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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1997.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
CALGENE, INC.
(NAME OF SUBJECT COMPANY)
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CALGENE, INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
129598 10 8
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
LLOYD M. KUNIMOTO
PRESIDENT AND ACTING CHIEF EXECUTIVE OFFICER
CALGENE, INC.
1920 FIFTH STREET
DAVIS, CALIFORNIA 95616
(916) 753-6313
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF
OF THE PERSON FILING STATEMENT)
------------------------
With a copy to:
<TABLE>
<S> <C>
MARK G. BORDEN, ESQ. STEVEN J. TONSFELDT, ESQ.
HALE AND DORR LLP VENTURE LAW GROUP
60 STATE STREET A PROFESSIONAL CORPORATION
BOSTON, MASSACHUSETTS 02109 2800 SAND HILL ROAD
(617)526-6000 MENLO PARK, CALIFORNIA 94025
(415)854-4488
</TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Calgene, Inc., a Delaware corporation
("Calgene" or the "Company"). The address of the principal executive offices of
the Company is 1920 Fifth Street, Davis, California 95616. The title of the
class of equity securities to which this Statement relates is the Company's
Common Stock, par value $0.001 per share ("Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by Monsanto Acquisition Company,
Inc. ("Purchaser"), a Delaware corporation and a wholly owned subsidiary of
Monsanto Company, a Delaware corporation ("Monsanto" or "Parent"), to purchase
all of the outstanding Shares held by the Company's stockholders other than
Parent or its affiliates (such stockholders, the "Public Stockholders" and such
Shares, the "Publicly Held Shares") at $8.00 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in Purchaser's
Offer to Purchase dated April 7, 1997 (the "Offer to Purchase") and the related
Letter of Transmittal (which together with the Offer to Purchase constitute the
"Offer"), copies of which are filed respectively as Exhibits 1 and 2 hereto and
are incorporated herein by reference in their entirety. The Offer is disclosed
in a Tender Offer Statement on Schedule 14D-1 dated April 7, 1997 (the "Schedule
14D-1") and in a Rule 13e-3 Transaction Statement on Schedule 13E-3 dated April
7, 1997 (the "Schedule 13E-3"), both of which are filed with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules promulgated by
Commission thereunder. The Offer is being made by Purchaser pursuant to the
Agreement and Plan of Merger, dated as of March 31, 1997, among Parent,
Purchaser and the Company (as the same may be amended from time to time, the
"Merger Agreement"), a copy of which is filed as Exhibit 3 hereto and
incorporated herein by reference in its entirety.
According to the Offer to Purchase, the address of the principal executive
offices of each of the Purchaser and Parent is 800 North Lindbergh Boulevard,
St. Louis, Missouri 63167.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, is set forth in Item 1 above. All information contained in this
Statement or incorporated herein by reference concerning Purchaser or Parent, or
actions or events with respect to either of them, was provided by the Purchaser
or Parent, respectively, and the Company takes no responsibility for such
information. Information contained in this Statement with respect to the Company
and its advisors has been provided by the Company.
(b) Except as described herein, in Schedule I hereto, and in the Company's
Proxy Statement dated October 10, 1996 relating to the Company's 1996 Annual
Meeting of Stockholders (the "1996 Proxy Statement") (attached hereto as Exhibit
5 and incorporated herein by reference), to the knowledge of the Company, as of
the date hereof there are no material contracts, agreements, arrangements or
understandings, or any potential or actual conflicts of interest between the
Company or its affiliates and (1) the Company, its executive officers, directors
or affiliates or (2) the Purchaser, its executive officers, directors or
affiliates.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER.
In considering the recommendations of the Board of Directors of the Company
(the "Calgene Board"), based on the recommendations of the special committee
(the "Special Committee") of the Calgene Board appointed to represent the Public
Stockholders (consisting of Messrs. Roger H. Salquist, Allen J. Vangelos and
Howard D. Palefsky, none of whom are designees of Parent or officers of the
Company), set forth in Item 4(a) hereto, the Public Stockholders should be aware
that certain members of the Calgene Board and the Special Committee have
interests in the Merger and the Offer which are described in Schedule I hereto
and which may present them with certain conflicts of interest. Each of the
members of the Calgene Board and the Special Committee were aware of these
potential conflicts and considered them along with the other factors described
in Item 4(b)(2) below.
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SUMMARY OF EXISTING AGREEMENTS BETWEEN THE COMPANY AND MONSANTO.
REORGANIZATION AGREEMENT. On October 13, 1995, the Company and Monsanto
entered into an Agreement and Plan of Reorganization ("Reorganization
Agreement") and certain other agreements whereby Monsanto agreed to contribute
all of the outstanding shares of capital stock of Tomato Investment Associates,
Inc., a wholly owned subsidiary of Monsanto ("TIA"), whose principal asset was
the entire equity interest in Gargiulo, L.P. ("Gargiulo"), $30 million in cash
and certain technology licenses, in exchange for a 49.9% equity interest in the
Company. In connection with the Reorganization Agreement, a total of 30,146,114
shares of Common Stock of the Company were issued to Monsanto. The
Reorganization Agreement was approved by the stockholders of the Company on
March 25, 1996. On March 31, 1996, the Company and Monsanto consummated the
transactions contemplated by the Reorganization Agreement, which included
entering into certain agreements as discussed below. Subsequent to such time,
Gargiulo was merged into TIA and TIA changed its name to "Gargiulo, Inc." The
Reorganization Agreement is included as Exhibit 6 hereto and is incorporated
herein by reference in its entirety. A summary of the terms of the
Reorganization Agreement is set forth in the 1996 Proxy Statement attached
hereto as Exhibit 5.
STOCK PURCHASE AGREEMENT. On September 27, 1996, the Company and Monsanto
entered into a Stock Purchase Agreement pursuant to which the Company agreed to
sell and issue to Monsanto, and Monsanto agreed to purchase from the Company, a
total of 6,250,000 shares of the Company's Common Stock (the "Additional
Shares") for a purchase price of $50,000,000. The Stock Purchase Agreement was
approved by the stockholders of the Company on November 12, 1996, at which time
the purchase and sale of the Additional Shares was consummated and the Company
and Monsanto amended certain existing agreements between the parties as
discussed below. The Stock Purchase Agreement is included as Exhibit 7 hereto
and incorporated herein by reference in its entirety. A summary of the terms of
the Stock Purchase Agreement is set forth in the 1996 Proxy Statement attached
hereto as Exhibit 5.
STOCKHOLDERS AGREEMENT. On March 31, 1996, pursuant to the Reorganization
Agreement, the Company and Monsanto entered into a Stockholders Agreement (the
"Original Stockholders Agreement") which provided Monsanto with certain rights
with respect to such matters as representation on the Calgene Board, and with
certain limitations on the acquisition of additional shares of Calgene Common
Stock. On November 12, 1996, the Stockholders Agreement was amended and restated
(as amended and restated, the "Restated Stockholders Agreement"). The Restated
Stockholders Agreement is included as Exhibit 8 hereto and is incorporated
herein by reference in its entirety. A summary of the terms of the Restated
Stockholders Agreement is set forth in the 1996 Proxy Statement attached hereto
as Exhibit 5.
CREDIT AGREEMENTS. On March 31, 1996, Monsanto and the Company entered into
a credit facility agreement (the "Calgene Credit Facility Agreement") and
another credit facility agreement (the "Gargiulo Credit Facility Agreement").
Under each of these agreements, Monsanto made certain amounts available to the
Company for various Company and Gargiulo uses. The Calgene Credit Facility
Agreement and the Gargiulo Credit Facility Agreement are included as Exhibits 9
and 10 hereto, respectively, and are incorporated herein by reference in their
entirety. A summary of the terms of the Calgene Credit Facility Agreement and
the Gargiulo Credit Facility Agreement is set forth in the 1996 Proxy Statement
attached as Exhibit 5 hereto.
LICENSE ARRANGEMENTS. In connection with the March 1996 reorganization,
Monsanto contributed certain technology licenses to the Company pursuant to
various license agreements and letter agreements. The technologies covered by
these licenses included ACC synthase and ACC deaminase, fruit-specific
promoters, virus resistance genes, the FAD 3 gene, an insect resistance gene,
the ADP glucose pyrophosphorylase gene and certain oil modification technology.
A summary of these license arrangements is set forth in the 1996 Proxy Statement
attached hereto as Exhibit 5.
THE MERGER AGREEMENT.
On April 1, 1997, the Company and Parent issued a press release announcing
the execution of Merger Agreement and the Purchaser's intention to commence the
Offer. A copy of that press release is filed as Exhibit 15 hereto and is
incorporated herein by reference in its entirety.
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THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable after the date thereof, but in no event
later than five business days after the initial public announcement of
Purchaser's intention to commence the Offer. Pursuant to the Merger Agreement,
Purchaser shall not, without the consent of the Special Committee, accept for
payment any Shares tendered pursuant to the Offer unless at least a majority of
the then issued and outstanding Publicly Held Shares shall have been validly
tendered and not withdrawn prior to the expiration of the Offer. The obligation
of Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer is conditioned upon there being validly tendered and not withdrawn prior
to the expiration of the Offer (i) not less than a majority of the Publicly Held
Shares (the "Majority-of-the-Minority Condition") and (ii) at least the number
of Shares that when added to the Shares owned by Parent shall constitute ninety
percent (90%) of the Shares then outstanding (the "Ninety Percent Condition"),
and certain other conditions that are described in Conditions to Consummating
the Offer below. Purchaser and Parent have agreed that no change in the Offer
may be made which decreases the Offer Price, changes the form of consideration
payable in the Offer or reduces the maximum number of Shares to be purchased in
the Offer or which imposes conditions to the Offer in addition to those
described in Conditions to Consummating the Offer below. Pursuant to the Merger
Agreement, in the event all conditions set forth in the Merger Agreement shall
have been satisfied or waived other than either the Majority-of-the-Minority
Condition or the Ninety Percent Condition, Purchaser may extend the Offer for a
period or periods aggregating not more than 20 business days after the later of
(i) the initial expiration date of the Offer and (ii) the date on which all
other conditions to the Offer other than the Majority-of-the-Minority Condition
or the Ninety Percent Condition shall have been satisfied or waived. If all of
the conditions to the Offer have been satisfied or waived other than the Ninety
Percent Condition, then, on the latest expiration date of the Offer permitted in
accordance with the preceding sentence, Purchaser shall waive the Ninety Percent
Condition and accept for payment Shares validly tendered pursuant to the Offer
and not properly withdrawn prior to such date.
THE MERGER. The Merger Agreement provides that as soon as practicable after
the purchase of the Shares pursuant to the Offer and the satisfaction of the
other conditions set forth in the Merger Agreement, and in accordance with the
Delaware General Corporation Law ("DGCL"), at the effective time of the Merger
(the "Effective Time"), Purchaser shall be merged with and into the Company. As
a result of the Merger, the separate corporate existence of Purchaser will cease
and the Company will continue as the Surviving Corporation and will become a
wholly owned subsidiary of Parent. At the Effective Time, each issued and then
outstanding Share (other than any Shares held in the treasury of the Company or
owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of
Parent or the Company, and other than Shares held by stockholders who shall not
have voted in favor of the Merger and who shall have demanded properly in
writing appraisal for such Shares in accordance with Section 262 of the DGCL)
shall be canceled and converted automatically into the right to receive $8.00
per Share, net to the seller in cash, without interest (the "Merger
Consideration").
Purchaser or the designated paying agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to the Merger
Agreement to any holder of Shares such amounts that Purchaser or the paying
agent is required to deduct and withhold with respect to the making of such
payment under the United States Internal Revenue Code of 1986, as amended (the
"Code"), the rules and regulations promulgated thereunder or any provision of
state, local or foreign tax law.
Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation. In addition, the Company is obligated under the
Merger Agreement to redeem all of the outstanding shares of its Series A
Redeemable, Non-Voting Preferred Stock, par value $.001 per share ("Series A
Preferred Shares"), not later than the day prior to the initial expiration date
of the Offer.
The Merger Agreement provides that the directors of Purchaser at the
Effective Time will be the initial directors of the Surviving Corporation and
that the officers of the Company at the Effective Time will be the initial
officers of the Surviving Corporation. The Merger Agreement provides that, at
the Effective Time, the certificate of incorporation of Purchaser will be the
certificate of incorporation of the Surviving Corporation;
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provided, however, that, at the Effective Time, Article 1 of the certificate of
incorporation of the Surviving Corporation will be amended to read as follows:
"The name of the corporation is Calgene, Inc." The Merger Agreement also
provides that the bylaws of Purchaser will be the bylaws of the Surviving
Corporation.
At the Effective Time, each holder of an outstanding option to purchase
Shares (in each case, a "Company Option") issued pursuant to the Company's 1981
Stock Option Plan, 1991 Stock Option Plan or 1996 Stock Option Plan (each such
plan, a "Company Stock Option Plan") shall become entitled to receive from the
Surviving Corporation, for each such Company Option, an amount in cash equal to
the product of (i) the excess, if any, of the Merger Consideration over the
applicable exercise price of each such Company Option and (ii) the number of
Shares such holder could have purchased had such holder exercised such Company
Option in full (without regard to exercisability) immediately prior to the
Effective Time, and thereafter each such Company Option shall be canceled;
provided, however, that any holder of a Company Option may instead have such
Company Option assumed by the surviving Corporation pursuant to the terms of the
Company Stock Option Plan pursuant to which such Company Option was issued
(each, an "Assumed Option"). After the Effective Time, each Assumed Option shall
(i) confer the right to receive from the Surviving Corporation, for each Share
subject to such Company Option immediately prior to the Effective Time, and upon
payment of the applicable exercise price per share in effect with respect to
such Company Option, the Merger Consideration, in cash, and (ii) shall otherwise
remain subject to all the terms and conditions (including with respect to the
exercisability thereof) applicable to such Company Option pursuant to the option
agreement related to such Company Options and to the Company Stock Option plan
pursuant to which such Company Option was issued. The Company has agreed to
provide timely notification and an election form to holders of Company Options
as may be required by any Company Stock Option Plan. After the Effective Time,
no further Company Options shall be granted pursuant to any Company Stock Option
plan; however, each Company Stock Option Plan shall continue to govern any
Assumed Option.
The Merger Agreement also provides that the Company shall take all such
action as may be necessary (i) to terminate the Company's Employee Stock
Purchase Plan established in March 1990 (the "Company Stock Purchase Plan") and
(ii) to cause the Shares entitled to be purchased pursuant to the Company Stock
Purchase Plan as of the Effective Time to be purchased and converted thereafter
in the Merger.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company, Parent and Purchaser as to corporate status and
the enforceability of the Merger Agreement against each such party and by the
Company as to its capitalization, compliance with law, the accuracy of financial
statements and filings with the Commission and the absence of certain material
adverse changes or events concerning the Company's business from December 31,
1996 to the date of the Merger Agreement.
Covenants of Parent, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company shall, if required by applicable law in order to
consummate the Merger, duly call, give notice of, convene and hold a special
meeting of its stockholders as soon as practicable following consummation of the
Offer for the purpose of considering and taking action on the Merger Agreement
and the transactions contemplated thereby (the "Stockholders Meeting"). At the
Stockholders Meeting, Parent and Purchaser shall cause all Shares then owned by
them to be voted in favor of the approval and adoption of the Merger Agreement
and the transactions contemplated thereby. Parent and Purchaser currently have
sufficient voting power to approve the Merger even if no other stockholder votes
in favor of the Merger. In the event that Purchaser acquires such number of
Shares that, when taken together with the Shares previously owned by Parent and
Purchaser, constitute at least ninety percent (90%) of the outstanding Shares,
the parties have agreed to take all necessary and appropriate action to cause
the Merger to become effective, in accordance with Section 253 of the DGCL as
soon as reasonable practicable after such acquisition, without a meeting of the
stockholders of the Company.
The Merger Agreement provides that the Company shall, if required by
applicable law, as soon as practicable following consummation of the Offer, file
a proxy statement with the Commission under the Exchange Act (the "Proxy
Statement"), and shall use its best efforts to have the Proxy Statement cleared
by the Commission. Parent, Purchaser and the Company shall cooperate with each
other in the preparation of the
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Proxy Statement, and the Company shall notify Parent of the receipt of any
comments of the Commission with respect to the Proxy Statement and of any
requests by the Commission for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
Commission. The Company shall give Parent and its counsel the opportunity to
review and comment upon the Proxy Statement prior to its being filed with the
Commission and shall give Parent and its counsel the opportunity to review and
comment upon all amendments and supplements to the Proxy Statement and to
participate in the preparation of any written responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the Commission. The Company and its counsel shall be given the
opportunity to review and comment on the Offer documents and any amendments
thereto prior to the filing thereof with the Commission. Parent and Purchaser
shall provide the Company and its counsel with a copy of any written comments or
telephonic notification of any verbal comments Parent or Purchaser may receive
from the Commission for its staff with respect to the Offer documents promptly
after the receipt thereof and shall provide the Company and its counsel with a
copy of any written responses and telephonic notification of any verbal
responses of Parent, Purchaser or their counsel. Each of the Company, Parent and
Purchaser agrees to use its reasonable best efforts, after consultation with the
other parties, to respond promptly to all such comments of and requests by the
Commission, and to cause the Proxy Statement and all required amendments and
supplements thereto to be mailed to the holders of Shares entitled to vote at
the Stockholders Meeting at the earliest practicable time.
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger agreement and the Effective Time, unless
Parent shall otherwise agree in writing the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; the Company shall use its reasonable best efforts to
preserve substantially intact the business organization of the Company, to keep
available the services of the current officers and employees of the Company and
to preserve the current relationships of the Company with customers, suppliers
and other persons with which the Company has significant business relations; and
the Company shall not declare or pay dividends, split, combine or reclassify its
stock, issue convertible securities or issue rights, warrants or options to
purchase Shares other than shares issuable upon exercise of options issued
pursuant to Company stock option or employee stock purchase plans outstanding as
of the date of the Merger Agreement.
Pursuant to the Merger Agreement, during the period prior to the purchase
of Shares pursuant to the Offer, Parent has covenanted to use its reasonable
best efforts not to interfere in any material respect with the Company's conduct
of its day-to-day operations except with respect to the rights and
responsibilities of Parent's designees on the Company Board or Parent's rights
and obligations under any contract or agreement with the Company.
The Company and Parent are each obligated under the Merger Agreement to
give each other prompt notice 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 the Merger Agreement to be untrue or
inaccurate and (ii) any failure of the Company, Parent or Purchaser, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it thereunder.
It is understood and agreed that all rights to indemnification by the
Company existing as of the date of the Merger Agreement in favor of each present
and former director and officer of the Company as provided in the Company's
certificate of incorporation or bylaws or pursuant to any other agreements in
effect as of such date shall survive the Merger and shall continue in full force
and effect for a period of at least six years from the Effective Time.
The Merger Agreement provides that Parent will, for a period six years from
and after the Effective Time, indemnify and hold harmless each such director and
officer of the Company with respect to all acts and omissions occurring before
the Effective Time that are based on or arise out of his service as a director
or officer, including all acts and omissions in connection with the amendment to
the Restated Stockholders Agreement, the Merger Agreement and the transactions
contemplated thereby, including the Offer and the
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Merger, to the extent of the more favorable of (i) the Company's indemnification
arrangements with such directors and officers as of the date of the Merger
Agreement, (ii) the indemnification provisions of Parent's certificate of
incorporation or bylaws and (iii) any other indemnification arrangement that
Parent has with its directors.
Pursuant to the terms of the Merger Agreement and subject to the conditions
thereof, each of the parties thereto shall use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement, including, without limitation, using its reasonable best
efforts to obtain all licenses, permits, consents, approvals, authorization,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for the consummation of
the transactions and to fulfill the conditions to the Offer and the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of the Merger Agreement, the proper officers
and directors of each party to the Merger Agreement and the Surviving
Corporation shall use their reasonable best efforts to take all such action.
Under the Merger Agreement, Parent and the Company agree to consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Merger Agreement or the transactions contemplated
thereby. Parent and the Company further agree not to issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with a national securities
exchange to which Parent or the Company is a party.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) to the extent
required by the DGCL and the Company's certificate of incorporation and bylaws,
the Merger Agreement, the Merger and the transactions contemplated thereby shall
have been approved and adopted by the affirmative vote or consent of the
stockholders of the Company; (b) no foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of (i) making the acquisition of Shares by Parent or Purchaser or
any affiliate of either of them illegal or otherwise restricting, preventing or
prohibiting consummation of the transactions contemplated by the Merger
Agreement, (ii) seeking to prohibit or limit materially the ownership or
operation by the Company, Parent or any of their respective subsidiaries of all
or any material portion of the business or assets of the Company, Parent or any
of their respective subsidiaries as a result of the transactions contemplated by
the Merger Agreement, or (iii) compelling the Company, Parent, Purchaser or any
of their respective subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of the Company, Parent, Purchaser or
any of their respective subsidiaries as a result of the transactions
contemplated by the Merger Agreement, provided, however, that each of the
parties shall have used its reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as practicable any
injunction or other order that may be entered; and (c) Purchaser shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
provided, however, that condition (c) shall not be applicable to the obligations
of Parent and Purchaser if, in breach of the Merger Agreement or the terms of
the Offer, Purchaser fails to purchase any Shares validly tendered and not
withdrawn pursuant to the Offer.
Termination; Fees and Expenses. The Merger Agreement may be terminated and
the Merger and the other transactions contemplated by the Merger Agreement may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the stockholders of the Company: (a) by mutual written
consent duly authorized by the Boards of Directors of Parent and the Company, if
such termination is also approved by the Special Committee; (b) by either Parent
or the Company if the Effective Time shall not have occurred on or before
December 31, 1997, provided, however, that such right to terminate shall not be
available to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date; (c) by either Parent or the Company if any
court of competent jurisdiction or other governmental authority shall have
issued an order, decree, ruling or taken
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any other action restraining, enjoining or otherwise prohibiting the Offer of
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable; (d) by Parent if, due to an occurrence or circumstance
that would result in a failure of any condition set forth in Annex A of the
Merger Agreement to be satisfied, (i) Purchaser shall not have commenced the
Offer within sixty (60) days following the date of the Merger Agreement, (ii)
the Offer shall have been terminated or expired in accordance with its terms
without Purchaser having accepted for payment any Shares pursuant to the Offer,
or (iii) Purchaser shall have failed to pay for Shares pursuant to the Offer
within ninety (90) days following the commencement of the Offer, unless, in the
case of clause (iii), such failure to pay for Shares shall have been caused by
or resulted from the failure of Parent or Purchaser to perform in any material
respect any material covenant or agreement of either of them contained in the
Merger Agreement or the material breach by Parent or Purchaser of any material
representation or warranty of either of them contained in the Merger Agreement;
(e) by the Company, upon approval of the Company Board and a majority of the
members of the Special Committee, if due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions set forth in Annex A
to the Merger Agreement, Purchaser shall have (i) failed to commence the Offer
within sixty (60) days following the date of the Merger Agreement, (ii)
terminated the Offer without having accepted any Shares for payment thereunder,
or (iii) failed to pay for Shares pursuant to the Offer within ninety (90) days
following the commencement of the Offer, unless such failure to pay for Shares
shall have been caused by or resulted from the failure of the Company to perform
in any material respect any material covenant or agreement of it contained in
the Merger Agreement or the material breach by the Company of any material
representation or warranty of it contained in the Merger Agreement; or (f) by
the Company, upon approval of the Company Board and a majority of the members of
the Special Committee, if Parent shall have breached in any material respect its
covenant relating to Parent's involvement in the day-to-day management of the
Company prior to the consummation of the Offer, and Parent continues such breach
following written notice by the Company to Parent thereof.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void, and there shall be no liability on the
part of any party thereto, except nothing therein shall relieve any party
thereto from liability for any willful breach thereof.
All costs and expenses incurred in connection with the Offer, the Merger
Agreement and the transactions contemplated thereby shall be paid by the party
incurring such fees and expenses, whether or not the Merger Agreement is
consummated.
CONDITIONS TO CONSUMMATING THE OFFER. Purchaser shall not be required to
accept for payment or may delay the acceptance for payment of any Shares, or may
terminate the Offer and not accept for payment any Shares, if (i) the
Majority-of-the-Minority Condition shall not have been satisfied as of the
expiration of the Offer (as it may be extended by Purchaser from time to time),
(ii) the Ninety Percent Condition shall not have been satisfied as of the
expiration of the Offer (as it may be extended by Purchaser from time to time,
but subject to the waiver requirements of Section 1.1(a) of the Merger
Agreement), or (iii) at any time on or after March 31, 1997 and prior to the
acceptance for payment of Shares, any of the following conditions exist:
(a) there shall have occurred and be remaining in effect (i) any
general suspension of trading in, or limitation on prices for, securities
on NASDAQ (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation
imposed by any government, governmental agency or authority on the
extension of credit by banks or other lending institutions in the United
States, or (iv) the commencement of a war or armed hostilities or other
international calamity directly or indirectly involving the United States;
(b) an order shall have been entered or an injunction shall have been
issued and remain in effect (i) restraining or prohibiting the making or
consummation of the Offer or the Merger, (ii) making the purchase, or
payment for, some or all of the Shares illegal or (iii) imposing
limitations on the ability of Purchaser effectively to acquire or to hold
or to exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by Purchaser on all
matters properly presented to the stockholders of the Company; or
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(c) any statute, rule, regulation or referendum shall be enacted,
enforced, promulgated or deemed applicable to (i) Parent or any of its
affiliates or subsidiaries or the Company or any of its subsidiaries or
(ii) the Offer or the Merger, which could reasonably be expected, directly
or indirectly, to result in any of the consequences referred to in clauses
(i) through (iii) of paragraph (b) above; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms or Parent and the Company shall have agreed that Parent shall
amend or terminate the Offer or postpone the payment for Shares pursuant
thereto; or
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality or material
adverse effect on the Company shall not be true and correct or any such
representations and warranties that are not so qualified shall not be true
and correct in any material respect; or
(f) the Company shall have failed to perform or comply with in any
material respect any of the agreements or covenants of the Company to be
performed or complied with by it under this Agreement; or
(g) all of the Series A Preferred Shares shall not have been redeemed;
which in the reasonable judgment of Parent with respect to each and every matter
referred to above and regardless of the circumstance (including any action or
inaction by Parent) giving rise to any such condition, makes it inadvisable to
proceed with the Offer, the acceptance for payment or payment for the Shares in
the Offer, or the Merger.
The foregoing conditions are for the benefit of Parent and Purchaser only
and may be asserted regardless of the circumstances giving rise to any such
conditions (including any action or inaction by Parent). Each of the foregoing
conditions may be waived by Purchaser in whole or in part, other than the
Majority-of-the-Minority Condition, which may not be waived without the consent
of the Special Committee. The failure to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, and each right shall be deemed a
continuing right which may be asserted at any time and from time to time.
The foregoing description summarizes certain provisions of the Merger
Agreement which relate to arrangements among the Company, Parent, Purchaser and
the Company's executive officers and directors. These, and the foregoing
descriptions of the Merger Agreement, are qualified in their entirety by
reference to the Merger Agreement.
AMENDMENT TO THE RESTATED STOCKHOLDERS AGREEMENT.
The Company and Monsanto have also entered into an Amendment to the
Restated Stockholders Agreement on March 31, 1997 (the "Amendment") solely for
the purpose of amending the Restated Stockholders Agreement to permit the
consummation of the Merger. The Amendment was approved by the Independent
Directors, as defined in the Restated Stockholders Agreement. The Amendment is
included as Exhibit 4 hereto and is incorporated herein by reference in its
entirety.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(A) RECOMMENDATION OF THE CALGENE BOARD.
At the March 31, 1997 Board meeting, the Calgene Board, based in part upon
the unanimous recommendation of the Special Committee, by unanimous vote of all
directors present and voting (with Messrs. Verfaillie, Fortune, Fraley and Hogan
abstaining, all of whom are employees of Monsanto) (a) determined that each of
the Offer and the Merger is fair to and in the best interests of the Public
Stockholders, (b) approved the Offer and the Merger, (c) approved and adopted
the Merger Agreement and the Amendment to the Restated Stockholders Agreement,
the execution of such agreements and the transactions contemplated by such
agreements and (d) recommended that the Company's stockholders accept the Offer
and tender their Shares pursuant thereto.
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THEREFORE, THE CALGENE BOARD RECOMMENDS THAT THE PUBLIC STOCKHOLDERS TENDER
ALL THEIR SHARES PURSUANT TO THE OFFER.
A copy of a letter to all stockholders of the Company communicating the
recommendations of the members of the Calgene Board is filed as Exhibit 11
hereto and is incorporated herein by reference in its entirety.
(B) BACKGROUND; REASONS FOR THE RECOMMENDATION OF THE SPECIAL COMMITTEE AND
THE CALGENE BOARD; OPINION OF MONTGOMERY SECURITIES.
(1) BACKGROUND.
Prior to October 1994, the Company held discussions from time to time with
various potential strategic partners in an effort to gain access to new markets
for its biotechnology products and to license new technologies. In the course of
such discussions, the Company considered possible alliances, combinations and
other transactions with various companies, including companies both smaller and
larger than the Company.
REORGANIZATION AGREEMENT. As above noted, in October 1994, Roger H.
Salquist, who was then Chief Executive Officer of the Company, contacted Hendrik
A. Verfaillie, an Executive Vice President of Parent, and inquired as to
Parent's interest in exploring a strategic alliance with the Company. At
subsequent meetings from October 1994 through May 1995, Messrs. Salquist and
Verfaillie, and their respective financial advisors, discussed a variety of
possible structures for such an alliance and in May 1995 the parties determined
to focus on a structure pursuant to which Parent would contribute cash,
technology and its equity interests in TIA, whose principal asset was the entire
equity interest in Gargiulo to the Company in exchange for an ownership interest
in the Company. Gargiulo is a grower, packager, marketer and distributor of
tomatoes, strawberries and other produce with operations in Florida, California,
Puerto Rico and Mexico. After negotiations that involved consideration of the
specific businesses and technologies and the amount of cash that would be
contributed by Parent, the parties determined that Parent would acquire an
approximately 49% interest in the Company.
Discussions continued, and on June 27, 1995, the Company and Parent entered
into a letter of intent with respect to the proposed reorganization. On October
5, 1995, the Company Board, acting on the recommendation of the Company's
management and in view of a fairness opinion delivered by Montgomery Securities,
approved the Reorganization Agreement and related Plan of Merger. Following
approval of the Reorganization Agreement by the Company's stockholders at a
special meeting on March 25, 1996, on March 31, 1996 Parent contributed its
equity interest in Gargiulo, $30 million in cash and certain oils and produce
related technology in exchange for a 49.9% equity interest in the Company.
In connection with the Reorganization Agreement, a total of 30,161,114
Shares were issued to Parent having an aggregate value of approximately $144
million or approximately $4.77 per Share, based on the $5.75 per Share closing
price on the day the Company's negotiations with Parent concluded, discounted
(based on an independent appraisal) to account for liquidity restrictions
imposed upon Parent in the transaction. On May 17, 1996, Parent sold 15,000
Shares to the revocable living trust of a director of Parent in consideration
for his services as a director of the Company thereby reducing the number of
Shares held by Parent to 30,146,114.
ORIGINAL STOCKHOLDERS AGREEMENT. As noted above, in connection with the
Reorganization Agreement, the Company and Parent entered into the Original
Stockholders Agreement. The Original Stockholders Agreement contained provisions
relating to: (i) composition of the boards of directors of the Company and
Gargiulo; (ii) restrictions upon the purchase of additional Shares by Parent;
(iii) restrictions upon sales of Shares by Parent; (iv) rights of Parent to
require the registration of the Shares under the Securities Act of 1933, as
amended (the "Securities Act"); and (v) rights of Parent to participate in
future equity financings of the Company. The Original Stockholders Agreement
also required that certain actions of the Company be approved by a majority of
the Company Board, including (a) prior to the occurrence of a "Trigger Event"
(as defined therein), at least one Company designee who is an "independent
director" (as defined therein), and (b) after a Trigger Event, at least two
Company designees who are "independent directors"; however, fewer
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actions required such approval following a Trigger Event. The Original
Stockholders Agreement defined the term "Trigger Event" as the earlier of any
time that (x) Parent's equity ownership interest in the Company is at least 55%,
or (y) the Company elects to convert certain borrowings made from Parent into
Shares and Parent's equity ownership interest is at least 50% after such
conversion.
The restrictions upon the purchase of additional shares by Parent contained
in the Original Stockholders Agreement contained an exception for, among other
things, a tender offer by Parent at a price approved by the disinterested
directors of the Company and based upon a fairness opinion delivered to the
Company Board by an investment banking firm. The Original Stockholders Agreement
also provided that after September 30, 1998, Parent may increase its ownership
of Shares through open market purchases or otherwise.
Pursuant to the Original Stockholders Agreement after consummation of the
Reorganization Agreement, the Company Board consisted of nine directors, of
which two were executive officers of the Company, three were designated by the
Company and four were designated by Parent.
STOCK PURCHASE AGREEMENT. As noted above, on September 27, 1996, the
Company and Parent entered into the Stock Purchase Agreement pursuant to which
Parent agreed to purchase 6,250,000 newly issued Shares at a price of $8.00 per
share. Parent's purchase was conditioned upon, among other things, (i) the
approval by the holders of a majority of the Shares present or represented at
the Company's Annual Meeting, other than Shares held by Parent, (ii) the
execution of the Amended and Restated Stockholders Agreement (described below)
by the Company and Parent, and (iii) the execution and delivery of the
Certificate of Amendment of the Restated Certificate of Incorporation of the
Company reflecting certain amendments to the Original Stockholders Agreement.
In the Company's 1996 Proxy Statement, the Company explained the reasons
for entering into the Stock Purchase Agreement as follows:
In the year ended June 30, 1996, the Company incurred substantial
losses primarily in connection with the operation of its tomato business.
As of June 30, 1996 the Company had available cash and equivalents and
available for sale securities of $28.6 million and working capital of
negative $1.5 million.
The Company believes that significant additional funds are required to
pay down debt, fund its tomato operations, support the market introduction
of new cotton products and finance continued oils research and development.
The Board of Directors of Calgene believes that the proposed transaction
with Monsanto is on terms no less favorable to the Company than could be
obtained from an independent third party. The Board determined to seek
stockholder approval for the Monsanto Transaction because the transaction
will enable Monsanto to nominate a majority of the members of the Board of
Directors of Calgene. If the proposed transaction with Monsanto is not
approved at the Annual Meeting, Calgene is unable to predict whether it
will be able to obtain required financing on favorable terms if at all.
The Company's stockholders approved the Stock Purchase Agreement at the
Company's Annual Meeting on November 12, 1996, and Parent's purchase of
6,250,000 Shares was consummated immediately thereafter.
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT. As noted above, on November
12, 1996, following approval by the Company's stockholders, the Company and
Parent entered into the Restated Stockholders Agreement which amended and
restated the Original Stockholders Agreement. Pursuant to the Restated
Stockholders Agreement, the composition of the Calgene Board changed to four
"independent directors" (three designated by the Company (collectively, the
"Company Directors") and one designated by Parent), the Chief Executive Officer
of the Company and four additional designees of Parent. Also, the definition of
"Trigger Event" was amended so that Parent's acquisition of Shares pursuant to
the Stock Purchase Agreement constituted a "Trigger Event," thereby
significantly reducing the number of Company actions requiring approval by two
or more "independent" directors in accordance with the otherwise unchanged
provisions of the Original Stockholders Agreement. Accordingly, actions
requiring such approval following a Trigger Event included (1) a merger,
consolidation or acquisition constituting a Substantial Part (defined as more
than 10% of the Company's total consolidated assets) of the Company; (2) sale,
transfer, pledge or other disposal of a Substantial Part of the Company (with
certain exceptions); (3) establishment of new
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committees of the Calgene Board or revision of delegation of authority to
existing committees; (4) election, appointment or removal of certain executive
officers; (5) approval of certain Company business plans; (6) any modification
of the agreements relating to the Reorganization Agreement; and (7) any
transaction between the Company and Parent (or their respective affiliates).
In connection with the Stock Purchase Agreement, in August 1996 Mr.
Salquist resigned as Chief Executive Officer of the Company and entered into an
amendment to his Change of Control Employment Agreement pursuant to which, among
other things, Mr. Salquist agreed to provide consulting services to the Company
for a 12-month period.
The Restated Stockholders Agreement amended the definition of "independent
director" to provide that, as long as Mr. Salquist continues to otherwise
qualify as an "independent director," Mr. Salquist would continue to qualify as
an "independent director" notwithstanding his previous employment by the Company
or his Change of Control Employment Agreement with the Company, dated, July 19,
1995, as amended.
DIVESTITURE DISCUSSIONS. From time to time over the several-month period
preceding commencement of the Offer, the Company's management engaged in
preliminary discussions with third parties who expressed an interest in
acquiring the Company's Stoneville Pedigreed Seed Company subsidiary
("Stoneville"), a cotton planting seed company. In December 1996, a third party
indicated an interest in acquiring Stoneville for $50 million plus an
unspecified royalty. Parent expressed its view to members of the Company's
management and the Calgene Board that Stoneville was a valuable asset of the
Company and should not be sold. In January 1997, another third party expressed
an interest in acquiring Stoneville to the Company's management. At a meeting of
the Calgene Board on March 6, 1997, Parent's designees on the Calgene Board
reiterated their view that it would not in the best interests of the Company or
its stockholders to divest Stoneville, and the Company Board did not authorize
the Company's management to pursue such discussions. Following the announcement
of the Acquisition Proposal (as defined herein), Parent received inquiries
regarding its willingness to sell assets of the Company. Parent advised parties
making such inquiries that it had no interest in entering into negotiations with
respect to any such sales at that time.
ACQUISITION PROPOSAL. On January 24, 1997, representatives of Parent
discussed with Parent's Board of Directors strategic alternatives with respect
to Parent's investment in the Company, including the possibility of making a
proposal to the Company to acquire the Publicly Held Shares. On January 26,
1997, Mr. Verfaillie contacted several directors of the Company to advise them
of Parent's consideration of a possible acquisition of the Publicly Held Shares.
On January 26, 1997, Mr. Verfaillie contacted several directors of the Company
to advise them of Parent's consideration of a possible acquisition of the
Publicly Held Shares. Mr. Verfaillie also advised such directors, including Mr.
Salquist, of Parent's desire to enter into a non-competition agreement with Mr.
Salquist in connection with any such acquisition. No specific terms of a
non-competition agreement were discussed, no agreements or understandings were
reached and discussions ceased shortly after Parent's submission of its
Acquisition Proposal.
On January 27, 1997, representatives of Parent advised the entire Calgene
Board that Parent was considering making a proposal to acquire the Publicly Held
Shares. On January 28, 1997 a special committee of the Board of Directors of
Parent authorized Parent to make a proposal (the "Acquisition Proposal") to the
Calgene Board to acquire all of the Publicly Held Shares for $7.25 per Share.
The Acquisition Proposal was conditioned upon the approval by a special
committee of disinterested directors of the Calgene Board. Parent advised the
Company of the Acquisition Proposal and issued a press release announcing the
Acquisition Proposal the same day.
Later that day, the Company announced that it had received the Acquisition
Proposal and that the Company Board had formed the Special Committee to consider
the Acquisition Proposal. The Company announced that the Special Committee had
retained Montgomery Securities to act as financial advisor and Venture Law Group
to act as legal counsel to the Special Committee.
On February 1, 1997, a representative of Montgomery Securities advised a
representative of Goldman Sachs, financial advisor to Parent, that the Special
Committee did not view $7.25 per Share to be an appropriate starting point for
negotiations in light of the $8.00 per Share paid by Parent in November 1996
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pursuant to the Stock Purchase Agreement. Also in early February, legal counsel
to Parent, the Company and the Special Committee discussed certain legal issues
in connection with Parent's proposal.
On February 14, 1997, a Montgomery Securities representative advised a
Goldman Sachs representative that the Special Committee believed a transaction
could be achieved at a price in the range of $8.50 per Share. He stated that it
was the Special Committee's view that a price at or in excess of $8.00 per Share
would require stockholder approval by means of a tender of a majority of the
Publicly Held Shares, and that a transaction at a price below $8.00 would
require stockholder approval by means of a tender of a supermajority of the
Publicly Held Shares not held by Parent.
In the week of February 24, 1997, a representative of Goldman Sachs advised
a representative of Montgomery Securities that Parent did not wish to subject a
transaction to a Company stockholder vote which might delay consummation. Parent
representative stated that Parent was considering raising its bid to a price
below $8.00 per Share, but that the price it would be willing to pay in a
transaction with a Company stockholder vote would be less than in a transaction
that would not be subject to such contingency and potential delay.
On February 26 and 27, Mr. Salquist, Chairman of the Special Committee,
contacted Robert B. Shapiro, Chairman of the Board and Chief Executive Officer
of Parent, and Howard D. Palefsky, another member of the Special Committee,
contacted John B. Robson, one of Parent's designees on the Company Board, to
discuss Parent's willingness to increase the price of its proposal.
On March 2, a representative of Goldman Sachs advised a representative of
Montgomery Securities that Parent might consider increasing the price of its
proposal to $8.00 per Share subject to at least a majority of the Publicly Held
Shares being tendered. The representative of Goldman Sachs requested a prompt
response, but indicated that the proposal would remain open for a reasonable
period in order to give the Special Committee adequate time in which to properly
evaluate it.
On March 6, the Special Committee met to consider Parent's proposal and
subsequently advised Parent that it would be prepared to recommend a transaction
at $8.00 per Share subject to agreement as to the terms and conditions of a
definitive agreement. At this meeting, representatives of Montgomery Securities
indicated on a preliminary basis that they would be prepared to deliver a
fairness opinion with respect to the $8.00 per Share proposal.
On March 11, legal counsel for Parent delivered a draft merger agreement
and a proposed amendment to the Restated Stockholders Agreement to legal counsel
for the Special Committee, and over the following two weeks, the parties and
their representatives negotiated the terms of the Merger Agreement and the
Amendment. During this time, legal counsel for Parent, the Company and the
Special Committee also entered into discussions with legal counsel for the
Company shareholder plaintiffs in the putative class action litigation with
respect to a possible settlement.
Over the next two weeks, the members of the Special Committee had numerous
conversations with its legal counsel and financial advisor regarding the
progress that was being made on the negotiation of the terms of the definitive
agreements as well as with respect to the settlement of the shareholder
litigation. At the conclusion of this process, the Special Committee reconfirmed
its decision to recommend the transaction to the Company Board.
On March 31, 1997, the Calgene Board held a telephonic meeting to discuss
the Offer and the Merger and to receive any recommendation that the Special
Committee would be prepared to make to the Company Board. At this meeting,
Montgomery Securities summarized and updated the presentation it had made to the
Special Committee at its March 6, 1997 meeting and rendered its opinion, which
it subsequently confirmed in writing that the consideration to be received by
the Public Stockholders pursuant to the Offer and the Merger is fair to such
stockholders from a financial point of view, as of March 31, 1997. Following
additional oral presentations by representatives of Venture Law Group, counsel
to the Special Committee, regarding the terms and conditions of the Merger
Agreement, the Special Committee informed the Company Board that it had
unanimously determined that each of the Offer and the Merger was fair as of
March 31, 1997 to, and in the best interests of, the Public Stockholders, and
that the Special Committee unanamiously recommends that
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the Company Board approve the Offer, the Merger, the Merger Agreement and the
Amendment to the Restated Stockholders Agreement (necessary to permit the
proposed transactions to proceed). Following a discussion of the Special
Committee's recommendation and a further discussion of the Offer, the Merger,
the Merger Agreement and the Amendment to the Restated Stockholders Agreement,
the Company Board, by unanimous vote of all directors present and voting (with
Messrs. Verfaillie, Fortune, Fraley and Hogan abstaining), (a) determined that
each of the Offer and the Merger is fair to and in the best interests of the
Public Stockholders, (b) approved the Offer and the Merger, (c) approved and
adopted the Merger Agreement, the execution of such agreement and the
transactions contemplated thereby and (d) recommended that the Public
Stockholders accept the Offer and tender their Shares pursuant thereto. The
members of the Board present and voting (with Messrs. Verfaillie, Fortune,
Fraley and Hogan abstaining) also voted unanimously to approve and adopt the
Amendment to the Restated Stockholders Agreement.
The Merger Agreement and related agreements were executed as of March 31,
1997, and Parent and the Company issued a joint press release announcing such
execution and delivery on April 1, 1997 (a copy of which is attached hereto as
Exhibit 15).
On April 7, 1997, the Purchaser commenced the Offer.
(2) REASONS FOR THE RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE CALGENE
BOARD.
In reaching its determinations referred to immediately above, the Special
Committee considered the following factors, each of which, in the view of the
Special Committee, supported such determinations:
(i) the historical market prices and recent trading activity of the
Shares, including the fact that the $8.00 per Share cash consideration to
be paid to the Public Stockholders in the Offer and Merger represents a
premium of approximately 45% over the reported cash price on the last full
trading day preceding the public announcement of the initial offer by
Parent and Purchaser and a premium of approximately 60% over the average
closing price for both the one-week and one-month period preceding such
date;
(ii) the fact that the standstill provision presently provided for in
the Restated Stockholders Agreement that requires the disinterested
directors of the Company to approve the acquisition of any additional
Shares by Monsanto will be in effect only until September 30, 1998, after
which time Monsanto would have the power under applicable Delaware law to
unilaterally cause a merger between itself (or one of its subsidiaries) and
the Company to be effected without the consent of the disinterested
directors of the Company or the remaining Public Stockholders;
(iii) the history of the negotiations between the Special Committee
and their representatives and Parent and its representatives, including the
facts that (a) the negotiations resulted in an increase in the price at
which Parent and Purchaser were prepared to acquire the Company's
outstanding shares from $7.25 to $8.00 per Share, and (b) the Special
Committee's belief that Parent and Purchaser would not further increase the
Offer and that $8.00 per Share was the highest price which could be
obtained from Parent and Purchaser;
(iv) the opinion of Montgomery Securities that the consideration to be
offered to the Public Stockholders in the Offer and the Merger is fair to
such stockholders (other than Parent or Purchaser) from a financial point
of view, as of March 31, 1997, and the report and analysis presented by
Montgomery Securities in connection therewith;
(v) the Majority-of-the-Minority Condition's requirement that the
Offer not be consummated unless at least a majority of those shares not
held by Parent or Purchaser are validly tendered pursuant to the Offer and
not withdrawn;
(vi) the availability of dissenters' rights for the Public
Stockholders under Delaware law in connection with the Merger;
(vii) the possibility that, because of a decline in the Company's
business, the trading price of the Shares or the stock market in general,
the consideration that the Public Stockholders would obtain in a
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future transaction might be less advantageous than the consideration they
would receive pursuant to the Offer and the Merger;
(viii) the risk that the Company would suffer the loss of key
employees and other adverse consequences if the Company had not accepted
Parent's offer to engage in the transactions contemplated by the Merger
Agreement and had pursued other alternatives;
(ix) the likelihood that the proposed acquisition would be
consummated, based in part on the financial condition of Parent and the
limited scope of conditions (other than the Majority-of-the-Minority
Condition) to be satisfied prior to the consummation of the Merger as
provided in the Merger Agreement;
(x) the terms and conditions of the Merger Agreement, including the
absence of a financing condition; and
(xi) the structure of the transaction which is designed, among other
things, to result in receipt by the Public Stockholders at the earliest
practicable time of the consideration to be paid in the Offer and the fact
that the per Share consideration to be paid in the Offer and the Merger is
the same.
In reaching its determinations to recommend the Offer and the Merger to the
Public Stockholders, the Calgene Board considered the recommendation of the
Special Committee and the factors set forth immediately above, each of which, in
the view of the Calgene Board, supported such determinations.
The members of the Calgene Board, including the Special Committee,
evaluated the various factors listed above in light of their knowledge of the
business, financial condition and prospects of the Company, and based upon the
advice of the Company's financial and legal advisors. In light of the number and
variety of factors that the Calgene Board and the Special Committee considered
in connection with their evaluation of the Offer and the Merger, neither the
Calgene Board nor the Special Committee found it practicable to assign relative
weights to the foregoing factors and, accordingly, neither the Calgene Board nor
the Special Committee did so. In addition to the factors listed above, the
Calgene Board and the Special Committee each considered the fact that
consummation of the Offer and the Merger would eliminate the opportunity of the
Public Stockholders to participate in any potential future growth in the value
of the Company, but determined that (i) this loss of opportunity was reflected
in part by the price of $8.00 per Share to be paid in the Offer and the Merger,
and (ii) there was uncertainty as to the Company's long-term prospects.
The Calgene Board, including the Special Committee, believes that the Offer
and the Merger are procedurally fair because, among other things: (i) the
Special Committee consisted of directors who are neither designees of Parent nor
officers of the Company who were appointed to represent the interests of the
Public Stockholders; (ii) the Special Committee retained and was advised by
independent legal counsel; (iii) the members of the Special Committee retained
Montgomery Securities as their independent financial advisor to assist them in
evaluating the Offer and the Merger; (iv) the existence of the Majority-of-the-
Minority Condition to the Offer; (v) the deliberations pursuant to which the
Special Committee evaluated the Offer and the Merger and alternatives thereto;
and (vi) the fact that the $8.00 per Share price and the other terms and
conditions of the Merger Agreement resulted from active arm's-length bargaining
between representatives of the Special Committee, on the one hand, and Parent,
on the other.
The Calgene Board and the Special Committee recognized that the Merger is
not structured to require the approval of a majority of the stockholders of the
Company other than Purchaser, and that if the Offer is consummated, Parent and
Purchaser will have sufficient voting power to approve the Merger without the
affirmative vote of any other stockholder of the Company. Consummation of the
Offer, however, is conditioned upon, among other things, the
Majority-of-the-Minority Condition, which may not be waived without consent of
the Special Committee. Pursuant to the Merger Agreement, the purchase by
Purchaser of all Shares validly tendered in the Offer and not withdrawn is a
condition to the Merger.
(3) OPINION OF MONTGOMERY SECURITIES.
Pursuant to an engagement letter dated February 26, 1997 (the "Engagement
Letter"), the Special Committee retained Montgomery Securities as its financial
advisor in connection with its consideration of a
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possible acquisition by Parent of the Publicly Held Shares. Montgomery
Securities 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. Montgomery Securities also has performed certain investment banking
services for the Company, including acting as advisor to the Company in
connection with the acquisition of 49.9% of the Shares by Parent in March 1996
and acting as co-manager of an underwritten public offering of Shares in January
1993 and as lead manager of an underwritten public offering of Shares in October
1994. The Special Committee selected Montgomery Securities as its financial
advisor on the basis of its experience and expertise in transactions similar to
the Offer and the Merger, its reputation in the biotechnology and investment
communities and its knowledge of and familiarity with the Company resulting from
the investment banking services it has previously provided to the Company.
Montgomery Securities was not retained to, nor did it, advise the Company or the
Special Committee with respect to alternatives to the Offer and the Merger or
the Company's underlying decision to proceed with or effect the Offer and the
Merger. Furthermore, Montgomery Securities was not requested to, nor did it,
solicit or assist the Company in soliciting indications of interest for all or
part of the Company.
On March 31, 1997, Montgomery Securities rendered its oral opinion to the
Special Committee and the Company Board, subsequently confirmed in writing as of
such date, that the consideration to be received by the Public Stockholders
pursuant to the Offer and the Merger was fair to such stockholders from a
financial point of view, as of the date thereof. No limitations were imposed by
the Special Committee on the scope of Montgomery Securities' investigation or
the procedures to be followed by Montgomery Securities in rendering its opinion.
Montgomery Securities did not determine the form or amount of consideration to
be offered to the Public Stockholders in the Offer or the Merger, which was
agreed to as a result of negotiations between the Special Committee and its
financial and legal advisors (including Montgomery Securities) and Parent and
its financial and legal advisors.
THE FULL TEXT OF MONTGOMERY SECURITIES' WRITTEN OPINION TO THE SPECIAL
COMMITTEE AND THE COMPANY BOARD IS ATTACHED HERETO AS EXHIBIT 16 AND IS
INCORPORATED HEREIN BY REFERENCE IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF
MONTGOMERY SECURITIES' OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION. MONTGOMERY SECURITIES' OPINION IS DIRECTED ONLY TO
THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE PUBLIC STOCKHOLDERS FROM
A FINANCIAL POINT OF VIEW, AND HAS BEEN PROVIDED FOR THE USE OF THE SPECIAL
COMMITTEE AND THE COMPANY BOARD IN THEIR EVALUATION OF THE OFFER AND THE MERGER,
AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE OFFER AND THE MERGER. MONTGOMERY
SECURITIES' OPINION IS ADDRESSED TO THE SPECIAL COMMITTEE AND THE COMPANY BOARD
ONLY AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER
TO ACCEPT THE CONSIDERATION BEING OFFERED TO SUCH STOCKHOLDER PURSUANT TO THE
OFFER OR AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER, IF
ANY VOTE IS REQUIRED.
In connection with its opinion, Montgomery Securities, among other things
(i) reviewed certain publicly available financial and other data with respect to
the Company, including the financial statements for recent years and interim
periods to September 30, 1996 and certain other relevant financial and operating
data relating to the Company made available to Montgomery Securities from
published sources and from the internal records of the Company; (ii) reviewed
the financial terms and conditions of the Merger Agreement in the form provided
to Montgomery Securities by the Company; (iii) reviewed certain publicly
available information concerning the trading of, and the trading market for, the
Shares; (iv) compared the Company from a financial point of view with certain
other companies which Montgomery Securities deemed to be relevant; (v)
considered the financial terms, to the extent publicly available, of selected
recent business combinations which Montgomery Securities deemed to be
comparable, in whole or in part, to the Offer and the Merger; (vi) reviewed and
discussed with representatives of the management of the Company certain
information of a business and financial nature furnished to Montgomery
Securities by the Company, including financial forecasts and related assumptions
of the Company; (vii) made inquiries regarding and discussed the Merger
Agreement and other matters related thereto with the Company's counsel; and
(viii) performed such other analyses and examinations as Montgomery Securities
deemed appropriate.
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<PAGE> 17
In connection with its review, Montgomery Securities did not assume any
obligation independently to verify the foregoing information and relied on its
being accurate and complete in all material respects. With respect to the
financial forecasts for the Company provided to Montgomery Securities by
management, as a result of discussions among Montgomery Securities,
representatives of management of the Company and the Special Committee, such
forecasts were adjusted to reflect more conservative assumptions regarding the
development and market penetration of certain products. Upon the advice and with
the consent of management of the Company and the Special Committee, Montgomery
Securities assumed for purposes of its opinion that the unadjusted forecasts
were reasonably prepared on bases reflecting the best available estimates and
judgments of the Company's management at the time of preparation as to the
future financial performance of the Company and that such forecasts, as
adjusted, provide a reasonable basis upon which Montgomery Securities could form
its opinion. Montgomery Securities also assumed that there were no material
changes in the Company's assets, financial condition, results of operations,
business or prospects since the date of its last financial statements available
to it. Although Montgomery Securities was aware of the asset write-downs and
restructuring expenses reflected in the Company's announcement of its financial
results for the quarter ended December 31, 1996, Montgomery Securities did not
revise its financial analyses to take into account developments (other than
Parent's $50 million investment in the Company) after September 30, 1996.
Montgomery Securities relied on advice of counsel to the Special Committee and
counsel and independent accountants to the Company as to all legal and financial
reporting matters with respect to the Special Committee, the Company, the
Agreement, the Offer and the Merger. Montgomery Securities assumed that the
Offer and the Merger will be consummated in a manner that complies in all
respects with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and all other applicable federal and state statutes, rules and
regulations. In addition, Montgomery Securities did not assume responsibility
for making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of the Company, nor was
Montgomery Securities furnished with any such appraisals. The Company informed
Montgomery Securities, and Montgomery Securities assumed, that the Merger will
be recorded as a purchase under generally accepted accounting principles.
Finally, Montgomery Securities' opinion was based on economic, monetary and
market and other conditions as in effect on, and the information made available
to Montgomery Securities as of March 31, 1997. Accordingly, although subsequent
developments may affect its opinion, Montgomery Securities has not assumed any
obligation to update, revise or affirm its opinion.
The following is a summary of the report presented by Montgomery Securities
on March 31, 1997 in connection with its opinion. For the purposes of all the
analyses described below, Montgomery Securities made pro forma adjustments to
reflect Parent's $50 million investment in the Company at $8.00 per Share in
November 1996 and assumed 66.71 million outstanding Shares.
Discounted Cash Flow Analysis. Montgomery Securities performed a
discounted cash flow analysis on certain cash flow forecasts that were adjusted
from the initial financial forecasts provided to Montgomery Securities by the
management of the Company. As described above, these adjustments were made as a
result of discussions among Montgomery Securities, representatives of management
of the Company and the Special Committee and reflect more conservative
assumptions regarding the development and market penetration of certain
products.
In performing this analysis, Montgomery Securities discounted to present
value the projected stream of after-tax cash flows and the terminal year equity
value of each of the Company's business segments. The discounted cash flow
analysis of the Company's projections was based upon, among other things, a
range of terminal multiples of projected fiscal year earnings before interest
and taxes ("EBIT") of 11.0x to 20.0x. Montgomery Securities applied multiple
ranges to each business segment in accordance with Montgomery Securities'
assessment of the growth and operational prospects for each segment. In
addition, Montgomery Securities used discount rates ranging from 12.5% to 45.0%,
and assigned discount rates to each business segment in accordance with
Montgomery Securities' assessment of the development stage and risks associated
with the successful development of each business segment.
Utilizing these projections and assumptions, Montgomery Securities computed
a range of implied equity values for the Company from $4.81 to $7.62 per Share.
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<PAGE> 18
Comparable Transaction Analysis. Montgomery Securities compared the
financial terms of certain recent merger or alliance transactions which
Montgomery Securities considered relevant. Montgomery Securities divided the
comparable transactions (listed below by acquiror/target) into three categories:
(a) cash biotechnology control combination transactions, where the acquiror
previously had a substantial equity ownership interest in the target, including
Novartis, Inc./SyStemix, Inc., American Home Products Corp./Genetics Institute,
Inc., and Rhone-Poulenc Rorer, Inc./Applied Immune Sciences Inc.; (b) cash
biotechnology purchase transactions, where the acquiror previously had a less
than substantial equity ownership interest in the target, including Amgen,
Inc./Synergen, Inc., Glaxo Wellcome plc/Affymax N.V., Chiron Corp./Viagene, Inc.
and Sandoz AG/Genetic Therapy, Inc.; and (c) cash non-biotechnology minority
acquisition transactions where the acquiror owned less than 90% of the target
prior to the transaction, including Andrews Group Inc./Toy Biz, Inc., Renco
Group, Inc./WCI Steel Inc., Chemed Corp./Roto-Rooter Inc., Equity Holdings
Ltd./Great American Management & Investment, Inc., Societe Commerciale de
Reassurance/SCOR US Corp., Berkshire Hathaway, Inc./GEICO Corp., COBE
Laboratories, Inc./REN Corp.-USA, MCI Communications Corp./Nationwide Cellular
Service, Inc., BIC SA/Bic Corp., McCaw Cellular Communications, Inc./LIN
Broadcasting Corp., Club Mediterranee SA/Club Med Inc., Fleet Financial Group,
Inc./Fleet Mortgage Group, Inc., PacificCorp/Pacific Telecom, Inc., Dole Food
Co./Castle & Cooke Homes, Medco Containment Services/Medical Marketing Group
Inc., W.R. Grace & Co./Grace Energy Corp., BHP Holdings/Hamilton Oil, Academy
Merger Co., Inc./Academy Insurance, Caesar's World, Inc./Caesar New Jersey,
Inc., Paramount Communications, Inc./TVX Broadcast Group, Renault Vehicles
Industrials/Mack Trucks Inc., Kansas City Southern/DST Systems, Inc., and Imetal
SA/ Copperweld Corp.
Montgomery Securities analyzed the price paid per share by the acquiror
(the "Merger/Purchase Price Per Share"). The Merger/Purchase Price Per Share for
each of these transactions was compared to the target stock price one day, one
week, and one month prior to the announcement of the transaction in order to
calculate the premium over such stock price. The average high and low premiums
were as follows: (i) 38.4% to 53.2% for the cash biotechnology control
combination transactions; (ii) 57.2% to 68.9% for the cash biotechnology
purchase transactions; and (iii) 20.2% to 29.4% for cash non-biotechnology
minority acquisition transactions. Montgomery Securities noted that the high and
low average premiums reflected an implied equity value for the Company of (i)
$7.01 to $8.43 per share for the cash biotechnology control combination
transactions; (ii) $8.10 to $8.65 per share for the cash purchase transactions;
and (iii) and $6.24 to $6.61 per share for the cash non-biotechnology minority
acquisition transactions.
Montgomery Securities also analyzed selected bioagricultural acquisition
transactions, including Holden's Seed & Corn States/Parent, Asgrow Agronomics
(Division of Empresas La Moderna)/Parent, Plan Genetic Systems/Hoechst Schering
AgrEvo, Agracetus (Division of W.R. Grace & Co.)/Parent, Dekalb Genetics
Corp./Parent, United AgriSeeds (Division of DowElanco)/Mycogen Corp., Gargiulo
(Division of Parent)/Company, Asgrow Seed Co. (Division of Upjohn)/Empresas La
Moderna, Fresh World (joint venture with DuPont)/DNA Plant Technology Corp.,
Agrigenetics (Division of Lubizol)/Mycogen Corp. and Del Monte Fresh Fruit
Division/Polly Peck International plc. Montgomery Securities calculated an
aggregate value to latest 12 months ("LTM") revenue multiple for each of the
target companies as determined by the price per share paid by the acquiror.
These values were used to compute an average aggregate value to LTM revenue
multiple of 2.6x. Montgomery Securities noted that the application of this
multiple resulted in an implied equity value for the Company of $4.68 per Share.
Because the reasons for and the circumstances surrounding each of the
transactions analyzed were specific to each transaction, and because of the
inherent difference between the businesses, operations and prospects of the
Company and the businesses, operations and prospects of the selected acquired
companies analyzed, Montgomery Securities believed it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis, but
rather also made qualitative judgments concerning differences between the
characteristics of these transactions and the Offer and the Merger that would
affect the acquisition values of the Company and such acquired companies.
Common Stock Price Analysis. Montgomery Securities compared the Company's
common stock price performance from December 30, 1994 to January 28, 1997 and
from March 29, 1996 to January 28, 1997
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<PAGE> 19
against the offer of $8.00 per Share. Montgomery Securities noted that the $8.00
offer per Share was above the closing price for the Shares for all but nine
trading days in the period from December 30, 1994 to January 28, 1997 and was
above the closing price for the Shares for all trading days in the period from
March 29, 1996 to January 28, 1997.
Common Stock Trading Volume Analysis. Montgomery Securities analyzed the
historical daily trading volume of the Shares over various periods. Montgomery
Securities noted that of the Shares traded between January 1, 1995 and January
18, 1997, 7.2% of the Shares traded at or above $8.00 per Share; 20.5% of the
Shares traded between $7.00 and $7.99 per Share, 38.6% of the Shares traded
between $6.00 to $6.99 per Share; 23.6% of the Shares traded between $5.00 and
$5.99 per Share; and the remaining 10.1% of the Shares traded below $5.00 per
Share. Montgomery also noted that of the Shares traded between March 31, 1996
and January 28, 1997, no Shares traded at or above $7.00 per Share; 22.9% of the
Shares traded between $6.00 and $6.99 per Share; 57.4% of the Shares traded
between $5.00 and $5.99 per Share; and 19.7% of the Shares traded below $5.00
per Share.
Comparable Public Company Analysis. Montgomery Securities compared the
historical financial, operating and stock market performances of certain
publicly traded companies that it considered relevant with the historical
financial and operating performance of the Company, based upon publicly
available financial information.
Montgomery Securities examined the aggregate value to LTM revenue multiples
for Dekalb Genetics Corp., Delta & Pine Land Company, Pioneer Hi-Bred
International, Inc. and Mycogen Corp. Based on the aggregate value to LTM
revenue multiples for these companies, Montgomery Securities computed an average
aggregate value to LTM revenue multiple of 3.8x. Montgomery Securities noted
that the application of this multiple resulted in an implied valuation for the
Company of $7.08 per Share.
Montgomery Securities compared the price performance of the Shares from
December 30, 1994 to January 28, 1997 and from March 29, 1996 to January 28,
1997 to an index composed of three agricultural biotechnology companies: Mycogen
Corp., Ecogen, Inc. and DNA Plant Technology, Inc. (the "Agricultural
Biotechnology Index"). Using December 30, 1994 and March 29, 1996 as base
values, on January 28, 1997 the Share prices were 73.3% and 93.7% of their base
values on December 30, 1994 and March 29, 1996, respectively, as compared to the
Agricultural Biotechnology Index whose values were of 176.9% and 123.3% of their
base values on December 30, 1994 and March 29, 1996, respectively.
Montgomery Securities also compared the price performance of the Shares
from December 30, 1994 to January 28, 1997 and from March 29, 1996 to January
28, 1997 to the AMEX Biotechnology Index, comprised of 15 biotechnology
companies listed on the American Stock Exchange. Using December 30, 1994 and
March 29, 1996 as base values, on January 28, 1997 the Share prices were 73.3%
and 95.7% of their base values on December 30, 1994 and March 29, 1995,
respectively, as compared to the AMEX Biotechnology Index whose values were
192.5% and 117.2% of their base values on December 30, 1994 and March 29, 1996,
respectively.
Because of the inherent differences between the business, operations and
prospects of the Company and the businesses, operations and prospects of the
comparable companies considered in this analysis, Montgomery Securities believed
that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis, but rather also made qualitative judgments
concerning differences between the financial and operating characteristics and
prospects of the Company and the comparable companies that would affect the
public trading values of each.
The summary set forth above does not purport to be complete description of
the presentation by Montgomery Securities to the Special Committee or the
analyses performed by Montgomery Securities. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. Montgomery Securities believes that its 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 Special Committee. In addition, Montgomery
Securities may have given various analyses more or less
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<PAGE> 20
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
Securities' view of the actual value of the Company. 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 arriving at
its opinion, Montgomery Securities did not ascribe a specific range of values to
the Company, but rather made its determination as to the fairness, from a
financial point of view, of the consideration received by the Public
Stockholders in the Offer and the Merger on the basis of the financial and
comparative analyses described above.
In performing its analyses, Montgomery Securities made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the Company. The
analyses performed by Montgomery Securities 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 Securities' analysis of the fairness of the transaction
contemplated by the Merger Agreement to the Company's stockholders and were
provided to the Special Committee in connection with the delivery of Montgomery
Securities' 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 Securities used in its analyses various projections of future
performance prepared by the management of the Company. 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.
Pursuant to the Engagement Letter, the Special Committee engaged Montgomery
Securities to act as its financial advisor in connection with a possible
transaction with Parent or an affiliated entity. The Company has agreed to pay
Montgomery Securities a fee equal to 0.85% of the total consideration involved
in the contemplated transactions. Pursuant to the Engagement Letter, the Company
has agreed to pay Montgomery Securities $500,000 upon rendering its opinion to
the Special Committee as to the fairness of the Offer, and will be obligated to
pay Montgomery Securities the remainder of its fee upon the closing of the
Merger. The Company has also agreed to reimburse Montgomery Securities for its
reasonable out-of-pocket expenses. Pursuant to a separate letter agreement, the
Company had agreed to indemnify Montgomery Securities, its affiliates, and their
respective partners, directors, officers, agents, consultants, employees and
controlling persons against certain liabilities, including liabilities under
federal securities laws.
In the ordinary course of business, Montgomery Securities actively trades
equity securities of the Company and Parent 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 Securities also has performed certain
investment banking services for the Company, as described above. Certain
partners of Montgomery Securities also own shares of Parent's common stock.
A copy of Montgomery Securities' report to the Special Committee and the
Company Board dated March 31, 1997 has been filed as an exhibit to the Rule
13e-3 Transaction Statement on Schedule 13E-3 filed with the SEC by Parent, the
Purchaser and the Company and is incorporated herein by reference in its
entirety. Copies of Montgomery Securities' report and opinion are available for
inspection and copying at the principal executive offices of the Company during
regular business hours by any stockholder of the Company, or a stockholder's
representative who has been so designated in writing.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
In connection with the Offer and other matters arising in connection
therewith, Montgomery Securities has been retained as the exclusive financial
advisor to the Special Committee.
Financial Advisor to the Special Committee.
Pursuant to the Engagement Letter, Montgomery Securities agreed to render
financial advisory services to the Special Committee concerning the unsolicited
offer by Parent, including any revised or modified offer to
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acquire some or all the Publicly Held Shares. Pursuant to such engagement,
Montgomery Securities agreed to (i) assist in evaluating the Offer; (ii)
implement the determinations of the Special Committee; (iii) at the Special
Committee' request, negotiate with Parent with respect to the Offer; (iv) if
requested by the Special Committee, render an opinion to the Special Committee
and the Company Board as to the fairness, from a financial point of view, to the
Public Stockholders of the consideration to be offered to such stockholders in
the Offer.
Pursuant to the Engagement Letter, the Company has agreed to pay Montgomery
Securities a fee of $500,000 upon the rendering of its opinion and has agreed to
pay Montgomery Securities an additional advisory fee equal to 0.85% of the total
consideration involved in the completed transactions upon consummation of the
Merger. In addition, the Company agreed to reimburse Montgomery Securities for
reasonable out-of-pocket expenses incurred in connection with the Merger and to
indemnify Montgomery Securities for certain liabilities that may arise out of
its engagement by the Company and the rendering of its opinion.
Montgomery Securities is a nationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Montgomery Securities also has performed certain investment banking
services for the Company, including acting as advisor to the Company in
connection with the acquisition of 49.9% of the Shares by Parent in March 1996
and acting as co-manager of an underwritten public offering of Shares in January
1993 and as lead manager of an underwritten public offering of shares in October
1994. The Special Committee selected Montgomery Securities as its financial
advisor on the basis of its experience and expertise in transactions similar to
the Offer and the Merger, its reputation in the biotechnology and investment
communities and its knowledge of and familiarity with the Company resulting from
the investment banking services it has previously provided to the Company.
Other Persons. Neither the Company, the Special Committee nor any person
acting on behalf of either of them has employed, retained or agreed to
compensate any other person to make solicitations or recommendations to the
Public Stockholders on behalf of the Special Committee or the Company concerning
Purchaser's Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the best knowledge of the Company, no transactions in Shares have
been effected during the past 60 days by the Company or any of its executive
officers, directors or affiliates.
(b) The Company has not been advised by its executive officers, directors
and affiliates who own Publicly Held Shares, either directly or beneficially,
whether they intend to tender such Shares to Purchaser pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as described in Items 3 and 4 above, including as set forth in
the Offer, to the knowledge of the Company no negotiation is being undertaken or
is underway by the Company in response to the Offer which relates to or would
result in (i) any extraordinary transaction, such as a merger or reorganization,
involving the Company or any affiliate or subsidiary of the Company, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company, (iii) a tender offer for or other acquisition of
securities by or of the Company or (iv) any material change in the present
capitalization or dividend policy of the Company.
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(b) Except as described in Items 3 and 4 above, there are no transactions,
board resolutions, agreements in principle, or signed contracts in response to
the Offer which relate to or would result in one or more of the matters referred
to in clauses (i) through (iv) of paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Litigation. Shortly after the January 28, 1997 announcement by Parent that
it proposed to acquire the Publicly Held Shares, several putative class actions
were filed in the Delaware Court of Chancery challenging the fairness of the
proposed transaction to the minority stockholders: Obstfeld v. Salquist, et al.
(Civ. Act. No. 15487 NC), Siegel v. Calgene, Inc., et al. (Civ. Act. No. 15490
NC), Susser v. Kunimoto et al. (Civ. Act. No. 15489 NC), Elstein v. Monsanto
Company, et al. (Civ. Act. No. 15488 NC), Lewis v. Monsanto Company, et al.
(Civ. Act. No. 15511 NC), Glickberg v. Monsanto Company, et al. (Civ. Act. No.
15499 NC), Manson v. Fortune, et al. (Civ. Act. No. 15491 NC), and Settle v.
Monsanto Company, et al. (Civ. Act. No. 15493 NC). These actions have been
consolidated for all purposes under the caption In re Calgene, Inc. Shareholders
Litigation, (Consolidated Civ. Act. No. 15487-NC) (the "Consolidated Action").
In substance, the complaints allege that because of Parent's ownership of
approximately 54.5% of the Company and control of the Calgene Board, no
independent group of Company directors exists and no independent advisor can be
chosen to properly consider Parent's acquisition proposal. The plaintiffs also
claim that the defendants -- Parent, the Company, and several individuals
serving as directors of one or more of those companies -- breached their
fiduciary duties to the Public Stockholders by failing to take adequate steps to
determine the fair value of the Shares or to condition the Offer on acceptance
by holders of a majority of the Publicly Held Shares. The relief sought by the
plaintiffs includes an injunction against the acquisition by Parent; a
declaration that each of the defendants have breached their fiduciary duties;
compensatory and/or rescissory damages plus costs, disbursements and attorneys'
and experts' fees in unspecified amounts.
Following commencement of the Consolidated Action, plaintiffs' counsel
retained a financial expert, obtained relevant documents from the Special
Committee and engaged in discussions with counsel for the Special Committee and
counsel for Parent with regard to resolution of the Consolidated Action.
On March 31, 1997, the parties to the Consolidated Action entered into a
memorandum of understanding reflecting their agreement in principle to settle
the Consolidated Action. To resolve the Consolidated Action, Parent will seek to
acquire the Company pursuant to the Offer and the Merger at the Offer Price of
$8.00 per Share. The consummation of the settlement is subject to a number of
conditions, including the completion by plaintiff of any additional necessary
discovery satisfactory to plaintiffs, the drafting and execution of a definitive
stipulation of settlement, consummation of the Offer and the Merger and final
court approval of the settlement and dismissal of the Consolidated Action, with
prejudice. If such conditions are met, plaintiffs' counsel intends to apply for
court awarded attorneys' fees and disbursements to be paid by Parent in an
amount not to exceed $795,000. Defendants will not oppose such application.
In the event settlement of the Consolidated Action is not consummated and
plaintiffs' counsel continues the Consolidated Action, such litigation could
result in substantial expense to the Company and significant diversion of
efforts of the Company's management team. The Company believes that all of such
lawsuits are without merit, and would vigorously defend such actions. There can
be no assurance, however, that in such event the plaintiffs will not be
successful. The above summary does not purport to be complete and is qualified
in its entirety by reference to the full text of the complaints, the order of
consolidation and the memorandum of understanding, which are attached as
Exhibits 17, 18, 19, 20, 21, 22, 23, 24, 25 and 26 hereto, respectively, and
which are incorporated herein by reference in their entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1 Form of Offer to Purchase, dated April 7, 1997.
Exhibit 2 Form of Letter of Transmittal.
Exhibit 3 Agreement and Plan of Merger, dated as of March 31, 1997, among Monsanto
Company, Monsanto Acquisition Company and Calgene, Inc.
</TABLE>
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<TABLE>
<S> <C>
Exhibit 4 Amendment to the Amended and Restated Stockholders Agreement, dated as of March
31, 1997, between Calgene, Inc. and Monsanto Company
Exhibit 5 Proxy Statement of Calgene, Inc. dated as of October 10, 1996 relating to the
Company's 1996 Annual Meeting of Stockholders.
Exhibit 6 Agreement and Plan of Reorganization between Calgene, Inc. and Monsanto Company
dated as of October 13, 1995. (A)
Exhibit 7 Stock Purchase Agreement between the Calgene, Inc. and Monsanto Company dated
as of September 27, 1996. (B)
Exhibit 8 Amended and Restated Stockholders Agreement between Calgene, Inc. and Monsanto
Company dated as of November 12, 1996. (B)
Exhibit 9 Calgene Credit Facility Agreement between Calgene, Inc. and Monsanto Company
dated as of March 31, 1996. (A)
Exhibit 10 Gargiulo Credit Facility Agreement between Calgene, Inc. and Monsanto Company
dated as of March 31, 1996. (A)
Exhibit 11 Letter to Stockholders of Calgene, Inc. dated April 7, 1997.*
Exhibit 12 Change of Control Employment Agreement between Roger Salquist and Calgene,
Inc., dated as of July 19, 1995. (A)
Exhibit 13 Change of Control Employment Agreement between Michael Motroni and Calgene,
Inc., dated as of July 19, 1995. (A)
Exhibit 14 Restated Certificate of Incorporation of Calgene, Inc. (B)
Exhibit 15 Text of Joint Press Release issued by Calgene, Inc. and Monsanto Company dated
April 1, 1997.
Exhibit 16 Opinion of Montgomery Securities, dated March 31, 1997.*
Exhibit 17 Complaint filed January 29, 1997, in Obstfeld v. Salquist, et al.
Exhibit 18 Complaint filed January 29, 1997, in Siegel v. Calgene, Inc., et al.
Exhibit 19 Complaint filed January 29, 1997, in Susser v. Kunimoto, et al.
Exhibit 20 Complaint filed January 29, 1997, in Elstein v. Monsanto Company, et al.
Exhibit 21 Complaint filed January 29, 1997, in Manson v. Fortune, et al.
Exhibit 22 Complaint filed January 30, 1997, in Settle v. Monsanto Company, et al.
Exhibit 23 Complaint filed January 31, 1997, in Glickberg v. Monsanto Company, et al.
Exhibit 24 Complaint filed February 5, 1997, in Lewis v. Monsanto Company, et al.
Exhibit 25 Order of Consolidation, dated March 10, 1997.
Exhibit 26 Memorandum of Understanding, dated March 31, 1997.
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to stockholders.
(A) Incorporated by Reference to the Company's Registration Statement on Form
S-4 dated February 6, 1996.
(B) Incorporated by reference to the Company's Form 10-K for the six-month
period ended December 31, 1996, filed on March 31, 1997.
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<PAGE> 24
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
By: /s/ LLOYD M. KUNIMOTO
------------------------------------
Lloyd M. Kunimoto
President and Acting Chief Executive
Officer
Dated: April 7, 1997
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<PAGE> 25
SCHEDULE I
INFORMATION WITH RESPECT TO THE INTERESTS
OF CERTAIN PERSONS IN THE OFFER AND MERGER
In considering the recommendations of the Calgene Board and the Special
Committee set forth in Item 4(a) of the Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") of which this Schedule I is a part, Public
Stockholders should be aware that certain members of the Calgene Board and the
Special Committee have interests in the Merger and the Offer which are described
below and which may present them with certain conflicts of interest.
SPECIAL COMMITTEE. The Company has agreed to pay the fees and expenses of
the Special Committee's counsel and financial advisor. In addition, in
consideration for their services in connection with the Offer and the Merger,
the Company has agreed to pay $25,000 to certain of the members of the Special
Committee (Allen J. Vangelos and Howard D. Palefsky) and $35,000 to the Chairman
of the Special Committee (Roger H. Salquist).
INTERESTS OF EXECUTIVE OFFICERS, DIRECTORS AND AFFILIATES WITH RESPECT TO
SHARES CURRENTLY HELD AND OPTIONS. In the Offer, the Public Stockholders,
including certain directors and employees of the Company, will be entitled to
receive $8.00 for each Share currently held which is tendered in the Offer and
accepted for payment in accordance with its terms. Pursuant to the Merger
Agreement, the directors and employees of the Company holding Options may
surrender such Options for cancellation and receive in exchange therefor cash
payments as described under "THE MERGER" in Item 3(b)(2) of the Schedule 14D-9.
