<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ----------)<F*>
Calgene, Inc.
- ---------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.001 par value
- ---------------------------------------------------------------------------
(Title of Class of Securities)
129598 10 8
-------------------------------------------------------
(CUSIP Number)
Karl R. Barnickol, 800 N. Lindbergh Boulevard, St. Louis, Missouri 63167,
(314) 694-1000
- ---------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
March 31, 1996
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
Check the following box if a fee is being paid with the statement /X/. (A
fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
<F*>The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 129598 10 8
-------------------
=============================================================================
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Monsanto Company: 43-0420020
- -----------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
n/a
- -----------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC, OO
- -----------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) OR 2(e)
n/a
- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 30,143,441
SHARES -------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH n/a
REPORTING -------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
30,143,441
-------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
n/a
- -----------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
30,143,441
- -----------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / /
n/a
- -----------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
49.9%
- -----------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
=============================================================================
-2-
<PAGE> 3
Item 1. Security and Issuer.
- ----------------------------
This statement relates to the Common Stock, par value $.001
per share (the "Common Stock"), of Calgene, Inc. (formerly
incorporated under the name Calgene II, Inc.), a Delaware
corporation (the "Issuer"). The Common Stock was registered under
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules promulgated thereunder effective March 29,
1996. The issuer changed its name from "Calgene II, Inc." to
"Calgene, Inc." effective March 31, 1996 and filed a Form 10-C
notifying the Securities and Exchange Commission (the "Commission")
of the name change shortly thereafter. The Issuer's executive
offices are located at 1920 Fifth Street, Davis, California 95616.
Item 2. Identity and Background.
- --------------------------------
This statement is filed by Monsanto Company (the "Company"),
a Delaware corporation. The Company and its subsidiaries are
engaged in the worldwide manufacture and sale of a diversified line
of agricultural products, chemical products, pharmaceuticals and
food ingredients. The Company's principal business and principal
office are located at 800 North Lindbergh Boulevard, St. Louis,
Missouri 63167.
During the last five years, neither the Company nor any of its
executive officers, directors or controlling persons, has been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
During the last five years, neither the Company nor any of its
executive officers, directors or controlling persons, has been, and
is not now (a) subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws, or (b) a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction finding any violation with respect to such
laws.
Item 3. Source and Amount of Funds or Other Consideration.
- ----------------------------------------------------------
The amount and source of funds used by the Company to purchase
the shares of Common Stock are (i) all outstanding shares of
capital stock of Gargiulo, Inc., a Delaware corporation and wholly-
owned subsidiary of the Company ("Gargiulo"), whose principal asset
at the time of its contribution to the Issuer was the entire equity
interest in Gargiulo, L.P., a Delaware limited partnership
("Gargiulo, L.P."), (ii) $30,000,000 in cash (less amounts
previously advanced to Calgene (as defined below) under an existing
subordinated promissory note, under which $23,000,000 was
outstanding at March 29, 1996) from the Company's current working
capital and (iii) certain technology licenses relating to fatty
acid composition, fruit ripening control, virus and insect
resistance, carbohydrate partitioning and gene expression.
Gargiulo L.P. engages in the growing, packaging, marketing and
distribution of tomatoes and strawberries and, to a lesser extent,
other fresh fruits and vegetables. On April 3, 1996, Gargiulo L.P.
was merged with and into Gargiulo, the sole general partner of
Gargiulo L.P. at the time of such merger.
-3-
<PAGE> 4
Item 4. Purpose of Transaction.
- -------------------------------
On October 13, 1995, Calgene Technology Corporation, (then
incorporated under the name Calgene, Inc. ("Calgene") entered in to
an Agreement and Plan of Reorganization with the Company (the
"Reorganization Agreement"), pursuant to which Calgene and the
Company agreed, subject to the approval of Calgene stockholders and
the fulfillment of certain other conditions, to a series of
transactions referred to herein as the "Reorganization."
The first step of the Reorganization involved the merger (the
"Merger") of Calgene Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of the Issuer, with and into Calgene, with
Calgene being the surviving corporation in the Merger and becoming
a wholly-owned subsidiary of the Issuer.
Pursuant to the Merger, each stockholder of Calgene received
one share of Common Stock for each share of Calgene common stock
held by such stockholder immediately prior to the Effective Time.
The shares of Common Stock received by Calgene stockholders in the
Merger (i) are registered under and are the subject of the Issuer's
prospectus prepared in accordance with the Securities Act of 1933,
as amended (the "Securities Act"), (ii) are listed on the Nasdaq
National Market under the symbol "CGNE," and (iii) represent 50.1%
of the outstanding shares of Common Stock at the Effective Time.
Because the common stock of Calgene was registered under Section
12(g) of the Exchange Act and the Reorganization required the
approval of the holders of a majority of the issued and outstanding
common stock of Calgene, Calgene prepared and filed with the
Commission and distributed to all of the holders of Calgene common
stock on the record date, a proxy statement describing the
transaction which proxy statement contained other information about
the transaction and the parties involved. The Prospectus of the
Issuer and the Proxy Statement of Calgene were contained in one
document filed as part of that certain Registration Statement on
Form S-4 (333-739) dated February 6, 1996, which was declared
effective by the Commission on February 7, 1996.
The second step of the Reorganization involved the exchange by
the Company of (i) all outstanding shares of capital stock of
Gargiulo, whose principal asset was the entire equity interest in
Gargiulo, L.P. (immediately following the Reorganization, Gargiulo,
L.P. was merged into Gargiulo, thereby succeeding to all of the
assets and liabilities of Gargiulo, L.P. by operation of law), (ii)
$30,000,000 in cash (less amounts previously advanced to Calgene
under an existing subordinated promissory note, under which
$23,000,000 was outstanding at March 29, 1996) and (iii) certain
technology licenses relating to fatty acid composition, fruit
ripening control, virus and insect resistance, carbohydrate
partitioning and gene expression, for that number of shares of
Common Stock representing 49.9% of the outstanding shares of Common
Stock at the Effective Time. The shares of Common Stock received
by the Company in the Reorganization were not registered under the
Securities Act. However, upon the occurrence of certain events, as
set forth in a Stockholders Agreement, dated as March 31, 1996,
between the Company and the Issuer (the "Stockholders Agreement"),
the Company has certain registration rights with respect to its
shares of Common Stock. The Stockholders Agreement is described in
more detail below.
On March 25, 1996, the holders of a majority of the issued and
outstanding common stock of Calgene approved the Reorganization
Agreement. Upon the Effective Time (March 31,
-4-
<PAGE> 5
1996), the Issuer then changed its name to "Calgene, Inc." and Calgene
changed its name to "Calgene Technology Corporation."
The Reorganization was structured in the manner described
herein in order that the exchange of Calgene common stock in the
Merger for Common Stock would qualify as a tax-free exchange under
Section 351 of the Internal Revenue Code of 1986, as amended.
The Stockholders Agreement contains provisions relating to:
(a) the composition of the Boards of Directors of the Issuer,
Calgene and Gargiulo; (b) restrictions upon the purchase of
additional shares of Common Stock by the Company; (c) restrictions
upon sales of shares of Common Stock by the Company; (d) rights of
the Company to require the registration of shares of Common Stock
under the Securities Act; (e) rights of the Company to participate
in future equity financings of the Issuer; and (f) requirements
that certain actions of the Issuer be approved by at least one
Calgene designee on the Board of Directors of the Issuer (the
"Issuer Board") and one Company designee on the Issuer Board.
Pursuant to the Stockholders Agreement, the Issuer Board is to
consist of nine directors, of which two are to be executive
officers of the Issuer (but only one of which has been appointed as
of the date hereof), three which are to be and which have been
designated by the Issuer and four which are to be and which have
been designated by the Company.
At the Effective Time, the executive officers of Calgene
immediately prior to the Effective Time, together with the Chairman
and Chief Executive Officer of Gargiulo, L.P. (prior to its merger
with and into Gargiulo), became the principal executive officers of
the Issuer, except that Roderick N. Stacey, the President and Chief
Operating Officer of Calgene, resigned.
The Company acquired its shares of Common Stock for investment
purposes. The Company believes that Calgene has established a
leadership position in the genetic engineering of plant oils for
the food and chemical industries and that plant oils represent a
significant commercial opportunity. The Company anticipates that
its indirect investment in Calgene, through ownership of Common
Stock, will enable the Company to participate in that opportunity.
The Company believes that combining the produce-related
biotechnology and business assets of Gargiulo which it contributed
to the Issuer with that of Calgene will result in an enterprise
that is better positioned to develop, produce and market a family
of high-value produce products on a nationwide basis. Finally, the
Company believes that Calgene is a leader in the development of
novel plant genetic engineering technologies, and that an indirect
investment in Calgene will provide a vehicle for the Company to
gain access to such technologies.
Item 5. Interest in Securities of the Issuer.
- ---------------------------------------------
(a) As determined in accordance with Rule 13d-3, the Company is
the beneficial owner of 30,143,441 shares of Common Stock,
representing approximately 49.9% of the total issued and
outstanding Common Stock.
(b) As determined in accordance with Rule 13d-3, the Company has
sole voting power and sole dispositive power with respect to
30,143,441 shares of Common Stock.
-5-
<PAGE> 6
(c) Except as set forth in this Schedule 13D, no transactions have
been effected by the Company during the past sixty (60) days with
respect to any shares of Common Stock.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings, or Relationships
- ------------------------------------------------------------------
with Respect to Securities of the Issuer.
- ----------------------------------------
THE REORGANIZATION AGREEMENT
On October 13, 1995, Calgene and the Company entered into the
Reorganization Agreement pursuant to which Calgene and the Company
agreed, subject to the approval of Calgene stockholders and the
fulfillment of certain other conditions, to the Reorganization,
which included (i) the merger of Calgene Acquisition Corp., with
and into Calgene, with Calgene, as the surviving corporation,
becoming a wholly-owned subsidiary of the Issuer, and the
stockholders of Calgene receiving shares of Common Stock
representing 50.1% of the outstanding shares of Common Stock at the
Effective Time, and (ii) the exchange by the Company of all
outstanding shares of capital stock of Gargiulo, $30,000,000 in
cash (less amounts previously advanced to Calgene under an existing
subordinated promissory note) and certain technology licenses for
that number of shares of Common Stock representing 49.9% of the
outstanding shares of Common Stock at the Effective Time.
THE STOCKHOLDERS AGREEMENT
Pursuant to the Reorganization Agreement, the Company and the
Issuer entered into the Stockholders Agreement at the Effective
Time providing for, among other things, the following:
Registration Rights
The Stockholders Agreement provides that the Company and
certain assignees may, subject to certain conditions and
limitations, require the Issuer, whether or not the Issuer proposes
to register its Common Stock for sale, to register all or part of
the shares of Common Stock acquired by the Company in connection
with the Reorganization or upon the later conversion into Common
Stock of outstanding principal or interest under the Newco Credit
Facility Agreement (as defined herein) or the Gargiulo Credit
Facility Agreement (as defined herein) (collectively, the
"Registrable Shares") under the Securities Act and to register or
qualify such Registrable Shares under any applicable state
securities or blue sky laws so as to permit the Company to sell
such Registrable Shares in the public markets. The Issuer is not
required to effect such a registration prior to September 30, 1998,
unless an Event of Default (as defined in the Newco Credit Facility
Agreement or the Gargiulo Credit Facility Agreement, as the case
may be) has occurred and is continuing under the Newco Credit
Facility Agreement or the Gargiulo Credit Facility Agreement, in
which event the Issuer is required to effect a registration of the
Registrable Shares received in such conversion at the request of
the Company or its assignee. The Issuer is required to pay all of
the expenses (other than certain expenses of the Company, such as
underwriting discounts and selling commissions) with respect to up
to four
-6-
<PAGE> 7
(4) such registrations. In the event the Issuer proposes
to register any of its securities under the Securities Act at any
time after September 30, 1998 for its own account (other than a
registration relating to employee benefit plans or a transaction
under Rule 145 of the Securities Act), the Company is entitled to
notice of such registration and to include Registrable Shares in
such registration, subject to certain conditions and limitations.
The registration rights granted pursuant to the Stockholders
Agreement shall terminate at such time as (a) all Registrable
Shares can be sold within a given three month period without
registration under the Securities Act pursuant to Rule 144 of the
Securities Act and (b) all accrued interest and principal under the
Newco Credit Facility Agreement and the Gargiulo Credit Facility
Agreement has been repaid in full or converted into Common Stock
(and such Common Stock can be sold as provided in clause (a)
above).
Anti-Dilution Rights
If at any time after the Effective Time the Issuer agrees to
sell shares of Common Stock or other securities having the right to
vote generally in any election of directors of the Issuer
(collectively, "Issuer Securities") in a private or public offering
(other than pursuant to the Issuer's stock option plans), the
Company is entitled to notice of such proposed sale and has the
right, but not the obligation, to acquire all or any portion of
Issuer Securities to be offered for sale sufficient for the Company
to maintain, after the consummation of the proposed offering, the
same percentage of ownership of Issuer Securities as the Company
possessed immediately prior to such offering. With respect to
shares of Issuer Securities issued pursuant to the Issuer's stock
option plans, the Company shall have the right to maintain its
percentage ownership of issued and outstanding Issuer Securities by
making open market purchases in accordance with the Stockholders
Agreement.
Limitations on the Company's Ownership of Issuer Securities
Except for purchases of Issuer Securities made in accordance
with the Stockholders Agreement, during the term of the
Stockholders Agreement, the Company shall not, directly or
indirectly, acquire any Issuer Securities except as follows: (a)
prior to the first anniversary of the Effective Time, the Company
shall not increase its percentage of ownership of issued and
outstanding Issuer Securities (the "Percentage Interest") above
49.9% except through one or more of the following: (i) conversion
of principal and/or interest under the Newco Credit Facility
Agreement or the Gargiulo Credit Facility Agreement into shares of
Common Stock; (ii) issuance of Issuer Securities in an asset sale
by the Company to the Issuer; or (iii) a tender offer by the
Company for not less than 100% of all publicly-traded Issuer
Securities at a price approved by the disinterested directors of
the Issuer and based upon a fairness opinion delivered to the
Issuer Board by an investment banking firm; (b) on and after the
first anniversary of the Effective Time until the earlier of
September 30, 1998, or the third anniversary of the Effective Time,
the Company shall not increase or further increase its ownership of
issued and outstanding Issuer Securities above 49.9% except through
one or more of the following: (i) conversion of principal and/or
interest under the Newco Credit Facility Agreement or the Gargiulo
Credit Facility Agreement into shares of Common Stock; (ii)
issuance of Issuer Securities in an asset sale by the Company to
the Issuer; or (iii) a tender offer by the Company to increase its
ownership to 70% or more of the issued and outstanding Issuer
Securities at a price approved by the disinterested directors of
the Issuer and based upon a fairness opinion delivered to the
-7-
<PAGE> 8
Issuer Board by an investment banking firm; provided, however, that
if the Company makes a tender offer to increase its ownership to
more than 80% of the issued and outstanding Issuer Securities, such
tender offer must be for at least 100% of all publicly traded
Issuer Securities; and (c) after the earlier of September 30, 1998,
or the third anniversary of the Effective Time, the Company may
increase its ownership of Issuer Securities through open market
purchases or otherwise.
Limitations on the Company's Resale of Issuer Securities
The Stockholders Agreement provides that the Company shall
not, directly or indirectly, sell any Issuer Securities (other than
to an affiliate) except as follows: (a) on and after the first
anniversary of the Effective Time until the earlier of September
30, 1998, or the third anniversary of the Effective Time, the
Company may sell Issuer 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 the Issuer; (b) after the
earlier of September 30, 1998, or the third anniversary of the
Effective Time, in addition to the rights set forth in (a) above,
the Company may sell Issuer Securities (i) in a registered public
offering pursuant to the registration rights granted to the Company
under the Stockholders Agreement; (ii) through sales pursuant to
Rule 144 under the Securities Act; (iii) through sales of not more
than 10% of the total issued and outstanding Issuer Securities to
a Non-Financial Purchaser (as defined in the Stockholders
Agreement); or (iv) through sales to a Financial Purchaser (as
defined in the Stockholders Agreement); (c) after the earlier of
September 30, 1999, or the fourth anniversary of the Effective
Time, in addition to the rights set forth in (a) and (b) above, the
Company may sell Issuer Securities through a private sale of 35% or
more of the total issued and outstanding Issuer Securities to a
Non-Financial Purchaser under circumstances where such third party
assumes the applicable and proportionate rights and obligations of
the Company under the Stockholders Agreement and the other
agreements signed pursuant to the Reorganization Agreement; and (d)
notwithstanding the foregoing, at any time after the Effective
Time, the Company may sell Issuer Securities issued to the Company
upon conversion by the Company of principal or interest under the
Newco Credit Facility Agreement or the Gargiulo Credit Facility
Agreement after the occurrence of an Event of Default under the
Newco Credit Facility or the Gargiulo Credit Facility as the case
may be.
Composition of the Issuer Board
The Stockholders Agreement provides that the composition of
the Issuer Board and the manner of nominating members thereof shall
be as follows:
(a) at and after the Effective Time, the Issuer Board shall
be comprised of nine directors. The number of Issuer Directors may
be increased only in accordance with the terms of the Stockholders
Agreement;
(b) at the Effective Time and until the earlier of any time
that (i) the Company's percentage ownership of the outstanding
Issuer Securities ("Percentage Interest") is at least 55% or (ii)
the Issuer elects to convert borrowings made from the Company into
equity securities of the Issuer and the Company's Percentage
Interest is at least 50% after such conversion (a
-8-
<PAGE> 9
"Trigger Event"), the Issuer shall nominate for election as directors
two directors who are either the Chief Executive Officer or Chief
Operating Officer of the Issuer (or the next most highly ranking
executive officers of the Issuer) ("Company Management Directors"),
three Independent Directors (as defined in the Stockholders Agreement)
designated by the Issuer ("Company Directors"), and four directors
designated by the Company (each a "Monsanto Director"), at least
one of whom shall be an Independent Director (as defined in the
Stockholders Agreement);
(c) at and after the occurrence of a Trigger Event, the
Issuer Board shall be comprised of eleven directors and the Issuer
shall nominate, subject to paragraph (d) below, two additional
directors designated by the Company.
(d) at any time that the Company's Percentage Interest is at
least 70%, the Issuer shall nominate (i) eight directors to consist
of the two Company Management Directors and six other directors
designated by the Company (including at least one Independent
Director) and (ii) three Independent Directors. At such time as
the Company's Percentage Interest is at least 99%, the Issuer shall
nominate eleven directors designated by the Company.
Notwithstanding anything in the foregoing to the contrary (i)
at any time the Company's Percentage Interest is less than 40% but
at least twenty percent (20%), the Issuer shall nominate three
directors designated by the Company, (ii) at any time the Company's
Percentage Interest is less than 20% but at least 10%, the Issuer
shall nominate two directors designated by the Company, and (iii)
at any time the Company's Percentage Interest is less than 10% but
at least 5%, the Issuer shall nominate one director designated by
the Company. If, at any time, the Company's Percentage Interest is
less than 5%, the Issuer shall not be obligated to nominate any
director designated by the Company. At any such time, all Issuer
Directors, other than Company Management Directors, shall be
nominated by the Issuer.
The Independent Directors to be nominated by the Issuer from
time to time shall be designated by action of a majority of Company
Directors then in office. In the event that no Company Directors
are in office at such time, such Independent Directors shall be
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 (as
defined in the Stockholders Agreement) shall be entitled to
nominate and elect Independent Directors in lieu of any individuals
so designated to be such Independent Directors by a majority of the
Independent Directors.
Solicitation and Voting of Shares
The Issuer is obligated to use its best efforts to solicit
from the stockholders of the Issuer proxies in favor of all
directors nominated in accordance with the Stockholders Agreement.
The Issuer and the Company shall also cooperate with each other
with respect to the election, removal and replacement of all
directors designated in accordance with the Stockholders Agreement.
-9-
<PAGE> 10
Committees of the Issuer Board
The Stockholders Agreement provides that the Issuer shall
establish, empower and maintain the following committees of the
Issuer Board: (i) an Audit Committee, consisting of at least three
Independent Directors; (ii) until the occurrence of a Trigger
Event, a Retention/Replacement Committee, consisting of the
Independent Directors then serving on the Issuer Board, responsible
for retention and/or replacement of all of the executive officers
of the Issuer; (iii) a Compensation Committee; and (iv) such other
committees as the Issuer Board deems necessary or desirable.
Except as otherwise provided in the Stockholders Agreement or as
agreed by a majority of the Company Management Directors (as
defined in the Stockholders Agreement), the number of the Company
Directors on each committee of the Issuer Board shall be the same
proportion (but not less than one) of the total membership of such
committee as the number of the Company Directors, as the case may
be, is of the entire the Issuer Board.
The corporate governance provisions included in the
Stockholders Agreement as discussed above have been incorporated
into the Restated Certificate of Incorporation of the Issuer, as
filed with the Secretary of State of the State of Delaware on March
29, 1996.
Approval Required for Certain Actions
(a) On and after the Effective Time until the earlier of a
Trigger Event or such date on which the Company's Percentage
Interest is less than 25%, a majority of the Issuer 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 the Issuer or any of its Affiliates into any merger or
consolidation or the acquisition by the Issuer or any of its
Affiliates of any business or assets that would constitute more
than 10% of the Issuer's total assets determined on a consolidated
basis (a "Substantial Part"); (ii) the sale, pledge, grant of
security interest in, transfer, retirement or other disposal of a
Substantial Part of the Issuer, 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 the Issuer or Gargiulo (other than such distributions by
Gargiulo to the Issuer as are necessary for the Issuer to timely
perform its obligations under the Gargiulo Credit Facility
Agreement); (iv) any incurrence or assumption, in the aggregate, by
the Issuer, any of its Affiliates or any combination thereof, of
any indebtedness for borrowed money at any time outstanding
exceeding in the aggregate (determined on a consolidated basis) the
greater of (A) $15,000,000, increasing by $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 Newco Credit
Facility Agreement, or (B) the amounts set forth in the Issuer's
Operating Plan (as defined in the Stockholders Agreement), provided
that loans under the Gargiulo Credit Facility Agreement shall not
be counted in this limitation; (v) the repurchase or redemption of
any Issuer Securities, other than from employees upon termination
of employment or service; (vi) the establishment of any new
committees of the Issuer Board (or the Calgene Board) or a new or
revised delegation(s) of Issuer Board (or Calgene Board) authority
to any Issuer 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
-10-
<PAGE> 11
benefit or incentive plans of the Issuer 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 Issuer
and Calgene and their successors and the establishment of their
annual or long term compensation level and benefits (other than
agreements in effect at the Effective Time); provided, however,
that the Company shall have the right to select the Chief Technical
Officer of the Issuer and a controller reporting to the Chief
Financial Officer of the Issuer; (ix) approval of the Operating
Plan and Strategic Plan (each as defined in the Stockholders
Agreement) of the Issuer and its Affiliates, as well as the annual
operating plan and long term strategic plan for the Gargiulo
business, to be submitted to the Issuer Board annually for
approval, and any material changes thereto; (x) any transaction
between the Issuer (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 the Issuer, Calgene or Gargiulo;
(xiii) the issuance of additional Issuer Securities (other than
warrants for the purchase of Issuer Securities) in excess of
4,000,000 shares of 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 Issuer
Securities; (xiv) the sale or licensing by the Issuer 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 $5,000,000 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 Issuer and its Affiliates having annual
payments in the aggregate (determined on a consolidated basis)
exceeding the aggregate amount set forth in the Operating Plan;
(xvi) matters relating to Gargiulo L.P. covered in Article 5 of the
Stockholders Agreement, including, without limitation, any changes
in the composition of the Gargiulo Board of Directors (other than
with respect to Messrs. Salquist and Stacey); (xvii) any press
release which mentions or directly or indirectly refers to the
Company, except as required by law and where Issuer 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 the Company or the filing of any
insolvency or bankruptcy proceeding by or on behalf of the Issuer
or any of its Affiliates; or (xix) the removal or election of the
directors, subject to the terms of the Stockholders Agreement, of
Gargiulo.
(b) After a Trigger Event and until the earlier of (i) the
third anniversary of the Effective Time or (ii) such time as the
Company's Percentage Interest is at least seventy percent (70%), a
majority of the Issuer Board, including at least two Company
Directors, shall be required to approve any of the following: (i)
except as provided in the Stockholders Agreement, the matters set
forth in clauses (ii), (vi), (viii), (ix) and (xi) of paragraph (a)
above; or (ii) any transaction between the Issuer (and its
Affiliates) and the Company or any Affiliate of the Company.
(c) From and after the occurrence of both (i) a Trigger Event
and (ii) the third anniversary of the Effective Time, and until the
Company's Percentage Interest is at least 99%, nether the Company
nor any of its Affiliates shall enter into any transaction with the
Issuer or any of its Affiliates without the approval of at least
two Company Directors.
-11-
<PAGE> 12
NEWCO CREDIT FACILITY AGREEMENT
At the Effective Time, the Issuer and the Company entered into
a revolving credit facility agreement (the "Newco Credit Facility
Agreement") pursuant to which the Company, subject to certain terms
and conditions, agreed to make, at the request of the Issuer, three
consecutive one-year subordinated loans of up to $15 million each
to the Issuer for general corporate purposes, provided that not
more than $15 million may be outstanding at any time. Under
certain circumstances, the principal and interest due under such
loans may be converted into shares of Common Stock. The loans made
pursuant to the Newco Credit Facility Agreement are secured by the
joint and several guaranties of certain subsidiaries of the Issuer.
The agreement also contains a number of restrictions on the Issuer
and its subsidiaries. For instance, the covenants contained in the
Newco Credit Facility Agreement require the Issuer to maintain a
minimum consolidated net worth of not less than $10,000,000 and a
minimum consolidated working capital of not less than $5,000,000.
