse Effect"); provided, however, that no Material
Adverse Effect shall be deemed to have occurred based solely on the
-11-
<PAGE>
outcome of the litigation between the Company and Enzo Biochem, Inc. ("Enzo"),
(v) Monsanto shall have received documentation reasonably acceptable to
Monsanto, verifying that Tomato Associates has reached certain milestones and
achieved certain goals of the Strategy reflected in the request for the Advance,
(vi) Monsanto shall have received certificates and evidence reasonably
acceptable to Monsanto as to the financial condition of Tomato Associates, and
(vii) an Advance request in proper form shall have been submitted or made to
Monsanto by the Company.
The making of a request by the Company for an Advance hereunder, whether in
writing, or by telephone confirmed in writing, or otherwise, shall constitute a
certification by the Company that all representations and warranties recited or
referred to in this Section 2.02 and Article III hereof are true as of and as if
made the date of such request (except as set forth above) and that all required
conditions to the making of such Advance have been met.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company. The
---------------------------------------------
representations and warranties of Calgene set forth in Section 6.2 of the
Acquisition Agreement are incorporated by reference herein. All such
representations and warranties shall be deemed made by the Company herein and
shall survive and be continuing so long as any principal or accrued interest is
outstanding under the Loan.
ARTICLE IV
COVENANTS OF THE COMPANY
Section 4.01. Affirmative Covenants. So long as any portion of the Loan
---------------------
or accrued interest shall remain unpaid or Monsanto shall have any Commitment
hereunder, the Company shall (and, where appropriate even if not so stated,
shall cause each of the
-12-
<PAGE>
Subsidiaries to), unless Monsanto shall otherwise consent in writing, which
consent shall not be unreasonably withheld:
(a) Preservation of Business and Corporate Existence. As to the
------------------------------------------------
Company and each Subsidiary, carry on and conduct its business affairs in
substantially the same manner as presently carried on and conducted, and
maintain in good standing its existence and its right to transact business in
those states in which it is now or may hereafter be doing business; and maintain
all licenses, permits and registrations necessary to the conduct of its
business.
(b) Use of Proceeds. Use the proceeds of the Loan solely to make
---------------
capital contributions or loans to Tomato Associates, which capital contributions
or loans shall be used solely by Tomato Associates to implement the Strategy or
to finance the Collier Farms acquisition. All such capital contributions shall
be evidenced by appropriate written documentation.
(c) Reporting Requirements. Furnish to Monsanto:
----------------------
(i) As soon as available and in any event within sixty (60)
days after the end of each calendar quarter, one (1) copy of the
consolidated and consolidating financial statements prepared by the Company
and certified by the Chief Financial Officer of the Company, and as soon as
available and in any event within one hundred twenty (120) days after the
end of its Fiscal Year, one (1) copy of its financial statements audited by
an independent public accountant. The financial state ments so provided
shall include, but not be limited to, the balance sheet, income statement
and cash flow statement of the Company, as well as consolidated and
consolidating statements of all Subsidiaries including Tomato Associates
(which consolidating statement need not be audited). Such financial
statements shall be accompanied by a written certification from the Chief
Financial Officer of the Company (A) stating that the financial statements
present fairly the consolidated
-13-
<PAGE>
financial condition of the Company and that no event has since occurred
which would constitute a Material Adverse Effect on the consolidated
financial condition of the Company from that represented on the financial
statements; (B) demonstrating in detail, satisfactory to Monsanto, the
Company's compliance with the financial covenants set forth in Sections
4.01(f) and 4.01(g) hereof at and as of the end of the quarter or Fiscal
Year, as applicable; (C) stating that no Event of Default or Potential
Default is then existing at the date of the certification; and (D) stating
that the representations and warranties contained in this Agreement and the
Guaranty are accurate and complete in all material respects.
(ii) Promptly after the sending or filing thereof, copies of
all reports which the Company sends to any of its stock or security holders
and copies of all reports and other materials (including registration
statements, if any) which the Company hereafter files with the Securities
and Exchange Commission or any national securities exchange.
(iii) Such other information respecting the condition or
operations, financial or otherwise, of the Company as Monsanto may from
time to time reasonably request.
(d) Insurance. Insure and keep insured at all times with good and
---------
responsible insurance companies reasonably acceptable to Monsanto all of its
property of an insurable nature and maintain insurance against liability on
account of damage to persons or property in such manner and to the extent that
like risks are usually insured by others conducting similar businesses in the
general areas where the Company and each of the Subsidiaries conduct their
business. Company shall, upon request of Monsanto at any time, furnish a
written summary of the amount and type of insurance carried, the names of the
insurers and the policy numbers.
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<PAGE>
(e) Government Actions. Obtain and maintain all material
-------------------
authorizations and approvals, and other actions by, and make and maintain all
notices to or filings with, any governmental authority or regulatory body now or
hereafter required for the making and performance of this Agreement and the
Note.
(f) Net Worth. Maintain, at and as of the end of the quarter or
---------
Fiscal Year, as applicable, consolidated Net Worth (hereinafter defined) of not
less than Ten Million Dollars ($10,000,000) and a minimum consolidated working
capital of not less than Five Million Dollars ($5,000,000) (which consolidated
working capital shall be the excess of Current Assets (hereinafter defined) over
Current Liabilities (hereinafter defined)). Further, the ratio of Total Long-
Term Liabilities (hereinafter defined) to Net Worth shall not exceed the ratio
of one-to-one.
As used herein, "Net Worth" shall mean the total of common and
preferred stock, paid in surplus, retained earnings and additional stockholders'
equity of the Company and the Subsidiaries on a consolidated basis less
intangibles, determined in accordance with generally accepted accounting
principles, consistently applied.
"Total Long-Term Liabilities" shall mean the total of all long-
term liabilities of the Company and the Subsidiaries on a consolidated basis,
determined in accordance with generally accepted accounting principles,
consistently applied.
"Current Assets" shall mean the total of all current assets of
the Company and the Subsidiaries on a consolidated basis, determined in
accordance with generally accepted accounting principles, consistently applied.
"Current Liabilities" shall mean the total of all current
liabilities of the Company and its Subsidiaries on a consolidated basis,
determined in accordance with generally accepted accounting principles,
consistently applied.
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<PAGE>
For purposes of making any calculation under this Article IV, the
outstanding principal of amounts loaned by Monsanto to the Company pursuant to
this Agreement (except to the extent of the Repayment Portion of Cumulative Free
Cash Flow, which has not been paid to Monsanto), or the Holding Company Credit
Facility Agreement of even date herewith between Monsanto and the Company (the
"Company Credit Facility Agreement") shall be deemed to be stockholders' equity
and not liabilities.
(g) Current Ratio. Maintain, on a consolidated basis, a ratio of
-------------
Current Assets to Current Liabilities of at least one-to-one.
(h) Audits, Consultants and Inspections. Permit Monsanto (using
-----------------------------------
Monsanto's internal and/or external auditors or any other person appointed by
Monsanto to whom the Company does not reasonably object) (i) to audit the books
and records, other financial information and business practices and operations
of the Company and its Subsidiaries, and (ii) to discuss the business practices
and operations, affairs, finances and accounts of the Company and its
Subsidiaries with the officers of the Company and its Subsidiaries 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
Subsidiaries') properties, books and records by Monsanto (using the persons
identified above) during normal business hours or at other reasonable times.
The scope of all such audits, discussions and inspections shall be determined by
Monsanto in its sole discretion. Any authorized representative of Monsanto who
or which is not employed by Monsanto (i) shall be required to execute a
confidentiality agreement in a form approved by the Board of Directors of the
Company (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 of the Company; 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.
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<PAGE>
(i) Payment of Taxes. Pay and discharge, before they become
----------------
delinquent, all taxes, assessments and other governmental charges imposed upon
the Company, the Subsidiaries or any of its or their properties, or any part
thereof, or upon the income or profits therefrom and all claims for labor,
materials or supplies which, if unpaid, might be or become a lien or charge upon
any of its or their property, except such items as it or they are in good faith
appropriately contesting and as to which adequate reserves have been provided.
(j) Payment of Indebtedness. Pay any and all indebtedness for
-----------------------
borrowed money payable or guaranteed by the Company (or any Subsidiary), and any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in accordance with the agreement
or instrument relating to such indebtedness or guarantee, except those being
contested in good faith and as to which adequate reserves have been provided.
(k) Notice of Subsequent Events. Immediately upon the President or
---------------------------
Chief Financial Officer of the Company obtaining knowledge of (i) any material
adverse change in the condition or operation, financial or otherwise, of the
Company and its Subsidiaries; (ii) any Event of Default or Potential Default
under this Agreement; (iii) any default or potential default by the Company or
any of the Subsidiaries under or with respect to any instrument, contract or
agreement to which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries is bound which may constitute a Material
Adverse Effect; (iv) any default or potential default by the Company or any of
the Subsidiaries under or with respect to any order, writ, injunction, decision
or decree of any court, governmental authority or arbitral body to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries is bound which may constitute a Material Adverse Effect; or (v)
any action or proceeding pending or, to the knowledge of the President or Chief
Financial Officer of the Company, threatened against the Company or any of the
Subsidiaries before any court, governmental authority or arbitral body which, if
decided adversely to the Company or such Subsidiary, would result in a Material
Adverse Effect, deliver to Monsanto a written certificate signed by such officer
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specifying the nature thereof, the period of existence thereof and what action
the Company has taken and proposes to take with respect thereto.
(l) ERISA Compliance. If the Company or any of the Subsidiaries shall
----------------
have any pension plan, comply with all requirements of the Employee Retirement
Income Security Act of 1974, as amended from time to time ("ERISA") relating to
such plan. Without limiting the generality of the foregoing, the Company (and
each of the Subsidiaries) shall not:
(i) Permit any Plan (hereinafter defined) maintained by it to
engage in any non-exempt "prohibited transaction" as such term is defined
in Section 4975 of the Internal Revenue Code of 1986, as amended;
(ii) Permit any Plan maintained by it to incur any
"accumulative funding deficiency," as such term is defined in Section 302
of ERISA, 29 U.S.C (S)1082, whether or not waived;
(iii) Terminate any such Plan in a manner which could result in
the imposition of a lien on the property of Company pursuant to Section
4068 of ERISA, 29 U.S.C. (S)1368; or
(iv) Take any action which would constitute a complete or
partial withdrawal from a Multiemployer Plan (hereinafter defined) within
the meaning of Sections 4203 and 4205 of Title IV of ERISA, 29 U.S.C.
(S)(S)1383 and 1385.
Notwithstanding any provision contained in this Section 4.01(l) to the
contrary, an act by the Company shall not be deemed to constitute a violation of
subparagraphs (i) through (iv) hereof unless Monsanto determines in good faith
that said action, individually or cumulatively with other acts of the Company,
does have or is likely to cause, a Material Adverse Effect.
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Company shall have the affirmative obligation hereunder to report to
Monsanto any of those acts identified in subparagraphs (i) through (iv) hereof,
regardless of whether said act does or is likely to cause a Material Adverse
Effect.
(m) Compliance with Laws. Comply in all material respects with all
--------------------
applicable laws, rules, regulations and orders.
(n) Additional Subsidiaries. If the Company or any Subsidiary
-----------------------
acquires or creates any additional majority-owned subsidiary hereafter, promptly
notify Monsanto in writing. Such additional subsidiary shall also, upon
capitalization and election of officers, execute and deliver to Monsanto a
guaranty of the Loan in the form attached hereto as Exhibit D and, upon such
---------
delivery, shall become a Subsidiary under this Agreement.
(o) Reservation of Shares. Reserve adequate shares of common stock
---------------------
of the Company to be issued upon the occurrence of a conversion as described in
Sections 1.02, 1.06 and 5.03 hereof.
(p) Further Assurances. From time to time, execute and deliver to
------------------
Monsanto such additional documents and provide such additional information as
Monsanto may reasonably require to carry out the terms of this Agreement and be
informed of the status and affairs of the Company and its Subsidiaries.
Section 4.02. Negative Covenants. Except as specifically provided
------------------
otherwise hereinbelow, so long as the Loan shall remain unpaid or Monsanto shall
have any Commitment hereunder, without the written consent of Monsanto, the
Company and each of the Subsidiaries:
The following negative covenants set forth in this Section 4.02 shall be of
no force or effect during such period as the "Supermajority Requirements"
set forth in Article 4 of the Stockholders Agreement of even date herewith
between the Company and
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<PAGE>
Monsanto are in effect. In the event such "Supermajority Requirements" are
no longer in effect, the foregoing negative covenants shall be fully
applicable to the Company (and, where appropriate, each of the
Subsidiaries).
(a) Acquisitions. Shall not enter into any merger or consolidation
------------
or acquire any business or assets that would constitute a Substantial Part
(hereinafter defined) of the Company and its Subsidiaries, taken as a whole,
whether such acquisition be by merger or consolidation or the purchase of stock
or assets or otherwise. "Substantial Part" means more than ten percent (10%) of
the total assets of the Company and its Subsidiaries, taken as a whole, 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.
(b) Liens. Shall not, and shall not permit any Subsidiary to,
-----
pledge, mortgage or otherwise encumber or subject to or permit to exist upon or
be subjected to any lien, charge or security interest of any kind (including any
conditional sale or other title retention agreement and any lease in the nature
thereof), on any of its properties of any kind or character at any time owned by
the Company or any Subsidiary other than:
(i) liens, pledges or deposits for workmen's compensation,
unemployment insurance, old age benefits or social security obligations, taxes,
assessments, statutory obligations or other similar charges, good faith deposits
made in connection with tenders, contracts or leases to which the Company or any
Subsidiary is a party or other deposits required to be made in the ordinary
course of business, provided in each case the obligation secured is not overdue
or, if overdue, is being contested in good faith by appropriate proceedings and
adequate reserves have been provided therefor in accordance with generally
accepted accounting principles, consistently applied, and that the obligation is
not for borrowed money, customer advances, trade payables, or obligations to
agricultural producers;
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<PAGE>
(ii) the pledge of assets for the purpose of securing an appeal
or stay or discharge in the course of any legal proceedings, provided that the
aggregate amount of liabilities of the Company or any Subsidiary so secured by a
pledge of property permitted under this subsection (ii) including interest and
penalties thereon, if any, shall not be in excess of One Million Dollars
($1,000,000) at any one time outstanding;
(iii) liens, pledges, mortgages, security interests or other
charges existing on the date hereof and disclosed in Exhibit F hereto; and
---------
(iv) liens, pledges, mortgages, security interests and other
encumbrances on property which secure indebtedness permitted under Section
4.02(k) hereof.
(c) Limitations on Merger and Disposition of Assets. Shall not merge
-----------------------------------------------
into or consolidate with any other entity, or lease, sell, transfer or otherwise
dispose of all or any Substantial Part of the Company and its Subsidiaries,
taken as a whole, except (i) pursuant to security interests granted in
connection with borrowings permitted under Section 4.02(k) hereof and (ii) in
the case of a merger or consolidation of the Company, (A) the shareholders of
the Company immediately prior to the merger or consolidation continue to hold
more than fifty percent (50%) of the outstanding voting power of the surviving
entity, (B) the surviving entity (after giving effect to the merger or
consolidation) has a net worth equal to or greater than the consolidated net
worth of the Company (determined immediately prior to the merger or
consolidation), and (C) the surviving entity expressly assumes all of the
obligations of the Company under this Agreement.
(d) Non-Default Under Other Agreements. Shall not default upon or
----------------------------------
fail to pay any indebtedness for money borrowed as the same matures under any
agreement or permit to occur any other event which creates a default under such
or under any other agreement to which the Company is a party or by which it is
bound, in either case in an amount in excess of One Million Dollars
($1,000,000).
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<PAGE>
(e) Conflicting Agreement. Shall not enter into any agreement, any
---------------------
term or condition of which conflicts with any term or condition of this
Agreement.
(f) Changes in Accounting Principles. Shall not make any change in
--------------------------------
its principles or methods of accounting as currently in effect, except such
changes as are required by generally accepted accounting principles, or, without
prior written notice to Monsanto, change its Fiscal Year.
(g) Loans and Investments. Shall not make any investment in a
---------------------
corporation, firm or business or make loans or advances to any person except:
(i) Investments in interest bearing obligations of the United
States government, certificates of deposit issued by United States banks,
commercial paper and repurchase agreements or other short-term, high grade
(A-1, P-1 or similar rating) investments;
(ii) Advances to others in the form of progress payments,
prepaid rents, security deposits, grower loans or other advances customary
in transactions made in the ordinary course of business between persons not
affiliated with each other;
(iii) Subject to the provisions of Section 4.02(a) hereof,
investments in any partially- or wholly-owned Subsidiary or any
corporation, firm or business in the same type of business as the Company,
which line of business will continue after such investment;
(iv) The loans listed and described on Exhibit G hereto and
---------
additional purchase money loans to purchasers of assets of the Company or
its Subsidiaries which at no time in the aggregate exceed One Million
Dollars ($1,000,000);
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<PAGE>
(v) Loans and travel advances to employees of the Company
which in the aggregate (inclusive of the employee loans listed on Exhibit H
---------
hereto), donot exceed One Hundred Thousand Dollars ($100,000);
(vi) Loans or advances by the Company to any wholly-owned
Subsidiary, or by Tomato Associates to the Company or any other wholly-
owned Subsidiary; or
(vii) Stock, obligations or securities received in settlement of
debts (created in the ordinary course of business) owing to the Company or
any Subsidiary.
Nothing in this subsection (g) shall be construed as preventing Company or any
Subsidiary from making any acquisition permitted under subsection (a) above of
this Section 4.02.
(h) Guaranties. Shall not guarantee the obligations of any
----------
corporation, person or entity, except endorsements of negotiable instruments or
checks deposited for collection acquired in the ordinary course of business and
except guaranties by (i) the Company or any Subsidiaries of the obligations of
any of the wholly-owned Subsidiaries or any subsidiary hereinafter acquired and
becoming a wholly-owned Subsidiary hereunder or (ii) any Subsidiary of the
obligations of the Company.
(i) Capital Expenditures. Shall not make capital expenditures
--------------------
(including capitalized leases but excluding fixed assets acquired in connection
with corporate acquisitions), during any Fiscal Year of the Company, on a
consolidated basis, in an aggregate amount in excess of Sixty Million Dollars
($60,000,000).
(j) Dividends. Shall not pay or declare any dividends (either in cash
---------
or property) or make distributions on, or redeem, repurchase, retire or
otherwise acquire for value, any shares of stock of the Company or Tomato
Associates (including, options,
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<PAGE>
warrants or other rights to acquire such shares of stock) other than repurchases
or redemptions of equity securities of the Company.
(k) Limit on Indebtedness. Shall not create, assume or incur any
---------------------
indebtedness, in the aggregate, exceeding Fifteen Million Dollars ($15,000,000),
increasing by Five Million Dollars ($5,000,000) per Fiscal Year, plus amounts
secured by inventory and/or receivables for working capital lines and
indebtedness incurred to acquire property, plant or equipment and secured by the
acquired asset, and any refinancing of any of the foregoing, exclusive of (i)
amounts outstanding under this Agreement or the Company Credit Facility
Agreement and (ii) indebtedness approved by the Board of Directors of the
Company while the "Supermajority Provisions" were in effect.
ARTICLE V
EVENTS OF DEFAULT
Section 5.01. Events of Default. Any one (1) or more of the following
-----------------
events shall constitute an Event of Default under this Agreement, the Note and
any other document or instrument pertaining to or necessary to carry out the
purposes of this Agreement:
(a) Payment Default. The Company fails to pay when due any principal,
----------------
interest or other amount which it is obligated to pay under this Agreement and
the Note and such failure shall continue unremedied for five (5) days after the
date on which such payment was due.
(b) Representation Default. Any representation or warranty made by
-----------------------
the Company in this Agreement, the Note, or in any certificate, notification or
report furnished hereunder, proves to have been incorrect or misleading in any
material respect when made or renewed and is material to the ability of the
Company to perform its obligations under this Agreement or the Note.
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<PAGE>
(c) Other Provisions Default. The Company fails to perform or observe
-------------------------
any material covenant or agreement to be performed or observed by it under this
Agreement or the Note or the Company fails to perform or observe any other
material term, covenant or condition in this Agreement or the Note to be made
and performed by the Company and, in the case of any such default that is
curable by the Company, such default is not cured within ten (10) days after
written notice thereof by Monsanto.
(d) Authorizations Default. Any governmental filing, registration,
-----------------------
consent or approval necessary in connection with this Agreement or any document
contemplated hereby is withheld, revoked or restricted in a way which
constitutes a Material Adverse Effect, unless such revocation or restriction is
withdrawn.
(e) Cross Default. The Company or any Subsidiary (i) fails to pay
--------------
when due any indebtedness (in an amount in excess of One Million Dollars
($1,000,000)) senior to this Loan for which it is liable, contingently or
otherwise, and the lender declares such indebtedness to be immediately due and
payable, or (ii) commits a material breach of or defaults in the performance or
observance of any of the representations, warranties, covenants, terms or
provisions of, or a default otherwise occurs under, (a) the Acquisition
Agreement or any of the other Transaction Agreements (as defined in the
Acquisition Agreement), (b) the Insect-Protected Cotton License and Seed
Services Agreement dated as of September 26, 1995, between Monsanto and Calgene,
(c) the Company Credit Facility Agreement, (d) the Stockholders Agreement
between Monsanto and the Company of even date herewith or (e) any other
agreement or instrument between Monsanto and the Company or any Subsidiary and,
in the case of any such default that is curable, such default is not cured
within ten (10) days after the Company or Subsidiary, as applicable, receives
notice thereof.
(f) Lien Default. The holder of any lien, whether now or hereafter
-------------
existing, granted or assumed by the Company, and securing any indebtedness
exceeding One Million Dollars ($1,000,000) in the aggregate (whether or not
indebtedness of the Company)
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<PAGE>
takes substantial steps to enforce the same because of the nonpayment (whether
by acceleration or otherwise) of the indebtedness secured thereby.
(g) Judgment Default. A final judgment, order or conviction (whether
-----------------
criminal or civil) is rendered against the Company or any of its Subsidiaries or
its or its Subsidiaries' properties or assets which constitutes a Material
Adverse Effect and such judgment or order shall continue unsatisfied and the
execution thereof unstayed for a period of ninety (90) consecutive days.
(h) Bankruptcy Default. (i) the Company or any of the Subsidiaries
-------------------
shall fail to pay or shall admit in writing its inability to pay its debts as
they become due, shall become insolvent, howsoever evidenced, or shall make a
general assignment for the benefit of creditors; (ii) any proceeding shall be
instituted by or against the Company or any of the Subsidiaries under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors or any
similar law or seeking appointment of a receiver, trustee, or other similar
person for it or for any Substantial Part of its property and, if such
proceeding is not commenced by the Company or any of the Subsidiaries, it is
consented to or acquiesced in by the Company or any of the Subsidiaries or
remains undismissed for forty-five (45) days after initiation; (iii) all or a
Substantial Part of the Company's or any Subsidiary's property is attached,
seized, levied upon or comes within the possession of any receiver, trustee or
similar person for the benefit of creditors; (iv) any action is taken or any
proceeding is filed or commenced with respect to the Company's or Tomato
Associates' liquidation, dissolution or termination of existence; or (v) the
Company or Tomato Associates shall take any corporate action to authorize any of
the actions described in this subsection (h).
(i) Tax Lien Default. Any local, state or federal government agency
----------------
places a material lien against any asset of the Company or any Subsidiary as a
result of nonpayment of any tax obligation owed by the Company or such
Subsidiary, which lien is not removed within forty-five (45) days after
placement.
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<PAGE>
(j) ERISA Default. Any of the following events occur or exist with
-------------
respect to the Company or any Subsidiary: (a) any Prohibited Transaction
(hereinafter defined) involving any Plan; (b) any Reportable Event (hereinafter
defined) with respect to any Plan; (c) the filing under Section 4041 of ERISA
of a notice of intent to terminate any Plan or the termination of any Plan; (d)
any event or circumstance that might constitute grounds entitling the PBGC
(hereinafter defined) to institute proceedings under Section 4042 of ERISA for
the termination of, or for the appointment of a trustee to administer, any Plan,
or the institution by the PBGC of any such proceedings; (e) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency or termination of any Multiemployer Plan; and, in
each case above, such event or condition, together with all other events or
conditions, if any, could, in the opinion of Monsanto, subject the Company to
any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC,
or otherwise. For purposes of this Agreement: "Plan" means any employee benefit
or other plan established, maintained, or to which contributions have been made
by the Company or any ERISA Affiliate; "Reportable Event" means any of the
events set forth in Section 4043 of ERISA; "ERISA Affiliate" means any trade or
business (whether or not incorporated) that, together with Company, is treated
as a single employer under Section 414 of the Internal Revenue Code of 1986, as
amended; "Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Company or any ERISA Affiliate; "PBGC" means
the Pension Benefit Guaranty Corporation or any entity succeeding to any or all
of its functions under ERISA; and "Prohibited Transaction" means any transaction
set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code
of 1986, as amended from time to time.
(k) Guaranty Default. Any Subsidiary shall fail to perform or observe
----------------
its obligations under the Guaranty and such failure (other than failure to pay
to Monsanto sums due thereunder which shall have no cure period) shall not have
been remedied within thirty (30) days after written notice thereof shall have
been given by Monsanto.
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<PAGE>
Section 5.02. Rights of Monsanto. Upon the occurrence of an Event of
------------------
Default, Monsanto may, at its election, without notice of its election and
without demand, do any one (1) or more of the following (all of which are
authorized by the Company):
(a) Cease advancing money or extending credit to or for the
benefit of the Company ;
(b) Declare the obligation of Monsanto to make Advances hereunder
to be terminated, whereupon the same shall forthwith terminate; and
(c) Declare the Note, including all principal and accrued interest
thereon, and all other amounts payable under this Agreement to be forthwith due
and payable, to the extent and only to the extent of the Repayment Portion of
Cumulative Free Cash Flow that has not been paid to Monsanto, without
presentment, protest or further notice of any kind, all of which are hereby
expressly waived by the Company.
Section 5.03. Additional Remedy. Upon the occurrence and during the
-----------------
continuation of an Event of Default, in addition to the other remedies set forth
in this Agreement, Monsanto may demand that the Company convert all or any
portion of the principal and accrued interest under the Loan into shares of
common stock of the Company at the average of the closing market prices for such
shares during the thirty (30) trading days immediately preceding the Default
Conversion Date (hereafter defined) for such Loan; provided, however, that in no
event shall Monsanto elect to convert principal and accrued interest into more
than eight million (8,000,000) shares of common stock of the Company (as such
number is adjusted for stock dividends, stock splits and similar events
affecting holders of the Company's common stock). In order to exercise its
conversion rights, at any time after the occurrence and during the continuation
of an Event of Default, Monsanto may send a written notice (the "Default
Conversion Notice") to the Company that Monsanto intends to exercise such
conversion rights. The Default Conversion Notice shall specify (i) the amount
of the principal and accrued interest that Monsanto intends to convert (the
"Default
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<PAGE>
Conversion Amount") and (ii) the date as of which such conversion shall take
place (the "Default Conversion Date"), which date shall not be later than ten
(10) days after the date of the Default Conversion Notice. If Monsanto properly
notifies the Company as provided in the preceding sentences, then within five
(5) business days after the Default Conversion Date, the Company shall issue to
Monsanto a number of shares (the "Default Conversion Shares") of common stock of
the Company (rounded to the next lowest full share) equal to the Default
Conversion Amount divided by the average of the closing market prices for such
shares during the thirty (30) trading days immediately preceding the Default
Conversion Date. Any portion of the Default Conversion Amount not so converted
(i.e., because such amount would require conversion into a fractional share)
shall be paid to Monsanto in cash. Upon any such conversion, the Default
Conversion Amount (including any portion thereof paid to Monsanto in cash) shall
first be applied to reduce the accrued interest due on the Loan as of the
Default Conversion Date, and any remaining portion of the Default Conversion
Amount shall be applied to reduce the principal due on such Loan.
Section 5.04. Company's Obligations. The Company recognizes that, if
---------------------
the Company fails to perform, observe or discharge any of its obligations under
this Agreement or the other collateral agreements hereto, a remedy at law may
not provide adequate relief to Monsanto; therefore, the Company agrees that
Monsanto shall be entitled to seek temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages. All of Monsanto's
rights and remedies granted under this Agreement and the collateral agreements
hereto are cumulative and nonexclusive. The Company shall pay upon demand all
costs and expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred by Monsanto in enforcing this Agreement. All such sums
not paid on demand shall be treated as outstanding principal under the Note.
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<PAGE>
ARTICLE VI
RIGHT OF SETOFF
Section 6.01. Right of Setoff. Upon the occurrence and during the
---------------
continuance of any Event of Default, Monsanto is hereby authorized at any time
and from time to time, without notice to the Company (any such notice being
expressly waived by the Company), to set off and apply any and all funds at any
time held and other indebtedness at any time owing by Monsanto to or for the
credit or the account of the Company or any of the Subsidiaries against any and
all of the obligations of the Company now or hereafter existing under this
Agreement and the Note to the extent and only to the extent of the Repayment
Portion of the Cumulative Free Cash Flow that has not been paid to Monsanto,
irrespective of whether or not Monsanto shall have made any demand under this
Agreement or the Note and although such obligations may be unmatured. The rights
of Monsanto under this Section 6.01 are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which Monsanto may have.
ARTICLE VII
SUBORDINATION
Section 7.01 Subordination.
-------------
(a) All of the obligations of the Company to Monsanto under this
Agreement and the Note, including, without limitation, the Company's obligation
to repay any Advances (collectively, the "Subordinated Indebtedness"), shall to
the extent and in the manner hereinafter set forth, be subordinated and subject
in right of payment to the prior payment in full of a Senior Indebtedness.
"Senior Indebtedness" means (a) all indebtedness of the Company, including the
principal of and interest on such indebtedness, whether outstanding on the date
of this Agreement or thereafter created (i) arising under working capital lines
of credit secured by inventory and/or receivables, (ii) incurred to acquire
property, plant or equipment and secured by the acquired asset or (iii)
otherwise permitted under Section 4.02(k) hereof at the time such indebtedness
is incurred, and (b) any
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modifications, refundings, deferrals, renewals or extensions of any such Senior
Indebtedness, or securities, notes or other evidences of indebtedness issued in
exchange for such Senior Indebtedness; provided, however, that in no event shall
the obligations of the Company under the Company Credit Facility Agreement
constitute Senior Indebtedness under this Agreement. No payment on account of
principal or interest on the Subordinated Indebtedness 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 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 Senior Indebtedness, as
defined in the instrument under which the same is outstanding, permitting the
holders thereof to accelerate the maturity thereof, and such event of default
shall not have been cured or waived or shall not have ceased to exist.
Notwithstanding the foregoing or any other provision of this Section 7.01,
nothing in this Section 7.01 shall restrict or otherwise limit Monsanto's or
Company's rights under Sections 1.02, 1.06 and 5.03 hereof.
(b) In the event of any distribution, dividend, or application,
partial or complete, voluntary or involuntary, by operation or law or otherwise,
of all or any part of the assets of the Company or of the proceeds thereof to
the creditors of the Company or upon any indebtedness of the Company, occurring
by reason of the liquidation, dissolution, or other winding up of the Company,
or by reason of any execution sale, or bankruptcy, receivership, reorganization,
arrangement, insolvency, liquidation or foreclosure proceeding of or for the
Company or involving its property, no dividend, distribution or application
shall be made, and Monsanto shall not be entitled to receive or retain any
dividend, distribution, or application on or in respect of principal of or
interest on Subordinated Indebtedness, unless and until all principal of and any
interest on Senior Indebtedness then outstanding shall have been paid and
satisfied in full, and in any such event any dividend, distribution or
application otherwise payable in respect of Subordinated Indebtedness shall be
paid and applied on Senior Indebtedness until such Senior Indebtedness has been
fully paid and satisfied.
-31-
<PAGE>
(c) The holders of Senior Indebtedness need not at any time give
Monsanto notice of any kind of the creation or existence of any Senior
Indebtedness, nor of the amount or terms thereof, all such notice being hereby
expressly waived. Also, the holders of Senior Indebtedness may at any time,
from time to time, without the consent of or notice to Monsanto, without
incurring responsibility to Monsanto, and without impairing or releasing the
obligation of Monsanto under this Agreement (i) renew, refund or extend the
maturity of any Senior Indebtedness, or any part thereof, or otherwise revise,
amend or alter the terms and conditions thereof, (ii) sell, exchange, release or
otherwise deal with any property by whomsoever at any time pledged, mortgaged or
otherwise hypothecated or subjected to a lien to secure any Senior Indebtedness,
and (iii) exercise or refrain from exercising any rights against the Company and
others, including Monsanto.
(d) Monsanto shall not sell, assign or otherwise transfer any
Subordinated Indebtedness, or any part thereof, except (i) upon the agreement of
the transferee or assignee to abide by and be bound by the terms hereof and (ii)
when Monsanto may assign its rights under the Stockholders Agreement dated of
even date herewith between Company and Monsanto.
(e) Monsanto shall cause all Subordinated Indebtedness to be at all
times evidenced by the Note of the Company and shall cause such Note to bear
thereon a legend substantially as follows:
"The indebtedness evidenced by this Note is subordinate to any and all
indebtedness, obligations and liabilities of the maker hereof to the
holders of Senior Indebtedness in the manner and to the extent set
forth in the Credit Facility Agreement (as defined below) to which
reference is hereby made for a more full statement thereof."
-32-
<PAGE>
(f) If, notwithstanding the provisions of this Agreement, Monsanto
shall receive any payment of principal or interest on Subordinated Indebtedness
which the Company is not entitled to make pursuant to the terms hereof, whether
or not Monsanto has knowledge that the Company is not entitled to make such
payment, Monsanto shall promptly account for such payment and upon the demand of
the holders of Senior Indebtedness pay over such payment to such holders for
application to the Senior Indebtedness owing to such holders. No payment or any
distribution received by the holders of the Senior Indebtedness in respect of
Subordinated Indebtedness pursuant to any of the terms hereof shall entitle
Monsanto to any right, whether by virtue of subrogation or otherwise, in and to
any Senior Indebtedness unless and until all Senior Indebtedness has been fully
paid and satisfied and any commitment of the holders of Senior Indebtedness to
extend Senior Indebtedness to the Company has terminated.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Incorporation of Acquisition Agreement. The provisions
--------------------------------------
contained in Article 12 of the Acquisition Agreement are incorporated herein by
this reference and shall apply to this Agreement to the same extent as if fully
set forth herein.
Section 8.02. Reinstatement of Indebtedness. This Agreement shall
-----------------------------
continue to be effective, or be reinstated, as the case may be, if, at any time,
payment, or any part thereof, of any amount paid by or on behalf of the Company
to Monsanto with regard to the Note is rescinded or must otherwise be restored
or returned (i) upon or in connection with the insolvency, bankruptcy,
dissolution, liquidation, or reorganization of the Company, or any Subsidiary,
or (ii) upon or as a result of the appointment of a receiver, intervenor, or
conservator of, or trustee, or similar officer for the Company or any Subsidiary
or any Substantial Part of the property of such entity or (iii) as a result of
Article VII hereof, all as though such payment has not been made.
-33-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CALGENE II, INC.
By:
________________________________
Title:
_____________________________
MONSANTO COMPANY
By:
________________________________
Title:
_____________________________
-34-
<PAGE>
The undersigned covenants to distribute adequate amounts of Cumulative Free
Cash Flow to enable the Company to timely perform its obligations under Sections
1.02 and 5.02(c) hereof to the extent such distributions are not unlawful.
TOMATO INVESTMENT ASSOCIATES, INC.
By:________________________________
Title:_____________________________
-35-
<PAGE>
EXHIBIT 10.3
------------
ACC DEAMINASE LICENSE AGREEMENT
This AGREEMENT is made this ___ day of ________, 1996, between Calgene II,
Inc., and Monsanto Company regarding the license of certain patent rights.
Based on the mutual consideration between the parties, the parties do hereby
agree as follows:
ARTICLE 1 BACKGROUND AND PARTIES
1.1 Calgene II, Inc. ("NEWCO") is a Delaware corporation, having a
principal place of business at 1920 Fifth Street, Davis, California 95616.
1.2 Monsanto Company ("MONSANTO") is a Delaware corporation, having a
principal place of business at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
1.3 NEWCO and MONSANTO are mutually interested in entering into a
transaction involving the licensing of certain patent and know-how rights
subject to the terms and conditions of this AGREEMENT.
ARTICLE 2 DEFINITIONS
For purposes of this AGREEMENT, the following words and phrases shall have the
following meanings:
2.1 "AFFILIATE" shall mean any company or other legal entity which
controls, or is controlled by, or is under common control with a party to this
AGREEMENT, control meaning the holding, directly or indirectly, of more than
twenty percent (20%) of (i) the capital and/or (ii) the voting rights and/or
(iii) the right to elect or appoint directors.
2.2 "AGREEMENT" shall mean this License Agreement.
2.3 "EFFECTIVE DATE OF THIS AGREEMENT" shall mean the date first above
written.
2.4 "FIELD" shall mean for use in PRODUCE PLANTS.
2.5 "PRODUCE PLANTS" shall mean fresh and processed tomatoes, berries,
mangoes, cucurbits, peppers and sweetcorn.
2.6 "LICENSED PRODUCTS" shall mean genes, vectors, PRODUCE PLANT cells,
PRODUCE PLANTS and seed thereof of PRODUCE PLANTS containing a gene which
encodes for the sense or antisense of a
<PAGE>
gene which, in the absence of a license, would infringe at least one (1) claim
of an unexpired U.S. or foreign patent included within LICENSED PATENT RIGHTS.
2.7 "LICENSED PATENT RIGHTS" shall mean the patents and patent
applications identified in Appendix A and any continuations, continuations in
part, divisionals, or reissue or reexamination patents or applications in the
United States deriving priority from a common application with said patent
applications and any foreign counterparts thereof.
2.8 "MONSANTO KNOW HOW" shall mean all know-how and biological materials
in the FIELD related to the LICENSED PATENT RIGHTS disclosed to NEWCO at the
EFFECTIVE DATE OF THIS AGREEMENT.
2.9 "TERM OF THIS AGREEMENT" shall be for the life of the last to issue
patent in the LICENSED PATENT RIGHTS.
ARTICLE 3 CONVEYANCE OF RIGHTS
3.1 LICENSE GRANT: Subject to the terms and conditions of this AGREEMENT,
--------------
MONSANTO hereby grants to NEWCO and AFFILIATES of NEWCO under the LICENSED
PATENT RIGHTS and MONSANTO KNOW HOW and during the TERM OF THIS AGREEMENT an
exclusive, royalty-free world-wide license to make, use and sell LICENSED
PRODUCTS in the FIELD and the right to sublicense others to sell PRODUCE PLANTS.
ARTICLE 4 CONFIDENTIALITY
4.1 CONFIDENTIAL INFORMATION: It is anticipated that it will be
-------------------------
necessary, in connection with their obligations under this AGREEMENT, for NEWCO
and MONSANTO, and AFFILIATES of either party, to disclose to each other
confidential proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information disclosed
in writing or other tangible form, including samples of materials. If disclosed
orally, the Confidential Information shall be summarized in written form within
thirty (30) days by the disclosing party and a copy provided to the recipient.
4.2 CONFIDENTIALITY AND LIMITED USE:
--------------------------------
(a) With respect to all Confidential Information, both NEWCO and MONSANTO
and AFFILIATES of either party agree as follows, it being understood that
"recipient" indicates the party
2
<PAGE>
receiving the confidential, proprietary information from the other "disclosing"
party. Confidential Information disclosed to the recipient shall remain the
property of the disclosing party and shall be maintained in confidence by the
recipient and shall not be disclosed to third parties by the recipient and,
further, shall not be used except for purposes contemplated in this AGREEMENT.
All confidentiality and limited use obligations with respect to the Confidential
Information shall terminate five (5) years after the termination date of this
AGREEMENT.
(b) Notwithstanding any provision to the contrary, a party may
disclose the Confidential Information of the other party: (i) in connection with
an order of a court or other government body or as otherwise required by or in
compliance with law or regulations; provided that the disclosing party provides
the other party with notice and takes reasonable measures to obtain confidential
treatment thereof; (ii) in confidence to attorneys, accountants, banks and
financial sources and their advisors; or (iii) in confidence, in connection with
a license, sublicense, or acquisition so long as, in each case, the entity to
which disclosure is made is bound to confidentiality on terms consistent with
those set forth herein.
4.3 EXCEPTIONS: The obligations of confidentiality and limited use shall
-----------
not apply to any of the Confidential Information which
(a) is publicly available by publication or other documented means or
later becomes likewise publicly available through no act or fault of recipient;
or
(b) is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
(c) is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not obligate
recipient to hold it in confidence.
Specific information should not be deemed to be within any of these exclusions
merely because it is embraced by more general information falling within these
exclusions.
4.4 DISCLOSURES TO PERSONNEL: Recipient agrees to advise those of its
-------------------------
officers, directors, stockholders, employees, associates, agents, consultants,
AFFILIATES, and sublicensees who become aware of the Confidential Information,
of these
3
<PAGE>
confidentiality and limited use obligations and agrees, prior to any disclosure
of Confidential Information to such individuals or entities, to make them bound
by obligations of confidentiality and limited use of the same stringency as
those contained in this AGREEMENT.
4.5 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this
-----------------------------------
AGREEMENT, originals and copies of Confidential Information in written or other
tangible form will be returned to the disclosing party by recipient or destroyed
by recipient. One copy of each document may be retained in the custody of the
recipient's legal counsel solely to provide a record of what disclosures were
made.
4.6 CONFIDENTIAL STATUS OF AGREEMENT: The terms of this AGREEMENT shall
---------------------------------
be deemed to be Confidential Information and shall be dealt with according to
the confidentiality requirements of this Article 4. Both parties agree,
furthermore, that neither party will make public disclosures concerning other
specific terms of this AGREEMENT without obtaining the prior written consent of
the other party, which consent shall not be unreasonably withheld.
ARTICLE 5 REPRESENTATION AND WARRANTIES
5.1 MONSANTO represents and warrants that it has the right to make
conveyances and grants in accordance with the articles hereof. MONSANTO further
warrants that at the date this Agreement is signed by MONSANTO, MONSANTO does
not know of any U.S. patent, whether or not owned or licensed to MONSANTO, which
would be infringed by the use or sale of LICENSED PRODUCTS other than LICENSED
PATENT RIGHTS. It is expressly understood, however, that in making the
conveyances and grants under this Agreement with the exception of the foregoing
provisions of this paragraph, MONSANTO MAKES NO REPRESENTATION, EXTENDS NO
WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO:
a) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN
LICENSED PATENT RIGHTS; OR
b) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF
PATENTS OTHER THAN THE LICENSED PATENT RIGHTS.
ARTICLE 6 TERMINATION
6.1 Except as expressly provided otherwise, this Agreement shall terminate
upon reaching the TERM OF THIS AGREEMENT.
4
<PAGE>
6.2 This Agreement may be terminated by NEWCO by giving MONSANTO thirty
(30) days prior written notice of its intention to terminate.
6.3 Except as provided in paragraph 6.2 , neither NEWCO nor MONSANTO may
terminate this Agreement unless the other party is in breach of this Agreement
and does not remedy such breach within thirty (30) days written notice of such
breach.
ARTICLE 7 PATENT LITIGATION
7.1 MONSANTO shall have power to institute and prosecute at its own
discretion and expense suits for infringement of the LICENSED PATENT RIGHTS.
All expenses in such suits will be borne entirely by MONSANTO, and MONSANTO
shall retain all judgements or awards arising from these suits.
7.2 If MONSANTO shall fail to commence suit on an infringement hereunder
within one (1) year after receipt of NEWCO's written request to do so, or at any
time MONSANTO so notifies NEWCO, NEWCO shall have the right to bring and
prosecute any such suits at its cost and expense through attorneys of its
selection, in its own name, and all sums received or recovered by NEWCO in or by
reason of such suits shall be retained by NEWCO; provided, however, NEWCO shall
have no such right during the time MONSANTO is prosecuting any infringement suit
in such country. In any such suit MONSANTO agrees to be joined as a party, if
necessary. Any costs to MONSANTO because of such suit brought by NEWCO, other
than any attorney fee paid by MONSANTO for its own representation, shall be
reimbursed by NEWCO.
ARTICLE 8 PATENT FILINGS AND PROSECUTION
8.1 MONSANTO shall be responsible for the filing, prosecuting and
maintaining any patent application relating to LICENSED PATENT RIGHTS, including
any foreign counterpart.
8.2 NEWCO shall be entitled to review and comment upon all actions
undertaken in the prosecution of all patents and applications. In the event
that MONSANTO decides to discontinue prosecution or maintenance of any patent or
patent application within LICENSED PATENT RIGHTS, it will notify NEWCO so that
NEWCO can assume the responsibility for prosecution or maintenance of such
patent or patent application at NEWCO's own costs.
5
<PAGE>
ARTICLE 9 APPLICABLE LAW
9.1 THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI, U.S.A. WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS.
ARTICLE 10 MISCELLANEOUS PROVISIONS
10.1 NOTICES: All notices and other communications required or permitted
--------
under this AGREEMENT shall be deemed to be properly given when in writing and
sent by registered or certified mail, postage prepaid or by reputable courier
service or by telefax with receipt confirmation, to the other party at the
address set forth below, or at such other address as either party may in writing
designate from time to time for these purposes.
If to NEWCO: Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Attention: President
If to MONSANTO: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ceregen
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel - A3SB
10.2 ASSIGNABILITY: The rights acquired herein by NEWCO are not
--------------
assignable in whole or part (by operation of law or otherwise) to any third
party, except to a successor to NEWCO's entire business, without the prior
written consent of MONSANTO. Any successor to NEWCO's entire business shall be
deemed bound by the terms of this AGREEMENT. Any transfer, assignment or
delegation made or attempted in violation of this subparagraph shall be void and
of no effect.
10.3 OTHER LICENSES: It is MONSANTO's present intention to minimize
---------------
licenses to others in the FIELD and to make commercially reasonable efforts to
limit licenses to others in the FIELD to those situations where it is beneficial
to MONSANTO in resolving patent issues and related business issues. However, it
shall remain solely in MONSANTO's discretion whether or not it will license
third parties who may directly compete with NEWCO.
6
<PAGE>
In accordance with this AGREEMENT, the granting by MONSANTO of other non-
exclusive licenses in PRODUCE PLANTS to third parties shall be permitted.
10.4 SEVERABILITY: In case any one or more of the provisions contained in
-------------
this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this AGREEMENT shall be construed as if such
invalid or illegal or unenforceable provisions had never been contained herein.
10.5 COUNTERPARTS: This AGREEMENT may be executed in any number of
-------------
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
10.6 HEADINGS: Headings as to the contents of particular Articles 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 to which they refer.
10.7 AGREEMENT REFERENCES: All paragraphs and subparagraphs referred to
---------------------
herein are paragraphs and subparagraphs of this AGREEMENT.
10.8 APPENDICES: The appended Appendices form an integral part of this
-----------
AGREEMENT.
10.9 EXPORT CONTROL: Notwithstanding any other provisions of this
---------------
AGREEMENT, NEWCO agrees to make no disclosure or use of any MONSANTO information
or MONSANTO technology furnished or made known to NEWCO pursuant to this
AGREEMENT, except in compliance with the laws and regulations of the United
States of America, including the Export Administration Regulations promulgated
by the Office of Export Administration International Trade Administration,
United States Department of Commerce; and in particular, NEWCO agrees not to
export, directly or indirectly, either
(a) the technical data furnished or made known to NEWCO pursuant to this
AGREEMENT; or
(b) the "direct product" thereof; or
(c) any commodity produced using such technical data
7
<PAGE>
to any country or countries for which a validated license is required unless a
validated license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean the
immediate product (including process and services) produced directly by the use
of the technical data.
10.10 FORCE MAJEURE:
--------------
(a) Except for payments of money, neither of the parties shall be
liable for any default or delay in performance of any obligation under this
AGREEMENT caused by any of the following: Act of God, war, riot, fire,
explosion, accident, flood, sabotage, compliance with governmental requests,
laws, regulations, orders or actions, national defense requirements or any other
event beyond the reasonable control of such party; or labor trouble, strike,
lockout or injunction (provided that neither of the parties shall be required to
settle a labor dispute against its own best judgment).
(b) The party invoking this subparagraph 10.10 shall give the other
party notice and full particulars of such force majeure event by telephone,
telegram, telex or telecopier as soon as possible after the occurrence of the
cause upon which said party is relying. Telephone, telegram, telex and
telecopier notices shall be confirmed in writing by the sending party within
five (5) days.
(c) Both MONSANTO and NEWCO shall use reasonable efforts to mitigate
the effects of any force majeure on their respective part.
10.11 NEGATION OF AGENCY: It is agreed and understood by the parties
-------------------
hereto that each of NEWCO and MONSANTO, in its performance of its obligations
and responsibilities under this AGREEMENT, is an independent contractor and that
nothing herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in which each of
NEWCO and MONSANTO carries out its performance under this AGREEMENT is within
each of NEWCO'S and MONSANTO'S sole discretion and control.
10.12 FURTHER ASSURANCES: The parties hereto agree that upon reasonable
-------------------
request of the other party, each such party shall execute and deliver such
additional documents and agreements, and take such further actions, as may be
necessary in order to fulfill and give effect to the terms of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
and delivered as of the Effective Date.
CALGENE II, INC.
By:____________________
MONSANTO COMPANY
By:____________________
Robert T. Fraley
President, Ceregen
9
<PAGE>
APPENDIX A
Serial No. 809,457 filed 12-17-91
<PAGE>
EXHIBIT 10.4
------------
ADPGPP LICENSE AGREEMENT
This AGREEMENT is made this ___ day of ________, 1996, between Calgene II,
Inc., and Monsanto Company regarding the non-exclusive license of certain patent
rights. Based on the mutual consideration between the parties, the parties do
hereby agree as follows:
ARTICLE 1 BACKGROUND AND PARTIES
1.1 Calgene II, Inc. ("NEWCO") is a Delaware corporation, having a
principal place of business at 1920 Fifth Street, Davis, California 95616.
1.2 Monsanto Company ("MONSANTO") is a Delaware corporation, having a
principal place of business at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
1.3 NEWCO and MONSANTO are mutually interested in entering into a
transaction involving the licensing of certain patent and know-how rights
subject to the terms and conditions of this AGREEMENT.
ARTICLE 2 DEFINITIONS
For purposes of this AGREEMENT, the following words and phrases shall have the
following meanings:
2.1 "AFFILIATE" shall mean any company or other legal entity which
controls, or is controlled by, or is under common control with a party to this
AGREEMENT, control meaning the holding, directly or indirectly, of more than
fifty percent (50%) of (i) the capital and/or (ii) the voting rights and/or
(iii) the right to elect or appoint directors.
2.2 "AGREEMENT" shall mean this License Agreement.
2.3 "EFFECTIVE DATE OF THIS AGREEMENT" shall mean the date first above
written.
2.4 "FIELD" shall mean for use in PRODUCE PLANTS.
2.5 "PRODUCE PLANTS" shall mean fresh and processed tomatoes, berries,
mangoes, cucurbits, peppers and sweetcorn.
2.6 "LICENSED PRODUCTS" shall mean genes, vectors, PRODUCE PLANT cells,
PRODUCE PLANTS and seed thereof of PRODUCE PLANTS containing a gene which
encodes for the sense or antisense of a
<PAGE>
gene which, in the absence of a license, would infringe at least one (1) claim
of an unexpired U.S. or foreign patent included within LICENSED PATENT RIGHTS.
2.7 "LICENSED PATENT RIGHTS" shall mean the patents and patent
applications identified in Appendix A and any continuations, continuations in
part, divisionals, or reissue or reexamination patents or applications in the
United States deriving priority from a common application with said patent
applications and any foreign counterparts thereof.
2.8 "MONSANTO KNOW HOW" shall mean all know-how and biological materials
in the FIELD related to the LICENSED PATENT RIGHTS disclosed to NEWCO at the
EFFECTIVE DATE OF THIS AGREEMENT.
2.9 "TERM OF THIS AGREEMENT" shall be for the life of the last to issue
patent in the LICENSED PATENT RIGHTS.
ARTICLE 3 CONVEYANCE OF RIGHTS
3.1 LICENSE GRANT: Subject to the terms and conditions of this
--------------
AGREEMENT, MONSANTO hereby grants to NEWCO and AFFILIATES of NEWCO under the
LICENSED PATENT RIGHTS and MONSANTO KNOW-HOW and during the TERM OF THIS
AGREEMENT a non-exclusive, royalty-free, world-wide license to make and use
LICENSED PRODUCTS in the FIELD and the right to sell or sublicense others to
sell PRODUCE PLANTS.
ARTICLE 4 CONFIDENTIALITY
4.1 CONFIDENTIAL INFORMATION: It is anticipated that it will be
-------------------------
necessary, in connection with their obligations under this AGREEMENT, for NEWCO
and MONSANTO, and AFFILIATES of either party, to disclose to each other
confidential proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information disclosed
in writing or other tangible form, including samples of materials. If disclosed
orally, the Confidential Information shall be summarized in written form within
thirty (30) days by the disclosing party and a copy provided to the recipient.
4.2 CONFIDENTIALITY AND LIMITED USE:
--------------------------------
(a) With respect to all Confidential Information, both NEWCO and
MONSANTO and AFFILIATES of either party agree as
2
<PAGE>
follows, it being understood that "recipient" indicates the party receiving the
confidential, proprietary information from the other "disclosing" party.
Confidential Information disclosed to the recipient shall remain the property of
the disclosing party and shall be maintained in confidence by the recipient and
shall not be disclosed to third parties by the recipient and, further, shall not
be used except for purposes contemplated in this AGREEMENT. All confidentiality
and limited use obligations with respect to the Confidential Information shall
terminate five (5) years after the termination date of this AGREEMENT.
(b) Notwithstanding any provision to the contrary, a party may
disclose the Confidential Information of the other party: (i) in connection with
an order of a court or other government body or as otherwise required by or in
compliance with law or regulations; provided that the disclosing party provides
the other party with notice and takes reasonable measures to obtain confidential
treatment thereof; (ii) in confidence to attorneys, accountants, banks and
financial sources and their advisors; or (iii) in confidence, in connection with
a license, sublicense, or acquisition so long as, in each case, the entity to
which disclosure is made is bound to confidentiality on terms consistent with
those set forth herein.
4.3 EXCEPTIONS: The obligations of confidentiality and limited use shall
-----------
not apply to any of the Confidential Information which
(a) is publicly available by publication or other documented means or
later becomes likewise publicly available through no act or fault of recipient;
or
(b) is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
(c) is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not obligate
recipient to hold it in confidence.
Specific information should not be deemed to be within any of these exclusions
merely because it is embraced by more general information falling within these
exclusions.
4.4 DISCLOSURES TO PERSONNEL: Recipient agrees to advise those of its
-------------------------
officers, directors, stockholders, employees, associates, agents, consultants,
AFFILIATES, and sublicensees who
3
<PAGE>
become aware of the Confidential Information, of these confidentiality and
limited use obligations and agrees, prior to any disclosure of Confidential
Information to such individuals or entities, to make them bound by obligations
of confidentiality and limited use of the same stringency as those contained in
this AGREEMENT.
4.5 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this
-----------------------------------
AGREEMENT, originals and copies of Confidential Information in written or other
tangible form will be returned to the disclosing party by recipient or destroyed
by recipient. One copy of each document may be retained in the custody of the
recipient's legal counsel solely to provide a record of what disclosures were
made.
4.6 CONFIDENTIAL STATUS OF AGREEMENT: The terms of this AGREEMENT shall
---------------------------------
be deemed to be Confidential Information and shall be dealt with according to
the confidentiality requirements of this Article 4. Both parties agree,
furthermore, that neither party will make public disclosures concerning other
specific terms of this AGREEMENT without obtaining the prior written consent of
the other party, which consent shall not be unreasonably withheld.
ARTICLE 5 REPRESENTATION AND WARRANTIES
5.1 MONSANTO represents and warrants that it has the right to make
conveyances and grants in accordance with the articles hereof. MONSANTO further
warrants that at the date this Agreement is signed by MONSANTO, MONSANTO does
not know of any U.S. patent, whether or not owned or licensed to MONSANTO, which
would be infringed by the use or sale of LICENSED PRODUCTS other than LICENSED
PATENT RIGHTS. It is expressly understood, however, that in making the
conveyances and grants under this Agreement with the exception of the foregoing
provisions of this paragraph, MONSANTO MAKES NO REPRESENTATION, EXTENDS NO
WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO:
a) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN
LICENSED PATENT RIGHTS; OR
b) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF
PATENTS OTHER THAN THE LICENSED PATENT RIGHTS.
4
<PAGE>
ARTICLE 6 TERMINATION
6.1 Except as expressly provided otherwise, this Agreement shall terminate
upon reaching the TERM OF THIS AGREEMENT.
6.2 This Agreement may be terminated by NEWCO by giving MONSANTO thirty
(30) days prior written notice of its intention to terminate.
6.3 Except as provided in paragraph , neither NEWCO nor MONSANTO may
terminate this Agreement unless the other party is in breach of this Agreement
and does not remedy such breach within thirty (30) days written notice of such
breach.
ARTICLE 7 PATENT LITIGATION
7.1 MONSANTO shall have power to institute and prosecute at its own
discretion and expense suits for infringement of the LICENSED PATENT RIGHTS.
All expenses in such suits will be borne entirely by MONSANTO, and MONSANTO
shall retain all judgements or awards arising from these suits.
ARTICLE 8 PATENT FILINGS AND PROSECUTION
8.1 MONSANTO shall be responsible for the filing, prosecuting and
maintaining any patent application relating to LICENSED PATENT RIGHTS, including
any foreign counterpart.
8.2 NEWCO shall be entitled to review and comment upon all actions
undertaken in the prosecution of all patents and applications.
ARTICLE 9 APPLICABLE LAW
9.1 THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI, U.S.A. WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS.
ARTICLE 10 MISCELLANEOUS PROVISIONS
10.1 NOTICES: All notices and other communications required or permitted
--------
under this AGREEMENT shall be deemed to be properly given when in writing and
sent by registered or certified mail, postage prepaid or by reputable courier
service or by telefax with receipt confirmation, to the other party at the
address set forth below, or at such other address as either party may in writing
designate from time to time for these purposes.
5
<PAGE>
If to NEWCO: Calgene II, Inc.
1920 Fifth Street
David, California 95616
Attention: President
If to MONSANTO: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ceregen
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel - A3SB
10.2 ASSIGNABILITY: The rights acquired herein by NEWCO are not
--------------
assignable in whole or part (by operation of law or otherwise) to any third
party, except to a successor to NEWCO's entire business, without the prior
written consent of MONSANTO. Any successor to NEWCO's entire business shall be
deemed bound by the terms of this AGREEMENT. Any transfer, assignment or
delegation made or attempted in violation of this subparagraph shall be void and
of no effect.
10.3 OTHER LICENSES: It is MONSANTO's present intention to minimize
---------------
licenses to others in the FIELD and to make commercially reasonable efforts to
limit licenses to others in the FIELD to those situations where it is beneficial
to MONSANTO in resolving patent issues and related business issues. However, it
shall remain solely in MONSANTO's discretion whether or not it will license
third parties who may directly compete with NEWCO. In accordance with this
AGREEMENT, the granting by MONSANTO of other non-exclusive licenses in PRODUCE
PLANTS to third parties shall be permitted.
10.4 SEVERABILITY: In case any one or more of the provisions contained in
-------------
this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this AGREEMENT shall be construed as if such
invalid or illegal or unenforceable provisions had never been contained herein.
10.5 COUNTERPARTS: This AGREEMENT may be executed in any number of
-------------
counterparts, each of which shall be an original with
6
<PAGE>
the same effect as if the signatures thereto and hereto were upon the same
instrument.
10.6 HEADINGS: Headings as to the contents of particular Articles 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 to which they refer.
10.7 AGREEMENT REFERENCES: All paragraphs and subparagraphs referred to
---------------------
herein are paragraphs and subparagraphs of this AGREEMENT.
10.8 APPENDICES: The appended Appendices form an integral part of this
-----------
AGREEMENT.
10.9 EXPORT CONTROL: Notwithstanding any other provisions of this
---------------
AGREEMENT, NEWCO agrees to make no disclosure or use of any MONSANTO information
or MONSANTO technology furnished or made known to NEWCO pursuant to this
AGREEMENT, except in compliance with the laws and regulations of the United
States of America, including the Export Administration Regulations promulgated
by the Office of Export Administration International Trade Administration,
United States Department of Commerce; and in particular, NEWCO agrees not to
export, directly or indirectly, either
(a) the technical data furnished or made known to NEWCO pursuant to this
AGREEMENT; or
(b) the "direct product" thereof; or
(c) any commodity produced using such technical data
to any country or countries for which a validated license is required unless a
validated license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean the
immediate product (including process and services) produced directly by the use
of the technical data.
10.10 FORCE MAJEURE:
--------------
(a) Except for payments of money, neither of the parties shall be
liable for any default or delay in performance of any obligation under this
AGREEMENT caused by any of the following: Act of God, war, riot, fire,
explosion, accident, flood, sabotage, compliance with governmental requests,
laws, regulations, orders or actions, national defense requirements or
7
<PAGE>
any other event beyond the reasonable control of such party; or labor trouble,
strike, lockout or injunction (provided that neither of the parties shall be
required to settle a labor dispute against its own best judgment).
(b) The party invoking this subparagraph 10.10 shall give the other
party notice and full particulars of such force majeure event by telephone,
telegram, telex or telecopier as soon as possible after the occurrence of the
cause upon which said party is relying. Telephone, telegram, telex and
telecopier notices shall be confirmed in writing by the sending party within
five (5) days.
(c) Both MONSANTO and NEWCO shall use reasonable efforts to mitigate
the effects of any force majeure on their respective part.
10.11 NEGATION OF AGENCY: It is agreed and understood by the parties
-------------------
hereto that each of NEWCO and MONSANTO, in its performance of its obligations
and responsibilities under this AGREEMENT, is an independent contractor and that
nothing herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in which each of
NEWCO and MONSANTO carries out its performance under this AGREEMENT is within
each of NEWCO'S and MONSANTO'S sole discretion and control.
10.12 FURTHER ASSURANCES: The parties hereto agree that upon reasonable
-------------------
request of the other party, each such party shall execute and deliver such
additional documents and agreements, and take such further actions, as may be
necessary in order to fulfill and give effect to the terms of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
and delivered as of the Effective Date.
CALGENE II, INC.
By:____________________
MONSANTO COMPANY
By:____________________
Robert T. Fraley
President, Ceregen
<PAGE>
APPENDIX A
U.S. Serial No. 08/ 398,627, filed 03-03-95
U.S. Serial No. 120,703, filed 09-13-93
<PAGE>
EXHIBIT 10.5
------------
CMV LICENSE AGREEMENT
This AGREEMENT is made this ____ day of ________, 1996, between Calgene II,
Inc., and Monsanto Company regarding the non-exclusive license of certain patent
rights. Based on the mutual consideration between the parties, the parties do
hereby agree as follows:
ARTICLE 1 BACKGROUND AND PARTIES
1.1 Calgene II, Inc. ("NEWCO") is a Delaware corporation, having a
principal place of business at 1920 Fifth Street, Davis, California 95616.
1.2 Monsanto Company ("MONSANTO") is a Delaware corporation, having a
principal place of business at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
1.3 NEWCO and MONSANTO are mutually interested in entering into a
transaction involving the licensing of certain patent and know-how rights
subject to the terms and conditions of this AGREEMENT.
ARTICLE 2 DEFINITIONS
For purposes of this AGREEMENT, the following words and phrases shall have the
following meanings:
2.1 "AFFILIATE" shall mean any company or other legal entity which
controls, or is controlled by, or is under common control with a party to this
AGREEMENT, control meaning the holding, directly or indirectly, of more than
fifty percent (50%) of (i) the capital and/or (ii) the voting rights and/or
(iii) the right to elect or appoint directors.
2.2 "AGREEMENT" shall mean this License Agreement.
2.3 "EFFECTIVE DATE OF THIS AGREEMENT" shall mean the date first above
written.
2.4 "FIELD" shall mean the cucumber mosaic coat protein gene for use in
PRODUCE PLANTS.
2.5 "PRODUCE PLANTS" shall mean fresh and processed tomatoes, berries,
mangoes, cucurbits, peppers and sweetcorn.
2.6 "NET REVENUE," as used herein, shall mean revenues actually received
by NEWCO or its AFFILIATES for the sale of
<PAGE>
LICENSED PRODUCTS less any transportation charges, customary and reasonable
discounts (or rebates) and commissions, returns, sales or excise taxes and
duties imposed on and paid by NEWCO respect to such sale.
2.7 "LICENSED PRODUCTS" shall mean genes, vectors, PRODUCE PLANT cells,
PRODUCE PLANTS and seed thereof of PRODUCE PLANTS containing a gene which
encodes for the sense or antisense of a gene which, in the absence of a license,
would infringe at least one (1) claim of an unexpired U.S. or foreign patent
included within LICENSED PATENT RIGHTS.
2.8 "LICENSED PATENT RIGHTS" shall mean the patents and patent
applications identified in Appendix A and any continuations, continuations in
part, divisionals, or reissue or reexamination patents or applications in the
United States deriving priority from a common application with said patent
applications and any foreign counterparts thereof.
2.9 "MONSANTO KNOW HOW" shall mean all know-how and biological materials
in the FIELD related to the LICENSED PATENT RIGHTS disclosed to NEWCO at the
EFFECTIVE DATE OF THIS AGREEMENT.
2.10 "TERM OF THIS AGREEMENT" shall be for the life of the last to issue
patent in the LICENSED PATENT RIGHTS.
ARTICLE 3 CONVEYANCE OF RIGHTS
3.1 LICENSE GRANT: Subject to the terms and conditions of this AGREEMENT,
--------------
MONSANTO hereby grants to NEWCO and AFFILIATES of NEWCO under the LICENSED
PATENT RIGHTS and MONSANTO KNOW-HOW and during the TERM OF THIS AGREEMENT a non-
exclusive, royalty-bearing, world-wide license to make and use LICENSED PRODUCTS
in the FIELD and the right to sell or sublicense others to sell PRODUCE PLANTS.
3.2 ROYALTIES: In consideration for the license and rights granted
----------
herein, NEWCO shall pay MONSANTO an earned royalty of six percent (6%) of NET
REVENUE.
ARTICLE 4 REPORTS, BOOKS AND RECORDS
4.1 Within thirty (30) days of the end of the calendar annual period
during which this Agreement shall be executed and delivered and within thirty
(30) days after the end of each June and December thereafter, NEWCO shall make a
written report to MONSANTO setting forth the total sales, the NET REVENUES and
the
2
<PAGE>
number of LICENSE PRODUCTS sold by NEWCO and any AFFILIATES of NEWCO. If there
are no sales, a statement to that effect shall be made by NEWCO to MONSANTO. At
the time each report is made, NEWCO shall pay to MONSANTO the royalties shown by
such report to be payable hereunder.
4.2 NEWCO shall keep Books and Records in such reasonable detail as will
permit the reports provided for in paragraph 4.1 hereof to be made and the
royalties payable by NEWCO hereunder to be determined. NEWCO further agrees to
permit such Books and Records to be inspected and audited from time to time (but
not more often than once annually) during reasonable business hours by an
independent auditor, designated by MONSANTO and approved by NEWCO, to the extent
necessary to verify the reports provided for in paragraph 4.1; provided,
however, that such auditor shall indicate to MONSANTO only whether the reports
and royalties paid are correct, and if not, the reason why not.
ARTICLE 5 CONFIDENTIALITY
5.1 CONFIDENTIAL INFORMATION: It is anticipated that it will be
-------------------------
necessary, in connection with their obligations under this AGREEMENT, for NEWCO
and MONSANTO, and AFFILIATES of either party, to disclose to each other
confidential proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information disclosed
in writing or other tangible form, including samples of materials. If disclosed
orally, the Confidential Information shall be summarized in written form within
thirty (30) days by the disclosing party and a copy provided to the recipient.
5.2 CONFIDENTIALITY AND LIMITED USE:
--------------------------------
(a) With respect to all Confidential Information, both NEWCO and
MONSANTO and AFFILIATES of either party agree as follows, it being understood
that "recipient" indicates the party receiving the confidential, proprietary
information from the other "disclosing" party. Confidential Information
disclosed to the recipient shall remain the property of the disclosing party and
shall be maintained in confidence by the recipient and shall not be disclosed to
third parties by the recipient and, further, shall not be used except for
purposes contemplated in this AGREEMENT. All confidentiality and limited use
obligations with respect to the Confidential Information shall terminate five
(5) years after the termination date of this AGREEMENT.
3
<PAGE>
(b) Notwithstanding any provision to the contrary, a party may
disclose the Confidential Information of the other party: (i) in connection with
an order of a court or other government body or as otherwise required by or in
compliance with law or regulations; provided that the disclosing party provides
the other party with notice and takes reasonable measures to obtain confidential
treatment thereof; (ii) in confidence to attorneys, accountants, banks and
financial sources and their advisors; or (iii) in confidence, in connection with
a license, sublicense, or acquisition so long as, in each case, the entity to
which disclosure is made is bound to confidentiality on terms consistent with
those set forth herein.
5.3 EXCEPTIONS: The obligations of confidentiality and limited use shall
-----------
not apply to any of the Confidential Information which
(a) is publicly available by publication or other documented means or
later becomes likewise publicly available through no act or fault of recipient;
or
(b) is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
(c) is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not obligate
recipient to hold it in confidence.
Specific information should not be deemed to be within any of these exclusions
merely because it is embraced by more general information falling within these
exclusions.
5.4 DISCLOSURES TO PERSONNEL: Recipient agrees to advise those of its
-------------------------
officers, directors, stockholders, employees, associates, agents, consultants,
AFFILIATES, and sublicensees who become aware of the Confidential Information,
of these confidentiality and limited use obligations and agrees, prior to any
disclosure of Confidential Information to such individuals or entities, to make
them bound by obligations of confidentiality and limited use of the same
stringency as those contained in this AGREEMENT.
5.5 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this
-----------------------------------
AGREEMENT, originals and copies of Confidential Information in written or other
tangible form will be returned to the disclosing party by recipient or destroyed
by recipient. One
4
<PAGE>
copy of each document may be retained in the custody of the recipient's legal
counsel solely to provide a record of what disclosures were made.
5.6 CONFIDENTIAL STATUS OF AGREEMENT: The terms of this AGREEMENT shall
---------------------------------
be deemed to be Confidential Information and shall be dealt with according to
the confidentiality requirements of this Article 5. Both parties agree,
furthermore, that neither party will make public disclosures concerning other
specific terms of this AGREEMENT without obtaining the prior written consent of
the other party, which consent shall not be unreasonably withheld.
ARTICLE 6 REPRESENTATION AND WARRANTIES
6.1 MONSANTO represents and warrants that it has the right to make
conveyances and grants in accordance with the articles hereof. MONSANTO further
warrants that at the date this Agreement is signed by MONSANTO, MONSANTO does
not know of any U.S. patent, whether or not owned or licensed to MONSANTO, which
would be infringed by the use or sale of LICENSED PRODUCTS other than LICENSED
PATENT RIGHTS. It is expressly understood, however, that in making the
conveyances and grants under this Agreement with the exception of the foregoing
provisions of this paragraph, MONSANTO MAKES NO REPRESENTATION, EXTENDS NO
WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO:
a) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN
LICENSED PATENT RIGHTS; OR
b) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF
PATENTS OTHER THAN THE LICENSED PATENT RIGHTS.
ARTICLE 7 TERMINATION
7.1 Except as expressly provided otherwise, this Agreement shall terminate
upon reaching the TERM OF THIS AGREEMENT.
7.2 This Agreement may be terminated by NEWCO by giving MONSANTO thirty
(30) days prior written notice of its intention to terminate.
7.3 Except as provided in paragraph 7.2, neither NEWCO nor MONSANTO may
terminate this Agreement unless the other party is in breach of this Agreement
and does not remedy such breach within thirty (30) days written notice of such
breach.
5
<PAGE>
ARTICLE 8 PATENT LITIGATION
8.1 MONSANTO shall have power to institute and prosecute at its own
discretion and expense suits for infringement of the LICENSED PATENT RIGHTS. All
expenses in such suits will be borne entirely by MONSANTO, and MONSANTO shall
retain all judgements or awards arising from these suits.
ARTICLE 9 PATENT FILINGS AND PROSECUTION
9.1 MONSANTO shall be responsible for the filing, prosecuting and
maintaining any patent application relating to LICENSED PATENT RIGHTS, including
any foreign counterpart.
9.2 NEWCO shall be entitled to review and comment upon all actions
undertaken in the prosecution of all patents and applications.
ARTICLE 10 APPLICABLE LAW
10.1 THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI, U.S.A. WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS.
ARTICLE 11 MISCELLANEOUS PROVISIONS
11.1 NOTICES: All notices and other communications required or permitted
--------
under this AGREEMENT shall be deemed to be properly given when in writing and
sent by registered or certified mail, postage prepaid or by reputable courier
service or by telefax with receipt confirmation, to the other party at the
address set forth below, or at such other address as either party may in writing
designate from time to time for these purposes.
If to NEWCO: Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Attention: President
If to MONSANTO: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ceregen
6
<PAGE>
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel - A3SB
11.2 ASSIGNABILITY: The rights acquired herein by NEWCO are not
--------------
assignable in whole or part (by operation of law or otherwise) to any third
party, except to a successor to NEWCO's entire business, without the prior
written consent of MONSANTO. Any successor to NEWCO's entire business shall be
deemed bound by the terms of this AGREEMENT. Any transfer, assignment or
delegation made or attempted in violation of this subparagraph shall be void and
of no effect.
11.3 OTHER LICENSES: It is MONSANTO's present intention to minimize
---------------
licenses to others in the FIELD and to make commercially reasonable efforts to
limit licenses to others in the FIELD to those situations where it is beneficial
to MONSANTO in resolving patent issues and related business issues. However, it
shall remain solely in MONSANTO's discretion whether or not it will license
third parties who may directly compete with NEWCO. In accordance with this
AGREEMENT, the granting by MONSANTO of other non-exclusive licenses in PRODUCE
PLANTS to third parties shall be permitted.
11.4 MOST FAVORED NATIONS: If MONSANTO subsequently grants a license
---------------------
under the LICENSED PATENT RIGHTS to a third party having substantially the same
scope as the license conveyed under this AGREEMENT and having terms which are
more favorable as to earned royalty than the terms granted to NEWCO hereunder,
then MONSANTO shall advise NEWCO as to such more favorable earned royalty terms.
NEWCO shall, at its election, be entitled upon notice to MONSANTO to have this
AGREEMENT amended to substitute such earned royalty terms for the earned royalty
terms of this AGREEMENT as of the date upon which such license containing the
more favorable earned royalty terms shall have become effective.
11.5 MARKING: NEWCO agrees to reasonably endeavor to mark permanently and
-------
legibly all LICENSED PRODUCTS or LICENSED PRODUCT packages sold by NEWCO under
this AGREEMENT with such patent notice as may be permitted under Title 35,
United States Code.
1.6 SEVERABILITY: In case any one or more of the provisions contained in
-------------
this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this AGREEMENT shall be construed as
7
<PAGE>
if such invalid or illegal or unenforceable provisions had never been contained
herein.
11.7 COUNTERPARTS: This AGREEMENT may be executed in any number of
-------------
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11.8 HEADINGS: Headings as to the contents of particular Articles 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 to which they refer.
11.9 AGREEMENT REFERENCES: All paragraphs and subparagraphs referred to
---------------------
herein are paragraphs and subparagraphs of this AGREEMENT.
11.10 APPENDICES: The appended Appendices form an integral part of this
-----------
AGREEMENT.