Assuming all such Shares are tendered in the Offer and all such Options are
surrendered for cancellation prior to the Effective Time, then the directors and
executive officers of the Company will be entitled to receive, as contemplated
by the Merger Agreement, based upon their holdings as of April 1, 1997, cash
payments in the manner set forth in the table below:
SHARE AND OPTION AMOUNTS WITH RESPECT
TO THE COMPANY'S DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES
<TABLE>
<CAPTION>
OPTIONS
$ AMOUNT CONVERTED $ AMOUNT
OWNED AT OFFER PRICE TO AT OFFER PRICE
NAME SHARES FOR SHARES CASH(1) FOR OPTIONS
- -------------------------------------------- ---------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
Andrew M. Baum 8,701 $ 69,608 100,000 $ 135,625
Patrick J. Fortune(2) 0 0 0 0
Robert T. Fraley(2) 0 0 0 0
Jeffrey D. Gargiulo 0 0 100,000 212,500
William Higgins 0 0 75,000 99,990
Michael R. Hogan(2) 0 0 0 0
Thomas F. Hughes 2,074 16,592 100,000 144,931
Lloyd M. Kunimoto 6,897 55,176 95,000 141,250
Christian Leleu 10,000 80,000 100,000 256,250
Michael J. Motroni 0 0 75,000 86,875
Howard D. Palefsky 0 0 16,000 35,000
John Robson 15,000 120,000 20,000 50,000
Roger H. Salquist 23,578 188,624 294,762 376,846
Richard Stonard 0 0 100,000 285,900
Allen J. Vangelos 600 4,800 16,000 35,000
Hendrick A. Verfaillie(2) 0 0 0 0
Travelers Group Inc.(3) 4,076,654 32,613,232 0 0
</TABLE>
- ---------------
(1) Excludes Options with exercise prices of $8.00 or greater per Share.
24
<PAGE> 26
(2) Excludes 36,396,114 shares of Common Stock beneficially held by Parent of
which such person may be considered an affiliate. Such person disclaims
beneficial ownership of any Shares held by Parent or its affiliates.
(3) Based on an Information Statement Pursuant to Rules 13d-1 and 13d-2 on
Schedule 13G filed by Travelers Group Inc. and Smith Barney Holdings Inc.
with the SEC on January 22, 1997 with respect to Shares beneficially owned
as of December 31, 1996.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS.
Messrs. Salquist and Motroni 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. For purposes of such agreements, a Change of Control included the closing
of the transaction on March 31, 1996 pursuant to which Monsanto acquired a 49.9%
equity interest in Calgene. Each of Messrs. Salquist's and Motroni's Change of
Control Agreements are attached hereto as Exhibits 12 and 13, respectively, and
are incorporated herein by reference in their entirety.
In connection with his resignation in August 1996, Mr. Salquist and Calgene
entered into an amendment to his Change of Control Employment Agreement pursuant
to which Mr. Salquist agreed that payments required to be made to him under such
agreement would be paid over a 13-month period rather than in a lump sum. The
amended agreement provided for the payment of $315,000 upon Mr. Salquist's
resignation and monthly payments of $25,000 during a 12 month consulting period
and an additional payment of $290,000 at the end of the 12 month period.
On May 31, 1996, Mr. Motroni and Calgene entered into an amendment to his
Change of Control Employment Agreement pursuant to which Mr. Motroni agreed to
remain in the employ of Calgene until the earlier of (i) May 31, 1997 or (ii)
the occurrence, after May 31, 1996, of any event that constitutes Good Reason
(as defined) in consideration of Calgene's payment to Mr. Motroni of $100,000.
In addition, the amended agreement provides for the payment to Mr. Motroni of
$335,000 upon the earliest of (i) the cessation of his employment for any reason
after May 31, 1997, (ii) the termination of his employment without Cause (as
defined) or by reason of death, or (iii) his resignation as a result of the
occurrence of any event that constitutes Good Reason.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Company's Restated
Certificate of Incorporation contains certain provisions permitted under the
General Corporation Law of Delaware relating to the liability of directors. The
provisions eliminate a director's liability for monetary damages for a breach of
fiduciary duty, except in certain circumstances involving wrongful acts, such as
the breach of director's duty of loyalty or acts or omissions which involve
intentional provisions to indemnify the Company's directors and officers to the
fullest extent permitted by the General Corporation Law of Delaware. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors. The foregoing description
is qualified in its entirety by reference to Calgene's Restated Certificate of
Incorporation, a copy of which is filed as Exhibit 14 to the Schedule 14D-9 and
is hereby incorporated herein by reference.
Calgene has entered into agreements with certain of its directors and
officers providing for indemnification to the full extent permitted by Delaware
law.
See also the discussion in Item 3(b)(2) of the Schedule 14D-9 under "The
Merger Agreement" for information concerning certain provisions relating to
these matters contained in the Merger Agreement.
Severance Arrangements. In connection with the Offer and the Merger,
Parent has agreed to make the following provisions for severance payments to be
made to certain eligible employees of the Company (including certain senior
level employees of the Company, but excluding the President and Acting Chief
Executive Officer of the Company, Lloyd M. Kunimoto) whose separation from the
Company results from
25
<PAGE> 27
the restructuring, consolidation and/or integration of the operations of the
Company with or into those of Parent (each such eligible employee, a "Covered
Person"). Each Covered Person who is currently a Vice President of the Company
shall receive (i) six months of base salary if such Covered Person has up to
five years of service or (ii) 12 months of base salary if such Covered Person
has more than five years of service.
With respect to Mr. Kunimoto, Parent has agreed to make the following
severance payments in the event of a separation occurring on or before December
31, 1997: (i) 24 months of base salary if Mr. Kunimoto is not offered a position
with the Surviving Corporation and (ii) 12 months of base salary if Mr. Kunimoto
is offered a position but subsequently elects to separate from the Surviving
Corporation; provided, however, that in either case no severance payments shall
result in the event the President is terminated for cause.
In all cases, severance payments shall be made by the Company, in the case
of separations occurring prior to the consummation of the Merger, and by Parent,
in the case of separations occurring thereafter until December 31, 1997.
Furthermore, in the case of all Covered Persons, the payment of severance as set
forth above is conditioned on each such Covered Person executing a release of
all claims against the Company and Parent, among others, and the failure to
execute such a release will result in severance payments of one-quarter of one
month's base salary for each year of service with the Company or Parent plus
one-quarter of one month's base salary in lieu of notice of termination.
26
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ----------- -------------------------------------------------------------------------------
<S> <C>
Exhibit 1 Form of Offer to Purchase, dated April 7, 1997.
Exhibit 2 Form of Letter of Transmittal.
Exhibit 3 Agreement and Plan of Merger, dated as of March 31, 1997, among Monsanto
Company, Monsanto Acquisition Company and Calgene, Inc.
Exhibit 4 Amendment to the Amended and Restated Stockholders Agreement, dated as of March
31, 1997, between Calgene, Inc. and Monsanto Company
Exhibit 5 Proxy Statement of Calgene, Inc. dated as of October 10, 1996 relating to the
Company's 1996 Annual Meeting of Stockholders.
Exhibit 6 Agreement and Plan of Reorganization between Calgene, Inc. and Monsanto Company
dated as of October 13, 1995. (A)
Exhibit 7 Stock Purchase Agreement between the Calgene, Inc. and Monsanto Company dated
as of September 27, 1996. (B)
Exhibit 8 Amended and Restated Stockholders Agreement between Calgene, Inc. and Monsanto
Company dated as of November 12, 1996. (B)
Exhibit 9 Calgene Credit Facility Agreement between Calgene, Inc. and Monsanto Company
dated as of March 31, 1996. (A)
Exhibit 10 Gargiulo Credit Facility Agreement between Calgene, Inc. and Monsanto Company
dated as of March 31, 1996. (A)
Exhibit 11 Letter to Stockholders of Calgene, Inc. dated April 7, 1997.*
Exhibit 12 Change of Control Employment Agreement between Roger Salquist and Calgene,
Inc., dated as of July 19, 1995. (A)
Exhibit 13 Change of Control Employment Agreement between Michael Motroni and Calgene,
Inc., dated as of July 19, 1995. (A)
Exhibit 14 Restated Certificate of Incorporation of Calgene, Inc. (B)
Exhibit 15 Text of Joint Press Release issued by Calgene, Inc. and Monsanto Company dated
April 1, 1997.
Exhibit 16 Opinion of Montgomery Securities, dated March 31, 1997.*
Exhibit 17 Complaint filed January 29, 1997, in Obstfeld v. Salquist, et al.
Exhibit 18 Complaint filed January 29, 1997, in Siegel v. Calgene, Inc., et al.
Exhibit 19 Complaint filed January 29, 1997, in Susser v. Kunimoto, et al.
Exhibit 20 Complaint filed January 29, 1997, in Elstein v. Monsanto Company, et al.
Exhibit 21 Complaint filed January 29, 1997, in Manson v. Fortune, et al.
Exhibit 22 Complaint filed January 30, 1997, in Settle v. Monsanto Company, et al.
Exhibit 23 Complaint filed January 31, 1997, in Glickberg v. Monsanto Company, et al.
Exhibit 24 Complaint filed February 5, 1997, in Lewis v. Monsanto Company, et al.
Exhibit 25 Order of Consolidation, dated March 10, 1997.
Exhibit 26 Memorandum of Understanding, dated March 31, 1997.
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to stockholders.
(A) Incorporated by Reference to the Company's Registration Statement on Form
S-4 dated February 6, 1996.
(B) Incorporated by reference to the Company's Form 10-K for the period ended
December 31, 1996, filed on March 31, 1997.
27
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CALGENE, INC.
AT
$8.00 NET PER SHARE
BY
MONSANTO ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
MONSANTO COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MAY 2, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER (I) NOT LESS
THAN A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE
$.001 PER SHARE (THE "SHARES"), OF CALGENE, INC. (THE "COMPANY") OTHER THAN
SHARES OWNED BY MONSANTO COMPANY ("PARENT") (THE "MAJORITY-OF-THE-MINORITY
CONDITION") AND (II) AT LEAST THE NUMBER OF SHARES THAT WHEN ADDED TO THE SHARES
OWNED BY PARENT SHALL CONSTITUTE 90% OF THE SHARES THEN OUTSTANDING ON A FULLY
DILUTED BASIS (AS DEFINED HEREIN) (THE "NINETY PERCENT CONDITION"). THE
MAJORITY-OF-THE-MINORITY CONDITION MAY NOT BE WAIVED WITHOUT THE CONSENT OF A
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY. PURCHASER HAS AGREED
TO WAIVE THE NINETY PERCENT CONDITION UNDER CERTAIN CIRCUMSTANCES DESCRIBED
HEREIN. SEE THE INTRODUCTION AND "THE OFFER -- CERTAIN CONDITIONS OF THE OFFER".
------------------------
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF ALL DIRECTORS
PRESENT AND VOTING (WITH ALL DIRECTORS WHO ARE EMPLOYEES OF PARENT ABSTAINING),
BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF A
SPECIAL COMMITTEE OF THE DIRECTORS OF THE COMPANY WHO ARE NEITHER DESIGNEES OF
PARENT NOR OFFICERS OF THE COMPANY, HAS DETERMINED THAT EACH OF THE OFFER AND
THE MERGER (AS DEFINED HEREIN) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY (OTHER THAN PARENT AND PURCHASER), AND RECOMMENDS
THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER. SEE "SPECIAL FACTORS -- RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE
COMPANY BOARD; FAIRNESS OF THE OFFER AND THE MERGER".
------------------------
IMPORTANT
Stockholders who desire to tender all or any portion of their Shares should
either (i) complete and sign the Letter of Transmittal (or facsimile thereof)
that accompanies this Offer to Purchase in accordance with the instructions in
such Letter of Transmittal, have their signature thereon guaranteed if required
by Instruction 1 to such Letter of Transmittal, and mail or deliver the Letter
of Transmittal (or such facsimile) together with the certificates ("Share
Certificates") representing the tendered Shares and any other required documents
to The First National Bank of Boston (the "Depositary"), or tender their Shares
pursuant to the procedures for book-entry transfer set forth under "THE
OFFER -- Procedure for Accepting the Offer and Tendering Shares" or (ii) request
their broker, dealer, bank, trust company or other nominee to effect the
transaction for them. Stockholders having Shares registered in the name of a
broker, dealer, bank, trust company or other nominee must contact such broker,
dealer, bank, trust company or other nominee if they desire to tender such
Shares.
Stockholders who desire to tender their Shares and whose Share
Certificate(s) are not immediately available, or who cannot comply in a timely
manner with the procedures for book-entry transfer, or who cannot deliver all
required documents to the Depositary prior to the expiration of the Offer, may
tender such Shares by following the procedures for guaranteed delivery set forth
under "THE OFFER -- Procedure for Accepting the Offer and Tendering Shares".
Questions and requests for assistance may be directed to Georgeson & Company
Inc. (the "Information Agent") or Goldman, Sachs & Co. (the "Dealer Manager") at
their respective addresses and telephone numbers set forth on the back cover of
this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter
of Transmittal and other related materials may be obtained from the Information
Agent or the Dealer Manager.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
------------------------
The Dealer Manager for the Offer is:
GOLDMAN, SACHS & CO.
The date of this Offer to Purchase is April 7, 1997.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.......................................................................... 1
SPECIAL FACTORS....................................................................... 4
1. Background of the Offer and the Merger.......................................... 4
2. Recommendations of the Special Committee and the Company Board; Fairness of the
Offer and the Merger............................................................ 8
3. Opinion of Financial Advisor to the Special Committee........................... 10
4. Position of Parent and Purchaser Regarding the Fairness of the Offer and the
Merger.......................................................................... 15
5. Purpose and Structure of the Offer and the Merger; Reasons of Parent and
Purchaser for the Offer and the Merger.......................................... 15
6. Plans for the Company After the Offer and the Merger; Certain Effects of the
Offer and the Merger............................................................ 17
7. Rights of Stockholders in the Merger............................................ 17
8. The Merger Agreement............................................................ 18
9. Interests of Certain Persons in the Offer and the Merger........................ 23
10. Share Ownership by Parent and Purchaser......................................... 24
11. Beneficial Ownership of Shares.................................................. 25
THE OFFER............................................................................. 26
1. Terms of the Offer.............................................................. 26
2. Procedure for Accepting the Offer and Tendering Shares.......................... 27
3. Withdrawal Rights............................................................... 29
4. Acceptance for Payment and Payment for Shares................................... 30
5. Certain Federal Income Tax Consequences......................................... 31
6. Price Range of the Shares....................................................... 32
7. Certain Information Concerning the Company...................................... 33
8. Certain Information Concerning Purchaser and Parent............................. 36
9. Financing of the Offer and the Merger........................................... 37
10. Intercompany Arrangements between Parent and the Company........................ 37
11. Dividends and Distributions..................................................... 43
12. Effect of the Offer on the Market for the Shares; NASDAQ Quotation and Exchange
Act Registration................................................................ 44
13. Certain Conditions of the Offer................................................. 45
14. Certain Legal Matters........................................................... 46
15. Fees and Expenses............................................................... 48
16. Miscellaneous................................................................... 49
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER
SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
SCHEDULE III AUDITED FINANCIAL STATEMENTS (AND RELATED NOTES) FOR THE COMPANY FOR THE
SIX-MONTH TRANSITIONAL PERIOD ENDED DECEMBER 31, 1996 AND THE FISCAL YEARS
ENDED JUNE 30, 1996 AND JUNE 30, 1995
ANNEX A OPINION OF MONTGOMERY SECURITIES
ANNEX B RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE DGCL
</TABLE>
<PAGE> 3
TO THE STOCKHOLDERS OF CALGENE, INC.:
INTRODUCTION
Monsanto Acquisition Company, Inc. ("Purchaser"), a Delaware corporation
and a wholly owned subsidiary of Monsanto Company, a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock,
par value $.001 per share (the "Shares"), of Calgene, Inc., a Delaware
corporation (the "Company"), at a price of $8.00 per Share, net to the seller in
cash, without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and the related Letter of
Transmittal (this Offer to Purchase and the related Letter of Transmittal,
together with any amendments or supplements hereto or thereto, collectively
constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. Parent or Purchaser will pay all fees and expenses of
Goldman, Sachs & Co. ("Goldman Sachs"), as Dealer Manager (in such capacity, the
"Dealer Manager"), The First National Bank of Boston, as Depositary (the
"Depositary"), and Georgeson & Company Inc., as Information Agent (the
"Information Agent"), incurred in connection with the Offer. See "THE
OFFER -- Fees and Expenses".
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BY UNANIMOUS
VOTE OF ALL DIRECTORS PRESENT AND VOTING (WITH ALL DIRECTORS WHO ARE EMPLOYEES
OF PARENT ABSTAINING), BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS
RECOMMENDATION AND APPROVAL OF A SPECIAL COMMITTEE (THE "SPECIAL COMMITTEE") OF
DIRECTORS OF THE COMPANY WHO ARE NEITHER DESIGNEES OF PARENT NOR OFFICERS OF THE
COMPANY, HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED
HEREIN) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY (OTHER THAN PARENT AND PURCHASER), AND RECOMMENDS THAT STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. SEE "SPECIAL
FACTORS -- RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE COMPANY BOARD;
FAIRNESS OF THE OFFER AND THE MERGER".
MONTGOMERY SECURITIES ("MONTGOMERY SECURITIES"), FINANCIAL ADVISOR TO THE
SPECIAL COMMITTEE, HAS DELIVERED TO THE SPECIAL COMMITTEE AND TO THE COMPANY
BOARD ITS WRITTEN OPINION, DATED MARCH 31, 1997, THAT THE $8.00 PER SHARE
CONSIDERATION TO BE RECEIVED BY HOLDERS OF THE COMPANY'S COMMON STOCK (OTHER
THAN PARENT AND ITS AFFILIATES) PURSUANT TO THE OFFER AND THE MERGER WAS FAIR TO
SUCH STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW, AS OF THE DATE OF SUCH
OPINION.
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9"), which is being mailed to stockholders herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER (I) NOT LESS
THAN A MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OTHER THAN SHARES OWNED BY
PARENT (THE "MAJORITY-OF-THE-MINORITY CONDITION") AND (II) AT LEAST THE NUMBER
OF SHARES THAT WHEN ADDED TO THE SHARES OWNED BY PARENT SHALL CONSTITUTE 90% OF
THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS (AS DEFINED HEREIN) (THE
"NINETY PERCENT CONDITION"). THE MAJORITY-OF-THE-MINORITY CONDITION MAY NOT BE
WAIVED WITHOUT THE CONSENT OF THE SPECIAL COMMITTEE. PURCHASER HAS AGREED TO
WAIVE THE NINETY PERCENT CONDITION UNDER CERTAIN CIRCUMSTANCES DESCRIBED IN THIS
OFFER TO PURCHASE. SEE "THE OFFER -- CERTAIN CONDITIONS OF THE OFFER". AS OF
APRIL 7, 1997, PARENT OWNS 36,396,114 SHARES, CONSTITUTING APPROXIMATELY 54.5%
OF THE CURRENTLY OUTSTANDING SHARES.
The Company has advised Purchaser that as of March 17, 1997, (i) 66,737,327
Shares were issued and outstanding, (ii) no Shares were held in the treasury of
the Company, (iii) 4,855,755 Shares were authorized and reserved for future
issuance pursuant to outstanding stock options granted pursuant to the Company's
stock option plans ("Company Options"), (iv) approximately 21,230 Shares were
authorized and reserved for
<PAGE> 4
future issuance pursuant to the Company's employee stock purchase plan and (v)
1,000 Preferred Shares, designated Series A Redeemable, Non-Voting Preferred
Stock, par value $.001 per share ("Series A Preferred Shares"), were issued and
outstanding, 499 of which are owned by Parent as of April 7, 1997. Pursuant to
the Merger Agreement (as defined herein), the Company has agreed to redeem all
the Series A Preferred Shares not later than the day prior to the initial
expiration date of the Offer. The Company has further advised Purchaser that as
of April 2, 1997, there were approximately 2,935 holders of record of the
Shares. Parent currently owns 36,396,114 Shares, (i) 30,161,114 of which Parent
acquired on March 31, 1996 in connection with the Reorganization Agreement (as
defined herein), less 15,000 Shares sold on May 17, 1996, and (ii) 6,250,000 of
which Parent acquired on November 12, 1996 pursuant to the Stock Purchase
Agreement (as defined herein). The remaining issued and outstanding Shares are
not held by Parent or Purchaser (the "Non-Affiliated Shares"). See "SPECIAL
FACTORS -- Background of the Offer and the Merger"). For purposes of the Offer,
"Fully Diluted Basis" means the number of Shares that would be outstanding
assuming the exercise of all outstanding Company Options and all options to
purchase Shares that were issued pursuant to the Company's employee stock
purchase plan in each case that are exercisable (or will be exercisable within
five business days) for less than the Offer Price (unless the holder has elected
to exchange such option for cash in the Merger). Accordingly, based on
information available as of the date hereof, the Majority-of-the-Minority
Condition will be satisfied if approximately 15.2 million Non-Affiliated Shares
are validly tendered in the Offer and not withdrawn, and the Ninety Percent
Condition will be satisfied if approximately 25.0 million Non-Affiliated Shares
are validly tendered in the Offer and not withdrawn (assuming that none of the
holders of options to purchase Shares included in the calculation of Fully
Diluted Basis elect to receive cash in exchange for the cancellation of such
options, as described under "SPECIAL FACTORS -- The Merger Agreement").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 31, 1997, by and among Parent, Purchaser and the Company (the
"Merger Agreement"). The Merger Agreement provides that as soon as practicable
after the purchase of Shares pursuant to the Offer and the satisfaction of the
other conditions set forth in the Merger Agreement and in accordance with the
relevant provisions of the General Corporation Law of the State of Delaware (the
"DGCL"), Purchaser will be merged with and into the Company (the "Merger").
Following consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will become a wholly owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held in the treasury of the Company, Shares owned by
Parent, Purchaser or any subsidiary of Parent or the Company, or Shares held by
stockholders who shall have properly demanded and perfected appraisal rights
under Section 262 of the DGCL) will be cancelled and converted automatically
into the right to receive in cash, without interest, an amount equal to the
price paid per Share in the Offer (the "Merger Consideration"). The Merger
Agreement is more fully described under "SPECIAL FACTORS -- The Merger
Agreement".
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, which, if the Ninety Percent Condition is waived and Parent
and Purchaser do not own at least 90% of the outstanding Shares upon
consummation of Offer, would include approval and adoption of the Merger
Agreement by the affirmative vote of holders of a majority of the outstanding
Shares in accordance with the Company's certificate of incorporation and the
DGCL. See "SPECIAL FACTORS -- The Merger Agreement". As of April 7, 1997, Parent
owns 36,396,114 Shares, representing approximately 54.5% of the outstanding
Shares. If the Offer is consummated, Parent and Purchaser will have sufficient
voting power to approve and adopt the Merger Agreement and the Merger without
the vote of any other stockholder. Consummation of the Offer is conditioned on,
among other things, satisfaction or waiver of the Majority-of-the-Minority
Condition, which cannot be waived by Purchaser without the consent of the
Special Committee. Pursuant to the Merger Agreement, the purchase by Purchaser
of all Shares validly tendered in the Offer and not withdrawn is a condition to
the Merger.
Under the DGCL, if after consummation of the Offer Purchaser owns at least
90% of the Shares then outstanding, Purchaser will be able to cause the Merger
to occur without a vote of the Company's stockholders. In such event, Parent,
Purchaser and the Company have agreed to take all necessary and appropriate
action to cause the Merger to become effective in accordance with the DGCL as
promptly as
2
<PAGE> 5
practicable after consummation of the Offer without a meeting of the
stockholders of the Company. If, however, after consummation of the Offer
Purchaser owns less than such number of Shares, a vote of the Company's
stockholders will be required under the DGCL to approve the Merger, and a
significantly longer period of time will be required to effect the Merger. See
"SPECIAL FACTORS -- Purpose and Structure of the Offer and the Merger; Reasons
of Parent and Purchaser for the Offer and the Merger", "SPECIAL FACTORS -- The
Merger Agreement" and "THE OFFER -- Certain Conditions of the Offer".
No appraisal rights are available in connection with the Offer; however,
stockholders may have appraisal rights in connection with the Merger regardless
of whether the Merger is consummated with or without a vote of the Company's
stockholders. See "SPECIAL FACTORS -- Rights of Stockholders in the Merger".
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION ABOUT THE OFFER AND THE MERGER. STOCKHOLDERS ARE URGED TO
READ CAREFULLY THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL IN
THEIR ENTIRETY BEFORE MAKING ANY DECISION WITH RESPECT TO THE OFFER.
3
<PAGE> 6
SPECIAL FACTORS
1. BACKGROUND OF THE OFFER AND THE MERGER
The Company has advised Parent that, prior to October 1994, the Company
held discussions from time to time with various potential strategic partners in
an effort to gain access to new markets for its biotechnology products and to
license new technologies. In the course of such discussions, the Company
considered possible alliances, combinations and other transactions with various
companies, including companies both smaller and larger than the Company.
Reorganization Agreement. In October 1994, Roger H. Salquist, who was then
Chief Executive Officer of the Company, contacted Hendrik A. Verfaillie, an
Executive Vice President of Parent, and inquired as to Parent's interest in
exploring a strategic alliance with the Company. At subsequent meetings from
October 1994 through May 1995, Messrs. Salquist and Verfaillie, and their
respective financial advisors, discussed a variety of possible structures for
such an alliance, and in May 1995 the parties determined to focus on a structure
pursuant to which Parent would contribute cash, technology and its equity
interest in Tomato Investment Associates, Inc., a wholly owned subsidiary of
Monsanto, whose principal asset was the entire equity interest in Gargiulo L.P.
("Gargiulo") to the Company in exchange for an ownership interest in the
Company. Gargiulo is a grower, packager, marketer and distributor of tomatoes,
strawberries and other produce with operations in Florida, California, Puerto
Rico and Mexico. After negotiations that involved consideration of the specific
businesses, technologies and the amount of cash that would be contributed by
Parent, the parties determined that Parent would acquire approximately a 49%
interest in the Company.
Discussions continued, and on June 27, 1995, the Company and Parent entered
into a letter of intent with respect to the proposed reorganization. On October
5, 1995, acting on the recommendation of the Company's management and in view of
a fairness opinion delivered by Montgomery Securities, the Company Board
approved the Agreement and Plan of Reorganization (the "Reorganization
Agreement") and related Plan of Merger. Following approval of the Reorganization
Agreement by the Company's stockholders at a special meeting on March 25, 1996,
on March 31, 1996 Parent contributed its equity interest in Gargiulo, $30
million in cash and certain oils and produce related technology in exchange for
a 49.9% equity interest in the Company.
In connection with the Reorganization Agreement, a total of 30,161,114
Shares were issued to Parent having an aggregate value of approximately $144
million, or approximately $4.77 per Share, based on the $5.75 per Share closing
price on the day the Company's negotiations with Parent concluded but discounted
(based on an independent appraisal) to account for liquidity restrictions
imposed upon Parent in the transaction. On May 17, 1996, Parent sold 15,000
Shares to the revocable living trust of a director of Parent in consideration
for his services as a director of the Company, thereby reducing the number of
Shares held by Parent to 30,146,114.
Original Stockholders Agreement. In connection with the Reorganization
Agreement, the Company and Parent entered into a stockholders agreement, dated
as of March 31, 1996 (the "Original Stockholders Agreement"). The Original
Stockholders Agreement contained provisions relating to: (i) composition of the
boards of directors of the Company and Gargiulo; (ii) restrictions upon the
purchase of additional Shares by Parent; (iii) restrictions upon sales of Shares
by Parent; (iv) rights of Parent to require the registration of the Shares under
the Securities Act of 1933, as amended (the "Securities Act"); and (v) rights of
Parent to participate in future equity financings of the Company. The Original
Stockholders Agreement also required that certain actions of the Company be
approved by a majority of the Company Board, including (a) prior to the
occurrence of a "Trigger Event" (as defined therein), at least one Company
designee who is an "independent director" (as defined therein), and (b) after a
Trigger Event, at least two Company designees who are "independent directors";
however, fewer actions required such approval following a Trigger Event. The
Original Stockholders Agreement defined the term "Trigger Event" as the earlier
of any time that (x) Parent's equity ownership interest in the Company is at
least 55% or (y) the Company elects to convert certain borrowings made from
Parent into Shares and Parent's equity ownership interest is at least 50% after
such conversion.
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The restrictions upon the purchase of additional Shares by Parent contained
in the Original Stockholders Agreement contained an exception for, among other
things, a tender offer by Parent at a price approved by the disinterested
directors of the Company and based upon a fairness opinion delivered to the
Company Board by an investment banking firm. The Original Stockholders Agreement
did not contain any restrictions on Parent increasing its ownership of Shares
through open market purchases or otherwise after September 30, 1998.
Pursuant to the Original Stockholders Agreement, after consummation of the
Reorganization Agreement, the Company Board consisted of nine directors, of
which two were executive officers of the Company, three were designated by the
Company and four were designated by Parent.
Stock Purchase Agreement. On July 31, 1996, the Company and Parent
announced they had entered into a letter of intent ("Letter of Intent") pursuant
to which Parent agreed to purchase 6,250,000 newly issued Shares at a price of
$8.00 per Share. On September 27, 1996, the Company and Parent executed a
definitive Stock Purchase Agreement (the "Stock Purchase Agreement") with
respect to such transaction. Parent's purchase was conditioned upon, among other
things, (i) the approval by the holders of a majority of the Shares present or
represented at the Company's 1996 Annual Meeting of Stockholders, other than
Shares held by Parent, (ii) the execution of the Amended and Restated
Stockholders Agreement (described below) by the Company and Parent and (iii) the
execution and delivery of the Certificate of Amendment to the Restated
Certificate of Incorporation of the Company reflecting certain amendments to the
Original Stockholders Agreement.
In the Company's Proxy Statement relating to its 1996 Annual Meeting of
Stockholders (the "1996 Proxy Statement"), dated October 10, 1996, the Company
explained the reasons for entering into the Stock Purchase Agreement as follows:
In the year ended June 30, 1996, the Company incurred substantial
losses primarily in connection with the operation of its tomato business.
As of June 30, 1996, the Company had available cash and equivalents and
available for sale securities of $28.6 million and working capital of
negative $1.5 million.
The Company believes that significant additional funds are required to
pay down debt, fund its tomato operations, support the market introduction
of new cotton products and finance continued oils research and development.
The Board of Directors of Calgene believes that the proposed transaction
with Monsanto is on terms no less favorable to the Company than could be
obtained from an independent third party. The Board determined to seek
stockholder approval for the Monsanto Transaction because the transaction
will enable Monsanto to nominate a majority of the members of the Board of
Directors of Calgene. If the proposed transaction with Monsanto is not
approved at the Annual Meeting, Calgene is unable to predict whether it
will be able to obtain required financing on favorable terms, if at all.
The Company's stockholders approved the Stock Purchase Agreement at the
Annual Meeting on November 12, 1996, and Parent's purchase of 6,250,000 Shares
was consummated immediately thereafter.
Amended and Restated Stockholders Agreement. Pursuant to the Stock
Purchase Agreement, on November 12, 1996, following approval by the Company's
stockholders, the Company and Parent entered into an Amended and Restated
Stockholders Agreement (the "Restated Stockholders Agreement") which amended and
restated the Original Stockholders Agreement. Pursuant to the Restated
Stockholders Agreement, the composition of the Company Board changed to four
"independent directors" (three designated by the Company (collectively, the
"Company Directors") and one designated by Parent), the Chief Executive Officer
of the Company (designated by the Company Directors) and four additional
designees of Parent. Also, the definition of "Trigger Event" was amended so that
Parent's acquisition of Shares pursuant to the Stock Purchase Agreement
constituted a "Trigger Event", thereby significantly reducing the number of
Company actions requiring approval by two or more "independent directors" in
accordance with the otherwise unchanged provisions of the Original Stockholders
Agreement. Accordingly, actions requiring such approval following a Trigger
Event include (1) a merger, consolidation or acquisition constituting a
Substantial Part (defined as more than 10% of the Company's total consolidated
assets) of the Company, (2) sale, transfer, pledge or other disposal of a
Substantial Part of the Company (with certain exceptions); (3) establishment of
new committees of the Company Board or revision of delegation of authority to
existing committees; (4) election, appointment or removal of certain executive
officers; (5) approval of certain Company business plans; (6) any modification
of the agreements relating to the
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Reorganization Agreement; and (7) any transaction between the Company and Parent
(or their respective affiliates).
In connection with the execution of the Letter of Intent, Mr. Salquist
resigned as Chief Executive Officer of the Company and entered into an amendment
to his Change of Control Employment Agreement pursuant to which, among other
things, Mr. Salquist agreed to provide consulting services to the Company for a
12-month period. The Restated Stockholders Agreement amended the definition of
"independent director" to provide that, as long as Mr. Salquist continues to
otherwise qualify as an "independent director", Mr. Salquist would continue to
qualify as an "independent director" notwithstanding his previous employment by
the Company or his amended Change of Control Employment Agreement. See "SPECIAL
FACTORS -- Interests of Certain Persons in the Offer and the Merger".
Divestiture Discussions. From time to time over the past several months,
the Company's management has engaged in preliminary discussions with third
parties who have expressed an interest in acquiring the Company's Stoneville
Pedigreed Seed Company subsidiary ("Stoneville"), a cotton planting seed
company. In December 1996, a third party indicated an interest in acquiring
Stoneville for $50 million plus an unspecified royalty. Parent expressed its
view to members of the Company's management and the Company Board that
Stoneville was a valuable asset of the Company and should not be sold. In
January 1997, another third party expressed an interest in acquiring Stoneville
to the Company's management. At a meeting of the Company Board on March 6, 1997,
Parent's designees on the Company Board reiterated their view that it would not
be in the best interests of the Company or its stockholders to divest
Stoneville, and the Company Board did not authorize pursuing such discussions.
Following the announcement of the Acquisition Proposal (as defined herein),
Parent received inquiries regarding its willingness to sell assets of the
Company. Parent advised parties making such inquiries that it had no interest in
entering into negotiations with respect to any such sales at that time.
Acquisition Proposal. On January 24, 1997, representatives of Parent
discussed with Parent's Board of Directors strategic alternatives with respect
to Parent's investment in the Company, including the possibility of making a
proposal to the Company to acquire the Non-Affiliated Shares. On January 26, Mr.
Verfaillie contacted several directors of the Company to advise them of Parent's
consideration of a possible acquisition of the Non-Affiliated Shares. Mr.
Verfaillie also advised such directors, including Mr. Salquist, of Parent's
desire to enter into a non-competition agreement with Mr. Salquist in connection
with any such acquisition. No specific terms of a non-competition agreement were
discussed, no agreements or understandings were reached and discussions ceased
shortly after Parent's submission of its Acquisition Proposal.
On January 27, 1997, representatives of Parent advised the Company Board
that Parent was considering making a proposal to acquire the remaining Shares
not owned by Parent. On January 28, a special committee of the Board of
Directors of Parent authorized Parent to make a proposal (the "Acquisition
Proposal") to the Company Board to acquire all of the Shares for $7.25 per
Share. The Acquisition Proposal was conditioned upon the approval by a special
committee of disinterested directors of the Company Board. Parent advised the
Company of the Acquisition Proposal and issued a press release announcing the
Acquisition Proposal the same day.
Later that day, the Company announced that it had received the Acquisition
Proposal and that the Company Board had formed the Special Committee, consisting
of Messrs. Salquist, Howard D. Palefsky and Allen J. Vangelos (none of whom is a
designee of Parent or an officer of the Company), to consider the Acquisition
Proposal. The Company announced that the Special Committee had retained
Montgomery Securities to act as financial advisor and Venture Law Group to act
as legal counsel to the Special Committee.
On February 1, 1997, a representative of Montgomery Securities advised a
representative of Goldman Sachs, financial advisor to Parent, that the Special
Committee did not view $7.25 per Share to be an appropriate starting point for
negotiations in light of the $8.00 per Share paid by Parent in November 1996
pursuant to the Stock Purchase Agreement. Also in early February, legal counsel
to Parent, the Company and the Special Committee discussed certain legal issues
in connection with Parent's proposal.
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On February 14, 1997, a Montgomery Securities representative advised a
Goldman Sachs representative that the Special Committee believed a transaction
could be achieved at a price of $8.50 per Share. The representative stated that
it was the Special Committee's view that a price at or in excess of $8 per Share
would require approval or acceptance by holders of a majority of the Shares not
held by Parent, and that a transaction at a price below $8 per Share would
require approval or acceptance by holders of a supermajority of the Shares not
held by Parent.
During the week of February 24, 1997, a representative of Goldman Sachs
advised a representative of Montgomery Securities that Parent did not want to
subject a transaction to a stockholder vote that might delay consummation. The
Goldman Sachs representative stated that Parent was considering raising its bid
to a price below $8 per Share, but that the price it would be willing to pay in
a transaction with a stockholder vote would be less than in a transaction that
would not be subject to such contingency and delay.
On February 26 and 27, 1997, Mr. Salquist, Chairman of the Special
Committee, contacted Robert B. Shapiro, Chairman of the Board and Chief
Executive Officer of Parent, and Mr. Palefsky, another member of the Special
Committee, contacted John E. Robson, a director of Parent and one of Parent's
designees on the Company Board, to discuss Parent's willingness to increase the
price of its proposal.
On March 2, 1997, a representative of Goldman Sachs advised a
representative of Montgomery Securities that Parent could consider increasing
the price of its proposal to $8 per Share subject to at least a majority of the
Non-Affiliated Shares being tendered. The representative of Goldman Sachs
requested a prompt response, but indicated that the proposal would remain open
for a reasonable period in order to give the Special Committee adequate time in
which to properly evaluate it.
On March 6, 1997, the Special Committee met to consider Parent's proposal
and subsequently advised Parent that it would be prepared to recommend a
transaction at $8 per Share subject to agreement on the terms and conditions of
a definitive agreement. At this meeting, representatives of Montgomery
Securities indicated on a preliminary basis that they would be prepared to
deliver a fairness opinion with respect to the $8 per Share proposal.
On March 11, 1997, legal counsel for Parent delivered a draft merger
agreement and a proposed amendment to the Restated Stockholders Agreement to
legal counsel for the Special Committee, and over the following two weeks, the
parties and their representatives negotiated the terms of these agreements.
During this time, legal counsel for each of Parent, the Company and the Special
Committee also entered into discussions with legal counsel for the stockholder
plaintiffs with respect to a possible settlement of the putative class action
litigation that was commenced in the Delaware Court of Chancery following the
January 28, 1997 public announcement of the Acquisition Proposal. See "THE
OFFER -- Certain Legal Matters".
During the month of March, the members of the Special Committee had
numerous conversations with its legal counsel and financial advisor regarding
the progress of negotiations of the terms of the definitive agreements as well
as the settlement of the stockholder litigation. At the conclusion of this
process, the Special Committee reconfirmed its decision to recommend the
transaction to the Company Board.
On March 31, 1997, the defendants (including Parent, the Company, and
certain of their respective employees and/or directors) and the plaintiffs in
the putative class action litigation referred to above entered into a memorandum
of understanding reflecting their agreement in principle to settle the
litigation. The proposed settlement remains subject to drafting and execution,
and final court approval, of a definitive stipulation of settlement. See
"SPECIAL FACTORS -- Certain Legal Matters".
On March 31, 1997, the Company Board held a telephonic meeting to discuss
the Offer and the Merger and to receive any recommendation that the Special
Committee would be prepared to make to the Company Board. At this meeting,
Montgomery Securities summarized the presentation it had made to the Special
Committee at the Special Committee's March 6, 1997 meeting and rendered its
opinion, which it subsequently confirmed in writing, that the consideration to
be received by holders of the Company's common stock (other than Parent and its
affiliates) pursuant to the Offer and the Merger was fair to such stockholders
from a financial point of view, as of March 31, 1997. Following additional oral
presentations by representatives
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of legal counsel to the Special Committee regarding the terms and conditions of
the Merger Agreement, the Special Committee informed the Company Board that it
had unanimously determined that each of the Offer and the Merger is fair to, and
in the best interests of, the stockholders of the Company (other than Parent and
Purchaser), and that the Special Committee unanimously recommends that the
Company Board approve the Offer, the Merger, the Merger Agreement and the
amendment to the Restated Stockholders Agreement and that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer.
Following discussion of the Special Committee's recommendation and further
discussion of the Offer, the Merger, the Merger Agreement and the amendment to
the Restated Stockholders Agreement, the Company Board, by unanimous vote of all
directors present and voting (with Messrs. Verfaillie, Fortune, Fraley and
Hogan, all of whom are employees of Parent, abstaining), (a) determined that
each of the Offer and the Merger is fair to, and in the best interests of, the
stockholders of the Company (other than Parent and Purchaser), (b) approved the
Offer and the Merger, (c) approved and adopted the Merger Agreement and the
amendment to the Restated Stockholders Agreement, and (d) recommended that the
stockholders of the Company (other than Parent or Purchaser) accept the Offer
and tender their Shares pursuant thereto.
At its meeting on March 31, a Special Committee of the Board of Directors
of Parent Regarding Agricultural Biotechnology Matters met to discuss the
proposed Offer and Merger and terms of the Merger Agreement and voted
unanimously to approve the Merger Agreement and the amendment to the Restated
Stockholders Agreement.
The Merger Agreement and the amendment to the Restated Stockholders
Agreement were executed on March 31, 1997, and Parent and the Company issued a
joint press release on April 1, 1997 announcing such execution.
On April 7, 1997, Purchaser commenced the Offer.
2. RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE COMPANY BOARD; FAIRNESS OF
THE OFFER AND THE MERGER
The Special Committee. The Special Committee has unanimously determined
that each of the Offer and the Merger is fair to, and in the best interests of,
the stockholders of the Company (other than Parent and Purchaser), and the
Special Committee unanimously recommends that the Company's stockholders accept
the Offer and tender their Shares pursuant to the Offer. In reaching these
determinations, the Special Committee considered the following factors, each of
which, in the view of the Special Committee, supported such determinations:
(i) the historical market prices and recent trading activity of the
Shares, including the fact that the $8.00 per Share cash consideration to
be received by the stockholders of the Company (other than Parent and
Purchaser) in the Offer and Merger represents a premium of approximately
45% over the reported closing price on the last full trading day preceding
the public announcement of the Acquisition Proposal by Parent, and a
premium of approximately 60% over the average closing price for both the
one-week and one-month period preceding such date;
(ii) the fact that the standstill provisions of the Restated
Stockholders Agreement that require the disinterested directors of the
Company to approve the acquisition of any additional Shares by Parent will
be in effect only until September 30, 1998, after which time Parent would
have the power under applicable state law to unilaterally cause a merger
between itself (or one of its subsidiaries) and the Company to be effected
without the consent of the disinterested directors of the Company or the
remaining stockholders of the Company (other than Parent and Purchaser);
(iii) the history of the negotiations between the Special Committee
and their representatives and Parent and its representatives, including (a)
the fact that the negotiations resulted in an increase in the price at
which Parent and Purchaser were prepared to acquire the Company's
outstanding Shares from $7.25 to $8.00 per Share, and (b) the Special
Committee's belief that Parent and Purchaser would not further increase the
Offer and that $8.00 per Share was the highest price that could be obtained
from Parent and Purchaser;
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(iv) the opinion of Montgomery Securities that the consideration to be
received by holders of the Company's common stock (other than Parent and
its affiliates) pursuant to the Offer and the Merger was fair to such
stockholders from a financial point of view, as of March 31, 1997, and the
report and analysis presented by Montgomery Securities in connection
therewith;
(v) the effect of the Majority-of-the-Minority Condition that, without
the consent of the Special Committee, the Offer will not be consummated
unless at least a majority of the Non-Affiliated Shares are validly
tendered pursuant to the Offer and not properly withdrawn;
(vi) the availability of appraisal rights in the Merger for the
stockholders of the Company (other than Parent and Purchaser) under the
DGCL;
(vii) the possibility that, because of a decline in the Company's
business, the trading price of the Shares or the stock market in general,
the consideration that the stockholders of the Company (other than Parent
and Purchaser) would obtain in a future transaction might be less
advantageous than the consideration they would receive pursuant to the
Offer and the Merger;
(viii) the risk that the Company would suffer the loss of key
employees and other adverse consequences if the Company had not accepted
Parent's offer to engage in the transactions contemplated by the Merger
Agreement and had pursued other alternatives with the attendant delay;
(ix) the likelihood that the proposed acquisition would be
consummated, based in part on the financial condition of Parent and the
limited scope of conditions (other than the Majority-of-the-Minority
Condition) to be satisfied prior to the consummation of the Merger as
provided in the Merger Agreement;
(x) the terms and conditions of the Merger Agreement, including the
absence of a financing condition; and
(xi) the structure of the transaction, which is designed, among other
things, to result in receipt by the stockholders at the earliest
practicable time of the consideration to be paid in the Offer and the fact
that the per Share consideration to be paid in the Offer and the Merger is
the same.
The Company Board. At its March 31, 1997 meeting, the Company Board, by
unanimous vote of all directors present and voting (with all directors who are
employees of Parent abstaining), (a) determined that each of the Offer and the
Merger is fair to, and in the best interests of, the stockholders of the Company
(other than Parent and Purchaser), (b) approved the Offer and the Merger, (c)
approved and adopted the Merger Agreement and the amendment to the Restated
Stockholders Agreement and (d) recommended that the stockholders of the Company
(other than Parent and Purchaser) accept the Offer and tender their Shares
pursuant thereto. In reaching its determinations and in making its
recommendation, the Company Board considered the recommendation of the Special
Committee, as well as all of the factors considered by the Special Committee
described above.
Additional Considerations of the Special Committee and the Company
Board. The members of the Company Board, including the Special Committee,
evaluated the various factors listed above in light of their knowledge of the
business, financial condition and prospects of the Company, and based upon the
advice of financial and legal advisors. In light of the number and variety of
factors that the Company Board and the Special Committee considered in
connection with their evaluation of the Offer and the Merger, neither the
Company Board nor the Special Committee found it practicable to assign relative
weights to the foregoing factors and, accordingly, neither the Company Board nor
the Special Committee did so. In addition to the factors listed above, the
Company Board and the Special Committee each considered the fact that while
consummation of the Offer would result in the stockholders of the Company
receiving a premium for their Shares over the trading prices of the Shares prior
to the public announcement of the Acquisition Proposal, consummation of the
Offer and the Merger would eliminate any opportunity for stockholders of the
Company (other than Parent and Purchaser) to participate in the potential future
growth prospects of the Company. The Company Board and the Special Committee
determined, however, that (i) the loss of opportunity is reflected in the Offer
Price, and (ii) there is uncertainty as to the Company's long-term financial
prospects.
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In addition, the Special Committee and the Company Board each determined
that the Offer and the Merger are procedurally fair to the stockholders of the
Company (other than Parent and Purchaser) because, among other things: (i) the
Special Committee, consisting of directors who are neither designees of Parent
nor officers of the Company, was appointed to represent the interests of the
stockholders of the Company (other than Parent and Purchaser); (ii) the Special
Committee retained and was advised by independent legal counsel; (iii) the
Special Committee retained Montgomery Securities as its independent financial
advisor to assist it in evaluating the Offer and the Merger; (iv) the
Majority-of-the-Minority Condition, which may not be waived without the consent
of the Special Committee, was made a condition to the Offer; (v) the
deliberations pursuant to which the Special Committee evaluated the Offer and
the Merger and alternatives thereto; and (vi) the fact that the $8.00 per Share
price and the other terms and conditions of the Merger Agreement resulted from
active arm's-length bargaining between representatives of the Special Committee,
on the one hand, and Parent, on the other.
Each of the Company Board and the Special Committee recognized that the
Merger is not structured to require the approval of a majority of the
stockholders of the Company (other than Parent or Purchaser), and that if the
Offer is consummated Parent and Purchaser will have sufficient voting power to
approve the Merger without the affirmative vote of any other stockholder of the
Company. Consummation of the Offer, however, is conditioned upon, among other
things, the Majority-of-the-Minority Condition, which may not be waived without
consent of the Special Committee. Pursuant to the Merger Agreement, the purchase
by Purchaser of all Shares validly tendered in the Offer and not withdrawn is a
condition to the Merger.
In making their respective determinations and recommendations, each of the
Company Board and the Special Committee was aware of the matters set forth under
"SPECIAL FACTORS -- Interests of Certain Persons in the Offer and Merger".
3. OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
Pursuant to an engagement letter dated February 26, 1997 (the "Engagement
Letter"), the Special Committee retained Montgomery Securities as its financial
advisor in connection with its consideration of a possible acquisition by Parent
of the Non-Affiliated Shares. Montgomery Securities 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. Montgomery Securities also has
performed certain investment banking services for the Company, including acting
as advisor to the Company in connection with the acquisition of 49.9% of the
Shares by Parent in March 1996 and acting as co-manager of an underwritten
public offering of Shares in January 1993 and as lead manager of an underwritten
public offering of Shares in October 1994. The Special Committee selected
Montgomery Securities as its financial advisor on the basis of its experience
and expertise in transactions similar to the Offer and the Merger, its
reputation in the biotechnology and investment communities and its knowledge of
and familiarity with the Company resulting from the investment banking services
it has previously provided to the Company. Montgomery Securities was not
retained to, nor did it, advise the Company or the Special Committee with
respect to alternatives to the Offer and the Merger or the Company's underlying
decision to proceed with or effect the Offer and the Merger. Furthermore,
Montgomery Securities was not requested to, nor did it, solicit or assist the
Company in soliciting indications of interest for all or part of the Company.
On March 31, 1997, Montgomery Securities rendered its oral opinion to the
Special Committee and the Company Board, subsequently confirmed in writing as of
such date, that the consideration to be received by the holders of the Company's
common stock (other than Parent and its affiliates) pursuant to the Offer and
the Merger was fair to such stockholders from a financial point of view, as of
the date thereof. No limitations were imposed by the Special Committee on the
scope of Montgomery Securities' investigation or the procedures to be followed
by Montgomery Securities in rendering its opinion. Montgomery Securities did not
determine the form or amount of consideration to be offered to stockholders in
the Offer or the Merger, which was agreed to as a result of negotiations between
the Special Committee and its financial and legal advisors (including Montgomery
Securities) and Parent and its financial and legal advisors.
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THE FULL TEXT OF MONTGOMERY SECURITIES' WRITTEN OPINION TO THE SPECIAL
COMMITTEE AND THE COMPANY BOARD IS ATTACHED HERETO AS ANNEX A AND IS
INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY OF MONTGOMERY
SECURITIES' OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION. MONTGOMERY'S OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE
CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF THE COMPANY'S COMMON STOCK (OTHER
THAN PARENT AND ITS AFFILIATES) FROM A FINANCIAL POINT OF VIEW, AND HAS BEEN
PROVIDED FOR THE USE OF THE SPECIAL COMMITTEE AND THE COMPANY BOARD IN THEIR
EVALUATION OF THE OFFER AND THE MERGER, AND DOES NOT ADDRESS ANY OTHER ASPECT OF
THE OFFER AND THE MERGER. MONTGOMERY SECURITIES' OPINION IS ADDRESSED TO THE
SPECIAL COMMITTEE AND THE COMPANY BOARD ONLY AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO ACCEPT THE CONSIDERATION
BEING OFFERED TO SUCH STOCKHOLDER PURSUANT TO THE OFFER OR AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER, IF ANY VOTE IS REQUIRED.
In connection with its opinion, Montgomery Securities, among other things
(i) reviewed certain publicly available financial and other data with respect to
the Company, including the financial statements for recent years and interim
periods to September 30, 1996 and certain other relevant financial and operating
data relating to the Company made available to Montgomery Securities from
published sources and from the internal records of the Company; (ii) reviewed
the financial terms and conditions of the Merger Agreement in the form provided
to Montgomery Securities by the Company; (iii) reviewed certain publicly
available information concerning the trading of, and the trading market for, the
Shares; (iv) compared the Company from a financial point of view with certain
other companies which Montgomery Securities deemed to be relevant; (v)
considered the financial terms, to the extent publicly available, of selected
recent business combinations which Montgomery Securities deemed to be
comparable, in whole or in part, to the Offer and the Merger; (vi) reviewed and
discussed with representatives of the management of the Company certain
information of a business and financial nature furnished to Montgomery
Securities by the Company, including financial forecasts and related assumptions
of the Company; (vii) made inquiries regarding and discussed the Merger
Agreement and other matters related thereto with the Company's counsel; and
(viii) performed such other analyses and examinations as Montgomery Securities
deemed appropriate.
In connection with its review, Montgomery Securities did not assume any
obligation independently to verify the foregoing information and relied on its
being accurate and complete in all material respects. With respect to the
financial forecasts for the Company provided to Montgomery Securities by
management, as a result of discussions among Montgomery Securities,
representatives of management of the Company and the Special Committee, such
forecasts were adjusted to reflect more conservative assumptions regarding the
development and market penetration of certain products. Upon the advice and with
the consent of management of the Company and the Special Committee, Montgomery
Securities assumed for purposes of its opinion that the unadjusted forecasts
were reasonably prepared on bases reflecting the best available estimates and
judgments of the Company's management at the time of preparation as to the
future financial performance of the Company and that such forecasts, as
adjusted, provide a reasonable basis upon which Montgomery Securities could form
its opinion. Montgomery Securities also assumed that there were no material
changes in the Company's assets, financial condition, results of operations,
business or prospects since the date of its last financial statements available
to it. Although Montgomery Securities was aware of the asset write-downs and
restructuring expenses reflected in the Company's announcement of its financial
results for the quarter ended December 31, 1996, Montgomery Securities did not
revise its financial analyses to take into account developments (other than
Parent's $50 million investment in the Company) after September 30, 1996.
Montgomery Securities relied on advice of counsel to the Special Committee and
counsel and independent accountants to the Company as to all legal and financial
reporting matters with respect to the Special Committee, the Company, the
Agreement, the Offer and the Merger. Montgomery Securities assumed that the
Offer and the Merger will be consummated in a manner that complies in all
respects with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and all other applicable federal and state statutes, rules and
regulations. In addition, Montgomery Securities did not assume responsibility
for making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of the Company, nor was
Montgomery Securities furnished with any such appraisals. The Company informed
Montgomery Securities, and Montgomery Securities assumed, that the Merger will
be recorded as a purchase under generally accepted accounting principles.
Finally, Montgomery
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Securities's opinion was based on economic, monetary and market and other
conditions as in effect on, and the information made available to Montgomery
Securities as of March 31, 1997. Accordingly, although subsequent developments
may affect its opinion, Montgomery Securities has not assumed any obligation to
update, revise or affirm its opinion.
The following is a summary of the report presented by Montgomery Securities
on March 31, 1997 in connection with its opinion. For the purposes of all the
analyses described below, Montgomery Securities made pro forma adjustments to
reflect Parent's $50 million investment in the Company at $8.00 per Share in
November 1996 and assumed 66.71 million outstanding Shares.
Discounted Cash Flow Analysis. Montgomery Securities performed a
discounted cash flow analysis on certain cash flow forecasts that were adjusted
from the initial financial forecasts provided to Montgomery Securities by the
management of the Company. As described above, these adjustments were made as a
result of discussions among Montgomery Securities, representatives of management
of the Company and the Special Committee and reflect more conservative
assumptions regarding the development and market penetration of certain
products.
In performing this analysis, Montgomery Securities discounted to present
value the projected stream of after-tax cash flows and the terminal year equity
value of each of the Company's business segments. The discounted cash flow
analysis of the Company's projections was based upon, among other things, a
range of terminal multiples of projected fiscal year earnings before interest
and taxes ("EBIT") of 11.0x to 20.0x. Montgomery Securities applied multiple
ranges to each business segment in accordance with Montgomery Securities'
assessment of the growth and operational prospects for each segment. In
addition, Montgomery Securities used discount rates ranging from 12.5% to 45.0%,
and assigned discount rates to each business segment in accordance with
Montgomery Securities' assessment of the development stage and risks associated
with the successful development of each business segment.
Utilizing these projections and assumptions, Montgomery Securities computed
a range of implied equity values for the Company from $4.81 to $7.62 per Share.
Comparable Transaction Analysis. Montgomery Securities compared the
financial terms of certain recent merger or alliance transactions which
Montgomery Securities considered relevant. Montgomery Securities divided the
comparable transactions (listed below by acquiror/target) into three categories:
(a) cash biotechnology control combination transactions, where the acquiror
previously had a substantial equity ownership interest in the target, including
Novartis, Inc./SyStemix, Inc., American Home Products Corp./Genetics Institute,
Inc., and Rhone-Poulenc Rorer, Inc./Applied Immune Sciences Inc.; (b) cash
biotechnology purchase transactions, where the acquiror previously had a less
than substantial equity ownership interest in the target, including Amgen, Inc./
Synergen, Inc., Glaxo Wellcome plc/Affymax N.V., Chiron Corp./Viagene, Inc. and
Sandoz AG/Genetic Therapy, Inc.; and (c) cash non-biotechnology minority
acquisition transactions where the acquiror owned less than 90% of the target
prior to the transaction, including Andrews Group Inc./Toy Biz, Inc., Renco
Group, Inc./WCI Steel Inc., Chemed Corp./Roto-Rooter Inc., Equity Holdings
Ltd./Great American Management & Investment, Inc., Societe Commerciale de
Reassurance/SCOR US Corp., Berkshire Hathaway, Inc./GEICO Corp., COBE
Laboratories, Inc./REN Corp.-USA, MCI Communications Corp./Nationwide Cellular
Service, Inc., BIC SA/Bic Corp., McCaw Cellular Communications, Inc./LIN
Broadcasting Corp., Club Mediterranee SA/Club Med Inc., Fleet Financial Group,
Inc./Fleet Mortgage Group, Inc., PacificCorp/Pacific Telecom, Inc., Dole Food
Co./Castle & Cooke Homes, Medco Containment Services/Medical Marketing Group
Inc., W.R. Grace & Co./Grace Energy Corp., BHP Holdings/Hamilton Oil, Academy
Merger Co., Inc./Academy Insurance, Caesar's World, Inc./Caesar New Jersey,
Inc., Paramount Communications, Inc./TVX Broadcast Group, Renault Vehicles
Industrials/Mack Trucks Inc., Kansas City Southern/DST Systems, Inc., and Imetal
SA/Copperweld Corp.
Montgomery Securities analyzed the price paid per share by the acquiror
(the "Merger/Purchase Price Per Share"). The Merger/Purchase Price Per Share for
each of these transactions was compared to the target stock price one day, one
week, and one month prior to the announcement of the transaction in order to
calculate the premium over such stock price. The average high and low premiums
were as follows: (i) 38.4% to 53.2% for the cash biotechnology control
combination transactions; (ii) 57.2% to 68.9% for the cash biotechnology
purchase transactions; and (iii) 20.2% to 29.4% for cash non-biotechnology
minority acquisition transactions. Montgomery Securities noted that the high and
low average premiums reflected an implied
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equity value for the Company of (i) $7.01 to $8.43 per Share for the cash
biotechnology control combination transactions; (ii) $8.10 to $8.65 per share
for the cash purchase transactions; and (iii) and $6.24 to $6.61 for the cash
non-biotechnology minority acquisition transactions.
Montgomery Securities also analyzed selected bioagricultural acquisition
transactions, including Holden's Seed & Corn States/Parent, Asgrow Agronomics
(Division of Empresas La Moderna)/Parent, Plan Genetic Systems/Hoechst Schering
AgrEvo, Agracetus (Division of W.R. Grace & Co.)/Parent, Dekalb Genetics
Corp./Parent, United AgriSeeds (Division of DowElanco)/Mycogen Corp., Gargiulo
(Division of Parent)/Company, Asgrow Seed Co. (Division of Upjohn)/Empresas La
Moderna, Fresh World (joint venture with DuPont)/DNA Plant Technology Corp.,
Agrigenetics (Division of Lubizol)/Mycogen Corp. and Del Monte Fresh Fruit
Division/Polly Peck International plc. Montgomery Securities calculated an
aggregate value to latest 12 months ("LTM") revenue multiple for each of the
target companies as determined by the price per share paid by the acquiror.
These values were used to compute an average aggregate value to LTM revenue
multiple of 2.6x. Montgomery Securities noted that the application of this
multiple resulted in an implied equity value for the Company of $4.68 per Share.
Because the reasons for and the circumstances surrounding each of the
transactions analyzed were specific to each transaction, and because of the
inherent difference between the businesses, operations and prospects of the
Company and the businesses, operations and prospects of the selected acquired
companies analyzed, Montgomery Securities believed it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis, but
rather also made qualitative judgments concerning differences between the
characteristics of these transactions and the Offer and the Merger that would
affect the acquisition values of the Company and such acquired companies.
Common Stock Price Analysis. Montgomery Securities compared the Company's
common stock price performance from December 30, 1994 to January 28, 1997 and
from March 29, 1996 to January 28, 1997 against the offer of $8.00 per Share.
Montgomery Securities noted that the $8.00 offer per Share was above the closing
price for the Shares for all but nine trading days in the period from December
30, 1994 to January 28, 1997 and was above the closing price for the Shares for
all trading days in the period from March 29, 1996 to January 28, 1997.
Common Stock Trading Volume Analysis. Montgomery Securities analyzed the
historical daily trading volume of the Shares over various periods. Montgomery
Securities noted that of the Shares traded between January 1, 1995 and January
18, 1997, 7.2% of the Shares traded at or above $8.00 per Share; 20.5% of the
Shares traded between $7.00 and $7.99 per Share, 38.6% of the Shares traded
between $6.00 to $6.99 per Share; 23.6% of the Shares traded between $5.00 and
$5.99 per Share; and the remaining 10.1% of the Shares traded below $5.00 per
Share. Montgomery also noted that of the Shares traded between March 31, 1996
and January 28, 1997, no Shares traded at or above $7.00 per Share; 22.9% of the
Shares traded between $6.00 and $6.99 per Share; 57.4% of the Shares traded
between $5.00 and $5.99 per Share; and 19.7% of the Shares traded below $5.00
per Share.
Comparable Public Company Analysis. Montgomery Securities compared the
historical financial, operating and stock market performances of certain
publicly traded companies that it considered relevant with the historical
financial and operating performance of the Company, based upon publicly
available financial information.
Montgomery Securities examined the aggregate value to LTM revenue multiples
for Dekalb Genetics Corp., Delta & Pine Land Company, Pioneer Hi-Bred
International, Inc. and Mycogen Corp. Based on the aggregate value to LTM
revenue multiples for these companies, Montgomery Securities computed an average
aggregate value to LTM revenue multiple of 3.8x. Montgomery Securities noted
that the application of this multiple resulted in an implied valuation for the
Company of $7.08 per Share.
Montgomery Securities compared the price performance of the Shares from
December 30, 1994 to January 28, 1997 and from March 29, 1996 to January 28,
1997 to an index composed of three agricultural biotechnology companies: Mycogen
Corp., Ecogen, Inc. and DNA Plant Technology, Inc. (the "Agricultural
Biotechnology Index"). Using December 30, 1994 and March 29, 1996 as base
values, on January 28, 1997 the Share prices were 73.3% and 93.7% of their base
values on December 30, 1994 and March 29, 1996,
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<PAGE> 16
respectively, as compared to the Agricultural Biotechnology Index whose values
were of 176.9% and 123.3% of their base values on December 30, 1994 and March
29, 1996, respectively.
Montgomery Securities also compared the price performance of the Shares
from December 30, 1994 to January 28, 1997 and from March 29, 1996 to January
28, 1997 to the AMEX Biotechnology Index, comprised of 15 biotechnology
companies listed on the American Stock Exchange. Using December 30, 1994 and
March 29, 1996 as base values, on January 28, 1997 the Share prices were 73.3%
and 95.7% of their base values on December 30, 1994 and March 29, 1995,
respectively, as compared to the AMEX Biotechnology Index whose values were
192.5% and 117.2% of their base values on December 30, 1994 and March 29, 1996,
respectively.
Because of the inherent differences between the business, operations and
prospects of the Company and the businesses, operations and prospects of the
comparable companies considered in this analysis, Montgomery Securities believed
that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis, but rather also made qualitative judgments
concerning differences between the financial and operating characteristics and
prospects of the Company and the comparable companies that would affect the
public trading values of each.
The summary set forth above does not purport to be complete description of
the presentation by Montgomery Securities to the Special Committee or the
analyses performed by Montgomery Securities. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. Montgomery Securities believes that its 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 incomplete view of the process underlying the analyses set
forth in its presentation to the Special Committee. In addition, Montgomery
Securities 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 Securities' view
of the actual value of the Company. 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 arriving at its opinion,
Montgomery Securities did not ascribe a specific range of values to the Company,
but rather made its determination as to the fairness, from a financial point of
view, of the consideration received by the holders of the Company's common stock
(other than Parent and its affiliates) in the Offer and the Merger on the basis
of the financial and comparative analyses described above.
In performing its analyses, Montgomery Securities made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the Company. The
analyses performed by Montgomery Securities 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 Securities' analysis of the fairness of the transaction
contemplated by the Merger Agreement to the Company's stockholders and were
provided to the Special Committee in connection with the delivery of Montgomery
Securities' 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 Securities used in its analyses various projections of future
performance prepared by the management of the Company. 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.
Pursuant to the Engagement Letter, the Special Committee engaged Montgomery
Securities to act as its financial advisor in connection with a possible
transaction with Parent or an affiliated entity. The Company has agreed to pay
Montgomery Securities a fee equal to 0.85% of the total consideration involved
in the contemplated transactions. Pursuant to the Engagement Letter, the Company
has agreed to pay Montgomery Securities $500,000 upon rendering its opinion to
the Special Committee as to the fairness of the Offer, and will be obligated to
pay Montgomery Securities the remainder of its fee upon the closing of the
Offer. The
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Company has also agreed to reimburse Montgomery Securities for its reasonable
out-of-pocket expenses. Pursuant to a separate letter agreement, the Company had
agreed to indemnify Montgomery Securities, its affiliates, and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against certain liabilities, including liabilities under federal
securities laws.
In the ordinary course of business, Montgomery Securities actively trades
equity securities of the Company and Parent 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 Securities also has performed certain
investment banking services for the Company, as described above. Certain
partners of Montgomery Securities also own shares of Parent's common stock.
A copy of Montgomery Securities' report to the Special Committee and the
Company Board dated March 31, 1997 has been filed as an exhibit to the Rule
13e-3 Transaction Statement on Schedule 13E-3 filed with the SEC by Parent, the
Purchaser and the Company. Copies of Montgomery Securities' report and opinion
are available for inspection and copying at the principal executive offices of
the Company during regular business hours by any stockholder of the Company, or
a stockholder's representative who has been so designated in writing.
4. POSITION OF PARENT AND PURCHASER REGARDING THE FAIRNESS OF THE OFFER AND THE
MERGER
Parent and Purchaser believe that the consideration to be received by the
stockholders of the Company (other than Parent and Purchaser), pursuant to the
Offer and the Merger, is fair to such stockholders. Parent and Purchaser base
their belief on the following factors: (i) a Special Committee consisting of
directors who are neither designees of Parent nor officers of the Company was
appointed to represent the interests of the stockholders of the Company (other
than Parent and Purchaser); (ii) the Special Committee retained and was advised
by independent legal and financial advisors; (iii) the Special Committee and the
Company Board (with all directors who are employees of Parent abstaining) each
determined that the Offer and the Merger are fair to, and in the best interests
of, the stockholders of the Company (other than Parent and Purchaser), approved
the Merger Agreement and the transactions contemplated thereby and recommended
that the stockholders of the Company accept the Offer and the Merger; (iv) the
parties' awareness that, because the Restated Stockholders Agreement imposes
substantial restrictions on Parent's ability to acquire additional Shares,
Parent would generally be unable to acquire any additional Shares prior to
September 30, 1998 other than in a negotiated transaction approved by the
"independent directors" (as defined in the Restated Stockholders Agreement); (v)
the $8.00 per Share price to be paid in the Offer and the Merger and the other
terms and conditions of the Merger Agreement resulted from active arm's-length
bargaining between representatives of the Special Committee, on the one hand,
and Parent, on the other; (vi) the consideration to be paid in the Offer and the
Merger represents a premium of approximately 45.5% over the reported closing
price for the Shares on the last trading day prior to the public announcement of
the Acquisition Proposal; (vii) the historical financial performance of the
Company and its financial results, which include substantial accumulated losses;
and (viii) the presence of the Majority-of-the-Minority Condition, which may not
be waived without the consent of the Special Committee. Parent and Purchaser
have reviewed the factors considered by the Special Committee and the Company
Board in support of their decisions, as described in the
Solicitation/Recommendation Statement on Schedule 14D-9 and above, and have no
basis to question their consideration of or reliance on such factors. In
reaching their conclusions, Parent and Purchaser also considered generally the
current and historical market prices for the Shares. Neither Parent nor
Purchaser found it practicable to assign, nor did either of them assign,
relative weights to the individual factors considered in reaching their
conclusions as to fairness.
5. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; REASONS OF PARENT AND
PURCHASER FOR THE OFFER AND THE MERGER
Purpose and Structure. The purpose of the Offer is for Parent indirectly
to acquire the entire equity interest in the Company. The purpose of the Merger
is for Parent to acquire all of the equity interest in the Company not acquired
pursuant to the Offer. Upon consummation of the Merger, the Company will become
a wholly owned subsidiary of Parent. The acquisition of the entire equity
interest in the Company has been
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structured as a cash tender offer followed by a cash merger in order to provide
a prompt and orderly transfer of ownership of the equity interest in the Company
held by stockholders of the Company (other than Parent and Purchaser) from such
stockholders to Parent and to provide the stockholders of the Company (other
than Parent and Purchaser) with cash for all of their Shares.
Under the DGCL and the Company's certificate of incorporation, the approval
of the Company Board and, under certain circumstances, the affirmative vote of
the holders of a majority of the outstanding Shares are required to approve and
adopt the Merger Agreement and the transactions contemplated thereby, including
the Merger. If the Offer is consummated, Parent and Purchaser will have
sufficient voting power to cause the approval and adoption of the Merger
Agreement and the transactions contemplated thereby without the affirmative vote
of any other stockholder of the Company. Consummation of the Offer, however, is
conditioned upon satisfaction or waiver of the Majority-of-the-Minority
Condition, which may not be waived without the consent of the Special Committee.
Pursuant to the Merger Agreement, the purchase by Purchaser of all Shares
validly tendered in the Offer and not withdrawn is a condition to the Merger.
In the Merger Agreement, the Company has agreed to take all action
necessary to convene a special meeting of its stockholders as promptly as
practicable after the consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby, if such action is required under the DGCL. Parent and Purchaser have
agreed that all Shares owned by them and their subsidiaries will be voted in
favor of the Merger Agreement and the transactions contemplated thereby.
Under the DGCL, if, following consummation of the Offer, Purchaser owns at
least 90% of the Shares then outstanding, Purchaser will be able to cause the
Merger to occur without a vote of the Company's stockholders. In such event,
Parent, Purchaser and the Company have agreed to take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after consummation of the Offer without a meeting of the Company's
stockholders. In the event all of the conditions to the Offer set forth under
"The Offer -- Certain Conditions to the Offer" shall have been satisfied other
than the Majority-of-the-Minority Condition or the Ninety Percent Condition,
Purchaser may extend the Offer for a period or periods aggregating not more than
20 business days after the later of (i) the initial expiration date of the Offer
and (ii) the date on which all the other conditions to the Offer set forth under
"The Offer -- Certain Conditions to the Offer" other than the
Majority-of-the-Minority Condition or the Ninety Percent Condition have been
satisfied. If all of the conditions to the Offer have been satisfied or waived
other than the Ninety Percent Condition, then, on the later of (i) the initial
expiration date of the Offer and (ii) the latest expiration date of the Offer
permitted in accordance with the preceding sentence, Purchaser has agreed
pursuant to the Merger Agreement to waive the Ninety Percent Condition and
accept for payment all of the Shares validly tendered and not withdrawn as of
such date. If, following consummation of the Offer, Purchaser owns less than 90%
of the Shares then outstanding, a vote of the Company's stockholders will be
required under the DGCL to approve the Merger, and a significantly longer period
of time will be required to effect the Merger. See "THE OFFER -- Certain
Conditions of the Offer".
Parent's Reasons for the Offer and the Merger. Parent believes that a
closer working relationship and greater sharing of technologies between Parent
and the Company has the potential to enhance significantly the Company's ability
to develop and market commercially viable products more rapidly. Parent has
concluded, however, that (i) the current structure of the relationship does not
and is not likely to enable Parent to take full advantage of a variety of market
opportunities and to achieve the desired level of technology exchange and
cooperation and (ii) these benefits are more likely to be achieved if the
Company is under the full control of Parent so that the efforts of the two
companies could be jointly directed without the conflicts of interest that might
otherwise arise. Parent considered various means of expanding its collaboration
with the Company, including attempting to achieve an alignment or integration
through an expansion of the parties' commercial relationship without increasing
Parent's ownership of Shares. Parent has concluded, however, that these
approaches would not enable Parent to take full advantage of market
opportunities and to achieve the desired level of technology exchange and
cooperation. Consequently, Parent concluded that an acquisition by Parent of the
entire equity interest in the Company should be considered. Parent chose to
undertake the transaction at this time because the businesses in which Parent
and the Company operate are subject to rapid change and Parent wished to take
advantage of commercial opportunities that might not be available at a later
time.
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6. PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER; CERTAIN EFFECTS OF THE
OFFER AND THE MERGER
Pursuant to the Merger Agreement, promptly upon completion of the Offer,
Parent and Purchaser intend to effect the Merger in accordance with the terms of
the Merger Agreement. See "SPECIAL FACTORS -- The Merger Agreement".
Parent's management has begun, and intends to continue, a review of the
Company and its assets, corporate structure, capitalization, operations,
properties, policies, management and personnel to determine what changes, if
any, would be desirable in order best to organize and integrate the activities
of the Company and Parent. Parent expressly reserves the right to make any
changes that it deems necessary or appropriate in light of its review or in
light of future developments or that would be desirable to permit Parent to
manage the Company. Except as otherwise disclosed in this Offer to Purchase,
Parent has no present plans or proposals that would result in an extraordinary
corporate transaction involving the Company or any of its subsidiaries, such as
a merger, reorganization, liquidation, relocation of operations, or sale or
transfer of a material amount of assets.
As a result of the Offer, the interest of Parent in the Company's net book
value and net earnings will increase in proportion to the number of Shares
acquired in the Offer. If the Merger is consummated, Parent's interest in such
items and in the Company's equity generally will increase to 100% and Parent and
its subsidiaries will be entitled to all benefits resulting from that interest,
including all income generated by the Company's operations and any future
increase in the Company's value. Similarly, Parent will also bear the risk of
losses generated by the Company's operations and any decrease in the value of
the Company after the Merger. Subsequent to the Merger, current stockholders of
the Company (other than Parent and Purchaser) will cease to have any equity
interest in the Company, will not have the opportunity to participate in the
earnings and growth of the Company after the Merger and will not have any right
to vote on corporate matters. Similarly, stockholders will not face the risk of
losses generated by the Company's operations or decline in the value of the
Company after the Merger.
The Shares are currently traded on The Nasdaq Stock Market, Inc.'s National
Market ("NASDAQ"). See "THE OFFER -- Price Range of the Shares". Following the
consummation of the Merger, the Shares will no longer be quoted on NASDAQ and
the registration of the Shares under the Exchange Act will be terminated.
Accordingly, after the Merger there will be no publicly traded equity securities
of the Company outstanding and the Company will no longer be required to file
periodic reports with the SEC. See "THE OFFER -- Effect of the Offer on the
Market for the Shares; NASDAQ Quotation and Exchange Act Registration". It is
expected that if Shares are not accepted for payment by Purchaser pursuant to
the Offer and the Merger is not consummated, the Company's current management,
under the general direction of the Company Board, will continue to manage the
Company as an ongoing business.
7. RIGHTS OF STOCKHOLDERS IN THE MERGER
No appraisal rights are available in connection with the Offer. If the
Merger is consummated, however, stockholders of the Company who have not
tendered their Shares will have certain rights under the DGCL to dissent and
demand appraisal of, and to receive payment in cash of the fair value of, their
Shares. Stockholders who perfect such rights by complying with the procedures
set forth in Section 262 of the DGCL ("Section 262") will have the fair value of
their Shares (exclusive of any element of value arising from the accomplishment
or expectation of the Merger) determined by the Delaware Court of Chancery and
will be entitled to receive a cash payment equal to such fair value from the
Surviving Corporation. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is required
to take into account all relevant factors. Accordingly, such determination could
be based upon considerations other than, or in addition to, the market value of
the Shares, including, among other things, asset values and earning capacity. In
Weinberger v. UOP, Inc., the Delaware Supreme Court stated that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding. The Weinberger court also noted that under Section 262,
fair value is to be determined "exclusive
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of any element of value arising from the accomplishment or expectation of the
merger." In Cede & Co. v. Technicolor, Inc., however, the Delaware Supreme Court
stated that, in the context of a two-step cash merger, "to the extent that value
has been added following a change in majority control before cash-out, it is
still value attributable to the going concern," to be included in the appraisal
process. As a consequence of the foregoing, the fair value determined in any
appraisal proceeding could be the same as or more or less than the Merger
Consideration. See Annex B attached hereto for a detailed description of
appraisal rights under the DGCL, as well as the text of Section 262.
Parent does not intend to object, assuming the proper procedures are
followed, to the exercise of appraisal rights by any stockholder and the demand
for appraisal of, and payment in cash for the fair value of, the Shares. Parent
intends, however, to cause the Surviving Corporation to argue in an appraisal
proceeding that, for purposes of such proceeding, the fair value of each Share
is less than the Merger Consideration. In this regard, stockholders should be
aware that opinions of investment banking firms as to the fairness from a
financial point of view (including Montgomery Securities' opinion described
herein) are not necessarily opinions as to "fair value" under Section 262.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTION 262 INCLUDED
HEREWITH IN ANNEX B. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS ARE
CONDITIONED ON STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
Several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has a
fiduciary duty to other stockholders that requires that the merger be "entirely
fair" to such other stockholders. In determining whether a merger is fair to
minority stockholders, Delaware courts have considered, among other things, the
type and amount of consideration to be received by the stockholders and whether
there was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and in Rabkin v. Philip A. Hunt Chemical Corp. that although the
remedy ordinarily available to minority stockholders in a cash-out merger that
is found to be not fair to the minority stockholders is the right to appraisal
described above, monetary damages, injunctive relief or such other relief as the
court may fashion may be available if a merger is found to be the product of
procedural unfairness, including fraud, misrepresentation or other misconduct.
If the settlement of the Consolidated Action (as defined herein) receives
final court approval and the Consolidated Action is dismissed with prejudice,
the ability of stockholders (other than stockholders who have properly perfected
appraisal rights under Section 262 in connection with the Merger) to obtain
monetary damages or other relief could be foreclosed by virtue of such dismissal
and the release provisions typically included in such settlements. See "THE
OFFER -- Certain Legal Matters".
8. THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which appears as an Exhibit to the Tender Offer Statement on Schedule
14D-1 filed by Purchaser and Parent with the SEC in connection with the Offer.
Such summary is qualified in its entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable after the date thereof, but in no event
later than five business days after the initial public announcement of
Purchaser's intention to commence the Offer. The Merger Agreement further
provides that Purchaser shall not, without the consent of the Special Committee,
accept for payment any Shares tendered pursuant to the Offer unless at least a
majority of the then issued and outstanding Non-Affiliated Shares shall have
been validly tendered and not withdrawn prior to the expiration of the Offer,
thereby satisfying the Majority-of-the-Minority Condition. The obligation of
Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer is subject to the satisfaction or waiver of the Majority-of-the-Minority
Condition, the Ninety Percent Condition and certain other conditions that are
described in "THE OFFER -- Certain Conditions of the Offer". Purchaser and
Parent have agreed that no change in the Offer may be made which decreases the
Offer Price, changes the form of consideration payable in the Offer or
18
<PAGE> 21
reduces the maximum number of Shares to be purchased in the Offer or which
imposes conditions to the Offer in addition to those described in "THE
OFFER -- Certain Conditions of the Offer". Pursuant to the Merger Agreement, in
the event all conditions set forth in the Merger Agreement shall have been
satisfied or waived other than either the Majority-of-the-Minority Condition or
the Ninety Percent Condition, Purchaser may extend the Offer for a period or
periods aggregating not more than 20 business days after the later of (i) the
initial expiration date of the Offer and (ii) the date on which all other
conditions to the Offer other than the Majority-of-the-Minority Condition or the
Ninety Percent Condition shall have been satisfied or waived. If all of the
conditions to the Offer have been satisfied or waived other than the Ninety
Percent Condition, then, on the latest expiration date of the Offer permitted in
accordance with the preceding sentence, Purchaser shall waive the Ninety Percent
Condition and consummate the Offer.