The Newco Credit Facility Agreement also requires that the Issuer
and its subsidiaries meet certain specified financial ratios,
including a ratio of total long-term liabilities to net worth and
a current ratio. In addition, the Newco Credit Facility Agreement
imposes a number of limitations on the Issuer 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. At the Effective
Time, the Company loaned the Issuer $15,000,000 pursuant to the
terms of the Newco Credit Facility Agreement.
GARGIULO CREDIT FACILITY AGREEMENT
At the Effective Time, the Issuer and the Company entered into
a revolving credit facility agreement (the "Gargiulo Credit
Facility Agreement") pursuant to which the Company, subject to
certain terms and conditions, shall make a loan of up to $40
million to the Issuer, the proceeds of which are to be used solely
by Gargiulo. Gargiulo L.P. borrowed funds from the Company
pursuant to an amendment of an existing credit facility to acquire
Collier Farms, to support Gargiulo L.P.'s branded tomato strategy
and to allow Gargiulo L.P. to make an approximately $2 million
payment to the Company pursuant to the Development License
Agreement dated December 23, 1992 (the "Development Agreement"),
which amounts were converted into a loan under the Gargiulo Credit
Facility Agreement at the Effective Time. The balance of any
future borrowings under the Gargiulo Credit Facility Agreement will
be used by Gargiulo to implement its branded tomato strategy. The
loan is repayable out of a specified portion of the Cumulative Free
Cash Flow (as defined in the Gargiulo Credit Facility Agreement) of
Gargiulo or, if not repaid within eight years, may be converted by
the Company under certain circumstances into shares of Common
Stock. The loans made pursuant to the Gargiulo Credit Facility
Agreement are secured by the joint and several guaranties of
certain subsidiaries of the Issuer. The agreement also contains a
number of restrictions on the Issuer and its subsidiaries. For
instance, the covenants contained in the Gargiulo Credit Facility
Agreement require the Issuer to maintain a minimum consolidated net
worth of not less than $10,000,000 and a minimum consolidated
working capital of not less than $5,000,000. The Gargiulo Credit
Facility Agreement also requires that the Issuer 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 Issuer and its subsidiaries with
respect to future acquisitions, liens, mergers and the sale of
-12-
<PAGE> 13
assets, loans and investments, guaranties, capital expenditures,
the payment of dividends and the incurrence of indebtedness.
Item 7. Material to be Filed as Exhibits
- -----------------------------------------
1. Agreement and Plan of Reorganization by and between
Monsanto Company and Calgene Technology Corporation, formerly
Calgene, Inc., dated as of October 13, 1995.
2. Stockholders Agreement by and between Monsanto Company
and Calgene, Inc., formerly Calgene II, Inc., dated as of March 31,
1996.
3. Holding Company Credit Facility Agreement by and between
Monsanto Company and Calgene, Inc., formerly Calgene II, Inc., dated
as of March 31, 1996.
4. Gargiulo Credit Facility Agreement by and between
Monsanto Company and Calgene, Inc., formerly Calgene II, Inc.,
dated as of March 31, 1996.
Signature
---------
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in
this statement is true, complete and correct.
Date: April 10, 1996 MONSANTO COMPANY, a Delaware corporation
By:
---------------------------------------
Name: Karl R. Barnickol
-------------------------------------
Title: Assistant Secretary
------------------------------------
-13-
<PAGE> 14
EXHIBIT INDEX
Exhibit
- ------------------------------------------------------------------------------
1. Agreement and Plan of Reorganization by and between Monsanto
Company and Calgene Technology Corporation, formerly Calgene,
Inc., dated as of October 13, 1995, filed as (i) Annex A to
the Proxy Statement/Prospectus constituting part of the
Registration Statement on Form S-4 (333-739) dated as of
February 6, 1996, and (ii) Exhibit 2.1. to the aforementioned
Registration Statement.
2. Stockholders Agreement by and between Monsanto Company and
Calgene, Inc. (formerly incorporated under the name Calgene
II, Inc.) dated as of March 31, 1996.
3. Holding Company Credit Facility Agreement by and between Monsanto
Company and Calgene, Inc., formerly Calgene II, Inc., dated as
of March 31, 1996.
4. Gargiulo Credit Facility Agreement by and between Monsanto
Company and Calgene, Inc. (formerly incorporated under the
name Calgene II, Inc.) dated as of March 31, 1996.
-14-
<PAGE> 1
CALGENE II, INC.
AND
MONSANTO COMPANY
STOCKHOLDERS AGREEMENT
as of March 31, 1996
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 Effect of this Agreement ................................ 1
1.1 Effect of this Agreement ................................ 1
ARTICLE 2 Compliance with Securities Act .......................... 2
2.1 Certain Definitions ..................................... 2
2.2 Requested Registration .................................. 7
2.3 Company Registration .................................... 10
2.4 Expenses of Registration ................................ 12
2.5 Registration Procedures ................................. 12
2.6 Indemnification ......................................... 14
2.7 Information by Holder ................................... 16
2.8 Rule 144 Reporting ...................................... 17
2.9 Transfer of Registration Rights ......................... 17
2.10 Limitations on Subsequent Registration Rights ........... 17
2.11 Termination of Registration Rights ...................... 18
2.12 "Market Stand-off" Agreement ............................ 18
ARTICLE 3 Anti-Dilution Rights and Limitations on Owner ........... 18
3.1 Anti-Dilution Rights .................................... 18
3.2 Private Offering ........................................ 19
3.3 Public Offering ......................................... 19
3.4 Limitations ............................................. 20
3.5 Open Market Purchases to Maintain Ownership
Percentage .............................................. 20
3.6 Limitations on Holder's Ownership ....................... 20
3.7 Limitations on Holder's Resale of Company
Securities .............................................. 22
ARTICLE 4 Company and Calgene Corporate Governance ................ 23
4.1 Composition of the Board of Directors and
Calgene Board ........................................... 23
4.2 Solicitation and Voting of Shares ....................... 26
4.3 Committees .............................................. 27
4.4 Approval Required for Certain Actions ................... 29
4.5 Enforcement of this Agreement ........................... 32
4.6 Certificate of Incorporation and By-laws ................ 32
4.7 Advisors ................................................ 32
4.8 Injunctive Relief ....................................... 33
ARTICLE 5 Governance of Gargiulo .................................. 33
5.1 Board of Tomato Associates .............................. 33
5.2 Operating and Strategic Plans ........................... 33
<PAGE> 3
5.3 Compensation; Etc. ...................................... 34
5.4 Certificate of Incorporation and By-Laws ................ 34
5.5 Effective Period ........................................ 34
5.6 Injunctive Relief ....................................... 34
ARTICLE 6 Miscellaneous ........................................... 35
6.1 Governing Law ........................................... 35
6.2 Successors and Assigns .................................. 35
6.3 Entire Agreement; Amendment ............................. 35
6.4 Notices ................................................. 35
6.5 Delays or Omissions ..................................... 36
6.6 Counterparts ............................................ 36
6.7 Severability ............................................ 36
6.8 Stock Legends ........................................... 36
6.9 Sale of Assets of Tomato Associates ..................... 37
6.10 Audits, Consultants and Inspections ..................... 37
6.11 No Third Party Beneficiaries ............................ 37
6.12 Sections and Articles ................................... 38
6.13 Headings ................................................ 38
</TABLE>
<PAGE> 4
STOCKHOLDERS AGREEMENT
----------------------
AGREEMENT made as of the 31st day of March, 1996, by and between Calgene II,
Inc., a Delaware corporation, having its principal place of business at
1920 Fifth Street, Davis, California 95616 (the "Company"), and Monsanto
Company, a Delaware corporation, having its principal place of business at
800 North Lindbergh Boulevard, St. Louis, Missouri 63167 ("Monsanto").
WHEREAS, Calgene, Inc., a Delaware corporation ("Calgene"), and Monsanto
have entered into an Agreement and Plan of Reorganization, dated as of October
13, 1995 (the "Reorganization Agreement"), and certain other Transaction
Agreements (as defined in the Reorganization Agreement) whereby Monsanto has
acquired shares of the Company's common stock, par value $.001 per share
("Common Stock") and may acquire additional shares of Common Stock;
WHEREAS, the Company and Monsanto have agreed that the Company shall, at
the request of a Holder (as hereafter defined), register under the Securities
Act of 1933, as amended (the "Securities Act"), and register or qualify under
any applicable state securities or blue sky laws the Common Stock of the
Company acquired or to be acquired by Holder so as to permit a Holder to
sell such Common Stock in the public markets; and
WHEREAS, the Company and Monsanto have agreed on certain restrictions and
obligations with respect to the management and operation of the Company,
Calgene and Tomato Investment Associates, Inc., a Delaware corporation
("Tomato Associates").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein contained, the Company and Monsanto hereby agree as
follows:
ARTICLE 1
Effect of this Agreement
------------------------
1.1 Effect of this Agreement. Effective upon the date hereof, and subject
------------------------
only to the conditions set forth herein, all provisions relating to the
granting of registration rights and covenants related thereto made by
the Company and Monsanto shall be contained in this Agreement. The
registration rights and covenants provided herein set forth the sole
and entire agreement between the Company and Monsanto on the subject
matter of registration rights.
<PAGE> 5
ARTICLE 2
Compliance with Securities Act
------------------------------
2.1 Certain Definitions. As used in this Agreement, the following terms shall
-------------------
have the following respective meanings (all terms defined in this
Article 2 or in other provisions of this Agreement in the singular
shall have the same meaning when used in the plural and vice versa):
---- -----
"Affiliate" has the same meaning as in Rule 12b-2 promulgated under the
---------
Exchange Act.
"Associate" has the same meaning as in Rule 12b-2 promulgated under the
---------
Exchange Act.
"Board" or "Board of Directors" means the Board of Directors of the
----- ------------------
Company except where the context otherwise requires.
"Calgene" has the meaning set forth in the recitals herein.
-------
"Calgene Board" means the Board of Directors of Calgene.
-------------
"Calgene Director" means a member of the Calgene Board.
----------------
"Commission" means the Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
"Common Stock" means the Common Stock, $.001 par value, of the Company.
------------
"Company" has the meaning set forth in the first paragraph hereof.
-------
"Company Credit Facility" means the Holding Company Credit Facility
-----------------------
Agreement made as of even date herewith between the Company and
Monsanto.
"Company Director" means an Independent Director who is designated for
----------------
such position by the Company in accordance with Section 4.1 hereof.
"Company Management Director" means a Director who is either the Chief
---------------------------
Executive Officer or Chief Operating Officer of the Company (or, if the
Chief Executive Officer is the Chief Operating Officer or if there is no
Chief Operating Officer, then the next most highly ranking executive
officer of the Company).
"Company Securities" has the meaning set forth in Section 3.1 hereof.
------------------
-2-
<PAGE> 6
"Control Securities" means securities of the Company, other than
------------------
Restricted Securities, owned by a Holder at the time such Holder would be
deemed to be an Affiliate of the Company.
"Credit Facilities" means the Company Credit Facility and the Gargiulo
-----------------
Credit Facility.
"Director" means a member of the Board of Directors of the Company.
--------
"Effective Date" means March 31, 1996.
--------------
"Employment Agreements" has the meaning set forth in Section 6.9 hereof.
---------------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Equity Security" means (i) any Common Stock or other Voting Stock, (ii)
---------------
any securities of the Company convertible into or exchangeable for
Common Stock or other Voting Stock or (iii) any options, rights or
warrants (or any similar securities) issued by the Company to acquire
Common Stock or other Voting Stock.
"Financial Purchaser" means a Person (i) purchasing Company Securities
-------------------
from Monsanto for investment purposes or otherwise in the ordinary course
of business and not for the purpose nor with the effect of changing or
influencing the control of the Company and (ii) which Person is not
already primarily in the same lines of business as the Company.
"Gargiulo" means Gargiulo, G.P. and Gargiulo, L.P. as such entities
--------
existed prior to the Effective Date.
"Gargiulo Business" means the business transacted by Tomato Associates
-----------------
after the Effective Date, which business was transacted by Gargiulo prior
to the Effective Date.
"Gargiulo Credit Facility" means the Gargiulo Credit Facility Agreement
------------------------
made as of even date herewith between the Company and Monsanto.
"Gargiulo, G.P." means Gargiulo G.P., Inc., a Delaware corporation.
--------------
"Gargiulo, L.P." means Gargiulo, L.P., a Delaware limited partnership.
--------------
"hereto", "hereunder", "herein", "hereof" and the like mean and refer to
------ --------- ------ ------
this Agreement as a whole and not merely to the specific article,
section, paragraph or clause in which the respective word appears.
-3-
<PAGE> 7
"Holder" means Monsanto and, subject to Section 2.9 hereof and except for
------
purposes of Article 3 hereof, any subsequent holder of outstanding
Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 2.6(c) hereof.
-----------------
"Indemnifying Party" has the meaning set forth in Section 2.6(c) hereof.
------------------
"Independent Director" means a Director or Calgene Director (i) who is
--------------------
not and has never been an officer or employee of Calgene, the Company,
any Affiliate or Associate of Calgene or the Company or of a Person that
derived five percent (5%) or more of its revenues or earnings in its
most recent fiscal year from transactions involving Calgene, the Company
or any Affiliate or Associate of Calgene or the Company, (ii) who is
not and has never been an officer or employee of Monsanto, any
Affiliate or Associate of Monsanto or of a Person that derived more than
five percent (5%) of its revenues or earnings in its most recent fiscal
year from transactions involving Monsanto or any Affiliate or Associate of
Monsanto, (iii) who is not and never has been an officer or employee of
Gargiulo, any Affiliate or Associate of Gargiulo or of a Person that
derived more than five percent (5%) of its revenues or earnings in its
most recent fiscal year from transactions involving Gargiulo or any
Affiliate or Associate of Gargiulo, (iv) who has no affiliation,
compensation, consulting or contracting arrangement with Calgene, the
Company, Monsanto, Gargiulo or their respective Affiliates or Associates or
any other Person such that a reasonable person would regard such Director
as likely to be unduly influenced by management of Calgene, the
Company or Monsanto, respectively (provided, however, that no Person
shall be regarded as being unduly influenced by the management of
Monsanto merely because such Person serves or previously served as a
director of Monsanto or any Affiliate or Associate of Monsanto), and
(v) who has an outstanding reputation for personal integrity and
distinguished achievement in areas relevant to the Company.
Notwithstanding the foregoing, no member of the immediate family of any
Person who does not qualify to be an Independent Director by reason of
clause (i), (ii), (iii) or (iv) above shall be considered an
Independent Director. For purposes of the preceding sentence, the term
"immediate family" shall have the same meaning as set forth in Item
404(a) of Regulation S-K.
"Monsanto" has the meaning set forth in the first paragraph hereof.
--------
-4-
<PAGE> 8
"Monsanto Management Director" means a Director or Calgene Director who
----------------------------
is designated for such position by Monsanto in accordance with Section
4.1 hereof and who is or was an employee of Monsanto.
"Monsanto Director" means a Director or Calgene Director, including any
-----------------
Monsanto Management Director, who is designated for such position by
Monsanto in accordance with Section 4.1 hereof.
"New Percentage Ownership" has the meaning set forth in Section 3.6(d)
------------------------
hereof.
"Non-Financial Purchaser" means a Person, other than a Financial
-----------------------
Purchaser, purchasing Company Securities from Monsanto.
"Operating Plan" has the meaning set forth in Section 4.4(a)(ix) hereof.
--------------
"Other Selling Stockholders" has the meaning set forth in Section 2.2(c)
--------------------------
hereof.
"Percentage Interest" means the percentage of outstanding Voting Stock
-------------------
that is controlled directly or directly by Monsanto and its Affiliates.
"Person" means a corporation, association, partnership, joint venture,
------
limited liability company, individual, trust, unincorporated organization,
a government agency or political subdivision thereof and any other entity.
"Preliminary Prospectus" means a preliminary prospectus as contemplated
----------------------
by Rule 430 or 430A under the Securities Act included at any time in
the Registration Statement.
"Pre-Offering Percentage" has the meaning set forth in Section 3.1 hereof.
-----------------------
"Prospectus" means (i) the prospectus as first filed with the Commission
----------
pursuant to Rule 424(b) under the Securities Act or, (ii) if no such
filing is required, the form of final prospectus included in the
Registration Statement at the effective date thereof or (iii) if a Term
Sheet or Abbreviated Term Sheet (as such terms are defined in Rule 434(b)
and 434(c), respectively, under the Securities Act) is filed with the
Commission pursuant to Rule 424(b)(7) under the Securities Act, the
Term Sheet or Abbreviated Term Sheet and the last Preliminary Prospectus
filed with the Commission prior to the time the Registration Statement
became effective, taken together (including, in each case, the
documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the Securities Act), together with any supplement to any
of the foregoing.
-5-
<PAGE> 9
"Registration Statement" means any registration statement of the Company
----------------------
filed under the Securities Act which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus relating thereto and all amendments and supplements to such
registration statement, including post-effective amendments, all exhibits
and all material incorporated or deemed to be incorporated by reference
in such registration statement.
"Registrable Securities" means shares of Common stock issued or issuable
----------------------
pursuant to the Transaction Agreements and all such other securities of
the Company acquired by a Holder.
"Register", "Registered" and "Registration", whether or not capitalized,
-------- ---------- ------------
mean and refer to a registration effected by preparing and filing a
Registration Statement in compliance with the Securities Act and applicable
rules and regulations thereunder, and the declaration or ordering of the
effectiveness of such Registration Statement.
"Registration Expenses" means all expenses incurred by the Company in
---------------------
compliance with this Article 2, including, without limitation, all
registration fees, qualification fees, filing fees, advertising and road
show expenses (excluding advertising and road show expenses incurred by
a Holder), printing expenses, escrow fees, fees and disbursements of
Counsel for the Company, blue sky fees and expenses, and the expense
of any special audits incident to or required by any such registration
(but excluding the Compensation of regular employees of the Company,
which shall be paid in any event by the Company).
"Reorganization Agreement" has the meaning set forth in the recitals
------------------------
herein.
"Requesting Holder" means a Holder requesting any registration
-----------------
pursuant to Section 2.2 hereof.
"Restricted Securities" means the securities of the Company acquired by
---------------------
a Holder from the Company or an Affiliate of the Company otherwise than
pursuant to a public offering.
"Section 16 Officers" has the meaning set forth in Section 4.3(b)(iii)
-------------------
hereof.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Selling Expenses" means all underwriting discounts and selling
----------------
commissions applicable to the sale of Registrable Securities.
"Strategic Plan" has the meaning set forth in Section 4.4(a)(ix) hereof.
--------------
-6-
<PAGE> 10
"Subsidiary" has the same meaning as in Rule 12b-2 promulgated under the
----------
Exchange Act.
"Substantial Part" means more than ten percent (10%) of the total
----------------
consolidated assets of the Company as shown on the Company's consolidated
balance sheet as of the end of the most recent fiscal quarter ending
prior to the time the determination is made.
"Tomato Associates" has the meaning set forth in the recitals herein.
-----------------
"Transaction Agreements" has the meaning set forth in the Reorganization
----------------------
Agreement.
"Trigger Event" means the earlier of any time that (i) Monsanto's
-------------
Percentage Interest is at least fifty-five percent (55%) or (ii) the
Company elects to convert borrowings made from Monsanto into Equity
Securities and Monsanto's Percentage Interest is at least fifty percent
(50%) after such conversion.
"Two Senior Gargiulo Officers" has the meaning set forth in Section 5.3
----------------------------
hereof.
"Unaffiliated Equity Holders" means holders of Equity Securities other
---------------------------
than Monsanto or any of its Affiliates.
"Voting Stock" means securities having the right to vote generally in
------------
any election of Directors of the Company (other than solely by reason of
the occurrence of an event).
2.2 Requested Registration.
-----------------------
(a) Request for Registration. Holders of Registrable Securities shall
------------------------
have the right to request (with such requests in writing and
stating the number of shares of Registrable Securities to be disposed
of and the intended method of disposition of shares by such Holders)
up to two (2) registrations on Form S-3 (and up to two (2) additional
registrations on Form S-3 for each conversion of outstanding principal
or interest into shares of Common Stock upon the occurrence of an
"Event of Default" under the Company Credit Facility or the
Gargiulo Credit Facility (as defined in each such Credit Facility,
respectively)) at the Company's expense and an unlimited number of
additional registrations on Form S-3 at the selling Holder's expense,
provided that the requests for additional registrations are made by
Holders of at least ten percent (10%) of the Registrable Securities,
subject only to the following:
-7-
<PAGE> 11
(i) The Company shall not be required to effect a registration
pursuant to this Section 2.2 prior to September 30, 1998,
unless an Event of Default has occurred and is continuing
under the Company Credit Facility or under the Gargiulo
Credit Facility, in which event the Company shall be required
to effect a registration pursuant to this Section 2.2 at any
time upon the request of a Holder with respect to any shares
of Common Stock issued to a Holder upon conversion of
outstanding principal or accrued interest under either the
Company Credit Facility or the Gargiulo Credit Facility
after the occurrence of an Event of Default under either of
such agreements.
(ii) The Company shall not be required to effect a registration
pursuant to this Section 2.2 within one hundred eighty (180)
days after the effective date of the last such registration
pursuant to this Section 2.2.
(iii) The Company shall not be required to effect a Registration
Statement in any particular jurisdiction in which the Company
would be required to execute a general consent to service of
process in effecting such registration, qualification or
compliance, unless the Company is already subject to service
in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations thereunder.
(iv) The Company shall not be required to effect a Registration
Statement for a period of not more than ninety (90) days
immediately following the delivery of a certificate signed
by the President of the Company to the Requesting Holders
stating that, in the good-faith judgment of the Board of
Directors of the Company, it would be seriously detrimental
to the Company and its shareholders for such Registration
Statement to be filed on or before the date filing would
otherwise be required hereunder; provided, however, that the
Company may not utilize this right more than once in any
twelve (12) month period and the Company may not exercise
this right based on the fact that the Company has recently
registered any of its securities for the account of a security
holder or holders exercising their respective demand
registration rights.
If the Company cannot qualify for registration on Form S-3, then
the Company shall effect any registration required or requested by
the Holder on Form S-1, or such
-8-
<PAGE> 12
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.
-9-
<PAGE> 13
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, then such person may elect to withdraw therefrom
by written notice to the Company, the underwriter and the
Requesting Holders. The Registrable Securities and/or other securities
so withdrawn shall also be withdrawn from registration; provided,
however, that, if, by the withdrawal of such Registrable Securities,
a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation
imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration
the right to include additional Registrable Securities in the same
proportion used to determine the underwriter limitation in this
Section 2.2(c).
If the underwriter has not limited the number of Registrable
Securities to be underwritten, then the Company and its executive
officers, and such other Persons as are determined by the Board of
Directors, their successors, and their assigns ("Other Selling
Stockholders"), may include securities for their own account in
such registration if the underwriter so agrees and if the number of
Registrable Securities held by the Holders that would otherwise
have been included in such registration and underwriting will not
thereby be limited for any reason, including but not limited to the
price for which the Registrable Securities will be sold. To the
extent that the underwriter wishes to limit the number of shares
to be included in the registration on behalf of the Company and the
Other Selling Stockholders, the shares of Common Stock to be
registered held by the Other Selling Stockholders shall be excluded
from such offering prior to excluding any shares held by the
Company and those held by the Company shall be excluded prior to
excluding any Registrable Securities held by the Holders.
2.3 Company Registration.
--------------------
(a) Notice and Inclusion. If, at any time after September 30, 1998, the
--------------------
Company shall determine to register any of its securities for its
own account, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Commission
Rule 145 transaction, the Company shall:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and
-10-
<PAGE> 14
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any
underwriting involved therein, all Registrable Securities
specified in a written request or requests, within twenty (20)
days after receipt of the written notice from the Company,
by any Holder or Holders.
(b) Underwriting. If the registration of which the Company gives notice
------------
is for a registered public offering by the Company of its securities
through an underwriting, then the Company shall so advise the
Holders as a part of the written notice given pursuant to Section
2.3(a)(i) hereof. In such event, the right of any Holder to
registration pursuant to this Section 2.3 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the
Company, and all the Other Selling Stockholders distributing their
securities through such underwriting) enter into an underwriting
agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other
provision of this Section 2.3, if the underwriter determines that
marketing factors require a limitation on the number of shares to
be underwritten, then the underwriter may exclude from such
registration and underwriting some or all of the Registrable
Securities held by the Holders or the stock held by Other Selling
Stockholders in accordance with this Section 2.3(b). The Company
shall so advise all Holders and all Other Selling Stockholders
distributing their securities through such underwriting, and (i) as
to the first registration in which Holders are entitled to participate
pursuant to this Section 2.3, the number of Registrable Securities
and other securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof on the
basis that shares held by all the Other Selling Stockholders who are
not Holders shall first be excluded to the extent required and, if
further exclusion is necessary, shares held by the selling Holders
shall then be excluded; provided, however, that, as among the
respective Other Selling Stockholders as a group on the one hand and
the Holders as a group on the other hand suffering such exclusion,
the exclusion shall be in proportion, as nearly as practicable, to
the amount of securities entitled to inclusion in such registration
held by each of the Other Selling Stockholders as a group and each of
the Holders at the time of filing the Registration Statement; and
(ii) as to all subsequent registrations, the number of shares of
Registrable Securities and other
-11-
<PAGE> 15
securities that may be included in the registration and underwriting
shall be allocated among all Other Selling Stockholders and the
Holders in proportion, as nearly as practicable, to the respective
amounts of securities entitled to inclusion in such registration
held by all such Other Selling Stockholders and Holders at the time of
filing the Registration Statement. For purposes of the apportionment
provisions in clause (i) above, for any selling Holder that is a
partnership or corporation, the partners, retired partners, and
shareholders of such Holder, the estate and family members of such
partners and retired partners, and any trusts for the benefit of
any of the foregoing persons shall be deemed to be a single "selling
Holder," and any pro rata reduction with respect to such selling
Holder shall be based upon the aggregate number of shares carrying
registration rights owned by all entities and individuals included
in such "selling Holder," as defined in this sentence. If any Other
Selling Stockholder or Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice
to the Company and the underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such
registration.