11.11 EXPORT CONTROL: Notwithstanding any other provisions of this
---------------
AGREEMENT, NEWCO agrees to make no disclosure or use of any MONSANTO information
or MONSANTO technology furnished or made known to NEWCO pursuant to this
AGREEMENT, except in compliance with the laws and regulations of the United
States of America, including the Export Administration Regulations promulgated
by the Office of Export Administration International Trade Administration,
United States Department of Commerce; and in particular, NEWCO agrees not to
export, directly or indirectly, either
(a) the technical data furnished or made known to NEWCO pursuant to this
AGREEMENT; or
(b) the "direct product" thereof; or
(c) any commodity produced using such technical data
to any country or countries for which a validated license is required unless a
validated license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean the
immediate product (including process and services) produced directly by the use
of the technical data.
11.12 FORCE MAJEURE:
--------------
(a) Except for payments of money, neither of the parties shall be
liable for any default or delay in performance
8
<PAGE>
of any obligation under this AGREEMENT caused by any of the following: Act of
God, war, riot, fire, explosion, accident, flood, sabotage, compliance with
governmental requests, laws, regulations, orders or actions, national defense
requirements or any other event beyond the reasonable control of such party; or
labor trouble, strike, lockout or injunction (provided that neither of the
parties shall be required to settle a labor dispute against its own best
judgment).
(b) The party invoking this subparagraph 11.12 shall give the other
party notice and full particulars of such force majeure event by telephone,
telegram, telex or telecopier as soon as possible after the occurrence of the
cause upon which said party is relying. Telephone, telegram, telex and
telecopier notices shall be confirmed in writing by the sending party within
five (5) days.
(c) Both MONSANTO and NEWCO shall use reasonable efforts to mitigate
the effects of any force majeure on their respective part.
11.13 NEGATION OF AGENCY: It is agreed and understood by the parties
-------------------
hereto that each of NEWCO and MONSANTO, in its performance of its obligations
and responsibilities under this AGREEMENT, is an independent contractor and that
nothing herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in which each of
NEWCO and MONSANTO carries out its performance under this AGREEMENT is within
each of NEWCO'S and MONSANTO'S sole discretion and control.
11.14 FURTHER ASSURANCES: The parties hereto agree that upon reasonable
-------------------
request of the other party, each such party shall execute and deliver such
additional documents and agreements, and take such further actions, as may be
necessary in order to fulfill and give effect to the terms of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
and delivered as of the Effective Date.
CALGENE II, INC.
By:____________________
MONSANTO COMPANY
By:____________________
Robert T. Fraley
President, Ceregen
10
<PAGE>
APPENDIX A
U.S. Serial No. 06/917,027 filed 10/9/86
11
<PAGE>
EXHIBIT 10.6
------------
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH
OMISSIONS
FAD 3 LICENSE AGREEMENT
This AGREEMENT is made this ___ day of ________, 1996, between Calgene II,
Inc., and Monsanto Company regarding the non-exclusive license of certain patent
rights. Based on the mutual consideration between the parties, the parties do
hereby agree as follows:
ARTICLE 1 BACKGROUND AND PARTIES
1.1 Calgene II, Inc. ("NEWCO") is a Delaware corporation, having a
principal place of business at 1920 Fifth Street, Davis, CA 95616.
1.2 Monsanto Company ("MONSANTO") is a Delaware corporation, having a
principal place of business at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
1.3 NEWCO and MONSANTO are mutually interested in entering into a
transaction involving the licensing of certain patent and know-how rights
subject to the terms and conditions of this AGREEMENT.
ARTICLE 2 DEFINITIONS
For purposes of this AGREEMENT, the following words and phrases shall have the
following meanings:
2.1 "AFFILIATE" shall mean any company or other legal entity which
controls, or is controlled by, or is under common control with a party to this
AGREEMENT, control meaning the holding, directly or indirectly, of more than
fifty percent (50%) of (i) the capital and/or (ii) the voting rights and/or
(iii) the right to elect or appoint directors.
2.2 "AGREEMENT" shall mean this License Agreement.
2.3 "DESATURASE GENES" shall be defined as set forth in the MSU
AGREEMENT.
2.4 "EFFECTIVE DATE OF THIS AGREEMENT" shall mean the date first above
written.
2.5 "FATTY ACID METABOLISM KNOW-HOW" shall be defined as set forth in the
MSU AGREEMENT.
<PAGE>
2.6 "FIELD" shall mean the area of plant oil modification through genetic
engineering to produce specialty oil products. The FIELD shall not include the
use of oil modification technology to produce non-specialty oil products, such
as low linoleic wheat flour, biodegradable polymers, natto beans, tofu beans,
other whole bean products or any product where the good sold is not a specialty
oil.
2.7 "NEWCO OILSEED CROP PLANTS" shall mean canola, oil seed rape and
sunflower.
2.8 "GROSS SALE PRICE" shall mean the total sale price, FOB place of
manufacture, less sales and/or use taxes, third party
sales commissions, discounts, customs duties and/or packing.
2.9 "LICENSED PRODUCTS" shall mean genes, vectors, plant cells, plants
and seed thereof of plants containing a gene which encodes for the sense or
antisense of an enzyme in the fatty acid metabolism pathway which, in the
absence of a license, would infringe at least one (1) claim of an unexpired U.S.
or foreign patent included within LICENSED PATENT RIGHTS.
2.10 "NET VALUE ADDED" shall mean the difference in GROSS SALE PRICE
between a crop containing a gene covered by an issued claim of the LICENSED
PATENT RIGHTS, where said crop was sold or produced in a country containing such
an issued claim, and the GROSS SALE PRICE that crop would have without said
gene.
2.11 "LICENSED PATENT RIGHTS" shall mean the patents and patent
applications identified in Appendix I of the MSU AGREEMENT and any other patent
or patent application owned or controlled by MSU relating to DESATURASE GENES
and any continuations, continuations in part, divisionals, or reissue or
reexamination patents or applications in the United States deriving priority
from a common application with said patent applications and any foreign
counterparts thereof.
2.12 "MSU AGREEMENT" shall mean the agreement entitled LICENSE FOR GENES
FOR INDUSTRIAL AND FOOD FATTY ACID MANIPULATION between MONSANTO and Michigan
State University ("MSU") dated August 12, 1994.
2.13 "OTHER DESATURASE GENES" shall mean any gene which encodes an enzyme
which functions in the fatty acid pathway of crops as a desaturase that is not a
DESATURASE GENE as defined above.
2
<PAGE>
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH
OMISSIONS
2.14 "TERM OF THIS AGREEMENT" shall be for the life of the last to issue
patent in the LICENSED PATENT RIGHTS.
ARTICLE 3 CONVEYANCE OF RIGHTS
3.1 Subject to the terms and conditions of this AGREEMENT, MONSANTO hereby
grants to NEWCO and AFFILIATES of NEWCO under the LICENSED PATENT RIGHTS and
FATTY ACID METABOLISM KNOW-HOW and during the TERM OF THIS AGREEMENT a non-
exclusive, royalty-bearing, world-wide sublicense to make and use LICENSED
PRODUCTS and the right to sell or sublicense others to sell NEWCO OILSEED CROP
PLANTS.
3.2 In consideration for the license and rights granted herein, NEWCO shall
pay MONSANTO a license maintenance fee of ****** beginning on the first
anniversary of the EFFECTIVE DATE OF THIS AGREEMENT and continuing annually on
each anniversary. This license maintenance fee shall be credited against any
royalties due under section below.
3.3 In further consideration for the license and rights granted herein,
NEWCO shall pay MONSANTO an earned royalty of ***** of NET VALUE ADDED.
ARTICLE 4 REPORTS, BOOKS AND RECORDS
4.1 Within thirty (30) days of the end of the calendar annual period
during which this Agreement shall be executed and delivered and within thirty
(30) days after the end of each following annual period, NEWCO shall make a
written report to MONSANTO setting forth the total sales, the NET VALUE ADDED
and the number of LICENSE PRODUCTS sold by NEWCO and any AFFILIATES of NEWCO.
If there are no sales, a statement to that effect shall be made by NEWCO to
MONSANTO. At the time each report is made, NEWCO shall pay to MONSANTO the
royalties shown by such report to be payable hereunder.
4.2 NEWCO shall keep Books and Records in such reasonable detail as will
permit the reports provided for in paragraph 4.1 hereof to be made and the
royalties payable by NEWCO hereunder to be determined. NEWCO further agrees to
permit such Books and Records to be inspected and audited from time to time (but
not more often than once annually) during reasonable business hours by an
independent auditor, designated by MONSANTO and approved by NEWCO, to the extent
necessary to verify the reports provided for in paragraph 4.1; provided,
however, that such auditor shall
3
<PAGE>
indicate to MONSANTO only whether the reports and royalties paid are correct,
and if not, the reason why not.
ARTICLE 5 JUDGMENT WITH RESPECT TO PATENTS
5.1 If a judgment or decree shall be entered in any proceeding in which
the validity or infringement of any claim of any patent under which the license
is granted hereunder shall be in issue, which judgment or decree shall become
not further reviewable through the exhaustion of all permissible applications
for rehearing or review by a superior tribunal or through the expiration of the
time permitted for such application, (such a judgment or decree being
hereinafter referred to as an "Irrevocable Judgment"), the construction placed
on any such claim by such Irrevocable Judgment shall thereafter be followed not
only as to such claim, but also as to all claims to which such construction
applies, with respect to acts occurring thereafter and if an Irrevocable
Judgment shall hold any claim invalid, NEWCO shall be relieved thereafter from
including in its reports hereunder that portion of the royalties due under
Article 3 payable only because of such claim or any broader claim to which such
Irrevocable Judgment shall be applicable, and from the performance of any other
acts required by this Agreement only because of any such claims.
ARTICLE 6 CONFIDENTIALITY
6.1 CONFIDENTIAL INFORMATION: It is anticipated that it will be
-------------------------
necessary, in connection with their obligations under this AGREEMENT, for NEWCO
and MONSANTO, and AFFILIATES of either party, to disclose to each other
confidential proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information disclosed
in writing or other tangible form, including samples of materials. If disclosed
orally, the Confidential Information shall be summarized in written form within
thirty (30) days by the disclosing party and a copy provided to the recipient.
6.2 CONFIDENTIALITY AND LIMITED USE:
--------------------------------
(a) With respect to all Confidential Information, both NEWCO and
MONSANTO and AFFILIATES of either party agree as follows, it being understood
that "recipient" indicates the party receiving the confidential, proprietary
information from the other "disclosing" party. Confidential Information
disclosed to the recipient shall remain the property of the disclosing party
4
<PAGE>
and shall be maintained in confidence by the recipient and shall not be
disclosed to third parties by the recipient and, further, shall not be used
except for purposes contemplated in this AGREEMENT. All confidentiality and
limited use obligations with respect to the Confidential Information shall
terminate five (5) years after the termination date of this AGREEMENT.
(b) Notwithstanding any provision to the contrary, a party may
disclose the Confidential Information of the other party: (i) in connection with
an order of a court or other government body or as otherwise required by or in
compliance with law or regulations; provided that the disclosing party provides
the other party with notice and takes reasonable measures to obtain confidential
treatment thereof; (ii) in confidence to attorneys, accountants, banks and
financial sources and their advisors; or (iii) in confidence, in connection with
a license, sublicense, or acquisition so long as, in each case, the entity to
which disclosure is made is bound to confidentiality on terms consistent with
those set forth herein.
6.3 EXCEPTIONS: The obligations of confidentiality and limited use shall
-----------
not apply to any of the Confidential Information which
(a) is publicly available by publication or other documented means or
later becomes likewise publicly available through no act or fault of recipient;
or
(b) is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
(c) is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not obligate
recipient to hold it in confidence.
Specific information should not be deemed to be within any of these exclusions
merely because it is embraced by more general information falling within these
exclusions.
6.4 DISCLOSURES TO PERSONNEL: Recipient agrees to advise those of its
-------------------------
officers, directors, stockholders, employees, associates, agents, consultants,
AFFILIATES, and sublicensees who become aware of the Confidential Information,
of these confidentiality and limited use obligations and agrees, prior to any
disclosure of Confidential Information to such individuals or entities, to make
them bound by obligations of confidentiality
5
<PAGE>
and limited use of the same stringency as those contained in this AGREEMENT.
6.5 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this
-----------------------------------
AGREEMENT, originals and copies of Confidential Information in written or other
tangible form will be returned to the disclosing party by recipient or destroyed
by recipient. One copy of each document may be retained in the custody of the
recipient's legal counsel solely to provide a record of what disclosures were
made.
6.6 CONFIDENTIAL STATUS OF AGREEMENT: The terms of this AGREEMENT
---------------------------------
including the royalty rate shall be deemed to be Confidential Information and
shall be dealt with according to the confidentiality requirements of this
Article 6. Both parties agree, furthermore, that neither party will make public
disclosures concerning other specific terms of this AGREEMENT without obtaining
the prior written consent of the other party, which consent shall not be
unreasonably withheld.
ARTICLE 7 REPRESENTATION AND WARRANTIES
7.1 MONSANTO represents and warrants that it has the right to make
conveyances and grants in accordance with the articles hereof. MONSANTO further
warrants that at the date this Agreement is signed by MONSANTO, MONSANTO does
not know of any U.S. patent, whether or not owned or licensed to MONSANTO, which
would be infringed by the use or sale of LICENSE PRODUCTS other than MONSANTO
PATENT RIGHTS. It is expressly understood, however, that in making the
conveyances and grants under this Agreement with the exception of the foregoing
provisions of this paragraph, MONSANTO MAKES NO REPRESENTATION, EXTENDS NO
WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO:
a) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN
LICENSED PATENT RIGHTS; OR
b) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF
PATENTS OTHER THAN THE LICENSED PATENT RIGHTS.
ARTICLE 8 TERMINATION
8.1 Except as expressly provided otherwise, this Agreement shall terminate
upon reaching the TERM OF THIS AGREEMENT.
8.2 This Agreement may be terminated by NEWCO by giving MONSANTO thirty
(30) days prior written notice of its intention
6
<PAGE>
to terminate, provided however that termination by NEWCO shall not relieve it of
its obligation to pay to MONSANTO any sum due or accrued prior to such
termination.
8.3 Except as provided in paragraph , neither NEWCO nor MONSANTO may
terminate this Agreement unless the other party is in breach of this Agreement
and does not remedy such breach within thirty (30) days written notice of such
breach.
ARTICLE 9 PATENT LITIGATION
9.1 MONSANTO shall have power to institute and prosecute at its own
discretion and expense suits for infringement of the MONSANTO PATENT RIGHTS.
All expenses in such suits will be borne entirely by MONSANTO, and MONSANTO
shall retain all judgements or awards arising from these suits.
ARTICLE 10 PATENT FILINGS AND PROSECUTION
10.1 MONSANTO shall be responsible for the filing, prosecuting and
maintaining any patent application relating to MONSANTO PATENT RIGHTS, including
any foreign counterpart.
10.2 NEWCO shall be entitled to review and comment upon all actions
undertaken in the prosecution of all patents and applications.
ARTICLE 11 APPLICABLE LAW
11.1 THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI, U.S.A. WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS.
ARTICLE 12 MISCELLANEOUS PROVISIONS
12.1 NOTICES: All notices and other communications required or permitted
--------
under this AGREEMENT shall be deemed to be properly given when in writing and
sent by registered or certified mail, postage prepaid or by reputable courier
service or by telefax with receipt confirmation, to the other party at the
address set forth below, or at such other address as either party may in writing
designate from time to time for these purposes.
If to NEWCO: Calgene II, Inc.
1920 Fifth Street
Davis, CA 95616
Attention: President
7
<PAGE>
If to MONSANTO: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ceregen
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel - A3SB
12.2 ASSIGNABILITY: The rights acquired herein by NEWCO are not
--------------
assignable in whole or part (by operation of law or otherwise) to any third
party, except to a successor to NEWCO's entire business, without the prior
written consent of MONSANTO. Any successor to NEWCO's entire business shall be
deemed bound by the terms of this AGREEMENT. Any transfer, assignment or
delegation made or attempted in violation of this subparagraph shall be void and
of no effect.
12.3 OTHER LICENSES: It is MONSANTO's present intention to minimize
---------------
licenses to others in the FIELD and to make commercially reasonable efforts to
limit licenses to others in the FIELD to those situations where it is beneficial
to MONSANTO in resolving patent issues and related business issues. However, it
shall remain solely in MONSANTO's discretion whether or not it will license
third parties who may directly compete with NEWCO. In accordance with this
agreement, the granting by MONSANTO of non-exclusive licenses to third parties
in the FIELD including NEWCO OILSEED CROP PLANTS shall be permitted.
12.4 SEVERABILITY: In case any one or more of the provisions contained in
-------------
this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this AGREEMENT shall be construed as if such
invalid or illegal or unenforceable provisions had never been contained herein.
12.5 COUNTERPARTS: This AGREEMENT may be executed in any number of
-------------
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12.6 HEADINGS: Headings as to the contents of particular Articles 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 to which they refer.
8
<PAGE>
12.7 AGREEMENT REFERENCES: All paragraphs and subparagraphs referred to
---------------------
herein are paragraphs and subparagraphs of this AGREEMENT.
12.8 APPENDICES: The appended Appendices form an integral part of this
-----------
AGREEMENT.
12.9 EXPORT CONTROL: Notwithstanding any other provisions of this
---------------
AGREEMENT, NEWCO agrees to make no disclosure or use of any MONSANTO information
or MONSANTO technology furnished or made known to NEWCO pursuant to this
AGREEMENT, except in compliance with the laws and regulations of the United
States of America, including the Export Administration Regulations promulgated
by the Office of Export Administration International Trade Administration,
United States Department of Commerce; and in particular, NEWCO agrees not to
export, directly or indirectly, either
(a) the technical data furnished or made known to NEWCO pursuant to this
AGREEMENT; or
(b) the "direct product" thereof; or
(c) any commodity produced using such technical data
to any country or countries for which a validated license is required unless a
validated license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean the
immediate product (including process and services) produced directly by the use
of the technical data.
12.10 FORCE MAJEURE:
--------------
(a) Except for payments of money, neither of the parties shall be
liable for any default or delay in performance of any obligation under this
AGREEMENT caused by any of the following: Act of God, war, riot, fire,
explosion, accident, flood, sabotage, compliance with governmental requests,
laws, regulations, orders or actions, national defense requirements or any other
event beyond the reasonable control of such party; or labor trouble, strike,
lockout or injunction (provided that neither of the parties shall be required to
settle a labor dispute against its own best judgment).
(b) The party invoking this subparagraph 12.10 shall give the other
party notice and full particulars of such force majeure event by telephone,
telegram, telex or telecopier as soon
9
<PAGE>
as possible after the occurrence of the cause upon which said party is relying.
Telephone, telegram, telex and telecopier notices shall be confirmed in writing
by the sending party within five (5) days.
(c) Both MONSANTO and NEWCO shall use reasonable efforts to mitigate
the effects of any force majeure on their respective part.
12.11 NEGATION OF AGENCY: It is agreed and understood by the parties
-------------------
hereto that each of NEWCO and MONSANTO, in its performance of its obligations
and responsibilities under this AGREEMENT, is an independent contractor and that
nothing herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in which each of
NEWCO and MONSANTO carries out its performance under this AGREEMENT is within
each of NEWCO'S and MONSANTO'S sole discretion and control.
12.12 FURTHER ASSURANCES: The parties hereto agree that upon reasonable
-------------------
request of the other party, each such party shall execute and deliver such
additional documents and agreements, and take such further actions, as may be
necessary in order to fulfill and give effect to the terms of this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
and delivered as of the Effective Date.
CALGENE II, INC.
By:___________________
MONSANTO COMPANY
By:___________________
Robert T. Fraley
President, Ceregen
11
<PAGE>
EXHIBIT 10.7
------------
FRUIT-SPECIFIC PROMOTER LICENSE AGREEMENT
This AGREEMENT is made this ___ day of ________, 1996, between Calgene II,
Inc., and Monsanto Company regarding the non-exclusive license of certain patent
rights. Based on the mutual consideration between the parties, the parties do
hereby agree as follows:
ARTICLE 1 BACKGROUND AND PARTIES
1.1 Calgene II, Inc. ("NEWCO") is a Delaware corporation, having a
principal place of business at 1920 Fifth Street, Davis, California 95616.
1.2 Monsanto Company ("MONSANTO") is a Delaware corporation, having a
principal place of business at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
1.3 NEWCO and MONSANTO are mutually interested in entering into a
transaction involving the licensing of certain patent and know-how rights
subject to the terms and conditions of this AGREEMENT.
ARTICLE 2 DEFINITIONS
For purposes of this AGREEMENT, the following words and phrases shall have the
following meanings:
2.1 "AFFILIATE" shall mean any company or other legal entity which
controls, or is controlled by, or is under common control with a party to this
AGREEMENT, control meaning the holding, directly or indirectly, of more than
fifty percent (50%) of (i) the capital and/or (ii) the voting rights and/or
(iii) the right to elect or appoint directors.
2.2 "AGREEMENT" shall mean this License Agreement.
2.3 "EFFECTIVE DATE OF THIS AGREEMENT" shall mean the date first above
written.
2.4 "FIELD" shall mean for use in PRODUCE PLANTS.
2.5 "PRODUCE PLANTS" shall mean fresh and processed tomatoes, berries,
mangoes, cucurbits, peppers and sweetcorn plants.
<PAGE>
2.6 "LICENSED PRODUCTS" shall mean genes, vectors, PRODUCE PLANT cells,
PRODUCE PLANTS and seed thereof of PRODUCE PLANTS containing a gene which
encodes for the sense or antisense of a gene which, in the absence of a license,
would infringe at least one (1) claim of an unexpired U.S. or foreign patent
included within LICENSED PATENT RIGHTS.
2.7 "LICENSED PATENT RIGHTS" shall mean the patents and patent
applications identified in Appendix A and any continuations, continuations in
part, divisionals, or reissue or reexamination patents or applications in the
United States deriving priority from a common application with said patent
applications and any foreign counterparts thereof.
2.8 "MONSANTO KNOW HOW" shall mean all know-how and biological materials
in the FIELD related to the LICENSED PATENT RIGHTS disclosed to NEWCO at the
EFFECTIVE DATE OF THIS AGREEMENT.
2.9 "TERM OF THIS AGREEMENT" shall be for the life of the last to issue
patent in the LICENSED PATENT RIGHTS.
ARTICLE 3 CONVEYANCE OF RIGHTS
3.1 LICENSE GRANT: Subject to the terms and conditions of this AGREEMENT,
--------------
MONSANTO hereby grants to NEWCO and AFFILIATES of NEWCO under the LICENSED
PATENT RIGHTS and MONSANTO KNOW-HOW and during the TERM OF THIS AGREEMENT a non-
exclusive, royalty-free, world-wide license to make and use LICENSED PRODUCTS in
the FIELD and the right to sell or sublicense others to sell PRODUCE PLANTS.
ARTICLE 4 CONFIDENTIALITY
4.1 CONFIDENTIAL INFORMATION: It is anticipated that it will be
-------------------------
necessary, in connection with their obligations under this AGREEMENT, for NEWCO
and MONSANTO, and AFFILIATES of either party, to disclose to each other
confidential proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information disclosed
in writing or other tangible form, including samples of materials. If disclosed
orally, the Confidential Information shall be summarized in written form within
thirty (30) days by the disclosing party and a copy provided to the recipient.
2
<PAGE>
4.2 CONFIDENTIALITY AND LIMITED USE:
--------------------------------
(a) With respect to all Confidential Information, both NEWCO and
MONSANTO and AFFILIATES of either party agree as follows, it being understood
that "recipient" indicates the party receiving the confidential, proprietary
information from the other "disclosing" party. Confidential Information
disclosed to the recipient shall remain the property of the disclosing party and
shall be maintained in confidence by the recipient and shall not be disclosed to
third parties by the recipient and, further, shall not be used except for
purposes contemplated in this AGREEMENT. All confidentiality and limited use
obligations with respect to the Confidential Information shall terminate five
(5) years after the termination date of this AGREEMENT.
(b) Notwithstanding any provision to the contrary, a party may
disclose the Confidential Information of the other party: (i) in connection with
an order of a court or other government body or as otherwise required by or in
compliance with law or regulations; provided that the disclosing party provides
the other party with notice and takes reasonable measures to obtain confidential
treatment thereof; (ii) in confidence to attorneys, accountants, banks and
financial sources and their advisors; or (iii) in confidence, in connection with
a license, sublicense, or acquisition so long as, in each case, the entity to
which disclosure is made is bound to confidentiality on terms consistent with
those set forth herein.
4.3 EXCEPTIONS: The obligations of confidentiality and limited use shall
-----------
not apply to any of the Confidential Information which
(a) is publicly available by publication or other documented means or
later becomes likewise publicly available through no act or fault of recipient;
or
(b) is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
(c) is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not obligate
recipient to hold it in confidence.
Specific information should not be deemed to be within any of these exclusions
merely because it is embraced by more general information falling within these
exclusions.
3
<PAGE>
4.4 DISCLOSURES TO PERSONNEL: Recipient agrees to advise those of its
-------------------------
officers, directors, stockholders, employees, associates, agents, consultants,
AFFILIATES, and sublicensees who become aware of the Confidential Information,
of these confidentiality and limited use obligations and agrees, prior to any
disclosure of Confidential Information to such individuals or entities, to make
them bound by obligations of confidentiality and limited use of the same
stringency as those contained in this AGREEMENT.
4.5 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this
-----------------------------------
AGREEMENT, originals and copies of Confidential Information in written or other
tangible form will be returned to the disclosing party by recipient or destroyed
by recipient. One copy of each document may be retained in the custody of the
recipient's legal counsel solely to provide a record of what disclosures were
made.
4.6 CONFIDENTIAL STATUS OF AGREEMENT: The terms of this AGREEMENT shall
---------------------------------
be deemed to be Confidential Information and shall be dealt with according to
the confidentiality requirements of this Article 4. Both parties agree,
furthermore, that neither party will make public disclosures concerning other
specific terms of this AGREEMENT without obtaining the prior written consent of
the other party, which consent shall not be unreasonably withheld.
ARTICLE 5 REPRESENTATION AND WARRANTIES
5.1 MONSANTO represents and warrants that it has the right to make
conveyances and grants in accordance with the articles hereof. MONSANTO further
warrants that at the date this Agreement is signed by MONSANTO, MONSANTO does
not know of any U.S. patent, whether or not owned or licensed to MONSANTO, which
would be infringed by the use or sale of LICENSED PRODUCTS other than LICENSED
PATENT RIGHTS. It is expressly understood, however, that in making the
conveyances and grants under this Agreement with the exception of the foregoing
provisions of this paragraph, MONSANTO MAKES NO REPRESENTATION, EXTENDS NO
WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO:
a) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN
LICENSED PATENT RIGHTS; OR
b) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF
PATENTS OTHER THAN THE LICENSED PATENT RIGHTS.
4
<PAGE>
ARTICLE 6 TERMINATION
6.1 Except as expressly provided otherwise, this Agreement shall terminate
upon reaching the TERM OF THIS AGREEMENT.
6.2 This Agreement may be terminated by NEWCO by giving MONSANTO thirty
(30) days prior written notice of its intention to terminate.
6.3 Except as provided in paragraph 6.2, neither NEWCO nor MONSANTO may
terminate this Agreement unless the other party is in breach of this Agreement
and does not remedy such breach within thirty (30) days written notice of such
breach.
ARTICLE 7 PATENT LITIGATION
7.1 MONSANTO shall have power to institute and prosecute at its own
discretion and expense suits for infringement of the LICENSED PATENT RIGHTS.
All expenses in such suits will be borne entirely by MONSANTO, and MONSANTO
shall retain all judgements or awards arising from these suits.
ARTICLE 8 PATENT FILINGS AND PROSECUTION
8.1 MONSANTO shall be responsible for the filing, prosecuting and
maintaining any patent application relating to LICENSED PATENT RIGHTS, including
any foreign counterpart.
8.2 NEWCO shall be entitled to review and comment upon all actions
undertaken in the prosecution of all patents and applications.
ARTICLE 9 APPLICABLE LAW
9.1 THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI, U.S.A. WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS.
ARTICLE 10 MISCELLANEOUS PROVISIONS
10.1 NOTICES: All notices and other communications required or permitted
--------
under this AGREEMENT shall be deemed to be properly given when in writing and
sent by registered or certified mail, postage prepaid or by reputable courier
service or by telefax with receipt confirmation, to the other party at the
address set forth below, or at such other address as either party may in writing
designate from time to time for these purposes.
5
<PAGE>
If to NEWCO: Calgene II, Inc
1920 Fifth Street
Davis, CA 95616
Attention: President
If to MONSANTO: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ceregen
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel - A3SB
10.2 ASSIGNABILITY: The rights acquired herein by NEWCO are not
--------------
assignable in whole or part (by operation of law or otherwise) to any third
party, except to a successor to NEWCO's entire business, without the prior
written consent of MONSANTO. Any successor to NEWCO's entire business shall be
deemed bound by the terms of this AGREEMENT. Any transfer, assignment or
delegation made or attempted in violation of this subparagraph shall be void and
of no effect.
10.3 OTHER LICENSES: It is MONSANTO's present intention to minimize
---------------
licenses to others in the FIELD and to make commercially reasonable efforts to
limit licenses to others in the FIELD to those situations where it is beneficial
to MONSANTO in resolving patent issues and related business issues. However, it
shall remain solely in MONSANTO's discretion whether or not it will license
third parties who may directly compete with NEWCO. In accordance with this
AGREEMENT, the granting by MONSANTO of other non-exclusive licenses in PRODUCE
PLANTS to third parties shall be permitted.
10.4 SEVERABILITY: In case any one or more of the provisions contained in
-------------
this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this AGREEMENT shall be construed as if such
invalid or illegal or unenforceable provisions had never been contained herein.
10.5 COUNTERPARTS: This AGREEMENT may be executed in any number of
-------------
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
6
<PAGE>
10.6 HEADINGS: Headings as to the contents of particular Articles 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 to which they refer.
10.7 AGREEMENT REFERENCES: All paragraphs and subparagraphs referred to
---------------------
herein are paragraphs and subparagraphs of this AGREEMENT.
10.8 APPENDICES: The appended Appendices form an integral part of this
-----------
AGREEMENT.
10.9 EXPORT CONTROL: Notwithstanding any other provisions of this
---------------
AGREEMENT, NEWCO agrees to make no disclosure or use of any MONSANTO information
or MONSANTO technology furnished or made known to NEWCO pursuant to this
AGREEMENT, except in compliance with the laws and regulations of the United
States of America, including the Export Administration Regulations promulgated
by the Office of Export Administration International Trade Administration,
United States Department of Commerce; and in particular, NEWCO agrees not to
export, directly or indirectly, either
(a) the technical data furnished or made known to NEWCO pursuant to this
AGREEMENT; or
(b) the "direct product" thereof; or
(c) any commodity produced using such technical data
to any country or countries for which a validated license is required unless a
validated license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean the
immediate product (including process and services) produced directly by the use
of the technical data.
10.10 FORCE MAJEURE:
--------------
(a) Except for payments of money, neither of the parties shall be
liable for any default or delay in performance of any obligation under this
AGREEMENT caused by any of the following: Act of God, war, riot, fire,
explosion, accident, flood, sabotage, compliance with governmental requests,
laws, regulations, orders or actions, national defense requirements or any other
event beyond the reasonable control of such party; or labor trouble, strike,
lockout or injunction (provided that
7
<PAGE>
neither of the parties shall be required to settle a labor dispute against its
own best judgment).
(b) The party invoking this subparagraph 10.10 shall give the other
party notice and full particulars of such force majeure event by telephone,
telegram, telex or telecopier as soon as possible after the occurrence of the
cause upon which said party is relying. Telephone, telegram, telex and
telecopier notices shall be confirmed in writing by the sending party within
five (5) days.
(c) Both MONSANTO and NEWCO shall use reasonable efforts to mitigate
the effects of any force majeure on their respective part.
10.11 NEGATION OF AGENCY: It is agreed and understood by the parties
-------------------
hereto that each of NEWCO and MONSANTO, in its performance of its obligations
and responsibilities under this AGREEMENT, is an independent contractor and that
nothing herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in which each of
NEWCO and MONSANTO carries out its performance under this AGREEMENT is within
each of NEWCO'S and MONSANTO'S sole discretion and control.
10.12 FURTHER ASSURANCES: The parties hereto agree that upon reasonable
-------------------
request of the other party, each such party shall execute and deliver such
additional documents and agreements, and take such further actions, as may be
necessary in order to fulfill and give effect to the terms of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
and delivered as of the Effective Date.
CALGENE II, INC.
By:____________________
MONSANTO COMPANY
By:____________________
Robert T. Fraley
President, Ceregen
9
<PAGE>
APPENDIX A
U.S. Serial No. 08/ 406,857, filed 3/20/95
U.S. Serial No. 334,639, filed 11-4-94
10
<PAGE>
EXHIBIT 10.8
------------
GEMINI VIRUS LICENSE AGREEMENT
This AGREEMENT is made this ___ day of ________, 1996, between Calgene II,
Inc., and Monsanto Company regarding the license of certain patent rights.
Based on the mutual consideration between the parties, the parties do hereby
agree as follows:
ARTICLE 1 BACKGROUND AND PARTIES
1.1 Calgene II, Inc. ("NEWCO") is a Delaware corporation, having a
principal place of business at 1920 Fifth Street, Davis, California 95616.
1.2 Monsanto Company ("MONSANTO") is a Delaware corporation, having a
principal place of business at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
1.3 NEWCO and MONSANTO are mutually interested in entering into a
transaction involving the licensing of certain patent and know-how rights
subject to the terms and conditions of this AGREEMENT.
ARTICLE 2 DEFINITIONS
For purposes of this AGREEMENT, the following words and phrases shall have the
following meanings:
2.1 "AFFILIATE" shall mean any company or other legal entity which
controls, or is controlled by, or is under common control with a party to this
AGREEMENT, control meaning the holding, directly or indirectly, of more than
fifty percent (50%) of (i) the capital and/or (ii) the voting rights and/or
(iii) the right to elect or appoint directors.
2.2 "AGREEMENT" shall mean this License Agreement.
2.3 "EFFECTIVE DATE OF THIS AGREEMENT" shall mean the date first above
written.
2.4 "FIELD" shall mean using the variant AL1 gene from the target virus,
except for the AL1 gene from tomato yellow leaf curl virus, for use in PRODUCE
PLANTS.
2.5 "TYLC FIELD" shall mean using the variant AL1 gene from tomato yellow
leaf curl virus for use in PRODUCE PLANTS.
<PAGE>
2.6 "PRODUCE PLANTS" shall mean fresh and processed tomatoes, berries,
mangoes, cucurbits, peppers and sweetcorn.
2.7 "LICENSED PRODUCTS" shall mean genes, vectors, PRODUCE PLANT cells,
PRODUCE PLANTS and seed thereof of PRODUCE PLANTS containing a gene which
encodes for the sense or antisense of a gene which, in the absence of a license,
would infringe at least one (1) claim of an unexpired U.S. or foreign patent
included within LICENSED PATENT RIGHTS.
2.8 "LICENSED PATENT RIGHTS" shall mean the patents and patent
applications identified in Appendix A and any continuations, continuations in
part, divisionals, or reissue or reexamination patents or applications in the
United States deriving priority from a common application with said patent
applications and any foreign counterparts thereof.
2.9 "MONSANTO KNOW HOW" shall mean all know-how and biological materials
in the FIELD related to the LICENSED PATENT RIGHTS disclosed to NEWCO at the
EFFECTIVE DATE OF THIS AGREEMENT.
2.10 "TERM OF THIS AGREEMENT" shall be for the life of the last to issue
patent in the LICENSED PATENT RIGHTS.
ARTICLE 3 CONVEYANCE OF RIGHTS
3.1 LICENSE GRANT: Subject to the terms and conditions of this AGREEMENT,
--------------
MONSANTO hereby grants to NEWCO and AFFILIATES of NEWCO under the LICENSED
PATENT RIGHTS and MONSANTO KNOW-HOW and during the TERM OF THIS AGREEMENT an
exclusive, royalty-free, world-wide license to make and use LICENSED PRODUCTS in
the FIELD and a non-exclusive, world-wide license to make and use LICENSED
PRODUCTS in the TYLC FIELD and the right to sell or sublicense others to sell
PRODUCE PLANTS.
ARTICLE 4 CONFIDENTIALITY
4.1 CONFIDENTIAL INFORMATION: It is anticipated that it will be
-------------------------
necessary, in connection with their obligations under this AGREEMENT, for NEWCO
and MONSANTO, and AFFILIATES of either party, to disclose to each other
confidential proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information disclosed
in writing or other tangible form, including samples of materials. If disclosed
orally, the Confidential Information shall be summarized in written form
2
<PAGE>
within thirty (30) days by the disclosing party and a copy provided to the
recipient.
4.2 CONFIDENTIALITY AND LIMITED USE:
--------------------------------
(a) With respect to all Confidential Information, both NEWCO and
MONSANTO and AFFILIATES of either party agree as follows, it being understood
that "recipient" indicates the party receiving the confidential, proprietary
information from the other "disclosing" party. Confidential Information
disclosed to the recipient shall remain the property of the disclosing party and
shall be maintained in confidence by the recipient and shall not be disclosed to
third parties by the recipient and, further, shall not be used except for
purposes contemplated in this AGREEMENT. All confidentiality and limited use
obligations with respect to the Confidential Information shall terminate five
(5) years after the termination date of this AGREEMENT.
(b) Notwithstanding any provision to the contrary, a party may
disclose the Confidential Information of the other party: (i) in connection with
an order of a court or other government body or as otherwise required by or in
compliance with law or regulations; provided that the disclosing party provides
the other party with notice and takes reasonable measures to obtain confidential
treatment thereof; (ii) in confidence to attorneys, accountants, banks and
financial sources and their advisors; or (iii) in confidence, in connection with
a license, sublicense, or acquisition so long as, in each case, the entity to
which disclosure is made is bound to confidentiality on terms consistent with
those set forth herein.
4.3 EXCEPTIONS: The obligations of confidentiality and limited use shall
-----------
not apply to any of the Confidential Information which
(a) is publicly available by publication or other documented means or
later becomes likewise publicly available through no act or fault of recipient;
or
(b) is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
(c) is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not obligate
recipient to hold it in confidence.
3
<PAGE>
Specific information should not be deemed to be within any of these exclusions
merely because it is embraced by more general information falling within these
exclusions.
4.4 DISCLOSURES TO PERSONNEL: Recipient agrees to advise those of its
-------------------------
officers, directors, stockholders, employees, associates, agents, consultants,
AFFILIATES, and sublicensees who become aware of the Confidential Information,
of these confidentiality and limited use obligations and agrees, prior to any
disclosure of Confidential Information to such individuals or entities, to make
them bound by obligations of confidentiality and limited use of the same
stringency as those contained in this AGREEMENT.
4.5 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this
-----------------------------------
AGREEMENT, originals and copies of Confidential Information in written or other
tangible form will be returned to the disclosing party by recipient or destroyed
by recipient. One copy of each document may be retained in the custody of the
recipient's legal counsel solely to provide a record of what disclosures were
made.
4.6 CONFIDENTIAL STATUS OF AGREEMENT: The terms of this AGREEMENT shall
---------------------------------
be deemed to be Confidential Information and shall be dealt with according to
the confidentiality requirements of this Article 4. Both parties agree,
furthermore, that neither party will make public disclosures concerning other
specific terms of this AGREEMENT without obtaining the prior written consent of
the other party, which consent shall not be unreasonably withheld.
ARTICLE 5 REPRESENTATION AND WARRANTIES
5.1 MONSANTO represents and warrants that it has the right to make
conveyances and grants in accordance with the articles hereof. MONSANTO further
warrants that at the date this Agreement is signed by MONSANTO, MONSANTO does
not know of any U.S. patent, whether or not owned or licensed to MONSANTO, which
would be infringed by the use or sale of LICENSED PRODUCTS other than LICENSED
PATENT RIGHTS. It is expressly understood, however, that in making the
conveyances and grants under this Agreement with the exception of the foregoing
provisions of this paragraph, MONSANTO MAKES NO REPRESENTATION, EXTENDS NO
WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO:
a) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN
LICENSED PATENT RIGHTS; OR
4
<PAGE>
b) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF
PATENTS OTHER THAN THE LICENSED PATENT RIGHTS.
ARTICLE 6 TERMINATION
6.1 Except as expressly provided otherwise, this Agreement shall terminate
upon reaching the TERM OF THIS AGREEMENT.
6.2 This Agreement may be terminated by NEWCO by giving MONSANTO thirty
(30) days prior written notice of its intention to terminate.
6.3 Except as provided in paragraph , neither NEWCO nor MONSANTO may
terminate this Agreement unless the other party is in breach of this Agreement
and does not remedy such breach within thirty (30) days written notice of such
breach.
ARTICLE 7 PATENT LITIGATION
7.1 MONSANTO shall have power to institute and prosecute at its own
discretion and expense suits for infringement of the LICENSED PATENT RIGHTS.
All expenses in such suits will be borne entirely by MONSANTO, and MONSANTO
shall retain all judgements or awards arising from these suits.
ARTICLE 8 PATENT FILINGS AND PROSECUTION
8.1 MONSANTO shall be responsible for the filing, prosecuting and
maintaining any patent application relating to LICENSED PATENT RIGHTS, including
any foreign counterpart.
8.2 NEWCO shall be entitled to review and comment upon all actions
undertaken in the prosecution of all patents and applications.
ARTICLE 9 APPLICABLE LAW
9.1 THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI, U.S.A. WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS.
ARTICLE 10 MISCELLANEOUS PROVISIONS
10.1 NOTICES: All notices and other communications required or permitted
--------
under this AGREEMENT shall be deemed to be properly given when in writing and
sent by registered or certified mail,
5
<PAGE>
postage prepaid or by reputable courier service or by telefax with receipt
confirmation, to the other party at the address set forth below, or at such
other address as either party may in writing designate from time to time for
these purposes.
If to NEWCO: Calgene II, Inc.
1920 Fifth Street
Davis, CA 95616
Attention: President
If to MONSANTO: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ceregen
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel - A3SB
10.2 ASSIGNABILITY: The rights acquired herein by NEWCO are not
--------------
assignable in whole or part (by operation of law or otherwise) to any third
party, except to a successor to NEWCO's entire business, without the prior
written consent of MONSANTO. Any successor to NEWCO's entire business shall be
deemed bound by the terms of this AGREEMENT. Any transfer, assignment or
delegation made or attempted in violation of this subparagraph shall be void and
of no effect.
10.3 OTHER LICENSES: It is MONSANTO's present intention to minimize
---------------
licenses to others in the FIELD and to make commercially reasonable efforts to
limit licenses to others in the FIELD to those situations where it is beneficial
to MONSANTO in resolving patent issues and related business issues. However, it
shall remain solely in MONSANTO's discretion whether or not it will license
third parties who may directly compete with NEWCO. In accordance with this
AGREEMENT, the granting by MONSANTO of other non-exclusive licenses in PRODUCE
PLANTS to third parties shall be permitted.
10.4 SEVERABILITY: In case any one or more of the provisions contained in
-------------
this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this AGREEMENT shall be construed as if such
invalid or illegal or unenforceable provisions had never been contained herein.
6
<PAGE>
10.5 COUNTERPARTS: This AGREEMENT may be executed in any number of
-------------
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
10.6 HEADINGS: Headings as to the contents of particular Articles 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 to which they refer.
10.7 AGREEMENT REFERENCES: All paragraphs and subparagraphs referred to
---------------------
herein are paragraphs and subparagraphs of this AGREEMENT.
10.8 APPENDICES: The appended Appendices form an integral part of this
-----------
AGREEMENT.
10.9 EXPORT CONTROL: Notwithstanding any other provisions of this
---------------
AGREEMENT, NEWCO agrees to make no disclosure or use of any MONSANTO information
or MONSANTO technology furnished or made known to NEWCO pursuant to this
AGREEMENT, except in compliance with the laws and regulations of the United
States of America, including the Export Administration Regulations promulgated
by the Office of Export Administration International Trade Administration,
United States Department of Commerce; and in particular, NEWCO agrees not to
export, directly or indirectly, either
(a) the technical data furnished or made known to NEWCO pursuant to this
AGREEMENT; or
(b) the "direct product" thereof; or
(c) any commodity produced using such technical data
to any country or countries for which a validated license is required unless a
validated license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean the
immediate product (including process and services) produced directly by the use
of the technical data.
10.10 FORCE MAJEURE:
--------------
(a) Except for payments of money, neither of the parties shall be
liable for any default or delay in performance of any obligation under this
AGREEMENT caused by any of the following: Act of God, war, riot, fire,
explosion, accident,
7
<PAGE>
flood, sabotage, compliance with governmental requests, laws, regulations,
orders or actions, national defense requirements or any other event beyond the
reasonable control of such party; or labor trouble, strike, lockout or
injunction (provided that neither of the parties shall be required to settle a
labor dispute against its own best judgment).
(b) The party invoking this subparagraph 10.10 shall give the other
party notice and full particulars of such force majeure event by telephone,
telegram, telex or telecopier as soon as possible after the occurrence of the
cause upon which said party is relying. Telephone, telegram, telex and
telecopier notices shall be confirmed in writing by the sending party within
five (5) days.
(c) Both MONSANTO and NEWCO shall use reasonable efforts to mitigate
the effects of any force majeure on their respective part.
10.11 NEGATION OF AGENCY: It is agreed and understood by the parties
-------------------
hereto that each of NEWCO and MONSANTO, in its performance of its obligations
and responsibilities under this AGREEMENT, is an independent contractor and that
nothing herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in which each of
NEWCO and MONSANTO carries out its performance under this AGREEMENT is within
each of NEWCO'S and MONSANTO'S sole discretion and control.
10.12 FURTHER ASSURANCES: The parties hereto agree that upon reasonable
-------------------
request of the other party, each such party shall execute and deliver such
additional documents and agreements, and take such further actions, as may be
necessary in order to fulfill and give effect to the terms of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
and delivered as of the Effective Date.
CALGENE II, INC.
By:____________________
MONSANTO COMPANY
By:____________________
Robert T. Fraley
President, Ceregen
9
<PAGE>
APPENDIX A
U.S. Serial No. 259,733 filed 6-13-94
<PAGE>
EXHIBIT 10.9
------------
INSECT RESISTANCE LICENSE AGREEMENT
This AGREEMENT is made this ______________ day of ________, 1996, between
Calgene II, Inc., and Monsanto Company regarding the non-exclusive license of
certain patent rights. Based on the mutual consideration between the parties,
the parties do hereby agree as follows:
ARTICLE 1 BACKGROUND AND PARTIES
1.1 Calgene II, Inc. ("NEWCO") is a Delaware corporation, having a
principal place of business at 190 Fifth Street, Davis, California 95616.
1.2 Monsanto Company ("MONSANTO") is a Delaware corporation, having a
principal place of business at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
1.3 NEWCO and MONSANTO are mutually interested in entering into a
transaction involving the licensing of certain patent and know-how rights
subject to the terms and conditions of this AGREEMENT.
ARTICLE 2 DEFINITIONS
For purposes of this AGREEMENT, the following words and phrases shall have the
following meanings:
2.1 "AFFILIATE" shall mean any company or other legal entity which
controls, or is controlled by, or is under common control with a party to this
AGREEMENT, control meaning the holding, directly or indirectly, of more than
fifty percent (50%) of (i) the capital and/or (ii) the voting rights and/or
(iii) the right to elect or appoint directors.
2.2 "AGREEMENT" shall mean this License Agreement.
2.3 "EFFECTIVE DATE OF THIS AGREEMENT" shall mean the date first above
written.
2.4 "FIELD" shall mean for use in PRODUCE PLANTS.
2.5 "PRODUCE PLANTS" shall mean fresh and processed tomatoes, berries,
mangoes, cucurbits, peppers and sweetcorn.
2.6 "LICENSED PRODUCTS" shall mean genes, vectors, PRODUCE PLANT cells,
PRODUCE PLANTS and seed thereof of PRODUCE PLANTS containing a gene which
encodes for the sense or antisense of a
1
<PAGE>
gene which, in the absence of a license, would infringe at least one (1) claim
of an unexpired U.S. or foreign patent included within LICENSED PATENT RIGHTS.
2.7 "LICENSED PATENT RIGHTS" shall mean the patents and patent
applications identified in APPENDIX A and any continuations, continuations in
part, divisionals, or reissue or reexamination patents or applications in the
United States deriving priority from a common application with said patent
applications and any foreign counterparts thereof.
2.8 "MONSANTO KNOW HOW" shall mean all know-how and biological materials
in the FIELD related to the LICENSED PATENT RIGHTS disclosed to NEWCO at the
EFFECTIVE DATE OF THIS AGREEMENT.
2.9 "TERM OF THIS AGREEMENT" shall be for the life of the last to issue
patent in the LICENSED PATENT RIGHTS.
ARTICLE 3 CONVEYANCE OF RIGHTS
3.1 LICENSE GRANT: Subject to the terms and conditions of this AGREEMENT,
--------------
MONSANTO hereby grants to NEWCO and AFFILIATES of NEWCO under the LICENSED
PATENT RIGHTS and MONSANTO KNOW-HOW and during the TERM OF THIS AGREEMENT a non-
exclusive, royalty-free, world-wide license to make and use LICENSED PRODUCTS in
the FIELD and the right to sell or sublicense others to sell PRODUCE PLANTS.
ARTICLE 4 CONFIDENTIALITY
4.1 CONFIDENTIAL INFORMATION: It is anticipated that it will be
-------------------------
necessary, in connection with their obligations under this AGREEMENT, for NEWCO
and MONSANTO, and AFFILIATES of either party, to disclose to each other
confidential proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information disclosed
in writing or other tangible form, including samples of materials. If disclosed
orally, the Confidential Information shall be summarized in written form within
thirty (30) days by the disclosing party and a copy provided to the recipient.
4.2 CONFIDENTIALITY AND LIMITED USE:
--------------------------------
(a) With respect to all Confidential Information, both NEWCO and
MONSANTO and AFFILIATES of either party agree as
2
<PAGE>
follows, it being understood that "recipient" indicates the party receiving the
confidential, proprietary information from the other "disclosing" party.
Confidential Information disclosed to the recipient shall remain the property of
the disclosing party and shall be maintained in confidence by the recipient and
shall not be disclosed to third parties by the recipient and, further, shall not
be used except for purposes contemplated in this AGREEMENT. All confidentiality
and limited use obligations with respect to the Confidential Information shall
terminate five (5) years after the termination date of this AGREEMENT.
(b) Notwithstanding any provision to the contrary, a party may
disclose the Confidential Information of the other party: (i) in connection with
an order of a court or other government body or as otherwise required by or in
compliance with law or regulations; provided that the disclosing party provides
the other party with notice and takes reasonable measures to obtain confidential
treatment thereof; (ii) in confidence to attorneys, accountants, banks and
financial sources and their advisors; or (iii) in confidence, in connection with
a license, sublicense, or acquisition so long as, in each case, the entity to
which disclosure is made is bound to confidentiality on terms consistent with
those set forth herein.
4.3 EXCEPTIONS: The obligations of confidentiality and limited use shall
-----------
not apply to any of the Confidential Information which
(a) is publicly available by publication or other documented means or
later becomes likewise publicly available through no act or fault of recipient;
or
(b) is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
(c) is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not obligate
recipient to hold it in confidence.
Specific information should not be deemed to be within any of these exclusions
merely because it is embraced by more general information falling within these
exclusions.
4.4 DISCLOSURES TO PERSONNEL: Recipient agrees to advise those of its
-------------------------
officers, directors, stockholders, employees, associates, agents, consultants,
AFFILIATES, and sublicensees who
3
<PAGE>
become aware of the Confidential Information, of these confidentiality and
limited use obligations and agrees, prior to any disclosure of Confidential
Information to such individuals or entities, to make them bound by obligations
of confidentiality and limited use of the same stringency as those contained in
this AGREEMENT.
4.5 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this
-----------------------------------
AGREEMENT, originals and copies of Confidential Information in written or other
tangible form will be returned to the disclosing party by recipient or destroyed
by recipient. One copy of each document may be retained in the custody of the
recipient's legal counsel solely to provide a record of what disclosures were
made.
4.6 CONFIDENTIAL STATUS OF AGREEMENT: The terms of this AGREEMENT
---------------------------------
shall be deemed to be Confidential Information and shall be dealt with according
to the confidentiality requirements of this Article 4. Both parties agree,
furthermore, that neither party will make public disclosures concerning other
specific terms of this AGREEMENT without obtaining the prior written consent of
the other party, which consent shall not be unreasonably withheld.
ARTICLE 5 REPRESENTATION AND WARRANTIES
5.1 MONSANTO represents and warrants that it has the right to make
conveyances and grants in accordance with the articles hereof. MONSANTO further
warrants that at the date this Agreement is signed by MONSANTO, MONSANTO does
not know of any U.S. patent, whether or not owned or licensed to MONSANTO, which
would be infringed by the use or sale of LICENSED PRODUCTS other than LICENSED
PATENT RIGHTS. It is expressly understood, however, that in making the
conveyances and grants under this Agreement with the exception of the foregoing
provisions of this paragraph, MONSANTO MAKES NO REPRESENTATION, EXTENDS NO
WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO:
a) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN
LICENSED PATENT RIGHTS; OR
b) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF
PATENTS OTHER THAN THE LICENSED PATENT RIGHTS.
ARTICLE 6 TERMINATION
4
<PAGE>
6.1 Except as expressly provided otherwise, this Agreement shall terminate
upon reaching the TERM OF THIS AGREEMENT.
6.2 This Agreement may be terminated by NEWCO by giving MONSANTO thirty
(30) days prior written notice of its intention to terminate.
6.3 Except as provided in paragraph , neither NEWCO nor MONSANTO may
terminate this Agreement unless the other party is in breach of this Agreement
and does not remedy such breach within thirty (30) days written notice of such
breach.
ARTICLE 7 PATENT LITIGATION
7.1 MONSANTO shall have power to institute and prosecute at its own
discretion and expense suits for infringement of the LICENSED PATENT RIGHTS. All
expenses in such suits will be borne entirely by MONSANTO, and MONSANTO shall
retain all judgements or awards arising from these suits.
ARTICLE 8 PATENT FILINGS AND PROSECUTION
8.1 MONSANTO shall be responsible for the filing, prosecuting and
maintaining any patent application relating to LICENSED PATENT RIGHTS, including
any foreign counterpart.
8.2 NEWCO shall be entitled to review and comment upon all actions
undertaken in the prosecution of all patents and applications.
ARTICLE 9 APPLICABLE LAW
9.1 THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI, U.S.A. WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS.
ARTICLE 10 MISCELLANEOUS PROVISIONS
10.1 NOTICES: All notices and other communications required or permitted
--------
under this AGREEMENT shall be deemed to be properly given when in writing and
sent by registered or certified mail, postage prepaid or by reputable courier
service or by telefax with receipt confirmation, to the other party at the
address set forth below, or at such other address as either party may in writing
designate from time to time for these purposes.
5
<PAGE>
If to NEWCO: Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Attention: President
If to MONSANTO: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ceregen
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel - A3SB
10.2 ASSIGNABILITY: The rights acquired herein by NEWCO are not
--------------
assignable in whole or part (by operation of law or otherwise) to any third
party, except to a successor to NEWCO's entire business, without the prior
written consent of MONSANTO. Any successor to NEWCO's entire business shall be
deemed bound by the terms of this AGREEMENT. Any transfer, assignment or
delegation made or attempted in violation of this subparagraph shall be void and
of no effect.
10.3 OTHER LICENSES: It is MONSANTO's present intention to minimize
---------------
licenses to others in the FIELD and to make commercially reasonable efforts to
limit licenses to others in the FIELD to those situations where it is beneficial
to MONSANTO in resolving patent issues and related business issues. However, it
shall remain solely in MONSANTO's discretion whether or not it will license
third parties who may directly compete with NEWCO. In accordance with this
AGREEMENT, the granting by MONSANTO of other non-exclusive licenses in PRODUCE
PLANTS to third parties shall be permitted.
10.4 SEVERABILITY: In case any one or more of the provisions contained in
-------------
this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this AGREEMENT shall be construed as if such
invalid or illegal or unenforceable provisions had never been contained herein.
10.5 COUNTERPARTS: This AGREEMENT may be executed in any number of
-------------
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
6
<PAGE>
10.6 HEADINGS: Headings as to the contents of particular Articles 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 to which they refer.
10.7 AGREEMENT REFERENCES: All paragraphs and subparagraphs referred to
---------------------
herein are paragraphs and subparagraphs of this AGREEMENT.
10.8 APPENDICES: The appended Appendices form an integral part of this
-----------
AGREEMENT.
10.9 EXPORT CONTROL: Notwithstanding any other provisions of this
---------------
AGREEMENT, NEWCO agrees to make no disclosure or use of any MONSANTO information
or MONSANTO technology furnished or made known to NEWCO pursuant to this
AGREEMENT, except in compliance with the laws and regulations of the United
States of America, including the Export Administration Regulations promulgated
by the Office of Export Administration International Trade Administration,
United States Department of Commerce; and in particular, NEWCO agrees not to
export, directly or indirectly, either
(a) the technical data furnished or made known to NEWCO pursuant to this
AGREEMENT; or
(b) the "direct product" thereof; or
(c) any commodity produced using such technical data
to any country or countries for which a validated license is required unless a
validated license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean the
immediate product (including process and services) produced directly by the use
of the technical data.
10.10 FORCE MAJEURE:
--------------
(a) Except for payments of money, neither of the parties shall be
liable for any default or delay in performance of any obligation under this
AGREEMENT caused by any of the following: Act of God, war, riot, fire,
explosion, accident, flood, sabotage, compliance with governmental requests,
laws, regulations, orders or actions, national defense requirements or any other
event beyond the reasonable control of such party; or labor trouble, strike,
lockout or injunction (provided that
7
<PAGE>
neither of the parties shall be required to settle a labor dispute against its
own best judgment).
(b) The party invoking this subparagraph 10.10 shall give the other
party notice and full particulars of such force majeure event by telephone,
telegram, telex or telecopier as soon as possible after the occurrence of the
cause upon which said party is relying. Telephone, telegram, telex and
telecopier notices shall be confirmed in writing by the sending party within
five (5) days.
(c) Both MONSANTO and NEWCO shall use reasonable efforts to mitigate
the effects of any force majeure on their respective part.
10.11 NEGATION OF AGENCY: It is agreed and understood by the parties
-------------------
hereto that each of NEWCO and MONSANTO, in its performance of its obligations
and responsibilities under this AGREEMENT, is an independent contractor and that
nothing herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in which each of
NEWCO and MONSANTO carries out its performance under this AGREEMENT is within
each of NEWCO'S and MONSANTO'S sole discretion and control.
10.12 FURTHER ASSURANCES: The parties hereto agree that upon reasonable
-------------------
request of the other party, each such party shall execute and deliver such
additional documents and agreements, and take such further actions, as may be
necessary in order to fulfill and give effect to the terms of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
and delivered as of the Effective Date.
CALGENE II, INC.
By:_____________________
MONSANTO COMPANY
By:_____________________
Robert T. Fraley
President, Ceregen
9
<PAGE>
APPENDIX A
U.S. Serial No. 813,250 filed 12-23-91
U.S. Serial No. 959,506 filed 10-09-92
10
<PAGE>
EXHIBIT 10.10
-------------
OIL LICENSE AGREEMENT
This AGREEMENT is made this ___ day of ________, 1996, between Calgene II,
Inc., and Monsanto Company regarding the non-exclusive license of certain patent
rights. Based on the mutual consideration between the parties, the parties do
hereby agree as follows:
ARTICLE 1 BACKGROUND AND PARTIES
1.1 Calgene II, Inc. ("NEWCO") is a Delaware corporation, having a
principal place of business at 1920 Fifth Street, Davis, California 95616.
1.2 Monsanto Company ("MONSANTO") is a Delaware corporation, having a
principal place of business at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
1.3 NEWCO and MONSANTO are mutually interested in entering into a
transaction involving the licensing of certain patent and know-how rights
subject to the terms and conditions of this AGREEMENT.
ARTICLE 2 DEFINITIONS
For purposes of this AGREEMENT, the following words and phrases shall have the
following meanings:
2.1 "AFFILIATE" shall mean any company or other legal entity which
controls, or is controlled by, or is under common control with a party to this
AGREEMENT, control meaning the holding, directly or indirectly, of more than
fifty percent (50%) of (i) the capital and/or (ii) the voting rights and/or
(iii) the right to elect or appoint directors.
2.2 "AGREEMENT" shall mean this License Agreement.
2.3 "EFFECTIVE DATE OF THIS AGREEMENT" shall mean the date first above
written.
2.4 "FIELD" shall mean the area of plant oil modification through genetic
engineering to produce specialty oil products. The FIELD shall not include the
use of oil modification technology to produce non-specialty oil products, such
as low linoleic wheat flour, biodegradable polymers, natto beans, tofu beans,
other whole bean products or any product where the good sold is not a specialty
oil.
<PAGE>
2.5 "NEWCO OILSEED CROP PLANTS" shall mean canola, oil seed rape and
sunflower plants.
2.6 "MONSANTO OIL KNOW-HOW" shall mean information and materials relating
to canola, oil seed rape and sunflower transformation methods disclosed and
transferred to NEWCO at the EFFECTIVE DATE OF THIS AGREEMENT and information and
materials relating to canola plants with altered oil compositions achieved
through insertion of the following genes:
a. Antisense cytochrome b5; and
b. PEP carboxylase
which were disclosed and transferred to NEWCO at the EFFECTIVE DATE OF THIS
AGREEMENT.
2.7 "LICENSED PRODUCTS" shall mean genes, vectors, NEWCO OILSEED CROP
PLANT cells, NEWCO OILSEED CROP PLANTS and seed thereof of NEWCO OILSEED CROP
PLANTS containing a gene which encodes for the sense or antisense of a gene
which, in the absence of a license, would infringe at least one (1) claim of an
unexpired U.S. or foreign patent included within LICENSED PATENT RIGHTS.
2.8 "LICENSED PATENT RIGHTS" shall mean the patents and patent
applications identified in Appendix A and any continuations, continuations in
part, divisionals, or reissue or reexamination patents or applications in the
United States deriving priority from a common application with said patent
applications and any foreign counterparts thereof.
2.9 "TERM OF THIS AGREEMENT" shall be for the life of the last to issue
patent in the LICENSED PATENT RIGHTS
ARTICLE 3 CONVEYANCE OF RIGHTS
3.1 LICENSE GRANT: Subject to the terms and conditions of this AGREEMENT,
--------------
MONSANTO hereby grants to NEWCO and AFFILIATES of NEWCO under the LICENSED
PATENT RIGHTS and MONSANTO OIL KNOW-HOW and during the TERM OF THIS AGREEMENT a
non-exclusive, royalty-free, world-wide license to make and use LICENSED
PRODUCTS in the FIELD and the right to sell or sublicense others to sell NEWCO
OILSEED CROP PLANTS.
3.2 MONSANTO further grants to NEWCO and AFFILIATES of NEWCO a first
right to negotiate the right to market an oil from an oilseed crop where said
oil has been produced in said crop
2
<PAGE>
through breeding. This right is contingent upon MONSANTO seeking a party other
than MONSANTO or an AFFILIATE of MONSANTO to market said oil.
3.3 As consideration for the licenses and rights granted herein, NEWCO
agrees that if MONSANTO acquires germplasm within the definition of NEWCO
OILSEED CROP PLANTS other than oilseed rape or canola germplasm, then NEWCO
shall incorporate such germplasm in its research in producing products in the
FIELD
ARTICLE 4 CONFIDENTIALITY
4.1 CONFIDENTIAL INFORMATION: It is anticipated that it will be
-------------------------
necessary, in connection with their obligations under this AGREEMENT, for NEWCO
and MONSANTO, and AFFILIATES of either party, to disclose to each other
confidential proprietary business and/or technical information ("Confidential
Information") relating to their respective businesses, products and
technologies. The Confidential Information shall include information disclosed
in writing or other tangible form, including samples of materials. If disclosed
orally, the Confidential Information shall be summarized in written form within
thirty (30) days by the disclosing party and a copy provided to the recipient.
4.2 CONFIDENTIALITY AND LIMITED USE:
--------------------------------
(a) With respect to all Confidential Information, both NEWCO and
MONSANTO and AFFILIATES of either party agree as follows, it being understood
that "recipient" indicates the party receiving the confidential, proprietary
information from the other "disclosing" party. Confidential Information
disclosed to the recipient shall remain the property of the disclosing party and
shall be maintained in confidence by the recipient and shall not be disclosed to
third parties by the recipient and, further, shall not be used except for
purposes contemplated in this AGREEMENT. All confidentiality and limited use
obligations with respect to the Confidential Information shall terminate five
(5) years after the termination date of this AGREEMENT.
(b) Notwithstanding any provision to the contrary, a party may
disclose the Confidential Information of the other party: (i) in connection with
an order of a court or other government body or as otherwise required by or in
compliance with law or regulations; provided that the disclosing party provides
the other party with notice and takes reasonable measures to obtain confidential
treatment thereof; (ii) in confidence to attorneys, accountants, banks and
financial sources and their
3
<PAGE>
advisors; or (iii) in confidence, in connection with a license, sublicense, or
acquisition so long as, in each case, the entity to which disclosure is made is
bound to confidentiality on terms consistent with those set forth herein.
4.3 EXCEPTIONS: The obligations of confidentiality and limited use shall
-----------
not apply to any of the Confidential Information which
(a) is publicly available by publication or other documented means or
later becomes likewise publicly available through no act or fault of recipient;
or
(b) is already known to recipient before receipt from the disclosing
party, as demonstrated by recipient's written records; or
(c) is made known to recipient by a third party who did not obtain it
directly or indirectly from the disclosing party and who does not obligate
recipient to hold it in confidence.
Specific information should not be deemed to be within any of these exclusions
merely because it is embraced by more general information falling within these
exclusions.
4.4 DISCLOSURES TO PERSONNEL: Recipient agrees to advise those of its
-------------------------
officers, directors, stockholders, employees, associates, agents, consultants,
AFFILIATES, and sublicensees who become aware of the Confidential Information,
of these confidentiality and limited use obligations and agrees, prior to any
disclosure of Confidential Information to such individuals or entities, to make
them bound by obligations of confidentiality and limited use of the same
stringency as those contained in this AGREEMENT.
4.5 RETURN OF CONFIDENTIAL INFORMATION: Upon termination of this
-----------------------------------
AGREEMENT, originals and copies of Confidential Information in written or other
tangible form will be returned to the disclosing party by recipient or destroyed
by recipient. One copy of each document may be retained in the custody of the
recipient's legal counsel solely to provide a record of what disclosures were
made.
4.6 CONFIDENTIAL STATUS OF AGREEMENT: The terms of this AGREEMENT shall
---------------------------------
be deemed to be Confidential Information and shall be dealt with according to
the confidentiality requirements of this Article 4. Both parties agree,
furthermore, that neither
4
<PAGE>
party will make public disclosures concerning other specific terms of this
AGREEMENT without obtaining the prior written consent of the other party, which
consent shall not be unreasonably withheld.
ARTICLE 5 REPRESENTATION AND WARRANTIES
5.1 MONSANTO represents and warrants that it has the right to make
conveyances and grants in accordance with the articles hereof. MONSANTO further
warrants that at the date this Agreement is signed by MONSANTO, MONSANTO does
not know of any U.S. patent, whether or not owned or licensed to MONSANTO, which
would be infringed by the use or sale of LICENSED PRODUCTS other than LICENSED
PATENT RIGHTS. It is expressly understood, however, that in making the
conveyances and grants under this Agreement with the exception of the foregoing
provisions of this paragraph, MONSANTO MAKES NO REPRESENTATION, EXTENDS NO
WARRANTIES, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES
WHATSOEVER WITH RESPECT TO:
a) THE SCOPE OR VALIDITY OF ANY PATENT WHICH MAY FALL WITHIN
LICENSED PATENT RIGHTS; OR
b) ANY USE OF LICENSED PRODUCT BEING FREE FROM INFRINGEMENT OF
PATENTS OTHER THAN THE LICENSED PATENT RIGHTS.
ARTICLE 6 TERMINATION
6.1 Except as expressly provided otherwise, this Agreement shall terminate
upon reaching the TERM OF THIS AGREEMENT.
6.2 This Agreement may be terminated by NEWCO by giving MONSANTO thirty
(30) days prior written notice of its intention to terminate.
6.3 Except as provided in paragraph , neither NEWCO nor MONSANTO may
terminate this Agreement unless the other party is in breach of this Agreement
and does not remedy such breach within thirty (30) days written notice of such
breach.
ARTICLE 7 PATENT LITIGATION
7.1 MONSANTO shall have power to institute and prosecute at its own
discretion and expense suits for infringement of the LICENSED PATENT RIGHTS.
All expenses in such suits will be borne entirely by MONSANTO, and MONSANTO
shall retain all judgements or awards arising from these suits.
5
<PAGE>
ARTICLE 8 PATENT FILINGS AND PROSECUTION
8.1 MONSANTO shall be responsible for the filing, prosecuting and
maintaining any patent application relating to LICENSED PATENT RIGHTS, including
any foreign counterpart.
8.2 NEWCO shall be entitled to review and comment upon all actions
undertaken in the prosecution of all patents and applications.
ARTICLE 9 APPLICABLE LAW
9.1 THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED, AND GOVERNED BY THE
LAWS OF THE STATE OF MISSOURI, U.S.A. WITHOUT REGARD TO CONFLICTS OF LAW
PROVISIONS.
ARTICLE 10 MISCELLANEOUS PROVISIONS
10.1 NOTICES: All notices and other communications required or
--------
permitted under this AGREEMENT shall be deemed to be properly given when in
writing and sent by registered or certified mail, postage prepaid or by
reputable courier service or by telefax with receipt confirmation, to the other
party at the address set forth below, or at such other address as either party
may in writing designate from time to time for these purposes.
If to NEWCO: Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Attention: President
If to MONSANTO: Monsanto Company
700 Chesterfield Parkway North
St. Louis, Missouri 63198
Attention: President, Ceregen
Copy to: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Group Patent Counsel - A3SB
10.2 ASSIGNABILITY: The rights acquired herein by NEWCO are not
--------------
assignable in whole or part (by operation of law or otherwise) to any third
party, except to a successor to NEWCO's entire business, without the prior
written consent of MONSANTO. Any successor to NEWCO's entire business shall be
deemed bound by
6
<PAGE>
the terms of this AGREEMENT. Any transfer, assignment or delegation made or
attempted in violation of this subparagraph shall be void and of no effect.
10.3 OTHER LICENSES: It is MONSANTO's present intention to minimize
---------------
licenses to others in the FIELD and to make commercially reasonable efforts to
limit licenses to others in the FIELD to those situations where it is beneficial
to MONSANTO in resolving patent issues and related business issues. However, it
shall remain solely in MONSANTO's discretion whether or not it will license
third parties who may directly compete with NEWCO. In accordance with this
agreement, the granting by MONSANTO of non-exclusive licenses to third parties
in the FIELD including NEWCO OILSEED CROP PLANTS shall be permitted.
10.4 SEVERABILITY: In case any one or more of the provisions contained in
-------------
this AGREEMENT shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, but this AGREEMENT shall be construed as if such
invalid or illegal or unenforceable provisions had never been contained herein.
10.5 COUNTERPARTS: This AGREEMENT may be executed in any number of
-------------
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
10.6 HEADINGS: Headings as to the contents of particular Articles 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 to which they refer.
10.7 AGREEMENT REFERENCES: All paragraphs and subparagraphs referred to
---------------------
herein are paragraphs and subparagraphs of this AGREEMENT.
10.8 APPENDICES: The appended Appendices form an integral part of this
-----------
AGREEMENT.
10.9 EXPORT CONTROL: Notwithstanding any other provisions of this
---------------
AGREEMENT, NEWCO agrees to make no disclosure or use of any MONSANTO information
or MONSANTO technology furnished or made known to NEWCO pursuant to this
AGREEMENT, except in compliance with the laws and regulations of the United
States of America, including the Export Administration Regulations promulgated
by the Office of Export Administration International Trade Administration,
United States Department of Commerce; and in
7
<PAGE>
particular, NEWCO agrees not to export, directly or indirectly, either
(a) the technical data furnished or made known to NEWCO pursuant to this
AGREEMENT; or
(b) the "direct product" thereof; or
(c) any commodity produced using such technical data
to any country or countries for which a validated license is required unless a
validated license is first obtained pursuant to the Export Administration
Regulations. The term "direct product" as used above, is defined to mean the
immediate product (including process and services) produced directly by the use
of the technical data.
10.10 FORCE MAJEURE:
--------------
(a) Except for payments of money, neither of the parties shall be
liable for any default or delay in performance of any obligation under this
AGREEMENT caused by any of the following: Act of God, war, riot, fire,
explosion, accident, flood, sabotage, compliance with governmental requests,
laws, regulations, orders or actions, national defense requirements or any other
event beyond the reasonable control of such party; or labor trouble, strike,
lockout or injunction (provided that neither of the parties shall be required to
settle a labor dispute against its own best judgment).
(b) The party invoking this subparagraph 10.10 shall give the other
party notice and full particulars of such force majeure event by telephone,
telegram, telex or telecopier as soon as possible after the occurrence of the
cause upon which said party is relying. Telephone, telegram, telex and
telecopier notices shall be confirmed in writing by the sending party within
five (5) days.
(c) Both MONSANTO and NEWCO shall use reasonable efforts to mitigate
the effects of any force majeure on their respective part.
10.11 NEGATION OF AGENCY: It is agreed and understood by the parties
-------------------
hereto that each of NEWCO and MONSANTO, in its performance of its obligations
and responsibilities under this AGREEMENT, is an independent contractor and that
nothing herein contained shall be deemed to create an agency, partnership, joint
venture or like relationship between the parties. The manner in
8
<PAGE>
which each of NEWCO and MONSANTO carries out its performance under this
AGREEMENT is within each of NEWCO'S and MONSANTO'S sole discretion and control.
10.12 FURTHER ASSURANCES: The parties hereto agree that upon reasonable
-------------------
request of the other party, each such party shall execute and deliver such
additional documents and agreements, and take such further actions, as may be
necessary in order to fulfill and give effect to the terms of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed
and delivered as of the Effective Date.
CALGENE II, INC.
By:_____________________
MONSANTO COMPANY
By:_____________________
Robert T. Fraley
President, Ceregen
10
<PAGE>
APPENDIX A
U.S. Patent No. 08/386,860 filed February 10, 1995
<PAGE>
EXHIBIT 10.11
-------------
[Monsanto Letterhead Appears Here]
Roger Salquist
Calgene
1920 Fifth Street
Davis, CA 95616
ACC Synthase License
--------------------
Dear Mr. Salquist:
With respect to the license entitled "Intellectual Property License between The
United States Department of Agriculture and The Monsanto Company on United
States Patent Application Serial Number 07/579,896 `Recombinant ACC Synthase'
filed September 10, 1990," Monsanto agrees that as long as Calgene remains an
affiliate of Monsanto, as that term is defined in the license, Monsanto will
maintain that license in full force and effect.
Calgene agrees that during the time it is an affiliate of Monsanto, it shall
reimburse Monsanto for any annual fees and any royalties due under the license.
In the event that Monsanto commercializes any product with the scope of the
license, the parties agree that Calgene's obligations shall be limited to
reimbursement of one half of the Annual Maintenance Fee and any fees and
royalties due solely because of activities or sales of Calgene.
Please indicate your acceptance of these terms by signing below.