The Merger. The Merger Agreement provides that as soon as practicable
after the purchase of Shares pursuant to the Offer and the satisfaction of the
other conditions set forth in the Merger Agreement and in accordance with the
relevant provisions of the DGCL, Purchaser will be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving Corporation
and will become a wholly owned subsidiary of Parent. At the Effective Time, each
Share issued and outstanding immediately prior to the Effective Time (other than
Shares held in the treasury of the Company, Shares owned by Parent, Purchaser or
any subsidiary of Parent or the Company or Shares held by stockholders who shall
have properly demanded and perfected appraisal rights under Section 262) will be
cancelled and converted automatically into the right to receive the Merger
Consideration.
Purchaser or the designated paying agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to the Merger
Agreement to any holder of Shares such amounts that Purchaser or the paying
agent is required to deduct and withhold with respect to the making of such
payment under the United States Internal Revenue Code of 1986, as amended (the
"Code"), the rules and regulations promulgated thereunder or any provision of
state, local or foreign tax law.
Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation. In addition, the Company is obligated under the
Merger Agreement to redeem all of the outstanding shares of its Series A
Preferred Shares not later than the day prior to the initial expiration date of
the Offer.
The Merger Agreement provides that the directors of Purchaser at the
Effective Time will be the initial directors of the Surviving Corporation and
that the officers of the Company at the Effective Time will be the initial
officers of the Surviving Corporation. The Merger Agreement provides that, at
the Effective Time, the certificate of incorporation of Purchaser will be the
certificate of incorporation of the Surviving Corporation; provided, however,
that, at the Effective Time, Article I of the certificate of incorporation of
the Surviving Corporation will be amended to read as follows: "The name of the
corporation is Calgene, Inc." The Merger Agreement also provides that the bylaws
of Purchaser will be the bylaws of the Surviving Corporation.
At the Effective Time, each holder of a Company Option issued pursuant to
the Company's 1981 Stock Option Plan, 1991 Stock Option Plan or 1996 Stock
Option Plan (each such plan, a "Company Stock Option Plan") shall become
entitled to receive from the Surviving Corporation, for each such Company
Option, an amount in cash equal to the product of (i) the excess, if any, of the
Merger Consideration over the applicable exercise price of each such Company
Option and (ii) the number of Shares such holder could have purchased had such
holder exercised such Company Option in full (without regard to exercisability)
immediately prior to the Effective Time, and thereafter each such Company Option
shall be cancelled; provided, however, that any holder of a Company Option may
instead have such Company Option assumed by the Surviving Corporation pursuant
to the terms of the Company Stock Option Plan pursuant to which such Company
Option was issued (each, an "Assumed Option"). After the Effective Time, each
Assumed Option shall (i) confer the right to receive from the Surviving
Corporation, for each Share subject to such Company Option immediately prior to
the Effective Time, and upon payment of the applicable exercise price per share
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<PAGE> 22
in effect with respect to such Company Option, the Merger Consideration, in
cash, and (ii) shall otherwise remain subject to all the terms and conditions
(including with respect to the exercisability thereof) applicable to such
Company Option pursuant to the option agreement related to such Company Option
and to the Company Stock Option Plan pursuant to which such Company Option was
issued. The Company has agreed to provide timely notification and an election
form to holders of Company Options as may be required by any Company Stock
Option Plan. After the Effective Time, no further Company Options shall be
granted pursuant to any Company Stock Option Plan; however, each Company Stock
Option Plan shall continue to govern any Assumed Option.
The Merger Agreement also provides that the Company shall take all such
action as may be necessary (i) to terminate the Company's Employee Stock
Purchase Plan established in March 1990 (the "Company Stock Purchase Plan") and
(ii) to cause the Shares entitled to be purchased pursuant to the Company Stock
Purchase Plan as of the Effective Time to be purchased and converted thereafter
in the Merger.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company, Parent and Purchaser as to corporate status and
the enforceability of the Merger Agreement against each such party and by the
Company as to its capitalization, compliance with law, the accuracy of financial
statements and filings with the SEC and the absence of certain material adverse
changes or events concerning the Company's business from December 31, 1996 to
the date of the Merger Agreement.
Covenants of Parent, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company shall, if required by applicable law in order to
consummate the Merger, duly call, give notice of, convene and hold a special
meeting of its stockholders as promptly as practicable following consummation of
the Offer for the purpose of considering and taking action on the Merger
Agreement and the transactions contemplated thereby (the "Stockholders'
Meeting"). At the Stockholders' Meeting, Parent and Purchaser shall cause all
Shares then owned by them to be voted in favor of the approval and adoption of
the Merger Agreement and the transactions contemplated thereby. Parent and
Purchaser currently have sufficient voting power to approve the Merger even if
no other stockholder votes in favor of the Merger. In the event that Purchaser
acquires such number of Shares that, when taken together with the Shares
previously owned by Parent and Purchaser, constitute at least 90% of the
outstanding Shares, the parties have agreed to take all necessary and
appropriate action to cause the Merger to become effective, in accordance with
Section 253 of the DGCL, as soon as reasonably practicable after such
acquisition, without a meeting of the stockholders of the Company.
The Merger Agreement provides that the Company shall, if required by
applicable law, as soon as practicable following consummation of the Offer, file
a proxy statement with the SEC under the Exchange Act (the "Proxy Statement"),
and shall use its best efforts to have the Proxy Statement cleared by the SEC.
Parent, Purchaser and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide promptly to Parent copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Parent and its counsel the opportunity to review and
comment upon the Proxy Statement prior to its being filed with the SEC and shall
give Parent and its counsel the opportunity to review and comment upon all
amendments and supplements to the Proxy Statement and participate in the
preparation of any written responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. The
Company and its counsel shall be given the opportunity to review and comment on
the Offer documents and any amendments thereto prior to the filing thereof with
the SEC. Parent and Purchaser shall provide the Company and its counsel with a
copy of any written comments or telephonic notification of any verbal comments
Parent or Purchaser may receive from the SEC or its staff with respect to the
Offer documents promptly after the receipt thereof and shall provide the Company
and its counsel with a copy of any written responses and telephonic notification
of any verbal responses of Parent, Purchaser or their counsel. Each of the
Company, Parent and Purchaser agrees to use its reasonable best efforts, after
consultation with the other parties, to respond promptly to all such comments of
and requests by the SEC and to cause the Proxy
20
<PAGE> 23
Statement and all required amendments and supplements thereto to be mailed to
the holders of Shares entitled to vote at the Stockholders' Meeting at the
earliest practicable time.
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the Effective Time, unless
Parent shall otherwise agree in writing: the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; the Company shall use its reasonable best efforts to
preserve substantially intact the business organization of the Company, to keep
available the services of the current officers and employees of the Company and
to preserve the current relationships of the Company with customers, suppliers
and other persons with which the Company has significant business relations; and
the Company shall not declare or pay dividends, split, combine or reclassify its
stock, issue convertible securities or issue rights, warrants or options to
purchase Shares other than shares issuable upon exercise of options issued
pursuant to Company Options or employee stock purchase plans outstanding as of
the date of the Merger Agreement.
Pursuant to the Merger Agreement, during the period prior to the purchase
of Shares pursuant to the Offer, Parent has covenanted to use its reasonable
best efforts not to interfere in any material respect with the Company's conduct
of its day-to-day operations except with respect to the rights and
responsibilities of Parent's designees on the Company Board or Parent's rights
and obligations under any contract or agreement with the Company.
The Company and Parent are each obligated under the Merger Agreement to
give each other prompt notice 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 the Merger Agreement to be untrue or
inaccurate and (ii) any failure of the Company, Parent or Purchaser, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it thereunder.
It is understood and agreed that all rights to indemnification by the
Company existing as of the date of the Merger Agreement in favor of each present
and former director and officer of the Company as provided in the Company's
certificate of incorporation or bylaws or pursuant to any other agreements in
effect as of such date shall survive the Merger and shall continue in full force
and effect for a period of at least six years from the Effective Time.
The Merger Agreement provides that Parent will, for a period of six years
from and after the Effective Time, indemnify and hold harmless each such
director and officer of the Company with respect to all acts and omissions
occurring before the Effective Time that are based on or arise out of his
service as a director or officer, including all acts and omissions in connection
with the amendment to the Restated Stockholders Agreement, the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
to the extent of the more favorable of (i) the Company's indemnification
arrangements with such directors and officers as of the date of the Merger
Agreement, (ii) the indemnification provisions of Parent's certificate of
incorporation or bylaws and (iii) any other indemnification arrangement that
Parent has with its directors.
Pursuant to the terms of the Merger Agreement and subject to the conditions
thereof, each of the parties thereto shall use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement, including, without limitation, using its reasonable best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for the consummation of
the transactions and to fulfill the conditions to the Offer and the Merger. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of the Merger Agreement, the proper officers
and directors of each party to the Merger Agreement and the Surviving
Corporation shall use their reasonable best efforts to take all such action.
Under the Merger Agreement, Parent and the Company agree to consult with
one another before issuing any press release or otherwise making any public
statements with respect to the Merger Agreement or the
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<PAGE> 24
transactions contemplated thereby. Parent and the Company further agree not to
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange to which Parent or the Company is a party.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) to the extent
required by the DGCL and the Company's certificate of incorporation and bylaws,
the Merger Agreement, the Merger and the transactions contemplated thereby shall
have been approved and adopted by the affirmative vote or consent of the
stockholders of the Company; (b) no foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect and
has the effect of: (i) making the acquisition of Shares by Parent or Purchaser
or any affiliate of either of them illegal or otherwise restricting, preventing
or prohibiting consummation of the transactions contemplated by the Merger
Agreement, (ii) seeking to prohibit or limit materially the ownership or
operation by the Company, Parent or any of their respective subsidiaries of all
or any material portion of the business or assets of the Company, Parent or any
of their respective subsidiaries as a result of the transactions contemplated by
the Merger Agreement or (iii) compelling the Company, Parent, Purchaser or any
of their respective subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of the Company, Parent or Purchaser
or any of their respective subsidiaries as a result of the transactions
contemplated by the Merger Agreement, provided, however, that each of the
parties shall have used its reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as practicable any
injunction or other order that may be entered; and (c) Purchaser shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer;
provided, however, that condition (c) shall not be applicable to the obligations
of Parent and Purchaser if, in breach of the Merger Agreement or the terms of
the Offer, Purchaser fails to purchase any Shares validly tendered and not
withdrawn pursuant to the Offer.
Termination; Fees and Expenses. The Merger Agreement may be terminated and
the Merger and the other transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the stockholders
of the Company: (a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company, if such termination is also approved by the
Special Committee; (b) by either Parent or the Company if the Effective Time
shall not have occurred on or before December 31, 1997, provided, however, that
such right to terminate shall not be available to any party whose failure to
fulfill any obligation under the Merger Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
(c) by either Parent or the Company if any court of competent jurisdiction or
other governmental authority shall have issued an order, decree, ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Offer or
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable; (d) by Parent if, due to an occurrence or circumstance
that would result in a failure of any condition set forth under "THE
OFFER" -- Certain Conditions of the Offer" to be satisfied, (i) Purchaser shall
not have commenced the Offer within 60 days following the date of the Merger
Agreement, (ii) the Offer shall have been terminated or expired in accordance
with its terms without Purchaser having accepted for payment any Shares pursuant
to the Offer or (iii) Purchaser shall have failed to pay for Shares pursuant to
the Offer within 90 days following the commencement of the Offer, unless, in the
case of clause (iii), such failure to pay for Shares shall have been caused by
or resulted from the failure of Parent or Purchaser to perform in any material
respect any material covenant or agreement of either of them contained in the
Merger Agreement or the material breach by Parent or Purchaser of any material
representation or warranty of either of them contained in the Merger Agreement;
(e) by the Company, upon approval of the Company Board and a majority of the
members of the Special Committee, if due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions set forth under "THE
OFFER" -- Certain Conditions of the Offer", Purchaser shall have (i) failed to
commence the Offer within 60 days following the date of the Merger Agreement,
(ii) terminated the Offer without having accepted any Shares for payment
thereunder or (iii) failed to pay for Shares pursuant to the Offer within 90
days following the commencement of the Offer, unless such failure to pay for
Shares shall have been caused by or resulted
22
<PAGE> 25
from the failure of the Company to perform in any material respect any material
covenant or agreement of it contained in the Merger Agreement or the material
breach by the Company of any material representation or warranty of it contained
in the Merger Agreement; or (f) by the Company, upon approval of the Company
Board and a majority of the members of the Special Committee, if Parent shall
have breached in any material respect its covenant relating to Parent's
involvement in the day-to-day management of the Company prior to the
consummation of the Offer, and Parent continues such breach following written
notice by the Company to Parent thereof.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void, and there shall be no liability on the
part of any party thereto, except nothing therein shall relieve any party
thereto from liability for any wilful breach thereof.
Except as set forth below, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such fees and expenses, whether or not the
transactions contemplated by the Merger Agreement are consummated. See "THE
OFFER -- Fees and Expenses".
9. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendations of the Company Board and the Special
Committee with respect to the Offer and the Merger and the fairness of the
consideration to be received in the Offer and the Merger, stockholders should be
aware that certain officers and directors of the Company have interests in the
Offer and the Merger which are described below and which may be in addition to
their interests as stockholders of the Company. Stockholders also should be
aware that Parent and Purchaser have certain interests that present actual or
potential conflicts of interest in connection with the Offer and the Merger. As
a result of Parent's current ownership of approximately 54.5% of the outstanding
Shares and its designees constituting a majority of the Company's directors,
Parent may be deemed to control the Company. The Special Committee and the
Company Board were each aware of these actual and potential conflicts of
interest and considered them along with the other matters described under
"SPECIAL FACTORS -- Recommendations of the Special Committee and the Company
Board; Fairness of the Offer and the Merger".
Parent and Purchaser have not been advised by the executive officers or
directors of the Company whether any of such persons intends to tender Shares
owned by them pursuant to the Offer.
Robson Shares. Mr. John E. Robson, a director of Parent, serves on the
Company Board as one of Parent's designees. In consideration of such service,
pursuant to a letter agreement (the "Robson Agreement"), dated May 6, 1996,
Parent transferred to Mr. Robson 15,000 Shares (the "Robson Shares"), which are
subject to a three-year vesting period under which one-third of the Robson
Shares become non-forfeitable on March 31 of each year, commencing March 31,
1997. Mr. Robson also participates in the Company's standard director
compensation arrangements with its non-employee directors. The Robson Agreement
provides for, among other things, acceleration of the vesting of the Robson
Shares upon the occurrence of certain events, among which are (i) the cessation
of Mr. Robson's service as a non-employee director of the Company for any reason
other than his voluntary resignation or removal for Cause (as defined in the
Robson Agreement) or (ii) a "Change of Control," defined as either (x) the
acquisition by Parent of 90% of the then issued and outstanding Shares or (y)
the disposition by Parent of substantially all of the Shares then owned by
Parent.
In addition, the Company granted Mr. Robson two options to purchase Shares
under the Company's 1996 Stock Option Plan. The first option, which is for the
purchase of 10,000 Shares, was granted on March 31, 1996 at an exercise price of
$5.75 per Share and is fully exercisable. The second option, which is for the
purchase of 10,000 Shares, was granted on September 20, 1996 at an exercise
price of $5.25 per Share and becomes exercisable in equal 1/12th increments over
twelve months from the date of grant. Both options have a term of ten years.
Change of Control and Severance Agreements. Mr. Salquist has entered into
a Change of Control Employment Agreement with the Company, dated as of July 19,
1995. The agreement provided that, upon a
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<PAGE> 26
Change of Control (as defined therein) of the Company, if Mr. Salquist's
employment were to be terminated thereafter by the Company without Cause (as
defined therein) or by Mr. Salquist for Good Reason (as defined therein) within
the three-year term of the agreement or if he were to resign upon the six-month
or three-year anniversary of the effective date of the agreement, he would
receive severance benefits that would include a payment equal to 2.99 times his
base salary and average bonus for the prior three fiscal years. For purposes of
such agreement, the closing of transactions in connection with the
Reorganization Agreement on March 31, 1996 constituted a Change of Control. See
"SPECIAL FACTORS -- Background of the Offer and the Merger".
In connection with his resignation as Chief Executive Officer in August
1996, Mr. Salquist and the Company entered into an amendment to his Change of
Control Employment Agreement pursuant to which Mr. Salquist agreed that payments
required to be made to him under such agreement would be paid over a 13 month
period rather than in a lump sum. The amended agreement provided for the payment
of $315,000 upon Mr. Salquist's resignation and monthly payments of $25,000
during a 12 month consulting period and an additional payment of $290,000 at the
end of the 12 month period.
Severance Arrangements. In connection with the Offer and the Merger,
Parent has agreed to make the following provisions for severance payments to be
made to certain eligible employees of the Company (including certain senior
level employees of the Company, but excluding the President and Acting Chief
Executive Officer of the Company, Lloyd M. Kunimoto) whose separation from the
Company results from the restructuring, consolidation and/or integration of the
operations of the Company with or into those of Parent (each such eligible
employee, a "Covered Person"). Each Covered Person who is currently a Vice
President of the Company shall receive (i) six months of base salary if such
Covered Person has up to five years of service or (ii) 12 months of base salary
if such Covered Person has more than five years of service.
With respect to Mr. Kunimoto, Parent has agreed to make the following
severance payments in the event of a separation occurring on or before December
31, 1997: 24 months of base salary if Mr. Kunimoto is not offered a position
with the Surviving Corporation, and 12 months of base salary if Mr. Kunimoto is
offered a position but subsequently elects to separate from the Surviving
Corporation; provided, however, that in either case no severance payments shall
result in the event Mr. Kunimoto is terminated for cause.
In all cases, severance payments shall be made by the Company, in the case
of separations occurring prior to the consummation of the Merger, and by Parent,
in the case of separations occurring thereafter until December 31, 1997.
Furthermore, in the case of all Covered Persons, the payment of severance as set
forth above is conditioned on each such Covered Person executing a release of
all claims against the Company and Parent, among others, and the failure to
execute such a release will result in severance payments of one-quarter of one
month's base salary for each year of service with the Company or Parent plus
one-quarter of one month's base salary in lieu of notice of termination.
10. SHARE OWNERSHIP BY PARENT AND PURCHASER
As of April 7, 1997, Parent owns (i) 30,146,114 Shares which were acquired
in connection with the Reorganization Agreement and (ii) 6,250,000 Shares which
were acquired in connection with the Stock Purchase Agreement, representing
approximately 54.5% of the Shares outstanding and approximately 53.3% of the
Shares outstanding on a Fully Diluted Basis. See "SPECIAL FACTORS -- Background
of the Offer and the Merger". Purchaser owns no Shares as of the date hereof.
Prior to the Effective Time, if necessary or desirable in connection with the
Merger, Parent will contribute all of its Shares to Purchaser.
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<PAGE> 27
11. BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information, as of February 28,
1997, regarding the ownership of Shares by each person known by the Company to
be the beneficial owner of more than 5% of the outstanding Shares, as well as
each director of the Company, the Acting Chief Executive Officer of the Company,
certain other officers of the Company, and all executive officers and directors
of the Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY APPROXIMATE PERCENT
OWNED(1) OWNED(2)
------------------- -------------------
<S> <C> <C>
Andrew M. Baum...................................... 57,780 *
Patrick J. Fortune.................................. -- --
Robert T. Fraley.................................... -- --
Jeffrey D. Gargiulo................................. 16,667 *
Michael R. Hogan.................................... -- --
Lloyd M. Kunimoto................................... 42,226 *
Christian Leleu..................................... 30,833 *
Howard D. Palefsky.................................. 17,000 *
John E. Robson...................................... 30,000 *
Roger H. Salquist................................... 248,340 *
Richard Stonard..................................... 23,333 *
Allen J. Vangelos................................... 21,600 *
Hendrik A. Verfaillie............................... -- --
All executive officers and directors as a group (16
persons).......................................... 598,654 *
Monsanto Company(3)................................. 36,396,114 54.5%
Travelers Group Inc. and Affiliates(4).............. 4,076,654 6.1%
</TABLE>
- ---------------
* Less than 1%
(1) The Company has advised Parent and Purchaser that it 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 January 31, 1997, by the exercise of any
Company Option of which the Company has knowledge. The Shares subject to
such Company Options are as follows: Mr. Baum: 49,079; Mr. Gargiulo: 16,667;
Mr. Leleu: 20,833; Mr. Stonard: 23,333; Mr. Kunimoto: 35,329; Mr. Palefsky:
17,000; Mr. Robson: 15,000: Mr. Salquist: 224,762; Mr. Vangelos: 21,000; and
all executive officers and directors as a group: 531,804.
(2) Percent of the 66,741,035 Shares outstanding as of April 2, 1997, counting
as outstanding for each named person all Shares issuable to such person on
exercise of Company Options that are included in the first column.
(3) Percentage calculated without taking into account Shares issuable on
exercise of Company Options.
(4) Based on an Information Statement Pursuant to Rules 13d-1 and 13d-2 on
Schedule 13G filed by Travelers Group Inc. and Smith Barney Holdings Inc.
with the SEC on January 22, 1997 with respect to Shares beneficially owned
as of December 31, 1996.
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<PAGE> 28
THE OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for all Shares validly
tendered on or prior to the Expiration Date and not theretofore withdrawn in
accordance with the provisions set forth under "THE OFFER -- Withdrawal Rights".
The term "Expiration Date" means 12:00 midnight, New York City time, on Friday,
May 2, 1997, unless and until Purchaser in its sole discretion, but subject to
the terms and conditions of the Merger Agreement, shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
Purchaser, shall expire.
The Offer is conditioned upon, among other things, satisfaction (or waiver
with approval of the Special Committee) of the Majority-of-the-Minority
Condition and satisfaction or waiver of the Ninety Percent Condition and the
other conditions to the Offer set forth under "THE OFFER -- Certain Conditions
of the Offer".
Subject to the applicable rules and regulations of the SEC, Purchaser
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement), at any time and from time to time, upon
the failure to be satisfied of any of the conditions to the Offer set forth
under "THE OFFER -- Certain Conditions of the Offer" (except that, under certain
circumstances Purchaser has agreed pursuant to the Merger Agreement to waive the
Ninety Percent Condition), to (i) terminate or amend the Offer, (ii) extend the
Offer and postpone acceptance for payment of any Shares, or (iii) waive any
condition (except, without the consent of the Special Committee, for the
Majority-of-the-Minority Condition), by giving oral or written notice of such
termination, amendment, extension or waiver to the Depositary and by making a
public announcement thereof. During any such extension, all Shares previously
tendered and not properly withdrawn will remain subject to any such extension,
and all Shares previously tendered and not properly withdrawn will remain
subject to the Offer, subject to the right of a tendering stockholder to
withdraw such stockholder's Shares. See "THE OFFER -- Withdrawal Rights". In the
event all conditions set forth under "THE OFFER -- Certain Conditions of the
Offer" shall have been satisfied other than the Majority-of-the-Minority
Condition or the Ninety Percent Condition, Purchaser may extend the Offer for a
period or periods aggregating not more than 20 business days after the later of
(i) the initial expiration date of the Offer and (ii) the date on which all
other conditions set forth under "THE OFFER -- Certain Conditions of the Offer"
other than the Majority-of-the-Minority Condition or the Ninety Percent
Condition shall have been satisfied. If all of the conditions to the Offer have
been satisfied or waived other than the Ninety Percent Condition, then, on the
latest expiration date of the Offer permitted in accordance with the preceding
sentence, Purchaser has agreed pursuant to the Merger Agreement to waive the
Ninety Percent Condition and accept for payment all of the Shares validly
tendered and not withdrawn as of such date. UNDER NO CIRCUMSTANCES WILL INTEREST
BE PAID ON THE PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT PURCHASER
EXERCISES ITS RIGHT TO EXTEND THE OFFER.
Any termination, amendment, extension or waiver will be followed as
promptly as practicable by public announcement. In the case of an extension,
Rule 14e-1(d) under the Exchange Act requires that the announcement be made no
later than 9:00 a.m., Eastern time, on the next business day after the
previously scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change), and without limiting the manner in which Purchaser may choose to make
any public announcements, Purchaser will not have any obligations to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release to the Dow Jones News Service. As used herein, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern
Time.
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<PAGE> 29
If Purchaser extends the Offer or if Purchaser (whether before or after its
acceptance for payment of the Shares) is delayed in its acceptance for payment
of or payment for any Shares validly tendered and not withdrawn in the Offer or
Purchaser is unable to accept for payment or pay for such Shares pursuant to the
Offer for any reason, then, without prejudice to Purchaser's rights under the
Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and
such Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in "THE OFFER -- Withdrawal Rights".
The ability of Purchaser to delay the payment for the Shares that Purchaser has
accepted for payment, however, is limited by Rule 14e-1(c) under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If Purchaser or Parent makes a material change in the terms of the Offer or
the information concerning the Offer or waives a material condition of the
Offer, Purchaser will, or Parent will cause Purchaser to, disseminate additional
tender offer materials and extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which an offer must remain open following material changes in the terms of the
offer or information concerning the offer, other than a change in price or a
change in the percentage of securities sought, or a change in the dealer's
advisory fee, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. In the
SEC's view, an offer should remain open for a minimum of five business days from
the date a material change is first published, sent or given to securityholders,
and, if material changes are made with respect to information that approaches
the significance of price and share levels, a minimum of ten business days may
be required to allow for adequate dissemination and investor response. With
respect to a change in price or, subject to certain limitations, a change in the
percentage of securities sought or a change in a dealer's solicitation fee, a
minimum period of ten business days from the date of such change is generally
required under the applicable rules and regulations of the SEC to allow for
adequate dissemination to stockholders and investor response.
The Company has provided Purchaser with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed by Purchaser to stockholders of record and
will be furnished by Purchaser to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on such
stockholder lists or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES
Valid Tender. For a stockholder to validly tender Shares pursuant to the
Offer, either (i) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees, or an
Agent's Message (as defined below) in connection with a book-entry delivery of
Shares, and any other required documents, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase, and
Share Certificates for tendered Shares must be received by the Depositary at one
of such addresses or such Share Certificates must be delivered pursuant to the
procedures for book-entry transfer set forth below (and a Book-Entry
Confirmation (as defined below) received by the Depositary), in each case on or
prior to the Expiration Date or (ii) the tendering stockholder must comply with
the guaranteed delivery procedures set forth below.
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company ("DTC") and the Philadelphia
Depositary Trust Company ("PDTC") (DTC and PDTC, each, a "Book-Entry Transfer
Facility" and, collectively, the "Book-Entry Transfer Facilities") for purposes
of the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in a Book-Entry Transfer
Facility may make book-entry delivery of Shares by causing the book-entry
transfer system to transfer such Shares into the Depositary's account at a
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. Although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal, properly completed and
duly executed, with any required
27
<PAGE> 30
signature guarantees, or an Agent's Message (as defined below) in connection
with a book-entry transfer, and any other required documents, must, in any case,
be transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase on or prior to the Expiration
Date, or the tendering stockholder must comply with the guaranteed delivery
procedures described below. The confirmation of a book-entry transfer of Shares
into the Depositary's account at a Book-Entry Transfer Facility as described
above is referred to herein as a "Book-Entry Confirmation". DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS BOOK-ENTRY
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received the
Letter of Transmittal and agrees to be bound by the terms of the Letter of
Transmittal and that Purchaser may enforce such agreement against such
participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING STOCKHOLDER
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED AT THE DEPOSITARY.
IF DELIVERY IS BY MAIL, THEN INSURED OR REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this Section, includes any
participant in a Book-Entry Transfer Facility system whose name appears on a
security position listing as the owner of the Shares) tendered therewith and
such registered holder(s) has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
such Letter of Transmittal or (ii) such Shares are tendered for the account of a
bank, broker, dealer, credit union, savings association or other entity that is
a member in good standing of the Securities Transfer Agents Medallion Program
(an "Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instructions 1
and 5 to the Letter of Transmittal. If the Share Certificates are registered in
the name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made or Share Certificates not validly tendered or not accepted
for payment or not purchased are to be issued or returned to a person other than
the registered holder of the Share Certificates, the tendered Share Certificates
must be endorsed in blank or accompanied by appropriate stock powers, signed
exactly as the name or names of the registered holder(s) appear on the Share
Certificates with the signatures on such Share Certificates or stock powers
guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary on or prior to the Expiration Date, such Shares may nevertheless be
tendered provided that all of the following guaranteed delivery procedures are
duly complied with:
(1) such tender is made by or through an Eligible Institution;
(2) the Depositary receives (by hand, mail, telegram or facsimile
transmission) on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
provided by Purchaser; and
(3) the Share Certificates representing all tendered Shares, in proper
form for transfer (or a Book-Entry Confirmation with respect to such
Shares), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees
(or in the case of Book-Entry Transfer, an Agent's Message) and any other
documents required by the Letter of Transmittal, are received by the
Depositary within three NASDAQ trading days after the date of execution of
such Notice of Guaranteed Delivery. A "NASDAQ trading day" is any day on
which NASDAQ is open for business.
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<PAGE> 31
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or by mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) Share Certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof) for such Shares, properly completed and duly executed, with
any required signature guarantees, or, in the case of Book-Entry Transfer, an
Agent's Message, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, tendering stockholders may be paid at different times
depending upon when Share Certificates, Book-Entry Confirmations and such other
documents are actually received by the Depositary. Under no circumstances will
interest be paid by Purchaser on the purchase price of the Shares to any
tendering stockholders, regardless of any extension of the Offer or any delay in
making such payment.
Purchaser's acceptance for payment of Shares validly tendered pursuant to
any of the procedures described above will constitute a binding agreement
between the tendering stockholder and Purchaser upon the terms and subject to
the conditions of the Offer.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by Purchaser, in its sole discretion, which determination
will be final and binding. Purchaser reserves the absolute right to reject any
or all tenders determined by it not to be in proper form or the acceptance for
payment of or payment for which may, in the opinion of Purchaser's counsel, be
unlawful. Purchaser also reserves the absolute right to waive any of the
conditions of the Offer (other than the Majority-of-the-Minority Condition,
which can only be waived with the consent of the Special Committee) or any
defect or irregularity in any tender with respect to any particular Shares, or
with respect to those Shares held by any particular stockholder, whether or not
similar conditions, defects or irregularities are waived in the case of other
Shares. No tender of Shares will be deemed to have been validly made until all
defects or irregularities relating thereto have been cured or waived. None of
Parent, Purchaser, any of its affiliates or assigns, the Depositary, the
Information Agent, the Dealer Manager or any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. Purchaser's interpretation
of the terms and conditions of the Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding.
Backup Withholding. In order to avoid backup withholding of Federal income
tax on payments of cash pursuant to the Offer, a stockholder tendering Shares in
the Offer must provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on a Substitute Form W-9 and certify under
penalties of perjury that such TIN is correct and that such stockholder is not
subject to backup withholding. Certain stockholders (including, among others,
all corporations and certain foreign individuals and entities) are not subject
to backup withholding. If a stockholder does not provide its correct TIN or
fails to provide the certification described above, under Federal income tax
laws, the Depositary will be required to withhold 31% of the amount of any
payment made to such stockholder pursuant to the Offer. All stockholders
tendering Shares pursuant to the Offer should complete and sign the Substitute
Form W-9 included as part of the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is provided in a manner satisfactory to
Purchaser and the Depositary). Noncorporate foreign stockholders should complete
and sign a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
Instruction 11 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn pursuant to the procedures set forth below at any time prior to the
Expiration Date, and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after June 5, 1997. If
Purchaser extends the Offer, is
29
<PAGE> 32
delayed in its acceptance for payment of Shares or is unable to purchase Shares
validly tendered pursuant to the Offer for any reason, then without prejudice to
Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf
of the Purchaser, retain tendered Shares and such Shares may not be withdrawn
except to the extent that tendering stockholders are entitled to withdrawal
rights as described in this section. Any such delay will be accompanied by an
extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn if Share Certificates have been tendered
and the name of the registered holder of the Shares to be withdrawn as set forth
on such Share Certificates if different from the name of the person who tendered
the Shares. If Share Certificates have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer as set forth under "THE OFFER -- Procedure for Accepting
the Offer and Tendering Shares", any notice of withdrawal must specify the name
and number of the account at the appropriate financial institution that is a
member of the system of a Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures for such withdrawal, in which case a notice of withdrawal will be
effective if delivered to the Depositary by any method of delivery described in
the first sentence of this paragraph. Withdrawals of tenders of Shares may not
be rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. Withdrawn Shares may be retendered
by again following one of the procedures described above under "THE
OFFER -- Procedure for Accepting the Offer and Tendering Shares" at any time on
or prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination shall be final and binding. None of Parent, Purchaser, any
of their affiliates or assigns, the Depositary, the Information Agent, the
Dealer Manager or any other person will be under any duty to give notification
of any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will purchase, by accepting for payment, and will pay
for, all Shares validly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the terms set forth under "THE
OFFER -- Withdrawal Rights" promptly after the later to occur of (i) the
Expiration Date or (ii) the satisfaction or waiver (where permissible) of the
terms and conditions set forth under "THE OFFER -- Certain Conditions of the
Offer". Any determination concerning the satisfaction or waiver of such terms
and conditions will be within the sole discretion of Purchaser, which
determination will be final and binding on all holders of Shares. See "THE
OFFER -- Terms of the Offer" and "THE OFFER -- Dividends and Distributions".
Subject to applicable rules of the SEC and the terms and conditions of the
Merger Agreement, Purchaser expressly reserves the right, in its sole
discretion, to delay acceptance for payment of or payment for Shares in order to
comply in whole or in part with any applicable law. Any such delays will be
effected in compliance with Purchaser's obligation under Rule 14e-1(c) under the
Exchange Act to pay for or return tendered Shares promptly after the termination
or withdrawal of the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) Share
Certificates (or timely Book-Entry Confirmation of the book-entry transfer of
such Shares into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedures set forth under "THE OFFER -- Procedure for Accepting
the Offer and Tendering Shares"), (ii) the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, together with any
30
<PAGE> 33
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer and (iii) any other documents required by the Letter of
Transmittal.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
properly withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. In all cases, upon the terms and subject to the conditions of the Offer,
payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payment from
Purchaser and transmitting payment to such validly tendering stockholders. UNDER
NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON THE PURCHASE PRICE OF THE
SHARES TENDERED PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER
OR ANY DELAY IN MAKING SUCH PAYMENT. Upon the deposit of funds with the
Depositary for the purpose of making payments to tendering stockholders,
Purchaser's obligation to make such payments shall be satisfied and tendering
stockholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares pursuant
to the Offer. Purchaser will pay any stock transfer taxes with respect to the
transfer and sale to it or its order pursuant to the Offer, except as otherwise
provided in Instruction 6 of the Letter of Transmittal, as well as any charges
and expenses of the Depositary and the Information Agent.
If Purchaser is delayed in its acceptance for payment of, or payment for
tendered Shares or is unable to accept for payment or pay for such Shares
pursuant to the Offer for any reason, then, without prejudice to Purchaser's
rights under the Offer (but subject to Purchaser's obligations under Rule
14e-1(c) under the Exchange Act to pay for or return the tendered Shares
promptly after the termination or withdrawal of the Offer), the Depositary may,
nevertheless, retain tendered Shares on behalf of Purchaser, and such Shares may
not be withdrawn except to the extent tendering stockholders are entitled to
exercise, and duly exercise, withdrawal rights as described under "THE
OFFER -- Withdrawal Rights".
If any tendered Shares are not purchased pursuant to the Offer because of
an invalid tender or for any reason, Share Certificates for any such Shares will
be returned, without expense, to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility pursuant to the procedures set forth
under "THE OFFER -- Procedure for Accepting the Offer and Tendering Shares",
such Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable after the expiration, termination or
withdrawal of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of Purchaser's subsidiaries or affiliates, the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer or prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for purchase.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The summary of Federal income tax consequences set forth below is for
general information only and is based on Purchaser's understanding of the law as
currently in effect. The tax consequences to each stockholder will depend in
part upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States and stockholders who acquired their Shares
through the exercise of an employee stock option or otherwise as compensation.
ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE
APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR
FOREIGN INCOME AND OTHER TAX LAWS AND OF CHANGES IN SUCH TAX LAWS.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for Federal income tax purposes under the Code, and may also be a
taxable transaction under applicable state, local or foreign income and other
tax laws. Generally, for Federal income tax purposes, a tendering stockholder
will recognize gain or
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<PAGE> 34
loss in an amount equal to the difference between the cash received by the
stockholder pursuant to the Offer and the stockholder's adjusted tax basis in
the Shares tendered by the stockholder and purchased pursuant to the Offer. For
Federal income tax purposes, such gain or loss will be a capital gain or loss if
the Shares are a capital asset in the hands of the stockholder, and a long-term
capital gain or loss if the stockholder's holding period is more than one year.
Legislative proposals have been under consideration that would reduce the
rate of Federal income taxation of certain capital gains. Such legislation, if
enacted, might apply only to gain realized on sales occurring after a date
specified in the legislation. It cannot be predicted whether any such
legislation ultimately will be enacted and, if enacted, when its effective date
will be.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) that
tenders Shares may be subject to 31% backup withholding unless the stockholder
provides its TIN and certifies that such number is correct or properly certifies
that it is awaiting a TIN, or unless an exemption applies. A stockholder who
does not furnish its TIN may be subject to a penalty imposed by the IRS. See
"THE OFFER -- Procedure for Accepting the Offer and Tendering Shares".
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an appropriate income tax return.
The receipt of cash by stockholders pursuant to the Merger should result in
similar Federal income tax consequences to such stockholders similar to those
described above.
6. PRICE RANGE OF THE SHARES
The Company's common stock is traded over the counter on NASDAQ under the
symbol CGNE. The following table sets forth for the periods indicated the high
and low sale prices of the common stock as reported by NASDAQ.
<TABLE>
<CAPTION>
CALGENE, INC.
------------------
HIGH LOW
------- ------
<S> <C> <C>
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 5.750
Quarter ended June 30, 1995..................................... 9.625 5.375
FISCAL 1996
Quarter ended September 30, 1995................................ 8.125 6.625
Quarter ended December 31, 1995................................. 7.250 4.250
Quarter ended March 31, 1996.................................... 7.375 4.500
Quarter ended June 30, 1996..................................... 6.875 5.375
SIX MONTHS ENDED DECEMBER 31, 1996
Quarter ended September 30, 1996................................ 6.875 4.250
Quarter ended December 31, 1996................................. 6.000 4.375
FISCAL 1997
Quarter ended March 31, 1997.................................... 7.563 4.875
Quarter ending June 30, 1997 (through April 4, 1997)............ 7.938 7.750
</TABLE>
On January 28, 1997, the last full day of trading prior to the public
announcement of the Acquisition Proposal, according to published sources, the
reported closing price of the Shares on NASDAQ was $5.500
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<PAGE> 35
per Share. On March 31, 1997, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, according to published
sources, the closing price of the Shares on NASDAQ was $5.563 per Share. On
April 4, 1997, the last full day of trading before the commencement of the
Offer, according to published sources, the reported closing price of the Shares
on NASDAQ was $7.875 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES.
The Company has never declared or paid cash dividends and the Company has
advised Purchaser that it does not intend to declare any dividend in the
foreseeable future. The ability of the Company to pay dividends is subject to
certain restrictions under certain indebtedness of the Company as well as the
terms of the Calgene Credit Facility Agreement (as defined below) and the
Gargiulo Credit Facility Agreement (as defined below) the Company has with
Parent.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
General. The following description of the Company's business has been
taken from the Company's Transition Report on Form 10-K for the six-month period
ended December 31, 1996 (the "Transition 10-K"):
Calgene is a biotechnology company that is developing a portfolio of
genetically engineered plants and plant products for the food, seed and
oleochemical industries. The Company's research and business efforts are
focused in three core crop areas -- fresh produce (tomato and strawberry),
edible and industrial plant oils (canola) and cotton -- where Calgene
believes biotechnology can provide substantial added commercial value in
consumer, industrial and seed markets.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and, in accordance therewith, is
required to file periodic reports, proxy statements and other information with
the SEC relating to its business, financial condition and other matters. Certain
information as of particular dates concerning the Company's directors and
officers (including their remuneration and stock options granted to them),
Shares held by them, the principal holders of the Company's securities and any
material interest of such persons in transactions with the Company and certain
other matters is required to be disclosed in proxy statements and annual reports
distributed to the Company's stockholders and filed with the SEC. Such reports,
proxy statements and other information are available for inspection and copying
at the public reference facilities of the SEC located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the SEC located in the Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and in Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies also may be obtained, by mail, upon payment of
the SEC's customary charges by writing to the SEC's principal office at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC
also maintains an Internet site on the World Wide Web at <http://www.sec.gov>
that contains reports, proxy statements and other information. The information
also should be available at The Nasdaq Stock Market, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
Directors and Officers. The name, address, principal occupation or
employment, five-year employment history, and citizenship of each director and
executive officer of the Company is set forth in Schedule II hereto.
Results for Quarter Ended December 31, 1996. On March 13, 1997, the
Company issued the following press release with respect to its financial results
for the quarter ended December 31, 1996:
Calgene, Inc. today announced a pro forma net loss of $13,475,000
($0.21 per share) on revenues of $33,329,000 for the quarter ended December
31, 1996. This compares with a net loss of $5,730,000 ($0.19 per share) on
revenues of $11,678,000 during the same period last year. The pro forma net
loss is before non-cash asset write-downs, and other restructuring expenses
totaling $32,605,000 at Gargiulo, Inc., Calgene's produce company. The
$21,651,000 or 185% increase in revenues compared to the same period of the
prior year was due to the inclusion of operating results from Gargiulo,
which Calgene acquired in March, 1996. The pro forma net loss is $7,745,000
higher than the comparable period of the prior year primarily due to losses
at Gargiulo. Sales from Calgene's cotton seed subsidiary occur primarily in
the quarters ended March 31 and June 30.
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<PAGE> 36
For the six months ended December 31, 1996, Calgene reported a pro
forma net loss of $31,329,000 ($0.50 per share) on revenues of $70,509,000,
compared to a net loss of $16,104,000 ($0.53 per share) on revenues of
$20,790,000 during the same period last year. After asset write-downs and
reserves, Calgene's net loss for the six-month period was $63,934,000
($1.03 per share). Effective January 1, 1997, Calgene changed its fiscal
year end from June 30 to December 31. The six month period ended December
31, 1996 is a transitional fiscal period.
"The operating results in the December, 1996 quarter were largely due
to low tomato prices," said Lloyd Kunimoto, President of Calgene. "In
response to these market conditions, we have consolidated and streamlined
operations, and significantly reduced expenses. As a result of these
measures, we believe our cost structure is now very competitive in today's
tomato market." said Mr. Kunimoto.
The non-cash asset write-downs, and other restructuring expenses
reflect the consolidation of redundant farming and packing operations,
which resulted from the merging of Collier Farms and Calgene Fresh
(Calgene's former fresh market tomato subsidiary) into Gargiulo's Southwest
Florida operations and the reduction of acreage. "The size of our Southwest
Florida operation now reflects the balance we are seeking between Florida
and Mexico. We intend to increase our production in Mexico, where we have
established partnerships with leading producers of vine-ripe tomatoes,"
said Mr. Kunimoto.
The Company also announced the establishment of a multi-year working
capital line of credit with Bank of America. The line of credit is $20
million in 1997, increasing to $30 million in 1998 and $40 million until
its expiration in December, 1999. "We are pleased that we have established
a relationship with Bank of America. Our partnership will help provide
Calgene, with the working capital needed for its produce operation and will
help to finance the scale-up of Calgene's transgenic product line,
including Laurical oil, BXN cotton and BXN/Bollgard cotton," said Mr.
Kunimoto.
Selected Consolidated Financial Data. The selected consolidated financial
information of the Company and its subsidiaries set forth below, and the
information set forth in Schedule III hereto, was excerpted and derived from the
Company's Transition 10-K, which included audited financial statements for the
six-month period ended December 31, 1996 and for the fiscal years ended June 30,
1995 and 1996, as filed by the Company with the SEC. More comprehensive
financial information is included in the Transition 10-K (including management's
discussion and analysis of results of operations and financial position) and
other documents filed with the SEC. The following summary financial information
is qualified in its entirety by reference to such documents and all other
reports and documents filed with the SEC and all of the financial statements and
related notes contained therein. Such reports and certain other reports may be
examined and copies may be obtained at the offices of the SEC in the manner set
forth in above. A copy of the financial statements set forth in the Transition
10-K is reproduced as Schedule III hereto.
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<PAGE> 37
CALGENE, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED
DECEMBER 31,(4) AT OR FOR THE YEARS ENDED JUNE 30,
-------------------- --------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA(1)
Revenues:
Product sales.............. $ 69,780 $ 19,940 $ 95,723 $ 48,972 $ 35,408 $ 24,675 $ 18,211
Product development........ 729 850 9,272 6,459 3,025 2,562 3,666
-------- -------- -------- -------- -------- -------- --------
Total revenues........... $ 70,509 $ 20,790 $104,995 $ 55,431 $ 38,433 $ 27,237 $ 21,877
-------- -------- -------- -------- -------- -------- --------
Loss from continuing
operations................. $(63,934) $(16,104) $(97,014) $(30,602) $(42,801) $(25,223) $(18,616)
Net loss..................... $(63,934) $(16,104) $(97,014) $(30,602) $(42,801) $(25,623) $(19,916)
NET LOSS PER SHARE(2)
Loss from continuing
operations............... $ (1.03) $ (.53) $ (2.56) $ (1.04) $ (1.71) $ (1.11) $ (1.34)
Net loss................... $ (1.03) $ (.53) $ (2.56) $ (1.04) $ (1.71) $ (1.13) $ (1.42)
CONSOLIDATED BALANCE SHEET
DATA:
Total assets............... $173,880 $ 78,960 $233,302 $ 89,231 $ 78,312 $ 88,401 $ 85,223
Long-term obligations...... $ 54,727 $ 23,853 $ 57,912 $ 15,421 $ 5,704 $ 3,694 $ 4,378
Preferred Stock(3)......... $ -- $ -- $ -- $ -- $ -- $ -- $ 29,506
Common stock and additional
paid-in capital.......... $417,648 $223,329 $367,554 $223,191 $190,961 $169,506 $111,119
</TABLE>
- ---------------
(1) As described in the Transition 10-K, acquisitions during 1993 and 1996
affect the comparability of the selected financial data.
(2) Applicable to holders of common stock.
(3) Includes additional paid-in capital allocable to Preferred Stock.
Substantially all the Preferred Stock was converted to common stock in July
1992.
(4) Effective January 1, 1997, the Company changed its fiscal year end from June
30 to December 31.
Book value per Share was $1.19, $1.55 and $1.52 as of December 31, 1996,
June 30, 1996 and June 30, 1995, respectively. Because the Company has recorded
a net loss for the 1995 and 1996 fiscal years and for the six month period ended
December 31, 1996, the ratio of earnings to fixed charges for those periods is
not meaningful.
Certain Projections. In the ordinary course of the Company's business
planning and budgeting process, the Company's management develops and presents
to the Company Board projections of the future performance of the Company.
THE PROJECTIONS SET FORTH BELOW WERE DEVELOPED FOR PLANNING PURPOSES ONLY
AND ARE NOT TO BE REGARDED AS FACTS AND SHOULD NOT BE RELIED UPON AS ACCURATE
REPRESENTATIONS OF FUTURE RESULTS. SUCH PROJECTIONS ARE BASED ON NUMEROUS
ESTIMATES AND ASSUMPTIONS WHICH THEMSELVES ARE BASED UPON EVENTS AND
CIRCUMSTANCES THAT HAVE NOT TAKEN PLACE AND ARE INHERENTLY SUBJECT TO
SIGNIFICANT FINANCIAL, MARKET, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND ARE
BEYOND PARENT'S AND THE COMPANY'S CONTROL, THEY ARE INHERENTLY IMPRECISE AND
THERE CAN BE NO ASSURANCE THAT THE PROJECTED RESULTS CAN BE REALIZED. THEREFORE,
IT IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN THE ACTUAL AND PROJECTED
RESULTS AND THAT THE ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE
PROJECTED. THE PROJECTIONS WERE NOT PREPARED IN CONTEMPLATION OF THE OFFER OR
THE MERGER AND, THEREFORE, DO NOT REFLECT ANY BENEFITS OR COSTS THAT COULD
RESULT AS A CONSEQUENCE OF CONSUMMATION OF THE OFFER OR THE MERGER. NONE OF THE
35
<PAGE> 38
COMPANY, PARENT NOR ANY OTHER PARTY ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY
OF SUCH INFORMATION. THE INCLUSION OF THE PROJECTIONS SET FORTH BELOW SHOULD NOT
BE REGARDED AS A REPRESENTATION BY PARENT OR ANY OF THEIR AFFILIATES OR
REPRESENTATIVES OR BY THE COMPANY OR ANY OF ITS AFFILIATES OR REPRESENTATIVES
THAT THE PROJECTED RESULTS WILL BE ACHIEVED. THE PROJECTIONS SET FORTH BELOW
WERE NOT PREPARED WITH A VIEW TOWARDS PUBLIC DISCLOSURE OR COMPLYING WITH
PUBLISHED GUIDELINES OF THE COMMISSION OR GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE PROJECTIONS HAVE NOT BEEN
EXAMINED, REVIEWED OR COMPILED BY THE COMPANY'S INDEPENDENT AUDITORS, AND
ACCORDINGLY THEY HAVE NOT EXPRESSED AN OPINION OR ANY OTHER ASSURANCE ON THEM.
CALGENE MANAGEMENT PROJECTIONS -- CONSOLIDATED
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PROJECTED
-------------------------------------------------------
YEARS ENDED DEC. 31, 1997 1998 1999 2000 2001
- ----------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues................................. $200.3 $270.1 $335.9 $431.7 $554.7
Operating Profit......................... 3.3 22.2 32.1 52.3 72.6
Net Income............................... (0.2) 10.1 20.1 40.1 60.0
Earnings (loss) Per Share(a)............. $ (0.00) $ 0.15 $ 0.30 $ 0.61 $ 0.91
</TABLE>
- ---------------
(a) Assumes 66 million shares outstanding.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
Purchaser. Purchaser is a Delaware corporation and has not carried on any
activities other than in connection with the Offer and the Merger. The principal
offices of Purchaser are located at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167. Purchaser is a wholly owned subsidiary of Parent.
Parent. Parent is a corporation organized under the State of Delaware. Its
principal offices are located at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167. Parent and its subsidiaries are engaged in the worldwide
manufacture and sale of a diversified line of agricultural products,
pharmaceuticals, food ingredients and chemical products. In December 1996,
Parent's Board of Directors approved a plan, subject to stockholder approval and
certain other conditions, to spin off Parent's chemical businesses to Parent's
stockholders.
The name, citizenship, business address, principal occupation or employment
and five-year employment history and certain other information for each of the
directors and executive officers of Purchaser and Parent are set forth in
Schedule I hereto.
As of April 7, 1997, Parent owned (i) 30,146,114 Shares which it acquired
in connection with the Reorganization Agreement and (ii) 6,250,000 Shares which
it acquired in connection with the Stock Purchase Agreement, representing
approximately 54.5% of the Shares outstanding. Prior to the Effective Time, if
necessary or desirable in connection with the Merger, Parent will contribute all
of its Shares to Purchaser. Except as described in this Offer to Purchase, (i)
none of Purchaser, Parent nor, to the best knowledge of Purchaser and Parent,
any of the persons listed in Schedule I to this Offer to Purchase or any
associate or majority-owned subsidiary of Purchaser, Parent or any of the
persons so listed beneficially owns or has any right to acquire, directly or
indirectly, any Shares and (ii) none of Purchaser, Parent nor, to the best
knowledge of Purchaser and Parent, any of the persons or entities referred to
above nor any director, executive officer or subsidiary of any of the foregoing
has effected any transaction in the Shares during the past 60 days.
Except as provided in the Merger Agreement or as otherwise described in
this Offer to Purchase, none of Purchaser, Parent nor, to the best knowledge of
Purchaser and Parent, any of the persons listed in Schedule I to this Offer to
Purchase, has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or voting of such securities, finder's fees, joint ventures,
36
<PAGE> 39
loan or option arrangements, puts or calls, guarantees of loans, guarantees
against loss, guarantees of profits, division of profits or loss or the giving
or withholding of proxies. Except as set forth in this Offer to Purchase, since
July 1, 1993, neither Purchaser nor Parent nor, to the best knowledge of
Purchaser and Parent, any of the persons listed on Schedule I hereto, has had
any business relationship or transaction with the Company or any of its
executive officers, directors or affiliates that is required to be reported
under the rules and regulations of the SEC applicable to the Offer. Except as
set forth in this Offer to Purchase, since July 1, 1993, there have been no
contacts, negotiations or transactions between any of Purchaser, Parent, or any
of their subsidiaries or, to the best knowledge of Purchaser and Parent, any of
the persons listed in Schedule I to this Offer to Purchase, on the one hand, and
the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
9. FINANCING OF THE OFFER AND THE MERGER
The total amount of funds required by Purchaser to consummate the Offer and
the Merger and to pay related fees and expenses is estimated to be approximately
$257 million. Parent will ensure that Purchaser has sufficient funds to acquire
all the outstanding Shares pursuant to the Offer and the Merger. Parent will
provide such funds initially through commercial paper borrowings at market rates
at the time of issuance.
Parent anticipates that any indebtedness incurred through borrowings will
be refinanced from time to time. Such decision will be made based on Parent's
review from time to time of the advisability of particular actions, as well as
on prevailing interest rates and financial and other economic conditions and
such other factors as Parent may deem appropriate.
10. INTERCOMPANY ARRANGEMENTS BETWEEN PARENT AND THE COMPANY
Commercial Contracts and Agreements. In addition to the Reorganization
Agreement, the Original Stockholders Agreement, the Stock Purchase Agreement,
the Restated Stockholders Agreement (each of which is described under "SPECIAL
FACTORS -- Background of the Offer and the Merger") and the Merger Agreement,
Parent and the Company have entered into a number of commercial contracts and
agreements. Following is a summary of certain of such arrangements.
Parent and the Company 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, the Company assigned certain patent rights to Parent and
Parent granted the Company 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 the Company to Parent totalled $50,290
in fiscal 1996 and $48,701 in fiscal 1995. No royalties were paid in fiscal 1993
or 1994.
Parent and the Company entered into an agreement dated as of April 22,
1993, pursuant to which Parent granted the Company a worldwide, non-exclusive,
royalty-bearing license under its patent rights relating to
Agrobacterium-mediated plant transformation. No royalties were paid by the
Company to Parent in fiscal 1993, 1994, 1995 or 1996.
Parent and the Company entered into a license agreement dated as of April
22, 1993 pursuant to which Parent granted the Company a worldwide,
non-exclusive, royalty-bearing license under its patent rights relating to
antibiotic marker genes. The Company paid Parent $12,573 in fiscal 1996 and
$12,175 in fiscal 1995 with respect to such license. No amounts were paid in
fiscal 1993 or 1994.
Parent and the Company entered into a license agreement dated as of April
22, 1993, under which Parent granted the Company a worldwide, non-exclusive,
royalty-bearing license under its U.S. patent rights relating to an
Agrobacterium-based method for soybean transformation. The Company did not pay
any amounts in fiscal 1993, 1994, 1995 or 1996, with respect to such license.
Parent and the Company entered into a license agreement dated as of April
22, 1993, under which the Company granted Parent a world-wide, non-exclusive,
royalty-bearing license under its patent rights relating
37
<PAGE> 40
to certain methods for transformation of Brassica and tomatoes. Parent did not
pay any royalties in fiscal 1993, 1994, 1995 or 1996.
Parent and the Company entered into a license agreement dated as of April
23, 1993, under which the Company granted Parent a non-exclusive,
royalty-bearing license under its U.S. Agrobacterium-related patent rights.
Parent did not pay any royalties to the Company in fiscal 1993, 1994, 1995 or
1996.
Parent and the Company entered into a license agreement dated as of April
22, 1993, under which the Company granted Parent 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. Parent did
not pay any royalties in fiscal 1993, 1994, 1995 or 1996.
Parent and the Company 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 to the use
of ACC-deaminase in plants to control ethylene production in certain fruits.
Neither Parent nor the Company paid any royalties pursuant to such agreement in
fiscal 1993, 1994, 1995 or 1996.
Parent and the Company entered into an Insect-Protected Cotton License and
Seed Services Agreement dated as of September 26, 1995, pursuant to which Parent
granted to the Company a non-exclusive license in the U.S. to make and sell
transgenic cotton seed containing Parent's B.t. technology to cotton farmers
licensed to use such seed by Parent. In return for providing such seed to
farmers licensed by Parent, Parent provides a seed services fee to the Company.
In December 1994, Parent and the Company, together with certain unrelated
third parties, entered into a settlement agreement regarding the Company's
patent rights relating to glyphosate resistant gene technology. Pursuant to the
terms of such settlement agreement, the Company granted Parent an exclusive
world-wide, paid-up license under its patent rights with respect to such
technology. Upon execution of the agreement, Parent paid $8 million jointly to
the Company and Rhone-Poulenc Agrochimie, an unrelated third party.
Parent and the Company executed an agreement effective as of September 26,
1995 pursuant to which Parent is to provide certain B.t. genes to the Company
for evaluation purposes only. Parent and the Company are under no obligation to
enter into a license agreement for commercial terms.
Financial Arrangements between the Company and Parent.
As a result of Parent's approximate 54.5% ownership interest in the
Company, the Company and Parent have a number of intercompany financial,
operating and other arrangements and have engaged in certain intercompany
transactions believed to be mutually beneficial. These arrangements include the
following:
Calgene Credit Facility Agreement. On March 31, 1996, Parent and the
Company entered into the Calgene Credit Facility Agreement pursuant to which
Parent shall, during the Commitment Period (as hereinafter defined), and subject
to the terms and conditions contained therein, make, at the request of the
Company, three consecutive one-year loans of up to $15 million each (each a
"Calgene Loan" and together the "Calgene Loans"), collectively totalling not
more than $45,000,000. At no time shall the outstanding principal of all Calgene
Loans exceed $15 million. Prior to the occurrence of an Event of Default (as
defined in the Calgene Credit Facility Agreement), the Company may borrow, repay
and reborrow under each Calgene Loan, each such borrowing or reborrowing being
an "Advance". The "Commitment Period" began on March 31, 1996 and ends on the
earlier of September 30, 1998, or such earlier time that Parent terminates its
obligations to make further Advances under the Calgene Credit Facility
Agreement. The Calgene Loans made pursuant to the Calgene Credit Facility
Agreement are to be secured by the joint and several guaranty of the
subsidiaries of the Company.
Prior to the occurrence of an Event of Default, the Calgene Loans bear
interest at the per annum rate equal to 2.00% above Citibank's published prime
rate (the "Calgene Base Rate"), and following an Event of Default at the per
annum rate equal to 3.00% above the Calgene Base Rate. During the continuance of
an Event of Default, the Company shall have no right to obtain any new Advances
under this Agreement. The
38
<PAGE> 41
Calgene Loans may be prepaid in whole or in part at any time after giving at
least three days prior written notice to Parent.
In lieu of repayment of outstanding principal and accrued interest on each
Calgene Loan, the Company, subject to Parent'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 Calgene
Loan (the "Conversion Amount") into Shares at the average of the closing market
price for such Shares during the thirty trading days immediately preceding the
applicable maturity date for such Calgene Loan.
Parent may, in its sole discretion and within five business days after its
receipt of notice from the Company that the Company intends to exercise the
Company's rights to convert the Conversion Amount, give written notice to the
Company stating that (i) all or any part of the Conversion Amount shall be
payable in cash (the "Alternative Conversion Amount"), (ii) the Company shall,
at its expense, sell publicly such number of Shares as Parent 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 the Company to
Parent 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 Calgene Loan as of the
applicable maturity date, and any remaining portion of the Conversion Amount
shall be applied to reduce the principal due on such Calgene Loan. In any event,
on each annual Maturity Date (as defined in the Calgene Credit Facility
Agreement), all outstanding principal and accrued interest not converted by the
Company into Shares shall be repaid in full to Parent.
Upon the occurrence and during the continuation of an Event of Default, for
a period of thirty days from the occurrence of the Event of Default, the
Company, subject to Parent's right to require the Company to sell Shares and pay
cash, as described above, may similarly elect to convert all or any portion of
the principal and accrued interest under any outstanding Calgene Loan into
Shares. If the Company does not elect to exercise its conversion rights upon
such an Event of Default, Parent may, in addition to its other remedies, elect
to convert all or a portion of the remaining principal and accrued interest
under such Calgene Loan into Shares 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 Parent elect to convert principal and accrued interest
into more than 3,000,000 Shares (as such number is adjusted for stock dividends,
stock splits and similar events affecting holders of the Shares).
The obligation of Parent 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 the Company and its subsidiaries;
(ii) the compliance with all covenants contained in the Calgene Credit Facility
Agreement; (iii) no event shall have occurred which would constitute an Event of
Default or Potential Event of Default (as defined in the Calgene Credit Facility
Agreement); or (iv) there shall not have occurred any circumstance which could
reasonably be expected to have a material adverse effect on (A) the business,
assets, operations or financial condition of the Company and its subsidiaries,
taken as a whole, or (B) the ability of the Company and its subsidiaries to
perform their obligations under the Calgene Credit Facility Agreement.
The covenants contained in the Calgene Credit Facility Agreement require
the Company to maintain a minimum consolidated net worth of not less than $10
million and a minimum consolidated working capital of not less than $5 million.
The Calgene Credit Facility Agreement also requires that the Company and its
subsidiaries meet certain specified financial ratios, including a ratio of total
long-term liabilities to net worth and a current ratio. In addition, the Calgene
Credit Facility Agreement imposes a number of limitations on the Company 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 the
Company'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 the Company'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 the
Company to satisfy these covenants would cause an Event of Default which could
have a material adverse effect on its business and results of operations.
39
<PAGE> 42
All of the Calgene Loans shall be subordinated and subject in right of
payment to the prior payment in full of a certain senior indebtedness of the
Company as more fully described in the Calgene Credit Facility Agreement. No
payment on account of principal or interest on the Calgene Loans shall be made
if at the time of such payment or immediately after giving the effect thereto:
(i) there shall exist a default in any payment with respect to any such senior
indebtedness or (ii) there shall have occurred an event of default (other than a
default in the payment of amounts due thereon) with respect to any such senior
indebtedness.
As of February 28, 1997, there was no outstanding balance of principal and
interest under the Calgene Credit Facility Agreement.
Gargiulo Credit Facility Agreement. On March 31, 1996, Parent and the
Company entered into the Gargiulo Credit Facility Agreement pursuant to which
Parent shall, during the Commitment Period (as hereinafter defined), and subject
to the terms and conditions contained therein, make available to the Company a
revolving credit facility of up to $40 million (the "Gargiulo Loan").
The Gargiulo Loan has been used to acquire Collier Farms and to support the
branded tomato strategy of Gargiulo as determined by the Gargiulo Board of
Directors (other than amounts used to finance the acquisition of Collier Farms).
Prior to the occurrence of an Event of Default (as defined in the Gargiulo
Credit Facility Agreement), Gargiulo may borrow, repay and reborrow, each such
borrowing or reborrowing being an "Advance". In order to obtain an Advance from
Parent under the Gargiulo Credit Facility Agreement, Gargiulo must provide
documentation reasonably acceptable to Parent verifying that Gargiulo has
reached certain milestones and achieved certain goals as set forth therein. The
maximum amount of each Advance is subject to certain limitations based upon such
milestones and goals. The "Commitment Period" began on March 31, 1996 and ends
on the earlier of the fourth anniversary or such earlier time that Parent
terminates its obligations to make further Advances. The Gargiulo Loan is
secured by the joint and several guaranty of the subsidiaries of the Company.
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, the Company 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 Parent.
The Gargiulo Loan is payable, unless extended as described below, in one
payment on the fourth anniversary of the Effective Time (the "Maturity Date") in
an amount equal to the lesser of (i) the Repayment Portion of the Cumulative
Free Cash Flow (as defined in the Gargiulo Credit Facility Agreement) of
Gargiulo from the Effective Time to the Maturity Date and (ii) the amount of the
outstanding principal and accrued interest on the Gargiulo Loan. "Repayment
Portion" means the sum of 20% of the first $10 million of Cumulative Free Cash
Flow, 50% of the next $10 million and 80% of the remaining balance. In the event
that the Repayment Portion is not sufficient to pay all of the then outstanding
principal and accrued interest at the Maturity Date, the maturity date with
respect to the unpaid amount of outstanding principal and interest shall be
extended to the sixth anniversary of the Effective Time (the "Extended Maturity
Date"). In the event the Repayment Portion of the Cumulative Free Cash Flow
(less amounts previously paid) is not sufficient to pay the then outstanding
principal and accrued interest at the Extended Maturity Date, the Company shall
pay Parent such lesser amount and Parent, 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 at the average of the
closing market prices for such Shares during the thirty trading days immediately
preceding the date of such conversion, (ii) further extend the Final Maturity
Date (as defined in the Gargiulo Credit Facility Agreement) upon the same terms
as are contained in the Gargiulo Credit Facility Agreement, or (iii) as to any
unpaid amount which is not converted under clause (i) or for which payment is
not extended pursuant to clause (ii), cause the Company to sell publicly that
number of Shares as Parent would have received if such amount has been converted
under clause (i) above with the net proceeds of such sale being delivered to
Parent in full payment and satisfaction of such amount.
Upon the occurrence and during the continuation of an Event of Default,
Parent may, in addition to its other remedies, similarly elect to convert all or
any portion of the principal and accrued interest under the
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Gargiulo Loan (the "Gargiulo Conversion Amount") into Shares 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 Parent elect to convert principal
and accrued interest into more than 8,000,000 Shares (as such number is adjusted
for stock dividends, stock splits and similar events affecting holders of the
Shares). 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 Parent 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 the Company 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 the Company 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
the Company 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 the Company 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 the
Company 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 the Company'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
the Company'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 the Company 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 the Company as more
fully described in the Gargiulo Credit Facility Agreement. No payment on account
of principal or interest on the Gargiulo Loan shall be made if at the time of
such payment or immediately after giving the effect thereto, (i) there shall
exist a default in any payment with respect to any such senior indebtedness or
(ii) there shall have occurred an event of default (other than a default in the
payment of amounts due thereon) with respect to any such senior indebtedness.
As of February 28, 1997, the outstanding balance of principal and interest
under the Gargiulo Credit Facility Agreement was $27.1 million.
Subordination Agreement. In February 1997, Parent and the Company entered
into a subordination agreement (the "Subordination Agreement") pursuant to which
Parent's claims against the Company, including claims under the Calgene Credit
Facility Agreement and the Gargiulo Credit Facility Agreement, but not including
certain trade receivables (such claims, the "Covered Claims") were subordinated
to the claims of Bank of America National Trust and Savings Association, a
national banking association ("Bank of America") under a business loan agreement
between the Company and Bank of America, entered into in February 1997 (the
"Business Loan"). Also pursuant to the Subordination Agreement, Parent agreed
not to take certain actions with respect to the collection, enforcement or
transfer of the Covered Claims without 45 days prior written notice to Bank of
America (except with respect to regularly scheduled payments of principal and
interest then due and owing under the Calgene Credit Facility Agreement or the
Gargiulo Credit Facility Agreement) or at any time there exists a default in
payment under the Business Loan; provided, however, that Parent shall in any
case maintain its rights to convert into Shares the indebtedness under the
Calgene Credit Facility Agreement and the Gargiulo Credit Facility Agreement.
The Subordination Agreement also provides
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that, in case of any (a) assignment for the benefit of creditors of the Company,
(b) proceeding under the Bankruptcy Code, (c) appointment of a receiver for the
Company's business or assets or (d) dissolution or winding up of the Company's
affairs, the Company will pay principal and interest to Bank of America under
the Business Loan in full prior to any making any payment to Parent of principal
and interest under a Covered Claim, as well as other matters, as more fully
described in the Subordination Agreement.
Technology Agreements between Parent and the Company.
License Agreements. As part of the transaction consummated in connection
with the Reorganization Agreement in March 1996, Parent contributed certain
technology licenses to the Company 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 the
Company to improve the efficiency of its tomato production operations. The
Company has been 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 Parent's ACC Synthase license from the
USDA.
Fruit-specific Promoters. Promoters control the expression of genes
in each plant cell. In order for certain genes to function in a beneficial
manner, expression of these genes must be restricted to certain parts of
the plant. Fruit-specific promoters provide a means of limiting gene
expression to the fruit. For example, these promoters may be useful in
regulating carbohydrate metabolism (e.g., sugar content) in ripening fruits
such as tomatoes and strawberries. The Company has been granted
non-exclusive, perpetual, royalty-free rights to certain fruit-specific
promoters for use in certain produce crops.
Virus Resistance Genes. Virus infection is known to significantly
reduce the yields of certain crops, including tomatoes. Parent 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. The Company has been granted
non-exclusive, perpetual, royalty-free or royalty-bearing rights to certain
aspects of Parent'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. The
Company 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. Such an oil would be a superior cooking oil, as
well as a superior raw material for the production of margarine and
shortening. The Company has been granted exclusive, perpetual,
royalty-bearing rights to the FAD 3 gene for use in certain oilseed crops.
Insect Resistance Gene. Parent has modified genes from a soil
microorganism called Bacillus thurengiensis ("B.t.") the encode proteins
that are toxic to certain insects. Use of insecticides to control insects
is a major cost in the production of tomatoes. The Company has been granted
non-exclusive, perpetual, royalty-free rights to Parent's B.t. patent
estate for use in certain produce crops.
ADP Glucose Pyrophosphorylase ("ADP GPP") Gene. The ADP GPP gene is a
bacterial gene involved in starch biosynthesis. By expression of this gene
in plants, the starch and/or sugar content of plants can be increased. This
may improve the flavor or sweetness of produce crops such as tomatoes or
strawberries. The Company has been granted non-exclusive, perpetual,
royalty-free rights to Parent's patent estate related to ADP GPP for use in
certain produce crops. Parent and the Company are parties to an
interference at the United States Patent and Trademark Office relating to
the ADP GPP gene.
Oil Modification Technology. Parent 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. Parent oil modification genes include sucrose phosphorylase,
cytochrome b5 and PEP carboxylase. The Company
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has been granted non-exclusive, perpetual, royalty-free rights under
Parent's patents and know-how for use in certain oilseed crops.
Insect Protected Cotton Direct Grower Licensing Agreement. The Company has
entered into an agreement with Parent under which the Company will participate
in the direct licensing of Parent's B.t. technology to cotton growers. Parent
granted to the Company a non-exclusive license in the U.S. to make and sell
transgenic cotton seed containing Parent's B.t. technology to cotton farmers
licensed to use such seed by Parent. In return for providing such seed to
farmers licensed by Parent, Parent provides a seed services fee to the Company
which represents a specified portion of the license fee obtained from the cotton
grower. The material terms of the license fee to the Company's agreement shall
be modified to reflect any more favorable terms that may be granted to any other
cotton seed company that may participate in the direct licensing program.
Parent 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
Parent's B.t. gene in return for the payment of a license fee. Parent has agreed
to pay to the Company a specified percentage of the net license fees received
from licensed growers who subsequently purchase the Company's cottonseed
products containing Parent's B.t. gene. The material terms of the Company'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.
Oilseed Development Agreement. In May 1996, the Company and Parent
executed a broad strategic cross-licensing agreement encompassing the two
companies' oilseed research programs. Under the agreement, the Company received
a royalty free license to current and future Parent agronomic technology for use
in combination with the Company's proprietary oils modification genes for use in
developing specialty canola oil product. Parent received a royalty bearing
license to the Company technology to develop agronomically superior corn,
soybean, canola and sunflower crops. In addition, Parent paid $7 million to the
Company and will pay royalties based on sales of insect resistant corn, soybean,
canola and sunflower seed with increased oil content and modified meal
composition utilizing the Company technology. Also as part of the agreement,
Parent paid the Company $10 million in cash to help fund oilseed research and
development. In exchange, Parent will receive a portion of the future profits
from the Company's specialty oils business.
Kelco Agreement. In January 1997, the Company and The Nutra Sweet Kelco
Company ("Kelco") entered into an agreement to collaborate on the development of
two specialty vegetable oil products. Kelco is a wholly owned subsidiary of
Parent. As part of the agreement, Kelco purchased from the Company a non-
exclusive license to certain Company technology for use in research purposes, an
option to expand the research license to include commercialization rights and
certain product distribution rights.
11. DIVIDENDS AND DISTRIBUTIONS
If, on or after March 31, 1997, the Company should declare or pay any
dividend on the Shares or make any other distribution (including the issuance of
additional shares of capital stock pursuant to a stock dividend or stock split,
the issuance of other securities or the issuance of rights for the purchase of
any securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares purchased pursuant to the Offer, then, without prejudice to Purchaser's
rights under "THE OFFER -- Certain Conditions of the Offer", (i) the Offer Price
per Share payable by Purchaser pursuant to the Offer will be reduced (subject to
the Merger Agreement) to the extent any such dividend or distribution is payable
in cash and (ii) any non-cash dividend, distribution or right shall be received
and held by the tendering stockholder for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all the rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by Purchaser in its sole discretion.
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12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ QUOTATION AND
EXCHANGE ACT REGISTRATION
The purchase of Shares by Purchaser pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly, will reduce the number of
holders of Shares and could thereby adversely affect the liquidity and market
value of the remaining publicly held Shares.
NASDAQ Listing. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the standards for continued inclusion
in NASDAQ. According to NASDAQ's published guidelines, the Shares would not be
eligible to be included for listing if, among other things, the number of
publicly held Shares falls below 500,000, the number of holders of Shares falls
below 400 or the aggregate market value of such publicly held Shares falls below
$3,000,000. If these standards are not met, the Shares might continue to be
listed on The Nasdaq SmallCap Market, Inc., but if the number of holders of the
Shares falls below 300, or if the number of publicly held Shares falls below
100,000, or if the aggregate market value of such publicly held Shares falls
below $200,000 or there are not at least two registered and active market makers
(one of which may be a market maker entering a stabilizing bid), NASDAQ rules
provide that the securities would no longer qualify for inclusion in NASDAQ and
NASDAQ would cease to provide any quotations. Shares held directly or indirectly
by an officer or director of the Company or by a beneficial owner of more than
10% of the Shares will ordinarily not be considered as being publicly held for
purposes of these standards. In the event the Shares are no longer eligible for
NASDAQ quotation, quotations might still be available from other sources. The
extent of the public market for the Shares and the availability of such
quotations would, however, depend upon the number of holders of such Shares
remaining at such time, the interest in maintaining a market in such Shares on
the part of securities firms, the possible termination of registration of such
Shares under the Exchange Act as described below and other factors.
Purchaser has been advised by the Company that as of April 2, 1997, there
were approximately 2,935 holders of record of the Shares. The Company has
advised Purchaser that it believes that the number of beneficial owners of the
Shares as of April 2, 1997 is in excess of 31,000.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares for the purpose of
buying, carrying or trading in securities ("Purpose Loans"). Depending upon
factors similar to those described above regarding the continued listing, public
trading and market quotations of the Shares, it is possible that, following the
purchase of the Shares pursuant to the Offer, the Shares would no longer
constitute "margin securities" for the purposes of the margin regulations of the
Federal Reserve Board and therefore could no longer be used as collateral for
Purpose Loans made by brokers.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the SEC if the Shares are not listed on a national securities
exchange and there are fewer than 300 record holders. The termination of the
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Shares and to
the SEC and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with stockholders' meetings and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 under the Securities Act. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for NASDAQ reporting. Purchaser currently intends to seek to
cause the Company to terminate the registration of the Shares under the Exchange
Act as soon after consummation of the Offer as the requirements for termination
of registration are met.
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13. CERTAIN CONDITIONS OF THE OFFER
Any other provision of the Offer notwithstanding, Purchaser shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance for
payment of, and payment for, Shares tendered, if (i) the Majority-of-the-
Minority Condition shall not have been satisfied (or waived with approval of the
Special Committee) as of the expiration of the Offer (as it may be extended by
Purchaser from time to time), (ii) the Ninety Percent Condition shall not have
been satisfied or waived as of the expiration of the Offer (as it may be
extended by Purchaser from time to time, but subject to certain waiver
requirements), or (iii) at any time on or after March 31, 1997 and prior to the
acceptance for payment of Shares, any of the following conditions exist:
(a) there shall have occurred and be remaining in effect (i) any
general suspension of trading in, or limitation on prices for, securities
on NASDAQ (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation
imposed by any government, governmental agency or authority on the
extension of credit by banks or other lending institutions in the United
States, or (iv) the commencement of a war or armed hostilities or other
international calamity directly or indirectly involving the United States;
or
(b) an order shall have been entered or an injunction shall have been
issued and remain in effect (i) restraining or prohibiting the making or
consummation of the Offer or the Merger, (ii) making the purchase of, or
payment for, some or all of the Shares illegal or (iii) imposing
limitations on the ability of Purchaser effectively to acquire or to hold
or to exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by Purchaser on all
matters properly presented to the stockholders of the Company; or
(c) any statute, rule, regulation or referendum shall be enacted,
enforced, promulgated or deemed applicable to (i) Parent or any of its
affiliates or subsidiaries or the Company or any of its subsidiaries or
(ii) the Offer or the Merger, which could reasonably be expected, directly
or indirectly, to result in any of the consequences referred to in clauses
(i) through (iii) of paragraph (b) above; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms or Parent and the Company shall have agreed that Parent shall
amend or terminate the Offer or postpone the payment for Shares pursuant
thereto; or
(e) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality or Material
Adverse Effect (as defined therein) on the Company shall not be true and
correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect; or
(f) the Company shall have failed to perform or comply with in any
material respect any of the agreements or covenants of the Company to be
performed or complied with by it under the Merger Agreement; or
(g) all of the Series A Preferred Shares shall not have been redeemed;
which in the reasonable judgment of Parent with respect to each and every matter
referred to above and regardless of the circumstance (including any action or
inaction by Parent) giving rise to any such condition, makes it inadvisable to
proceed with the Offer, the acceptance for payment or payment for the Shares in
the Offer, or the Merger.
The foregoing conditions are for the benefit of Purchaser and Parent only
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition. Each of the foregoing conditions may be
waived by Purchaser in whole or in part at any time from time to time, other
than the Majority-of-the-Minority Condition, which may not be waived without the
consent of the Special Committee. Purchaser has agreed to waive the Ninety
Percent Condition under certain circumstances. See "SPECIAL FACTORS -- The
Merger Agreement". The failure by Parent or Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
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14. CERTAIN LEGAL MATTERS
General. Except as described in this section, based on its review of
publicly available filings of the Company with the SEC and other publicly
available information regarding the Company, Purchaser is not aware of any
license or regulatory permit that appears to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely affected
by Purchaser's acquisition of Shares (and/or the indirect acquisition of the
stock of the Company's subsidiaries) as contemplated herein or of any approval
or other action by or with any domestic, foreign, or international government
authority or administrative or regulatory agency that would be required for the
acquisition or ownership of the Shares (and/or the indirect acquisition of the
stock of the Company's subsidiaries) by Purchaser. Should any such approval or
other action be required, Purchaser currently contemplates that such approval or
other action will be sought, except as described below under "State Takeover
Laws". While, except as otherwise expressly described in this section, Purchaser
does not presently intend to delay the acceptance for payment of or payment for
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or other action, if needed,
would be obtained without substantial conditions or that failure to obtain any
such approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be divested of if such approvals were not obtained or such other actions
were not taken, any of which could cause Purchaser to decline to accept for
payment or pay for any Shares tendered. Purchaser's obligations to accept for
payment or pay for the Shares tendered pursuant to the Offer is subject to the
certain conditions set forth in this Offer, including the conditions set forth
above in this paragraph and with respect to litigation and governmental action
as contemplated herein. See "THE OFFER -- Certain Conditions of the Offer".