2.4 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant
to this Article 2 shall be borne by the Company; provided, however,
that the Registration Expenses for the fifth and all subsequent
registrations under Section 2.2(a) hereof requested by the Holders shall
be borne by the requesting Holders pro rata on the basis of the number
of their shares so registered. All Selling Expenses relating to the
securities registered by Holders and, if applicable, Other Selling
Stockholders, and fees and disbursements of counsel, shall be borne by
the Holders or the Other Selling Stockholders, as the case may be, of
such securities pro rata on the basis of the number of their shares so
registered.
2.5 Registration Procedures.
-----------------------
(a) Company shall use its best efforts to register or qualify the
Registrable Securities covered by such Registration Statement under
such other securities or blue sky laws of such United States
jurisdictions as Holder shall reasonably request and do any and all
acts and things which may be necessary or desirable to enable
Holder to consummate the public sale or other disposition in such
jurisdictions; provided, however, that Company shall not be required
in connection therewith or as a condition thereto to qualify to do
business or file a general consent to service of process in any
such jurisdictions.
-12-
<PAGE> 16
(b) The Company represents and warrants that, on the date of its
effectiveness, the Registration Statement will comply in all
material respects with the applicable requirements of the Securities
Act and the rules thereunder, including without limitation Rule 415;
on the date of its effectiveness, the Registration Statement will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
in order to make the statements made therein not misleading; provided,
however, that no representation is made by Company with respect to
information relative to any Holder; and the Prospectus will not
include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that no representation is made by Company with
respect to information relative to any Holder.
(c) If, at any time or times while the Registration Statement is
effective, Company notifies Holder that a development has occurred
or is pending which, based upon consultation with Company's legal
counsel, Company reasonably believes may cause the then current
Prospectus not to be in compliance with applicable securities laws,
then Holder shall refrain from delivering the Prospectus and from
making any offers or sales of Registrable Securities requiring the
delivery of the Prospectus until such time as Company either
notifies Holder that the Prospectus complies with such laws or
delivers an amended Prospectus in replacement of the deficient
Prospectus. Company shall use its reasonable best efforts to
minimize the time during which Holder must so refrain, and no more
than one (1) such period of refrain shall be imposed during any
period of one hundred eighty (180) days.
(d) At least two (2) business days prior to the initial filing of the
Registration Statement or Prospectus and no fewer than two (2)
business days prior to the filing of any amendment or supplement
thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference), Company shall furnish
Holder, its legal counsel and the managing underwriter, if any,
copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by
reference) shall be subject to review of Holder, its legal counsel
and such underwriters, if any, and Company shall cause its officers
and directors and the independent certified public accountants to
Company to respond to such inquiries as shall be necessary, in the
opinion of respective counsel to Company and any such underwriters,
-13-
<PAGE> 17
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,
-14-
<PAGE> 18
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 each Person controlling
such Holder within the meaning of Section 15 of the Securities Act
against all expenses, claims, losses, damages and liabilities (or
actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact made by the Holder and contained in
any such Registration Statement, Prospectus, offering circular or
other document, or any amendment or supplement thereto or incident
to any such registration, qualification or compliance or based on
any omission (or alleged omission) to state therein a material fact
required to be made by the Holder and stated therein or necessary to
make the statements therein not misleading or any violation by the
Company of any rule or regulation promulgated under the Securities
Act applicable to the Company in connection with such registration,
qualification or compliance as a result of any statement (or based
on any omission to state or alleged omission) required to be made by
such Holder. Each such Holder shall reimburse the Company, such other
Holders, directors, officers, employees, agents, partners,
-15-
<PAGE> 19
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.
-16-
<PAGE> 20
2.8 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities or Control Securities to the public
without registration, the Company agrees to:
(a) Use its best efforts to make and keep public information available
as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements);
(c) For so long as a Holder owns any Restricted Securities or Control
Securities, furnish to the Holder forthwith upon request (i) a
written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly
report of the Company, and (iii) such other reports and documents
so filed as such Holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Holder to sell
any such securities without registration; and
(d) When any Holder qualifies under Rule 144 for the unrestricted right
of sale under Rule 144, the Company shall, upon written request of
such Holder (such request to include sufficient detail as to
establish how the Holder so qualifies under Rule 144), promptly
remove any restrictive legend that may have been placed on any
Restricted or Control Securities and issue Common Stock of the
Company free of such restrictive or other legends.
2.9 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register the Registrable Securities granted to each Holder by the
Company under Sections 2.2 and 2.3 hereof may be transferred or assigned
to a transferee or assignee in connection with the transfer or assignment
of not less than one million (1,000,000) shares of the Registrable
Securities; provided, however, that the Company shall be entitled to
notice of any such transfer of registration rights within thirty (30) days
of the date such transfer is effected.
2.10 Limitations on Subsequent Registration Rights. No owner or prospective
---------------------------------------------
owner of securities of the Company shall have any registration rights
other than as set forth in this Agreement. The Company shall not, without
the prior written consent of the Holders (which consent shall not be
-17-
<PAGE> 21
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
-18-
<PAGE> 22
maintain, after the offering, the same percentage of ownership of issued
and outstanding Company Securities that Holder possessed immediately
prior to the offering (the "Pre-Offering Percentage"). With respect to
the issuance of Company Securities pursuant to the Company's stock option
plans, Holder shall have a right to maintain its percentage ownership of
issued and outstanding Company Securities by making open market purchases
as provided in Section 3.5 hereof.
3.2 Private Offering. With respect to a private offering, other than pursuant
----------------
to a Company stock option plan, Company shall, within five (5) business
days after the execution of any agreement entered into in connection
with such private offering, notify Holder in writing of the proposed
offering and provide Holder with copies of all related documentation,
including, for example, any letter of intent and the final contract.
Holder shall have twenty (20) business days from the date of receipt of
Company's notice in which to advise Company whether Holder elects to
exercise its rights under Section 3.1 hereof. If Holder does not respond,
or if Holder indicates that it will not exercise its rights, Holder shall
be considered irrevocably to have waived its rights under Section 3.1
hereof with respect to such specific private offering. If Holder timely
advises Company that Holder will exercise its rights under Section 3.1
hereof, Holder shall have the right to acquire all or any portion of the
necessary amount of the Company Securities to maintain Holder's Pre-
Offering Percentage at the price or value of the consideration specified
in the private offering agreement entered into between Company and the
purchaser. Closing shall be in accordance with the terms of the private
offering agreement, and Holder shall make such investment representations
to Company and shall provide Company with such other documentation at
closing as is reasonably required by Company to comply with applicable
securities laws.
3.3 Public Offering. With respect to a public offering, Company shall notify
---------------
Holder no later than five (5) business days after Company has entered
into a letter of intent with its underwriters, and shall provide Holder
with a copy of the letter of intent. Holder shall have twenty (20) business
days from the date of receipt of Company's notice in which to advise
Company whether Holder elects to exercise its rights under Section 3.1
hereof. If Holder does not respond or if Holder indicates that it will
not exercise its rights, Holder shall be considered irrevocably to have
waived its rights under Section 3.1 hereof with respect to the public
offering. If Holder timely advises Company that Holder desires to retain
its rights under Section 3.1 hereof, then, when Company files a
Registration Statement containing a Preliminary Prospectus with the
Commission, Company shall provide Holder with copies of the Preliminary
Prospectus and all subsequent amendments. Holder shall have twenty (20)
-19-
<PAGE> 23
business days from its receipt of the Preliminary Prospectus in which to
exercise its rights under Section 3.1 hereof by making an offer to acquire
all or any portion of the necessary amount of Company Securities to
maintain Holder's Pre-Offering Percentage based on the price, less all
Selling Expenses, and the other terms contained in the final Prospectus.
No such offer to buy shall be accepted prior to the time that the
Registration Statement becomes effective. The Registration Statement
shall indicate that Holder has anti-dilution rights to purchase Company
Securities on the terms offered to the public.
3.4 Limitations. Notwithstanding the preceding provisions of this Article 3,
-----------
Company shall not be required to issue any fractional shares as a result
of Holder's exercise of its rights under Section 3.1 hereof. Company
shall not be required to transfer any Company Securities to Holder under
this Article 3 if to do so would result in the violation of any
applicable law, rule or regulation.
3.5 Open Market Purchases to Maintain Ownership Percentage. Notwithstanding
------------------------------------------------------
any other provision hereof, at any time after the Effective Date, Holder
may make such open market purchases of Company Securities as are
necessary to maintain Holder's percentage of ownership of issued and
outstanding Company Securities at forty-nine and nine-tenths percent
(49.9%) (or such higher percentage as may be permitted under Section 3.6
hereof) or to increase its percentage of ownership of issued and
outstanding Company Securities to forty-nine and nine-tenths percent
(49.9%) (or such higher percentage as may be permitted under Section
3.6 hereof). With respect to the issuance of Company Securities pursuant
to a Company stock option plan or any warrant, conversion right or other
option, Company shall notify Holder no later than ten (10) calendar days
after the end of each calendar quarter and within ten (10) calendar days
of the record date for a shareholder meeting and for dividend payments
for Company Securities of the number of shares and issuance price of
Company Securities issued pursuant to Company's stock option plans or any
warrant, conversion right or other option subsequent to the last notice
given pursuant to this Section 3.5 so as to enable Holder to make open
market purchases of Company Securities as permitted under this Section
3.5.
3.6 Limitations on Holder's Ownership. Except for purchases of Company
---------------------------------
Securities made in accordance with this Article 3, during the term of
this Agreement, Holder shall not directly or indirectly acquire any
Company Securities except as follows:
-20-
<PAGE> 24
(a) Prior to the first anniversary of the Effective Date, Holder shall
not increase its percentage of ownership of issued and outstanding
Company Securities above forty-nine and nine-tenths percent (49.9%)
except through one (1) or more of the following:
(i) Conversion of principal and/or interest under the Company
Credit Facility or the Gargiulo Credit Facility into shares
of Common Stock;
(ii) Issuance of Company Securities in an asset sale by Holder to
Company; and
(iii) A tender offer by Holder for no less than one hundred percent
(100%) of the publicly-traded Company Securities at a price
approved by the disinterested Directors of Company and based
upon a fairness opinion delivered to the Board of Directors
of the Company by an investment banking firm.
(b) On and after the first anniversary of the Effective Date until the
earlier of September 30, 1998, or the third anniversary of the
Effective Date, Holder shall not increase or further increase its
ownership of issued and outstanding Company Securities above forty-
nine and nine-tenths percent (49.9%) except through one (1) or more
of the following:
(i) Conversion of principal and/or interest under the Company
Credit Facility or the Gargiulo Credit Facility into shares
of Common Stock;
(ii) Issuance of Company Securities in an asset sale by Holder to
Company; and
(iii) A tender offer by Holder to increase its ownership to seventy
percent (70%) or more of the issued and outstanding Company
Securities at a price approved by the disinterested Directors
of Company and based upon a fairness opinion delivered to the
Board of Directors of the Company by an investment banking
firm; provided, however, that, if Holder makes a tender offer
to increase its ownership to more than eighty percent (80%) of
the issued and outstanding Company Securities, such tender
offer must be for one hundred percent (100%) of the publicly
traded Company Securities.
(c) After the earlier of September 30, 1998, or the third anniversary of
the Effective Date, Holder may increase its ownership of Company
Securities through open market purchases or otherwise.
-21-
<PAGE> 25
(d) If, at any time after the Effective Date, Holder shall elect to
increase its percentage of ownership of issued and outstanding
Company Securities above forty-nine and nine-tenths percent (49.9%)
as provided in paragraphs (a) and/or (b) above (such increased
percentage hereafter being the "New Percentage Ownership"), then
thereafter Holder may make such open market purchases of Company
Securities as are necessary to maintain such New Percentage Ownership
or to increase its percentage of ownership of issued and outstanding
Company Securities to such New Percentage Ownership.
(e) Holder shall not be required to dispose of any Company Securities
if Holder's percentage ownership of Company Securities is increased
as a result of any recapitalization by Company or any other action
taken by Company.
3.7 Limitations on Holder's Resale of Company Securities. Holder shall not
----------------------------------------------------
directly or indirectly sell any Company Securities (other than to an
Affiliate of Holder) except as follows:
(a) On and after the first anniversary of the Effective Date until the
earlier of September 30, 1998, or the third anniversary of the
Effective Date, Holder may sell Company Securities (i) as part of a
joint venture, merger or sale of all or substantially all of its
current Crop Protection business unit, as such business may be
subsequently renamed or reorganized, or (ii) pursuant to a tender
offer by a third party to the shareholders of Company.
(b) After the earlier of September 30, 1998, or the third anniversary of
the Effective Date, in addition to the rights to sell Company
Securities set forth in paragraph (a) above, Holder may sell Company
Securities (i) in a registered public offering pursuant to the
registration rights granted to Holder under this Agreement, (ii)
through sales pursuant to Rule 144 under the Securities Act, (iii)
through sales of not more than ten percent (10%) of the total issued
and outstanding Company Securities to a Non-Financial Purchaser, or
(iv) through sales to a Financial Purchaser.
(c) After the earlier of September 30, 1999, or the fourth anniversary
of the Effective Date, in addition to the rights to sell Company
Securities as set forth in paragraphs (a) and (b) above, Holder may
sell Company Securities through a private sale of thirty-five percent
(35%) or more of the total issued and outstanding
-22-
<PAGE> 26
Company Securities to a Non-Financial Purchaser under circumstances
where such third party assumes the applicable and proportionate rights
and obligations of Holder under this Agreement and the other
Transaction Agreements.
(d) Notwithstanding the foregoing, at any time after the Effective Date,
Holder may sell Company Securities issued to Holder upon conversion
by Holder of principal or accrued interest under either of the Credit
Facilities after the occurrence of an Event of Default under either
of such Credit Facilities.
ARTICLE 4
Company and Calgene Corporate Governance
----------------------------------------
4.1 Composition of the Board of Directors and Calgene Board. The number of
-------------------------------------------------------
Directors comprising both the Board of Directors and the Calgene Board
and the manner of nominating the members thereof shall be as follows:
(a) The number of Directors comprising the Board of Directors shall
initially be fixed at nine (9) Directors. The number of such Directors
may be increased only in accordance with Section 4.1(c) or Section
4.4(a)(xii) hereof. The parties agree that the manner of nominating,
and the governance provisions relating to, the Board of Directors
and the Calgene Board shall be identical, and that the provisions of
this Section 4.1 set forth below and of Sections 4.3(c) and 4.3(d)
hereof shall be deemed to apply equally to the Calgene Board and
Calgene Directors. Accordingly, when applied to the Calgene Board,
the term "Director" shall be deemed to mean "Calgene Director", the
term "Company", whether used alone or as a modifier, shall be deemed
to mean "Calgene", and the term "Board of Directors" shall be deemed
to mean "Calgene Board".
(b) Until the occurrence of a Trigger Event, the Corporation shall
nominate for election as Directors: (i) two (2) Corporation
Management Directors, (ii) three (3) Corporation Directors, and
(iii) four (4) Directors designated by Monsanto, at least one (1)
of which shall be an Independent Director.
(c) At and after the occurrence of a Trigger Event, the Board of
Directors shall be comprised of eleven (11) Directors and the
Corporation shall nominate, subject to paragraph (d) below, two (2)
additional Directors designated by Monsanto for a total of six (6)
nominees to be designated by Monsanto.
-23-
<PAGE> 27
(d) At any time that Monsanto's Percentage Interest is at
least seventy percent (70%), (i) the Corporation shall
nominate: (i) eight (8) Directors designated by Monsanto,
which shall consist of the two (2) Corporation Management
Directors and six (6) other Monsanto Directors (including
at least one (1) Independent Director) and (ii) three (3)
Independent Directors. At such time as Monsanto's Percentage
Interest is at least ninety-nine percent (99%), the Corporation
shall nominate eleven (11) Directors designated by Monsanto.
(e) Notwithstanding anything in the foregoing paragraphs (b), (c)
and (d) to the contrary,(i) at any time Monsanto's Percentage
Interest is less than forty percent (40%) but at least twenty
percent (20%). The Corporation shall nominate three (3) Directors
designated by Monsanto, (ii) at any time Monsanto's Percentage
Interest is less than twenty percent (20%) but at least ten percent
(10%), the Corporation shall nominate two (2) Directors designated
by Monsanto and (iii) at any time Monsanto's Percentage Interest
is less than ten percent (10%) but at least five percent (5%), the
Corporation shall nominate one (1) Director designated by
Monsanto. If, at any time, Monsanto's Percentage Interest is
less than five percent (5%), the Corporation shall not be
obligated to nominate any Director designated by Monsanto.
At any such time, all other Directors, other than the Corporation
Management Directors, shall be nominated by the Corporation.
(f) The Independent Directors to be nominated by the Corporation
from time to time shall be nominated by action of a majority of
the Corporation Directors then in office. In the event that no
Corporation Directors are in office at such time, such Independent
Directors shall be nominated by a majority of the Independent
Directors then in office; provided, however, that the holders of a
-------- -------
majority of the outstanding Voting Stock held by Unaffiliated
Equity Holders shall be entitled to nominate and elect Corporation
Directors in lieu of any individuals so nominated to be such
Corporation Directors by a majority of the Corporation Directors.
(g) The Corporation and Monsanto, respectively, shall have the right to
nominate any replacement for a Director nominated in accordance
with this Section 4.1 by the Corporation or Monsanto, respectively,
upon the death, resignation, retirement, disqualification or
removal from office for cause of such Director. Such replacement
for any Independent Director shall also be an Independent
Director unless, in the case of a replacement of a Monsanto
Director, the Monsanto Directors include more than the required
number of Independent Directors. The Board of Directors shall
-24-
<PAGE> 28
elect each person so nominated by Monsanto or the Corporation
pursuant to this paragraph (g). In addition, the Board of Directors
shall nominate the Corporation's Chief Executive Officer to replace
such officer's predecessor in office as a Corporation Management
Director.
(h) In the event that the number of Monsanto Directors on the Board
of Directors differs from the number that Monsanto has the right
(and wishes) to designate for nomination pursuant to this Section
4.1, (i) if the number of Monsanto Directors exceeds such number,
Monsanto shall promptly take all appropriate action to cause to
resign that number of Monsanto Directors as is required to make the
remaining number of such Monsanto Directors conform to this
Section 4.1 or (ii) if the number of Monsanto Directors otherwise
is less than such number, the Corporation shall promptly take all
necessary action to create sufficient vacancies on the Board of
Directors to permit Monsanto to designate the full number of
Monsanto Directors which it is entitled (and wishes) to nominate
pursuant to this Section 4.1 (such action to include seeking the
resignation or removal of Directors or, at the request of Monsanto,
calling a special meeting of the stockholders of the Corporation
for the purpose of removing Directors to create such vacancies to
the extent permitted by applicable law). Upon the creation of any
vacancy pursuant to the preceding sentence, Monsanto shall nominate
the person to fill such vacancy in accordance with this Section 4.1
and the Board of Directors shall elect each person so nominated.
Notwithstanding the foregoing, at each annual meeting of the
stockholders of the Corporation, the Corporation shall nominate such
number of Directors as Monsanto is otherwise entitled to designate
under this Section 4.1.
(i) Notwithstanding anything herein to the contrary, no individual who
is an officer, director, employee, agent, partner or principal
stockholder of any competitor of the Corporation or any of its
Affiliates (other than Monsanto and its Affiliates) or any competitor
of Monsanto or any of its Affiliates (other than the Corporation)
shall serve as a Director without the unanimous consent of the
Board of Directors.
(j) In the event that Monsanto desires to remove any Monsanto Director
with or without cause and Monsanto is unable to procure the
resignation of such Monsanto Director, then, upon the request of
Monsanto, the Board of Directors shall promptly call a special
meeting of stockholders of the Corporation for purposes of removing
such Monsanto Director. In the event that the Corporation desires
to remove any Corporation Director
-25-
<PAGE> 29
with or without cause and the Corporation is unable to procure
the resignation of such Corporation Director, then, upon the
request of a majority of the Corporation Directors then in office
(or, in the event no Corporation Directors are then in office,
upon the request of a majority of the Independent Directors then
in office), the Board of Directors shall promptly call a special
meeting of stockholders of the Corporation for purposes of removing
such Corporation Director. In the event that the Chief Executive
Officer's employment with the Corporation is terminated for any
reason, then upon the request of either Monsanto or a majority of
the Corporation Directors then in office (or, in the event no
Corporation Directors are then in office, upon the request of a
majority of the Independent Directors then in office), the Board
of Directors shall promptly call a special meeting of stockholders
of the Corporation for the purpose of removing such person as a
Corporation Management Director.
4.2 Solicitation and Voting of Shares.
---------------------------------
(a) The Company shall use its best efforts to solicit from the
stockholders of the Company eligible to vote for the election
of Directors proxies in favor of the Company Management Directors
and the nominees designated in accordance with Section 4.1 hereof
or the removal of any Director pursuant to Section 4.1(h) or 4.1(j)
hereof.
(b) In any election of Directors or any meeting of the stockholders
of the Company called expressly for the removal of Directors, so
long as the Board of Directors includes (and will include after
any such removal) the number of Monsanto Directors contemplated by
Section 4.1 hereof and so long as such meeting is properly called
and Monsanto is properly notified in accordance with the Company's
by-laws and certificate of incorporation, Monsanto and its
Affiliates shall attend such meeting for purposes of establishing
a quorum and shall vote all their shares of Voting Stock (i) in favor
of any nominee or Director designated in accordance with Section 4.1
hereof, (ii) in favor of removal of any Director as contemplated
by Section 4.1(h) or 4.1(j) hereof, and (iii) otherwise against
the removal of any Director designated in accordance with
Section 4.1 hereof (other than in cases of removal of a Director
for cause); provided, however, that, if Monsanto and its Affiliates
elect to cumulate their votes in accordance with the Company's
by-laws and certificate of incorporation, then, in any vote
electing Monsanto Directors, Monsanto and its Affiliates may cast
all of their votes in favor of one (1) or more of the Monsanto
Directors designated by Monsanto and in any vote with respect to
the removal of a Monsanto Director, Monsanto and its Affiliates may
-26-
<PAGE> 30
cast all or any portion of their votes either in favor or against
the removal of any Monsanto Director unless a Monsanto Director
is otherwise required to be removed in accordance with Section 4.1(h)
hereof. In any other matter submitted to a vote of the stockholders
of the Company, Monsanto and its Affiliates may vote any or all of
their shares in their sole discretion.
(c) Monsanto agrees that it will, and will cause any of its
Subsidiaries (other than the Company and its Subsidiaries) to,
take all action as a stockholder of the Company or as is otherwise
reasonably within its control, as necessary to effect the provisions
of this Agreement, including, without limitation, voting all shares
of Voting Stock in favor of all persons nominated in accordance
with Section 4.1 hereof; provided, however, that, if Monsanto
cannot so take actions to give effect to all of the provisions of
this Agreement, it may first take actions to ensure that it receives
all of its benefits hereunder and then, to the extent possible,
to give effect to the provisions in favor of the Company.
4.3 Committees.
----------
(a) The Board of Directors shall establish, empower and maintain the
committees of the Board of Directors contemplated by this
Section 4.3.
(b) The following committees shall be established, empowered and
maintained by the Board of Directors at all times during the term
of this Agreement:
(i) an Audit Committee, consisting of at least three (3) of the
Company's Independent Directors, which committee shall be
authorized and empowered to cause an audit to be performed
of the Company and each of its Subsidiaries;
(ii) until the occurrence of a Trigger Event, a Retention/Replacement
Committee, consisting of the Independent Directors then serving
on the Board, responsible for the retention and/or replacement
of all of the executive officers of the Company, to be based
on the financial and behavioral criteria established by the
Retention/Replacement Committee; in the event that such
committee decides to replace any executive officer, Monsanto
shall have the right to nominate a replacement for such
executive officer for consideration by the committee along
with any other candidates identified by such committee; the
rights of the Retention/Replacement Committee shall be subject
to the provisions set forth in Section 4.4(a)(viii) hereof;
-27-
<PAGE> 31
(iii) a Compensation Committee, responsible, among other things, for
recommending to the Board of Directors, for approval by a
majority of the Board of Directors, (a) the adoption and
amendment of all employee benefit plans and arrangements,
(b) the engagement of, terms of any employment agreements and
arrangements with, and termination of, all persons designated
by the Company as "officers" for purposes of Section 16 of the
Exchange Act ("Section 16 Officers"), (c) the policies,
limitations and procedures under which the Stock Option Plan
Administration Committee shall operate and (d) the granting
under the Company's employee benefit plans of stock options and
other equity rights to Section 16 Officers, and consisting
solely of the Independent Directors then serving on the Board
provided each such Independent Director is (A) a disinterested
person (as such term is defined in Rule 16b-3(d) under the
Exchange Act) and (B) an "independent director" for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as
amended; and
(iv) such other committees as the Board of Directors deems necessary
or desirable; provided, however, that such committees are
established in compliance with Section 4.4(a)(vi) hereof.
For purpose of clause (ii) above, "executive officers" shall have
the same meaning as in Rule 3b-7 promulgated under the Exchange Act.
(c) Except as otherwise provided in Section 4.3(b) hereof or as agreed
by a majority of the Monsanto Management Directors, the number of
Monsanto Directors on each committee of the Board of Directors shall
be the same proportion (but not less than one (1)) of the total
membership of such committee as the number of Monsanto Directors,
as the case may be, is of the entire Board of Directors. Except as
otherwise provided in Section 4.3(b) hereof, the Monsanto Directors
on each committee of the Board of Directors shall be determined by a
majority of the Monsanto Management Directors.
(d) No action by any committee of the Board of Directors shall be valid
unless taken by unanimous written consent as provided in the
Company's by-laws or taken at a meeting for which adequate notice
has been duly given or waived by the members of such committee.