Monsanto Company
Robert T. Fraley
President, Ceregen
Agreed and Accepted by:
Calgene, Inc.,
Roger Salquist
Chief Executive Officer
<PAGE>
Exhibit 10.12
-------------
INSECT-PROTECTED COTTON LICENSE
-------------------------------
AND
---
SEED SERVICES AGREEMENT
-----------------------
THIS AGREEMENT is made as of the 26th day of September, 1995, by and
between Monsanto Company having a principal place of business at 800 North
Lindbergh Boulevard, St. Louis, Missouri 63167 and Calgene, Inc., having a
principal place of business at 1920 Fifth Street, Davis, California 95616
SECTION 1 -- BACKGROUND
-----------------------
1.1 MONSANTO has developed and has a present intention to continue to
develop technology which is useful in the production of genetically modified
cotton plants exhibiting resistance to Lepidopteran insects. Such MONSANTO
TECHNOLOGY is the subject of certain patents and patent applications. MONSANTO
also possesses certain know-how and germplasm relating to such cotton plants.
1.2 MONSANTO and CALGENE entered into commercial License Agreements each
dated April 22, 1993 relating to technology useful in production of genetically-
modified cotton plants exhibiting resistance to Lepidopteran insects.
1.3 MONSANTO and CALGENE now desire to revise the manner in which the
above-described MONSANTO technology is to be commercialized and hereby amend the
RELATED AGREEMENTS as set forth below.
1.4 MONSANTO and CALGENE are each interested in entering into a
contractual arrangement under which MONSANTO would license cotton farmers the
right to use LICENSED COMMERCIAL SEED exhibiting such resistance to Lepidopteran
insects to produce a single cotton crop in THE TERRITORY and CALGENE would
produce and sell LICENSED COMMERCIAL SEED to cotton farmers licensed by MONSANTO
to use such LICENSED COMMERCIAL SEED.
1
<PAGE>
SECTION 2 -- INTERPRETATION
---------------------------
2.1 DEFINITIONS: In this Agreement, unless the context otherwise
-----------
requires:
2.1.1 The term "AGRONOMIC CRITERIA" means:
(a) With respect to new varieties of LICENSED COMMERCIAL
SEED produced by crossing a cotton line containing a LEPIDOPTERAN-ACTIVE
MONSANTO GENE with another cotton line followed by subsequent BACKCROSSES with a
RECURRENT PARENT, those certain standards for the agronomic and fiber
characteristics of cotton plants set forth below:
(i) Yield: At least 95% of the RECURRENT PARENT.
(ii) Maturity: No more than three (3) days longer than that of the
RECURRENT PARENT.
(iii) Lint Percent: No more than1.0% less than that of the RECURRENT
PARENT.
(iv) Disease Resistance: Within 0.5 of RECURRENT PARENT on a 1-5
rating system for economically significant diseases.
(v) Leaf Pilosity: Pilosity similar to that of the RECURRENT
PARENT.
(vi) Ozone: In affected geographic areas, the GENETICALLY-MODIFIED
CALGENE CULTIVARS must carry tolerance similar to that of
plants of other NON-GENETICALLY-MODIFIED CALGENE CULTIVARS
grown in the area.
(vii) Strength: A minimum strength of the lower of either (i) 0.1
gm/tex above the discount strength as determined by the USDA or
(ii) 1.0 gm/tex below the strength of the RECURRENT PARENT
(HVI).
(viii) Length: At least 1 1/16 inch.
(ix) Micronaire: Between 3.0 and 5.5 (HVI).
(x) Uniformity: Within 1.0% of the RECURRENT PARENT.
(xi) Elongation: Within 0.5% of the RECURRENT PARENT.
(xii) Seed Coat Fragments: No higher than the RECURRENT PARENT.
(xiii) Aberrant Characteristics: There are no aberrant morphological
characteristics in any part of the plants which CALGENE
reasonably believes would significantly reduce the market
acceptance of the GENETICALLY-MODIFIED CALGENE CULTIVARS.
<PAGE>
(b) With respect to varieties of LICENSED COMMERCIAL SEED which
are not produced by repeated BACKCROSSES with a RECURRENT PARENT, those certain
standards for the agronomic and fiber characteristics of cotton plants set forth
in Subsection 2.1.1(a) as such characteristics relate to the primary cotton line
from which the new variety of LICENSED COMMERCIAL SEED was derived.
(c) Any other standards for the agronomic and fiber
characteristics of cotton plants as MONSANTO and CALGENE may agree to in the
future.
2.1.2 The term "AGROBACTERIUM TRANSFORMATION LICENSE AGREEMENT"
means the Agrobacterium Transformation License Agreement between MONSANTO and
CALGENE dated April 22, 1993.
2.1.3 The term "ALTERNATE GENE" means a LEPIDOPTERAN-ACTIVE
MONSANTO GENE the use of which by CALGENE is requested by MONSANTO, in whole or
in part, because the use of such ALTERNATIVE GENE would have the effect of
reducing or eliminating the royalty due by MONSANTO to a third party under a
license agreement with respect to a LEPIDOPTERAN-ACTIVE MONSANTO GENE previously
authorized for COMMERCIAL SALE by MONSANTO and which when incorporated into the
germplasm of at least one (1) CALGENE B.T. CULTIVAR of an upland picker type
results in plants which exhibit in field tests conducted by CALGENE for a
minimum of two (2) testing seasons: (i) the criteria for COMMERCIAL INSECT
RESISTANCE; and (ii) all of the AGRONOMIC CRITERIA.
2.1.4 The term "ANTIBIOTIC MARKER GENE LICENSE AGREEMENT" means
the Antibiotic Marker Gene License Agreement between MONSANTO and CALGENE dated
April 22, 1993.
2.1.5 The term "B.T. TOXIN" means the insecticidal protein derived
from Bacillus thuringiensis, and any active fragment, modification, deletion, or
mutation thereof, which is toxic to LEPIDOPTERAN INSECTS.
2.1.6 The term "BACKCROSS" means a cross of a hybrid with either
of its parents.
<PAGE>
2.1.7 The terms "BACKCROSSES" or "BACKCROSSING" means a system of
breeding whereby recurrent crosses are made to one (1) of the parents of a
hybrid, accompanied by the selection for a specific characteristic or
characteristics.
2.1.8 The term "BOLLGARD" GENE TRADEMARK" means a trademark owned
by MONSANTO relating to LEPIDOPTERAN-ACTIVE MONSANTO GENE(S).
2.1.9 The term "BOLLGARD" GENE TRADEMARK LICENSE AGREEMENT" means
the agreement attached hereto as Exhibit B.
2.1.10 The term "BOLLGARD" SEED SERVICES FEE" means the
compensation to be paid by MONSANTO to CALGENE in consideration for selling
LICENSED COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE or
LICENSED CALGENE GENE to licensed cotton farmers equal to the NET LICENSE
REVENUE multiplied by the BOLLGARD" SEED SERVICES PERCENTAGE less an amount
equal to the applicable MONSANTO ROYALTY PERCENTAGE times the total revenue
earned by CALGENE from any increased gross margin for such LICENSED COMMERCIAL
SEED over cotton seed not resistant to LEPIDOPTERAN INSECTS.
2.1.11 The term "BOLLGARD" SEED SERVICES PERCENTAGE" means a
percentage equal to one hundred percent (100%) less the MONSANTO ROYALTY
PERCENTAGE applicable for sales of LICENSED COMMERCIAL SEED containing a
LEPIDOPTERAN-ACTIVE MONSANTO GENE or LICENSED CALGENE GENE.
2.1.12 The term "CALGENE" means Calgene, Inc., a company
incorporated in the State of Delaware having offices at 1920 Fifth Street,
Davis, California 95616.
2.1.13 The term "CALGENE B.T. CULTIVAR" means a CALGENE CULTIVAR
which contains a LEPIDOPTERAN-ACTIVE MONSANTO GENE or LICENSED CALGENE GENE.
2.1.14 The term "CALGENE CULTIVAR" means a cultivar of cotton
produced from germplasm in which CALGENE has the right to use for plant breeding
purposes.
<PAGE>
2.1.15 The term "CALGENE SEED SERVICES FEE" means the compensation
to be paid by MONSANTO to CALGENE in consideration for selling LICENSED
COMMERCIAL SEED (the production, use or sale of which would, without a license,
infringe a claim of the LICENSED PATENT RIGHTS, but not containing a
LEPIDOPTERAN-ACTIVE MONSANTO GENE or a LICENSED CALGENE GENE) to licensed cotton
farmers equal to the NET LICENSE REVENUE less the following: (i) all marketing
expenses relating to such LICENSED COMMERCIAL SEED; (ii) an amount equal to
GROSS REVENUE multiplied by the MONSANTO ROYALTY PERCENTAGE applicable to such
LICENSED COMMERCIAL SEED as set forth in Subsection 2.1.48(b); and (iii) less
an amount equal to such MONSANTO ROYALTY PERCENTAGE times the total revenue
earned by CALGENE from any increased gross margin for such LICENSED COMMERCIAL
SEED (the production, use or sale of which would, without a license, infringe a
claim of the LICENSED PATENT RIGHTS, but not containing a LEPIDOPTERAN-ACTIVE
MONSANTO GENE or a LICENSED CALGENE GENE) over cotton seed not resistant to
LEPIDOPTERAN INSECTS.
2.1.16 The term "CALGENE TECHNOLOGY" means any information, data
and germplasm that CALGENE develops, produces, makes, or obtains (other than
from MONSANTO), relating to the breeding and development of commercial varieties
or hybrids of LICENSED COMMERCIAL SEED or other varieties or hybrids of cotton.
2.1.17 The term "CAMV35S PROMOTER LICENSE AGREEMENT" means the
Interference Settlement/License Agreement between MONSANTO and CALGENE dated
April 22, 1993.
2.1.18 The term "COMMERCIAL DEVELOPMENT" of a LEPIDOPTERAN-ACTIVE
MONSANTO GENE means the evaluation of such LEPIDOPTERAN-ACTIVE MONSANTO GENE by
CALGENE in CALGENE CULTIVARS and/or by a third party in such third party's
cultivars, after MONSANTO has determined that said LEPIDOPTERAN-ACTIVE MONSANTO
GENE has exhibited the criteria for COMMERCIAL INSECT RESISTANCE.
2.1.19 The term "COMMERCIAL INSECT RESISTANCE" means for purposes
of authorization for COMMERCIAL DEVELOPMENT, if for a minimum of two (2) seasons
the mean yield (averaged from all test locations) of plants of the GENETICALLY-
MODIFIED line containing
<PAGE>
such LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) with no insecticide applications
exhibits no statistically significant differences [at a ninety-five percent
(95%) confidence level] from the mean yield of plants of the NON-GENETICALLY-
MODIFIED line treated with insecticides on an "as needed" basis., as the same
may be modified by mutual written agreement of MONSANTO and CALGENE based on
experience gained in carrying out development activities.
2.1.20 The term "COMMERCIAL SALE" with respect to a LEPIDOPTERAN-
ACTIVE MONSANTO GENE or LICENSED COMMERCIAL SEED means sale or other transfer
for value of such LICENSED COMMERCIAL SEED containing such LEPIDOPTERAN-ACTIVE
MONSANTO GENE for use in producing a commercial commodity cotton crop (other
than sale or other transfer for testing or seed multiplication on behalf of the
transferor).
2.1.21 The term "COMPENSATION PERIOD" means that period of time
pursuant to Subsection 6.2 that MONSANTO is obligated to pay the SEED SERVICES
FEE to CALGENE for LICENSED COMMERCIAL SEED containing a particular
LEPIDOPTERAN-ACTIVE MONSANTO GENE or LICENSED CALGENE GENE.
2.1.22 The term "DATE FOR COMMENCEMENT OF BULK PRODUCTION" means
the DATE OF APPROVAL FOR COMMERCIAL SALE of seed of at least one (1) CALGENE
B.T. CULTIVAR of an upland picker type containing a LEPIDOPTERAN-ACTIVE MONSANTO
GENE which when contained in such CALGENE B.T. CULTIVAR(S) qualifies as the
FIRST GENE. If the gene which MONSANTO proposes as a candidate to be the FIRST
GENE fails to meet the criteria to be the FIRST GENE, MONSANTO shall, as soon as
reasonably practical, identify another gene to be the candidate to become the
FIRST GENE.
2.1.23 The term "DATE OF APPROVAL FOR COMMERCIAL DEVELOPMENT" with
respect to a LEPIDOPTERAN-ACTIVE MONSANTO GENE means the date on which MONSANTO
first authorizes the COMMERCIAL DEVELOPMENT of cotton seed containing that
LEPIDOPTERAN-ACTIVE MONSANTO GENE by CALGENE, which shall be no later than the
date on which MONSANTO first authorizes the COMMERCIAL DEVELOPMENT of cotton
seed containing that LEPIDOPTERAN-ACTIVE MONSANTO GENE by any party.
<PAGE>
2.1.24 The term "DATE OF APPROVAL FOR COMMERCIAL SALE" with respect
to a LEPIDOPTERAN-ACTIVE MONSANTO GENE means the date on which MONSANTO first
authorizes the COMMERCIAL SALE by CALGENE of cotton seed of specific CALGENE
B.T. CULTIVARS containing that LEPIDOPTERAN-ACTIVE MONSANTO GENE.
2.1.25 The term "DATE OF FIRST COMMERCIAL LICENSING" means the
first date on which MONSANTO licenses a third party (other than a third party
under contract with CALGENE for testing or seed multiplication) the right to use
LICENSED COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE for use
in producing a commercial commodity cotton crop in THE TERRITORY.
2.1.26 The term "DATE OF FIRST COMMERCIAL SALE" means the first
date on which CALGENE sells or otherwise transfers for value to a third party
(other than a third party under contract with CALGENE for testing or seed
multiplication) LICENSED COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE
MONSANTO GENE or LICENSED CALGENE GENE for use in producing a commercial
commodity crop in THE TERRITORY.
2.1.27 The term "DATE OF GOVERNMENTAL APPROVAL" with respect to a
LEPIDOPTERAN-ACTIVE MONSANTO GENE means the date on which official clearances or
written approvals for COMMERCIAL SALE of seed to produce genetically-transformed
cotton plants containing that LEPIDOPTERAN-ACTIVE MONSANTO GENE have been
obtained by MONSANTO from all federal governmental agencies which, as of that
date, have authority to regulate the production, use, and sale of such plants or
seed produced therefrom. Provided, however, that this shall not require
MONSANTO to obtain approval from any agency with respect to the issuance of seed
certificates or phytosanitary certificates or certificates of plant variety
protection under the Plant Variety Protection Act, which approvals, when
appropriate or required, shall be the responsibility of CALGENE.
2.1.28 The term "DISTINCTIVE NOMENCLATURE" means nomenclature [such
as word(s), other combinations of letters or symbols] which identifies that seed
as containing the INSECT RESISTANT TRAIT.
<PAGE>
2.1.29 The term "DISTRIBUTION PAYMENTS" mean the payments made by
MONSANTO to distributors and/or retailers for their assistance in implementing
the licensing process described in Subsection 4.5 hereof.
2.1.30 The term "EFFECTIVE DATE" means the date first above
written.
2.1.31 The term "ENHANCED CAMV35S PROMOTER LICENSE AGREEMENT"
means the Enhanced CaMV35S Promoter License Agreement between MONSANTO and
CALGENE dated April 22, 1993.
2.1.32 The term "FIRST GENE" means the first LEPIDOPTERAN-ACTIVE
MONSANTO GENE authorized by MONSANTO for COMMERCIAL SALE which when incorporated
into the germplasm of at least one (1) CALGENE B.T. CULTIVAR of an upland picker
type results in plants which exhibit in field tests conducted by CALGENE for a
minimum of two (2) testing seasons: (i) the criteria for COMMERCIAL INSECT
RESISTANCE; and (ii) all of the AGRONOMIC CRITERIA.
2.1.33 The term "GROSS REVENUE" means the amount equal to the sum
of NET LICENSE REVENUE and NET SALES during the applicable period for which
payments pursuant to Section 6 is being determined.
2.1.34 The term "INSECT RESISTANCE" or "INSECT RESISTANCE TRAIT"
means the property of cotton plants to be toxic to LEPIDOPTERAN INSECTS due to
the presence of gene(s) which encode a toxin (whether or not a B.T. TOXIN).
2.1.35 The term "LEPIDOPTERAN-ACTIVE MONSANTO GENE" means a DNA
molecule received from MONSANTO, or a replicate thereof, encoding a toxin that
provides INSECT RESISTANCE, the COMMERCIAL DEVELOPMENT of which has been
authorized by MONSANTO. LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) authorized for
COMMERCIAL SALE shall be classified as the FIRST GENE, SUBSEQUENT GENE or
ALTERNATE GENE.
<PAGE>
2.1.36 The term "LEPIDOPTERAN INSECTS" means cotton boll worms,
tobacco budworms, and pink boll worms, as well as certain other susceptible
insects of the Order Lepidoptera identified through development activities.
2.1.37 The term "LEPIDOPTERAN RESISTANCE" means the property of
cotton plants to be toxic to LEPIDOPTERAN INSECTS due to the presence of gene(s)
that encode a toxin (whether or not a B.T. TOXIN).
2.1.38 The term "LICENSE" or "LICENSES" means the license(s)
granted to CALGENE under Section 3.
2.1.39 The term "LICENSE REVENUE" means the total amount due to
MONSANTO from licenses to cotton farmers for use of the LICENSED COMMERCIAL SEED
during the applicable period for which payment pursuant to Section 6 is being
determined.
2.1.40 The term "LICENSED CALGENE GENE" means a gene comprising a
structural DNA sequence encoding a B.T. TOXIN, made and under development by
CALGENE as of the EFFECTIVE DATE, which provides INSECT RESISTANCE and the
structural DNA of which is covered by a claim of an issued U.S. patent of the
LICENSED PATENT RIGHTS.
2.1.41 The term "LICENSED COMMERCIAL SEED" means cotton seed of a
CALGENE CULTIVAR sold by CALGENE which: (i) incorporates a LEPIDOPTERAN-ACTIVE
MONSANTO GENE and/or is produced by use of MONSANTO TECHNOLOGY; (ii)
incorporates a LICENSED CALGENE GENE; or (iii) the production, use or sale of
which would, absent a license, infringe a claim of the LICENSED PATENT RIGHTS.
2.1.42 The term "LICENSED PATENT RIGHTS" means patent rights
licensed and/or sublicensed by MONSANTO and which are listed in Exhibit A and
any additional such patent rights of others which may be added to said Exhibit
by MONSANTO by written notice to CALGENE. LICENSED PATENT RIGHTS shall include
any patent rights acquired by MONSANTO prior to the EFFECTIVE DATE and during
the term of this Agreement to which a license is required
<PAGE>
for CALGENE'S performance hereunder. MONSANTO shall periodically update Exhibit
A with any patent rights which have been newly acquired by MONSANTO.
2.1.43 The term "LOST PROFIT CONTRIBUTION" means the value set
forth in Subsection 12.3(b)
2.1.44 The term "MONSANTO" means Monsanto Company, a company
incorporated in the State of Delaware, having a place of business at 800 North
Lindbergh Boulevard, St. Louis, Missouri, 63167.
2.1.45 The term "MONSANTO PATENT RIGHTS" shall mean the patents and
patent applications listed in Exhibit A owned by MONSANTO, and any patents
granted or issued pursuant to any of the foregoing and any extensions,
continuations, continuations-in-part, reissues or divisions thereof.
2.1.46 The term "MONSANTO ROYALTY PERCENTAGE" means:
(a) seventy-one percent (71%) for LICENSED COMMERCIAL SEED
containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE or a LICENSED CALGENE GENE.
Provided, however, that in the event that MONSANTO requests that CALGENE
introduce an ALTERNATE GENE into cotton which has the effect of eliminating or
reducing the royalty due to a third party by MONSANTO under a License Agreement
and CALGENE makes such introduction at no cost to MONSANTO, the net savings,
after offsetting any royalty payable to any third party by MONSANTO for use of
such ALTERNATE GENE, shall be shared on a 50:50 basis by reducing the applicable
MONSANTO ROYALTY PERCENTAGE. For example, if a third party royalty of eight and
one-half percent (8.5%) of MONSANTO'S seventy-one percent (71%) ROYALTY is
eliminated by CALGENE'S commercializing an ALTERNATE GENE as requested by
MONSANTO, and no other royalty is owed to a third party for such ALTERNATE GENE,
then the MONSANTO ROYALTY PERCENTAGE shall be reduced to sixty-eight percent
[.71 - (.71 x .085)/2 = .68]; or
(b) the equivalent percentage as would have been due under the
terms of the RELATED AGREEMENTS prior to amendment herein for LICENSED
COMMERCIAL SEED the production, use or sale of which would, without a license,
infringe a claim of the LICENSED
<PAGE>
PATENT RIGHTS, but not containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE or a
LICENSED CALGENE GENE.
2.1.47 The term "MONSANTO TECHNOLOGY" means information, data,
know-how and technology which has to do with LEPIDOPTERAN RESISTANCE in cotton
including, but not limited to, information and technology relating to cells and
seeds of cotton plants, LEPIDOPTERAN-ACTIVE MONSANTO GENE(S), DNA sequences and
probes therefor, transformation methodology, tissue cultures, assays, residue
analyses, regeneration and selection procedures, plant genetic constituents,
vectors useful in transforming such genetic constituents, construction and use
of such vectors, B.T. TOXIN and its role in plants and registration approvals.
2.1.48 The term "NET LICENSE REVENUE" means the total amount due to
MONSANTO from licenses to cotton farmers for use of the LICENSED COMMERCIAL SEED
less any DISTRIBUTION PAYMENTS during the applicable period for which payments
pursuant to Section 6 is being determined.
2.1.49 The term "NET SEED SALES" means the gross invoiced seed
sales by CALGENE during the applicable period for which payments pursuant to
Section 6 is being determined, for all LICENSED COMMERCIAL SEED in arm's length
sales to third parties after deduction of the following items, provided and to
the extent such items are actually incurred and do not exceed reasonable and
customary amounts in the market in which such sale occurred: (i) trade and
quantity discounts and rebates; (ii) credits or allowances given or made for
rejection or return of previously sold LICENSED COMMERCIAL SEED; (iii) any tax
or government charge levied on the sale other than an income tax or value added
tax; and (iv) any charges for freight or insurance.
2.1.50 The term "NON-B.T. COTTON SEED" means cotton seed which has
not been altered by the introduction of any recombinant gene which causes the
transgenic cotton plant to exhibit LEPIDOPTERAN RESISTANCE.
<PAGE>
2.1.51 The term "NON-GENETICALLY-MODIFIED" means, when applied to a
plant, a line, or a cultivar, that the genome of the subject plants have not
been altered through mutagenesis or the introduction of a recombinant gene by
any means.
2.1.52 The term "NON-LEPIDOPTERAN-RESISTANT COTTON SEED" means
cotton seed which has not been genetically-engineered and is not resistant to
LEPIDOPTERAN INSECTS.
2.1.53 The term "RECIPIENT" means a party which receives
confidential information of another party as described in Section 8.
2.1.54 The term "RECURRENT PARENT" means the parent to which
successive BACKCROSSES are made in BACKCROSS breeding.
2.1.55 The term "RELATED AGREEMENTS" means the AGROBACTERIUM
TRANSFORMATION LICENSE AGREEMENT, the ANTIBIOTIC MARKER GENE LICENSE AGREEMENT,
the CAMV35S PROMOTER LICENSE AGREEMENT and the ENHANCED CAMV35S PROMOTER LICENSE
AGREEMENT.
2.1.56 The term "SUBSEQUENT GENE" means each LEPIDOPTERAN-ACTIVE
MONSANTO GENE, other than the FIRST GENE, authorized by MONSANTO for COMMERCIAL
DEVELOPMENT.
2.1.57 The term "SUBSIDIARY" or "SUBSIDIARIES" mean any
company(ies), more than fifty percent (50%) of the voting stock of which is
owned, directly or indirectly, by a party hereto.
2.1.58 The term "TECHNOLOGY" means MONSANTO TECHNOLOGY and/or
CALGENE TECHNOLOGY as appropriate.
2.1.59 The term "THE TERRITORY" means the United States of America.
<PAGE>
2.1.60 The term "THIRD-PARTY LEPIDOPTERAN ACTIVE GENE" means a DNA
molecule, or a replicate thereof, encoding a toxin (whether or not a B.T. TOXIN)
that provides LEPIDOPTERAN RESISTANCE which is not a LEPIDOPTERAN-ACTIVE
MONSANTO GENE or LICENSED CALGENE GENE.
2.1.61 The term "UNIT" means a quantity of delinted cotton seed
weighing fifty (50) pounds or such other package size(s) as CALGENE may use in
the future. Provided, however, that all calculations involving UNITS shall be
made in terms of the quantity of cotton seed contained in the packages relevant
to the calculation. Provided further, that in all calculations requiring
quantities of non-delinted cotton seed to be converted to UNITS of delinted
cotton seed, such conversion shall be made on the basis of CALGENE'S experience
for conversion of non-delinted cotton seed to delinted cotton seed averaged for
the immediately preceding three (3) years.
2.1.62 The term "VARIETAL NAME" means a word or combination of
words or other combination of letters (for example "CALGENE," or "ST") which
identifies a CALGENE CULTIVAR.
2.1.63 The term "VARIETAL NUMBER" means a number which identifies a
CALGENE CULTIVAR.
2.2 STATUTORY REFERENCES: Each reference in this Agreement to a
--------------------
statute or a provision of a statute shall be construed as a reference to that
statute or provision as it exists on the EFFECTIVE DATE.
SECTION 3 -- LICENSES
---------------------
3.1 LIMITED LICENSE TO SELL LICENSED COMMERCIAL SEED: MONSANTO hereby
------------------------------------------------
grants to CALGENE, and CALGENE hereby accepts, on and subject to the terms and
conditions of this Agreement, the right, without the right to transfer except as
provided in Subsection 15.2, a non-exclusive license under LICENSED PATENT
RIGHTS to develop, produce, have produced, and sell LICENSED COMMERCIAL SEED
containing a FIRST GENE or LICENSED CALGENE GENE to
<PAGE>
cotton farmers licensed by MONSANTO for use in THE TERRITORY; provided however
that, CALGENE shall not be permitted to commercialize such LICENSED COMMERCIAL
SEED in the area East of Oklahoma and Texas prior to January 1, 1997..
3.2 TRANSITION TO LEPIDOPTERAN-ACTIVE MONSANTO GENE:
------------------------------------------------
(a) MONSANTO shall promptly initiate an aggressive breeding program
to introduce LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) into a mutually agreed upon
number of CALGENE CULTIVARS. MONSANTO shall provide CALGENE with BC\\3\\F\\3\\
seed of such CALGENE B.T. CULTIVARS to facilitate aggressive development of
LEPIDOPTERAN-ACTIVE MONSANTO GENE containing LICENSED COMMERCIAL SEED by
CALGENE.
(b) CALGENE shall be obligated to replace all LICENSED COMMERCIAL SEED
containing LICENSED CALGENE GENE with LICENSED COMMERCIAL SEED containing
LEPIDOPTERAN ACTIVE MONSANTO GENE(S) beginning in planting year 1999; provided
that, one or more CALGENE CULTIVARS containing a LEPIDOPTERAN-ACTIVE MONSANTO
GENE have demonstrated yield equivalency in at least two years of multi-located
replicated yield trial conducted jointly by CALGENE and MONSANTO using a
protocol approved by MONSANTO.
(c) CALGENE'S license to make, use, an sell LICENSED COMMERCIAL SEED
containing the LICENSED CALGENE GENE shall be limited, and the amount of such
LICENSED COMMERCIAL SEED sold: (i) for planting year 2000 shall not exceed
eighty percent (80%) of CALGENE'S total seed sales of CALGENE B.T. CULTIVARS for
planting year 1999, (ii) for planting year 2001 shall not exceed fifty percent
(50%) of CALGENE'S total seed sales of CALGENE B.T. CULTIVARS for planting year
1999, and (iii) for planting year 2002 shall not exceed twenty percent (20%) of
CALGENE'S total seed sales of CALGENE B.T. CULTIVARS for planting year 1999;
provided however that, CALGENE and MONSANTO may meet and discuss the potential
for delaying the phase-out of LICENSED COMMERCIAL SEED containing the LICENSED
CALGENE GENE.
(d) MONSANTO shall reimburse the reasonable incremental development
costs incurred by CALGENE in years 1997 through 2000 which are directly and
solely related to the introduction of LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) into
the Calgene germplasm, not to exceed Five Hundred Thousand Dollars ($500,000)
per year; provided, that such costs are clearly attributable solely to the
introduction of the LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) and are
<PAGE>
not incurred as a result of normal and customary development of new CALGENE
CULTIVARS. At the beginning of each subject year, CALGENE shall submit to
MONSANTO a written development plan outlining such incremental development costs
which CALGENE believes are subject to re-imbursement pursuant to this Subsection
3.2(d). CALGENE are MONSANTO shall mutually agree upon the elements of the
development plan that are subject to such reimbursement. At the end of each
subject year, CALGENE shall submit to MONSANTO a written report outlining the
incremental development costs actually incurred by CALGENE for the subject year.
Payment shall be due by MONSANTO within thirty (30) days of the receipt of such
report by MONSANTO.
(e) In the event that the yield trials conducted pursuant to
Subsection 3.2(b) do not indicate yield equivalency, initiation of transition to
a LEPIDOPTERAN-ACTIVE MONSANTO GENE containing LICENSED COMMERCIAL SEED shall be
delayed for the period of time until such yield equivalency is reasonably
demonstrated.
(f) In the event that CALGENE is selling seed of a CALGENE CULTIVAR
expressing a B.T. TOXIN by December 31, 1998, but is not selling LICENSED
COMMERCIAL SEED containing a LICENSED CALGENE GENE by such date, initiation of
transition to a LEPIDOPTERAN-ACTIVE MONSANTO GENE containing LICENSED COMMERCIAL
SEED shall be delayed until the planting year following the first planting year
in which CALGENE first sells LICENSED CALGENE GENE containing LICENSED
COMMERCIAL SEED.
(g) CALGENE shall not be licensed under LICENSED PATENT RIGHTS to
develop, produce, have produced or sell LICENSED COMMERCIAL SEED containing the
LICENSED CALGENE GENE after planting year 2002.
3.3 LICENSE TO MULTIPLY LICENSED COMMERCIAL SEED: The rights granted to
--------------------------------------------
CALGENE include the right to multiply such LICENSED COMMERCIAL SEED (for
subsequent sale to licensed cotton farmers) directly or through third party
contract growers selected by CALGENE in THE TERRITORY and licensed by MONSANTO
or, after notice to and approval by MONSANTO (which approval will not be
unreasonably delayed or denied), outside THE TERRITORY where CALGENE has
obtained all necessary governmental approvals, and to carry out all other
activities reasonably necessary for the production, and for the sale in THE
TERRITORY, of LICENSED COMMERCIAL SEED.
3.4 OPTIONS FOR LICENSES TO SUBSEQUENT GENE(S):
-------------------------------------------
<PAGE>
(a) MONSANTO grants to CALGENE an option to a license in the
TERRITORY as described in Subsections 3.1, 3.2 and 3.3, to SUBSEQUENT GENE(S)
for which MONSANTO obtains GOVERNMENT APPROVAL, and MONSANTO TECHNOLOGY related
thereto for use in cotton in THE TERRITORY for so long as CALGENE is not
developing a cotton seed containing a THIRD-PARTY LEPIDOPTERAN-ACTIVE GENE and
until October 11, 2008.
(b) CALGENE shall provide prompt written notice to MONSANTO should
CALGENE initiate development of cotton seed containing a THIRD-PARTY
LEPIDOPTERAN-ACTIVE GENE.
(c) For so long as the option to such licenses pursuant to Subsection
3.4(a) is effective, MONSANTO shall notify CALGENE in writing whenever MONSANTO
decides to authorize a SUBSEQUENT GENE for COMMERCIAL DEVELOPMENT in THE
TERRITORY. Such notification shall be given to CALGENE with respect to each
LEPIDOPTERAN-ACTIVE MONSANTO GENE not later than thirty (30) days after its DATE
OF APPROVAL FOR COMMERCIAL DEVELOPMENT. CALGENE may exercise the option to
obtain a license for such LEPIDOPTERAN-ACTIVE MONSANTO GENE by notifying
MONSANTO in writing within sixty (60) days after the date on which MONSANTO
gives CALGENE such notice of the DATE OF APPROVAL FOR COMMERCIAL DEVELOPMENT.
With respect to a LEPIDOPTERAN-ACTIVE MONSANTO GENE, the license under the terms
of this Agreement shall become effective upon receipt by MONSANTO of CALGENE'S
notice of exercise of its option.
3.5 PROHIBITION AGAINST MODIFICATION OF GENETIC MATERIALS:
-----------------------------------------------------
(a) CALGENE shall not modify any LEPIDOPTERAN-ACTIVE MONSANTO GENE
nor modify or use any isolated regulatory control sequences contained in a
LEPIDOPTERAN-ACTIVE MONSANTO GENE, for any purpose without the prior written
consent of MONSANTO.
(b) CALGENE shall not be permitted to produce, have produced and/or
commercialize new cotton transformants containing any LEPIDOPTERAN-ACTIVE
MONSANTO GENE without the prior written approval of MONSANTO.
3.6 CONDITIONS ON LICENSE: In partial consideration for the above
---------------------
LICENSES:
(a) CALGENE shall not insert into a line of LICENSED COMMERCIAL SEED
containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE, any other non-naturally
occurring gene or genes which result in INSECT RESISTANCE without the prior
written consent of MONSANTO.
<PAGE>
MONSANTO shall provide such consent if MONSANTO has permitted the same or
similar insertions by any other licensee of the subject LEPIDOPTERAN-ACTIVE
MONSANTO GENE(S) for use in cotton. Provided, however, that CALGENE'S
modification of such lines of LICENSED COMMERCIAL SEED and MONSANTO'S obligation
with respect to such lines shall be subject to equivalent terms and conditions
as may be applicable to such third party licensee. A gene shall be considered
naturally-occurring if it exists in a cotton cultivar and has not been produced
as a result of tissue culture selection, genetic engineering using recombinant
DNA techniques, or any other in vitro modification to the cotton plant or plants
from which was isolated.
(b) CALGENE shall choose VARIETAL NAMES, VARIETAL NUMBERS, or
DISTINCTIVE NOMENCLATURE to designate cotton seed of CALGENE'S varieties which
contains LEPIDOPTERAN-ACTIVE MONSANTO GENE(S). If the VARIETAL NUMBER used as
part of the name of a variety of LICENSED COMMERCIAL SEED has not been used by
CALGENE in connection with the sale of NON-B.T. COTTON SEED prior to the DATE OF
FIRST COMMERCIAL SALE, CALGENE shall not use such VARIETAL NUMBER to identify
cotton seed which contains a recombinant gene for INSECT RESISTANCE other than a
LEPIDOPTERAN-ACTIVE MONSANTO GENE. If the VARIETAL NUMBER used as part of the
name of a variety of LICENSED COMMERCIAL SEED has been used by CALGENE in
connection with the sale of NON-B.T. COTTON SEED prior to the DATE OF FIRST
COMMERCIAL SALE, CALGENE may use such VARIETAL NUMBER to identify cotton seed
which does not contain LEPIDOPTERAN-ACTIVE MONSANTO GENE(S), but if such
VARIETAL NUMBER is used to identify cotton seed which does not contain a
LEPIDOPTERAN-ACTIVE MONSANTO GENE, CALGENE shall not use such VARIETAL NUMBER in
connection with DISTINCTIVE NOMENCLATURE, used to identify LICENSED COMMERCIAL
SEED, to identify cotton seed which does not contain a LEPIDOPTERAN-ACTIVE
MONSANTO GENE. For examples, (1) if, prior to the DATE OF FIRST COMMERCIAL
SALE, CALGENE has not sold cotton seed using the VARIETAL NUMBER "235," and
after the DATE OF FIRST COMMERCIAL SALE sells LICENSED COMMERCIAL SEED with a
VARIETAL NAME such as "ST 235 Lep-Con", CALGENE may thereafter identify NON-B.T.
COTTON SEED by a VARIETAL NAME such as "ST 235", but cannot identify cotton seed
which contains a recombinant gene for INSECT RESISTANCE other than a
LEPIDOPTERAN-ACTIVE MONSANTO GENE using the VARIETAL NUMBER "235". Thus, such
seed could not be identified as "ST 235 I.R." but could be identified as "ST 335
I.R." (2) If, prior to the DATE OF FIRST COMMERCIAL SALE, CALGENE has sold
cotton seed using the VARIETAL NUMBER "275" and thereafter sells seed containing
a LEPIDOPTERAN-ACTIVE
<PAGE>
MONSANTO GENE using such VARIETAL NUMBER with a DISTINCTIVE NOMENCLATURE, such
as in the VARIETAL NAME "ST 275 Lep-Con," CALGENE may thereafter (a) identify
NON-B.T. COTTON SEED by a VARIETAL NAME such as "ST 275", and (b) may also
identify cotton seed which contains a recombinant gene for INSECT RESISTANCE
other than a LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) using the VARIETAL NUMBER
"275" but must use some DISTINCTIVE NOMENCLATURE other than "Lep-Con" in
connection with such seed, so that the VARIETAL NAME "ST 275 I.R." could be used
to identify such seed but VARIETAL NAMES such as "ST 275 Lep-Con", "ST 275 Lep-
Con Plus", or "CALGENE 275 Lep-Con" could not be used.
(c) CALGENE shall conspicuously display on all packages containing
LICENSED COMMERCIAL SEED, covered by MONSANTO PATENT RIGHTS, and in all invoices
relating to such LICENSED COMMERCIAL SEED to be sold or transferred to third
parties, the following notice, or a notice having the same meaning and effect,
with the blanks appropriately filled in:
THESE SEEDS ARE COVERED UNDER U. S. PATENT(S) ______________. NO
SUBLICENSE IS CONVEYED UNDER SAID PATENTS TO USE THESE SEEDS
SOLELY BY THE PURCHASE OF SUCH SEEDS. A SUBLICENSE UNDER SAID
PATENTS TO USE THESE SEEDS TO PRODUCE A SINGLE COTTON CROP MUST
----
ALSO BE OBTAINED FROM MONSANTO COMPANY.
3.7 BOLLGARD" GENE TRADEMARK:
------------------------
(a) CALGENE shall conspicuously display the BOLLGARD" GENE TRADEMARK
and accompanying logo on all packages of LICENSED COMMERCIAL SEED containing a
LEPIDOPTERAN-ACTIVE MONSANTO GENE. After initial use of the BOLLGARD" GENE TRADE
MARK and accompanying logo, any alteration of the size and location of such
TRADEMARK and accompanying logo shall require the written approval of MONSANTO.
(b) It is agreed that the BOLLGARD" GENE TRADEMARK shall be licensed
to CALGENE on a non-exclusive royalty-free basis pursuant to the BOLLGARD" GENE
TRADEMARK LICENSE AGREEMENT. The parties shall execute said BOLLGARD" GENE
TRADEMARK LICENSE AGREEMENT following identification of the final graphic form
of the BOLLGARD" GENE TRADEMARK and accompanying logo by MONSANTO.
(c) The BOLLGARD" GENE TRADEMARK shall be utilized in the manner
specified in the BOLLGARD" GENE TRADEMARK LICENSE AGREEMENT. Provided, however,
that
<PAGE>
the size of the BOLLGARD" GENE TRADEMARK shall be reasonable in relation to the
overall size of the package and shall be smaller than the largest representation
of the CALGENE trademark appearing on the package. Provided, further, that the
BOLLGARD" GENE TRADEMARK shall not unreasonably detract from the appearance of
such CALGENE package nor be so similar to any existing CALGENE trademark as to
create confusion. MONSANTO shall inform CALGENE of the final graphic form of
the BOLLGARD" GENE TRADEMARK and accompanying logo to be used on such LICENSED
COMMERCIAL SEED as soon as practicable, and in no event later than June 15 prior
to the marketing year in which the BOLLGARD" GENE TRADEMARK is to be used, and
shall reimburse CALGENE for any increase in the cost of the package necessitated
directly and solely by the application of the BOLLGARD" GENE TRADEMARK and for
the cost of any unused packaging or other materials which cannot be used because
of any subsequent change requested by MONSANTO in the BOLLGARD" GENE TRADEMARK.
3.8 LIMITATIONS ON LICENSE: This Agreement is not to be construed as
----------------------
including a grant from MONSANTO to CALGENE of any license, sublicense or other
right: (a) to make or sell the LICENSED CALGENE GENE, LEPIDOPTERAN-ACTIVE
MONSANTO GENE(S) or MONSANTO TECHNOLOGY, (b) to use LICENSED CALGENE
GENE,LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) or MONSANTO TECHNOLOGY for any purpose
other than those expressly set forth herein.
3.9 EDUCATIONAL PROGRAM TO DISCOURAGE FARMER-SAVED SEED: CALGENE shall
---------------------------------------------------
employ reasonable efforts on a continuing basis to proactively educate the
purchasers of LICENSED COMMERCIAL SEED with the nature of the limited-use
license granted to such cotton farmers by MONSANTO, the benefits of purchasing
LICENSED COMMERCIAL SEED annually and the disadvantages of using farmer-saved
seed and applicable legal restrictions.
3.10 THIRD PARTY VIOLATIONS OR INVALIDITY OF RESTRICTIONS ON LICENSE: The
---------------------------------------------------------------
use of LICENSED COMMERCIAL SEED by purchasers for purposes other than, or in
addition to, production of a single commercial commodity crop unless expressly
authorized by CALGENE shall not be considered a breach of this Agreement. The
LICENSE granted to CALGENE shall not be revoked, diminished, or otherwise
affected in the event that the limitations and restrictions of such
<PAGE>
license to purchasers are found to be unenforceable, in whole or in part, by a
court of competent jurisdiction.
3.11 IDENTIFICATION OF FIELDS PLANTED WITH FARMER-SAVED SEED: CALGENE
-------------------------------------------------------
and MONSANTO shall cooperate in a reasonable effort to develop and employ
methods or techniques, which can be employed in a commercially efficient manner,
to identify fields of cotton that are planted with seed saved from a crop
produced from LICENSED COMMERCIAL SEED. All costs associated with the
cooperative efforts to develop and employ such methods and techniques shall be
borne by MONSANTO.
SECTION 4 -- DEVELOPMENT AND MARKETING ACTIVITIES
-------------------------------------------------
4.1 DEVELOPMENT OF LICENSED COMMERCIAL SEED CONTAINING LEPIDOPTERAN-ACTIVE
----------------------------------------------------------------------
MONSANTO GENE(S): MONSANTO shall cooperate with CALGENE in development
- - ----------------
activities directed to the insertion of LEPIDOPTERAN-ACTIVE MONSANTO GENE(S)
into CALGENE CULTIVARS.
4.2 CONSULTATION: MONSANTO and CALGENE shall consult regularly throughout
------------
the term of this Agreement relative to activities affecting the development and
maintenance of sales of LICENSED COMMERCIAL SEED including, but not limited to,
CALGENE'S plans for and progress in production and field testing of such
LICENSED COMMERCIAL SEED. Representatives of MONSANTO and CALGENE shall
periodically meet at mutually acceptable times to discuss such activities and
progress hereunder. For planning purposes, MONSANTO and CALGENE shall meet each
year by October 31 to plan the activities of the following year.
<PAGE>
4.3 TIMING OF DEVELOPMENT ACTIVITIES:
--------------------------------
(a) MONSANTO shall make each gene which MONSANTO determines is a
candidate to become a LEPIDOPTERAN-ACTIVE MONSANTO GENE available to CALGENE for
development and evaluation.
(b) MONSANTO shall notify CALGENE in writing when a LEPIDOPTERAN-
ACTIVE MONSANTO GENE is authorized for COMMERCIAL DEVELOPMENT by MONSANTO. Such
notification shall be given not later than thirty (30) days after MONSANTO'S
decision to authorize COMMERCIAL DEVELOPMENT of such LEPIDOPTERAN-ACTIVE
MONSANTO GENE.
(c) MONSANTO shall notify CALGENE in writing within thirty (30) days
of the DATE OF GOVERNMENTAL APPROVAL with respect to each LEPIDOPTERAN-ACTIVE
MONSANTO GENE. Such notice shall contain a list of the governmental agencies
from which official clearances or written approvals of the subject LEPIDOPTERAN-
ACTIVE MONSANTO GENE have been obtained together with copies of such clearances
or approvals.
(d) Although MONSANTO may have authorized a LEPIDOPTERAN-ACTIVE
MONSANTO GENE for COMMERCIAL DEVELOPMENT, CALGENE shall not offer for sale or
sell, seed of a CALGENE B.T. CULTIVAR containing that LEPIDOPTERAN-ACTIVE
MONSANTO GENE until the DATE OF APPROVAL FOR COMMERCIAL SALE of that
LEPIDOPTERAN-ACTIVE MONSANTO GENE in that CALGENE B.T. CULTIVAR. The DATE OF
APPROVAL FOR COMMERCIAL SALE of a LEPIDOPTERAN-ACTIVE MONSANTO GENE in a CALGENE
B.T. CULTIVAR shall occur not later than the date on which MONSANTO has approved
COMMERCIAL SALE of cotton seed containing that LEPIDOPTERAN-ACTIVE MONSANTO GENE
by any third party. Provided, however, that as of such date CALGENE shall have
submitted to MONSANTO test data for a minimum of two (2) testing years which
shows that plants of the particular CALGENE B.T. CULTIVAR, which is to be
offered for sale, exhibit all of the criteria for COMMERCIAL INSECT RESISTANCE
and AGRONOMIC CRITERIA. MONSANTO shall notify CALGENE in writing of the DATE OF
APPROVAL FOR COMMERCIAL SALE of a LEPIDOPTERAN-ACTIVE MONSANTO GENE.
4.4 BULK PRODUCTION: CALGENE shall be obligated to use reasonable
---------------
business efforts to have available for sale a sufficient quantity of LICENSED
COMMERCIAL SEED to satisfy the reasonably foreseeable market demand for such
LICENSED COMMERCIAL SEED.
<PAGE>
4.5 MARKETING ACTIVITIES: Monsanto shall provide the following marketing
--------------------
and licensing services to support the commercialization of LICENSED COMMERCIAL
SEED:
(a) licensing of cotton farmers including specification of the fees,
due dates, credit terms and discounts applicable to licenses for the LICENSED
COMMERCIAL SEED;
(b) development of the forms of such licenses and the process to
enforce such the terms of such licenses;
(c) development and implementation of procedures for cotton farmers
to enter into such licenses;
(d) entering into such licenses with the cotton farmers either by
using MONSANTO employees or by contracting with retailers to act on behalf of
MONSANTO;
(e) invoicing and collection of license fees due under such licenses;
(f) management and assumption of the credit risk of collecting such
license fees;
(g) communication of the license process and license limitations to
cotton ginners and delinters;
(h) development and implementation of programs to create demand for
LICENSED COMMERCIAL SEED, including advertising, merchandising and promotions;
(i) development and implementation of distributor and retailer
programs for the LICENSED COMMERCIAL SEED;
(j) development and implementation of a program to train cotton
farmers, distributors, retailers, consultants, bankers, CALGENE employees,
MONSANTO employees, and extension and academic personnel on the use and benefits
of the LICENSED COMMERCIAL SEED;
(k) development and implementation of resistance management plans for
LICENSED COMMERCIAL SEED, including plan design and implementation; education of
distributors, retailers, farmers, consultants, and extension and academic
personnel about potential resistance and management options; and cooperation
with retailers and farmers to detect instances of resistance;
(l) investigation and attempting to resolve complaints alleging non-
performance of the LICENSED COMMERCIAL SEED;
(m) development of a replant policy for the LICENSED COMMERCIAL SEED;
and
(n) management of the field test kit program for identification of
LICENSED COMMERCIAL SEED and its implementation.
<PAGE>
4.6 ADDITIONAL SERVICES: MONSANTO and CALGENE shall consult on an ongoing
-------------------
basis concerning the following services to support commercialization of LICENSED
COMMERCIAL SEED which shall be provided by MONSANTO:
(a) development of lists of retailers authorized to act on behalf of
MONSANTO in entering into licenses with cotton farmers covering LICENSED
COMMERCIAL SEED;
(b) development and implementation of the distributor and retailer
contracts required to implement such licensing process;
(c) development and implementation of the compensation programs to be
offered to distributors and retailers for implementation of such licensing
process;
(d) development and implementation of the process to book and the system
to report such license fees to MONSANTO; and
(e) development and implementation of prevention programs for farmer-
saved seed.
4.7 SERVICES PROVIDED TO CALGENE: After consultation with CALGENE,
----------------------------
MONSANTO shall provide CALGENE with terms and conditions deemed necessary to
effect the licensing process described in Subsections 4.5 and 4.6 hereof, which
terms and conditions CALGENE shall include in its agreements with distributors
and retailers involved in such process.
4.8 LEVEL OF SERVICES: The amount and frequency of the services described
-----------------
in Subsections 4.5, 4.6 and 4.7 hereof and the manner in which they are provided
shall be determined by MONSANTO after consultation with CALGENE.
SECTION 5 -- OWNERSHIP OF TECHNOLOGY
------------------------------------
5.1 MONSANTO TECHNOLOGY AND LICENSED PATENT RIGHTS:
----------------------------------------------
(a) All MONSANTO TECHNOLOGY shall remain the property of MONSANTO.
(b) All LICENSED PATENT RIGHTS shall remain the property of the
owners as of the EFFECTIVE DATE.
5.2 CALGENE TECHNOLOGY: All CALGENE TECHNOLOGY shall remain the property
------------------
of CALGENE.
<PAGE>
5.3 SAFETY AND TOXICOLOGY DATA: CALGENE and MONSANTO shall jointly own
--------------------------
all safety and toxicological data generated jointly through any joint
development activities. All such data solely developed by either party shall be
solely owned by the respective party.
5.4 EFFICACY DATA: CALGENE and MONSANTO shall jointly own all efficacy
-------------
data produced through joint development activities. All such data solely
developed by either party shall be solely owned by the respective party.
5.5 USE OF DATA: CALGENE and MONSANTO shall be permitted to use the
-----------
jointly-owned safety, toxicological and efficacy data produced through joint
development activities. Provided, however, that such use shall not be for the
sole benefit of a third party.
SECTION 6 -- PAYMENTS
---------------------
6.1 COMPENSATION TO BE PAID TO/BY CALGENE:
-------------------------------------
(a) In consideration of CALGENE producing and selling LICENSED
COMMERCIAL SEED to cotton farmers licensed by MONSANTO to purchase and use such
seed, MONSANTO shall pay to CALGENE: (i) the BOLLGARD" SEED SERVICES FEE for
sales of LICENSE COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE
or LICENSED CALGENE GENE; and/or (ii) the CALGENE SEED SERVICES FEE for sales
of LICENSE COMMERCIAL SEED the production, use or sale of which would, without a
license, infringe a claim of the LICENSED PATENT RIGHTS, but not containing a
LEPIDOPTERAN-ACTIVE MONSANTO GENE or a LICENSED CALGENE GENE.
(b) If CALGENE makes COMMERCIAL SALES of cotton seed containing a
THIRD-PARTY LEPIDOPTERAN-ACTIVE GENE, CALGENE shall pay MONSANTO: (i) for the
first marketing year during the term of this Agreement in which CALGENE makes
COMMERCIAL SALES in THE TERRITORY of cotton seed containing a THIRD-PARTY
LEPIDOPTERAN-ACTIVE GENE, an amount equal to Eight Million Dollars ($8,000,000)
less the following for that marketing year: (1) DISTRIBUTION PAYMENTS; (2)
BOLLGARD" SEED SERVICES FEES; and (3) CALGENE SEED SERVICES FEES; and (ii) for
the second and in each subsequent marketing year during the term of this
Agreement in which CALGENE makes COMMERCIAL SALES in THE TERRITORY of cotton
seed containing a THIRD-PARTY LEPIDOPTERAN-ACTIVE GENE, an amount equal to
Sixteen Million
<PAGE>
Dollars ($16,000,000) less the following for the subject marketing year: (1)
DISTRIBUTION PAYMENTS; (2) BOLLGARD" SEED SERVICES FEES; and (3) CALGENE SEED
SERVICES FEES.
(c) The payment obligation of CALGENE to MONSANTO set forth in
Subsection 6.1(b) shall not apply if:
(i) within one (1) year of the date on which a party other than
MONSANTO or CALGENE obtains GOVERNMENT APPROVAL of a THIRD-PARTY
LEPIDOPTERAN-ACTIVE GENE which exhibits COMMERCIAL INSECT RESISTANCE,
MONSANTO has not:
(1) authorized for COMMERCIAL DEVELOPMENT (and delivered to
CALGENE seed containing) a LEPIDOPTERAN-ACTIVE MONSANTO GENE that
results in plants of at least one (1) CALGENE CULTIVAR which
exhibits the criteria for COMMERCIAL INSECT RESISTANCE, and all
of the AGRONOMIC CRITERIA in field tests conducted by CALGENE for
two (2) generations of testing at the BC\\3\\F\\3\\ level (or
equivalent); and
(2) obtained GOVERNMENT APPROVAL of such LEPIDOPTERAN-ACTIVE
MONSANTO GENE; and
(3) authorized the COMMERCIAL SALE of seed of one or more
CALGENE CULTIVAR(S) containing such LEPIDOPTERAN-ACTIVE MONSANTO
GENE subject to the homozygosity standard of Subsection 11.2; or
(ii) Cotton plants grown from seed containing a LEPIDOPTERAN-ACTIVE
MONSANTO GENE which MONSANTO has authorized for COMMERCIAL SALE by
CALGENE have ceased to exhibit COMMERCIAL INSECT RESISTANCE to one or
more economically significant species of LEPIDOPTERAN INSECTS in tests
conducted by CALGENE, and if, within one (1) year of such event,
MONSANTO has not:
(1) authorized for COMMERCIAL DEVELOPMENT (and delivered to
CALGENE seed containing) at least one (1) or more other
LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) that result in plants of at
least one CALGENE CULTIVAR which, at that time, exhibits the
criteria for COMMERCIAL INSECT RESISTANCE, and all of the
AGRONOMIC CRITERIA in field tests
<PAGE>
conducted by CALGENE for two (2) generations of testing at the
BC\\3\\F\\3\\ level (or equivalent); and
(2) obtained GOVERNMENT APPROVAL for such LEPIDOPTERAN-ACTIVE
MONSANTO GENE(S); and
(3) authorized the COMMERCIAL SALE of seed of one or more
CALGENE CULTIVAR(S) containing such LEPIDOPTERAN-ACTIVE MONSANTO
GENE subject to the homozygosity standard of Subsection 11.2.
6.2 COMPENSATION PERIOD:
-------------------
(a) With respect to each LEPIDOPTERAN-ACTIVE MONSANTO GENE or
LICENSED CALGENE GENE, MONSANTO'S obligation to pay CALGENE the SEED SERVICES
FEE described in Subsection 6.1(a) shall begin on the DATE OF FIRST COMMERCIAL
LICENSING of LICENSED COMMERCIAL SEED and shall end upon the expiration of the
last-to-expire patent of LICENSED PATENT RIGHTS with one (1) or more enforceable
claim(s) which, in the absence of a license, would be infringed by the making,
using or selling LICENSED COMMERCIAL SEED of the specific CALGENE B.T. CULTIVAR
in THE TERRITORY.
(b) CALGENE'S obligation to pay MONSANTO the amounts described in
Subsection 6.1(b) shall begin in the marketing year in which CALGENE makes
COMMERCIAL SALES of cotton seed containing a THIRD-PARTY LEPIDOPTERAN-ACTIVE
GENE and shall end upon termination of this Agreement.
6.3 MOST FAVORED LICENSEE STATUS: If MONSANTO subsequently grants a
-----------------------------
license under the LICENSED PATENT RIGHTS and MONSANTO TECHNOLOGY to a third
party having substantially the same scope as a LICENSE conveyed under this
Agreement and having terms which are more favorable as to earned royalty than
the terms granted to CALGENE hereunder and CALGENE is not selling in THE
TERRITORY any cotton seed which contains a THIRD-PARTY LEPIDOPTERAN-ACTIVE GENE,
then MONSANTO shall advise CALGENE as to such more favorable earned royalty
terms. CALGENE shall be entitled upon notice to MONSANTO to have this Agreement
amended to substitute such earned royalty terms for the earned royalty terms of
this Agreement as of the date upon which such license containing the more
favorable earned royalty terms shall have become effective and such new earned
royalty terms shall be effective for so long
<PAGE>
as CALGENE is not selling in THE TERRITORY any cotton seed which contains a
THIRD-PARTY LEPIDOPTERAN-ACTIVE GENE.
SECTION 7 -- BUSINESS RECORDS/PAYMENTS
--------------------------------------
7.1 BUSINESS RECORDS: CALGENE shall keep records showing the amount of
----------------
LICENSED COMMERCIAL SEED sold or otherwise transferred to third parties.
CALGENE further agrees to permit its books and records to be examined from time
to time to the extent necessary to verify the reports provided for in this
Section 7, such confidential examination to be made by a national auditing firm
appointed by and at the expense of MONSANTO, which firm shall be reasonably
acceptable to CALGENE.
7.2 REPORTS AND PAYMENTS:
--------------------
(a) MONSANTO shall submit to CALGENE within (10) days of each month a
report which summarizes the cash payments on accounts receivable specifically
identifiable as LICENSE REVENUE resulting from licenses to cotton farmers for
use of LICENSED COMMERCIAL SEED. MONSANTO shall submit to CALGENE by the end of
October of each year a report which summarizes any payment due for the previous
twelve (12) months. With each such annual report, MONSANTO shall pay to CALGENE
the applicable SEED SERVICES FEE due pursuant to Subsection 6.1(a). If no such
payment is due to CALGENE for the subject reporting period, the written report
shall so state.
(b) CALGENE shall submit to MONSANTO within (10) days of each month a
report which summarizes: (i) the cash payments on accounts receivable
specifically identifiable as NET SALES resulting from sales of LICENSED
COMMERCIAL SEED, and (ii) revenue earned by CALGENE from increased gross margin
for LICENSED COMMERCIAL SEED over cotton seed not resistant to LEPIDOPTERAN
INSECTS. CALGENE shall submit to MONSANTO by the end of October of each year
for the previous twelve (12) months, a report which summaries the NET SALES
resulting from sales of LICENSED COMMERCIAL SEED, and any revenue earned by
CALGENE from increased gross margin for LICENSED COMMERCIAL SEED over cotton
seed not resistant to LEPIDOPTERAN INSECTS. With each such report, CALGENE
shall pay to MONSANTO the payments due pursuant to Subsection 6.1(b). If no
such payment is due to MONSANTO for the subject reporting period, the written
report shall so state.
<PAGE>
(c) Reports and payments due pursuant to this Section 7 shall be sent
to:
If to CALGENE: Calgene, Inc.
1920 Fifth Street
Davis, California 95616
Attention: Mr. Roger Salquist
President
If to MONSANTO: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Mr. James P. Tobin
Business Director, Cotton
Ceregen SBU
7.3 INTEREST ON OUTSTANDING BALANCES: If MONSANTO or CALGENE fails to pay
--------------------------------
on any due date any amount which is payable under this Agreement, then, without
prejudice to Subsection 10.5, that amount shall bear interest at the "Prime Rate
on Corporate Loans at Large U.S. Money Center Commercial Banks" as reported by
the Wall Street Journal on said due date plus three percent (3%) per annum from
the due date until payment is made in full, both before and after any judgment.
7.4 MONSANTO RECORDS:
----------------
(a) MONSANTO has listed (i) on Exhibit C each interference proceeding
in the United States Patent and Trademark Office or in any court involving any
of the MONSANTO PATENT RIGHTS as of the EFFECTIVE DATE, and to the extent it has
information from a MONSANTO licensor, and further to the extent MONSANTO is
legally permitted to do so, each such interference proceeding involving other
patent rights of LICENSED PATENT RIGHTS as of the EFFECTIVE DATE and (ii) on
Exhibit C any publicly-known United States patent or patent application of a
third party not a part of LICENSED PATENT RIGHTS of which MONSANTO is aware as
of the EFFECTIVE DATE which may reasonably result in an interference with any of
the MONSANTO PATENT RIGHTS based on the issued/published claims of such U.S.
patent or foreign counterpart patent application; and to the extent it has
information from a MONSANTO licensor, and further to the extent MONSANTO is
legally permitted to do so, such applicable information with respect to other
patent rights of LICENSED PATENT RIGHTS.
<PAGE>
(b) If, after the EFFECTIVE DATE, there are any changes in matters
which were subject to disclosure as of the EFFECTIVE DATE under Subsection
7.4(a), MONSANTO shall, not later than the DATE OF APPROVAL FOR COMMERCIAL SALE
of each LEPIDOPTERAN-ACTIVE MONSANTO GENE approved for COMMERCIAL SALE,
supplement the list attached as Exhibit C to the extent MONSANTO is legally
permitted, so that such Exhibit C is complete and accurate to the best of its
knowledge and belief as of that date.
(c) Upon such DATE OF APPROVAL FOR COMMERCIAL SALE, MONSANTO shall
make available to CALGENE for inspection upon reasonable notice, the record of
any such interference proceeding involving MONSANTO PATENT RIGHTS then still
pending and the record of any such interference proceeding involving any other
LICENSED PATENT RIGHTS which may be disclosed by a MONSANTO licensor and which
MONSANTO is legally permitted to disclose to its licensees.
SECTION 8 -- CONFIDENTIALITY
----------------------------
8.1 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION: Neither CALGENE nor
------------------------------------------
MONSANTO shall, at any time during the period specified by Subsection 8.2,
disclose to any other person any confidential TECHNOLOGY or other confidential
information which has been disclosed to it by another party except with the
prior written consent of the other involved party or parties or as provided in
Subsection 8.3.
8.2 PERIOD OF CONFIDENTIALITY: The period referred to in Subsection 8.1
-------------------------
shall be the period beginning with the date of receipt of the confidential
TECHNOLOGY or other confidential information and ending, with respect to that
TECHNOLOGY or other information, ten (10) years thereafter.
8.3 USES OF CONFIDENTIAL INFORMATION: Any TECHNOLOGY or other
--------------------------------
confidential information which is disclosed by either CALGENE, or MONSANTO to
other party may be:
(a) Disclosed by the RECIPIENT to any directors, officers, employees,
agents or contractors of the RECIPIENT, to such extent only as is reasonably
necessary for fulfillment of the RECIPIENT'S obligations under this Agreement or
for the commercial exploitation of the LICENSED COMMERCIAL SEED, and subject, in
each case, to the RECIPIENT'S obligating the person in
<PAGE>
question to hold the same confidential by written agreement coincident in scope
and term with the confidentiality obligation of this Agreement and that person
further agreeing not to use the same except for the purposes for which the
disclosure is made;
(b) Disclosed by the RECIPIENT to any governmental or other authority
or regulatory body to the extent required by law. Provided, however, that the
RECIPIENT shall take all reasonable measures to ensure that such authority or
body keeps the same confidential and does not use the same except for the
purpose for which such disclosure is made. Provided, further, that the party
proposing to so disclose shall give prior notice of that intent to the party
which disclosed such TECHNOLOGY and/or other confidential information and permit
said other party, at its option, to contest said requirement and to seek
confidential treatment of such TECHNOLOGY or information;
(c) Disclosed to a Court or litigant, to the extent such disclosure
is ordered by a Court or government agency of competent jurisdiction. Provided,
however, that the RECIPIENT shall take all reasonable measures to ensure that
the Court, other litigants, or government agency keep the same confidential and
does not use the same except for the purpose for which such disclosure is made.
Provided, further, that the party proposing to so disclose shall give prior
notice of that intent to the party which disclosed such TECHNOLOGY and/or other
confidential information and permit said other party, at its option to contest
said requirement and to seek confidential treatment of such TECHNOLOGY or
information; and
(d) Used by the RECIPIENT for any purpose, or disclosed by the
RECIPIENT to any other person, to the extent only that it is on the EFFECTIVE
DATE or thereafter becomes, public knowledge through no fault of the RECIPIENT,
or is disclosed to the RECIPIENT by a third party as a matter of right, or can
be shown by the RECIPIENT to have been known to the RECIPIENT prior to such
disclosure by written records.
<PAGE>
SECTION 9 -- FORCE MAJEURE
--------------------------
9.1 FORCE MAJEURE: Except with regard to any payments required pursuant
-------------
to this Agreement, neither party shall be liable for delay or failure to
perform, in whole or in part, by reason of contingencies beyond its reasonable
control ("Force Majeure"), whether herein specifically enumerated or not,
including, among others, acts of God, war, acts of war, revolution, civil
commotion, riots, acts of public enemies, blockade or embargo, delays of
carriers, car shortage, fire, explosion, breakdown of equipment, strike,
chemical reversal reactions, lockout, labor dispute, casualty or accident,
earthquake, epidemic, flood, cyclone, tornado, hurricane or other windstorm,
delays of vendors, or by reason of any law, order, proclamation, regulation,
ordinance, demand, requisition, requirement or any other act of any governmental
authority, including, but not limited to, government actions restricting or
preventing the growing of LICENSED COMMERCIAL SEED in areas where CALGENE has
historically produced seed; provided, however, that the party so affected shall,
as promptly as reasonably possible under the circumstances, give written or oral
notice to each other parties whenever such a contingency appears likely to occur
or has occurred and shall use all reasonable efforts to overcome the effects of
the contingency as promptly as possible and shall allow each such party such
access and information as may be necessary or desirable to evaluate such
contingency. No party shall be required to resolve a strike, lockout or other
labor problem in a manner which it alone does not deem proper and advisable. If
any party is affected by an event of the sort enumerated in or contemplated by
this Subsection 9.1, it may suspend performance of this Agreement for a period
of time equal to the duration of the event excusing such performance and the
time required to overcome the consequences of such event and resume performance.
The affected party shall complete performance as required by this Agreement as
soon as practicable after removal or cessation of the cause for the delay or
reduction in performance.
SECTION 10 -- TERM AND TERMINATION
----------------------------------
10.1 TERM OF AGREEMENT: The term of this Agreement shall begin on the
-----------------
EFFECTIVE DATE and shall extend until the later of: (i) the expiration of the
last to expire patent of LICENSED
<PAGE>
PATENT RIGHTS, or (ii) October 11, 2008, unless this Agreement is terminated
earlier pursuant to a provision of this Section 10.
<PAGE>
10.2 TERMINATION:
-----------
(a) MONSANTO shall have the right to terminate this Agreement at any
time prior to the DATE OF GOVERNMENT APPROVAL of the FIRST GENE by giving notice
to CALGENE.
(b) MONSANTO shall have the right during the COMPENSATION PERIOD for
the FIRST GENE to terminate this Agreement if, over a period of two (2)
consecutive years starting January 1, 1997, total annual royalty revenue to
MONSANTO from all of its licensees for use of LEPIDOPTERAN-ACTIVE MONSANTO
GENE(S) in cotton is less than MONSANTO'S total annual royalty due to third
parties under license agreements from those parties for their technology applied
to cotton. MONSANTO shall notify CALGENE when annual royalty revenue to
MONSANTO from all of its licensees within THE TERRITORY is less than one hundred
twenty-five percent (125%) of MONSANTO'S total annual royalty due to said third
parties. In the event that MONSANTO elects to terminate this Agreement under
this Subsection 10.2(c), MONSANTO shall: (i) terminate also all license
agreements for the use of LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) with other
licensees/sublicensees; and (ii) allow CALGENE and other sublicensees/licensees
to sell only existing inventories of cotton seed containing LEPIDOPTERAN-ACTIVE
MONSANTO GENE(S) in their possession as of the date of notice of termination or
for which each is then obligated by contract to take delivery. In the event
that MONSANTO so elects to terminate this Agreement under this Subsection
10.2(c) all other provisions of this Agreement shall remain in force until
contractual purchase commitments are fulfilled, and such inventories are
exhausted. In the event that MONSANTO subsequently elects to re-enter the
cotton seed market with LEPIDOPTERAN-ACTIVE MONSANTO GENE(S), MONSANTO shall
offer a license to CALGENE under the same terms contained in this Agreement.
(c) CALGENE shall have the right, within three (3) months thereafter,
to terminate this Agreement by written notice to MONSANTO, if:
(i) within one (1) year of the date on which a party other than
MONSANTO or CALGENE obtains GOVERNMENT APPROVAL of a THIRD-PARTY
LEPIDOPTERAN-ACTIVE GENE which exhibits COMMERCIAL INSECT RESISTANCE,
MONSANTO has not:
(1) authorized for COMMERCIAL DEVELOPMENT (and delivered to
CALGENE seed containing) a LEPIDOPTERAN-ACTIVE MONSANTO GENE that
results in plants of at least one (1) CALGENE CULTIVAR which
exhibits the criteria for COMMERCIAL INSECT RESISTANCE, and all
of the
<PAGE>
AGRONOMIC CRITERIA in field tests conducted by CALGENE for two
(2) generations of testing at the BC\\3\\F\\3\\ level (or
equivalent); and
(2) obtained GOVERNMENT APPROVAL of such LEPIDOPTERAN-ACTIVE
MONSANTO GENE; and
(3) authorized the COMMERCIAL SALE of seed of one or more
CALGENE CULTIVAR(S) containing such LEPIDOPTERAN-ACTIVE MONSANTO
GENE subject to the homozygosity standard of Subsection 11.2; or
(ii) Cotton plants grown from seed containing one or more
LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) which MONSANTO has authorized for
COMMERCIAL SALE by CALGENE have ceased to exhibit COMMERCIAL INSECT
RESISTANCE to one or more economically significant species of
LEPIDOPTERAN INSECTS in tests conducted by CALGENE, and if, within one
(1) year of such event, MONSANTO has not:
(1) authorized for COMMERCIAL DEVELOPMENT (and delivered to
CALGENE seed containing) at least one (1) or more other
LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) that result in plants of at
least one CALGENE CULTIVAR which, at that time, exhibits the
criteria for COMMERCIAL INSECT RESISTANCE, and all of the
AGRONOMIC CRITERIA in field tests conducted by CALGENE for two
(2) generations of testing at the BC\\3\\F\\3\\ level (or
equivalent); and
(2) obtained GOVERNMENT APPROVAL for such LEPIDOPTERAN-ACTIVE
MONSANTO GENE(S); and
(3) authorized the COMMERCIAL SALE of seed of one or more
CALGENE CULTIVAR(S) containing such LEPIDOPTERAN-ACTIVE MONSANTO
GENE subject to the homozygosity standard of Subsection 11.2.
(d) After October 11, 2008, CALGENE shall have the right to terminate
this Agreement for any reason deemed sufficient to CALGENE by giving at least
three (3) months notice to MONSANTO.
<PAGE>
10.3 BREACH OF OBLIGATIONS: Breach by any party of any of the material
---------------------
provisions of this Agreement (other than the confidentiality obligations of
Section 8 or default upon any of the payment obligations provided herein) shall
entitle each of the other parties to give the party in breach or default at
least ninety (90) days' notice to cure such breach or default. If a breach or
default by the defaulting party is not cured within the ninety (90) day period,
the materially-affected other party may terminate this Agreement by giving
notice to the other parties to take effect immediately. Provided, however, that
if a breach or default is not cured by MONSANTO within the ninety (90) day
period, CALGENE, to the extent that it shall have been materially affected by
such default, may at its option by giving notice to MONSANTO (i) terminate this
Agreement, or (ii) terminate CALGENE'S obligations under Subsection 4.4, with
all other provisions of this Agreement to remain in effect. Such option
selected by CALGENE shall take effect immediately. Any termination under this
Subsection 10.3 shall not affect any other rights the notifying party may have
under this Agreement.
10.4 DEFAULT ON PAYMENT: In the event CALGENE or MONSANTO defaults on any
------------------
payment due the other party pursuant to Section 6 and fails to cure such default
within thirty (30) days of notice by CALGENE or MONSANTO, as the case may be,
the non-defaulting party shall have the right to terminate this Agreement by
giving notice to the other parties.
10.5 EFFECT OF TERMINATION: In the event this Agreement is terminated in
---------------------
its entirety by either CALGENE or MONSANTO, CALGENE shall lose all rights and
LICENSES granted to it pursuant to this Agreement. Provided, however, that if
this Agreement is terminated by CALGENE on account of a breach or default by
MONSANTO, CALGENE shall have the right to sell LICENSED COMMERCIAL SEED then in
the possession of CALGENE or which CALGENE is then obligated by contract to take
delivery.
10.6 SURVIVAL OF COVENANTS: Notwithstanding the termination of this
---------------------
Agreement by notice or otherwise, the rights and obligations conferred by
Sections 6, 7, 8 and 11, 12, 13 and 14 with respect to events which occurred
prior to such termination and Subsection 15.15 shall survive termination.
<PAGE>
10.7 ABANDONMENT OF GROWER LICENSING BY MONSANTO:
-------------------------------------------
(a) If on or after December 31, 1996, MONSANTO has any licensee to its
INSECT RESISTANCE cotton technology covered by this Agreement that is solely
authorized to solely grant the necessary license(s) to the cotton grower as part
of the purchase of cotton seed containing such technology, MONSANTO shall so
notify CALGENE.
(b) Upon receipt of such notice, CALGENE shall, upon written request
of MONSANTO, be permitted to supersede this Agreement with the then prevailing
license agreement between MONSANTO and such other licensees of such MONSANTO
TECHNOLOGY.
SECTION 11 -- WARRANTY/LIMITATIONS
----------------------------------
11.1 MONSANTO WARRANTIES: MONSANTO hereby warrants and represents
-------------------
that:
(a) With respect to each LEPIDOPTERAN-ACTIVE MONSANTO GENE authorized
by MONSANTO for COMMERCIAL SALE, as of its DATE OF APPROVAL FOR COMMERCIAL SALE,
MONSANTO: (i) is the owner of such LEPIDOPTERAN-ACTIVE MONSANTO GENE and
MONSANTO TECHNOLOGY used in the development thereof; (ii) is owner or licensee
of the LICENSED PATENT RIGHTS; and (iii) has the right to license (or
sublicense) CALGENE such LEPIDOPTERAN-ACTIVE MONSANTO GENE and LICENSED PATENT
RIGHTS and MONSANTO TECHNOLOGY used in the development thereof for use under the
terms of this Agreement;
(b) With respect to each LEPIDOPTERAN-ACTIVE MONSANTO GENE authorized
by MONSANTO for COMMERCIAL SALE, as of its DATE OF APPROVAL FOR COMMERCIAL SALE,
there is no issued third-party United States patent, not then a part of the
LICENSED PATENT RIGHTS, of which MONSANTO is then aware, that will preclude
CALGENE'S lawful performance under this Agreement;
(c) As of the date on which MONSANTO gives the notice described in
Subsection 4.3(c) with respect to a LEPIDOPTERAN-ACTIVE MONSANTO GENE, official
clearances or written approvals for COMMERCIAL SALE of cotton seed containing
that LEPIDOPTERAN-ACTIVE MONSANTO GENE to produce genetically-transformed cotton
plants have been obtained from all federal government agencies which have
authority to regulate the production, use, and sale
<PAGE>
of such cotton seed or the plants produced therefrom. Provided, however, that
this shall not require MONSANTO to obtain approval from any agency with respect
to the issuance of seed certificates or phytosanitary certificates or
certificates of plant variety protection under the Plant Variety Protection Act,
which approvals, when appropriate or required, shall be the responsibility of
CALGENE; and
(d) All material information that MONSANTO has provided or hereafter
provides to any federal government agency for the purpose of obtaining approval
of the COMMERCIAL SALE of LICENSED COMMERCIAL SEED is, to the best of MONSANTO'S
knowledge and belief, true and correct in all material respects. Provided,
however, that this warranty is not made to CALGENE with respect to any such
information which was supplied to MONSANTO by CALGENE and which was thereafter
provided in the same form by MONSANTO to a governmental agency.