Federal Regulatory Approval. No federal regulatory approval is required
for Purchaser to complete the Offer and consummate the Merger.
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally, a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder. Parent became an
interested stockholder in 1995 (in connection with the Reorganization Agreement)
in a transaction approved by the Company Board. Accordingly, Section 203 is
inapplicable to the Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. In 1987, however, in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were incorporated
there.
Purchaser has not currently complied with any state takeover statute or
regulation. Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer or the Merger and
nothing in this Offer to Purchase or any action taken in connection with the
Offer or the Merger is intended as a waiver of such right. If it is asserted
that any state takeover statute is applicable to the Offer or the Merger and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer or the Merger, Purchaser might be required to file certain
information with, or to receive approvals from, the relevant state authorities,
and Purchaser might be unable to accept for payment or pay for Shares tendered
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pursuant to the Offer, or be delayed in consummating the Offer or the Merger.
See "THE OFFER -- Certain Conditions of the Offer".
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
and the rules that have been promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain transactions (including certain transactions
involving the proposed acquisition of in excess of 15%, 25% and 50% of the
equity interest of a target corporation) may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied (the "HSR Requirements"). Because Parent
complied with the applicable HSR Requirements in connection with its acquisition
of in excess of 50% of the outstanding equity of the Company, the HSR
Requirements are inapplicable to the acquisition of Shares in the Offer and to
the Merger.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
Purchaser or the divestiture of substantial assets of Parent, the Company or
their respective subsidiaries. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to Parent
relating to the businesses in which Parent, the Company and their respective
subsidiaries are engaged, Parent and Purchaser believe that neither the Offer
nor the Merger will violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, what the result would be. See "THE
OFFER -- Certain Conditions of the Offer".
Litigation. Shortly after the January 28, 1997 public announcement by
Parent that it proposed to acquire those Shares of the Company that it did not
already own, several putative class actions were filed in the Delaware Court of
Chancery challenging the fairness of the proposed transaction to the minority
stockholders: Obstfeld v. Salquist, et al. (Civ. Act. No. 15487 NC), Siegel v.
Calgene, Inc., et al. (Civ. Act. No. 15490 NC), Susser v. Kunimoto et al. (Civ.
Act. No. 15489 NC), Elstein v. Monsanto Company, et al., (Civ. Act. No. 15488
NC), Lewis v. Monsanto Company, et al. (Civ. Act. No. 15511 NC), Glickberg v.
Monsanto Company, et al. (Civ. Act. No. 15499 NC), Manson v. Fortune, et al.
(Civ. Act. No. 15491 NC), and Settle v. Monsanto Company, et al. (Civ. Act. No.
15493 NC). These actions have been consolidated for all purposes under the
caption In re Calgene, Inc. Shareholders Litigation,(Consolidated Civ. Act. No.
15487-NC) (the "Consolidated Action"). In substance, the complaints allege that
because of Parent's ownership of approximately 54.5% of the company and control
of its Board of Directors, no independent group of Company directors exists and
no independent advisor can be chosen to consider properly Parent's acquisition
proposal. The plaintiffs also claim that the defendants -- Parent, the Company,
and several individuals serving as directors of one or more of those
companies -- breached their fiduciary duties to the public stockholders of the
Company by failing to take adequate steps to determine the fair value of the
Shares or to condition the Offer on acceptance by holders of a majority of the
Non-Affiliated Shares. The relief sought by the plaintiffs includes an
injunction against the acquisition of Shares by Parent; a declaration that each
of the defendants have breached their fiduciary duties; compensatory and/or
rescissory damages plus costs, disbursements and attorneys' and experts' fees in
unspecified amounts.
Following commencement of the Consolidated Action, plaintiffs' counsel
retained a financial expert, obtained relevant documents from the Special
Committee and engaged in discussions with counsel for the Special Committee and
counsel for Parent with regard to resolution of the Consolidated Action.
On March 31, 1997, the parties to the Consolidated Action entered into a
memorandum of understanding reflecting their agreement in principle to settle
the Consolidated Action. To resolve the Consolidated Action, Parent will seek to
acquire the Company pursuant to the Offer and the Merger at the Offer Price of
$8.00 per Share. The consummation of the settlement is subject to a number of
conditions, including the completion by plaintiffs of any additional necessary
discovery satisfactory to plaintiffs, the drafting and execution of a definitive
stipulation of settlement, consummation of the Offer and the Merger and final
court approval of the
47
<PAGE> 50
settlement and dismissal of the Consolidated Action with prejudice. If such
conditions are met, plaintiffs' counsel intend to apply for court awarded
attorneys' fees and disbursements to be paid by Parent in an amount not to
exceed $795,000. Defendants will not oppose such application.
15. FEES AND EXPENSES
Except as set forth below, Purchaser will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares pursuant
to the Offer.
Goldman Sachs is acting as Dealer Manager in connection with the Offer and
has provided certain financial advisory services in connection with the
acquisition of the Non-Affiliated Shares. Parent has agreed to compensate
Goldman Sachs for its financial advisory services and to reimburse Goldman Sachs
for its reasonable out-of-pocket expenses, including those incurred in
connection with Goldman Sachs's activities as Dealer Manager and including the
fees and disbursements of its legal counsel, and to indemnify Goldman Sachs
against certain liabilities and expenses in connection with its financial
advisory services and its activities as Dealer Manager, including certain
liabilities under the federal securities laws. Goldman Sachs has agreed to act
as Dealer Manager without additional compensation, except as set forth in the
preceding sentence.
Purchaser and Parent have retained Georgeson & Company Inc. to be the
Information Agent and The First National Bank of Boston to be the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telecopy, telegraph and personal interview and may request
banks, brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, Georgeson & Company Inc. will be paid a fee of $15,000 and will also be
reimbursed for certain out-of-pocket expenses and may be indemnified against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws. Purchaser will pay the Depositary
reasonable and customary compensation for its services in connection with the
Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the
Depositary against certain liabilities and expenses in connection therewith,
including certain liabilities under federal securities laws. Brokers, dealers,
commercial banks and trust companies will be reimbursed by Purchaser for
customary handling and mailing expenses incurred by them in forwarding material
to their customers.
The following is an estimate of expenses to be incurred in connection with
the Offer and the Merger:
<TABLE>
<S> <C>
EXPENSES TO BE PAID BY PURCHASER AND ITS AFFILIATES:
Financial Advisor/Dealer Manager............................... $1,720,000
Legal Fees..................................................... 750,000
Printing and Mailing........................................... 150,000
Advertising.................................................... 70,000
Filing Fees.................................................... 49,000
Depositary Fees................................................ 40,000
Information Agent Fees......................................... 17,500
Miscellaneous.................................................. 25,000
----------
Total.................................................. $2,821,500
==========
EXPENSES TO BE PAID BY THE COMPANY:
Financial Advisor to Special Committee......................... $2,100,000
Legal Fees..................................................... 500,000
Printing and Mailing........................................... 50,000
Miscellaneous.................................................. 25,000
----------
Total.................................................. $2,675,000
==========
</TABLE>
48
<PAGE> 51
16. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the securities,
blue sky or other laws of such jurisdiction. Purchaser may, in its discretion,
however, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to holders of Shares in any such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of Purchaser by Goldman Sachs or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of Purchaser not contained herein or in the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized. Neither the delivery of this Offer to
Purchase nor any purchase pursuant to the Offer shall, under any circumstances,
create any implication that there has been no change in the affairs of Purchaser
or the Company since the date as of which information is furnished or the date
of this Offer to Purchase.
Parent and Purchaser have filed with the SEC a Tender Offer Statement on
Schedule 14D-1, together with the SEC exhibits, pursuant to Rule 14d-3 under the
Exchange Act, and Parent, Purchaser and the Company have filed with the SEC a
Rule 13e-3 Transaction Statement on Schedule 13E-3, together with exhibits,
pursuant to Rule 13e-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the SEC a Solicitation/Recommendation Statement Schedule 14D-9, together with
exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the
recommendations of the Company Board and the Special Committee with respect to
the Offer and the reasons for such recommendations and furnishing certain
additional related information. Such Schedules and any amendments thereto,
including exhibits, may be inspected and copies may be obtained from the SEC in
the manner set forth under "THE OFFER -- Certain Information Concerning the
Company" (except that they will not be available at the regional offices of the
SEC).
MONSANTO ACQUISITION COMPANY, INC.
April 7, 1997
49
<PAGE> 52
SCHEDULE I
DIRECTORS AND THE EXECUTIVE OFFICERS
OF PURCHASER AND PARENT
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth
the name, business or residence address, principal occupation or employment at
the present time and during the last five years, and the name and business
address of any corporation or other organization in which such employment is
conducted or was conducted of each directors and executive officer of Parent.
Except as otherwise indicated, each of Parent's directors and officers is a
citizen of the United States. The business address of each executive officer of
Parent is 800 North Lindbergh Boulevard, St. Louis, Missouri 63167, unless
otherwise set forth below. Each occupation set forth opposite a person's name,
unless otherwise indicated, refers to employment with Parent. Directors are
indicated with an asterisk.
<TABLE>
<CAPTION>
NAME, AGE, ADDRESS AND YEAR
FIRST APPOINTED OR ELECTED PRESENT POSITION OTHER BUSINESS EXPERIENCE
- ------------------------------- ------------------------------ --------------------------------------
<S> <C> <C>
*Joan T. Bok, 67............... Chairman of the Board, New Chairman, New England Electric System,
One International Place, England Electric System since 1984-93; Chairman & CEO, New England
Suite 2115 1994. Electric System, 1988-89; Vice
Boston, MA 02110 Chairman, New England Electric System,
First became director: 1987 1979-84; Vice President, New England
Electric System, 1977-79. Director:
Avery Dennison Corporation; John
Hancock Mutual Life Insurance Company;
New England Electric System and its
subsidiaries Massachusetts Electric
Company, The Narragansett Electric
Company, and New England Power
Company. Trustee: National
Osteoporosis Foundation; Woods Hole
Oceanographic Institution; Worcester
Foundation for Biomedical Research.
Richard U. De Schutter, 56..... Chairman, Chief Executive Chairman, International Operations,
5200 Old Orchard Road Officer and President, G.D. G.D. Searle & Co., 1989; President,
Skokie, IL 60077 Searle & Co. (a subsidiary of G.D. Searle & Co., 1991; President and
First appointed: 1995 Monsanto; Advisory Director, Chief Operating Officer, G.D. Searle &
Monsanto Company since 1995. Co., 1993.
Steven L. Engelberg, 54........ Senior Vice President Monsanto Partner, Keck, Mahin & Cate, 1986;
700 14th Street, N.W., Company since 1996. Partner-in-Charge, Keck, Mahin & Cate,
Suite 1100 Washington, D.C. office, 1986; Chief
Washington, D.C. 20005 of Staff of Officer of the United
First appointed: 1995 States Trade Representative (on leave
from Keck, Mahin & Cate until May
1993), 1993; Vice President, Worldwide
Government Affairs, Monsanto Company,
1994.
*Robert M. Heyssel, 68......... Consultant; President President and Chief Executive Officer,
R.D. 5, 4 Canal Lane Emeritus, The Johns Hopkins The Johns Hopkins Health System and
Secford, DE 19973. Health System since 1992. The Johns Hopkins Hospital, 1972-92.
First became director: 1988 Professor, The Johns Hopkins Schools
of Medicine and Public Health since
1971 and 1972, respectively. Director:
Signet Banking Corporation.
Michael R. Hogan, 43........... Vice President and Controller, Executive Vice President, General
First appointed: 1996 Monsanto Company since 1996. American Life Insurance Company,
1986-95.
</TABLE>
I-1
<PAGE> 53
<TABLE>
<CAPTION>
NAME, AGE, ADDRESS AND YEAR
FIRST APPOINTED OR ELECTED PRESENT POSITION OTHER BUSINESS EXPERIENCE
- ------------------------------- ------------------------------ --------------------------------------
<S> <C> <C>
Pierre Hochuli, 49............. Vice President, Monsanto Regional Director,
Avenue de Tetusen 270-272 Company; President, Growth Europe/Africa/Middle, Monsanto Europe,
1150 Brussels, Belgium Enterprises Business Unit; S.A., 1985; Vice President, Finance
First appointed: 1995 Chairman, Monsanto Europe- and Planning, The Agricultural Group,
Citizenship: Switzerland Africa since 1996. 1991; Vice President and General
Manager, New Products Division, The
Agricultural Group, 1992; Group Vice
President and General Manager, New
Products Division, The Agricultural
Group, 1993; Vice President, Corporate
Planning, Monsanto Company, 1993; Vice
President, Monsanto Company;
President, Growth Enterprises, 1995.
Robert B. Hoffman, 60.......... Senior Vice President and Vice President, FMC Corporation, 1990.
First appointed: 1994 Chief Financial Officer;
Advisory Director, Monsanto
Company since 1994.
John C. Hunter III, 50......... President, Fibers Business Vice President and General Manager,
First appointed: 1997 Unit, Monsanto Company since Asia- Pacific Monsanto Chemical
1995. Company, 1989; Vice President and
General Manager, Fibers Division and
Asia-Pacific, The Chemical Group,
1993.
R. William Ide, III, 56........ Senior Vice President, General Partner, Long, Aldridge & Norman 1993-
First appointed: 1996 Counsel and Secretary, 96; Partner Kutak & Rock 1989-93;
Monsanto Company since 1996. President, American Bar Association
1993-94.
Madonna A. Kindl, 39........... Vice President, Human Director, Human Resources Planning and
First appointed: 1996 Resources, Monsanto Company. Development, Clorox Corporation,
1990-93; Director of Human Resources,
Staff of the Vice Chairman, Monsanto
Company, 1993-95; Director, Human
Resources, Crop Protection Business
Unit, Monsanto Company, 1995-96.
*Gwendolyn S. King, 56......... Senior Vice President, Commissioner, Social Security
2301 Market St. Corporate and Public Affairs, Administration, 1989-92. Director:
Philadelphia, PA 19103 Peco Energy Company (formerly Adwin Equipment Co., Adwin Realty Co.;
First became director: 1993 Philadelphia Electric Company) Eastern Pennsylvania Development
since 1992. Corp., Lockheed Martin Corp.
*Philip Leder, 62.............. Chairman and Professor, John Emory Andrus Professor of
200 Longwood Ave. Department of Genetics, Genetics since 1980. Senior
Boston, MA 02115 Harvard Medical School since Investigator, Howard Hughes Medical
First became director: 1990 1980. Institute since 1986. Director: Genome
Therapeutics Corporation. Trustee: The
General Hospital Corporation; The
Hadassah Medical Organization;
Massachusetts General Hospital; The
Charles A. Revson Foundation; The
Rockefeller University.
*Howard M. Love, 66............ Retired Chief Executive Honorary Chairman, National Steel
500 Grant Street, Suite 2715 Officer, National Intergroup, Corporation, formerly a subsidiary of
Pittsburgh, PA 15219 Inc., 1981-91. National Intergroup, Inc., since 1990;
First became director: 1977 Chairman and Chief Executive Officer,
1984-90. Director: AEA Investors;
COMSAT Corp. Member: The Business
Council.
</TABLE>
I-2
<PAGE> 54
<TABLE>
<CAPTION>
NAME, AGE, ADDRESS AND YEAR
FIRST APPOINTED OR ELECTED PRESENT POSITION OTHER BUSINESS EXPERIENCE
- ------------------------------- ------------------------------ --------------------------------------
<S> <C> <C>
*Frank A. Metz, Jr., 63........ Retired Senior Vice President, Director, International Business
P.O. Box 20 Finance and Planning, and Machines Corporation, 1991-93.
Sloatsburg, NY 10974 Chief Financial Officer, Director: Allegheny Power System,
First became director: 1990 International Business Inc.; Norrell Corporation.
Machines Corporation, 1986-93.
Philip Needleman, 58........... Senior Vice President, Vice President, Research and
First appointed: 1991 Research and Development and Development, Monsanto Company, 1989;
Chief Scientist; Advisory Vice President, Research and
Director, Monsanto Company; Development and Advisory Director,
President, Research and Monsanto Company, 1991; Vice
Development, G.D. Searle & Co. President, Research and Development
since 1993. and Advisory Director, Monsanto
Company; President, Research and
Development, G.D. Searle & Co., 1992.
*Jacobus F.M. Peters, 65....... Retired Chairman of the Director: Kleinwort Endowment Policy
Dennesloau 15 Executive Board and Chief Trust Plc. Member of Supervisory
2244 AK Wassenaor Executive Officer, AEGON N.V., Board: AEGON N.V.; Amsterdam Company
The Netherlands 1984-93. for Town Restoration Ltd.; DAF Trucks
First became director: 1993 N.V.; IBM International Centre for
Citizenship: The Netherlands Asset Management N.V.; Koninklijke
Pakhoed Holding N.V.; Randstad Holding
N.V.; SAMAS Group N.V.; United Flower
Auctions Aalsmeer.
Robert G. Potter, 57........... Executive Vice President and Executive Vice President and Advisory
First appointed: 1981 Advisory Director, Monsanto Director, Monsanto Company; President,
Company since 1995. The Chemical Group, 1990.
*Nicholas L. Reding, 62........ Vice Chairman of the Board, Executive Vice President, Environment,
First became director: 1993 Monsanto Company since 1993. Safety, Health and Manufacturing,
1990-93, and Advisory Director,
Monsanto Company, 1986-92. Director:
CPI Corp.; Meredith Corporation;
Multifoods Corporation; The Keystone
Center.
*John S. Reed, 58.............. Chairman and Chief Executive Director: Citicorp; Citibank, N.A.;
153 East 53rd Street Officer, Citicorp and Philip Morris Companies, Inc. Trustee:
New York, NY 10022 Citibank, N.A. since 1984. Rand Corporation. Member: The Business
First became director: 1985 Council; The Business Roundtable.
Robert W. Reynolds, 53......... Vice President, International Vice President and General Manager,
First appointed: 1994 Operations and Development, Crop Protection Products Division,
Monsanto Company since 1994. Monsanto Agricultural Company, 1990;
Vice President and Managing Director,
Latin America World Area, Monsanto
Company, 1991.
*John E. Robson, 66............ Senior Advisor, Robertson, Distinguished Faculty Fellow, Yale
555 California Street Stephens & Company since 1993. University School of Management, and
San Francisco, CA 94104 Visiting Fellow, The Heritage
First became director: 1996 Foundation, 1993; Deputy Secretary of
the U.S. Department of the Treasury,
1989-92; Dean, Emory University
Business School, 1986-89; President
and Chief Executive Officer, G.D.
Searle & Co., 1985-86; Executive Vice
President, G.D. Searle & Co., 1978-85.
Director: Northrop Grumman Corp.;
Calgene, Inc.; Security Capital
Industrial Trust (REIT).
</TABLE>
I-3
<PAGE> 55
<TABLE>
<CAPTION>
NAME, AGE, ADDRESS AND YEAR
FIRST APPOINTED OR ELECTED PRESENT POSITION OTHER BUSINESS EXPERIENCE
- ------------------------------- ------------------------------ --------------------------------------
<S> <C> <C>
*William D. Ruckelshaus, 64.... Chairman, Browning-Ferris Chief Executive Officer,
1000 Second Avenue, Industries, Inc. since 1995; Browning-Ferris Industries, Inc.,
Suite 3700 Principal, Madrona Investment 1988-95. Of Counsel, Perkins Coie
Seattle, WA 98104 Group, LLC since 1996. since 1985. Administrator,
First became director: 1985 Environmental Protection Agency,
1983-85. Director: Browning-Ferris
Industries, Inc.; Cummins Engine Co.,
Inc.; Gargoyles, Inc.; Nordstrom,
Inc.; Weyerhaeuser Company.
*Robert B. Shapiro, 58......... Chairman, President and Chief President and Chief Operating Officer,
First became director: 1993 Executive Officer, Monsanto Monsanto Company, 1993-95; Executive
Company since 1995. Vice President and Advisory Director,
Monsanto Company, and President, The
Agricultural Group of Monsanto
Company, 1990-93. Director: Citicorp;
Silicon Graphics, Inc.; Barnes-Jewish
Hospital. Trustee: Washington
University; Missouri Botanical Garden.
Member: The Business Council; The
Business Roundtable.
*John B. Slaughter, 62......... President, Occidental College Director, National Science Foundation,
1600 Campus Rd. since 1988. 1980-82. Director: Atlantic Richfield
Los Angeles, CA 90041 Company; Avery Dennison Corporation;
First became director: 1983 International Business Machines
Corporation; Northrop Grumman Corp.
Member: American Academy of Arts and
Sciences; National Academy of
Engineering. Fellow: American
Association for the Advancement of
Science; Institute of Electrical and
Electronic Engineers.
Hendrik A. Verfaillie, 51...... Executive Vice President and Vice President and General Manager,
First appointed: 1993 Advisory Director, Monsanto Roundup Division, The Agricultural
Company since 1995. Group, 1990; Vice President and
Advisory Director, Monsanto Company;
President, The Agricultural Group,
1993; Vice President and Advisory
Director, Monsanto Company, 1995.
Virginia V. Weldon, 61......... Senior Vice President, Public Vice President, Public Policy and
First appointed: 1990 Policy and Advisory Director, Advisory Director, Monsanto Company,
Monsanto Company since 1993. 1990.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The directors of Purchaser
are Patrick J. Fortune, Robert T. Fraley, Michael R. Hogan and Hendrik A.
Verfaillie. Mr. Verfaillie is President of Purchaser and Mr. Hogan is its
Secretary and Treasurer. Each director and officer was appointed or elected in
March 1997. Each of such persons is an officer of Parent and a director of the
Company. Additional information regarding the directors and officers of
Purchaser is set forth in Schedule II.
I-4
<PAGE> 56
SCHEDULE II
DIRECTORS AND THE EXECUTIVE OFFICERS
OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. The following table sets
forth the name, business or residence address, principal occupation or
employment at the present time and during the last five years, and the name and
business address of any corporation or other organization in which such
employment is conducted or was conducted of each director and executive officer
of the Company. Each of the Company's directors and officers is a citizen of the
United States. The business address of each executive officer of the Company is
1920 Fifth Street, Davis, California 95616, unless otherwise set forth below.
Each occupation set forth opposite a person's name, unless otherwise indicated,
refers to employment with the Company. Directors are indicated with an asterisk.
<TABLE>
<CAPTION>
NAME, AGE, ADDRESS AND YEAR
FIRST APPOINTED/ELECTED PRESENT POSITION OTHER BUSINESS EXPERIENCE
- ---------------------------- ------------------------ ---------------------------------------
<S> <C> <C>
Andrew M. Baum, 40.......... Vice President, Calgene, Mr. Baum joined Calgene as Director of
1987 and President of Oils Operations in 1981, became Vice
Division, Calgene, since President of Operations in 1987, and
1987 became Senior Vice President of
Operations in 1991. Since November
1992, Mr. Baum has been the President
of Calgene's Oils Division. Mr. Baum is
a founding member and is currently
Secretary of the U.S. Canola
Association.
*Patrick J. Fortune, 49..... Corporate Vice From 1989 to 1991, Mr. Fortune was
1996 President, Information Senior Vice President and General
and Chief Information Manager of Packaging Corporation of
Officer, Monsanto America. From 1991 to 1994, he served
Company since 1995. as Corporate Vice President,
Information Management for
Bristol-Meyers Squibb. From August 1994
to August 1995, Mr. Fortune was
President and Chief Operating Officer
of Coram-Healthcare Corporation, whose
business is home infusion therapy for
cancer and AIDS patients. Mr. Fortune
is also a member of the Board of
Directors of Parexel Corporation, a
clinical research organization, and
serves on the Board of Visitors of the
School of Physical Sciences at the
University of Chicago.
*Robert T. Fraley, 43....... President Ceregen (a From 1990 to 1993, Mr. Fraley was Vice
1996 business unit of President, Research and Development,
Monsanto Company) since New Products Division, of the Monsanto
1995. Agricultural Products Group, and from
1993 to 1995, was Vice President, New
Products Division, of the Monsanto
Agricultural Products Group. Mr. Fraley
is a director of Dekalb Genetics Corp.,
an agricultural products company.
</TABLE>
II-1
<PAGE> 57
<TABLE>
<CAPTION>
NAME, AGE, ADDRESS AND YEAR
FIRST APPOINTED/ELECTED PRESENT POSITION OTHER BUSINESS EXPERIENCE
- ---------------------------- ------------------------ ---------------------------------------
<S> <C> <C>
Jeffrey D. Gargiulo, 45..... Chief Executive Officer, Mr. Gargiulo served as Chairman and
1996 Gargiulo, Inc. Chief Executive Officer of Gargiulo
(successor to Gargiulo L.P. from 1981 until 1996.
L.P. and wholly owned
subsidiary of Calgene)
since 1996.
William Higgins, 57......... Vice President of Human From February 1982 through March 1988,
1994 Resources since 1994. Mr. Higgins served as Vice President of
Human Resources for Genentech, Inc.,
and from April 1988 through December
1991 he was President of Consultants in
Managing Change. Prior to joining
Calgene, Mr. Higgins served as Vice
President of Human Resources for
Tenera, L.P. from January 1992 through
December 1993. Mr. Higgins joined
Calgene in January 1994 as Human
Resources Director and was elected to
his present position in May 1994.
*Michael R. Hogan, 43....... Corporate Vice President From 1986 to 1995, Mr. Hogan served as
1996 and Corporate Executive Vice President of General
Controller, Monsanto American Life, during which time he
Company since 1996. also served as President and Director
of Gencare Health Systems, Inc. (and
its predecessor) from 1990 until 1994.
Thomas Hughes, 38........... President, Stoneville Mr. Hughes joined Stoneville Pedigreed
1992 Pedigreed Seed Co. since Seed Co. in 1988 as Plant Operations
1992. Manager and became President in 1992.
Mr. Hughes is Director of the
Mississippi Seedmen's Association,
President of the Mississippi Seed
Improvement Association and is an
active member of the Delta Council,
Cotton Foundation (National Cotton
Council), and the American Seed Trade
Association.
*Lloyd M. Kunimoto, 43...... President and Acting From November 1983 to June 1995, Mr.
1996 Chief Executive Officer Kunimoto served in several senior
since July 1996. management positions with Calgene. From
June 1995 to July 1996, Mr. Kunimoto
served as Vice President of Strategic
Planning and Business Development.
Christian Leleu, 43......... Senior Vice President Mr. Leleu worked in various positions
1996 and Chief Financial at Monsanto Company, most recently as
Officer since 1996. Director of Business Analysis for Crop
Protection.
Michael J. Motroni, 41...... Vice President of Mr. Motroni joined Calgene in August
1992 Finance and Secretary 1983 and became Controller in July
since May 1992. 1986.
</TABLE>
II-2
<PAGE> 58
<TABLE>
<CAPTION>
NAME, AGE, ADDRESS AND YEAR
FIRST APPOINTED/ELECTED PRESENT POSITION OTHER BUSINESS EXPERIENCE
- ---------------------------- ------------------------ ---------------------------------------
<S> <C> <C>
*Howard D. Palefsky, 49..... Chairman, Collagen Mr. Palefsky served as President and
2500 Faber Place Corporation since 1995. Chief Executive Officer of Collagen
Palo Alto, CA 94303 Corporation, a medical products
1986 company, from 1978 to 1997, and served
as President from 1978 to 1995. Mr.
Palefsky is also a director of Target
Therapeutics, Inc. and Innovasive
Devices, Inc., both medical products
companies.
*John E. Robson, 66......... Senior Advisor of Mr. Robson served as Deputy Secretary
555 California Street Robertson, Stephens & of the United States Treasury from 1989
San Francisco, CA 94104 Company since 1993. to 1992. Mr. Robson is also a director
1996 of Monsanto Company, Northrop Grumman
Corporation, an aerospace and defense
company, and Security Capital
Industrial Trust, a real estate
investment trust.
*Roger H. Salquist, 55...... Principal of the Craves Mr. Salquist served as an executive
One Bush Street Group since February officer of Calgene since September 1983
San Francisco, CA 94104 1997. and as its Chief Executive Officer from
1981 November 1985 until August 1996. Mr.
Salquist served as Chairman of the
Board of Directors from 1984 until
August 1996. Mr. Salquist is also a
director of Collagen Corporation, a
medical products company. Mr. Salquist
has been a principal of the Craves
Group, a private merchant bank, since
February 1997. He also serves as a
consultant for Calgene.
Richard J. Stonard, 42...... Senior Vice President Since 1982, Dr. Stonard worked in
1996 and Chief Technical various positions at Monsanto Company,
Officer since 1996. most recently as Director of Crop
Protection Research for Ceregen, a unit
of Monsanto Company.
*Allen J. Vangelos, 64...... President and Chief In 1993, Mr. Vangelos served as
15661 Red Hill Avenue Executive Officer, Chairman of the Board of Directors of
Tustin, CA 92680 Calavo Growers of the Agricultural Council of California.
1994 California since 1986. He has also served as Chairman of the
United Fresh Fruit and Vegetable
Association.
*Hendrik A. Verfaillie, Executive Vice From 1990 to 1993, Mr. Verfaillie was
51.......................... President, Monsanto Vice President and General Manager,
1996 Company since 1995. Roundup Division, The Agricultural
Group, and from 1993 to 1995 served as
President of The Agricultural Group,
Vice President and Advisory Director,
Monsanto Company.
</TABLE>
II-3
<PAGE> 59
SCHEDULE III
CALGENE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JUNE
DECEMBER 31, JUNE 30, 30,
1996 1996 1995
------------ -------- -------
<S> <C> <C> <C>
Current assets:
Cash and equivalents.................................... $ 1,908 $ 17,674 $11,753
Available-for-sale securities........................... 1,382 10,919 10,283
Accounts receivable, primarily trade, net of allowance
for doubtful accounts of $707, $487 and $346 at
December 31, 1996 and June 30, 1996 and 1995,
respectively......................................... 16,748 26,133 6,697
Inventories............................................. 37,272 23,865 8,148
Prepaid expenses and other current assets............... 1,327 2,174 1,699
-------- -------- -------
Total current assets............................ 58,637 80,765 38,580
Property, plant and equipment:
Land.................................................... 18,258 22,755 763
Buildings............................................... 18,418 23,083 3,743
Leasehold improvements.................................. 8,330 8,556 9,643
Furniture, fixtures and equipment....................... 33,971 40,398 22,436
Construction in progress................................ 1,411 1,676 1,459
-------- -------- -------
80,388 96,468 38,044
Less accumulated depreciation and amortization.......... 19,642 16,481 15,524
-------- -------- -------
Property, plant and equipment, net.............. 60,746 79,987 22,520
Product rights, patents and other intangible assets, less
accumulated amortization of $4,046, $3,060 and $2,507 at
December 31, 1996 and June 30, 1996 and 1995,
respectively............................................ 20,461 30,642 16,199
Costs in excess of fair values assigned to net assets
acquired, less accumulated amortization of $5,440,
$4,612 and $4,145 at December 31, 1996 and June 30, 1996
and 1995, respectively.................................. 25,680 36,219 10,025
Assets held for sale...................................... 5,185 963 --
Other non-current assets.................................. 3,171 4,726 1,907
-------- -------- -------
$173,880 $233,302 $89,231
======== ======== =======
</TABLE>
See accompanying notes.
III-1
<PAGE> 60
CALGENE, INC.
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------ -------- --------
<S> <C> <C> <C>
Current liabilities:
Notes payable.......................................... $ 9,402 $ 16,789 $ 7,761
Accounts payable....................................... 13,920 20,111 6,487
Accrued payroll and related expenses................... 3,470 3,252 2,049
License contract payable............................... -- 750 1,500
Accrued grower payments................................ 1,364 615 942
Amounts due customers.................................. 317 5,028 4,596
Accrued restructure expenses........................... 2,525 5,770 --
Other current liabilities.............................. 3,193 6,559 2,930
Current portion of long-term debt...................... 5,139 22,850 1,494
-------- -------- --------
Total current liabilities...................... 39,330 81,724 27,759
License contract payable, long-term...................... -- -- 750
Research and development advance from affiliate.......... 10,000 10,000 --
Note payable to affiliate................................ 24,760 24,760 --
Interest payable to affiliate............................ 1,912 509 --
Accrued restructure expenses, long-term.................. 3,860 -- --
Long-term debt........................................... 14,195 22,643 14,671
Commitments and contingencies (Note 9)
Minority interest........................................ 263 266 --
Shareholders' equity:
Preferred stock, $.001 par value; 5,000,000 authorized,
no shares issued and outstanding.................... -- -- --
Common stock, $.001 par value; 100,000,000 shares
authorized, 66,714,636, 60,443,115 and 30,244,226
shares issued and outstanding at December 31, 1996
and June 30, 1996 and 1995, respectively............ 67 60 30
Additional paid-in capital............................. 417,581 367,494 223,161
Accumulated deficit.................................... (338,088) (274,154) (177,140)
-------- -------- --------
Total shareholders' equity..................... 79,560 93,400 46,051
-------- -------- --------
$173,880 $233,302 $ 89,231
======== ======== ========
</TABLE>
See accompanying notes.
III-2
<PAGE> 61
CALGENE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED JUNE 30,
DECEMBER 31, ---------------------------------------
1996 1996 1995 1994
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product sales, net........................ $ 69,780 $ 95,723 $ 48,972 $ 35,408
Product development revenues.............. 729 9,272 6,459 3,025
------------ ------------ ------------ ------------
70,509 104,995 55,431 38,433
Costs and expenses:
Cost of goods sold........................ 72,042 90,403 53,678 43,982
Research and development:
Contract............................... 1,672 4,222 3,436 2,721
Other.................................. 6,743 9,801 11,937 12,847
Selling, general and administrative....... 19,677 21,705 16,081 21,279
In-process research and development
acquired............................... -- 59,200 -- --
Write-off of assets and restructure
expenses............................... 32,605 15,574 1,098 --
------------ ------------ ------------ ------------
132,739 200,905 86,230 80,829
Interest expense............................ (3,822) (3,428) (924) (729)
Other income, net........................... 2,163 2,345 1,136 389
------------ ------------ ------------ ------------
Loss from operations before provision for
income taxes.............................. (63,889) (96,993) (30,587) (42,736)
Provision for income taxes.................. (45) (21) (15) (65)
------------ ------------ ------------ ------------
Net loss.................................... $ (63,934) $ (97,014) $ (30,602) $ (42,801)
============ ============ ============ ============
Net loss per share.......................... $ (1.03) $ (2.56) $ (1.04) $ (1.71)
============ ============ ============ ============
Shares used in per share calculations....... 62,155,384 37,883,871 29,439,008 24,987,513
</TABLE>
See accompanying notes.
III-3
<PAGE> 62
CALGENE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 1996 AND YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------- PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1993.......... 24,411,782 $ 24 $ 169,482 $(103,737) $ 65,769
Net loss.......................... -- -- -- (42,801) (42,801)
Sale of common stock, net of
expenses........................ 1,845,000 2 19,150 -- 19,152
Options exercised................. 249,530 1 1,605 -- 1,606
Stock compensation................ -- -- 697 -- 697
---------- --- -------- --------- --------
Balance at June 30, 1994.......... 26,506,312 27 190,934 (146,538) 44,423
Net loss.......................... -- -- -- (30,602) (30,602)
Sale of common stock, net of
expenses........................ 3,683,262 3 31,419 -- 31,422
Options exercised................. 54,652 -- 340 -- 340
Stock compensation................ -- -- 452 -- 452
Unrealized gain on
available-for-sale securities... -- -- 16 -- 16
---------- --- -------- --------- --------
Balance at June 30, 1995.......... 30,244,226 30 223,161 (177,140) 46,051
Net loss.......................... -- -- -- (97,014) (97,014)
Sale of common stock, primarily
for acquisition of Gargiulo..... 30,192,707 30 144,343 -- 144,373
Options exercised................. 6,182 -- 40 -- 40
Unrealized loss on
available-for-sale securities... -- -- (50) -- (50)
---------- --- -------- --------- --------
Balance at June 30, 1996.......... 60,443,115 60 367,494 (274,154) 93,400
Net loss.......................... -- -- -- (63,934) (63,934)
Sale of common stock, net of
expenses........................ 6,271,521 7 50,071 -- 50,078
Unrealized gain on
available-for-sale securities... -- -- 16 -- 16
---------- --- -------- --------- --------
Balance at December 31, 1996...... 66,714,636 $ 67 $ 417,581 ($338,088) $ 79,560
========== === ======== ========= ========
</TABLE>
See accompanying notes.
III-4
<PAGE> 63
CALGENE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED JUNE 30,
DECEMBER 31, ----------------------------------
1996 1996 1995 1994
---------------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................ $(63,934) $(97,014) $(30,602) $(42,801)
Adjustments to reconcile net loss to net
cash used in operating activities:
Minority interest in net loss........ -- (787) (116) (46)
Depreciation and amortization........ 6,371 6,989 4,957 4,099
In-process research and development
acquired........................... -- 59,200 -- --
Gain on sale of assets............... (1,536) -- -- --
Write-off of assets and restructure
expenses........................... 28,039 15,574 1,098 --
Equity in net (gain) loss of
affiliate.......................... (3) 1 213 583
Stock compensation................... -- -- 452 697
Net changes in operating assets and
liabilities, excluding effect of
acquisition of subsidiaries:
Accounts receivable.................. 9,165 8,912 (1,992) (1,658)
Inventories.......................... (13,407) 6,455 (2,003) 1,320
Accounts payable..................... (6,191) (1,903) (1,429) 2,589
Amounts due customers................ (4,711) 432 1,268 1,740
Accrued restructure expenses......... 1,949 -- -- --
Other accrued liabilities............ (3,366) (6,736) 612 1,637
Interest payable to affiliate........ 1,403 509 -- --
Other................................ 1,284 2,614 146 279
-------- -------- -------- --------
Net cash used in operating
activities.................... (44,937) (5,754) (27,396) (31,561)
-------- -------- -------- --------
Cash flows from investing activities:
Proceeds from sales of
available-for-sale securities........ 10,515 11,787 22,904 24,904
Purchase of available-for-sale
securities........................... (955) (12,473) (17,714) (15,588)
Collection of notes receivable.......... -- -- -- 1,709
Investment in affiliate................. -- 19 (73) (579)
Capital expenditures for property, plant
and equipment........................ (3,800) (3,887) (5,649) (4,437)
Payment for purchase of subsidiaries,
net of cash and equivalents
acquired............................. -- (1,436) (90) (12)
Purchases of product rights, patents and
other intangible assets.............. (1,343) (1,397) (4,782) (4,843)
Proceeds from sale of assets............ 7,136 489 38 69
Other noncurrent assets................. 1,366 -- -- --
-------- -------- -------- --------
Net cash provided by (used in)
investing activities.......... 12,919 (6,898) (5,366) 1,223
-------- -------- -------- --------
</TABLE>
III-5
<PAGE> 64
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
1996 1996 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from notes payable............. 36,364 8,453 19,398 14,214
Payments on notes payable............... (43,751) (19,489) (20,322) (13,161)
Decrease in securities-pledged.......... 164 214 159 136
Increase in borrowings of long-term
debt................................. -- 25,057 10,000 --
Principal payments on long-term debt.... (26,603) (15,549) (1,768) (1,332)
Proceeds on notes payable to
affiliate............................ 15,000 2,680 -- --
Payments on notes payable to
affiliate............................ (15,000) -- -- --
Sale of common stock.................... 50,078 7,207 31,762 20,758
Research and development advance from
affiliate............................ -- 10,000 -- --
-------- -------- -------- --------
Net cash provided financing
activities.................... 16,252 18,573 39,229 20,615
-------- -------- -------- --------
Net increase (decrease) in cash and
equivalents............................. (15,766) 5,921 6,467 (9,723)
Cash and equivalents at beginning of
year.................................... 17,674 11,753 5,286 15,009
-------- -------- -------- --------
Cash and equivalents at end of year....... $ 1,908 $ 17,674 $ 11,753 $ 5,286
======== ======== ======== ========
</TABLE>
See accompanying notes.
III-6
<PAGE> 65
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND JUNE 30, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGE IN FISCAL YEAR
The Company has changed its fiscal year end from June 30 to December 31,
beginning with the period ended December 31, 1996 to conform with the fiscal
year end of the Monsanto Company which holds an equity ownership in Calgene of
approximately 54.6% (Note 13).
Accordingly, the financial presentation in this report for 1996 is for the
six month period from July 1, 1996 to December 31, 1996. Prior fiscal year's
operations are as previously reported and cover twelve month periods ended June
30.
Unaudited comparative information for the six months ended December 31,
1995, is as follows (in thousands, except per share amounts):
<TABLE>
<S> <C>
Revenues.................................................................. $ 20,790
Gross profit (loss)....................................................... (1,309)
Net loss.................................................................. (16,104)
Net loss per share........................................................ (0.53)
</TABLE>
ORGANIZATION AND BUSINESS
Calgene is a biotechnology company that is developing a portfolio of
genetically engineered plants and plant products for the food, seed and
oleochemical industries. The Company's research and business efforts are focused
in three core crop areas -- fresh produce (tomato and strawberry), edible and
industrial plant oils (canola) and cotton -- where Calgene believes
biotechnology can provide substantial added commercial value in consumer,
industrial and seed markets.
CONSOLIDATION AND EQUITY ACCOUNTING
The consolidated financial statements include the accounts of Calgene, its
wholly-owned subsidiaries and its majority owned joint venture (together the
"Company"). All significant intercompany balances and transactions have been
eliminated in consolidation.
Calgene uses the equity method to account for its investments in its 50
percent or less owned joint ventures. Under the equity method, Calgene
recognizes its proportionate share of the net income or loss of these joint
ventures currently, rather than when realized through dividends or disposal.
CASH EQUIVALENTS AND AVAILABLE-FOR-SALE SECURITIES
Cash equivalents and available-for-sale securities, consisting principally
of certificates of deposit, bankers acceptances, commercial paper, U.S. treasury
and agency securities, and money market funds, are stated at fair market value,
and are adjusted for amortization of premiums and accretion of discounts, which
are recognized as adjustments to interest income. Unrealized gains and losses,
net of tax, on available-for-sale securities are reported in shareholders'
equity. Gross realized gains and losses on available-for-sale securities were
not material during the periods presented. The aggregate fair market value of
available-for-sale securities at December 31, 1996 is $1,960,000 of which
$578,000 is included in cash and equivalents. The aggregate fair market value of
available-for-sale securities at June 30, 1996 is $28,288,000 of which
$17,369,000 is included in cash and equivalents. The aggregate fair market value
of available-for-sale securities at June 30, 1995 is $20,276,000 of which
$9,993,000 is included in cash and equivalents. The contractual maturities of
available-for-sale securities at December 31, 1996 are as follows: $1,409,000 in
1997, $313,000 in 1998, and $238,000 in 2002.
III-7
<PAGE> 66
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated or
amortized on a straight-line basis over the estimated useful lives of the assets
or the capital lease term, whichever is less. The estimated useful lives range
from 3 to 30 years.
PRODUCT RIGHTS, PATENTS AND OTHER INTANGIBLE ASSETS
Product rights of approximately $3,939,000 at December 31, 1996; $3,042,000
at June 30, 1996 and $7,827,000 at June 30, 1995 are stated at cost and are
amortized on a straight-line basis over the lesser of their contractual lives or
their estimated useful lives (generally 10 to 20 years).
External costs incurred in obtaining patents are capitalized. The costs of
successful patent applications are amortized on a straight-line basis over the
lesser of their statutory lives or their estimated useful lives (generally 17
years). External costs incurred in defense of patents are capitalized and
amortized on a straight-line basis over the remaining life of the patent. The
costs of unsuccessful patent applications or patent defense are charged to
expense in the period in which the patent applications are denied or the patent
defense is unsuccessful. The net book value of capitalized patent related costs
is $7,950,000, $7,908,000 and $8,372,000 at December 31, 1996 and June 30, 1996
and 1995, respectively.
Other intangible assets consist primarily of the seed library acquired in
connection with the acquisition of Gargiulo (Note 4), which is being amortized
over its estimated useful life of 15 years. See write-off of other intangible
assets in Note 7.
Costs in excess of fair values assigned to net assets acquired are
capitalized and amortized on a straight-line basis over periods of 10 to 25
years.
REVENUE RECOGNITION AND PRODUCT DEVELOPMENT ARRANGEMENTS
Revenue from product sales is recognized primarily at the time of shipment
net of estimated product returns. The Company performs research under contracts
for the development of certain products for other entities. Revenue from product
development contracts is recognized according to the percentage of completion
method. Funding received in advance of research performed under these contracts
is recorded as deferred revenue. Related contract expenses are charged to
expense as incurred.
INCOME TAXES
The liability method is used to account for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. General business tax credits will be
accounted for as a reduction of federal income taxes payable under the
flow-through method.
NET LOSS PER SHARE
Net loss per share has been computed by dividing the net loss by the
weighted average number of common shares outstanding during each period. Common
equivalent shares related to stock options have been excluded from the
computation of net loss per share since their inclusion would be antidilutive.
III-8
<PAGE> 67
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF CASH FLOWS
For purposes of the consolidated statement of cash flows, the Company
considers highly liquid investments with original maturities of three months or
less to be cash equivalents. During the six month period ended December 31, 1996
and fiscal year 1996, 1995 and 1994, the Company paid cash for interest and
income taxes as follows:
<TABLE>
<CAPTION>
1996
(SIX MONTHS) 1996 1995 1994
------------ ------ ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest................................... $3,282 $1,619 $895 $621
Income taxes............................... 17 83 91 53
</TABLE>
The Company maintains its cash and equivalents and short-term investments
in several different instruments. This diversification of risk is consistent
with the Company's policy to maintain liquidity and ensure the safety of
principal.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF
During the quarter ended September 30, 1996, the Company adopted the
provisions of the Financial Accounting Standards Board Statement of Financial
Accounting No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 requires impairment
losses to be recognized for long-lived assets and identifiable intangibles used
in operations when indicators of impairment are present and the estimated
undiscounted cash flows are not sufficient to recover the assets' carrying
amount. The impairment loss is measured by comparing the fair value of the asset
to its carrying amount. Costs in excess of fair values assigned to net assets
acquired in purchase business combinations are included in impairment
evaluations when events or circumstances exist that indicate the carrying amount
of the acquired assets may not be recoverable. SFAS 121 also requires that
assets held for disposal be valued at the lower of carrying amount or fair value
less cost to sell.
ACCOUNTING FOR STOCK BASED COMPENSATION
The Company accounts for its stock option plans and its employee stock
purchase plan in accordance with the provisions of the Accounting Principles
Board's Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." In
1995, the Financial Accounting Standards Board released Statement of Financial
Accounting Standard No. 123 (SFAS 123), "Accounting for Stock Based
Compensation." SFAS 123 provides an alternative to APB 25 and is effective for
fiscal years beginning after December 15, 1995. The Company expects to continue
to account for its stock plans in accordance with APB 25. Accordingly, SFAS 123
is not expected to have a material impact on the Company's financial position or
results of operations.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and equivalents
and available-for-sale securities approximates their respective fair values. The
carrying amounts of the Company's borrowings under its debt agreements
approximate their fair value. The fair values of the Company's long-term debt
are estimated using discounted cash flow analysis, based on the Company's
current incremental borrowing rates for similar types of borrowing arrangements.
USE OF ESTIMATES AND CERTAIN RISKS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported to the financial
III-9
<PAGE> 68
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
statements and accompanying notes. Actual results could differ from those
estimates. Among other things, the Company is subject to risks from changes in
farm legislation, market price fluctuations for the Company's products, and
adverse weather conditions which may effect the ultimate realization of certain
of its inventories.
RECLASSIFICATIONS
Certain amounts reported for prior years have been reclassified to conform
with the presentation of the December 31, 1996 financial statements.
2. RECEIVABLES
Receivables consist of the following:
<TABLE>
<CAPTION>
JUNE
30,
DECEMBER 31, 1996 JUNE 30, 1996 1995
------------------------- ------------------------- ------
TRADE RELATED PARTY TRADE RELATED PARTY TRADE
------- ------------- ------- ------------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Customer............................ $13,771 $ -- $18,808 $ -- $6,708
Grower advances..................... 2,993 -- 5,917 -- --
Other............................... 452 239 923 972 335
------- ---- ------- ---- -------
Total..................... 17,216 239 25,648 972 7,043
Less allowance for doubtful
amounts........................... (707) -- (487) -- (346)
------- ---- ------- ---- -------
Total..................... $16,509 $ 239 $25,161 $ 972 $6,697
======= ==== ======= ==== =======
</TABLE>
3. INVENTORIES
Inventories consist of the following at December 31, 1996 and June 30, 1996
and 1995 (In thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 30, 1995
----------------- ------------- -------------
<S> <C> <C> <C>
Growing crops..................................... $17,958 $11,208 $ 2,368
Supplies and seeds inventories.................... 5,836 10,136 1,123
Finished goods.................................... 5,689 1,415 1,942
Work in progress.................................. 2,631 596 2,245
Raw materials..................................... 5,158 510 470
------- ------- ------
$37,272 $23,865 $ 8,148
======= ======= ======
</TABLE>
4. STRATEGIC ALLIANCE
On March 31, 1996, Calgene and Monsanto Company ("Monsanto") consummated an
Agreement and Plan of Reorganization (the "Reorganization Agreement") and
related Plan of Merger under which Monsanto contributed Gargiulo, Inc.
("Gargiulo"), $30 million and certain oils and produce related technology in
exchange for a 49.9% equity interest in Calgene. Gargiulo is a grower, packager,
marketer and distributor of tomatoes, strawberries and other produce with
operations in Florida, California, Puerto Rico and Mexico. The acquisition of
Gargiulo was accounted for as a purchase.
In connection with the Reorganization Agreement a total of 30,161,114
shares of Calgene common stock were issued with an aggregate fair value of
approximately $144,206,000. The per share value of Calgene common stock assigned
to the transaction was based on the last trade as reported on the National
Market System on the day the Company's negotiations with Monsanto concluded. The
common stock trade price was
III-10
<PAGE> 69
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
discounted to account for Monsanto's liquidity restrictions based on an
independent appraisal. The purchase price consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
30,161,114 shares of common stock.............................. $144,206
Acquisition costs, consisting primarily of financial advisory,
legal and accounting fees.................................... 1,530
Less cash received............................................. (30,000)
--------
$115,736
========
</TABLE>
A summary of the purchase price allocation is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net assets acquired............................................ $ 11,506
Identified intangible assets................................... 21,680
Excess purchase price over net assets acquired................. 23,350
In-process research and development............................ 59,200
-------
$115,736
=======
</TABLE>
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 5 to 15 years. Because the technological
feasibility of the acquired in-process research and development has not been
established and has no alternative future uses, the $59.2 million allocated to
in-process research and development has been expensed.
Between June 29, 1995 and March 19, 1996 Calgene received $23 million in
advances toward the $30 million proceeds in the form of a subordinated
promissory note. The subordinated note was converted to equity upon consummation
of the transaction. The additional $7 million was received on April 1, 1996.
On November 12, 1996, the Company entered into a Stock Purchase Agreement
with Monsanto (the "Stock Purchase Agreement"), pursuant to which (i) the
Company sold and issued to Monsanto, and Monsanto purchased 6,250,000 shares of
Common Stock of the Company (the "Additional Shares"), at $8.00 per share, for
an aggregate purchase price of $50 million, thereby increasing Monsanto's
ownership interest in shares of Calgene Common Stock from 49.9% to approximately
54.6% (without giving effect to the exercise of outstanding options and
warrants), (ii) Monsanto and Calgene agreed to enter into a Restated
Stockholders Agreement ("Restated Stockholders Agreement") amending and
restating the Stockholders Agreement dated March 31, 1996 ("Stockholders
Agreement"), and (iii) the Restated Certificate of Incorporation was amended to
reflect the amendments to the Stockholders Agreement contemplated by the
Restated Stockholders Agreement. As a consequence of the transaction, Monsanto
owned approximately 36,396,114 shares of Common Stock of the Company,
representing approximately 54.6% of the issued and outstanding shares of Common
Stock of the Company.
ACQUISITION OF COLLIER FARMS
On February 29, 1996, Gargiulo and Collier Enterprises consummated an asset
purchase agreement whereby Gargiulo acquired substantially all the assets,
subject to the assumption of certain specified liabilities, of the produce
business conducted by certain affiliates of Collier Enterprises under the trade
name Collier Farms ("Collier"). Collier is an agricultural producer of tomatoes
and other vegetables in Florida, and engages in the packaging, marketing and
distribution of those products in the commodity markets.
The purchase price consists of $10 million in cash and a $10 million
promissory note, plus an earn-out payment based upon achieving certain earnings
of the combined operations of Gargiulo and Collier in
III-11
<PAGE> 70
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Southwest Florida. Gargiulo also acquired Collier's 1995-1996 crop and assumed
liabilities related thereto, and committed to lease certain farmland from
affiliates of Collier. The acquisition was accounted for as a purchase. The
purchase price consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash........................................................... $ 10,000
Promissory note................................................ 10,000
Investment in 1995-1996 crop................................... 12,127
Acquisition costs, consisting primarily of financial advisory,
legal and accounting fees.................................... 200
-------
$ 32,327
=======
</TABLE>
A summary of the purchase price allocation is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net assets acquired............................................ $ 23,500
Excess purchase price over net assets acquired................. 8,827
-------
$ 32,327
=======
</TABLE>
UNAUDITED PRO FORMA COMBINED RESULTS OF OPERATIONS
Unaudited pro forma combined results of operations for the year ended June
30, 1996, giving effect to certain adjustments as if the Gargiulo and Collier
acquisitions occurred on July 1, 1995 are displayed in the following table.
These unaudited proforma combined results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the acquisition been in effect on July 1,
1995 or which may result in the future.
<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C>
Revenue........................................................ $ 182,041
Net loss....................................................... $ (128,115)
Net loss per share............................................. $ (2.12)
</TABLE>
5. OILSEED CROSS LICENSING AGREEMENT
In May 1996, the Company entered into a broad cross licensing agreement
with Monsanto encompassing the two companies' oilseed research programs. The
agreement has an initial term of 15 years.
Under the agreement Calgene received a royalty free license to current and
future Monsanto agronomic technology for use in combination with Calgene's
proprietary oils modification genes for development of specialty canola oil
products. Calgene also received $10 million from Monsanto for best-efforts
research and development activities to be performed by Calgene over a three year
period relating to further development of plant expression or oil modification
technologies. In exchange for the above, Calgene will pay royalties to Monsanto
based on a portion of the net profits of Calgene's oils division. The Company
recorded the $10 million research and development funding as a long-term
liability in the accompanying balance sheet. Royalties payable to Monsanto as
described above will be charged against the liability in the period incurred. In
the event the aggregate royalties to Monsanto exceeds $10 million, such amounts
will be charged to expense as incurred.
In exchange for a $7 million non-refundable license fee paid to Calgene,
Monsanto received a royalty bearing license to Calgene technology to develop
agronomically superior corn, soybean, canola and sunflower
III-12
<PAGE> 71
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
crops. The license fee was recorded as product development revenue in the
accompanying Statement of Operations.
6. PGI-KIRIN PARTNERSHIP
In March 1990 the Company and Kirin Brewery Co., Ltd. established PGI-Kirin
Partnership ("PGK"), a joint venture to develop and commercialize new potato
varieties. In January 1996 management decided to cease PGK operations and sell
its remaining assets. Consequently, Calgene recorded an estimated net write-off
of its investment in PGK of $982,000 in the third fiscal quarter of fiscal 1996.
PGK's revenues in fiscal 1996 and fiscal 1995 were $1.6 million and $1.5,
respectively.
7. WRITE-OFF OF ASSETS AND RESTRUCTURING EXPENSES
During the fiscal year ended June 30, 1996, the Company recorded a charge
of approximately $15.6 million for the write-off of assets, including $10.4
million primarily related to the merger of Calgene's tomato operations into
Gargiulo. The write-off of tomato assets primarily reflects a $5.4 million asset
impairment charge due to the consolidation of facilities and equipment and a
$2.5 million write-off of obsolete technology licenses. The Company also
recorded $1.5 million for the write-off of its investment in PG-K (before
minority interest), and $1.0 million for the write-off of an option to a
technology license the Company does not intend to exercise. As a consequence of
the Company's decision in the third quarter of fiscal 1996 to reduce its
emphasis on commodity distribution products at Calgene Chemical, the excess
purchase price of net assets acquired associated with the commodity distribution
business was written-down to net realizable value resulting in a $1.2 million
expense.
Pursuant to a plan approved by Calgene's Board of Directors in the quarter
ended December 31, 1996, Gargiulo intends to significantly reduce its produce
acreage in Southwest Florida. The reduction in acreage is in response to
increased competitive pressure from Mexico produce and is expected to be
accomplished over the next two to three years. As a consequence, during the
quarter ended December 31, 1996, the Company recorded a charge of approximately
$32.6 million for the write-off of assets, and other reserves. The write-offs
include $9.4 million for the write-down of tomato germplasm, an $8.3 million
asset impairment charge due to further consolidation of the Company's tomato
packing facilities, and a $10.4 million charge related to the excess purchase
price of net assets acquired allocated to the asset write-downs. The Company is
actively seeking buyers for the packing facilities. In addition, a reserve of
$4.5 million relating to other restructuring costs was recorded.
8. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt consists of the following at December 31, 1996 and June 30,
1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to bank; due in monthly installments of
approximately $3,000 including interest at 11.8% per annum,
through 2004; secured by a $220,000 certificate of deposit
and guaranteed by the Small Business Administration........ $ 213 $ 221 $ 235
Mortgage notes payable; due in quarterly installments of
approximately $31,000 including interest at 8.5% per annum,
through 1998; secured by land and buildings with a net book
value of approximately $531,400 at December 31, 1996....... 255 280 377
</TABLE>
III-13
<PAGE> 72
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Capitalized lease obligations; due in monthly installments
of approximately $86,000 including interest imputed at 5.4%
to 11% per annum, through 2001; secured by equipment with a
net book value of approximately $2,710,000 at December 31,
1996 and supported by a $150,000 which is secured by a
$150,000 certificate of deposit............................ 2,581 6,030 2,960
Note payable to the former owner of an acquired business;
due in an annual installment of $338,000 at July 17, 1997;
plus interest on the unpaid principal balance at the prime
rate (8.25% at December 31, 1996) over the term of the
loan; secured by a $338,000 certificate of deposit......... 338 592 705
Non-interest bearing note payable to the former owner of an
acquired business; due in monthly installments of $14,083
through June 30, 1997...................................... 84 169 338
Mortgage note payable; interest only payable in monthly
installments of approximately $3,800, current interest at
9.0% per annum. Interest is adjustable effective each
November 1 to prime plus 1%, rate not to exceed 9% or be
lower than 6% during the term of the note. Final payment of
$506,000 plus unpaid interest due November 1, 1999; secured
by land with a net book value of approximately $605,000 at
December 31, 1996.......................................... 506 506 506
Note payable to a bank; due in monthly installments of
approximately $2,200 including interest at 8.59% per annum,
through 2000; secured by equipment with a net book value of
approximately $195,500 at December 31, 1996................ 137 144 --
Note payable to a bank; due in monthly installments of
approximately $22,500 monthly including interest at prime
plus 1.25% (aggregating 9.50% at December 31, 1996) per
annum, through 2005, secured by buildings and equipment
with a net book value of approximately $2,372,000 at
December 31, 1996.......................................... 1,566 1,644 --
Mortgage loan payable to former owner of an acquired
business, payable in quarterly principal installments of
$280,966 plus interest at prime (8.25% at December 31,
1996) through February 28, 2001, secured by assets with a
net book value of approximately $11,537,000 at December 31,
1996....................................................... 4,688 5,338 --
Mortgage loan payable to former owner of an acquired
business, payable in quarterly principal installments of
$219,034 plus interest at prime (8.25% at December 31,
1996) through February 28, 2001, secured by assets with a
net book value of approximately $11,537,000 at December 31,
1996....................................................... 3,724 4,162 --
Mortgage loan, payable in monthly principal and interest
installments of $9,595 with interest at prime (8.25% at
December 31, 1996), secured by assets with a net book value
of approximately $753,000 at December 31, 1996............. 1,108 1,191 --
Mortgage loans payable in monthly principal and interest
installments of $40,237 with interest ranging from 6.63% to
prime (8.25% at December 31, 1996), secured by assets with
a net book value of approximately $1,184,000 at December
31, 1996................................................... 1,175 1,377 --
Term loan payable to former partner in acquired business,
monthly principal and interest payments of $37,981, with
interest at 10%............................................ 975 1,149 --
Note payable to a corporate lender, due in monthly
installments of $25,550 including interest at 10.38% per
annum, through 1999, secured by assets with a net book
value of approximately $481,000 at December 31, 1996....... 267 417 673
</TABLE>
III-14
<PAGE> 73
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Various term loans payable with interest at rates that
range from 8% to 12%. Maturity dates ranging from June 1998
through November 2001, secured by assets with a net book
value of approximately $541,000 at December 31, 1996....... 1,717 1,794 --
Note payable to a corporate lender, due in quarterly
installments of $30,938 including interest imputed at
22.29% per annum, through June 1, 1998..................... -- 279 371
Note payable to former owner of an acquired business for
the purchase of growing crops, principal due upon
collection of crop receivable, plus interest at 7%......... -- 9,070 --
Mortgage loan, payable in annual principal installments of
$1,000,000 through August 1999, with interest at prime..... -- 4,000 --
Mortgage loan, payable in annual principal installments of
$175,000, balance due November 30, 1996.................... -- 3,325 --
Mortgage loan, payable in annual principal installments of
$153,333, balance due November 30, 1996.................... -- 2,147 --
Mortgage loan, payable in annual principal installments of
$273,200, balance due on November 30, 1996................. -- 1,658 --
Convertible note payable to a corporate lender; converted
to equity on March 31, 1996 (Note 4)....................... -- -- 10,000
Note payable to affiliate consists of the following:
Advances under a $40,000,000 convertible term loan with a
balloon payment due March 31, 2000 interest at prime plus
2% (aggregating 10.25% at December 31, 1996)............... 24,760 24,760 --
------ ------ ------
44,094 70,253 16,165
Less note payable to affiliate............................. 24,760 24,760 --
Less amount due within one year............................ 5,139 22,850 1,494
------ ------ ------
Long-term debt............................................. $ 14,195 $ 22,643 $ 14,671
====== ====== ======
</TABLE>
The capitalized lease obligations listed above contain certain restrictive
covenants which, among other things, require the Company to maintain a specified
level of working capital. In addition, certain debt and capital lease
obligations prohibit the Company from paying dividends on common stock.
At December 31, 1996 aggregate future principal payments by year on
long-term debt and note payable to affiliate are due as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997................................... $ 5,139
1998................................... 3,848
1999................................... 4,580
2000................................... 27,795
2001................................... 797
Thereafter............................. 1,935
-------
$ 44,094
</TABLE>
III-15
<PAGE> 74
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTES PAYABLE
A $13 million bank line of credit is used to help finance working capital
requirements for Calgene's subsidiaries, excluding Gargiulo. Borrowings under
the line bear interest at the greater of one quarter percent over the bank's
prime rate or two and one half percent over the federal funds rate. On December
31, 1996 the bank's prime rate was 8.25% and the federal funds rate was 6.26%.
The weighted average annual interest rate under the line of credit was 8.62%,
8.90%, and 8.92% for the six month period ended December 31, 1996 and for the
fiscal year ended June 30, 1996, and 1995, respectively. Borrowings are subject
to certain financial covenants which include prohibiting the Company from paying
cash dividends on its common stock. Borrowings are secured by qualifying
accounts receivable and inventory and must be repaid on a monthly basis to the
extent they exceed qualifying accounts receivable and inventory. As of December
31, 1996, and June 30, 1995 there was $6,500,000 and $5,973,000, respectively,
outstanding on the line of credit.
During fiscal year 1996 the Company entered into a credit facility
agreement with Monsanto. Monsanto is obligated, subject to certain terms and
conditions, to lend up to $15 million annually for a period of three years to
Calgene, although not more than $15 million may be outstanding at any one time.
The credit facility agreement contains various covenants precluding Calgene and
its subsidiaries from taking certain actions without the approval of Monsanto.
Also, in the event of a default by Calgene, Monsanto has certain rights to
convert the outstanding principal and interest under such agreement into
additional shares of Calgene Common Stock, not to exceed 3,000,000 shares. The
outstanding balance of this credit facility shall bear interest at two percent
above the prime rate (aggregating 10.25% at December 31, 1996). This credit
facility expires on September 30, 1998. As of December 31, 1996, the Company's
advances under this credit facility had been paid in full.
A $3.5 million line of credit with a bank is used to finance working
capital requirements at Gargiulo's Puerto Rico operations. Borrowings under the
line bear interest at prime. The credit line expires on September 30, 1997. On
December 31, 1996, the bank's prime rate was 8.25%. As of December 31, 1996,
there was $2,500,000 outstanding on the line of credit.
9. COMMITMENTS AND CONTINGENCIES
LEASING ARRANGEMENTS
The Company leases certain research and office equipment as well as office
and research space. These leases are accounted for as follows in the
accompanying consolidated financial statements:
CAPITAL LEASES
The following amounts are included in property, plant and equipment as
assets recorded under capital leases:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996 JUNE 30, 1995
----------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost.............................. $ 4,235 $ 6,847 $ 4,192
Less accumulated depreciation..... 1,525 1,245 1,113
------ ------ ------
$ 2,710 $ 5,602 $ 3,079
====== ====== ======
</TABLE>
Depreciation expense charged to operations pursuant to these capital leases
amounted to approximately $294,000, $482,000, $537,000 and $462,000 during the
six month period ended December 31, 1996 and the years ended June 30, 1996, 1995
and 1994 respectively.
During the six month period ended December 31, 1996 and the years ended
June 30, 1996, 1995 and 1994, the Company capitalized equipment of approximately
$334,000, $489,000, $1,506,000 and $773,000,
III-16
<PAGE> 75
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
respectively which represents the present value of the net minimum lease
payments of capital lease obligations entered into during such fiscal periods.
The future minimum lease payments by fiscal year under capital leases,
together with the present value of the net minimum lease payments are as follows
at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997................................................... $ 1,322
1998................................................... 621
1999................................................... 445
2000................................................... 555
2001................................................... 71
-------
3,014
Less amount representing interest...................... 433
Present value of net minimum Lease payments (Note 8)... $ 2,581
=======
</TABLE>
OPERATING LEASES
Future minimum payments by fiscal year under non-cancelable operating
leases are as follows at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997................................................... $ 6,379
1998................................................... 3,732
1999................................................... 3,153
2000................................................... 2,815
2001................................................... 1,436
Thereafter............................................. 637
-------
$ 18,152
=======
</TABLE>
Rental expense charged to operations for all operating leases was
approximately $3,445,000, $3,971,000, $3,259,000 and $1,761,000 for the six
month period ended December 31, 1996 and the years ended June 30, 1996, 1995 and
1994, respectively. Rent expense related to leases with related parties was
approximately $202,000 for the six month period ended December 31, 1996 and
$143,000 for the year ended June 30, 1996.
INVENTORY PURCHASE COMMITMENTS
In the normal course of business, the Company has entered into various
grower contracts with third party growers. Pursuant to these contracts, the
Company has agreed to purchase the resulting crop, subject to certain quality
standards, at the end of the growing cycle which is generally less than one
year. The amount of outstanding grower contract commitments is approximately
$4.4 million at December 31, 1996.
PATENTS
Certain institutions and companies have been issued patents, have patent
applications pending or have otherwise obtained proprietary rights to technology
necessary or potentially useful to Calgene. These patents or patent
applications, if patents are issued, could delay product introduction or
preclude Calgene from using this technology without a license. The extent to
which Calgene would be required to license such patents and cost and
availability of such licenses are currently unknown.
III-17
<PAGE> 76
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
On or about January 29, 1997, Hanna Obstfeld filed suit in Delaware
Chancery Court against the Company and certain of its directors alleging
unfairness in connection with the proposed acquisition by Monsanto Company of
those shares of the Company's common stock which Monsanto does not own. After
Ms. Obstfeld brought her suit, other essentially identical actions followed,
none of which have as yet been served upon the Company. It is anticipated that
the complaints will shortly be consolidated and the Company has no obligation to
answer, move or otherwise plead until such time as a consolidated complaint has
been filed and served. No discovery has occurred to date in this action. The
Company believes it has meritorious defenses to the allegations set forth in the
pending complaints.
On February 11, 1997, three named Plaintiffs filed a Class Action Complaint
against Gargiulo, Inc. in the United States District Court for the Northern
District of California, San Jose Division. The Complaint arose from the
employment relationship between the named and unnamed Plaintiffs and Gargiulo,
Inc. The Plaintiffs allege certain violations of the Migrant and Seasonal
Agricultural Worker Protection Act ("MSPA"), California's IWC Wage Order, the
California Labor Code and the California Business and Professions Code; and
Breach of Contract. The Plaintiffs seek damages including all unpaid wages,
statutory damages under the California Labor Code; a declaration that Gargiulo
violated MSPA, monetary damages pursuant to MSPA; and for an order enjoining
Gargiulo, Inc. from violations of MSPA. Gargiulo's insurance carriers were
contacted regarding this lawsuit. As of March 27, 1997, Gargiulo has answered
the Class Action Complaint, and is initiating discovery regarding class
certification. Gargiulo, Inc. is also waiting for the response from its
insurance carrier. While the results of the Class Action Complaint cannot be
predicted, the Company believes that the ultimate outcome will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
From 1992 through early 1996, Calgene was engaged in a litigation with Enzo
Biochem, Inc. ("Enzo") a company licensed under three related U.S. patents and
counterpart foreign patents (the "Enzo Patents") which purported 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 had 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. Calgene subsequently requested
that the court clarify certain aspects of the infringement portion of its
decision, and the court has agreed to reconsider on this basis. There is no
indication that the court would reverse any aspect of its original ruling.
Meanwhile, Enzo has indicated that it intends to appeal the decision.
Although the trial court has the option of altering any aspect of its
decision upon reconsideration, and Enzo may appeal the decision after its
publication, Calgene believes that further proceedings will not have a
materially adverse effect on its consolidated financial position or results of
operations, based on the trial court's determination that the SUNY/Enzo Patents
are invalid and not infringed by Calgene and that the Calgene Antisense Patent
is valid.
Nevertheless, if on reconsideration or as a result of an 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. If the court were to determine that
the Calgene Antisense Patent is invalid or unenforceable, Calgene would be
deprived of the competitive and licensing advantages afforded by its patent.
Moreover, the Company would have to expense the capitalized legal fees related
to the defense of the Calgene's Antisense Patent, which amounted to
approximately $5.7 million at December 31, 1996.
III-18
<PAGE> 77
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 18, 1995, two groups of Plaintiffs filed separate complaints
against various Defendants including Gargiulo & Associates in the United States
District Court for the Eastern District of California. Both complaints arose
from the same set of facts and allege the same three theories of recovery. These
actions were consolidated. The cases involve personal injury claims relating to
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, Albertano Alberto
Jimenez; et al. v. Gargiulo & Associates; Pat Kreger, Inc., Manuel Vegas; Robles
Rios; Jesus Loza and Samuel Santiago Vasquez, and Jose Vasquez; et al. v.
Gargiulo & Associates; Pat Kreger, Inc., Manuel Vegas; Robles Rios; Jesus Loza
and Samuel Santiago Vasquez, were both filed on October 18, 1995. The plaintiffs
sought 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's insurance carriers have been contacted regarding these
lawsuits. As of March 12, 1997, Gargiulo was granted its Motion for Summary
Judgment as to all of the claims against it. This matter is now subject to
appeal which must be filed by no later than 30 days from entry of judgment which
will not occur for a few weeks.
The Company is party to other pending litigation incidental to its business
and has from time to time been notified of various claims that are not the
subject of pending litigation. While the results of litigation and claims cannot
be predicted with certainty, the Company believes that the final outcome of all
such other litigation matters and claims will not have a materially adverse
effect on its consolidated financial position or results of operations.
EMPLOYMENT AGREEMENTS
Calgene has various employment and consulting agreements with certain key
individuals. The aggregate fixed commitment under these agreements is
$2,125,000. In addition, one employment agreement provides for additional
compensation based on a percentage of the net profit of Gargiulo.
10. SHAREHOLDERS' EQUITY
STOCK OPTIONS
At December 31, 1996, the Company has three stock-based compensation plans,
which are described below. The Company applies APB 25 and related
interpretations in accounting for its stock options because, as discussed below,
the alternative fair value accounting provided for under SFAS 123 requires use
of option valuation models that were not developed for use in valuing the stock
options. Under APB 25, because the exercise price of the Company's stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
The Company established stock option plans in June 1991 (the "1991 Plan")
and March 1996 (the "1996 Plan"), under which all officers, employees and
directors of the Company may participate. Either incentive stock options or
non-qualified stock options can be granted under both plans. 2,500,000 and
5,000,000 shares of the Company's common stock have been reserved for issuance
under the 1991 Plan, and the 1996 Plan, respectively. Options granted under the
plans generally have a term of ten years from the date of grant. The exercise
price of incentive stock options granted under the plans may not be less that
100% of the fair market value of Calgene's common stock on the date of grant.
The administrative committee of the option plans has the authority to
provide that options issued may be exercised by either (1) cash, (2) surrender
by the optionee of other shares of common stock of the Company of a value equal
to the exercise price of the shares as to which the option is being exercised,
or (3) the optionee's issuance of an interest-bearing, full-recourse promissory
note.
III-19
<PAGE> 78
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also has a 1981 Stock Option Plan having terms generally
similar to the 1991 Plan. The 1981 Plan has been terminated subject to the
rights of holders of outstanding options.
Pro forma information regarding net loss and net loss per share is required
by SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to June
30, 1995 under the fair value method of that Statement. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions for the year ended
June 30, 1996, and the six month period ended December 31, 1996: dividend yield
of 0; volatility factors of the expected market price of the Company's common
stock of .44; risk-free interest rate of 6.6%; and a weighted-average expected
life of the options of 3.5 years for certain option holders and five years for
all other option holders.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information, which includes the stock option plans and the Employee
Stock Purchase Plan, follows (in thousands except for net loss per share
information):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1996 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Net loss -- actual..................................... $ (63,934) $ (97,014)
Net loss -- pro forma.................................. (65,085) (97,564)
Net loss per share -- actual........................... (1.03) (2.56)
Net loss per share -- pro forma........................ (1.05) (2.58)
</TABLE>
Because SFAS 123 is applicable only to options granted subsequent to June
30, 1995, its pro forma effect will not be fully reflected until 1999.
III-20
<PAGE> 79
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the Company's stock option plans and changes
during the periods is presented below:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at June 30, 1993............................. 1,461,025
Granted................................................ 499,000
Canceled............................................... (13,759)
Exercised (at $5.25 to $12.375)........................ (268,588)
---------
Outstanding at June 30, 1994............................. 1,677,678
Granted................................................ 769,025
Canceled............................................... (119,968)
Exercised (at $5.875 to $12.375)....................... (61,457)
---------
Outstanding at June 30, 1995............................. 2,265,278 $ 7.57
Granted................................................ 2,000,929 5.72
Canceled............................................... (567,502) 7.47
Exercised (at $6.50)................................... (6,182) 6.50
---------
Outstanding at June 30, 1996............................. 3,692,523 6.56
Granted................................................ 1,386,350 5.25
Canceled............................................... (135,327) 6.63
---------
Outstanding at December 31, 1996......................... 4,943,546 6.18
=========
</TABLE>
The weighted-average fair value of options granted during the six month
period ended December 31, 1996, and the year ended June 30, 1996, was $2.37 and
$2.54, respectively.
The following table summarizes information about the stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- ----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
RANGE OF EXERCISE PRICES OPTIONS LIFE PRICE OPTIONS PRICE
----------------------------- ---------- ----------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
$4.63 - $ 5.49............... 1,645,587 9.37 $ 5.23 225,147 $ 5.22
5.50 - 5.99............... 1,647,082 9.31 5.76 311,044 5.75
6.00 - 6.99............... 304,973 5.35 6.67 212,403 6.76
7.00 - 7.99............... 1,187,586 6.91 7.50 710,719 7.51
8.00 - 15.25............... 158,318 6.50 9.65 124,558 9.92
--------- ---------
4,943,546 6.18 1,583,871 6.93
========= =========
</TABLE>
At June 30, 1995, 814,421 options were exercisable at prices ranging from
$5.25 to $15.25 per share. At June 30, 1996, 1,088,775 options were exercisable
at prices ranging from $4.75 to $15.25 per share. At December 31, 1996, there
are 404,917 shares and 2,138,072 shares available for grant under the 1991 plan
and 1996 plan, respectively. Of the options outstanding at December 31, 1996,
options to purchase 1,583,871 shares were immediately exercisable at prices
ranging from $4.75 to $15.25 per share on dates ranging from 1996 to 2006.
In November 1994, the Board of Directors approved an amendment to all
outstanding options held by employees of the Company under the 1991 plan with
exercise prices in excess of $7.50 per share. The amendment allowed employees to
elect to reduce the option exercise price to $7.50 per share in exchange for
III-21
<PAGE> 80
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
an extended vesting period. A total of 1,268,081 options with option prices
ranging from $7.75 to $16.00 were repriced.
EMPLOYEE STOCK PURCHASE PLAN
The Company established a stock purchase plan in March 1990 (the "1990
Plan") under which most employees of the Company may participate. A total of
500,000 shares of the Company's common stock have been reserved for issuance
under the 1990 Plan. The 1990 Plan is administered by the Board of Directors or
by a committee appointed by the Board of Directors. Employees can elect to have
from two to ten percent of their monthly gross salary deducted during each
offering period and applied to the purchase of stock. The purchase price is an
amount equal to 85% of the fair market value of a share of common stock of the
Company on the enrollment date or on the purchase date, whichever is lower.
During the fiscal years ended December 31, 1996, June 30, 1996, 1995 and 1994,
the Company sold 21,521 shares of common stock for $91,464, 31,593 shares of
common stock for $166,183, 31,462 shares of common stock for $216,179, and
23,045 shares of common stock for $223,144, respectively. For purposes of
calculating the pro forma disclosures required by SFAS 123, the fair value of
the employees' purchase rights was estimated using the Black-Scholes option
pricing model with the following assumptions for the six month period ended
December 31, 1996 and the year ended June 30, 1996: dividend yield of 0;
expected life of 6 months; expected volatility of .33; and risk-free interest
rate of 5.81%. The weighted-average fair value of those purchase rights granted
during the six month period ended December 31, 1996 and the year ended June 30,
1996 was $1.60 and $1.97, respectively.
11. INCOME TAXES
The income tax provision for the six month period ended December 31, 1996
and years ended June 30, 1996, and 1995 is comprised of state franchise taxes.