Such notice shall include a description of the general nature of the
business to be transacted at the meeting, and no other business may
be transacted at such meeting unless all members of the committee are
present and consent to the consideration of such other business.
Any committee
-28-
<PAGE> 32
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 Director to
replace any absent or disqualified Independent Director member or
Company Management Director member, respectively, of any committee
and a majority of the Monsanto Management Directors shall designate
a Monsanto Director to replace any absent or disqualified Monsanto
Director member of any committee. Each of the committees established
by the Board of Directors pursuant to this Section 4.3 shall
establish such other rules and procedures for its operation and
governance (consistent with the terms of this Agreement) as it
shall see fit and may seek such consultation and advice as to
matters within its purview as it shall require.
4.4 Approval Required for Certain Actions.
-------------------------------------
(a) On and after the Effective Date and until the earlier of a
Trigger Event or such date on which Monsanto's Percentage Interest
is less than twenty-five (25%), a majority of the board, including
at least one (1) Company Director and one (1) Monsanto Management
Director, shall be required to approve any of the following:
(i) the entry by the Company or any of its affiliates into any
merger or consolidation or the acquisition by the Company
or any of its Affiliates of any business or assets that would
constitute a Substantial Part of the Company (determined on a
consolidated basis) whether such acquisition be by merger of
consolidation or the purchase of stock or assets or otherwise;
(ii) the sale, pledge, grant of security interest in, transfer,
retirement or other disposal of (A) a Substantial Part of the
Company (determined on a consolidated basis), except pursuant
to a security interest granted in connection with borrowings
permitted under subsection (iv) below or (B) the pledge or
granting of a security interest in any intangible property
set forth in Exhibit B attached to the disclosure letter from
---------
Monsanto to Calgene dated June 27, 1995;
(iii) any dividend by or return of capital by the Company or Tomato
Associates (other than such distributions by Tomato Associates
to the Company as are necessary for the Company to timely
perform its obligations under Sections 1.02 and 5.02(c) of the
Gargiulo Credit Facility);
-29-
<PAGE> 33
(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
-30-
<PAGE> 34
as the annual operating plan and long-term strategic plan for
the Gargiulo Business, to be submitted to the Board annually
for approval, and any material changes thereto;
(x) any transaction between the Company (and its Affiliates),
on the one hand, and its (their) directors, officers or
employees, on the other hand, which is not in the normal course
of business;
(xi) any modification of the Transaction Agreements;
(xii) any amendment of the by-laws or certificate of incorporation
of the Company, Calgene or Tomato Associates by the respective
Boards of Directors thereof;
(xiii) the issuance of any warrants for the purchase of Equity
Securities or the issuance of additional Equity Securities
(other than warrants for the purchase of Equity Securities)
in excess of four million (4,000,000) shares of Common Stock
in any two (2) year period to a third party, other than
pursuant to plans referred to in subsection (vii) above;
(xiv) the sale or licensing by the Company or any of its Affiliates
of (A) any intangible property set forth in Exhibit B attached
---------
to the disclosure letter from Monsanto to Calgene dated
June 27, 1995 or (B) any other intangible property for
consideration (other than royalties contingent on future sales)
exceeding Five Million Dollars ($5,000,000) in the aggregate
(determined on a consolidated basis) per transaction or per
series of related transactions;
(xv) new fixed capital investments, capital leases or noncancellable
operating leases by the Company and its Affiliates having
annual payments in the aggregate (determined on a consolidated
basis) exceeding the aggregate amount set forth in the
Operating Plan;
(xvi) matters covered in Article 5 hereof, including, without
limitation, any changes in the composition of the Tomato
Associates' Board of Directors other than with respect to
Messrs. Salquist and Stacey;
(xvii) any press release which mentions or directly or indirectly
refers to Monsanto, except as required by law and where Board
approval cannot be obtained in a timely manner;
-31-
<PAGE> 35
(xviii) the initiation, settlement or termination of any suit or
proceeding concerning intellectual property, any other matter
which could have an adverse public affairs effect upon Monsanto
or the filing of any insolvency or bankruptcy proceeding by
or on behalf of the Company or any of its Affiliates; or
(xix) the removal or election of the directors, subject to Section 5.1
hereof, of Tomato Associates.
(b) After a Trigger Event and until the earlier of (i) the third
anniversary of the Effective Date or (ii) Monsanto's Percentage
Interest is at least seventy percent (70%), a majority of the
Board, including at least two (2) Company Directors, shall be
required to approve any of the following:
(i) Except as provided in Section 4.4(a)(xvi) hereof, the matters
set forth in subsections (i), (ii), (vi), (viii), (ix) and
(xi) of paragraph (a) above; or
(ii) Any transaction between the Company (and its Affiliates) and
Monsanto or any Affiliate of Monsanto.
(c) From and after the occurrence of both (i) a Trigger Event and
(ii) the third anniversary of the Effective Date, and until
Monsanto's Percentage Interest is at least ninety-nine percent
(99%), neither Monsanto nor any of its Affiliates shall enter into
any transaction with the Company or any of its Affiliates without
the approval of at least two (2) Company Directors.
4.5 Enforcement of this Agreement. A majority of the Company Directors
-----------------------------
shall have full and complete authority on behalf of the Company to
enforce the terms of this Agreement.
4.6 Certificate of Incorporation and By-Laws. The Company and Monsanto
----------------------------------------
shall take or cause to be taken all lawful action necessary to ensure
at all times that the Company's and Calgene's Certificate of
Incorporation and By-laws are not at any time inconsistent with the
provisions of this Agreement. Not later than the Effective Date, the
Board of Directors shall amend the Company's By-laws and the Calgene
Board shall amend Calgene's By-laws to reflect the provisions of this
Agreement.
4.7 Advisors. The Company Directors shall be entitled to retain, at the cost
--------
and expense of the Company, the services of an investment banking firm
of national reputation of their
-32-
<PAGE> 36
choice and one (1) law firm of their choice to advise them in their
capacity as Independent Directors with respect to any matter on which
the Company Directors are required or permitted to act hereunder.
4.8 Injunctive Relief. In the event of a breach of the provisions of this
-----------------
Article 4, a party hereto entitled to rights under this Article 4 will
suffer irreparable harm and the total amount of monetary damages will be
impossible to calculate and will therefore be an inadequate remedy.
Accordingly, in such event, such party shall be entitled to temporary
and permanent injunctive relief against the Company and any other
breaching party and to any other rights and remedies to which such
party may be entitled to at law or in equity.
ARTICLE 5
Governance of Gargiulo
----------------------
5.1 Board of Tomato Associates.
--------------------------
(a) Upon the Effective Date, the Board of Directors of Tomato Associates
shall consist of Jeffrey D. Gargiulo, John Gargiulo, Hendrik A.
Verfaillie, Robert T. Fraley, Roger H. Salquist, Roderick N. Stacey
and an additional director who shall be (and whose successor shall
be) designated by the company who shall need to be reasonably
acceptable to Monsanto and Jeffrey D. Gargiulo (as long as he
serves as a director). In addition, the Board of Directors of
Tomato Associates shall include two (2) advisory, non-voting
directors designated by Monsanto from members of the senior
management of Tomato Associates. Upon request by Monsanto, Company
shall remove and replace Messrs. Verfaillie and Fraley, and their
respective successors, and replace them with Persons designated by
Monsanto.
(b) The Chief Executive Officer and Chairman of the Board of Tomato
Associates shall be Jeffrey D. Gargiulo as long as he is employed
by Tomato Associates. The Board of Directors of Tomato Associates
shall appoint a Vice Chairman of the Board, Chief Operating Officer,
Senior Vice President and such other positions as they may designate.
5.2 Operating and Strategic Plans. The annual operating plan and long-term
-----------------------------
strategic plan for the Gargiulo Business shall be subject to approval
by the Board of Directors in accordance with Section 4.4 hereof. The
annual operating plan shall include, among other things: (i) capital
expenditure budget, (ii) borrowing forecast, (iii) monthly profit and
loss, cash flow and balance sheet forecasts, (iv) hiring and compensation
plans, (v) profit and loss forecasts by crop
-33-
<PAGE> 37
production area, (vi) material asset acquisition plans and (vi) account
level details for each cost center. From and after the approval of each
annual operating plan for a fiscal year (or portion thereof), the Board
of Directors of Tomato Associates shall have authority to operate the
Gargiulo Business during such year in the ordinary cause of business
and within the confines of such annual operating plan and the strategic
plan then in effect (as it may be modified by the Board of Directors
of Tomato Associates, subject to approval of the Board of Directors
in accordance with Section 4.4 hereof) and other delegations of
authority from the Board of Directors which shall be similar in scope
to the delegation of such Board to the Chief Executive Officer of the
Company (except that such delegations shall apply solely to the
Gargiulo Business). As of the Effective Date, the Board of Directors
shall approve, as part of the strategic plan for the Gargiulo Business,
the branded tomato strategy plan previously approved by Monsanto.
5.3 Compensation; Etc. The initial compensation for the Chief Executive
------------------
Officer and the Chief Operating Officer of Tomato Associates (the "Two
Senior Gargiulo Officers") shall be determined by agreement of Monsanto
and the company prior to the Effective Date. Thereafter, the
compensation of the Two Senior Gargiulo Officers shall not be reduced
without the approval of Monsanto. The initial employment agreements
for the Two Senior Gargiulo Officers shall be upon terms agreed to by
Monsanto and the Company prior to the Effective Date. The employment
of any of the Two Senior Gargiulo Officers with Tomato Associates shall
not be terminated without the approval of the Board of Directors of
Tomato Associates.
5.4 Certificate of Incorporation and By-Laws. The Company shall take or
----------------------------------------
cause to be taken all lawful action necessary to ensure at all times
that Tomato Associates' Certificate of Incorporation and By-Laws are not
at any time inconsistent with the provisions of this Agreement. Not
later than the Effective Date, the Board of Directors shall cause Tomato
Associates to amend Tomato Associates' By-Laws to reflect the provisions
of this Agreement.
5.5 Effective Period. The provisions of Sections 5.1, 5.2, 5.3 and 5.4
----------------
shall be effective from the Effective Date until the earlier of (a) a
Trigger Event or (b) such time as Monsanto's Percentage Interest is
less than forty percent (40%).
5.6 Injunctive Relief. In the event of a breach of the provisions of this
-----------------
Article 5, a party hereto entitled to rights under this Article 5 will
suffer irreparable harm and the total amount of monetary damages will be
impossible to calculate and will therefore be an inadequate remedy.
-34-
<PAGE> 38
Accordingly, in such event, such party shall be entitled to temporary
and permanent injunctive relief against the Company and any other
breaching party and to any other rights and remedies to which such
party may be entitled to at law or in equity.
ARTICLE 6
Miscellaneous
-------------
6.1 Governing Law. This Agreement shall be governed in all respects by the
-------------
laws of the State of Delaware (exclusive of such state's choice of laws
rules).
6.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors, and administrators of the
parties hereto.
6.3 Entire Agreement; Amendment. This Agreement and the other documents
---------------------------
delivered pursuant hereto constitute the complete, exclusive and final
understanding and agreement between the parties with regard to the
subjects hereof and thereof. Except as specifically set forth herein,
any term of Section 2 or 3 hereof may be waived only with the prior
written consent of the Company and the Holders of at least sixty-six
and two-thirds (66-2/3%) of the outstanding shares of the Registrable
Securities. Any amendment or waiver effected in accordance with this
Section 6.3 shall be binding upon each holder of the Registrable
Securities (including securities into which such Registrable Securities
have been converted) outstanding at the time, each future Holder of all
such securities, and the Company.
6.4 Notices. Any notice required or permitted to be given under this
-------
Agreement shall be in writing, and shall be deemed sufficiently given
when delivered in person or transmitted by telegram or telecopier
(confirmed by mail), addressed as follows:
If to Monsanto: Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Attention: Senior Vice President and
General Counsel
Telecopy Number: 314-694-3011
If to any other Holder, at such address and telecopy number as such
Holder shall have furnished the Company in writing.
-35-
<PAGE> 39
If to Company: Calgene, Inc.
1920 Fifth Street
Davis, California 95616
Attention: Chairman and Chief Executive
Officer
Telecopy Number: 916-753-1510
or to such other address as may be specified from time to time in a
notice given by such party. The parties agree to acknowledge in writing
the receipt of any such notice delivered in person.
6.5 Delays or Omissions. No delay or omission to exercise any right, power
-------------------
or remedy accruing to any Holder of any Registrable Securities, upon
any breach or default of the Company under this Agreement, shall impair
any such right, power or remedy of such Holder nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein,
or of or in any similar breach or default thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part
of any party or any waiver on the part of any party of any provisions or
conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, at law, in equity or otherwise
afforded to any party, shall be cumulative and not alternative.
6.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
6.7 Severability. In the event that any provision of this Agreement becomes
------------
or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided, however, that no such
severability shall be effective if it materially changes the economic
benefit of this Agreement to any party.
6.8 Stock Legends. Subject to Section 2.8(d) hereof, certificates
-------------
representing Restricted Securities (other than Restricted Securities
issued to Monsanto in connection with the conversion of principal
and/or accrued interest under the Company Credit Facility or the
Gargiulo Credit Facility upon the occurrence of an Event of Default
under either such Credit Facility) issued to Monsanto pursuant to the
Transaction Agreements shall bear the following legend:
"The securities represented by this certificate are subject to
certain resale restrictions and entitled to the benefits set forth
in a Stockholders Agreement dated
-36-
<PAGE> 40
March 31, 1996, between Calgene II, Inc., a Delaware corporation,
and Monsanto Company, a Delaware corporation (the "Agreement").
A copy of the Agreement and all amendments thereto is on file in
the office of the Secretary of the Company."
6.9 Sale of Assets of Tomato Associates. For so long as Jeffrey Gargiulo
-----------------------------------
or Robert Shulman are employed by Tomato Associates under employment
agreements with Tomato Associates (the "Employment Agreements"), the
Company shall cause Tomato Associates not to sell or otherwise dispose
of (by merger, consolidation or otherwise) all or substantially all
of its assets unless the acquiring entity assumes all of Tomato
Associates' obligations under each of the Employment Agreements then in
effect.
6.10 Audits, Consultants and Inspections. Monsanto (using Monsanto's internal
-----------------------------------
and/or external auditors or any other Person appointed by Monsanto to
whom the Company does not reasonably object) shall have the right (i) to
audit the books and records, other financial information and business
practices and operations of the Company and its Affiliates, and (ii) to
discuss the business practices and operations, affairs, finances and
accounts of the Company and its Affiliates with the officers of the
Company and its Affiliates and the independent public accountants who
review or audit the Company's financial statements, all at such
reasonable times and as often as may reasonably be requested. The
Company shall also permit inspection of its (and its Affiliates')
properties, books and records by Monsanto (using the Persons identified
above) during normal business hours or at other reasonable times. The
scope of all such audits, discussions and inspections shall be
determined by Monsanto in its sole discretion. Any authorized
representative of Monsanto who or which is not employed by Monsanto
(i) shall be required to execute a confidentiality agreement in a form
approved by the Board of Directors (which approval shall not be
unreasonably withheld or delayed) and (ii) may not be employed by or
affiliated with a competitor of the Company, as reasonably determined
by the Board of Directors; provided, however, that an independent
certified public accounting firm shall not be deemed to be employed by
or affiliated with a competitor of the Company even if such firm
provides services to a competitor of the Company.
6.11 No Third Party Beneficiaries. Nothing contained in this Agreement,
----------------------------
express or implied, is intended to or shall confer upon anyone other
than the parties hereto (and their successors and assigns, including,
without limitation, subsequent Holders and purchasers under Section
3.7(c)) any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
-37-
<PAGE> 41
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.
-38-
<PAGE> 42
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
CALGENE II, INC.
By: /s/ Roger H. Salquist
---------------------------------
-----------------------------
President
MONSANTO COMPANY
By: /s/ Hendrik A. Verfaillie
---------------------------------
Hendrik A. Verfaillie
Executive Vice President
-39-
<PAGE> 1
HOLDING COMPANY CREDIT FACILITY AGREEMENT
THIS AGREEMENT is made as of the 31st day of March, 1996, by
and between CALGENE II, INC., a Delaware corporation having its
principal office at 1920 Fifth Street, Davis, California 95616 (the
"Company"), and MONSANTO COMPANY, a Delaware corporation with its
main offices at 800 N. Lindbergh Boulevard, St. Louis, Missouri
63167 ("Monsanto").
In consideration of the mutual benefits accruing to each of
the parties, the receipt and sufficiency of which are hereby
acknowledged, and in further consideration of the mutual
performance of this Agreement, the parties hereto agree as follows:
ARTICLE I
AMOUNT AND TERMS OF THE LOANS
Section 1.01. Loans. During the Commitment Period
-----
(hereinafter defined), Monsanto agrees, on the terms and conditions
hereafter set forth, to make three (3) one (1) year loans,
totalling not more than $45,000,000, to the Company for general
corporate purposes from time to time after the date hereof, not to
exceed at any time outstanding Fifteen Million Dollars
($15,000,000), said sum being the "Commitment." Within said limits
and prior to the occurrence of an Event of Default (hereinafter
defined), the Company may borrow, repay and reborrow under this
Agreement, each such borrowing or reborrowing being referred to
herein as an "Advance." Each Advance shall be in an amount of not
less than One Hundred Thousand Dollars ($100,000) and shall be in
increments of One Hundred Thousand Dollars ($100,000). Each request
for an Advance shall be made in writing substantially in the form
attached hereto as Exhibit A and incorporated herein or on such
---------
other forms acceptable to Monsanto or in any other manner
acceptable to Monsanto. Monsanto shall process each request for an
Advance as soon as reasonably practicable but no later than ten
(10) working days after receipt of the Company's request. Each of
the Loans (hereinafter defined) shall consist of no more than
twelve (12) Advances. Upon fulfillment of the applicable conditions
set forth in Article II hereof and
-1-
<PAGE> 2
subject to the provisions of this Agreement, Monsanto shall make
such Advances available to the Company by wire transfer or otherwise
as reasonably directed by the Company, but the Company agrees to
reimburse Monsanto for all such wire and other transfer costs
incurred by Monsanto, and the Company shall bear all risks of delays
or nondelivery or misdelivery of any such funds so wired or
otherwise transferred other than those caused by Monsanto's
negligence or failure to transfer such funds in accordance with the
Company's directions. Any Advance under this Agreement shall be
deemed made on the day that the Advance proceeds are wired or
otherwise transferred or, if the Advance proceeds are used to repay
an outstanding Loan, on the day such proceeds are so applied. All
Advances made on or after the date of this Agreement and before the
first anniversary of this Agreement shall be considered to be part
of "Loan One"; all Advances made on or after the first anniversary
of this Agreement and before the second anniversary of this
Agreement shall be considered to be part of "Loan Two"; all Advances
made on or after the second anniversary of this Agreement and before
the earlier of the third anniversary of this Agreement and September
30, 1998, shall be considered to be part of "Loan Three." Loan One,
Loan Two and Loan Three shall hereinafter be collectively referred
to as the "Loans" and individually as a "Loan." The "Commitment
Period" means the period from the date of this Agreement to the
earlier of September 30, 1998, or the third anniversary of the
execution of this Agreement or the date Monsanto terminates its
obligations to make further Advances or Loans hereunder pursuant to
Section 5.02 hereof. The Loans made pursuant to this Agreement shall
be supported by the joint and several guaranty (the "Guaranty") of
the subsidiaries of the Company which are listed on Exhibit B hereto
---------
(the "Subsidiaries" or a "Subsidiary") in the form attached hereto
as Exhibit C.
---------
Section 1.02. Notes. Each of the Loans shall be evidenced by
-----
a promissory note in the form of Exhibit D attached hereto (a
---------
"Note"), payable to the order of Monsanto and representing the
obligation of the Company to pay the amount of the aggregate unpaid
principal amount of such Loans made by Monsanto, together with
interest on the principal amount outstanding from time to time, as
provided in this Agreement. Each Note shall provide that the
Company shall pay all outstanding principal and accrued interest to
Monsanto on the first anniversary of the date of such Note or, in
the case of the Note evidencing Loan Three, on the earlier of
September 30, 1998, or the first anniversary of the date of such
Note; provided, however, that the Company
-2-
<PAGE> 3
shall have the option to convert the outstanding principal and
accrued interest into shares of the Company's common stock as
provided in Section 1.06 hereof, subject to Monsanto's right to
require the Company to sell shares and pay cash (as provided in such
Section 1.06). The Notes evidencing Loan One, Loan Two and Loan
Three shall be dated as of the date of this Agreement, as of the
first anniversary of this Agreement and as of the second anniversary
of this Agreement, respectively.
Section 1.03. Interest Rate. The outstanding principal
-------------
balance of the Loans from time to time shall bear interest at two
percent (2%) above Citibank's published prime rate ("Note Rate").
Interest shall be compounded daily and adjusted quarterly on each
January 1, April 1, July 1 and October 1 pursuant to calculations
performed by Monsanto.
Section 1.04. Effects of Event of Default or Potential
----------------------------------------
Default. Notwithstanding the foregoing and in addition to the
- -------
remedies set forth in Sections 5.02 and 5.03 hereof, upon an Event
of Default and so long as such Event of Default shall continue or,
if Monsanto shall have accelerated the maturity date of the then
outstanding Loans pursuant to Section 5.02 hereof, until the Loans
are repaid in full, the principal amount of all Loans then
outstanding, together with all interest then accrued, shall
thereafter bear interest at the Default Rate (hereinafter defined),
with interest payable upon demand. The "Default Rate" shall be the
per annum rate equal to three percent (3%) above the Note Rate that
would otherwise be applicable and thereafter until paid in full.
During the continuance of an Event of Default, the Company shall
have no right to obtain any new Advances under this Agreement.
A "Potential Default" shall be an event which, solely but for
the lapse of time or the giving of notice, or both, would
constitute an Event of Default. If a Potential Default then exists
and has not been waived in writing by Monsanto and does not itself
constitute or is not declared an Event of Default, the Company
shall have no right to borrow any additional money beyond the
principal amount of Loans then outstanding.
Section 1.05. Miscellaneous Provisions Regarding Loan
---------------------------------------
Payments and Interest. All payments on any Loan shall be made to
- ---------------------
Monsanto by wire transfer for deposit in Citibank, New
-3-
<PAGE> 4
York, New York, Account #00000502 unless Monsanto notifies Company
of a different place for payments to be made. Loan One shall be due
and payable on the first anniversary of the Note evidencing Loan One
or such earlier date as all of the outstanding Loans have been
declared due and payable pursuant to Section 5.02 hereof. Loan Two
shall be due and payable on the first anniversary of the Note
evidencing Loan Two or such earlier date as all of the outstanding
Loans have been declared due and payable pursuant to Section 5.02
hereof. Loan Three shall be due and payable on the earlier of
September 30, 1998, or the first anniversary of the Note evidencing
Loan Three or such earlier date as all of the outstanding Loans
have been declared due and payable pursuant to Section 5.02 hereof.
The date each Loan shall be due and payable shall hereafter from
time to time be referred to as the "Maturity Date" and,
collectively, as the "Maturity Dates." If Monsanto makes a new Loan
hereunder on a day on which the Company is required to or has
elected to repay all or any part of an outstanding Loan and the
Company has not elected to exercise its conversion rights under
Section 1.06 hereof, Monsanto shall apply the proceeds of this new
Loan to make such repayment, and only an amount equal to the
difference (if any) between the amount being borrowed and the
amount being repaid shall be made available by Monsanto to the
Company, as provided in Section 1.01 hereof. All interest rates
respecting any Loan hereunder are stated on a per annum basis with
a year of three hundred and sixty (360) days, and interest is
calculated on the actual number of days elapsed (including the
first day, but excluding the last day of any period for any Loan
under this Agreement). All Loans outstanding after their respective
Maturity Dates or such earlier date as all of the outstanding Loans
have been declared due pursuant to Section 5.02 hereof shall
thereafter bear interest at the Default Rate on all unpaid amounts
until the Loans are fully paid.
Section 1.06 Right of Conversion in Lieu of Repayment. In
----------------------------------------
lieu of repayment in cash of outstanding principal and accrued
interest on each Maturity Date, the Company, subject to Monsanto's
right to require the Company to sell shares and pay cash, as
provided below, may elect to convert all or any portion of the
principal and accrued interest due under the applicable Loan into
shares of common stock of the Company at the average of the closing
market prices for such shares during the thirty (30) trading days
immediately preceding the Maturity Date for such Loan (the "Average
Market Price"). In order to exercise its conversion rights, at
least thirty (30) days prior to the Maturity Date for a Loan, the
Company shall send a written notice
-4-
<PAGE> 5
(the "Conversion Notice") to Monsanto, stating that the Company
intends to exercise such conversion rights. The Conversion Notice
shall specify the amount of the principal and accrued interest that
the Company intends to convert (the "Conversion Amount").
Monsanto may, in its sole discretion and within five (5)
business days after its receipt of any Conversion Notice from the
Company, give written notice (the "Alternative Notice") to the
Company, stating that all or any part of the Conversion Amount set
forth in such Conversion Notice (the "Alternative Conversion
Amount") shall be payable in cash. Upon receipt of an Alternative
Notice, (i) the Alternative Conversion Amount may no longer be
converted into shares of common stock of the Company (unless the
Alternative Notice shall have been withdrawn as provided below) and
(ii) the difference, if any, between the Conversion Amount and the
Alternative Conversion Amount shall be converted into shares of
common stock of the Company in accordance with the terms of the
Conversion Notice and the applicable provisions of this
Section 1.06. The Company shall proceed promptly, using its best
efforts and at its expense, to take such actions as are necessary
to effect the public sale of a number of shares of its common stock
(rounded to the next lowest full share) equal to the Alternative
Conversion Amount divided by the Average Market Price (the
"Offering"). The Alternative Conversion Amount shall be due and
payable to Monsanto in cash on the closing date for the Offering.
On such closing date, the net proceeds of such Offering shall be
paid by the Company to Monsanto in full payment and satisfaction of
such Alternative Conversion Amount, even if such net proceeds are
less than or greater than such Alternative Conversion Amount.