11.2 CALGENE WARRANTY: CALGENE hereby warrants and represents that CALGENE
----------------
shall not sell LICENSED COMMERCIAL SEED that fails to meet the homozygosity
standards for the respective LEPIDOPTERAN-ACTIVE MONSANTO GENE or LICENSED
CALGENE GENE, as the case may be, as set forth in Exhibit D. CALGENE shall keep
lot samples of all LICENSE COMMERCIAL SEED sold by CALGENE for at least two (2)
years following the date of sale of such LICENSED COMMERCIAL SEED following a
procedure for archiving and storage of samples of seed lots reasonably
acceptable to MONSANTO.
11.3 MUTUAL WARRANTIES: CALGENE and MONSANTO each warrant to the other
-----------------
parties that this Agreement does not, and performance by CALGENE and MONSANTO of
their obligations hereunder will not, contravene any provision of any agreement
or contract binding upon either CALGENE or MONSANTO.
11.4 NO OTHER WARRANTIES: It is expressly understood that CALGENE and
-------------------
MONSANTO MAKE NO REPRESENTATIONS, EXTEND NO WARRANTIES, EITHER EXPRESS OR
IMPLIED, AND ASSUME NO RESPONSIBILITIES, OTHER THAN EXPRESSLY PROVIDED FOR
HEREIN, WITH RESPECT TO:
(a) THE PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF THE LICENSED CALGENE GENE,LEPIDOPTERAN-ACTIVE MONSANTO GENE(S),
MONSANTO TECHNOLOGY, LICENSED COMMERCIAL SEED, OR CALGENE B.T. CULTIVARS;
<PAGE>
(b) THE SCOPE OR VALIDITY OF ANY PATENT OF THE LICENSED PATENT
RIGHTS; OR
(c) LICENSED CALGENE GENE,LEPIDOPTERAN-ACTIVE MONSANTO GENE(S),
MONSANTO TECHNOLOGY, LICENSED COMMERCIAL SEED, OR CALGENE B.T. CULTIVARS OR USE
THEREOF BEING FREE FROM INFRINGEMENT OF PATENTS OTHER THAN LICENSED PATENT
RIGHTS.
SECTION 12 -- PATENT INFRINGEMENT
---------------------------------
12.1 UTILIZATION OF NON-INFRINGING TECHNOLOGY: If, in MONSANTO'S opinion,
----------------------------------------
the development, production, processing, use, export or sale of LICENSED
COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE, that has been
authorized for COMMERCIAL SALE in writing by MONSANTO, would infringe a third
party patent, MONSANTO shall employ reasonable business efforts and judgment to
access the necessary license from said third party at no additional cost to
CALGENE, at which time said patent shall become part of the LICENSED PATENT
RIGHTS. If MONSANTO cannot access said license at a reasonable cost, then
MONSANTO may require CALGENE to promptly cease sales and lawfully dispose of
such LICENSED COMMERCIAL SEED then in inventory, subject to the provisions of
Subsection 12.3. If MONSANTO has alternative TECHNOLOGY which MONSANTO can
lawfully license for use by CALGENE that obviates the need for said third party
license which MONSANTO cannot access at a reasonable cost and results in plants
which exhibit the AGRONOMIC CRITERIA and COMMERCIAL INSECT RESISTANCE at the
same or greater levels as those CALGENE B.T. CULTIVARS produced from such
LICENSED COMMERCIAL SEED containing previously authorized TECHNOLOGY, MONSANTO
shall make such alternative TECHNOLOGY available to CALGENE. CALGENE shall
promptly utilize such alternative TECHNOLOGY to avoid the need for such third
party license. If CALGENE converts to such non-infringing alternative
TECHNOLOGY and has inventory of any such LICENSED COMMERCIAL SEED, which is not
salable in THE TERRITORY, MONSANTO shall reimburse CALGENE for the variable
costs of such inventory which CALGENE has either actually incurred or is bound
by contract to incur thereafter (The elements of variable costs of inventory
reimbursable hereunder to be determined using generally acceptable accounting
practices reasonably acceptable to MONSANTO.), plus CALGENE'S LOST PROFIT
CONTRIBUTION with respect to such inventory as defined in Subsection 12.3(b).
CALGENE shall make all reasonable
<PAGE>
efforts to limit or mitigate such costs. Nothing in this Agreement shall
preclude CALGENE from negotiating directly with any third party for rights under
patents or patent applications held by a third party. Provided, however, that
any costs incurred by CALGENE in negotiating for or acquiring any third party
patent rights shall not be credited against any payments due by CALGENE or added
to any payments due to CALGENE by MONSANTO unless MONSANTO agrees to such credit
or payment in writing.
12.2 DEFENSE OF INFRINGEMENT CLAIMS:
------------------------------
(a) MONSANTO shall assume the defense of any claim brought against
CALGENE for infringement of any United States patent insofar as such claim
arises out of (i) CALGENE'S use of any LEPIDOPTERAN-ACTIVE MONSANTO GENE that
has been furnished by MONSANTO to CALGENE for initial evaluation or testing
prior to the DATE OF APPROVAL FOR COMMERCIAL DEVELOPMENT or of any LEPIDOPTERAN-
ACTIVE MONSANTO GENE that has been authorized by MONSANTO for COMMERCIAL
DEVELOPMENT or (ii) CALGENE'S development, production, use, or sale of LICENSED
COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE that has been
authorized by MONSANTO for COMMERCIAL SALE. In any such suit, MONSANTO shall
indemnify CALGENE against any and all monetary damages and/or costs actually
awarded in such suit or any amounts paid in settlement in respect to such a
claim, subject to the conditions of Subsection 12.2(b).
(b) The obligation of MONSANTO pursuant to Subsection 12.2(a) above
shall apply only if:
(1) CALGENE promptly notifies MONSANTO of any claim within the scope
of Subsection 12.2(a);
(2) MONSANTO is given exclusive control of the defense of such claim
and all negotiations relating to its settlement;
(3) CALGENE promptly assists MONSANTO to the extent reasonably
necessary for the conduct of the suit;
(4) Pursuant to the terms of Subsection 12.1 above, CALGENE promptly
introduces alternative TECHNOLOGY provided by MONSANTO into
CALGENE'S breeding and multiplication processes to abate the
alleged infringement, as rapidly as possible, if the utilization
of such TECHNOLOGY is commercially feasible. Provided, however,
that nothing in this Subsection
<PAGE>
12.2(b)(4) shall be deemed to require CALGENE to infringe a third
party patent or to undertake or continue any activity unless
CALGENE has a good faith belief, based on opinion of counsel,
that such activity would not infringe a valid and enforceable
patent of another but, in such a case, if CALGENE refuses to
introduce the alternative TECHNOLOGY, then MONSANTO may terminate
this Agreement; and
(5) CALGENE shall take every reasonable measure requested by MONSANTO
to mitigate patent infringement damages or, if such is not
possible, promptly cease production, use and sales of LICENSED
COMMERCIAL SEED described in MONSANTO'S request, and lawfully
dispose of any LICENSED COMMERCIAL SEED then in inventory,
subject to the provisions of Subsection 12.3.
12.3 INDEMNITY AGAINST LOSSES DUE TO CLAIMS OF PATENT INFRINGEMENT:
-------------------------------------------------------------
(a) In the event that CALGENE ceases sales of all or some types of
LICENSED COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE as
planting seed, either at MONSANTO'S request or upon the order of any court as a
result of a third party claim of infringement of a United States patent unless
such court order is the result of some act for which CALGENE is solely
responsible, MONSANTO shall reimburse CALGENE for an amount which allows CALGENE
to recover the variable costs of inventory of such LICENSED COMMERCIAL SEED not
sold on account of such event, which CALGENE has either actually incurred or is
bound by contract to incur thereafter less the amount which CALGENE has
recovered, or with reasonable efforts could have recovered, to mitigate such
costs. The elements of variable costs of inventory reimbursable hereunder are
to be determined using generally acceptable accounting practices reasonably
acceptable to MONSANTO. CALGENE shall deliver to MONSANTO an invoice for such
costs, which shall be issued after CALGENE has made commercially reasonable
efforts to limit or mitigate such costs. Payment of such costs shall be due on
the earlier of ninety (90) days after delivery of such invoice, or on September
1 following the delivery of such invoice. Provided, however, that any provision
hereof notwithstanding if, as of September 1 following the date on which CALGENE
has ceased sales of such LICENSED COMMERCIAL SEED under the conditions of this
Subsection 12.3(a), CALGENE has not completely disposed of the inventory of such
LICENSED COMMERCIAL SEED, not sold as planting seed on account of such event
(including such seed returned by
<PAGE>
distributors), MONSANTO shall on that date, after receipt of an accounting for
such inventory then on hand, pay to CALGENE the variable costs of such
inventory, plus the net amounts due to CALGENE for LICENSED COMMERCIAL SEED
previously disposed of under the terms of this Subsection 12.3(a). Provided,
further, that upon such payment CALGENE shall continue to attempt to lawfully
dispose of the remaining portion of such inventory of LICENSED COMMERCIAL SEED
using all commercially reasonable efforts suggested by MONSANTO which may
include blending seed or sale in a permitted foreign country, with MONSANTO
receiving the net proceeds after deduction of the direct costs of disposition.
(b) In addition to the variable costs of such inventory, in
circumstances covered by Subsection 12.3(a), MONSANTO shall reimburse CALGENE
for its LOST PROFIT CONTRIBUTION for any inventory which is not sold as planting
seed. The LOST PROFIT CONTRIBUTION due to CALGENE shall be an amount calculated
by multiplying the quantity of LICENSED COMMERCIAL SEED expressed in UNITS then
in existence in CALGENE'S possession or for which CALGENE is contractually
liable to take possession, whether unconditioned, partially conditioned or fully
conditioned, which CALGENE is prevented from selling, times the LOST PROFIT
CONTRIBUTION (per UNIT) to be determined as follows:
CALGENE'S average published distributor price for all CALGENE CULTIVARS
(weighted by UNIT sales) for the marketing year in which such sales are
prevented or if such prohibition or restriction occurs before the prices
for the subject marketing year are published, then for the immediately
preceding marketing year [said average published distributor price, for the
purpose of this calculation, cannot have increased on a percentage basis,
more than the weighted average amount of CALGENE'S year-to-year price
increase for all CALGENE CULTIVARS over the prior three (3) year period].
For example, if sales are stopped during marketing year 1998 and the
weighted average price increases for all CALGENE CULTIVARS in 1995-1997
averaged 5% per year, then the maximum that the weighted averaged published
distributor price for all CALGENE CULTIVARS for 1998 can have increased
over the 1997 price for the purpose of this calculation shall be 5%,
Minus
All distributor discounts (which for this calculation shall be consistent
with comparative discounts available in prior years), on a per UNIT basis,
all CALGENE
<PAGE>
CULTIVARS, combined in a manner that equals the maximum discount actually
given by CALGENE to any distributor for the subject marketing year,
Equals
per UNIT weighted average net distributor price for all CALGENE CULTIVARS,
Minus
CALGENE'S average per UNIT cost of goods (including variable and allocated
fixed costs) for the current year for all CALGENE CULTIVARS as calculated
using CALGENE'S historic costing methods, determined in accordance with
generally accepted accounting principles, consistently applied, as verified
by an independent certified public accounting firm reasonably acceptable to
both CALGENE and MONSANTO,
Equals
LOST PROFIT CONTRIBUTION (per UNIT).
The amount owed by MONSANTO to CALGENE for such LOST PROFIT CONTRIBUTION shall
be reduced by any unincurred expenses and any specific reductions in CALGENE'S
expenses related to sales, marketing, research, quality assurance, general and
administrative, and interest which are a direct result of CALGENE not having
such LICENSED COMMERCIAL SEED inventory available for sale. If after CALGENE
ceases the sales of such LICENSED COMMERCIAL SEED in circumstances covered by
Subsection 12.3(a), CALGENE'S sales of all CALGENE CULTIVARS for the subject
marketing year increase beyond the volume of sales of NON-B.T. COTTON SEED that
was forecast by CALGENE'S latest business plan developed prior to planting in
the spring of the year prior to the subject marketing year and before CALGENE
had notice that sales of LICENSED COMMERCIAL SEED would be ceased, then the
number of UNITS of LICENSED COMMERCIAL SEED for which MONSANTO is obligated to
compensate CALGENE for LOST PROFIT CONTRIBUTION shall be further reduced by the
number of UNITS of all CALGENE CULTIVARS sold by CALGENE in the subject
marketing year above the number forecast.
(c) MONSANTO'S obligations to reimburse CALGENE for the variable cost
of inventory and LOST PROFIT CONTRIBUTION under this Subsection 12.3 shall be
limited to a quantity of LICENSED COMMERCIAL SEED containing a LEPIDOPTERAN-
ACTIVE MONSANTO GENE mutually agreed by the parties. Should the parties fail to
agree on this quantity by January 31 of the production year immediately
preceding the subject marketing year, MONSANTO'S
<PAGE>
obligations under this Subsection 12.3 for the subject marketing year shall be
limited to the quantity of LICENSED COMMERCIAL SEED sold by CALGENE during the
marketing year immedi ately preceding the subject marketing year.
(d) In the event that prevention of the sale of any UNIT of cotton
seed may qualify for reimbursement of variable costs and LOST PROFIT
CONTRIBUTION under both this Agreement and any other license agreement between
the parties, MONSANTO shall be obligated to reimburse CALGENE only once for the
subject UNIT of cotton seed.
12.4 SUSPECTED INFRINGEMENT OF LICENSED PATENT RIGHTS: In the event
------------------------------------------------
CALGENE learns of suspected infringement of LICENSED PATENT RIGHTS, then to the
extent that CALGENE is lawfully permitted to do so, CALGENE shall notify
MONSANTO to such effect and provide MONSANTO with the evidence concerning
suspected infringement in CALGENE'S possession. MONSANTO and CALGENE shall use
reasonable efforts to terminate such infringement without litigation. Nothing
herein shall be construed as conferring on CALGENE any right to bring suit for
infringement of LICENSED PATENT RIGHTS.
12.5 EFFECT OF INVALIDITY OF LICENSED PATENT RIGHTS: In the event any
----------------------------------------------
claim of LICENSED PATENT RIGHTS is declared invalid or unenforceable by a final
judgment of a court having competent jurisdiction, the LICENSE granted under
Section 3 shall terminate and have no force or effect as to the subject matter
covered by that claim. However, subject to the provisions of Section 6, the
LICENSE shall continue with respect to any remaining patent claims within
LICENSED PATENT RIGHTS.
12.6 SUSPECTED MISAPPROPRIATION OF A POTENTIAL LEPIDOPTERAN-ACTIVE MONSANTO
----------------------------------------------------------------------
GENE: In the event CALGENE learns of any suspected misappropriation by a third
- - ----
party of a gene which is a candidate to become a LEPIDOPTERAN-ACTIVE MONSANTO
GENE or other MONSANTO TECHNOLOGY, furnished by MONSANTO, or progeny thereof, to
the extent that it may lawfully do so, CALGENE shall notify MONSANTO and provide
MONSANTO with the available information concerning the suspected
misappropriation, and cooperate with MONSANTO to terminate such misappropriation
and/or obtain redress therefor, but at the expense of MONSANTO.
<PAGE>
12.7 LIMITATION OF LIABILITY: Except to the extent that CALGENE has a
-----------------------
claim against MONSANTO for breach of any of the warranties contained in
Subsections 11.1(a) and 11.1(b) [other than a claim with respect to its
inventories which are covered solely by the provisions of Subsections 12.3(a)
and 12.3(b)], the foregoing Subsections of this Section 12 state the entire
liability of MONSANTO to CALGENE in respect to any claim of patent infringement
in respect to CALGENE'S use of LEPIDOPTERAN-ACTIVE MONSANTO GENE(S) and MONSANTO
TECHNOLOGY in the commercialization of LICENSED COMMERCIAL SEED. With respect
to a claim by CALGENE against MONSANTO for breach of any of the warranties
contained in Subsections 11.1(a) and 11.1(b), MONSANTO'S total liability for any
and all losses and damages arising out of any cause (whether such cause be based
in contract, negligence, other tort or otherwise, except for causes of action
based on MONSANTO'S fraudulent conduct) shall in no event exceed the net revenue
obtained by MONSANTO under this Agreement to the date of award of such damages,
reduced by an amount equal to any amounts paid by MONSANTO to CALGENE under
Subsections 12.3(a) and 12.3(b) hereof. CALGENE shall take the measures
required by this Section 12 to mitigate patent infringement damages.
SECTION 13 -- CLAIMS BY VENDEES FOR
-----------------------------------
FAILURE OF GENE PERFORMANCE
---------------------------
13.1 INDEMNITIES FOR VENDEE CLAIMS:
-----------------------------
(a) If MONSANTO authorizes COMMERCIAL SALE by CALGENE of LICENSED
COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE in THE TERRITORY,
then notwithstanding any other provisions of this Agreement, but subject to the
conditions and limitations of this Subsection 13.1 and Subsection 13.2, MONSANTO
and CALGENE shall each indemnify the other, so that each shall share on the pro
rata basis set forth in Subsection 13.1(b), for the costs of any claims
(including reasonable costs of defense) by cotton farmers who purchase LICENSED
COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE and of
distributors against whom such farmers may make claims arising from (1) any
alleged breach of an express warranty relating to failure of performance of the
INSECT RESISTANCE TRAIT and (2) any alleged breach of implied warranties of
merchantability or fitness for a particular purpose relating to failure of
performance of the INSECT RESISTANCE TRAIT when disclaimers of such express or
<PAGE>
implied warranties set forth on the packaging containing the subject LICENSED
COMMERCIAL SEED and the invoices pertaining thereto are not effective to prevent
such claims being asserted and won by such farmers. It is understood and agreed
that MONSANTO shall be free to give any performance warranty that it wishes.
Provided, however, that before there is an obligation by CALGENE to indemnify
MONSANTO by sharing in the costs of such claims on said pro rata basis, the
parties must have reached a written agreement on the content, scope, limitation
and necessary conditions of any express performance warranty given by MONSANTO,
claims for the breach of which would be subject to this indemnification.
MONSANTO and CALGENE shall each act in good faith to reach agreement on
appropriate express performance warranties by the DATE OF APPROVAL FOR
COMMERCIAL SALE. If MONSANTO and CALGENE have not reached agreement on the
content, scope, limitation or necessary conditions of such express performance
warranties by the DATE OF APPROVAL FOR COMMERCIAL SALE, MONSANTO shall designate
the content, scope, limitation and necessary conditions for express performance
warranties which would be subject to this indemnification. Such express
warranties shall be made solely by MONSANTO.
(b) The costs of claims covered under Subsection 13.1(a) shall be
prorated between the parties on the basis of MONSANTO'S and CALGENE'S respective
share of the NET LICENSE REVENUE obtained from licensing cotton farmers the use
of the LICENSED COMMERCIAL SEED. In the event that any claim is settled in
whole or in part by furnishing replacement seed, the cost of settlement shall be
based upon the full costs of such seed per UNIT determined in accordance with
generally accepted accounting principles.
(c) In the event that a claim is asserted against CALGENE covered by
Subsection 13.1(a), CALGENE shall give prompt notice to MONSANTO and MONSANTO
shall have the right, at its election, to take over the defense or settlement of
such claim by giving notice to CALGENE. CALGENE shall have the right to
participate at its own expense. The parties shall cooperate fully in defending
any such claim.
(d) In the event that information comes to the attention of either
MONSANTO or CALGENE that a change in conditions has occurred which reasonably
necessitates a modification of performance warranty(ies) previously approved or
designated by MONSANTO, as provided in Subsection 13.1(a), the party having such
information shall notify the other party within sixty (60) days after receipt of
such information and MONSANTO and CALGENE shall each act in good faith to reach
agreement upon appropriate modification(s) of such performance warranty(ies).
If, within thirty (30) days after written notice requesting modification(s) in
the performance warranty(ies) is
<PAGE>
given, the parties have not agreed upon the necessity for or the form of such
modification(s), MONSANTO shall determine whether changed circumstances
necessitate modification(s) of the performance warranty(ies) and, if so, shall
designate the appropriate modification(s).
(e) In the event information which has been reasonably verified comes
to either MONSANTO'S or CALGENE'S attention any time after the approval or
designation of the express performance warranty(ies) which at the time of its
receipt and verification would be reasonably convincing to an expert in the
relevant field that the express performance warranty(ies) should be modified,
and the party with such information does not notify the other party of such
information within sixty (60) days thereafter, then the party withholding such
information shall be solely liable for the costs of all such claims arising from
the alleged breach of such express performance warranty(ies) in connection with
sales occurring between (1) the date on which CALGENE in the exercise of
reasonable commercial diligence could have disseminated effective legally-
binding modification(s) of such express performance warranty(ies) had such
information been known to it and (2) the date on which CALGENE does, or in the
exercise of reasonable commercial diligence could, disseminate effective
legally-binding modification(s) of such performance warranty(ies), and the party
withholding such information shall indemnify and hold the other party harmless
from and against any and all damages or other liabilities arising from such
claims and for any extra expenses arising from its delay in notifying the other
party of such information.
13.2 CALGENE'S INDEMNITY FOR VENDEES CLAIMS:
---------------------------------------
(A) NOTWITHSTANDING THE PROVISIONS OF SUBSECTION 13.1, CALGENE SHALL
DEFEND AND INDEMNIFY AGAINST, AND HOLD MONSANTO AND THEIR RESPECTIVE EMPLOYEES,
DIRECTORS, OFFICERS AND AGENTS HARMLESS FROM, ANY LOSS, COST, LIABILITY OR
EXPENSE (INCLUDING COURT COSTS AND REASONABLE FEES OF ATTORNEYS AND OTHER
PROFESSIONALS) INCURRED FROM ANY CLAIM BY COTTON FARMERS WHO PURCHASE LICENSED
COMMERCIAL SEED, AND OF DISTRIBUTORS AGAINST WHOM SUCH FARMERS MAY MAKE CLAIMS,
ARISING OR ALLEGED TO ARISE OUT OF THE FAILURE PLANTS GROWN FROM LICENSED
COMMERCIAL SEED OF CALGENE B.T. CULTIVARS SOLD BY CALGENE TO EXHIBIT INSECT
RESISTANCE, IF SUCH LICENSED COMMERCIAL SEED DOES NOT CONTAIN A LEPIDOPTERAN-
ACTIVE MONSANTO GENE, OR SUCH LICENSED COMMERCIAL SEED AT THE TIME IT WAS
SHIPPED BY CALGENE, FAILS TO MEET THE HOMOZYGOSITY STANDARD FOR THE RESPECTIVE
LEPIDOPTERAN-ACTIVE MONSANTO GENE, AS THE CASE MAY BE, AS
<PAGE>
SET FORTH IN SUBSECTION 11.2. PROVIDED, HOWEVER, THAT: (I)CALGENE SHALL HAVE
SOLE CONTROL OF SUCH DEFENSE, AND (II) MONSANTO SHALL PROVIDE NOTICE TO CALGENE
OF ANY SUCH CLAIM WITHIN TWENTY (20) DAYS AFTER MONSANTO BECOMES AWARE OF IT.
(b) In order for a claim to come within the coverage of Subsection
13.2(a) if such LICENSED COMMERCIAL SEED contains a LEPIDOPTERAN-ACTIVE MONSANTO
GENE, MONSANTO must show based on tests of lot samples from which the subject
LICENSED COMMERCIAL SEED was drawn, that the subject lot samples did not meet
the homozygosity standards of Exhibit D. If CALGENE does not have the correct
lot samples in its possession for analysis, then the tests shall be done on the
plants or plant material alleged to have been produced from the subject LICENSED
COMMERCIAL SEED and coverage of such claim under Subsection 13.2(a) based solely
thereon.
SECTION 14 -- GOVERNMENT ACTION
-------------------------------
14.1 INDEMNITY FOR LOSSES DUE TO GOVERNMENT ACTION:
---------------------------------------------
Except under circumstances to which Section 12 applies, if, subsequent
to the DATE OF GOVERNMENTAL APPROVAL, any federal or state court or government
agency cancels a registration or otherwise takes some action which precludes the
sale of LICENSED COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE
for planting seed, MONSANTO and CALGENE shall jointly try to obtain approval
from such court or agency in order to sell the existing inventory of LICENSED
COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE for planting
seed. To the extent that, after commercially reasonable efforts to obtain such
approvals, and after the exercise of commercially reasonable efforts to mitigate
the losses by sale of such inventory for non-seed purposes in THE TERRITORY
and/or permitted sales for planting purposes outside THE TERRITORY on account of
such government action, any portion of existing inventories of LICENSED
COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE cannot be sold
for planting seed in THE TERRITORY, then MONSANTO shall reimburse CALGENE for
one-half (1/2) of its variable costs to produce the inventory of LICENSED
COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE not sold as
planting seed in THE TERRITORY on account of such government action, less one-
half (1/2) of any amounts received, if any, by CALGENE from the sale of such
inventory for non-seed purposes in THE TERRITORY and/or permitted sales for
planting purposes outside THE TERRITORY. The elements of variable costs of
<PAGE>
inventory reimbursable hereunder are to be determined using generally acceptable
accounting practices reasonably acceptable to MONSANTO. CALGENE shall deliver
to MONSANTO an invoice for such costs. Payment of such costs shall be due on
the earlier of ninety (90) days after delivery of such invoice, or on September
1 following the delivery of such invoice. Provided, however, that if as of
September 1 following the date on which the above-described court or agency
orders were issued, CALGENE has not completely disposed of the inventory of such
LICENSED COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE not used
as planting seed in THE TERRITORY on account of such government action
(including such seed returned by distributors), MONSANTO shall on that date,
after receipt of an accounting for such inventory on hand, pay CALGENE one-half
(1/2) of the variable costs of such inventory then on hand, plus the net amounts
due to CALGENE for such LICENSED COMMERCIAL SEED containing a LEPIDOPTERAN-
ACTIVE MONSANTO GENE previously disposed of under the terms of this Subsection
14.1. Provided, further, that upon such payment, CALGENE shall continue to
attempt to lawfully dispose of the re maining inventory of such LICENSED
COMMERCIAL SEED containing a LEPIDOPTERAN-ACTIVE MONSANTO GENE using all
commercially reasonable efforts suggested by MONSANTO, with MONSANTO receiving
one-half of the net proceeds after deduction of the direct costs of disposition.
SECTION 15 -- GENERAL
15.1 ASSIGNMENT OF CALGENE'S RIGHTS AND OBLIGATIONS: The rights and
----------------------------------------------
obligations under this Agreement pertaining to CALGENE are personal to CALGENE
and CALGENE shall not (by operation of law or otherwise) assign, mortgage,
pledge as security, or license any of its rights hereunder, nor shall CALGENE
subcontract or delegate (other than in the ordinary course of business) any of
its obligations hereunder (except as otherwise provided in this Agreement),
except with the prior written consent of MONSANTO.
15.2 ASSIGNMENT OF MONSANTO'S RIGHTS AND OBLIGATIONS: The rights and
-----------------------------------------------
obligations under this Agreement pertaining to MONSANTO are personal to MONSANTO
and MONSANTO shall not (by operation of law or otherwise) assign, mortgage, or
pledge as security any of its rights hereunder, nor shall MONSANTO subcontract
or otherwise delegate (other than in the ordinary course of business) any of its
obligations hereunder (except as otherwise provided in
<PAGE>
this Agreement), except with the prior written consent of CALGENE. Provided,
however, that MONSANTO may assign this Agreement and the rights and obligations
thereunder to another acquiring all or substantially all of the assets related
to research and development in the field of cotton of MONSANTO'S Ceregen
Business Unit, or such other business unit of MONSANTO as may then be
responsible for compliance with this Agreement. Provided, further, that such
assignee has a net worth of not less than $50,000,000 and that the assignee
shall agree to be bound by the provisions hereof. However, the aforementioned
requirement of a net worth of not less than $50,000,000 shall not apply to an
assignee which is a SUBSIDIARY of MONSANTO.
15.3 RELATION OF PARTIES: Nothing in this Agreement shall create, or be
-------------------
deemed to create, a partnership, or the relationship of principal and agent
among the parties.
15.4 INTEGRATION OF CONTRACT: This Agreement constitutes the full
-----------------------
understanding of the parties, a complete allocation of risks between them and a
complete and exclusive statement of the terms and conditions of their agreement
relating to the subject matter hereof. All prior agreements, negotiations,
dealings and understandings, whether oral or written, regarding the subject
matter hereof are hereby superseded and merged into this Agreement.
15.5 WAIVERS AND AMENDMENTS: This Agreement may be amended, superseded,
----------------------
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by all the parties, or, in the case of a waiver, by
the party or parties waiving compliance. Except where a specific period for
action or inaction is provided herein, no delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any
subsequent or other such right, power or privilege. Except as otherwise
provided herein, no conditions, usage of trade, course of dealing or
performance, understanding or agreement purporting to modify, vary, explain or
supplement the terms or conditions of this Agreement shall be binding unless
hereafter made in writing and signed by the party to be bound, or by a written
amendment hereof executed by all parties, and no modification shall be effected
by the acknowledgement or acceptance of any forms or other documents containing
terms or conditions at variance with or in addition to those set forth in this
Agreement.
<PAGE>
15.6 HEADINGS: Section and Subsection headings as to the contents of
--------
particular Sections and Subsections 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 Section or Subsection to which they refer.
15.7 REFERENCES TO SECTIONS, SUBSECTIONS AND EXHIBITS: Unless otherwise
------------------------------------------------
expressly stated, all Sections and Subsections referred to herein are Sections
and Subsections of this Agreement, and all Exhibits referred to herein are
Exhibits attached hereto.
15.8 PARTIAL INVALIDITY: If any provision of this Agreement is held by any
------------------
competent authority to be invalid or unenforceable in whole or in part, this
Agreement shall continue to be valid as to the other provisions thereof and the
remainder of the affected provision.
15.9 GOVERNING CONTRACT LAW: THIS AGREEMENT SHALL, EXCEPT AS PROVIDED IN
----------------------
SUBSECTION 15.10, BE GOVERNED AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH
THE LAWS OF THE STATE OF MISSOURI (OTHER THAN ITS RULES OF CONFLICTS OF LAW).
15.10 GOVERNING PATENT LAW: Any question arising out of this Agreement as
--------------------
to the validity, construction or effect of any patent shall be decided in
accordance with Title 35 United States Code.
15.11 MONSANTO'S REDUCTION OR ABANDONMENT OF ITS LEPIDOPTERAN RESISTANT
-----------------------------------------------------------------
COTTON PROGRAM: MONSANTO shall give written notice to CALGENE of any
- - --------------
substantial reduction or abandonment of MONSANTO'S present intention to continue
to develop technology which provides genetically modified cotton plants
exhibiting resistance to LEPIDOPTERAN INSECTS, as described in Subsection 1.1,
which notice shall be given not later than thirty (30) days after MONSANTO has
decided to substantially reduce or abandon such intention.
15.12 NOTICES: Any notice or other information required or authorized by
-------
this Agreement to be given by any party to the others shall be given in writing
and shall be deemed sufficiently
<PAGE>
given when delivered by hand, or transmitted by express mail or overnight
courier service, or transmitted by facsimile or other means of electronic data
transmission, confirmed by express mail or overnight courier service, to the
following addresses of the other parties or such other address(es) as is (are)
notified to the parties by the one (1) or more of the other parties from time to
time.
If to CALGENE: Calgene, Inc.
1920 Fifth Street
Davis, California 95616
Attention: Mr. Roger Salquist
President
If to MONSANTO: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Mr. James J. Tobin
Business Director, Cotton
Ceregen SBU
15.13 CHANGE OF CONTROL OF CALGENE: Upon the acquisition of either (1)
----------------------------
substantially all the assets of CALGENE'S cotton seed business or (2) control of
CALGENE, by any person, partnership, corporation or legal entity which then has
either (a) a net worth of Two Hundred Fifty Million Dollars ($250,000,000) or
more determined by generally accepted accounting principles consistently applied
or (b) a net worth of less than Two Hundred Fifty Million Dollars ($250,000,000)
but which has had annual research expenditures in the field of biotechnology in
excess of Ten Million Dollars ($10,000,000) for each of the three (3) years
immediately preceding such acquisition, or by an affiliate(s) of such a person,
partnership, corporation or legal entity, the following provisions of this
Agreement will have no further effect:
(a) Subsection 11.1(b) pertaining to a warranty by MONSANTO
concerning third-party patents in the United States.
(b) Provisions of the second (2nd), fourth (4th), and fifth (5th)
sentences of Subsection 12.1, and Subsections 12.3(a) and 12.3(b), pertaining to
reimbursement of inventory costs and LOST PROFIT CONTRIBUTION in the event of
cessation or restriction of sales due to patent infringement.
<PAGE>
(c) Subsection 13.1 pertaining to claims by farmers and distributors
for failure of LEPIDOPTERAN-ACTIVE MONSANTO GENE performance. However, all
parties shall have a continuing obligation to inform the other parties of
conditions, which reasonably necessitate a modification in performance
warranty(ies) to vendees of the LICENSED COMMERCIAL SEED.
15.14 DISPUTE RESOLUTION:
------------------
(a) Any claim, dispute, difference or controversy between the parties
not relating to issues involving patent rights arising out of, or relating to,
this Agreement which cannot be settled by mutual understanding between the
parties (a "Dispute") shall be submitted within thirty (30) days of such Dispute
to a panel consisting of a senior executive nominated by each party (the
"Panel"). Such Panel shall meet and use reasonable efforts to resolve said
Dispute.
(b) If the Dispute cannot be resolved within thirty (30) days of
submission to the Panel, then any party may invoke the following arbitration
rights:
(1) The Dispute shall be referred to arbitration under the rules
of the American Arbitration Association (AAA) to the extent
that such rules are not inconsistent with the provisions of
this Subsection 15.14. Judgment upon the award of the
arbitrators may be entered in any court having jurisdiction
thereof or application may be made to such court for a
judicial confirmation of the award and an order of
enforcement, as the case may be. The demand for arbitration
shall be made within a reasonable time after the Dispute in
question has arisen and, in any event, shall not be made
after the date when institution of legal or equitable
proceedings, based on such Dispute in question, would be
barred by the applicable statute of limitations;
(2) The independent arbitration panel shall consist of three (3)
independent arbitrators, one (1) of whom shall be appointed
by each party involved in the Dispute. In the event that
one (1) party does not designate an arbitrator, the other
party may request the Executive Secretary of the AAA to
designate an arbitrator for such party. The two (2)
arbitrators thus appointed shall choose the third arbitrator
so that the arbitration panel shall consist of three (3)
arbitrators; provided, however, that, if the arbitrators
selected by the
<PAGE>
parties involved in the Dispute are unable to agree on the
appointment of the additional arbitrator, any of the
selected arbitrators may petition the Executive Secretary of
the AAA to make the appointment of such additional
arbitrators; and
(3) The place of arbitration shall be Memphis, Tennessee.
(c) Pending resolution of any Dispute, each party involved in the
dispute shall make every reasonable effort to minimize adverse economic
consequences to the parties under this Agreement which would result from any
delays caused by attempts to resolve the Dispute. Such reasonable effort shall
include, without limitation, continued performance of relevant obligations under
a reservation of rights in lieu of termination and nonperformance, and nothing
contained in this Subsection 15.14 shall serve to preclude any party from its
right to seek any other remedy at law.
15.15 MODIFICATION OF RELATED AGREEMENTS: The RELATED AGREEMENTS are
----------------------------------
hereby amended as follows:
(a) The definition of "Licensed Field" in the AGROBACTERIUM
TRANSFORMATION LICENSE AGREEMENT, CAMV35S PROMOTER LICENSE AGREEMENT, and the
ENHANCED CAMV35S PROMOTER LICENSE AGREEMENT are each amended to read:
"Licensed Field" shall mean all fields of use except for (i) oil
modification in soybeans, (ii) use in Antibiotic Maker Genes in any
plant, and (iii) insect resistance using B.t. gene(s) in any plant.
(b) The definition of "Licensed Field" in the ANTIBIOTIC MARKER GENE
LICENSE AGREEMENT is amended to read:
"Licensed Field" shall mean all fields of use except for (i) oil
modification in soybeans, and (ii) insect resistance using B.t.
gene(s) in any plant.
15.16 RESTORATION OF RELATED AGREEMENTS: If this Agreement is superseded
---------------------------------
by another license agreement pursuant to the provisions of Subsection 10.7, the
RELATED AGREEMENTS shall be further amended to reverse the amendments of
Subsection 15.15.
<PAGE>
15.17 FUTURE CHANGES IN MONSANTO'S LICENSING PROGRAM: CALGENE agrees that
----------------------------------------------
this Agreement shall be promptly amended to reflect any changes in MONSANTO'S
licensing program as indicated by differences between this Agreement and the
licenses that MONSANTO may have with other licensees of MONSANTO'S insect
resistant cotton technology to which this Agreement pertains; provided however
that, CALGENE'S obligation shall not apply to changes which first existed after
December 31, 1996.
<PAGE>
15.18 INCORPORATION OF EXHIBITS: Exhibits A-D, inclusive, are
-------------------------
incorporated herein and made a part hereto.
IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
representatives of the parties herein.
MONSANTO COMPANY CALGENE, INC.
By: /s/ Hendrik A. Verfaillie By: /s/ Michael J. Motroni
------------------------- -------------------------
Title: EVP Title: Vice President
<PAGE>
EXHIBIT A
---------
LICENSED PATENT RIGHTS
----------------------
U. S. Patent 5,352,605 which issued on October 4, 1994
from U.S.S.N. 08/146,621, filed October 28, 1993
U. S. Patent Application Serial No. 08/300,029, filed September 2, 1994
which is a DIV of U.S.S.N. 08/146,621, filed October 28, 1993
which is a CON of U.S.S.N. 07/625,637, filed December 7, 1990
which is a CON of U.S.S.N. 06/931,492, filed November 17, 1986
which is a CIP of U.S.S.N. 06/485,568, filed April 15, 1983
which is a CIP of U.S.S.N. 06/458,414, filed January 17, 1983
U. S. Patent 5,164,316 which issued on November 17, 1992
from U.S.S.N. 07/395,155, filed August 17, 1989
U. S. Patent 5,196,525 which issued on March 23, 1993
from U.S.S.N. 07/682,049, filed April 8, 1991
U. S. Patent 5,322,938 which issued on June 21, 1994
from U.S.S.N. 07/977,600, filed November 17, 1992
U. S. Patent 5,359,142 which issued on October 25, 1994
from U.S.S.N. 08/209,752, filed March 9, 1994
U. S. Patent 5,424,200 which issued on June 13, 1995
from U.S.S.N. 08/272,900, filed July 11, 1994
U.S. Patent 5,378,619 which issued on January 3, 1995
from U.S.S.N. 08/172,334, filed December 22, 1993
U.S. Patent Application Serial No. 08/366,240, filed December 27, 1994
which is a CON of U.S.S.N. 08/172,334, filed December 22, 1993
which is a CON of U.S.S.N. 07/429,917, filed October 31, 1989
U.S. Patent Application Serial No. 06/783,336-(1/17/83 U.S.
priority) "Plasmids for Transforming Plant Cells"
U.S. Patent Application Serial No. 06/793,486-(1/17/83 U.S.
priority) "Genetically Transformed Plants"
U.S. Patent Application Serial No. 07/732,974-(1/17/83 U.S.
priority) "Chimeric Genes Suitable for Expression in
Plant Cells"
<PAGE>
EXHIBIT A
---------
LICENSED PATENT RIGHTS
----------------------
U.S. Patent Application Serial No. 06/917,925-(12/10/84 U.S.
priority) "Incomplete B.t. Protoxin Gene"
U. S. Patent Application Serial No. 07/959,506, filed October 9, 1992
which is a CON of U.S.S.N. 07/476,661, filed February 12,1990
which is a CIP of U.S.S.N. 07/315,355, filed February 24, 1989
U. S. Patent Application Serial No. 08/434,105, filed May 3, 1995
which is a CON of U.S.S.N. 07/959,506, filed October 9, 1992
which is a CON of U.S.S.N. 07/476,661, filed February 12,1990
which is a CIP of U.S.S.N. 07/315,355, filed February 24, 1989
U. S. Patent Application Serial No. 08/433,111, filed May 3, 1995
which is a CON of U.S.S.N. 07/959,506, filed October 9, 1992
which is a CON of U.S.S.N. 07/476,661, filed February 12,1990
which is a CIP of U.S.S.N. 07/315,355, filed February 24, 1989
Ecogen Inc.
U.S. Patent 5,073,632 issued December 17, 1991
U.S.S.N. 07/630,379 filed December 18, 1990
"CryIIA Toxin Gene"
Agracetus, Inc.
U.S. Patent 5,004,863 issued April 2, 1991
U.S. Patent 5,159,135 issued October 27, 1992
"Genetic Engineering of Cotton Plants and Lines"
<PAGE>
EXHIBIT B
---------
BOLLGARD" GENE TRADEMARK LICENSE AGREEMENT
------------------------------------------
This Agreement, made as of the day of , 199____, by and between
Monsanto Company, a corporation organized and existing under the laws of the
State of Delaware, having its principal place of business at 800 North Lindbergh
Boulevard, St. Louis, Missouri 63167 (hereinafter referred to as "MONSANTO"),
and Calgene, Inc., a corporation organized and existing under the laws of the
State of Delaware, having its principal place of business at 1920 Fifth Street,
Davis, California 95616 (hereinafter referred to as "LICENSEE")
WITNESSETH:
WHEREAS, MONSANTO is the owner of the trademark, which is the subject of U.S.
trademark application no. for BOLLGARD" Genes (hereinafter referred to
as the "BOLLGARD Trademark"); and
WHEREAS, LICENSEE desires to obtain a license to use the BOLLGARD Trademark in
connection with the sale of transgenic cotton seed containing insect resistance
genes licensed by MONSANTO pursuant to the LICENSE AGREEMENT;
NOW, THEREFORE, in consideration of the mutual undertakings and obligations
herein obtained, the parties agree as follows:
1. MONSANTO hereby grants to LICENSEE, subject to all of the terms and
conditions herein contained, a non-exclusive, royalty-free license to use the
BOLLGARD Trademark on or in relation to cotton seed which contains insect
resistance genes and which has been produced pursuant to the LICENSE AGREEMENT
(hereinafter referred to as "Goods"). This license shall be assignable to a
third party only in the manner specified in Subsection 15.1 of the LICENSE
AGREEMENT and only as part and parcel of an assignment of the LICENSE AGREEMENT.
2. LICENSEE agrees that it will use the BOLLGARD Trademark on all Goods,
but only on Goods which meet the criteria for "COMMERCIAL INSECT RESISTANCE" as
defined in the LICENSE AGREEMENT.
3. MONSANTO shall have the right at all reasonable times to inspect and
examine the methods, processes and containers used by LICENSEE in bagging,
treating and storing the Goods on which the LICENSEE uses the BOLLGARD Trademark
and to request samples of such Goods and containers. LICENSEE agrees to permit
such inspections and examinations and to furnish such samples. Such inspection
and examination shall be for the sole purpose of confirming that the quality of
the Goods meets the standards set forth in writing by MONSANTO and shall not be
used for any competitive purpose whatsoever.
4. LICENSEE shall have the right to use the BOLLGARD Trademark in
advertising and promotional literature and the like, as well as on labels,
packaging, containers and the like, for the Goods. LICENSEE agrees that each
such use of the BOLLGARD Trademark shall be in accordance with the provisions of
Section 3.8 of the LICENSE AGREEMENT and agrees that the BOLLGARD Trademark
shall be keyed by an asterisk to a footnote reading "Trademark of, and used
under license from, Monsanto Company". After the BOLLGARD Trademark has been
registered,
<PAGE>
MONSANTO will notify the LICENSEE of the registration and thereafter LICENSEE
shall change the asterisk to the (R) symbol which shall be keyed to the footnote
"Registered trademark of, and used under license from, Monsanto Company".
LICENSEE further agrees to submit to MONSANTO representative samples of labels,
packaging, containers, advertising, promotional materials and other materials to
which the BOLLGARD Trademark is applied.
5. LICENSEE acknowledges MONSANTO'S exclusive ownership of all right,
title and interest in and to the BOLLGARD Trademark and agrees that LICENSEE's
use of the BOLLGARD Trademark shall inure to the benefit of MONSANTO. LICENSEE
further agrees that it will in no way dispute, impugn or attack the validity of
said BOLLGARD Trademark or MONSANTO'S rights thereto.
6. The term of this Agreement shall be coextensive with the term of the
LICENSE AGREEMENT unless sooner terminated in accordance with the terms of
Section 7 hereof.
7. If at any time, LICENSEE should use the BOLLGARD Trademark for Goods
not produced in accordance with the terms of the LICENSE AGREEMENT, or if at any
time LICENSEE breaches any other provision of this Agreement or fails to observe
any of its obligations hereunder the license granted herein shall be terminable
upon written notice from MONSANTO to that effect. Provided, however, that
LICENSEE shall have ninety (90) days from the receipt of such notice to cure any
breach or default.
8. LICENSEE agrees to notify MONSANTO promptly of any apparent
infringement of the BOLLGARD Trademark. MONSANTO will take such action
regarding such infringement as it deems, in its sole discretion, to be necessary
or desirable, and LICENSEE agrees to cooperate therein.
9. MONSANTO agrees to indemnify and hold LICENSEE harmless from and
against all claims, suits, damages and costs arising out of a claim of trademark
infringement or unfair competition on account of LICENSEE's use of the BOLLGARD
Trademark. Provided, however, that LICENSEE shall promptly notify MONSANTO of
such claim or suit and shall reasonably cooperate with MONSANTO in the defense
thereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate by their duly authorized representatives as of the date first set
forth above.
MONSANTO COMPANY
WITNESS
By
Title
DELTA AND PINE LAND COMPANY
WITNESS
By
Title
<PAGE>
EXHIBIT C
---------
INTERFERENCES AND POTENTIAL INTERFERENCE
----------------------------------------
Interference No. 102,200
Watrud et al. v. Adang
Watrud et al. - U.S.S.N. 06/917,925
Adang - U.S.S.N. 06/617,321
Interference No. 102,890: "Chimeric Genes for Transforming Plant Cells
Using Viral Promoters"
Fraley et al. v. Comai et al.
Fraley et al. - U.S.S.N. 07/625,637
Comai et al. - U.S.S.N. 07/373,795
Decided: In favor of Party Fraley et al. (Monsanto Company)
Interference No. 102,924: "Genetically Transformed Plants"
Schilperoort et al. v. Rogers at al. v. Barton et al. v. Zambryski et al.
Schilperoort et al. - U.S. Patent No. 4,940,838
Rogers et al. - U.S.S.N 06/793,486
Barton et al. - U.S.S.N. 07/155,092
Zambryski et al. - U.S.S.N 07/196,763
Interference No. 102,925: "Plasmids for transforming Plant Cells"
Fraley et al. v. Zambryski et al. v. Anderson et al.
Fraley et al. - U.S.S.N 06/783,336
Zambryski et al. - U.S.S.N 07/196,763
Anderson - U.S.S.N. 06/910,470
Interference No. 102,926: "Plasmids for transforming Plant Cells"
Fraley et al. v. Zambryski et al.
Fraley et al. - U.S.S.N 06/783,336
Zambryski et al. - U.S.S.N 07/196,763
Interference No. 103,324: "Insect Resistant Plants"
Fischhoff et al. v. Adang et al.
Fischhoff et al. - U.S.S.N. 07/813,250
Adang et al. - U.S.S.N. 07/713,624
U.S. Patent No. 5,380,831 issued January 10, 1995
<PAGE>
EXHIBIT D
---------
HOMOZYGOSITY STANDARD
---------------------
GENERAL
- - -------
* This protocol primarily addresses outcrossing which is one potential source
of negatives. Additional sources for negatives include mishandling of seed and
misclassification by ELISA. Separate protocols will need to be developed to
address these areas.
* When non-transgenic borders are required, keep them spatially separated
from the transgenic breeding material. Always use a 4 row or 15' transgenic
border of a variety with the same gene/insert around nurseries.
* Regularly spray the breeding nurseries and seed production fields with an
insecticide to control pollinating insects using weekly applications of Sevin
during flowering.
* Harvest leaf samples at appropriate stage to ensure high quality material
for the ELISA. Ideally, leaf samples should be pulled within 6 weeks after
planting.
* Confirm purity for each generation on both seed and leaf tissue.
* Cotton should be grown in fields with a minimal possibility for volunteer
cotton from the previous cropping season.
* Outer eight rows of a production field should not be harvested for seed.
Additionally, the first 30 feet on the ends should be excluded from the seed
harvest if the bordering cotton is non-transgenic or is a different line.
SPECIFIC GUIDELINES
F1 and F2 generation
- - --------------------
* Whenever possible, both the F1 and F2 plants are grown in the greenhouse to
eliminate the possibility of outcrossing.
* If F1 and/or F2 plants are grown in the field, the seed harvested from
those plants must be from hand-selfed flowers.
* Leaf samples of F1 and F2 plants will be tested with ELISA for the presence
of the gene. All negative plants will be rogued to eliminate the possibility of
outcrossing.
<PAGE>
F3 generation
- - -------------
* Ideally, progeny tests will be done on F2 plants prior to planting to
-----------------
determine which F2 plants are homozygous for the gene(s) of interest. F3 seed
from only homozygous F2 plants would then be planted in progeny rows in the
field. Homozygosity is determined by testing 40 to 50 progeny per plant.
* Progeny rows from homozygous F2 plants of the same transgenic gene/insert
are grouped together. A border of the same transgenic line, as described above,
must separate these progeny rows from other transgenic lines.
* ELISA analyses must be completed prior to flowering. Rows which are
negative or segregating must be rogued prior to pollination to prevent
outcrossing. Negative or segregating rows can be eliminated with herbicides or
hand hoeing.
* Progeny rows should be harvested and maintained separately.
F4 generation
- - -------------
* Confirm results on the F4 seed with ELISA analyses on 400 seed. Advance
only those lines with no negative seed. This provides 95% confidence that the
actual level of negatives is less than 1%.
* Progeny rows must be planted as separate blocks in the F4 generation
(typically grown in the winter nursery).
* Analyze 400 leaf samples from the progeny row blocks to confirm purity.
Rogue any that do not have 100% expressing plants.
* Harvest of progeny row blocks is similar to F3 harvest described above.
The outer 4 rows should be discarded if the cotton bordering the progeny row
block is not a pure source of the same transgenic line.
* Bulking across progeny rows done only after confirming transgenic purity of
F5 seed.
<PAGE>
F5 generation
- - -------------
* Confirm seed purity by testing 1000 seed/family. Only families with purity
greater than 99% can be bulked for seed production. This provides 95% confidence
that the actual purity is greater than 98%.
* Plant pure lots in seed production fields.
* Analyze 1000 leaf samples per lot to confirm purity.
* Do not include outer eight border rows and 30' of ends in seed harvest if
not bordered with same transgenic line.
* Analyze 4000 seed samples per lot to confirm purity. Do not advance or
sell if less than ninety eight percent (98%) pure.
<PAGE>
Exhibit 10.13
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 16th day of October, 1995 by and between
Jeffrey D. Gargiulo ("Executive") and Gargiulo, L.P., a Delaware limited
partnership (the "Partnership") and sometimes referred to herein as the Employer
(the "Employer").
Preliminary Statement
---------------------
NTGargiulo, Inc., a Florida corporation ("NTG") and the Partnership, among
others, entered into an Asset Contribution Agreement dated December 23, 1992
(the "Asset Contribution Agreement"), pursuant to which NTG contributed
substantially all of its assets to the Partnership and the Partnership has
assumed substantially all of the liabilities of NTG. Gargiulo G.P., Inc.
(formerly "N.T. Gargiulo G.P., Inc."), a Delaware corporation (the "Company"),
is the managing general partner of the Partnership. For a period of continuous
years until December 23, 1992, the Executive had been employed as an executive
officer of NTG, which together with its affiliates, were at various times
engaged in the operation of packing houses and farms, in the marketing of fresh
fruits and vegetables, and in the provision of management services to others in
connection with those activities.
In connection with the contribution of assets to the Partnership, the
parties entered into the Employment Agreement dated as of December 23, 1992
("Original Employment Agreement") pursuant to which the Executive continued to
render services as an executive employee of the Employer and covenanted not to
compete with the Employer. Executive, Employer, Tomato Investment Associates,
Inc. ("MCO"), Monsanto Company ("Monsanto") and certain
1
<PAGE>
other parties also entered into a Restructuring Agreement ("Restructuring
Agreement") and the parties hereto entered into an Amended and Restated
Employment Agreement dated as of July 29, 1994 as contemplated by such
Restructuring Agreement. Also, concurrently therewith, the parties to the
Agreement entered into the Option and Retained Interests Agreement (the "Option
Agreement") pursuant to which MCO was granted, among other things, an option to
purchase certain additional interests in the Partnership (the term "Option" is
used herein as defined in such Option and Retained Interests Agreement). It is
anticipated that (a) MCO will purchase all remaining Partnership interests it
does not currently hold (the "Additional Interest Acquisition"), (b) Monsanto
will contribute to a new corporation ("Holding Company") to be formed by
Monsanto and Calgene, Inc., a Delaware corporation ("Calgene"), all of the
capital stock of MCO in exchange for shares of Holding Company (the "Exchange"),
whereupon MCO will become a wholly owned subsidiary of Holding Company, (c)
simultaneously with the Exchange, a subsidiary of Holding Company will merge
with Calgene, whereupon Calgene will also become a wholly owned subsidiary of
Holding Company, and (d) immediately after the Exchange, the Company will
dissolve and liquidate and distribute all of its assets to MCO, as its sole
stockholder, whereupon the Partnership will be dissolved and all of its assets
and liabilities will be vested in MCO (the "Liquidation" and, collectively with
the Additional Interest Acquisition and the Exchange, the "Partnership
Reorganization Transactions"). However, this Agreement shall become effective
whether or not the Partnership Reorganization Transactions are consummated.
This Second Amended and Restated Employment Agreement amends, restates and
supersedes the Original Employment Agreement and the Amended and Restated
Employment Agreement in their entirety. The Effective Date of the Second
Amended and Restated Employment Agreement shall be July 1, 1995.
2
<PAGE>
NOW THEREFORE, in consideration of the mutual promises herein contained,
and for other good and valuable consideration, the receipt and adequacy of which
are conclusively acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. The Employer shall continue to employ the Executive as Chief Executive
Officer of the Partnership. It is understood and the Partnership agrees that
during the Employment Term (as hereinafter defined) the Executive shall also
serve, without additional compensation therefor, as the President and Chief
Executive Officer of the Company and, if and when elected, as an officer or
director of any subsidiary, division or other affiliates of the Employer,
provided that, as determined by the Company's Board of Directors, a portion of
the Executive's compensation under this Agreement may be allocated and charged
to the Company for services provided to it by the Executive. Notwithstanding
the foregoing, if the Partnership Reorganization Transactions are consummated,
then (a) Executive shall become the Chief Executive Officer of MCO, (b) MCO
shall assume all of the obligations of the Partnership hereunder, (c) MCO shall
thereafter be deemed the "Employer" hereunder, and (d) this Agreement shall
otherwise remain in full force and effect. Nothing in this provision shall
require the Executive, without his written consent, to assume significant
management duties with Holding Company or any Holding Company affiliate which is
unrelated to MCO and its subsidiaries. The Executive accepts such employment
and agrees to perform diligently, on a full-time basis, and to the best of his
ability during the Employment Term, all of the duties and functions attendant
upon such offices and such other executive duties and functions appropriate to
such offices as may be assigned to him by the Company's Board of Directors or,
upon consummation of the Partnership Reorganization Transactions, by MCO's Board
of Directors. The Executive shall be a member of and report solely to the Board
of Directors of the Company or, upon consummation of the
3
<PAGE>
Partnership Reorganization Transactions, to the Board of Directors of MCO. The
Employer shall provide, pay for, and maintain such facilities, equipment and
supplies as are reasonably necessary for the Executive's performance of his
duties under this Agreement. The Executive shall, unless prevented by
incapacity, devote his whole working time, attention and ability to the
discharge of his duties hereunder and to the faithful and diligent performance
of such duties and the exercise of such powers. The Executive shall perform his
duties and responsibilities pursuant to reasonable guidelines for employee
conduct applicable to all employees of the Employer and adopted by the Company's
Board of Directors (or, upon consummation of the Partnership Reorganization
Transactions, by MCO's Board of Directors) from time to time pertaining to
internal control, business conduct, conflicts of interest, outside business
activities and other similar issues. The Executive agrees that, in addition to
complying with the provisions of Section 6 of this Agreement, he will not,
during the Employment Term, engage in any other gainful occupation or ventures,
except that the Executive may participate in such trade, community, charitable
and religious activities which do not interfere in a material respect with the
performance of his duties hereunder, and except that the Executive shall be
entitled to make and manage his personal investments, which include the
ownership of a vineyard in Napa Valley, California, provided that such
investments require only his incidental time, do not conflict with or compete
with his duties to the Employer hereunder (it being understood that the
Executive has ownership interests in lands which are leased to the Employer or
its affiliates, and such investments or the Executive's activities in respect
thereof shall not be deemed to constitute a conflict of interest with the
Executive's duties to the Employer hereunder), are not violative of the
provisions of Section 6 hereof, and are consistent with the guidelines for
employee conduct described previously in this Section 1. If the Partnership
Reorganization Transactions are consummated, then the Executive shall become a
member of the Board of Directors of Holding Company, and Holding
4
<PAGE>
Company shall provide the Executive with the same Director and Officer Liability
Insurance coverage it provides to the other members of the Board of Directors of
Holding Company and to the other directors and officers of the Employer. If the
Executive is elected or appointed as an officer of Holding Company, Holding
Company shall provide the Executive with the same Director and Officer Liability
Insurance Coverage it provides the other officers of Holding Company. If the
Partnership Reorganization Transactions are not consummated, Monsanto will make
any amendments necessary to the charter documents of MCO or any successor entity
so that the indemnification provisions shall be comparable to the
indemnification provisions of the charter documents of Monsanto and its
subsidiaries. The Executive acknowledges and agrees that, if the Partnership
Reorganization Transactions are consummated, then timely cooperation with
Holding Company shall be a material duty under this Agreement. In this regard,
the Executive agrees that he will use his best efforts so that he and the
Employer will provide timely financial reports, other communications and perform
other duties and obligations relating to the matters described in Schedule 1 as
may reasonably be required by Holding Company from time to time. The Executive
agrees that, contemporaneously with his execution of this Agreement, he will
execute a separate agreement relating to obligations of Gargiulo management to
cooperate, communicate and inform, the form of which is attached hereto as
Schedule 1 (the "Cooperation Agreement").
2. (a) The initial term of the Executive's employment under this
Agreement shall be for a period commencing effective July 1, 1995 and ending on
December 31, 2001, unless sooner terminated pursuant to Section 2(b), Section 5,
Section 6 or Section 7 hereof. The term of the Executive's employment hereunder
shall be automatically renewed from year to year after December 31, 2001, for
additional one-year periods, unless sooner terminated pursuant to Section 2(b),
Section 5, Section 6 or Section 7 hereof or unless at least six (6) months prior
to the expiration of the initial or
5
<PAGE>
any renewal term, either party gives written notice to the other of his or its
intention not to renew the Executive's employment at the end of such term. The
initial term of the Executive's employment (as it may be sooner terminated
pursuant to Section 2(b), Section 5, Section 6 or Section 7 hereof) is referred
to herein as the "Initial Term" and such Initial Term, as it may be renewed from
time to time, is referred to herein as the "Employment Term."
(b) Notwithstanding anything in Section 2(a) above, if, after
completion of the Employer's financial statements for the calendar year ending
December 31, 1998, the independent certified public accountants of the Company
determine that Cumulative EBIT (as defined in Schedule 2, a copy of which is
attached hereto and incorporated by reference herein) through December 31, 1998
is less than 70% of the Cumulative Plan, the Board of Directors of the Company
(or, if the Partnership Reorganization Transactions are consummated, the Board
of Directors of MCO) shall give the Executive notice of its determination, and
the Employer shall have the right to renegotiate this Agreement. If the
renegotiation is not completed in a manner acceptable to the Board, in its sole
discretion, within sixty (60) days of the Board's notice to the Executive, the
Employer shall have the right to terminate this Agreement, in which case the
Executive's termination shall hereinafter sometimes be referred to as a "Section
2(b) Termination." If the Partnership Reorganization Transactions are
consummated and the Board of Directors of Holding Company disputes the
determination that Cumulative EBIT through December 31, 1998 is 70% or more of
the Cumulative Plan, the dispute shall be referred to Holding Company's
independent certified public accountants ("Certified Public Accountants") for
that firm to determine, using generally accepted accounting principles, if
Cumulative EBIT through December 31, 1998 equalled or exceeded 70% of the
Cumulative Plan, and the Certified Public Accountants' determination shall be
final and binding on all parties absent manifest error.
6
<PAGE>
3. In consideration of the services rendered by the Executive pursuant to
this Agreement, the Employer agrees to provide the Executive compensation as
follows:
(a) Commencing on January 1, 1996 and continuing through December 31,
1996, the Employer shall pay the Executive an annual salary ("Salary") of Three
Hundred Fifty Thousand Dollars ($350,000), payable in substantially equal
monthly installments. Commencing January 1, 1997 and annually thereafter during
the Initial Term, Executive's Salary shall be increased by an amount equal to
four percent (4%) of the Salary paid to the Executive during the immediately
preceding calendar year.
(b) In addition, during the Initial Term, the Executive shall be
eligible for Annual and Long-Term Incentive Awards as defined on Schedule 2.
The Long-Term Incentive Award shall be based on the performance of the Company
during calendar years 1996-2001. No Long-Term Incentive Award shall be paid to
the Executive unless all of the goals and targets set forth on Schedules 2 and
2-A have been met as of the end of calendar year 2001. The Executive
acknowledges and agrees that the financial targets, calculations and projections
on which the Long-Term Incentive Award is based were prepared using financial
information, data and projections prepared by the Company under the direction of
the Executive and furnished by the Company to Monsanto. It is understood that
the Executive is not providing any assurance that the targets and goals set
forth on Schedules 2 and 2-A will in fact be met.
If the Partnership Reorganization Transactions are consummated and the Board of
Directors of Holding Company disputes whether the respective financial goals set
forth on Schedule 2 have been met, the dispute shall be referred to the
Certified Public Accountants for that firm to determine, using generally
accepted accounting principles, if the financial goals were, in fact, met. The
7
<PAGE>
Certified Public Accountants' determination shall be final and binding on all
parties absent manifest error.
(c) The Additional Compensation, as defined in the First Amended and
Restated Employment Agreement, for periods under prior agreements through June
30, 1995 shall be paid in accordance with the terms of the First Amended and
Restated Employment Agreement.
(d) The compensation (Salary and Annual and Long-Term Incentive
Awards) for any portion of the Employment Term after the Initial Term shall be
as mutually agreed by the Executive and the Board of Directors of the Company.
(e) Payments of any Annual or Long-Term Incentive Awards and any
incentive compensation payable pursuant to Section 3(d) for any fiscal year or
period shall be made no later than two and one-half months following the close
of the applicable calendar year.
(f) The Executive shall be accorded the right to participate, on a
basis comparable to the basis on which other executive officers of the Employer
participate (including the payment of any applicable employee contributions and
premiums), in any and all stock option plans, pension plans (provided his
participation in the pension plan will not adversely affect the tax qualified
status of the plan), group insurance, accident, sickness, disability and
hospitalization insurance plans and all other similar employee benefit plans
(but not including any nonqualified profit-sharing, bonus or other incentive
compensation plan (except for a stock option plan)) for the benefit of the
Employer's executive officers which may be in effect during the period of the
Executive's employment hereunder. During the Employment Term and for a period
of twelve months after any termination thereof, the Employer shall at its own
expense maintain term life insurance on the Executive's life providing coverage
of at least $2,000,000 (provided that any cost thereof in excess of that
attributable to
8
<PAGE>
normal rates shall be borne by the Executive), naming such beneficiaries as the
Executive may designate from time to time. The Executive shall be entitled to
the same types of additional fringe benefits as the Executive was entitled to
receive in his capacity as Chief Executive Officer of the Partnership during the
year preceding the Effective Date of this Agreement to the extent such are
disclosed in Schedule 3 attached to this Agreement. Any other fringe benefits
shall be as approved by the Board of Directors of the Company (or, if the
Partnership Reorganization Transactions are consummated, by the Board of
Directors of MCO).
4. The Executive is authorized to incur reasonable expenses, including
without limitation reasonable travel and entertainment expenses, incident to the
business of the Partnership and the Company (and, if the Partnership
Reorganization Transactions are consummated, to the business of MCO) and the
performance of his duties under this Agreement. The Employer will reimburse the
Executive for all such expenses upon presentation by the Executive, from time to
time, of an itemized account of such expenses as well as supporting evidence
thereof.
5. (a) The Executive shall be entitled to five (5) weeks of vacation
during each calendar year of the Employer, and to reasonable absences by reasons
of incapacity. For purposes of this Agreement, "incapacity" shall mean
disability to perform the duties and functions assigned to the Executive
pursuant to Section 1 of this Agreement by reason of the Executive's then
physical or mental condition. There shall be no reduction in the Executive's
Salary or in his entitlement to Annual or Long-Term Incentive Awards or
compensation pursuant to Section 3(d) for the first six (6) months of any
continuous period of incapacity. In the event that the Executive's incapacity
continues for a period exceeding six (6) consecutive months, and without
abrogating the Employer's right not to renew the Employment Term pursuant to and
in accordance with the provisions of Section 2 of this Agreement, thereafter the
Executive
9
<PAGE>
shall be entitled to receive two-thirds (2/3) of the Salary, and no Annual
Incentive Award, for so long as such incapacity continues, for a maximum period
of eighteen (18) months after such initial six (6) month period; provided,
however, that the Employer may terminate this Agreement at any time during the
last twelve (12) months of such eighteen (18) month period if the Executive
shall be certified at such time to be "incapacitated" (within the meaning of
"incapacity" set forth herein) by at least two out of three licensed physicians
(one selected by the Employer, one selected by the Executive and one selected by
the other two physicians). In the event that the Executive's incapacity
continues for a period exceeding twenty-four (24) consecutive months, the
Employer may terminate this Agreement upon notice, without need for any
certification of incapacity by licensed physicians. In the event that this
Agreement is terminated pursuant to the provisions of this Section 5, the
Employer shall have no further obligations hereunder other than (i) the
Employer's obligation to pay to the Executive all amounts of Salary and Annual
Incentive Award, and compensation pursuant to Section 3(d) as set forth in this
Section 5 accrued to date of termination, (ii) its obligation to continue
coverage of the Executive under the Employer's life, health and medical plans in
which he was then a participant, (iii) such further obligations to the Executive
as the Employer deems appropriate, and (iv) the payment of any Long-Term
Incentive Award pursuant to Section 5(b) below. For purposes of this Section 5,
the Employer's obligation to pay the Salary shall be offset by any payments made
to the Executive during any such period of incapacity pursuant to any short-term
sickness and accident policy or long-term disability policy, the premiums for
which are paid by the Employer, and by the amount of any workers' compensation
if those benefits are not taken into account by the disability policy.
(b) In the event that this Agreement is terminated by the Employer
because of the Executive's incapacity, the Executive shall be eligible to
receive a prorated share of his Long-Term
10
<PAGE>
Incentive Award. Any such award shall be paid to him by the Employer after the
close of the calendar year ending December 31, 2001. The prorated award shall
be the amount of the award otherwise payable to the Executive except for the
incapacity divided by a fraction, the numerator of which is the number of whole
months during the term of this Agreement until the date which is six (6) months
from the date the Executive last worked because of incapacity and the
denominator is 72. No interest will accrue on the Long-Term Incentive Award
from the date of the Executive's termination due to incapacity until it is paid
him.
6. (a) During the Employment Term, and, except in the case of a
termination of the Employment Term because of a Section 2(b) Termination, for a
period of two (2) years from the date of termination of the Employment Term:
(i) The Executive shall not, in the United States of America, the
Commonwealth of Puerto Rico and any other country or territory in which the
Employer or any of its affiliates or, if the Partnership Reorganization
Transactions are consummated, Holding Company or any of its affiliates
(including, without limitation, Calgene), conduct, either at, or at any
time during the two-year period preceding the date of termination of the
Employment Term, significant (which shall, without limitation of the
generality of the foregoing, be deemed to include any country or territory
in which the Partnership or its affiliates or Holding Company, or any of
its affiliates (including, without limitation, Calgene) has or had $1.0
million or more in annual sales)) business (including, for these purposes,
but without limitation, the sale or marketing of any product)
(collectively, the "Covered Jurisdictions"), be engaged, directly or
indirectly, either for his own account or as agent, consultant,
representative, employee, partner, officer, director, stockholder or
otherwise of any person, firm, corporation or enterprise engaged in
11
<PAGE>
either (A) any aspect of the business of growing, packing or marketing
tomatoes or other products grown, packed or marketed by the Employer; (B)
any other business conducted by the Employer or its affiliates either at,
or at any time during the two-year period preceding the date of termination
of the Employment Term ("Other Business Activities of the Employer"); or
(C) if the Partnership Reorganization Transactions are consummated, any
aspect of the cotton, oils or other businesses conducted by Holding
Company, or any of its affiliates (including, without limitation, Calgene),
at any time during the two-year period preceding the date of termination of
the Employment Term (collectively, the "Covered Businesses");
(ii) the Executive shall not render financial or other assistance
to any person, firm, corporation or enterprise engaged in the Covered
Businesses in the Covered Jurisdictions;
(iii) the Executive shall not, directly or indirectly, buy from
or sell to, solicit the business of or broker to or sell for, or perform
any services within the Covered Businesses for, any person or entity who
was a customer of the Employer or any of its affiliates or, if the
Partnership Reorganization Transactions are consummated, Holding Company or
any of its affiliates (including, without limitation, Calgene), or who
became such a customer within two years after termination of the
Executive's employment;
(iv) the Executive shall not solicit for employment, hire, or
induce to leave the service of the Employer or any of its affiliates, any
employee, salesman, agent or representative of the Employer or any of its
affiliates who was engaged in any activities within the Covered Businesses
and who was such either at or at any time during the one-year
12
<PAGE>
period preceding the date of termination of the Employment Term; and
(v) the Executive shall not use or permit the Executive's name
to be used in connection with any business or enterprise engaged in any
activities within the Covered Businesses.
In Clause B of Section 6(a)(i) and in Sections 6(a)(iii) and 6(a)(iv), the term
"affiliate" shall be limited to subsidiaries of the Employer or, in the case of
other affiliates, to business activities of the affiliate of the type described
in Clause A of this Section 6(a)(i), Other Business Activities of the Employer
and to other business activities of the affiliate to which the Executive has
devoted direct supervision or substantial activity. If the Partnership
Reorganization Transactions are consummated, the term "affiliate" in Clause C of
Section 6(a)(i) and in Sections 6(a)(iii) and 6(a)(iv) shall be limited to
Holding Company and its other subsidiaries (including, without limitation,
Calgene).
Notwithstanding the foregoing, the Executive may participate in any manner in
the business activities of Chile Financial Investments Associates, Inc. and
Gargiulo Landco, Inc. (provided that, for the period during which the Executive
is subject to the restrictions of this Section 6(a), the Executive shall not
propose or consent to such entities entering into any new business not conducted
by such entities on December 23, 1992, the effective date of the Original
Employment Agreement, that competes with any of the Covered Businesses in any of
the Covered Jurisdictions), and the operation of a vineyard in Napa Valley,
California, and such activities of the Executive (and the Executive's ownership
interests in lands which are leased to the Employer or its affiliates) shall not
be deemed a breach of the foregoing provisions of this Section 6(a) or to
constitute a conflict of interest with the Executive's duties to the Employer
under Section 1 of this Agreement.
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(b) The Executive agrees that a violation on the part of the
Executive of the covenants contained in Section 6(a) will cause irreparable
damage to the Employer, and that it is and will be impossible to estimate or
determine the damage that will be suffered by the Employer in the event of a
breach by the Executive of such covenants. Therefore, the Executive further
agrees that the Employer shall be entitled to an injunction from any court of
competent jurisdiction restraining any further violation of such covenants by
the Executive, his employer, employees, partners, agents or other associates, or
any of them, such right to an injunction to be in addition to whatever other
remedies the Employer may have. In addition, the Employer may, as provided in
Section 7 of this Agreement, terminate this Agreement for breach of the
provisions set forth in Section 6(a).
(c) The invalidity of any one or more of the words, phrases,
sentences or clauses contained in this Section 6 shall not affect the
enforceability of the remaining portions of this Section. If one or more of the
words, phrases, sentences or clauses contained in this Section shall be invalid,
this Section shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences or clause or clauses had not been inserted, and
if such invalidity should be caused by the length of any period of time, the
size of any area, or the service or product limitations set forth in this
Section, such period of time or such area or such service or product
limitations, or all of them, shall, without need of further action by any party
hereto, be deemed to be reduced to a period, area, service or product that will
cure such invalidity.
(d) In the case where this Agreement terminates because of a Section
2(b) Termination, all of the terms, conditions and provisions of Section 6(a)-
(c) above shall also apply, except that restrictions shall extend only for a
period of one year from the effective date of the termination of this Agreement.
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7. (a) In the event of the death of the Executive, this Agreement shall
terminate, without notice, on the date of the happening of such event, and the
Employer shall have no further obligations hereunder other than (i) for payment
of Salary and compensation pursuant to Section 3(d) to which the Executive is
entitled, accrued through the date of death, (ii) for continued regular payments
of Salary for a period of six (6) months after the date of death, to the
Executive's wife if she then be living and, if not, to the Executive's estate,
(iii) payment of an Annual Incentive Award (prorated during the calendar year in
which the Executive dies) no later than two and one-half months following the
close of the calendar year during which the Executive died, and (iv) those with
respect to any employee benefit plan in which the Executive shall have
participated that arise because of or survive his death. The Executive's
designated beneficiary also shall be eligible to receive a prorated share of his
Long-Term Incentive Award to be paid after the close of the calendar year ending
December 31, 2001. The prorated award shall be the amount of the award
otherwise payable to the Executive had he lived, divided by a fraction, the
numerator of which is the number of whole months during the term of this
Agreement until the Executive's death and the denominator is 72. No interest
will accrue or be paid on the Long-Term Incentive Award from the date of the
Executive's death until it is paid to his designated beneficiary.
(b) For purposes of this Agreement, "Cause" shall mean (i) a willful
violation on the part of the Executive of the covenants contained in Section 1,
Section 6(a), or Section 9, (ii) the willful misconduct or gross negligence on
the part of the Executive which is materially and demonstrably injurious to the
Employer or is otherwise a material breach of fiduciary duties owed to the
Employer, or (iii) an act or acts by the Executive constituting a violation of
applicable laws which is materially and demonstrably injurious to the Employer
and which the Executive knew or reasonably should have known constituted a
violation of law. The
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Employer may terminate the Executive's employment under subsection (i) or (ii)
of this Section 7(b) only if the Executive is given prior written notice
specifying the nature of the alleged Cause and the Executive has been given a
reasonable opportunity (which shall be not less than sixty days) to take
remedial action but failed or refused to do so.
(c) In the event that the Executive voluntarily terminates his
employment with the Employer, the Employer shall pay to the Executive as final
remuneration all amounts of Salary and compensation pursuant to Section 3(d)
accrued, due and payable under this Agreement to the effective date of
termination, to the extent not previously paid to the Executive, and the
Employer shall have no further obligation to the Executive. The Executive
shall not be eligible for any Annual Incentive Award for the calendar year in
which the Executive voluntarily terminated employment, and the Executive shall
not be entitled to any Long-Term Incentive Award. Moreover, the Executive's
"Voluntary Termination" (as hereinafter defined) of employment shall be deemed
to be a breach of this Agreement. For purposes of the preceding sentence,
"Voluntary Termination" shall mean the Executive voluntarily and without being
induced or caused to do so by the Employer, resigning his position with the
Employer in writing. Without limiting the foregoing, Voluntary Termination
shall not include, and the Executive shall not be subject to a claim for breach
of contract under this Section, due to (i) the Employer terminating the
Executive without Cause, including, without limitation, due to the Executive's
failure to meet any performance goals or targets, (ii) Termination by the
Executive for Good Reason, (iii) a failure of the parties to agree upon a
renegotiated employment agreement pursuant to Section 2(b) hereof upon a failure
to reach 70% of the Cumulative Plan by December 31, 1998 and the Executive
resigning as a result thereof, (iv) the death or disability of the Executive,
(v) any nonrenewal of the Employment Term, or (vi) any Termination of the
Executive For Cause. The provision described above limiting
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the Employer's right to a claim for breach of contract under circumstances not
constituting a Voluntary Termination is not meant to limit the Employer's right
to other types of claims under any other provision of this Agreement under such
circumstances.