Significant components of the Company's deferred tax assets and liabilities for
federal and state income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1996 1996 1995
------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $ 85,200 $70,600 $66,200
Research and other credits.................................. 3,800 3,800 3,800
Capitalized research and development........................ 400 400 400
Inventory reserves and allowances........................... 1,000 1,500 --
Facility writedowns and restructuring....................... 9,400 6,400 300
Development fee............................................. 4,000 4,000 --
Capitalized license fees.................................... 400 600 700
Increase in tax value of net assets from business
acquisition............................................... 15,000 4,200 --
Other, net.................................................. 800 1,800 1,600
--------- -------- --------
Total deferred tax assets................................... 120,000 93,300 73,000
Valuation allowance for deferred tax assets................. (118,400) (91,500) (72,800)
--------- -------- --------
Net deferred tax assets..................................... $ 1,600 $ 1,800 $ 200
========= ======== ========
Deferred tax liabilities:
Depreciation.............................................. $ 1,600 $ 1,800 $ --
Other, net................................................ -- -- 200
--------- -------- --------
Total deferred tax liabilities.............................. $ 1,600 $ 1,800 $ 200
========= ======== ========
</TABLE>
At June 30, 1994 the valuation allowance for deferred tax assets was $61.1
million.
III-22
<PAGE> 81
CALGENE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For federal income tax return purposes, as of December 31, 1996, the
Company has a net operating loss carryover of approximately $234 million which
expires between 1997 and 2012 and a general business tax credit carryover of
approximately $4 million which expires between 1997 and 2012. In addition, as of
December 31, 1996, the Company has a net operating loss carryover of
approximately $143 million for state income tax purposes which expires between
1997 and 2012.
Approximately $20 million and $3 million of the federal and state net
operating loss carryovers, respectively, and $700,000 of the general business
tax credit carryover, were generated by Plant Genetics prior to its merger with
Calgene. Such net operating loss and general business tax credit carryovers are
available only to offset the separate federal and state taxable income, if any,
of Calgene Fresh (Plant Genetics was renamed Calgene Fresh in January, 1992).
For financial reporting purposes, a valuation allowance of approximately $118.4
million has been recognized to offset the deferred tax assets related to all of
the aforementioned carryforwards.
Because of "change in ownership" provisions of the Tax Reform Act of 1986,
a portion of the Company's federal net operating loss and credit carryovers will
be subject to an annual limitation regarding their utilization against taxable
income in future periods. The Company expects that this annual limitation will
not have a material adverse effect on the Company's ability to utilize the net
operating loss and credit carryovers prior to the expiration of the carryover
periods.
12. TAX DEFERRED INVESTMENT PLAN
Substantially all full-time employees of the Company are eligible to
participate in a tax deferred investment plan (the "401(k) Plan"). The 401(k)
Plan permits each employee to contribute 2% to 15% of compensation on a pre-tax
basis, to a maximum amount per calendar year. For the six month period ended
December 31, 1996 and the years ended June 30, 1996, 1995 and 1994, matching
contributions by the Company were $118,000, $227,000, $179,000 and $151,000,
respectively.
13. SUBSEQUENT EVENTS
In January 1997, the Company received an unsolicited proposal from Monsanto
to acquire all of the outstanding shares of the Company's stock that Monsanto
does not already own at a price of $7.25 per share. Monsanto currently owns
approximately 54.6% of the Company's outstanding shares. The proposal is under
consideration by a special committee of three disinterested Calgene Directors.
In February 1997, the Company replaced its $13 million bank line of credit
with a $20 million bank line of credit with a different bank. The bank line is
used to help finance working capital requirements for Calgene. Borrowings are
secured by accounts receivable, inventory and equipment. The line of credit
expires on December 1, 1999. Available credit increases to $30 million after
December 31, 1997 and to $40 million after December 31, 1998.
III-23
<PAGE> 82
ANNEX A
[MONTGOMERY LOGO IN DTP]
March 31, 1997
Special Committee of the Board of Directors
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"),
Monsanto, a Delaware corporation ("Monsanto"), and Monsanto Acquisition Company,
Inc., a Delaware corporation and a wholly-owned subsidiary of Monsanto
("Purchaser") expect to enter into an Agreement and Plan of Merger (the
"Agreement") pursuant to which Purchaser will commence a tender offer to
purchase for cash all of the outstanding shares of the Company's common stock at
$8.00 per share (the "Offer"). Pursuant to the terms and subject to the
conditions of the Agreement, after consummation of the Offer, the Purchaser will
be merged with and into the Company, which will be the surviving entity (the
"Merger"). In the Merger, all shares of the Company's common stock (other than
(i) shares held by the Company as treasury stock; (ii) shares held by Monsanto,
Purchaser or any of their respective subsidiaries; and (iii) shares as to which
dissenters' rights have been perfected) will be exchanged for cash equal to the
amount per share paid in the Offer. The terms and conditions of the Offer and
the Merger are set forth in more detail in the Agreement.
We have been engaged as financial advisor to the Special Committee of the
Board of Directors of the Company (the "Special Committee") in its consideration
of a possible sale to Monsanto of the publicly traded shares of the Company's
common stock not already owned by Monsanto and its affiliates. In that capacity,
the Special Committee has asked for our opinion as investment bankers as to
whether the consideration to be received by the holders of the Company's common
stock (other than Monsanto and its affiliates) pursuant to the Offer and the
Merger is fair to such stockholders from a financial point of view, as of the
date hereof. As you are aware, we were not retained to, nor did we, advise the
Company or the Special Committee with respect to alternatives to the Offer and
the Merger or the Company's underlying decision to proceed with or effect the
Offer and the Merger. Further, we were not requested to, nor did we, solicit or
assist the Company in soliciting indications of interest from third parties for
all or any part of the Company.
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 financial statements for recent years and interim periods to
September 30, 1996 and certain other relevant financial and operating data
relating to the Company made available to us from published sources and from the
internal records of the Company; (ii) reviewed the financial terms and
conditions of the Agreement in the form provided to us by the Company; (iii)
reviewed certain publicly available information concerning the trading of, and
the trading market for, the Company's common stock; (iv) compared the Company
from a financial point of view with certain other companies which we deemed to
be relevant; (v) considered the financial terms, to the extent publicly
available, of selected recent business combinations which we deemed to be
comparable, in whole or in part, to
A-1
<PAGE> 83
Special Committee of the Board of Directors
Calgene, Inc.
March 31, 1997
Page 2
the Offer and the Merger; (vi) reviewed and discussed with representatives of
the management of the Company certain information of a business and financial
nature, furnished to us by the Company, including financial forecasts and
related assumptions of the Company; (vii) made inquiries regarding and discussed
the Agreement and other matters related thereto with the Company's counsel; and
(viii) performed such other analyses and examinations as we deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for the Company provided to us by management, as a result of
discussions among us, representatives of management of the Company and the
Special Committee, such forecasts were adjusted to reflect more conservative
assumptions regarding the development and market penetration of certain products
and to reflect Monsanto's $50 million investment in the Company at $8.00 per
share in November 1996. Upon the advice and with the consent of management of
the Company and the Special Committee, we have assumed for purposes of our
opinion that the unadjusted forecasts were reasonably prepared on bases
reflecting the best available estimates and judgments of the Company's
management at the time of preparation as to the future financial performance of
the Company and that such forecasts, as adjusted, 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 assets, financial condition, results of
operations, business or prospects since the date of its last financial
statements available to us. Although we were aware of the asset write-downs and
restructuring expenses reflected in the Company's announcement of its financial
results for the quarter ended December 31, 1996, we did not revise our financial
analyses to take into account developments (other than Monsanto's $50,000,000
investment in the Company) after September 30, 1996. We have relied on advice of
counsel to the Special Committee and counsel and independent accountants to the
Company as to all legal and financial reporting matters with respect to the
Special Committee, the Company, the Agreement, the Offer and the Merger. We have
assumed that the Offer and the Merger will be consummated in a manner that
complies in all respects with the applicable provisions of 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 any of
the assets or liabilities (contingent or otherwise) of the Company, nor have we
been furnished with any such appraisals. The Company has informed us, and we
have assumed, that the Merger will be recorded as a purchase under generally
accepted accounting principles. 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. Accordingly, although subsequent
developments may affect this opinion, we have not assumed any obligation to
update, revise or affirm this opinion.
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 further amendments thereto, and without
waiver by the Company of any of the conditions to its obligations thereunder.
We have acted as financial advisor to the Special Committee in connection
with the Offer and the Merger and will receive a fee for our services, including
rendering this opinion, a significant portion of which is contingent upon the
consummation of the Offer. In the ordinary course of business, we actively trade
the equity securities of the Company and Monsanto for our own account and for
the accounts of 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 advisor to the Company in
connection with the sale of 49.9% of the Company to Monsanto in March 1996, and
acting as co-manager of an underwritten public offering of Calgene Common Stock
in January 1993 and as lead manager of an underwritten public offering of
Calgene Common Stock in October 1994.
A-2
<PAGE> 84
Special Committee of the Board of Directors
Calgene, Inc.
March 31, 1997
Page 3
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the consideration to be received by the holders of the
Company's common stock (other than Monsanto and its affiliates) pursuant to the
Offer and the Merger is fair to such stockholders from a financial point of
view, as of the date hereof.
This opinion is furnished pursuant to our engagement letter, dated February
26, 1997. This opinion is addressed to the Special Committee and the Company's
Board of Directors only and is not intended to be and shall not be deemed to be
a recommendation to any stockholder as to whether to accept the consideration to
be offered to such stockholder pursuant to the Offer or as to how such
stockholder should vote with respect to the Merger, if any vote is required.
Except as provided in such engagement letter, this opinion may not be used or
referred to by the Special Committee, the Company's Board of Directors or the
Company, or quoted or disclosed to any person in any manner, without our prior
written consent, which consent is hereby given to the inclusion of this opinion
in any Schedule 14D-1, Schedule 13E-3 or Schedule 14D-9 filed with the
Securities and Exchange Commission in connection with the Offer or the Merger.
Very truly yours,
/s/ MONTGOMERY SECURITIES
--------------------------------------
Montgomery Securities
A-3
<PAGE> 85
ANNEX B
RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE DGCL
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF THE DGCL, ANY
STOCKHOLDER WHO IS CONSIDERING EXERCISING DISSENTERS' RIGHTS SHOULD
CONSULT HIS OR HER LEGAL ADVISOR.
STATUTORY APPRAISAL PROCEDURES. The following is a brief summary of the
statutory procedures to be followed by a holder of Shares at the Effective Time
who does not wish to accept the per Share cash consideration pursuant to the
Merger (a "Remaining Stockholder") in order to dissent from the Merger and
perfect appraisal rights under Delaware law. THIS SUMMARY IS NOT INTENDED TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SECTION 262 OF THE
DGCL, THE TEXT OF WHICH IS SET FORTH IN THIS ANNEX B HERETO. ANY REMAINING
STOCKHOLDER CONSIDERING DEMANDING APPRAISAL IS ADVISED TO CONSULT LEGAL COUNSEL.
APPRAISAL RIGHTS WILL NOT BE AVAILABLE UNLESS AND UNTIL THE MERGER (OR A SIMILAR
BUSINESS COMBINATION) IS CONSUMMATED.
Remaining Stockholders of record who desire to exercise their appraisal
rights must fully satisfy all of the following conditions. A written demand for
appraisal of Shares must be delivered to the Secretary of the Company (x) before
the taking of the vote on the approval and adoption of the Merger Agreement if
the Merger is not being effected as a "short-form" merger but, rather, is being
consummated following approval thereof at a meeting of the Company's
stockholders (a "long-form merger") or (y) within 20 days after the date that
the Surviving Corporation mails to the Remaining Stockholders a notice (the
"Notice of Merger") to the effect that the Merger is effective and that
appraisal rights are available (and includes in such notice a copy of Section
262 of the DGCL and any other information required thereby) if the Merger is
being effected as a "short-form" merger without a vote or meeting of the
Company's stockholders. If the Merger is effected as a "long-form" merger, this
written demand for appraisal of Shares must be in addition to and separate from
any proxy or vote abstaining from or against the approval and adoption of the
Merger Agreement, and neither voting against, abstaining from voting, nor
failing to vote on the Merger Agreement will constitute a demand for appraisal
within the meaning of Section 262 of the DGCL. In the case of a "long-form"
merger, any stockholder seeking appraisal rights must hold the Shares for which
appraisal is sought on the date of the making of the demand, continuously hold
such Shares through the Effective Time, and otherwise comply with the provisions
of Section 262 of the DGCL.
In the case of both a "short-form" and a "long-form" merger, a demand for
appraisal must be executed by or for the stockholder of record, fully and
correctly, as such stockholder's name appears on the stock certificates. If
Shares are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, such demand must be executed by the fiduciary. If Shares
are owned of record by more than one person, as in a joint tenancy or tenancy in
common, such demand must be executed by all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that in exercising the demand, he
is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for others,
may exercise appraisal rights with respect to the Shares held for all or less
than all beneficial owners of Shares as to which the holder is the record owner.
In such case the written demand must set forth the number of Shares covered by
such demand. Where the number of Shares is not expressly stated, the demand will
be presumed to cover all Shares outstanding in the name of such record owner.
Beneficial owners who are not record owners and who intend to exercise appraisal
rights should instruct the record owner to comply strictly with the statutory
requirements with respect to the exercise of appraisal rights before the date of
any meeting of stockholders of the Company called to approve the Merger in the
case of a "long-form" merger and within 20 days following the mailing of the
Notice of Merger in the case of a "short-form" merger.
Remaining stockholders who elect to exercise appraisal rights must mail or
deliver their written demands to: Secretary, Calgene, Inc., 1920 Fifth Street,
Davis, California 95616. The written demand for appraisal should specify the
stockholder's name and mailing address, the number of Shares covered by the
demand and
B-1
<PAGE> 86
that the stockholder is thereby demanding appraisal of such Shares. In the case
of a "long-form" merger, the Company must, within ten days after the Effective
Time, provide notice of the Effective Time to all stockholders who have complied
with Section 262 of the DGCL and have not voted for approval and adoption of the
Merger Agreement.
In the case of a "long-form" merger, Remaining Stockholders electing to
exercise their appraisal rights under Section 262 must not vote for the approval
and adoption of the Merger Agreement or consent thereto in writing. Voting in
favor of the approval and adoption of the Merger Agreement, or delivering a
proxy in connection with the stockholders meeting called to approve the Merger
Agreement (unless the proxy votes against, or expressly abstains from the vote
on, the approval and adoption of the Merger Agreement), will constitute a waiver
of the stockholder's right of appraisal and will nullify any written demand for
appraisal submitted by the stockholder.
Regardless of whether the Merger is effected as a "long-form" merger or a
"short-form" merger, within 120 days after the Effective Time, either the
Company or any stockholder who has complied with the required conditions of
Section 262 and who is otherwise entitled to appraisal rights may file a
petition in the Delaware Court of Chancery demanding a determination of the fair
value of the Shares of the dissenting stockholders. If a petition for an
appraisal is timely filed, after a hearing on such petition, the Delaware Court
of Chancery will determine which stockholders are entitled to appraisal rights
and thereafter will appraise the Shares owned by such stockholders, determining
the fair value of such Shares, exclusive of any element of value arising from
the accomplishment or expectation of the Merger, together with a fair rate of
interest to be paid, if any, upon the amount determined to be the fair value.
The cost of the appraisal proceeding may be determined by the Delaware
Court of Chancery and taxed upon the parties as the Delaware Court of Chancery
deems equitable in the circumstances. Upon application of a dissenting
stockholder, the Delaware Court of Chancery may order that all or a portion of
the expenses incurred by any dissenting stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable attorneys' fees
and the fees and expenses of experts, be charged pro rata against the value of
all Shares entitled to appraisal. In the absence of such determination or
assessment, each party bears its own expenses.
Any Remaining Stockholder who has duly demanded appraisal in compliance
with Section 262 of the DGCL will not, after the Effective Time, be entitled to
vote for any purpose the Shares subject to such demand or to receive payment of
dividends or other distributions on such Shares, except for dividends or other
distributions payable to stockholders of record at a date prior to the Effective
Time.
At any time within 60 days after the Effective Time, any former holder of
Shares shall have the right to withdraw his or her demand for appraisal and to
accept the per Share cash consideration pursuant to the Merger. After this
period, such holder may withdraw his or her demand for appraisal only with the
consent of the Surviving Corporation. If no petition for appraisal is filed with
the Delaware Court of Chancery within 120 days after the Effective Time,
stockholders' rights to appraisal shall cease and all stockholders shall be
entitled to receive the per Share cash consideration pursuant to the Merger.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET
FORTH ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER (OR ANY SIMILAR BUSINESS COMBINATION) IS
CONSUMMATED. STOCKHOLDERS WHO WILL BE ENTITLED TO APPRAISAL RIGHTS IN CONNECTION
WITH THE MERGER WILL RECEIVE ADDITIONAL INFORMATION CONCERNING APPRAISAL RIGHTS
AND THE PROCEDURES TO BE FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH
STOCKHOLDERS HAVE TO TAKE ANY ACTION RELATING THERETO.
B-2
<PAGE> 87
STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE
APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE PRICE PAID
IN THE OFFER THEREFOR.
GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
subsection (g) of Section 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
B-3
<PAGE> 88
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not
B-4
<PAGE> 89
more than 10 days prior to the date the notice is given; provided that, if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
B-5
<PAGE> 90
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
B-6
<PAGE> 91
The related Letter of Transmittal and Share Certificates for your Shares
should be sent or delivered by you, your broker, dealer, commercial bank or
trust company to the Depositary at its addresses set forth below. Facsimile
copies of the Letters of Transmittal will be accepted.
The Depositary:
THE FIRST NATIONAL BANK OF BOSTON
------------------------
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
BANK OF BOSTON BANK OF BOSTON STARS
Corporate Agency and Reorganization Corporate Agency and Reorganization SECURITIES TRANSFER AND REPORTING SERVICES, INC.
P.O. Box 1889 150 Royall Street One Exchange Place/55 Broadway, 3rd Floor
Mail Stop 45-02-53 Mail Stop 45-02-53 New York, New York 10006
Boston, Massachusetts 02105-1889 Canton, Massachusetts 02021
</TABLE>
By Facsimile:
(For Eligible Institutions Only)
(617) 575-2233
Confirm Facsimile by Telephone:
(800) 736-3001
------------------------
Stockholders should contact the Information Agent, the Dealer Manager or
their broker, dealer, commercial bank or trust company for assistance concerning
the Offer. Requests for additional copies of the Offer to Purchase and Letters
of Transmittal may also be directed to the Information Agent.
The Information Agent:
(LOGO)
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Dealer Manager for the Offer is:
GOLDMAN, SACHS & CO.
(800) 323-5678 (toll free)
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
CALGENE, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED APRIL 7, 1997
BY
MONSANTO ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
MONSANTO COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MAY 2, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary:
THE FIRST NATIONAL BANK OF BOSTON
------------------------
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Bank of Boston Bank of Boston STARS
Corporate Agency and Reorganization Corporate Agency and Reorganization Securities Transfer and Reporting
Services, Inc.
P.O. Box 1889 150 Royall Street One Exchange Place/55 Broadway, 3rd
Floor
Mail Stop 45-02-53 Mail Stop 45-02-53 New York, New York 10006
Boston, Massachusetts 02105-1889 Canton, Massachusetts 02021
</TABLE>
By Facsimile:
(For Eligible Institutions Only)
(617) 575-2233
Confirm Facsimile by Telephone:
(800) 736-3001
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER
THAN AS LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS
LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders of Calgene,
Inc. either if certificates ("Share Certificates") representing shares of common
stock, par value $.001 per share (the "Shares"), are to be forwarded herewith
or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized,
if delivery of Shares is to be made by book-entry transfer to an account
maintained by The First National Bank of Boston (the "Depositary") at The
Depository Trust Company ("DTC") or Philadelphia Depository Trust Company
("PDTC") (DTC and PDTC, each, a "Book-Entry Transfer Facility" and collectively,
the "Book-Entry Transfer Facilities") pursuant to the procedures set forth under
"THE OFFER -- Procedures for Accepting the Offer and Tendering Shares" in the
Offer to Purchase dated April 7, 1997 (the "Offer to Purchase"). DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other required documents to the
Depositary on or prior to the expiration date of the Offer or who are unable to
complete the procedure for book-entry transfer prior to the expiration date of
the Offer may nevertheless tender their Shares pursuant to the guaranteed
delivery procedures set forth under "THE OFFER -- Procedures for Accepting the
Offer and Tendering Shares" in the Offer to Purchase. See Instruction 2 below.
<PAGE> 2
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT A BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------------------------------------
Check Box of Applicable Book-Entry Transfer Facility and provide Account
Number and Transaction Code Number:
<TABLE>
<S> <C>
[ ] The Depository Trust Company Account Number:
[ ] Philadelphia Depository Trust Company Transaction Code Number: _______________
</TABLE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY (PLEASE INCLUDE A
PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY) AND COMPLETE THE FOLLOWING:
Name(s) of Registered
Holder(s): __________________________________________________________
Window Ticket Number (if
any): ____________________________________________________________
Date of Execution of Notice of Guaranteed
Delivery: ____________________________________________
Name of Institution which Guaranteed
Delivery: ________________________________________________
If Delivered by Book-Entry Transfer to the Book-Entry Transfer Facility:
Check Box of Applicable Book-Entry Transfer Facility and provide Account
Number and Transaction Code Number:
<TABLE>
<S> <C>
[ ] The Depository Trust Company Account Number:
[ ] Philadelphia Depository Trust Company Transaction Code Number: _______________
</TABLE>
<PAGE> 3
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES BEING TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) ATTACH ADDITIONAL LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
CERTIFICATE NUMBER(S)* OF SHARES
APPEAR(S) ON SHARE REPRESENTED BY NUMBER OF SHARES
CERTIFICATE(S) CERTIFICATES TENDERED TENDERED**
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL SHARES:
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Certificate numbers are not required if tender is made by book-entry
transfer.
** If you desire to tender fewer than all Shares represented by any
certificate listed above, please indicate in this column the number of
Shares you wish to tender. Otherwise, all Shares represented by such
certificate will be deemed to have been tendered. See Instruction 4.
================================================================================
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL CAREFULLY.
<PAGE> 4
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Monsanto Acquisition Company, Inc.
("Purchaser"), a Delaware corporation and a wholly owned subsidiary of Monsanto
Company, a Delaware corporation ("Parent"), the above-described shares of common
stock, par value $.001 per share (the "Shares"), of Calgene, Inc., a Delaware
corporation (the "Company"), pursuant to Purchaser's offer to purchase all
outstanding Shares at $8.00 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated April 7,
1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which, together with the Offer to Purchase and any
amendments or supplements thereto or hereto, collectively constitute the
"Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after March 31, 1997 (collectively,
"Distributions") and irrevocably appoints The First National Bank of Boston (the
"Depositary") the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares and all Distributions, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver certificates representing Shares
("Share Certificates") and all Distributions, or transfer ownership of such
Shares and all Distributions on the account books maintained by a Book-Entry
Transfer Facility, together, in either case, with all accompanying evidences of
transfer and authenticity, to or upon the order of Purchaser, (ii) present such
Shares and all Distributions for transfer on the books of the Company and (iii)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Shares and all Distributions, all in accordance with the terms of the
Offer.
The undersigned hereby irrevocably appoints R. William Ide, III, Robert B.
Shapiro and Hendrik A. Verfaillie as attorneys and proxies of the undersigned,
each with full power of substitution, to vote in such manner as such attorney
and proxy or his substitute shall, in his sole discretion, deems proper and
otherwise act (by written consent or otherwise) with respect to all the Shares
tendered hereby which have been accepted for payment by Purchaser prior to the
time of such vote or other action and all Shares and other securities issued in
Distributions in respect of such Shares, which the undersigned is entitled to
vote at any meeting of stockholders of the Company (whether annual or special
and whether or not an adjourned or postponed meeting) or consent in lieu of any
such meeting or otherwise. This proxy and power of attorney is coupled with an
interest in the Shares tendered hereby, is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by Purchaser in accordance with the terms of the Offer. Such acceptance
for payment shall revoke all other proxies and powers of attorney granted by the
undersigned at any time with respect to such Shares (and all Shares and other
securities issued in Distributions in respect of such Shares), and no subsequent
proxy or power of attorney shall be given or written consent executed (and if
given or executed, shall not be effective) by the undersigned with respect
thereto. The undersigned understands that, in order for Shares to be deemed
validly tendered, immediately upon Purchaser's acceptance of such Shares for
payment, Purchaser must be able to exercise full voting and other rights with
respect to such Shares, including, without limitation, voting at any meeting of
the Company's stockholders then scheduled.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, and that when such Shares are accepted
for payment by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions. In
addition, the undersigned shall remit and transfer promptly to the Depositary
for the account of Purchaser all Distributions in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of each such Distribution and may
withhold the entire purchase price of the Shares tendered hereby, or deduct from
such purchase price, the amount or value of such Distribution as determined by
Purchaser in its sole discretion.
<PAGE> 5
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable. See "THE
OFFER -- Withdrawal Rights" in the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "THE OFFER -- Procedures
for Accepting the Offer and Tendering Shares" and in the instructions hereto
will constitute the undersigned's acceptance of the terms and conditions of the
Offer. Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and Purchaser upon the terms and
subject to the conditions of the Offer. Without limiting the foregoing, if the
price to be paid in the Offer is amended in accordance with the Offer, the price
to be paid to the undersigned will be the amended price notwithstanding the fact
that a different price is stated in this Letter of Transmittal. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
Purchaser may not be required to accept for payment any of the Shares tendered
hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates not purchased or not tendered in
the name(s) of the registered holder(s) appearing above under "Description of
Shares Tendered". Similarly, unless otherwise indicated in the box entitled
"Special Delivery Instructions", please mail the check for the purchase price of
all Shares purchased and all Share Certificates not tendered or not purchased
(and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing above under "Description of Shares Tendered". In
the event that the boxes entitled "Special Payment Instructions" and "Special
Delivery Instruction" are both completed, please issue the check for the
purchase price of all Shares purchased and return all Share Certificates not
purchased or not tendered in the name(s) of, and mail such check and Share
Certificates to, the person(s) so indicated. Unless otherwise indicated herein
in the box entitled "Special Payment Instructions", please credit any Shares
tendered hereby and delivered by book-entry transfer, but which are not
purchased, by crediting the account at the Book-Entry Transfer Facility
designated above. The undersigned recognizes that Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name of the registered holder(s) thereof if Purchaser does not purchase any of
the Shares tendered hereby.
The undersigned understands that Purchaser reserves the right to transfer
or assign, in whole at any time, or in part from time to time, to one or more of
its affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST OR DESTROYED AND SEE INSTRUCTION 9.
Number of Shares represented by the lost or destroyed
certificates: ____________
<PAGE> 6
- ------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not
purchased and/or the check for the purchase price of the Shares
purchased are to be issued in the name of and sent to someone other
than the undersigned, or if Shares tendered by book-entry transfer
which are not purchased are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than the account
indicated above.
Issue:
[ ] Check [ ] Certificate(s)
To:
------------------------------------------------------------
NAME (PLEASE PRINT)
------------------------------------------------------------
ADDRESS
------------------------------------------------------------
ZIP CODE
------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
Credit unpurchased Shares delivered by book-entry transfer to the
Book-Entry Transfer Facility account at:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
------------------------------------------------------------
ACCOUNT NUMBER
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if Share Certificates not tendered or not
purchased and/or the check for the purchase price of the Shares
purchased are to be sent to someone other than the undersigned, or to
the undersigned at an address other than that shown above.
Mail:
[ ] Check [ ] Certificate(s)
To:
------------------------------------------------------------
NAME (PLEASE PRINT)
------------------------------------------------------------
ADDRESS
------------------------------------------------------------
ZIP CODE
------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
- ------------------------------------------------------------
<PAGE> 7
- --------------------------------------------------------------------------------
SIGN HERE
(AND COMPLETE SUBSTITUTE FORM W-9 BELOW)
X
--------------------------------------------------------------------------
X
--------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: , 1997
-----------------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by Share Certificates and
documents transmitted herewith. If a signature is by an officer on behalf
of a corporation or by an executor, administrator, trustee, guardian,
attorney-in-fact, agent or other person acting in a fiduciary or
representative capacity, please provide the following information. See
Instructions 1 and 5.)
--------------------------------------------------------------------------
NAME (PLEASE PRINT)
--------------------------------------------------------------------------
CAPACITY (FULL TITLE)
--------------------------------------------------------------------------
ADDRESS
--------------------------------------------------------------------------
ZIP CODE
<TABLE>
<S> <C>
--------------------------------------------------- ---------------------------------------------------
(AREA CODE) TELEPHONE NO. TAX IDENTIFICATION OR SOCIAL SECURITY NO.
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
</TABLE>
SIGNATURE GUARANTEE
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
X
--------------------------------------------------------------------------
AUTHORIZED SIGNATURE
--------------------------------------------------------------------------
NAME (PLEASE PRINT)
<TABLE>
<S> <C>
--------------------------------------------------- ---------------------------------------------------
FULL TITLE NAME OF FIRM
</TABLE>
--------------------------------------------------------------------------
ADDRESS
--------------------------------------------------------------------------
ZIP CODE
---------------------------------------------------------
(AREA CODE) TELEPHONE NO.
Dated: , 1997
-----------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
To complete the Letter of Transmittal, you must do the following:
- Fill in the box entitled "Description of Shares Being Tendered."
- Sign and date the Letter of Transmittal in the box entitled "Sign Here."
- Fill in and sign in the box entitled "Substitute Form W-9."
In completing the Letter of Transmittal, you may (but are not required to)
also do the following:
- If you want the payment for any Shares purchased issued in the name of
another person, complete the box entitled "Special Payment Instructions."
- If you want any certificate for Shares not tendered or Shares not
purchased issued in the name of another person, complete the box entitled
"Special Payment Instructions."
- If you want any payment for Shares or certificate for Shares not tendered
or purchased delivered to an address other than that appearing under your
signature, complete the box entitled "Special Delivery Instructions."
If you complete the box entitled "Special Payment Instructions" or "Special
Delivery Instructions," you must have your signature guaranteed by an Eligible
Institution (as defined in Instruction 1 below) unless the Letter of Transmittal
is signed by an Eligible Institution.
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program (an "Eligible Institution"), unless (i) this Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) of the
Shares tendered hereby and such holder(s) has not completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" herein or (ii) such Shares are tendered for the account of an
Eligible Institution. If a Share Certificate is registered in the name of a
person other than the person signing this Letter of Transmittal, or if payment
is to be made, or a Share Certificate not accepted for payment and not tendered
is to be returned to a person other than the registered holder(s), then such
Share Certificate must be endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name(s) of the registered holder(s) appear
on such Share Certificate, with the signatures on such Share Certificate or
stock powers guaranteed as described above. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined below) is used, if Shares are
to be delivered by book-entry transfer pursuant to the procedure set forth under
"THE OFFER -- Procedures for Accepting the Offer and Tendering Shares" in the
Offer to Purchase. Share Certificates representing all physically tendered
Shares, or confirmation of a book-entry transfer, if such procedure is
available, into the Depositary's account at one of the Book-Entry Transfer
Facilities ("Book-Entry Confirmation") of all Shares delivered by book-entry
transfer together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), or an Agent's Message in the case of
book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the expiration date of the Offer. If Share Certificates
are forwarded to the Depositary in multiple deliveries, a properly completed and
duly executed Letter of Transmittal must accompany each such delivery.
<PAGE> 9
Stockholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the expiration date of the Offer or who cannot complete the
procedure for delivery by book-entry transfer on a timely basis may tender their
Shares pursuant to the guaranteed delivery procedure described under "THE
OFFER -- Procedures for Accepting the Offer and Tendering Shares" in the Offer
to Purchase. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by
Purchaser, must be received by the Depositary prior to the expiration date of
the Offer; and (iii) the Share Certificates representing all physically
delivered Shares in proper form for transfer by delivery, or Book-Entry
Confirmation of all Shares delivered by book-entry transfer, in each case
together with a Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message), and any other documents required by
this Letter of Transmittal, must be received by the Depositary within three
NASDAQ trading days after the date of execution of such Notice of Guaranteed
Delivery, all as described under "THE OFFER -- Procedures for Accepting the
Offer and Tendering Shares" in the Offer to Purchase. A "NASDAQ trading day" is
any day on which The Nasdaq Stock Market, Inc.'s National Market ("NASDAQ") is
open for business.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participants in the Book-Entry
Transfer Facility tendering the Shares that such participant has received this
Letter of Transmittal and agrees to be bound by the terms of this Letter of
Transmittal and that Purchaser may enforce such agreement against such
participant.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or facsimile hereof), all tendering stockholders waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers, the number of Shares
represented by such Share Certificates and the number of Shares tendered should
be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such cases, a new certificate representing the remainder of the
Shares that were represented by the Share Certificates delivered to the
Depositary herewith will be sent to each person signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" herein as soon as practicable after the expiration or termination
of the Offer. All Shares represented by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
<PAGE> 10
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates not
tendered or not purchased are to be issued in the name of, a person other than
the registered holder(s), in which case, the Share Certificate(s) representing
the Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear on such Share Certificate(s). Signatures on such Share Certificate(s) and
stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
representing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
Purchaser of such person's authority to so act must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) representing Shares not tendered or not purchased are to be
issued in the name of, a person other than the registered holder(s), the amount
of any stock transfer taxes (whether imposed on the registered holder(s), such
other person or otherwise) payable on account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES REPRESENTING THE
SHARES TENDERED HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
representing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" herein, the appropriate boxes in this
Letter of Transmittal must be completed. Stockholders delivering Shares tendered
hereby by book-entry transfer may request that Shares not purchased be credited
to an account maintained at a Book-Entry Transfer Facility as such stockholder
may designate in the box entitled "Special Payment Instructions" herein. If no
such instructions are given, all such Shares not purchased will be returned by
crediting the same account at the Book-Entry Transfer Facility as the account
from which such Shares were delivered.
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived, in
whole or in part, by Purchaser, in its sole discretion (other than the
Majority-of-the Minority Condition (as defined in the Offer to Purchase), which
may not be waived without the consent of the Special Committee (as defined in
the Offer to Purchase)), at any time and from time to time, in the case of any
Shares tendered. In certain circumstances, Purchaser will be required to waive
the Ninety Percent Condition (as defined in the Offer to Purchase). See "THE
OFFER -- Certain Conditions to the Offer" in the Offer to Purchase.
9. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Share Certificate(s)
have been lost, destroyed or stolen, the stockholder should promptly notify the
Depositary by checking the box immediately preceding the special payment/special
delivery instructions, indicating the number of Shares lost and delivering the
Letter of Transmittal. The stockholder will then be contacted and provided with
instructions as to the procedures for replacing the Share Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen certificates have been
followed.
10. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses or telephone numbers set forth
below. Additional copies of the Offer to Purchase, this Letter of Transmittal,
the Notice of Guaranteed Delivery and the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 may be obtained from the
Information Agent or the Dealer Manager or from brokers, dealers, commercial
banks or trust companies.
<PAGE> 11
11. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of Federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% Federal income tax withholding on the payment of the purchase price of all
Shares purchased from such stockholder. If the tendering stockholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such stockholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification
Number. If "Applied For" is written in Part I and the Depositary is not provided
with a TIN within 60 days, the Depositary will withhold 31% on all payments of
the purchase price to such stockholder until a TIN is provided to the
Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF), TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION OF THE OFFER, AND EITHER SHARE CERTIFICATES
FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE
DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR
TO THE EXPIRATION DATE OF THE OFFER, OR THE TENDERING STOCKHOLDER MUST COMPLY
WITH THE PROCEDURES FOR GUARANTEED DELIVERY.
<PAGE> 12
IMPORTANT TAX INFORMATION
Under the Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a Form W-8, signed under penalties of
perjury, attesting to such individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions. A stockholder should consult his or her tax advisor as to such
stockholder's qualification for an exemption from backup withholding and the
procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that (a) the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN) and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
What Number to Give the Depositary
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9 and the Certificate of
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I
and the Depositary is not provided with a TIN within 60 days, the Depositary
will withhold 31% of all payments of the purchase price to such stockholder
until a TIN is provided to the Depositary.
<PAGE> 13
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PAYER'S NAME: THE FIRST NATIONAL BANK OF BOSTON, AS DEPOSITARY
- ---------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN SOCIAL SECURITY OR
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY SIGNING EMPLOYER IDENTIFICATION NUMBER
AND DATING BELOW. ---------------------------------
(If awaiting TIN write "Applied
For")
--------------------------------------------------------------------------------------------------------
PART 2 -- Check the box if you are NOT subject to backup withholding under
the [ ]
DEPARTMENT OF provisions of Section 3406(a)(1)(C) of the Internal Revenue Code because
THE TREASURY
INTERNAL REVENUE (1) you have not been notified that you are subject to backup withholding
SERVICE as a result of failure to report all interest or dividends or (2) the
Internal Revenue Service has notified you that you are no longer subject
to backup withholding.
---------------------------------------------------------------------------
PAYER'S REQUEST FOR CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT THE
TAXPAYER IDENTIFICATION INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT, AND COMPLETE.
NUMBER ("TIN") Signature: __________________________________________ Dated: _____________
AND CERTIFICATION
--------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. ADDITION, FAILURE TO
PROVIDE SUCH INFORMATION MAY RESULT IN A PENALTY IMPOSED BY THE INTERNAL
REVENUE SERVICE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
INSTEAD OF A TIN IN THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld until I provide a number.
Signature: _________________________________ Dated: _________________
<PAGE> 14
Questions and requests for assistance or additional copies
of the Offer to Purchase, Letter of Transmittal and
other tender offer materials may be directed to the
Information Agent or the Dealer Manager as set forth below:
THE INFORMATION AGENT FOR THE OFFER IS:
(LOGO)
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL COLLECT: (212) 440-9800
ALL OTHERS CALL TOLL FREE: (800) 223-2064
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(800) 323-5678 (TOLL FREE)
<PAGE> 1
EXHIBIT 3
EXECUTION COPY
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
MONSANTO COMPANY,
MONSANTO ACQUISITION COMPANY, INC.,
and
CALGENE, INC.
March 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER
SECTION 1.1. The Offer.................................. 3
SECTION 1.2. Company Action............................. 7
SECTION 1.3. Stockholder Lists.......................... 10
ARTICLE II
THE MERGER
SECTION 2.1. The Merger................................. 11
SECTION 2.2. Effective Time; Closing.................... 11
SECTION 2.3. Effect of the Merger....................... 12
SECTION 2.4. Conversion of Shares....................... 12
SECTION 2.5. Stock Options and Stock Purchase Plan...... 14
SECTION 2.6. Surrender of Shares; Stock Transfer
Books.................................... 18
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Certificate of Incorporation............... 22
SECTION 3.2. Bylaws..................................... 22
SECTION 3.3. Directors and Officers..................... 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1. Organization and Standing.................. 23
SECTION 4.2. Capitalization............................. 24
SECTION 4.3. Authority for Agreement.................... 25
SECTION 4.4. No Conflict................................ 26
SECTION 4.5. Required Filings and Consents.............. 27
SECTION 4.6. Compliance................................. 28
SECTION 4.7. Reports and Financial Statements........... 28
-i-
<PAGE> 3
Page
SECTION 4.8. Offer Documents; Schedule 14D-9; Schedule
13-E; Proxy Statement.................... 30
SECTION 4.9. Absence of Certain Changes or Events....... 31
SECTION 4.10. Change of Control Agreements .............. 32
SECTION 4.11. Brokers.................................... 32
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 5.1. Organization and Standing.................. 33
SECTION 5.2. Authority for Agreement.................... 33
SECTION 5.3. No Conflict................................ 34
SECTION 5.4. Required Filings and Consents.............. 35
SECTION 5.5. Offer Documents............................ 35
SECTION 5.6. Brokers.................................... 36
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of the Business Pending
the Merger............................... 37
SECTION 6.2. Access to Information; Confidentiality..... 38
SECTION 6.3. Notification of Certain Matters............ 39
SECTION 6.4. Further Action; Reasonable Best Efforts.... 40
SECTION 6.5. Stockholders' Meeting...................... 40
SECTION 6.6. Proxy Statement............................ 42
SECTION 6.7. Indemnification............................ 43
SECTION 6.8. Public Announcements....................... 45
SECTION 6.9. Redemption of Preferred Stock ............. 45
SECTION 6.10. Parent Actions............................. 46
ARTICLE VII
CONDITIONS
SECTION 7.1. Conditions to the Obligation of
Each Party............................... 46
-ii-
<PAGE> 4
Page
ARTICLE VIII
TERMINATION, AMENDMENT
AND WAIVER
SECTION 8.1. Termination................................ 48
SECTION 8.2. Effect of Termination...................... 51
SECTION 8.3. Amendments................................. 51
SECTION 8.4. Waiver..................................... 52
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. No Third Party Beneficiaries............... 52
SECTION 9.2. Entire Agreement........................... 52
SECTION 9.3. Succession and Assignment.................. 53
SECTION 9.4. Counterparts............................... 53
SECTION 9.5. Headings................................... 53
SECTION 9.6. Governing Law.............................. 53
SECTION 9.7. Severability............................... 54
SECTION 9.8. Specific Performance....................... 54
SECTION 9.9. Construction............................... 55
SECTION 9.10. Non-Survival of Representations and
Warranties............................... 55
SECTION 9.11. Certain Definitions........................ 55
SECTION 9.12. Fees and Expenses.......................... 56
SECTION 9.13. Notices.................................... 56
ANNEX A -- Conditions to the Offer
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated
as of March 31, 1997, among Calgene, Inc., a Delaware corpora-
tion (the "Company"), Monsanto Company, a Delaware corporation
("Parent"), and Monsanto Acquisition Company, Inc., a Delaware
corporation and wholly owned subsidiary of Parent ("Pur-
chaser").
W I T N E S S E T H:
WHEREAS, as of the date hereof, Parent owns an ag-
gregate of 36,396,114 shares (the "Parent Shares") of the com-
mon stock, par value $.001 per share, of the Company (the
"Shares"), representing approximately 54.6% of the total number
of Shares issued and outstanding as of the date hereof;
WHEREAS, Parent and the Company are parties to the
Amended and Restated Stockholders Agreement, dated as of Novem-
ber 12, 1996 (the "Stockholders Agreement");
WHEREAS, Parent has proposed that Parent acquire all
of the remaining issued and outstanding Shares;
WHEREAS, in furtherance of such acquisition, it is
proposed that Purchaser shall make a cash tender offer (the
"Offer") in compliance with Section 14(d)(1) of the Securities
<PAGE> 6
Exchange Act of 1934, as amended (the "Exchange Act"), to ac-
quire all of the issued and outstanding Shares for $8.00 per
Share (the "Per Share Amount"), net to the seller in cash, upon
the terms and subject to the conditions of this Agreement and
the Offer;
WHEREAS, the Special Committee (the "Special Commit-
tee") of Independent Directors (as defined in the Stockholders
Agreement) of the Board of Directors of the Company (the "Com-
pany Board") has unanimously recommended that the Company Board
approve and authorize the Offer, the Merger (as defined below)
and this Agreement, which recommendation was based in part on
the opinion of Montgomery Securities, Inc. ("Montgomery Securi-
ties"), independent financial advisors to the Special Commit-
tee, that the consideration to be received by the holders of
Shares (other than Parent and Purchaser) in the Offer and the
Merger is fair to such holders from a financial point of view;
WHEREAS, the Company Board has approved the Offer and
resolved to recommend its acceptance by the Company's stock-
holders;
WHEREAS, the respective Boards of Directors of Par-
ent, Purchaser and the Company have deemed it advisable and in
the best interests of their respective stockholders to consum-
mate, and have approved, the merger of Purchaser with and into
-2-
<PAGE> 7
the Company (the "Merger"), upon the terms and subject to the
conditions set forth herein;
WHEREAS, Parent and the Company (with the unanimous
approval of the Independent Directors) have agreed to enter
into an Amendment to the Stockholders Agreement (the "Amend-
ment") to permit the consummation of the transactions contem-
plated by this Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements contained in this Agreement, the parties hereto
agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer. (a) Provided that this
Agreement shall not have been terminated in accordance with
Section 8.1 and none of the events set forth in paragraphs
(a)-(g) of Annex A hereto shall have occurred or be existing,
Purchaser shall commence the Offer as promptly as reasonably
practicable after the date hereof, but in no event later than
five business days after the initial public announcement of
Purchaser's intention to commence the Offer. Purchaser shall
not, without the consent of the Special Committee, accept for
payment any Shares tendered pursuant to the Offer unless at
-3-
<PAGE> 8
least a majority of the then issued and outstanding Shares,
other than the Parent Shares, shall have been validly tendered
and not withdrawn prior to the expiration of the Offer (the
"First Minimum Condition"). In addition to the First Minimum
Condition, the obligation of Purchaser to accept for payment
and pay for Shares tendered pursuant to the Offer shall be sub-
ject (i) to the condition (the "Second Minimum Condition") that
there shall have been validly tendered and not withdrawn prior
to the expiration of the Offer at least the number of Shares
that when added to the Parent Shares shall constitute not less
than 90% of the then issued and outstanding Shares on a Fully
Diluted Basis (as defined below) and (ii) to the satisfaction
of the other conditions set forth in Annex A hereto. Purchaser
expressly reserves the right to waive any such condition (ex-
cept the First Minimum Condition) without the consent of the
Company, and to make any other changes in the terms and condi-
tions of the Offer; provided, however, that no change may be
made which decreases the Per Share Amount, changes the form of
consideration payable in the Offer, reduces the maximum number
of Shares to be purchased in the Offer or which imposes condi-
tions to the Offer in addition to those set forth in Annex A
hereto. The initial expiration date of the Offer shall be mid-
night on the 20th business day following commencement of the
Offer. The foregoing notwithstanding, Purchaser may, without
the consent of the Company, extend the Offer (i) for any period
-4-
<PAGE> 9
required by any rule, regulation, interpretation or position of
the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer, (ii) if at the initial expira-
tion date any of the conditions to the Offer set forth in para-
graphs (a) - (g) of Annex A have not been satisfied or waived,
until such time as all of such conditions shall have been sat-
isfied or waived, and (iii) in the event all of the conditions
to the Offer set forth in Annex A shall have been satisfied or
waived, other than the First Minimum Condition or the Second
Minimum Condition, for a period or periods aggregating not more
than 20 business days after the later of (A) the initial expi-
ration date of the Offer and (B) the date on which all of the
conditions set forth in paragraphs (a) - (g) of Annex A shall
have been satisfied or waived. If all of the conditions to the
Offer set forth in Annex A have been satisfied or waived, other
than the Second Minimum Condition, then on the later to occur
of (x) the initial expiration date of the Offer and (y) the
latest expiration date of the Offer permitted by the preceding
sentence, Purchaser shall waive the Second Minimum Condition.
The Per Share Amount shall, subject to applicable withholding
of taxes, be net to the seller in cash, upon the terms and sub-
ject to the conditions of the Offer. Subject to the terms and
conditions of the Offer (including, without limitation, the
First Minimum Condition and the Second Minimum Condition), Pur-
chaser shall pay, as promptly as practicable after expiration
-5-
<PAGE> 10
of the Offer, for all Shares validly tendered and not with-
drawn. "Fully Diluted Basis" shall mean, as of any expiration
date, the number of Shares that would be outstanding on such
date assuming the exercise of all Company Purchase Plan Options
(as defined below) outstanding on such date and of all out-
standing Company Options (as defined below) (i) that have an
exercise price per Share of less than the Per Share Amount,
(ii) that are or will be exercisable in accordance with their
terms within five business days of such date, and (iii) with
respect to which a Cash Election (as defined below) shall not
have been received as of such date.
(b) As soon as reasonably practicable on the date of
commencement of the Offer, Purchaser shall file with the SEC
(i) a Tender Offer Statement on Schedule 14D-1 (together with
all amendments and supplements thereto, the "Schedule 14D-1")
with respect to the Offer and (ii) a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (together with all amendments and
supplements thereto, the "Schedule 13E-3") with respect to the
Offer, the Merger and the other transactions contemplated
hereby (collectively, the "Transactions"). The Schedule 14D-1
and the Schedule 13E-3 shall contain or shall incorporate by
reference an offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and any related doc-
uments (the Schedule 14D-1, the Schedule 13E-3, the Offer to
-6-
<PAGE> 11
Purchase and such other documents, together with all supple-
ments and amendments thereto, being referred to herein collec-
tively as the "Offer Documents"). Parent, Purchaser and the
Company agree to correct promptly any information provided by
any of them for use in the Offer Documents which shall have
become false or misleading, and Parent and Purchaser further
agree to take all steps necessary to cause the Schedule 14D-1
and the Schedule 13E-3 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be dissemi-
nated to holders of Shares, in each case as and to the extent
required by applicable federal and state securities laws. Par-
ent and Purchaser shall give the Company and its counsel rea-
sonable opportunity to review and comment upon the Offer Docu-
ments and any amendments thereto prior to the filing thereof
with the SEC. Parent and Purchaser shall provide the Company
and its counsel with a copy of any written comments or tele-
phonic notification of any verbal comments Parent or Purchaser
may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt thereof and shall provide
the Company and its counsel with a copy of any written re-
sponses and telephonic notification of any verbal responses of
Parent, Purchaser or their counsel.
SECTION 1.2. Company Action. (a) The Company here-
by approves and consents to the Offer and represents that (i)
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<PAGE> 12
the Special Committee has approved and recommended this Agree-
ment and the Transactions, (ii) the Company Board, at a meeting
duly called and held, has, by unanimous vote of all directors
present and voting (with all directors who are designees of
Parent abstaining) and based on the approval and recommendation
of the Special Committee set forth in the preceding clause (i),
(A) determined that this Agreement and the Transactions, in-
cluding each of the Offer and the Merger, are fair to and in
the best interests of the holders of Shares (other than Parent
and Purchaser), (B) approved and authorized this Agreement and
the Merger and (C) recommended that the stockholders of the
Company accept the Offer and, if approval is required by ap-
plicable law, approve and adopt this Agreement and the Merger,
and (iii) Montgomery Securities has delivered to the Special
Committee and to the Company Board its written opinion that the
consideration to be received by the holders of Shares (other
than Parent and Purchaser) in the Offer and the Merger is fair
to such holders from a financial point of view.
(b) The Company shall provide for inclusion in the
Offer Documents any information reasonably requested by Parent
or Purchaser, and, to the extent reasonably requested by Parent
or Purchaser, the Company shall cooperate in the preparation of
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<PAGE> 13
the Offer Documents. The Company hereby consents to the inclu-
sion in the Offer Documents of the recommendation of the Com-
pany Board and the recommendation of the Special Committee de-
scribed in the immediately preceding sentence and represents
that Montgomery Securities has consented to the inclusion of
references to its opinion in the Offer Documents.
(c) As soon as reasonably practicable on the date of
commencement of the Offer, the Company shall file with the SEC
a Solicitation/Recommendation Statement on Schedule 14D-9 (to-
gether with all amendments and supplements thereto, the "Sched-
ule 14D-9") containing the recommendation of the Company Board
described in Section 1.2(a) and shall disseminate the Schedule
14D-9 to the extent required by Rule 14d-9 promulgated under
the Exchange Act and any other applicable federal or state se-
curities laws. The Company, Parent and Purchaser agree to cor-
rect promptly any information provided by any of them for use
in the Schedule 14D-9 which shall have become false or mis-
leading, and the Company further agrees to take all steps nec-
essary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and disseminated to holders of Shares, in each
case as and to the extent required by applicable federal or
state securities laws. The Company shall give Parent and Pur-
chaser and their counsel reasonable opportunity to review and
comment upon the Schedule 14D-9 and any amendments thereto
prior to the filing thereof with the SEC. The Company shall
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<PAGE> 14
provide Parent and Purchaser and their counsel with a copy of
any written comments or telephonic notification of any verbal
comments the Company may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt
thereof and shall provide Parent and Purchaser and their coun-
sel with a copy of any written responses and telephonic notifi-
cation of any verbal responses of the Company or its counsel.
SECTION 1.3. Stockholder Lists. The Company shall
promptly, or shall cause its transfer agent to promptly, fur-
nish Parent and Purchaser with mailing labels containing the
names and addresses of all record holders of Shares and with
security position listings of Shares held in stock deposito-
ries, each as of the most recent practicable date, together
with all other available listings and computer files containing
names, addresses and security position listings of record hold-
ers and beneficial owners of Shares. The Company shall furnish
Parent and Purchaser with such additional information, includ-
ing, without limitation, updated listings and computer files of
stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents
may reasonably request. Subject to the requirements of appli-
cable law, and except for such steps as are necessary to dis-
seminate the Offer Documents and any other documents necessary
to consummate the Offer or the Merger, Parent and Purchaser
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<PAGE> 15
shall hold in confidence the information contained in such la-
bels, listings and files, shall use such information only in
connection with the Offer and the Merger, and, if this Agree-
ment shall be terminated in accordance with Section 8.1, shall
deliver to the Company all copies of such information then in
their possession.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and subject
to the conditions set forth in this Agreement, and in accor-
dance with the General Corporation Law of the State of Delaware
("Delaware Law"), at the Effective Time (as defined below) Pur-
chaser shall be merged with and into the Company. As a result
of the Merger, the separate corporate existence of Purchaser
shall cease and the Company shall continue as the surviving
corporation of the Merger. In its capacity as the surviving
corporation of the Merger, the Company is sometimes referred to
herein as the "Surviving Corporation."
SECTION 2.2. Effective Time; Closing. As promptly
as practicable after the satisfaction or, if permissible, waiv-
er of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, in such form as is
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<PAGE> 16
required by, and executed in accordance with the relevant pro-
visions of, Delaware Law. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such other
time as the parties hereto agree shall be specified in the Cer-
tificate of Merger (the date and time the Merger becomes effec-
tive, the "Effective Time"). On the date of such filing, a
closing shall be held at the offices of Wachtell, Lipton, Rosen
& Katz, 51 West 52nd Street, New York, New York, or such other
place as the parties shall agree.
SECTION 2.3. Effect of the Merger. At the Effective
Time, the effect of the Merger shall be as provided in the ap-
plicable provisions of Delaware Law.
SECTION 2.4. Conversion of Shares. At the Effective
Time:
(a) each Share held by the Company as treasury stock
or owned by Parent, Purchaser or any subsidiary of either
of them immediately prior to the Effective Time shall be
cancelled, and no payment shall be made with respect
thereto;
(b) each Share outstanding immediately prior to the
Effective Time shall, except as otherwise provided in
paragraph (a) or paragraph (d) of this Section 2.4, be
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<PAGE> 17
converted into the right to receive in cash, without in-
terest, the amount paid per Share in the Offer (the
"Merger Consideration");
(c) each share of common stock of Purchaser out-
standing immediately prior to the Effective Time shall be
converted into and become one share of common stock of the
Surviving Corporation and shall constitute the only out-
standing shares of capital stock of the Surviving Corpora-
tion; and
(d) anything in this Agreement to the contrary not-
withstanding, any issued and outstanding Shares held by a
person (a "Dissenting Stockholder") who objects to the
Merger and complies with all the provisions of Delaware
Law concerning the right of holders of Shares to dissent
from the Merger and require appraisal of their Shares
("Dissenting Shares") shall not be converted as described
in Section 2.4(b) but shall become, by virtue of the
Merger, the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pur-
suant to Delaware Law. If, after the Effective Time, such
Dissenting Stockholder withdraws his demand for appraisal
or fails to perfect or otherwise loses his right of ap-
praisal, in any case pursuant to Delaware Law, such Shares
shall be deemed to have been converted as of the Effective
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<PAGE> 18
Time into the right to receive the Merger Consideration.
The Company shall give Parent (i) prompt notice of any
demands for appraisal of Shares received by the Company
and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such de-
mands. The Company shall not, without the prior written
consent of Parent, make any payment with respect to, or
settle, offer to settle or otherwise negotiate, any such
demands.
SECTION 2.5. Stock Options and Stock Purchase Plan.
(a) At the Effective Time, each holder of an option to pur-
chase Shares issued pursuant to the Company's 1981 Stock Option
Plan, 1991 Stock Option Plan or 1996 Stock Option Plan (each
such plan, a "Company Stock Option Plan" and each option issued
thereunder, a "Company Option") shall become entitled to re-
ceive (subject to any required tax withholding) from the Sur-
viving Corporation, for each Company Option held by such holder
as of the Effective Time, an amount in cash equal to the prod-
uct of (i) the excess, if any, of the Merger Consideration over
the applicable exercise price of such Company Option (deter-
mined on a Share by Share basis) and (ii) the number of Shares
subject to such Company Option (without regard to exercisabil-
ity) immediately prior to the Effective Time (such amount with
respect to any Company Option, the "Option Consideration"), and
thereafter each Company Option shall be cancelled; provided,
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<PAGE> 19
however, that any holder of Company Options may elect not to
receive the Option Consideration, and, in lieu thereof, to have
the Company Options held by such holder assumed by the Surviv-
ing Corporation pursuant to the terms of the Company Stock Op-
tion Plan pursuant to which such Company Option was issued
(each, an "Assumed Option"). After the Effective Time, each
Assumed Option shall no longer confer the right to purchase
Shares, but shall (i) confer the right to receive from the Sur-
viving Corporation, for each Share subject to such Company Op-
tion immediately prior to the Effective Time, and upon payment
of the applicable exercise price per share in effect with re-
spect to such Company Option, the Merger Consideration, in
cash, and (ii) shall otherwise remain subject to all the terms
and conditions (including with respect to the exercisability
thereof) applicable to such Company Option pursuant to the op-
tion agreement related to such Company Option and to the Com-
pany Stock Option Plan pursuant to which such Company Option
was issued.
(b) Promptly after the date hereof, the Company
shall cause to be mailed to each holder of Company Options (i)
any notification with respect to the effect of the Offer and
Merger on such Company Options as may be required by any Com-
pany Stock Option Plan and (ii) a form of election (an "Elec-
tion Form") which shall indicate that such holder may elect
either (A) to have such holder's Company Options cancelled in
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<PAGE> 20
the Merger and to receive the Option Consideration in consider-
ation therefor, or (B) to have such holder's Company Options
remain outstanding after the Merger as Assumed Options. Such
Election Form shall indicate (x) that any election indicated
thereon shall be contingent upon the occurrence of the Effec-
tive Time, (y) that if such holder elects to receive the Option
Consideration (a "Cash Election") in respect of such holder's
Company Options and the Effective Time occurs, such holder's
Cash Election shall constitute such holder's (1) consent to and
acknowledgment of the cancellation of such holder's Company Op-
tions as of the Effective Time and (2) release of the Surviving
Corporation from any and all liability or obligation in connec-
tion with each of such holder's Company Options, and (z) agree-
ment not to exercise such Company Options prior to the earlier
of the Effective Time or the termination of this Agreement. No
interest shall accrue or be paid to the beneficial owner or
holder of any Company Option with respect to the Option Consid-
eration payable upon the cancellation of any Company Option.
(c) No further Company Options shall be granted pur-
suant to any Company Stock Option Plan after the Effective
Time; however, each Company Stock Option Plan shall continue to
govern any Assumed Option originally issued pursuant to such
Company Stock Option Plan.
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<PAGE> 21
(d) In the event the current Offering Period (as
such term is defined in the Company's Employee Stock Purchase
Plan established March 1990 (the "Company Stock Purchase
Plan")) ends prior to the Effective Time, the Company shall
take all such action as may be necessary in accordance with the
Company Stock Purchase Plan to terminate the Company Stock Pur-
chase Plan as of the last day of such Offering Period, with the
effect, among other things, that no new Offering Period shall
commence thereafter. In the event the current Offering Period
under the Company Stock Purchase Plan would not otherwise end
prior to the Effective Time, then prior to the date that is
five days prior to the Effective Time, the Company shall amend
the Company Stock Purchase Plan such that the date on which the
Effective Time occurs shall be the "Exercise Date" for purposes
of the Company Stock Purchase Plan with respect to the current
Offering Period, with the effect that on such Exercise Date,
prior to the Effective Time, each option to purchase Shares
issued pursuant to the Company Stock Purchase Plan (each, a
"Company Purchase Plan Option") shall automatically be exer-
cised, and the Shares purchased upon such exercise shall there-
after be converted in the Merger, as provided for in Section
2.4(b). At the Effective Time, the Company shall terminate the
Company Stock Purchase Plan, and no Offering Period that would
otherwise commence or after on such date shall commence.
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<PAGE> 22
SECTION 2.6. Surrender of Shares; Stock Transfer
Books. (a) Prior to the Effective Time, Parent shall desig-
nate a bank or trust company to act as agent (the "Paying
Agent") for the holders of Shares in connection with the Merger
to receive the funds to which holders of Shares (including
former holders of Company Purchase Plan Options who become
holders of Shares immediately prior to the Effective Time pur-
suant to Section 2.5(d)) shall become entitled pursuant to Sec-
tion 2.4(b). Purchaser will make available to the Paying
Agent, as needed, the Merger Consideration to be paid in re-
spect of the Shares (the "Fund"). The Fund shall be invested
by the Paying Agent as directed by Parent. The Paying Agent
shall make the payments provided in Sections 2.4(b).
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at
the Effective Time, a holder of record of Shares entitled to
receive the Merger Consideration pursuant to Section 2.4(b) a
form of letter of transmittal (which shall specify that de-
livery shall be effected, and risk of loss and title to the
certificates evidencing such Shares (the "Share Certificates")
shall pass, only upon proper delivery of the Share Certificates
to the Paying Agent) and instructions for use in effecting the
surrender of the Share Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Share
Certificate, together with such letter of transmittal, duly
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<PAGE> 23
completed and validly executed in accordance with the instruc-
tions thereto, and such other documents as may be required pur-
suant to such instructions, the holder of such Share Certifi-
cate shall be entitled to receive in exchange therefor the
Merger Consideration for each Share formerly evidenced by such
Share Certificate, and such Share Certificate shall then be
cancelled. Until so surrendered, each such Share Certificate
shall, at and after the Effective Time, represent for all pur-
poses, only the right to receive such Merger Consideration. No
interest shall accrue or be paid to any beneficial owner of
Shares or any holder of any Share Certificate with respect to
the Merger Consideration payable upon the surrender of any
Share Certificate. If payment of the Merger Consideration is
to be made to a person other than the person in whose name the
surrendered Share Certificate is registered on the stock trans-
fer books of the Company, it shall be a condition of payment
that the Share Certificate so surrendered shall be endorsed in
blank or to the Paying Agent or otherwise be in proper form for
transfer and that the person requesting such payment shall have
paid all transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the
registered holder of the Share Certificate surrendered or shall
have established to the satisfaction of the Surviving Corpora-
tion that such taxes either have been paid or are not applica-
ble.
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<PAGE> 24
(c) At any time following the sixth month after the
Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any portion of the
Fund which had been made available to the Paying Agent and not
disbursed to holders of Shares (including, without limitation,
all interest and other income received by the Paying Agent in
respect of all amounts held in the Fund or other funds made
available to it), and thereafter each such holder shall be en-
titled to look only to the Surviving Corporation (subject to
abandoned property, escheat and other similar laws), and only
as general creditors thereof, with respect to any Merger Con-
sideration that may be payable upon due surrender of the Share
Certificates held by such holder. The foregoing notwithstand-
ing, neither the Surviving Corporation nor the Paying Agent
shall be liable to any holder of a Share for any Merger Consid-
eration delivered in respect of such Share to a public official
pursuant to any abandoned property, escheat or other similar
law.
(d) After the Effective Time, the stock transfer
books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the rec-
ords of the Company. From and after the Effective Time, the
holders of Shares outstanding immediately prior to the Effec-
tive Time shall cease to have any rights with respect to such
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<PAGE> 25
Shares except as otherwise provided herein or by applicable
law.
(e) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each holder of Company
Options from whom a Cash Election has been received a check
payable to such holder in an amount equal to the Option Consid-
eration payable with respect to all Company Options held by
such holder with respect to which a Cash Election has been
made.
(f) Purchaser, the Surviving Corporation and the
Paying Agent, as the case may be, shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant
to this Agreement to any holder of Shares and/or Company Op-
tions such amounts that Purchaser, the Surviving Corporation or
the Paying Agent is required to deduct and withhold with re-
spect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), the rules and regula-
tions promulgated thereunder or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld
by Purchaser, the Surviving Corporation or the Paying Agent,
such amounts shall be treated for all purposes of this Agree-
ment as having been paid to the holder of the Shares and/or
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<PAGE> 26
Company Options in respect of which such deduction and with-
holding was made by Purchaser, the Surviving Corporation or the
Paying Agent.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Certificate of Incorporation. At the
Effective Time and subject to the terms of Section 6.7, the
certificate of incorporation of Purchaser shall be the certifi-
cate of incorporation of the Surviving Corporation until there-
after amended in accordance with Delaware Law, such certificate
of incorporation and the bylaws of the Surviving Corporation;
provided, however, that, at the Effective Time, Article I of
the certificate of incorporation of the Surviving Corporation
shall be amended to read as follows: "The name of the corpora-
tion is Calgene, Inc."
SECTION 3.2. Bylaws. Subject to the terms of Sec-
tion 6.7, the bylaws of Purchaser in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until
amended in accordance with Delaware Law, and the certificate of
incorporation and such bylaws of the Surviving Corporation.
SECTION 3.3. Directors and Officers. From and after
the Effective Time, until successors are duly elected or ap-
pointed and qualified in accordance with applicable law, (i)
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<PAGE> 27
the directors of Purchaser at the Effective Time shall be the
directors of the Surviving Corporation, and (ii) the officers
of the Company at the Effective Time shall continue as the of-
ficers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and quali-
fied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and
Purchaser as follows:
SECTION 4.1. Organization and Standing. The Company
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full
corporate power and authority to conduct its business as pres-
ently conducted and to enter into and perform the Amendment and
this Agreement and to carry out the Transactions. The Company
is duly qualified to do business as a foreign corporation and
is in good standing in the State of California and in every
other jurisdiction in which the failure to so qualify would
have a Material Adverse Effect (as defined below) on the Com-
pany. The Company has furnished to Parent true and complete
copies of its certificate of incorporation (the "Company Cer-
tificate of Incorporation") and bylaws (the "Company Bylaws"),
each as amended to date and presently in effect. "Material
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<PAGE> 28
Adverse Effect" shall mean, with respect to any party hereto,
any change, event or effect that, when taken together with all
other adverse changes, events or effects, is or is reasonably
likely to be materially adverse to the business, operations,
properties, condition (financial or otherwise), assets, or li-
abilities (including, without limitation, contingent liabili-
ties) of such party and its subsidiaries, taken as a whole.
SECTION 4.2. Capitalization. The authorized capital
stock of the Company consists of 100,000,000 Shares and
10,000,000 shares of preferred stock, $.001 par value per share
(the "Preferred Shares"). As of March 17, 1997, (i) 66,737,327
Shares are issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no Shares are held
in the treasury of the Company, (iii) 4,855,755 Shares are au-
thorized and reserved for future issuance pursuant to Company
Options issued under the Company Stock Option Plans, (v) ap-
proximately 21,230 Shares are authorized and reserved for fu-
ture issuance pursuant to Company Purchase Plan Options issued
under the Company Stock Purchase Plan, and (v) 1,000 Preferred
Shares, designated as Series A Redeemable, Non-Voting Preferred
Stock, par value $.001 per share ("Series A Preferred Shares"),
are issued and outstanding. The Company has previously fur-
nished to Parent a detailed schedule of outstanding Company
Options and Company Purchase Plan Options, including, where
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<PAGE> 29
available, the exercise prices and existing provisions there-
fore. Except as provided in this Section 4.2 and Section 6.9,
and except for any rights of Parent pursuant to prior agree-
ments between Parent and the Company, (A) no subscription, war-
rant, option, convertible security or other right (contingent
or otherwise) to purchase or acquire any shares of capital
stock of the Company is authorized or outstanding, (B) the Com-
pany has no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other
such right or to issue or distribute to holders of any shares
of its capital stock any evidence of indebtedness or assets of
the Company, and (C) the Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay
any dividend or make any other distribution in respect thereof.
SECTION 4.3. Authority for Agreement. The execu-
tion, delivery and performance by the Company of this Agreement
and the Amendment, and the consummation by the Company of the
Transactions, has been duly authorized by all necessary corpo-
rate action (including without limitation the unanimous ap-
proval of the Independent Directors), other than the approval
of stockholders of the Company to the extent required by ap-
plicable law. This Agreement has been duly executed and deliv-
ered by the Company and, assuming the due authorization, execu-
tion and delivery by Parent and Purchaser, constitutes a legal,
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<PAGE> 30
valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. In the event the
Merger is consummated pursuant to a provision of Delaware Law
other than Section 253 of Delaware Law, the affirmative vote of
holders of a majority of the outstanding Shares entitled to
vote at a duly called and held meeting of stockholders is the
only vote of the Company's stockholders necessary to approve
this Agreement and the Transactions.
SECTION 4.4. No Conflict. The execution and deliv-
ery of the Amendment and this Agreement by the Company do not,
and the performance of the Amendment and this Agreement by the
Company and the consummation of the Transactions will not, (i)
conflict with or violate the Company Certificate of Incorpora-
tion or Company Bylaws or equivalent organizational documents
of any of its subsidiaries, (ii) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to
the Company or any of its subsidiaries or by which any property
or asset of the Company or any of its subsidiaries is bound or
affected, or (iii) result in any breach of or constitute a de-
fault (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any
property or asset of the Company or any of its subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract,
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<PAGE> 31
agreement, lease, license, permit, franchise or other instru-
ment or obligation to which the Company or any of its subsid-
iaries is a party or by which the Company or any of its subsid-
iaries or any property or asset of any of them is bound or af-
fected, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, breaches, defaults or other occur-
rences which would not, individually or in the aggregate, have
a Material Adverse Effect on the Company, or prevent or materi-
ally delay the performance by the Company of any of its obliga-
tions under this Agreement or the consummation of the Transac-
tions.
SECTION 4.5. Required Filings and Consents. The
execution and delivery of the Amendment and this Agreement by
the Company do not, and the performance of the Amendment and
this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notifi-
cation to, any governmental or regulatory authority, domestic
or foreign, except (i) for applicable requirements, if any, of
the Exchange Act, state securities or "blue sky" laws ("Blue
Sky Laws") and filing and recordation of appropriate merger
documents as required by Delaware Law and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not, individually
or in the aggregate, have a Material Adverse Effect on the Com-
pany, or prevent or materially delay the performance by the
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<PAGE> 32
Company of any of its obligations under this Agreement or the
consummation of the Transactions.
SECTION 4.6. Compliance. Neither the Company nor
any of its subsidiaries is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or
by which any property or asset of the Company or any of its
subsidiaries is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, per-
mit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any property or asset of
the Company or any of its subsidiaries 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 on the Company, or prevent or materially delay
the performance by the Company of any of its obligations under
this Agreement or the consummation of the Transactions.
SECTION 4.7. Reports and Financial Statements. The
Company has previously furnished to Parent complete and accu-
rate copies, as amended or supplemented, of its (i) Transi-
tional Report on Form 10-K for the transitional period from
July 1, 1996 to December 31, 1996, (ii) proxy statements
relating to all meetings of its stockholders (whether annual or
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<PAGE> 33
special) since June 30, 1996 and (iii) all other reports or
registration statements, including Registration Statements on
Form S-8, filed by the Company with the SEC since June 30, 1996
(such annual reports, proxy statements, registration statements
and other filings, together with any amendments or supplements
thereto, are collectively referred to herein as the "Company
Reports"). The Company Reports constitute all of the documents
filed or required to be filed by the Company with the SEC since
June 30, 1996. As of their respective dates, the Company
Reports did not contain 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
audited financial statements and unaudited interim financial
statements of the Company included in the Company Reports (to-
gether, the "Financial Statements") (A) comply as to form in
all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto, (B) have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") ap-
plied on a consistent basis throughout the periods covered
thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as
permitted by Form 10-Q under the Exchange Act), and (C) fairly
present in all material respects the consolidated financial
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condition, results of operations and cash flows of the Company
and its consolidated subsidiaries as of the respective dates
thereof and for the periods referred to therein.
SECTION 4.8. Offer Documents; Schedule 14D-9; Sched-
ule 13-E; Proxy Statement. Neither the Schedule 14D-9 nor any
information supplied by the Company for inclusion in the Offer
Documents shall, at the respective times the Schedule 14D-9,
the Offer Documents or any amendments or supplements thereto
are filed with the SEC or are first published, sent or given to
stockholders of the Company, as the case may be, contain any
untrue statement of a material fact or omit to state any mate-
rial fact required to be stated therein or necessary in order
to make the statements made therein, in the light of the cir-
cumstances under which they are made, not misleading. If a
Stockholders' Meeting (as defined below) is held, the Proxy
Statement (as defined below) to be sent to the stockholders of
the Company in connection with the such Stockholders' Meeting
shall not, on the date such Proxy Statement (or any amendment
or supplement thereto) is first mailed to stockholders of the
Company and at the time of the Stockholders' Meeting, contain
an untrue statement of material fact, or omit to state any ma-
terial fact required to be stated therein or necessary in order
to make the statements made therein, in the light of the cir-
cumstances under which they are made, not misleading or nec-
essary to correct any statement in any earlier communication
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with respect to the solicitation of proxies for the Stockhold-
ers' Meeting which shall have become false or misleading. The
foregoing notwithstanding, the Company makes no representation
or warranty with respect to any information supplied by Parent,
Purchaser or any of their representatives which is contained in
any of the foregoing documents. The Schedule 14D-9 and the
Proxy Statement shall comply as to form in all material re-
spects with the requirements of the Exchange Act and the rules
and regulations thereunder.
SECTION 4.9. Absence of Certain Changes or Events.
Except as contemplated by this Agreement or as disclosed in the
Company Reports filed prior to the date hereof, since December
31, 1996, the Company and its subsidiaries have conducted their
respective businesses only in the ordinary course and consis-
tent with prior practice and, as of the date hereof, there has
not been (i) to the best of the Company's knowledge, any event
or occurrence of any condition that has had or would have a
Material Adverse Effect on the Company (other than changes due
to industry-wide events or general economic conditions) or (ii)
any material change in accounting methods, principles or prac-
tices employed by the Company.
SECTION 4.10. Change of Control Agreements. Except
as otherwise set forth on Schedule 4.10 to this Agreement de-
livered by the Company to Parent on or prior to the date
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<PAGE> 36
hereof, and except as disclosed in the Company Reports filed
prior to the date hereof, neither the execution and delivery of
this Agreement nor the consummation of the Transactions, will
(either alone or in conjunction with any other event) result
in, cause the accelerated vesting or delivery of, or increase
the amount or value of, any payment or benefit to any employee
of the Company. Without limiting the generality of the fore-
going, to the best of the Company's knowledge, no amount paid
or payable by the Company in connection with the Transactions
(either solely as a result thereof or as a result of such
Transactions in conjunction with any other event) will be an
"excess parachute payment" within the meaning of Section 280G
of the Code.
SECTION 4.11. Brokers. No broker, finder or invest-
ment banker (other than Montgomery Securities) is entitled to
any brokerage, finder's or other fee or commission in connec-
tion with this Agreement or the Transactions based upon ar-
rangements made by or on behalf of the Company. The Company
has heretofore furnished to Parent a complete and correct copy
of all agreements between the Company and Montgomery Securities
pursuant to which such firm would be entitled to any payment
relating to this Agreement or the Transactions.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the
Company as follows:
SECTION 5.1. Organization and Standing. Each of
Parent and Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct
its business as presently conducted and to enter into and per-
form this Agreement and to carry out the Transactions.
SECTION 5.2. Authority for Agreement. The execu-
tion, delivery and performance by each of Parent and Purchaser
of this Agreement and the Amendment, and the consummation by
each of Parent and Purchaser of the Transactions, has been duly
authorized by all necessary corporate action. This Agreement
has been duly executed and delivered by Parent and Purchaser
and, assuming the due authorization, execution and delivery by
the Company, constitutes a legal, valid and binding obligation
of each of Parent and Purchaser enforceable against Parent and
Purchaser in accordance with its terms.
SECTION 5.3. No Conflict. The execution and de-
livery of this Agreement by Parent and Purchaser do not, and
the performance of this Agreement by Parent and Purchaser and
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the consummation of the Transactions will not, (i) conflict
with or violate the certificate of incorporation or bylaws of
Parent or Purchaser, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Par-
ent or Purchaser or any of their respective subsidiaries or by
which any property or asset of Parent or Purchaser or their
respective subsidiaries is bound or affected, or (iii) result
in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default)
under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of Parent or
Purchaser or their respective subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to
which Parent or Purchaser or their respective subsidiaries is a
party or by which Parent or Purchaser or their respective sub-
sidiaries or any property or asset of any of them is bound or
affected, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, breaches, defaults or other occur-
rences which would not, individually or in the aggregate, pre-
vent or delay the performance by Parent or Purchaser of their
respective obligations under this Agreement or the consummation
of the Transactions.
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<PAGE> 39
SECTION 5.4. Required Filings and Consents. The
execution and delivery of this Agreement by Parent and Pur-
chaser do not, and the performance of this Agreement by Parent
and Purchaser will not, require any consent, approval, authori-
zation or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, ex-
cept (i) for applicable requirements, if any, of the Exchange
Act, state securities or Blue Sky Laws and filing and recorda-
tion of appropriate merger documents as required by Delaware
Law and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifica-
tions, would not, individually or in the aggregate, prevent or
delay the performance by Parent or Purchaser of any of their
respective obligations under this Agreement or the consummation
of the Transactions.
SECTION 5.5. Offer Documents. None of the Offer
Documents nor any information supplied by Parent or Purchaser
for inclusion in the Schedule 14D-9 shall, at the respective
times the Offer Documents, the Schedule 14D-9 or any amendments
or supplements thereto are filed with the SEC or are first pub-
lished, sent or given to stockholders of the Company, as the
case may be, 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, in
the light of the circumstances under which they are made, not
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misleading. If a Stockholders' Meeting (as defined below) is
held, the information supplied by Parent or Purchaser for in-
clusion in the Proxy Statement shall not, on the date such
Proxy Statement (or any amendment or supplement thereto) is
first mailed to stockholders of the Company and at the time of
the Stockholders' Meeting, contain any untrue statement of ma-
terial fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which
they are made, not misleading or necessary to correct any
statement in any earlier communication with respect to the so-
licitation of proxies for the Stockholders' Meeting which shall
have become false or misleading. The foregoing notwithstand-
ing, neither Parent nor Purchaser makes any representation or
warranty with respect to any information supplied by the Com-
pany or any of its representatives which is contained in any of
the foregoing documents. The Offer Documents shall comply as
to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder.
SECTION 5.6. Brokers. No broker, finder or invest-
ment banker is entitled to any brokerage, finder's or other fee
or commission payable by the Company in connection with this
Agreement and the Transactions based upon arrangements made by
or on behalf of Parent or Purchaser.
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ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of the Business Pending the
Merger. (a) The Company covenants and agrees that between
the date of this Agreement and the Effective Time, unless Par-
ent shall otherwise agree in writing, (i) the businesses of the
Company shall be conducted only in, and the Company shall not
take any action except in, the ordinary course of business and
in a manner consistent with prior practice, and (ii) the Com-
pany shall use its reasonable best efforts to preserve substan-
tially intact the business organization of the Company, to keep
available the services of the current officers and employees of
the Company and to preserve the current relationships of the
Company with customers, suppliers and other persons with which
the Company has significant business relations.
(b) The Company agrees and covenants that between
the date of this Agreement and the Effective Time, the Company
shall not, nor shall the Company permit any of its subsidiaries
to, (i) declare or pay any dividends on or make other distribu-
tions in respect of any of its capital stock, except for divi-
dends by a wholly owned subsidiary of the Company to the Com-
pany or another wholly owned subsidiary of the Company, (ii)
split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in
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respect of, in lieu of or in substitution for shares of its
capital stock, (iii) repurchase or otherwise acquire or permit
any subsidiary to purchase or otherwise acquire, any shares of
its capital stock, or (iv) issue, deliver or sell, or authorize
or propose the issuance, delivery or sale of, any shares of its
capital stock or any securities convertible into any such
shares of its capital stock, or any rights, warrants or options
to acquire any such shares or convertible securities, other
than the issuance of Shares upon the exercise of Company Op-
tions or Company Purchase Plan Options outstanding as of the
date of this Agreement under the Company Stock Option Plan or
the Company Stock Purchase Plan, respectively.