If the Offering has not closed within sixty (60) days after
the Company's receipt of an Alternative Notice, Monsanto may,
thereafter and in its sole discretion, withdraw its Alternative
Notice at any time. If Monsanto withdraws an Alternative Notice,
then, within five (5) business days thereafter, the Company shall
issue to Monsanto a number of shares of common stock of the Company
(rounded to the next lowest full share) equal to the Alternative
Conversion Amount divided by the Average Market Price.
If (i) the Company properly notifies Monsanto as provided
above in this Section 1.06 and (ii) Monsanto does not give an
Alternative Notice for the full Conversion Amount, then, within
-5-
<PAGE> 6
five (5) business days after the Maturity Date for a Loan, the
Company shall issue to Monsanto a number of shares of common stock
of the Company (rounded to the next lowest full share) equal to the
Conversion Amount (or the difference between the Conversion Amount
and Alternative Conversion Amount, as applicable) divided by the
Average Market Price.
Any portion of the Conversion Amount not converted as provided
above (i.e., because such amount would require conversion into a
fractional share) shall be paid to Monsanto by wire transfer as set
forth above. Upon any such conversion, the amount converted shall
first be applied to reduce the accrued interest due on the Loan as
of the Maturity Date, and any remaining portion of the amount
converted shall be applied to reduce the principal due on such
Loan.
Each time the Company issues shares of its common stock
(including any shares issued pursuant to Section 5.03 hereof) to
Monsanto, it shall deliver to Monsanto an opinion from counsel to
the Company in a form reasonably satisfactory to Monsanto relating
to the issuance of such shares.
Notwithstanding anything to the contrary contained in this
Agreement, on each Maturity Date, all outstanding principal and
accrued interest not to be repaid, or converted by the Company to
shares of common stock of the Company, in accordance with this
Section 1.06 shall be repaid in full to Monsanto in accordance with
Section 1.05 hereof.
Section 1.07. Prepayments. The Loans may be prepaid in whole
-----------
or in part at any time after giving at least three (3) days' prior
written notice to Monsanto.
Section 1.08. Approved Persons. All requests for Advances
----------------
(including any requests for continuation of Loans) shall be made by
an Approved Person (hereinafter defined). An "Approved Person"
shall be any person designated in writing from time to time by the
Company who is authorized to make requests for Advances in the name
of the Company hereunder. Unless Monsanto otherwise agrees, there
shall not be more than three (3) Approved Persons at any one time
nor shall any Approved Person have his or her office located at any
place other than the
-6-
<PAGE> 7
Company's main office in Davis, California, but the Company shall
have the right to change the persons so designated upon written
notice thereof to Monsanto. Any such designation shall be executed
by the President or the Chief Financial Officer of the Company and
shall contain a specimen signature of the Approved Person. Monsanto
shall be entitled to rely on any direction by an Approved Person
regarding the making of Advances or the transfer of funds hereunder,
or any such direction that Monsanto believes to be made by the
Approved Person, whether such direction be received by telephone, by
facsimile transmission, by TELEX, by mail or otherwise.
ARTICLE II
CONDITIONS OF LENDING
Section 2.01. Conditions Precedent to Loan One. The
--------------------------------
obligation of Monsanto to make the first Advance under Loan One is
subject to the following conditions precedent that:
(a) Acquisition Agreement Conditions. All of the
--------------------------------
conditions set forth in Section 8.2 of the Agreement and Plan of
Reorganization ("Acquisition Agreement") between Monsanto and
Calgene, Inc. ("Calgene"), dated October 13, 1995 must be fulfilled
(or waived in writing by Monsanto) and all the documents that
Calgene or the Company is required to deliver to Monsanto pursuant
to such Section 8.2 must be delivered (or waived in writing by
Monsanto).
(b) Documents. Monsanto shall receive the following,
---------
each dated the date hereof or such other date as may be
specifically permitted, in form and substance satisfactory to
Monsanto:
(i) Note. The Note for Loan One, duly executed by
----
the Company.
(ii) Guaranty. The Guaranty, duly executed by all
--------
the Subsidiaries.
(iii) Other Approvals. Such other approvals,
---------------
resolutions, opinions or documents, as Monsanto may reasonably
request.
-7-
<PAGE> 8
Section 2.02. Conditions Precedent to Each Advance. The
------------------------------------
obligation of Monsanto to make any Advances under Loan One, Loan
Two or Loan Three shall be subject to the further conditions
precedent that, on the funding date, (i) all representations and
warranties of the Company and the Subsidiaries contained in this
Agreement and the Guaranty shall be true, correct, accurate and
complete in all material respects as if made on such date (except
(A) to the extent such representations speak as of an earlier date
or (B) for changes arising from events permitted by the covenants
specified in this Agreement), (ii) all covenants specified in this
Agreement shall have been complied with in all material respects,
(iii) no event shall have occurred and be continuing, or would
result from such Advance, which constitutes an Event of Default or
Potential Default, (iv) there shall not be initiated against the
Company or any Subsidiary any action, suit or proceeding at law or
in equity or by or before any court or government agency or
authority or arbitral tribunal and there shall not have occurred
any legal, regulatory or other development or any other
circumstances whatsoever which, in the opinion of Monsanto, could
reasonably be expected to have a material adverse effect on (a) the
business, assets, operations or financial condition of the Company
and its Subsidiaries taken as a whole, or (b) the ability of the
Company and its Subsidiaries to perform any of their respective
obligations hereunder or under the documents contemplated hereby
(each of the foregoing being hereafter referred to as a "Material
Adverse Effect"); provided, however, that no Material Adverse
Effect shall be deemed to have occurred based solely on the outcome
of the litigation between the Company and Enzo Biochem, Inc.
("Enzo"), (v) the Note evidencing Loan Two and the Note evidencing
Loan Three shall have been delivered by the Company to Monsanto
before any Advance under Loan Two or Loan Three, respectively, and
(vi) an Advance request in proper form shall have been submitted or
made to Monsanto by the Company.
The making of a request by the Company for an Advance or a
Loan hereunder, whether in writing, or by telephone confirmed in
writing, or otherwise, shall constitute a certification by the
Company that all representations and warranties recited or referred
to in this Section 2.02 and Article III hereof are true as of and
as if made the date of such request (except as set forth above) and
that all required conditions to the making of such Loan and any
Advance thereunder have been met.
-8-
<PAGE> 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company.
---------------------------------------------
The representations and warranties of Calgene set forth in Section
6.2 of the Acquisition Agreement are incorporated by reference
herein. All such representations and warranties shall be deemed
made by the Company herein and shall survive and be continuing so
long as any principal or accrued interest is outstanding under any
of the Loans.
ARTICLE IV
COVENANTS OF THE COMPANY
Section 4.01. Affirmative Covenants. So long as any of the
---------------------
Loans or accrued interest shall remain unpaid or Monsanto shall
have any Commitment hereunder, the Company shall (and, where
appropriate even if not so stated, shall cause each of the
Subsidiaries to), unless Monsanto shall otherwise consent in
writing, which consent shall not be unreasonably withheld:
(a) Preservation of Business and Corporate Existence.
------------------------------------------------
As to the Company and each Subsidiary, carry on and conduct its
business affairs in substantially the same manner as presently
carried on and conducted, and maintain in good standing its
existence and its right to transact business in those states in
which it is now or may hereafter be doing business; and maintain
all licenses, permits and registrations necessary to the conduct of
its business.
(b) Use of Proceeds. Use the proceeds of the Loans
---------------
solely for general corporate purposes of the Company and the
Subsidiaries. Regardless of the general corporate purposes to which
the Company chooses to apply the proceeds of the Loans (including
loaning any portion of the proceeds to Gargiulo Inc., formerly
Tomato Investment Associates, Inc. ("Tomato Associates") and
Calgene), all outstanding principal and accrued interest of each
Loan shall be due on each respective Maturity Date.
-9-
<PAGE> 10
(c) Reporting Requirements. Furnish to Monsanto:
----------------------
(i) As soon as available and in any event within
sixty (60) days after the end of each calendar quarter, one
(1) copy of the consolidated and consolidating financial
statements prepared by the Company and certified by the Chief
Financial Officer of the Company, and as soon as available and
in any event within one hundred twenty (120) days after the
end of its fiscal year, one (1) copy of its financial
statements audited by an independent public accountant. The
financial statements so provided shall include, but not be
limited to, the balance sheet, income statement and cash flow
statement of the Company, as well as consolidated and
consolidating statements of all Subsidiaries (which
consolidating statement need not be audited). Such financial
statements shall be accompanied by a written certification
from the Chief Financial Officer of the Company (A) stating
that the financial statements present fairly the consolidated
financial condition of the Company and that no event has since
occurred which would constitute a Material Adverse Effect on
the consolidated financial condition of the Company from that
represented on the financial statements; (B) demonstrating in
detail, satisfactory to Monsanto, the Company's compliance
with the financial covenants set forth in Sections 4.01(f) and
4.01(g) hereof at and as of the end of the quarter or fiscal
year, as applicable; (C) stating that no Event of Default or
Potential Default is then existing at the date of the
certification; and (D) stating that the representations and
warranties contained in this Agreement and the Guaranty are
accurate and complete in all material respects.
(ii) Promptly after the sending or filing thereof,
copies of all reports which the Company sends to any of its
stock or security holders and copies of all reports and other
materials (including registration statements, if any) which
the Company hereafter files with the Securities and Exchange
Commission or any national securities exchange.
-10-
<PAGE> 11
(iii) Such other information respecting the
condition or operations, financial or otherwise, of the
Company as Monsanto may from time to time reasonably request.
(d) Insurance. Insure and keep insured at all times
---------
with good and responsible insurance companies reasonably acceptable
to Monsanto all of its property of an insurable nature and maintain
insurance against liability on account of damage to persons or
property in such manner and to the extent that like risks are
usually insured by others conducting similar businesses in the
general areas where the Company and each of the Subsidiaries
conduct their business. Company shall, upon request of Monsanto at
any time, furnish a written summary of the amount and type of
insurance carried, the names of the insurers and the policy
numbers.
(e) Government Actions. Obtain and maintain all
------------------
material authorizations and approvals, and other actions by, and
make and maintain all notices to or filings with, any governmental
authority or regulatory body now or hereafter required for the
making and performance of this Agreement and the Notes.
(f) Net Worth. Maintain, at and as of the end of the
---------
quarter or fiscal year, as applicable, consolidated Net Worth
(hereinafter defined) of not less than Ten Million Dollars
($10,000,000) and a minimum consolidated working capital of not
less than Five Million Dollars ($5,000,000) (which consolidated
working capital shall be the excess of Current Assets (hereinafter
defined) over Current Liabilities (hereinafter defined). Further,
the ratio of Total Long-Term Liabilities (hereinafter defined) to
Net Worth shall not exceed the ratio of one-to-one.
As used herein, "Net Worth" shall mean the total of
common and preferred stock, paid in surplus, retained earnings and
additional stockholders' equity of the Company and the Subsidiaries
on a consolidated basis less intangibles, determined in accordance
with generally accepted accounting principles, consistently
applied.
-11-
<PAGE> 12
"Total Long-Term Liabilities" shall mean the total
of all long-term liabilities of the Company and the Subsidiaries on
a consolidated basis, determined in accordance with generally
accepted accounting principles,consistently applied.
"Current Assets" shall mean the total of all current
assets of the Company and the Subsidiaries on a consolidated basis,
determined in accordance with generally accepted accounting
principles, consistently applied.
"Current Liabilities" shall mean the total of all
current liabilities of the Company and its Subsidiaries on a
consolidated basis, determined in accordance with generally
accepted accounting principles, consistently applied.
For purposes of making any calculation under this
Article IV, the outstanding principal of amounts loaned by Monsanto
to the Company pursuant to this Agreement or the Gargiulo Credit
Facility Agreement of even date herewith between Monsanto and the
Company (the "Gargiulo Credit Facility Agreement") (except to the
extent of the "Repayment Portion of Cumulative Free Cash Flow," as
defined therein, which has not been paid to Monsanto), shall be
deemed to be stockholders' equity and not liabilities.
(g) Current Ratio. Maintain, on a consolidated basis,
-------------
a ratio of Current Assets to Current Liabilities of at least one-
to-one.
(h) Audits, Consultants and Inspections. Permit
-----------------------------------
Monsanto (using Monsanto's internal and/or external auditors or any
other person appointed by Monsanto to whom the Company does not
reasonably object) (i) to audit the books and records, other
financial information and business practices and operations of the
Company and its Subsidiaries, and (ii) to discuss the business
practices and operations, affairs, finances and accounts of the
Company and its Subsidiaries with the officers of the Company and
its Subsidiaries and the independent public accountants who review
or audit the Company's financial statements, all at such reasonable
times and as often as may reasonably be requested. The Company
shall also permit inspection of its (and its Subsidiaries')
properties, books and records by Monsanto (using the
-12-
<PAGE> 13
persons identified above) during normal business hours or at other
reasonable times. The scope of all such audits, discussions and
inspections shall be determined by Monsanto in its sole discretion.
Any authorized representative of Monsanto who or which is not
employed by Monsanto (i) shall be required to execute a
confidentiality agreement in a form approved by the Board of
Directors of the Company (which approval shall not be unreasonably
withheld or delayed) and (ii) may not be employed by or affiliated
with a competitor of the Company, as reasonably determined by the
Board of Directors of the Company; provided, however, that an
independent certified public accounting firm shall not be deemed to
be employed by or affiliated with a competitor of the Company even
if such firm provides services to a competitor of the Company.
(i) Payment of Taxes. Pay and discharge, before they
----------------
become delinquent, all taxes, assessments and other governmental
charges imposed upon the Company, the Subsidiaries or any of its or
their properties, or any part thereof, or upon the income or
profits therefrom and all claims for labor, materials or supplies
which, if unpaid, might be or become a lien or charge upon any of
its or their property, except such items as it or they are in good
faith appropriately contesting and as to which adequate reserves
have been provided.
(j) Payment of Indebtedness. Pay any and all
-----------------------
indebtedness for borrowed money payable or guaranteed by the
Company (or any Subsidiary), and any interest or premium thereon,
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in accordance with the agreement
or instrument relating to such indebtedness or guarantee, except
those being contested in good faith and as to which adequate
reserves have been provided.
(k) Notice of Subsequent Events. Immediately upon the
---------------------------
President or Chief Financial Officer of the Company obtaining
knowledge of (i) any material adverse change in the condition or
operation, financial or otherwise, of the Company and its
Subsidiaries; (ii) any Event of Default or Potential Default under
this Agreement; (iii) any default or potential default by the
Company or any of the Subsidiaries under or with respect to any
instrument, contract or agreement to which the Company or any of
the Subsidiaries is a party or by which the Company
-13-
<PAGE> 14
or any of the Subsidiaries is bound which may constitute a Material
Adverse Effect; (iv) any default or potential default by the Company
or any of the Subsidiaries under or with respect to any order, writ,
injunction, decision or decree of any court, governmental authority
or arbitral body to which the Company or any of the Subsidiaries is
a party or by which the Company or any of the Subsidiaries is bound
which may constitute a Material Adverse Effect; or (v) any action
or proceeding pending or, to the knowledge of the President or
Chief Financial Officer of the Company, threatened against the
Company or any of the Subsidiaries before any court, governmental
authority or arbitral body which, if decided adversely to the
Company or such Subsidiary, would result in a Material Adverse
Effect, deliver to Monsanto a written certificate signed by such
officer specifying the nature thereof, the period of existence
thereof and what action the Company has taken and proposes to take
with respect thereto.
(l) ERISA Compliance. If the Company or any of the
----------------
Subsidiaries shall have any pension plan, comply with all
requirements of the Employee Retirement Income Security Act of
1974, as amended from time to time ("ERISA") relating to such plan.
Without limiting the generality of the foregoing, the Company (and
each of the Subsidiaries) shall not:
(i) Permit any Plan maintained by it to engage in
any non-exempt "prohibited transaction" as such term is
defined in Section 4975 of the Internal Revenue Code of 1986,
as amended;
(ii) Permit any Plan maintained by it to incur any
"accumulative funding deficiency," as such term is defined in
Section 302 of ERISA, 29 U.S.C Section 1082, whether or not
waived;
(iii) Terminate any such Plan in a manner which
could result in the imposition of a lien on the property of
Company pursuant to Section 4068 of ERISA, 29 U.S.C. Section
1368; or
-14-
<PAGE> 15
(iv) Take any action which would constitute a
complete or partial withdrawal from a Multiemployer Plan
(hereinafter defined) within the meaning of Sections 4203 and
4205 of Title IV of ERISA, 29 U.S.C. Sections 1383 and 1385.
Notwithstanding any provision contained in this Section
4.01(l) to the contrary, an act by the Company shall not be deemed
to constitute a violation of subparagraphs (i) through (iv) hereof
unless Monsanto determines in good faith that said action,
individually or cumulatively with other acts of the Company, does
have or is likely to cause, a Material Adverse Effect.
Company shall have the affirmative obligation hereunder
to report to Monsanto any of those acts identified in subparagraphs
(i) through (iv) hereof, regardless of whether said act does or is
likely to cause a Material Adverse Effect.
(m) Compliance with Laws. Comply in all material
--------------------
respects with all applicable laws, rules, regulations and orders.
(n) Additional Subsidiaries. If the Company or any
-----------------------
Subsidiary acquires or creates any additional majority-owned
subsidiary hereafter, promptly notify Monsanto in writing. Such
additional subsidiary shall also, upon capitalization and election
of officers, execute and deliver to Monsanto a guaranty of the
Loans in the form attached hereto as Exhibit C and, upon such
---------
delivery, shall become a Subsidiary under this Agreement.
(o) Reservation of Shares. Reserve adequate shares of
---------------------
common stock of the Company to be issued upon the occurrence of a
conversion as described in Sections 1.06 and 5.03 hereof.
(p) Further Assurances. From time to time, execute and
------------------
deliver to Monsanto such additional documents and provide such
additional information as Monsanto may reasonably require to carry
out the terms of this Agreement and be informed of the status and
affairs of the Company and its Subsidiaries.
-15-
<PAGE> 16
Section 4.02. Negative Covenants. Except as specifically
------------------
provided otherwise hereinbelow, so long as any Loan shall remain
unpaid or Monsanto shall have any Commitment hereunder, without the
written consent of Monsanto, the Company (and each of the
Subsidiaries):
The following negative covenants set forth in this Section
4.02 shall be of no force or effect during such period as the
"Supermajority Requirements" set forth in Article 4 of the
Stockholders Agreement dated of even date herewith between the
Company and Monsanto are in effect. In the event such
"Supermajority Requirements" are no longer in effect, the
foregoing negative covenants shall be fully applicable to the
Company (and, where appropriate, each of the Subsidiaries).
(a) Acquisitions. Shall not enter into any merger or
------------
consolidation or acquire any business or assets that would
constitute a Substantial Part (hereinafter defined) of the Company
and its Subsidiaries, taken as a whole, whether such acquisition be
by merger or consolidation or the purchase of stock or assets or
otherwise. "Substantial Part" means more than ten percent (10%) of
the total assets of the Company and its Subsidiaries, taken as a
whole, as shown on the Company's consolidated balance sheet as of
the end of the most recent fiscal quarter ending prior to the time
the determination is made.
(b) Liens. Shall not, and shall not permit any
-----
Subsidiary to, pledge, mortgage or otherwise encumber or subject to
or permit to exist upon or be subjected to any lien, charge or
security interest of any kind (including any conditional sale or
other title retention agreement and any lease in the nature
thereof), on any of its properties of any kind or character at any
time owned by the Company or any Subsidiary other than:
(i) liens, pledges or deposits for workmen's
compensation, unemployment insurance, old age benefits or social
security obligations, taxes, assessments, statutory obligations or
other similar charges, good faith deposits made in connection with
tenders, contracts or leases to which the Company or any Subsidiary
is a party or other deposits required to be made in the ordinary
course of business, provided in each case the obligation
-16-
<PAGE> 17
secured is not overdue or, if overdue, is being contested in good
faith by appropriate proceedings and adequate reserves have been
provided therefor in accordance with generally accepted accounting
principles, consistently applied, and that the obligation is not
for borrowed money, customer advances, trade payables, or
obligations to agricultural producers;
(ii) the pledge of assets for the purpose of
securing an appeal or stay or discharge in the course of any legal
proceedings, provided that the aggregate amount of liabilities of
the Company or any Subsidiary so secured by a pledge of property
permitted under this subsection (ii) including interest and
penalties thereon, if any, shall not be in excess of One Million
Dollars ($1,000,000) at any one time outstanding;
(iii) liens, pledges, mortgages, security
interests or other charges existing on the date hereof and
disclosed in Exhibit E hereto; and
---------
(iv) liens, pledges, mortgages, security interests
and other encumbrances on property which secure indebtedness
permitted under Section 4.02(l) hereof.
(c) Limitations on Merger and Disposition of Assets.
-----------------------------------------------
Shall not merge into or consolidate with any other entity, or
lease, sell, transfer or otherwise dispose of all or any
Substantial Part of the Company and its Subsidiaries, taken as a
whole, except (i) pursuant to security interests granted in
connection with borrowings permitted under Section 4.02(l) hereof
and (ii) in the case of a merger or consolidation of the Company,
(A) the shareholders of the Company immediately prior to the merger
or consolidation continue to hold more than fifty percent (50%) of
the outstanding voting power of the surviving entity, (B) the
surviving entity (after giving effect to the merger or
consolidation) has a net worth equal to or greater than the
Company's consolidated net worth (determined immediately prior to
the merger or consolidation) and (C) the surviving entity expressly
assumes all of the obligations of the Company under this Agreement.
(d) Non-Default Under Other Agreements. Shall not
----------------------------------
default upon or fail to pay any indebtedness for money borrowed as
the same matures under any agreement or permit
-17-
<PAGE> 18
to occur any other event which creates a default under such or under
any other agreement to which the Company is a party or by which it
is bound, in either case in an amount in excess of One Million
Dollars ($1,000,000).
(e) Conflicting Agreement. Shall not enter into any
---------------------
agreement, any term or condition of which conflicts with any term
or condition of this Agreement.
(f) Changes in Accounting Principles. Shall not make
--------------------------------
any change in its principles or methods of accounting as currently
in effect, except such changes as are required by generally
accepted accounting principles, or, without prior written notice to
Monsanto, change its fiscal year.
(g) Loans and Investments. Shall not make any
---------------------
investment in a corporation, firm or business or make loans or
advances to any person except:
(i) Investments in interest bearing obligations of
the United States government, certificates of deposit issued
by United States banks, commercial paper and repurchase
agreements or other short-term, high grade (A-1, P-1 or
similar rating) investments;
(ii) Advances to others in the form of progress
payments, prepaid rents, security deposits, grower loans or
other advances customary in transactions made in the ordinary
course of business between persons not affiliated with each
other;
(iii) Subject to the provisions of Section
4.02(a) hereof, investments in any partially- or wholly-owned
Subsidiary or any corporation, firm or business in the same
type of business as the Company, which line of business will
continue after such investment;
-18-
<PAGE> 19
(iv) The loans listed and described on Exhibit F
---------
hereto and additional purchase money loans to purchasers of
assets of the Company or its Subsidiaries which at no time in
the aggregate exceed One Million Dollars ($1,000,000);
(v) Loans and travel advances to employees of the
Company which, in the aggregate (inclusive of the employee
loans listed on Exhibit G hereto), do not exceed One Hundred
---------
Thousand Dollars ($100,000);
(vi) Loans or advances to any wholly-owned
Subsidiary; or
(vii) Stock, obligations or securities received
in settlement of debts (created in the ordinary course of
business) owing to the Company or any Subsidiary.
Nothing in this subsection (g) shall be construed as preventing
Company or any Subsidiary from making any acquisition permitted
under subsection (a) above of this Section 4.02.
(h) Guaranties. Shall not guarantee the obligations of
----------
any corporation, person or entity, except endorsements of
negotiable instruments or checks deposited for collection acquired
in the ordinary course of business and except guaranties by (i) the
Company or any Subsidiary of the obligations of any of the wholly-
owned Subsidiaries or any subsidiary hereinafter acquired and
becoming a wholly-owned Subsidiary hereunder or (ii) any Subsidiary
of the obligations of the Company.
(i) Capital Expenditures. Shall not make capital
--------------------
expenditures (including capitalized leases but excluding fixed
assets acquired in connection with corporate acquisitions), during
any fiscal year of the Company, on a consolidated basis, in an
aggregate amount in excess of Sixty Million Dollars ($60,000,000).
(j) Dividends. Shall not pay or declare any dividends
---------
(either in cash or property) or make distributions on, or redeem,
repurchase, retire or otherwise acquire for value,
-19-
<PAGE> 20
any shares of stock of the Company (including, options, warrants or
other rights to acquire such shares of stock), other than
repurchases or redemptions of equity securities of the Company.
(l) Limit on Indebtedness. Shall not create, assume or
---------------------
incur any indebtedness, in the aggregate, exceeding Fifteen Million
Dollars ($15,000,000), increasing by Five Million Dollars
($5,000,000) on each July 1 commencing July 1, 1996, plus amounts
secured by inventory and/or receivables for working capital lines
and indebtedness incurred to acquire property, plant or equipment
and secured by the acquired asset, and any refinancing of any of
the foregoing, exclusive of (i) amounts outstanding under this
Agreement or the Gargiulo Credit Facility Agreement, and (ii)
indebtedness approved by the Board of Directors of the Company
while the "Supermajority Provisions" were in effect.
(m) Limitations on Use of Proceeds. Shall not use the
------------------------------
proceeds of the Loans to make advances, loans or capital
contributions to, or to otherwise make an investment in or benefit,
either directly or indirctly, any subsidiary of the Company which
is not a Subsidiary listed on Exhibit B hereto and which is not as
---------
a signatory to the Guaranty.