(d) The Executive may, at his option, exercisable by notice to the
Employer given within ninety (90) days after the Executive first becomes aware
of the occurrence of such event, terminate this Agreement, effective as of a
date specified in such notice, upon the occurrence of any one or more of the
following (each a "Termination by Executive for Good Reason"):
(i) the reassignment of the Executive by the Employer, without
the Executive's express written consent, to a position with the Employer
other than that of Chief Executive Officer, or to a position with the
Company other than that of Chief Executive Officer, or a material adverse
change in the nature or scope of the Executive's authorities, powers,
functions, duties or responsibilities in those positions; provided,
however, that the consummation of the Partnership Reorganization
Transactions shall not be deemed a violation of this provision;
(ii) The Employer's failure to perform its obligations under this
Agreement in any material respect, including without limitation the failure
by the Employer to pay compensation in accordance with this Agreement or
the failure of the Employer to provide the Executive with fringe benefits
substantially the same as those previously provided under this Agreement;
(iii) The Employer's requiring the Executive, without the
Executive's express written consent, to change his place of permanent
residency or to spend more than one-half of the time in which he performs
his duties for the Employer in a
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place outside of Collier County, Florida, provided that any time that he
spends outside of Collier County engaging in any activity for Monsanto,
Holding Company or Calgene (if the Partnership Reorganization Transactions
are consummated) shall not be counted;
(iv) unless the Executive gives prior written consent: (A) the
Employer's failure to continue the use of the name "Gargiulo" in its
business name; (B) the sale, exchange or other disposition of a material
portion of the Employer's assets (other than assets which may be
contributed to the Employer by Calgene, Holding Company or Monsanto if the
Partnership Reorganization Transactions are consummated) to a third party
unrelated to the Employer, Holding Company, Calgene or Monsanto, such that
the value of the remaining assets of the Employer and its subsidiaries
which are consolidated with the Employer are materially diminished; (C) the
transfer of a material portion of the Employer's assets (other than assets
which may be contributed to the Employer by Calgene, Holding Company or
Monsanto if the Partnership Reorganization Transactions are consummated) to
Holding Company, Calgene or Monsanto or any of their affiliates if (1) the
transfer materially diminishes the Employer's abilities to conduct its
business as previously conducted prior to the transfer and thereby causes
it not to be reasonably possible for it to achieve the Earnings Targets, or
(2) after the transfer, it is not reasonably possible to measure the
financial return on the transferred assets and thereby causes it not to be
reasonably possible to measure the return to the Employer, including the
transferred assets; (D) if the Partnership Reorganization Transactions are
consummated, a material breach by Monsanto or Holding Company or any of
their successors of the Gargiulo Credit Facility Agreement between Monsanto
and Holding Company; (E) if the Partnership Reorganization Transactions are
not consummated,
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the failure by Monsanto to enter into a Gargiulo Credit Facility Agreement
that is comparable to the Gargiulo Credit Facility Agreement between
Monsanto and Holding Company, and once the Monsanto Gargiulo Credit
Facility Agreement is executed, a material breach of that Agreement by
Monsanto; (F) the removal from the Employer by dividend or distribution to
the owners of the Employer, capital or assets such that the achievement of
the Earnings Targets described in Schedule 2 hereof are not reasonably
possible; or (G) the taking of any other actions by Monsanto or, if the
Partnership Reorganization Transactions are consummated, by Holding Company
or Calgene, which materially diminishes the Employer's abilities to conduct
its business and thereby causes it not to be reasonably possible to achieve
the Earnings Targets;
provided, in each case, that the event was suffered or incurred involuntarily
by, or without the express written consent of, the Executive and is not cured by
the Employer within thirty (30) days after the Employer receives written notice
from the Executive specifying the event that the Executive asserts constitutes a
basis for Termination by Executive for Good Reason. Notwithstanding anything in
this Section 7(d)(iv) to the contrary, the Partnership Reorganization
Transactions and any Restructuring Event, as defined in Section 8 below, shall
not be the basis for a Termination by Executive for Good Reason.
(e) (i) Upon any termination of this Agreement because of a
Section 2(b) Termination, the Employer shall pay to the Executive, in
addition to all sums then accrued, due and payable under this Agreement, an
additional amount equal to the Executive's Salary paid or payable to the
Executive for the calendar year ending December 31, 1998. The amount shall
be payable in a single sum within thirty days after the effective date of
the termination of this Agreement because of the Section 2(b) Termination.
In addition, the Employer shall
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maintain or provide, at no cost to the Executive, group medical and other
insurance coverages on the Executive and his family, to the extent
previously received by the Executive under this Agreement for one year
following the effective date of the termination of this Agreement because
of the Section 2(b) Termination.
(ii) Upon any termination of this Agreement by the Employer
without Cause, or any timely nonrenewal by the Employer of the Employment
Term pursuant to Section 2(a) of this Agreement, or any Termination by
Executive for Good Reason, the Employer shall pay to the Executive, in
addition to all sums then accrued, due and payable under this Agreement, an
additional amount equal to twice the Executive's Salary paid or payable to
the Executive for the calendar year in which the effective date of the
termination of this Agreement occurs, which amount shall be payable in a
lump sum within thirty (30) days after the effective date of termination of
this Agreement. The Employer also shall maintain or provide, at no cost to
the Executive, group medical and other insurance coverages on the Executive
and his family, to the extent previously received by the Executive under
this Agreement, for at least two years after any such termination of this
Agreement. In addition, upon the termination of this Agreement by the
Employer without Cause, any timely nonrenewal by the Employer of the
Employment Term pursuant to Section 2(a) of the Agreement or any
Termination by Executive for Good Reason, the Employer shall pay to the
Executive, if the termination occurs on or before December 31, 1998, an
amount equal to one times the Annual Incentive Award, or if the termination
occurs on or after January 1, 1999, an amount equal to two times the Annual
Incentive Award, in each case paid the Executive for the calendar year in
which the termination took place or for the prior calendar year, whichever
Annual Incentive Award is greater. The payment of
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this amount shall be paid to the Executive no later than two and one-half
months after the end of the calendar year in which the termination took
place.
(iii) In the event of a Section 2(b) Termination, the termination
of this Agreement by the Employer without Cause or by reason of nonrenewal
of the Employment Term, or Termination by Executive for Good Reason, the
Executive shall have no duty to seek other employment or otherwise mitigate
the amount of compensation payable to him under the terms of this
Agreement, and the amounts payable to the Executive hereunder shall not be
reduced because of any new Employment the Executive may obtain after
termination.
(iv) In addition, upon termination of this Agreement by the
Employer without Cause or any Termination by Executive for Good Reason
(hereinafter sometimes collectively referred to as "Termination"), the
Executive shall be eligible to receive a prorated share of the Annual
Incentive Award for the year in which the Termination occurs and shall also
be eligible to receive a prorated share of his Long-Term Incentive Award to
be paid to him within two and one-half months after the close of the
calendar year ending December 31, 2001. The prorated Long-Term Incentive
Award shall be the amount of the Award otherwise payable to the Executive
(except for the Termination) divided by a fraction, the numerator of which
is the number of whole or partial months during the term of this Agreement
until the effective date of the Executive's termination and the denominator
is 72. No interest shall accrue or be paid on the Long-Term Incentive
Award from the date of the Executive's Termination until it is paid to him.
(f) Upon the Termination of this Agreement by the Employer for Cause,
the Employer shall pay to the Executive all
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Salary then accrued, due and payable under this Agreement. The Employer shall
be under no obligation to pay the Executive any Annual Incentive Award for the
calendar year in which the termination of this Agreement by the Employer for
Cause occurred, nor shall the Executive be eligible for any Long-Term Incentive
Award.
(g) In all cases where the Executive or his estate or heirs has a
right to receive a pro rata share of his Long-Term Incentive Award following his
termination, death or disability, the Employer shall provide to the Executive or
his personal representative two and one-half months after the close of its
fiscal year copies of its audited financial statements as well as a calculation
of the EBIT for the Employer for the calendar year then ended; provided,
however, if the Partnership Reorganization Transactions are consummated, the
financial statements provided by the Employer are not required to be audited.
(h) Notwithstanding any other provision of this Agreement, the
Employer's obligations to continue any benefits under any employee benefit plan
after the termination of this Agreement shall be subject to the timely making,
by the Executive or his beneficiary, of any elections required by the terms of
such plan and the payment, if required, of any premiums therefor.
(i) The Executive agrees that any payments required under this
Section 7 that constitute continuation of the Executive's Salary beyond
termination of the Employment Term shall be reduced by any and all severance
payments which the Executive receives under any severance plan or program of the
Employer. Except as specifically otherwise provided in this Agreement, the
Executive acknowledges and agrees that he will not be entitled to accrue or be
eligible for any vacation pay, Annual or Long-Term Incentive Awards or other
benefits during periods following his termination with respect to which he is
paid or entitled to be paid
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any amounts, or provided any benefits pursuant to this Section 7. However, the
preceding sentence shall not be deemed to release the Employer from its
obligation to pay the Executive any other compensation or benefits to which the
Executive is specifically entitled during periods following his termination
pursuant to this Agreement. The Executive and the Employer agree that, in the
event that any health, disability or life insurance benefits required to be
provided under this Section 7 cannot be provided under the terms of the plans
maintained by the Employer for any reason, the Employer shall satisfy the
requirement to provide such health, disability or life insurance benefits by
purchasing other comparable benefits and making them available to the Executive
at the same after-tax cost, provided, in the case of disability insurance, that
the same is obtainable, using reasonable efforts, on commercially reasonable
terms.
8. In the event that there occurs a Restructuring Event prior to June 30,
2001, to-wit:
(a) the sale of more than fifty percent of the stock or other equity
interest of the Employer to a person, corporation or entity other than to
Holding Company, a Holding Company affiliate, Calgene, a Calgene affiliate (in
the Partnership Reorganization Transactions or otherwise), Monsanto or a
Monsanto affiliate;
(b) the sale of all or substantially all of the assets of the
Employer to a person, corporation or entity other than to Holding Company, a
Holding Company affiliate, Calgene, a Calgene affiliate (in the Partnership
Reorganization Transactions or otherwise), Monsanto or a Monsanto affiliate; or
(c) there occurs a registered public offering of more than twenty-
five percent of the stock of the Employer;
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and the net amount realized by the Employer or the shareholders of the Employer
exceeds the net cumulative capital invested (i.e., cumulative capital invested
reduced by cumulative capital returned in the form of dividends or other
distributions) by Monsanto and its affiliates and Holding Company and its
affiliates in the Employer plus a 14% cost of capital factor (compounded
annually), then the Executive shall be entitled to receive an amount equal to
five percent (5%) of the excess ("Restructuring Event Award"), but in no event
shall the amount payable to the Executive as a Restructuring Event Award exceed
the maximum Long-Term Incentive Award payable to the Executive under this
Agreement, and provided further, that the amount of the Restructuring Event
Award shall be reduced by the amount of any Long-Term Incentive Award paid to
the Executive hereunder. The Restructuring Event Award shall be fully earned
upon the occurrence of the Restructuring Event and shall not be forfeited or
reduced in the event that no amount of Long-Term Incentive Award is payable to
the Executive hereunder. The Restructuring Event Award shall be payable no
later than two and one-half months after the close of the calendar year ending
December 31, 2001. No interest shall accrue or be paid on the Restructuring
Event Award from the date of the Restructuring Event until it is paid. In the
event that there is a dispute over the net amount realized or the amount of the
investment and cost of capital factor, or any other financial issue, the dispute
shall be referred to Monsanto's independent certified public accountants or, if
the Partnership Reorganization Transactions are consummated, to the Certified
Public Accountants for them to resolve, using generally accepted accounting
principles. The determination of Monsanto's certified public accountants or the
Certified Public Accountants, as the case may be, shall be final and binding on
all parties absent manifest error.
9. (a) The Executive acknowledges that, during and as a result of his
employment hereunder, he may have access to trade secrets and other confidential
information of the Employer and
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Holding Company and their respective affiliates, including but not limited to
the nature and material terms of business opportunities and proposals available
to the Employer, Holding Company and Calgene and their respective affiliates,
the Employer's, Holding Company's or Calgene's and their respective affiliates'
methods and systems, the names and addresses of the Employer's, Holding
Company's or Calgene's and their respective affiliates' customers and suppliers,
technical memoranda, research reports, designs and specifications, operating
procedures, ledgers and other information, data and documents relating to the
Employer's, Holding Company's and Calgene's and their respective affiliates'
present or future operations, whether or not any such information, data or
documents qualify as a "trade secret" under applicable federal or state law
(collectively, the "Confidential Information"). The Executive covenants and
agrees that he shall not at any time during or following any termination of this
Agreement, without the consent of the Employer, Holding Company or Calgene or
their affiliates, respectively, use or disclose (except for the sole and
exclusive benefit of the Employer, Holding Company or Calgene or their
affiliates, respectively, or as required to perform his duties under this
Agreement or as required by law or as is already in the public domain) any
Confidential Information which has been obtained by or disclosed to him as a
result of his employment with the Employer. The Executive agrees that the
Employer and Calgene would be irreparably harmed by any breach of the
Executive's agreements set forth in this Section 9, that such injury would not
be adequately compensated by monetary damages, and that, accordingly, Monsanto,
the Employer, Holding Company or Calgene, whichever corporation is appropriate,
may specifically enforce the provisions of this Section by injunction without
thereby affecting any claim for damages.
(b) Upon termination of this Agreement, the Executive shall promptly
return to the Employer, Holding Company and Calgene, respectively, all documents
(including without limitation copies
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and notes relating to such documents) and other materials and property of the
Employer, Holding Company or Calgene, or pertaining to their businesses,
including without limitation customer and prospect lists, contracts, files,
manuals, letters, reports and records in his possession or control, including
all computerized records, files and computer programs, tapes or discs, no matter
from whom or in what manner acquired.
(c) The Executive agrees that he will fully disclose, and shall
assign and transfer to the Employer, its successors and assigns, the entire
right, title and interest in the development of a new variety of plant,
patentable or unpatentable, conceived by the Executive during the Employment
Term and relating, in the opinion of the Employer, in any way to the Employer's
business (an "Invention"). Such assignment shall include the right to obtain
letters of patent or plant patents, in the name of the Employer or otherwise, on
such Inventions in the United States or in any foreign countries, covering such
Inventions. The Executive agrees to sign all papers and to make all oaths
necessary for the filing and prosecution of any applications for such letter of
patent or plant patents, or any divisions, continuations, continuations in part,
renewals or reissue thereof, and to execute on request all papers necessary to
assign such Inventions to the Employer. The Executive will promptly disclose to
the Employer every Invention and every scientific product, process, apparatus or
design that the Executive, individually or jointly, during the Employment Term,
may invent, discover, conceive or originate, relating in any way to the
Employer's ability to develop new hybrids and plant varieties.
10. Any notice required or permitted to be given under this Agreement
shall be in writing, and shall be given by hand-delivery to the addressee, by
deposit in the U.S. mail, postage prepaid, certified mail, return receipt
requested, by overnight courier service, or facsimile transmission followed by
written confirmation sent in one of the manners specified above, as follows:
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If to Employer, to:
Gargiulo L.P.
15000 Old 41 North
Naples, Florida 33963
Attention: Jeffrey D. Gargiulo
Telefax No.: 813/597-8963
with a copy to:
Martin A. Genauer, Esq.
Karp & Genauer, P.A.
2 Alhambra Plaza, Suite 1202
Coral Gables, Florida 33134
Telefax No.: 305/461-3545
and, if the Partnership Reorganization
Transactions are consummated, to:
Tomato Investment Associates, Inc.
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Telefax No.: 314/694-3011
with a copy to:
Monsanto Company
800 North Lindbergh Blvd.
St. Louis, Missouri 63167
Attention: Senior Vice President and General Counsel
Telefax No.: 314/694-3011
and, if the Partnership Reorganization
Transactions are consummated, with a
copy to:
Holding Company
1920 Fifth Street
Davis, California 95616
Attention: Chairman and Chief Executive Officer
Telefax No.: 916/753-1510
If to the Executive, to:
Jeffrey D. Gargiulo
1442 Galleon Drive
Naples, Florida 33940
with a copy to:
Martin A. Genauer, Esq.
Karp & Genauer, P.A.
2 Alhambra Plaza, Suite 1202
Coral Gables, Florida 33134
Telefax No.: 305/461-3545
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or to such other address as any party may specify by notice hereunder to the
other. Any notice sent in accordance with the foregoing provisions shall be
deemed given on the date of receipt if personally delivered, or on the date
three (3) days after being deposited in the mail, if mailed.
11. This Agreement and the Cooperation Agreement incorporate the entire
agreement between the parties hereto pertaining to the subject matter hereof,
and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written (including,
without limitation, any agreements or contracts regarding employment of the
Executive with NTG or any other predecessor to any business of the Employer,
which agreements and contracts are in all respects cancelled and any rights or
remedies thereunder are hereby waived by the Executive and the Employer), and
there are no warranties, representations or other agreements between the parties
in connection with the subject matter hereof, except as specifically set forth
herein. No amendment, supplement, modification or waiver of this Agreement shall
be binding upon a party hereto unless in writing and executed by such party.
12. It is the intention of the parties hereto that all questions with
respect to the construction of this Agreement and the rights and liabilities of
the parties hereto shall be determined in accordance with the laws of the State
of Delaware applicable to business agreements entered into and performed
entirely within the State of Delaware.
13. Each of the provisions of this Agreement shall be independent of all
other provisions, and if any provision of this Agreement is declared void or
invalid by any court or other governmental agency of competent jurisdiction,
each other provision of this Agreement shall remain in full force and effect and
shall be construed to the extent possible as consistent with all other valid
provisions in order to carry out the intent of the parties hereto.
Notwithstanding the termination or expiration of this Agreement for any reason,
the Executive's obligations under
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Sections 6 and 9 hereof shall survive and remain in full force and effect for
the periods therein provided, and the provisions for equitable relief in
Sections 6 and 9 hereof shall continue in force.
14. This Agreement shall be binding upon and inure to the benefit of the
respective heirs, executors, administrators, successors and assigns of the
Employer and the Executive. If the Employer shall, at any time, be merged with
or consolidated into or with any other corporation or person or if all or
substantially all of the assets of the Employer are transferred to another
corporation or person in connection with the Partnership Reorganization
Transactions or otherwise, the provisions of this Agreement shall be binding
upon and inure to the benefit of the entity resulting from such merger or
consolidation or the corporation or person to which or to whom such assets shall
be transferred, and this provision shall apply in the event of any subsequent
mergers, consolidations or transfers of assets. Except as provided in this
Section 14, and except for the Partnership Reorganization Transactions, neither
the Employer nor the Executive may assign its or his interest in this Agreement
or any part hereof. The Executive acknowledges and agrees that he has had the
opportunity and been given sufficient time to read this Agreement, that he
understands this Agreement's terms and conditions, that he has had any questions
regarding the meaning of this Agreement answered to his satisfaction, and that
he has retained competent counsel to represent him with respect to this
Agreement. Nothing in this Agreement shall require the Employer to segregate
monies from its general funds or create any trusts or special deposits to secure
payment of any obligations hereunder. This Agreement shall not be construed
more strictly against one party than against the other merely by virtue of the
fact that this Agreement may have been physically prepared by one of the
parties, or such party's counsel, it being agreed that both parties and their
respective counsel have mutually participated in the negotiation and preparation
of this Agreement.
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15. If the Partnership Reorganization Transactions are consummated, the
Executive agrees to execute with Holding Company and its affiliates (including,
without limitation, Calgene), agreements relating to noncompetition,
Confidential Information and Inventions substantially similar to those set forth
in this Agreement as may reasonably be advisable or necessary in furtherance of
the transaction and as may be needed by Holding Company or Calgene and its
affiliates to protect their interests with respect to the transaction. In the
event that the Partnership Reorganization Transactions are not consummated, all
references in this Agreement to Holding Company or Calgene shall be null and
void, except to the extent necessary to protect any information about its
businesses and operations that the Executive may have learned as part of his
involvement, if any, in connection with the proposed Partnership Reorganization
Transactions. Each of Holding Company and Calgene may enforce the terms of this
Agreement with respect to the provisions applicable to it even though it is not
a party to this Agreement.
16. The Executive acknowledges the fact that another employee of the
Employer will receive a similar Employment Agreement providing the employee with
eligibility for Annual and Long-Term Incentive Awards similar to those for which
the Executive is eligible under this Agreement. Executive acknowledges and
agrees that, in the event that the other employee terminates his employment with
the Employer in such a way that he is not eligible for all or any Annual or
Long-Term Incentive Awards, or if either the Annual or Long-Term Incentive
Awards shall, for whatever reason, not be paid to the other employee, the amount
of the Annual or Long-Term Incentive Awards otherwise payable to the Executive
hereunder shall not be increased or decreased.
17. The Executive hereby acknowledges that right to the use of the name
"Gargiulo" is an asset of the Company and the
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Partnership and may be used by the Employer and its successors and assigns both
during and after the Employment Term.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of
the date first above written.
GARGIULO, L. P.
By: GARGIULO G. P., Inc.
its General Partner
By:/s/ John Gargiulo
___________________________
John Gargiulo
Executive Vice President
/s/ Jeffrey D. Gargiulo
___________________________
Jeffrey D. Gargiulo
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EXHIBIT 10.14
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ARTICLES OF PARTNERSHIP
-----------------------
NT Gargiulo L.P. ("Gargiulo"), a Delaware Limited
Partnership, and Dresick Farms, Inc. ("Dresick"), a California
corporation, voluntarily associate themselves together as General
Partners pursuant to the terms and conditions set forth in these
Articles of Partnership.
ARTICLE 1 -- NATURE OF PARTNERSHIP
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Type of Business
1.01 The Partnership shall engage in the business of
acquiring and operating a produce packaging facility, and growing,
harvesting and packaging tomatoes and other fresh produce
("produce") and in such activities as may be incidental thereto.
In furtherance of its business purpose the Partnership will enter
into an independent custom farming agreement with Dresick, and may
do so with other produce growers, and will enter into a marketing
agreement with Gargiulo, which agreements shall be independent and
separate and apart from the Partnership obligations of Dresick and
Gargiulo.
Name of Partnership
1.02 The name of the Partnership shall be NT Gargiulo &
Dresick Associates, a California General Partnership.
Term of Partnership
1.03 The Partnership commenced on 15 December 1992 and shall
continue until terminated by the Partners, provided, however,
neither Partner shall terminate the Partnership without written
consent of the other Partner for a period of three (3) years.
Place of Business
1.04 The principal administrative place of business of the
Partnership shall be in Watsonville, Santa Cruz County, California
or at such other place or places as may from time to time be
agreed on by the Partners.
ARTICLE 2 -- FINANCIAL
----------------------
2.01 The initial capital of the Partnership shall be Seven
Hundred Fifty Thousand Dollars ($750,000) contributed by the
Partners as follows:
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a. Dresick shall contribute to the Partnership the sum
of Two Hundred Fifty Thousand Dollars ($250,000) and shall have a
one-third (1/3) interest in the Partnership.
b. Gargiulo shall contribute to the Partnership the
sum of Five Hundred Thousand Dollars ($500,000) and shall have a
two thirds (2/3) interest in the Partnership.
Additional Contributions to Capital
2.02 The Partners may be required to make additional
contributions to the capital of this Partnership. In the event a
Partner is unable to make a capital contribution when required,
the other Partner may make the contribution for and in behalf of
that Partner, which amount shall be treated as a loan to that
Partner, bearing interest at the prime rate or the rate at which
the individual Partners borrow funds (the higher of the two, if
there is a disparity), whichever is more. Any such sums loaned in
this manner shall be due as agreed by the Partners, or in the
absence of agreement, on demand. Neither Partner shall be allowed
to make a voluntary contribution to capital without the written
consent of the other Partner.
Withdrawal of Capital
2.03 No portion of the capital of the Partnership may be
withdrawn at any time without the express written consent of both
Partners.
Interest on Capital
2.04 Neither Partner shall be entitled to interest on its
contribution to the capital of the Partnership.
Loans to Partnership
2.05 Neither Partner may loan or advance money to the
Partnership without the written consent of the other Partner. Any
such loan by a Partner to the Partnership shall be separately
entered in the books of the Partnership as a loan to the
Partnership, shall bear interest at such rate as may be agreed on
by the lending Partner and the other Partner, and shall be
evidenced by a promissory note delivered to the lending Partner
and executed in the name of the Partnership by the other Partner.
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<PAGE>
Books of Account
2.06 Complete and accurate accounts of all transactions of
the Partnership shall be kept in proper books, and both Partners
shall enter, or cause to be entered therein, a full and accurate
account of all its transactions on behalf of the Partnership.
Inspection of Books
2.07 The books of account and other records of the
Partnership shall, at all times, be kept in the principal
administrative place of business of the Partnership, and both of
the Partners shall, at all times, have access to, and may inspect
and copy, any of them. A duplicate set of the books of account
and other records of the Partnership shall be kept in a safe
deposit box at a bank to be selected by the Partners or with an
accountant to be selected by the Partners.
Method of Accounting
2.08 The books of account of the Partnership shall be kept
on an accrual basis.
Fiscal Year
2.09 The fiscal year of the Partnership shall end on 30 June
of each year.
Accountings
2.10 As soon after the close of each fiscal year as is
reasonably practicable, or at quarterly intervals as the Partners
shall decide, a full and accurate inventory and accounting shall
be made of the affairs of the Partnership, for the quarter or
fiscal year last ending. On such accounting being made, the net
profit or net loss sustained by the Partnership during such
quarter or fiscal year shall be ascertained and credited or
debited, as the case may be, in the books of the account of the
Partnership to the respective Partners in the proportions
specified in Paragraph 2.12 of these Articles.
Definition of Profits and Losses
2.11 The terms "net profits" and "net losses" as used in
these Articles shall mean the net profits and net losses of the
Partnership determined for each accounting period provided for in
these Articles according to rules and regulations promulgated in
the Internal Revenue Code.
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<PAGE>
Profits and Losses
2.12 The net profits or net losses of the Partnership shall
be credited or charged, as the case may be, to the Partners as
follows: one-third (1/3) shall be credited or charged to Dresick,
two-thirds (2/3) shall be credited or charged to Gargiulo.
Capital Accounts
2.13 An individual capital account shall be maintained for
each Partner consisting of its contribution to the initial capital
of the Partnership, any additional contributions to the
Partnership capital made pursuant to these Articles, and any
amounts transferred from a Partner's income account to its capital
account pursuant to these Articles. A Partner's capital account
shall be determinative of its interest in the Partnership, it
being the intent of the Partners, in the absence of express
agreement to the contrary, that Dresick shall have a one-third
(1/3) interest and Gargiulo shall have a two-thirds (2/3)
interest. Additional capital contributions or transfers from the
income accounts shall be effected by or for each Partner in
accordance with these respective interests.
Income Accounts
2.14 An individual income account shall be maintained for
each Partner. At the end of each fiscal year or at quarterly
intervals as the Partners shall decide, each Partner's share of
the net profits or net losses of the Partnership shall be credited
or debited to its income account. All of each Partner's
distributive share of the net profits shall be paid to each
Partner within sixty (60) days following the close of the quarter
or fiscal year.
Bank Accounts
2.15 All funds of the Partnership shall be deposited in
accounts in the name of the Partnership at such bank or banks as
may from time to time be selected by both the Partners. All
withdrawals from any such account or accounts shall be made only
by check.
ARTICLE 3 -- RIGHTS AND DUTIES OF PARTNERS
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Time Devoted to Partnership
3.01 Both Partners shall devote as much time to the ordinary
business of the Partnership as may be required, and such
additional time as the exigencies of the business and
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<PAGE>
extraordinary circumstances may require in the furtherance of such
business.
Compensation
3.02 Neither Partner in its capacity as a partner shall be
entitled to compensation for services rendered to the Partnership.
Dresick, in its capacity as an independent grower for the
Partnership, and Gargiulo, in its capacity as the marketing agent
for the Partnership, shall each be entitled to compensation as
agreed by each with the Partnership.
Management
3.03 Gargiulo shall manage the Partnership business on a
day-to-day basis. Both Partners shall have an equal voice in
major management decisions of the Partnership business such as,
for example, significantly expanding or reducing the size or
capacity or production volume of its harvesting or packaging
commitments, making major capital improvements, entering into
contracts with additional growers, or for different produce,
modifying the terms of any independent grower agreement or
marketing agreement, or encumbering or selling any of the
Partnership assets. Any differences arising between the Partners
as to matters connected with the Partnership business shall be
resolved and decided by negotiation and compromise.
Power to Incur Liabilities
3.04 Subject to the provisions of Paragraph 3.03, the power
to incur liabilities shall be distinguished as follows:
a. In its capacity as Managing Partner Gargiulo shall
have sole and exclusive authority to bind the Partnership in
making contracts and incurring obligations in the name and on the
credit of the Partnership in the ordinary course of the
Partnership business. Gargiulo shall be indemnified by the
Partnership for any act taken, or business decision made in good
faith in the ordinary course of business.
b. The consent and affirmative acts of both Partners
shall be required to bind the Partnership with respect to matters
outside the ordinary course of the Partnership business.
Reimbursement of Expenses
3.05 The Partnership shall indemnify a Partner for payments
made and liabilities reasonably incurred in the ordinary and
proper conduct of the Partnership business or for the preservation
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<PAGE>
of the Partnership business or property. Direct costs shall be
reimbursed at the actual amounts expended. Indirect costs,
including overhead and administrative expenses, shall be
reimbursed as agreed by the Partners.
Prohibited Acts
3.06 Neither Partner shall, without the prior written
consent of the other Partner:
a. Sell any Partnership inventory at less than fair
market price;
b. Loan any Partnership funds to third parties;
c. Extend Partnership credit to any person a Partner
has notified the Partnership is not credit worthy, or trustworthy;
d. Incur any obligations in the name or on the credit
of the Partnership except in the ordinary course of the
Partnership business;
e. Become bail, surety, or endorser for any other
person;
f. Any loss sustained by the Partnership because of
the breach of this paragraph 3.06 by any Partner shall be deducted
from such Partner's share of the net profits of the Partnership,
or if the net profits of the Partnership for the fiscal year in
which the breach occurred are insufficient, from such Partner's
capital interest in the Partnership. In the alternative the
Partner may elect to pay the full sum in cash on demand.
Partner's Separate Debts
3.07 Each Partner shall pay and discharge as they become due
its separate obligations, and protect the other Partner and the
Partnership from all related costs, claims and demands.
Assignment of Interest
3.08 In the event either Partner elects to sell, assign,
mortgage, hypothecate or encumber all or any portion of its
interest in the Partnership, the other Partner shall have a right
of first refusal to purchase, accept the assignment, or otherwise
take the interest, or any part, being offering. A change for any
reason in the control of Dresick or Gargiulo shall be deemed an
assignment by that Partner and permit exercise of a right of first
refusal by the other Partner, the purchase price to be determined
as set forth in Paragraph 4.04.
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<PAGE>
ARTICLE 4 -- TERMINATION OF PARTNERSHIP
---------------------------------------
Dissolution of Partner
4.01 The voluntary or involuntary dissolution of either
Partner shall effect a termination of that Partner's interest in
the Partnership.
Bankruptcy and Charging Order
4.02 The remaining Partner may by service of a written
notice stating the effective date thereon on both the Partner and
on the trustee in bankruptcy of such Partner or the judgment
creditor of such Partner who has obtained a charging order against
such Partner's interest, terminate such Partner's interest in the
Partnership:
a. If a Partner has been adjudged bankrupt pursuant to
a petition in bankruptcy filed by or against it under the
Bankruptcy Act of the United States;
b. Against whose interest in the Partnership a
charging order has been issued pursuant to Section 15028 of the
California Corporations Code and not removed within thirty (30)
days after it is issued.
Withdrawal of a Partner
4.03 Either Partner may voluntarily withdraw from the
Partnership by giving the other Partner at least thirty (30) days
notice of tis intention to do so; however, there shall be no such
voluntary withdrawal for a period of three (3) years from the
commencement of the partnership.
Option to Purchase Terminated Interest
4.04 On termination of the Partnership, or withdrawal of a
Partner, the remaining Partner shall have the option to purchase
the interest of the terminated or withdrawing Partner in the
assets and goodwill of the Partnership business by paying to such
Partner or the person legally entitled thereto the value of such
interest determined as provided in Paragraph 4.05 of these
Articles. The remaining Partner shall give notice of its exercise
of such option in the following manner:
a. If the Partnership is dissolved due to the
dissolution of the corporate Partner, by serving written notice of
exercise of such option on all of the shareholders of the
dissolved or dissolving corporate Partner within thirty (30) days
of receiving notification of the pending corporate dissolution.
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<PAGE>
b. If the Partnership is dissolved by the voluntary
withdrawal of a Partner, by serving written notice of the exercise
of such option on the withdrawing Partner within thirty days after
service on the remaining Partner of the notice of withdrawal
provided in Paragraph 4.03 of these Articles.
c. If the Partnership is dissolved for the reasons
specified in Paragraph 4.02(a) or (b) of these Articles, by
serving written notice of the exercise of such option on both the
terminated Partner and its trustee in bankruptcy, or the judgment
creditor who secured a charging order against such Partner's
interest, at the same time the notice of termination of such
Partner's Partnership interest is served on said persons.
2. All accounts receivable due the Partnership that
are more than ninety calendar days old and not barred by the statute of
limitations at one-half their face value;
3. All accounts receivable due the Partnership that
are less than ninety (90) calendar days old at their full face value;
4. Goodwill and other intangible assets of the
Partnership at their fair cash market value.
Payment and Purchase Price
4.06 On exercise of the option to purchase the Partnership
interest of a withdrawing or terminated Partner, the remaining
Partner shall pay to the person or entity legally entitled thereto
the value of such interest determined as provided in Paragraph
4.05 of these Articles in the following manner:
One-fourth thereof in cash within ninety (90) days of
withdrawal or termination, if the Partners agreed on the price, or
within ninety (90) days of receipt by them of the report of the
appraisers provided for in Paragraph 4.05, and the balance in
thirty six (36) equal monthly installments commencing not later
than ninety days after the receipt of such report of appraisers.
Each monthly installment shall be applied first to interest at the
rate of ten percent (10%) per annum on the then remaining unpaid
principal balance of such purchase price from the date the
appraiser's report was received by the remaining Partner and then
to the reduction of the principal thereof.
Assumption of Partnership Obligations
4.07 On any purchase or sale of a Partnership interest being
made as in this Article provided, the remaining Partner shall
assume all the Partnership obligations and shall protect and
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<PAGE>
indemnify the withdrawing or terminated Partner and the property
of such withdrawing or terminated Partner from liability for any
such obligation.
Publication of Notice
4.08 On any purchase and sale of a Partnership interest
being made as in this Article provided, the remaining Partner
shall at its own cost and expense, as soon as reasonably
practicable after giving notice of exercise of option to purchase
such interest, cause to be prepared, published, filed and served
such notices as may be required by law to protect the withdrawing
or terminated Partner from liability for future obligations of the
Partnership business.
Dissolution Without Sale
4.09 On dissolution of the Partnership other than as
provided in Paragraphs 4.01 through 4.08 of these Articles, the
affairs of the Partnership shall be wound up, the assets
liquidated, the debts paid and the remaining funds divided among
the Partners according to their respective interests in the
Partnership business.
ARTICLE 5 -- MISCELLANEOUS
--------------------------
Notices
5.01 Any notices between the parties provided for or
permitted under these Articles or by law shall be in writing and
shall be deemed duly served when personally delivered to a
Partner, or in lieu of such personal service, when deposited in
the United States mail, certified, postage prepaid, addressed to
such Partner at the address given or to such other place as may
from time to time be specified in a notice given pursuant to this
paragraph as the address for service of notice on such Partner:
Dresick Farms, Inc. NT Gargiulo, L.P.
P.O. Box 1260 P.O. Box 1570
Huron CA Watsonville, CA 95077
and
15000 Old 41 North
Naples, FL 33963
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<PAGE>
Consents and Agreements
5.02 Any and all consents and agreements provided for or
permitted by these Articles shall be in writing and a signed copy
thereof shall be filed and kept with the books of the Partnership.
Attorneys' Fees
5.03 Should any litigation be commenced between the parties
concerning any provision of these Articles or the rights and
duties of any person in relation thereof, the party prevailing in
such litigation shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum as and for
attorney's fees in such litigation which shall be determined by
the court in such litigation or in a separate action brought for
that purpose.
Sole and Only Agreement
5.04 This instrument contains the only agreement of the
parties relating to their Partnership and correctly sets forth the
rights, duties and obligations of each to the other as of its
date. Any prior agreements, promises, negotiations, or
representations not expressly set forth in these Articles are of
no force and effect.
Successors
5.05 This agreement and each of its terms and provisions
shall be binding upon the parties, and their successors and
assigns.
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<PAGE>
Executed in Santa Cruz County, California on __ January 1993
by NT Gargiulo L.P. and in Fresno County, California on __ January
1993 by Dresick Farms, Inc.
NT Gargiulo L.P.
a Limited Partnership
By: NT Gargiulo G.P. Inc.
Its General Partner
By: /s/ John Gargiulo
--------------------------
John Gargiulo
Vice President
Dresick Farms, Inc.
a California Corporation
By: /s/ Mike Dresick
--------------------------
Mike Dresick
President
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<PAGE>
FIRST AMENDMENT
TO
ARTICLES OF PARTNERSHIP
-----------------------
This Amendment, effective 1 June 1993, is between NT
GARGIULO, L.P., a Delaware limited partnership ("Gargiulo") and
DRESICK FARMS, INC., a California corporation ("Dresick").
RECITALS
A. Gargiulo and Dresick formed a California general
partnership named "NT Gargiulo & Dresick Associates" pursuant to
Articles of Partnership dated 14 January 1993 ("Articles of
Partnership").
B. The parties desire to amend the Articles of Partnership
as here set forth.
C. For good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as
follows:
1. The Articles of Partnership are amended by deleting
Section 3.03 (entitled "Management") in its entirety, and by
substituting the following:
Management.
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3.03 Gargiulo shall manage the Partnership business
on a day-to-day basis. Notwithstanding the foregoing,
action on the following matters shall require the
approval of Dresick:
(i) Sale of all or substantially all of the
assets of the Partnership, whether by direct sale,
merger, consolidation or otherwise.
(ii) Pledging or otherwise encumbering all
or substantially all of the Partnership assets.
(iii) Making capital improvements having a
cost in excess of One Hundred Thousand and no/100
Dollars ($100,000.00) for each such capital
improvement.
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<PAGE>
In the event of disagreement between the Partners
with respect to any matter which requires the approval
of both Partners, the Partners shall first attempt to
resolve such dispute by negotiation and compromise.
2. Except as here amended, the Articles of Partnership
remain in full force and effect.
Executed by John D. Gargiulo for NT Gargiulo, G.P., Inc. and
Mike Dresick for Dresick Farms, Inc., at Firebaugh, California on
25 June 1993.
NT GARGIULO, L.P.
By: /s/ John D. Gargiulo
-------------------------
John D. Gargiulo
Vice President
NT Gargiulo, G.P., Inc.,
Its General Partner
DRESICK FARMS, INC.
By: /s/ Mike Dresick
-------------------------
Mike Dresick, President
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<PAGE>
EXHIBIT 10.15
-------------
BHN JOINT VENTURE AGREEMENT
AMENDED AND RESTATED
AS OF JANUARY 1, 1981
WHEREAS, HARLLEE-GARGIULO, INC., NAPLES TOMATO GROWERS, INC., and
BEEFSTAKE TOMATO GROWERS, INC. ("Venturers"), all being corporations
organized and existing under the laws of the State of Florida, entered
into a JOINT VENTURE AGREEMENT effective the first day of November 1979
operating under the name of BHN, and
WHEREAS, ARTICLE XIX of said JOINT VENTURE AGREEMENT had expressly
reserved the right to amend said AGREEMENT if made in writing and
signed by all the Venturers, and
WHEREAS, it is now the desire of the Venturers to increase the
number of Venturers involved in the discovery and development of new
plant varieties, and
WHEREAS, the present Venturers are willing to admit A. DUDA &
SONS, INC., and RICHFIELD PACKING CORPORATION, INC., into the Venture
in return for a capital contribution as provided herein,
NOW, THEREFORE, the JOINT VENTURE AGREEMENT dated the twenty-
seventh day of October 1980, which was effective the first day of
November 1979, is hereby amended and restated in its entirety effective
January 1, 1981, and the Amended and Restated Agreement shall read as
follows:
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<PAGE>
JOINT VENTURE AGREEMENT
-----------------------
JOINT VENTURE AGREEMENT, by and between HARLLEE-GARGIULO, INC., a
corporation organized and existing under the laws of the State of
Florida and having its principal office at 2308 U.S. Highway 301 East
(Post Office Box 8), Palmetto, Florida 33561 (hereinafter specifically
referred to as "HARLLEE"), and NAPLES TOMATO GROWERS, INC., a Florida
corporation having its principal office at Route 2, Box 1700, Old U.S.
Highway 41, Naples, Florida 33940 (hereinafter specifically referred to
as "NAPLES"), and BEEFSTAKE TOMATO GROWERS, INC., a Florida corporation
having its principal office at 440 South Shelfer Street, Quincy,
Florida 32351 (hereinafter specifically referred to as "BEEFSTAKE"),
and A. DUDA & SONS, INC., a Florida corporation having its principal
office at Post Office Box 257, Oviedo, Florida 32765 (hereinafter
specifically referred to as "DUDA"), and RICHFIELD PACKING CORPORATION,
INC., a Florida corporation having its principal office at Post Office
Box 566, Palmetto, Florida 33561 (hereinafter specifically referred to
as "RICHFIELD"). The parties hereto may be hereinafter sometimes
referred to individually as the "Venturer" and collectively as the
"Venturers."
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<PAGE>
R E C I T A L S
---------------
WHEREAS, the Venturers operate certain businesses connected with
agriculture including, but not limited to, packing and distribution of
tomatoes; and
WHEREAS, the Venturers have a joint interest in the development of
improved plant varieties and believe that it would be prudent to join
together in a joint venture to fund a research facility to discover and
develop new plant varieties which can be used in connection with their
individual business operations and to employ at said facility a person
or persons having the educational background and experience necessary
to conduct such research; and
WHEREAS, the risk of the Venture and the anticipated cost of a
magnitude that no one Venturer would be willing to undertake the
project alone, but collectively, the Venturers believe the potential
would justify the risks involved, and the Venturers desire, therefore,
to conduct the project in joint venture form for the purposes
hereinabove and hereinafter provided.
NOW, THEREFORE, in consideration of the premises which shall be
deemed to be an integral part of this agreement and not as mere
recitals hereto, and of the mutual agreements herein contained, it is
agreed by and between the parties hereto as follows:
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<PAGE>
ARTICLE I
---------
The Venturers hereby constitute themselves Joint Venturers for the
purpose of funding and operating a research facility for purposes of
discovering and developing new plant varieties having a commercial
application to existing or future business operations of the Venturers
and to do all things incident thereto including, but not limited to,
the employment of persons having the ability to conduct such research.
ARTICLE II
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A. Name. The Venture shall operate under the name BHN, a
----
Joint Venture, or such other name as the Venturers shall determine.
B. Office Address. The office and principal place of business
--------------
of the Venture shall be at Route 2, Box 1700, Naples, Florida 33940, or
such other place or places as shall mutually be agreed upon by the
Venturers.
ARTICLE III
-----------
The Venture shall commence on the first day of November 1979 and
shall continue until the thirty-first day of October 1989, or until
dissolved, if dissolution shall occur prior to the aforesaid
termination date by the terms of this agreement, by desire of a
majority in interest of the Venturers, or by operation of law;
provided, however, that dissolution of the Venture shall not terminate
this agreement prior to completion of the liquidation of the Venture.
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<PAGE>
ARTICLE IV
Defined Terms
-------------
The defined terms used in this agreement shall, unless the context
otherwise requires, have the meanings specified in this Article IV.
A. "Agreement" means this Joint Venture Agreement as amended and
-----------
restated and as hereafter amended from time to time unless the context
otherwise requires.
B. "Capital Account" as to any Venturer means such Venturer's
-----------------
capital account as provided in Paragraph C of Article V hereof.
C. "Capital Contribution" means the total amount of money or
----------------------
property contributed to the Venture as provided in Article V by the
Venturers or any Venturer, as the context requires.
D. "Cash Flow" shall mean gross receipts determined on a cash
-----------
basis from Venture operations less cash disbursements for Venture
purposes including, by way of example and not by way of limitation:
(1) All expenses of the Venture including operating
expenses of the Venture;
(2) Debt payments;
(3) Capital costs of equipment, improvements,
replacements and other tangibles and intangibles; and
(4) Prepaid items.
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<PAGE>
Depreciation and other noncash amortizations or charges, if
any, shall not be a charge in determining cash flow.
E. "Code" means the United States Internal Revenue Code of 1954
------
as heretofore or hereafter amended (or any corresponding provision of
succeeding law).
F. "Consent" means the written consent of a Venturer to do the
---------
act or thing for which the consent is solicited, or the act of granting
such consent, as the context may require.
G. "Development Plan" shall mean the development plan and
------------------
program setting forth research priorities plus the detailed overall
budget and cash flow estimate that is adopted by the Venturers at an
annual meeting or a special meeting or by written consent, as the case
may be.
H. "Dissolution", when used with respect to a Venturer, assignee
-------------
or other successor or person or entity having an interest in the
Venture, shall mean an actual substantive dissolution.
I. "Distributable Cash Flow" shall mean cash flow adjusted
-------------------------
for amounts which are from time to time set aside for restoration or
creation of reserves or which are from time to time withdrawn from such
reserves.
J. "Fiscal Year" means, with respect to the Venture, December 31
-------------
or such other fiscal year as the Venturers may properly and lawfully
agree upon from time to time.
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<PAGE>
K. "Gross Receipts" shall mean the total Venture revenues
----------------
received during an accounting period or any other given period from all
sources, including, by way of example and not by way of limitation, the
proceeds of a sale of seeds or plants developed.
L. "Incapacity" or "Incapacitated" means the insolvency,
------------ ---------------
adjudication of bankruptcy, as the case may be, of any Venturer.
M. "Interest" and "Venture Interest" means the entire ownership
---------- ------------------
interest (which may, either for its capital account or its interest in
profits, losses, distributable cash flow, etc., be expressed as a
percentage) of a Venturer in the Venture at any particular time,
including the rights and obligations of such Venturer under this
Agreement.
N. "Majority" or "Majority of the Venturers" or "Majority in
---------- --------------------------- ------------
Interest" means a majority in interest of the Venturers and not a
---------
majority in number of the Venturers.
O. "Notification" means a writing containing the information
--------------
required by this agreement or desired by any Venturer to be
communicated to any person, sent by registered or certified mail,
return receipt requested, postage prepaid, to such person at the
address for such person specified in Exhibit "B" attached hereto and by
this reference made a part hereof, the same as if fully set forth
herein or, if applicable, at such address for such person specified in
the most recent notification by or on behalf of such person changing
the address of such.
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<PAGE>
P. "Operating Expenses" shall mean all costs of operating
--------------------
Venture properties including, by way of example and not by way of
limitation, the costs and expenses of repairs to equipment, fixtures
and facilities constituting a part of such properties or related to or
used on such properties, the costs and expenses of staffing the
research facility and the costs and expenses of administration and
operation of the Venture and the Venture properties; provided, however,
that operating expenses shall include only those expenditures provided
in any approved budget adopted by the Venture or otherwise approved by
a majority in interest of the Venturers.
Q. "Venturer" means HARLLEE-GARGIULO, INC.; NAPLES TOMATO
----------
GROWERS, INC.; BEEFSTAKE TOMATO GROWERS, INC.; A DUDA & SONS, INC.; and
RICHFIELD PACKING CORPORATION, INC.; or any successor in that capacity
permitted hereunder.
R. "Property" and "Venture Property" shall mean the real and
---------- ------------------
personal property initially leased by or transferred to the Venture and
all property subsequently leased or acquired by the Venture.
S. "Venture" means the Venture formed hereby as said Venture may
---------
from time to time be constituted.
T. "Venture Account" means the bank account or bank accounts to
-----------------
be maintained by the Venturers on behalf of the Venture with any bank.
- 8 -
<PAGE>
U. "Person" means any individual, partnership, corporation,
--------
trust or other entity.
V. "Profits" and "Losses" means the net ordinary income
--------- --------
(profits) or net ordinary loss (losses) of the Venture as determined on
a cash basis for U.S. federal income tax purposes determined as of the
[illegible text].
A. DUDA & SONS, INC. -0-
RICHFIELD PACKERS CORPORATION, INC. 10,000.00
B. Additional Contributions. It is recognized and agreed by and
------------------------
between the Venturers that additional contributions to the capital of
the Venture (in amounts and at times not at present known) will be
necessary to carry out the purposes of the Venture and to carry on the
business of the Venture and that such additional contributions shall be
made by the Venturers in the same ratios as their participation in the
profits of the Venture as set forth in Exhibit "A" hereto. The decision
as to whether additional contributions to the capital of the Venture
shall be made is considered to be a management decision and as such
shall be determined as provided in ARTICLE X, paragraph A, of this
Agreement.
C. Remedies for Failure of Venturer to Make Additional
---------------------------------------------------
Contributions. When additional contributions are necessary to carry out
-------------
the purposes of the Venture or to carry on the business
- 9 -
<PAGE>
of the Venture and any Venturer fails to make its full share of such
additional contributions within thirty (30) days after the required or
agreed date thereof, then the other Venturers may make such
contribution (hereinafter called the "Contributing Venturers") in which
event the proportionate Venture interest of the Venturer failing to
make such additional contribution (hereinafter called the "Delinquent
Venturer") shall be decreased by twice the percentage equal to the
percentage which such additional contribution to the Venture bears to
the total contributed capital of the Venture including the subject
additional capital contribution, and the Venture interest of the
contributing Venturers will be increased by a like amount. The
Delinquent Venturer shall, however, have ninety (90) days from the date
of the payment by the Contributing Venturer or Venturers in which to
cure (as hereinafter provided) the failure to make its full share of
such additional contribution, and upon cure, the Venture interests of
the respective Venturers prior to the above contemplated delinquency
adjustment shall be reinstated. Said cure shall only be accomplished by
payment by the Delinquent Venturer to the Contributing Venturer or
Venturers of an amount equal to fifteen percent (15%) of the Delinquent
Venturer's required share. In the event that Delinquent Venturer's
contribution is not made by any other Venturer but other Venturers have
contributed their shares of the additional contribution, then in that
event, upon expiration of one hundred twenty (120) days
- 10 -
<PAGE>
after the required or agreed date for contributions to be made, the
respective interests of the Venturers shall be adjusted to reflect
additional capital contributions made. In all instances Exhibit "A"
shall be amended to reflect the change in Venture interests of the
Venturers.
D. Capital Accounts. An individual capital account shall be
----------------
maintained for each Venturer. The capital account of each Venturer
shall initially consist of the amount or value of the sum of its
contributions to the capital of the Venture as set forth in Exhibit "A"
hereto and in addition to the adjustments contemplated by Article V-C
hereof, shall be (a) increased (i) by the amount or value of its
additional contributions to the capital of the Venture and (ii) by the
amount of its share of any profits or other income as set forth in
Exhibit "A" hereto; and (b) decreased by (i) its share of any
distributions of any Venture cash or assets (assets to be valued at
their fair market value at the date of distribution) and (ii) by its
share of any losses as set forth in Exhibit "A" hereto. The capital
accounts of the Venturers shall be maintained at all times in the
ratios in which they share in the profits or losses of the Venture as
set forth in Exhibit "A" hereto or as said Exhibit "A" may be amended
from time to time as provided in this Agreement.
E. Tax Basis Record. An individual tax basis record for U.S.
----------------
Federal income tax purposes shall be maintained for each Venturer. The
tax basis record of each Venturer shall be
- 11 -
<PAGE>
established and shall be adjusted as of the close of each taxable year
of the Venture (or when appropriate, as of the close of the taxable
year of the Venture for such Venturer) in accordance with Federal
income tax law and procedure as the same may exist from time to time.
F. Interest on and Repayment of Capital Accounts. No interest
---------------------------------------------
shall be payable on the capital accounts of the Venturers. Repayment of
all or any part of the capital accounts of the Venturers shall be only
in accordance with the provisions of this Agreement or in accordance
with the agreement of a majority of the Venturers to the extent allowed
by law; provided, however, that any and all such repayments shall be
made (a) with respect to each Venturer's capital account and (b) in
equal percentages with respect to each Venturer's capital account.
ARTICLE VI
Distributions
-------------
A. Cash Flow Accounts and Distributions. An individual cash flow
------------------------------------
account shall be maintained for each Venturer. The cash flow shall be
computed at the end of each quarter during each fiscal year of the
partnership, and after the allocation, if any, to such reserves as the
Venturers may from time to time establish by approval of the majority
of the Venturers, each Venturer's distributive share (measured by its
proportion for sharing in the profits of the Venture as set forth in
Exhibit "A" hereto or as said Exhibit "A" may be amended from time to
time as provided in
- 12 -
<PAGE>
this Agreement) of such distributable cash flow shall then be credited
to its cash flow account. Distributions (withdrawals) from such cash
flow accounts shall be permitted by agreement of a majority of the
Venturers, provided, however, that any and all such distributions
(withdrawals) shall be permitted (a) with respect to each Venturer's
cash flow account and (b) in percentages with respect to each
Venturer's cash flow account.
B. Interest on Cash Flow Accounts. No interest shall be payable
------------------------------
on the cash flow accounts of the Venturers.
C. Distributions to Pay Income Taxes. The Venturers agree that
---------------------------------
to the extent that the Venture has available cash funds, distributions
shall be made to the parties to the Venture in the actual net amount of
any United States Federal or state income taxes which the parties to
the Venture may be required to pay on account of their share of any
taxable income of the Venture as reported on income tax returns of the
Venture.
ARTICLE VII
Profits and Losses
------------------
A. Participation of Venturers in Profits and Losses. The
------------------------------------------------
Venturers shall participate in the profits and losses of the Venture as
set forth in Exhibit "A" in this Agreement or as said Exhibit "A" may
be amended from time to time as provided in this Agreement.
B. Participation of Venturers in Gains, Costs, Expenses, Credits
-------------------------------------------------------------
and Deductible Items. All items of gain or income not
--------------------
- 13 -
<PAGE>
included in determining Venture profits or losses shall be allocated to
the Venturers in the same manner and proportions as profits are
allocated as set forth in Exhibit "A" hereto or as said Exhibit "A" may
be amended from time to time as provided in this Agreement. All items
of capital loss, depreciation, investment tax credits and other such
items of deduction or credit that are separately allocated among the
Venturers or not included in determining Venture profits or losses
shall be allocated to the Venturers in the same manner and proportions
as losses are allocated as set forth in Exhibit "A" hereto or as said
Exhibit "A" may be amended from time to time as provided in this
Agreement. Notwithstanding anything else herein contained, any amounts
of any credits, depreciation or other deductible items recaptured shall
be allocated to the Venturers who claimed such credits, depreciation or
other deductible items (or to their successors or assigns) to the
extent thereof.
ARTICLE VIII
Rights, Powers and Duties of Agent and Parties to the Venture
-------------------------------------------------------------
A. Responsibilities of Agent. Jeffrey Gargiulo is hereby
-------------------------
appointed agent for the Venture and shall be responsible for:
(1) The management and operations of the affairs, activities
and business of the Venture in accordance with the development plan
adopted by the Venture.
(2) The development of an estimated operating statement of
profit and loss for each six-month period of the existence of
- 14 -
<PAGE>
the Venture in accordance with the development plan adopted by the
Venture and estimated costs and income for same.
(3) Semi-annual progress and other similar reports by
notification to the notice address of each Venturer not later than
fifteen (15) days following the end of each six-month period which
reveal the status of the Venture.
(4) Hiring of all personnel, preparation of project policies
and budgets (including periodic review and amendments thereto)
direction and coordination of experts and other personnel needed to
carry out the purposes of the Venture, obtaining all government
approvals and permits in connection with discovery and development of
plant varieties in accordance with the development plan adopted by the
Venture, financing requirements and establishing and maintaining a
system of books and records.
(5) Monitoring the Venture activities continuously,
vigilantly and diligently and reporting immediately to each Venturer or
their designees any problems, delays, defaults, mistakes, impediments
or special opportunities with respect to the Venture project or any
part or phase thereof with respect to any specific deal or proposal in
connection with the Venture project or any part or phase thereof.
Subject to the provisions of this entire Agreement, Venturers hereby
delegate to Agent such authority as is reasonably required to
accomplish the above-mentioned activities.
- 15 -
<PAGE>
B. A majority of the Venturers shall have the right and power by
express notice to the other Venturers and BHN's agent to terminate
effective upon receipt of such notice any and all of the actions of
said agent and to direct the accomplishment of any such terminated
task(s) by those persons and/or entities selected by majority of the
Venturers.
C. Power of Agent to Commit the Venturer or Venturers to
-----------------------------------------------------
Obligations.
-----------
(1) The Agent shall not, without the consent of a majority
of the Venturers, obligate the Venture to expenditures, obligations,
responsibilities or similar items of expense in excess of a total
annual aggregate amount of $50,000.00 or in excess of $50,000.00 for
any single such item of expense or to contract for a term in excess of
one year.
(2) Any expenditure, obligation, responsibility or similar
item in excess of $50,000.00 shall require the consent by a majority of
the Venturers prior to the incurrence by the Venture of such
expenditure, obligation, responsibility or similar item. For this
purpose, approval of the semi-annual budget for the Venture shall be
deemed to satisfy the requirements of this subparagraph C(2) to the
extent of the items of expenditure and obligation contained therein and
the dollar limitations or other limitations thereon as provided in said
semi-annual budget as approved.
- 16 -
<PAGE>
D. Operating Costs of Project. No party to the Venture shall be
--------------------------
entitled to a separate fee for carrying out any responsibilities
assigned to such party under this Agreement.
ARTICLE IX
Representations of the Parties to the Venture
---------------------------------------------
A. HARLLEE represents and warrants:
(1) That HARLLEE has and shall have the full right and
authority to enter into this Agreement and to carry out all rights and
obligations of HARLLEE expressed, implied and contemplated in this
Agreement.
B. NAPLES represents and warrants:
(1) That NAPLES has and shall have the full right and
authority to enter into this Agreement and to carry out all rights and
obligations of NAPLES expressed, implied and contemplated in this
Agreement.
C. BEEFSTAKE represents and warrants:
(1) That BEEFSTAKE has and shall have the full right and
authority to enter into this Agreement and to carry out all rights and
obligations of BEEFSTAKE expressed, implied and contemplated in this
Agreement.
D. DUDA represents and warrants:
(1) That DUDA has and shall have the full right and
authority to enter into this Agreement and to carry out all rights and
obligations of BEEFSTAKE expressed, implied and contemplated in this
Agreement.
- 17 -
<PAGE>
E. RICHFIELD represents and warrants:
(1) That RICHFIELD has and shall have the full right and
authority to enter into this Agreement and to carry out all rights and
obligations of RICHFIELD expressed, implied and contemplated in this
Agreement.
ARTICLE X
Administrative Provisions of the Venture
----------------------------------------
A. Management of Venture. In the management of the business of
---------------------
the Venture, each party to the Venture shall have one vote for each One
Percent (1%) of participation in the profits of the Venture as set
forth in Article VII hereof. Except as otherwise specifically provided
herein and specifically in Article VIII, decisions as to all matters in
the management of the business of the Venture shall be decided by a
simple majority of the total votes of the Venture (elsewhere referred
to as a majority of the Venturers). At all meetings of Venturers, a
Venturer may vote by proxy, executed in writing by the Venturer or its
duly authorized attorney-in-fact or corporate officer, but no proxy
shall be valid after eleven (11) months from the date of such proxy
unless the proxy provides for a longer period. Such
- 18 -
<PAGE>
proxies shall be filed with the entity designated by the Venturers
prior to or at the time of the meeting.
B. Annual Meetings of the Venturers. The Venturers agree that
--------------------------------
there shall be annual meetings of the Venturers held on dates and at
locations chosen by the Venturers. Any business of the Venture may be
transacted at the annual meeting. Formal written minutes of all
meetings of the Venturers and any committees established by the
Venturers shall be prepared and maintained by BHN's agent for
inspection by the Venturers.
C. Special Meetings of the Venturers. Any number of Venturers
---------------------------------
having Thirty-three Percent (33%) or more in interest of the total
Venture interest may call a meeting of the Venturers by giving notice
to all Venturers and setting forth in such notice the purpose or
purposes of the meeting.
D. Informal Action by Venturers. Any action required or
----------------------------
permitted to be taken at any meetings of the Venturers may be taken
without a meeting if, prior to such action, a written consent thereto
is signed by an officer of each of the Venturers setting forth the
actions so to be taken and filed in the minutes of the proceedings of
the Venturers.
E. Telephonic Meetings. The Venturers shall be deemed present at
-------------------
a meeting if there is used a conference telephone or similar
communications equipment by means of which duly authorized officers or
representatives of each Venturer participating in the meeting can hear
each other at the same time.
- 19 -
<PAGE>
F. Books and Records. Full and accurate books of the Venture
-----------------
shall be maintained at the Venture's principal place of business
showing all receipts and expenditures, assets and liabilities, profits
and losses, and all other records necessary for recording the Venture's
business and affairs. The books of the Venture shall be kept on a cash
basis and shall be kept in conformance with generally accepted
accounting principles and practices in accordance with standards
generally expected by national accounting firms. All Venturers or their
respective duly authorized representatives shall at all times during
regular business hours have access to and may inspect and copy any of
such books and records.
G. Fiscal Year. The fiscal year of the Venture shall be January
-----------
1 to December 31 or any other twelve-month period selected by the
Venturers from time to time.
H. Reports. Annual audited financial statements showing at least
-------
the income and expenses of the Venture for the fiscal year and the
balance sheet thereof as of the end of such year shall be prepared by
an accounting firm (the "accountants") selected by a majority of the
Venturers. The audited financial statements of the Venture shall be
prepared in conformance with generally accepted accounting principles.
Each party to the Venture shall be furnished copies of such statements
of income and expenses and of such balance sheets within one hundred
twenty (120) days after the end of each fiscal year of the Venture.
- 20 -
<PAGE>
I. Bank Accounts and Investments of Funds. All funds of the
--------------------------------------
Venture shall be deposited in its name in such checking and savings
accounts or time deposits or certificates of deposit as shall be
designated from time to time by a majority of the Venturers.
Withdrawals therefrom shall be made upon such signatures of such
persons as may be designated from time to time. The Venture may only
invest funds in any investments which a national bank is permitted to
carry in its investment portfolio.
ARTICLE XI
Restriction on Venturers
------------------------
No Venturer, without the consent of the other Venturers,
shall:
(1) Borrow or lend money, make, deliver or accept any
commercial paper on behalf of the Venture.
(2) Execute any mortgage, bond or lease on behalf of the
Venture.
(3) Assign, transfer or pledge any debts due the Venture or
release any debts due the Venture, except on payment in full.
(4) Compromise any claim due the Venture or submit to
arbitration any dispute or controversy involving the Venture.
(5) Purchase or contract to purchase any property on behalf
of the Venture.
(6) Sell, assign or license any patent, trademark or patent
owned by the Venture.
- 21 -
<PAGE>
(7) Enter into employment contracts on behalf of the
Venture.
(8) Do any act detrimental to the best interest of the
Venture which would make it impossible to carry on the ordinary
business of the Venture.
(9) In the absence of full compliance with applicable
provisions of Article XII and Article XIII hereof, sell, assign,
pledge, mortgage or otherwise encumber or transfer its interest in the
capital or profits and losses of the Venture to enter into any
agreement as a result of which any person shall become interest with it
in the Venture.
ARTICLE XII
Voluntary Transfers
-------------------
Of Venture Interest
-------------------
A. Restrictions on Granting Security Interest. A Venturer shall
------------------------------------------
not, directly or indirectly, mortgage, encumber, pledge or assign or
transfer for financing purposes or otherwise give or grant any security
interest in all or any part of its Venture interest without first
obtaining the consent of the other Venturers. In the event such consent
is obtained, the mortgagee, encumbrancer, pledgee, assignee, or
transferee shall be entitled to receive Venturer's interest in the
profits and losses of the Venture and should liquidation of the Venture
occur, the right to receive the Venturer's allocable share of the
remaining assets. However, pursuant to Florida Statute 620.60, in the
absence of the written agreement of all Venturers, there shall be no
entitlement
- 22 -
<PAGE>
to the mortgagee, encumbrancer, pledgee, assignee, or transferee to
participate or interfere in the management of the administration of the
Venture's business or affairs. The consent to directly or indirectly,
mortgage, encumber, pledge or assign or transfer for financing purposes
or otherwise give or grant any security interest shall not otherwise
release such Venture interest from the other restrictions contained in
this Agreement, but such restrictions shall merely become subject to
the security interest to which such consent expressly applies for the
duration of such security interest only, and in the event the holder of
such security interest shall foreclose upon such Venture interest or
otherwise acquire such Venture interest, such holder shall take such
Venture interest subject to the restrictions contained in this
Agreement, and it shall be subject to all such restrictions the same as
if such holder were a party to this Agreement.
B. Restrictions on Transfer. A Venturer shall not, directly or
------------------------
indirectly, sell, assign, transfer or otherwise dispose of all or any
part of its Venture interest other than to its parent, controlled
affiliates, subsidiaries, an entity substantially owned by the
Venturer's shareholders or the Venturer's shareholders without first
obtaining the consent of the other Venturers, or in the absence of such
consent, without first complying with all of the following terms and
conditions:
(1) Right of Existing Venturer to Buy. Except as hereinabove
---------------------------------
provided, in the event a Venturer desires, directly or
- 23 -
<PAGE>
indirectly, to sell, assign, transfer or otherwise deal with or dispose
of all or any part of its Venture interest, the Venturer (hereinafter
referred to as the "selling Venturer") shall be required to offer to
sell its Venture interest by delivering a notification (hereinafter
referred to as the "offer to sell"), signed by the selling Venturer to
the other Venturers, stating the amount of its Venture interest which
it desires to sell, assign or transfer. The other Venturers shall then
have the option to purchase their proportionate share of the Venture
interest offered pursuant to the offer to sell or the share of
Venturers not exercising their option, which option may be exercised by
delivering a notification of acceptance to the selling Venturer within
sixty (60) days after delivery to it of the said offer to sell.
C. Determination of Purchase Price and Terms. In the event that
-----------------------------------------
any Venture interest is to be purchased pursuant to the foregoing
provisions of this Article XII, the following provisions shall apply:
(1) Price. Each One Percent (1%) of Venture interest to be
-----
purchased pursuant to the foregoing provisions of this Article XII
shall be purchased at the price specified in Article XIV of this
Agreement, and fractions of One Percent (1%) of Venture interest shall
be purchased at the appropriate proportion of the price specified in
Article XIV of this Agreement.
- 24 -
<PAGE>
(2) Manner of Payment. The purchase price of any Venture
-----------------
interest to be purchased pursuant to the foregoing provisions of this
Article XII shall be paid in accordance with the provisions of
Paragraph F of this Article.
D. Right of Selling Venturer to Sell. In the event that the
---------------------------------
other Venturers fail or refuse to purchase all of the Venture interest
offered for sale by the selling Venturer pursuant to the offer to sell
in accordance with the provisions of this Agreement, then after the
expiration of the option period, the selling Venturer shall be free to
sell, transfer or otherwise dispose of the Venture interest offered
pursuant to the offer to sell made and delivered in accordance with the
provisions of this Agreement and not accepted for purchase by the other
Venturers, as hereinabove provided, to any person or entity, in any
manner and upon any terms and conditions; provided however, that such
selling Venturer shall not in fact sell, transfer or otherwise dispose
of any Venture interest to any person or entity either for a price less
than or on terms more favorable than the purchase price and the terms
fixed by this Agreement without first offering the other Venturers the
right to purchase such Venture interest at the same price and upon the
same terms as agreed between such selling Venturer and any other person
or entity. In carrying out the intent of the immediately preceding
sentence, the same procedure and time periods as specified in the
preceding paragraphs of this Article shall again be followed except
that the notice provided
- 25 -
<PAGE>
the other Venturers shall specify the name and address of the person or
entity to whom the selling Venturer proposes to sell its Venture
interest and the price and terms offered by such person or entity for
such Venture interest. The selling Venturer shall also provide the
other Venturers with a copy of the contract of sale (subject to the
right of first refusal herein granted to the other Venturers) and
evidence of a deposit made by the proposed purchasers which must be
equal to not less than Five Percent (5%) of the purchase price. In the
event that the other Venturers shall then fail or refuse to purchase
all the Venture interest offered for sale pursuant to this Agreement,
then after the expiration of the option period, the selling Venturer
shall not be required to sell any part of its Venture interest to the
other Venturer, but shall then be free to sell to such other person or
entity the Venture interest not purchased by the other Venturers in
accordance with the foregoing provisions of this Agreement for the
price and upon the terms set forth in such notice. Any sale, or other
disposition that may take place after the end of all applicable option
periods specified above must, in any event, take place within ninety
(90) days following the close of all applicable option periods, and
upon the expiration of such ninety (90) day period, the provisions of
this Agreement shall reattach to all of the Venture interest not sold,
transferred or otherwise disposed of during said ninety (90) day
period.
- 26 -
<PAGE>
E. Application to Transferees. This Agreement shall apply to any
--------------------------
permitted transferee of any Venture interest.
F. Time and Method of Payment. Within sixty (60) days after
--------------------------
there has been an offer and acceptance under this Article, except an
offer and acceptance under Paragraph D, any purchaser of any Venture
interest pursuant to this Article shall pay the purchase price therefor
in full to the seller or its assignee in cash or certified cashier's
check.
ARTICLE XIII
Transfer of Venture Interest on
-------------------------------
Insolvency, Bankruptcy or Appointment
-------------------------------------
Of a Receiver or Trustee for a Venturer
---------------------------------------
A. Option of Other Venturer to Buy. Upon the insolvency,
-------------------------------
bankruptcy or appointment of a receiver or trustee for one of the
Venturers (hereinafter called "Distressed Venturer"), then the other
Venturers shall have the option to purchase the Venture interest of the
Distressed Venturer, and Distressed Venturer or its representative
shall, upon proper exercise of said option, sell to the other Venturer
such Distressed Venturer's Venture interest; provided however, that
such option shall not arise with respect to a Venturer for whom a
receiver or trustee has been appointed but for whom no adjudication or
settlement has occurred unless such action has not been resolved
favorably to such Venturer within one hundred twenty (120) days after
appointment of such receiver or trustee. Such option shall be
exercisable by the other Venturers by notice of exercise any time
within one hundred
- 27 -
<PAGE>
eighty (180) days after such other Venturers are notified or otherwise
become aware of such action. The other Venturers shall mutually agree
as to the percentage of the Distressed Venturer's Venture interest each
shall purchase. If no agreement is reached, each shall have an option
for a proportionate share of Distressed Venturer's Venture interest
based upon purchasing Venturer's proportionate interest in the Venture
without considering Distressed Venturer's interest.
B. Determination of Purchase Price and Terms. In the event that
-----------------------------------------
any Venture interest is to be purchased pursuant to the foregoing
provisions of this Article XIII, the following provisions shall apply:
(1) Price. The Venture interest to be purchased pursuant to
-----
the foregoing provisions of this Article XIII, shall be purchased at
the price equal to total capital account of the distressed Venturer.
(2) Manner of Payment. The purchase price of any Venture
-----------------
interest to be purchased pursuant to the foregoing provisions of this
Article XIII shall be paid in accordance with the provisions of
Paragraph D of this Article.
C. Application to Transferees. This Agreement shall apply to the
--------------------------
transferee of any Venture interest.
D. Time of Closing and Method of Payment. Upon the closing of
-------------------------------------
any sale pursuant to this Article XIII, any purchaser of any Venture
interest shall pay the purchase price therefor in full to
- 28 -
<PAGE>
the seller or its assignee in cash or certified cashier's check. The
closing shall be held on or before the 90th day subsequent to exercise
of the options set forth in this Article XIII or to the extent required
by law or a court having jurisdiction within thirty (30) days after any
required third party approval, whichever shall last occur.
ARTICLE XIV
Purchase Price
--------------
A. Determination of Purchase Price by the Ventures. The
-----------------------------------------------
Venturers agree that where the purchase results from a transfer
pursuant to an offer to sell as provided in Article XII and not because
of a transfer pursuant to Article XIII, then the purchase price of a
One Percent (1%) Venture interest shall be the agreed value of such
interest as reflected initially on Exhibit "A" and as determined from
time to time by agreement of a majority of the Venturers and recorded
on a new or amended Exhibit "A" or the minutes of a Venture meeting. It
is the intention of the Venturers that the value for purposes of this
Agreement shall be reviewed at least annually. In the event the
aforesaid valuation has not been reviewed and redetermined within
twenty-four (24) months preceding an event requiring determination of
purchase price, then in that event, the purchase price shall be at fair
market value as determined by an appraiser selected by both the
- 29 -
<PAGE>
selling Venturers and the other Venturers provided both the selling
Venturers and the other Venturers agree to the purchase price
determined by the selected appraiser. Otherwise the purchase price
shall be at fair market value as determined by an average of the
closest two determinations of a panel of three arbitrators selected in
the following manner:
(1) One arbitrator selected by the selling Venturer.
(2) One arbitrator selected by the other Venturers.
(3) One arbitrator selected by the two arbitrators
designated by the selling and the other Venturers. Arbitration shall be
conducted in accordance with the provisions of Chapter 682 of the
Florida Statutes or successor statutes as amended from time to time,
and the determination of fair market value shall be conclusive.
The purchase price as determined in accordance with the provisions
of this Article XIV shall be binding upon the Venturers and all
successors and assigns of the Venturers.
ARTICLE XV
Venture Income Tax Returns
--------------------------
A copy of any Venture income tax return required to be filed with
the taxing authorities shall be given to each Venturer within one month
before that return is required to be filed.
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<PAGE>
ARTICLE XVI
Dissolution and Liquidation
---------------------------
The Venture shall be dissolved upon the occurrence of any of the
following:
(1) The consent of each of the Venturers to dissolve and
terminate the Venture;
(2) The sale or condemnation of all or substantially all of
the assets of the Venture, or the expiration of the term of the Venture
provided in Article III hereof.
In addition, any event of dissolution of the Venture provided in
the Florida Uniform Partnership Act shall cause the dissolution of the
venture, except that no Venturer shall have the right to demand
dissolution or to withdraw from the Venture, except in accordance with
the restrictions on transfer of its Venture interest provided in this
Agreement, and except that no event of dissolution shall cause the
Venture to be dissolved and liquidated if the surviving or remaining
Venturers shall elect to continue the Venture. Subject to the
foregoing, in the event of dissolution, the Venture shall be
immediately liquidated, due allowance being made for reasonable time to
wind up the affairs of the Venture in an orderly and businesslike
manner. Upon liquidation, the property of the Venture shall be applied
and distributed in the following order:
(1) To the payment of all debts and liabilities of the
Venture and the expenses of liquidation of the Venture.