SECTION 6.2. Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, the Company
shall, and shall cause the officers, directors, employees, au-
ditors and agents of the Company to, afford the officers, em-
ployees and agents of Parent and Purchaser access at all rea-
sonable times to the officers, employees, agents, properties,
offices, plants and other facilities, books and records of the
Company and its subsidiaries, and shall furnish Parent and Pur-
chaser with financial, operating and other data and information
as Parent or Purchaser, through its officers, employees or
agents, may reasonably request.
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<PAGE> 43
(b) No investigation pursuant to this Section 6.2
shall affect any representation or warranty in this Agreement
of any party hereto or any condition to the obligations of the
parties hereto.
(c) Information afforded or furnished to Parent or
Purchaser by the Company pursuant to this Section 6.2 shall be
kept confidential and shall not be disclosed to third parties
except (i) with the consent of the Company, (ii) as may be re-
quired by law, regulation or by legal process (including by
deposition, interrogatory, request for documents, subpoena,
civil investigative demand or similar process), or (iii) as may
be necessary in connection with the consummation of the Trans-
actions.
SECTION 6.3. Notification of Certain Matters. The
Company shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company, of (i) the occurrence, or
nonoccurrence, of any event which would be likely to cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate and (ii) any failure by such party (or
Purchaser, in the case of Parent) to comply with or satisfy any
covenant, condition or agreement to be complied with or satis-
fied by it hereunder; provided, however, that the delivery of
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any notice pursuant to this Section 6.3 shall not limit or oth-
erwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 6.4. Further Action; Reasonable Best Ef-
forts. Upon the terms and subject to the conditions hereof,
each of the parties hereto shall use its reasonable best ef-
forts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate
and make effective the Transactions, including, without limita-
tion, using its reasonable best efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications
and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for the
consummation of the Transactions and to fulfill the conditions
to the Offer and the Merger. In case at any time after the Ef-
fective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers
of Parent and the Surviving Corporation shall use their reason-
able best efforts to take all such action.
SECTION 6.5. Stockholders' Meeting. (a) If re-
quired by Delaware Law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance
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<PAGE> 45
with applicable law and the Company Certificate of Incorpora-
tion and Company Bylaws, (i) duly call, give notice of, convene
and hold a special meeting of its stockholders as promptly as
practicable following consummation of the Offer for the purpose
of considering and taking action on this Agreement and the
Merger (the "Stockholders' Meeting"), (ii) to cause the record
date for the Stockholders' Meeting to be subsequent to the date
on which Purchaser last purchases Shares pursuant to the Offer,
and (iii) include in the Proxy Statement (A) the recommendation
of the Company Board (with all directors who are designees of
Parent abstaining) that the stockholders of the Company approve
and adopt this Agreement and (B) the opinion of Montgomery Se-
curities that the consideration to be received by the holders
of Shares (other than Parent and Purchaser) in the Offer and
the Merger is fair to such holders from a financial point of
view. The Company shall, if proxies are solicited, use its
best efforts to solicit from holders of Shares entitled to vote
at the Stockholders' Meeting proxies in favor of such approval
and shall take all other action necessary or, in the reasonable
judgment of Parent, helpful to secure the vote or consent of
such holders required by Delaware Law to effect the Merger. At
the Stockholders' Meeting, Parent and Purchaser shall cause the
Parent Shares and any Shares acquired in the Offer to be voted
in favor of the approval and adoption of this Agreement and the
Transactions.
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<PAGE> 46
(b) The foregoing notwithstanding, in the event that
Purchaser shall acquire such number of Shares that, when taken
together with the Parent Shares, constitute at least 90% of the
then outstanding Shares, the parties hereto agree, subject to
Article VII, to take all necessary and appropriate action to
cause the Merger to become effective in accordance with Section
253 of Delaware Law, as promptly as practicable after such ac-
quisition, without a meeting of the stockholders of the Com-
pany.
SECTION 6.6. Proxy Statement. If required by ap-
plicable federal securities law in order to consummate the
Merger, as promptly as practicable following consummation of
the Offer, the Company shall file a proxy statement with the
SEC in accordance with the Exchange Act (the "Proxy Statement")
and shall use its best efforts to have the Proxy Statement
cleared by the SEC. Parent, Purchaser and the Company shall
also take any action required to be taken under Blue Sky Laws
or state securities laws in connection with the Merger. Par-
ent, Purchaser and the Company shall cooperate with each other
in taking such action and in the preparation of the Proxy
Statement. Parent and its counsel shall be given the opportu-
nity to review the Proxy Statement and any amendments thereto
prior to dissemination of the Proxy Statement to holders of
Shares. The Company shall provide Parent and its counsel with
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<PAGE> 47
a copy of any written comments or telephonic notification of
any verbal comments the Company may receive from the SEC or its
staff with respect to the Proxy Statement promptly after the
receipt thereof and shall permit Parent and its counsel to par-
ticipate in the preparation of any written responses and tele-
phonic notification of any verbal responses of the Company or
its counsel. Each of the Company, Parent and Purchaser agrees
to use its reasonable best efforts, after consultation with the
other parties hereto, to respond promptly to all such comments
of or requests by the SEC and to cause the Proxy Statement and
all required amendments and supplements to be mailed to the
holders of Shares entitled to vote at the Stockholders' Meeting
at the earliest practicable time.
SECTION 6.7. Indemnification. (a) It is understood
and agreed that all rights to indemnification by the Company
now-existing in favor of each present and former director and
officer of the Company (each an "Indemnified Party") as pro-
vided in the Company Certificate of Incorporation or the Com-
pany Bylaws, in each case as in effect on the date of this
Agreement, or pursuant to any other agreements in effect on the
date hereof, copies of which have been provided to Parent,
shall survive the Merger and shall continue in full force and
effect for a period of at least six years from the Effective
Time. Consistent with the foregoing, for a period of at least
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<PAGE> 48
six years from the Effective Time, the Certificate of Incorpo-
ration and Bylaws of the Surviving Corporation shall contain
the provisions with respect to indemnification set forth, re-
spectively, in the Company Certificate of Incorporation and
Company Bylaws, which provisions shall not be amended, repealed
or otherwise modified during such six year period in any manner
that would adversely affect the rights thereunder of individu-
als who, immediately prior to the Effective Time, were direc-
tors, officers, employees or agents of the Company.
(b) To the fullest extent permitted by applicable
law, Parent will, for a period of six years from and after the
Effective Time, indemnify and hold harmless each Indemnified
Party with respect to all acts and omissions occurring before
the Effective Time that are based on or arise out of the Indem-
nified Party's service as a director or officer of the Company,
including all acts or omissions in connection with the Amend-
ment, this Agreement and the Transactions, to the extent which-
ever of the following is most favorable to the Indemnified
Party: (i) any indemnification policy, practice, contract or
other arrangement that the Company has with its directors at
the date of this Agreement (copies of which have previously
been furnished to Parent), (ii) indemnification provisions in
Parent's then-existing certificate of incorporation or bylaws
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<PAGE> 49
and (iii) any other then existing indemnification policy, prac-
tice, contract or other arrangement that Parent has with its
directors.
(c) In the event the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision
shall be made so that the successors and assigns of the Surviv-
ing Corporation shall assume the obligations set forth in this
Section 6.7.
SECTION 6.8. Public Announcements. Parent and the
Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect
to this Agreement or any Transaction and shall not issue any
such press release or make any such public statement prior to
such consultation, except as may be required by law or any
listing agreement with a national securities exchange to which
Parent or the Company is a party.
SECTION 6.9. Redemption of Preferred Stock. As
promptly as practicable after the date hereof, the Company
shall cause all of the outstanding Series A Preferred Shares to
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be redeemed in accordance with the Company Certificate of In-
corporation as of a date not later than the day prior to the
initial expiration date.
SECTION 6.10. Parent Actions. During the period
prior to the purchase of Shares in the Offer, Parent shall use
its reasonable best efforts not to interfere in any material
respect with the Company's conduct of its day-to-day opera-
tions; provided, however, that this Section 6.10 shall not
limit or affect (i) the rights, duties and responsibilities of
Parent's designees on the Company Board in their capacity as
such or (ii) the rights and obligations of Parent under any
contract or agreement with the Company.
ARTICLE VII
CONDITIONS
SECTION 7.1. Conditions to the Obligation of Each
Party. The respective obligations of Parent, Purchaser and the
Company to effect the Merger are subject to the satisfaction of
the following conditions, unless waived in writing by all par-
ties:
(a) Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the requi-
site vote or consent of the stockholders of the Company to
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the extent required by Delaware Law, the Company Certifi-
cate of Incorporation and the Company Bylaws.
(b) No Order. No foreign, United States or state
governmental authority or other agency or commission or
foreign, United States or state court of competent juris-
diction shall have enacted, issued, promulgated, enforced
or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, pre-
liminary or permanent) which is then in effect and has the
effect of: (i) making the acquisition of Shares by Parent
or Purchaser or any affiliate of either of them illegal or
otherwise restricting, preventing or prohibiting consumma-
tion of any of the Transactions, (ii) seeking to prohibit
or limit materially the ownership or operation by the Com-
pany, Parent or any of their respective subsidiaries of
all or any material portion of the business or assets of
the Company, Parent or any of their respective subsidiar-
ies as a result of any Transaction, or (iii) compelling
the Company, Parent, Purchaser or any of their respective
subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of the Company,
Parent, Purchaser or any of their respective subsidiaries
as a result of any Transaction; provided, however, that
each of the parties shall have used its reasonable efforts
to prevent the entry of any such injunction or other order
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and to appeal as promptly as practicable any injunction or
other order that may be entered.
(c) Purchase of Shares in the Offer. Purchaser
shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that
this condition shall not be applicable to the obligations
of Parent and Purchaser if, in breach of this Agreement or
the terms of the Offer, Purchaser fails to purchase any
Shares validly tendered and not withdrawn pursuant to the
Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. Termination. This Agreement may be
terminated and the Offer and the Merger may be abandoned at any
time prior to the Effective Time:
(a) By mutual written consent duly authorized by the
Boards of Directors of Parent and the Company, if such
termination is also approved by the Special Committee;
(b) By either Parent or the Company if any court of
competent jurisdiction or administrative agency, commis-
sion, governmental or regulatory authority, domestic or
foreign, shall have issued an order, decree, ruling or
taken any other action restraining, enjoining or otherwise
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<PAGE> 53
prohibiting the Offer or the Merger and such order, de-
cree, ruling or other action shall have become final and
nonappealable;
(c) By either Parent, Purchaser or the Company if
(i) the Effective Time shall not have occurred on or be-
fore December 31, 1997; provided, however, that the right
to terminate this Agreement under this Section 8.1(c)
shall not be available to any party whose failure to ful-
fill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(d) By Parent if, due to an occurrence or circum-
stance that would result in a failure of any condition set
forth in Annex A hereto to be satisfied, (i) Purchaser
shall not have commenced the Offer within 60 days follow-
ing the date of this Agreement, (ii) the Offer shall have
been terminated or shall have expired in accordance with
its terms without Purchaser having accepted for payment
any Shares pursuant to the Offer or (iii) Purchaser shall
have failed to pay for Shares pursuant to the Offer within
90 days following the commencement of the Offer, unless,
in the case of clause (iii) such failure to pay for Shares
shall have been caused by or resulted from the failure of
Parent or Purchaser to perform in any material respect any
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material covenant or agreement of either of them contained
in this Agreement or the material breach by Parent or Pur-
chaser of any material representation or warranty of ei-
ther of them contained in this Agreement;
(e) By the Company, upon approval of the Com-
pany Board and a majority of the members of the Special
Committee, if due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions
set forth in Annex A hereto, Purchaser shall have (i)
failed to commence the Offer within 60 days following the
date of this Agreement, (ii) terminated the Offer without
having accepted any Shares for payment thereunder, or
(iii) failed to pay for Shares pursuant to the Offer
within 90 days following the commencement of the Offer,
unless such failure to pay for Shares shall have been
caused by or resulted from the failure of the Company to
perform in any material respect any material covenant or
agreement of it contained in this Agreement or the mate-
rial breach by the Company of any material representation
or warranty of it contained in this Agreement; or
(f) By the Company, upon approval of the Com-
pany Board and a majority of the members of the Special
Committee, if Parent shall have breached in any material
respect its covenant set forth in Section 6.10, and Parent
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continues such breach following written notice by the Com-
pany to Parent thereof.
SECTION 8.2. Effect of Termination. In the event of
the termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void, and there shall be no
liability on the part of any party hereto, provided that noth-
ing herein shall relieve any party from liability for any wil-
ful breach hereof.
SECTION 8.3. Amendments. This Agreement may not be
amended except by action of the board of directors of each of
the parties hereto (and, in the case of the Company, with the
approval of the Special Committee) set forth in an instrument
in writing signed on behalf of each of the parties hereto; pro-
vided, however, that after approval of the Merger by the stock-
holders of the Company (if required), no amendment may be made
without the further approval of the stockholders of the Company
if the effect of such amendment would be to (i) reduce the
Merger Consideration or change the form thereof or (ii) alter
or change any of the terms and conditions of this Agreement if
any of such alterations or changes, alone or in the aggregate,
would be materially adverse to the stockholders of the Company
(other than Parent and its affiliates).
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SECTION 8.4. Waiver. At any time prior to the Ef-
fective Time, whether before or after any Stockholders' Meet-
ing, any party hereto, by action taken by its board of direc-
tors (and, in the case of the Company, with the approval of the
Special Committee), may (i) extend the time for the performance
of any of the covenants, obligations or other acts of any other
party hereto or (ii) waive any inaccuracy of any representa-
tions or warranties or compliance with any of the agreements,
covenants or conditions of any other party or with any condi-
tions to its own obligations. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf
of such party by its duly authorized officer.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. No Third Party Beneficiaries. Other
than the provisions of Section 6.7, nothing in this Agreement
shall confer any rights or remedies upon any person other than
the parties hereto.
SECTION 9.2. Entire Agreement. This Agreement (in-
cluding any Annex or Schedule hereto) and the Stockholders
Agreement (as amended by the Amendment) constitute the entire
agreement among the parties with respect to the subject matter
hereof and supersedes any prior understandings, agreements, or
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representations by or among the parties, written or oral, with
respect to the subject matter hereof.
SECTION 9.3. Succession and Assignment. This Agree-
ment shall be binding upon and inure to the benefit of the par-
ties named herein and their respective successors. No party
may assign either this Agreement or any of its rights, inter-
ests, or obligations hereunder without the prior written ap-
proval of the other party, provided, however, that Purchaser
may freely assign its rights to another wholly owned subsidiary
of Parent without such prior written approval.
SECTION 9.4. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute
one and the same instrument.
SECTION 9.5. Headings. The section headings con-
tained in this Agreement are inserted for convenience only and
shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 9.6. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without regard to principles of conflicts of
law thereof.
-53-
<PAGE> 58
SECTION 9.7. Severability. Any term or provision of
this Agreement that is invalid or unenforceable in any situa-
tion in any jurisdiction shall not affect the validity or en-
forceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provi-
sion in any other situation or in any other jurisdiction. If
the final judgment of a court of competent jurisdiction de-
clares that any term or provision hereof is invalid or unen-
forceable, the parties agree that the court making the determi-
nation of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provi-
sion, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or pro-
vision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term
or provision, and this Agreement shall be enforceable as so
modified after the expiration of the time within which the
judgment may be appealed.
SECTION 9.8. Specific Performance. Each of the par-
ties acknowledges and agrees that the other party would be dam-
aged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the par-
ties agrees that the other party shall be entitled to an in-
junction or injunctions to prevent breaches of the provisions
-54-
<PAGE> 59
of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having ju-
risdiction over the parties and the matter, in addition to any
other remedy to which it may be entitled, at law or in equity.
SECTION 9.9. Construction. The language used in
this Agreement shall be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party.
SECTION 9.10. Non-Survival of Representations and
Warranties. None of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time. Nothing in this
Section 9.10 shall limit any covenant or agreement of the par-
ties which by its terms contemplates performance after the Ef-
fective Time of the Merger.
SECTION 9.11. Certain Definitions. For purposes of
this Agreement, the term "affiliate" shall have the same mean-
ing as set forth in Rule 12b-2 of the Regulation 12B of the
General Rules and Regulations under the Exchange Act, and the
term "person" shall mean any individual, corporation, partner-
ship (general or limited), limited liability company, limited
-55-
<PAGE> 60
liability partnership, trust, joint venture, joint-stock com-
pany, syndicate, association, entity, unincorporated organiza-
tion or government or any political subdivision, agency or in-
strumentality thereof.
SECTION 9.12. Fees and Expenses. Whether or not the
Merger is consummated, all costs and expenses incurred in con-
nection with the Offer, this Agreement and the Transactions
shall be paid by the party incurring such expenses.
SECTION 9.13. Notices. All notices, requests,
claims, demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been
duly given upon receipt) by delivery in person, by telecopy or
by registered or certified mail (postage prepaid, return re-
ceipt requested) to the respective parties at the following
addresses, or at such other address for a party as shall be
specified in a notice given in accordance with this Section
9.13:
If to Parent or Purchaser:
Monsanto Company
800 N. Lindbergh Boulevard
St. Louis, MO 63167
Telecopier: (314) 694-6572
Attn: R. William Ide, III, Esq.
-56-
<PAGE> 61
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Telecopier: (212) 403-2000
Attn: Eric S. Robinson, Esq.
If to the Company:
Calgene, Inc.
1920 Fifth Street
Davis, CA 95616
Telecopier: (916) 753-1510
Attn: Lloyd M. Kunimoto
with copies to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Telecopier: (617) 526-5000
Attn: Mark G. Borden, Esq.
and to:
Venture Law Group
Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
Telecopier: (415) 233-8386
Attn: Steven J. Tonsfeldt, Esq.
-57-
<PAGE> 62
IN WITNESS WHEREOF, Parent, Purchaser and the Company
have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly au-
thorized.
MONSANTO COMPANY
/s/ Hendrik A. Verfaillie
-------------------------------
By: Hendrik A. Verfaillie
Title: Executive Vice President
MONSANTO ACQUISITION COMPANY, INC.
/s/ Hendrik A. Verfaillie
-------------------------------
By: Hendrik A. Verfaillie
Title: Executive Vice President
CALGENE, INC.
/s/ Lloyd M. Kunimoto
-------------------------------
By: Lloyd M. Kunimoto
Title: Acting Chief Executive Officer
and President
-58-
<PAGE> 63
ANNEX A
CONDITIONS TO THE OFFER
Any other provision of the Offer notwithstanding,
Purchaser shall not be required to accept for payment or may
delay the acceptance for payment of any Shares, or may termi-
nate the Offer and not accept for payment any Shares, if (i)
the First Minimum Condition shall not have been satisfied as of
the expiration of the Offer (as it may be extended by Purchaser
from time to time), (ii) the Second Minimum Condition shall not
have been satisfied as of the expiration of the Offer (as it
may be extended by Purchaser from time to time, but subject to
the waiver requirements of Section 1.1(a)), or (iii) at any
time on or after March 31, 1997 and prior to the acceptance for
payment of Shares, any of the following conditions exist:
(a) there shall have occurred and be remaining in
effect (i) any general suspension of trading in, or limi-
tation on prices for, securities on The Nasdaq Stock Mar-
ket, Inc.'s National Market (ii) a declaration of a bank-
ing moratorium or any suspension of payments in respect of
banks in the United States, (iii) any limitation imposed
by any government, governmental agency or authority on the
extension of credit by banks or other lending institutions
in the United States, or (iv) the commencement of a war or
A-1
<PAGE> 64
armed hostilities or other international calamity directly
or indirectly involving the United States;
(b) an order shall have been entered or an injunc-
tion shall have been issued and remain in effect (i) re-
straining or prohibiting the making or consummation of the
Offer or the Merger, (ii) making the purchase of, or pay-
ment for, some or all of the Shares illegal or (iii) im-
posing limitations on the ability of Purchaser effectively
to acquire or to hold or to exercise full rights of owner-
ship of the Shares, including, without limitation, the
right to vote the Shares purchased by Purchaser on all
matters properly presented to the stockholders of the Com-
pany; or
(c) any statute, rule, regulation or referendum
shall be enacted, enforced, promulgated or deemed ap-
plicable to (i) Parent or any of its affiliates or subsid-
iaries or the Company or any of its subsidiaries or (ii)
the Offer or the Merger, which could reasonably be ex-
pected, directly or indirectly, to result in any of the
consequences referred to in clauses (i) through (iii) of
paragraph (b) above; or
(d) this Agreement shall have been terminated in
accordance with its terms or Parent and the Company shall
A-2
<PAGE> 65
have agreed that Parent shall amend or terminate the Offer
or postpone the payment for Shares pursuant thereto; or
(e) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as
to materiality or Material Adverse Effect on the Company
shall not be true and correct or any such representations
and warranties that are not so qualified shall not be true
and correct in any material respect; or
(f) the Company shall have failed to perform or com-
ply with in any material respect any of the agreements or
covenants of the Company to be performed or complied with
by it under this Agreement; or
(g) all of the Series A Preferred Shares shall not
have been redeemed;
which in the reasonable judgment of Parent with respect to each
and every matter referred to above and regardless of the cir-
cumstance (including any action or inaction by Parent) giving
rise to any such condition, makes it inadvisable to proceed
with the Offer, the acceptance for payment or payment for the
Shares in the Offer, or the Merger.
The foregoing conditions are for the benefit of Par-
ent and Purchaser only and may be asserted regardless of the
circumstances giving rise to any such conditions (including any
A-3
<PAGE> 66
action or inaction by Parent). Each of the foregoing condi-
tions may be waived by Purchaser in whole or in part, other
than the First Minimum Condition, which may not be waived with-
out the consent of the Special Committee. The failure to exer-
cise any of the foregoing rights shall not be deemed a waiver
of any such right, and each right shall be deemed a continuing
right which may be asserted at any time and from time to time.
A-4
<PAGE> 1
EXHIBIT 4
EXECUTION COPY
AMENDMENT
AMENDMENT (the "Amendment") dated as of March 31,
1997, among Calgene, Inc., a Delaware corporation (the "Com-
pany"), and Monsanto Company, a Delaware corporation ("Par-
ent").
W I T N E S S E T H:
WHEREAS, Parent and the Company are parties to the
Amended and Restated Stockholders Agreement, dated as of Novem-
ber 12, 1996 (the "Stockholders Agreement");
WHEREAS, the Company, Parent and a wholly owned sub-
sidiary of Parent ("Purchaser") have entered into an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of the
date hereof, pursuant to which, among other things, Purchaser
shall make a cash tender offer (the "Offer") to acquire all of
the issued and outstanding shares of common stock, par value
$.001 per share, of the Company (the "Shares") not currently
owned by Parent or Purchaser, and, following consummation of
the Offer, Purchaser shall, upon the terms and subject to the
conditions of the Merger Agreement, merge with and into the
Company (the "Merger" and together with the Offer and the other
transactions contemplated by the Merger Agreement, the "Trans-
actions");
<PAGE> 2
WHEREAS, the Special Committee (the "Special Commit-
tee") of the Board of Directors of the Company (the "Company
Board"), consisting of three Independent Directors (as defined
in the Stockholders Agreement), has unanimously recommended
that the Company Board approve the Merger Agreement and the
Transactions, which recommendation was based in part on the
opinion of Montgomery Securities, Inc., independent financial
advisors to the Special Committee, that the consideration to be
received by the holders of Shares (other than Parent and Pur-
chaser) in the Offer and the Merger is fair to such holders
from a financial point of view;
WHEREAS, the Company Board has duly approved and au-
thorized the Merger Agreement and the Transactions contemplated
thereby and has recommended that holders of Shares accept the
Offer, and, if approval is required by applicable law, approve
and adopt the Merger Agreement and the Merger;
WHEREAS, Parent and the Company (with the unanimous
approval of the Independent Directors) have agreed to enter in
this Amendment;
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements contained in this Amendment, the parties hereto
agree as follows:
- 2 -
<PAGE> 3
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms. Capitalized terms de-
fined in the Stockholders Agreement and used herein shall have
the meanings given to them in the Stockholders Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations and Warranties of the
Company. The Company hereby represents and warrants to Parent
as follows:
(a) Amendment Approved. This Amendment has been
approved, in accordance with Section 6.3 of the Stockhold-
ers Agreement, by all of the Independent Directors of the
Company.
(b) Required Actions Taken. Each of the Company,
the Company Board, the Special Committee and the Indepen-
dent Directors has taken any action and given any consent
or approval required of it or them required to permit the
acquisition of Shares by Purchaser in the Offer, the en-
tering into of the Merger Agreement by the Company and the
consummation of the Transactions contemplated thereby wit-
hout violating or conflicting with the Stockholders Agree-
ment. The actions referred to in the previous sentence
- 3 -
<PAGE> 4
include, without limitation, (i) approval by the disinter-
ested Directors of the Company, based upon a fairness opi-
nion delivered to the Company Board by an investment bank-
ing firm, of the price to be offered to holders of the
Shares in the Offer and (ii) approval of the Merger Agree-
ment and the Transactions by a majority of the Company
Board, including at least two Company Directors.
ARTICLE III
AMENDMENTS
SECTION 3.1. Definitions. Section 2.1 of the
Stockholders Agreement is hereby amended by adding the follow-
ing definitions at their respective appropriate alphabetic-
order locations in such section:
"`Merger' shall have the meaning ascribed to it in
the Merger Agreement."
"`Merger Agreement' shall mean that certain Agreement
and Plan of Merger (the "Merger Agreement"), dated as of
March 31, 1997, by and among the Company, Monsanto, and
Purchaser."
"`Offer' shall have the meaning ascribed to it in the
Merger Agreement."
- 4 -
<PAGE> 5
"`Purchaser' shall mean Monsanto Acquisition Company,
Inc., a Delaware corporation and a wholly owned subsidiary
of Monsanto."
"`Transactions' shall mean the transactions contem-
plated by the Merger Agreement, including, without limita-
tion, the Offer and the Merger."
SECTION 3.2. Amendment to Section 3.6(a). Section
3.6(a) of the Stockholders Agreement is hereby amended by re-
placing the period at the end of clause (iii) with a semicolon
and adding the following clause (iv) after clause (iii):
"(iv) Any of the Transactions."
SECTION 3.3. Amendment to Section 6.9. Section 6.9
of the Stockholders Agreement is hereby amended by deleting the
text thereof in its entirety and replacing it with the follow-
ing:
"SECTION 6.9. Termination. In the event the Offer
is consummated, this Agreement shall terminate and cease
to be of any force or effect as of the date Purchaser
first accepts for payment any Shares tendered pursuant to
the Offer."
- 5 -
<PAGE> 6
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1. No Other Amendments. Except as ex-
pressly amended, modified and supplemented hereby, the provi-
sions of the Stockholders Agreement are and shall remain in
full force and effect.
SECTION 4.2. Governing Law. This Amendment shall
be governed in all respects by the laws of the State of Dela-
ware (exclusive of such state's choice of laws rules).
SECTION 4.3. Counterparts. This Amendment may be
executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one
instrument.
SECTION 4.4. 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 Amendment or
as a limitation of the scope of the particular articles or sec-
tions to which they refer.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, Parent and the Company have
caused this Amendment to be executed as of the date first writ-
ten above by their respective officers thereunto duly autho-
rized.
MONSANTO COMPANY
/s/ Hendrik A. Verfaillie
----------------------------
By: Hendrik A. Verfaillie
Title: Executive Vice President
CALGENE, INC.
/s/ Lloyd M. Kunimoto
----------------------------
By: Lloyd M. Kunimoto
Title: Acting Chief Executive
Officer and President
- 7 -
<PAGE> 1
EXHIBIT 5
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only
(as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CALGENE, INC.
--------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii),
14a-6(i)(1), or 14a-6(i)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3)
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
October 10, 1996
To the Stockholders of Calgene, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Calgene, Inc. (the "Company") on Tuesday, November 12, 1996 at 10:00 a.m. local
time. The Annual Meeting will be held at the Varsity Theatre, 616 Second Street,
Davis, California.
A description of business to be conducted at the Annual Meeting is set forth
in the attached Notice of Annual Meeting and Proxy Statement. Also enclosed is a
copy of our Annual Report to Stockholders for the fiscal year ended June 30,
1996.
Whether or not you plan to attend the Annual Meeting, please mark, sign, date
and return the enclosed proxy card promptly in the accompanying envelope. By
returning the proxy, you can help the Company avoid the expense of duplicate
proxy solicitations and possibly having to reschedule the Annual Meeting if a
quorum of the outstanding shares is not present or represented by proxy. If you
attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.
Lloyd M. Kunimoto
President
<PAGE> 3
CALGENE, INC.
1920 FIFTH STREET
DAVIS, CALIFORNIA 95616
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 12, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Calgene,
Inc. (the "Company" or "Calgene") will be held on Tuesday, November 12, 1996 at
10:00 a.m., local time, at the Varsity Theatre, 616 Second Street, Davis,
California for the following purposes:
1. To elect directors of the Company.
2. To approve the Stock Purchase Agreement dated as of September 27, 1996
("Stock Purchase Agreement") between Calgene and Monsanto Company, a Delaware
Company ("Monsanto"), pursuant to which (i) Calgene would issue 6,250,000
shares of Common Stock to Monsanto for $8.00 per share for an aggregate
purchase price of $50 million, thereby increasing Monsanto's ownership
interest in shares of Calgene Common Stock from 49.9% to approximately 54.6%
(without giving effect to the exercise of outstanding options and warrants),
(ii) Monsanto and Calgene would enter into a Restated Stockholders Agreement
("Restated Stockholders Agreement") amending and restating the Stockholders
Agreement dated March 31, 1996 ("Stockholders Agreement") as more fully
described in the Proxy Statement, and (iii) the Company's Restated Certificate
of Incorporation would be amended to reflect the amendments to the
Stockholders Agreement contemplated by the Restated Stockholders Agreement
(the foregoing transactions are hereinafter collectively referred to as the
"Monsanto Transaction").
3. To increase the authorized number of shares of Common Stock from
80,000,000 to 100,000,000 shares.
4. To confirm the appointment of Ernst & Young LLP as the independent
auditors of the Company through the fiscal year ending December 31, 1997.
5. To transact such other business as may properly come before the
meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Holders of Common Stock of record at the close of business on September 23,
1996 are entitled to vote at the Annual Meeting.
FOR THE BOARD OF DIRECTORS
MICHAEL J. MOTRONI
Secretary
Davis, California
October 10, 1996
IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-
PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY
VOTE IN PERSON EVEN IF YOU RETURN A PROXY.
<PAGE> 4
CALGENE, INC.
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 12, 1996
INFORMATION CONCERNING
VOTING AND PROXY SOLICITATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Calgene, Inc. ("Calgene" or the "Company") for use at the Annual Meeting of
Stockholders to be held on Tuesday, November 12, 1996 at 10:00 a.m., local time,
or at any adjournment of the Annual Meeting. The Annual Meeting will be held at
the Varsity Theatre, 616 Second Street, Davis, California.
The Company's principal executive offices are located at 1920 Fifth Street,
Davis, California 95616. This Proxy Statement is being mailed to stockholders on
or about October 10, 1996.
Only holders of Common Stock of record at the close of business on September
23, 1996 (the "Record Date") are entitled to vote at the meeting. On the Record
Date, 60,443,115 shares of the Company's Common Stock were issued and
outstanding. The affirmative vote of the holders of a plurality of the shares of
Common Stock present or represented at the Annual Meeting is required for the
election of directors. Each share is entitled to one vote for each of the nine
nominees, unless a stockholder notifies the Secretary of the Company prior to
the commencement of voting of the stockholder's intention to cumulate votes. In
that event, each share will be entitled to nine votes, which a stockholder may
cast for a single candidate or distribute among up to nine candidates, but such
cumulative voting will only apply to candidates who have been properly nominated
prior to the commencement of voting. The affirmative vote of (i) the holders of
a majority of the shares of Common Stock present or represented at the Annual
Meeting, other than broker non-votes (as defined below) and other than those
held by Monsanto and (ii) the holders of a majority of the shares of Common
Stock outstanding on the Record Date is required for the approval of the
Monsanto Transaction. The affirmative vote of the holders of a majority of the
shares of Common Stock outstanding on the Record Date is required for the
approval of the proposed amendment to the Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 80,000,000 to
100,000,000 shares, and the approval of the holders of a majority of the shares
of Common Stock present or represented at the Annual Meeting is required for the
ratification of the selection of Ernst & Young LLP as the Company's independent
auditors through the fiscal year ending December 31, 1997. A majority of the
shares entitled to vote, present in person or represented by proxy (including
those held by Monsanto), will constitute a quorum at the Annual Meeting. For
purposes of determining a quorum, shares represented by all valid proxies
received will be counted, including proxies that contain instructions to abstain
as to certain votes and proxies filed by brokers or others indicating that their
voting authority does not extend to all agenda items ("broker non-votes").
Monsanto, which owns 49.9% of the outstanding shares of Common Stock as of the
Record Date, has advised the Company that it intends to vote "FOR" each proposal
set forth in this Proxy Statement.
A proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date, or by attending the meeting and voting in person.
The cost of soliciting proxies will be borne by the Company. If the Company
decides to retain the services of a proxy solicitor, the Company estimates that
it would pay a fee not to exceed $6,000. In addition, the Company expects to
<PAGE> 5
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expense in forwarding solicitation material to such beneficial
owners. Proxies may be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, in person or by
telephone or facsimile.
1
<PAGE> 6
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock of the
Company as of July 31, 1996 by each director, by each executive officer shown in
the Summary Compensation Table (see "Executive Compensation"), by all directors
and executive officers as a group and by each person known by the Company to be
a beneficial owner of more than 5% of the shares outstanding.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY APPROXIMATE PERCENT
OWNED(1) OWNED(2)
------------------- -------------------
<S> <C> <C>
Roger H. Salquist...................... 239,940 *
Robert E. Baker........................ 15,000 *
Andrew M. Baum......................... 49,817 *
Patrick J. Fortune..................... -- --
Robert T. Fraley....................... -- --
Jeffrey D. Gargiulo.................... 6,667 *
Michael R. Hogan....................... -- --
Thomas F. Hughes....................... 28,618 *
Lloyd M. Kunimoto...................... 38,263 *
Danilo S. Lopez........................ -- --
Michael J. Motroni..................... 37,040 *
Howard D. Palefsky..................... 14,500 *
John E. Robson......................... 19,167 *
Roderick N. Stacey..................... 107,830 *
Allen J. Vangelos...................... 14,600 *
Hendrik A. Verfaillie.................. -- --
All executive officers and directors as
a group (16 persons).................. 587,692 *
Monsanto Company....................... 30,146,114 49.9%
800 North Lindbergh
Boulevard, St. Louis, MO 63137(3)
Travelers Group Inc. .................. 3,386,072 5.6%
and Affiliates
388 Greenwich Street
New York, NY 10013(4)
</TABLE>
- --------
* Less than 1%.
(1) The Company believes that all beneficial owners named in the table have
sole voting and investment power with respect to the shares they
beneficially own. The shares shown in the table to be beneficially owned
include any shares that the person has the right to acquire within 60 days
of July 31, 1996 by exercise of any stock option for which the Company has
knowledge. The shares subject to such options are as follows: Mr.
Salquist: 209,762; Mr. Baker: 14,500; Mr. Baum: 41,116; Mr. Gargiulo:
6,667; Mr. Hughes: 26,544; Mr. Kunimoto: 31,366; Mr. Motroni: 37,040; Mr.
Palefsky: 13,500; Mr. Robson: 4,167; Mr. Stacey: 107,830; Mr. Vangelos:
14,500; and all executive officers and directors as a group: 513,242.
(2) Percent of the 60,443,115 outstanding shares of Common Stock, counting as
outstanding for each named person all shares issuable to such person on
exercise of options that are included in the first column.
(3) Does not include the 6,250,000 shares of Calgene Common Stock ("Additional
Shares") which would be issued if the Monsanto Transaction is consummated,
which would increase Monsanto's holdings to approximately 54.6% (without
giving effect to the exercise of outstanding options and warrants).
(4) Based on a Schedule 13G filed on January 23, 1996 with respect to beneficial
ownership as of December 31, 1995. The total includes 2,013,372 shares
beneficially owned by Smith Barney Inc. and 1,372,700 shares beneficially
owned by other subsidiaries of Smith Barney Holdings Inc.
2
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A board of nine directors will be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the nine nominees of the Board of Directors named below. Except for Messrs.
Fortune and Hogan, all of the nominees are presently directors of the Company.
If any nominee is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the current Board of Directors to fill the vacancy in accordance
with the Stockholders Agreement. It is not expected that any nominee will be
unable or will decline to serve as a director. If stockholders nominate persons
other than the Board's nominees for election as directors, the proxy holders
will vote all proxies received by them in accordance with cumulative voting to
assure the election of as many of the Board's nominees as possible.
Directors are elected by a plurality of the votes cast. Proxies marked to
withhold authority to vote for one or more nominees, and broker non-votes, will
not be counted as votes cast. Each share is entitled to one vote for each of the
nine nominees, unless a stockholder notifies the Secretary of the Company prior
to the commencement of voting of the stockholder's intention to cumulate votes.
In that event, each share will be entitled to nine votes, which a stockholder
may cast for a single candidate or distribute among up to nine candidates, but
such cumulative voting will only apply to candidates who have been properly
nominated prior to the commencement of voting.
Messrs. Verfaillie, Fraley, Robson, Hogan and Fortune have been designated by
Monsanto in accordance with the Stock Purchase Agreement and the Restated
Stockholders Agreement between Calgene and Monsanto. The election of Messrs.
Verfaillie, Fraley, Robson, Hogan and Fortune is a condition precedent to
Monsanto's purchase of the Additional Shares. See "Approval of Transaction with
Monsanto."
The Board of Directors recommends a vote FOR the nominees listed below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------- --- -------------------- --------
<S> <C> <C> <C>
Patrick J. Fortune......... 49 Chief Information Officer of --
Monsanto Company
Robert T. Fraley........... 43 President of Ceregen (a business 1996
unit of Monsanto Company)
Michael R. Hogan........... 43 Vice President and Corporate --
Controller of Monsanto Company
Lloyd M. Kunimoto.......... 43 President and Acting Chief Executive 1996
Officer of the Company
Howard D. Palefsky......... 49 Chairman and Chief Executive Officer 1986
of Collagen Corporation
John E. Robson............. 66 Senior Advisor of Robertson, 1996
Stephens & Company
Roger H. Salquist.......... 55 Consultant; Former Chairman and 1981
Chief Executive Officer of the
Company
Allen J. Vangelos.......... 64 President and Chief Executive 1994
Officer of Calavo Growers of
California
Hendrik A. Verfaillie...... 51 Executive Vice President of Monsanto 1996
Company
</TABLE>
The term of office of each person elected as a director will continue until
the next Annual Meeting of Stockholders or until his or her successor has been
<PAGE> 8
elected. The terms of the Stockholders Agreement and Restated Stockholders
Agreement set forth the rights of Calgene and Monsanto to designate nominees to
the
3
<PAGE> 9
Board of Directors. See "Approval of Transaction with Monsanto--Summary of
Stockholders Agreement and Restated Stockholders Agreement." There is no family
relationship between any director and any other director or executive officer of
the Company.
Mr. Fortune was appointed Corporate Vice President, Information Technology and
Chief Information Officer of Monsanto Company in October 1995. From August 1994
to August 1995, Mr. Fortune was President and Chief Operating Officer of
Coram-Healthcare Corporation, whose business is home infusion therapy for cancer
and AIDS patients. From 1991 to 1994, Mr. Fortune was Corporate Vice President,
Information Management for Bristol-Meyers Squibb. From 1989 to 1991, Mr. Fortune
was Senior Vice President and General Manager of Packaging Corporation of
America, prior to which he served as Vice President, Information Services and
Corporate Vice President of the Parenterals Group of Baxter International. He is
also a member of the Board of Directors of Parexel Corporation, a clinical
research organization, and serves on the Board of Visitors of the School of
Physical Sciences at the University of Chicago.
Mr. Fraley was named President of Ceregen, a business unit of Monsanto, in
1995. From 1993 to 1995, Mr. Fraley was Vice President, New Products Division,
of the Monsanto Agricultural Products Group. From 1990 to 1993, Mr. Fraley was
Vice President, Research and Development, New Products Division, of the Monsanto
Agricultural Products Group. Mr. Fraley is a director of DEKALB Genetics Corp.,
an agricultural products company.
Mr. Hogan was appointed Corporate Vice President and Corporate Controller of
Monsanto Company in January 1996. From 1986 to 1995, Mr. Hogan was Executive
Vice President of General American Life and while holding such position also
served as President and Director of Gencore Health Systems, Inc. and its
predecessor organization from 1990 through 1994.
Mr. Kunimoto has been the President and Acting Chief Executive Officer of the
Company since July 1996. From June 1995 to July 1996, Mr. Kunimoto served as
Vice President of Strategic Planning and Business Development. From November
1983 to June 1995, Mr. Kunimoto served in several senior management positions
with the Company.
Mr. Palefsky has been the Chairman and Chief Executive Officer of Collagen
Corporation, a medical products company, since 1995. He served as President and
Chief Executive Officer of Collagen Corporation from 1978 to 1995. He is also a
director of Target Therapeutics, Inc. and Innovasive Devices, Inc., both medical
products companies.
Mr. Robson has been a Senior Advisor of Robertson, Stephens & Company since
1993. From 1989 to 1992, Mr. Robson was Deputy Secretary of the United States
Treasury. Mr. Robson is also a director of Monsanto Company, a chemicals,
pharmaceuticals and agricultural products company, Northrop Grumman Corporation,
an aerospace and defense company, and Security Capital Industrial Trust, a real
estate investment trust.
Mr. Salquist has been a consultant to the Company since August 1996. Mr.
Salquist had previously served as an executive officer of the Company since
September 1983 and its Chief Executive Officer since November 1985. Mr. Salquist
is a director of Collagen Corporation, a medical products company.
Mr. Vangelos has been the President and Chief Executive Officer of Calavo
Growers of California since September 1986, prior to which he held management
positions at Castle & Cooke, including Vice President and General Manager of
Processed Products and President of International Diversified Business and Fresh
Marketing. From 1980 to 1984, he was the Chief Executive Officer of Impact
Corporate Group, a food brokerage company. Mr. Vangelos was the 1993 Chairman of
the Board of Directors of the Agricultural Council of California and a past
Chairman of the United Fresh Fruit and Vegetable Association.
<PAGE> 10
Mr. Verfaillie was appointed an Executive Vice President of Monsanto Company
in July 1995. Prior to this he served as President of The Agricultural Group,
Vice President and Advisory Director--Monsanto Company from 1993 to 1995, Vice
President and General Manager, Roundup Division--The Agricultural Group from
1990 to 1993, and Vice President-Commercial Development--Monsanto Agricultural
Company from 1986 to 1990.
4
<PAGE> 11
BOARD MEETINGS, COMMITTEES AND DIRECTOR COMPENSATION
The Board of Directors of the Company (the "Board") held four meetings during
the fiscal year ended June 30, 1996. No nominee attended fewer than 75% of the
meetings of the Board of Directors and of the committee of the Board on which he
served that were held during the period of the director's service except for Mr.
Stinnett who passed away in January 1996.
The Board has an Audit Committee, a Human Resources Committee and a
Replacement/Retention Committee. From time to time, the Board has created
various ad hoc committees for special purposes.
The Audit Committee consists of Messrs. Palefsky, Robson and Fraley. The Audit
Committee held three meetings in the last fiscal year. The Audit Committee
recommends engagement of the Company's independent auditors and is primarily
responsible for approving the services performed by the Company's independent
auditors and for reviewing and evaluating the Company's accounting principles
and its system of internal accounting controls.
The Human Resources Committee consists of Messrs. Vangelos, Verfaillie and
Baker. The Human Resources Committee held two meetings during the last fiscal
year. The Human Resources Committee considers and makes recommendations to the
Calgene Board of Directors concerning general compensation policies and employee
benefit plans and specifically recommends salary levels and bonus awards for
certain senior executive officers, including the Chief Executive Officer. The
Human Resources Committee also administers Calgene's stock option plans and has
sole authority to grant options to officers. The Human Resources Committee's
executive salary and bonus recommendations for fiscal 1996 were approved by the
Calgene Board of Directors without modifications.
The Retention/Replacement Committee consists of Messrs. Palefsky, Verfaillie
and Robson. The Retention/Replacement Committee held no meetings during the last
fiscal year. The Retention/Replacement Committee is responsible for the
retention and/or replacement of all of the executive officers of the Company.
Under the terms of the Restated Stockholders Agreement, the
Retention/Replacement Committee would be eliminated, thus leaving the Calgene
Board of Directors thereafter responsible for the retention and/or replacement
of all of the executive officers of the Company.
Directors who are not also employees of the Company or Monsanto or their
subsidiaries receive a fee of $1,000 per meeting ($250 per telephone meeting)
attended, $500 per Board committee meeting attended (unless held on the same day
as a Board meeting) and a monthly retainer of $1,000, plus out-of-pocket travel
expenses. Prior to April 1, 1996, directors received an annual retainer of
$3,000 (accruing and payable $250 per month). Under the 1996 Stock Option Plan,
non-employee directors (excluding directors employed by Monsanto) receive an
option to purchase 10,000 shares of Common Stock at the time of their initial
election to the Board, and receive annually thereafter options to purchase 3,000
shares of Common Stock. These automatically granted options have terms of five
years (subject to continued service on the Board), become exercisable in equal
monthly increments over the twelve months following the respective grant dates
and have exercise prices equal to the fair market value of the Common Stock on
their respective dates of grant. On March 25, 1996, annual options were
automatically granted to each of the nonemployee directors then serving
(excluding directors employed by Monsanto) at an exercise price of $6.00 per
share.
There were no consulting fees paid to directors in fiscal 1996.
In addition to the fees listed above, Monsanto Company transferred to Mr.
Robson 15,000 shares of Common Stock of the Company pursuant to the terms of a
letter agreement dated May 6, 1996 between John E. Robson and Monsanto Company.
Such shares are subject to a three-year vesting period, under which 33 1/3% of
the total number of shares originally granted become non-forfeitable on each
March 31 commencing March 31, 1997.
<PAGE> 12
5
<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table provides certain summary information concerning
compensation earned during the last three fiscal years by the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company who were serving at the end of fiscal 1996 (the "named
executive officers"). The table also includes such information for two former
executive officers who at the end of fiscal 1996 were no longer employed by the
Company or a subsidiary of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
----------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR ($) ($) ($) OPTIONS (#) $(2)
- ------------------ ------ -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist(3)(4). 1996 $275,577 $ -- -- -- $3,596
Chairman of the Board 1995 242,404 -- -- 100,000 1,212
and Chief Executive 1994 225,865 -- -- 104,762 --
Officer
Andrew M. Baum.......... 1996 160,046 10,000 -- 40,000 3,280
Vice President 1995 162,600 10,000 -- 25,000 840
1994 154,592 -- -- -- --
Thomas F. Hughes........ 1996 125,261 25,000 -- 55,175 3,002
Division President, 1995 106,731 25,000 -- 22,825 1,142
Stoneville 1994 89,462 -- -- 10,000 977
Pedigreed Seed Company
Lloyd M. Kunimoto(5).... 1996 140,000 60,000 -- 50,000 2,800
Vice President 1995 140,538 -- -- 25,000 754
1994 135,519 4,808 -- -- --
Michael J. Motroni...... 1996 140,230 -- 100,000(6) 20,000 2,962
Vice President of 1995 120,461 -- -- 15,000 647
Finance and Secretary 1994 107,135 3,654 -- -- --
Roderick N. Stacey...... 1996 198,462 -- 695,000 -- 6,524
Former President and 1995 233,558 -- -- -- 1,077
Chief Operating Officer 1994 200,673 -- 6,679 100,000 --
Danilo S. Lopez......... 1996 148,077 -- 131,250 -- 2,558
Former President, 1995 171,635 -- -- 100,000 815
Calgene Fresh
</TABLE>
- --------
(1) Includes amounts earned in the fiscal year even if paid in the subsequent
fiscal year or deferred pursuant to the Company's 401(k) savings plan.
Excludes amounts paid during the fiscal year that were earned in a prior
year.
(2) Amounts reported as "All Other Compensation" represent the Company's
matching contributions under its 401(k) savings plan.
(3) The options shown in the table as granted to Mr. Salquist in fiscal 1994
were originally granted in 1987 for a six-year term and extended for four
additional years in fiscal 1994.
(4) In August 1996 Mr. Salquist resigned as Chairman of the Board and Chief
Executive Officer. Mr. Salquist remains as a member of the Board and has
also become a consultant to the Company. See "Executive Compensation--
Change of Control Employment Agreements."
(5) Since the resignation of Mr. Salquist, Mr. Kunimoto has served as Acting
<PAGE> 14
Chief Executive Officer.
(6) Represents amount paid to Mr. Motroni in May 1996 pursuant to a Change of
Control Employment Agreement dated July 19, 1995 and amended on May 31,
1996. See "Executive Compensation--Change of Control Employment
Agreements."
6
<PAGE> 15
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
Messrs. Salquist, Stacey and Motroni entered into Change of Control Employment
Agreements, dated as of July 19, 1995, with the Company. Each agreement becomes
effective only upon a Change of Control (as defined) of the Company and provides
that, if the employment of the officer is terminated by the Company without
Cause (as defined) or by the officer for Good Reason (as defined) within the
three-year term of the agreement or if (in the case of Mr. Salquist) he resigns
upon the six-month or three-year anniversaries of the effective date of the
agreement, the officer shall receive severance benefits that include a payment
equal to 2.99 times his base salary and average bonus for the prior three fiscal
years. For purposes of such agreements, a Change of Control included the closing
of the transaction on March 31, 1996 pursuant to which Monsanto Company acquired
a 49.9% equity interest in the combined business of the Company and Gargiulo,
L.P. (the "Initial Monsanto Transaction"). See "Certain Transactions--
Reorganization Agreement."
In connection with his resignation following the closing of the Initial
Monsanto Transaction, Mr. Stacey and the Company entered into an amendment to
his Change of Control Employment Agreement pursuant to which Mr. Stacey agreed
that payments required to be made to him under such agreement would be paid over
a one-year period rather than in a lump sum. The amended agreement provided for
the payment of $347,500 upon Mr. Stacey's resignation and monthly payments of
$9,000 during a 12 month consulting period and an additional payment of $239,500
at the end of the 12 month period.
In connection with his resignation in August 1996, Mr. Salquist and the
Company entered into an amendment to his Change of Control Employment Agreement
pursuant to which Mr. Salquist agreed that payments required to be made to him
under such agreement would be paid over a 13 month period rather than in a lump
sum. The amended agreement provided for the payment of $315,000 upon Mr.
Salquist's resignation and monthly payments of $25,000 during a 12 month
consulting period and an additional payment of $290,000 at the end of the 12
month period.
On May 31, 1996, Mr. Motroni and the Company entered into an amendment to his
Change of Control Employment Agreement pursuant to which Mr. Motroni agreed to
remain in the employ of the Company until the earlier of (i) May 31, 1997 or
(ii) the occurrence, after May 31, 1996, of any event that constitutes Good
Reason (as defined) in consideration of the Company's payment to Mr. Motroni of
$100,000. In addition, the amended agreement provides for the payment to Mr.
Motroni of $335,000 upon the earliest of (i) the cessation of his employment for
any reason after May 31, 1997, (ii) the termination of his employment without
Cause (as defined) or by reason of death, or (iii) his resignation as a result
of the occurrence of any event that constitutes Good Reason.
7
<PAGE> 16
STOCK OPTION TABLES
The following table provides information regarding stock options granted in
fiscal 1996 to the named executive officers in the Summary Compensation Table.
In accordance with rules of the Commission, the table shows the hypothetical
gains that would be produced by the respective options based on assumed 5% and
10% rates of annual compound stock price appreciation from the date the options
were granted until the end of the ten-year option terms. The actual value an
executive may realize will depend on the spread between the market price and the
exercise price on the date the option is exercised.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
-------------------------------------------- REALIZED VALUE
PERCENT OF AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OPTIONS STOCK PRICE
OF SHARES GRANTED APPRECIATION FOR
UNDERLYING TO OPTION TERM
OPTIONS EMPLOYEES ($)(3)
GRANTED IN FISCAL EXERCISE EXPIRATION -----------------
(#)(1) YEAR(%) PRICE($)(2) DATE 5% 10%
---------- ---------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist....... -- -- -- -- -- --
Andrew M. Baum.......... 40,000 2.00 5.75 4/22/06 144,646 366,561
Thomas F. Hughes........ 175 -- 6.75 7/27/05 743 1,883
25,000 1.25 5.688 3/22/06 89,429 226,630
30,000 1.51 5.75 4/22/06 108,484 274,921
Lloyd M. Kunimoto....... 50,000 2.51 5.75 4/22/06 180,807 458,201
Michael J. Motroni...... 5,000 .25 4.75 12/18/05 14,936 37,851
15,000 .75 5.75 4/22/06 54,242 137,460
Roderick N. Stacey...... -- -- -- -- -- --
Danilo S. Lopez......... -- -- -- -- -- --
</TABLE>
- --------
(1) Newly granted options have terms of ten years and become exercisable
incrementally in equal monthly amounts over a period of five years from the
date of grant. The committee that administers the stock option plan may,
with the consent of the option holder, modify the terms (including price) of
outstanding options.
(2) The exercise price may be paid in cash or by delivery of already-owned
shares, subject to certain conditions.
(3) At assumed rates of appreciation of 5% and 10%, compounded annually, the
Common Stock would appreciate in value 63% and 159%, respectively, over a
ten-year period. These mandated computations do not represent the Company's
estimate or projection of future Common Stock prices.
8
<PAGE> 17
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows stock options exercised by the named executive
officers in the Summary Compensation Table during fiscal 1996, the aggregate
value of gains on the dates of exercise, the number of shares covered by both
exercisable and non-exercisable stock options as of fiscal year-end, and the
year-end values for such options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT FISCAL MONEY OPTIONS AT FISCAL
SHARES YEAR-END(#) YEAR-END($)(1)
ACQUIRED ON VALUE ------------------------- --------------------------------
EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------------- ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Roger H. Salquist....... -- -- 202,262 92,500 144,048 --
Andrew M. Baum.......... -- -- 37,134 62,866 1,166 33,834
Thomas F. Hughes........ -- -- 20,610 79,390 2,046 47,629
Lloyd M. Kunimoto....... -- -- 26,884 73,116 1,459 42,291
Michael J. Motroni...... -- -- 33,085 41,915 2,782 19,718
Roderick N. Stacey...... -- -- 107,830 160,170 10,500 --
Danilo S. Lopez......... -- -- -- -- -- --
</TABLE>
- --------
(1) Value is based on market value of the Common Stock at exercise date (for
value realized), or at year-end (for value of unexercised options), minus
the option exercise price.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
COMPOSITION AND FUNCTIONS OF THE COMMITTEE
The Human Resources Committee (referred to in this report as the "Committee")
consists of three non-employee directors: Messrs. Allen J. Vangelos, Hendrik A.
Verfaillie and Robert E. Baker.
The Committee performs the functions of a compensation committee. The
Committee considers and makes recommendations to the Calgene Board of Directors
concerning general compensation policies and employee benefit plans and
specifically recommends salary levels and bonus awards for certain senior
executive officers, including the Chief Executive Officer. The Committee also
administers Calgene's stock option plan and has sole authority to grant options
to officers. The Committee's executive salary and bonus recommendations for
fiscal 1996 were approved by the Calgene Board of Directors without
modifications.
OBJECTIVES OF EXECUTIVE COMPENSATION POLICY
The objectives of Calgene's executive compensation policy are to:
. set executive compensation at levels sufficient to attract, retain and
motivate highly qualified executive personnel;
. align the interests of management and the stockholders by making a
substantial portion of executive compensation dependent on the success of
Calgene, as measured by long-term appreciation in the market price of
Calgene's Common Stock; and
. balance considerations of individual achievements each year with
Calgene's financial and non-financial performance.
9
<PAGE> 18
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 AND BONUSES
In determining its recommendation to the Calgene Board of Directors concerning
the salary of senior executive officers, the Committee considers published data
from annual surveys of executive compensation at other companies in its field.
With the survey data as a reference point, the Committee makes adjustments based
on its evaluation of Calgene executives' individual levels of experience,
responsibility and past performance. The Committee also takes into consideration
each executive's comparability with other Calgene executives. The Committee
typically gives considerable weight to the views of the Chief Executive Officer
with respect to executive salaries other than his own. Annual salary adjustments
normally become effective in the month of July.
The Committee also awards incentive bonuses for certain senior executives
based on both individual and corporate performance. Such awards in 1996 were
based on subjective assessments of performance and not on any specific formulas.
STOCK OPTIONS
The granting of stock options is the principal method available to the
Committee to align the interests of the executive officers with those of the
stockholders. The option will reward the executive only if the market price of
the Common Stock appreciates over the option term and the executive remains
employed by Calgene over the vesting period. Options granted to executive
officers generally have a ten-year term, vest over a period of five years and
may be exercised at a price per share equal to the market price on the date of
grant. Stock options are granted to at least some executive officers each year,
as well as to numerous other employees. The number of shares in an option grant
reflects the executive's position at Calgene, stock options granted to the
executive in the past and the executive's potential contribution to the success
of Calgene. In granting stock options to senior executive officers, the
Committee has not followed any set of fixed guidelines.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee increased the salary of Mr. Salquist from $225,000 in fiscal
1995 to $275,000 in fiscal 1996, reflecting his contributions to the Company and
the consummation of the Initial Monsanto Transaction.
OTHER MATTERS
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code, which disallows a tax deduction to any publicly-held
corporation for compensation (including non-cash compensation) exceeding $1
million in any year paid to any of the five most highly compensated executive
officers, unless such compensation meets certain requirements. The cash
compensation of each of Calgene's executive officers is well below $1 million.
The principal non-cash compensation of Calgene executives is from stock options.
Calgene is generally entitled to a tax deduction if an executive exercises a
nonqualified stock option or disposes of shares acquired from the exercise of an
incentive stock option before the required holding period has ended. The
Committee believes that Calgene stock options either will meet the requirements
of Section 162(m) or will not result in the loss of significant tax deductions.
Taking this into account, as well as Calgene's large tax loss carryover and the
reduced flexibility from a change to the stock option plan to conform to the
requirements of Section 162(m), the Committee has not recommended any change to
the stock option plan. However, the Committee may consider imposing annual
exercise limitations in some future option grants to executives if Calgene would
otherwise be deprived of significant tax benefits.
<PAGE> 19
10
<PAGE> 20
The Calgene Board of Directors approved Change of Control Agreements for Roger
H. Salquist, Roderick N. Stacey and Michael J. Motroni. These agreements provide
for the payment of severance compensation in the event of termination of their
employment in connection with any Change of Control of Calgene.
This report is submitted by the following directors, who constituted all the
members of the Committee during fiscal 1996.
Robert E. Baker
Allen J. Vangelos
Hendrik A. Verfaillie
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1996, the members of the Human Resources
Committee were Messrs. Baker, Vangelos and Verfaillie. None of the members has
ever been an officer or employee of the Company or any of its subsidiaries.
During fiscal 1996, there were no Committee "interlocks" within the meaning of
the Securities and Exchange Commission rules, and there continue to be no such
"interlocks."
Mr. Salquist, former Chairman of the Board and Chief Executive Officer,
participated in portions of meetings of the Committee at the invitation of the
Committee and made various proposals to the Committee at its request. In
addition, at the Committee's direction, Mr. Salquist set the cash compensation
of certain other executives.
11
<PAGE> 21
STOCK PERFORMANCE GRAPH
The graph below compares the five-year cumulative total returns for Calgene
Common Stock, the Nasdaq Composite Index and a select Peer Group Index of
companies identified by Calgene. The graph assumes a $100 investment on June 30,
1991 in Calgene Common Stock and in each of the two indices, and assumes the
reinvestment of all dividends paid by companies represented in the two indices.
The representation of the component companies in the indices is weighted
according to their respective market capitalizations at the end of each period
for which cumulative returns are shown in the graph. The selected peer group
index consists of the following agricultural biotechnology companies known by
the Company to have their shares traded on the Nasdaq National Market: Mycogen
Corporation, Ecogen Inc., DNA Plant Technology Corporation and Biosys Inc. The
graph is in this Proxy Statement in accordance with the rules of the SEC and is
not necessarily indicative of future performance.
[CALGENE STOCK COMPARISON LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Calgene, Inc.................... 100 120.63 148.51 149.96 95.13 89.88
Nasdaq Composite................ 100 158.23 186.20 154.69 199.47 249.51
Peer Group Index................ 100 120.85 124.61 118.34 68.42 71.18
</TABLE>
12
<PAGE> 22
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's officers and directors are required to file with the Securities
and Exchange Commission reports of their acquisitions and dispositions of equity
securities of the Company. Based on the Company's review of copies of such
reports received by it, or written representations from reporting persons, the
Company believes that during the fiscal year ended June 30, 1996, its officers
and directors filed all required reports on a timely basis.
PROPOSAL NO. 2
APPROVAL OF TRANSACTION WITH MONSANTO
The Company has entered into a Stock Purchase Agreement dated as of September
27, 1996 with Monsanto (the "Stock Purchase Agreement"), pursuant to which (i)
the Company agreed to sell and issue to Monsanto, and Monsanto agreed to
purchase, 6,250,000 shares of Common Stock of the Company (the "Additional
Shares"), at $8.00 per share, for an aggregate purchase price of $50 million,
thereby increasing Monsanto's ownership interest in shares of Calgene Common
Stock from 49.9% to approximately 54.6% (without giving effect to the exercise
of outstanding options and warrants), (ii) Monsanto and Calgene agreed to enter
into a Restated Stockholders Agreement ("Restated Stockholders Agreement")
amending and restating the Stockholders Agreement dated March 31, 1996
("Stockholders Agreement"), and (iii) the Restated Certificate of Incorporation
shall be amended to reflect the amendments to the Stockholders Agreement
contemplated by the Restated Stockholders Agreement (the foregoing transactions
are herein collectively referred to as the "Monsanto Transaction"). On September
27, 1996, the last reported sale price of the Calgene Common Stock on the Nasdaq
National Market was $5.125 per share. Upon the closing of such purchase,
Monsanto will own approximately 36,396,114 shares of Common Stock of the
Company, representing approximately 54.6% of the issued and outstanding shares
of Common Stock of the Company. The affirmative vote of (i) the holders of a
majority of the shares of Common Stock present or represented at the Annual
Meeting, other than broker non- votes and shares held by Monsanto and (ii) the
holders of a majority of the shares of Common Stock outstanding on the Record
Date is required for the approval of the Monsanto Transaction.
REASONS FOR THE TRANSACTION
In the year ended June 30, 1996, the Company incurred substantial losses
primarily in connection with the operation of its tomato business. As of June
30, 1996, the Company had available cash and equivalents and available for sale
securities of $28.6 million and working capital of negative $1.5 million.
The Company believes that significant additional funds are required to pay
down debt, fund its tomato operations, support the market introduction of new
cotton products and finance continued oils research and development. The Board
of Directors of Calgene believes that the proposed transaction with Monsanto is
on terms no less favorable to the Company than could be obtained from an
independent third party. The Board determined to seek stockholder approval for
the Monsanto Transaction because the transaction will enable Monsanto to
nominate a majority of the members of the Board of Directors of Calgene. If the
proposed transaction with Monsanto is not approved at the Annual Meeting,
Calgene is unable to predict whether it will be able to obtain required
financing on favorable terms, if at all.
The Board of Directors recommends a vote FOR the Monsanto Transaction.
SUMMARY OF STOCK PURCHASE AGREEMENT
Consummation of the purchase of the Additional Shares by Monsanto pursuant to
the Stock Purchase Agreement is subject to various conditions including: (i)
expiration of the applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HRS Act"), (ii) election of the
five (5) Monsanto designated directors of the Company by the stockholders of
<PAGE> 23
Calgene, (iii) approval of the Monsanto Transaction, which includes the issuance
of the Additional Shares to Monsanto by the holders of a majority of the shares
of Calgene Common Stock present or represented at the Annual Meeting, other than
Monsanto, (iv) Calgene shall have executed the Restated Stockholders Agreement,
(v) the Additional Shares shall have been
13
<PAGE> 24
authorized for listing on the Nasdaq National Market, subject to official notice
of issuance, (vi) between the date of the Stock Purchase Agreement and the
Closing Date there shall have been no Material Adverse Change (as defined in the
Stock Purchase Agreement) in the position, financial or otherwise, or the
operations, assets, liabilities or results of operations of Calgene or its
subsidiaries, and (vii) prior to Closing, Calgene shall not have issued, agreed
to issue or approve the issuance of any shares of its capital stock or any
options, warrants or other rights entitling the holder thereof to convert into
or receive shares of Calgene capital stock, except for the grant of options for
Calgene Common Stock to employees and consultants in the ordinary course of
business and the issuance of shares of Calgene Common Stock pursuant to the
exercise of outstanding options or warrants, unless approved by the Calgene
directors designated by Monsanto in writing. The waiting period under the HSR
Act has expired.
The Stock Purchase Agreement provides that the closing of the transactions
contemplated thereunder shall occur on the first date after the conditions set
forth therein are satisfied or waived. Assuming the requisite stockholder
approval at the Annual Meeting with respect to the Monsanto Transaction, Calgene
and Monsanto presently anticipate closing on or about November 12, 1996. The
Stock Purchase Agreement provides that either Monsanto or Calgene may terminate
the Stock Purchase Agreement if the conditions for each's benefit as set forth
therein are not satisfied or waived by January 31, 1997.
SUMMARY OF THE STOCKHOLDERS AGREEMENT AND THE RESTATED STOCKHOLDERS AGREEMENT
As part of the Monsanto Transaction, the Stock Purchase Agreement provides
that, simultaneously with the issuance of the Additional Shares to Monsanto,
Calgene and Monsanto shall enter into the Restated Stockholders Agreement which
amends and restates the existing Stockholders Agreement. A copy of the proposed
Restated Stockholders Agreement is appended to this Proxy Statement as Exhibit
A.
The following is a summary of both the existing Stockholders Agreement which
became effective on March 31, 1996 and the proposed Restated Stockholders
Agreement which will become effective upon the consummation of the transactions
contemplated by the Stock Purchase Agreement.
Composition of the Calgene Board. The existing Stockholders Agreement provides
that the composition of the Calgene Board and the manner of selecting members
thereof shall be as follows:
(a) After March 31, 1996, the Calgene Board shall be comprised of nine
directors;
(b) Until the earlier of any time that (i) Monsanto's percentage ownership
of the outstanding Calgene securities ("Percentage Interest") is at least 55%
or (ii) Calgene elects to convert borrowings made from Monsanto into equity
securities of Calgene and Monsanto's Percentage Interest is at least 50% after
such conversion (a "Trigger Event"), the Calgene Board shall consist of two
directors who include the Chief Executive Officer and a second director
nominated by a majority of the Company Directors (as hereinafter defined)
("Company Management Directors"), three Independent Directors (as defined in
the Stockholders Agreement) nominated by Calgene ("Company Directors") and
four directors nominated by Monsanto (each a "Monsanto Director"), at least
one of which shall be an Independent Director;
(c) At and after the occurrence of a Trigger Event, the Calgene Board shall
be comprised of 11 Directors and Monsanto shall have the right to designate
two additional directors to the Board; and
(d) At any time that Monsanto's Percentage Interest is at least 70%, (i)
Monsanto shall have the right to designate eight Calgene Directors, to
<PAGE> 25
consist of two Company Management Directors and six other directors designated
by Monsanto (including at least one Independent Director) and (ii) Calgene
shall have the right to designate three Independent Directors to the Board. At
such time as Monsanto's Percentage Interest is at least 99%, Monsanto shall
have the right to designate all of the Calgene Directors.
The proposed Restated Stockholders Agreement provides that the composition of
the Calgene Board and the manner of selecting members thereof shall be as
follows:
(a) Until otherwise changed in accordance with the Restated Stockholders
Agreement, the Board of Directors of Calgene shall be comprised of nine
Directors consisting of one Company Management Director, three Independent
Directors and five Directors designated by Monsanto, at least one of which
shall
14
<PAGE> 26
be an Independent Director. With respect to the nominees for election at
the Annual Meeting, Mr. Kunimoto is the Company Management Director,
Messrs. Salquist, Vangelos and Palefsky are the Company Directors and
Messrs. Verfaillie, Fraley, Robson, Hogan and Fortune have been designated
by Monsanto with Mr. Robson being the Independent Director designated by
Monsanto.
(b) The provision in the existing Stockholders Agreement set forth in clause
(c) above, increasing the Calgene Board to 11 upon the occurrence of a Trigger
Event and granting to Monsanto the right to designate two additional directors
was deleted.
(c) At any time that Monsanto's Percentage Interest is at least seventy
percent (70%), Calgene shall nominate (i) six directors designated by Monsanto
which shall consist of one Company Management Director and five Monsanto
directors (including at least one Independent Director) and (ii) three
Independent Directors. At such time as Monsanto's Percentage Interest is at
least ninety-nine percent (99%), Calgene shall nominate nine directors
designated by Monsanto.
The Restated Stockholders Agreement also provides that the Board of Directors,
by unanimous action, may increase the number of directors comprising the Board
and may elect, or nominate for election, the director(s) to fill the vacancy or
vacancies created by such increase.
Under the terms of the existing Stockholders Agreement, and unchanged by the
Restated Stockholders Agreement, Calgene shall nominate the following number of
Monsanto designees when the Monsanto Percentage Interest is as set forth below:
<TABLE>
<CAPTION>
MONSANTO
DESIGNEES FOR NOMINATION
MONSANTO PERCENTAGE INTEREST TO THE CALGENE BOARD
---------------------------- ------------------------
<S> <C>
less than 40% but at least 20%...................... 3 directors
less than 20% but at least 10%...................... 2 directors
less than 10% but at least 5%....................... 1 director
less than 5%........................................ none
</TABLE>
In addition, the Restated Stockholders Agreement has changed the definition of
"Trigger Event" so that upon the purchase by Monsanto of the Additional Shares
pursuant to the Stock Purchase Agreement a "Trigger Event" occurs.
Under the terms of the Restated Stockholders Agreement the
Retention/Replacement Committee would be eliminated, leaving the Calgene Board
of Directors thereafter responsible for the retention and/or replacement of all
of the executive officers of the Company.
Registration Rights. The Stockholders Agreement provides Monsanto and certain
assignees may, subject to certain conditions and limitations, require Calgene,
whether or not Calgene proposes to register its Common Stock for sale, to
register with the Securities and Exchange Commission all or part of the shares
held by Monsanto. The Restated Stockholders Agreement provides that the
Additional Shares acquired by Monsanto pursuant to the Stock Purchase Agreement
shall also be entitled to these registration rights. Calgene is not required to
effect such a registration prior to September 30, 1998, unless an event of
default has occurred and is continuing under the Credit Agreements. See "Certain
Transactions--Credit Agreements."
Anti-Dilution Rights. If at any time Calgene agrees to sell shares of Calgene
Common Stock or other securities having the right to vote generally in any
election of directors of Calgene (collectively, "Calgene Securities") in a
private or public offering (other than pursuant to Calgene stock option plans),
<PAGE> 27
Monsanto is entitled to notice of such proposed sale and has the right, but not
the obligation, to acquire all or any portion of the Calgene Securities to be
offered for sale sufficient for Monsanto to maintain, after the consummation of
the proposed offering, the same percentage of ownership of Calgene Securities as
Monsanto possessed immediately prior to such offering. With respect to shares of
Calgene Securities issued pursuant to Calgene's stock option plans, Monsanto
shall have the right to maintain its percentage ownership of issued and
outstanding Calgene Securities by making open market purchases in accordance
with the Stockholders Agreement. This provision is unchanged by the Restated
Stockholders Agreement.
15
<PAGE> 28
Limitations on Monsanto's Ownership of Calgene Securities. The existing
Stockholders Agreement provides that until September 30, 1998 Monsanto may not
increase its Percentage Interest above 49.9% except in limited circumstances
such as:
(a) conversion of principal and/or interest under the Credit Agreements;
(b) issuance of Calgene Securities in an asset sale by Monsanto to
Calgene;
(c) prior to March 31, 1997 a tender offer for 100% of the publicly held
shares; or
(d) on or after March 31, 1997, a tender offer to increase its Percentage
Interest to 70%, provided if Monsanto increases its Percentage Interest to
more than 80%, then it has to tender for 100% of the publicly held shares.
In both (c) and (d) above, the price must be approved by disinterested
directors and supported by a fairness opinion by an investment banking firm.
The Restated Stockholders Agreement increases the Percentage Interest which
Monsanto may hold prior to September 30, 1998 to 54.6% to reflect the purchase
of the Additional Shares pursuant to the Stock Purchase Agreement and deletes
clause (c) above.
Limitations on Monsanto's Resale of Calgene Securities. The existing
Stockholders Agreement provides that Monsanto shall not, directly or indirectly,
sell any Calgene Securities (other than to an affiliate) except as follows: (a)
on and after March 31, 1997, Monsanto may sell Calgene Securities (i) as part of
a joint venture, merger or sale of all or substantially all of its current Crop
Protection business unit, as such business may be subsequently renamed or
reorganized, or (ii) pursuant to a tender offer by a third party to the
stockholders of Calgene; (b) after September 30, 1998, in addition to the rights
set forth in (a) above, Monsanto may sell Calgene Securities (ii) in a
registered public offering pursuant to the registration rights granted to
Monsanto under the Stockholders Agreement; (ii) through sales pursuant to Rule
144 under the Securities Act of 1933 (the "Securities Act"); (iii) through sales
of not more than 10% of the total issued and outstanding Calgene Securities to a
Non-Financial Purchaser (as defined in the Stockholders Agreement); or (iv)
through sales to a Financial Purchaser (as defined in the Stockholders
Agreement); (c) after September 30, 1999, in addition to the rights set forth in
(a) and (b) above, Monsanto may sell Calgene Securities through a private sale
of 35% or more of the total issued and outstanding Calgene Securities to a
Non-Financial Purchaser under circumstances where such third party assumes the
applicable and proportionate rights and obligations of Monsanto under the
Stockholders Agreement and the other transaction agreements; and (d)
notwithstanding the foregoing, at any time, Monsanto may sell Calgene Securities
issued to Monsanto upon conversion by Monsanto of principal or accrued interest
under the Credit Agreements after the occurrence of an event of default (see
"Certain Transactions--Credit Agreements").
This provision will not be changed by the Restated Stockholders Agreement.
Approval Required for Certain Actions. The existing Stockholder Agreement
provides as follows:
(a) On and after March 31, 1996 until the earlier of a Trigger Event or such
date on which Monsanto's Percentage Interest is less than 25%, a majority of
the Calgene Board, including at least one Company Director and one Monsanto
Management Director, shall be required to approve any of the following: (i)
the entry by Calgene or any of its Affiliates into any merger or consolidation
or the acquisition by Calgene or any of its Affiliates of any business or
assets that would constitute more than 10% of Calgene's total assets
determined on a consolidated basis (a "Substantial
<PAGE> 29
Part"); (ii) the sale, pledge, grant of security interest in, transfer,
retirement or other disposal of a Substantial Part of Calgene, except pursuant
to a security interest granted in connection with borrowings permitted under
subsection (iv) below or the pledge or granting of a security interest in
certain intangible property as further described in the Stockholders
Agreement; (iii) any dividend by or return of capital by Calgene or Gargiulo,
Inc. (formerly Tomato Investment Associates, Inc.) (other than such
distributions by Gargiulo, Inc. to Calgene as are necessary for Calgene to
timely perform its obligations under the Gargiulo Credit Facility Agreement);
(iv) any incurrence or assumption, in the aggregate, by Calgene, any of its
affiliates or any combination thereof, of any indebtedness for borrowed
16
<PAGE> 30
money at any time outstanding exceeding in the aggregate (determined on a
consolidated basis) the greater of (A) $15 million, increasing by $5 million
on each July 1 commencing July 1, 1996, plus amounts secured by inventory
and/or receivables for seasonal working capital lines and indebtedness
incurred to acquire property, plant or equipment and secured by the acquired
asset, minus amounts outstanding under the Calgene Credit Facility Agreement,
or (B) the amounts set forth in the Calgene Operating Plan (as defined in the
Stockholders Agreement), provided that loans under the Gargiulo Credit
Facility Agreement shall not be counted in this limitation; (v) the repurchase
or redemption of any Calgene securities, other than from employees upon
termination of employment or service; (vi) the establishment of any new
committees of the Calgene Board or new or revised delegations of Calgene Board
authority to any Calgene Board committee or changes or revisions to general
delegations of authority to officers or other persons for categories of
expenditures; (vii) the adoption of or amendment to any benefit or incentive
plans of Calgene or any of its Affiliates which would increase the annual cost
thereof by more than fifteen percent (15%) from the prior fiscal year or any
adoption of, or amendment to, any stock option plan; (viii) the election,
appointment or removal of the Chief Executive Officer, Chief Operating Officer
or Chief Financial Officer of Calgene and its successors and the establishment
of its annual or long-term compensation level and benefits (other than
agreements in effect at the Effective Time); provided, however, that Monsanto
shall have the right to select the Chief Technical Officer of Calgene and a
controller reporting to the Chief Financial Officer of Calgene; (ix) approval
of the Operating Plan and Strategic Plan (each as defined in the Stockholders
Agreement) of Calgene and its Affiliates, as well as the annual operating plan
and long-term strategic plan for the Gargiulo business, to be submitted to the
Calgene Board annually for approval, and any material changes thereto; (x) any
transaction between Calgene (and its Affiliates), on the one hand, and its
directors, officers or employees, on the other hand, which is not in the
normal course of business; (xi) any modification of the transaction
agreements; (xii) any amendment of the By-Laws or Certificate of Incorporation
of Calgene or Gargiulo, Inc.; (xiii) the issuance of additional Calgene
securities (other than warrants for the purchase of Calgene securities) in
excess of 4,000,000 shares of Calgene Common Stock in any two-year period to a
third party, other than pursuant to plans referred to in subsection (vii)
above or the issuance of any warrants for the purchase of Calgene securities;
(xiv) the sale or licensing by Calgene or any of its Affiliates of certain
intangible property, as further described in the Stockholders Agreement, or
any other intangible property for consideration (other than royalties
contingent on future sales) exceeding $5 million in the aggregate (determined
on a consolidated basis) per transaction or per series of related
transactions; (xv) new fixed capital investments, capital leases or
noncancellable operating leases by Calgene and its Affiliates having annual
payments in the aggregate (determined on a consolidated basis) exceeding the
aggregate amount set forth in the Operating Plan; (xvi) matters relating to
Gargiulo, Inc. covered in Article 5 of the Stockholders Agreement, including,
without limitation, any changes in the composition of the Gargiulo Board of
Directors; (xvii) any press release which mentions or directly or indirectly
refers to Monsanto, except as required by law and where Calgene Board approval
cannot be obtained in a timely manner; (xviii) the initiation, settlement or
termination of any suit or proceeding concerning intellectual property, any
other matter which could have an adverse public affairs effect upon Monsanto
or the filing of any insolvency or bankruptcy proceeding by or on behalf of
Calgene or any of its Affiliates; or (xix) the removal or election of the
directors, subject to the terms of the Stockholders Agreement, of Gargiulo,
Inc.
(b) After a Trigger Event and until the earlier of (i) March 31, 1999 or
(ii) such time as Monsanto's Percentage Interest is at least seventy percent
(70%), a majority of the Calgene Board, including at least two Company
Directors, shall be required to approve any of the following: except as
provided in the Stockholders Agreement, the matters set forth in
<PAGE> 31
clauses (i), (ii), (vi), (viii), (ix) and (xi) of paragraph (a) above; or (ii)
any transaction between Calgene (and its Affiliates) and Monsanto or any
Affiliate of Monsanto.