ARTICLE V
EVENTS OF DEFAULT
Section 5.01. Events of Default. Any one (1) or more of the
-----------------
following events shall constitute an Event of Default under this
Agreement, the Notes and any other document or instrument
pertaining to or necessary to carry out the purposes of this
Agreement:
(a) Payment Default. The Company fails to pay when due
---------------
any principal, interest or other amount which it is obligated to
pay under this Agreement and the Notes and such failure shall
continue unremedied for five (5) days after the date on which such
payment was due.
(b) Representation Default. Any representation or
----------------------
warranty made by the Company in this Agreement, the Notes, or in
any certificate, notification or report furnished
-20-
<PAGE> 21
hereunder, proves to have been incorrect or misleading in any
material respect when made or renewed and is material to the ability
of the Company to perform its obligations under this Agreement or
the Notes.
(c) Other Provisions Default. The Company fails to
------------------------
perform or observe any material covenant or agreement to be
performed or observed by it under this Agreement or the Notes or
the Company fails to perform or observe any other material term,
covenant or condition in this Agreement or the Notes to be made and
performed by the Company and, in the case of any such default that
is curable by the Company, such default is not cured within ten
(10) days after written notice thereof by Monsanto.
(d) Authorizations Default. Any governmental filing,
----------------------
registration, consent or approval necessary in connection with this
Agreement or any document contemplated hereby is withheld, revoked
or restricted in a way which constitutes a Material Adverse Effect,
unless such revocation or restriction is withdrawn.
(e) Cross Default. The Company or any Subsidiary (i)
-------------
fails to pay when due any indebtedness (in an amount in excess of
One Million Dollars ($1,000,000)) senior to any of the Loans for
which it is liable, contingently or otherwise, and the lender
declares such indebtedness to be immediately due and payable, or
(ii) commits a material breach of or defaults in the performance or
observance of any of the representations, warranties, covenants,
terms or provisions of, or a default otherwise occurs under, (a)
the Acquisition Agreement or any of the other Transaction
Agreements (as defined in the Acquisition Agreement), (b) the
Insect-Protected Cotton License and Seed Services Agreement dated
as of September 26, 1995 between Monsanto and Calgene, (c) the
Gargiulo Credit Facility Agreement, (d) the Stockholders Agreement
between Monsanto and the Company of even date herewith or (e) any
other agreement or instrument between Monsanto and the Company or
any Subsidiary and, in the case of any such default that is
curable, such default is not cured within ten (10) days after the
Company or Subsidiary, as applicable, receives notice thereof.
-21-
<PAGE> 22
(f) Lien Default. The holder of any lien, whether now
------------
or hereafter existing, granted or assumed by the Company, and
securing any indebtedness exceeding One Million Dollars
($1,000,000) in the aggregate (whether or not indebtedness of the
Company) takes substantial steps to enforce the same because of the
nonpayment (whether by acceleration or otherwise) of the
indebtedness secured thereby.
(g) Judgment Default. A final judgment, order or
----------------
conviction (whether criminal or civil) is rendered against the
Company or any of its Subsidiaries or its or its Subsidiaries'
properties or assets which constitutes a Material Adverse Effect
and such judgment or order shall continue unsatisfied and the
execution thereof unstayed for a period of ninety (90) consecutive
days.
(h) Bankruptcy Default. (i) the Company or any of the
------------------
Subsidiaries shall fail to pay or shall admit in writing its
inability to pay its debts as they become due, shall become
insolvent, howsoever evidenced, or shall make a general assignment
for the benefit of creditors; (ii) any proceeding shall be
instituted by or against the Company or any of the Subsidiaries
under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors or any similar law or seeking appointment of a
receiver, trustee, or other similar person for it or for any
Substantial Part of its property and, if such proceeding is not
commenced by the Company or any of the Subsidiaries, it is
consented to or acquiesced in by the Company or any of the
Subsidiaries or remains undismissed for forty-five (45) days after
institution; (iii) all or a Substantial Part of the Company's or
any Subsidiary's property is attached, seized, levied upon or comes
within the possession of any receiver, trustee or similar person
for the benefit of creditors; (iv) any action is taken or any
proceeding is filed or commenced with respect to the Company's
liquidation, dissolution or termination of existence; or (v) the
Company shall take any corporate action to authorize any of the
actions described in this subsection (h);
(i) Tax Lien Default. Any local, state or federal
----------------
government agency places a material lien against any asset of the
Company or any Subsidiary as a result of nonpayment of any tax
obligation owed by the Company or such Subsidiary, which lien is
not removed within forty-five (45) days after placement.
-22-
<PAGE> 23
(j) ERISA Default. Any of the following events occur or
-------------
exist with respect to the Company or any Subsidiary: (a) any
Prohibited Transaction (hereinafter defined) involving any Plan;
(b) any Reportable Event (hereinafter defined) with respect to any
Plan; (c) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
(d) any event or circumstance that might constitute grounds
entitling the PBGC (hereinafter defined) to institute proceedings
under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; (e) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency or termination
of any Multiemployer Plan; and, in each case above, such event or
condition, together with all other events or conditions, if any,
could, in the opinion of Monsanto, subject the Company to any tax,
penalty, or other liability to a Plan, a Multiemployer Plan, the
PBGC, or otherwise. For purposes of this Agreement: "Plan" means
any employee benefit or other plan established, maintained, or to
which contributions have been made by the Company or any ERISA
Affiliate; "Reportable Event" means any of the events set forth in
Section 4043 of ERISA; "ERISA Affiliate" means any trade or
business (whether or not incorporated) that, together with Company,
is treated as a single employer under Section 414 of the Internal
Revenue Code of 1986, as amended; "Multiemployer Plan" means a Plan
described in Section 4001(a)(3) of ERISA which covers employees of
the Company or any ERISA Affiliate; "PBGC" means the Pension
Benefit Guaranty Corporation or any entity succeeding to any or all
of its functions under ERISA; and "Prohibited Transaction" means
any transaction set forth in Section 406 of ERISA or Section 4975
of the Internal Revenue Code of 1986, as amended from time to time.
(k) Guaranty Default. Any Subsidiary shall fail to
----------------
perform or observe its obligations under the Guaranty and such
failure (other than failure to pay to Monsanto sums due thereunder)
shall not have been remedied within thirty (30) days after written
notice thereof shall have been given by Monsanto.
Section 5.02. Rights of Monsanto. Upon the occurrence of an
------------------
Event of Default, Monsanto may, at its election, without notice of
its election and without demand, do any one (1) or more of the
following (all of which are authorized by the Company):
-23-
<PAGE> 24
(a) Cease advancing money or extending credit to or for
the benefit of the Company;
(b) Subject to the provisions of Section 5.03 hereof,
declare the obligation of Monsanto to make Loans and Advances
hereunder to be terminated, whereupon the same shall forthwith
terminate; and
(c) Subject to the provisions of Section 5.03 hereof,
declare the Notes, including all principal and accrued interest
thereon, and all other amounts payable under this Agreement to be
forthwith due and payable, without presentment, protest or further
notice of any kind, all of which are hereby expressly waived by the
Company.
Section 5.03. Default Conversion. Upon the occurrence and
------------------
during the continuation of an Event of Default, for a period of
thirty (30) days from the occurrence of the Event of Default (the
"Election Period"), the Company, subject to Monsanto's right to
require the Company to sell shares and pay cash, as provided below,
may elect to convert all or any portion of the principal and
accrued interest under any outstanding Loan into shares of common
stock of the Company at the average of the closing market prices
for such shares during the thirty (30) trading days immediately
preceding the Default Conversion Date (hereinafter defined) for
such Loan (the "Default Average Market Price"). Monsanto shall not
take any of the actions set forth in paragraphs (b) or (c) of
Section 5.02 hereof until the end of such Election Period. If all
of the principal and accrued interest are converted into shares of
common stock of the Company or paid in cash pursuant to this
Section 5.03, Monsanto shall have no further rights under
Section 5.02 hereof, arising because of the Event of Default for
which such conversion or payment was made hereunder.
If the Company does not elect to convert all of the principal
and accrued interest under any outstanding Loan into shares of
common stock of the Company during the Election Period, then,
within ten (10) days after such Election Period, Monsanto may, in
addition to any other remedies set forth in this Agreement, elect
to convert all or any portion of the remaining principal and
accrued interest under such Loan into shares of common stock of the
Company at
-24-
<PAGE> 25
the Default Average Market Price; provided, however, that in no
event shall Monsanto elect to convert principal and accrued interest
into more than three million (3,000,000) shares of common stock of
the Company (as such number is adjusted for stock dividends, stock
splits and similar events affecting holders of the Company's common
stock) for each Loan.
In order to exercise the conversion rights described above, at
any time after the occurrence and during the continuation of an
Event of Default, a party shall send a written notice (the "Default
Conversion Notice") to the other party, stating that the exercising
party intends to exercise such conversion rights; provided,
however, that, in the case of the Company, the Default Conversion
Notice may only be given during the Election Period. The Default
Conversion Notice shall specify (i) the amount of the principal and
accrued interest that the exercising party intends to convert (the
"Default Conversion Amount") and (ii) the date as of which such
conversion shall take place (the "Default Conversion Date"), which
date shall not be later than ten (10) days after the date of the
Default Conversion Notice.
Monsanto may, in its sole discretion and within five (5)
business days after its receipt of any Default Conversion Notice
from the Company, give written notice (the "Alternative Default
Notice") to the Company, stating that all or any part of the
Default Conversion Amount set forth in such Default Conversion
Notice (the "Alternative Default Conversion Amount") shall be
payable in cash. Upon receipt of an Alternative Default Notice,
(i) the Alternative Default Conversion Amount may no longer be
converted into shares of common stock of the Company (unless the
Alternative Default Notice shall have been withdrawn as provided
below) and (ii) the difference, if any, between the Default
Conversion Amount and the Alternative Default Conversion Amount
shall be converted into shares of common stock of the Company in
accordance with the terms of the Default Conversion Notice and the
applicable provisions of this Section 5.03. The Company shall
proceed promptly, using its best efforts and at its expense, to
take such actions as are necessary to effect the public sale of a
number of shares of its common stock (rounded to the next lowest
full share) equal to the Alternative Default Conversion Amount
divided by the Default Average Market Price (the "Default
Offering"). The Alternative Default Conversion Amount shall be due
and payable to Monsanto in cash on the closing date for the Default
Offering. On such closing date, the net proceeds of such Default
-25-
<PAGE> 26
Offering shall be paid by the Company to Monsanto in full payment
and satisfaction of such Alternative Default Conversion Amount,
even if such net proceeds are less than or greater than such
Alternative Default Conversion Amount.
If the Default Offering has not closed within sixty (60) days
after the Company's receipt of an Alternative Default Notice,
Monsanto may, thereafter and in its sole discretion, withdraw its
Alternative Default Notice at any time. If Monsanto withdraws an
Alternative Default Notice, then, within five (5) business days
thereafter, the Company shall issue to Monsanto a number of shares
of common stock of the Company (rounded to the next lowest full
share) equal to the Alternative Default Conversion Amount divided
by the Default Average Market Price.
If (i) either party properly gives the other party a Default
Conversion Notice and (ii) in the case of a Default Conversion
Notice given by the Company, Monsanto does not give an Alternative
Default Notice for the full Default Conversion Amount, then, within
five (5) business days after the Default Conversion Date, the
Company shall issue to Monsanto a number of shares of common stock
of the Company (rounded to the next lowest full share) equal to the
Default Conversion Amount (or the difference between the Default
Conversion Amount and the Alternative Default Conversion Amount, as
applicable) divided by the Default Average Market Price.
Any portion of the Default Conversion Amount not so converted
(i.e., because such amount would require conversion into a
fractional share or, in the case of Monsanto, because the number of
shares available are not adequate to convert all of the Default
Conversion Amount) shall be paid to Monsanto in cash. Upon any such
conversion, the Default Conversion Amount (including any portion
thereof paid to Monsanto in cash) shall first be applied to reduce
the accrued interest due on the Loan as of the Default Conversion
Date, and any remaining portion of the Default Conversion Amount
shall be applied to reduce the principal due on such Loan.
Section 5.04. Company's Obligations. The Company recognizes
---------------------
that, if the Company fails to perform, observe or discharge any of
its obligations under this Agreement or the other
-26-
<PAGE> 27
collateral agreements hereto, a remedy at law may not provide
adequate relief to Monsanto; therefore, the Company agrees that
Monsanto shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving
actual damages. All of Monsanto's rights and remedies granted under
this Agreement and the collateral agreements hereto are cumulative
and nonexclusive. The Company shall pay upon demand all costs and
expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred by Monsanto in enforcing this Agreement. All
such sums not paid on demand shall be treated as outstanding
principal under the Notes.
ARTICLE VI
RIGHT OF SETOFF
Section 6.01. Right of Setoff. Upon the occurrence and
---------------
during the continuance of any Event of Default, Monsanto is hereby
authorized at any time and from time to time, without notice to the
Company (any such notice being expressly waived by the Company), to
set off and apply any and all funds at any time held and other
indebtedness at any time owing by Monsanto to or for the credit or
the account of the Company or any of the Subsidiaries against any
and all of the obligations of the Company now or hereafter existing
under this Agreement and the Notes, irrespective of whether or not
Monsanto shall have made any demand under this Agreement or the
Notes and although such obligations may be unmatured.
Notwithstanding the preceding sentence, Monsanto shall not apply
any of such setoff amounts until the end of the notice periods set
forth in Section 5.03 hereof. The rights of Monsanto under this
Section 6.01 are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which
Monsanto may have.
ARTICLE VII
SUBORDINATION
Section 7.01 Subordination.
-------------
(a) All of the obligations of the Company to Monsanto
under this Agreement and the Notes, including, without limitation,
the Company's obligation to repay any Advances
-27-
<PAGE> 28
(collectively, the "Subordinated Indebtedness"), shall to the extent
and in the manner hereinafter set forth, be subordinated and subject
in right of payment to the prior payment in full of a Senior
Indebtedness. "Senior Indebtedness" means (a) all indebtedness of
the Company, including the principal of and interest on such
indebtedness, whether outstanding on the date of this Agreement or
thereafter created (i) arising under working capital lines of credit
secured by inventory and/or receivables, (ii) incurred to acquire
property, plant or equipment and secured by the acquired asset or
(iii) otherwise permitted under Section 4.02(l) hereof at the time
such indebtedness is incurred, and (b) any modifications,
refundings, deferrals, renewals or extensions of any such Senior
Indebtedness, or securities, notes or other evidences of
indebtedness issued in exchange for such Senior Indebtedness;
provided, however, that in no event shall the obligations of the
Company under the Gargiulo Credit Facility Agreement constitute
Senior Indebtedness under this Agreement. No payment on account of
principal or interest on the Subordinated Indebtedness shall be
made if, at the time of such payment or immediately after giving
the effect thereto, (i) there shall exist a default in any payment
with respect to any Senior Indebtedness or (ii) there shall have
occurred an event of default (other than a default in the payment
of amounts due thereon) with respect to any Senior Indebtedness, as
defined in the instrument under which the same is outstanding,
permitting the holders thereof to accelerate the maturity thereof,
and such event of default shall not have been cured or waived or
shall not have ceased to exist. Notwithstanding the foregoing or
any other provision of this Section 7.01, nothing in this
Section 7.01 shall restrict or otherwise limit Monsanto's or
Company's rights under Sections 1.06 or 5.03 hereof.
(b) In the event of any distribution, dividend, or
application, partial or complete, voluntary or involuntary, by
operation or law or otherwise, of all or any part of the assets of
the Company or of the proceeds thereof to the creditors of the
Company or upon any indebtedness of the Company, occurring by
reason of the liquidation, dissolution, or other winding up of the
Company, or by reason of any execution sale, or bankruptcy,
receivership, reorganization, arrangement, insolvency, liquidation
or foreclosure proceeding of or for the Company or involving its
property, no dividend, distribution or application shall be made,
and Monsanto shall not be entitled to receive or retain any
dividend, distribution, or application on or in respect of principal
of or interest on Subordinated Indebtedness, unless and until all
-28-
<PAGE> 29
principal of and any interest on Senior Indebtedness then
outstanding shall have been paid and satisfied in full, and in any
such event any dividend, distribution or application otherwise
payable in respect of Subordinated Indebtedness shall be paid and
applied on Senior Indebtedness until such Senior Indebtedness has
been fully paid and satisfied.
(c) The holders of Senior Indebtedness need not at any
time give Monsanto notice of any kind of the creation or existence
of any Senior Indebtedness, nor of the amount or terms thereof, all
such notice being hereby expressly waived. Also, the holders of
Senior Indebtedness may at any time and from time to time, without
the consent of or notice to Monsanto, without incurring
responsibility to Monsanto, and without impairing or releasing the
obligation of Monsanto under this Agreement (i) renew, refund or
extend the maturity of any Senior Indebtedness, or any part
thereof, or otherwise revise, amend or alter the terms and
conditions thereof, (ii) sell, exchange, release or otherwise deal
with any property by whomsoever at any time pledged, mortgaged or
otherwise hypothecated or subjected to a lien to secure any Senior
Indebtedness, and (iii) exercise or refrain from exercising any
rights against the Company and others, including Monsanto.
(d) Monsanto shall not sell, assign or otherwise
transfer any Subordinated Indebtedness, or any part thereof, except
(i) upon the agreement of the transferee or assignee to abide by
and be bound by the terms hereof and (ii) when Monsanto may assign
its rights under the Stockholders Agreement dated of even date
herewith between Company and Monsanto.
(e) Monsanto shall cause all Subordinated Indebtedness
to be at all times evidenced by the Notes of the Company and shall
cause all such Notes to bear thereon a legend substantially as
follows:
"The indebtedness evidenced by this Note is
subordinate to any and all indebtedness,
obligations and liabilities of the maker hereof to
the holders of Senior Indebtedness in the manner
and to the extent set forth in the Credit Facility
Agreement (as defined below) to which reference is
hereby made for a more full statement thereof."
-29-
<PAGE> 30
(f) If, notwithstanding the provisions of this
Agreement, Monsanto shall receive any payment of principal or
interest on Subordinated Indebtedness which the Company is not
entitled to make pursuant to the terms hereof, whether or not
Monsanto has knowledge that the Company is not entitled to make
such payment, Monsanto shall promptly account for such payment and
upon the demand of the holders of Senior Indebtedness pay over such
payment to such holders for application to the Senior Indebtedness
owing to such holders. No payment or any distribution received by
the holders of the Senior Indebtedness in respect of Subordinated
Indebtedness pursuant to any of the terms hereof shall entitle
Monsanto to any right, whether by virtue of subrogation or
otherwise, in and to any Senior Indebtedness unless and until all
Senior Indebtedness has been fully paid and satisfied and any
commitment of the holders of Senior Indebtedness to extend Senior
Indebtedness to the Company has terminated.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Incorporation of Acquisition Agreement. The
--------------------------------------
provisions contained in Article 12 of the Acquisition Agreement are
incorporated herein by this reference and shall apply to this
Agreement to the same extent as if fully set forth herein.
Section 8.02. Reinstatement of Indebtedness. This Agreement
-----------------------------
shall continue to be effective, or be reinstated, as the case may
be, if, at any time, payment, or any part thereof, of any amount
paid by or on behalf of the Company to Monsanto with regard to any
Note is rescinded or must otherwise be restored or returned
(i) upon or in connection with the insolvency, bankruptcy,
dissolution, liquidation, or reorganization of the Company, or any
Subsidiary, or (ii) upon or as a result of the appointment of a
receiver, intervenor, or conservator of, or trustee, or similar
officer for the Company or any Subsidiary or any Substantial Part
of the property of such entity or (iii) as a result of Article VII
hereof, all as though such payment has not been made.
-30-
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
CALGENE II, INC.
By: /s/Michael J. Motroni
-----------------------------------
Title: Vice President
--------------------------------
MONSANTO COMPANY
By: /s/Hendrik A. Verfaillie
-----------------------------------
Title: Executive Vice President
--------------------------------
-31-
<PAGE> 1
GARGIULO CREDIT FACILITY AGREEMENT
THIS AGREEMENT is made as of the 31st day of March, 1996, by
and between CALGENE II, INC., a Delaware corporation having its
principal office at 1920 Fifth Street, Davis, California 95616 (the
"Company"), and MONSANTO COMPANY, a Delaware corporation with its
main offices at 800 N. Lindbergh Boulevard, St. Louis, Missouri
63167 ("Monsanto").
In consideration of the mutual benefits accruing to each of
the parties, the receipt and sufficiency of which are hereby
acknowledged, and in further consideration of the mutual
performance of this Agreement, the parties hereto agree as follows:
ARTICLE I
AMOUNT AND TERMS OF THE LOAN
Section 1.01. Loan. During the Commitment Period
----
(hereinafter defined), Monsanto agrees, on the terms and conditions
hereafter set forth, to make a loan ("Loan") to the Company, the
proceeds of which shall be used solely to support the branded
tomato strategy ("Strategy") of Gargiulo, Inc., formerly Tomato
Investment Associates, Inc., a Delaware corporation, or its
successors ("Tomato Associates") (such Strategy shall be agreed
upon by the Board of Directors of Tomato Associates and
incorporated herein by reference), from time to time after the date
hereof, in an aggregate amount not to exceed at any time
outstanding Forty Million Dollars ($40,000,000), said sum being the
"Commitment." Amounts advanced by Monsanto to Gargiulo, G.P.,
Inc., a Delaware corporation ("Gargiulo, G.P."), or Gargiulo, L.P.,
a Delaware limited partnership ("Gargiulo, L.P."), (Gargiulo, G.P.
and Gargiulo, L.P. collectively, "Gargiulo") prior to the date of
this Agreement (the "Gargiulo Loan") and outstanding on the date
hereof, plus any accrued interest thereon, shall be re-financed
under, and shall become subject to the terms and conditions of,
this Agreement, and the total of such prior advances and accrued
interest shall be deemed, without any action, to be an Advance
(hereinafter defined)
-1-
<PAGE> 2
hereunder on the date hereof used to repay such total. Within said
limits and prior to the occurrence of an Event of Default
(hereinafter defined), the Company may borrow, repay and reborrow
under this Agreement, each such borrowing or reborrowing being
referred to herein as an "Advance." Each Advance shall be in an
amount of not less than One Hundred Thousand Dollars ($100,000) and
shall be in increments of One Hundred Thousand Dollars ($100,000).
Each request for an Advance (except the Advance relating to
repayment of the Gargiulo Loan referred to above) shall consist of
documentation submitted to Monsanto by Tomato Associates and the
Company that is reasonably acceptable to Monsanto, verifying that
Tomato Associates has reached certain milestones and achieved
certain goals as set forth on Exhibit A attached hereto and
---------
incorporated herein by reference, as it may be amended from time to
time, and shall be accompanied by a written request substantially in
the form attached hereto as Exhibit B and incorporated herein or in
---------
such other form acceptable to Monsanto. The maximum amount of each
Advance shall be determined in accordance with the schedule set
forth on Exhibit A. At no time shall Monsanto be obligated to make
---------
any Advance to the Company in connection with any milestone or goal
set forth on Exhibit A until such time as Tomato Associates and the
---------
Company have provided Monsanto with documentation reasonably
acceptable to Monsanto, verifying Tomato Associates' achievement of
the goal and milestone for which Tomato Associates and the Company
are seeking the Advance. Upon achievement of the applicable goal and
milestone and upon fulfillment of the applicable conditions set
forth in Article II hereof and subject to the provisions of this
Agreement, Monsanto shall make such Advances available by wire
transfer directly into Tomato Associates' bank account pursuant to
wiring instructions to be provided at the time the request for each
Advance is submitted, but the Company agrees to reimburse Monsanto
for all wire and other transfer costs incurred by Monsanto, and the
Company shall bear all risks of delays or nondelivery or misdelivery
of any such funds so wired or otherwise transferred other than those
caused by Monsanto's negligence or failure to transfer such funds in
accordance with the Company's directions. Any Advance under this
Agreement shall be deemed made on the day that the Advance proceeds
are wired or otherwise transferred or, if the Advance proceeds are
used to repay the Gargiulo Loan, on the date hereof. Monsanto shall
process each request for an Advance as soon as reasonably
practicable but no later than ten (10) working days after receipt
of the Company's request. The "Commitment Period" means the period
from the date of this Agreement to the earlier of the fourth
anniversary of the
-2-
<PAGE> 3
execution of this Agreement or the date Monsanto terminates its
obligations to make further Advances hereunder pursuant to Section
5.02 hereof. The Loan made pursuant to this Agreement shall be
supported by the joint and several guaranty (the "Guaranty") of the
subsidiaries of the Company which are listed on Exhibit C hereto
---------
(the "Subsidiaries" or a "Subsidiary") in the form attached hereto
as Exhibit D.
---------
Section 1.02. Note. The Loan shall be evidenced by a
----
promissory note in the form of Exhibit E attached hereto (the
---------
"Note"), dated as of the date hereof, payable to the order of
Monsanto and representing the obligation of the Company to pay the
amount of the aggregate unpaid principal amount of the Loan,
together with interest on the principal amount outstanding from
time to time, as provided in this Agreement. Subject to the other
provisions of this Agreement, the Note shall provide that the
Company shall pay all outstanding principal and accrued interest to
Monsanto on the fourth anniversary of this Agreement (the "Maturity
Date"), unless extended as provided herein, in one (1) payment in
an amount equal to the lesser of the Repayment Portion (hereinafter
defined) of the Cumulative Free Cash Flow (hereinafter defined) of
Tomato Associates' total business during the period between the
date of this Agreement and the Maturity Date and the amount of
outstanding principal and accrued interest on the Loan. For
purposes of this Section 1.02, "Free Cash Flow" shall mean, for any
Fiscal Year (hereinafter defined) of Tomato Associates, the
Operating Income (hereinafter defined) of Tomato Associates' total
business for such Fiscal Year, adjusted by:
(i) the addition of the amount of depreciation and
amortization in such Fiscal Year, as included in calculating
such Operating Income, as reflected in Tomato Associates'
consolidated statement of operations for such Fiscal Year;
(ii) the addition of the net loss, and subtraction of the
net gain, from the following events during such Fiscal Year,
in all cases as included in calculating such Operating Income,
as reflected in Tomato Associates' consolidated statement of
operations for such Fiscal Year:
- the disposition of assets outside the ordinary course
of business;
-3-
<PAGE> 4
- the retirement of assets; and
- write-down of assets.