- 31 -
<PAGE>
(2) To the establishment of such reasonable reserves as may
be deemed advisable by a majority in interest of the Venturers for any
consequent contingent liabilities or obligations of the Venture.
(3) To the repayment of any loans or advances made by any of
the Venturers to the Venture.
(4) To the repayment to the Venturers of the balances in
their respective capital accounts.
(5) To the Venturers in the ratios in which they participate
in the profits and losses of the Venture as set forth in Exhibit "A"
hereto or amendments thereto.
ARTICLE XVII
Termination of Agreement
------------------------
A. Termination as to All Venturers. This Agreement shall
-------------------------------
terminate upon the occurrence of one of the following events:
(1) The complete liquidation of the Venture upon dissolution
thereof, in accordance with the provisions of Article XVI hereof with
respect to dissolution and liquidation.
(2) Upon written revocation or termination of this Agreement
signed by all of the Venturers.
B. Termination as to Selling or Withdrawing or Dissolved,
-----------------------------------------------------
Insolvent, Bankrupt, etc. Venturer. Upon the sale, assignment or other
----------------------------------
transfer (other than an assignment or transfer solely for the purpose
of providing security for a promise, obligation or performance) by a
Venturer or its legal representative
- 32 -
<PAGE>
(hereinafter "selling Venturer") to a permitted person, persons, entity
or entities and substitution of such person or persons or entity or
entities as a Venturer in place of the selling Venturer in accordance
with and in compliance with this Agreement, this Agreement shall
terminate with respect to such selling Venturer upon the closing of
such sale, assignment or other transfer.
ARTICLE XVIII
Indemnity and Contributions
---------------------------
Should the Venture or one of the Venturers in its behalf be
required to pay sums on account of liability imposed on the Venture by
the acts of the other Venturers referred to in Section 620.62 and
620.625 of the Florida Uniform Partnership Act, the Venture or the
Venturer advancing, paying or otherwise becoming liable for monies by
reason of such acts of the other Venturers shall be entitled to be
indemnified and compensated for the payment of such monies by the
offending Venturer. Should any Venturer pay or become liable for any
obligation of the Venture, he shall be entitled to contribution from
the other Venturers on a pro rata basis according to their respective
interest in the Venture.
ARTICLE XIX
Amendment
---------
No amendment or variations to the terms of this Agreement shall be
valid unless made in writing and signed by all the Venturers.
- 33 -
<PAGE>
ARTICLE XX
Notices
-------
A. Method of Effecting Notice. No notice request, consent,
--------------------------
approval, waiver or other communication required or permitted under
this Agreement shall be effective, unless such communication is in
compliance with the provisions of Article IV-O hereof.
ARTICLE XXI
Rules of Construction
---------------------
A. Complete Agreement. This Amended and Restated Agreement,
------------------
including the exhibits and schedules attached hereto and made a part
hereof, constitutes the entire agreement among the parties pertaining
to the subject matter hereof and supersedes all prior verbal and
written and all contemporaneous verbal agreements and understandings of
the parties in connection with the subject matter hereof. No covenant,
representation or condition not expressed in this Agreement shall be
binding upon the parties hereto or shall affect or be effective to
interpret, change or restrict the provisions of this Agreement. No
change, modification or termination of any of the provisions hereof
shall be effective unless this Agreement is amended in accordance with
the provisions of Article XIX hereof.
B. Invalid Provisions. In the event that any provision of this
------------------
Agreement shall be held to be invalid, the validity of the remainder
shall not in any way be affected thereby.
- 34 -
<PAGE>
C. Governing Law. This Agreement shall be governed and construed
-------------
in accordance with the laws of the State of Florida. In addition, it is
specifically agreed that the partnership laws of the State of Florida
(Chapter 620) shall be applicable to this Agreement.
D. Gender and Number. All pronouns and variations thereof shall
-----------------
be deemed to refer to the masculine, feminine or neuter and to the
singular and plural, as the identity of the person, persons or entity
may require.
E. Titles. Titles of the articles and paragraphs of this
------
Agreement are provided for convenience of reference only, and they in
no way define, limit, extend or describe the scope or extent of this
Agreement or any of its provisions.
F. Successors and Assigns. The terms and conditions of this
----------------------
Agreement shall be binding upon and shall enure to the benefit of the
heirs, successors and assigns of the Venturers.
- 35 -
<PAGE>
G. Effective Date. This Agreement shall become and be deemed to
--------------
be effective as of January 1, 1981, notwithstanding the execution of
this Agreement this 9th day of June, 1981.
HARLLEE-GARGIULO, INC.
BY: /s/ Peter Harllee
----------------------------
As President
NAPLES TOMATO GROWERS, INC.
BY: /s/ Dewey Gargiulo
----------------------------
President
BEEFSTAKE TOMATO GROWERS, INC.
BY: /s/ Dewey Gargiulo
----------------------------
President
A. DUDA & SONS, INC.
BY: /s/ J.S. Duda
----------------------------
Exec. Vice President
- 36 -
<PAGE>
RICHFIELD PACKING CORPORATION,
INC.
BY: /s/ James Woodson
----------------------------
President
- 37 -
<PAGE>
EXHIBIT "A"
-----------
Percentages of Initial Contributions to the Capital of the
Venture and Amounts:
HARLLEE-GARGIULO, INC. 20% $136,500.00
NAPLES TOMATO GROWERS, INC. 40% $273,000.00
BEEFSTAKE TOMATO GROWERS, INC. 10% $ 68,250.00
A. DUDA & SONS, INC. 20% $136,500.00
RICHFIELD PACKERS, INC. 10% $ 68,250.00
The Venturers shall participate in the profits and losses of
the Venture according to the percentages provided above with the
exception that for fiscal year ending 1981, alone, the first
Ninety-Eight Thousand Three Hundred Twenty-Two Dollars
($98,322.00) of loss shall be allocated as follows:
HARLLEE-GARGIULO, INC. $ -0-
NAPLES TOMATO GROWERS, INC. $26,219.00
BEEFSTAKE TOMATO GROWERS, INC. $ 3,277.00
A. DUDA & SONS, INC. $45,884.00
RICHFIELD PACKERS, INC. $22,942.00
The remaining loss incurred for fiscal year ending 1981 shall
be allocated according to the percentages provided above.
Pursuant to Article XIV, the purchase price of a 1% interest
is $6,825.00.
- 38 -
<PAGE>
EXHIBIT "B"
-----------
HARLLEE-GARGIULO, INC.
Post Office Box 8
2308 U.S. Highway 301 East
Palmetto, Florida 33561
NAPLES TOMATO GROWERS, INC.
Route 2, Box 1700
Old U.S. Highway 41
Naples, Florida 33940
BEEFSTAKE TOMATO GROWERS, CIN.
440 South Shelfer Street
Quincy, Florida 32351
A. DUDA & SONS, INC.
Post Office Box 257
Oviedo, Florida 32765
RICHFIELD PACKING CORPORATION, INC.
Post Office Box 566
1306 16th Avenue East
Palmetto, Florida 33561
- 39 -
<PAGE>
AMENDMENT
---------
Pursuant to Article XIX of the BHN Joint Venture Agreement,
Amended and Restated, dated January 1, 1981 the undersigned, being all
of the Venturers, hereby agree to amend the BHN Joint Venture Agreement
in the following respect:
The BHN Joint Venture shall continue in existence and the
termination date shall be extended until October 31, 1994. This
Amendment shall be effective from October 31, 1989.
A. Duda & Sons, Inc.
By: /s/ J.S. Duda
-----------------------------
Harllee-Gargiulo, Inc.
By: /s/ Peter Harllee
-----------------------------
Naples Tomato Growers, Inc.
By: /s/ Dewey Gargiulo
-----------------------------
Beefstake Tomato Growers, Inc.
By: /s/ Dewey Gargiulo
-----------------------------
Gargiulo, Inc.
By: /s/ Dewey Gargiulo
-----------------------------
- 40 -
<PAGE>
ASSIGNMENT OF INTEREST IN BHN, A JOINT VENTURE
----------------------------------------------
In consideration of the sum of $10.00, and other good and valuable
consideration, the receipt and adequacy of which is hereby
acknowledged, NTGargiulo, Inc., a Florida corporation ("Assignor")
having an address at 15000 Old 41 North, Naples, Florida 33963, hereby
assigns and transfers to NTGargiulo, L.P., a Delaware limited
partnership ("Assignee") having an address at 15000 Old 41 North,
Naples, Florida 33963, all of Assignor's right, title and interest in
and to an 80% joint venture interest under and pursuant to that certain
BHN Amended and Restated Joint Venture Agreement executed on January 1,
1981, as amended by that certain Amendment dated October 31, 1989,
between Harllee-Gargiulo, Inc. and Assignor (as successor in interest
to Naples Tomato Growers, Inc. and Beefsteak Tomato Growers, Inc.).
IN WITNESS WHEREOF, Assignor has caused this instrument to be
executed by its authorized representative as of this 23rd day of
December, 1992.
NTGARGIULO, INC.
By: /s/ Jeffrey Gargiulo
-------------------------------
Jeffrey Gargiulo
President
- 41 -
<PAGE>
AMENDMENT TO BHN JOINT VENTURE AGREEMENT
This Amendment to Joint Venture Agreement is entered into as
of the 31st day of October, 1994 by and between NTGargiulo, L.P.,
a Delaware limited partnership ("NTG LP") and Harllee-Gargiulo,
Inc. ("Harllee"), being all of the Venturers of the Venture.
W I T N E S S E T H:
WHEREAS, NTG LP and Harllee entered into a Joint Venture
Agreement effective November 1, 1979, as amended and restated on
January 1, 1981 and amended as of October 31, 1989 (the
"Agreement"); and
WHEREAS, the parties hereto desire to amend and supplement
the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. All capitalized terms used herein and not
-----------
otherwise defined shall have the meanings set forth in the
Agreement.
2. Expiration. Article III of the Agreement is hereby
----------
amended to provide that the Venture shall continue until
December 31, 1995, or until dissolved as provided in said Article
III.
3. Except as amended hereby, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to BHN Joint Venture Agreement to be duly executed as of
the date first above written.
NTGargiulo, L.P., by
NTGargiulo G.P., Inc., its
General Partner
By: /s/ Jeffrey Gargiulo
--------------------------------
Name: Jeffrey Gargiulo
------------------------------
Title: President
-----------------------------
Harllee-Gargiulo, Inc.
By: /s/ Peter Harllee
--------------------------------
Peter Harllee Jr., President
- 42 -
<PAGE>
EXHIBIT 10.16
-------------
JOINT VENTURE AGREEMENT
-----------------------
This Joint Venture Agreement made this 31st day of October, 1994,
----
by and between NTGargiulo Mexico, L.L.C., a limited liability company organized
under the laws of the State of Delaware (referred to hereinafter as "NTGM"),
duly represented by its vice-president, John Gargiulo, with his domicile in
Naples, Florida, United States of America and Hermanos Ley, a business group
consisting of six Mexican citizens (referred to hereinafter as "Hermanos Ley"),
duly represented by Mr. Juan Manuel Ley, with his domicile in the city of
Culiacan, Sinalos State, United Mexican States.
PREAMBLE
--------
WHEREAS, NTGM and Hermanos Ley (the "Parties") desire to form a
joint venture to grow, develop, cultivate, harvest, package, ship, distribute
and sell various types of agricultural produce in Mexico and elsewhere (the
"Joint Venture"); and
WHEREAS, the Parties desire to adopt certain provisions pertaining
to their respective contributions to the Joint Venture as well as to their
respective obligations;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Parties hereby agree to this Joint Venture
Agreement and promise to abide by the following terms and conditions:
I. DEFINITIONS
-----------
A. "Additional Products" shall mean any or all of the following:
(i) strawberries; (ii) raspberries; (iii) tomatoes (any kind); and (iv) such
other products as the parties mutually agree from time to time.
B. "AenP" shall mean the "Asociacion en Participacion" to be
created pursuant to articles 252 through 259 of the Mexican General Law of
Business Corporations by AIRC and NTGM.
C. "AIRC" means Agricola Industrial de Rio Culiacan S. de P.R.
de R.I., a company organized under the laws of the United Mexican States and
wholly owned by Hermanos Ley.
D. "Comercial" means Comercial De Insumos y Abastos de Culiacan
S.A. de C.V., a company organized under the laws of the United Mexican States
and wholly owned by Hermanos Ley.
<PAGE>
E. "Del Campo" means Del Campo Supreme, Inc., a company
organized under the laws of the State of Arizona, U.S.A., which is wholly owned
by COMERCIAL.
F. "Expenses and Deductions" means all cash and non-cash
expenses (not including asset and income taxes) incurred or paid by the
applicable entity during any fiscal year.
G. "Farmland" shall mean that farmland located in Mexico
consisting of 600 hectares and more specifically described in Annex "A" hereto.
H. "Gross Profits" means the amount by which the total revenues
and income of the applicable entity during any fiscal year exceed its respective
Expenses and Deductions during fiscal year.
I. "Losses" means the amount by which the total revenues and
income of the applicable entity is less than its respective Expenses and
Deductions incurred or permitted during any fiscal year.
J. "MEXCO" shall mean Del Campo NTGargiulo Mexico, S. de R.L., a
company to be organized under the laws of the United Mexican States by NTGM and
Comercial.
K. "Net Profits" means the amount of Gross Profits remaining in
the applicable entity in any fiscal year after deducting all taxes and
compulsory profit sharing ("reparto de utilidades") applicable for said fiscal
year.
L. "NTGL" shall mean Del Campo NTGargiulo, L.L.C., a limited
liability company to be formed under the laws of the State of Delaware, U.S.A.
by NTGM and Del Campo.
M. "NTGM" means NTGargiulo Mexico, L.L.C., a limited liability
company, organized under the laws of the State of Delaware, U.S.A. which is
owned 99% by NTGargiulo, L.P. and 1% by NTGargiulo, G.P., Inc.
N. "Pick and Pack Costs" shall mean the costs and expenses
incurred by AenP from the harvesting of the Products through delivery of the
Products to NTGL in Nogales, Arizona.
O. "Products" shall mean any or all of the following: (i) vine
ripened tomatoes; (ii) mature green tomatoes; (iii) red bell peppers; (iv) green
bell peppers; (v) yellow bell peppers; and (vi) such other products as the
parties mutually agree from time to time.
- 2 -
<PAGE>
When the term "Party" is used with respect to Hermanos Ley is
shall also include reference AIRC, Comercial and Del Campo.
II. PURPOSE
-------
The Joint Venture is formed for the purpose of: (i) growing,
developing, harvesting, packing, shipping, marketing, distributing and selling
the Products in Mexico, Canada and the United States; and (ii) marketing,
distributing and selling the Additional Products in Mexico.
III. REPRESENTATIONS AND COVENANTS
-----------------------------
A. Representations and Covenants of NTGM. NTGM warrants and
-------------------------------------
covenants to Hermanos Ley that:
1. Authority and Good Standing. NTGM is a limited liability
---------------------------
company duly organized, validly existing and in good standing under
the laws of the State of Delaware, U.S.A. and all action necessary
to authorize it to enter into this Agreement and to form and
operate entities to be formed and operated by it under this
Agreement has been taken.
2. Approvals Obtained; No Conflict. The entering into and
-------------------------------
performance of this Agreement by NTGM does not: (i) conflict with
or violate its charter documents or other agreements to which it
is a party; or (ii) require any approval or authorization of or
violate any laws, regulations or orders of any court, governmental
authority or regulatory body which has jurisdiction over NTGM.
3. Legal Representation. Mr. John Gargiulo has sufficient
--------------------
powers to represent and bind NTGM in terms of this agreement as
stated in Section 15 of the Limited Liability Company Agreement of
NTGM.
4. Binding Agreement. This Agreement constitutes a
-----------------
valid and binding obligation of NTGM, enforceable against it
in accordance with its terms.
5. Compliance with law. NTGL will be operated in full
-------------------
compliance with all applicable United States Laws and
Regulations.
B. Representations and Covenants of Hermanos Ley. Hermanos
---------------------------------------------
Ley warrants and covenants to NTGM that:
- 3 -
<PAGE>
1. Authority and Good Standing. AIRC, Comercial and
---------------------------
Del Campo are each companies duly organized, validly existing and
in good standing under the laws of their respective jurisdictions
of incorporation and have each taken all actions necessary to
authorize them to perform their obligations required under this
Agreement and to form and operate the entities to be formed and
operated by them as contemplated by this Agreement.
2. Approvals Obtained; No Conflict. The entering into and
-------------------------------
performance of this Agreement by Hermanos Ley has been duly
authorized and does not: (i) conflict with or violate its charter
documents or other agreements to which it is a party; or (ii)
require any approval or authorization of or violate any laws,
regulations, or orders of any court, governmental authority or
regulatory body which has jurisdiction over Hermanos Ley. The same
is true for AIRC, Comercial and Del Campo.
3. Legal Representation. Mr. Juan Manuel Ley has sufficient
--------------------
powers to represent and bind Hermanos Ley in terms of this
agreement as stated in Public Deed 167 granted on January 4, 1988
before Mr. Cesar Valadez Soto, Notary Public No. 139 of Navolato,
Sinaloa and by Public Deed No. 2561, granted on October 22, 1994,
before the said notary public.
4. Binding Agreement. This Agreement constitutes a valid
-----------------
and binding obligation on Hermanos Ley enforceable against them in
accordance with its terms.
5. Farmland. AIRC has sole ownership or exclusive use of
--------
the Farmland and the Farmland is sufficient for the proper growing,
cultivation and harvesting of the Products as contemplated by this
Agreement. AIRC shall provide AenP with use of the farmland so that
AenP will be able to grow, cultivate and harvest the products and
otherwise perform its responsibilities hereunder.
6. Compliance with Law. AenP and MEXCO will be operated in
-------------------
full compliance with all applicable Mexican laws and regulations.
7. This Joint Venture Agreement and the Association in
Participation Agreement relating to AenP are not required to be
registered or recorded with any public authority or in any public
registry in Mexico in order to be effective under Mexican law.
- 4 -
<PAGE>
IV. ENTITIES
--------
A. Association in Participation. The Parties shall enter into
----------------------------
an Association in Participation Agreement to organize AenP, as follows:
1. Compliance with Law. AenP shall be organized in
-------------------
accordance with all applicable laws, regulations and requirements
in effect in the Republic of Mexico.
2. Formation of AenP. AenP shall be formed and regulated
-----------------
pursuant to the terms of the Association in Participation Agreement
attached hereto as Exhibit "G".
3. AIRC's Profits. AIRC shall be entitled to receive
--------------
seventy percent (70%) of the profits or losses of AenP, as adjusted
as provided in Section VI.2.b. of this Agreement.
4. NTGM's Profits. NTGM shall be entitled to receive thirty
--------------
percent (30%) of the profits or losses of AenP, as adjusted as
provided in Section VI.2.b. of this Agreement.
5. AenP Administration. AIRC shall be responsible for
-------------------
the management and operation of AenP.
6. AenP Operation. AenP shall be responsible for growing,
--------------
cultivating and harvesting the Products on the Farmland and for
packing and shipping the same to MEXCO or NTGL, all as provided in
this Agreement
7. Access and review by NTGM. NTGM shall have full access
-------------------------
to review and inspect all offices, facilities, plants and locations
of AIRC related to AenP; and to review, inspect, audit and copy all
of the documents, records, financial statements, agreements,
instruments, lease, understandings, accords, protocols, and any
other documents of AIRC related to AenP.
B. Distribution Companies. The Parties shall form or otherwise
----------------------
participate in the equity of NTGL and MEXCO, as follows:
1. NTGL.
----
a. Formation of NTGL. NTGM shall duly organize NTGL in
-----------------
accordance with all applicable laws, regulations and
requirements in effect in the State of Delaware. All expenses
incurred by NTGM in such respect shall be for the account to
NTGL.
- 5 -
<PAGE>
b. NTGM Interest. NTGM shall own fifty percent (50%)
-------------
of all the equity interests in NTGL. In consideration for its
interest, NTGM shall contribute to NTGL the sum of
US$100,000.00.
c. Del Campo Interest. Del Campo shall own fifty
------------------
percent (50%) of all the equity interests in NTGL. In
consideration for its interest, Del Campo shall contribute to
NTGL clear unencumbered title (but subject to certain
financing applicable to two (2) automobiles) to certain assets
in amount and condition satisfactory to NTGM as more
particularly described in Annex "B" hereto. The assets to be
contributed by Del Campo shall have a net book value of
US$100,000.00.
d. NTGL Administration. NTGM shall be the partner
-------------------
responsible for the management and operation of NTGM. NTGL
shall be operating and administered by NTGM pursuant to an
operating plan and budget agreed to by Del Campo and NTGM.
Such plan and budget is attached hereto as Annex "C". Such
plan or budget shall be updated on an annual basis. The
expenditure of funds by NTGL which result in deviations which
exceed five percent (5%) of the amounts listed in the budget
(by category or in the aggregate) shall require the prior
written consent of Del Campo.
e. NTGL Operation. NTGL shall be responsible for
--------------
handling the distribution, marketing and sale of the Products
to buyers outside of Mexico. NTGL shall make "advances"
(relative to final liquidations on the sale of the Products)
to AenP each week toward Pick and Pack Costs of AenP. The
amount of such weekly advances shall be based upon the dollar
amount per each box of the Products (by type of Product) to be
mutually agreed by the Parties and multiplied by the number of
boxes of Products received by NTGL from AenP in the prior week
(in arrears).
f. Commission. NTGL shall be entitled to receive a
----------
usual and standard fee from AenP in the amount of ten percent
(10%) of the net f.o.b. price of the Products, in connection
with distribution, marketing and sale of the Products.
g. Additional Products. NTGL shall also cooperate with
-------------------
MEXCO with respect to the marketing, distribution and sale of
the Additional Products in Mexico.
- 6 -
<PAGE>
h. Access and Review by Hermanos Ley. Hermanos Ley
---------------------------------
shall have full access to review and inspect all offices,
facilities, plants and locations pertaining to NTGL, and to
review, inspect, audit and copy all of the documents, records,
financial statements, agreements, instruments, leases,
understandings, accords, protocols, and any other documents
pertaining to NTGL.
2. MEXCO.
-----
a. Formation of MEXCO. COMERCIAL shall duly organize
------------------
MEXCO in accordance with all applicable laws, regulations and
requirements in effect in the United Mexican States. All
expenses incurred by Comercial in such respect shall be for
the account of MEXCO.
b. COMERCIAL Interest. COMERCIAL shall own fifty
------------------
percent (50%) of all the equity interests in MEXCO. In
consideration for its interest, COMERCIAL shall contribute
fifty percent (50%) of the capital of MEXCO.
c. NTGM Interest. NTGM shall own fifty percent (50%)
-------------
of all the equity interests of MEXCO. In consideration for its
interest, NTGM shall contribute fifty percent (50%) of the
capital of MEXCO.
d. MEXCO Administration. COMERCIAL shall have the
--------------------
responsibility to manage and operate MEXCO. MEXCO shall be
operated and administered by COMERCIAL pursuant to an
operating plan and budget agreed to by COMERCIAL and NTGM.
Such plan and budget is attached hereto as Annex "D". Such
plan or budget shall be updated on an annual basis. The
expenditure of funds by MEXCO which results in deviations
which exceed five percent (5%) of the amounts listed in the
budget (by category or in the aggregate) shall require the
prior written consent of NTGM.
e. MEXCO Operation. MEXCO shall be responsible for
---------------
handling the distribution, marketing and sale of the Products
and Additional Products to buyers in Mexico. MEXCO shall not
make any "advances" to AenP with respect to the harvesting,
packing and shipment of the Products distributed and sold by
MEXCO.
f. Commission. MEXCO shall be entitled to receive a
----------
usual and standard fee from AenP in the amount of ten percent
(10%) of the net f.o.b. price of the Products, in connection
with the distribution, marketing and sale of the Products.
- 7 -
<PAGE>
g. Additional Products. MEXCO shall also cooperate
-------------------
with NTGL with respect to the marketing, distribution and sale
of the Additional Products outside of Mexico.
h. Access and Review by NTGM. NTGM shall have full
-------------------------
access to review and inspect all offices, facilities, plants
and locations pertaining to MEXCO; and to review, inspect,
audit and copy all of the documents, records, financial
statements, agreements, instruments, leases, understandings,
accords, protocols, and any other documents relating to MEXCO.
3. Right to Have Representatives.
-----------------------------
a. NTGM shall have the right to designate one or more
representatives to review and inspect the Farmland and the
operations of AenP and MEXCO at any time and from time to time
as such representatives may reasonably determine. NTGM or such
representative shall have the right to review all pertinent
records of AenP and MEXCO related to the Products and the
Additional Products. All expenses associated with such
representatives shall be borne directly by NTGM.
b. Similarly, Hermanos Ley shall have the right to have
one or more representatives present to inspect the operations
of NTGL at any time and from time to time as such
representatives may reasonably determine, and Del Campo and/or
its representatives shall have the right to review all
pertinent records relating to the Products and the Additional
Products. All expenses associated with such representatives
shall be borne directly by Hermanos Ley.
C. Transfer and Ownership Provisions.
---------------------------------
1. Restrictions on Transfer. Neither Party hereto may sell,
assign, encumber, pledge, transfer or otherwise dispose of
("Transfer") its interest in the Joint Venture or its interest in
AenP, NTGL or MEXCO (collectively or individually, an "Interest")
without the written consent of the other Party. If either Party
desires to Transfer an Interest it shall notify the other Party in
writing and the Parties shall attempt to agree upon an acceptable
transaction to both Parties (i.e. to permit a Transfer to a third
party or for one Party to purchase the Interest of the other). If
within 60 days of such notification the Parties are unable to
mutually agree upon an acceptable transaction, then either Party
may cause the Joint Venture, AenP, NTGL
- 8 -
<PAGE>
and MEXCO to be dissolved or liquidated and the proceeds shall be
distributed to the Parties in accordance with their percentage
interest therein. Notwithstanding the foregoing, no dissolution or
liquidation shall occur until after the then current crop year has
been completed and all proceeds from such current crop year have
been properly distributed.
2. Mandatory Sale of Shares. The occurrence of any of the
------------------------
events described below shall be deemed to constitute an offer by
the Party affected by the event to sell to the other Party the
affected Party's interest in the Joint Venture, AenP, NTGL and
MEXCO for a price equal to the Book Value of such interest (such
Book Value to be determined by the independent accountants of the
applicable company being sold in accordance with generally accepted
accounting principals):
a. a voluntary filing by a party under bankruptcy,
insolvency, reorganization, receivership or other similar
laws;
b. an involuntary filing or appointment against a party
under bankruptcy, insolvency, reorganization, receivership of
other similar laws, or the filing by a creditor to attach or
levy against the Interest of a Party, and the same not being
dismissed within 90 days.
3. Change in Control. In the event (i) Hermanos Ley, AIRC,
-----------------
COMERCIAL or Del Campo becomes controlled by persons or entities
other than Hermanos Ley, or (ii) NTGM becomes controlled by persons
or entities other than NTGargiulo, L.P., or (iii) NTGargiulo, L.P.
becomes controlled by a party other than members of the Gargiulo
family, Procacci family or Monsanto Company or its affiliates, or
any one of them, then the Party which has not undergone the change
in control shall have the right, within 60 days of being notified
of the change in control, to either (x) cause the Joint Venture,
AenP, NTGL and MEXCO to be liquidated, or (y) purchase the Interest
in AenP, NTGL and/or MEXCO of the party which underwent the change
in control for Book Value (as determined in subparagraph 2, above)
and terminate such party's participation in the Joint Venture.
4. Additional Equity Interests. No additional equity
---------------------------
interests in AenP, NTGL or MEXCO shall be issued without the
express written consent of Hermanos Ley and NTGM.
5. Restrictive Legend. Each certificate or other evidence of
------------------
equity interest of NTGL and MEXCO shall bear a legend in
substantially the following form:
- 9 -
<PAGE>
"The transfer of the equity interest represented by
this certificate is restricted under the terms of a
Joint Venture Agreement between NTGargiulo Mexico,
L.L.C. and Hermanos Ley."
6. Invalidity of Unauthorized Transfers. Any Transfer of any
------------------------------------
equity interest in AenP, NTGL or MEXCO in contravention of the
terms of this Agreement shall not be registered on the books of
AenP, NTGL or MEXCO and shall not be required to be recognized by
the other Party.
D. Accounting Matters.
------------------
1. Books of Account and Records. Full and accurate records
----------------------------
and books of account shall be kept by AIRC related to AenP, MEXCO
and NTGL consistently applied, and proper entries made thereon of
all the sales, purchases, receipts, payments, engagements,
transactions, and property of each. All records and books of
account, and all papers and writings of AIRC related to AenP, MEXCO
and NTGL shall be kept at places as may be selected by the Parties
by mutual agreement, but subject to requirements of applicable law.
Each Party shall have reasonable access during normal business
hours to inspect, examine, copy and take extracts from the records,
books, papers and other writings of AIRC related to AenP, MEXCO and
NTGL.
2. Auditing of Accounts. In the event of disagreement among
--------------------
the Parties relating to the distribution of profits in accordance
hereof and subject only to manifest error on the part of the
accountants, such dispute shall be definitively resolved by the
firm of independent certified public accountants responsible for
the most recent audited financial statements involved.
V. RESPONSIBILITIES AND CONTRIBUTIONS
----------------------------------
A. Standard of Performance. Each Party agrees that it shall
-----------------------
exercise its best reasonable efforts to represent the best interests of the
Joint Venture, AenP, MEXCO and NTGL.
B. Obligations of NTGM. NTGM agrees that it shall:
-------------------
1. Growing, Cultivation and Harvesting.
-----------------------------------
a. contribute to AenP the sum of US$2.2 million for the
exclusive purpose of providing capital for the purpose of permitting AenP to
grow and cultivate the Products in the Farmland. Such contribution shall be made
in the amounts and at
- 10 -
<PAGE>
the times set forth in Annex "E" hereto, except as otherwise agreed by the
Parties. Notwithstanding the timing of contributions set forth in Annex E, if
the cash flow needs of AenP dictate a different schedule of contributions, the
Parties shall in good faith adjust the schedule of such contributions. Any
outstanding loans, credits or advances made by NTGM to AenP or AIRC, prior to
the execution of this Agreement, shall be converted into a portion of the
contribution required by this Section;
b. contribute to AenP thirty percent (30%) of the sum
of all new drip irrigation equipment purchased by AIRC for AenP and installed in
all or part of the Farmland, which amount shall be contributed within seven (7)
days of submission of an invoice to NTGM regarding the same. It is understood
and agreed that the cost of the acquisition and installation of such equipment
is estimated to be US$3,000 per hectare for approximately 250 hectares part of
the Farmland. Such costs shall be finally determined by: (i) the accountants of
AenP, subject to manifest error, at the conclusion of the fiscal year of AenP
ending after the date of the execution of this Joint Venture Agreement; or (ii)
by the Parties by agreement at any time; and
c. provide technical advice and reasonable assistance
to AenP in the proper growing, cultivation, harvesting and packing of the
Products and all activities incidental thereto.
d. contribute to AenP, subject to adjustment as
provided in Section V1.A.2.b. hereof, thirty percent (30%) of the Pick and Pack
Costs.
2. Distribution
------------
a. administer the operations of NTGL so as to maximize
the sale of the Products and the Additional Products.
b. invest U.S. $100,000 in NTGL as provided for
in Section IV.B.a.b., above.
c. Such working capital shall not include any provision
for any advances to AenP by MEXCO, and it is understood and agreed that NTGM
shall not be obligated to fund any such advances.
d. NTGM (and its affiliates) shall license and
authorize MEXCO and NTGL the non-exclusive right to use its names and trademarks
in connection with the distribution, marketing and sale of the Products and the
Additional Products. The parties shall develop labels for the Products and the
Additional Products which incorporate the licensed names (including but not
limited to "NT Gargiulo" and "Coastal Berry"). It is understood and agreed
- 11 -
<PAGE>
that the right to use such names and trademarks shall cease whenever this Joint
Venture is terminated for any reason or expires in accordance with its terms.
C. Obligations of AIRC, Commercial and Del Campo. AIRC,
---------------------------------------------
Commercial and Del Campo, as appropriate, agree to:
1. Growing, Cultivation and Harvesting.
-----------------------------------
a. AIRC shall cause AenP to grow, cultivate, harvest
and develop the Products in accordance with an appropriate production schedule.
AIRC shall cause AenP to grow the Products in accordance with the best
agricultural practices prevailing in the region of the Farmlands and shall take
all actions consistent with prudent farming methods to grow and adequately care
for the crop. Unless the Parties agree otherwise, the Parties agree that the
Farmlands shall be allocated for the Crop as follows: (i) Vine Ripened Tomato -
340 Hectares; (ii) Mature Green Tomato -- 60 hectares;' (iii) Red Bell Pepper --
143 hectares; (iv) Green Bell Pepper -- 50 hectares; and (v) Yellow Bell Pepper
- - -- 7 hectares.
b. AIRC shall cause AenP to perform all necessary works
and efforts to: (i) bring the crop to a position where it is ready for harvest;
(ii) harvest the Products and; (iii) pack the Products.
c. AIRC shall cause AenP to take all precautions to
prevent the contamination of the Products as well as the exposure of the
Products to pesticides or other elements that could restrict or prohibit the
sale of the Products.
d. AIRC shall cause AenP to arrange to obtain and
maintain all permits, approvals, clearances and licenses needed to own or
operate and cultivate the Farmland, and comply in all material respects with all
applicable laws (including without limitation, all environmental and labor
laws).
e. together with NTGM's contribution per Section
V.B.1.a., above, pay and otherwise bear the cost of all other expenses, fees,
costs and charges of whatever nature as are required by AenP for the performance
of the aforementioned activities, which expenses are estimated to be
US$7,333,334 for the 1994/1995 crop year.
f. AIRC shall contribute to AenP seventy percent (70%),
subject to adjustment based upon the adjustment to be performed under Section
VI.A.2.b. hereof, of the Pick and Pack Costs.
- 12 -
<PAGE>
g. AIRC shall contribute seventy percent (70%) of the
sum of all new drip irrigation equipment to be purchased and installed in all or
part of the Farmland.
2. Distribution
------------
a. Commercial shall administer the operations of MEXCO
so as to maximize the sale of the Products and Additional Products in Mexico.
b. Del Campo shall contribute to NTGL the assets listed
in Annex "B" as provided above.
c. Commercial shall contribute to MEXCO fifty percent
(50%) of the capital required by MEXCO in accordance with the Business Plan and
budget attached as Annex "D" hereto. Such capital shall not include any
provision for any advances to AenP by MEXCO.
d. Hermanos Ley (and its affiliates) shall license and
authorize MEXCO and NTGL the nonexclusive right to use its names and trademarks
in connection with the distribution, marketing and sale of the Products and the
Additional Products. The parties shall develop labels for the Products and the
Additional Products which incorporate the licensed names (including but not
limited to "Big Tom" And "Del Campo"). It is understood and agreed that the
right to use such names and trademarks shall cease whenever this Joint Venture
is terminated for any reason or expires in accordance with its terms.
D. Further Contributions. Except as set forth above or with the
---------------------
prior written consent of the Party marking the loan or contribution, no Party
shall be required to: (i) make any additional capital or asset contributions to
the Joint Venture, AenP, NTGL or MEXCO or (ii) make any loans or extensions of
credit to the Joint Venture, AenP, NTGL or MEXCO.
E. Review of Operations. The Parties shall periodically meet (but
--------------------
no less than once every 6 months) to generally review the operations
contemplated by this Agreement, including, without limitations, the completion
of the agreed to schedules, implementation of the business plan and approved
budgets, financial information and any other circumstances which may affect the
operation of the Joint Venture. At each such meeting, minutes evidencing the
actions and agreements adopted by the Parties shall be taken and signed by the
representatives appointed by the Parties for such purpose. NTGM shall be
entitled to elect a number of directors of MEXCO and vote upon matters submitted
to its board of directors in accordance with its percentage interest in MEXCO.
Del Campo shall be entitled to participate in meetings
- 13 -
<PAGE>
of the members of NTGL and vote upon matters submitted to a vote of such members
in accordance with its percentage interest in NTGL. If AIRC holds meetings
related to AenP, reasonable advance written notice thereof shall be given to
NTGM and a representative of NTGM shall be invited to attend and participate.
VI. Expenses, Profits and Losses.
----------------------------
A. Allocation of Profits and Losses.
--------------------------------
1. Of NTGL and MEXCO. The Net Profits and Losses of NTGL and
-----------------
MEXCO shall be allocated among their respective equity owners in accordance with
their respective equity ownership of the Interests thereof. To the extent
allowed by applicable law and unless otherwise agreed by the Parties,
distribution of all of the profits of NTGL and MEXCO shall be made to their
respective equity owners at any time by mutual agreement or at least once a year
on or within thirty-five (35) calendar days after the financial statements of
the applicable Company have been audited and either approved by the Parties or
settled definitively by the accountants of the applicable Company, subject to
manifest error on the part of said accountants.
2. Of AenP.
-------
a. In consideration for its contributions to AenP, NTGM
shall be given an undivided thirty percent (30%) interest, subject to year-end
adjustment of its Percentage Share, in the Net Profits of AenP, as adjusted
below (the "Adjusted Net Profits"). Adjusted Net Profits shall be defined as the
Net Profits of AenP, provided, however, that for this purpose the Expenses and
Deductions of AenP shall not include: (i) any depreciation or similar expense
associated with any new drip irrigation equipment acquired by AenP with all or
part of the proceeds of the monies contributed by NTGM for such equipment; and
(ii) any interest payable by AenP to any related or unrelated party on account
of any credit extended to or otherwise obtained by AenP.
b. Year End Adjustments. NTGM's percentage share (the
--------------------
"Percentage Share") of the Net Profits of AIRC shall be adjusted from the base
thirty percent (30%) figure listed herein on or within 35 business days from the
end of the fiscal year of AenP. The final Percentage Share corresponding to NTGM
shall be computed by a formula:
(1) the numerator of which will be the sum of: (i)
---------
US$2.2 million; plus (ii) the amount of Pick and Pack Costs paid by NTGM to
AenP; and
- 14 -
<PAGE>
(2) the denominator of which shall be the sum of: (i)
-----------
all monies paid in connection with the growing and cultivation of the Products,
plus (ii) all actual Pick and Pack Costs of AenP.
B. LOSSES. If NTGL or MEXCO incur Losses, the applicable company
------
may borrow the funds needed to cover such Losses if the capital of the
applicable company is not sufficient. If such company cannot borrow sufficient
funds from an unaffiliated party to cover such Losses, then each equity owner
thereof may, but shall not be obligated to, fund its respective percentage of
the funds necessary to cover said Losses. In such event, the lending equity
owner shall be repaid its loan (with interest at the N.Y. Prime Rate) prior to
any distributions being made to the respective equity owners. If AenP incurs
losses in excess of the capital contributions of NTGM and AIRC to AenP, NTGM
shall fund 30% of such losses, subject to adjustment as provided in Section VI
A.2.b.
VII. COVENANTS AND LIMITATIONS.
-------------------------
A. INDEPENDENT ACTIVITIES OF PARTIES. Each Party acknowledges that the
---------------------------------
other Party may be carrying on activities (without the participation of the
other Party) similar to those of the Joint Venture and nothing herein shall be
construed to limit such activities; provided, however, that during the duration
of this Joint Venture: (i) NTGM and its affiliates shall sell on an exclusive
basis through MEXCO all NTGargiulo (or its affiliates) labeled products grown or
harvested in the United States and destined for sale in Mexico; and (ii)
Hermanos Ley and its affiliates shall sell on an exclusive basis through NTGL
all products grown or harvested in Mexico (whether grown on the Farmland or
elsewhere) destined for sale in the United States and/ or Canada.
B. APPROVALS AND PERMITS. Hermanos Ley and its affiliates shall be
---------------------
responsible to obtain all Mexican approvals and permits required to conduct the
business of AenP and MEXCO. NTGM shall be responsible to obtain all United
States approvals and permits required to conduct the business of NTGL.
C. CONFLICTS OF INTEREST. If a Party or an affiliate of a Party provides
---------------------
goods or services to AenP, NTGL or MEXCO, it shall do so on terms no less
favorable than it would offer to an unrelated party.
D. OTHER DOCUMENTS. Each Party will execute and deliver, or cause to be
---------------
executed and delivered, such further documents and instruments as may reasonably
be necessary in order to carry out the purposes of the Joint Venture or to give
effect to this Agreement.
- 15 -
<PAGE>
E. INDEMNIFICATION.
---------------
1. Indemnity for Certain Matters. Each Party agrees to indemnify and
-----------------------------
hold harmless each other, AenP, MEXCO and NTGL from and against all loss or
damage (including reasonable attorneys fees) suffered or incurred by any of them
as a result of or arising directly or indirectly out of or by reason of any of
the following:
a. a breach in any material respect of a representation or
warranty made by a Party herein; and
b. any material breach of any of the covenants given by any
Party or any failure in any material respect by any such Party to duly and
timely perform its obligations hereunder.
2. Payment of Indemnity Amounts. Any indemnification required to
----------------------------
be paid by any Party pursuant to the above shall be paid within thirty (30)
calendar days after notice and demand for payment has been given by the Party or
applicable entity to whom such payment is due.
3. Survival of Indemnity Obligations. The rights and obligations
---------------------------------
of the Parties under this Section VII.E shall survive the dissolution of the
Joint Venture.
VIII. DURATION AND TERMINATION.
------------------------
A. DURATION AND TERMINATION OF JOINT VENTURE. Unless renewed or extended
-----------------------------------------
by mutual agreement of the Parties, the Joint Venture shall terminate one year
from the date of this Agreement. The Joint Venture shall be sooner dissolved
upon, or reasonably promptly after, the happening of any of the following
1. the entry into force of a final decree of dissolution issued by
any court of competent jurisdiction under applicable law;
2. the mutual agreement of the Parties to dissolve AenP, NTGL and
MEXCO;
3. the occurrence of an event of default by a Party under this
Agreement, unless said default: (i) is waived by the innocent Party; or (ii) is
corrected by the defaulting Party, to the reasonable satisfaction of the
innocent Party, within twenty (20) days after the mailing of written notice by
certified letter from the innocent Party to the defaulting Party in regard to
the default;
- 16 -
<PAGE>
4. a Party's election to dissolve the Joint Venture pursuant to any
other provision of this Agreement; or
5. The filing of a petition against or by a party under bankruptcy,
insolvency or similar laws or the appointment of a receiver for a party, and in
the case when the same is involuntary, the failure to dismiss the same within 90
days.
B. RENEWAL AND EXTENSION. This Agreement shall not be automatically
---------------------
renewable, but shall require the prior written approval of both Parties to
extend or renew this Agreement prior to its expiration.
C. DISTRIBUTIONS UPON TERMINATION OF JOINT VENTURE.
-----------------------------------------------
1. Upon the termination of this agreement the entire assets and
rights of AenP, MEXCO and NTGL, including without limitation, all contract
rights, bank accounts, cash, equipment, real property, trademarks, real estate,
general intangibles and all other assets of whatever description shall be
collected and disposed of, the business wound up, and all debts of AenP, MEXCO
and NTGL paid in the manner set forth below, without the necessity of appointing
any liquidator or receiver. The Party responsible for the management and
supervision of a particular entity shall be responsible to supervise its
liquidation.
2. Order Upon Distribution. Upon liquidation, the assets of AenP,
-----------------------
MEXCO and NTGL shall be distributed as follows:
a. first, to repaying any liabilities owing to, any person who
-----
is not a Party or an Affiliate of a Party;
b. second, to repaying loans made to AenP, MEXCO or NTGL by, or
------
any liabilities owing to, any Party or Affiliate thereof, in full (or pro rata
if the available funds are insufficient to pay all such loans in full); and
c. third, the balance, if any, to be divided between the
-----
Parties in accordance with their respective proportionate interest in AenP, NTGL
and MEXCO.
3. Termination of Licenses. Upon the termination of this Agreement
-----------------------
for any reason, the trademark and trade name license agreements referred to
hereinabove shall be deemed to terminate.
D. REIMBURSEMENT OF NTGM IRRIGATION EXPENSES. In the event that
-----------------------------------------
the Joint Venture established herein terminates, for any reason, before it has
been renewed or extended by the Parties for a continuous period of time of eight
years commencing on the date of this Agreement, then AIRC shall reimburse NTGM
on account of
- 17 -
<PAGE>
the contributions made by NTGM for the drip irrigation equipment installed on
the Farmland in accordance with the schedule attached hereto as Annex "F." Such
reimbursement shall be made in a lump sum by AIRC to NTGM in U.S. dollars on or
within sixty (60) calendar days from the date of written demand by NTGM.
IX. NOTICES. All notices or other communications required or permitted to be
-------
given under this Agreement, or which any Party desires to give, shall be in
writing and may be delivered personally or sent by certified or registered mail,
return receipt requested or sent by facsimile with acknowledgment requested to
the other Parties at the addresses indicated below (or to such other address as
any Party or the Joint Venture designates by written notice given in accordance
with this Section).
To: NTGargiulo Mexico, L.L.C.
c/o NTGargiulo, L.P.
15000 Old 41 North
Naples, Florida 33963
Attn: John Gargiulo
Telefax Number: (813) 597-8963
To: Hermanos Ley
C.P. Diego Ley Lopez
Carretera Internacional
Norte y Calle Deportiva
C.P. 80020 Culiacan
Sinaloa, Mexico A postal 498
Telefax Number 011-52-67-10-00-18
X. MISCELLANEOUS PROVISIONS.
------------------------
A. ENTIRE AGREEMENT. This Agreement (and all annexes hereto) constitute
----------------
the entire agreement between the Parties with respect to the subject matter of
this Agreement and supersedes all prior or contemporaneous negotiations, letters
of intent, representations and any prior or contemporaneous oral or written
agreements.
B. GOVERNING LAW. For the interpretation, execution and enforcement of
-------------
this Agreement, the Parties expressly submit themselves to the jurisdiction or
competence of the laws of the Republic of Mexico, expressly removing any other
law which by reason of residence or nationality, present or future, could apply.
C. ARBITRATION. Any claim, dispute or controversy between the Parties
-----------
arising out of or relating to this Agreement, or the alleged breach hereof, that
cannot be satisfactorily settled among the Parties within thirty (30) calendar
days after the date
- 18 -
<PAGE>
which the issue was first raised in a written notice, shall be settled by final
binding arbitration before the International Chamber of Commerce ("ICC") in
Mexico City, Mexico. The arbitration shall be heard and determined by a panel of
three arbitrators, selected in accordance with ICC procedures. Each Party shall
be permitted to conduct reasonable pretrial discovery. Any award rendered by the
arbitral tribunal shall be payable in U.S. dollars free of any tax or any other
deduction. The award shall include: (i) interest from the date of any breach or
other violation of this contract (the arbitrators shall fix an appropriate rate
of interest); and (ii) the reasonable attorneys fees and costs incurred by the
prevailing Party in the arbitration.
D. GOVERNING LANGUAGE. This Agreement is to be prepared and signed in
------------------
accordance with both the English language and the Spanish language. However, in
the case of a dispute between the Parties, the Spanish version will govern the
interpretation of this Agreement and all disputes which arise thereunder.
E. AMENDMENT. This Agreement may be amended only by a written instrument
---------
duly signed by all of the Parties.
F. SEVERABILITY. If any term or provision of this Agreement, or the
application of any term or provision to any person or circumstances, is invalid
or unenforceable to any extent, then the remainder of this Agreement or the
application of the term or provision to persons or circumstances, other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term and provision of this Agreement or the application of the
term or provision to persons or circumstances, other than those as to which it
is held invalid or unenforceable, shall not be affected thereby and each term
and provision of this Agreement shall be valid and enforceable to the extent
permitted by law.
G. WAIVER. Failure by any party at any time to require performance under
------
this Agreement by any of the other parties or to claim a breach of any provision
of this Agreement shall not be construed as a waiver of any right accruing under
this Agreement nor will it affect any subsequent breach of this Agreement or the
effectiveness of any provision of this Agreement or prejudice any party as
regards any subsequent action. A waiver of any right accruing to any Party
pursuant to this Agreement shall not be effective unless given in writing.
H. STATUS OF RELATIONSHIP. No Party is hereby constituted an agent or
----------------------
legal representative of any other Party hereto, and no Party is granted any
right or authority hereunder to assume or create any obligation, expressed or
implied, or to make any
- 19 -
<PAGE>
representation, covenant, warranty, or guaranty on behalf of any other Party,
AenP, MEXCO or NTGL, except as expressly granted or made in this Agreement.
I. TRANSFER TO NEW CORPORATION. All of the rights and obligations of
---------------------------
Hermanos Ley under this Agreement may be transferred to a holding company to be
formed by Hermanos Ley under Mexican law ("Sociedad Ley"). It si agreed that
Hermanos Ley shall directly or indirectly own all of the equity and beneficial
interests in Sociedad Ley, and that Sociedad Ley shall own all of the equity and
beneficial interests in AIRC, Commercial and Del Campo. Upon written notice from
Hermanos Ley received by NTGM, but without any requirement to obtain NTGM's
consent, Hermanos Ley may effect the transfer of such rights and obligations to
Sociedad Ley, whereupon: (i) Hermanos Ley shall have no further rights,
obligations or responsibilities under this Agreement; (ii) Sociedad Ley shall be
vested with all of the rights, obligations and responsibilities of Hermanos Ley
under this Agreement; and (iii) Sociedad Ley and NTGM shall be thereafter
considered the Parties for purposes of this Joint Venture Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
NTGARGIULO MEXICO, L.L.C.
BY ITS MEMBER NTGARGIULO G.P., INC.
By: /s/ John R. Gargiulo
---------------------------------
John R. Gargiulo
Executive Vice President
HERMANOS LEY
By: /s/ Juan Manuel Ley
---------------------------------
Juan Manuel Ley
Legal Representative
- 20 -
<PAGE>
EXHIBIT 10.17
-------------
MARKETING AGREEMENT
AGREEMENT, made this 1st day of September, 1988, by and
between HARLLEE-GARGIULO INC., a Florida corporation, hereinafter
referred to as "COMPANY," and GARGIULO INC., hereinafter referred
to as "SALES AGENT."
WHEREAS, COMPANY is engaged in the packing of tomatoes, and
WHEREAS, the SALES AGENT is currently acting as an
independent sales representative of the COMPANY, and
WHEREAS, the parties desire to affirm such relationship for a
one year period;
NOW, THEREFORE, in consideration of the foregoing and of the
joint and mutual promises and undertakings, herein contained, and
for other good and valuable considerations, the parties do hereby
agree as follows:
1. Exclusive Sales Representative: THE COMPANY hereby
------------------------------
retains SALES AGENT as its exclusive sales agent for the COMPANY'S
tomatoes for a period of one (1) year from the date of this
Agreement. This Agreement shall automatically renew on a year to
year basis absent its termination by either party in accordance
with Paragraph 6 hereof.
2. Agent's Compensation: THE COMPANY shall pay the SALES
--------------------
AGENT a commission of twenty cents ($.20) per twenty-five pound
box of regular tomatoes and twenty-five cents ($.25) per flat of
cherry tomatoes sold by SALES AGENT on behalf of COMPANY. COMPANY
<PAGE>
agrees to pay sales agent's full commission to SALES AGENT when
SALES AGENT sells tomatoes through a secondary broker. COMPANY
further agrees to pay such secondary broker its full brokerage fee
or commission. A "sale" for purposes of this Agreement shall
occur upon receipt of the sales price by the COMPANY.
3. Expenses: The SALES AGENT shall pay all of its expenses
--------
in connection with the selling of COMPANY's tomatoes in accordance
with the established custom by and between COMPANY and SALES
AGENT.
4. Customer's Failure to Pay Account: In the event of
---------------------------------
nonpayment of a customer's account resulting in a loss to the
COMPANY, the SALES AGENT shall not be liable for such loss, but
does hereby agree to devote his best efforts to obtain the full
satisfaction of such account by the delinquent customer. SALES
AGENT or secondary broker shall not receive any commission as
provided herein for any portion of an unsatisfied account.
5. SALES AGENT's Status: It is further agreed by and
--------------------
between the parties hereto that the SALES AGENT shall perform
under this Agreement as an independent agent, and nothing herein
contained shall be construed to be inconsistent with the
relationship or status. SALES AGENT shall be responsible for all
sub-agents and all other selling expenses.
6. Termination of Agreement: If either party shall desire
------------------------
to terminate this Agreement it shall deliver notice of such
termination at least 1 year prior to the end of the Agreement.
-2-
<PAGE>
Upon the end of such year, this Agreement shall be null and void.
SALES AGENT shall continue its best efforts until the end of this
Agreement in accordance with Paragraph 7 hereof and the COMPANY
shall pay over to the SALES AGENT any commissions accruing to the
SALES AGENT prior to the termination of the Agreement. It is
further agreed that upon the termination of this Agreement by
either party, SALES AGENT shall be entitled to purchase the
interest of the COMPANY in the BHN Joint Venture at a price equal
to the cumulative investment of the COMPANY in the joint venture.
Said purchase price shall be paid in thirty-six (36) equal
installments beginning thirty (30) days after termination of this
Agreement. Such debt shall be evidenced by a promissory note in
the form of Exhibit "A." Said note shall not bear any interest.
7. Best Efforts: SALES AGENT covenants and agrees to use
------------
its best efforts to sell the COMPANY's merchandise for the best
available price.
8. Veto Power: The COMPANY may prohibit sales as the Board
----------
of Directors of the COMPANY deem not to be in the best interests
of the COMPANY.
9. Entire Agreement: This Agreement supersedes all prior
----------------
agreements and understandings between the SALES AGENT and the
COMPANY, and this Agreement expresses the whole and entire
agreement between the parties.
10. Choice of Law: This Agreement shall be construed
-------------
according to the laws of the State of Florida.
-3-
<PAGE>
11. Title: Absolute title to all tomatoes shall remain with
-----
the COMPANY at all times that the SALES AGENT is negotiating
contracts of sale for the COMPANY; at no time shall the SALES
AGENT ship, handle or own the merchandise for which it negotiates
the contracts of purchase and sale.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ATTEST: HARLLEE-GARGIULO INC.
By: /s/ Peter S. Harllee, Sr.
------------------------------
Peter S. Harllee, Sr.
President
GARGIULO, INC.
By: /s/ Jeffrey Gargiulo
------------------------------
Jeffrey Gargiulo
President
-4-
<PAGE>
Exhibit 10.18
-------------
CALGENE II, INC.
1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996 Stock
--------------------
Option Plan are to attract and retain the best available
personnel, to provide additional incentive to the Employees,
Consultants and Outside Directors of Calgene II, Inc. (the
"Company") and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock
Options or Nonstatutory Stock Options, at the discretion of the
Board and as reflected in the terms of the written option
agreement.
2. Definitions. As used herein, the following definitions
-----------
shall apply:
(a) "Board" shall mean the Committee, if one has been
-----
appointed, or the Board of Directors of the Company, if no
Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of
----
1986, as amended.
(c) "Committee" shall mean the Committee appointed by
--------
the Board of Directors in accordance with Section 4(a) of the
Plan.
(d) "Common Stock" shall mean the Common Stock of the
------------
Company.
(e) "Company" shall mean Calgene II, Inc., a Delaware
-------
corporation.
(f) "Consultant" shall mean any person who is engaged
----------
by the Company or any Parent or Subsidiary to render consulting
services and is compensated for such consulting services; provided
that the term Consultant shall not include directors who are not
compensated for their services or are paid only a director's fee
by the Company.
(g) "Continuous Status as an Employee, Consultant or
-----------------------------------------------
Outside Director" shall mean the absence of any interruption or
----------------
termination of service as an Employee, Consultant or Outside
Director, as applicable. Continuous Status as an Employee,
Consultant or Outside Director shall not be considered interrupted
<PAGE>
in the case of sick leave, military leave, or any other leave of
absence approved by the Board; provided that such leave is for a
period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
(h) "Disinterested Person" shall have the meaning set
--------------------
forth in Rule 16b-3.
(i) "Employee" shall mean any person, including
--------
officers and directors, employed by the Company or any Parent or
Subsidiary of the Company. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the
Company.
(j) "Exchange Act" shall mean the Securities Exchange
------------
Act of 1934, as amended from time to time.
(k) "Incentive Stock Option" shall mean an option
----------------------
intended to qualify as an incentive stock option within the
meaning of Section 422A of the Code.
(l) "Nonstatutory Stock Option" shall mean an Option
-------------------------
not intended to qualify as an Incentive Stock Option.
(m) "Option" shall mean a stock option granted pursuant
------
to the Plan.
(n) "Optioned Stock" shall mean the Common Stock
--------------
subject to an Option.
(o) "Optionee" shall mean an Employee, Consultant or
--------
Outside Director who receives an Option.
(p) "Outside Director" shall mean a member of the Board
----------------
of Directors of the Company who is not an Employee or an employee
of Monsanto Company.
(q) "Parent" shall mean a "parent corporation," whether
------
now or hereafter existing, as defined in Section 425(e) of the
Code.
(r) "Plan" shall mean this 1996 Stock Option Plan, as
----
amended.
(s) "Rule 16b-3" shall mean Rule 16-b3, as promulgated
----------
by the Securities and Exchange Commission under Section 16(b) of
the Exchange Act, as such rule is amended from time to time and as
interpreted by the Securities and Exchange Commission.
-2-
<PAGE>
(t) "Share" shall mean a share of the Common Stock, as
-----
adjusted in accordance with Section 10 of the Plan.
(u) "Subsidiary" shall mean a "subsidiary corporation,"
----------
whether now or hereafter existing, as defined in Section 425(f) of
the Code.
3. Stock Option to the Plan. Subject to the provisions of
------------------------
Section 11 of the Plan, the maximum aggregate number of shares
issuable under the Plan is 5,000,000 shares of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common
Stock.
If an Option should expire or become unexercisable for
any reason without having been exercised in full, then the
unpurchased Shares which were subject thereto shall, unless the
Plan shall have been terminated, become available for future grant
or sale under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by a
---------
committee (the "Committee") appointed by the Board of Directors.
The Committee shall consist of two or more Outside Directors
appointed by the Board of Directors, and all Committee members
must be Disinterested Persons. The Committee may authorize the
Chief Executive Officer of the Company to grant Options to persons
other than officers and directors and to fix the terms of such
Options within the limitations imposed by this Plan, by the form
of option agreement approved by the Committee, and by the
authorizing resolutions. The Company shall not grant Options for
more than 500,000 shares to any single Optionee in any calendar
year.
(b) Powers of the Board. Subject to Section 5(b),
-------------------
(relating to Option grants to Outside Directors) and subject to
the provisions of the Plan, the Committee shall have the
authority, in its discretion: (i) to grant Incentive Stock Options
or Nonstatutory Stock Options; (ii) to determine, upon review of
relevant information and in accordance with Section 7 of the Plan,
the fair market value of the Common Stock; (iii) to determine the
exercise price per share of Options to be granted, which exercise
price shall be determined in accordance with Section 7 of the
Plan; (iv) to determine the Employees or Consultants to whom, and
the time or times at which, Options shall be granted and the
number of shares to be represented by each Option; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical)
and, with the consent of the holder thereof, modify or amend any
-3-
<PAGE>
provisions (including provisions relating to exercise price) of
any option; (viii) to accelerate or defer (with the consent of the
Optionee) the exercise date of any Option; (ix) to authorize any
person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted by the
Committee; and (x) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
(c) Effect of Committee's Decision. All decisions,
------------------------------
determinations and interpretations of the Committee shall be final
and binding on all Optionees and any other holders of any Options
granted under the Plan.
5. Eligibility.
-----------
(a) Options may be granted to Employees, Consultants
and Outside Directors provided that (i) Incentive Stock Options
may be granted only to Employees and (ii) Options may be granted
to Outside Directors only in accordance with the provisions of
Section 5(b) hereof. Subject to Section 5(b) with respect to
Outside Directors, an Employee, Consultant or Outside Director who
has been granted an option may, if such Employee, Consultant or
Outside Director is otherwise eligible, be granted additional
Options.
(b) All grants of Options to Outside Directors under
this Plan shall be automatic and non-discretionary and shall be
made strictly in accordance with the following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine
the number of shares to be covered by Options granted to Outside
Directors; provided, however, that nothing in this Plan shall be
construed to prevent an Outside Director from declining to receive
an Option under this Plan.
(ii) Each Outside Director who is first elected to
the Board of Directors after the adoption of this Plan (other than
an Outside Director who was previously a director of Calgene,
Inc.) shall be automatically granted on the date of such election
(whether by the stockholders or by the Board of Directors) an
Option to purchase 10,000 Shares (subject to adjustment as
provided in Section 10). On the date of the Annual Stockholders
Meeting in each calendar year commencing in 1997, each Outside
Director who is elected or re-elected at that meeting shall be
automatically granted an Option to purchase 3,000 Shares (subject
to adjustment as provided in Section 10); except that no such
automatic annual grant shall be made to an Outside Director who is
first elected to the Board of Directors at such Annual Meeting
(and therefore receives an automatic grant of a 10,000 Share
-4-
<PAGE>
Option) or who was first elected by the Board of Directors within
three months prior to such Annual Meeting.
(iii) The terms of each Option granted under this
Section 5(b) shall be as follows:
(A) the term of the Option shall be ten
years;
(B) the Option shall become exercisable
cumulatively with respect to one twelfth of the
Shares on the last day of each month following the
date of grant; provided, however, that in no event
shall any Option be exercisable prior to obtaining
stockholder approval of the Plan.
(C) the exercise price per share of Common
Stock shall be 100% of the Fair Market Value on the
date of grant of the Option.
(c) Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding such
designations, to the extent that the aggregate fair market value
of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company)
exceeds $100,000, such Options shall be treated as Nonstatutory
Stock Options. For purposes of this Section 5(c), Options shall
be taken into account in the order in which they were granted, and
the fair market value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any
right with respect to continuation of employment by or the
rendition of services to the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate
his or her employment or services at any time, with or without
cause.
6. Term of Plan. The Plan shall become effective upon the
------------
earlier to occur of its adoption by the Board of Directors or its
approval by vote of the holders of a majority of the outstanding
shares of the Company entitled to vote on the adoption of the
Plan. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 14 of the Plan.
-5-
<PAGE>
7. Exercise Price and Consideration.
--------------------------------
(a) The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is
determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
granted to any Employee, the per Share exercise price shall be no
less than 100% of the fair market value per Share on the date of
grant, but if granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the fair market value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
granted to any person other than an Outside Director, the per
Share exercise price shall be no less than 85% of the fair market
value per Share on the date of grant, but if granted to a person
who, at the time of the grant of such Option, owns stock
representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the
fair market value per Share on the date of the grant. The
exercise price of Options granted pursuant to Section 5(b) shall
be 100% of the Fair Market Value on the date of grant of the
Option.
For purposes of this Section 7(a), in the event that an
Option is amended to reduce the exercise price, the date of grant
of such Option shall thereafter be considered to be the date of
such amendment.
(b) The fair market value shall be determined by the
Board in its discretion.
(c) The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of
payment, shall be determined by the Committee (and, in the case of
an Incentive Stock Option, shall be determined at the time of
grant), and may consist entirely of (i) cash, (ii) check, (iii)
the Optionee's personal interest bearing full recourse promissory
note with such terms and provisions as the Board of Directors may
authorize, provided that no person who is not an employee of the
Company may purchase Shares with a promissory note, (iv) other
Shares of Common Stock which (x) either have been owned by the
Optionee for more than six (6) months on the date of surrender or
were not acquired directly or indirectly from the Company, and (y)
have a fair market value on the date of surrender (determined
-6-
<PAGE>
without regard to any limitations on transferability imposed by
securities laws) equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (v) having the
Company retain from the total number of Shares as to which the
Option is exercised that number of Shares having a fair market
value on the date of exercise equal to the exercise price for the
total number of Shares as to which the Option is exercised;
provided however that the method of exercise set forth in this
clause (v) shall not be permitted unless the Committee so permits
at the time of exercise; (vi) delivery of a properly executed
exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company the amount of sale or loan
proceeds required to pay the exercise price; (vii) any combination
of such methods of payment; or (viii) such other consideration and
method of payment for the issuance of Shares to the extent
permitted under applicable laws.
8. Options.
-------
(a) Term of Option. The term of each Option shall be
--------------
ten (10) years from the date of grant thereof or such shorter term
as may be provided in the Option agreement. However, in the case
of an Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter time as may
be provided in the Option agreement.
(b) Exercise of Option.
------------------
(i) Procedure for Exercise; Rights as a
-----------------------------------
Shareholder. Any Option granted hereunder (other than an Option
-----------
granted pursuant to Section 5(b) shall be exercisable at such
times and under such conditions as determined by the Committee,
including performance criteria with respect to the Company and/or
the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the Shares with respect
to which the Option is exercised has been received by the Company.
Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 7 of
the Plan. Until the issuance (as evidenced by the appropriate
-7-
<PAGE>
entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights
as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. In the event that the exercise of an
Option is treated in part as the exercise of an Incentive Stock
Option and in part as the exercise of a Nonstatutory Stock Option
pursuant to Section 5(b), the Company shall issue a separate stock
certificate evidencing the Shares treated as acquired upon
exercise of an Incentive Stock Option and a separate stock
certificate evidencing the Shares treated as acquired upon
exercise of a Nonstatutory Stock Option and shall identify each
such certificate accordingly in its stock transfer records. No
adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in
a decrease in the number of Shares which thereafter may be
available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is
exercised.
(ii) Termination of Status as an Employee,
------------------------------------
Consultant or Outside Director. In the event of termination of an
------------------------------
Optionee's Continuous Status as an Employee, Consultant or Outside
Director (as the case may be) for any reason whatever, such
Optionee may, but only within such period of time as provided in
the Option Agreement, after the date of such termination (but in
no event later than the date of expiration of the term of such
Option as set forth in the Option agreement), exercise the Option
to the extent that such Employee, Consultant or Outside Director
was entitled to exercise the Option at the date of such
termination, or if such Employee, Consultant or Outside Director
does not exercise such Option (which such Employee, Consultant or
Outside Director was entitled to exercise) within the time
specified herein, the Option shall terminate.
9. Non-Transferability of Options. Options may not be
------------------------------
sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or
distribution or pursuant to a qualified domestic relations order
as defined by the Code or the rules thereunder. An Option may be
exercised, during the lifetime of the Optionee, only by the
Optionee or a transferee pursuant to such qualified domestic
relations order.
-8-
<PAGE>
10. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, the number of
shares of Common Stock referred to in Sections 4(a) and 5(b) of
the Plan, and the number of shares of Common Stock subject to each
outstanding Option, as well as the price per share of Common Stock
covered by each such outstanding option, shall be proportionately
adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the
Common Stock of the Company or the payment of a stock dividend
with respect to the Common Stock. Except as expressly provided
herein, no issuance by the Company of shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common
Stock subject to an Option.
(b) In the event of the proposed dissolution or
liquidation of the Company, the Option will terminate immediately
prior to the consummation of such proposed action, unless
otherwise provided by the Committee. The Committee may, in the
exercise of its sole discretion in such instances, declare that
any Option shall terminate as of a date fixed by the Committee and
give each Optionee the right to exercise his or her Option as to
all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
(c) In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor
corporation, unless the successor corporation refuses to assume
the Option or substitute an equivalent option, in which case the
Optionee shall have the right to exercise the Option as to all of
the Optioned Stock, including Shares as to which the Option would
not otherwise be exercisable. The Option shall be deemed to be
assumed if, following the sale of assets or merger, the Option
confers the right to purchase, for each share of Optioned Stock
subject to the Option immediately prior to the sale of assets or
merger, the consideration (whether stock, cash or other securities
or property) received in the sale of assets or merger by holders
of Common Stock for each share of Common Stock held on the
effective date of the sale of assets or merger (and if such
holders were offered a choice of consideration, the type of
consideration chosen by the holders of the largest number of the
-9-
<PAGE>
outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its
Parent, the Committee may, with the consent of the successor
corporation and the Optionee, provide for the per Share
consideration to be received upon exercise of the Option to be
solely Common Stock of the successor corporation or its Parent
equal in fair market value (as of the effective date of the sale
of assets or merger) to the per share consideration received by
holders of Common Stock in the sale of assets or merger. If the
Committee makes an Option fully exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the
Committee shall notify the Optionee that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of
such notice, and the Option will terminate upon the expiration of
such period.
11. Time of Granting Options. The date of grant of an
------------------------
Option shall, for all purposes, be the date on which the Committee
(or its delegate the President as permitted herein) makes the
determination granting such Option. Notice of the determination
shall be given to each Employee, Consultant or Outside Director to
whom an Option is so granted within a reasonable time after the
date of such grant.
12. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Committee may amend
-------------------------
or terminate the Plan from time to time in such respects as the
Committee may deem advisable; provided that , to the extent
necessary to comply with Rule 16b-3 or with Section 422A of the
Code (or any other successor or applicable law or regulation), the
Company shall obtain stockholder approval of any Plan amendment in
such a manner and to such a degree as is required by the
applicable law, rule or regulation. Notwithstanding the
foregoing, neither the provisions of Section 5(b), nor any other
provisions pertaining to the automatic option grants to Outside
Directors, shall be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement
Income Security Act (if applicable) or the rules thereunder.
(b) Effect of Amendment or Termination. Any such
----------------------------------
amendment or termination of the Plan shall not affect Options
already granted and such Options shall remain in full force and
effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Committee,
which agreement must be in writing and signed by the Optionee and
the Company.
-10-
<PAGE>
13. Conditions Upon Issuance of Shares. Shares shall not be
----------------------------------
issued pursuant to the exercise of an Option unless the exercise
of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and
warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
14. Reservation of Shares. The Company, during the term of
---------------------
this Plan, will at all times reserve and keep available such
number of Shares as shall be sufficient to permit the exercise of
all Options outstanding under the Plan.
The inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is deemed
by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
15. Option Agreements. Options shall be evidenced by
-----------------
written Option agreements in such form as the Committee shall
approve.
16. Information to Optionees. To the extent required by
------------------------
applicable law, the Company shall provide to each Optionee, during
the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information
which are provided to all shareholders of the Company.
-11-
<PAGE>
EXHIBIT 10.36
-------------
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Calgene, Inc., a Delaware corporation (the
"Company") and Roger Salquist (the "Executive"), dated as of the 19th day of
July, 1995.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement
<PAGE>
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
l. Certain Definitions. (a) The "Effective Date" shall mean the first
-------------------
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate three years from such Renewal Date,
-2-
<PAGE>
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (ii) any acquisition by
any corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this Section 2; or
-3-
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal or directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
immediately following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
-4-
<PAGE>
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 40%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination;
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company; or
-5-
<PAGE>
(e) The closing of the transactions contemplated by the Letter of Intent
dated June 27, 1995 between the Company and Monsanto Company (the "Monsanto
Letter of Intent").
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period")
4. Terms of Employment. (a) Position and Duties. (i) During the
------------------- -------------------
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned to the Executive at any time during the 120-
day period immediately preceding the Effective Date, except as otherwise
contemplated by the Monsanto Letter of Intent, and (B) the Executive's services
shall be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 50 miles from
such location.
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<PAGE>
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable efforts to perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards or
committees, or (B) deliver lectures and fulfill speaking engagements, so long as
such activities do not significantly interfere with the Executive's
responsibilities under this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but
-7-
<PAGE>
deferred, to the Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary increase awarded
to the Executive prior to the Effective Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" shall mean any direct or
indirect subsidiary of the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the average bonus
paid to the Executive for the last three full fiscal years prior to the
Effective Date (the "Recent Average Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus.
-8-
<PAGE>
(iii) Savings and Retirement Plans. During the Employment Period, the
----------------------------
Executive shall be entitled to participate in all savings and retirement plans,
practices, policies and programs applicable generally to other senior executives
of the Company, but in no event shall such plans, practices, policies and
programs provide the Executive with savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other senior executives of the Company.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
---------------------
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other senior executives of
the Company, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate,
than the
-9-
<PAGE>
most favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other senior executives of the Company.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies, practices and procedures of the
Company in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date.
(vi) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other senior executives of the Company.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall
-------------------
terminate automatically upon the Executive's death during
-10-
<PAGE>
the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 11(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to be
-11-
<PAGE>
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of an act or omission constituting Cause.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, except as contemplated by
the Monsanto Letter of Intent, or any other action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
-12-
<PAGE>
Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
-13-
<PAGE>
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 90-day period immediately following the six-month anniversary of the
Effective Date or during the 30-day period immediately prior to the expiration
of the Employment Period shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or
---------------------
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 11(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive
-14-
<PAGE>
any right of the Executive or the Company, respectively, hereunder or preclude
the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
date on which the Company notifies the Executive of such termination and (iii)
if the Executive's employment is terminated by reason of death or Disability,
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason; Other than for Cause, Death or Disability. If,
------------------------------------------------------
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or
-15-
<PAGE>
Disability, or the Executive shall terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. The sum of (l) the Executive's Annual Base Salary through the
Date of Termination to the extent not previously paid, (2) the product of
(x) the Recent Average Bonus and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent
not previously paid (the sum of the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Recent Average Bonus.
-16-
<PAGE>
(ii) For one year after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other senior executives of the Company and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility, and for purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until one year after the
Date of Termination and to have retired on the last day of such period;
(iii) to the extent not previously paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the
-17-
<PAGE>
Executive is eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment by the Company of (i) Accrued Obligations,
(ii) Other Benefits, and (iii) an amount, in cash, equal to one times the
Executive's Annual Base Salary at the time of death. The amounts due under
clauses (i) and (iii) of the preceding sentence shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination.
(c) Disability. If the Executive's employment is terminated by reason of
----------
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
by the Company of (i) Accrued Obligations, (ii) Other Benefits, and (iii) an
amount, in cash, equal to one times the Executive's Annual Base Salary at the
time of termination. The amounts due under clauses (i) and (iii) of the
preceding sentence shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.
-18-
<PAGE>
(d) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent previously unpaid.
If the Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligation to the Executive, other than for the payment by the Company
of (i) Accrued Obligations (ii) Other Benefits, and (iii) an amount, in cash,
equal to one times his Annual Base Salary at the time of termination. In such
case, all amounts due under clauses (i) and (iii) of the preceding sentence
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
-------------------------
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
-19-
<PAGE>
Company or any of its affiliated companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contrast or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or Contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement; Legal Fees. The Company's obligation to make the
---------------------------
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to pay
as incurred, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur, up to a maximum of $10,000, as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision
-20-
<PAGE>
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company. Payments under this
------------------------------------------
Agreement shall be made without regard to whether the deductibility of such
payments (or any other payments) to or for the benefit of the Executive) would
be limited or precluded by Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and without regard to whether such payments (or any other
payments) would subject the Executive to the federal excise tax levied on
certain "excise parachute payments" under Section 4999 of the Code; provided,
that if the total of all payments to or for the benefit of the Executive, after
reduction of all federal taxes (including the tax set forth in Section 4999 of
the Code, if applicable) with respect to such payments (the "Executive's total
after-tax payments"), would be increased by the limitation of elimination of any
payment under this Agreement, amounts payable under this Agreement shall be
reduced to the extent, and only to the extent, necessary to maximize the
Executive's total after-tax payments. The determination as to whether and to
what extent payments under this Agreement are required to be reduced in
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<PAGE>
accordance with the preceding sentence shall be made by agreement between the
Executive and the independent public accounting firm of the Company. To the
extent that any elimination or reduction of payments is made in accordance with
this Section 9, the determination as to which payments shall be eliminated or
reduced shall be made by the Executive.
10. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or
-22-
<PAGE>
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Mr. Roger Salquist
-------------------
If to the Company: Calgene, Inc.
----------------- 1920 Fifth Street
Davis, CA 95616
Attention: Vice President -
Human Resources
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and
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<PAGE>
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, prior to the Effective
-24-
<PAGE>
Date, the Executive's employment may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
CALGENE, INC.