(c) From and after the occurrence of both (i) a Trigger Event and (ii) March
31, 1999, and until Monsanto's Percentage Interest is at least 99%, neither
Monsanto nor any of Affiliates shall enter into any transaction with Calgene
or any of its Affiliates without the approval of at least two Company
Directors.
The Restated Stockholders Agreement will delete clause (a)(xvi) above because
Article 5 of the Stockholders Agreement referred to therein, which contained
several provisions relating to the operations of
17
<PAGE> 32
Gargiulo, Inc. (formerly Tomato Investment Associates, Inc.) a wholly owned
subsidiary of Calgene, will also be deleted.
Further, the Restated Stockholders Agreement changes the definition of
"Trigger Event" so that upon the purchase by Monsanto of the Additional Shares a
"Trigger Event" occurs. Accordingly, after the purchase by Monsanto of the
Additional Shares, clause (b) above, not clause (a), will be applicable.
CERTIFICATE OF AMENDMENT
The amendments to Calgene's Certificate of Incorporation reflected in the
proposed Certificate of Amendment are to (i) reflect the amendments to the
provisions in the Stockholders Agreement as reflected in the Restated
Stockholders Agreement and described in the "Composition of the Calgene Board"
and "Approval Required for Certain Actions," and (ii) increase the authorized
shares of Calgene from 80,000,000 shares to 100,000,000 shares. A copy of the
Certificate of Amendment is appended to this Proxy Statement as Exhibit B.
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding on the Record Date is required for the approval of the
amendments. Monsanto, which owns 49.9% of the outstanding shares of Common Stock
as of the Record Date, has advised the Company that it intends on voting in
favor of the amendments. Additionally, the amendments to Calgene's Certificate
of Incorporation to reflect the Restated Stockholders Agreement will also
require the affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the Annual Meeting, other than broker
non-votes and other than those held by Monsanto.
THE FOREGOING IS A BRIEF SUMMARY OF CERTAIN PROVISIONS OF THE STOCK PURCHASE
AGREEMENT, THE RESTATED STOCKHOLDERS AGREEMENT AND CERTIFICATE OF AMENDMENT. THE
RESTATED STOCKHOLDERS AGREEMENT AND CERTIFICATE OF AMENDMENT ARE ATTACHED HERETO
AS EXHIBITS A AND B, RESPECTIVELY, AND INCORPORATED BY REFERENCE HEREIN.
18
<PAGE> 33
CERTAIN TRANSACTIONS
SUMMARY OF EXISTING AGREEMENTS WITH MONSANTO
Reorganization Agreement. On October 13, 1995, the Company and Monsanto
entered into an Agreement and Plan of Reorganization ("Reorganization
Agreement") and certain other agreements whereby Monsanto contributed all of the
outstanding shares of capital stock of Tomato Investment Associates, Inc., a
wholly-owned subsidiary of Monsanto ("TIA"), whose principal asset was the
entire equity interest in Gargiulo, L.P., $30 million in cash and certain
technology licenses in exchange for a 49.9% equity interest in the Company. In
connection with the Reorganization Agreement, a total of 30,146,114 shares of
Common Stock of the Company were issued to Monsanto. The Reorganization
Agreement was approved by the stockholders of the Company on March 25, 1996. On
March 31, 1996 (the "Effective Time"), the Company and Monsanto consummated the
transactions contemplated by the Reorganization Agreement which included
entering into the agreements discussed below. Subsequent to the Effective Date,
Gargiulo L.P. was merged into TIA and TIA changed its name to "Gargiulo, Inc."
Stockholders Agreement. On March 31, 1996, the Company and Monsanto entered
into a Stockholders Agreement (the "Stockholders Agreement"). The Stockholders
Agreement and the proposed Restated Stockholders Agreement are summarized herein
under "Proposal No. 2--Approval of Transaction with Monsanto--Summary of the
Stockholders Agreement and the Restated Stockholders Agreement."
CREDIT AGREEMENTS
Calgene Credit Facility Agreement
On March 31, 1996, Monsanto and Calgene entered into the Calgene Credit
Facility Agreement pursuant to which Monsanto shall, during the Commitment
Period (as hereinafter defined), and subject to the terms and conditions
contained therein, make, at the request of Calgene, three consecutive one-year
loans of up to $15 million each (each a "Calgene Loan" and together the "Calgene
Loans"), collectively totalling not more than $45,000,000. At no time shall the
outstanding principal of all Calgene Loans exceed $15 million. Prior to the
occurrence of an Event of Default (as defined in the Calgene Credit Facility
Agreement), Calgene may borrow, repay and reborrow under each Calgene Loan, each
such borrowing or reborrowing being an "Advance." The "Commitment Period" began
on March 31, 1996 and ends on the earlier of September 30, 1998, or such earlier
time that Monsanto terminates its obligations to make further Advances under the
Calgene Credit Facility Agreement. The Calgene Loans made pursuant to the
Calgene Credit Facility Agreement are to be secured by the joint and several
guaranty of the subsidiaries of Calgene.
Prior to the occurrence of an Event of Default, the Calgene Loans bear
interest at the per annum rate equal to 2.00% above Citibank's published prime
rate (the "Calgene Base Rate"), and following an Event of Default at the per
annum rate equal to 3.00% above the Calgene Base Rate. During the continuance of
an Event of Default, Calgene shall have no right to obtain any new Advances
under this Agreement. The Calgene Loans may be prepaid in whole or in part at
any time after giving at least three days prior written notice to Monsanto.
In lieu of repayment of outstanding principal and accrued interest on each
Calgene Loan, Calgene, subject to Monsanto's right to require Calgene to sell
shares and pay cash, as provided below, may elect to convert all or any portion
of the principal and accrued interest due under the applicable Calgene Loan (the
"Conversion Amount") into shares of Calgene Common Stock at the average of the
closing market price for such shares during the thirty trading days immediately
preceding the applicable maturity date for such Calgene Loan.
Monsanto may, in its sole discretion and within five business days after its
receipt of notice from Calgene that Calgene intends to exercise Calgene's rights
to convert the Conversion Amount, give written notice to Calgene stating that
(i) all or any part of the Conversion Amount shall be payable in cash (the
<PAGE> 34
"Alternative Conversion Amount"), (ii) Calgene shall, at its expense, sell
publicly such number of shares of its common stock as Monsanto would have
received if the Alternative Conversion Amount had been converted as described
above
19
<PAGE> 35
and (iii) the net proceeds of such sale shall be paid by Calgene to Monsanto in
full payment and satisfaction of such Alternative Conversion Amount.
Upon any such conversion, the Conversion Amount shall first be applied to
reduce the accrued interest due on the applicable Calgene Loan as of the
applicable maturity date, and any remaining portion of the Conversion Amount
shall be applied to reduce the principal due on such Calgene Loan. In any event,
on each annual Maturity Date (as defined in the Calgene Credit Facility
Agreement), all outstanding principal and accrued interest not converted by
Calgene into shares of Calgene Common Stock shall be repaid in full to Monsanto.
Upon the occurrence and during the continuation of an Event of Default, for a
period of thirty (30) days from the occurrence of the Event of Default, Calgene,
subject to Monsanto's right to require Calgene to sell shares and pay cash, as
described above, may similarly elect to convert all or any portion of the
principal and accrued interest under any outstanding Calgene Loan into shares of
Calgene Common Stock. If Calgene does not elect to exercise its conversion
rights upon such an Event of Default, Monsanto may, in addition to its other
remedies, elect to convert all or a portion of the remaining principal and
accrued interest under such Calgene Loan into shares of Calgene Common Stock at
the average of the closing market prices for such shares during the thirty days
preceding such Event of Default. In no event, however, shall Monsanto elect to
convert principal and accrued interest into more than 3,000,000 shares of
Calgene Common Stock (as such number is adjusted for stock dividends, stock
splits and similar events affecting holders of Calgene's common stock).
The obligation of Monsanto to provide Advances is subject to the fulfillment
of certain conditions, including, among others: (i) the continued accuracy of
all representations and warranties made by Calgene and its subsidiaries; (ii)
the compliance with all covenants contained in the Calgene Credit Facility
Agreement; (iii) no event shall have occurred which would constitute an Event of
Default or Potential Event of Default (as defined in the Calgene Credit Facility
Agreement); or (iv) there shall not have occurred any circumstance which could
reasonably be expected to have a material adverse effect on (A) the business,
assets, operations or financial condition of Calgene and its subsidiaries, taken
as a whole, or (B) the ability of the Company and its subsidiaries to perform
their obligations under the Calgene Credit Facility Agreement.
The covenants contained in the Calgene Credit Facility Agreement require
Calgene to maintain a minimum consolidated net worth of not less than $10
million and a minimum consolidated working capital of not less than $5 million.
The Calgene Credit Facility Agreement also requires that Calgene and its
subsidiaries meet certain specified financial ratios, including a ratio of total
long-term liabilities to net worth and a current ratio. In addition, the Calgene
Credit Facility Agreement imposes a number of limitations on Calgene with
respect to future acquisitions, liens, mergers and the sale of assets, loans and
investments, guaranties, capital expenditures, the payment of dividends and the
incurrence of indebtedness. The existence of these covenants could limit
Calgene's ability to finance the growth of its existing operations if cash flows
were to decrease substantially or if expenses were to increase substantially.
These covenants would also limit Calgene's ability to engage in additional
acquisitions that would significantly increase the ratio of long- term
indebtedness to net worth following such acquisitions. The failure of Calgene to
satisfy these covenants would cause an Event of Default which could have a
material adverse effect on its business and results of operations. Calgene is
not in compliance with certain financial covenants contained in the Calgene
Credit Facility Agreement. Monsanto has agreed to grant Calgene a limited waiver
with respect to such non-compliance only as to the initial Advance which matures
March 31, 1997, provided Calgene first makes all reasonable efforts to obtain
any further necessary funds from its existing senior lenders.
All of the Calgene Loans shall be subordinated and subject in right of payment
to the prior payment in full of a certain senior indebtedness of Calgene as more
fully described in the Calgene Credit Facility Agreement. No payment on account
of principal or interest on the Calgene Loans shall be made if at the time of
<PAGE> 36
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.
20
<PAGE> 37
As of August 31, 1996, there was no outstanding balance of principal and
interest under the Calgene Credit Facility Agreement.
Gargiulo Credit Facility Agreement
On March 31, 1996, Monsanto and Calgene entered into the Gargiulo Credit
Facility Agreement pursuant to which Monsanto shall, during the Commitment
Period (as hereinafter defined), and subject to the terms and conditions
contained therein, make available to Calgene a revolving credit facility of up
to $40 million (the "Gargiulo Loan").
The Gargiulo Loan has been used to acquire Collier Farms and to support the
branded tomato strategy of Gargiulo as determined by the Gargiulo Board of
Directors (other than amounts used to finance the acquisition of Collier Farms).
Prior to the occurrence of an Event of Default (as defined in the Gargiulo
Credit Facility Agreement), Gargiulo may borrow, repay and reborrow, each such
borrowing or reborrowing being an "Advance." In order to obtain an Advance from
Monsanto under the Gargiulo Credit Facility Agreement, Gargiulo must provide
documentation reasonably acceptable to Monsanto verifying that Gargiulo has
reached certain milestones and achieved certain goals as set forth therein. The
maximum amount of each Advance is subject to certain limitations based upon such
milestones and goals. The "Commitment Period" began on March 31, 1996 and ends
on the earlier of the fourth anniversary or such earlier time that Monsanto
terminates its obligations to make further Advances. The Gargiulo Loan is
secured by the joint and several guaranty of the subsidiaries of Calgene.
Prior to the occurrence of an Event of Default, the Gargiulo Loan shall bear
interest at the per annum rate equal to 2.00% above Citibank's published prime
rate (the "Gargiulo Base Rate"), and following an Event of Default at the per
annum rate equal to 3.00% above the Gargiulo Base Rate. During the continuance
of an Event of Default, Calgene shall have no right to obtain any new Advances.
The Gargiulo Loan may be prepaid in whole or in part at any time after giving at
least three days prior written notice to Monsanto.
The Gargiulo Loan is payable, unless extended as described below, in one
payment on the fourth anniversary of the Effective Time (the "Maturity Date") in
an amount equal to the lesser of (i) the Repayment Portion of the Cumulative
Free Cash Flow (as defined in the Gargiulo Credit Facility Agreement) of
Gargiulo from the Effective Time to the Maturity Date and (ii) the amount of the
outstanding principal and accrued interest on the Gargiulo Loan. "Repayment
Portion" means the sum of 20% of the first $10 million of Cumulative Free Cash
Flow, 50% of the next $10 million and 80% of the remaining balance. In the event
that the Repayment Portion is not sufficient to pay all of the then outstanding
principal and accrued interest at the Maturity Date, the maturity date with
respect to the unpaid amount of outstanding principal and interest shall be
extended to the sixth anniversary of the Effective Time (the "Extended Maturity
Date"). In the event the Repayment Portion of the Cumulative Free Cash Flow
(less amounts previously paid) is not sufficient to pay the then outstanding
principal and accrued interest at the Extended Maturity Date, Calgene shall pay
Monsanto such lesser amount and Monsanto, at its sole option, may do any one or
combination of the following: (i) convert all or any portion of the then
outstanding principal and accrued interest into shares of Calgene Common Stock
at the average of the closing market prices for such shares during the thirty
trading days immediately preceding the date of such conversion, (ii) further
extend the Final Maturity Date (as defined in the Gargiulo Credit Facility
Agreement) upon the same terms as are contained in the Gargiulo Credit Facility
Agreement, or (iii) as to any unpaid amount which is not converted under clause
(i) or for which payment is not extended pursuant to clause (ii), cause Calgene
to sell publicly that number of shares of Calgene Common Stock as Monsanto would
have received if such amount has been converted under clause (i) above with the
net proceeds of such sale being delivered to Monsanto in full payment and
satisfaction of such amount.
Upon the occurrence and during the continuation of an Event of Default,
Monsanto may, in addition to its other remedies, similarly elect to convert all
<PAGE> 38
or any portion of the principal and accrued interest under the Gargiulo Loan
(the "Gargiulo Conversion Amount") into shares of Calgene Common Stock at the
average of the closing market prices for such shares during the thirty days
preceding such Event of Default. In no event,
21
<PAGE> 39
however, shall Monsanto elect to convert principal and accrued interest into
more than 8,000,000 shares of Calgene Common Stock (as such number is adjusted
for stock dividends, stock splits and similar events affecting holders of
Calgene's common stock). Upon any such conversion, the Gargiulo Conversion
Amount shall first be applied to reduce the accrued interest due on the Gargiulo
Loan, and any remaining portion of the Gargiulo Conversion Amount shall be
applied to reduce the principal due on such Gargiulo Loan.
The obligation of Monsanto to provide Advances is subject to the fulfillment
of certain conditions, including, among others: (i) the continued accuracy of
all representations and warranties made by Calgene and its subsidiaries; (ii)
the compliance with all covenants contained in the Gargiulo Credit Facility
Agreement; (iii) no event shall have occurred which would constitute an Event of
Default or Potential Event of Default (as defined in the Gargiulo Credit
Facility Agreement); or (iv) there shall not have occurred any circumstance
which could reasonably be expected to have a material adverse effect on (A) the
business, assets, operations or financial condition of Calgene and its
subsidiaries, taken as a whole or (B) the ability of the Company and its
subsidiaries to perform their obligations under the Gargiulo Credit Facility
Agreement.
The covenants contained in the Gargiulo Credit Facility Agreement require
Calgene to maintain a minimum consolidated net worth of not less than $10
million and a minimum consolidated working capital of not less than $5 million.
The Gargiulo Credit Facility Agreement also requires that Calgene and its
subsidiaries meet certain specified financial ratios, including a ratio of total
long-term liabilities to net worth and a current ratio. In addition, the
Gargiulo Credit Facility Agreement imposes a number of limitations on Calgene
and each of its subsidiaries with respect to future acquisitions, liens, mergers
and the sale of assets, loans and investments, guaranties, capital expenditures,
the payment of dividends and the incurrence of indebtedness. The existence of
these covenants could limit Calgene's ability to finance the growth of its
existing operations if cash flows were to decrease substantially or if expenses
were to increase substantially. These covenants would also limit Calgene's
ability to engage in additional acquisitions that would significantly increase
the ratio of long-term indebtedness to net worth following such acquisitions.
The failure of Calgene to satisfy these covenants would cause an Event of
Default which could have a material adverse effect on its business and results
of operations. Calgene is not in compliance with certain financial covenants
contained in the Gargiulo Credit Facility Agreement. Calgene intends to seek a
waiver from Monsanto with respect to such non-compliance.
The Gargiulo Loan is to be subordinated and subject in right of payment to the
prior payment in full of certain senior indebtedness of Calgene as more fully
described in the Gargiulo Credit Facility Agreement. No payment on account of
principal or interest on the Gargiulo Loan shall be made if at the time of such
payment or immediately after giving the effect thereto, (i) there shall exist a
default in any payment with respect to any such senior indebtedness or (ii)
there shall have occurred an event of default (other than a default in the
payment of amounts due thereon) with respect to any such senior indebtedness.
As of August 31, 1996, the outstanding balance of principal and interest under
the Gargiulo Credit Facility Agreement was $25.1 million.
License Agreements
As part of the Initial Monsanto Transaction in March 1996, Monsanto
contributed certain technology licenses to Calgene pursuant to various license
agreements and letter agreements. The technologies underlying the License
Agreements are summarized below.
ACC Synthase and ACC Deaminase. ACC is a precursor of ethylene, a plant growth
regulator that induces ripening in certain fruits. By reducing the amount of ACC
available for conversion into ethylene, the ripening process can be delayed.
Control of the ripening process may enable Calgene to improve the efficiency of
<PAGE> 40
its tomato production operations. Calgene will be granted non-exclusive,
perpetual, royalty-free rights to the ACC synthase and ACC deaminase genes for
use in certain produce crops and shall be able to practice under Monsanto's ACC
Synthase license from the USDA.
22
<PAGE> 41
Fruit-specific Promoters. Promoters control the expression of genes in each
plant cell. In order for certain genes to function in a beneficial manner,
expression of these genes must be restricted to certain parts of the plant.
Fruit-specific promoters provide a means of limiting gene expression to the
fruit. For example, these promoters may be useful in regulating carbohydrate
metabolism (e.g., sugar content) in ripening fruits such as tomatoes and
strawberries. Calgene has been granted non-exclusive, perpetual, royalty-free
rights to certain fruit-specific promoters for use in certain produce crops.
Virus Resistance Genes. Virus infection is known to significantly reduce the
yields of certain crops, including tomatoes. Monsanto has developed methods of
interfering with viral replication in engineered plants, which slows the rate
and degree of infection, and reduces the yield loss resulting from the
infection. Calgene has been granted non-exclusive, perpetual, royalty-free or
royalty-bearing rights to certain aspects of Monsanto's patent estate related to
the engineering of virus resistance into certain produce crops.
FAD 3 Gene. The FAD 3 gene controls the relative amount of polyunsaturated
fatty acids found in plant oils, including canola oil. Calgene believes that
reducing the expression of the FAD 3 gene in engineered canola plants may result
in an oil with reduced linoleic and linolenic acid content. Such an oil would be
a superior cooking oil, as well as a superior raw material for the production of
margarine and shortening. Calgene has been granted exclusive, perpetual,
royalty-bearing rights to the FAD 3 gene for use in certain oilseed crops.
Insect Resistance Gene. Monsanto has modified genes from a soil microorganism
called Bacillus thurengiensis ("B.t.") the encode proteins that are toxic to
certain insects. Use of insecticides to control insects is a major cost in the
production of tomatoes. Calgene has been granted non-exclusive, perpetual,
royalty-free rights to Monsanto's B.t. patent estate for use in certain produce
crops.
ADP Glucose Pyrophosphorylase ("ADPGPP") Gene. The ADPGPP gene is a bacterial
gene involved in starch biosynthesis. By expression of this gene in plants, the
starch and/or sugar content of plants can be increased. This may improve the
flavor or sweetness of produce crops such as tomatoes or strawberries. Calgene
has been granted non-exclusive, perpetual, royalty-free rights to Monsanto's
patent estate related to ADPGPP for use in certain produce crops. Monsanto and
Calgene are parties to an interference at the United States Patent and Trademark
Office relating to the ADPGPP gene.
Oil Modification Technology. Monsanto has certain patent rights and know-how
related to the production of plants with altered oil compositions. By modifying
oil composition it may be possible to provide temperate sources of certain
tropical oils and the production of novel oil compositions. The Monsanto oil
modification genes include sucrose phosphorylase, cytochrome b5 and PEP
carboxylase. Calgene has been granted non-exclusive, perpetual, royalty-free
rights under Monsanto's patents and know-how for use in certain oilseed crops.
Insect Protected Cotton Direct Grower Licensing Agreement
Calgene has entered into an agreement with Monsanto under which Calgene will
participate in the direct licensing of Monsanto's B.t. technology to cotton
growers. Under the terms of this agreement, Monsanto has granted to Calgene a
non-exclusive, royalty-free U.S. license to use Monsanto's B.t. technology in
Calgene's cottonseed products. Subject to the issuance of a Monsanto patent that
covers the B.t. gene that is currently being utilized in Calgene's cottonseed
product development program, Calgene would be obligated under applicable patent
law to end use of its current B.t. gene and is permitted under such agreement to
incorporate Monsanto's B.t. gene into its product development program over a
four-year period.
Monsanto intends to enter into license agreements directly with cotton
growers. Under the terms of these agreements, cotton growers would obtain a
one-time right to purchase a specified number of units of cottonseed containing
<PAGE> 42
Monsanto's B.t. gene in return for the payment of a license fee. Monsanto has
agreed to pay to Calgene a specified percentage of the net license fees received
from licensed growers who subsequently purchase Calgene's cottonseed products
containing Monsanto's B.t. gene. The material terms of Calgene's agreement shall
be modified to reflect any more favorable terms that may be granted to any other
cottonseed company that may participate in the direct licensing program.
23
<PAGE> 43
Oilseed Development Agreement
In May 1996, Calgene and Monsanto executed a broad strategic cross-licensing
agreement encompassing the two companies' oilseed research programs. Under the
agreement, Calgene received a royalty free license to current and future
Monsanto agronomic technology for use in combination with Calgene's proprietary
oils modification genes for use in developing specialty canola oil product.
Monsanto received a royalty bearing license to Calgene technology to develop
agronomically superior corn, soybean, canola and sunflower crops. In addition,
Monsanto paid $7 million to Calgene and will pay royalties based on sales of
insect resistant corn, soybean, canola and sunflower seed with increased oil
content and modified meal composition utilizing Calgene technology. Also as part
of the agreement, Monsanto paid Calgene $10 million in cash to help fund oilseed
research and development. In exchange, Monsanto will receive a portion of the
future profits from Calgene's specialty oils business.
PROPOSAL NO. 3
INCREASE IN AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Company currently has authorized 80,000,000 shares of Common Stock. As of
August 31, 1996, there were 60,443,115 shares of Common Stock outstanding and
3,673,996 additional shares of Common Stock reserved for issuance upon exercise
of outstanding stock options. After giving effect to the purchase of the
Additional Shares by Monsanto, only 9,632,889 shares will be available for
further issuance. Accordingly, the Board has adopted an amendment to the
Certificate of Incorporation, subject to stockholder approval, to increase its
authorized Common Stock to 100,000,000 shares. The affirmative vote of the
holders of a majority of the shares of Calgene Common Stock outstanding on the
Record Date is required for approval of this amendment to the Certificate of
Incorporation.
The Board of Directors recommends a vote FOR the proposed increase in
authorized Common Stock.
PROPOSAL NO. 4
CONFIRMATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On May 21, 1996, the Company announced that it was changing its fiscal year
end from June 30 to December 31. The Board of Directors has selected Ernst &
Young LLP as the Company's independent public accountants for the transition
period of July 1, 1996 through December 31, 1996 and for the fiscal year ending
December 31, 1997 and recommends that the stockholders confirm such selection.
Confirmation will require the affirmative vote by holders of a majority of
shares present or represented by proxy and entitled to vote on the matter. In
the event that confirmation fails to receive the required majority vote, the
Board of Directors will reconsider its selection.
Ernst & Young LLP has audited the Company's annual financial statements since
the fiscal year ended September 30, 1982. Representatives of Ernst & Young LLP
are expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
24
<PAGE> 44
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
Proposals that are intended to be presented by stockholders of the Company at
the 1998 Annual Meeting must be received by the Company no later than December
3, 1997 in order that they may be potentially eligible to be included in the
Company's proxy statement and form of proxy relating to that meeting.
INCORPORATION BY REFERENCE
The Company hereby incorporates by reference into this Proxy Statement its
Annual Report on Form 10-K for the fiscal year ended June 30, 1996 and all
reports filed by the Company with the Securities and Exchange Commission
pursuant to Section 13(a) of the Securities Exchange Act of 1934 after the date
hereof and prior to the date of the Annual Meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the accompanying form of proxy to vote the shares they
represent as the Board of Directors may recommend.
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST A
COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO THE CORPORATE
SECRETARY, CALGENE, INC., 1920 FIFTH STREET, DAVIS, CALIFORNIA 95616.
25
<PAGE> 45
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CALGENE, INC.
1996 ANNUAL MEETING OF STOCKHOLDERS
To be held on November 12, 1996
The undersigned stockholder of Calgene, Inc. ("Calgene") hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement for the 1996 Annual Meeting of Stockholders of Calgene, Inc.
to be held on November 12, 1996, and hereby appoints Lloyd M. Kunimoto and
Michael J. Motroni, and each of them, proxy and attorney-in-fact, with full
power of substitution, on behalf and in the name of the undersigned to
represent the undersigned at such meeting and at any continuations or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present,
on the matters set forth on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 46
1. To elect directors of the Company.
NOMINEES: Patrick J. Fortune, Robert T. Fraley, Michael R. Hogan, Lloyd M.
Kunimoto, Howard D. Palefsky, John E. Robson, Roger H. Salquist, Allen J.
Vangelos, Hendrik A. Verfaillie.
For [_] Withheld [_]
[_] ___________________ For all nominees except vote
withheld from nominee(s) noted on line above.
2. To approve the Monsanto Transaction, as described in the accompanying
Proxy Statement.
For [_] Against [_] Abstain [_]
3. To increase the authorized number of shares of Common Stock from
80,000,000 to 100,000,000 shares.
For [_] Against [_] Abstain [_]
4. To confirm the appointment of Ernst & Young LLP as the independent
auditors of the Company through the fiscal year ending December 31, 1997.
For [_] Against [_] Abstain [_]
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE PROPOSALS SET FORTH ABOVE AND AS THE
---
PROXYHOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [_] (This Proxy should
be marked, dated, signed by the stockholder(s) exactly as his or her name
appears hereon, and returned promptly in the enclosed envelope. Persons
signing as officers or in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.)
Signature _______________________ Date________________
Signature _______________________ Date________________
<PAGE> 47
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Calgene, Inc.
We have audited the accompanying consolidated balance sheets of Calgene, Inc. as
of June 30, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended June 30, 1996. Our audits also included the financial statement
schedules listed in the Index at Item 14(a)2. These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Calgene, Inc.
at June 30, 1996 and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended June 30, 1996, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
Sacramento, California
September 12, 1996
<PAGE> 48
EXHIBIT A
CALGENE, INC.
(FORMERLY CALGENE II, INC.)
AND
MONSANTO COMPANY
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <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............................................ 7
2.4 Expenses of Registration........................................ 8
2.5 Registration Procedures......................................... 8
2.6 Indemnification................................................. 9
2.7 Information by Holder........................................... 10
2.8 Rule 144 Reporting.............................................. 10
2.9 Transfer of Registration Rights................................. 11
2.10 Limitations on Subsequent Registration Rights................... 11
2.11 Termination of Registration Rights.............................. 11
2.12 "Market Stand-off" Agreement.................................... 11
ARTICLE 3 Anti-Dilution Rights and Limitations on Owner................... 11
3.1 Anti-Dilution Rights............................................ 11
3.2 Private Offering................................................ 12
3.3 Public Offering................................................. 12
3.4 Limitations..................................................... 12
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........................... 16
4.5 Enforcement of this Agreement................................... 18
4.6 Certificate of Incorporation and By-laws........................ 18
4.7 Advisors........................................................ 18
4.8 Injunctive Relief............................................... 18
ARTICLE 5 Governance of Gargiulo.......................................... 19
ARTICLE 6 Miscellaneous................................................... 19
6.1 Governing Law................................................... 19
6.2 Successors and Assigns.......................................... 19
6.3 Entire Agreement; Amendment..................................... 19
6.4 Notices......................................................... 19
6.5 Delays or Omissions............................................. 20
6.6 Counterparts.................................................... 20
6.7 Severability.................................................... 20
6.8 Stock Legends................................................... 20
6.9 [This section intentionally left blank.]........................ 20
6.10 Audits Consultants and Inspections.............................. 20
6.11 No Third Party Beneficiaries.................................... 20
6.12 Sections and Articles........................................... 21
6.13 Headings........................................................ 21
</TABLE>
<PAGE> 50
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AGREEMENT made as of the ___ day of November, 1996, by and between Calgene,
Inc., a Delaware corporation (formerly known as Calgene II, Inc.), 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 Technology Corporation, a Delaware corporation and a
wholly-owned subsidiary of the Company (formerly known as Calgene,
Inc.)("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 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 agreed that the Company shall, at the
request of a Holder (as hereafter defined), register under the Securities Act of
1933, as amended (the "Securities Act"), and register or qualify under any
applicable state securities or blue sky laws the Common Stock of the Company
acquired or to be acquired by Holder so as to permit a Holder to sell such
Common Stock in the public markets;
WHEREAS, the Company and Monsanto 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 and a
wholly-owned subsidiary of the Company ("Tomato Associates");
WHEREAS, the Company and Monsanto have entered into a Stock Purchase Agreement
dated as of September 27, 1996 (the "Stock Purchase Agreement") pursuant to
which Monsanto has agreed to purchase additional shares of Common Stock of the
Company; and
WHEREAS, in connection with the consummation of the transaction contemplated
by the Stock Purchase Agreement, the Company and Monsanto desire to amend the
Stockholders Agreement dated March 31, 1996 by and between the Company and
Monsanto (the "Prior Stockholders Agreement") in its entirety and to become
bound by the terms of this Agreement;
NOW, THEREFORE, in consideration of the promises 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):
1
<PAGE> 51
"Affiliate" has the same meaning as in Rule 12b-2 promulgated under the
Exchange Act.
"Associate" has the same meaning as in Rule 12b-2 promulgated under the
Exchange Act.
"Board" or "Board of Directors" means the Board of Directors of the Company
except where the context otherwise requires.
"Calgene" has the meaning set forth in the recitals herein.
"Calgene Board" means the Board of Directors of Calgene.
"Calgene Director" means a member of the Calgene Board.
"Commission" means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, $.001 par value, of the Company.
"Company" has the meaning set forth in the first paragraph hereof.
"Company Credit Facility" means the Holding Company Credit Facility Agreement
dated March 31, 1996 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 the Chief Executive Officer (or, if there
is none at any time, a Director nominated by a majority of the Company
Directors) and a second Director who shall be nominated by a majority of the
Company Directors.
"Company Securities" has the meaning set forth in Section 3.1 hereof.
"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 November , 1996.
"Effective Date Percentage" means the greater of 53% or the percentage of
outstanding shares of Common Stock of the Company held by Monsanto immediately
after the consummation of the transactions contemplated by the Stock Purchase
Agreement.
"Equity Security" means (i) any Common Stock or other Voting Stock, (ii) any
securities of the Company convertible into or exchangeable for Common Stock or
other Voting Stock or (iii) any options, rights or warrants (or any similar
securities) issued by the Company to acquire Common Stock or other Voting Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Purchaser" means a Person (i) purchasing Company Securities from
Monsanto for investment purposes or otherwise in the ordinary course of business
and not for the purpose nor with the effect of changing or influencing the
control of the Company and (ii) which Person is not already primarily in the
same lines of business as the Company.
<PAGE> 52
2
<PAGE> 53
"Gargiulo" means Gargiulo, Inc. formerly known as Tomato Investment
Associates, Inc.
"Gargiulo Business" means the business transacted by Tomato Associates after
March 31, 1996, which business was transacted by Gargiulo prior to March 31,
1996.
"Gargiulo Credit Facility" means the Gargiulo Credit Facility Agreement dated
March 31, 1996 between the Company and Monsanto.
"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.
"Indemnifying Party" has the meaning set forth in Section 2.6(c) hereof.
"Independent Director" means a Director or Calgene Director (i) who is not and
has never been an officer or employee of Calgene, the Company, any Affiliate or
Associate of Calgene or the Company or of a Person that derived five percent
(5%) or more of its revenues or earnings in its most recent fiscal year from
transactions involving Calgene, the Company or any Affiliate or Associate of
Calgene or the Company, (ii) who is not and has never been an officer or
employee of Monsanto, any Affiliate or Associate of Monsanto or of a Person that
derived more than five percent (5%) of its revenues or earnings in its most
recent fiscal year from transactions involving Monsanto or any Affiliate or
Associate of Monsanto, (iii) who is not and never has been an officer or
employee of Gargiulo, any Affiliate or Associate of Gargiulo or of a Person that
derived more than five percent (5%) of its revenues or earnings in its most
recent fiscal year from transactions involving Gargiulo or any Affiliate or
Associate of Gargiulo, (iv) who has no affiliation, compensation, consulting or
contracting arrangement with Calgene, the Company, Monsanto, Gargiulo or their
respective Affiliates or Associates or any other Person such that a reasonable
person would regard such Director as likely to be unduly influenced by
management of Calgene, the Company or Monsanto, respectively (provided, however,
that no Person shall be regarded as being unduly influenced by the management of
Monsanto merely because such Person serves or previously served as a director of
Monsanto or any Affiliate or Associate of Monsanto), and (v) who has an
outstanding reputation for personal integrity and distinguished achievement in
areas relevant to the Company. Notwithstanding the foregoing, no member of the
immediate family of any Person who does not qualify to be an Independent
Director by reason of clause (i), (ii), (iii) or (iv) above shall be considered
an Independent Director. For purposes of the preceding sentence, the term
"immediate family" shall have the same meaning as set forth in Item 404(a) of
Regulation S-K. Without limiting the foregoing, Roger H. Salquist shall qualify
as an Independent Director so long as he continues to qualify under clauses (iv)
and (v) of such definition. Roger H. Salquist shall not fail to qualify under
clause (iv) above as a result of his Change of Control Employment Agreement
dated July 19, 1995, as modified, or Consulting Agreement dated September 16,
1996 with the Company. Any of the above restrictions may be waived by unanimous
action of the Board of Directors.
"Monsanto" has the meaning set forth in the first paragraph hereof.
"Monsanto Director" means a Director or Calgene Director, including any
Monsanto Management Director, who is designated for such position by Monsanto in
accordance with Section 4.1 hereof.
<PAGE> 54
"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.
"New Percentage Ownership" has the meaning set forth in Section 3.6(c) hereof.
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<PAGE> 55
"Non-Financial Purchaser" means a Person, other than a Financial Purchaser,
purchasing Company Securities from Monsanto.
"Operating Plan" has the meaning set forth in Section 4.4(a)(ix) hereof.
"Other Selling Stockholders" has the meaning set forth in Section 2.2(c)
hereof.
"Percentage Interest" means the percentage of outstanding Voting Stock that is
controlled directly or directly by Monsanto and its Affiliates.
"Person" means a corporation, association, partnership, joint venture, limited
liability company, individual, trust, unincorporated organization, a government
agency or political subdivision thereof and any other entity.
"Preliminary Prospectus" means a preliminary prospectus as contemplated by
Rule 430 or 430A under the Securities Act included at any time in the
Registration Statement.
"Pre-Offering Percentage" has the meaning set forth in Section 3.1 hereof.
"Prospectus" means (i) the prospectus as first filed with the Commission
pursuant to Rule 424(b) under the Securities Act or, (ii) if no such filing is
required, the form of final prospectus included in the Registration Statement at
the effective date thereof or (iii) if a Term Sheet or Abbreviated Term Sheet
(as such terms are defined in Rule 434(b) and 434(c), respectively, under the
Securities Act) is filed with the Commission pursuant to Rule 424(b) (7) under
the Securities Act, the Term Sheet or Abbreviated Term Sheet and the last
Preliminary Prospectus filed with the Commission prior to the time the
Registration Statement became effective, taken together (including, in each
case, the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the Securities Act), together with any supplement to any of the
foregoing.
"Registration Statement" means any registration statement of the Company filed
under the Securities Act which covers any of the Registrable Securities pursuant
to the provisions of this Agreement, including the Prospectus relating thereto
and all amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all material incorporated or deemed
to be incorporated by reference in such registration statement.
"Registrable Securities" means shares of Common Stock issued or issuable to
Monsanto pursuant to the Transaction Agreements and the Prior Stockholders
Agreement and the Stock Purchase Agreement whether owned by Monsanto or a
permitted transferee of Monsanto and all such other securities of the Company
acquired by Monsanto or any Affiliate of Monsanto in accordance herewith.
"Register", "Registered" and "Registration", whether or not capitalized, mean
and refer to a registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such Registration Statement.
"Registration Expenses" means all expenses incurred by the Company in
compliance with this Article 2, including, without limitation, all registration
fees, qualification fees, filing fees, advertising and road show expenses
(excluding advertising and road show expenses incurred by a Holder), printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company).
"Reorganization Agreement" has the meaning set forth in the recitals herein.
<PAGE> 56
"Requesting Holder" means a Holder requesting any registration pursuant to
Section 2.2 hereof.
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<PAGE> 57
"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 l2b-2 promulgated under the
Exchange Act.
"Substantial Part" means more than ten percent (10%) of the total consolidated
assets of the Company as shown on the Company's consolidated balance sheet as of
the end of the most recent fiscal quarter ending prior to the time the
determination is made.
"Tomato Associates" has the meaning set forth in the recitals herein.
"Transaction Agreements" has the meaning set forth in the Reorganization
Agreement.
"Trigger Event" means the earliest of (i) any time that Monsanto's Percentage
Interest is at least fifty-five percent (55%), (ii) the Company elects to
convert borrowings made from Monsanto into Equity Securities and Monsanto's
Percentage Interest is at least fifty percent (50%) after such conversion, or
(iii) the closing of Monsanto's purchase of additional shares of Common Stock
pursuant to the Stock Purchase Agreement.
"Unaffiliated Equity Holders" means holders of Equity Securities other than
Monsanto or any of its Affiliates.
"Voting Stock" means securities having the right to vote generally in any
election of Directors of the Company (other than solely by reason of the
occurrence of an event).
2.2 Requested Registration.
(a) Request for Registration. Holders of Registrable Securities shall have the
right to request (with such requests in writing and stating the number of shares
of Registrable Securities to be disposed of and the intended method of
disposition of shares by such Holders) up to two (2) registrations on Form S-3
(and up to two (2) additional registrations on Form S-3 for each conversion of
outstanding principal or interest into shares of Common Stock upon the
occurrence of an "Event of Default" under the Company Credit Facility or the
Gargiulo Credit Facility (as defined in each such Credit Facility,
respectively)) at the Company's expense and an unlimited number of additional
registrations on Form S-3 at the selling Holder's expense, provided that the
requests for additional registrations are made by Holders of at least ten
percent (10%) of the Registrable Securities, subject only to the following:
(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.
<PAGE> 58
(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.
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<PAGE> 59
(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 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
<PAGE> 60
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
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<PAGE> 61
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 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
<PAGE> 62
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
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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 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
<PAGE> 64
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
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<PAGE> 65
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 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
<PAGE> 66
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
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<PAGE> 67
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 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
<PAGE> 68
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
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<PAGE> 69
(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
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
<PAGE> 70
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.
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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. 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 the Effective Date Percentage or to increase its percentage of
ownership of issued and outstanding Company Securities to the Effective Date
Percentage. 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
<PAGE> 72
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 or the Stock Purchase
Agreement, during the term of this Agreement, Holder shall not directly or
indirectly acquire any Company Securities except as follows:
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(a) On and after March 31, 1996 until September 30, 1998, Holder shall not
increase or further increase its ownership of issued and outstanding Company
Securities above the Effective Date Percentage, 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.
(b) After September 30, 1998, Holder may increase its ownership of Company
Securities through open market purchases or otherwise.
(c) If, at any time after the Effective Date, Holder shall elect to increase
its percentage of ownership of issued and outstanding Company Securities above
the Effective Date Percentage as permitted by paragraph (a) above (such
increased percentage hereafter being the "New Percentage Ownership"), then
thereafter Holder may make such open market purchases of Company Securities as
are necessary to maintain such New Percentage Ownership or to increase its
percentage of ownership of issued and outstanding Company Securities to such New
Percentage Ownership.
(d) Holder shall not be required to dispose of any Company Securities if
Holder's percentage ownership of Company Securities is increased as a result of
any recapitalization by Company or any other action taken by Company.
3.7 Limitations on Holder's Resale of Company Securities. Holder shall not
directly or indirectly sell any Company Securities (other than to an Affiliate
of Holder) except as follows:
(a) On and after March 31, 1997 until September 30, 1998, 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 September 30, 1998, in addition to the rights to sell Company
Securities set forth in paragraph (a) above, Holder may sell Company Securities
(i) in a registered public offering pursuant to the registration rights granted
to Holder under this Agreement, (ii) through sales pursuant to Rule 144 under
the Securities Act, (iii) through sales of not more than ten percent (10%) of
the total issued and outstanding Company Securities to a Non-Financial
Purchaser, or (iv) through sales to a Financial Purchaser.
(c) After September 30, 1999, 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
<PAGE> 74
principal or accrued interest under either of the Credit Facilities after the
occurrence of an Event of Default under either of such Credit Facilities.
ARTICLE 4
COMPANY AND CALGENE CORPORATE GOVERNANCE
4.1 Composition of the Board of Directors and Calgene Board. The number of
Directors comprising both the Board of Directors and the Calgene Board and the
manner of nominating the members thereof shall be as follows:
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(a) The number of Directors comprising the Board of Directors shall initially
be fixed at nine (9) Directors. The parties agree that the manner of nominating,
and the governance provisions relating to, the Board of Directors and the
Calgene Board shall be identical, and that the provisions of this Section 4.1
set forth below and of Sections 4.3(c) and 4.3(d) hereof shall be deemed to
apply equally to the Calgene Board and Calgene Directors. Accordingly, when
applied to the Calgene Board, the term "Director" shall be deemed to mean
"Calgene Director", the term "Company", whether used alone or as a modifier,
shall be deemed to mean "Calgene", and the term "Board of Directors" shall be
deemed to mean "Calgene Board".
(b) Until changed in accordance with this Agreement, the Board of Directors
shall be comprised of nine (9) Directors, and the Company shall nominate for
election as Directors: (i) one (1) Company Management Director, (ii) three (3)
Company Directors, and (iii) five (5) Directors designated by Monsanto, at least
one (1) of which shall be an Independent Director.
(c) [This section intentionally left blank]
(d) At any time that Monsanto's Percentage Interest is at least seventy
percent (70%), (i) the Company shall nominate: (i) six (6) Directors designated
by Monsanto, which shall consist of the one (1) Company Management Director and
five (5) other Monsanto Directors (including at least one (1) Independent
Director) and (ii) three (3) Independent Directors. At such time as Monsanto's
Percentage Interest is at least ninety-nine percent (99%), the Company shall
nominate nine (9) Directors designated by Monsanto.
(e) Notwithstanding anything in the foregoing paragraphs (b) and (d) to the
contrary, (i) at any time Monsanto's Percentage Interest is less than forty
percent (40%) but at least twenty percent (20%), the Company shall nominate
three (3) Directors designated by Monsanto, (ii) at any time Monsanto's
Percentage Interest is less than twenty percent (20%) but at least ten percent
(10%), the Company shall nominate two (2) Directors designated by Monsanto and
(iii) at any time Monsanto's Percentage Interest is less than ten percent (10%)
but at least five percent (5%), the Company shall nominate one (1) Director
designated by Monsanto. If, at any time, Monsanto's Percentage Interest is less
than five percent (5%), the Company shall not be obligated to nominate any
Director designated by Monsanto. At any such time, all other Directors, other
than the Company Management Directors, shall be nominated by the Company.
(f) The Independent Directors to be nominated by the Company from time to time
shall be nominated by action of a majority of Company Directors then in office.
The Company Directors shall consult with the other Independent Directors as to
the nomination of any Company Director, and in the event a majority of the
Company Directors are unable to agree upon any Company Director nominee, then
the majority of all the Independent Directors shall nominate such nominee. In
the event that no Company Directors are in office at the time of any nomination
of a Company Director, such Company Directors shall be nominated by a majority
of the Independent Directors then in office; provided, however, that the holders
of a majority of the outstanding Voting Stock held by Unaffiliated Equity
Holders shall be entitled to nominate and elect Company Directors in lieu of any
individuals so nominated to be such Company Directors by a majority of the
Independent Directors.
(g) The Company and Monsanto, respectively, shall have the right to nominate
any replacement for a Director nominated in accordance with this Section 4.1 by
the Company or Monsanto, respectively, upon the death, resignation, retirement,
disqualification or removal from office for cause of such Director. Such
replacement for any Independent Director shall also be an Independent Director
unless, in the case of a replacement of a Monsanto Director, the Monsanto
Directors include more than the required number of Independent Directors. The
Board of Directors shall elect each person so nominated by Monsanto or the
Company pursuant to this paragraph (g). In addition, the Board of Directors
<PAGE> 76
shall nominate the Company's Chief Executive Officer to replace such officer's
predecessor in office as a Company Management Director.
(h) In the event that the number of Monsanto Directors on the Board of
Directors differs from the number that Monsanto has the right (and wishes) to
designate for nomination pursuant to this Section 4.1, (i) if the number of
Monsanto Directors exceeds such number, Monsanto shall promptly take all
appropriate action to cause to resign that number of Monsanto Directors as is
required to make the remaining number of such Monsanto Directors conform to this
Section 4.1 or (ii) if the number of Monsanto Directors otherwise is less than
such number, the Company shall promptly take all necessary action to create
sufficient vacancies on the
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Board of Directors to permit Monsanto to designate the full number of Monsanto
Directors which it is entitled (and wishes) to nominate pursuant to this Section
4.1 (such action to include seeking the resignation or removal of Directors or,
at the request of Monsanto, calling a special meeting of the stockholders of the
Company for the purpose of removing Directors to create such vacancies to the
extent permitted by applicable law). Upon the creation of any vacancy pursuant
to the preceding sentence, Monsanto shall nominate the person to fill such
vacancy in accordance with this Section 4.1 and the Board of Directors shall
elect each person so nominated. Notwithstanding the foregoing, at each annual
meeting of the stockholders of the Company, the Company shall nominate such
number of Directors as Monsanto is otherwise entitled to designate under this
Section 4.1.
(i) Notwithstanding anything herein to the contrary, no individual who is an
officer, director, employee, agent, partner or principal stockholder of any
competitor of the Company or any of its Affiliates (other than Monsanto and its
Affiliates) or any competitor of Monsanto or any of its Affiliates (other than
the Company) shall serve as a Director without the unanimous consent of the
Board of Directors.
(j) In the event that Monsanto desires to remove any Monsanto Director with or
without cause and Monsanto is unable to procure the resignation of such Monsanto
Director, then, upon the request of Monsanto, the Board of Directors shall
promptly call a special meeting of stockholders of the Corporation for purposes
of removing such Monsanto Director. In the event that the Company desires to
remove any Company Director with or without cause and the Company is unable to
procure the resignation of such Company Director, then, upon the request of a
majority of all of the Independent Directors then in office, the Board of
Directors shall promptly call a special meeting of stockholders of the Company
for purposes of removing such Company Director. In the event that the Chief
Executive Officer's employment with the Company is terminated for any reason,
then upon the request of either Monsanto or a majority of all of the Independent
Directors then in office, the Board of Directors shall promptly call a special
meeting of stockholders of the Corporation for the purpose of removing such
person as a Company Management Director.
(k) Notwithstanding anything to the contrary herein, the Board of Directors,
by unanimous action of all members of the Board of Directors, may increase the
number of directors comprising the Board of Directors and may elect, or nominate
for election, the director(s) to fill the vacancy or vacancies created by such
increase.
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
<PAGE> 78
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.
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(c) Monsanto agrees that it will, and will cause any of its Subsidiaries
(other than the Company and its Subsidiaries) to, take all action as a
stockholder of the Company or as is otherwise reasonably within its control, as
necessary to effect the provisions of this Agreement, including, without
limitation, voting all shares of Voting Stock in favor of all persons nominated
in accordance with Section 4.1 hereof; provided, however, that, if Monsanto
cannot so take actions to give effect to all of the provisions of this
Agreement, it may first take actions to ensure that it receives all of its
benefits hereunder and then, to the extent possible, to give effect to the
provisions in favor of the Company.
4.3 Committees.
(a) The Board of Directors shall establish, empower and maintain the
committees of the Board of Directors contemplated by this Section 4.3.
(b) The following committees shall be established, empowered and maintained by
the Board of Directors at all times during the term of this Agreement:
(i) an Audit Committee, consisting of at least three (3) of the Company's
Independent Directors, which committee shall be authorized and empowered to
cause an audit to be performed of the Company and each of its Subsidiaries;
(ii) [This section intentionally left blank]
(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") and (c) the policies, limitations and procedures under
which the Stock Option Plan Administration Committee shall operate; 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, if applicable.
(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 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
<PAGE> 80
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)
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<PAGE> 81
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 (the "Monsanto Disclosure Letter");
(iii) any dividend by or return of capital by the Company or Gargiulo (other
than such distributions by Gargiulo to the Company as are necessary for the
Company to timely perform its obligations under Sections 1.02 and 5.02(c) of
the Gargiulo Credit Facility);
(iv) any incurrence or assumption, in the aggregate, by the Company, any of
its Affiliates or any combination thereof, of any indebtedness for borrowed
money at any time outstanding exceeding in the aggregate (determined on a
consolidated basis) the greater of (i) fifteen million dollars ($15,000,000),
increasing by five million dollars ($5,000,000) on each July 1 commencing July
1, 1996, plus amounts secured by inventory and/or receivables for seasonal
working capital lines and indebtedness incurred to acquire property, plant or
equipment and secured by the acquired asset, minus amounts outstanding under
the Company Credit Facility, or (ii) the amounts set forth in the Company's
Operating Plan (hereinafter defined), provided that loans under the Gargiulo
Credit Facility shall not be counted in this limitation;
(v) the repurchase or redemption of any Equity Securities of the Company,
other than from employees upon termination of employment or service;
(vi) the establishment of any new committees of the Board (or the Calgene
Board) or new or revised delegation(s) of Board (or the Calgene Board)
authority to any Board (or Calgene Board) committee or changes or revisions to
general delegations of authority to officers or other Persons for categories
of expenditures;
(vii) the adoption of or amendment to any benefit or incentive plans of the
Company or any of its Affiliates which would increase the annual cost thereof
by more than fifteen percent (15%) from the prior fiscal year or any adoption
of, or amendment to, any stock option plan;
(viii) the election, appointment or removal of the Chief Executive Officer,
Chief Operating Officer or Chief Financial Officer of the Company and Calgene
and their successors and the establishment of their annual or long term
compensation level and benefits and basis for awards (other than agreements in
effect on the Effective Date); provided, however, that Monsanto shall have the
right to select the Chief Technical Officer of the Company and a controller
reporting to the Chief Financial Officer of the Company;
(ix) approval of the annual operating plan ("Operating Plan") and long-term
strategic plan ("Strategic Plan") of the Company and its Affiliates, as well
as the annual operating plan and long-term strategic plan for the Gargiulo
Business, to be submitted to the Board annually for approval, and any material
changes thereto;
<PAGE> 82
(x) any transaction between the Company (and its Affiliates), on the one
hand, and its (their) directors, officers or employees, on the other hand,
which is not in the normal course of business;
(xi) any modification of the Transaction Agreements;
(xii) any amendment of the by-laws or certificate of incorporation of the
Company, Calgene or Tomato Associates by the respective Boards of Directors
thereof;
(xiii) the issuance of any warrants for the purchase of Equity Securities or
the issuance of additional Equity Securities (other than warrants for the
purchase of Equity Securities) in excess of four million
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(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) [This section intentionally left blank]
(xvii) any press release which mentions or directly or indirectly refers to
Monsanto, except as required by law and where Board approval cannot be
obtained in a timely manner;
(xviii) the initiation, settlement or termination of any suit or proceeding
concerning intellectual property, any other matter which could have an adverse
public affairs effect upon Monsanto or the filing of any insolvency or
bankruptcy proceeding by or on behalf of the Company or any of its Affiliates;
or
(xix) the removal or election of the directors of Gargiulo.
(b) After a Trigger Event and until the earlier of (i) March 31, 1999 or (ii)
Monsanto's Percentage Interest is at least seventy percent (70%), a majority of
the Board, including at least two (2) Company Directors, shall be required to
approve any of the following:
(i) the matters set forth in subsections (i), (ii), (vi), (viii), (ix)
and (xi) of paragraph (a) above; or
(ii) any transaction between the Company (and its Affiliates) and
Monsanto or any Affiliate of Monsanto.
(c) From and after the occurrence of both (i) a Trigger Event and (ii) March
31, 1999, and until Monsanto's Percentage Interest is at least ninety-nine
percent (99%), neither Monsanto nor any of its Affiliates shall enter into any
transaction with the Company or any of its Affiliates without the approval of at
least two (2) Company Directors.
4.5 Enforcement of this Agreement. The Independent Directors, acting by
unanimous consent, shall have full and complete authority on behalf of the
Company to enforce the terms of this Agreement.
4.6 Certificate of Incorporation and By-laws. The Company and Monsanto shall
take or cause to be taken all lawful action necessary to ensure at all times
that the Company's and Calgene's Certificate of Incorporation and By-laws are
not at any time inconsistent with the provisions of this Agreement. Not later
than the Effective Date, the Board of Directors shall amend the Company's By-
laws and the Calgene Board shall amend Calgene's By-laws to reflect the
provisions of this Agreement.
4.7 Advisors. The Independent Directors shall be entitled to retain, at the
cost and expense of the Company, the services of an investment banking firm of
national reputation of their choice and one (1) law firm of their choice to
advise them in their capacity as Independent Directors with respect to any
matter on which the Independent Directors are required or permitted to act
hereunder.
<PAGE> 84
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.
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ARTICLE 5
GOVERNANCE OF GARGIULO
[This Article intentionally left blank.]
ARTICLE 6
MISCELLANEOUS
6.1 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Delaware (exclusive of such state's choice of laws rules).
6.2 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto.
6.3 Entire Agreement; Amendment. The Company and Monsanto hereby agree that,
as of the date of this Agreement: (i) the Prior Stockholders Agreement is hereby
amended in its entirety by this Agreement, (ii) the provisions of the Prior
Stockholders Agreement shall no longer be of any force or effect, (iii) the
Company and Monsanto shall be bound by the terms of this Agreement, and (iv)
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. Any provision of this Agreement may be amended or waived if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company and Monsanto, or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that no such amendment or
waiver shall be effective without the approval of all of the Independent
Directors.
6.4 Notices. Any notice required or permitted to be given under this Agreement
shall be in writing, and shall be deemed sufficiently given when delivered in
person or transmitted by telegram or telecopier (confirmed by mail), addressed
as follows:
If to Monsanto: Monsanto Company 800 North Lindbergh
Boulevard St. Louis, Missouri 63167
Attention: Assistant Secretary
Telecopy Number: 314-694-2574
If to any other Holder, at such address and telecopy number as such Holder
shall have furnished the Company in writing.
If to Company: Calgene, Inc.1920 Fifth Street
Davis, California 95616Attention:
Chairman and Chief Executive
OfficerTelecopy 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.
19
<PAGE> 86
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 and the Stock Purchase Agreement shall
bear the following legend:
"The securities represented by this certificate are subject to certain
resale restrictions and entitled to the benefits set forth in a Stockholders
Agreement dated March 31, 1996, as amended and restated on November , 1996,
between Calgene, Inc., a Delaware corporation (formerly known as Calgene II,
Inc.), and Monsanto Company, a Delaware corporation (the "Agreement") . A copy
of the Agreement and all amendments thereto are on file in the office of the
Secretary of the Company."
6.9 [This section intentionally left blank.]
6.10 Audits Consultants and Inspections. Monsanto (using Monsanto's internal
and/or external auditors or any other Person appointed by Monsanto to whom the
Company does not reasonably object) shall have the right (i) to audit the books
and records, other financial information and business practices and operations
of the Company and its Affiliates, and (ii) to discuss the business practices
and operations, affairs, finances and accounts of the Company and its Affiliates
with the officers of the Company and its Affiliates and the independent public
accountants who review or audit the Company's financial statements, all at such
reasonable times and as often as may reasonably be requested. The Company shall
also permit inspection of its (and its Affiliates') properties, books and
records by Monsanto (using the Persons identified above) during normal business
hours or at other reasonable times. The scope of all such audits, discussions
and inspections shall be determined by Monsanto in its sole discretion. Any
authorized representative of Monsanto 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
<PAGE> 87
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.
20
<PAGE> 88
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, Inc.
By: _________________________________
Lloyd M. Kunimoto
President
Monsanto Company
By: _________________________________
Hendrik A. Verfaillie
Executive Vice President
21
<PAGE> 89
EXHIBIT B
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
CALGENE, INC.
PURSUANT TO SECTION 242
OF THE CORPORATION LAW
OF THE STATE OF DELAWARE
Calgene, Inc. (the "Corporation"), a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, does
hereby certify as follows:
At a meeting of the Board of Directors of the Corporation held on September
20, 1996, a resolution was duly adopted, pursuant to Section 242 of the General
Corporation Law of the State of Delaware, setting forth an amendment to the
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said proposed
amendment in accordance with Sections 211 and 222 of the General Corporation Law
of the State of Delaware at a meeting of stockholders on November 12, 1996. The
resolution authorizing the amendment is as follows:
RESOLVED: That Article FIFTH of the Certificate of Incorporation of the
Corporation be and hereby is amended as follows:
1. Section A of Article FIFTH shall be amended as follows:
(a) The following definitions shall be deleted: "Gargiulo, G.P." and
"Gargiulo, L.P."
(b) The definition of "Gargiulo" shall be amended to read in its
entirety as follows:
" `Gargiulo' means Gargiulo, Inc. formerly known as Tomato
Investment Associates, Inc."
(c) The definition of "Governance Agreement" shall be amended and restated
to read in its entirety as follows:
" `Governance Agreement' means the Amended and Restated Stockholders
Agreement dated as of November , 1996 by and between the Corporation and
Monsanto."
(d) The following sentence shall be added at the end of the
definition of "Independent Director":
"Without limiting the foregoing, Roger H. Salquist shall qualify as an
Independent Director so long as he continues to qualify under clauses (iv)
and (v) of such definition. Roger H. Salquist shall not fail to qualify
under clause (iv) above as a result of his Change of Control Employment
Agreement dated July 19, 1995, as modified, or Consulting Agreement dated
September 16, 1996 with the Corporation. Any of the above restrictions may
be waived by unanimous action of the Board of Directors."
(e) The following definition shall be added:
" `Stock Purchase Agreement' means the Stock Purchase Agreement dated as
of September 27, 1996 between the Corporation and Monsanto."
<PAGE> 90
(f) The definition of "Trigger Event" shall be amended and restated to
read in its entirety as follows:
" `Trigger Event' means the earliest of (i) any time that Monsanto's
Percentage Interest is at least fifty-five percent (55%), (ii) the
Corporation elects to convert borrowings made from Monsanto into Equity
Securities and Monsanto's Percentage Interest is at least fifty percent
(50%) after such conversion, or (iii) the closing of Monsanto's purchase
of additional shares of Common Stock pursuant to the Stock Purchase
Agreement."
1
<PAGE> 91
(g) The definition of "Registrable Securities" shall be amended and
restated to read in its entirety as follows:
" `Registrable Securities' means shares of Common Stock issued or issuable
to Monsanto pursuant to the Transaction Agreements and the Prior
Stockholders Agreement (as defined in the Governance Agreement) and the
Stock Purchase Agreement whether owned by Monsanto or a permitted
transferee of Monsanto and all such other securities of the Corporation
acquired by Monsanto or any Affiliate of Monsanto in accordance herewith."
2. Section C of Article FIFTH shall be amended and restated to read in
its entirety as follows:
"C. THE BOARD OF DIRECTORS; COMMITTEES
During the term of the Governance Agreement (i) the number of directors and
the manner of nominating and removing members thereof shall be set forth in
Section C(1), below, and (ii) the Board of Directors shall establish, empower,
and maintain committees as set forth in Section C(2), below.
1. Board of Directors. The number of Directors and manner of nominating
Directors shall be as follows:
(a) The number of Directors comprising the Board of Directors shall
initially be fixed at nine (9) Directors.
(b) Until changed in accordance with the Governance Agreement, the Board
of Directors shall be comprised of nine (9) Directors, and the Corporation
shall nominate for election as Directors: (i) one (1) Corporation Management
Director, (ii) three (3) Corporation Directors, and (iii) five (5) Directors
designed by Monsanto, at least one (1) of which shall be an Independent
Director.
(c) [This section intentionally left blank]
(d) At any time that Monsanto's Percentage Interest is at least seventy
percent (70%), (i) the Corporation shall nominate: (i) six (6) Directors
designated by Monsanto, which shall consist of the one (1) Corporation
Management Director and five (5) other Monsanto Directors (including at
least one (1) Independent Director) and (ii) three (3) Independent
Directors. At such time as Monsanto's Percentage Interest is at least
ninety-nine percent (99%), the Corporation shall nominate nine (9) Directors
designated by Monsanto.
(e) Notwithstanding anything in the foregoing paragraphs (b) and (d) to
the contrary, (i) at any time Monsanto's Percentage Interest is less than
forty percent (40%) but at least twenty percent (20%), the Corporation shall
nominate three (3) Directors designated by Monsanto, (ii) at any time
Monsanto's Percentage Interest is less than twenty percent (20%) but at
least ten percent (10%), the Corporation shall nominate two (2) Directors
designated by Monsanto and (iii) at any time Monsanto's Percentage Interest
is less than ten percent (10%) but at least five percent (5%), the
Corporation shall nominate one (1) Director designated by Monsanto. If, at
any time, Monsanto's Percentage Interest is less than five percent (5%), the
Corporation shall not be obligated to nominate any Director designated by
Monsanto. At any such time, all other Directors, other than the Corporation
Management Directors, shall be nominated by the Corporation.
(f) The Independent Directors to be nominated by the Corporation from time
to time shall be nominated by action of a majority of Corporation Directors
then in office. The Corporation Directors shall consult with the other
Independent Directors as to the nomination of any Corporation Director, and
in the event a majority of the Corporation Directors are
<PAGE> 92
unable to agree upon any Corporation Director nominee, then the majority of
all the Independent Directors shall nominate such nominee. In the event that
no Corporation Directors are in office at the time of any nomination of a
Corporation Director, such Corporation Directors shall be nominated by a
majority of the Independent Directors then in office; provided, however,
that the holders of a majority of the outstanding Voting Stock held by
Unaffiliated Equity Holders shall be entitled to nominate and elect
Corporation Directors in lieu of any individuals so nominated to be such
Corporation Directors by a majority of the Independent Directors.
2
<PAGE> 93
(g) The Corporation and Monsanto, respectively, shall have the right to
nominate any replacement for a Director nominated in accordance with this
Section C(1) by the Corporation or Monsanto, respectively, upon the death,
resignation, retirement, disqualification or removal from office for cause
of such Director. Such replacement for any Independent Director shall also
be an Independent Director unless, in the case of a replacement of a
Monsanto Director, the Monsanto Directors include more than the required
number of Independent Directors. The Board of Directors shall elect each
person so nominated by Monsanto or the Corporation pursuant to this
paragraph (g). In addition, the Board of Directors shall nominate the
Corporation's Chief Executive Officer to replace such officer's predecessor
in office as a Corporation Management Director.
(h) In the event that the number of Monsanto Directors on the Board of
Directors differs from the number that Monsanto has the right (and wishes)
to designate for nomination pursuant to this Section C(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 C(1) or (ii) if the number of Monsanto Directors otherwise
is less than such number, the Corporation shall promptly take all necessary
action to create sufficient vacancies on the Board of Directors to permit
Monsanto to designate the full number of Monsanto Directors which it is
entitled (and wishes) to nominate pursuant to this Section C(1) (such action
to include seeking the resignation or removal of Directors or, at the
request of Monsanto, calling a special meeting of the stockholders of the
Corporation for the purpose of removing Directors to create such vacancies
to the extent permitted by applicable law). Upon the creation of any vacancy
pursuant to the preceding sentence, Monsanto shall nominate the person to
fill such vacancy in accordance with this Section C(1) and the Board of
Directors shall elect each person so nominated. Notwithstanding the
foregoing, at each annual meeting of the stockholders of the Corporation,
the Corporation shall nominate such number of Directors as Monsanto is
otherwise entitled to designate under this Section C(1).
(i) Notwithstanding anything herein to the contrary, no individual who is
an officer, director, employee, agent, partner or principal stockholder of
any competitor of the Corporation or any of its Affiliates (other than
Monsanto and its Affiliates) or any competitor of Monsanto or any of its
Affiliates (other than the Corporation) shall serve as a Director without
the unanimous consent of the Board of Directors.
(j) In the event that Monsanto desires to remove any Monsanto Director
with or without cause and Monsanto is unable to procure the resignation of
such Monsanto Director, then, upon the request of Monsanto, the Board of
Directors shall promptly call a special meeting of stockholders of the
Corporation for purposes of removing such Monsanto Director. In the event
that the Corporation desires to remove any Corporation Director with or
without cause and the Corporation is unable to procure the resignation of
such Corporation Director, then, upon the request of a majority of all of
the Independent Directors then in office, the Board of Directors shall
promptly call a special meeting of stockholders of the Corporation for
purposes of removing such Corporation Director. In the event that the Chief
Executive Officer's employment with the Corporation is terminated for any
reason, then upon the request of either Monsanto or a majority of all of the
Independent Directors then in office, the Board of Directors shall promptly
call a special meeting of stockholders of the Corporation for the purpose of
removing such person as a Corporation Management Director.
(k) Notwithstanding anything to the contrary herein, the Board of
<PAGE> 94
Directors, by unanimous action of all members of the Board of Directors, may
increase the number of directors comprising the Board of Directors and may
elect, or nominate for election, the director(s) to fill the vacancy or
vacancies created by such increase.
2. Committees.
(a) The Board of Directors shall establish, empower and maintain the
committees of the Board of Directors contemplated by this Section C(2).
3
<PAGE> 95
(b) The following committees shall be established, empowered and maintained by
the Board of Directors at all times during the term of the Governance Agreement:
(i) an Audit Committee, consisting of at least three (3) of the
Corporation's Independent Directors, which committee shall be authorized and
empowered to cause an audit to be performed of the Corporation and each of its
Subsidiaries;
(ii) [This section intentionally left blank]
(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 Corporation as "officers" for purposes of Section 16 of the Exchange
Act ("Section 16 Officers"), and (c) the policies, limitations and procedures
under which the Stock Option Plan Administration Committee shall operate; 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 D(a)(vi) below, if applicable.
(c) Except as otherwise provided in Section C(2)(b) above 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 C(2)(b) above, 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 Corporation's By-laws or
taken at a meeting for which adequate notice has been duly given or waived by
the members of such committee. Such notice shall include a description of the
general nature of the business to be transacted at the meeting, and no other
business may be transacted at such meeting unless all members of the committee
are present and consent to the consideration of such other business. Any
committee member unable to participate in person at any meeting shall be given
the opportunity to participate by telephone. The Board of Directors or the
remaining committee members shall designate an Independent Director or
Corporation Management Director to replace any absent or disqualified
Independent Director member or Corporation 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 C(2) shall
establish such other rules and procedures for its operation and governance
(consistent with the terms of the Governance Agreement) as it shall see fit and
may seek such consultation and advice as to matters within its purview as it
shall require."
3. Section D of Article FIFTH shall be amended and restated to read in its
entirety as follows:
"D. APPROVAL REQUIRED FOR CERTAIN ACTIONS
(a) 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) Corporation Director and one (1) Monsanto Management
Director, shall be required to approve any of the following:
(i) the entry by the Corporation or any of its Affiliates into any merger
<PAGE> 96
or consolidation or the acquisition by the Corporation or any of its
Affiliates of any business or assets that would constitute a Substantial Part
of the Corporation (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 Corporation (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 Monsanto Disclosure Letter;
4
<PAGE> 97
(iii) any dividend by or return of capital by the Corporation or Gargiulo
(other than such distributions by Gargiulo to the Corporation as are necessary
for the Corporation 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 Corporation, 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 Corporation Credit Facility, or (ii) the amounts set forth in the
Corporation's Operating Plan, 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
Corporation, other than from employees upon termination of employment or
service;
(vi) the establishment of any new committees of the Board or new or revised
delegation(s) of Board authority to any 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
Corporation 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 Corporation 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 Corporation
and a controller reporting to the Chief Financial Officer of the Corporation;
(ix) approval of the annual operating plan ("Operating Plan") and long-term
strategic plan ("Strategic Plan") of the Corporation 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 Corporation (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
Corporation, Calgene or Gargiulo by the respective Boards of Directors
thereof;
(xiii) the issuance of any warrants for the purchase of Equity Securities or
the issuance of additional Equity Securities (other than warrants for the
purchase of Equity Securities) in excess of four million (4,000,000) shares of
Common Stock in any two (2) year period to a third party, other than pursuant
to plans referred to in subsection (vii) above;
(xiv) the sale or licensing by the Corporation or any of its Affiliates of
(A) any intangible property set forth in Exhibit B attached to the
<PAGE> 98
Monsanto Disclosure Letter 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 Corporation 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) [This section intentionally left blank]
(xvii) any press release which mentions or directly or indirectly refers to
Monsanto, except as required by law and where Board approval cannot be
obtained in a timely manner;
5
<PAGE> 99
(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 Corporation or any of its
Affiliates; or
(xix) the removal or election of the directors of Gargiulo.
(b) After a Trigger Event and until March 31, 1999 or Monsanto's Percentage
Interest is at least seventy percent (70%), a majority of the Board, including
at least two (2) Corporation Directors, shall be required to approve any of the
following:
(i) the matters set forth in subsections (i), (ii), (vi), (viii), (ix)
and (xi) of paragraph (a) above; or
(ii) any transaction between the Corporation (and its Affiliates) and
Monsanto or any Affiliate of Monsanto.
(c) From and after the occurrence of both (i) a Trigger Event and (ii) March
31, 1999 and until Monsanto's Percentage Interest is at least ninety-nine
percent (99%), neither Monsanto nor any of its Affiliates shall enter into any
transaction with the Corporation or any of its Affiliates without the approval
of at least two (2) Corporation Directors."
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be signed by
its President on this day of November, 1996.
Calgene, Inc.
BY: _________________________________
LLOYD M. KUNIMOTO
PRESIDENT
6
<PAGE> 1
LOGO
April 7, 1997
To Our Stockholders:
I am pleased to inform you that on March 31, 1997, Calgene, Inc. entered
into an Agreement and Plan of Merger with Monsanto Company and Monsanto
Acquisition Company, Inc., a wholly owned subsidiary of Monsanto. Under the
Agreement, Monsanto Acquisition Company, Inc. has commenced a cash tender offer
to purchase all of the outstanding shares of Calgene Common Stock for $8.00 per
share. The Offer will be followed by a Merger in which any remaining shares of
Calgene Common Stock will be converted into the right to receive $8.00 per share
in cash, without interest.
YOUR BOARD OF DIRECTORS BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT AND
VOTING (WITH ALL DIRECTORS WHO ARE EMPLOYEES OF MONSANTO ABSTAINING), BASED
UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION AND APPROVAL OF A SPECIAL
COMMITTEE OF THE DIRECTORS OF THE COMPANY WHO ARE NOT MONSANTO DESIGNEES OR
COMPANY OFFICERS, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND
IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY (OTHER THAN MONSANTO),
HAS APPROVED THE OFFER AND THE MERGER, AND RECOMMENDS THAT COMPANY STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at their recommendations, the Board of Directors and the
Special Committee gave careful consideration to a number of factors, which are
described in the attached Schedule 14D-9 that Calgene has filed today with the
Securities and Exchange Commission. These factors include, among other things,
the opinion of Montgomery Securities, the financial advisor to the Special
Committee, that the consideration to be received by holders of the Company's
common stock (other than Monsanto and its affiliates) pursuant to the Agreement
was fair to such stockholders from a financial point of view, as of the date of
such opinion. A copy of the opinion is set forth in the Schedule 14D-9 and
should be read carefully and in its entirety for a description of the procedures
followed, the factors considered and the assumptions made by Montgomery
Securities.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated April 7, 1997, of Monsanto Acquisition
Company, Inc., together with related materials to be used for tendering your
shares. These documents set forth the terms and conditions of the Offer and the
Merger and provide instructions as to how to tender your shares. I urge you to
read the enclosed materials carefully.
Sincerely,
LOGO
Lloyd M. Kunimoto
President and Acting Chief Executive
Officer
<PAGE> 1
MONSANTO AGREES TO ACQUIRE
REMAINING SHARES OF CALGENE
FOR $8 PER SHARE
ST. LOUIS, April 1, 1997 -- Monsanto Company. announced today that it had
entered into a definitive agreement with Calgene Inc. to acquire the remaining
shares of Calgene that Monsanto doesn't already own for $8 per share in cash, or
approximately $240 million. The agreement was unanimously approved by a special
committee composed of Calgene's directors who are neither designees of Monsanto
nor Calgene employees.
The agreement provides that Monsanto will commence a tender offer by April
7, 1997. The tender offer will be conditioned upon the tender of a majority of
the outstanding Calgene shares not owned by Monsanto and other customary
conditions. Following the completion of the tender offer, Monsanto would acquire
the remaining Calgene shares in a second-step merger at the same cash price per
share.
<PAGE> 2
Monsanto currently owns 36.4 million shares of Calgene common stock, or
approximately 54.6 percent of the outstanding Calgene shares.
"This will promote the closer working relationships and the greater sharing
of technologies that are only possible with full ownership of the company," said
Monsanto Executive Vice President Hendrik A. Verfaillie. "We can now better
realize the benefits from Calgene's research by combining our technology efforts
and bringing products to market more rapidly."
"We're extremely pleased to be joining forces with Monsanto," said Lloyd M.
Kumimoto, president of Calgene. "Calgene has built a robust pipeline of products
and technologies that can be aggressively commercialized through Monsanto's
network of operating companies, affiliates and strategic partners."
Monsanto first invested in Calgene in March 1996 by acquiring a 49.9
percent equity stake. In November 1996, Monsanto purchased an additional 6.25
million shares to raise its equity ownership to 54.6 percent of the shares
outstanding. In January 1997, the company made a proposal to the board of
directors of Calgene to acquire the remaining shares outstanding at the price of
$7.25 per share. This proposal was subject to the approval of a Calgene special
committee.
Monsanto also announced that it and Calgene have entered into an agreement
in principle to settle putative class actions, which were filed in the
<PAGE> 3
Delaware Chancery Court following the announcement of Monsanto's initial
acquisition proposal. The lawsuits had challenged the fairness to Calgene's
shareowners of the transaction as initially proposed. The agreement is subject
to the negotiation of a definitive settlement agreement.
Calgene has done significant research in oils, fresh produce and cotton.
Calgene's oil products include Laurical laurate canola and other canola oil
products that have applications in low-fat foods, pharmaceuticals, nutritional
supplements, confectionery products, margarine and shortening, personal care
products, lubricants and soaps and detergents. Other products under development
include fresh tomatoes and strawberries with improved flavor and shelf-life,
naturally colored cotton fibers, and BXN herbicide-tolerant and Bollgard
insect-protected cotton.
"We see a number of connections between Monsanto and Calgene's research and
believe our combined strengths will help us accelerate the introduction of these
products," Verfaillie added. "Calgene's oils research will be particularly
valuable to us as we explore new applications for improved oils in Monsanto's
food ingredients and pharmaceutical businesses."
Monsanto is a global leader in agricultural biotechnology and in the
development and marketing of improved food and fiber crops. Monsanto is in the
process of creating a new life sciences company that will combine its existing
<PAGE> 4
agricultural, food and pharmaceutical businesses and seek to develop new
businesses that capture synergies among these fields.
Calgene is an agricultural biotechnology company based in Davis,
California. Stoneville Pedigreed Seed Company and N.T. Gargiulo, a produce
company, are subsidiaries of Calgene.
<PAGE> 1
Exhibit 17
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
HANNA OBSTFELD,
C.A. NO. 15487NC
Plaintiff, CLASS ACTION
-against- COMPLAINT
ROGER H. SALQUIST, HOWARD D. PALEFSKY,
ALLEN J. VANGELOS, LLOYD M. KUNIMOTO,
ROBERT FRALEY, JOHN E. ROBSON, HENDRIK A.
VERFAILLIE, PATRICK J. FORTUNE, MICHAEL R.
HOGAN, MONSANTO COMPANY and CALGENE, INC.,
Defendants.
Plaintiff, by and through her attorneys, alleges as
follows:
1. Plaintiff brings this action as a class action on
behalf of herself and all other stockholders of Calgene, Inc.
("Calgene" or the "Company") who are similarly situated,
against the directors of Calgene and the controlling share-
holder of Calgene, Monsanto Company ("Monsanto") to enjoin cer-
tain actions of the defendants related to the offer to acquire
the remaining outstanding shares of Calgene stock (the "Pur-
chase") by Monsanto.
THE PARTIES
2. Plaintiff is the owner of Calgene common stock
and has owned such stock at all times material hereto.
<PAGE> 2
3. (a) Defendant Calgene is a corporation organized
and existing under the laws of the State of Delaware and is
engaged in the development of genetically engineered plants and
plant products for seed, food and oleochemical industries. Its
principal executive offices are located at 1920 Fifth Street,
Davis, CA 95616. Calgene has approximately 60 million shares
of common stock outstanding which shares are traded on the
NASDAQ National Market System ("NASDAQ") under the symbol
"CGNE" and of which approximately 54.6% are held by Monsanto.
(b) Defendant Monsanto is a St. Louis based, diverse
company with subsidiaries which make and sell a diversified
line of agricultural products. In mid 1996 it brought its
holdings of Calgene up to 54.6%. Pursuant to the Stock Pur-
chase Agreement (defined below), by late 1996, Monsanto was
able to use its voting control of Calgene to place five
Monsanto officers or directors on Calgene's nine-member board
of directors -- Patrick J. Fortune ("Fortune"), Chief Informa-
tion Officer of Monsanto, Michael R. Hogan ("Hogan"), vice
president and corporate controller of Monsanto, Robert J.
Fraley ("Fraley"), President of Calgene, a business unit of
Monsanto, John E. Robson ("Robson"), a director of Monsanto and
Hendrik A. Verfaillie ("Verfaillie"), Executive Vice President
of Monsanto. Consequently, as a result of its current stock
ownership and its board nominees, Monsanto controls Calgene and
its Board of Directors.
- 2 -
<PAGE> 3
(c) Defendant Lloyd M. Kunimoto ("Kunimoto") is and
was at all relevant times hereto President and acting Chief
Executive Officer and a director of the Company.
(d) Defendants Howard D. Palefsky ("Palefsky"),
Roger H. Salquist ("Salquist") and Allen J. Vangelos
("Vangelos") are and were at all relevant times hereto direc-
tors of the Company. Salquist is also the Company's former
Chief Executive Officer and Chairman.
4. The foregoing individual defendants (collectively
referred to herein as the "Individual Defendants") are in a
fiduciary relationship with plaintiff and the public stockhold-
ers of Calgene, and owe plaintiff and the other Calgene public
stockholders the highest obligations of good faith, fair deal-
ing, due care, loyalty and full and candid disclosure.