(iii) the addition of the aggregate net amount of any
decrease, and subtraction of the aggregate net amount of any
increase, in current assets (excluding cash, cash equivalents
and short-term investments) which include, but are not limited
to, the following items as included in Tomato Associates'
consolidated balance sheet at the end of such Fiscal Year as
compared to the corresponding items included in Tomato
Associates' consolidated balance sheet at the end of the then
preceding Fiscal Year:
Receivables, net;
Inventories;
Prepaid expenses; and
Deferred charges;
(iv) the addition of the aggregate net amount of any
increase, and subtraction of the aggregate net amount of any
decrease, in current liabilities, which include, but are not
limited to, the following items as included in Tomato
Associates' consolidated balance sheet at the end of such
Fiscal Year compared to the corresponding items included in
Tomato Associates' consolidated balance sheet at the end of
the then next preceding Fiscal Year:
Accounts payable;
Accrued expenses;
Amounts due to growers;
Deferred compensation;
Deferred income taxes; and
Liability reserves;
(v) the subtraction of the aggregate amount of capital
expenditures and investments and expenditures for other
noncurrent assets during such Fiscal Year, as
-4-
<PAGE> 5
included in Tomato Associates' consolidated statement of cash
flows for such Fiscal Year;
(vi) the addition of the amount of any net decrease, and
the subtraction of the amount of any net increase, in such
Operating Income due to accounting changes for such Fiscal
Year; in all cases as included in Tomato Associates'
consolidated financial statements for such Fiscal Year
prepared in accordance with generally accepted accounting
principles, consistently applied, and audited by Tomato
Associates' independent certified public accountants; and
(vii) the addition of the aggregate net amount of any
increase, and subtraction of the aggregate net amount of any
decrease, in noncurrent liabilities as reflected in Tomato
Associates' consolidated balance sheet at the end of such
Fiscal Year compared to the corresponding items included in
Tomato Associates' consolidated balance sheet at the end of
the then next preceding Fiscal Year. For purposes of this
calculation, changes in any loans which are unsecured, secured
by assets existing on the date hereof or amounts due Monsanto
hereunder shall be excluded from noncurrent liabilities.
"Fiscal Year" shall mean the period commencing with July 1 and
ending with the following June 30 and "Operating Income" shall
mean, for any Fiscal Year, the consolidated net income of Tomato
Associates and its consolidated subsidiaries for such Fiscal Year
as reflected in the consolidated statement of operations of Tomato
Associates and its consolidated subsidiaries for such Fiscal Year
prepared in accordance with generally accepted accounting
principles, consistently applied, and audited by Tomato Associates'
independent certified public accountants. Notwithstanding the
provisions of the preceding sentence, the initial Fiscal Year under
this Agreement shall be the period commencing on the first day of
the fiscal quarter beginning after the date hereof and ending with
the following June 30.
"Cumulative Free Cash Flow" shall mean the aggregate of the
Free Cash Flow of Tomato Associates during the period between the
execution date of this Agreement and the Maturity Date, during the
period between the Maturity Date and the Extended Maturity Date
(hereinafter
-5-
<PAGE> 6
defined) and during the period between the Extended Maturity Date
and the Final Maturity Date (hereinafter defined), respectively. At
the end of each Fiscal Year, the Chief Financial Officer of the
Company shall certify the amount of Tomato Associates' Free Cash
Flow for the Fiscal Year just ended.
"Repayment Portion" shall mean the sum of (i) 20% of the first
$10 million of Cumulative Free Cash Flow or portion thereof, (ii)
50% of the next $10 million of Cumulative Free Cash Flow or portion
thereof and (iii) 80% of the remaining balance of Cumulative Free
Cash Flow, if any.
All transactions between Tomato Associates and any affiliate
of Tomato Associates during the term of this Agreement shall be
accounted for on an arm's-length basis. Further, (i) dividends and
returns of capital by Tomato Associates to Company, (ii)
investments by Company in Tomato Associates and (iii) any loans
between Tomato Associates and Company (or any direct or indirect
subsidiary of Company that is not a direct or indirect subsidiary
of Tomato Associates) shall not be considered when determining
"Free Cash Flow."
If the Repayment Portion of Cumulative Free Cash Flow is not
sufficient to pay all the then outstanding principal and accrued
interest on the Maturity Date, then the Company shall pay to
Monsanto on the Maturity Date the Repayment Portion of the
Cumulative Free Cash Flow, the Maturity Date as to the principal
and accrued interest remaining outstanding after such payment is
applied, if any, shall be extended to the sixth anniversary of this
Agreement ("Extended Maturity Date"). If the Repayment Portion of
the Cumulative Free Cash Flow (less the aggregate amount of
principal and accrued interest previously paid) is not sufficient
to pay all the then outstanding principal and accrued interest on
the Extended Maturity Date, then the Company shall pay to Monsanto
on the Extended Maturity Date the Repayment Portion of the
Cumulative Free Cash Flow, and the Extended Maturity Date as to the
principal and accrued interest remaining outstanding after such
payment is applied, if any, shall be extended to the eighth
anniversary of this Agreement ("Final Maturity Date"). If the
Repayment Portion of the Cumulative Free Cash Flow (less the
aggregate amount of principal and accrued interest previously paid)
is not sufficient to pay all the then outstanding principal and
accrued interest
-6-
<PAGE> 7
on the Final Maturity Date, then (i) the Company shall pay to
Monsanto on the Final Maturity Date the Repayment Portion of the
Cumulative Free Cash Flow and (ii) Monsanto, at its sole option, may
do any one or combination of the following: (A) convert all or any
remaining portion of the then outstanding principal and accrued
interest to the Company's common stock in compliance with the terms
of Section 1.06 hereof, (B) further extend the Final Maturity Date
on the same terms and conditions as are contained in this Agreement
or (C) elect, in its sole discretion, to require the Company to sell
publicly, at the Company's expense, such number of shares of its
common stock as is equal to that portion of such remaining portion
of the then outstanding principal and accrued interest for which
Monsanto has not made an election to convert under clause (A) above
and/or to extend the Final Maturity Date under clause (B) above
("Election Amount"), whereupon the Company shall proceed promptly to
use its best efforts to take such actions as are necessary to effect
a sale of such shares of its common stock, the net proceeds of which
shall be paid to Monsanto in full payment and satisfaction of the
Election Amount. If the Company has not so sold such shares within
sixty (60) days after its receipt of notice of Monsanto's election
under clause (C) above, then, at any time thereafter, Monsanto may,
in its sole discretion, withdraw any such election, whereupon the
rights and obligations of the parties hereto shall be restored.
Section 1.03. Interest Rate. The outstanding principal
-------------
balance of the Loan from time to time shall bear interest at two
percent (2%) above Citibank's published prime rate ("Note Rate").
Interest shall be compounded daily and adjusted quarterly on each
January 1, April 1, July 1 and October 1 pursuant to calculations
performed by Monsanto.
Section 1.04. Effects of Event of Default or Potential
----------------------------------------
Default. Notwithstanding the foregoing and in addition to the
- -------
remedies set forth in Sections 5.02 and 5.03 hereof, upon an Event
of Default and so long as such Event of Default shall continue, the
principal amount of the Loan then outstanding, together with all
interest then accrued, shall thereafter bear interest at the
Default Rate (hereinafter defined), with interest payable upon
demand. The "Default Rate" shall be the per annum rate equal to
three percent (3%) above the Note Rate that would otherwise be
applicable and thereafter until paid in full. During the
continuance of an Event of Default, the Company shall have no right
to obtain any new Advances under this Agreement.
-7-
<PAGE> 8
A "Potential Default" shall be an event which, solely but for
the lapse of time or the giving of notice, or both, would
constitute an Event of Default. If a Potential Default then exists
and has not been waived in writing by Monsanto and does not itself
constitute or is not declared an Event of Default, the Company
shall have no right to borrow any additional money beyond the
principal amount of the Loan then outstanding.
Section 1.05. Miscellaneous Provisions Regarding Loan
---------------------------------------
Payments and Interest. All payments on the Loan shall be made to
- ---------------------
Monsanto by wire transfer for deposit in Citibank, New York, New
York, Account #00000502 unless Monsanto notifies the Company of a
different place for payments to be made. All interest rates
respecting the Loan hereunder are stated on a per annum basis with
a year of three hundred and sixty (360 days), and interest is
calculated on the actual number of days elapsed (including the
first day, but excluding the last day of any period for the Loan).
Any outstanding principal and accrued interest that has been
declared due pursuant to Section 5.02 hereof shall thereafter bear
interest at the Default Rate on all unpaid amounts until such
amounts are fully paid.
Section 1.06 Right of Conversion in Lieu of Repayment. In
----------------------------------------
addition to any other remedies that Monsanto may have, in lieu of
repayment of outstanding principal and accrued interest on and
after the Final Maturity Date, Monsanto may elect, at any time
after the Final Maturity Date, to convert all or any portion of the
principal and accrued interest due under the Loan into shares of
common stock of the Company at the average of the closing market
prices for such shares during the thirty (30) trading days
immediately preceding the Conversion Date (as hereafter defined)
for such Loan. In order to exercise its conversion rights, at any
time on or after the Final Maturity Date, Monsanto may send a
written notice (the "Conversion Notice") to the Company that
Monsanto intends to exercise such conversion rights and the date as
of which such conversion shall take place (the "Conversion Date").
The Conversion Notice shall specify the amount of the principal and
accrued interest that Monsanto intends to convert (the "Conversion
Amount"). If Monsanto properly notifies the Company as provided in
the preceding sentences, then within five (5) business days after
the Conversion Date, the Company shall issue to Monsanto a number
of shares (the "Conversion Shares") of common stock of the Company
(rounded to the next lowest full share) equal to the Conversion
Amount divided by the average
-8-
<PAGE> 9
of the closing market prices for such shares during the thirty (30)
trading days immediately preceding the Conversion Date. Any portion
of the Conversion Amount not so converted (because such amount would
require conversion into a fractional share) shall be paid to
Monsanto by wire transfer as set forth above. Upon any such
conversion, the Conversion Amount shall first be applied to reduce
the accrued interest due on the Loan as of the Conversion Date, and
any remaining portion of the Conversion Amount shall be applied to
reduce the principal due on such Loan. If Monsanto elects to receive
Conversion Shares (including any Default Conversion Shares pursuant
to Section 5.03 hereof) in lieu of repayment, the Company shall
deliver to Monsanto, simultaneously with the delivery of the
Conversion Shares, an opinion from counsel to the Company in a form
reasonably satisfactory to Monsanto relating to the issuance of the
Conversion Shares.
Section 1.07. Prepayments. The Loan may be prepaid in whole
-----------
or in part at any time after giving at least three (3) days' prior
written notice to Monsanto.
Section 1.08. Approved Persons. All requests for Advances
----------------
(including any requests for continuation of the Loan) shall be made
by an Approved Person (hereinafter defined). An "Approved Person"
shall be any person designated in writing from time to time by the
Company who is authorized to make requests for Advances in the name
of the Company hereunder. Unless Monsanto otherwise agrees, there
shall not be more than three (3) Approved Persons at any one time
nor shall any Approved Person have his or her office located at any
place other than the Company's main office in Davis, California,
but the Company shall have the right to change the persons so
designated upon written notice thereof to Monsanto. Any such
designation shall be executed by the President or the Chief
Financial Officer of the Company and shall contain a specimen
signature of the Approved Person. Monsanto shall be entitled to
rely on any direction by an Approved Person regarding the making of
Advances or the transfer of funds hereunder, or any such direction
that Monsanto believes to be made by the Approved Person, whether
such direction be received by telephone, by facsimile transmission,
by TELEX, by mail or otherwise.
-9-
<PAGE> 10
ARTICLE II
CONDITIONS OF LENDING
Section 2.01. Conditions Precedent to Loan. The obligation
----------------------------
of Monsanto to make the first Advance under the Loan is subject to
the following additional conditions precedent that:
(a) Acquisition Agreement Conditions. All of the
--------------------------------
conditions set forth in Section 8.2 of the Agreement and Plan of
Reorganization ("Acquisition Agreement") between Monsanto and
Calgene, Inc., a Delaware corporation ("Calgene"), dated October
13, 1995 must be fulfilled (or waived in writing by Monsanto) and
all the documents that Calgene or the Company is required to
deliver to Monsanto pursuant to such Section 8.2 must be delivered
(or waived in writing by Monsanto).
(b) Documents. Monsanto shall receive the following,
---------
each dated the date hereof or such other date as may be
specifically permitted, in form and substance satisfactory to
Monsanto:
(i) Note. The Note, duly executed by the Company.
----
(ii) Guaranty. The Guaranty, duly executed by all
--------
the Subsidiaries.
(iii) Other Approvals. Such other approvals,
---------------
resolutions, opinions or documents, as Monsanto may reasonably
request.
Section 2.02. Conditions Precedent to Each Advance. The
------------------------------------
obligation of Monsanto to make any Advances under the Loan shall be
subject to the further conditions precedent that, on the funding
date, (i) all representations and warranties of the Company and the
Subsidiaries contained in this Agreement and the Guaranty shall be
true, correct, accurate and complete in all material respects as if
made on such date (except (A) to the extent such representations
speak as of an earlier date or (B) for changes arising from events
permitted by the covenants specified in this Agreement), (ii) all
covenants specified in this Agreement shall have been complied with
-10-
<PAGE> 11
in all material respects, (iii) no event shall have occurred and be
continuing, or would result from such Advance, which constitutes an
Event of Default or Potential Default, (iv) there shall not be
initiated against the Company or any Subsidiary any action, suit or
proceeding at law or in equity or by or before any court or
government agency or authority or arbitral tribunal and there shall
not have occurred any legal, regulatory or other development or any
other circumstances whatsoever which, in the opinion of Monsanto,
could reasonably be expected to have a material adverse effect on
(a) the business, assets, operations or financial condition of the
Company and its Subsidiaries taken as a whole, or (b) the ability
of the Company and its Subsidiaries to perform any of their
respective obligations hereunder or under the documents
contemplated hereby (each of the foregoing being hereafter referred
to as a "Material Adverse Effect"); provided, however, that no
Material Adverse Effect shall be deemed to have occurred based
solely on the outcome of the litigation between the Company and
Enzo Biochem, Inc. ("Enzo"), (v) Monsanto shall have received
documentation reasonably acceptable to Monsanto, verifying that
Tomato Associates has reached certain milestones and achieved
certain goals of the Strategy reflected in the request for the
Advance, (vi) Monsanto shall have received certificates and
evidence reasonably acceptable to Monsanto as to the financial
condition of Tomato Associates, and (vii) an Advance request in
proper form shall have been submitted or made to Monsanto by the
Company.
The making of a request by the Company for an Advance
hereunder, whether in writing, or by telephone confirmed in
writing, or otherwise, shall constitute a certification by the
Company that all representations and warranties recited or referred
to in this Section 2.02 and Article III hereof are true as of and
as if made the date of such request (except as set forth above) and
that all required conditions to the making of such Advance have
been met.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company.
---------------------------------------------
The representations and warranties of Calgene set forth in Section
6.2 of the Acquisition Agreement are incorporated by reference
herein. All such representations and warranties shall be deemed
made by the Company
-11-
<PAGE> 12
herein and shall survive and be continuing so long as any principal
or accrued interest is outstanding under the Loan.
ARTICLE IV
COVENANTS OF THE COMPANY
Section 4.01. Affirmative Covenants. So long as any portion
---------------------
of the Loan or accrued interest shall remain unpaid or Monsanto
shall have any Commitment hereunder, the Company shall (and, where
appropriate even if not so stated, shall cause each of the
Subsidiaries to), unless Monsanto shall otherwise consent in
writing, which consent shall not be unreasonably withheld:
(a) Preservation of Business and Corporate Existence.
------------------------------------------------
As to the Company and each Subsidiary, carry on and conduct its
business affairs in substantially the same manner as presently
carried on and conducted, and maintain in good standing its
existence and its right to transact business in those states in
which it is now or may hereafter be doing business; and maintain
all licenses, permits and registrations necessary to the conduct of
its business.
(b) Use of Proceeds. Use the proceeds of the Loan
---------------
solely to make capital contributions or loans to Tomato Associates,
which capital contributions or loans shall be used solely by Tomato
Associates to implement the Strategy or to finance the Collier
Farms acquisition. All such capital contributions shall be
evidenced by appropriate written documentation.
(c) Reporting Requirements. Furnish to Monsanto:
----------------------
(i) As soon as available and in any event within
sixty (60) days after the end of each calendar quarter, one
(1) copy of the consolidated and consolidating financial
statements prepared by the Company and certified by the Chief
Financial Officer of the Company, and as soon as available and
in any event within one hundred twenty (120) days after the
end of its Fiscal Year, one (1) copy of its financial
statements
-12-
<PAGE> 13
audited by an independent public accountant. The financial
statements so provided shall include, but not be limited to,
the balance sheet, income statement and cash flow statement of
the Company, as well as consolidated and consolidating
statements of all Subsidiaries including Tomato Associates
(which consolidating statement need not be audited). Such
financial statements shall be accompanied by a written
certification from the Chief Financial Officer of the Company
(A) stating that the financial statements present fairly the
consolidated financial condition of the Company and that no
event has since occurred which would constitute a Material
Adverse Effect on the consolidated financial condition of the
Company from that represented on the financial statements; (B)
demonstrating in detail, satisfactory to Monsanto, the
Company's compliance with the financial covenants set forth in
Sections 4.01(f) and 4.01(g) hereof at and as of the end of the
quarter or Fiscal Year, as applicable; (C) stating that no
Event of Default or Potential Default is then existing at the
date of the certification; and (D) stating that the
representations and warranties contained in this Agreement and
the Guaranty are accurate and complete in all material
respects.
(ii) Promptly after the sending or filing thereof,
copies of all reports which the Company sends to any of its
stock or security holders and copies of all reports and other
materials (including registration statements, if any) which
the Company hereafter files with the Securities and Exchange
Commission or any national securities exchange.
(iii) Such other information respecting the
condition or operations, financial or otherwise, of the
Company as Monsanto may from time to time reasonably request.
(d) Insurance. Insure and keep insured at all times
---------
with good and responsible insurance companies reasonably acceptable
to Monsanto all of its property of an insurable nature and maintain
insurance against liability on account of damage to persons or
property in such manner and to the extent that like risks are
usually insured by others conducting similar businesses in the
general areas where the Company and each of the Subsidiaries
conduct their
-13-
<PAGE> 14
business. Company shall, upon request of Monsanto at any time,
furnish a written summary of the amount and type of insurance
carried, the names of the insurers and the policy numbers.
(e) Government Actions. Obtain and maintain all
------------------
material authorizations and approvals, and other actions by, and
make and maintain all notices to or filings with, any governmental
authority or regulatory body now or hereafter required for the
making and performance of this Agreement and the Note.
(f) Net Worth. Maintain, at and as of the end of the
---------
quarter or Fiscal Year, as applicable, consolidated Net Worth
(hereinafter defined) of not less than Ten Million Dollars
($10,000,000) and a minimum consolidated working capital of not
less than Five Million Dollars ($5,000,000) (which consolidated
working capital shall be the excess of Current Assets (hereinafter
defined) over Current Liabilities (hereinafter defined)). Further,
the ratio of Total Long-Term Liabilities (hereinafter defined) to
Net Worth shall not exceed the ratio of one-to-one.
As used herein, "Net Worth" shall mean the total of
common and preferred stock, paid in surplus, retained earnings and
additional stockholders' equity of the Company and the Subsidiaries
on a consolidated basis less intangibles, determined in accordance
with generally accepted accounting principles, consistently
applied.
"Total Long-Term Liabilities" shall mean the total
of all long-term liabilities of the Company and the Subsidiaries on
a consolidated basis, determined in accordance with generally
accepted accounting principles, consistently applied.
"Current Assets" shall mean the total of all current
assets of the Company and the Subsidiaries on a consolidated basis,
determined in accordance with generally accepted accounting
principles, consistently applied.
-14-
<PAGE> 15
"Current Liabilities" shall mean the total of all
current liabilities of the Company and its Subsidiaries on a
consolidated basis, determined in accordance with generally
accepted accounting principles, consistently applied.
For purposes of making any calculation under this
Article IV, the outstanding principal of amounts loaned by Monsanto
to the Company pursuant to this Agreement (except to the extent of
the Repayment Portion of Cumulative Free Cash Flow, which has not
been paid to Monsanto), or the Holding Company Credit Facility
Agreement of even date herewith between Monsanto and the Company
(the "Company Credit Facility Agreement") shall be deemed to be
stockholders' equity and not liabilities.
(g) Current Ratio. Maintain, on a consolidated basis,
-------------
a ratio of Current Assets to Current Liabilities of at least one-
to-one.
(h) Audits, Consultants and Inspections. Permit
-----------------------------------
Monsanto (using Monsanto's internal and/or external auditors or any
other person appointed by Monsanto to whom the Company does not
reasonably object) (i) to audit the books and records, other
financial information and business practices and operations of the
Company and its Subsidiaries, and (ii) to discuss the business
practices and operations, affairs, finances and accounts of the
Company and its Subsidiaries with the officers of the Company and
its Subsidiaries and the independent public accountants who review
or audit the Company's financial statements, all at such reasonable
times and as often as may reasonably be requested. The Company
shall also permit inspection of its (and its Subsidiaries')
properties, books and records by Monsanto (using the persons
identified above) during normal business hours or at other
reasonable times. The scope of all such audits, discussions and
inspections shall be determined by Monsanto in its sole discretion.
Any authorized representative of Monsanto who or which is not
employed by Monsanto (i) shall be required to execute a
confidentiality agreement in a form approved by the Board of
Directors of the Company (which approval shall not be unreasonably
withheld or delayed) and (ii) may not be employed by or affiliated
with a competitor of the Company, as reasonably determined by the
Board of Directors of the Company; provided, however, that an
independent certified public accounting firm shall not be deemed to
be employed by or affiliated
-15-
<PAGE> 16
with a competitor of the Company even if such firm provides services
to a competitor of the Company.
(i) Payment of Taxes. Pay and discharge, before they
----------------
become delinquent, all taxes, assessments and other governmental
charges imposed upon the Company, the Subsidiaries or any of its or
their properties, or any part thereof, or upon the income or
profits therefrom and all claims for labor, materials or supplies
which, if unpaid, might be or become a lien or charge upon any of
its or their property, except such items as it or they are in good
faith appropriately contesting and as to which adequate reserves
have been provided.
(j) Payment of Indebtedness. Pay any and all
-----------------------
indebtedness for borrowed money payable or guaranteed by the
Company (or any Subsidiary), and any interest or premium thereon,
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in accordance with the agreement
or instrument relating to such indebtedness or guarantee, except
those being contested in good faith and as to which adequate
reserves have been provided.
(k) Notice of Subsequent Events. Immediately upon the
---------------------------
President or Chief Financial Officer of the Company obtaining
knowledge of (i) any material adverse change in the condition or
operation, financial or otherwise, of the Company and its
Subsidiaries; (ii) any Event of Default or Potential Default under
this Agreement; (iii) any default or potential default by the
Company or any of the Subsidiaries under or with respect to any
instrument, contract or agreement to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the
Subsidiaries is bound which may constitute a Material Adverse
Effect; (iv) any default or potential default by the Company or any
of the Subsidiaries under or with respect to any order, writ,
injunction, decision or decree of any court, governmental authority
or arbitral body to which the Company or any of the Subsidiaries is
a party or by which the Company or any of the Subsidiaries is bound
which may constitute a Material Adverse Effect; or (v) any action
or proceeding pending or, to the knowledge of the President or
Chief Financial Officer of the Company, threatened against the
Company or any of the Subsidiaries before any court, governmental
authority or arbitral body which, if decided adversely to the
Company or such
-16-
<PAGE> 17
Subsidiary, would result in a Material Adverse Effect, deliver to
Monsanto a written certificate signed by such officer specifying the
nature thereof, the period of existence thereof and what action the
Company has taken and proposes to take with respect thereto.
(l) ERISA Compliance. If the Company or any of the
----------------
Subsidiaries shall have any pension plan, comply with all
requirements of the Employee Retirement Income Security Act of
1974, as amended from time to time ("ERISA") relating to such plan.
Without limiting the generality of the foregoing, the Company (and
each of the Subsidiaries) shall not:
(i) Permit any Plan (hereinafter defined)
maintained by it to engage in any non-exempt "prohibited
transaction" as such term is defined in Section 4975 of the
Internal Revenue Code of 1986, as amended;
(ii) Permit any Plan maintained by it to incur any
"accumulative funding deficiency," as such term is defined in
Section 302 of ERISA, 29 U.S.C Section 1082, whether or not
waived;
(iii) Terminate any such Plan in a manner which
could result in the imposition of a lien on the property of
Company pursuant to Section 4068 of ERISA, 29 U.S.C. Section
1368; or
(iv) Take any action which would constitute a
complete or partial withdrawal from a Multiemployer Plan
(hereinafter defined) within the meaning of Sections 4203 and
4205 of Title IV of ERISA, 29 U.S.C. Sections 1383 and 1385.
Notwithstanding any provision contained in this Section
4.01(l) to the contrary, an act by the Company shall not be deemed
to constitute a violation of subparagraphs (i) through (iv) hereof
unless Monsanto determines in good faith that said action,
individually or cumulatively with other acts of the Company, does
have or is likely to cause, a Material Adverse Effect.
-17-
<PAGE> 18
Company shall have the affirmative obligation hereunder to
report to Monsanto any of those acts identified in subparagraphs
(i) through (iv) hereof, regardless of whether said act does or is
likely to cause a Material Adverse Effect.