By /s/ William Higgins
---------------------------------
/s/ Roger Salquist
-----------------------------------
Roger Salquist
-25-
<PAGE>
EXHIBIT 10.37
-------------
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Calgene, Inc., a Delaware corporation (the
"Company") and Roderick N. Stacey (the "Executive"), dated as of the 19th day of
July, 1995.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement
<PAGE>
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
l. Certain Definitions. (a) The "Effective Date" shall mean the first
-------------------
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate three years from such Renewal Date,
-2-
<PAGE>
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (ii) any acquisition by
any corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this Section 2; or
-3-
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal or directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
immediately following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
-4-
<PAGE>
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 40%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination;
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company; or
-5-
<PAGE>
(e) The closing of the transactions contemplated by the Letter of Intent
dated June 27, 1995 between the Company and Monsanto Company (the "Monsanto
Letter of Intent").
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
------------------- -------------------
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned to the Executive at any time during the 120-
day period immediately preceding the Effective Date, except as otherwise
contemplated by the Monsanto Letter of Intent, and (B) the Executive's services
shall be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 50 miles from
such location.
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<PAGE>
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable efforts to perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards or
committees, or (B) deliver lectures and fulfill speaking engagements, so long as
such activities do not significantly interfere with the Executive's
responsibilities under this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but
-7-
<PAGE>
deferred, to the Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary increase awarded
to the Executive prior to the Effective Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" shall mean any direct or
indirect subsidiary of the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the average bonus
paid to the Executive for the last three full fiscal years prior to the
Effective Date (the "Recent Average Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus.
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<PAGE>
(iii) Savings and Retirement Plans. During the Employment Period, the
----------------------------
Executive shall be entitled to participate in all savings and retirement plans,
practices, policies and programs applicable generally to other senior executives
of the Company, but in no event shall such plans, practices, policies and
programs provide the Executive with savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other senior executives of the Company.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
---------------------
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other senior executives of
the Company, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate,
than the
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<PAGE>
most favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other senior executives of the Company.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies, practices and procedures of the
Company in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date.
(vi) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other senior executives of the Company.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during
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<PAGE>
the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 11(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to be
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<PAGE>
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of an act or omission constituting Cause.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, except as contemplated by
the Monsanto Letter of Intent, or any other action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
-12-
<PAGE>
Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
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<PAGE>
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or
---------------------
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 11(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
-14-
<PAGE>
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
date on which the Company notifies the Executive of such termination and (iii)
if the Executive's employment is terminated by reason of death or Disability,
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason; Other than for Cause, Death or Disability. If,
------------------------------------------------------
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability, or the Executive shall terminate
employment for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
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<PAGE>
A. The sum of (l) the Executive's Annual Base Salary through the
Date of Termination to the extent not previously paid, (2) the product of
(x) the Recent Average Bonus and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent
not previously paid (the sum of the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Recent Average Bonus.
(ii) For one year after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the
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<PAGE>
Executive, as in effect generally at any time thereafter with respect to other
senior executives of the Company and their families, provided, however, that if
the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided plan,
the medical and other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable period of
eligibility, and for purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be considered to
have remained employed until one year after the Date of Termination and to have
retired on the last day of such period;
(iii) to the extent not previously paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company (such
other amounts and benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the
-17-
<PAGE>
Executive's legal representatives under this Agreement, other than for payment
by the Company of (i) Accrued Obligations, (ii) Other Benefits, and (iii) an
amount, in cash, equal to one times the Executive's Annual Base Salary at the
time of death. The amounts due under clauses (i) and (iii) of the preceding
sentence shall be paid to the Executive's estate or beneficiary, as applicable,
in a lump sum in cash within 30 days of the Date of Termination.
(c) Disability. If the Executive's employment is terminated by reason of
----------
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
by the Company of (i) Accrued Obligations, (ii) Other Benefits, and (iii) an
amount, in cash, equal to one times the Executive's Annual Base Salary at the
time of termination. The amounts due under clauses (i) and (iii) of the
preceding sentence shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.
(d) Cause. If the Executive's employment shall be terminated for Cause
-----
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
(x) the Annual Base Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Executive, and (z) Other Benefits,
in each case to the extent previously unpaid.
-18-
<PAGE>
(e) Other than For Good Reason. If the Executive voluntarily terminates
--------------------------
employment during the Employment Period, excluding a termination for Good Reason
or pursuant to Section 6(f), this Agreement shall terminate without further
obligation to the Executive, other than for the payment by the Company of (i)
Accrued Obligations (ii) Other Benefits, and (iii) an amount, in cash, equal to
one times his Annual Base Salary at the time of termination. In such case, all
amounts due under clauses (i) and (iii) of the preceding sentence shall be paid
to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
(f) End of Term. If the Executive voluntarily provides notice of
-----------
termination of his employment during the 90-day period immediately prior to the
expiration of the Employment Period, effective as of the end of the Employment
Period, the Company shall pay to the Executive (i) Accrued Obligations, (ii)
Other Benefits and (iii) an amount, in cash, equal to two times his Annual Base
Salary at the time of termination. In such case, all amounts due under clauses
(i) and (iii) of the preceding sentence shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
-------------------------
or limit the Executive's continuing or future
-19-
<PAGE>
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contrast or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or Contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement; Legal Fees. The Company's obligation to make the
---------------------------
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to pay
-20-
<PAGE>
as incurred, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur, up to a maximum of $10,000, as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company. Payments under this
------------------------------------------
Agreement shall be made without regard to whether the deductibility of such
payments (or any other payments) to or for the benefit of the Executive) would
be limited or precluded by Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and without regard to whether such payments (or any other
payments) would subject the Executive to the federal excise tax levied on
certain "excise parachute payments" under Section 4999 of the Code; provided,
that if the total of all payments to or for the benefit of the Executive, after
reduction of all federal taxes (including the tax set forth in Section 4999 of
the Code, if applicable) with respect to such payments (the "Executive's total
after-tax payments"), would be increased by the limitation of
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<PAGE>
elimination of any payment under this Agreement, amounts payable under this
Agreement shall be reduced to the extent, and only to the extent, necessary to
maximize the Executive's total after-tax payments. The determination as to
whether and to what extent payments under this Agreement are required to be
reduced in accordance with the preceding sentence shall be made by agreement
between the Executive and the independent public accounting firm of the Company.
To the extent that any elimination or reduction of payments is made in
accordance with this Section 9, the determination as to which payments shall be
eliminated or reduced shall be made by the Executive.
10. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the
-22-
<PAGE>
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Mr. Roderick N. Stacey
-------------------
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<PAGE>
If to the Company: Calgene, Inc.
----------------- 1920 Fifth Street
Davis, CA 95616
Attention: Vice President -
Human Resources
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
-24-
<PAGE>
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under this Agreement.
From and after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
CALGENE, INC.
By /s/ William Higgins
-----------------------------------
/s/ Roderick N. Stacey
-------------------------------------
Roderick N. Stacey
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<PAGE>
EXHIBIT 10.38
-------------
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Calgene, Inc., a Delaware corporation (the
"Company") and Michael J. Motroni (the "Executive"), dated as of the 19th day of
July, 1995.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement
<PAGE>
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
l. Certain Definitions. (a) The "Effective Date" shall mean the first
-------------------
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate three years from such Renewal Date,
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<PAGE>
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (ii) any acquisition by
any corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (c) of this Section 2; or
-3-
<PAGE>
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal or directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
immediately following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
-4-
<PAGE>
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 40%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination;
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company; or
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<PAGE>
(e) The closing of the transactions contemplated by the Letter of Intent
dated June 27, 1995 between the Company and Monsanto Company (the "Monsanto
Letter of Intent").
3. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period")
4. Terms of Employment. (a) Position and Duties. (i) During the
------------------- -------------------
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned to the Executive at any time during the 120-
day period immediately preceding the Effective Date, except as otherwise
contemplated by the Monsanto Letter of Intent, and (B) the Executive's services
shall be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 50 miles from
such location.
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<PAGE>
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable efforts to perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards or
committees, or (B) deliver lectures and fulfill speaking engagements, so long as
such activities do not significantly interfere with the Executive's
responsibilities under this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but
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<PAGE>
deferred, to the Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary increase awarded
to the Executive prior to the Effective Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" shall mean any direct or
indirect subsidiary of the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the average bonus
paid to the Executive for the last three full fiscal years prior to the
Effective Date (the "Recent Average Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus.
-8-
<PAGE>
(iii) Savings and Retirement Plans. During the Employment Period, the
----------------------------
Executive shall be entitled to participate in all savings and retirement plans,
practices, policies and programs applicable generally to other senior executives
of the Company, but in no event shall such plans, practices, policies and
programs provide the Executive with savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other senior executives of the Company.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
---------------------
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other senior executives of
the Company, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate,
than the
-9-
<PAGE>
most favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other senior executives of the Company.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the policies, practices and procedures of the
Company in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date.
(vi) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other senior executives of the Company.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall
-------------------
terminate automatically upon the Executive's death during
-10-
<PAGE>
the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 11(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company. The
cessation of employment of the Executive shall not be deemed to be
-11-
<PAGE>
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of an act or omission constituting Cause.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position as Chief Financial Officer of the
Company (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 4(a) of
this Agreement or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities
(including the removal of chief financial officer responsibilities),
excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in
-12-
<PAGE>
bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
-13-
<PAGE>
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or
---------------------
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 11(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
-14-
<PAGE>
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
date on which the Company notifies the Executive of such termination and (iii)
if the Executive's employment is terminated by reason of death or Disability,
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason; Other than for Cause, Death or Disability. If,
------------------------------------------------------
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability, or the Executive shall terminate
employment for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
-15-
<PAGE>
A. The sum of (l) the Executive's Annual Base Salary through the
Date of Termination to the extent not previously paid, (2) the product of
(x) the Recent Average Bonus and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent
not previously paid (the sum of the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum of
(x) the Executive's Annual Base Salary and (y) the Recent Average Bonus.
(ii) For one year after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the
-16-
<PAGE>
Executive, as in effect generally at any time thereafter with respect to other
senior executives of the Company and their families, provided, however, that if
the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided plan,
the medical and other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable period of
eligibility, and for purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be considered to
have remained employed until one year after the Date of Termination and to have
retired on the last day of such period;
(iii) to the extent not previously paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company (such
other amounts and benefits shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the
-17-
<PAGE>
Executive's legal representatives under this Agreement, other than for payment
by the Company of (i) Accrued Obligations, (ii) Other Benefits, and (iii) an
amount, in cash, equal to one times the Executive's Annual Base Salary at the
time of death. The amounts due under clauses (i) and (iii) of the preceding
sentence shall be paid to the Executive's estate or beneficiary, as applicable,
in a lump sum in cash within 30 days of the Date of Termination.
(c) Disability. If the Executive's employment is terminated by reason of
----------
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
by the Company of (i) Accrued Obligations, (ii) Other Benefits, and (iii) an
amount, in cash, equal to one times the Executive's Annual Base Salary at the
time of termination. The amounts due under clauses (i) and (iii) of the
preceding sentence shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.
(d) Cause. If the Executive's employment shall be terminated for Cause
-----
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive
(x) the Annual Base Salary through the Date of Termination, (y) the amount of
any compensation previously deferred by the Executive, and (z) Other Benefits,
in each case to the extent previously unpaid.
-18-
<PAGE>
(e) Other than For Good Reason. If the Executive voluntarily terminates
--------------------------
employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligation to the
Executive, other than for the payment by the Company of (i) Accrued Obligations
(ii) Other Benefits, and (iii) an amount, in cash, equal to one times his Annual
Base Salary at the time of termination. In such case, all amounts due under
clauses (i) and (iii) of the preceding sentence shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
-------------------------
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contrast or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
-19-
<PAGE>
or Contract or agreement except as explicitly modified by this Agreement.
8. Full Settlement; Legal Fees. The Company's obligation to make the
---------------------------
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to pay
as incurred, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur, up to a maximum of $10,000, as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
-20-
<PAGE>
9. Certain Additional Payments by the Company. Payments under this
------------------------------------------
Agreement shall be made without regard to whether the deductibility of such
payments (or any other payments) to or for the benefit of the Executive) would
be limited or precluded by Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and without regard to whether such payments (or any other
payments) would subject the Executive to the federal excise tax levied on
certain "excise parachute payments" under Section 4999 of the Code; provided,
that if the total of all payments to or for the benefit of the Executive, after
reduction of all federal taxes (including the tax set forth in Section 4999 of
the Code, if applicable) with respect to such payments (the "Executive's total
after-tax payments"), would be increased by the limitation of elimination of any
payment under this Agreement, amounts payable under this Agreement shall be
reduced to the extent, and only to the extent, necessary to maximize the
Executive's total after-tax payments. The determination as to whether and to
what extent payments under this Agreement are required to be reduced in
accordance with the preceding sentence shall be made by agreement between the
Executive and the independent public accounting firm of the Company. To the
extent that any elimination or reduction of payments is made in accordance with
this Section 9, the determination as to which payments shall be eliminated or
reduced shall be made by the Executive.
-21-
<PAGE>
10. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions
-22-
<PAGE>
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Mr. Michael J. Motroni
-------------------
If to the Company: Calgene, Inc.
----------------- 1920 Fifth Street
Davis, CA 95616
Attention: Vice President -
Human Resources
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
-23-
<PAGE>
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under this Agreement.
From and after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof.
-24-
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
CALGENE, INC.
By /s/ William Higgins
------------------------------
/s/ Michael J. Motroni
--------------------------------
Michael J. Motroni
-25-
<PAGE>
ASSET PURCHASE AGREEMENT
among
GARGIULO, L.P.
(BUYER)
and
COLLIER FARM EQUIPMENT COMPANY
COLLIER FARMS, INC.
COLLIERGRO, LTD.
COLLIER GROVES & PACKING, LTD.
COLLIER TEC, INC.
COLLIER DEVELOPMENT CORPORATION, INC.
TRUST DATED AS OF MARCH 16, 1983 AND NUMBERED 1983CDC
and
COLLIER ENTERPRISES
(collectively, SELLER)
Dated as of December 29, 1995
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Preliminary Statement....................................................... 1
- - ---------------------
ARTICLE I. DEFINITIONS; CONSTRUCTION........................................ 2
1.1 Certain Defined Terms............................................ 2
---------------------
1.2 Construction..................................................... 12
------------
ARTICLE II. SALE OF ASSETS; PURCHASE PRICE; ASSUMED LIABILITIES;
FARMLAND LEASES; CLOSING.................................. 13
2.1 Assets Conveyed.................................................. 13
---------------
2.2 Excluded Assets.................................................. 13
---------------
2.3 Purchase Price and Payment....................................... 13
--------------------------
2.4 Security for Purchase Price and Earn-out Payment; Offset;
---------------------------------------------------------
Cross-default.................................................. 13
-------------
2.5 Assumed Liabilities; Use of Gross Crop Revenues.................. 14
-----------------------------------------------
2.6 Investment Guaranty.............................................. 15
-------------------
2.7 Prudential Loan Assumption....................................... 15
--------------------------
2.8 Allocation of Consideration...................................... 16
----------------------------
2.9 Farmland Leases.................................................. 16
----------------
2.10 Closing.......................................................... 16
--------
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER................... 17
3.1 Corporate Status and Power....................................... 17
--------------------------
3.2 Authorization; No Conflicts; Consents............................ 17
-------------------------------------
3.3 Financial Statements; Changes in Condition....................... 18
------------------------------------------
3.4 Ownership of Property; Completeness of Assets.................... 18
---------------------------------------------
3.5 Leases and Growers' Contracts.................................... 19
-----------------------------
3.6 Insurance........................................................ 19
----------
3.7 Intellectual Property and Trademarks............................. 19
------------------------------------
3.8 Taxes............................................................ 20
-----
3.9 [Intentionally omitted.]......................................... 20
3.10 Contracts........................................................ 20
---------
3.11 Employee Benefit Plans........................................... 21
----------------------
3.12 Litigation....................................................... 21
----------
3.13 Conformance with Laws; Environmental Matters..................... 21
--------------------------------------------
3.14 Subsidiaries..................................................... 24
------------
3.15 Facilities....................................................... 24
----------
3.16 Labor............................................................ 25
-----
3.17 Accounts Receivable.............................................. 25
-------------------
3.18 Transactions With Affiliates..................................... 25
----------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.19 Tangible Personal Property Other Than Inventory.................. 25
-----------------------------------------------
3.20 Prudential Loan.................................................. 26
---------------
3.21 All Required Consents Disclosed; One is Sufficient............... 26
--------------------------------------------------
3.22 Accuracy of Information.......................................... 26
-----------------------
3.23 Free to Deal..................................................... 26
-----------
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER......................... 27
4.1 Status and Power................................................. 27
----------------
4.2 Authorization; No Conflicts; Consents............................ 27
-------------------------------------
4.3 Accuracy of Information.......................................... 28
-----------------------
4.4 Free to Deal..................................................... 28
------------
ARTICLE V. COVENANTS OF THE PARTIES......................................... 29
5.1 Actions prior to Closing.......................................... 29
------------------------
(a) Operations Pending Closing........................... 29
--------------------------
(b) Preservation of Organization......................... 30
----------------------------
(c) Other Transactions Prohibited........................ 30
-----------------------------
(d) Change in Information................................ 30
---------------------
(e) Financial Reports.................................... 30
-----------------
(f) Access prior to Closing.............................. 30
-----------------------
(g) Confidentiality prior to Closing..................... 31
--------------------------------
(h) HSR.................................................. 31
---
5.2 Actions at the Closing............................................ 31
----------------------
(a) Prorations........................................... 31
----------
5.3 Actions after the Closing......................................... 31
-------------------------
(a) Further Assurances................................... 31
------------------
(b) Misdirected Funds.................................... 31
-----------------
(c) Failure to obtain certain Consents................... 32
----------------------------------
(d) Access after Closing................................. 32
--------------------
(e) Buyer's Books and Records............................ 32
-------------------------
(f) Confidentiality after Closing........................ 32
-----------------------------
(g) Restriction on Use of "Collier Farms" Name........... 33
------------------------------------------
5.4 Title; Instruments of Conveyance and Assumption................... 33
-----------------------------------------------
5.5 Employees......................................................... 34
---------
5.6 Proxy Matters..................................................... 35
-------------
5.7 Seller's Representative........................................... 36
-----------------------
ARTICLE VI. CLOSING CONDITIONS, DOCUMENTS AND PROCEDURES.................... 37
6.1 Conditions to Obligations of Buyer................................ 37
----------------------------------
(a) Seller's Representations and Warranties True......... 37
--------------------------------------------
(b) Seller's Performance of Covenants.................... 37
---------------------------------
(c) Delivery of Closing Documents to Buyer............... 37
--------------------------------------
6.2 Conditions to Obligations of Seller............................... 38
-----------------------------------
(a) Buyer's Representations and Warranties True.......... 38
-------------------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(b) Buyer's Performance of Covenants..................... 39
--------------------------------
(c) Delivery of Closing Documents by Buyer............... 39
--------------------------------------
6.3 Conditions to Obligations of all Parties.......................... 39
----------------------------------------
(a) Compliance with Law.................................. 39
-------------------
(b) No Action or Proceeding.............................. 40
-----------------------
(c) HSR; etc............................................. 40
--------
(d) Exhibits............................................. 40
--------
ARTICLE VII. INDEMNIFICATION................................................ 41
7.1 Seller's Indemnity................................................ 41
------------------
7.2 Buyer's Indemnity................................................. 41
-----------------
7.3 Survival.......................................................... 42
--------
7.4 Method of Asserting Claims........................................ 42
--------------------------
7.5 Limitations on Amounts............................................ 44
----------------------
(a) Seller............................................... 44
------
(b) Buyer................................................ 45
-----
7.6 Offset............................................................ 45
------
ARTICLE VIII. GENERAL PROVISIONS............................................ 47
8.1 Joint and Several Obligations..................................... 47
-----------------------------
8.2 Successors and Assigns............................................ 47
----------------------
8.3 No Third Party Beneficiary........................................ 47
--------------------------
8.4 Entire Agreement.................................................. 47
----------------
8.5 Notices........................................................... 47
-------
8.6 Modifications..................................................... 48
-------------
8.7 Counterparts...................................................... 48
------------
8.8 Cooperation....................................................... 48
-----------
8.9 Governing Law; Venue.............................................. 48
--------------------
8.10 Headings.......................................................... 49
--------
8.11 Gender, Number.................................................... 49
--------------
8.12 Severability...................................................... 49
------------
8.13 Survival.......................................................... 49
--------
8.14 Attorneys' Fees; Expenses......................................... 49
-------------------------
8.15 Termination....................................................... 50
-----------
8.16 Radon Disclosure.................................................. 51
----------------
8.17 Remedies Cumulative............................................... 51
-------------------
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
--------
Exhibit A Assignment and Assumption Agreement
Exhibit B Earn-Out Payment
Exhibit C Farmland Lease Agreement
Exhibit D Owned Properties Mortgage
Exhibit E Duda Property Mortgage
Exhibit F Security Agreement
Exhibit G Buyer Notes Form (aggregate of $10,000,000)
Exhibit H Subordination Agreement (Owned Properties)
Exhibit I Subordination Agreement (Duda Property)
Exhibit J Notice of Future Advance Limitation
Exhibit K Mercer Employment Agreement
Exhibit L Escrow Agreement
Exhibit M Opinion of Seller's Counsel
Exhibit N Opinion of Buyer's Counsel
Exhibit O Form of Warranty Deed
Exhibit P Seller's Affidavit
SCHEDULES
---------
1.1(a) Seller's Fixed Assets (as of 9/30/95)
1.1(b) Duda Property; Buyer's Land and Related Property, Naples, Florida
1.1(c) Excluded Accounts Receivable
1.1(d) Initial Leased Properties
1.1(e) Owned Properties
1.1(f) Permitted Encumbrances
2.8 Allocation of Consideration
3.2 Requisite Approvals - Seller
3.3(a) 1995 Financial Statements and Interim Financial Statements
3.3(b) Material Changes Since 9/30/95
3.4 Encumbrances
3.5 Leases, Grower Contracts and Other (not owned) Facilities
3.6 Insurance
3.7 Trademarks
3.10 Material Agreements
3.11 Employee Benefits
3.13 Conformance with Laws; Environmental Matters
3.15(d) Pending or Threatened Condemnation, Assessments, Public Improvement
Liens, or Violations of Restrictive Covenants as to Facilities
3.16 Labor Matters
iv
<PAGE>
3.17 Accounts Receivable Subject to Claim or Offset
4.2 Requisite Approvals - Buyer
6.1(c)(iii) Motor Vehicles
v
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of December 29, 1995, by and
among Gargiulo, L.P., a Delaware limited partnership (the "Buyer"), and Collier
Farm Equipment Company, a Florida corporation, Collier Farms, Inc., a Florida
corporation; Colliergro Ltd., a Florida limited partnership; Collier Groves &
Packing, Ltd., a Florida limited partnership; Collier Tec, Inc., a Florida
corporation; Collier Development Corporation, Inc., a Florida corporation; that
certain Trust dated as of March 16, 1983 and numbered 1983CDC and Collier
Enterprises, a Florida general partnership (collectively, the "Seller").
Preliminary Statement
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The Seller is engaged primarily in the business of farming tomatoes,
peppers and potatoes and producing vegetable transplants in Southwest Florida.
This Agreement sets forth the terms pursuant to which (i) the Seller is selling,
and the Buyer is acquiring, the Assets and (ii) the Buyer is assuming the
Assumed Liabilities (as all of such terms are defined below).
NOW, THEREFORE, in consideration of the covenants contained in this
Agreement and other good and valuable consideration, the receipt and adequacy of
which are conclusively acknowledged, the parties to this Agreement, intending to
be legally bound, agree as follows:
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ARTICLE I. DEFINITIONS; CONSTRUCTION.
1.1 Certain Defined Terms. In addition to the terms defined elsewhere in this
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Agreement, the following capitalized terms used herein shall have the following
meanings, unless the context clearly requires otherwise:
"1995 Financial Statements" shall mean the audited (i) combined balance
sheets of Seller relating to the Business as of June 30, 1995, (ii) combined
statements of operations and owners' equity for the year ended June 30, 1995,
and (iii) combined statements of cash flows for the year ended June 30, 1995,
together with the notes thereto.
"1995-1996 Crop" shall mean the crop of tomatoes, peppers, potatoes and
nursery transplants in the ground and being produced by the Business for the
fiscal year beginning July 1, 1995.
"1995-1996 Crop Liabilities" shall mean the accrued but unpaid expenses of
the Seller incurred to third parties and Affiliates in the Ordinary Course
during the Applicable Period (but with respect to Affiliates, only those which
constitute payments in the Ordinary Course consistent with past practice and the
1995 Financial Statements), for the production of the 1995-1996 Crop, excluding
any capital costs or expenses, a listing of which shall be set forth on a
certificate to be delivered by Seller to Buyer at Closing.
"Affiliate" shall mean, with respect to a specified Person, any other
Person controlling, controlled by, or under common control with the Person
specified. Without limiting the generality of the foregoing, (i) an Affiliate of
an individual Person shall include all members of such Person's immediate family
(which shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law) and (ii) an Affiliate of any
Person shall include any other Person with respect to which either such Person,
directly or indirectly, (A) has the power to appoint or direct management of the
other Person or (B) owns an interest in equity or profits of the other Person of
twenty-five percent (25%) or more.
"Agreement" shall mean this Asset Purchase Agreement, and any written
modifications or amendments of it executed by the party sought to be charged
therewith, and shall include the Schedules and Exhibits attached to it.
"Applicable Period" shall mean the period from July 1, 1995 through the
Closing Date.
"Assets" shall mean all of Seller's right, title and interest in, to and
under the following assets directly related to the Business wherever located
(other than Excluded Assets): deposits; accounts receivable; purchase orders;
tax refunds relating to taxes included in the Investment; proceeds payable under
insurance policies of Seller relating to items included in the Investment or
Assumed Liabilities (to the extent paid by Buyer); inventories; machinery,
equipment, parts,
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accessories, furniture and fixtures, a list of which assets as of September 30,
1995 is set forth on Schedule 1.1(a) hereof; motor vehicles, a list of which as
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of the date hereof is set forth on Schedule 6.1(c)(iii); books, records and
accounts relating to the 1995-1996 Crop; customer lists and originals or copies,
as appropriate, of other business documents and information required for the
operation of the Business; Contracts; licenses (to the extent transferable);
Permits (to the extent transferable); Intellectual Property; Trademarks; Leases;
Growers' Contracts; Equipment; Owned Property; the 1995-1996 Crop and the
Business as a going concern.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement to be signed and delivered by the Buyer and the Seller at
Closing, substantially in the form of Exhibit A attached hereto.
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"Assumed Liabilities" shall mean only those obligations and liabilities of
the Seller directly relating to the Business that consist of: (i) the 1995-1996
Crop Liabilities, (ii) obligations and liabilities of the Seller arising after
the Closing under Contracts, Growers Contracts and Leases specifically assumed
by the Buyer at the Closing pursuant to the Assignment and Assumption Agreement,
and (iii) any and all workers' compensation claims relating to incidents or
events occurring during the Applicable Period.
"Business" shall mean all of the businesses and operations of the Seller
relating to the farming of tomatoes, potatoes and peppers and the production of
vegetable transplants, as of the Closing.
"Buyer" shall have the meaning set forth in the first paragraph hereof.
"Buyer Notes" shall have the meaning set forth in Section 2.3(a)(ii)
hereof.
"Claim Notice" shall have the meaning set forth in Section 7.4(a) hereof.
"Closing" shall have the meaning set forth in Section 2.10 hereof.
"Closing Date" shall have the meaning set forth in Section 2.10 hereof.
"Closing Date Cash Payment" shall have the meaning set forth in
Section 2.3(a)(i) hereof.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"COBRA Coverage" shall have the meaning set forth in Section 5.5(a) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as it may be amended
from time to time (including for this purpose all provisions of any public law
regardless of whether consolidated in such code), together with any successor
statute thereto and any rules or regulations
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relating thereto. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
future law.
"Combined Business" shall mean the combined tomato, potato, pepper and
vegetable transplant operation and business (i) purchased by Buyer pursuant to
this Agreement, and (ii) conducted as of the commencement of the Earn-Out Period
by the Buyer in Collier, Hendry and Polk Counties (the "Area"), Florida
excluding (a) all assets and operations relating to produce re-pack operations,
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such as Buyer's existing re-pack facility in Palmetto, Florida and any other
re-pack facility which Buyer operates within the Area; (b) the Buyer's BHN
Research business and operations; (c) Buyer's land and related buildings and
fixtures located at and around Buyer's headquarters facility in Naples, Florida,
and Buyer's land and related buildings and fixtures commonly known as the "Duda
Property," described in Schedule 1.1(b) hereto; and (d) all activities and
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operations related to the sale and marketing of a premium or branded tomato.
"Confidentiality Agreement" shall mean that certain letter agreement
regarding confidentiality dated October 27, 1995 between Buyer, Seller, Monsanto
Company and Calgene, Inc.
"Contracts" shall have the meaning set forth in Section 3.10 hereof.
"Current Seller Balance Sheet" shall mean Seller's balance sheet included
in the Interim Financial Statements.
"Damages" shall mean any and all damages, losses, liabilities,
obligations, penalties, claims, litigation, demands, defenses, judgments,
amounts paid in settlement, suits, proceedings, costs, disbursements or expenses
(including, without limitation, reasonable attorneys' fees and experts' fees and
disbursements) of any kind or of any nature whatsoever (whether based on common
law, statute or contract; fixed or contingent; known or unknown) suffered or
incurred. Without limiting the generality of the foregoing, "Damages" shall
include reasonable fees for attorneys (including the cost of enforcing any
indemnification obligation), consultants and experts and costs of investigation,
cleanup, response, removal, remediation, containment, monitoring, restoration,
treatment and disposal relating to Environmental Liabilities.
"Duda Property Mortgage" shall have the meaning set forth in the definition
of Security Instruments.
"Earn-Out Payment" shall have the meaning set forth in Exhibit B
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attached hereto.
"Employees" shall have the meaning set forth in the definition of
"Excluded Liabilities."
"Encumbrance" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, restriction, lease, lien
(statutory or otherwise), security interest or preferential arrangement of any
kind or nature whatsoever, including any conditional sale or other title
retention agreement.
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"Environmental Laws" shall mean any applicable Federal, state or local
statutory or common law, and any regulation, code, plan, order, decree,
judgment, permit, license, grant, franchise, concession, restriction, agreement,
requirement, and injunction issued, entered, promulgated, or approved
thereunder, relating to the environment, or human health or safety relating to
occupational or environmental matters, including, without limitation, any law
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment (including, without limitation, air, surface
water, groundwater and land), relating to the presence, manufacture, generation,
refining, processing, distribution, use, sale, treatment, recycling, receipt,
storage, disposal, transport, arranging for transportation, treatment or
disposal, or handling of Hazardous Materials, including, but not limited to,
CERCLA, RCRA, FIFRA, CAA, CWA (as those terms are defined in the definition of
"Hazardous Material"), the Hazardous Material Transportation Act, as amended
from time to time, the Toxic Substances Control Act, as amended from time to
time, and the Occupational Safety and Health Act of 1970, as amended from time
to time, or relating to the disposal of Nonhazardous Solid Waste.
"Environmental Liabilities" shall mean Damages arising as a result, or by
reason, of any violation of Environmental Laws.
"Environmental Permits" shall mean Permits required by Environmental Laws.
"Equipment" shall mean that portion of the Assets which consists of goods
or equipment used in the Business, including, without limitation, all machinery,
equipment, tools and tooling relating to the production, packaging and storing
of tomatoes, potatoes and peppers, and the production of vegetable transplants,
and all computer equipment and software, furniture, fixtures, and leasehold
improvements used directly in connection with the Business.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rules or regulations issued pursuant thereto.
"ERISA Plans" shall have the meaning set forth in the definition of
"Excluded Liabilities."
"Excluded Assets" shall mean all assets of Seller other than the Assets,
including: (a) all tax records pertaining to the Seller's operation of the
Business prior to the Closing Date (provided that the Seller shall provide
Buyer, upon Buyer's request made at any time after Closing, with copies of any
such tax records relating to a taxable period within five (5) years prior to
the Closing Date); (b) tax refunds relating to any taxes paid by the Seller
or any Affiliate and not included in the Investment for any periods prior to
the Closing Date; (c) insurance policies covering excess risk under Seller's
workers compensation arrangements prior to the Applicable Period; (d) the
Seller's corporate books and related corporate records; (e) the accounts
receivable of Seller which are set forth on Schedule 1.1(c); and (f) the trade
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name "Collier Farms."
"Excluded Liabilities" shall mean all obligations and liabilities of, or
Damages or claims asserted against or suffered by, the Seller (except Assumed
Liabilities and those included in the Investment), including, without limitation
(save for said exceptions), any obligations, liabilities
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or claims arising out of or in connection with: (1) any of the Excluded Assets;
(2) violations of Requirements of Law, including, without limitation, violations
of Environmental Laws, arising in connection with the operation of the Business
prior to Closing; (3) personal injury to or other torts against Persons or
statutory claims of a similar nature arising in connection with the operation of
the Business prior to the Closing; (4) amounts or performance owing by the
Seller to the shareholders or partners or beneficiaries of Seller or their
Affiliates or to any former stockholder or partners or beneficiaries of the
Seller and arising prior to the Applicable Period, including but not limited to
fees, charges, reimbursements and other amounts due or coming due to any
Affiliates of Seller in respect of management or related services, and for
allocations of interest or other expense; (5) equity or profit interests in the
Seller or its assets; (6) any liability of Seller for any federal, state, local
or foreign income, franchise, sales, use, withholding or property taxes or other
taxes of any kind or description (and any fine, penalty or interest with respect
thereto) with respect to a period ending on or before or otherwise attributable
to transactions or periods occurring on or before the Applicable Period; (7)
income taxes owing by the Seller or its beneficial owners to any Governmental
Body and relating to the Applicable Period or arising from the transactions
contemplated by this Agreement; (8) employment, consulting, and non-compete
agreements between the Seller and any of its officers, employees, consultants or
agents; (9) the obligations or liabilities of the Seller under or by reason of
this Agreement, or any other Transaction Document; (10) any liability to a
broker or finder retained by the Seller in connection with the transaction
contemplated by this Agreement; (11) any liability of Seller to any person or
entity the existence of which constitutes a breach of any covenant, agreement,
representation or warranty of Seller contained in this Agreement; (12) any and
all employee compensation, employee benefit, workers' compensation, vacation,
severance, pension, profit-sharing and other retirement obligations, and tax
liabilities incurred in connection therewith, that have accrued prior to the
Applicable Period during the course of Seller's employment of each of its
employees associated with the Business ("Employees") or each person who in the
past has worked for Seller in connection with the Business (each, a "Former
Employee"), including, without limitation, any accrued or other liability for
contributions or payments to be made in respect of participation by any Employee
or Former Employee in any employee pension benefit plan (as defined in Section
3(2) of ERISA), employee welfare benefit plan (as defined in Section 3(1) of
ERISA) or any other employee benefit plan maintained for Employees
(collectively, the "ERISA Plans"); (13) any liability or obligation (contingent
or otherwise) of Seller arising out of any pending litigation, whether or not
set forth on any schedule attached hereto; (14) any liability, obligation or
damage to persons or property arising out of defects in products sold or
services provided by Seller prior to the Closing Date; and (15) any negative
cash balances, bank overdrafts or held checks of Seller; (16) any breach of
contract by Seller prior to Closing, and (17) any employment severance payment
made outside of the Ordinary Course or in connection with the transactions
contemplated hereby.
"Facilities" shall mean any one or more of the Owned Properties.
"Farmland Lease Agreement" shall mean each and all of the lease agreements
executed by Buyer and Affiliates of Seller at the Closing in substantially the
form attached hereto as Exhibit C, which provide for, among other things, (i) an
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initial term ending on June 30, 2001, (ii) three
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(3) options for Buyer to extend the term for up to five (5) years each (so that
if all renewal options are fully exercised, the term of the Farmland Lease
Agreement will expire June 30, 2016), (iii) the lease of at least 6,000
"Farmable Acres" (as defined therein) each year during the term thereof and
(iv) the additional right of Buyer to lease up to an additional 5,000
(approximate) Farmable Acres, all as defined and further described and provided
for in Exhibit C hereto.
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"Former Employee" shall have the meaning set forth in the definition of
"Excluded Liabilities."
"GAAP" shall mean the following, consistently applied, generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession.
"Governmental Body" shall mean any federal, state, county, provincial,
municipal, governmental department, commission, board, bureau, agency or
instrumentality, or other political subdivision exercising executive,
legislative, judicial, regulatory or administrative functions or pertaining
to government.
"Growers' Contracts" shall mean any contract, agreement or arrangement
relating to the production of tomatoes, potatoes, peppers and vegetable
transplants for the Business by any Persons other than Seller or its Affiliates
who produce tomatoes, potatoes, peppers and vegetable transplants for the
Business.
"Gross Crop Revenues" shall mean all revenues (net of returns and
adjustments given to customers) from sales of the 1995-1996 Crop.
"Hazardous Material" shall mean (a) any "hazardous substance", as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time ("CERCLA"), (b) any "hazardous waste", as
defined by the Resource Conservation and Recovery Act of 1976, as amended from
time to time ("RCRA"), (c) any "pesticides" or "defoiliant", as defined in the
Federal Insecticide, Fungicide and Rodenticide Act, as amended from time to time
("FIFRA"), (d) any "hazardous air pollutant," as defined by the Clean Air Act,
as amended from time to time ("CAA"), (e) any "pollutant" or "toxic pollutant,"
as defined by the Clean Water Act, as amended from time to time ("CWA"), (f) any
asbestos, polychlorinated biphenyls ("PCBs"), infectious wastes, urea
formaldehyde or petroleum product, or (g) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material or substance within the meaning
of any other applicable Federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders) relating to or
imposing liability or standards of conduct concerning any hazardous, toxic or
dangerous waste, substance or material, all as amended from time to time.
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"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Immediately Available Funds" shall mean cash, certified check or wire
transfer of immediately available funds.
"Indemnified Party" shall mean a Person indemnified and claiming
indemnification pursuant to the provisions of Article VII of this Agreement.
"Indemnifying Party" shall mean a Person against whom a claim for
indemnification is asserted pursuant to the provisions of Article VII of this
Agreement.
"Initial Leased Properties" shall mean the real properties described on
Schedule 1.1(d) hereto, consisting of all farmlands and similar real
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properties, other than the Owned Properties, owned or leased by Seller or
Affiliates of Seller and presently used in the operation of the Business.
"Intellectual Property" shall mean intangible property rights, including
inventions, discoveries, trade secrets, processes, formulas, know-how, United
States and foreign patents and patent applications, Trademarks, copyrights,
copyright registrations, computer and electronic processing programs and
software processes used exclusively in connection with the Business and shall
include the goodwill associated therewith.
"Intellectual Property Licenses" shall mean all licenses, consents,
covenants not to sue and other authorizations issued or granted to a Person by
another Person with respect to Intellectual Property of such other Person, and
relating to the Business.
"Interim Financial Statements" shall mean the unaudited combined
balance sheets of Seller relating to the Business as of September 30, 1995,
together with the related combined statements of operations for the quarter
ended September 30, 1995.
"Investment" shall mean the amount equal to all actual expenses of every
kind incurred by Seller in the Ordinary Course during the Applicable Period in
connection with the 1995-1996 Crop (including, without limitation, all employee
costs, workers' compensation claims and costs and the Lease Payments, but with
respect to Lease Payments only to the extent provided in the definition of Lease
Payments), less (i) Gross Crop Revenues received by Seller prior to the Closing
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Date, (ii) the 1995-1996 Crop Liabilities, and (iii) any such expenses which are
Excluded Liabilities, plus interest on the amount so calculated through the date
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of Buyer's payment of such amount pursuant to Section 2.5 hereof at the rate
which may from time to time be in effect under Seller's operating line of credit
with SunTrust, N.A. (f/k/a SunBank, N.A.). In determining the amount of the
Investment:
(a) The expenses incurred by the Business during the Applicable Period
shall be determined and allocated consistently with the 1995 Financial
Statements, including, without
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limitation, the manner in which the "related party management fees" (as set
forth in the 1995 Financial Statements) was allocated to the Business for the
fiscal year ended June 30, 1995 and with no greater percentage of such fees
being allocated to the Business during the Applicable Period than was allocated
to the Business for the fiscal year ended June 30, 1995, but subject to
the matters hereinbelow set forth.
(b) Only actual direct and indirect expenses incurred in the Ordinary
Course of producing the 1995-1996 Crop shall be part of the Investment, and the
Investment shall not include any charge for non-cash expenses, such as
depreciation, amortization or other non-cash items.
(c) The Investment shall not include any amounts used to pay for
capital items (as determined in accordance with GAAP) during the Applicable
Period.
(d) To the extent that the Investment would otherwise include an
expense which relates to both the Applicable Period and the period prior to the
Applicable Period, only that portion which relates to the Applicable Period
shall be included in the amount of the Investment.
(e) The Investment shall not include any professional and consulting
fees incurred by Seller in connection with the transactions contemplated hereby;
provided, that the foregoing shall not limit Buyer's responsibility for expenses
incurred by Seller in connection with the Proxy Statement and Registration
Statement as provided in Section 5.6 hereof.
"Seller's knowledge" or "knowledge of Seller" shall mean, unless otherwise
specified herein, a matter which is within the knowledge of Seller after having
made due internal inquiry but without independent investigation.
"Lease Payments" shall mean the lease payments (but lease payments to
Affiliates of Seller shall be calculated at the per acre rates set forth in the
Farmland Lease Agreement and not at the per acre rates contained in the existing
lease between Seller and the Affiliate of Seller which is the lessor of such
farmland) made by Seller for farmland used in the Business during the Applicable
Period.
"Leased Property" shall mean, collectively, (i) the Initial Leased
Properties and (ii) all additional farmlands or real properties which may be
leased by Buyer pursuant to the Farmland Lease Agreement.
"Leases" shall mean all agreements, understandings or arrangements in
effect prior to Closing which relate to the use and/or occupancy of the Initial
Leased Properties.
"Liabilities and Investment Certificate" shall have the meaning set forth
in Section 2.5(b) hereof.
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"Material Adverse Effect" shall mean a material adverse change in (i) the
property, business, operations or condition of the Business (financial or
otherwise), or (ii) the Buyer's ability to use the Assets after the Closing in
substantially the same manner as in the conduct of the Business prior to the
Closing.
"Misdirected Funds" shall mean any collections, or other amounts received,
by a party or any of its Affiliates that constitute the proceeds of, or a
collection in respect of, any account receivable or other asset to which the
other party is entitled.
"Nonhazardous Solid Waste" shall mean solid waste as that term is defined
in the Solid Waste Disposal Act which is neither characteristically hazardous
waste nor listed hazardous waste under RCRA, but which is subject to special
handling, transportation or disposal requirements under state or local
Environmental Law. Nonhazardous Solid Waste shall not include household solid
waste.
"Notice Period" shall have the meaning set forth in Section 7.4(a) hereof.
"Operating Line" shall mean Seller's existing operating line of credit with
SunTrust, N.A. (f/k/a SunBank, N.A.).
"Ordinary Course" shall mean the ordinary course of the Business conducted
in a manner substantially consistent with its previous operations prior to the
date of this Agreement.
"Other Facilities" shall mean the premises, including farmland (but not
including any of the Facilities), operated for the benefit of the Business under
Growers' Contracts.
"Owned Properties" shall mean (i) the real property on which the tomato
packing house, vegetable packing house, greenhouses and office facilities of the
Business (exclusive of the farm operation office) are located and (ii) a parcel
containing approximately 100 acres near Immokalee, Florida suitable for migrant
labor housing, all of which are listed on Schedule 1.1(e) hereof, but not the
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mineral rights relating to any of the foregoing.
"Owned Properties Mortgage" shall have the meaning set forth in the
definition of Security Instruments.
"Permits" shall mean all permits, licenses, consents, registrations,
certificates, accreditations, approvals, authorizations, rights and franchises
held or used by the Seller in connection with the ownership and/or operation of
all or any part of the Assets or Business or otherwise necessary for the
operation of the Business (except Intellectual Property Licenses), including,
without limitation, those issued by any Governmental Body, to the extent the
foregoing are transferrable under any applicable Requirement of Law.
"Permitted Encumbrances" shall mean those Encumbrances listed on
Schedule 1(f) hereto.
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"Person" shall mean an individual (natural person), a corporation, a
partnership (general or limited), a joint venture, an association, a joint-stock
company, a limited liability company, a bank, a trust company, a land trust, a
vehicle trust, a business trust, a real estate investment trust, an estate, a
trust, an unincorporated organization, a Governmental Body or any other type of
entity.
"Plan" shall have the meaning set forth in Section 3.11 hereof.
"Prudential" shall mean the holder of the Prudential Loan.
"Prudential Loan" shall mean the indebtedness for borrowed money owed by
the Seller and certain related entities to Prudential Insurance Company of
America in the outstanding principal amount of $6,478,000 as of November 30,
1995.
"Prudential Loan Documents" shall mean all loan documents relating to the
Prudential Loan.
"Purchase Price" shall have the meaning set forth in Section 2.3 hereof.
"Requirement of Law" shall mean, with respect to the United States or
elsewhere, any applicable statute, law, ordinance, rule, regulation, permit,
order, decree, judicial or administrative decision or directive, or other
requirement having the force of law and, where applicable, any interpretation
thereof by any authority having jurisdiction with respect thereto or charged
with the administration thereof.
"Requisite Approvals" shall mean any necessary consent, permit, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Body or any third party.
"Security Instruments" shall mean the following documents securing the
Buyer's obligations under the Buyer Notes and Earn-Out Payment: (i) the Owned
Properties Mortgage (in substantially the form of Exhibit D hereto) encumbering
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the Owned Properties together with the buildings and improvements thereon
erected or to be erected subject to the liens and mortgages securing the
Prudential Loan (if assumed by Buyer), (ii) the Duda Property Mortgage (in
substantially the form of Exhibit E hereto) encumbering the Duda Property (as
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defined in the Duda Property Mortgage) together with the buildings and
improvements thereon erected or to be erected subject to the existing lien on
the Duda Property in favor of A. Duda & Sons, Inc., (a copy of which was
previously delivered to Seller), and (iii) the Security Agreement (in
substantially the form of Exhibit F hereto) encumbering the Assets subject to
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the liens and mortgages securing the Prudential Loan (if assumed by Buyer) on
Assets presently secured under the Prudential Loan and the Permitted
Encumbrances. The Owned Properties Mortgage, the Duda Property Mortgage and the
Security Agreement shall each also encumber the buildings and improvements
included among the Assets which are located on land to be leased to Buyer
pursuant to the Farmland Lease.
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"Seller" shall have the meaning set forth in the first paragraph hereof,
and shall include each of the listed Persons individually, as the context
requires.
"Seller's Financial Statements" shall mean (i) the 1995 Financial
Statements and (ii) the Interim Financial Statements.
"Seller's Representative" shall mean Collier Enterprises.
"Trademarks" shall mean (and shall include all goodwill associated
therewith) all trademark registrations, applications for trademark
registrations, trade names, trade dress, service marks, and service names used
in the Business, but specifically excluding "Collier Farms" and the names of
each Seller.
"Transaction Documents" shall mean this Agreement, Exhibits A through L,
inclusive as executed, and all closing documents delivered in connection
herewith.
1.2 Construction. Unless the context of this Agreement clearly requires
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otherwise: (a) references to the plural include the singular and vice versa; (b)
references to any Person include such Person's successors and assigns but, if
applicable, only if such successors and assigns are specifically permitted by
this Agreement; (c) references to one gender include all genders; (d)
"including" is not limiting; (e) the words "hereof", "herein", "hereby",
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement; (f) article,
section, subsection, clause, Exhibit and Schedule references are to this
Agreement unless otherwise specified; (g) reference to any agreement (including
this Agreement), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof and, if applicable, the terms hereof; and (h) general or
specific references to any Requirement of Law means such Requirement oy
particular provision of this Agreement; (f) article, section, subsection,
clause, Exhibit and Schedule references are to this Agreement unless otherwise
specified; (g) reference to any agreement (including this Agreement), document
or instrument means such agreement, document or instrument as amended or
modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof; and (h) general or specific references to
any Requirement of Law means such Requirement of Law as amended, modified,
codified or re-enacted, in whole or in part, and in effect at the indicated
time.
12
<PAGE>
ARTICLE II. SALE OF ASSETS; PURCHASE PRICE; ASSUMED LIABILITIES;
FARMLAND LEASES; CLOSING.
2.1 Assets Conveyed. On the terms and subject to the conditions and
---------------
exceptions set forth herein, on the Closing Date, Seller shall convey, sell,
transfer, assign and deliver to Buyer, and Buyer shall purchase, acquire and
accept from Seller, on a going-concern basis, the Business, the goodwill of
Seller related to the Business, and all of the Assets free and clear from any
Encumbrances other than Permitted Encumbrances.
2.2 Excluded Assets. Notwithstanding anything contained in Section 2.1
---------------
hereof or elsewhere in this Agreement to the contrary, Seller is not selling
and Buyer is not purchasing, any of the Excluded Assets, all of which shall be
retained by Seller.
2.3 Purchase Price and Payment. The purchase price for the Assets (the
--------------------------
"Purchase Price") shall consist of the following:
(a) A payment of $20,000,000, paid at the Closing as follows:
(i) Buyer shall pay to Seller $10,000,000 (the "Closing
Date Cash Payment") in Immediately Available Funds as requested by the
Seller as consideration for the Assets identified on Schedule 2.8.1
--------------
and being transferred to Buyer hereunder.
(ii) Buyer shall deliver two promissory notes in favor of Seller
(collectively the "Buyer Notes") in the aggregate original principal
amount of $10,000,000 (subject to reduction as provided in Section
2.7) in the form attached hereto as Exhibit G. The first Buyer Note
--- ---------
shall be in the original principal amount of Four Million Three
Hundred Eighty Thousand Six Hundred and Seventy-One Dollars
($4,380,671) in consideration for the Assets identified on
Schedule 2.8.2; and the second Buyer Note shall be in the original
--------------
principal amount of Five Million Six Hundred Nineteen Thousand Three
Hundred Twenty-Nine Dollars ($5,619,329) in consideration of the
goodwill of the Business and the intangible assets being transferred
to Buyer hereunder. Any reduction as provided in Section 2.7 shall be
applied against the first Buyer Note with any excess amount applied to
the second Buyer Note.
(b) The Earn-Out Payment to be calculated and paid as provided in
Exhibit B hereto as additional consideration for the goodwill of the Business
- - ---------
and the intangible assets being transferred to Buyer hereunder. Seller
specifically acknowledges that there is no assurance that the Combined Business
will be profitable or that Seller will realize any Earn-Out Payment at all.
2.4 Security for Purchase Price and Earn-out Payment; Offset;
--------------------------------------------------------
Cross-default. The Buyer Notes and the Earn-Out Paymet shall be secured by the
- - -------------
Security Instruments; provided, however, if the Buyer Notes are paid in full
with the proceeds realized from the sale of the Duda
13
<PAGE>
Property, then (i) the Duda Property Mortgage shall be released and satisfied,
(ii) the Earn-Out Payment shall no longer be secured by the Duda Property and
(iii) any proceeds realized by the Buyer in excess of those needed to pay off
the first mortgage on the Duda Property and the Buyer Notes shall be retained by
Buyer free of any Encumbrances in favor of Seller.
If the Buyer assumes a portion of the Prudential Loan as provided in
Section 2.7, then the Owned Properties Mortgage shall be subject and subordinate
to the Prudential Loan Documents with respect to those assets which presently
secure the Prudential Loan. To evidence such subordination, Seller agrees to
execute a Subordination Agreement (Owned Properties) in substantially the form
of Exhibit H hereto.
---------
The Duda Property Mortgage shall be subject and subordinate to the
existing first mortgage thereon in favor of A. Duda & Sons, Inc. in the
approximate principal amount of $4 million (and to any refinancing thereof that
does not increase such outstanding amount and which is on no less favorable
terms other than changes in interest rates dictated by market conditions). To
evidence such subordination, Seller agrees to execute a Subordination Agreement
(Duda) in substantially the form of Exhibit I hereto.
---------
Buyer shall deliver to Seller at Closing a Notice of Future Advance
Limitation in the form attached hereto as Exhibit I and made a part hereof,
---------
which notice shall limit any future advances under the Duda Property Mortgage
and shall be recorded in the public records of the county in which the land
encumbered by the Duda property mortgage is located.
Buyer, at its expense, shall deliver to Seller or its attorney prior
to Closing a mortgagee title insurance commitment issued by Buyer's title
insurer, or a qualified title insurer reasonably satisfactory to Seller (with
the premium therefor to be paid by Buyer at Closing) agreeing to issue to
Seller, upon recording of the Owned Properties Mortgage and the Duda Property
Mortgage, a mortgagee policy of title insurance insuring the lien of each such
mortgage (in the case of the Owned Properties Mortgage, in the amount of the
first Buyer Note and, in the case of the Duda Property Mortgage in the amount of
$10,000,000, but subject to reduction in the event of the assumption by Buyer of
the Prudential Loan in the amount of the outstanding principal amount so
assumed), subject only to the applicable title exceptions disclosed in Buyer's
owner's policy of title insurance.
The Buyer Notes and the Security Instruments shall be legended to
reflect that the Buyer may offset any claim for indemnification hereunder
against payments due or coming due thereunder, as provided in Section 7.6. The
Buyer Notes, the Earn-Out Payment and the Farmland Lease Agreement shall be
cross-defaulted with each other.
2.5 Assumed Liabilities: Use of Gross Crop Revenues. As further
-----------------------------------------------
consideration for the consummation of the transactions contemplated hereby, on
the Closing Date, Buyer shall assume, and agree to pay or perform when due: (i)
the Assumed Liabilities and (ii) the Investment.
14
<PAGE>
(a) All Gross Crop Revenues received by Seller prior to the
Closing Date shall be used by Seller (i) to make payments to reduce the amount
of the Operating Line or (ii) to pay Ordinary Course expenses of Seller relating
to the production of the 1995-1996 Crop so as to reduce the 1995-1996 Crop
Liabilities.
(b) Seller shall deliver to Buyer at Closing a certificate (the
"Liabilities and Investment Certificate") setting forth the amount of: (i) the
1995-1996 Crop Liabilities which are outstanding as of the Closing Date, and
(ii) the Investment outstanding as of the Closing Date for which Buyer is
responsible as provided in this Section 2.5 to the extent such amount is
calculable. Seller shall permit Buyer full access to books, records,
professionals and personnel, at Buyer's sole expense but without charge by
Seller, as required to verify and/or audit such calculations. Buyer shall have
ninety (90) days from the Closing Date to dispute the calculations of Seller
contained in the Liabilities and Investment Certificate. If Buyer does not
dispute such calculations in writing by such date, the calculations contained in
the Liabilities and Investment Certificate shall be deemed conclusive and
binding upon the parties. If Buyer does give written notice of its disagreement
with such calculations by such date, the parties shall first attempt to resolve
their disagreement. If the parties are unable to do so within 15 days after
delivery of such notice of disagreement to Seller, then the parties shall submit
such dispute to a neutral, independent, certified public accounting firm whose
determination shall be conclusive and binding upon the parties.
(c) All Gross Crop Revenues received by Buyer after the Closing
Date shall be used by Buyer, first, to pay the 1995-1996 Crop Liabilities and,
second, to pay the Seller for the Investment. Seller agrees to use all Gross
Crop Revenues received from Buyer, first, to make payments on the portion of the
Investment related to the Operating Line, and second to reimburse Seller for the
remainder of the Investment. Seller agrees to provide Buyer with such assurances
as Buyer shall reasonably require to assure Buyer that Gross Crop Revenues are
being used by Seller to make payments on the Operating Line to reduce the
Investment. In no event shall Buyer be responsible to pay any default interest
or expenses incurred by Seller because of any default by Seller under the
Operating Line, provided that Buyer is in compliance with its obligations to
make payments to Seller under this subsection (c) and subsection (d).
(d) If the Gross Crop Revenues paid to Seller are not adequate
to pay the balance owing under the Investment (other than default charges as set
forth above) by September 1, 1996, then Buyer shall pay such remaining balance
on September 1, 1996.
2.6 Investment Guaranty. Buyer shall guarantee the portion of the
-------------------
Operating Line relating to the Investment by executing a guaranty relating
thereto in a form reasonably satisfactory to Buyer, Seller and such lender under
the Operating Line.
2.7 Prudential Loan Assumption. Subject to Prudential's consent
--------------------------
(which Seller and Buyer will use reasonable efforts to obtain prior to the
Closing), Buyer may (at its option and at its sole expense) assume, and agree to
pay in accordance with its terms, a portion of the Prudential Loan and related
Prudential Loan Documents; provided, that, following such assumption, neither
15
<PAGE>
Seller nor any of its Affiliates shall have any continuing obligation or
encumbrance on any of their assets with respect to the Prudential Loan. If the
Buyer so assumes a Portion of the Prudential Loan and related Prudential Loan
Documents, then (i) the original principal amount of the Buyer Notes stated in
Section 2.3(a)(ii)($10,000,000), beginning with the first Buyer Note, shall be
reduced by the amount so assumed (whether for outstanding principal or accrued
interest), and (ii) Seller shall execute a Subordination Agreement (Owned
Properties) as provided in Section 2.4. Buyer shall pay any fees or expenses
imposed by Prudential, and any documentary or excise taxes payable in connection
with any such assumption. Seller shall not be liable to pay any fees or expenses
in connection with such assumption.
2.8 Allocation of Consideration. The Buyer and Seller agree that in
---------------------------
order to comply with financial reporting and tax accounting requirements, it is
necessary for them to allocate among the Assets both the amount and the types of
consideration paid or assumed by Buyer pursuant to this Agreement including the
Closing Date Cash payment, the Buyer Notes, the Earn-Out payment and Assumed
Liabilities. The Allocation of the Purchase Price is as set forth in
Schedule 2.8 hereto (which the parties acknowledge is an allocation based on the
- - ------------
fair market value of the Assets determined by arm's length negotiations). Seller
and Buyer jointly shall complete and separately file Form 8594 with their
respective federal income tax returns for the tax year in which the Closing Date
occurs in accordance with such allocation. The parties shall prepare their
respective federal, state and local tax returns in a manner consistent with such
Form 8594. Neither Seller nor Buyer shall, without the written consent of the
other, take a position (i) on any tax return, (ii) before any Governmental Body
charged with the collection of any such tax, or (iii) in any judicial
proceeding, that is in any manner inconsistent with the terms of such
allocation.
2.9 Farmland Leases. At the Closing, the Seller shall cause the
---------------
Farmland Lease Agreement to be executed and delivered to the Buyer, and Buyer
shall execute and deliver the Farmland Lease Agreement.
2.10 Closing. The closing of the transactions contemplated herein
-------
(the "Closing") shall take place at the offices of Buyer's counsel, Karp &
Genauer, P.A., 2 Alhambra Plaza, Suite 1202, Coral Gables, Florida 33134, at
10:00 a.m., local time, on January 31, 1996 (the "Closing Date"), unless another
date, time or place is agreed to by the parties hereto, but in no event shall
the Closing Date be later than the date described in Section 8.15(iv) hereof.
16
<PAGE>
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to Buyer as follows:
3.1 Corporate Status and Power. Each Seller who will be a party to
--------------------------
any Transaction document (i) is duly organized, validly existing and in the case
of corporations and limited partnerships, in good standing, under the laws of
its respective jurisdiction or organization, and (ii) has all requisite
corporate or other appropriate authorization to conduct its business as it is
being conducted on the date of this Agreement. Each Seller and each of their
Affiliates who will be parties to any Transaction Document is qualified to
do business in all jurisdictions in which such qualification is necessary with
respect to the operation of the Business. Each Seller and each of their
Affiliates who will be parties to any Transaction Documents has all requisite
power and authority, corporate or otherwise, (i) to enter into each Transaction
Document to which it will be a party and (ii) subject to obtaining all Requisite
Approvals, to carry out its obligations under each Transaction Document to which
it will be a party and to consummate the transactions contemplated thereby. A
true and correct copy of the organization documents of each Seller and each of
their Affiliates who will be party to any Transaction Document, as presently in
effect, have been provided to or made available to Buyer.
3.2 Authorization: No Conflicts: Consents.
-------------------------------------
(a) This Agreement has been, and at the Closing all Transaction
Documents and other documents which are contemplated by this Agreement to be
executed by any Seller or any of their Affiliates in connection with the
transactions contemplated by this Agreement will have been, duly executed and
delivered on behalf of each Seller and each such Affiliate. Each Seller and each
of their Affiliates who will be parties to any Transaction Documents have
received all necessary authorization, corporate or otherwise, to execute,
deliver and perform this Agreement and each Transaction Document to which they
are or will be a party. This Agreement and each Transaction Document to which it
is or will be a party is, or upon execution and delivery will be, a legal, valid
and binding obligation of each Seller and each of their Affiliates who is or
will be a party thereto, enforceable against it in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, reorganization,
insolvency and similar laws affecting creditors' rights generally, and general
equitable principles.
(b) Except as set forth in Schedule 3.2 to this Agreement, the
------------
execution, delivery, and performance of this Agreement and each Transaction
Document and the consummation of the transactions contemplated hereby and
thereby will not conflict with, or result in any violation of or default under,
any provision of the articles or certificate of incorporation, bylaws or other
organizational or governing instruments of any Seller, or the articles or
certificate of incorporation, bylaws or other organizational or governing
instruments of any Affiliates of any Seller who will be a party to any
Transaction Document, or any agreement or other arrangement described in
Schedule 3.10, or, subject to obtaining Requisite Approvals, of any Permit,
- - -------------
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to a Seller or such
17
<PAGE>
Affiliate or any of their respective properties, other than any such conflict,
violation, default or loss that does not have a Material Adverse Effect.
(c) Except as set forth in Schedule 3.2, there are no Requisite
------------
Approvals required on the part of any Seller or any Affiliate who will be a
party to any Transaction Document in connection with the execution and delivery
of this Agreement or any Transaction Document or the consummation of the
transactions contemplated hereby or thereby, except those as to which the
failure to obtain would not have a Material Adverse Effect.
3.3 Financial Statements; Changes in Condition.
------------------------------------------
(a) Attached as composite Schedule 3.3(a) to this Agreement are
---------------
true, correct and complete copies of the 1995 Financial Statements and the
Interim Financial Statements. Except as noted herein or therein, the Financial
Statements were prepared in conformity with GAAP and present fairly, in all
material respects (subject, in the case of the Interim Financial Statements, to
normal, recurring year-end audit adjustments), the financial condition of the
Business as of the dates thereof and the results of operations and cash flows of
the Business for the periods indicated therein.
(b) Except as set forth in Schedule 3.3(b) to this Agreement,
---------------
there have been no changes in the financial condition of the Business since the
date of the Current Seller Balance Sheet, which would, in the aggregate, have a
Material Adverse Effect other than due to market conditions and pricing in the
fresh produce industry, agricultural conditions in Southwest Florida, including
weather and disease, and economic conditions generally. Since the date of
the Current Seller Balance Sheet, the Seller has except as disclosed in
Schedule 3.3(b), (i) other than in connection with the transactions contemplated
- - ---------------
herein, carried on and operated the Business in the usual, regular and Ordinary
Course, and (ii) not (A) except for sales of inventory in the Ordinary Course,
sold or disposed of any assets of the Seller having a fair market value in
excess of $50,000 for any transaction (or $100,000 for any series of
transactions); (B) incurred any indebtedness for borrowed money (except for
continuing borrowings and repayments of indebtedness under existing or amended
credit facilities identified in the Financial Statements); in any case, in
connection with the Business; (C) engaged in any "prohibited transaction" (as
such term is defined in section 406 of ERISA and Section 4975(c) of the Code),
or incurred any "accumulated funding deficiency" (as such term is defined in
section 302 of ERISA), whether or not waived, or terminated any Plan in a manner
that could result in the imposition of a lien on any property of the Seller
pursuant to Section 4068 of ERISA, or (D) to the Seller's knowledge, done any
act or omitted to do any act, or permitted any act or omission to act, which
caused or will cause a material breach of any of the Prudential Loan documents,
Leases, Contracts, Growers' Contracts or Intellectual Property Licenses listed
or described in any Schedule to this Agreement.
3.4 Ownership of Property; Completeness of Assets. The Seller has
---------------------------------------------
good and marketable title to all of the Assets (except for the Owned Properties
which are addressed in Section 3.15(b)), subject to no Encumbrances other than
Permitted Encumbrances and (i) those items that secure liabilities that are
reflected in the Current Seller Balance Sheet or the notes
18
<PAGE>
thereto, (ii) those Encumbrances described in Schedule 3.4 to this Agreement or
------------
in any other Schedule hereto, (ii) liens for taxes not yet due and payable, and
(iv) worker's, carrier's and materialman's liens and other liens incurred in the
Ordinary Course, including rights of set-off accruing to banking institutions at
which the Seller deposits funds. The Seller has the right under valid and
existing Leases to occupy, use, possess and control all Initial Leased
Properties as now occupied, used, possessed and controlled by the Seller,
subject in each case to the applicable terms and conditions of the Leases. The
Assets being transferred to the Buyer include all assets (i) used directly by
the Seller as of the Closing Date in the operation of the Business (except that,
with respect to real property, only the Owned Properties are being transferred)
and (ii) necessary for the operation of the Business as conducted in the year
ended June 30, 1995, as shown in the Financial Statements, and as conducted just
prior to the Closing (except for the Excluded Assets and except that, with
respect to real property, only the Owned Properties are being transferred).
3.5 Leases and Growers' Contracts. All of the Leases and Growers'
-----------------------------
Contracts to which the Seller is a party and which are currently in effect are
listed in Schedule 3.5 to this Agreement. Schedule 3.5 also sets forth the Other
------------ ------------
Facilities with respect to which the Seller has provided financing since
January 1, 1995. To the Seller's knowledge, each such Lease or Growers' Contract
is in full force and effect. True, complete and correct copies of all of such
written Leases and Growers' Contracts have been made available to Buyer for
inspection and copying. Except as reflected in Schedule 3.5 or such documents,
------------
there have been no material amendments or modifications to any of such Leases or
Growers' Contracts. Neither the Seller, nor to the best of the Seller's
knowledge, any other party of such Leases or Growers' Contracts, is in breach of
or in default under (nor has any event occurred which with the passage of time,
giving of notice or both would constitute a breach or default under) in each
case in any material respect, any such Lease or Growers' Contract, except as
noted in Schedule 3.5. Seller has not received any written notice from, or given
------------
any written notice to, any party under any Lease or Growers' Contract regarding
an intention to terminate any Lease or Growers' Contract or a material default
under any Lease or Growers' Contract, which default has not been cured. Except
as noted in Schedule 3.5, none of the leasehold interests of the Seller as
------------
tenant, in any of the Initial Leased Properties are mortgaged by the Seller.
3.6 Insurance. Schedule 3.6 to this Agreement contains a list of all
--------- ------------
insurance policies covering the Seller and its assets, insofar as they relate to
the business. Each such policy is in full force and effect on the date hereof.
3.7 Intellectual Property and Trademarks. Schedule 3.7 to this
------------------------------------ ------------
Agreement contains a true, correct and complete list of all Intellectual
Property and similar assets (except know-how), and a complete list of all
Trademarks, used by the Seller in connection with the Business. Except as set
forth on Schedule 3.7, the Seller is not a licensor in respect of any
------------
Intellectual Property or Trademark used in the Business. The Seller has not
received any written notice that any item listed in Schedule 3.7 infringes upon
------------
or otherwise violates the rights of others, which infringement or violation has
not been cured. Except as set forth in Schedule 3.7, the Seller has full right,
------------
title and interest in and to the Intellectual Property and the Trademarks shown
as owned by it on such Schedule. Except as set forth on Schedule 3.7, the Seller
------------
is not making any royalty or other
19
<PAGE>
payments with respect to such Intellectual Property and Trademarks, and, to the
Seller's knowledge, no person has a right to any such payments.
3.8 Taxes. With respect to taxes which are included in the
-----
Investment or constitute a part of Assumed Liabilities, (i) Seller is not
delinquent in the payment of any tax, assessment or governmental charge that has
become due or, to the extent not due, has failed to accrue on its books adequate
reserves in accordance with GAAP for the payment thereof, (ii) no deficiency in
any tax assessment or governmental charge has been assessed or, to the knowledge
of the Seller, proposed or asserted against the Seller that has not been settled
and paid or adequately reserved for in accordance with GAAP, (iii) no tax
authority is presently in the process of auditing, examining or investigating
Seller or has indicated or given notice that it intends to audit, examine or
investigate Seller, (iv) Seller is not involved in any action or proceeding
(administrative or court) relating to any liability for taxes, and/or (v) there
are outstanding waivers or comparable consents regarding the application or
extension of any statute of limitations with respect to any taxes or returns of
Seller.
3.9 [Intentionally omitted.]
3.10 Contract. Schedule 3.10 of this Agreement is a true, correct and
--------- -------------
complete list of all material oral and written contracts, agreements and
understandings relating to the Business or the Assets (the "Contracts"). Except
as set forth in Schedule 3.10 of this Agreement, with respect to the Business,
-------------
the Seller is not a party to or bound by any material written or oral (i)
employment agreement, or arrangement related to continued employment (including,
without limitation, any collective bargaining contract or union agreement) or
consulting agreement or other contract for personal services that may not be
terminated within thirty (30) days without penalty, other than Ordinary Course
severance and employee benefit arrangements (or any augmentation or acceleration
of benefits), (ii) real property lease or license, or personal property lease or
license requiring annual payments by the Seller in excess of $50,000
individually (or $100,000 in the aggregate), (iii) agreement or commitment for
future capital expenditures in excess of $50,000 for any one project or set of
related projects (or $100,000 for any group of unrelated projects), (iv)
agreement, arrangement or commitment with third parties with respect to
participation in any results of the Business by a Person other than the Seller
or an Affiliate, including any supplier or customer and including any management
agreement; or (vi) agreement, arrangement or commitment which involves the
expenditure of more than $50,000 individually (or $100,000 in the aggregate),
other than agreements relating to the purchase, sale, cooling, or brokering of
produce items or nursery transplants in the Ordinary Course. The Seller has
furnished to or made available to the Buyer a true, correct and complete (A)
summary of all material provisions of Contracts that are not reduced to written
documents, and (B) copies of all written Contracts, including all material
amendments. Except as set forth in Schedule 3.10, the Seller is not, and, to the
-------------
best of the Seller's knowledge, no other party to any Contract is, in default
under any Contract, nor, to the Seller's knowledge, has any event occurred
which, but for the giving of notice or the passage of time or both, would
constitute a breach or default of any Contract, which in each case and in the
aggregate, would have a Material Adverse Effect.
20
<PAGE>
3.11 Employee Benefit Plans.
----------------------
(a) Schedule 3.11 lists all pension, retirement, profit-sharing,
thrift-savings, deferred compensation, incentive compensation, stock bonus,
stock option, stock appreciation right, executive compensation, expense
reimbursement, employee stock ownership, group insurance, severance pay,
retirement, and other employee benefit plans, agreements, arrangements, or
practices of any kind, and any arrangement which represents any combination of
the foregoing or any other bonus or fringe benefit plans, programs, agreements,
arrangements or practices, in each case whether written or oral, whether or not
covered by ERISA, maintained or sponsored by the Seller for any its directors,
officers, executives, managers, employees, or consultants employed or engaged
with respect to the Business and relating to the operation of the Business.
Schedule 3.11 also sets forth the rates of pay of each Employee and the fringe
- - -------------
benefits, including any Seller-owned or leased vehicles, club memberships and
similar arrangements, maintained or sponsored by the Seller. The Seller has
made available to Buyer a copy of each written Plan described in Schedule 3.11.
-------------
Except as set forth in Schedule 3.11, Seller has not made any oral commitment to
-------------
any Employee that is not set forth in the terms of any employment agreement
disclosed in a Schedule to this Agreement and that entitles such Employee to any
severance benefit in the event of termination during the Applicable Period other
than severance benefits payable in the Ordinary Course.
(b) Except as described in Schedule 3.11, the Seller does not
-------------
maintain or contribute to, nor is Seller obligated to contribute to, nor is
Seller a sponsor of or a plan administrator (as defined in ERISA) with respect
to, any employee benefit plan (as defined in Section 3(3) of ERISA) (referred to
as a "Plan"). Each Plan complies in all material respects and is operated in
compliance in all material respects with the applicable provisions of ERISA and
the Code. The Seller has not maintained or contributed to any multi-employer
plan as such term is defined under ERISA.
3.12 Litigation. There are no suits, actions, written (or to the
----------
knowledge of the Seller, oral) claims, or proceedings pending, or, to the
knowledge of the Seller, threatened, against or affecting the Seller or the
Assets as to which there is a reasonable possibility of an adverse determination
and which, if adversely determined, could, either individually or in the
aggregate, have a Material Adverse Effect and there is no judgement, decree,
injunction, rule or order of any Governmental Body or arbitrator outstanding or
unsatisfied against the Seller or the Assets.
3.13 Conformance with Laws: Environmental Matters.
--------------------------------------------
(a) Except as set forth in Schedule 3.13, with respect to the
-------------
Facilities:
(i) To the knowledge of the Seller, the operations,
practices, policies and procedures of the Seller with respect to
the Facilities have been conducted in compliance, in all material
respects, with, and have not given rise to any known Damages
under, any applicable Requirement of Law, including any
Environmental Laws, which have not been settled or resolved. Any
settlements or resolutions of
21
<PAGE>
such Damages which require ongoing obligations, including, but
not limited to, reporting, monitoring and payments, shall be
listed on Schedule 3. 13.
--------------
(ii) To the knowledge of Seller, there are no outstanding
notices of violations or consent orders under any applicable
Environmental Law to which the Facilities are subject.
(iii) The Seller has not filed with or made any notification
to any Governmental Body nor has Seller received any notification
from any Governmental Body or any other Person respecting any
condition which has resulted in, or may reasonably result in, an
Environmental Liability. There has not been, to the knowledge of
Seller, any incident or condition with respect to a Facility
resulting in or which may reasonably result in an Environmental
Liability. Such incidents or conditions include, but are not
limited to: (A) any burying, dumping, leaking, tank failure,
spillage, evaporation, underground injection, or disposal of any
Hazardous Materials, (B) any unpermitted discharge, emission or
release of any Hazardous Materials, (C) any soil, surface water
or groundwater contamination, or (D) any unpermitted dumping or
disposal of Nonhazardous Solid Waste related to the Facilities.
To the knowledge of Seller, the Facilities and the Business
conducted on the Facilities do not contain, generate, handle,
treat, store or dispose of any Hazardous Materials other than
those used in the Ordinary Course of the Business in compliance
with Environmental Permits and Environmental Laws. Seller has
previously delivered to Buyer a true, correct and complete list
in all material respects of all Hazardous Materials generated,
used or handled at the Facilities.
(iv) To the knowledge of Seller, Seller does not own or
possess or control any PCBs or PCB-contaminated fluids or PCB-
contaminated or PCB-containing equipment nor, to the knowledge of
Seller, does any Facility contain in or on its premises any
waste, scrap, raw material, work-in-progress, inventory, product,
residue or other material or substance containing PCBs. Schedule
--------
3.13 sets forth with respect to the Facilities all locations at
----
which PCBs or any substance containing PCBs have, to the
knowledge of Seller, at any time during the last five (5) years
been located on the Facilities or used or stored by the Seller,
whether as a raw material, process ingredient, hydraulic fluid or
otherwise. To the knowledge of Seller, Seller does not own,
possess or control, directly or indirectly, any asbestos or
asbestos-containing material, nor, to the knowledge of Seller,
does any Facility contain in or on its premises any waste, scrap,
raw material, work-in-progress, inventory, product, residue or
other material containing asbestos. Schedule 3.13 sets forth with
-------------
respect to the Facilities all locations at which asbestos or any
material containing asbestos has been located on the Facilities
or used or stored, to the knowledge of Seller, during the last
five (5) years by the Seller. Schedule 3.13 sets forth, with
-------------
respect to the Facilities, all
22
<PAGE>
locations where, to the knowledge of Seller, lead-based paints
were applied to building components.