5. Each of the Individual Defendants owes his posi-
tion as director of Calgene, and the resulting benefits there-
from, to Monsanto, the controlling shareholder of Calgene, and
as such cannot exercise the independent judgment required as a
director of Calgene.
6. As controlling shareholder of Calgene, Monsanto
is in a fiduciary relationship with plaintiff and the other
public stockholders of the Company, and owes to plaintiff and
the other members of the Class the highest obligations of good
faith and fair dealing.
- 3 -
<PAGE> 4
CLASS ACTION ALLEGATIONS
7. Plaintiff brings this action for declaratory,
injunctive and other relief on their own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chan-
cery on behalf of all common stockholders of Calgene (except
defendants herein and any person, firm, trust, corporation or
other entity related to or affiliated with any of the defen-
dants) or their successors in interests, who are being deprived
of the opportunity to maximize the value of their Calgene
shares by the wrongful acts of the defendants as described
herein.
8. This action is properly maintainable as a class
action for the following reasons:
(a) The class of stockholders for whose benefit this
action is brought is so numerous that joinder of all Class mem-
bers is impracticable. There are more than 3,000 stockholders
of record, holding over 30 million shares of Calgene common
stock. Members of the Class are scattered throughout the
United States.
(b) There are questions of law and fact which are
common to members of the Class and which predominate over all
questions affecting only individual members, including whether
the defendants have breached the fiduciary duties owed by them
to plaintiff and members of the Class by reason of the acts
described herein.
- 4 -
<PAGE> 5
(c) The claims of plaintiff are typical of the
claims of the other members of the Class and plaintiff has no
interests that are adverse or antagonistic to the interests of
the Class.
(d) Plaintiff is committed to the vigorous prosecu-
tion of this action and has retained competent counsel experi-
enced in litigation of this nature. Accordingly, plaintiff is
an adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
(e) The prosecution of separate actions by indi-
vidual members of the Class would create a risk of inconsistent
or varying adjudications with respect to individual members of
the Class and establish incompatible standards of conduct for
the party opposing the Class.
(f) Defendants have acted and are about to act on
grounds generally applicable to the Class, thereby making ap-
propriate final injunctive relief with respect to the Class as
a whole.
FACTUAL BACKGROUND
9. On September 27, 1996, the Company entered into a
stock purchase agreement (the "Stock Purchase Agreement") with
Monsanto, pursuant to which the Company agreed to increase Mon-
santo's ownership of the Company from 49.9% to approximately
54.6% (without giving effect to the exercise of outstanding
- 5 -
<PAGE> 6
options and warrants) for an aggregate purchase price of $50
million, among other things.
10. Consummation of the Stock Purchase Agreement by
Monsanto was conditioned upon, inter alia, the election of five
(out of nine, or a majority) of Monsanto designated directors
to the Company's board.
11. The Stock Purchase Agreement was only required
to be approved by, and was approved by, holders of a majority
of the shares of Calgene common stock present or represented at
the Annual Meeting, which was held in November 1996. It was
not required to be approved by a majority of the minority
stockholders.
12. The Stock Purchase Agreement further required
that if Monsanto tenders or seeks to acquire more than 70% of
Calgene's outstanding shares, the price at which the purchase
will occur must be approved by the disinterested directors of
the board and supported by a fairness opinion by an investment
banking firm.
13. On January 28, 1996, Calgene announced it had
received an unsolicited proposal from Monsanto to acquire all
of the outstanding Calgene shares it doesn't already own, for
$7.50 a share (the "Offer").
14. Calgene has indicated that it will form a spe-
cial committee of the board, which will hire independent coun-
sel, The Venture Law Group, and an investment advisor, Montgom-
ery Securities, to consider the Offer.
- 6 -
<PAGE> 7
15. However, because of Monsanto's ownership of more
than 54% of the Company, and its control of the board, no inde-
pendent group of directors exists nor can any independent in-
vestment advisor be chosen who could properly consider the
Offer. Moreover, no fair, arms-length market check to deter-
mine the fair value of Calgene's publicly held shares can be
conducted.
16. Moreover, defendants, through their actions,
have capped the price for which the remaining publicly held
shares of Calgene could ever be acquired without taking ad-
equate steps to determine the fair value of such shares. Fur-
thermore, contrary to the practices often followed in similar
transactions, Calgene has failed to condition the Offer upon
its acceptance by a majority of unaffiliated shares.
17. Monsanto is seeking to acquire Calgene at a
price which does not reflect its fair value.
18. As a result of the foregoing, Monsanto, the con-
trolling shareholder of Calgene, and the Individual Defendants
have breached their fiduciary obligations to the Class.
19. Plaintiff and other Class members are immedi-
ately threatened by the acts and transactions complained of
herein which have caused and will cause irreparable injury to
them.
20. Plaintiff and the Class have no adequate remedy
at law.
- 7 -
<PAGE> 8
WHEREFORE, plaintiff demands judgment and preliminary
and permanent relief, including injunctive relief, in her favor
and in favor of the Class and against defendants as follows:
A. Declaring that this action is properly maintain-
able as a class action, and certifying plaintiff as class rep-
resentative;
B. Declaring that defendants and each of them have
committed a gross abuse of trust and have breached their fidu-
ciary duties to plaintiff and the other members of the Class;
C. Granting injunctive relief with respect to the
Offer;
D. Awarding plaintiff and the Class compensatory
and/or rescissory damages;
E. Awarding plaintiff and the Class the costs and
disbursements of this action, including reasonable attorneys'
and experts' fees; and
F. Granting such other and further relief as this
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/
--------------------------------
Mellon Bank Center, Suite 1401
919 North Market Street
Wilmington, Delaware 18801
(302) 656-4433
Attorneys for Plaintiff
- 8 -
<PAGE> 9
OF COUNSEL:
GOODKIND LABATON RUDOFF
& SUCHAROW, LLP
100 Park Avenue, 12th Floor
New York, New York 10017
(212) 907-0700
- 9 -
<PAGE> 1
Exhibit 18
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR THE NEW CASTLE COUNTY
ALVIN SIEGEL, ) Civil Action No. 15490NC
)
Plaintiff, )
)
-against- )
)
CALGENE, INC., LLOYD M. KUNIMOTO, )
PATRICK J. FORTUNE, ROBERT T. )
FRALEY, MICHAEL R. HOGAN, JOHN E. )
ROBSON, HENDRICK A. VERAFILLE, )
HOWARD D. PALEFSKY, ROGER H. )
SALQUIST and ALLEN J. VANGELOS, )
)
Defendants. )
CLASS ACTION COMPLAINT
Plaintiff, by his attorneys, alleges upon information
and belief, except as to paragraph 2 which plaintiff alleges
upon knowledge:
1. Plaintiff Alvin Siegel brings this action on be-
half of himself and all other public stockholders of defendant
Calgene, Inc. ("Calgene" or the "Company"), who are similarly
situated seeking to enjoin the proposed sale of Calgene to de-
fendant Monsanto Company ("Monsanto") for grossly inadequate
consideration or, alternatively, to seek rescission or reces-
sionary or compensatory damages in the event that the transac-
tion complained of is consummated. The proposed transaction,
if consummated, will eliminate the interests of Calgene's pub-
lic stockholders. Plaintiff and the class are entitled to the
relief sought herein because the transaction and the acts of
<PAGE> 2
defendants in connection therewith constitute self-dealing,
deception, overreaching and a breach of their fiduciary duties
owed to Calgene and its public stockholders by defendants.
2. Plaintiff is and has been a stockholder of
Calgene at all relevant times.
3. Defendant Calgene, is a Delaware corporation,
with its principal offices located at 1920 Fifth Street, Davis,
California, is an agricultural biotechnology company. At all
relevant times, Calgene common stock was listed and actively
traded on the NASDAQ under the CGNE symbol. Calgene has ap-
proximately 66.6 million shares of common stock outstanding.
Of the 66.6 million shares of outstanding Calgene common stock,
36.4 million shares (or 54.6%) are owned by defendant Monsanto.
4. Defendant Lloyd M. Kunimoto ("Kunimoto") is
President, Chief Executive Officer and a director of the Com-
pany. By virtue of his positions at the Company, Kunimoto owes
his continued employment and salary to the good graces of Mon-
santo.
5. Defendants Patrick J. Fortune ("Fortune"), Robert
T. Fraley ("Fraley"), Michael R. Hogan ("Hogan"), John E.
Robson ("Robson") and Hendrick A. Verafille ("Verafille") are
and were at all times hereto, members of the Boards of both
Calgene and Monsanto. They are sometimes referred to herein as
the "Interlocking Directors."
- 2 -
<PAGE> 3
6. Defendants Howard D. Palefsky ("Palefsky"), Roger
H. Salquist ("Salquist") and Allen J. Vangelos ("Vangelos") are
and were at all times relevant hereto, members of the board of
Calgene. They, together with the Interlocking Directors, are
sometimes referred to herein as the "Individual Defendants."
7. The Calgene nine-member board is now comprised of
five Interlocking Directors, three independent directors and
Kunimoto.
8. As directors, officers and/or controlling share-
holders of Calgene, defendants are in a fiduciary relationship
with plaintiff and the other public stockholders of Calgene and
owe to them the highest obligations of good faith, fair deal-
ing, loyalty and care.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action on his own behalf
and as a class action, pursuant to Rule 23 of the Rules of the
Court of Chancery, on behalf of all stockholders of Calgene
(except the defendants herein and any person, firm, trust, cor-
poration, or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or
will be threatened with dilution of their equity interest in
Calgene through the wrongs complained of herein.
10. This actions is properly maintainable as a class
action for the following reasons:
- 3 -
<PAGE> 4
(a) The class is so numerous that joinder of all
members is impracticable. There are more than 66.6 million
shares of Calgene common stock outstanding with approximately
24.2 million shares in public hands held by more than three
thousands persons.
(b) There are questions of law and fact which are
common to the class including, inter alia, the following:
(1) whether defendants have engaged in a plan
and scheme to enrich Monsanto and the Individual Defendants at
the expense of Calgene and its public stockholders;
(2) whether defendants have breached their
fiduciary and other common law duties owed by them to plaintiff
and the other public shareholders by agreeing to the transac-
tion complained of; and
(3) whether plaintiff and the other members of
the class would be irreparably damaged if the transaction com-
plained of herein is consummated.
11. Plaintiff is committed to prosecuting this ac-
tion and has retained competent counsel experienced in litiga-
tion of this nature. The claims of plaintiff are typical of
the claims of other members of the class and plaintiff has the
same interests as the other members of the class. Plaintiff is
an adequate representative of the class and will fairly and
adequately protect the interest of the class.
- 4 -
<PAGE> 5
12. The likelihood that individual members of the
class will prosecute separate individual actions is remote due
to the burden and expense of prosecuting litigation of this
nature and magnitude. Plaintiff anticipates that there will
not be any difficulty in the management of this litigation.
13. For the reasons stated herein, a class action is
superior to other available methods for the fair and efficient
adjudication of the controversy and this action satisfies the
requirements of Rule 23 of the Chancery Court Rules.
SUBSTANTIVE ALLEGATIONS
14. The transaction complained of by plaintiff comes
at a time when Calgene has consistently reported improved pros-
pects and is poised to continue its growth in the future.
15. On October 30, 1996, Calgene received a U.S.
patent for a protein that will allow the company to harvest
canola that contains higher concentrations of laurate, a key
raw material used in the manufacture of soap, detergent and
personal care products. Calgene said the patent allows the
company to control the middle position, which will allow
Calgene to produce canola oil that has a 60% laurate content.
16. On November 13, 1996, Monsanto bought 6.25 mil-
lion newly issued common shares of Calgene at $8 a share for a
total of $50 million which brought Monsanto's equity interest
in Calgene to approximately 54.6%.
- 5 -
<PAGE> 6
17. On December 3, 1996 Calgene received a U.S.
patent for its method of controlling the concentration of genes
in plant plastids. This marks the third patent Calgene has
received involving the integration of foreign genes into plant
plastids.
18. On December 17, 1996, Calgene announced that
Saskatchewan Wheat Pool ("SWP") and Calgene plan to jointly
develop and produce "value-added genetically engineered" canola
oil products in Canada. Calgene said that, under the agree-
ment, SWP will combine its own breeding program with Calgene's
genetically engineered oils to develop "Canadian-adapted, spe-
cialty canola varieties."
19. Calgene is poised for growth and financial suc-
cess.
20. On January 28, 1997 Calgene announced that it
received an offer by Monsanto to acquire the 45% stake of
Calgene common stock it does not already own for $7.25 per
share (the "Monsanto Offer"). Calgene formed a special commit-
tee of outside directors to consider the bid which hired
Montgomery Securities to advise it and render a business opin-
ion on the Monsanto Offer.
21. The Monsanto Offer does not provide for the
value the Calgene shares are actually worth or will be worth
due to its future prospects. For example, Monsanto, itself as
- 6 -
<PAGE> 7
recently as November 13, 1996, 2 1/2 months prior to the Mon-
santo Offer paid $8 per Calgene share. The price paid by Mon-
santo preceded positive information which has raised the pros-
pects of Calgene's value. The $8 per share paid is $0.75 or
more than 10% more Monsanto is paying Calgene shareholders pur-
suant to the Monsanto Offer.
22. Although the press release announcing the pro-
posed transaction indicated that Calgene would form a special
committee of "independent" directors, Monsanto's domination and
control over Monsanto is so extreme that any formulation of a
special committee is a pure fiction.
23. The approval of the transaction is a foregone
conclusion because Monsanto dominates and controls Calgene.
24. Defendants have timed the announcement of the
proposed transaction to place an artificial lid on the market
price of Calgene's common stock to justify a price that is un-
fair to Calgene's public stockholders and to send a signal to
any other bidders that any other offer will be a hostile one.
Moreover, defendants have timed the proposed transaction to
obtain for themselves the benefits flowing from Calgene's
dramatically improving financial prospects and continuing suc-
cess.
25. The proposed transaction is wrongful, unfair and
harmful to Calgene and its public stockholders, and represents
an attempt by Monsanto and the defendants to increase their own
- 7 -
<PAGE> 8
personal and financial position and interest at the expense of,
and the detriment of, Calgene and its public stockholders. The
transaction will eliminate the ownership of Calgene common
stock by class members.
26. By virtue of Monsanto dominance and control over
Calgene, Monsanto, together with the Individual Defendants, has
engaged in a plan involving acts which are grossly unfair to
plaintiff and the other members of the class. The purpose of
the plan is to enable Monsanto to acquire 100% equity ownership
of Calgene and its assets for its own benefit, and at the ex-
pense of the other Calgene stockholders who will be deprived of
their equity investment and the benefits to accrue thereafter,
for a grossly inadequate price.
27. Because defendants dominate and control the
business and corporate affairs of Calgene, and possesses pri-
vate corporate information concerning Calgene's assets, busi-
ness and future prospects, there exists an imbalance and dis-
parity of knowledge and economic power between defendants and
Calgene's public stockholders which makes it inherently unfair
for Monsanto to pursue the transaction at the expense of
Calgene and class members.
28. Because of Monsanto's overwhelming control over
Calgene, all of Calgene's directors who will be considering the
transaction, and the entire Board of Directors, no third party,
as a practical matter, can attempt any bid for Calgene, as the
- 8 -
<PAGE> 9
success of any such bid would require the consent and coopera-
tion of Monsanto. In fact, because of such control by Mon-
santo, it is a foregone conclusion that the offer will be
accepted.
29. Defendants have failed to expose Calgene to a
market check to ascertain the full market value of the Com-
pany's assets and future prospects. The proposed transaction
consideration does not reflect the value of Calgene's valuable
assets or its improving financial performance.
30. The proposed transaction serves no legitimate
business purpose of Calgene but rather is an attempt by defen-
dants to unfairly benefit Monsanto from the transaction at the
expense of Calgene's public stockholders. The proposed trans-
action will, for a grossly inadequate consideration, deny
plaintiff and the other members of the class their right to
share proportionately in the future success of Calgene and its
valuable assets, while permitting defendants to reap huge ben-
efits from the transaction.
31. Unless enjoined by this Court, defendants will
continue to breach their fiduciary duties owed to plaintiff and
the class, and will consummate and close the transaction and
Monsanto will succeed in its plan to enrich itself by paying
Calgene shareholders inadequate consideration for their shares
of Calgene common stock.
- 9 -
<PAGE> 10
32. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as
follows:
(1) Preliminarily and permanently enjoining defen-
dants and their counsel, agents, servants, employees and all
persons acting under, in concert with, or for them, from pro-
ceeding with, consummating or closing the transaction com-
plained of;
(2) In the event the transaction is consummated,
awarding rescission or rescissory damages to Calgene and the
class as their interests may appear;
(3) Awarding compensatory damages to Calgene and the
class as their interests may appear;
(4) Awarding plaintiff the costs and expenses of
this action, including reasonable counsel and expert fees; and
- 10 -
<PAGE> 11
(5) Awarding such other and further relief as may be
necessary and appropriate.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
/s/
------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
Attorneys for Plaintiff
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
FARUQI & FARUQI, LLP
415 Madison Avenue
New York, New York 10017
(212) 986-1074
- 11 -
<PAGE> 1
Exhibit 19
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR THE NEW CASTLE COUNTY
LESLIE SUSSER, ) Civil Action No. 15489NC
)
Plaintiff, )
-against- )
)
LLOYD M. KUNIMOTO, PATRICK J. )
FORTUNE, ROBERT T. FRALEY, MICHAEL )
R. HOGAN, JOHN E. ROBSON, HENDRICK )
A. VERAFILLE, HOWARD D. PALEFSKY, )
ROGER H. SALQUIST, ALLEN J. )
VANGELOS, MONSANTO COMPANY and )
CALGENE, INC., )
)
Defendants. )
CLASS ACTION COMPLAINT
Plaintiff, by his attorneys, alleges upon information
and belief, except as to paragraph 2 which plaintiff alleges
upon knowledge:
1. Plaintiff Leslie Susser brings this action on
behalf of himself and all other public stockholders of defen-
dant Calgene, Inc. ("Calgene" or the "Company"), who are simi-
larly situated seeking to enjoin the proposed freeze out of
Calgene's public shareholders by defendant Monsanto Company
("Monsanto") for grossly inadequate consideration or, alterna-
tively, seeking rescission or rescissory damages in the event
that the transaction complained of is consummated. The pro-
posed transaction, if consummated, will eliminate the equity
interests of Calgene's public stockholders. Plaintiff and the
class are entitled to the relief sought herein because the
<PAGE> 2
transaction and the acts of defendants in connection therewith
constitute self-dealing, deception, overreaching and a breach
of their fiduciary duties owed to Calgene and its public stock-
holders by defendants.
2. Plaintiff is and has been a stockholder of
Calgene at all relevant times.
3. Defendant Calgene, is a Delaware corporation,
with its principal offices located at 1920 Fifth Street, Davis,
California, is an agricultural biotechnology company. Calgene
has approximately 66.6 million shares of common stock outstand-
ing. Of the 66.6 million shares of outstanding Calgene common
stock, 36.4 million shares (or 54.6%) are owned by defendant
Monsanto.
4. Defendant Lloyd M. Kunimoto ("Kunimoto") is
President, Chief Executive Officer and a director of the Com-
pany. By virtue of his positions at the Company, Kunimoto owes
his continued employment and salary to the good graces of Mon-
santo.
5. Defendants Patrick J. Fortune ("Fortune"), Robert
T. Fraley ("Fraley"), Michael R. Hogan ("Hogan"), John E.
Robson ("Robson") and Hendrick A. Verafille ("Verafille") are
and were at all times relevant hereto, members of the Boards of
both Calgene and Monsanto. They are sometimes referred to
herein as the "Interlocking Directors."
- 2 -
<PAGE> 3
6. Defendants Howard D. Palefsky ("Palefsky"), Roger
H. Salquist ("Salquist") and Allen J. Vangelos ("Vangelos") are
and were at all times relevant hereto, members of the board of
Calgene.
7. As directors, officers and/or controlling share-
holder of Calgene, defendants are in a fiduciary relationship
with plaintiff and the other public stockholders of Calgene and
owe to them the highest obligations of good faith, fair deal-
ing, loyalty and care.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action on his own behalf
and as a class action, pursuant to Rule 23 of the Rules of the
Court of Chancery, on behalf of all stockholders of Calgene
(except the defendants herein and any person, firm, trust, cor-
poration, or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or
will be threatened with loss of their equity interest in Cal-
gene through the wrongs complained of herein.
9. This action is properly maintainable as a class
action for the following reasons:
(a) The class is so numerous that joinder of all
members is impracticable. The shares of Calgene in public
hands are held of record by more than three thousand persons.
(b) There are questions of law and fact which are
common to the class including, inter alia, the following:
- 3 -
<PAGE> 4
(c) whether defendants have engaged in a plan and
scheme to enrich Monsanto and the Individual Defendants at the
expense of Calgene and its public stockholders;
(1) whether defendants have breached their
fiduciary and other common law duties owed by them to plaintiff
and the other public shareholders by agreeing to the transac-
tion complained of; and
(2) whether plaintiff and the other members of
the class would be irreparably damaged if the transaction com-
plained of herein is consummated.
10. Plaintiff is committed to prosecuting this ac-
tion and has retained competent counsel experienced in litiga-
tion of this nature. The claims of plaintiff are typical of
the claims of other members of the class and plaintiff has the
same interests as the other members of the class. Plaintiff is
an adequate representative of the class and will fairly and
adequately protect the interest of the class.
SUBSTANTIVE ALLEGATIONS
11. The transaction complained of by plaintiff comes
at a time when Calgene has consistently reported improved pros-
pects and is poised to continue its growth in the future.
12. On October 30, 1996, Calgene received a U.S.
patent for a protein that will allow the company to harvest
canola that contains higher concentrations of laurate, a key
raw material used in the manufacture of soap, detergent and
- 4 -
<PAGE> 5
personal care products. Calgene said the patent allows the
company to control the middle position, which will allow
Calgene to produce canola oil that has a 60% laurate content.
13. On November 13, 1996, Monsanto bought 6.25 mil-
lion newly issued common shares of Calgene at $8 a share for a
total of $50 million which brought Monsanto's equity interest
in Calgene to approximately 54.6%.
14. On December 3, 1996 Calgene received a U.S.
patent for its method of controlling the concentration of genes
in plant plastids. This marks the third patent Calgene has
received involving the integration of foreign genes into plant
plastids.
15. On December 17, 1996, Calgene announced that
Saskatchewan Wheat Pool ("SWP") and Calgene plan to jointly
develop and produce "value-added genetically engineered" canola
oil products in Canada. Calgene said that, under the agree-
ment, SWP will combine its own breeding program with Calgene's
genetically engineered oils to develop "Canadian-adapted, spe-
cialty canola varieties."
16. On January 28, 1997 Calgene announced that it
received an offer by Monsanto to acquire the 45% stake of
Calgene common stock it does not already own for $7.25 per
share (the "Monsanto Offer").
17. The Monsanto Offer does not provide for the
value the Calgene shares are actually worth or will be worth
- 5 -
<PAGE> 6
due to its future prospects. For example, Monsanto, itself as
recently as November 13, 1996, 2 1/2 months prior to the
Monsanto Offer paid $8 per Calgene share. The price paid by
Monsanto preceded positive information which have improved
Calgene's prospects.
18. Monsanto timed the announcement of the proposed
transaction to place an artificial lid on the market price of
Calgene's common stock to justify a price that is unfair to
Calgene's public stockholders.
19. The proposed transaction is wrongful, unfair and
harmful to Calgene and its public stockholders, and represents
an attempt by Monsanto to promote its own financial position
and interest at the expense of, and the detriment of, Calgene's
public stockholders. The transaction will eliminate the owner-
ship of Calgene common stock by class members.
20. By virtue of Monsanto's dominance and control
over Calgene, Monsanto has engaged in a plan involving acts
which are grossly unfair to plaintiff and the other members of
the class. The purpose of the plan is to enable Monsanto to
acquire 100% equity ownership of Calgene and its assets for its
own benefit, and at the expense of the other Calgene stock-
holders who will be deprived of their equity investment and the
benefits to accrue thereafter, for a grossly inadequate price.
21. Because defendants dominate and control the
business and corporate affairs of Calgene, and possess private
- 6 -
<PAGE> 7
corporate information concerning Calgene's assets, business and
future prospects, there exists an imbalance and disparity of
knowledge and economic power between defendants and Calgene's
public stockholders which makes it inherently unfair for
Monsanto to pursue the transaction at the expense of Calgene
and class members.
22. Because of Monsanto's overwhelming control over
Calgene, all of Calgene's directors who will be considering the
transaction, and the entire Board of Directors, no third party,
as a practical matter, can attempt any bid for Calgene, as the
success of any such bid would require the consent and coopera-
tion of Monsanto. Thus, Calgene will not be exposed to a mar-
ket check to ascertain the fair value of the Company's assets
and future prospects or its improving financial performance.
23. The proposed transaction serves no legitimate
business purpose of Calgene but rather is an attempt by defen-
dants to unfairly benefit Monsanto from the transaction at the
expense of Calgene's public stockholders. The proposed trans-
action will, for a grossly inadequate consideration, deny
plaintiff and the other members of the class their right to
share proportionately in the future success of Calgene and its
valuable assets, while permitting Monsanto to benefit from the
transaction.
24. Unless enjoined by this Court, defendants will
continue to breach their fiduciary duties owed to plaintiff and
- 7 -
<PAGE> 8
the class, and will consummate and close the transaction and
Monsanto will succeed in its plan to enrich itself by paying
Calgene shareholders inadequate consideration for their shares
of Calgene common stock.
25. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as
follows:
(1) Preliminarily and permanently enjoining
defendants and their counsel, agents, servants, employees and
all persons acting under, in concert with, or for them, from
proceeding with, consummating or closing the transaction
complained of;
(2) In the event the transaction is consummated,
awarding rescission or rescissory damages to the class;
(3) Awarding compensatory damages to the class;
(4) Awarding plaintiff the costs and expenses of
this action, including reasonable counsel and expert fees; and
(5) Awarding such other and further relief as may be
necessary and appropriate.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
/s/
------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
- 8 -
<PAGE> 9
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
(212) 889-3700
- 9 -
<PAGE> 1
Exhibit 20
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
------------------------------------x
:
MARGIE ELSTEIN, custodian for :
GARY ELSTEIN, UGMA, :
:
Plaintiff, : Civil Action No. 15488NC
:
- against - :
: CLASS ACTION COMPLAINT
MONSANTO COMPANY, LLOYD KUNIMOTO, :
JOHN ROBSON, HENDRIK VERFAILLIE, :
ROBERT FRALEY, PATRICK FORTUNE, :
MICHAEL HOGAN, HOWARD PALEFSKY, :
ALLEN VANGELOS, ROGER SALQUIST, :
and CALGENE, INC. :
:
Defendants.:
:
------------------------------------x
Plaintiff, by her attorneys, alleges the following
upon information and belief, except for those allegations which
pertain to plaintiff, which allegations are based upon personal
knowledge:
1. This action arises out of an unlawful scheme and
plan to enable Monsanto Company ("Monsanto") to acquire the
remaining approximately 45.4% ownership of Calgene, Inc.
("Calgene" or the "Company") which Monsanto does not already
own for grossly inadequate consideration and in breach of
defendants' fiduciary duties. Plaintiff alleges that she and
the other public stockholders of Calgene common stock are
<PAGE> 2
entitled to enjoin the proposed transaction, or alternatively,
recover damages in the event the transaction is consummated.
THE PARTIES
2. Plaintiff is and at all relevant times was the
owner of Calgene common stock.
3. Defendant Calgene is a corporation organized and
existing under the laws of the State of Delaware with its prin-
cipal executive offices located at 1920 Fifth Street, Davis,
California 95616. Calgene is the developer of genetically
engineered plants and plant products for the seed, food and
oleochemical industries, using recombinant-DNA technology. The
Company developed the first genetically engineered tomato and
is in the process of developing other bio-engineered products,
such as canola oil and cottonseed.
4. Defendant Monsanto is a Delaware corporation with
its principal headquarters located at 800 North Lindbergh
Blvd., St. Louis, Missouri 63167. Monsanto is the largest
shareholder of Calgene. It owns approximately 54.6% of the
Company's common stock. As such, Monsanto has effective con-
trol over the Company.
5. Defendant Lloyd Kunimoto is President of Calgene
and a director of the Company.
6. Defendant Hendrik Verfaillie is a director of the
Company. He is also the Executive Vice President of Monsanto.
- 2 -
<PAGE> 3
7. Defendant Robert Fraley is a director of the Com-
pany. He is also President of Ceregen, a Monsanto business
unit.
8. Defendant Patrick Fortune is a director of the
Company. He is also Chief Information Officer for Monsanto.
9. Defendant Michael Hogan is a director of the Com-
pany. He is also Vice President and Corporate Controller of
Monsanto.
10. Defendant Roger Salquist is a director of the
Company. Mr. Salquist was the Chairman of the Board and Chief
Executive officer of Calgene until his resignation in July
1996.
11. Defendants John Robson, Howard Palefsky, and
Allen Vangelos are directors of the Company.
12. The above-named individual defendants (collec-
tively the "Individual Defendants") as officers and/or direc-
tors of the Company, owe fiduciary duties of good faith, loy-
alty, fair dealing, due care, and candor to plaintiff and the
other members of the Class (as defined below).
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action pursuant to Rule 23
of the Rules of this Court, on behalf of himself and all other
stockholders of the Company as of January 29, 1997 (the
"Class"), and their successors in interest, who are or will be
- 3 -
<PAGE> 4
threatened with injury arising from defendants' actions. Ex-
cluded from the Class are the defendants herein, members of
their immediate families, and any subsidiary, firm, trust, cor-
poration, or other entity related to or affiliated with any of
the defendants.
14. This action is properly maintainable as a class
action for the following reasons:
(a) the Class is so numerous that joinder of all
members is impracticable. There are more than 26 million
shares of Calgene common stock outstanding held by hundreds of
shareholders of record. Calgene common stock is listed and
actively traded on the NASDAQ Exchange;
(b) there are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common ques-
tions include, inter alia, the following:
(i) whether defendants have engaged and are
continuing to engage in a plan and scheme to benefit Monsanto
at the expense of the members of the Class;
(ii) whether the Individual Defendants, as
directors and/or officers of the Company, have breached their
fiduciary duties owed to plaintiff and the other members of the
Class, including their duties of entire fairness, loyalty, due
care, and candor;
- 4 -
<PAGE> 5
(iii) whether defendants have disclosed all
material facts in connection with the challenged transaction;
and
(iv) whether plaintiff and the other members
of the Class would be irreparably damaged were defendants not
enjoined from the conduct described herein;
(c) the claims of plaintiff are typical of the
claims of the other members of the Class and plaintiff has no
interest that are adverse or antagonistic to the interests of
the Class; and
(d) the plaintiff is committed to prosecuting this
action and has retained counsel competent and experienced in
litigation of this nature. Plaintiff is an adequate represen-
tative of the Class and will fairly and adequately protect the
interests of the Class.
SUBSTANTIVE ALLEGATIONS
15. On January 28, 1997, it was reported over the
Bloomberg Business Wire that Monsanto would acquire the remain-
ing shares of Calgene that it does not already own. Pursuant
to the proposed transaction, each of Calgene's minority owned
common shares will be purchased for $7.25 per share in cash
(the "Buyout Transaction").
16. The purpose of the Buyout Transaction is to en-
able Monsanto to acquire one hundred (100%) percent equity
- 5 -
<PAGE> 6
ownership of Calgene and its valuable assets for its own ben-
efit at the expense of Calgene's public stockholders who will
be deprived of their equity investment and the benefits thereof
including, among other things, the expected growth in the Com-
pany's profitability.
17. The Buyout Transaction is the product of unfair
dealing, and the price of $7.25 cash per share to be paid to
class members is unfair and grossly inadequate because, among
other things:
(a) the announcement of the proposed Buyout Transac-
tion was made to take advantage of the fact that the Company
has recently experienced some poor operating results, which has
caused the market to undervalue its shares. Monsanto recently
purchased 6.25 million shares of the Company at $8 a share;
(b) because Monsanto has an overwhelming controlling
interest in the Company's common stock, no third party will
likely bid for Calgene. Thus, defendants will be able to pro-
ceed with the Buyout Transaction without an auction or other
type of market check to maximize value for Calgene's public
shareholders; and
(c) defendants timed the announcement of the Buyout
Transaction to place an artificial lid or cap on the market
price for Calgene's stock to enable Monsanto to acquire the
minority stock at the lowest possible price.
- 6 -
<PAGE> 7
18. By reason of their positions with Calgene and
Monsanto's controlling ownership of the Company, defendants are
in possession of non-public information concerning the finan-
cial condition and prospects of Calgene, and especially the
true value and expected increased future value of Calgene and
its assets, which they have not disclosed to Calgene's public
stockholders.
19. The proposed Buyout Transaction is wrongful,
unfair and harmful to Calgene's minority public stockholders,
and represents an effort by defendants to aggrandize Monsanto's
financial position and interests at the expense of and to the
detriment of class members. The Buyout Transaction is an at-
tempt to deny plaintiff and the other members of the Class
their right to share proportionately in the true value of Cal-
gene's valuable technology, future growth in profits, earnings
and dividends, while usurping the same for the benefit of
Monsanto on unfair and inadequate terms.
20. Defendants, in failing to disclose the material
non-public information in their possession as to the value of
Calgene's technology, the full extent of the future earnings
potential of Calgene and its expected increase in profitabil-
ity, have breached and are breaching their fiduciary duties to
the members of the Class.
21. As a result of defendants' unlawful actions,
plaintiff and the other members of the Class will be damaged in
- 7 -
<PAGE> 8
that they will not receive their fair portion of the value of
Calgene assets and business and will be prevented from obtain-
ing the real value of their equity ownership of the Company.
22. Unless the proposed Buyout Transaction is en-
joined by the Court, defendants will continue to breach their
fiduciary duties owed to the plaintiff and the members of the
Class, will not engage in arm's-length negotiations on the
merger terms, and will consummate and close the proposed merger
complained of and succeed in their plan described above, all to
the irreparable harm of the members of the Class.
23. Plaintiff and the other members of the Class
have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class ac-
tion and certifying plaintiff as the representative of the
Class;
(b) ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, includ-
ing those duties of care, loyalty, candor and fair dealing;
(c) granting preliminary and permanent injunctive
relief against the consummation of the Buyout Transaction as
described herein;
(d) in the event the Buyout Transaction is consum-
mated, rescinding the Buyout Transaction effected by defendants
and/or awarding rescissory damages to the Class;
- 8 -
<PAGE> 9
(e) ordering defendants, jointly and severally, to
account to plaintiff and other members of the Class for all
damages suffered and to be suffered by them as the result of
the acts and transactions alleged herein;
(f) awarding plaintiff the costs and disbursements
of the action including allowances for plaintiff's reasonable
attorneys' and experts' fees; and
(g) granting such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/
--------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
WOLF POPPER LLP
845 Third Avenue
New York, New York 10022
(212) 759-4600
- 9 -
<PAGE> 1
Exhibit 21
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - - - - - - - - - - - - - - - - - x
F. RICHARD MANSON and ERNEST HACK, :
Individually And On Behalf Of All :
Others Similarly Situated, :
:
Plaintiffs, : C.A. No. 15491
v. :
:
PATRICK J. FORTUNE, ROBERT T. :
FRALEY, MICHAEL R. HOGAN, LLOYD M. :
KUNIMOTO, HOWARD D. PALEFSKY, :
JOHN E. ROBSON, ROGER H. SALQUIST, :
ALLEN J. VANGELOS, HENDRIK A. :
VERFAILLIE AND MONSANTO CO. :
:
Defendants.:
- - - - - - - - - - - - - - - - - - x
CLASS ACTION AND DERIVATIVE COMPLAINT
Plaintiffs, by their attorneys, allege on information
and belief, except for the allegations herein relating to
plaintiffs and their counsel, which allegations are made on the
basis of knowledge, as follows:
SUMMARY OF ACTION
1. This Action is brought as a class action on be-
half of the public holders of the common stock Calgene, Inc.
("Calgene" or the "Company"). Plaintiffs seek damages and in-
junctive relief against the Calgene Board of Directors and de-
fendant Monsanto Co. ("Monsanto"), Calgene's controlling share-
holder, in connection with a proposed acquisition by Monsanto
of the remaining public shares of Calgene.
<PAGE> 2
THE PARTIES
2. Plaintiffs own shares of the common stock of
Calgene.
3. Calgene, Inc. is a Delaware corporation with ex-
ecutive offices at 1920 Fifth Street, Davis, California 95616.
Calgene develops genetically engineered plants and plant prod-
ucts. As of October 31, 1996, Calgene had approximately
60,464,636 shares of common stock outstanding held by approxi-
mately 3,244 shareholders of record.
4. Defendant Patrick J. Fortune is a Director of
Calgene.
5. Defendant Robert T. Fraley is a Director of
Calgene.
6. Defendant Michael R. Hogan is a Director of
Calgene.
7. Defendant Lloyd M. Kunimoto is President, Chief
Executive Officer and a Director of Calgene.
8. Defendant Howard D. Palefsky is a Director of
Calgene.
9. Defendant John E. Robson is a Director of
Calgene.
10. Defendant Roger H. Salquist is a Director of
Calgene. Salquist is also the former Chairman and Chief Execu-
tive Officer of Calgene, and is a current consultant to Cal-
gene.
- 2 -
<PAGE> 3
11. Defendant Allen J. Vangelos is a Director of
Calgene.
12. Defendant Hendrik A. Verfaillie is a Director of
Calgene.
13. Each of the foregoing individuals owes the Com-
pany a fiduciary duty to exercise due care and diligence in the
administration of the affairs of the Company and the highest
obligations of good faith and fair dealing. By reason of their
positions as Directors and/or officers of the Company, the Di-
rector Defendants owe the Company and its shareholders fidu-
ciary obligations of trust, loyalty and due care, and were and
are required to use their utmost ability to act in furtherance
of the best interests of the Company and its shareholders so as
to benefit all shareholders proportionately and not one group
of common shareholders at the expense of another, and to pro-
vide full and complete information concerning the affairs of
the Company to the shareholders.
14. Monsanto Co. is a Delaware corporation with
executive Offices at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167-0001. Monsanto manufactures and sells agricul-
tural products, manufactures and markets chemical products,
develops, manufactures and markets medical products, and Manu-
factures and markets "Nutrasweet" brand sweetener. Monsanto
currently owns approximately 54.6 percent of Calgene's
outstanding shares. As such, Monsanto is the controlling
- 3 -
<PAGE> 4
shareholder of Calgene. By virtue of its status as controlling
shareholder and its domination and control of the Calgene
Board, Monsanto owes fiduciary duties to Calgene's public
shareholders.
15. Pursuant to the Restated Stockholders Agreement.
defendants Fortune, Fraley, Hogan, Robson and Verfaillie are
Monsanto designees on the Calgene Board of Directors.
CLASS ACTION ALLEGATIONS
16. Plaintiffs bring this action an behalf of a
class (the "Class") consisting of all public holders of Calgene
common stock, excluding defendants, members of the immediate
families of each of the individual defendants, any entity con-
trolled by any defendants, and the heirs, successors, assigns,
partners or principals of any of the defendants.
17. As of October 31, 1996, there were over 60 mil-
lion shares of Calgene common stock held by thousands of share-
holders. Therefore, the members of the Class are so numerous
that joinder of all members is impracticable.
18. Plaintiffs' claims are typical of the claims of
the Class. They and all other members of the class who own
Calgene common stock have sustained and will sustain damages as
a result of defendants' wrongful conduct as herein alleged.
19. Plaintiffs will fairly and adequately protect
and represent the interests of the members of the Class and
have retained counsel competent and experienced in shareholder
class action litigation. Plaintiffs are members of the Class
- 4 -
<PAGE> 5
and their claims are typical of the claims of the Class mem-
bers. Plaintiffs do not have interests antagonistic to, or in
conflict with, the interests of those they represent.
20. A class action is superior to other available
methods for the fair and efficient adjudication of this contro-
versy. Since the damages suffered by individual Class members
may be relatively small, the expense and burden of individual
litigation makes it impossible for the Class members individu-
ally to seek redress for the wrongful conduct herein alleged.
Absent a class action, defendants will likely retain the ben-
efits of their wrongdoing.
21. Common questions of law and fact exist as to all
members of the Class and predominate over any questions affect-
ing solely individual members of the Class. Among the ques-
tions of law and fact common to the Class are:
a. Whether defendants are capable of fulfilling
their fiduciary duties to the class;
b. Whether the Calgene public shareholders will be
irreparably harmed; and
c. Whether the members of the Class has or will sus-
tain damages and, if so, the proper measure of damages.
SUBSTANTIVE ALLEGATIONS
22. Pursuant to a stock purchase agreement dated as
of September 27, 1996, Monsanto purchased 6.25 million newly
- 5 -
<PAGE> 6
issued Calgene shares for $8 per share, increasing its owner-
ship from 49.9% to 54.6%.
23. On January 29, 1997, Monsanto publicly announced
a proposal to acquire the outstanding shares of Calgene which
did not already own for $7.25 per share (the "Transaction").
On January 28, 1997, the last trading date prior to announce-
ment of the Transaction, calgene stock closed at $5.50 per
share. However, the Transaction price is $.75 below the price
at which Monsanto acquired the new Calgene shares.
24. It has been announced that a panel of three pur-
portedly disinterested directors was formed to consider the
Transaction. However, these directors cannot be expected to
adequately represent, protect and advocate the interests of the
public shareholders and ensure that the Transaction is entirely
fair to the Class, as a result of Monsanto's ownership and
domination and control of the Calgene Board.
25. Unless enjoined by this Court, defendants will
continue to breach their fiduciary duties owed to Calgene and
its public shareholders unjustly enriching Monsanto at the ex-
pense the Class, all to the irreparable harm of the Class.
26. The Transaction is a self-dealing transaction in
breach of fiduciary duties owed to Calgene and the public hold-
ers of Calgene common stock.
- 6 -
<PAGE> 7
27. As a result of defendants' wrongful course of
conduct, Calgene and its shareholders have sustained and will
continue to sustain injury.
28. Plaintiffs seek, inter alia, to preliminarily
and permanently enjoin implementation of the Transaction.
Plaintiffs further seek damages for defendants' wrongful con-
duct.
WHEREFORE, Plaintiffs demand judgment as follows:
A. That the Court declare that the defendants, and
each of them, have committed a gross abuse of trust and have
breached fiduciary duties to Calgene and Calgene's public
shareholders;
B. Preliminarily, and permanently enjoining defen-
dants from continuing their actions and breaches of fiduciary
duties;
C. Declaring this action to be a class action;
D. Awarding money damages against all defendants,
jointly and severally, in favor of the Company, Plaintiffs and
members of the class for all losses and damages suffered as a
result of the conduct complained of herein, together with in-
terest;
E. Enjoining defendants from exercising any rights
or benefits granted or received as part of the Transaction;
- 7 -
<PAGE> 8
F. Awarding Plaintiffs the costs and disbursements
of this action, including reasonable attorneys' and expert's
fees; and
G. Granting such other and further relief as this
court may deem just and proper.
- 8 -
<PAGE> 9
Dated: January 29, 1997 CHIMICLES, JACOBSEN & TIKELLIS
/s/ Pamela S. Tikellis
-----------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
Daniel P. O'Brien
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiffs
OF COUNSEL:
WOLF HALDENSTEIN ADLER FREEMAN
& HERZ LLP
270 Madison Avenue
New York, New York 10016
LAW OFFICES OF CHARLES J. PIVEN
111 S. Calvert Street
Suite 2700
Baltimore, MD 21202
- 9 -
<PAGE> 1
Exhibit 22
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
------------------------------------x
:
JERE SETTLE, :
:
Plaintiff, :
: Civil Action No. 15493NC
:
against :
: CLASS ACTION COMPLAINT
MONSANTO COMPANY, LLOYD KUNIMOTO, :
JOHN ROBSON, HENDRIK VERFAILLIE, :
ROBERT FRALEY, PATRICK FORTUNE, :
MICHAEL HOGAN, HOWARD PALEFSKY, :
ALLEN VANGELOS, ROGER SALQUIST, :
and CALGENE, INC. :
:
Defendants.:
------------------------------------x
Plaintiff, by his attorneys, alleges the following
upon information and belief, except for those allegations which
pertain to plaintiff, which allegations are based upon personal
knowledge:
1. This action arises out of an unlawful scheme and
plan to enable Monsanto Company ("Monsanto") to acquire the
remaining approximately 45.4% ownership of Calgene, Inc.
("Calgene" or the "Company") which Monsanto does not already
own for grossly inadequate consideration and in breach of de-
fendants' fiduciary duties. Plaintiff alleges that he and the
other public stockholders of Calgene common stock are entitled
to enjoin the proposed transaction, or alternatively, recover
damages in the event the transaction is consummated.
<PAGE> 2
THE PARTIES
2. Plaintiff is and at all relevant times was the
owner of Calgene common stock.
3. Defendant Calgene is a corporation organized and
existing under the laws of the State of Delaware with its prin-
cipal executive offices located at 1920 Fifth Street, Davis,
California 95616. Calgene is the developer of genetically en-
gineered plants and plant products for the seed, food and
oleochemical industries, using recombinant-DNA technology. The
Company developed the first genetically engineered tomato and
is in the process of developing other bio-engineered products,
such as canola oil and cottonseed.
4. Defendant Monsanto is a Delaware corporation with
its principal headquarters located at 800 North Lindbergh
Blvd., St. Louis, Missouri 63167. Monsanto is the largest
shareholder of Calgene. It owns approximately 54.6% of the
Company's common stock. As such, Monsanto has effective con-
trol over the Company.
5. Defendant Lloyd Kunimoto is President of Calgene
and director of the Company.
6. Defendant Hendrik Verfaillie is a director of the
Company. He is also the Executive Vice President of Monsanto.
7. Defendant Robert Fraley is a director of the Com-
pany. He is also President of Ceregen, a Monsanto business
unit.
- 2 -
<PAGE> 3
8. Defendant Patrick Fortune is a director of the
Company. He is also Chief Information Officer for Monsanto.
9. Defendant Michael Hogan is a director of the Com-
pany. He is also Vice President and Corporate Controller of
Monsanto.
10. Defendant Roger Salquist is a director of the
Company. Mr. Salquist was the Chairman of the Board and Chief
Executive Officer of Calgene until his resignation in July
1996.
11. Defendants John Robson, Howard Palefsky, and
Allen Vangelos are directors of the Company.
12. The above-named individual defendants (collec-
tively the "Individual Defendants") as officers and/or direc-
tors of the Company, owe fiduciary duties of good faith,
loyalty, fair dealing, due care, and candor to plaintiff and
the other members of the Class (as defined below).
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action pursuant to Rule 23
of the Rules of this Court, on behalf of herself and all other
stockholders of the Company as of January 29, 1997 (the
"Class"), and their successors in interest, who are or will be
threatened with injury arising from defendants' actions. Ex-
cluded from the Class are the defendants herein, members of
- 3 -
<PAGE> 4
their immediate families, and any subsidiary, firm, trust, cor-
poration, or other entity related to or affiliated with any of
the defendants.
14. This action is properly maintainable as a class
action for the following reasons:
(a) the Class is so numerous that joinder of all
members is impracticable. There are more than 26 million
shares of Calgene common stock outstanding held by hundreds of
shareholders of record. Calgene common stock is listed and
actively traded on the NASDAQ Exchange;
(b) there are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common ques-
tions include, inter alia, the following:
(i) whether defendants have engaged and are
continuing to engage in a plan and scheme to benefit Monsanto
at the expense of the members of the Class;
(ii) whether the Individual Defendants, as di-
rectors and/or officers of the Company, have breached their
fiduciary duties owed to plaintiff and the other members of the
Class, including their duties of entire fairness, loyalty, due
care, and candor;
(iii) whether defendants have disclosed all mate-
rial facts in connection with the challenged transaction; and
- 4 -
<PAGE> 5
(iv) whether plaintiff and the other members of
the Class would be irreparably damaged were defendants not
enjoined from the conduct described herein;
(c) the claims of plaintiff are typical of the
claims of the other members of the Class and plaintiff has no
interests that are adverse or antagonistic to the interests of
the Class; and
(d) plaintiff is committed to prosecuting this ac-
tion and has retained counsel competent and experienced in
litigation of this nature. Plaintiff is an adequate representa-
tive of the Class and will fairly and adequately protect the
interests of the Class.
SUBSTANTIVE ALLEGATIONS
15. On January 28, 1997, it was reported over the
Bloomberg Business Wire that Monsanto would acquire the remain-
ing shares of Calgene that it does not already own. Pursuant
to the proposed transaction, each of Calgene's minority owned
common shares will be purchased for $7.25 per share in cash
(the "Buyout Transaction").
16. The purpose of the Buyout Transaction is to en-
able Monsanto to acquire one hundred (100%) percent equity
ownership of Calgene and its valuable assets for its own ben-
efit at the expense of Calgene's public stockholders who will
be deprived of their equity investment and the benefits thereof
- 5 -
<PAGE> 6
including, among other things, the expected growth in the Com-
pany's profitability.
17. The Buyout Transaction is the product of unfair
dealing, and the price of $7.25 cash per share to be paid to
class members is unfair and grossly inadequate because, among
other things:
(a) the announcement of the proposed Buyout Transac-
tion was made to take advantage of the fact that the Company
has recently experienced some poor operating results, which has
caused the market to undervalue its shares. Monsanto recently
purchased 6.25 million shares of the Company at $8 a share;
(b) because Monsanto has an overwhelming controlling
interest in the Company's common stock, no third party will
likely bid for Calgene. Thus, defendants will be able to pro-
ceed with the Buyout Transaction without an auction or other
type of market check to maximize value for Calgene's public
shareholders; and
(c) defendants timed the announcement of the Buyout
Transaction to place an artificial lid or cap on the market
price for Calgene's stock to enable Monsanto to acquire the
minority stock at the lowest possible price.
18. By reason of their positions with Calgene and
Monsanto's controlling ownership of the Company, defendants are
in possession of non-public information concerning the finan-
cial condition and prospects of Calgene, and especially the
- 6 -
<PAGE> 7
true value and expected increased future value of Calgene and
its assets, which they have not disclosed to Calgene's public
stockholders.
19. The proposed Buyout Transaction is wrongful,
unfair and harmful to Calgene's minority public stockholders,
and represents an effort by defendants to aggrandize Monsanto's
financial position and interests at the expense of and to the
detriment of class members. The Buyout Transaction is an at-
tempt to deny plaintiff and the other members of the Class
their right to share proportionately in the true value of Cal-
gene's valuable technology, future growth in profits, earnings
and dividends, while usurping the same for the benefit of
Monsanto on unfair and inadequate terms.
20. Defendants, in failing to disclose the material
non-public information in their possession as to the value of
Calgene's technology, the full extent of the future earnings
potential of Calgene and its expected increase in profitabil-
ity, have breached and are breaching their fiduciary duties to
the members of the Class.
21. As a result of defendants, unlawful actions,
plaintiff and the other members of the Class will be damaged in
that they will not receive their fair portion of the value of
Calgene assets and business and will be prevented from obtain-
ing the real value of their equity ownership of the Company.
22. Unless the proposed Buyout Transaction is en-
joined by the Court, defendants will continue to breach their
- 7 -
<PAGE> 8
fiduciary duties owed to plaintiff and the members of the
Class, will not engage in arm's-length negotiations on the
merger terms, and will consummate and close the proposed merger
complained of and succeed in their plan described above, all to
the irreparable harm of the members of the Class.
23. Plaintiff and the other members of the Class
have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class
action and certifying plaintiff as the representative of the
Class;
(b) ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, includ-
ing those duties of care, loyalty, candor and fair dealing;
(c) granting preliminary and permanent injunctive
relief against the consummation of the Buyout Transaction as
described herein;
(d) in the event the Buyout Transaction is consum-
mated, rescinding the Buyout Transaction effected by defendants
and/or awarding rescissory damages to the Class;
(e) ordering defendants, jointly and severally, to
account to plaintiff and other members of the Class for all
damages suffered and to be suffered by them as the result of
the acts and transactions alleged herein;
- 8 -
<PAGE> 9
(f) awarding plaintiff the costs and disbursements
of the action including allowances for plaintiff's reasonable
attorneys' and experts' fees; and
(g) granting such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS &
& GODDESS, P.A.
By: /s/
------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
GILMAN AND PASTOR
One Boston Place
28th Floor
Boston, MA 02108
- 9 -
<PAGE> 1
Exhibit 23
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
------------------------------------x
:
HOWARD GLICKBERG, :
:
Plaintiff, : Civil Action No. 15499NC
:
- against - :
: CLASS ACTION COMPLAINT
:
MONSANTO COMPANY, LLOYD KUNIMOTO, :
JOHN ROBSON, HENDRIK VERFAILLIE, :
ROBERT FRALEY, PATRICK FORTUNE, :
MICHAEL HOGAN, HOWARD PALEFSKY, :
ALLEN VANGELOS, ROGER SALQUIST, :
and CALGENE, INC. :
:
Defendants.:
:
------------------------------------x
Plaintiff, by his attorneys, alleges the following
upon information and belief, except for those allegations which
pertain to plaintiff, which allegations are based upon personal
knowledge:
1. This action arises out of an unlawful scheme and
plan to enable Monsanto Company ("Monsanto") to acquire the
remaining approximately 45.4% ownership of Calgene, Inc.
("Calgene" or the "Company") which Monsanto does not already
own for grossly inadequate consideration and in breach of de-
fendants' fiduciary duties. Plaintiff alleges that he and the
other public stockholders of Calgene common stock are entitled
<PAGE> 2
to enjoin the proposed transaction, or alternatively, recover
damages in the event the transaction is consummated.
THE PARTIES
2. Plaintiff is and at all relevant times was the
owner of Calgene common stock.
3. Defendant Calgene is a corporation organized and
existing under the laws of the State of Delaware with its prin-
cipal executive offices located at 1920 Fifth Street, Davis,
California 95616. Calgene is the developer of genetically en-
gineered plants and plant products for the seed, food and
oleochemical industries, using recombinant-DNA technology. The
Company developed the first genetically engineered tomato and
is in the process of developing other bio-engineered products,
such as canola oil and cottonseed.
4. Defendant Monsanto is a Delaware corporation with
its principal headquarters located at 800 North Lindbergh
Blvd., St. Louis, Missouri 63167. Monsanto is the largest
shareholder of Calgene. It owns approximately 54.6% of the
Company's common stock. As such, Monsanto has effective con-
trol over the Company.
5. Defendant Lloyd Kunimoto is President of Calgene
and a director of the Company.
6. Defendant Hendrik Verfaillie is a director of the
Company. He is also the Executive Vice President of Monsanto.
- 2 -
<PAGE> 3
7. Defendant Robert Fraley is a director of the Com-
pany. He is also President of Ceregen, a Monsanto business
unit.
8. Defendant Patrick Fortune is a director of the
Company. He is also Chief Information Officer for Monsanto.
9. Defendant Michael Hogan is a director of the Com-
pany. He is also Vice President and Corporate Controller of
Monsanto.
10. Defendant Roger Salquist is a director of the
Company. Mr. Salquist was the Chairman of the Board and Chief
Executive Officer of Calgene until his resignation in July
1996.
11. Defendants John Robson, Howard Palefsky, and
Allen Vangelos are directors of the Company.
12. The above-named individual defendants (collec-
tively the "Individual Defendants") as officers and/or direc-
tors of the Company, owe fiduciary duties of good faith, loy-
alty, fair dealing, due care, and candor to plaintiff and the
other members of the Class (as defined below).
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action pursuant to Rule 23
of the Rules of this Court, on behalf of herself and all other
stockholders of the Company as of January 29, 1997 (the
"Class"), and their successors in interest, who are or will be
- 3 -
<PAGE> 4
threatened with injury arising from defendants' actions. Ex-
cluded from the Class are the defendants herein, members of
their immediate families, and any subsidiary, firm, trust, cor-
poration, or other entity related to or affiliated with any of
the defendants.
14. This action is properly maintainable as a class
action for the following reasons:
(a) the Class is so numerous that joinder of all
members is impracticable. There are more than 26 million
shares of Calgene common stock outstanding held by hundreds of
shareholders of record. Calgene common stock is listed and
actively traded on the NASDAQ Exchange;
(b) there are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common ques-
tions include, inter alia, the following:
(i) whether defendants have engaged and are con-
tinuing to engage in a plan and scheme to benefit Monsanto at
the expense of the members of the Class;
(ii) whether the Individual Defendants, as direc-
tors and/or officers of the Company, have breached their fidu-
ciary duties owed to plaintiff and the other members of the
Class, including their duties of entire fairness, loyalty, due
care, and candor;
- 4 -
<PAGE> 5
(iii) whether defendants have disclosed all mate-
rial facts in connection with the challenged transaction; and
(iv) whether plaintiff and the other members of
the Class would be irreparably damaged were defendants not en-
joined from the conduct described herein;
(c) the claims of plaintiff are typical of the
claims of the other members of the Class and plaintiff has no
interests that are adverse or antagonistic to the interests of
the Class; and
(d) plaintiff is committed to prosecuting this ac-
tion and has retained counsel competent and experienced in
litigation of this nature. Plaintiff is an adequate represen-
tative of the Class and will fairly and adequately protect the
interests of the Class.
SUBSTANTIVE ALLEGATIONS
15. On January 28, 1997, it was reported over the
Bloomberg Business Wire that Monsanto would acquire the remain-
ing shares of Calgene that it does not already own. Pursuant
to the proposed transaction, each of Calgene's minority owned
common shares will be purchased for $7.25 per share in cash
(the "Buyout Transaction").
16. The purpose of the Buyout Transaction is to en-
able Monsanto to acquire one hundred (100%) percent equity own-
ership of Calgene and its valuable assets for its own benefit
at the expense of Calgene's public stockholders who will be
- 5 -
<PAGE> 6
deprived of their equity investment and the benefits thereof
including, among other things, the expected growth in the Com-
pany's profitability.
17. The Buyout Transaction is the product of unfair
dealing, and the price of $7.25 cash per share to be paid to
class members is unfair and grossly inadequate because, among
other things:
(a) the announcement of the proposed Buyout Transac-
tion was made to take advantage of the fact that the Company
has recently experienced some poor operating results, which has
caused the market to undervalue its shares. Monsanto recently
purchased 6.25 million shares of the Company at $8 a share;
(b) because Monsanto has an overwhelming controlling
interest in the Company's common stock, no third party will
likely bid for Calgene. Thus, defendants will be able to pro-
ceed with the Buyout Transaction without an auction or other
type of market check to maximize value for Calgene's public
shareholders; and
(c) defendants timed the announcement of the Buyout
Transaction to place an artificial lid or cap on the market
price for Calgene's stock to enable Monsanto to acquire the
minority stock at the lowest possible price.
18. By reason of their positions with Calgene and
Monsanto's controlling ownership of the Company, defendants are
- 6 -
<PAGE> 7
in possession of non-public information concerning the finan-
cial condition and prospects of Calgene, and especially the
true value and expected increased future value of Calgene and
its assets, which they have not disclosed to Calgene's public
stockholders.
19. The proposed Buyout Transaction is wrongful,
unfair and harmful to Calgene's minority public stockholders,
and represents an effort by defendants to aggrandize Monsanto's
financial position and interests at the expense of and to the
detriment of class members. The Buyout Transaction is an at-
tempt to deny plaintiff and the other members of the Class
their right to share proportionately in the true value of
Calgene's valuable technology, future growth in profits, earn-
ings and dividends, while usurping the same for the benefit of
Monsanto on unfair and inadequate terms.
20. Defendants, in failing to disclose the material
non-public information in their possession as to the value of
Calgene's technology, the full extent of the future earnings
potential of Calgene and its expected increase in profitabil-
ity, have breached and are breaching their fiduciary duties to
the members of the Class.
21. As a result of defendants' unlawful actions,
plaintiff and the other members of the Class will be damaged in
that they will not receive their fair portion of the value of
- 7 -
<PAGE> 8
Calgene assets and business and will be prevented from obtain-
ing the real value of their equity ownership of the Company.
22. Unless the proposed Buyout Transaction is en-
joined by the Court, defendants will continue to breach their
fiduciary duties owed to plaintiff and the members of the
Class, will not engage in arm's-length negotiations on the
merger terms, and will consummate and close the proposed merger
complained of and succeed in their plan described above, all to
the irreparable harm of the members of the Class.
23. Plaintiff and the other members of the Class
have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class ac-
tion and certifying plaintiff as the representative of the
Class;
(b) ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, includ-
ing those duties of care, loyalty, candor and fair dealing;
(c) granting preliminary and permanent injunctive
relief against the consummation of the Buyout Transaction as
described herein;
(d) in the event the Buyout Transaction is consum-
mated, rescinding the Buyout Transaction effected by defendants
and/or awarding rescissory damages to the Class;
- 8 -
<PAGE> 9
(e) ordering defendants, jointly and severally, to
account to plaintiff and other members of the Class for all
damages suffered and to be suffered by them as the result of
the acts and transactions alleged herein;
(f) awarding plaintiff the costs and disbursements
of the action including allowances for plaintiff's reasonable
attorneys' and experts' fees; and
(g) granting such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS &
& GODDESS, P.A.
By: /s/
-------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BEIGEL LASKY RIFKIND FERTIK
GELBER & WHITE
750 Lexington Avenue, 30th Floor
New York, NY 10022
- 9 -
<PAGE> 1
Exhibit 24
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
-----------------------------------x
:
ROBERT LEWIS, :
:
Plaintiff, :
: Civil Action No. 15511-NC
v. :
: CLASS ACTION COMPLAINT
:
MONSANTO COMPANY, LLOYD KUNIMOTO, :
JOHN ROBSON, HENDRIK VERFAILLIE, :
ROBERT FRALEY, PATRICK FORTUNE, :
MICHAEL HOGAN, HOWARD PALEFSKY, :
ALLEN VANGELOS, ROGER SALQUIST, :
and CALGENE, INC. :
:
Defendants. :
-----------------------------------x
Plaintiff, by his attorneys, alleges the following
upon information and belief, except for those allegations which
pertain to plaintiff, which allegations are based upon personal
knowledge:
1. This action arises out of an unlawful scheme and
plan to enable Monsanto Company ("Monsanto") to acquire the
remaining approximately 45.40% ownership of Calgene, Inc.
("Calgene" or the "Company") which Monsanto does not already
own for grossly inadequate consideration and in breach of de-
fendants' fiduciary duties. Plaintiff alleges that he and the
other public stockholders of Calgene common stock are entitled
to enjoin the proposed transaction, or alternatively, recover
damages in the event the transaction is consummated.
<PAGE> 2
THE PARTIES
2. Plaintiff is and at all relevant times was the
owner of Calgene common stock.
3. Defendant Calgene is a corporation organized and
existing under the laws of the State of Delaware with its prin-
cipal executive offices located at 1920 Fifth Street, Davis,
California 95616. Calgene is the developer of genetically en-
gineered plants and plant products for the seed, food and
oleochemical industries, using recombinant-DNA technology. The
Company developed the first genetically engineered tomato and
is in the process of developing other bio-engineered products,
such as canola oil and cottonseed.
4. Defendant Monsanto is a Delaware corporation with
its principal headquarters located at 800 North Lindbergh
Blvd., St. Louis, Missouri 63167. Monsanto is the largest
shareholder of Calgene. It owns approximately 54.6% of the
Company's common stock. As such, Monsanto has effective con-
trol over the Company.
5. Defendant Lloyd Kunimoto is President of Calgene
and director of the Company.
6. Defendant Hendrik Verfaillie is a director of the
Company. He is also the Executive Vice President of Monsanto.
7. Defendant Robert Fraley is a director of the Com-
pany. He is also President of Ceregen, a Monsanto business
unit.
- 2 -
<PAGE> 3
8. Defendant Patrick Fortune is a director of the
Company. He is also Chief Information Officer for Monsanto.
9. Defendant Michael Hogan is a director of the Com-
pany. He is also Vice President and Corporate Controller of
Monsanto.
10. Defendant Roger Salquist is a director of the
Company. Mr. Salquist was the Chairman of the Board and Chief
Executive Officer of Calgene until his resignation in July
1996.
11. Defendants John Robson, Howard Palefsky, and
Allen Vangelos are directors of the Company.
12. The above-named individual defendants (collec-
tively the "Individual Defendants") as officers and/or direc-
tors of the Company, owe fiduciary duties of good faith, loy-
alty, fair dealing, due care, and candor to plaintiff and the
other members of the Class (as defined below).
CLASS ACTION ALLEGATIONS
13. Plaintiff brings this action pursuant to Rule 23
of the Rules of this Court, on behalf of herself and all other
stockholders of the Company as of January 29, 1997 (the
"Class"), and their successors in interest, who are or will be
threatened with injury arising from defendants' actions. Ex-
cluded from the Class are the defendants herein, members of
- 3 -
<PAGE> 4
their immediate families, and any subsidiary, firm, trust, cor-
poration, or other entity related to or affiliated with any of
the defendants.
14. This action is properly maintainable as a class
action for the following reasons:
(a) the Class is so numerous that joinder of all
members is impracticable. There are more than 26 million
shares of Calgene common stock outstanding held by hundreds of
shareholders of record. Calgene common stock is listed and
actively traded on the NASDAQ Exchange;
(b) there are questions of law and fact which are
common to members of the Class and which predominate over any
questions affecting only individual members. The common ques-
tions include, inter alia, the following:
(i) whether defendants have engaged and are
continuing to engage in a plan and scheme to benefit Monsanto
at the expense of the members of the Class;
(ii) whether the Individual Defendants, as di-
rectors and/or officers of the Company, have breached their
fiduciary duties owed to plaintiff and the other members of the
Class, including their duties of entire fairness, loyalty, due
care, and candor;
(iii) whether defendants have disclosed all mate-
rial facts in connection with the challenged transaction; and
- 4 -
<PAGE> 5
(iv) whether plaintiff and the other members of
the Class would be irreparably damaged were defendants not en-
joined from the conduct described herein;
(c) the claims of plaintiff are typical of the
claims of the other members of the Class and plaintiff has no
interests that are adverse or antagonistic to the interests of
the Class; and
(d) plaintiff is committed to prosecuting this ac-
tion and has retained counsel competent and experienced in
litigation of this nature. Plaintiff is an adequate represen-
tative of the Class and will fairly and adequately protect the
interests of the Class.
SUBSTANTIVE ALLEGATIONS
15. On January 28, 1997, it was reported over the
Bloomberg Business Wire that Monsanto would acquire the remain-
ing shares of Calgene that it does not already own. Pursuant
to the proposed transaction, each of Calgene's minority owned
common shares will be purchased for $7.25 per share in cash
(the "Buyout Transaction").
16. The purpose of the Buyout Transaction is to en-
able Monsanto to acquire one hundred (100%) percent equity own-
ership of Calgene and its valuable assets for its own benefit
at the expense of Calgene's public stockholders who will be
deprived of their equity investment and the benefits thereof
- 5 -
<PAGE> 6
including, among other things, the expected growth in the Com-
pany's profitability.
17. The Buyout Transaction is the product of unfair
dealing, and the price of $7.25 cash per share to be paid to
class members is unfair and grossly inadequate because, among
other things:
(a) the announcement of the proposed Buyout Transac-
tion was made to take advantage of the fact that the Company
has recently experienced some poor operating results, which has
caused the market to undervalue its shares. Monsanto recently
purchased 6.25 million shares of the Company at $8 a share;
(b) because Monsanto has an overwhelming controlling
interest in the Company's common stock, no third party will
likely bid for Calgene. Thus, defendants will be able to pro-
ceed with the Buyout Transaction without an auction or other
type of market check to maximize value for Calgene's public
shareholders; and
(c) defendants timed the announcement of the Buyout
Transaction to place an artificial lid or cap on the market
price for Calgene's stock to enable Monsanto to acquire the
minority stock at the lowest possible price.
18. By reason of their positions with Calgene and
Monsanto's controlling ownership of the Company, defendants are
in possession of non-public information concerning the finan-
cial condition and prospects of Calgene, and especially the
- 6 -
<PAGE> 7
true value and expected increased future value of Calgene and
its assets, which they have not disclosed to Calgene's public
stockholders.
19. The proposed Buyout Transaction is wrongful,
unfair and harmful to Calgene's minority public stockholders,
and represents an effort by defendants to aggrandize Monsanto's
financial position and interests at the expense of and to the
detriment of class members. The Buyout Transaction is an at-
tempt to deny plaintiff and the other members of the Class
their right to share proportionately in the true value of Cal-
gene's valuable technology, future growth in profits, earnings
and dividends, while usurping the same for the benefit of
Monsanto on unfair and inadequate terms.
20. Defendants, in failing to disclose the material
non-public information in their possession as to the value of
Calgene's technology, the full extent of the future earnings
potential of Calgene and its expected increase in profitabil-
ity, have breached and are breaching their fiduciary duties to
the members of the Class.
21. As a result of defendants' unlawful actions,
plaintiff and the other members of the class will be damaged in
that they will not receive their fair portion of the value of
Calgene assets and business and will be prevented from obtain-
ing the real value of their equity ownership of the Company.
- 7 -
<PAGE> 8
22. Unless the proposed Buyout Transaction is en-
joined by the Court, defendants will continue to breach their
fiduciary duties owed to the plaintiff and the members of the
Class, will not engage in arm's-length negotiations on the
merger terms, and will consummate and close the proposed merger
complained of and succeed in their plan described above, all to
the irreparable harm of the members of the Class.
23. Plaintiff and the other members of the Class
have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) declaring this action to be a proper class
action and certifying plaintiff as the representative of the
Class;
(b) ordering defendants to carry out their fiduciary
duties to plaintiff and the other members of the Class, includ-
ing those duties of care, loyalty, candor and fair dealing;
(c) granting preliminary and permanent injunctive
relief against the consummation of the Buyout Transaction as
described herein;
(d) in the event the Buyout Transaction is consum-
mated, rescinding the Buyout Transaction effected by defendants
and/or awarding rescissory damages to the Class;
(e) ordering defendants, jointly and severally, to
account to plaintiff and other members of the Class for all
- 8 -
<PAGE> 9
damages suffered and to be suffered by them as the result of
the acts and transactions alleged herein;
(f) awarding plaintiff the costs and disbursements
of the action including allowances for plaintiff's reasonable
attorneys' and experts, fees; and
(g) granting such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS &
& GODDESS, P.A.
By: /s/
-------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
HAROLD B. OBSTFELD, P.C.
500 Fifth Avenue, 56th Floor
New York, NY 10110-0002
(212) 391-4150
- 9 -
<PAGE> 1
EXHIBIT 25
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
-----------------------------------x
HANNA OBSTFELD, :
:
Plaintiff, :
:
v. : C.A. No. 15487-NC
:
ROGER H. SALQUIST et al., :
:
Defendants. :
-----------------------------------x
MARGIE ELSTEIN, custodian for :
GARY ELSTEIN, UGMA, :
:
Plaintiff, :
:
v. : C.A. No. 15488-NC
:
MONSANTO COMPANY et al., :
:
Defendants. :
-----------------------------------x
LESLIE SUSSER, :
:
Plaintiff, :
:
v. : C.A. No. 15489-NC
:
LLOYD M. KUNIMOTO et al., :
:
Defendants. :
-----------------------------------x
ALVIN SIEGEL, :
:
Plaintiff, :
:
v. : C.A. No. 15490-NC
:
CALGENE, INC. et al., :
:
Defendants. :
-----------------------------------x
<PAGE> 2
-----------------------------------x
:
F. RICHARD MANSON and ERNEST HACK, :
:
Plaintiffs, :
:
v. : C.A. No, 15491-NC
:
PATRICK J. FORTUNE at al., :
:
Defendants. :
-----------------------------------x
JERE SETTLE, :
:
Plaintiff, :
:
v. : C.A. No. 15493-NC
:
MONSANTO COMPANY et al., :
:
Defendants. :
-----------------------------------x
HOWARD GLICKBERG, :
:
Plaintiff, :
:
v. : C.A. No. 15499-NC
:
MONSANTO COMPANY et al., :
:
Defendants. :
-----------------------------------x
ROBERT LEWIS, :
:
Plaintiff, :
:
v. : C.A. No. 15511-NC
:
MONSANTO COMPANY et al., :
:
Defendants. :
-----------------------------------x
ORDER OF CONSOLIDATION
----------------------
-2-
<PAGE> 3
It appearing that the above-captioned actions involve
the same subject matter, and that the administration of justice
would be best served by consolidating the actions,
IT IS, this 10th day of March, 1997, ORDERED AS
FOLLOWS:
1. The above-captioned actions are hereby consoli-
dated for all purposes.
2. Hereafter, papers need only be filed in Civil
Action No. 15487-NC.
3. The caption of the consolidated action shall be
as follows:
-----------------------------------x
IN RE CALGENE, INC. : CONSOLIDATED
SHAREHOLDERS LITIGATION : C.A. No. 15487-NC
-----------------------------------x
4. The law firms of ABBEY, GARDY & SQUITIERI, LLP,
212 East 39th Street, New York, NY 10016; BEIGEL LASKY RIFKIND
FERTIK GELBER & WHITE, 750 Lexington Avenue, 30th Floor, New
York, NY 10022; CHIMICLES, JACOBSEN & TIKELLIS, One Rodney
Square, P.O. Box 1035, Wilmington, DE 19899; FARUQI & FARUQI,
LLP, 415 Madison Avenue, New York, NY 10017; GILMAN AND PASTOR,
One Boston Place, 28th Floor, Boston, MA 02108; GOODKIND
LABATON RUDOFF & SUCHAROW, LLP, 100 Park Avenue, 12th Floor,
New York, NY 10017; HAROLD B. OBSTFELD, P.C., 500 Fifth Avenue,
56th Floor, New York, NY 10110-0002; LAW OFFICES OF CHARLES J.
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PIVEN, 111 S. Calvert Street, Suite 2700, Baltimore, MD 21202;
WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP, 270 Madison Avenue,
New York, NY 10016; and WOLF POPPER LLP, 845 Third Avenue, New
York, NY 10022 shall constitute plaintiffs' Committee of the
Whole. The law firms of ABBEY, GARDY & SQUITIERI, LLP;
GOODKIND LABATON RUDOFF & SUCHAROW, LLP; and WOLF POPPER LLP
shall constitute plaintiffs' Co-Lead Counsel. The law firms of
CHIMICLES, JACOBSEN & TIKELLIS and ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A., Suite 1401, Mellon Bank Center, P.0. Box 1070,
Wilmington, DE 19899 are hereby designated as plaintiffs'
Delaware Co-Liaison Counsel.
5. All documents previous served and filed to date
in any of the cases consolidated herein are deemed a part of
the record in the consolidated action. As soon as practicable,
plaintiffs shall file a consolidated amended complaint. Defen-
dants need not respond to the complaints heretofore filed in
any of the constituent actions.
6. Plaintiffs' Co-Lead Counsel shall set policy for
plaintiffs for the prosecution of this litigation, delegate and
monitor the work performed by the plaintiffs' attorneys to en-
sure that there is no duplication of effort or unnecessary ex-
pense, coordinate on behalf of plaintiffs the initiation and
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conduct of discovery proceedings, conduct settlement negotia-
tions, and provide supervision and coordination of the activi-
ties of plaintiffs' counsel.
/s/ William T. Allen
----------------------------
Chancellor
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EXHIBIT 26
MEMORANDUM OF UNDERSTANDING
The parties to the consolidated action entitled In re Calgene, Inc.
Shareholders Litigation, Civil Action No. 15487-NC (the "Action"), pending in
the Court of Chancery for the State of Delaware in and for New Castle County
(the "Chancery Court"), by their respective attorneys, have reached an
agreement in principle providing for the settlement of the Action on the terms
and subject to the conditions set forth below.
1. Monsanto Company ("Monsanto") currently owns approximately 54.55%
of the outstanding common stock of Calgene, Inc. ("Calgene"). On January 28,
1997, Monsanto announced that it had offered to buy all of the remaining
outstanding shares of Calgene not owned by Monsanto (the "Minority Shares") for
$7.25 per share. Following commencement of the Action, plaintiffs' counsel
retained a financial expert, obtained relevant documents from defendants and
engaged in discussions with counsel for the Special Committee of Calgene's
Board of Directors and counsel for Monsanto with regard to resolution of the
Action. To resolve the Action, Monsanto will seek to acquire the Minority
Shares by means of a first-step tender offer and a second-step merger at a
price, in each step, of $8.00 per share in cash in lieu of the $7.25 per share
proposal made by Monsanto. Monsanto will not, without the consent of the
Special Committee of Calgene Board of Directors, accept for payment any shares
tendered pursuant to the tender
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offer unless at least a majority of the Minority Shares are tendered
and not withdrawn prior to the expiration of the tender offer.
2. The parties to the Action will attempt in good
faith to agree upon and execute a definitive Stipulation of
Settlement and such other documentation as may be required in
order to obtain approval by the Chancery Court of the settle-
ment upon the terms set forth in this Memorandum of Understand-
ing. The Stipulation of Settlement will expressly provide,
inter alia, that defendants have denied, and continue to deny,
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that they have committed or have threatened to commit any vio-
lations of law and that they are entering into the Stipulation
because the proposed settlement would eliminate the burden and
expense of further litigation and would facilitate the consum-
mation of a transaction which is in the best interests of Cal-
gene and all of its shareholders. The Stipulation of Settle-
ment will further provide that the defendants considered the
Action, the allegations made by plaintiffs therein and the dis-
cussions with plaintiffs' counsel, in agreeing to the increased
consideration to be offered by Monsanto for the Minority
Shares.
3. The parties to the Action will present the set-
tlement to the Chancery Court for approval as soon as practi-
cable following appropriate notice to the Calgene shareholders
on whose behalf the Action was instituted, and will use
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their best efforts to obtain final Court approval of the settlement
and the dismissal of the Action with prejudice as to all claims
asserted in the Action an against the named plaintiffs and the
class of Calgene shareholders on whose behalf the Action was
brought and without costs to any party (except as provided for
in paragraph 6 below).
4. The consummation of the settlement is subject to
the completion by plaintiffs of any additional necessary dis-
covery satisfactory to plaintiffs, the drafting and execution
of a definitive Stipulation of Settlement and such other docu-
mentation as may be required to obtain final Court approval of
the settlement, and the dismissal of the Action with prejudice
and without costs to any party (except as provided for in para-
graph 6 below).
5. The settlement contemplated by this Memorandum
of Understanding will not be binding upon any party until the
transaction referred to in paragraph 1 has been consummated,
discovery referred to in paragraph 4 above has been completed,
a definitive Stipulation of Settlement has been signed and
final Court approval of the settlement and the dismissal of the
Action with prejudice and without costs (except as provided for
in paragraph 6 below) has been obtained. This Memorandum of
Understanding shall be null and void and of no force and effect
should any of these conditions not be met or should counsel for
any of the parties determine that, based upon discovery or sub-
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sequent events, the settlement is not fair and reasonable and,
in that event, this Memorandum of Understanding shall not be
deemed to prejudice in any way the positions of the parties
with respect to the Action.
6. Plaintiffs' counsel intend to apply to the Court
for an award of attorneys' fees and reasonable disbursements,
including expert fees, in an amount not to exceed $795,000.
Defendants will not oppose such application. Subject to the
terms and conditions of this Memorandum of Understanding, the
consummation of the transaction and the Stipulation of Settle-
ment contemplated by paragraphs 2 and 5 above, Monsanto will
pay plaintiffs' counsel such amounts within such limit as may
be awarded by the Chancery Court. Monsanto shall pay the costs
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and expenses related to providing notice of the settlement to
Calgene shareholders.
Dated: New York, New York
March 31, 1997
ABBEY, GARDY & SQUITIERI, LLP
-and-
GOODKIND LABATON RUDOFF &
SUCHAROW, LLP
-and-
WOLF POPPER LLP
By: /s/ Arthur Abbey
---------------------------
Arthur Abbey
Plaintiffs' Co-Lead Counsel
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