(m) Compliance with Laws. Comply in all material
--------------------
respects with all applicable laws, rules, regulations and orders.
(n) Additional Subsidiaries. If the Company or any
-----------------------
Subsidiary acquires or creates any additional majority-owned
subsidiary hereafter, promptly notify Monsanto in writing. Such
additional subsidiary shall also, upon capitalization and election
of officers, execute and deliver to Monsanto a guaranty of the Loan
in the form attached hereto as Exhibit D and, upon such delivery,
---------
shall become a Subsidiary under this Agreement.
(o) Reservation of Shares. Reserve adequate shares of
---------------------
common stock of the Company to be issued upon the occurrence of a
conversion as described in Sections 1.02, 1.06 and 5.03 hereof.
(p) Further Assurances. From time to time, execute and
------------------
deliver to Monsanto such additional documents and provide such
additional information as Monsanto may reasonably require to carry
out the terms of this Agreement and be informed of the status and
affairs of the Company and its Subsidiaries.
Section 4.02. Negative Covenants. Except as specifically
------------------
provided otherwise hereinbelow, so long as the Loan shall remain
unpaid or Monsanto shall have any Commitment hereunder, without the
written consent of Monsanto, the Company and each of the
Subsidiaries:
The following negative covenants set forth in this Section
4.02 shall be of no force or effect during such period as the
"Supermajority Requirements" set forth in Article 4 of the
Stockholders Agreement of even date herewith between the
Company and Monsanto are in effect. In the event such
"Supermajority Requirements" are no longer in effect, the
-18-
<PAGE> 19
foregoing negative covenants shall be fully applicable to the
Company (and, where appropriate, each of the Subsidiaries).
(a) Acquisitions. Shall not enter into any merger or
------------
consolidation or acquire any business or assets that would
constitute a Substantial Part (hereinafter defined) of the Company
and its Subsidiaries, taken as a whole, whether such acquisition be
by merger or consolidation or the purchase of stock or assets or
otherwise. "Substantial Part" means more than ten percent (10%) of
the total assets of the Company and its Subsidiaries, taken as a
whole, as shown on the Company's consolidated balance sheet as of
the end of the most recent fiscal quarter ending prior to the time
the determination is made.
(b) Liens. Shall not, and shall not permit any
-----
Subsidiary to, pledge, mortgage or otherwise encumber or subject to
or permit to exist upon or be subjected to any lien, charge or
security interest of any kind (including any conditional sale or
other title retention agreement and any lease in the nature
thereof), on any of its properties of any kind or character at any
time owned by the Company or any Subsidiary other than:
(i) liens, pledges or deposits for workmen's
compensation, unemployment insurance, old age benefits or social
security obligations, taxes, assessments, statutory obligations or
other similar charges, good faith deposits made in connection with
tenders, contracts or leases to which the Company or any Subsidiary
is a party or other deposits required to be made in the ordinary
course of business, provided in each case the obligation secured is
not overdue or, if overdue, is being contested in good faith by
appropriate proceedings and adequate reserves have been provided
therefor in accordance with generally accepted accounting
principles, consistently applied, and that the obligation is not
for borrowed money, customer advances, trade payables, or
obligations to agricultural producers;
(ii) the pledge of assets for the purpose of
securing an appeal or stay or discharge in the course of any legal
proceedings, provided that the aggregate amount of liabilities of
the Company or any Subsidiary so secured by a pledge of property
permitted under
-19-
<PAGE> 20
this subsection (ii) including interest and penalties thereon, if
any, shall not be in excess of One Million Dollars ($1,000,000) at
any one time outstanding;
(iii) liens, pledges, mortgages, security
interests or other charges existing on the date hereof and
disclosed in Exhibit F hereto; and
---------
(iv) liens, pledges, mortgages, security interests
and other encumbrances on property which secure indebtedness
permitted under Section 4.02(k) hereof.
(c) Limitations on Merger and Disposition of Assets.
-----------------------------------------------
Shall not merge into or consolidate with any other entity, or
lease, sell, transfer or otherwise dispose of all or any
Substantial Part of the Company and its Subsidiaries, taken as a
whole, except (i) pursuant to security interests granted in
connection with borrowings permitted under Section 4.02(k) hereof
and (ii) in the case of a merger or consolidation of the Company,
(A) the shareholders of the Company immediately prior to the merger
or consolidation continue to hold more than fifty percent (50%) of
the outstanding voting power of the surviving entity, (B) the
surviving entity (after giving effect to the merger or
consolidation) has a net worth equal to or greater than the
consolidated net worth of the Company (determined immediately prior
to the merger or consolidation), and (C) the surviving entity
expressly assumes all of the obligations of the Company under this
Agreement.
(d) Non-Default Under Other Agreements. Shall not
----------------------------------
default upon or fail to pay any indebtedness for money borrowed as
the same matures under any agreement or permit to occur any other
event which creates a default under such or under any other
agreement to which the Company is a party or by which it is bound,
in either case in an amount in excess of One Million Dollars
($1,000,000).
(e) Conflicting Agreement. Shall not enter into any
---------------------
agreement, any term or condition of which conflicts with any term
or condition of this Agreement.
-20-
<PAGE> 21
(f) Changes in Accounting Principles. Shall not make
--------------------------------
any change in its principles or methods of accounting as currently
in effect, except such changes as are required by generally
accepted accounting principles, or, without prior written notice to
Monsanto, change its Fiscal Year.
(g) Loans and Investments. Shall not make any
---------------------
investment in a corporation, firm or business or make loans or
advances to any person except:
(i) Investments in interest bearing obligations of
the United States government, certificates of deposit issued
by United States banks, commercial paper and repurchase
agreements or other short-term, high grade (A-1, P-1 or
similar rating) investments;
(ii) Advances to others in the form of progress
payments, prepaid rents, security deposits, grower loans or
other advances customary in transactions made in the ordinary
course of business between persons not affiliated with each
other;
(iii) Subject to the provisions of Section
4.02(a) hereof, investments in any partially- or wholly-owned
Subsidiary or any corporation, firm or business in the same
type of business as the Company, which line of business will
continue after such investment;
(iv) The loans listed and described on Exhibit G
---------
hereto and additional purchase money loans to purchasers of
assets of the Company or its Subsidiaries which at no time in
the aggregate exceed One Million Dollars ($1,000,000);
(v) Loans and travel advances to employees of the
Company which in the aggregate (inclusive of the employee
loans listed on Exhibit H hereto), do not exceed One Hundred
---------
Thousand Dollars ($100,000);
-21-
<PAGE> 22
(vi) Loans or advances by the Company to any wholly-
owned Subsidiary, or by Tomato Associates to the Company or
any other wholly-owned Subsidiary; or
(vii) Stock, obligations or securities received
in settlement of debts (created in the ordinary course of
business) owing to the Company or any Subsidiary.
Nothing in this subsection (g) shall be construed as preventing
Company or any Subsidiary from making any acquisition permitted
under subsection (a) above of this Section 4.02.
(h) Guaranties. Shall not guarantee the obligations of
----------
any corporation, person or entity, except endorsements of
negotiable instruments or checks deposited for collection acquired
in the ordinary course of business and except guaranties by (i) the
Company or any Subsidiaries of the obligations of any of the
wholly-owned Subsidiaries or any subsidiary hereinafter acquired
and becoming a wholly-owned Subsidiary hereunder or (ii) any
Subsidiary of the obligations of the Company.
(i) Capital Expenditures. Shall not make capital
--------------------
expenditures (including capitalized leases but excluding fixed
assets acquired in connection with corporate acquisitions), during
any Fiscal Year of the Company, on a consolidated basis, in an
aggregate amount in excess of Sixty Million Dollars ($60,000,000).
(j) Dividends. Shall not pay or declare any dividends
---------
(either in cash or property) or make distributions on, or redeem,
repurchase, retire or otherwise acquire for value, any shares of
stock of the Company or Tomato Associates (including, options,
warrants or other rights to acquire such shares of stock) other
than repurchases or redemptions of equity securities of the
Company.
(k) Limit on Indebtedness. Shall not create, assume or
---------------------
incur any indebtedness, in the aggregate, exceeding Fifteen Million
Dollars ($15,000,000), increasing by Five Million Dollars
($5,000,000) per Fiscal Year, plus amounts secured by inventory
and/or receivables for
-22-
<PAGE> 23
working capital lines and indebtedness incurred to acquire property,
plant or equipment and secured by the acquired asset, and any
refinancing of any of the foregoing, exclusive of (i) amounts
outstanding under this Agreement or the Company Credit Facility
Agreement and (ii) indebtedness approved by the Board of Directors
of the Company while the "Supermajority Provisions" were in effect.
ARTICLE V
EVENTS OF DEFAULT
Section 5.01. Events of Default. Any one (1) or more of the
-----------------
following events shall constitute an Event of Default under this
Agreement, the Note and any other document or instrument pertaining
to or necessary to carry out the purposes of this Agreement:
(a) Payment Default. The Company fails to pay when due
---------------
any principal, interest or other amount which it is obligated to
pay under this Agreement and the Note and such failure shall
continue unremedied for five (5) days after the date on which such
payment was due.
(b) Representation Default. Any representation or
----------------------
warranty made by the Company in this Agreement, the Note, or in any
certificate, notification or report furnished hereunder, proves to
have been incorrect or misleading in any material respect when made
or renewed and is material to the ability of the Company to perform
its obligations under this Agreement or the Note.
(c) Other Provisions Default. The Company fails to
------------------------
perform or observe any material covenant or agreement to be
performed or observed by it under this Agreement or the Note or the
Company fails to perform or observe any other material term,
covenant or condition in this Agreement or the Note to be made and
performed by the Company and, in the case of any such default that
is curable by the Company, such default is not cured within ten
(10) days after written notice thereof by Monsanto.
-23-
<PAGE> 24
(d) Authorizations Default. Any governmental filing,
----------------------
registration, consent or approval necessary in connection with this
Agreement or any document contemplated hereby is withheld, revoked
or restricted in a way which constitutes a Material Adverse Effect,
unless such revocation or restriction is withdrawn.
(e) Cross Default. The Company or any Subsidiary (i)
-------------
fails to pay when due any indebtedness (in an amount in excess of
One Million Dollars ($1,000,000)) senior to this Loan for which it
is liable, contingently or otherwise, and the lender declares such
indebtedness to be immediately due and payable, or (ii) commits a
material breach of or defaults in the performance or observance of
any of the representations, warranties, covenants, terms or
provisions of, or a default otherwise occurs under, (a) the
Acquisition Agreement or any of the other Transaction Agreements
(as defined in the Acquisition Agreement), (b) the Insect-Protected
Cotton License and Seed Services Agreement dated as of September
26, 1995, between Monsanto and Calgene, (c) the Company Credit
Facility Agreement, (d) the Stockholders Agreement between Monsanto
and the Company of even date herewith or (e) any other agreement or
instrument between Monsanto and the Company or any Subsidiary and,
in the case of any such default that is curable, such default is
not cured within ten (10) days after the Company or Subsidiary, as
applicable, receives notice thereof.
(f) Lien Default. The holder of any lien, whether now
------------
or hereafter existing, granted or assumed by the Company, and
securing any indebtedness exceeding One Million Dollars
($1,000,000) in the aggregate (whether or not indebtedness of the
Company) takes substantial steps to enforce the same because of the
nonpayment (whether by acceleration or otherwise) of the
indebtedness secured thereby.
(g) Judgment Default. A final judgment, order or
----------------
conviction (whether criminal or civil) is rendered against the
Company or any of its Subsidiaries or its or its Subsidiaries'
properties or assets which constitutes a Material Adverse Effect
and such judgment or order shall continue unsatisfied and the
execution thereof unstayed for a period of ninety (90) consecutive
days.
-24-
<PAGE> 25
(h) Bankruptcy Default. (i) the Company or any of the
------------------
Subsidiaries shall fail to pay or shall admit in writing its
inability to pay its debts as they become due, shall become
insolvent, howsoever evidenced, or shall make a general assignment
for the benefit of creditors; (ii) any proceeding shall be
instituted by or against the Company or any of the Subsidiaries
under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors or any similar law or seeking appointment of a
receiver, trustee, or other similar person for it or for any
Substantial Part of its property and, if such proceeding is not
commenced by the Company or any of the Subsidiaries, it is
consented to or acquiesced in by the Company or any of the
Subsidiaries or remains undismissed for forty-five (45) days after
initiation; (iii) all or a Substantial Part of the Company's or any
Subsidiary's property is attached, seized, levied upon or comes
within the possession of any receiver, trustee or similar person
for the benefit of creditors; (iv) any action is taken or any
proceeding is filed or commenced with respect to the Company's or
Tomato Associates' liquidation, dissolution or termination of
existence; or (v) the Company or Tomato Associates shall take any
corporate action to authorize any of the actions described in this
subsection (h).
(i) Tax Lien Default. Any local, state or federal
----------------
government agency places a material lien against any asset of the
Company or any Subsidiary as a result of nonpayment of any tax
obligation owed by the Company or such Subsidiary, which lien is
not removed within forty-five (45) days after placement.
(j) ERISA Default. Any of the following events occur or
-------------
exist with respect to the Company or any Subsidiary: (a) any
Prohibited Transaction (hereinafter defined) involving any Plan;
(b) any Reportable Event (hereinafter defined) with respect to any
Plan; (c) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
(d) any event or circumstance that might constitute grounds
entitling the PBGC (hereinafter defined) to institute proceedings
under Section 4042 of ERISA for the termination of, or for the
appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; (e) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency or termination
of any Multiemployer Plan; and, in each case above, such event or
condition, together with all
-25-
<PAGE> 26
other events or conditions, if any, could, in the opinion of
Monsanto, subject the Company to any tax, penalty, or other
liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise.
For purposes of this Agreement: "Plan" means any employee benefit or
other plan established, maintained, or to which contributions have
been made by the Company or any ERISA Affiliate; "Reportable Event"
means any of the events set forth in Section 4043 of ERISA; "ERISA
Affiliate" means any trade or business (whether or not incorporated)
that, together with Company, is treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended;
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Company or any ERISA Affiliate;
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA; and
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986,
as amended from time to time.
(k) Guaranty Default. Any Subsidiary shall fail to
----------------
perform or observe its obligations under the Guaranty and such
failure (other than failure to pay to Monsanto sums due thereunder
which shall have no cure period) shall not have been remedied
within thirty (30) days after written notice thereof shall have
been given by Monsanto.
Section 5.02. Rights of Monsanto. Upon the occurrence of an
------------------
Event of Default, Monsanto may, at its election, without notice of
its election and without demand, do any one (1) or more of the
following (all of which are authorized by the Company):
(a) Cease advancing money or extending credit to or for
the benefit of the Company;
(b) Declare the obligation of Monsanto to make Advances
hereunder to be terminated, whereupon the same shall forthwith
terminate; and
(c) Declare the Note, including all principal and
accrued interest thereon, and all other amounts payable under this
Agreement to be forthwith due and payable, to the extent and only
to the extent of the Repayment Portion of Cumulative Free Cash Flow
that has not been
-26-
<PAGE> 27
paid to Monsanto, without presentment, protest or further notice of
any kind, all of which are hereby expressly waived by the Company.
Section 5.03. Additional Remedy. Upon the occurrence and
-----------------
during the continuation of an Event of Default, in addition to the
other remedies set forth in this Agreement, Monsanto may demand
that the Company convert all or any portion of the principal and
accrued interest under the Loan into shares of common stock of the
Company at the average of the closing market prices for such shares
during the thirty (30) trading days immediately preceding the
Default Conversion Date (hereafter defined) for such Loan;
provided, however, that in no event shall Monsanto elect to convert
principal and accrued interest into more than eight million
(8,000,000) shares of common stock of the Company (as such number
is adjusted for stock dividends, stock splits and similar events
affecting holders of the Company's common stock). In order to
exercise its conversion rights, at any time after the occurrence
and during the continuation of an Event of Default, Monsanto may
send a written notice (the "Default Conversion Notice") to the
Company that Monsanto intends to exercise such conversion rights.
The Default Conversion Notice shall specify (i) the amount of the
principal and accrued interest that Monsanto intends to convert
(the "Default Conversion Amount") and (ii) the date as of which
such conversion shall take place (the "Default Conversion Date"),
which date shall not be later than ten (10) days after the date of
the Default Conversion Notice. If Monsanto properly notifies the
Company as provided in the preceding sentences, then within five
(5) business days after the Default Conversion Date, the Company
shall issue to Monsanto a number of shares (the "Default Conversion
Shares") of common stock of the Company (rounded to the next lowest
full share) equal to the Default Conversion Amount divided by the
average of the closing market prices for such shares during the
thirty (30) trading days immediately preceding the Default
Conversion Date. Any portion of the Default Conversion Amount not
so converted (i.e., because such amount would require conversion
into a fractional share) shall be paid to Monsanto in cash. Upon
any such conversion, the Default Conversion Amount (including any
portion thereof paid to Monsanto in cash) shall first be applied to
reduce the accrued interest due on the Loan as of the Default
Conversion Date, and any remaining portion of the Default
Conversion Amount shall be applied to reduce the principal due on
such Loan.
-27-
<PAGE> 28
Section 5.04. Company's Obligations. The Company recognizes
---------------------
that, if the Company fails to perform, observe or discharge any of
its obligations under this Agreement or the other collateral
agreements hereto, a remedy at law may not provide adequate relief
to Monsanto; therefore, the Company agrees that Monsanto shall be
entitled to seek temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages. All of
Monsanto's rights and remedies granted under this Agreement and the
collateral agreements hereto are cumulative and nonexclusive. The
Company shall pay upon demand all costs and expenses, including,
without limitation, reasonable attorneys' fees and expenses,
incurred by Monsanto in enforcing this Agreement. All such sums not
paid on demand shall be treated as outstanding principal under the
Note.
ARTICLE VI
RIGHT OF SETOFF
Section 6.01. Right of Setoff. Upon the occurrence and
---------------
during the continuance of any Event of Default, Monsanto is hereby
authorized at any time and from time to time, without notice to the
Company (any such notice being expressly waived by the Company), to
set off and apply any and all funds at any time held and other
indebtedness at any time owing by Monsanto to or for the credit or
the account of the Company or any of the Subsidiaries against any
and all of the obligations of the Company now or hereafter existing
under this Agreement and the Note to the extent and only to the
extent of the Repayment Portion of the Cumulative Free Cash Flow
that has not been paid to Monsanto, irrespective of whether or not
Monsanto shall have made any demand under this Agreement or the
Note and although such obligations may be unmatured. The rights of
Monsanto under this Section 6.01 are in addition to other rights
and remedies (including, without limitation, other rights of
setoff) which Monsanto may have.
ARTICLE VII
SUBORDINATION
Section 7.01 Subordination.
-------------
-28-
<PAGE> 29
(a) All of the obligations of the Company to Monsanto
under this Agreement and the Note, including, without limitation,
the Company's obligation to repay any Advances (collectively, the
"Subordinated Indebtedness"), shall to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of
payment to the prior payment in full of a Senior Indebtedness.
"Senior Indebtedness" means (a) all indebtedness of the Company,
including the principal of and interest on such indebtedness,
whether outstanding on the date of this Agreement or thereafter
created (i) arising under working capital lines of credit secured
by inventory and/or receivables, (ii) incurred to acquire property,
plant or equipment and secured by the acquired asset or
(iii) otherwise permitted under Section 4.02(k) hereof at the time
such indebtedness is incurred, and (b) any modifications,
refundings, deferrals, renewals or extensions of any such Senior
Indebtedness, or securities, notes or other evidences of
indebtedness issued in exchange for such Senior Indebtedness;
provided, however, that in no event shall the obligations of the
Company under the Company Credit Facility Agreement constitute
Senior Indebtedness under this Agreement. No payment on account of
principal or interest on the Subordinated Indebtedness shall be
made if, at the time of such payment or immediately after giving
the effect thereto, (i) there shall exist a default in any payment
with respect to any Senior Indebtedness or (ii) there shall have
occurred an event of default (other than a default in the payment
of amounts due thereon) with respect to any Senior Indebtedness, as
defined in the instrument under which the same is outstanding,
permitting the holders thereof to accelerate the maturity thereof,
and such event of default shall not have been cured or waived or
shall not have ceased to exist. Notwithstanding the foregoing or
any other provision of this Section 7.01, nothing in this
Section 7.01 shall restrict or otherwise limit Monsanto's or
Company's rights under Sections 1.02, 1.06 and 5.03 hereof.
(b) In the event of any distribution, dividend, or
application, partial or complete, voluntary or involuntary, by
operation or law or otherwise, of all or any part of the assets of
the Company or of the proceeds thereof to the creditors of the
Company or upon any indebtedness of the Company, occurring by
reason of the liquidation, dissolution, or other winding up of the
Company, or by reason of any execution sale, or bankruptcy,
receivership, reorganization, arrangement, insolvency, liquidation
or foreclosure proceeding of or for the Company or involving its
property, no dividend, distribution or application shall be made,
and
-29-
<PAGE> 30
Monsanto shall not be entitled to receive or retain any dividend,
distribution, or application on or in respect of principal of or
interest on Subordinated Indebtedness, unless and until all
principal of and any interest on Senior Indebtedness then
outstanding shall have been paid and satisfied in full, and in any
such event any dividend, distribution or application otherwise
payable in respect of Subordinated Indebtedness shall be paid and
applied on Senior Indebtedness until such Senior Indebtedness has
been fully paid and satisfied.
(c) The holders of Senior Indebtedness need not at any
time give Monsanto notice of any kind of the creation or existence
of any Senior Indebtedness, nor of the amount or terms thereof, all
such notice being hereby expressly waived. Also, the holders of
Senior Indebtedness may at any time, from time to time, without the
consent of or notice to Monsanto, without incurring responsibility
to Monsanto, and without impairing or releasing the obligation of
Monsanto under this Agreement (i) renew, refund or extend the
maturity of any Senior Indebtedness, or any part thereof, or
otherwise revise, amend or alter the terms and conditions thereof,
(ii) sell, exchange, release or otherwise deal with any property by
whomsoever at any time pledged, mortgaged or otherwise hypothecated
or subjected to a lien to secure any Senior Indebtedness, and
(iii) exercise or refrain from exercising any rights against the
Company and others, including Monsanto.
(d) Monsanto shall not sell, assign or otherwise
transfer any Subordinated Indebtedness, or any part thereof, except
(i) upon the agreement of the transferee or assignee to abide by
and be bound by the terms hereof and (ii) when Monsanto may assign
its rights under the Stockholders Agreement dated of even date
herewith between Company and Monsanto.
(e) Monsanto shall cause all Subordinated Indebtedness
to be at all times evidenced by the Note of the Company and shall
cause such Note to bear thereon a legend substantially as follows:
"The indebtedness evidenced by this Note is
subordinate to any and all indebtedness,
obligations and liabilities of the maker
hereof
-30-
<PAGE> 31
to the holders of Senior Indebtedness in
the manner and to the extent set forth in
the Credit Facility Agreement (as defined
below) to which reference is hereby made for a
more full statement thereof."
(f) If, notwithstanding the provisions of this
Agreement, Monsanto shall receive any payment of principal or
interest on Subordinated Indebtedness which the Company is not
entitled to make pursuant to the terms hereof, whether or not
Monsanto has knowledge that the Company is not entitled to make
such payment, Monsanto shall promptly account for such payment and
upon the demand of the holders of Senior Indebtedness pay over such
payment to such holders for application to the Senior Indebtedness
owing to such holders. No payment or any distribution received by
the holders of the Senior Indebtedness in respect of Subordinated
Indebtedness pursuant to any of the terms hereof shall entitle
Monsanto to any right, whether by virtue of subrogation or
otherwise, in and to any Senior Indebtedness unless and until all
Senior Indebtedness has been fully paid and satisfied and any
commitment of the holders of Senior Indebtedness to extend Senior
Indebtedness to the Company has terminated.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Incorporation of Acquisition Agreement. The
--------------------------------------
provisions contained in Article 12 of the Acquisition Agreement are
incorporated herein by this reference and shall apply to this
Agreement to the same extent as if fully set forth herein.
Section 8.02. Reinstatement of Indebtedness. This Agreement
-----------------------------
shall continue to be effective, or be reinstated, as the case may
be, if, at any time, payment, or any part thereof, of any amount
paid by or on behalf of the Company to Monsanto with regard to the
Note is rescinded or must otherwise be restored or returned
(i) upon or in connection with the insolvency, bankruptcy,
dissolution, liquidation, or reorganization of the Company, or any
Subsidiary, or (ii) upon or as a result of the appointment of a
receiver, intervenor, or
-31-
<PAGE> 32
conservator of, or trustee, or similar officer for the Company or
any Subsidiary or any Substantial Part of the property of such
entity or (iii) as a result of Article VII hereof, all as though
such payment has not been made.
-32-
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
CALGENE II, INC.
By: /s/Michael J. Motroni
-----------------------------------
Title: Vice President
--------------------------------
MONSANTO COMPANY
By: /s/Hendrik A. Verfaillie
-----------------------------------
Title: Executive Vice President
--------------------------------
-33-
<PAGE> 34
The undersigned covenants to distribute adequate amounts of
Cumulative Free Cash Flow to enable the Company to timely perform
its obligations under Sections 1.02 and 5.02(c) hereof to the
extent such distributions are not unlawful. The undersigned
further covenants that all capital contributions or loans from the
Company made through the use of the proceeds of the Loan shall be
used solely by the undersigned to implement the Strategy or to
finance the Collier Farms acquisition. Notwithstanding the
foregoing, the undersigned covenants that none of such capital
contributions or loans shall be used to make advances, loans or
capital contributions to, or to otherwise make an investment in or
benefit, either directly or indirectly, any subsidiary of the
Company which is not a Subsidiary listed on Exhibit C hereto and
---------
which is not a signatory to the Guaranty.
GARGIULO, INC.
By: /s/Frank E. Vigus
-----------------------------------
Title: Vice President
--------------------------------
-34-