(v) The Seller has all Environmental Permits necessary to
conduct the Business. All such Environmental Permits are listed
on Schedule 3.13 and, except as set forth thereon, are currently
-------------
valid and in full force and effect. To the knowledge of Seller,
there are no material violations or breaches of, or material
exceptions to any of the Environmental Permits or the terms and
conditions pursuant to which it was issued which may reasonably
result in any Environmental Liability. The Seller has made
available to Buyer or representatives of Buyer who have requested
same in writing copies of all periodic monitoring reports and
records maintained or filed by the Seller since January 1, 1991,
in compliance with the requirements of the Environmental Permits.
Except as set forth in any Schedule to this Agreement, the
consummation of the transactions contemplated by this Agreement
will not require Buyer to provide notice or obtain governmental
approval to enable the Seller to transfer the Environmental
Permits to Buyer.
(vi) The Seller has provided or made available to Buyer or
its consultant or other representatives, true, correct and
complete material information in its possession pertaining to the
matters set forth in this Section 3.13, including copies of all
documents pertaining to all environmental audits or assessments
prepared by or for the Seller with respect to any Facility and
all Environmental Reports in its possession or control which
describe any condition which may reasonably result in any
Environmental Liability with respect to any Facility.
(b) Except as set forth in Schedule 3.13, with respect to the
-------------
Initial Leased Properties:
(i) To the knowledge of Seller, there are no known
Damages under any applicable Requirement of Law, including any
Environmental Laws, which have not been settled or resolved. Any
settlements or resolutions of such Damages which require ongoing
obligations, including, but not limited to, reporting, monitoring
and payments, shall be listed on Schedule 3.13.
-------------
(ii) To the knowledge of Seller, there are no outstanding
notices of violations or consent orders under any applicable
Environmental Law to which the Initial Leased Properties are
subject.
(iii) The Seller has not filed with or made any notification
to any Governmental Body nor has Seller received any notification
from any Governmental Body or any other Person respecting any
condition which has resulted in, or may reasonably result in, an
Environmental Liability. There has not been, to the knowledge of
the acting Environmental Manager of Collier Enterprises, based
upon his general familiarity with the Business but without
23
<PAGE>
conducting an environmental audit, any incident or condition with
respect to the Initial Leased Properties resulting in or which may reasonably
result in an Environmental Liability.
(c) With respect to the Business, to the knowledge of the acting
Environmental Manager of Collier Enterprises, based upon his general familiarity
with the Business but without conducting an environmental audit, the off-site
disposal of Hazardous Materials has been conducted in material compliance with
applicable Requirements of Law, including Environmental Laws.
3.14 Subsidiaries. Seller has no majority-owned subsidiaries engaged
------------
primarily in the farming or marketing of tomatoes, potatoes or peppers or the
production of vegetable transplants.
3.15 Facilities.
----------
(a) Schedule 1.1(e) to this Agreement contains a list of all
---------------
Facilities used in connection with the Business.
(b) With respect to the Owned Properties (including fixtures
attached thereto), title to each of such Owned Properties (other than the
mineral rights relating to the Owned Properties) is held in the name of Seller,
free and clear of all Encumbrances, liens, adverse claims and other matters
affecting the relevant Seller's title to or possession of such Owned Property,
including, but not limited to, all encroachments, boundary disputes, covenants,
restrictions, easements, rights of way, mortgages, security interests, leases,
encumbrances and title objections, excepting only such easements, restrictions,
covenants and other matters of record or disclosed in the Schedules to this
Agreement, or, to the extent not of record, which will not interfere with or
impair Buyer's intended use of such Owned Property in substantially the same
manner as in the conduct of the Business prior to the Closing.
(c) All of the buildings, fixtures and other improvements (i)
located on the Facilities; or (ii) which are being acquired by Buyer pursuant to
this Agreement and which are located on land to be leased pursuant to the
Farmland Lease Agreement, are in good operating condition, subject to ordinary
wear and tear.
(d) Except as disclosed on Schedule 3.15(d) to this Agreement,
----------------
the Seller has not received any written notice relating to (i) any pending or
threatened condemnation or eminent domain proceeding with regard to all or part
of the Facilities; (ii) the imposition of any special taxes or assessments, or
payments in lieu thereof, against the Facilities; (iii) the continuing
curtailment of any utility services supplied to the Facilities; (iv) any planned
public improvement which will result in any material charge being levied or
assessed against, or will result in the creation of any material lien or
encumbrance upon, any of the Facilities; or (v) any violation of any material
restrictive covenant or condition or other title encumbrance affecting any of
the Facilities.
24
<PAGE>
(e) To the knowledge of Seller, no Facility is in violation of,
and each Facility and the operation thereof is in compliance with, all
comprehensive plan, zoning, subdivision and all other applicable land use laws,
regulations or ordinances which violation would have a Material Adverse Effect.
(f) None of the Facilities is located within a flood hazard zone,
as described in the Flood Disaster Protection Act of 1973, as amended, and the
National Flood Insurance Act of 1968, as amended, or if any such property is so
located and has buildings located thereon, then to the Seller's knowledge proper
federal insurance has been obtained in the maximum amount permitted respecting
such risk and is in full force and effect.
3.16 Labor. To the knowledge of the Seller, the Seller has complied
-----
and is complying with the requirements of the Immigration Reform and Control Act
of 1986 and the rules and regulations thereunder and as amended, the
non-compliance with which would have a Material Adverse Effect. Except as
described on Schedule 3.16, there is no labor controversy pending, or to the
-------------
knowledge of the Seller, threatened against the Seller, which could have a
Material Adverse Effect. Except as disclosed in Schedule 3.16, the Seller has no
union or collective bargaining agreements, no collective bargaining agent has
been certified as a representative of any Employee and no representation
campaign or election is now in progress with respect to any Employees.
3.17 Accounts Receivable. All accounts receivable of the Seller which
-------------------
constitute part of the Assets, whether reflected in the Current Seller Balance
Sheet or otherwise, represent services actually rendered or sales actually made
in the Ordinary Course, are in all respects genuine and valid, and except as
disclosed in Schedule 3.17 (as such may be updated through the Closing) or
-------------
except as reserved against in the Current Seller Balance Sheet (as such may be
updated through the Closing), are not known by the Seller to be subject to any
defense or offset or to be otherwise uncollectible.
3.18 Transactions With Affiliates. All transactions between Seller and
----------------------------
any of its Affiliates which relate to any Asset, Assumed Liability or the
Investment are or were bona fide, arm's length, fair market value transactions.
---- ----
3.19 Tangible Personal Property Other Than Inventory. Schedules 1.1(a)
-----------------------------------------------------------------
and 3.10 set forth a list and description of (i) all tangible property (other
- - --------
than inventory) owned by Seller and used in the Business, and having a book
value in excess of $2,500, (ii) a list of computer software and programs
(excluding personal computer software generally available to the public),
computer operating systems and applications used primarily in the Business, and
(iii) a list of the owners of, and copies of any agreements relating to the use
of, each such item of tangible personal property not owned by Seller and the
circumstances under which such property is used and what consents and
authorizations are necessary for such property to continue to be used by Buyer.
25
<PAGE>
3.20 Prudential Loan. Seller had delivered or made available to Buyer
---------------
true, correct and complete copies of the Prudential Loan Documents. The
Prudential Loan Documents are all of the documents between Seller and Prudential
relating to the Prudential Loan. To the knowledge of Seller, there exists no
default or event of default or state of facts which, with the giving of notice,
or the passing of time, or both, would constitute such a default or event of
default under any of the foregoing.
3.21 All Required Consents Disclosed; One is Sufficient.
--------------------------------------------------
(a) To Seller's knowledge, the consents and approvals identified on
Schedule 3.2 constitute all of the Requisite Approvals on the part of the Seller
- - ------------
necessary or appropriate to (i) the consummation of the transactions
contemplated by this Agreement; or (ii) the Seller's execution, delivery and
performance of this Agreement, except in either case for consents or approvals
previously obtained by the Seller, and for those as to which the failure to
obtain would not have a Material Adverse Effect.
(b) If any agreement, instrument or other information would
otherwise be required to be disclosed on more than one of the Schedules to this
Agreement, a single reference to such agreement, instrument or other information
in a Schedule hereto with an appropriate cross-reference to other relevant
Schedule(s) shall be sufficient for purposes of this Agreement.
3.22 Accuracy of Information. The information concerning Seller set
-----------------------
forth in this Agreement, the Schedules hereto and any document to be delivered
by Seller at the Closing to Buyer pursuant hereto, does not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements and
facts contained herein or therein, in light of the circumstances in which they
are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available to Buyer pursuant hereto were or will be
true, correct and complete copies of such documents.
3.23 Free to Deal. Seller is free to deal with Buyer and to sell the
------------
Assets and Business from Buyer. Except with respect to Requisite Approvals, the
consummation of the transactions contemplated by this Agreement does not breach
or violate any agreements or understandings of Seller with any other parties
with respect to the sale and purchase of the Business.
26
<PAGE>
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents to the Seller as follows:
4.1 Status and Power. Buyer is a limited partnership and (i) is duly
----------------
formed, validly existing and in good standing under the laws of the State of
Delaware, (ii) has all requisite authorization to conduct its business as it is
being conducted on the date of this Agreement, and (iii) is qualified to do
business in all jurisdictions in which such qualification is necessary. Buyer
has all requisite power and authority to enter into, or cause its relevant
Affiliates to enter into, this Agreement and the Transaction Documents to which
it or they are or will be a party and, subject to obtaining all Requisite
Approvals set forth in Schedule 4.2, to carry out its obligations under this
------------
Agreement and each Transaction Document to which it is or will be a party and to
consummate the transactions contemplated hereby and thereby.
4.2 Authorization: No Conflicts: Consents.
-------------------------------------
(a) Subject to obtaining the Requisite Approvals set forth in
Schedule 4.2, this Agreement has been, and at the Closing the Buyer Notes, the
- - ------------
Security Instruments and the other Transaction Documents to be executed by Buyer
as contemplated hereby will have been, duly executed and delivered on behalf of
Buyer and its relevant Affiliates. Subject to obtaining the Requisite Approvals
set forth in Schedule 4.2, Buyer, or its Affiliate, as the case may be, has
------------
received all necessary authorization to execute, deliver and perform this
Agreement and each Transaction Document to which it is or will be a party and
each such agreement is, or upon its execution and delivery will be, a legal,
valid and binding obligation of Buyer, or its Affiliate, as the case may be,
enforceable against it in accordance with its terms except as enforcement
thereof may be limited by bankruptcy, reorganization, insolvency and similar
laws affecting creditors rights generally, and general equitable principles.
(b) Except as set forth in Schedule 4.2 to this Agreement, the
------------
execution, delivery, and performance of this Agreement and each Transaction
Document to which Buyer or its Affiliate is or will be a party and the
consummation of the transactions contemplated hereby and thereby will not
conflict with, or result in any violation of or default under, any provision of
the partnership agreement or other organizational or governing instrument of
Buyer or such Affiliate, or any agreement or other arrangement to which Buyer or
such Affiliate is subject or may be bound, or, subject to obtaining Requisite
Approvals in Schedule 4.2, of any permit, concession, grant, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Buyer
or such Affiliate or their respective properties, other than any such conflict,
violation, default or loss that has been waived by the Seller in writing prior
to Closing, or does not have a material adverse effect upon Buyer. No Requisite
Approval is required on the part of Buyer or its relevant Affiliate in
connection with the execution and delivery of this Agreement or any Transaction
Document by Buyer or such Affiliate, or the consummation of the transactions
contemplated hereby or thereby, except for those set forth on Schedule 4.2 of
------------
the Agreement.
27
<PAGE>
4.3 Accuracy of Information. The information concerning Buyer set
-----------------------
forth in this Agreement, the Schedules hereto and any document to be delivered
by Buyer at the Closing to Seller pursuant hereto, does not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements and
facts contained herein or therein, in light of the circumstances in which they
are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available to Seller pursuant hereto were or will be
true, correct and complete copies of such documents.
4.4 Free to Deal. Buyer is free to deal with Seller and to purchase
------------
the Assets and Business from Seller. Except with respect to Requisite Approvals,
the consummation of the transactions contemplated by this Agreement does not
breach or violate any agreements or understandings of Buyer with any other
parties with respect to the purchase of the Business.
28
<PAGE>
ARTICLE V. COVENANTS OF THE PARTIES.
5.1 Actions prior to Closing.
------------------------
(a) Operations Pending Closing. Between the date of this
--------------------------
Agreement and the Closing Date, the Seller shall continue to operate the
Business in the Ordinary Course. Without the prior written consent of the Buyer,
which consent shall not be unreasonably withheld or delayed, the Seller shall
not do any of the following with respect to the Business during such period:
(i) engage in any commercial practice that is not in the
Ordinary Course including sales of product to any one
customer in excess of such customer's needs for one season,
adding or terminating a distributor, or modifying any
material contract;
(ii) sell, lease to others, license to others or otherwise
dispose of any Assets, except for sales of produce inventory
and use of nursery transplants in the Ordinary Course and
replacement or retirement of machinery and equipment in the
Ordinary Course;
(iii) except as may be imposed by a Requirement of Law (which
shall not qualify the Seller's representations or the
Buyer's closing conditions contained herein), create or
suffer to be created any Encumbrance or other exceptions to
title upon the Assets, except for draws under the Operating
Line in the Ordinary Course, and except that the financing
for property which is presently secured may be refinanced;
provided, however, that such refinancing shall be on no less
favorable terms (other than changes in interest rates
dictated by market conditions), shall not increase the
amount of the debt and shall not increase the collateral
therefor;
(iv) enter into any agreement or commitment that materially
restricts the Business from being carried on as it is
currently being carried on;
(v) incur any additional indebtedness for money borrowed,
except (a) amounts secured by inventory and/or receivables
under the Operating Line, (b) indebtedness incurred to
acquire property, plant or equipment and secured by the
acquired asset otherwise permitted hereby and (c)
indebtedness to Affiliates.
(vi) make any press release or other public disclosure which
mentions, or directly or indirectly refers to, Buyer,
Calgene or Monsanto, except as required by law and where
approval by Buyer cannot be obtained in a timely manner.
29
<PAGE>
(b) Preservation of Organization. Prior to the Closing, Seller shall
----------------------------
use its commercially reasonable efforts to preserve the Business and the
1995/1996 Crop, to keep available to Buyer the services of Seller's Employees
(but without expenditure of funds out of the Ordinary Course), and to preserve
for Buyer Seller's favorable business relationships with its suppliers,
customers and others with whom business relationships exist.
(c) Other Transactions Prohibited. During the period from the date
-----------------------------
of this Agreement to the Closing Date, Seller shall not, and shall not permit
their representatives to, directly or indirectly, initiate, solicit, negotiate
with, encourage discussions with, provide information to, or agree to a
transaction with, any corporation, partnership, person or other entity or group
concerning any sale of any of the Assets other than among the Seller entities
(any such transaction being referred to herein as an "Acquisition Transaction").
Seller shall notify Buyer of any proposals relating to Acquisition Transactions.
(d) Change in Information. Each of Seller and Buyer will advise the
---------------------
other in writing immediately, but in any event prior to the Closing, of:
(i) the occurrence of any event which renders any of the
representations or warranties set forth herein materially
inaccurate or the awareness of either Buyer or Seller that
any representation or warranty set forth herein was not
materially accurate when made; and
(ii) the failure of any party hereto to comply with or
accomplish in any material respect any of the covenants or
agreements set forth herein.
(e) Financial Reports. Seller shall provide to Buyer copies of all
-----------------
operating and financial reports relating to the Business prepared by or for
Seller from the date of the Current Balance Sheet and prior to the Closing Date
as reasonably requested by Buyer.
(f) Access prior to Closing. Between the date hereof and the Closing
-----------------------
Date (i) authorized representatives of Buyer, Monsanto and Calgene shall have
reasonable access to all properties, books, records, Contracts and documents of
Seller relating to the Business, (ii) Seller shall furnish to Buyer, Monsanto
and Calgene all information with respect to the Business that Buyer, Monsanto
and Calgene may reasonably request, and (iii) Buyer, Monsanto and Calgene shall
have the right to discuss the Business of Seller with the Employees and Seller's
counsel and independent accountants. Buyer, its agents or employees, shall have
the right to enter upon the Owned Properties and the Leased Property prior to
Closing to perform inspections. Buyer agrees to leave the Owned Properties and
the Leased Property prior to Closing in the state approximating its present
condition, to indemnify and hold Seller harmless from any and all damage to the
Owned Properties and the Leased Property caused by Buyer, its agents or
employees, and to indemnify and hold Seller harmless from and against any and
all claims, losses, damages, injuries (including death), liabilities and causes
of action, and all costs and expenses attributable thereto, including attorneys'
fees (including such fees for pretrial, trial and appellate matters), resulting
30
<PAGE>
from or arising out of or in connection with Buyer's exercise of its rights
under this Section. Buyer, Monsanto and Calgene shall bear all costs and
expenses incurred by them with respect to their due diligence examinations.
(g) Confidentiality prior to Closing. The Confidentiality Agreement
--------------------------------
shall survive the execution of this Agreement and remain fully enforceable until
the Closing Date. On and after the Closing Date, the Confidentiality Agreement
shall terminate, except with respect to information not directly related to the
Business.
(h) HSR. If required by applicable law, each party agrees to
----
cooperate in, and use its reasonable efforts to complete, any necessary filings
under the HSR Act, and any other necessary governmental filings, in respect of
the transactions contemplated hereby.
5.2 Actions at the Closing.
----------------------
(a) Prorations. All personal and real property taxes with respect
----------
to the Assets to be conveyed to Buyer pursuant hereto and any charges for rents,
utilities, governmental fees and charges or other operating costs of the
Business shall be prorated through July 1, 1995. If the 1995 tax year's bills
are not issued before the Closing, then prorations for taxes shall be based on
the immediately prior year's tax bills and adjusted post-Closing after the
current tax year's tax bills are issued and received. The parties will execute a
closing statement reflecting such prorations and adjustments. If any amount is
due from either party to the other party as a result of any such proration, the
resulting amount payable shall be paid immediately upon demand in a written
notice containing reasonable evidence and calculation of such amount.
5.3 Actions after the Closing.
-------------------------
(a) Further Assurances. From time to time after the Closing, Seller
------------------
(for no additional consideration, but otherwise at Buyer's expense) shall
execute and deliver to Buyer such instruments of sale, transfer, conveyance,
assignment, delivery, consents, assurances, powers of attorney and other similar
instruments as may be reasonably requested by Buyer or its counsel in order to
vest in Buyer all right, title and interest in and to the Assets, and each party
shall execute and perform all documents or acts reasonably requested by another
party in order to carry out the purposes and intent of this Agreement.
(b) Misdirected Funds. Each party shall on and after the Closing,
-----------------
execute and deliver any documents and perform any acts as reasonably requested
by the other to minimize the occurrence of Misdirected Funds, including but not
limited to notices to account debtors and other third parties. Any Misdirected
Funds shall be received in trust for the benefit of the party entitled to the
same, and shall be promptly delivered to such party in the exact form received
(except for endorsement of instruments in favor of such party). As of the
Closing Date, Seller hereby authorizes Buyer to open any and all mail addressed
to Seller and delivered to the Facilities or otherwise delivered to Buyer on or
after the Closing Date. Seller hereby appoints Buyer its attorney-in-fact to
endorse, cash and deposit any monies, checks or negotiable instruments
31
<PAGE>
received by Buyer after the Closing Date with respect to any accounts receivable
transferred by Seller to Buyer as an Asset in connection with this Agreement and
made payable or endorsed to Seller or its order, for Buyer's own account.
(c) Failure to obtain certain Consents. Nothing contained in this
----------------------------------
Agreement shall be construed as an attempt to agree or an agreement to assign
any Asset, including, without limitation, any Contract, agreement or license,
which is in law non-assignable or which is non-assignable without the consent of
another Person, unless such consent shall be given. The Seller shall use
reasonable efforts to obtain all necessary consents of such Persons to the
assignment of any such Assets. If the required consent of any Person to the
assignment of any Asset cannot be obtained, or if any attempted assignment of
any Asset would be ineffective or would adversely affect, as applicable, the
Seller's rights thereunder so that Buyer would not in fact receive all such
rights, the Seller, at Buyer's expense, shall cooperate in any arrangement Buyer
may reasonably request to provide for Buyer the benefit of any such Asset,
including enforcement for the benefit of Buyer of any and all of the Seller's
rights against any other party thereto arising out of the breach or cancellation
thereof by such party or otherwise.
(d) Access after Closing. Each of the Seller and Buyer shall
--------------------
maintain or cause to be maintained, at no cost to the other party, at its
offices where such records may be kept in the ordinary course of its business,
all such books and records which relate to the Assets, the Excluded Assets
relating to the Business, the Assumed Liabilities and the Excluded Liabilities
relating to the Business, and shall afford to each other and their respective
accountants, counsel and other representatives, at the requesting party's
expense, full and complete access, upon reasonable notice and in such manner as
will not unreasonably interfere with the conduct of business, to such books and
records.
(e) Buyer's Books and Records. Buyer covenants that it will
--------------------------
maintain complete and auditable separate books and records for the Combined
Business during the Earn-Out Period as defined in Exhibit B hereto (except that
---------
for the fiscal year ended June 30, 1996, Buyer shall maintain complete and
auditable separate books and records for each of the Business and for the
portion of the Combined Business conducted by Buyer as of the commencement of
the Earn-Out Period, it being understood that Seller shall have maintained
complete and auditable separate books and records for the Business from July 1,
1995 through the Closing Date), and permit the Seller and its authorized
representatives access thereto, subject to the confidentiality provisions of
this Agreement.
(f) Confidentiality after Closing. After the Closing, (i) all
-----------------------------
information relating to the Assets, Business and Assumed Liabilities shall be
the confidential information of Buyer and (ii) information disclosed in
connection with the exercise of access or similar rights provided herein shall
be the confidential information of the disclosing party. Each party will hold
the confidential information of the other party in the strictest confidence, and
will not without the consent of the other disclose another party's confidential
information without the prior written consent of such party, except as required
by law or in connection with the enforcement of its rights hereunder or under
any of the Transaction Documents.
32
<PAGE>
(g) Restriction on Use of "Collier Farms" Name. Even though the
------------------------------------------
Trademarks which are included as part of the Assets do not include the trade
name of "Collier Farms," Seller nonetheless agrees that, for a period of ten
(10) years following the Closing Date, Seller will not engage in a business
which is competitive with the Business in the United States using the name of
"Collier Farms" or any other name which includes the name "Collier."
5.4 Title; Instruments of Conveyance and Assumption.
-----------------------------------------------
(a) Seller has heretofore delivered to Buyer copies of all title
insurance policies or commitments (including copies of exceptions thereto),
abstracts of title, updated surveys and related documents relating to each Owned
Property in Seller's possession. Based thereupon, Buyer shall at its expense
procure title insurance commitments committing to insure Buyer's title to the
Owned Properties in the amount shown on the Allocation of Purchase Price
attached hereto as Schedule 2.8 and made a part hereof (such commitments to
------------
attach copies of all instruments constituting exceptions to title), without
exceptions which do not materially adversely affect the use of the Owned
Properties for the purposes for which they are being used in the Business. Upon
receipt of such title commitments, Buyer shall provide a copy thereof to Seller.
Buyer may object to such title commitments on or prior to January 31, 1996 on
the basis that they materially adversely affect the use of the Owned Properties
for the purpose for which they are being used in the Business ("Title Defects")
whereupon Seller shall use reasonable efforts to cure any such objections to
title within sixty (60) days from receipt of written notice from Buyer of such
objections. If Buyer fails to so notify Seller within such twenty (20) day
period, Buyer shall be deemed to have accepted title to the Owned Properties in
their respective existing condition, provided that Seller shall in any event
satisfy all requirements shown in Schedule B - Section 1 of such title insurance
commitments (except as to the Prudential Loan, if assumed by Buyer in accordance
with Section 2.7 hereof). Notwithstanding any provision contained in this
Agreement to the contrary, expressed or implied, Seller's obligation to cure
Title Defects which requires the payment of money to cure the same shall be
limited to the payment of Two Hundred Thousand Dollars ($200,000) in the
aggregate, provided that such limitation shall not apply to the satisfying of
mortgages or liens. If any Title Defect is disclosed by Buyer to Seller and if
Seller fails to correct such Title Defect within the sixty (60) day period, then
Buyer shall have the option of (1) accepting the title as it then is, or (2)
terminating this Agreement pursuant to Section 8.15(iv) hereof, provided that if
all such Title Defects can be cured by the payment of money in an amount not to
exceed Two Hundred Thousand Dollars ($200,000) in the aggregate (less amounts
already expended by Seller to cure Title Defects), then the parties shall close
the transactions contemplated hereby and Buyer shall receive (x) a credit
against the Buyer's Notes, in the manner described in the last sentence of
Section 2.3(a)(ii), in an amount (but not to exceed $100,000) equal to one-half
of the amount necessary to cure such Title Defects; and (y) a credit against the
cash portion of the Purchase Price in an amount (but not to exceed $100,000)
equal to one-half of the amount necessary to cure such Title Defects. In no
event shall the total credit exceed $200,000 less amounts previously expended by
Seller to cure Title Defects. Survey defects shall be treated as objections to
title.
33
<PAGE>
(b) In addition to this Agreement, the Seller shall execute and
deliver (in recordable form, when appropriate), any and all special warranty
deeds (in the form attached as Exhibit O), instruments or other documents of
---------
transfer, conveyance and assignment (in form reasonably satisfactory to the
Seller and Buyer), and take such other action as Buyer may reasonably request,
as may be necessary or advisable to effect or evidence the transfers of the
Assets and the transactions contemplated hereby (including Seller's affidavit in
the form attached hereto as Exhibit P), as and to the extent contemplated
---------
hereby. In addition to this Agreement, Buyer shall execute and deliver (in
recordable form, when appropriate), any and all instruments or other documents
of assumption and acceptance (in form reasonably satisfactory to Seller and
Buyer), and take such other action as the Seller may reasonably request, as may
be necessary or advisable to effect or evidence the assumption of the Assumed
Liabilities and the transactions contemplated hereby, as and to the extent
contemplated hereby. Seller shall pay all documentary, sales, use and transfer
taxes or fees imposed upon or incurred to procure the transfer of the Assets
(including but not limited to documentary taxes on all deeds conveying the Owned
Properties); provided, however, that Buyer shall pay one-half of such taxes or
fees applicable to the transfer of all motor vehicles included in the Assets.
(c) Buyer shall pay all documentary, intangible, and other taxes or
fees imposed upon the execution or recordation of the Buyer Notes and the
Security Instruments and all recordings fees for the recordation of the special
warranty deed(s).
5.5 Employees. The Buyer shall have the right, but not the obligation, to
---------
offer employment, on terms and conditions to be set by the Buyer, to the
Employees of the Seller (whether or not such Employees' employment has been
theretofore terminated by Seller). No later than 10 days prior to the Closing,
Buyer shall advise Seller which of Seller's Employees Buyer will hire from and
after the Closing (it being understood that James A. Mercer shall be employed by
Buyer pursuant to the Mercer Employment Agreement attached hereto as Exhibit K
---------
and, except for James A. Mercer, all of the Employees of Seller so hired by
Buyer shall be employees at will). Except as otherwise provided in this
Agreement, all such Employees so hired by Buyer shall be employed at such
salaries and with such benefits as Buyer shall determine.
(a) Except to the extent included in the Investment or the Assumed
Liabilities, Seller shall remain liable and responsible for and pay all taxes,
for all time periods prior to and including the Closing Date, relating to
employee wages, salaries and benefits. Seller, to the extent required by law,
regulations or interpretations, shall be liable and responsible for all
obligations to give notice of and to provide health care continuation coverage
for Employees, Former Employees and their respective dependents and qualified
beneficiaries, in accordance with the requirements of COBRA (hereinafter
referred to as "COBRA Coverage"), including, without limitation, all
liabilities, taxes, sanctions, interest and penalties imposed upon, incurred by
or assessed against Buyer or any affiliated corporation within a controlled
group relationship with Buyer (as determined under Section 414 of the Code), and
any of their employees, arising by reason of or relating to any failure to
provide the COBRA Coverage, including, but not limited to, Buyer's failure to
provide COBRA Coverage to Employees or Former Employees who are receiving COBRA
Coverage under Seller's plans at the Closing Date. Buyer shall offer
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immediate participation without any waiting period requirement in Buyer's group
health care plan to all salaried (but not hourly) Employees hired by Buyer.
(b) Except to the extent included in the Investment or the Assumed
Liabilities, Buyer expressly assumes no liabilities or obligations with respect
to any of the ERISA Plans, whether or not described or listed on any Schedule
attached hereto and whether or not such liabilities arise from the transactions
contemplated herein, including, without limitation, (i) health care continuation
liability under COBRA, and (ii) ERISA pension liability.
(c) Buyer hereby agrees to credit under its sick leave and vacation
policies the sick leave and vacation days accrued by Employees under the sick
leave and vacation policies of the Seller or its Affiliates (or their
predecessors) to the extent the same exceed the amount of sick leave and
vacation to which the Employees are entitled under Buyer's policies relating to
sick leave and vacation; provided, that Buyer shall not be obligated to credit
any Employee for any unused vacation time for calendar years prior to 1996 in
excess of 5 days carryover from calendar year 1995.
5.6 Proxy Matters. Each Seller acknowledges and agrees that it
-------------
understands that, in connection with the transactions contemplated by a separate
agreement, and specifically the pending transaction (the "Calgene Transaction")
with Calgene, Inc. ("Calgene") an Affiliate of Buyer will be preparing and
filing with the Securities and Exchange Commission (the "SEC") a registration
statement (the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act") and that Calgene will be preparing and filing
with the SEC a proxy statement (the "Proxy Statement") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in connection with
Calgene's solicitation of approval of the Calgene Transaction by its
stockholders. Each Seller further acknowledges and agrees that it understands
that the Registration Statement and the Proxy Statement will contain information
regarding the assets, liabilities, business and condition, financial and
otherwise, of the Seller and the Business. The Seller hereby agrees, at Buyer's
expense (except that preparation of the 1995 Financial Statements and
information and documentation relating to compliance with HSR shall be at
Seller's expense) to cooperate in all reasonable respects with Calgene, Buyer
and Buyer's Affiliates in their preparation of the information concerning Seller
and the Business for inclusion in the Registration Statement and Proxy Statement
and to use reasonable best efforts to furnish, or cause to be furnished,
such information concerning the Seller and the Business as Calgene, Buyer and
Buyer's Affiliates may reasonably request in connection with their preparation
and filing of the Registration Statement and the Proxy Statement. Buyer shall
furnish to Seller a copy of the form of the Registration Statement and the
Proxy Statement (and any amendment or supplement of either thereof) proposed
to be filed with the SEC and provide Seller reasonable opportunity to review
same reasonably in advance of any filing thereof with the SEC and shall be
reasonably responsive to any comments or suggestions made by Seller regarding
the information contained therein concerning the Seller and the Business and
shall furnish Seller with a copy of the Registration Statement and the Proxy
Statement (and any amendment or supplement of either thereof) as such is filed
with the SEC.
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5.7 Seller's Representative. Each Seller hereby irrevocably constitutes
-----------------------
and appoints the Seller's Representative, with full power of substitution, as
such Person's attorney-in-fact with full irrevocable power and authority in the
place and stead of such Person and in the name of such Person or in the Seller's
Representative's own name, from time to time in the Seller's Representative's
reasonable discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute and deliver any
and all documents and instruments which the Seller's Representative may
reasonably deem necessary to accomplish the purposes of this Agreement. Without
limiting the generality of the foregoing, each such Person hereby gives the
Seller's Representative the power and right, on behalf of each such Person, to
do the following:
(i) agree with the Buyer as to the allocation of the Purchase Price
and Assumed Liabilities;
(ii) agree with the Buyer as to the Closing Date;
(iii) amend, change or modify the Agreement or any Transaction Document
(to the extent such Person is a party thereto) before or after
Closing;
(iv) receive any notice to any such Person relating to this Agreement
or any Transaction Document;
(v) settle or otherwise deal with Buyer on any matter arising in
connection with this Agreement or any Transaction Document.
(a) Notwithstanding anything contained herein to the contrary, at Buyer's
option, Buyer may (i) pay the Closing Date Cash Payment to the Seller's
Representative, (ii) make the Buyer's Notes payable to the Seller's
Representative and (iii) pay any other amount due by Buyer to Seller under this
Agreement to the Seller's Representative (including, without limitation, Gross
Crop Revenues and the Earn-Out Payment). The Seller's Representative shall be
responsible for allocating and transferring any amounts so received from Buyer
among the individual Sellers. Buyer's payment to the Seller's Representative of
any such amount shall fully discharge Buyer's obligation to make any such
payment to any Seller.
(b) Each Seller hereby ratifies, to the extent permitted by applicable
law, all that Seller's Representative lawfully does or causes to be done by
virtue of this Section 5.7. The power of attorney granted pursuant to this
Section 5.7, being coupled with an interest, is irrevocable.
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ARTICLE VI. CLOSING CONDITIONS, DOCUMENTS AND PROCEDURES.
6.1 Conditions to Obligations of Buyer. The obligations of Buyer to
----------------------------------
consummate the transactions contemplated hereby shall be subject to the
fulfillment, at or prior to the Closing, of the following conditions:
(a) Seller's Representations and Warranties True. The
--------------------------------------------
representations and warranties of Seller contained in this Agreement or in any
other document delivered by Seller pursuant hereto shall have been true and
correct in all material respects as of the date of this Agreement or when
otherwise given and shall be true and correct in all material respects on the
Closing Date with the same effect as if made on the Closing Date, and, at the
Closing, Seller shall have delivered to Buyer certificates to such effect signed
by the President of Seller's Representative.
(b) Seller's Performance of Covenants. Each of the obligations of
---------------------------------
Seller to be performed by them on or before the Closing Date pursuant to the
terms of this Agreement shall have been duly performed in all material respects
on or before the Closing Date, and, at the Closing, Seller shall have delivered
to Buyer certificates to such effect signed by the President of Seller's
Representative.
(c) Delivery of Closing Documents to Buyer. At Closing, Buyer shall
--------------------------------------
have received the following documents, each dated on or about the Closing Date
and duly executed and delivered:
(i) Copies, certified by the Secretary of Seller, of resolutions
of the board of directors or other appropriate documents authorizing
the execution, delivery and performance of this Agreement and all
other agreements, documents and instruments relating hereto and the
consummation of the transactions contemplated hereby;
(ii) Marked title insurance commitments (to be provided by
Buyer's title insurance agent), special warranty deeds, bills of sale
and assignments, in form and substance to be reasonably agreed upon by
Seller and Buyer, covering the items of real and personal tangible and
intangible personal property included in the Assets and conveying the
Owned Properties to Buyer as required by this Agreement;
(iii) Certificates of title to the motor vehicles identified on
Schedule 6.1(c)(iii), duly endorsed, completed and acknowledged for
-------------------
transfer;
(iv) The Mercer Employment Agreement duly signed by James Mercer
in substantially the form attached hereto as Exhibit K hereto;
---------
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(v) The Farmland Lease Agreement duly executed by Seller or the
appropriate Affiliate of Seller;
(vi) A good standing certificate, certificate of existence or
certificate of valid qualification as a foreign corporation, as the
case may be, from the State of Seller's incorporation or formation, to
the extent available;
(vii) Any necessary certificate of no tax due or similar
certificate from any tax authority relating to the Assets or Business;
(viii) FIRPTA certificate;
(ix) Incumbency Certificates of Seller's officers executing any
documents or instruments delivered to Buyer hereunder;
(x) The Certificate of Seller contemplated by Sections 6.1(a)
and (b) hereof;
(xi) The Liabilities and Investment Certificate.
(xii) Except as provided in Section 5.3(c), all consents set forth
on Schedule 3.2 that are required in connection with the transactions
------------
contemplated in this Agreement shall have been obtained in a manner
reasonably acceptable to Buyer, except for consents which, if not
obtained, would not (in the aggregate) have a Material Adverse Effect;
(xiii) A legal opinion from Terry Flora, Director of Law and
Administration and/or Seller's counsel, Steel Hector & Davis, in
substantially the form of Exhibit M hereto; and
---------
(xiv) Such further documents and instruments of sale, transfer,
conveyance, assignment or delivery covering the Assets or any part
thereof as Buyer may reasonably require to assure the full and
effective sale, transfer, conveyance, assignment or delivery to it of
all the Assets to be transferred to Buyer pursuant to this Agreement.
6.2 Conditions to Obligations of Seller. The obligations of Seller to
-----------------------------------
consummate the transactions contemplated hereby shall be subject to the
fulfillment, at or prior to the Closing, of the following conditions:
(a) Buyer's Representations and Warranties True. The representations
-------------------------------------------
and warranties of Buyer contained in this Agreement or in any other document
delivered by Buyer pursuant hereto shall have been true and correct in all
material respects as of the date of this Agreement or when otherwise given and
shall be true and correct in all material respects on the
38
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Closing Date with the same effect as if made on the Closing Date, and, at the
Closing, Buyer shall have delivered to Seller certificates to such effect signed
by the President and Secretary of Buyer.
(b) Buyer's Performance of Covenants. Each of the obligations of
--------------------------------
Buyer to be performed by it on or before the Closing Date pursuant to the terms
of this Agreement shall have been duly performed in all material respects on
or before the Closing Date, and, at the Closing, Buyer shall have delivered
to Seller certificates to such effect signed by the President and Secretary
of Buyer.
(c) Delivery of Closing Documents by Buyer. At Closing, Seller shall
--------------------------------------
have received the following documents, each dated the Closing Date:
(i) Copies, certified by the Secretary of Buyer's general
partner, of resolutions of the board of directors of Buyer's general
partner authorizing the execution and delivery of this Agreement and
all other agreements, documents or instruments relating hereto and the
consummation of the transactions contemplated hereby;
(ii) The Closing Date Cash Payment, Buyer Notes and the Security
Instruments required to be delivered by Buyer at the Closing pursuant
to Article II hereof, duly executed by the Buyer or its Affiliate as
appropriate;
(iii) The Mercer Employment Agreement and the Farmland Lease
Agreement, each duly executed by Buyer; and
(iv) a legal opinion from Buyer's counsel, Karp & Genauer, P.A.,
in substantially the form of Exhibit N hereto;
---------
(v) the Notice of Future Advance Limitation substantially in the
form attached hereto as Exhibit J; and
---------
(vi) Such other Closing documents as Seller may reasonably
request.
6.3 Conditions to Obligations of all Parties. The obligations of both
----------------------------------------
Buyer and Seller to consummate the transactions contemplated hereby shall be
subject to the fulfillment, on or prior to the Closing Date, of the following
conditions:
(a) Compliance with Law. There shall have been obtained all permits,
-------------------
approvals, consents and authorizations of all governmental bodies or agencies
reasonably necessary or appropriate so that consummation of the transactions
contemplated by this Agreement will be in material compliance with applicable
laws, and so that Buyer will be eligible to operate the Business.
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(b) No Action or Proceeding. No claim, action, suit, investigation
-----------------------
or other proceeding brought by any Governmental Body or other third party shall
be pending or threatened before any court or governmental agency which presents
a substantial risk of restraining or prohibiting the transactions contemplated
by this Agreement or the obtaining of material damages from either Buyer and
Seller or other relief in connection therewith.
(c) HSR; etc. If required by applicable law, the pre-transaction
---------
filing and waiting period requirements applicable to the transactions
contemplated by this Agreement under the HSR Act shall have expired or shall
have been terminated, and any necessary governmental approvals shall have been
obtained, and there shall not be pending or threatened any governmental
litigation or proceeding which restrains, prohibits or prevents or in the
reasonable opinion of counsel presents a significant risk of restraining,
prohibiting or preventing, or changing the terms of, or obtaining material
damages in connection with, the transactions contemplated hereby.
(d) Exhibits. If any Exhibit to be attached to this Agreement is not
--------
attached hereto, it shall be a condition precedent to both parties' obligations
to close this transaction that the same be executed and delivered at Closing in
a form to be mutually agreed by the parties, but in any event consistent with
the terms and provisions of the Letter of Intent between Buyer and Seller dated
October 27, 1995 with respect to the transaction contemplated hereby.
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ARTICLE VII. INDEMNIFICATION.
7.1 Seller's Indemnity. Subject to the provisions of this Article VII,
------------------
the Seller shall indemnify and hold harmless Buyer and its shareholders,
officers, directors, partners, employees and agents from and against any and all
Damages suffered, sustained, incurred or required to be paid them as a result of
or arising out of:
(a) any and all liabilities and obligations (other than
Environmental Liabilities which are addressed in subparagraph (d) below) of the
Seller or otherwise relating to the Business of any nature whatsoever which
arise out of or are based upon any matter or event which occurred on or prior to
the Closing, except for Assumed Liabilities and the obligations of Buyer to pay
Seller the Investment and without limiting the generality of the foregoing, any
product liability or similar claim for injury to person or property, regardless
of when made or asserted, which arises out of or is based upon any express or
implied representation, warranty, agreement or guarantee made by the Seller, or
alleged to have been made by the Seller, or which is imposed or asserted to be
imposed by operation of law, in connection with any service performed or product
sold or leased by or on behalf of the Seller on or prior to the Closing,
including without limitation any claim relating to any product delivered and any
claim seeking recovery for incidental, special, consequential or punitive
damages;
(b) any inaccuracy or breach of any representation or warranty
(except for the representations set forth in Section 3.13 hereof which is
addressed in subsection (d) below), on the part of the Seller contained in this
Agreement;
(c) any breach of any covenant or agreement made by the Seller
contained in this Agreement; or
(d) any Environmental Liability suffered by Buyer with respect to the
Owned Properties or Business arising out of or in connection with any condition
or state or fact existing on or before the Closing Date. Such indemnification
responsibility of Seller shall be applicable even if the Environmental Liability
giving rise to Buyer's indemnification claim did not constitute a breach of the
representation and warranty made by Seller pursuant to Section 3.13 of this
Agreement.
7.2 Buyer's Indemnity. Subject to the provisions of this Article VII,
-----------------
Buyer shall indemnify and hold harmless the Seller and their respective
shareholders, officers, directors, partners, employees and agents from and
against any and all Damages suffered, sustained, incurred or required to be paid
directly or indirectly by them as a result of or arising out of:
(a) any and all liabilities and obligations (other than
Environmental Liabilities which are addressed in subparagraph (e) below) of the
Buyer or otherwise relating to the Business of any nature whatsoever which arise
out of or are based upon any matter or event which occurred after the Closing,
including any and all Assumed Liabilities and without limiting the generality of
the foregoing, any product liability or similar claim for injury to person or
property, regardless
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of when made or asserted, which arises out of or is based upon any express or
implied representation, warranty, agreement or guarantee made by the Buyer, or
alleged to have been made by the Buyer, or which is imposed or asserted to be
imposed by operation of law, in connection with any service performed or product
sold or leased by or on behalf of the Buyer after the Closing, including without
limitation any claim relating to any product delivered and any claim seeking
recovery for incidental, special, consequential or punitive damages; or
(b) any inaccuracy or breach of any representation or warranty on
the part of Buyer under this Agreement;
(c) any breach of any covenant or agreement made by the Buyer
contained in this Agreement;
(d) Buyer, its agents or employees entering onto the Owned
Properties or Leased Property prior to Closing for purposes of performing
investigations with respect to the transactions contemplated hereby; or
(e) any Environmental Liability suffered by Seller with respect to
the Owned Properties or Business arising out of or in connection with any
condition or state or fact arising after the Closing Date.
7.3 Survival. Notwithstanding anything to the contrary in this Agreement,
--------
the indemnification liabilities and obligations of the Seller and the Buyer
pursuant to this Article VII shall survive the Closing for a period of three (3)
years, except that the indemnification liabilities and obligations of Seller and
Buyer under Section 7.1(d) and Section 7.2(e), respectively, shall survive the
Closing for a period of seven (7) years. The foregoing shall in no way limit
Buyer's obligations with respect to the Earn-Out.
7.4 Method of Asserting Claims. All claims for indemnification by any
--------------------------
Indemnified Party under this Article VII shall be asserted and resolved as
follows:
(a) If any claim or demand for which an Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against or sought to be
collected from such Indemnified Party by a third party, the Indemnified Party
shall with reasonable promptness notify the Indemnifying Party of such claim or
demand, specifying the nature of and specific basis for such claim or demand and
the amount or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim and demand)
(the "Claim Notice"). The Indemnifying Party shall not be obligated to indemnify
the Indemnified Party with respect to any such claim or demand if the
Indemnified Party fails to notify the Indemnifying Party thereof in accordance
with the provisions of this Agreement in reasonably sufficient time so that the
Indemnifying Party's ability to defend against the claim or demand is not
materially prejudiced. The Indemnifying Party shall have sixty (60) days from
the delivery of the Claim Notice (the "Notice Period") in accordance with the
provisions of this Agreement to notify the Indemnified Party, (i) whether or not
it disputes the liability of the Indemnifying Party to the
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Indemnified Party hereunder with respect to such claim or demand, and (ii)
notwithstanding any such dispute, whether or not it desires, at the sole cost
and expense of the Indemnifying Party subject to reimbursement if finally
determined not to be liable for indemnification, to defend the Indemnified Party
against such claim or demand; provided, however, that any Indemnified Party is
hereby authorized prior to and during the Notice Period to file any motion,
answer or other pleading which it shall deem necessary or appropriate to protect
its interests or those of the Indemnifying Party and not materially prejudicial
to the Indemnifying Party.
(b) If the Indemnifying Party disputes its liability with respect to
such claim or demand or the amount thereof (if such amount is set out in the
Claim Notice) (whether or not such Indemnifying Party desires to defend the
Indemnified Party against such claim or demand as provided in paragraphs (c) and
(d) below), such dispute shall be resolved in accordance with paragraph (f)
hereof. Pending the resolution of any dispute by the Indemnifying Party of its
liability with respect to any claim or demand, such claim or demand shall not be
settled without the prior written consent of the Indemnifying Party.
(c) If the Indemnifying Party notifies the Indemnified Party within
the Notice Period that it desires to defend the Indemnified Party against such
claim or demand then, except as hereinafter provided, the Indemnifying Party
shall have the right to defend against such claim or demand by all appropriate
proceedings, which proceedings shall be promptly settled or prosecuted by it to
a final conclusion; provided, however, the Indemnifying Party shall not, without
the prior written consent of the Indemnified Party, consent to the entry of any
judgment against the Indemnified Party or enter into any settlement or
compromise which does not include, as an unconditional term thereof, the giving
by the claimant or plaintiff to the Indemnified Party of a release, in form and
substance satisfactory to the Indemnified Party, from all liability in respect
of such claim or litigation. If the Indemnified Party desires to participate in,
but not control, any such defense or settlement, it may do so at its sole cost
and expense; provided, however, that if in the reasonable judgment of the
Indemnified Party there may be a conflict of interest between the Indemnifying
Party and the Indemnified Party in the conduct of the defense of such action,
the fees and expenses of such counsel to the Indemnified Party shall be at the
expense of the Indemnifying Party (unless the Indemnifying Party disputes its
liability with respect to such claim or demand and such dispute is resolved in
its favor). If requested by the Indemnifying Party, the Indemnified Party agrees
to cooperate with the Indemnifying Party and its counsel in contesting any claim
or demand which the Indemnifying Party elects to contest, or, if appropriate and
related to the claim in question, in making any counterclaim against the person
asserting the claim and any third party cross complaint against any person.
(d) (i) If the Indemnifying Party elects not to defend the
Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the amount
of any such claim or demand, or if the same be defended by the Indemnifying
Party or by the Indemnified Party (but the Indemnified Party shall not have any
obligation to defend any such claim or demand), then that portion thereof as to
which such defense is unsuccessful, in each case shall be conclusively deemed to
be a liability of the Indemnifying Party hereunder, unless the Indemnifying
Party shall have disputed its liability to
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the Indemnified Party hereunder, as provided in paragraph (a) above, in which
event such dispute shall be resolved in accordance with paragraph (f) hereof. No
claim may be settled without the consent of the Indemnifying Party.
(ii) In the event an Indemnified Party should have a claim
against an Indemnifying Party hereunder which does not involve a claim or demand
being asserted against or sought to be collected from it by a third party, the
Indemnified Party shall promptly send a Claim Notice with respect to such claim
to the Indemnifying Party. If the Indemnifying Party disputes its liability
with respect to such claim or demand, such dispute shall be resolved in
accordance with paragraph (f) hereof. If the Indemnifying Party does not notify
the Indemnified Party within the Notice Period that it disputes such claim, the
amount of such claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder.
(e) Upon the final determination of the liability under this
Article VII, payment shall be made as provided in Section 7.5 (a) or (b), as
appropriate.
(f) If an Indemnifying Party timely disputes its liability with
respect to a claim or demand against it for indemnification in accordance with
paragraph (a) above, such dispute between the Indemnifying Party and the
Indemnified Party shall be settled by arbitration in Miami, Florida in
accordance with the rules of the American Arbitration Association. The
arbitration shall be conducted by three arbitrators, one of whom shall be
selected by the Indemnified Party, one of whom shall be selected by the
Indemnifying Party and the third of whom shall be selected by the two
arbitrators so chosen. The fees of the arbitrators shall be paid by the losing
party, unless otherwise awarded by the arbitrators. The arbitration award shall
be final, conclusive and binding on the parties and judgment thereon may be
entered and enforced in any court of competent jurisdiction.
(g) Seller will be entitled, at its election, to control any cleanup,
remediation or other proceeding with respect to which indemnity is sought under
Section 7.1(d) for Environmental Liability, provided that Seller acts diligently
in connection therewith and in accordance with all Requirements of Law.
7.5 Limitations on Amounts.
----------------------
(a) Seller. Except with respect to matters covered by Section 7.1(d)
------
or Excluded Liabilities, Seller will have no liability under this Article for
indemnification with respect to any matter which (i) constitutes an inaccuracy
or breach of any representation or warranty of Seller under this Agreement
(whether asserted under Section 7.1(b) or otherwise), or (ii) to the extent
relating to any failure to perform or comply, prior to the Closing Date,
constitutes a breach of a covenant or agreement made by the Seller or any
Affiliate of the Seller under Sections 5.1 and 5.6 of this Agreement, until the
cumulative and aggregate amount of the Damages relating to such matters exceeds
ONE HUNDRED THOUSAND DOLLARS ($100,000), and then only for the amount by which
such Damages exceed ONE HUNDRED THOUSAND DOLLARS ($100,000). Seller shall not be
obligated to indemnify any party
44
<PAGE>
pursuant to this Article after the aggregate amount of indemnifiable Damages
equals or exceeds the sum of TWENTY MILLION DOLLARS ($20,000,000) provided that
the foregoing limitation on Seller's indemnity obligation shall not apply to
"Excluded Indemnity Liabilities" and any indemnification payments made by Seller
to an Indemnified Party for Excluded Indemnity Liabilities shall not be counted
toward the $20,000,000 limitation described above (and instead shall be in
addition to such $20,000,000 maximum amount). For purposes hereof "Excluded
Indemnity Liabilities" shall mean Excluded Liabilities other than (i)
Environmental Liabilities described in Section 7.1(d), or (ii) any liability of
Seller to any person or entity which constitutes a breach of any representation
or warranty of Seller contained in this Agreement or a breach of a covenant of
Seller contained in Section 5.1 or 5.6 of this Agreement. All amounts payable by
Seller under this Article shall be paid as follows: first, by reducing the
outstanding principal amount and any accrued and unpaid interest on the Buyer
Notes, and second, by payment from Seller within ten (10) days after final
determination of the amount so payable in accordance with the provisions of
this Article.
(b) Buyer. Buyer shall not be obligated under this Article for
-----
indemnification with respect to any matter which constitutes an inaccuracy or
breach of any representation or warranty of Buyer under Article IV of this
Agreement, but not including a matter covered by Section 7.2(e) and not
including a liability which constitutes an Assumed Liability or is included in
the Investment, after the aggregate amount of indemnifiable Damages therefor
equals or exceeds the sum of TWENTY MILLION DOLLARS ($20,000,000). All amounts
payable by Buyer under this Article shall be paid within ten (10) days after
final determination of the amount so payable in accordance with the provisions
of this Article.
7.6 Offset. If Seller fails to pay any amounts to Buyer that are owed
------
pursuant to this Article VII, Buyer may set-off any such amounts against the
amounts, if any, owed to Seller by Buyer pursuant to the Buyer Notes and the
Earn-Out Payment. Further, if litigation, arbitration or a Claim Notice has been
instituted which could give rise to an indemnification payment to Buyer, payment
of amounts, if any, owed Seller, pursuant to the Buyer Notes or the Earn-Out
Payment, shall be deposited into escrow by Buyer as provided below until such
litigation, arbitration or Claim Notice with respect to Seller's obligation to
indemnify Buyer is finally resolved.
The amount to be deposited into escrow shall be limited to the
disputed portion of the claimed indemnification payment ("Disputed Amount") and
all other amounts owing by Buyer to Seller under the Buyer Notes and Earn-Out
Payment shall be timely paid. The Disputed Amount shall be deposited into an
interest-bearing escrow account at NationsBank of Florida, N.A., Naples, Florida
("Escrow Account") pursuant to an Escrow Agreement in the form attached hereto
as Exhibit L ("Escrow Agreement") and shall be disbursed as provided in such
---------
Escrow Agreement. The party entitled to the Disputed Amount or portion thereof
shall receive the same with the interest earned thereon. The other party shall
also pay to the receiving party an amount ("Additional Interest Amount") equal
to (a) in the case of a payment to Buyer, the difference between (i) the amount
of interest which would have been earned on the Disputed Amount, or portion
thereof, from the date it should have been paid to Seller calculated at the
45
<PAGE>
prime lending rate of NationsBank of Florida, N.A. (or its successor) from time
to time in effect (the "Prime Rate"), and (ii) the amount of interest actually
earned on the Disputed Amount, or portion thereof, in the Escrow Account; and
(b) in the case of a payment to Seller, the difference between (i) the amount of
interest which would have been earned on the Disputed Amount, or portion
thereof, from the date it should have been paid to Seller calculated at the
greater of (x) three percent (3%) over the Prime Rate and (y) twelve percent
(12%), and (ii) the amount of interest actually earned on the Disputed Amount,
or portion thereof, in the Escrow Account. The Additional Interest Amount shall
be paid within ten (10) days after the Disputed Amount, or portion thereof, is
delivered to the applicable party.
46
<PAGE>
ARTICLE VIII. GENERAL PROVISIONS.
8.1 Joint and Several Obligations. All obligations and liabilities
-----------------------------
arising under this Agreement of each entity comprising the Seller shall be joint
and several.
8.2 Successors and Assigns. This Agreement shall be binding upon, and
----------------------
inure to the benefit of, the parties hereto and their respective permitted
successors and assigns, and no other person shall have any rights or obligations
hereunder. Except as expressly provided herein, neither this Agreement nor any
rights hereunder may be assigned or transferred by any party hereto without the
prior written consent of all other parties hereto.
8.3 No Third Party Beneficiary. This Agreement is for the benefit of, and
--------------------------
may be enforced only by, Seller, Buyer and their respective successors and
permitted assignees and Affiliates, and is not for the benefit of, and may not
be enforced by, any third party.
8.4 Entire Agreement. This Agreement incorporates by this reference the
----------------
Preliminary Statement and all Exhibits and Schedules hereto (except that
references to this Agreement in Article VII do not thereby incorporate the
Transaction Documents). This Agreement, the Transaction Documents, the closing
documents to be delivered in connection with this Agreement, and the
Confidentiality Agreement, contain the parties' entire agreement with respect to
the subject matter hereof. Any and all conflicting or inconsistent discussions,
agreements, promises, representations and statements, if any, between the
parties or their representatives that are not incorporated herein shall be null
and void and are merged into this Agreement. This Agreement shall constitute the
entire understanding and agreement among the parties. Neither the Seller nor the
Buyer has made or is making any representation or warranty (express or implied)
to the other, or to any of their respective Affiliates, agents, employees or
consultants, except for those expressly set forth in this Agreement or in any
agreement or document to be executed at Closing pursuant hereto. This Agreement
shall not be construed more strictly against one party than against the other
merely by virtue of the fact that this Agreement may have been physically
prepared by one of the parties, or such party's counsel, it being agreed that
all parties and their respective counsel have mutually participated in the
negotiation and preparation of this Agreement.
8.5 Notices. All notices or other communications required or permitted
-------
under the terms of this Agreement shall be made in writing and shall be deemed
given upon delivery by hand, courier or by certified mail, return receipt
requested, first class postage and registration fees prepaid and correctly
addressed to the parties at the following addresses (or on the date such
delivery is determined by the postal authorities to be impossible to
accomplish):
If to Buyer: Gargiulo L.P.
15000 Old 41 North
Naples, Florida 33963
Attn: Jeffrey D. Gargiulo, CEO
47
<PAGE>
with a copy to: Martin J. Genauer, Esq.
Karp & Genauer, P.A.
2 Alhambra Plaza, Suite 1202
Coral Gables, Florida 33131
If to Seller: c/o Collier Enterprises
3003 Tamiami Trail North, Suite 400
Naples, Florida 33940
Attn: Thomas J. Flood, President and Chief
Executive Officer
with a copy to: Thomas McGuigan, P.A.
Steel Hector & Davis
200 S. Biscayne Boulevard
Suite 4000
Miami, Florida 33131-2398
or to such other address as any of the parties hereto may designate by notice to
the others (such notice of change in address to be effective only upon actual
receipt thereof). The parties shall acknowledge in writing any notice given by
hand delivery.
8.6 Modifications. This Agreement may not be waived, modified or amended
-------------
orally, by course of conduct or dealing, but only by and pursuant to an
instrument in writing duly executed and delivered by the party sought to be
charged therewith.
8.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original, but all of which
together shall constitute a single agreement.
8.8 Cooperation. Each of the parties to this Agreement, when requested by
-----------
another party, shall give all reasonable and necessary cooperation with respect
to any reasonable matters relating to the transactions contemplated by this
Agreement.
8.9 Governing Law; Venue.
--------------------
(a) It is the intention of the parties hereto that all questions with
respect to the construction of this Agreement and the rights and liabilities of
the parties hereto shall be determined in accordance with the laws of the State
of Florida applicable to agreements entered into and performed entirely within
the State of Florida.
(b) Except as otherwise set forth in Section 7.4(f), each of the
parties hereto (i) hereby irrevocably submits itself to the exclusive
jurisdiction of (A) the Circuit Court of Collier County, Florida, and (B) the
United States District Court for the Southern District of Florida, for the
purposes of any suit, action or other proceeding brought by the other, or its
respective successors or assigns, with respect to this Agreement, and (ii) to
the extent permitted
48
<PAGE>
by applicable law, hereby waives, and agrees not to assert, by way of motion, as
a defense or otherwise in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of the above-named courts, that
the suit, action or proceeding is brought in an inconvenient forum, or that the
venue of the suit, action or proceeding is improper in such courts. Service by
mailing (by certified mail, return receipt requested) or delivering a copy of
such process to a party in care of its agent for service of process as aforesaid
shall be deemed good and sufficient service thereof, and each party hereby
irrevocably authorizes and directs its respective agent for service of process
to accept such service on its behalf.
8.10 Headings. The various section headings are inserted for purposes of
--------
reference only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.
8.11 Gender, Number. All references to gender or number in this Agreement
--------------
shall be deemed interchangeably to have a masculine, feminine, neuter, singular
or plural meaning, as the sense of the context requires.
8.12 Severability. The provisions of this Agreement shall be severable,
------------
and any invalidity, unenforceability or illegality of any provision or
provisions of this Agreement shall not affect any other provision or provisions
of this Agreement, and each term and provision of this Agreement shall be
construed to be valid and enforceable to the full extent permitted by law.
8.13 Survival. Except as otherwise expressly provided in this Agreement
--------
and/or any Transaction Document, the liabilities and obligations of each party
with respect to any and all of its representations, warranties, covenants,
indemnifications and agreements set forth in this Agreement and/or in any
Transaction Document or in any document incorporated herein or therein shall not
be merged into, affected or impaired by the Closing under this Agreement.
Survival of the representations and warranties of the parties under this
Agreement and the covenants of the parties under Sections 5.1 and 5.6 shall,
however, be limited to the extent provided in Section 7.3 hereof.
8.14 Attorneys' Fees; Expenses.
-------------------------
(a) In any suit or proceeding (including arbitration, insolvency,
bankruptcy, investigative, administrative and regulatory proceedings) arising in
connection with this Agreement, the prevailing party shall have the right to
receive an award of the reasonable attorneys' fees and disbursements actually
incurred by it in connection therewith. Each reference to attorneys' fees or
attorneys' fees and disbursements in this Agreement or any document incorporated
by reference into it shall include attorneys and paralegal fees, and costs and
disbursements, whether suit be brought or not and in any administrative,
regulatory, investigative, insolvency, bankruptcy, and appellate proceedings.
(b) Except as otherwise provided in (a), above, each party shall bear
all of their own costs and expenses incurred in connection with the negotiating
and consummating of this Agreement; provided, however, that Buyer will pay or
reimburse Seller for the actual costs of
49
<PAGE>
obtaining information or documents (other than the 1995 Financial Statements of
Seller, or information or documents required to comply with the HSR Act, all of
which shall be obtained at Seller's sole cost and expense) that are requested by
Buyer and its Affiliates and due to such Person's status as a public company or
which relates to transactions separate from the transactions contemplated by
this Agreement (including, without limitation, the matters referred to in
Section 5.6 hereof).
8.15 Termination.
-----------
(a) This Agreement and the transactions contemplated hereby may be
terminated at any time prior to Closing by written notice delivered by Seller to
Buyer or by Buyer to Seller, as the case may be, in the following instances:
(i) By Buyer, if there has been a material misrepresentation,
a material breach of warranty or a material failure to comply on the
part of the Seller with respect to any of the representations,
warranties, covenants or provisions set forth herein (or delivered in
any other document pursuant hereto), including without limitation, any
misrepresentation, breach or failure to comply that is evidenced in
any Schedule delivered by Seller, or which is discovered in Buyer's
due diligence investigation of Seller and the Business, and such
misrepresentation, breach or failure has or may reasonably be expected
to have a Material Adverse Effect on the Business in the hands of
Buyer and has not been cured, if capable of cure, in full within
twenty (20) days of receipt by Seller of notice from Buyer.
(ii) By Seller, if there has been a material misrepresentation,
a material breach of warranty or a material failure to comply on the
part of Buyer with respect to the representations, warranties or
covenants set forth herein (or in any other document delivered
pursuant hereto) and such misrepresentation, breach or failure to
comply has not been cured, if capable of cure, within twenty (20) days
of receipt by Buyer of notice from Seller.
(iii) At any time prior to Closing, by the mutual consent in
writing of Seller and Buyer.
(iv) by Buyer if Seller fails to correct a Title Defect to which
Buyer has objected pursuant to Section 5.4 within the sixty (60) day
cure period provided therein, unless the provision of Section 5.4 for
closing the transactions contemplated hereby with a credit against the
Purchase Price is applicable.
(v) By Buyer or Seller, if the Closing does not occur on or
before the later of the end of the sixty (60) day cure period provided
in Section 5.4 and February 28, 1996.
50
<PAGE>
(b) Liability in the Event of Termination; Remedies.
-----------------------------------------------
(i) In the event of termination of this Agreement and the
transactions contemplated hereby pursuant to Sections 8.15(a)(i) or
(ii) hereof, the non-breaching party may avail itself of all rights,
power and remedies now or hereafter existing at law or in equity or by
statute or otherwise.
(ii) In the event of termination of this Agreement and the
transactions contemplated hereby pursuant to Section 8.15(a)(iii),
(iv) or (v) hereof, this Agreement shall, with the exception of
Section 8.14(b) hereof, become void and have no further effect,
without any liability on the part of any party hereto.
(c) Section 8.14(b) hereof shall survive the termination of this
Agreement regardless of the reason for such termination.
8.16 Radon Disclosure. Radon is a naturally occurring radioactive gas
----------------
that, when it has accumulated in a building in sufficient quantities, may
present health risks to persons who are exposed to it over time. Levels of
radon that exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from the county public health unit. The foregoing disclosure is
provided to comply with state law and is for informational purposes only.
8.17 Remedies Cumulative. All rights and remedies granted in this
-------------------
Agreement (including, without limitation, those granted under Article VII
hereof) or available under applicable law shall be deemed concurrent and
cumulative and not alternative or exclusive remedies, to the full extent
permitted by law and this Agreement, and any party may proceed with any number
of remedies at the same time or in any order (except that the set-off rights of
Buyer under Section 7.6 shall be exclusive; but only so long as the
indemnification obligations of Article VII are in effect). The exercise of any
one right or remedy shall not be deemed a waiver or release of any other right
or remedy, and any party, upon the occurrence of an event of default by another
party under this Agreement, may proceed at any time, under any agreement, in any
order and with any available remedy. Nothing in this Section shall affect the
termination of (i) indemnification liabilities and obligations pursuant to
Section 7.3, and (ii) the survival of representations and warranties and certain
covenants pursuant to Section 8.13.
51
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed and delivered, all as of the day and year first above written.
GARGIULO, L.P., a Delaware limited partnership
By: GARGIULO G.P., INC., a Delaware corporation
and its General Partner
By: /s/ Jeffrey D. Gargiulo
-------------------------------------------
Jeffrey D. Gargiulo, President
COLLIER ENTERPRISES, a Florida general partnership
By: /s/ Miles Collier
-------------------------------------------
Miles Collier, Managing Partner
COLLIER FARM EQUIPMENT COMPANY,
a Florida corporation
By: /s/ Miles C. Collier
-------------------------------------------
Miles C. Collier, President
COLLIER FARMS, INC., a Florida corporation
By: /s/ Miles C. Collier
-------------------------------------------
Miles C. Collier, President
COLLIERGRO, LTD., a Florida limited partnership
By: /s/ Miles C. Collier
-------------------------------------------
Miles C. Collier, President of Collier
Management Services, Inc., the General
Partner
52
<PAGE>
COLLIER GROVES & PACKING, LTD., a Florida limited
partnership
By: /s/ Miles C. Collier
-------------------------------------------
Miles C. Collier, President of Collier
Management Services, Inc., the General
Partner
COLLIER TEC, INC., a Florida corporation
By: /s/ Miles C. Collier
-------------------------------------------
Miles C. Collier, President
COLLIER DEVELOPMENT CORPORATION,
a Florida corporation, on its own behalf and as
sole beneficiary under the Trust dated as of
March 16, 1983 and numbered 1983CDC
By: /s/ Miles C. Collier
-------------------------------------------
Miles C. Collier, President
/s/ Miles C. Collier
------------------------------------------------
Miles C. Collier, as Trustee under that certain
Trust dated as of March 16, 1983 and numbered
1983CDC
53
<PAGE>
Exhibit 21.1
------------
List of Registrant's Subsidiaries
---------------------------------
Name of Subsidiary State of Incorporation
================== ======================
Calgene Acquisition Corp. Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) of Calgene II, Inc. for the registration of
31,290,445 shares of its common stock and to the incorporation by reference
therein of our report dated August 18, 1995, with respect to the consolidated
financial statements and schedules of Calgene, Inc. included in its Annual
Report (Form 10-K/A) for the year ended June 30, 1995, filed with the
Securities and Exchange Commission.
We also consent to the reference to our firm under the caption "Experts" and
to the use of our report dated December 18, 1995, in the Registration
Statement (Form S-4) of Calgene II, Inc. for the registration of 31,290,445
shares of its common stock.
Ernst & Young LLP
Sacramento, California
January 31, 1996
<PAGE>
EXHIBIT 23.2.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement of Calgene II, Inc. on
Form S-4 of our report dated October 2, 1995, accompanying the combined
financial statements of Tomato Investments and Associates, Inc. and Produce
Related Technology of Monsanto Company appearing in the Prospectus which is
part of the Registration Statement and the schedules appearing elsewhere in
this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE AND TOUCHE LLP
St. Louis, Missouri
February 2, 1996
<PAGE>
EXHIBIT 23.2.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Calgene II, Inc. on
Form S-4 of our reports dated September 22, 1995 (except for Note 9, as to
which the date is December 29, 1995) and October 29, 1993 accompanying the
consolidated financial statements of Gargiulo L.P. and Subsidiaries and the
combined financial statements of NTGargiulo Inc. and Affiliates, respectively,
appearing in the Proxy Statement/Prospectus, which is a part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Proxy Statement/Prospectus.
DELOITTE AND TOUCHE LLP
Miami, Florida
February 1, 1996
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Calgene II, Inc. on Form
S-4 of our reports dated August 18, 1995 and August 10, 1994 (relating to the
consolidated financial statements of Gargiulo P.R., Inc. and its Subsidiary and
the consolidated financial statements of NTGargiulo P.R., Inc., respectively,
such financial statements are not presented separately herein) appearing in the
Proxy Statement/Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such Proxy
Statement/Prospectus.
LANDA, UMPIERRE & COMPANY
San Juan, Puerto Rico
February 1, 1996
<PAGE>
Exhibit 23.4
CONSENT TO USE OF REPORTS OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Tampa, Florida,
February 2, 1996
<PAGE>
Exhibit 23.6
CONSENT OF MONTGOMERY SECURITIES
We hereby consent to the use of our opinion dated October 5, 1995 as Annex
C to the Proxy Statement/Prospectus included in the Registration Statement on
Form S-4 relating to the merger of Calgene, Inc. with and into a wholly-owned
subsidiary of Calgene II, Inc. and to the references to our firm name in such
Proxy Statement/Prospectus in each place it appears therein. In giving such
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
MONTGOMERY SECURITIES
January 31, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-1996
<PERIOD-END> DEC-15-1995
<CASH> 1,010
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,010
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,010
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 1,009
<TOTAL-LIABILITY-AND-EQUITY> 1,010
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.2
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CALGENE, INC.
SPECIAL MEETING OF STOCKHOLDERS
To be held on March 25, 1996
The undersigned stockholder of Calgene, Inc. ("Calgene") hereby
acknowledges receipt of the Notice of Special Meeting of Stockholders and Proxy
Statement/Prospectus for the Special Meeting of Stockholders of Calgene to be
held on March 25, 1996 at 9:00 a.m., local time, at the Varsity Theatre, 616 2nd
Street, Davis, California, and hereby appoints Roger H. Salquist 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 there personally present, on the matters set forth on the reverse
side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
To approve the Agreement and Plan of Reorganization dated as of October 13,
1995, between Calgene and Monsanto Company, a Delaware corporation ("Monsanto"),
and the related Plan of Merger, under which Calgene and Tomato Investment
Associates, Inc., a Delaware corporation and a wholly-owned subsidiary of
Monsanto ("TIA"), will become wholly-owned subsidiaries of a newly-formed
holding company, Calgene II, Inc., a Delaware corporation ("Newco"), pursuant
to: (i) a merger of a wholly-owned subsidiary of Newco with and into Calgene and
the conversion of each outstanding share of Calgene Common Stock, par value
$0.001 per share, into the right to receive one share of Common Stock, par value
$0.001 per share, of Newco, followed immediately by (ii) the exchange by
Monsanto of all of the outstanding shares of capital stock of TIA and certain
other assets for that number of shares of Newco Common Stock representing 49.9%
of the then outstanding shares of Newco Common Stock.
For [__] Against [__] Abstain [__]
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF
REORGANIZATION AND THE RELATED PLAN OF MERGER 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
the shares are held by joint tenants or as community property, both holders
should sign.
Signature ________________________
Date _____________________________
Signature ________________________
Date _____________________________
<PAGE>
EXHIBIT 99.3
February 2, 1996
Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Gentlemen:
I hereby consent to the use of my name as a director-nominee in the section
entitled "CALGENE II, INC.--Directors and Executive Officers" of the Proxy
Statement/Prospectus which is a part of the Registration Statement on Form S-4
for the registration of shares of Common Stock of Calgene II, Inc., and any
pre-effective or post-effective amendments thereto.
Sincerely,
/s/ Robert T. Fraley
_____________________________________
ROBERT T. FRALEY
<PAGE>
EXHIBIT 99.4
February 2, 1996
Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Gentlemen:
I hereby consent to the use of my name as a director-nominee in the section
entitled "CALGENE II, INC.--Directors and Executive Officers" of the Proxy
Statement/Prospectus which is a part of the Registration Statement on Form S-4
for the registration of shares of Common Stock of Calgene II, Inc., and any
pre-effective or post-effective amendments thereto.
Sincerely,
/s/ Jeffrey D. Gargiulo
_____________________________________
JEFFREY D. GARGIULO
<PAGE>
EXHIBIT 99.5
February 2, 1996
Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Gentlemen:
I hereby consent to the use of my name as a director-nominee in the section
entitled "CALGENE II, INC.--Directors and Executive Officers" of the Proxy
Statement/Prospectus which is a part of the Registration Statement on Form S-4
for the registration of shares of Common Stock of Calgene II, Inc., and any
pre-effective or post-effective amendments thereto.
Sincerely,
/s/ Howard D. Palefsky
_____________________________________
HOWARD D. PALEFSKY
<PAGE>
EXHIBIT 99.6
February 2, 1996
Calgene II, Inc.
1920 Fifth Street
Davis, California 95616
Gentlemen:
I hereby consent to the use of my name as a director-nominee in the section
entitled "CALGENE II, INC.--Directors and Executive Officers" of the Proxy
Statement/Prospectus which is a part of the Registration Statement on Form S-4
for the registration of shares of Common Stock of Calgene II, Inc., and any
pre-effective or post-effective amendments thereto.
Sincerely,
/s/ John E. Robson
_____________________________________
JOHN E. ROBSON
<PAGE>
EXHIBIT 99.7
February 2, 1996
Calgene II, Inc.
1920 Fifth Street
Davis, California
Gentlemen:
I hereby consent to the use of my name as a director-nominee in the section
entitled "CALGENE II, INC.--Directors and Executive Officers" of the Proxy
Statement/Prospectus which is a part of the Registration Statement on Form S-4
for the registration of shares of Common Stock of Calgene II, Inc., and any
pre-effective or post-effective amendments thereto.
Sincerely,
/s/ Carl V. Stinnett
_____________________________________
CARL V. STINNETT
<PAGE>
EXHIBIT 99.8
February 2, 1996
Calgene II, Inc.
1920 Fifth Street
Davis, California
Gentlemen:
I hereby consent to the use of my name as a director-nominee in the section
entitled "CALGENE II, INC.--Directors and Executive Officers" of the Proxy
Statement/Prospectus which is a part of the Registration Statement on Form S-4
for the registration of shares of Common Stock of Calgene II, Inc., and any
pre-effective or post-effective amendments thereto.
Sincerely,
/s/ Allen J. Vangelos
_____________________________________
ALLEN J. VANGELOS
<PAGE>
EXHIBIT 99.9
February 2, 1996
Calgene II, Inc.
1920 Fifth Street
Davis, California
Gentlemen:
I hereby consent to the use of my name as a director-nominee in the section
entitled "CALGENE II, INC.--Directors and Executive Officers" of the Proxy
Statement/Prospectus which is a part of the Registration Statement on Form S-4
for the registration of shares of Common Stock of Calgene II, Inc., and any
pre-effective or post-effective amendments thereto.
Sincerely,
/s/ Hendrik A. Verfaillie
_____________________________________
HENDRIK A. VERFAILLIE
